Kevin Haakensen, B.Comm, CIM, FMA, FCSI, CFA, Portfolio Manager, DMW Securities Inc.

Stance: Insurance license a must-have

When I started my career about 16 years ago, one of the first things I did after becoming investment-licensed was to pursue my insurance license. It has paid off.

Prospects often bring disjointed pieces from previous investment plans and aren’t sure how they fit together. A person may have a term policy that’s 10 or 15 years old, a whole life policy, and a disability policy. Many prospects ask what to do with these existing policies, rather than about investment planning. I help them decide if those policies still fit their needs.

A number of our clients are business owners and retirees. The business-owner clients are usually looking to protect their companies. While we definitely put buy-sell agreements in place, and make sure corporate loans are adequately insured, we also look at insuring them against things they often don’t think about, such as critical illness. As retirement approaches, we start thinking about how best to protect their estates.

Insurance can also create wealth. Lots of tax-structured things that can be done within corporations not only help the long-term bottom line, but also provide clients with tax-free dividends.

Take corporate-owned universal life or whole life policies. The corporation is both the owner and beneficiary, and you can insure one or more key shareholders.

The proceeds of a life insurance policy — minus any adjusted cost basis — go into the capital dividend account within a corporation and can be paid out to shareholders tax-free. This lets a business not only protect its wealth but also grow assets in a tax-deferred

Edged out

Clients prefer consolidated services. We provide a full-service tax and accounting business along with bookkeeping. Insurance just adds an extra layer.

If you’re not dual licensed, or don’t have an expert within your practice who can offer insurance advice, you’re giving up competitive edge. You can outsource insurance to specialists, but if you let your
clients go elsewhere, you risk losing them.

Multi-pronged planning

When we create a plan, we draw up a couple of different versions. One is a snapshot of their financial lives over 10, 20, 30 and 40 years if they keep doing what they’re doing.

Version two includes key tax-saving strategies, and projects how their income tax, cash flow and estate will change if applied. The final version incorporates items such as term insurance, permanent insurance, and living benefits such as long-term-care insurance.

In the final version we incorporate two scenarios, if applicable to their ages:

Scenario 1: What would an LTC policy cost the estate if they paid premiums but never used it? We like to be as specific as possible: for example, “it will cost your estate $200,000 if you live to your mortality.”

Scenario 2: What would happen if they didn’t take out a policy but ended up needing coverage at some point? We want prospects to understand that even with a portfolio that’s working very well, an unexpected health event could derail retirement plans.

Not everyone takes the coverage but presenting options is part of our fiduciary process.

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