Life insurance can play a vital role in the financial planning process, but many planners don’t think they’re getting it right. According to a recent survey by Saybrus Partners Inc., less than half of advisor respondents said their efforts to provide life insurance and related advice were successful.
Forty-four percent of advisors said that during the past three years no more than 10% of their current clients had asked about life insurance.
For some advisors, the subject is unsexy, time-consuming and/or too complicated. “People in the financial planning business tend to gravitate more toward the investment piece and away from the insurance piece,” says Kevin Kimbrough, national sales manager at Hartford, Conn.-based Saybrus, a partnership firm that helps financial professionals incorporate life insurance into their practices.
Thirty percent of advisors do not regularly provide life insurance to their clients, says the survey. Of those, 49% said selling life insurance distracts attention away from their regular business, and nearly 17% said they don’t sell it because it’s too complicated.
When asked what was the most complicated part of understanding and selling life insurance products and services, 37% of advisors said it was all the different types of policies and riders and figuring out how they fit client needs. A quarter of advisors cited “the abundance of paperwork required to sell and issue a policy,” while 13% said it was the “frequent product development changes.”
Advisors’ other hang-ups included the regulatory changes in the insurance industry (9%). Another 8% said it was hard to understand combination products that address multiple needs, such as long-term care insurance.
“When we look at what’s the holdup, it seems to be that advisors don’t have confidence to do [life insurance] successfully for their clients, so they kind of skip over that,” Kimbrough says.
He notes that some of the hesitancy advisors feel toward life insurance stems from questions they have about whether it’s a sound financial strategy. He says Saybrus helps advisors understand how to have client conversations about insurance and find appropriate products that make sense from economic and financial planning perspectives.
Life insurance partnership firms such as Saybrus, a subsidiary of The Phoenix Companies Inc., are one source of help for advisors. Some advisors work with independent insurance agents, while some broker-dealers hire their own life insurance specialists.
The Saybrus survey polled broker-dealer registered reps, registered investment advisors and dually registered advisors at the INSITE 2013 conference in Hollywood, Fla., in June.