Can IFAs help broach the insurance conversation with your clients?

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Talking to your clients about the benefits of an IFA

When talking to your clients about their overall financial plan, some topics are easier to discuss than others—and insurance is often at the bottom of the list.

An Immediate Financing Arrangement (IFA) can help ease into this challenging topic, setting the stage for a more positive conversation. Rather than focusing on sad possibilities that could happen sometime in the future, you can emphasize how an IFA reduces the financial and emotional strain involved in protecting loved ones. But how exactly do you kick-start the dialogue?

At Equitable Bank, we’ve devised a four-step process to help you broach the subject. This plan should act as a guide on how to position the IFA in various client scenarios:

1. Identify

First, complete a standard discovery to determine whether your clients’ current insurance coverage is sufficient based on their family needs and financial objectives. Look for any gaps that require additional coverage, and from there try to understand if the client would be willing to take on debt to pay for this coverage, or if they would be more comfortable paying for it out of pocket. Additional credit can help many effectively manage their finances, though some may be uncomfortable taking on this additional debt

When reviewing your clients’ insurance needs, it’s important to identity if they’re the right type of borrower for an IFA. Normally, this solution is geared to ultra-high net worth clients (UHNW), and while we believe it should be more widely available, it is not a fit for everyone as the ideal IFA client is still a sophisticated, affluent investor or business owner with robust insurance needs.

Case Study: While speaking to your clients, John and Helen, you discover that they haven’t updated their insurance coverage in over 10 years. During that time, they’ve had three children, which has drastically altered their financial plan and insurance needs. Additional insurance is a must for them, and an IFA allows them to expand their coverage without impairing the cash flow that’s needed for their growing family.

2. Educate

Having confirmed your clients’ insurance gaps, you can now have a more in-depth discussion about their finances. Often, clients don’t realize they can leverage their whole life policy as a new source for cash. You can educate them on the many benefits of doing so, including the ability to borrow up to 100% of the premiums on your policy without requiring any additional collateral or security.

Once your clients understand they can monetize their insurance policy in such a tangible way, you can open up a discussion on why an IFA may be the best option to maintain or improve their cash flow and provide them with greater financial control.

Case Study: John would need to liquidate some of his non-registered investments in order to pay his new insurance premium. However, he’s reluctant to cash-in higher yielding investments, as they’re performing so well right now. With an IFA, he wouldn’t need to liquidate these assets. Instead, he could simply tap into an IFA to recoup his premium payment while also safeguarding the future of his family.

3. Align

Many clients don’t realize there can be tax advantages associated with an IFA, depending on their particular situation. It’s a great idea for you to spearhead a meeting with their accountant or lawyer to determine the optimal use case, which only further demonstrates your value-add.

Case Study: Based on the advice from his advisor, John meets with his accountant to discuss the best way to structure an IFA. His accountant recommends that it would be best to hold the policy within his corporation since the premiums could then be paid from corporate earnings on a pre-personal tax basis, thereby creating a capital dividend credit upon the death of the insured.

4. Simplify

At long last, they’re ready to start the application process. This can be a fairly daunting step in many cases, and, as a trusted advisor, you should focus on making the execution as simple and straightforward as possible. This is where your choice in an IFA lender becomes extremely important.

At Equitable Bank, our sales team can provide you with qualification amounts, competitive rates and the financial requirements upfront, preventing any back and forth. We can also complete the underwriting at the same time as the insurer, ensuring the policy placement and loan advance occur at around the same time to expedite things. Finally, our ability to lend solely against the policy without the need for collateral makes the process much easier—and accessible.

Case Study: Focused on ensuring a smooth process from start to finish, the Advisor contacts Equitable Bank. Our team provides all the requirements – all at the same time – enabling you to easily retrieve the necessary financial information from the borrower.

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