Advisors are well aware of the ways life insurance can help the ultra-wealthy, but a more personal reason may help gain customers.
Brokers have long found success selling life insurance to the ultra-wealthy by extolling its tax benefits for clients, but a better selling point may be psychological.
“A more psychological reason I’ve seen lately is people like to compartmentalize,” said Steve Santoro, Certified Financial Planner & Investment Representative of Santoro Financial Group. If a client has a family, and wants to take care of the next generation they’ll set up an insurance policy.
“It crystalizes that no matter what happens to the family wealth, the next generation is taken care of,” he said. “That actually frees up the current owner of that wealth… to actually spend their money as they would like to in retirement.”
There are technical reasons for using life insurance like estate equalization or charitable gifting and philanthropy. But a life insurance policy can also allow wealthy clients to enjoy retirement.
“If I’m sitting there and I’m worth $20, $50 or $100 million I might want to consume some of my assets,” said Santoro. “If I go and commit some of the capital I have to insurance policies I now have my estate set as each of my kids gets $10 million and then I can consume the rest of the capital if I’d like.
"That gives them confidence in their panning and that they’ve taken care of their planning.”
That being said, the tax benefits of life insurance still can’t be understated. “It’s not news that these clients don’t need insurance so the big question is why would they want it,” says Santoro. “I’ve never spoken to someone that wants to pay more tax. They would rather allocate their capital the way they choose.”
“A more psychological reason I’ve seen lately is people like to compartmentalize,” said Steve Santoro, Certified Financial Planner & Investment Representative of Santoro Financial Group. If a client has a family, and wants to take care of the next generation they’ll set up an insurance policy.
“It crystalizes that no matter what happens to the family wealth, the next generation is taken care of,” he said. “That actually frees up the current owner of that wealth… to actually spend their money as they would like to in retirement.”
There are technical reasons for using life insurance like estate equalization or charitable gifting and philanthropy. But a life insurance policy can also allow wealthy clients to enjoy retirement.
“If I’m sitting there and I’m worth $20, $50 or $100 million I might want to consume some of my assets,” said Santoro. “If I go and commit some of the capital I have to insurance policies I now have my estate set as each of my kids gets $10 million and then I can consume the rest of the capital if I’d like.
"That gives them confidence in their panning and that they’ve taken care of their planning.”
That being said, the tax benefits of life insurance still can’t be understated. “It’s not news that these clients don’t need insurance so the big question is why would they want it,” says Santoro. “I’ve never spoken to someone that wants to pay more tax. They would rather allocate their capital the way they choose.”
