Between 1997 and 2000, Paula O’Brien, struggled with a problem many financial advisors face. An advisor with Merrill Lynch Canada Inc. in Ottawa at the time, O’Brien was doing a good job of imparting investment advice to her clients but found herself frustrated when it came to the insurance component of their financial plans.

On the one hand, as a financial advisor, she felt it was her duty to inform clients about the options they had in protecting their assets with insurance. But she wasn’t licensed to sell insurance and, therefore, couldn’t offer any of those products to her clients herself.

“I was opening a big door to discussing risk and protecting against it,” says O’Brien, now an advisor in Ottawa with Toronto-based Richardson GMP Ltd. “But then I couldn’t help my clients implement any of the solutions I was suggesting.”

So, O’Brien did something about her dilemma: she enrolled in a course toward acquiring an insurance licence.

When investment advisors and financial planners avoid insurance, they are often leaving client assets on the table for another advisor to pick up, says Norm Trainor, president and CEO of the Covenant Group, an advisor consulting firm based in Toronto: “If you aren’t helping a client with the risk side of his or her profile, there is another financial advisor out there who is licensed — and who will.”

By serving your clients’ insurance needs in addition to their investments, you are also increasing your clients’ commitment to your practice, says George Hartman, president and CEO of Toronto-based Market Logics Inc. : “Insurance products add to client ‘stickiness’ because the [insurance] contracts need to be serviced over long periods. The more of a client’s needs you can fulfill, the client is less likely to go to a competitor.”

Incorporating insurance into your practice can also be a great way to balance out your clients’ portfolios — as well as your own “portfolio” of clients, Hartman adds. “When there is a downturn,” he says, “advisors who are dually licensed find themselves shifting to the insurance side of the business rather than to investments.”

Instead of waiting for markets to rebound during the recent market downturn, Hartman says, advisors with insurance licences were able to grow their books of business by pursuing insurance clients during the downturn, partly because people are more likely to buy insurance during periods of economic uncertainty. “[Having an insurance licence] allowed [those advisors] to put more stability into their portfolios,” he explains, “because insurance products aren’t always tied to the markets.”

Clients who had insurance-based products, such as segregated funds and whole life policies, in their portfolios also felt more secure. “[Those] clients were calmer,” says Hartman, “because they knew a certain amount of their income was locked away in a policy.”

Despite these benefits, a great number of advisors are not dually licensed. Data from Investment Executive’s 2010 Report Card series show that 71% of advisors are either dually licensed or multi-licensed — that is, with an insurance licence as well as a licence to sell mutual funds or securities, or both. That figure is consistent with figures from Advocis, which says about 60% of its members are dually licensed. That means 30%-40% of financial advisors are not qualified to sell insurance. Furthermore, holding an insurance licence doesn’t mean an advisor is actively selling policies. An advisor may have a licence, Trainor says, but remain hesitant to put it into practice.

Because investment advisors and financial planners are, understandably, focused on discussing the accumulation of wealth, they may find it awkward to shift gears and bring up the subject of insurance, Trainor says: “Talking about death and disability risk tends to make a lot of advisors uncomfortable, which is why they ignore it altogether.”

O’Brien agrees. “Advisors aren’t comfortable discussing their [clients’] demise,” she says, “because they think it will detract from the financial relationship.”

O’Brien had a personal experience with insurance early in her career that serves as a persuasive argument for buying insurance sooner rather than later.

While working on acquiring her insurance licence 11 years ago, O’Brien bought, through her firm, two universal life policies for herself and her husband at the time. Within six months of purchasing those universal life policies, her then-husband was diagnosed with cancer and subsequently became uninsurable.

“Thanks to that policy, we had piece of mind about our financial future,” O’Brien says. “It was nice to know that in case he were to die, our family would be financially taken care of.”

Sharing this experience has helped O’Brien persuade clients to acquire insurance coverage.

“Money was never my primary motivator for getting insurance-licensed,” O’Brien says. “But it has certainly paid off in terms of commissions and strengthening the bond I have with my clients.”

