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Stop and think about the most “real” human event you experienced in the last year. What moved you? What shocked you? What caused you to question if you were in control?
I suspect that in reflecting on those questions you thought about the family whose dad was just diagnosed with cancer, the grandparent lost to COVID or the friend who was unexpectedly laid off. You didn’t think about anything that was ordinary or expected.
But that’s how life goes. As John Lennon wrote, “Life is what happens to you while you’re making other plans.”
How do you prepare your clients for what can happen while they’re busy making other plans? Is your client ready for all that life will throw at them today, tomorrow and 20 years from now? One of my mentors told me that a real financial plan doesn’t just deal with what we hope will happen but is something that endures through all the future’s uncertainties – in the markets, workplace, personal health and more. And further, he says wryly, “A plan should deal with the one certainty we all share: One day, we will die.” He is quick to remind me that he hasn’t been wrong yet!
While advisors believe that evaluating a client’s risk is a part of the comprehensive planning process, there is a mistaken perception among many financial advisors that offering commissionable insurance solutions is inappropriate. This attitude runs counter to my belief that one of the most important roles a financial professional/advisor can play is ensuring everyone has a plan that brings them financial clarity. It is the job of the advisor to help people see how they can plan to achieve – and protect – their hopes and dreams. This happens through an advice experience – when an advisor has built trust, understands the unique values, goals, and beliefs of a client, and ultimately, helps that client take action to meet their current and future financial needs.
Although they are not mutually exclusive, there is a substantial difference between providing advice and selling a product like insurance. I am unabashedly opposed to the idea of transactional product sales where the goal is to make a sale for the insurer and a commission for the agent. Advice, in contrast, is about sitting on the same side of the table as the client and helping them evaluate decisions that support their individual situation and goals. Selling can be a tool to get people to take action if they are shown how a solution creates value for them.
A comprehensive holistic financial plan should serve the short- and long-term goals of the client in alignment with their values and address the inherent risks of that plan across different, uncertain scenarios. These scenarios include volatile markets, job security and taxes, as well as our very human mortality and morbidity. As Benjamin Franklin famously noted, “Nothing in this world is certain, except death and taxes,” and a good financial plan should take both into account.
And while death is a certainty, the time of its arrival is not, which is an important consideration in financial planning. An advisor who mentored me as an intern in my senior year of college told me a personal story that has stuck with me ever since.
Early in his own career, that mentor worked up the nerve to talk to his father-in-law about whether he had adequate life insurance. His father-in-law said, “Yep, everything's covered,” and shut down the conversation. Unfortunately, his father-in-law died a short time later and it turned out all he had was a single $2,000 policy. My mentor and his wife had to take care of his mother-in-law for the rest of her life.
Death isn’t the only event to be considered, as there are many possible health events that can happen. Insurance is a pooled-risk solution that is an effective and affordable tool for most people to offset these certain and uncertain risks.
It can be extremely difficult to ensure that clients are positioned to attain their long-term goals if we eliminate protection products from the advice process based on their compensation model. Following proper disclosure of potential conflicts, clients should be well-equipped to make an informed choice on whatever product they purchase in service of their plan.
As an advisor who has developed a long-term relationship with a client and is privy to the intricate details of their financial life, they are able to address the changing role of insurance over time in the financial plan in ways that an insurance broker cannot.
Insurance is like a raincoat: we buy with the hope that we’ll never have to use it but having protection from unexpected calamities can bring real peace of mind, which is something advisors should always strive to achieve.
Helping people see the need of risk hedging throughout their life is an important responsibility and requires the insight of a knowledgeable professional, such as a trusted financial advisor who understands their situation. A fiduciary advisor must play that role and deliver value to the client.
In his role as senior vice president of advice and wealth management at Thrivent, Luke Winskowski is responsible for driving consistency and efficiency across platforms, technology, best practices, and talent to support financial advisors in providing purpose-based advice that helps clients achieve financial clarity. Winskowski joined Thrivent in 2005, serving progressively as a financial advisor, senior business consultant, and partner. Most recently, he was instrumental in launching and bringing to market Thrivent’s hybrid RIA platform, Thrivent Advisor Network, which he continues to oversee. He serves as board member and foundation trustee of Lutheran Social Service of Minnesota.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
