(This blog can also be found at the FPA Practice Management site: http://practicemanagementblog.onefpa.org/2015/03/10/you-are-insurance-to-uncertainty/)
A client pays an adviser an ongoing fee to develop and implement a plan that will meet his or her financial needs, release anxieties and provide an avenue to achieve aspirations. Although the plan itself—and the financial and investment tools used to implement it—focus on the uncertain future, the sheer fact that a plan is in place brings the client peace of mind.
An insurance product has a similar structure in which premiums are paid with the expectation that protection is provided if the insured event occurs at some point in the future. With protection in place, the policy owner’s present benefit is the release from anxiety.
While insurance products and wealth advisers produce the same result—confidence to handle an uncertain future—society is well grounded in the need for insurance. For example, to get a car registered, buy a home or get a doctor’s appointment, insurance must be in place.
Using Insurance Principles as a Selling Metaphor
Since the need for insurance is well settled in people’s minds, using an insurance metaphor helps clients relate to the important protections wealth management provides.
Keeping Purposes Fresh
Either through personal experience, a person’s own relationship network or insurance commercials, people understand the financial and emotional trauma that can occur when a car accident happens, a fire destroys a home or disease takes hold. Insurance companies work hard to keep these adverse possibilities in the buying public’s mind; as stories, they shift insurance from a concept to an experience.
The threat of an adverse event in the future is real. In fact, most elements of a wealth plan seek to deliver protection against what otherwise would be adverse outcomes: insufficient income; financial insecurity; wasted money; complexity; family disharmony.
With the hope that an executed wealth plan will produce financial security and peace of mind, a client willingly starts paying an ongoing advisory fee. Unfortunately, years may pass before benefits are received while the costs remain; this is especially true with younger clients.
Planning with Execution
The plan itself ties directly to an intended solution producing protection in one form or another. Think of the wealth plan as an ever-ready agenda that guides client communications to a straight line spotlighting these types of protective benefits:
- Budgets to set spending priorities
- Portfolios designed to minimize losses
- Tax programs that keep more money in the family
- Lower-fee investments that increase net return
- Trusts that efficiently transfer wealth
- Estate plans that smooth life’s transitions and prevent discord