As a group, the evidence-based advisors I serve through our coaching and web design companies are among the finest people I’ve ever met. You are caring, competent, conscientious and dedicated to the well-being of your clients.
Yet, I wonder if there are gaps in the financial planning you and others are providing to your clients. My concern doesn’t have a sound statistical basis. It’s based largely on inquiries I receive from readers of my books and blogs, but it’s also reinforced by industry data.
Lack of life insurance
Every widow who has contacted me over the last decade or so has told me her husband had either no life insurance or “very little.” This includes the wife of a trusts and estates lawyer who died suddenly and prematurely.
Their experience isn’t atypical. According to one study, only 59% of Americans own some form of life insurance.
The lack of life insurance is particularly troubling considering the dire financial condition of many Americans. One-third of families surveyed admit they would confront a financial crisis within one month after the death of the primary earner.
There are many reasons why Americans are underinsured, not the least of which is the complexity of life insurance, the poor reputation of those selling it and perhaps ignorance of financial advisors.
Here’s something you can tell your clients who may be reluctant to buy life insurance: There has never been a widow who, upon receiving a death benefit, questioned whether the type of life insurance purchased was the best policy available.
Instead of getting bogged down in the weeds, focus on the forest. Your clients need life insurance. Make them aware of the consequences of inaction.
Buy a home
Renting a home is popular these days. It makes sense in some circumstances, especially in areas where home prices are sky high.
I can tell you this: My experience with widows has not included this comment: I really regret we own our home, mortgage free.
Advisors are fond of talking about how they provide “peace of mind.” When I paid off my mortgage, it gave me “peace of mind” in way I hadn’t previously experienced. During my life, our shelter is secured. After my death, my wife can live in our home without the burden of a mortgage.
If you haven’t had this discussion with your clients, you should.
Outliving your money
You can run the most sophisticated financial planning software in existence, but here’s one fact you can’t tell your clients: When they are going to die. You can discuss probabilities, but you can’t give them certainty they won’t outlive their money. That is what they want.
For a healthy couple in their mid 60s, it’s not unlikely one of them will live for another 35 years.
There are many benefits to partially annuitizing this risk. They are discussed in detail here. If you aren’t considering immediate or deferred-income annuities for appropriate clients, you are doing them a disservice.
Here’s what I want to hear from the next widow who calls me:
I’ll be fine. My husband had more than enough insurance for me to maintain my quality of life.
We own our home without a mortgage. I think I’ll stay here, at least for a while.
We purchased a longevity annuity that meets some of my expenses for the rest of my life.
Will that be your client?
Resource of the week
I don’t believe you can competently provide financial planning advice without knowing about the benefits of “participating whole life insurance.” You might start by reading this article.