Lack of knowledge is a common obstacle preventing advisors from exploring the insurance side of the financial advisory business, O’Brien continues: “It’s a whole world of policies and procedures advisors may not be familiar with. It can be intimidating.”

There’s no need for financial planners and investment advisors to treat insurance as the Bermuda Triangle of a financial plan. With the right approach to discussing risk, the following steps can help you increase your business through insurance:@page_break@> Opening The Door

Once you have gained an education regarding insurance products and are licensed to sell them (see sidebars, above), your next challenge is to begin broaching the subject of insurance with your clients. Making the shift from discussing the accumulation of assets to protecting them need not be awkward, Trainor says. It’s as simple as presenting insurance as a way to help clients meet their objectives.

“You always want to frame insurance,” says Trainor, “in a way that it protects the financial goal that a client has set.”

He cites as an example a client couple whose goal is to take a round-the-world cruise with their family when they turn 70, using a chunk of their retirement savings. Insurance can be a way to ensure that if one partner dies prematurely, the other person can still take that trip.

“You have to open up a dialogue to find out what a client dreams about,” Trainor adds, “and then link that to the emotional consequences of what could happen if he or she isn’t around.”

You also can share the anecdote of a client who had a good experience as a result of insurance planning. For example, O’Brien and her former husband had formed a business partnership with another couple; together, the four bought a six-seater aircraft for their business. O’Brien sold the other couple a policy that insured that if the husband unexpectedly died, the benefit could be used to pay off the debt both couples had used to purchase the plane, as well as dissolve the partnership.

Sadly, the husband of the other couple later died in a sailing accident. The policy enabled the remaining partners to settle the debt and dissolve the business. Thus, insurance prevented a tragic death from also becoming a financial disaster.

“People connect with personal stories,” O’Brien says, “because they show that products do, in fact, pay out.”

Whatever tale you share, be sure to focus on the people, not the policies. “If you start talking about insurance in terms of products,” Trainor says, “you will come across as a product-pusher. Make sure you always pose insurance as a solution to a larger problem.”

> Fitting Insurance Into Your Practice

There are many insurance products and many ways to fit them into a client’s portfolio. The type of insurance you specialize in will depend on the needs of your client base. Hartman suggests analyzing your client base and determining the types of insurance products its members are most likely to benefit from. For example, if your clients are mainly business owners, you should become well versed in business-insurance products, such as a key person insurance, which protects a business in the event the entrepreneur — the “key person” — becomes disabled or dies.

Says Hartman: “It’s important to make sure the product pitch fits.”

O’Brien, who began her career in financial services as a chartered accountant, finds that she uses insurance products as a vehicle for tax savings in retirement, in addition to using them as part of a strategy for protecting assets.

For example, she says, clients can borrow from their whole life and universal life policies and create an income that is tax-free. If a couple needs a cash flow of $70,000 in retirement, they can borrow from their universal life policies to subsidize a portion of that income stream. Because cash from a whole life policy is not considered income and is not taxable, it won’t invoke the old-age security clawback.

“I am always happy,” says O’Brien, “to use my chartered accountant background to do what I can, within the realm of the law, to help my clients save on taxes.”

You can also point out to your clients the flexibility insurance affords in estate planning. A client can designate a beneficiary for an life insurance policy without affecting the will or triggering probate fees or income taxes. In addition, insurance products can be used in charitable plans: your client can donate an annuity to a favourite charity and be remembered as a donor to that cause. Or your client can donate the proceeds of a life insurance policy to a charity.

“People buy insurance only if they love someone or something,” Trainor says. “Insurance can be one of the best ways to bequeath a legacy, because a policy can create money where it didn’t exist before.”

With so many applications for insurance, O’Brien says, it’s not uncommon for her to enlist the support of Richardson GMP’s wills and estate planning department to ensure she is on the right track with a case.

“Sometimes, we act as gatekeepers to the wills and estate planning specialists,” O’Brien says, “when we should be enabling them” — referring to the fear among some advisors that the help from an expert in another department within their firm could pose a threat to the client/advisor relationship.

But O’Brien has had the opposite experience: “My clients are much more committed to me now that I can take them from talking about an insurance plan to implementing it, the whole way through.” IE