This is sponsored content submitted by Sun Life Financial. In this article, Kevin Press, Assistant Vice-President, Market Insights at Sun Life Financial discusses his newest white paper — sharing results from a recent study of high net worth Canadians.
The benefits of life insurance for wealthy Canadians are well-documented.
To gain a deeper understanding of affluent clients and their insurance needs, Sun Life Financial asked Ipsos to conduct a study of high net worth (HNW) Canadians.1 Based on those findings, I’ve written a white paper called Life insurance and high net worth Canadians: an eye-opening opportunity, to share the data with advisors who specialize in HNW planning.
In this article, I’ll provide highlights from the white paper and insights on what the results mean for you.
Download a copy of the Sun Life Financial white paper
The perceived lack of need
As many wealthy Canadians continue to believe they can afford to self-insure, educational efforts focused on the unique benefits life insurance provide HNW individuals are paying off. However, while wealth managers have fine-tuned their efforts to meet affluent clients’ requirements, 3 in 10 wealthy Canadians don’t own personal life insurance.2 When asked why not:
- 53% said “I have enough money to cover everything my family would need in the event of my death,”
- 12% “don’t consider it a good investment,”
- 10% “don’t believe in life insurance,”
- 5% said they “don’t trust the life insurance industry” and
- 11% already own group life insurance.
A lack of understanding
Since HNW Canadians could in fact benefit from insurance, where do these misconceptions come from? It’s simple: most wealthy Canadians don’t fully understand or appreciate the value of life insurance.
HNW individuals — who often believe they know best when it comes to household finances — tend not to see themselves as well-informed regarding life insurance. The study found that only about one-quarter describe themselves as “expert” (5%) or “very knowledgeable” (19%). About half (48%) as “somewhat knowledgeable.” And a remarkable 27% say they are “novice or beginner.”
During the study, respondents were presented with a series of product attributes and asked to identify which applied to term or permanent life insurance. Few of the respondents were correct. For example, just 49% recognized that permanent insurance includes an investment component; 47% said the same (or didn’t know) about term insurance.
|Percentages of HNW Canadians who recognize that various product attributes apply to term and/or permanent insurance|
|Life insurance attributes||Term insurance||Permanent insurance||Neither||Don’t know|
|Includes an investment component||13%||49%||10%||34%|
|Has a cash value that can grow tax free||11%||48%||9%||36%|
|Has a cash value that can be accessed before you die||14%||49%||8%||32%|
|Provides protection for your entire lifetime||12%||64%||8%||22%|
|Provides protection for a specific period of time||61%||15%||6%||25%|
|Provides benefits when you die||57%||61%||5%||21%|
|Provides a tax-free death benefit||41%||55%||8%||32%|
|Has no cash value||45%||10%||13%||33%|
This disconnect — between the needs of HNW Canadians and their understanding of life insurance product attributes — highlights a tremendous opportunity for insurance advisors who can explain the real, demonstrable benefits of life insurance.
HNW individuals have needs that align closely with life insurance product attributes. Among those who have an advisor involved in their financial planning, 84% say they’d like their advisor to “provide tax planning advice on how to minimize taxes” and 72% want “estate and legacy planning advice.”
What about affluent Canadians whose primary relationships are with accountants or investment advisors who don’t sell insurance?
One quarter (24%) work with an accountant regularly. Among those, 41% involve their accountant in their financial planning formally and 5% consider that accountant to be their primary advisor.
One-third (32%) of HNW Canadians work with an investment advisor on a regular basis. Among them, 77% say their investment advisor is formally involved in their financial planning and 30% say their investment advisor has the “most influence” on their plan.
This doesn’t mean HNW Canadians don’t have access to life insurance or that the opportunity for these accountants and investment advisors doesn’t exist. We know that insurance specialists are brought into discussions regularly. In fact, 59% of those surveyed who own life insurance say they didn’t purchase it through their primary advisor.
The key to success here is your ability to gain access to these clients — in many cases with the cooperation of whomever has the primary relationship — and then to successfully educate the client about the benefits of life insurance.
To the extent that you can shift wealthy Canadians’ thinking — from questioning the need for life insurance to understanding its benefits from a holistic financial planning perspective — there are opportunities to expand relationships with HNW clients by reintroducing them to a product category that offers significant value.
To learn more about this eye-opening opportunity, download a copy of the Sun Life Financial white paper. Or, if you only have a few minutes, watch this whiteboard video: Protecting your wealth with insurance.
You might also like…
- 4 planning pitfalls – show wealthy clients how to avoid them
- Life insurance as an asset class: An industry expert shares his insight
- 7 ideas for better conversations with affluent clients
1 Those with a minimum $1 million in investable assets.
2 All data findings subsequent to this footnote are sourced from Sun Life Financial’s study of high net worth Canadians, conducted by Ipsos, January 2016.
Kevin Press is an award-winning marketer and journalist. His current role is Assistant Vice-President, Market Insights at Sun Life Financial. He leads a number of thought leadership studies including the Retirement Now Report, Canadian Health Index and Investor Sentiment Report.
Before joining Sun Life Financial, Kevin worked as a journalist for a number of business magazines, including Benefits Canada, Advisor’s Edge and Benefits and Pensions Monitor. He served as Editor of Benefits Canada from 1999 to 2003.
These days, he writes about the economy and personal finance for sunlife.ca. His e-book – Understanding Unretirement – was released in 2014.