There’s a saying: Anything worth doing is worth doing well. And when it comes to your affluent clients, life insurance as an asset class is certainly worth exploring. But even if you’re familiar with this idea, you may be wondering:

  • how does life insurance really stack up against other investments in clients’ portfolios?
  • how do I properly quantify and evaluate the insurance opportunity?
  • which clients are most suited to this strategy?
  • how do I start the conversation?

As a firm believer in the value of participating whole life insurance (par) as an asset class, Sun Life Financial’s Scott Morrow, CEA, Director of Sales, National Accounts, Third-Party Insurance Distribution, is helping advisors across the country learn more. Through his ‘Let’s talk safe money’ presentation, he covers:

  • the economic value of ‘safe’ money,
  • key points for client conversations, and
  • facts and figures to support your discussions.

And his answers to our questions provide additional insight on how this strategy can help your clients.

About Scott Morrow

During his 22 years in the financial services industry, Scott Morrow has worked with some of North America’s top insurance experts. He’s shared his ‘Let’s talk safe money’ presentation with advisors throughout Canada over 60 times in the past 2 years. His vision? To ‘smash’ the current perception that all life insurance is a commodity, so that every financially fortunate person in Canada includes par as an asset class among their investments.

Q: Life insurance as an asset class is a concept that’s attracting attention – how so?

Scott Morrow: Life insurance as an asset class isn’t a concept, it’s a reality. The wealthiest people in North America, as well as banks and corporations, have incorporated properly structured permanent insurance solutions as a portion of their overall portfolios for 150 years. But with mainstream clients, it’s really gained traction since the credit crisis of 2008. Just Google it. With lower and lower fixed income yield options on long-term money, a properly structured permanent insurance policy may add to the long-term yield of a client’s balance sheet and safe money positions.

My personal ‘ah-ha’ moment happened about 7 years ago before I joined Sun Life. I was consulting with a financial engineering firm in the United States. Some of the U.S. wealth management firms I worked with were allocating 5 to 10% of their clients’ portfolios to participating insurance — and I knew then this was something more people needed to know about.

Q: What do you mean by ‘safe money’?

Morrow: Money that won’t decrease in value — cash, bonds, guaranteed investment certificates.

By utilizing a participating policy as an asset class, it’s important to understand that this approach is intended to complement a client’s safe money portfolio. Keep in mind you’ll need to consider ‘net yields’ versus the dividend interest rates of the insurance company’s par accounts.

Q: What types of clients are most suited to this approach?

Morrow: It’s very aligned to high net worth clients who’ve allocated part of their investments to safe money assets. Clients with money in holding companies are prime candidates. So are affluent clients not yet considered high net worth.

Q: What can this approach do for them?

Morrow: If properly structured, a participating policy can add a great deal of certainty to the future of a client’s lifetime investment experience. Not only will it complement their fixed income portfolio or safe money, it allows for diversification in their portfolio. It provides for a potential increase in borrowing capacity for further investment/business opportunities. It can provide for income not exposed to market-timing risk. And at death, it provides a multiple of that asset value, tax-free, to a beneficiary of their choice.

A simple allocation of assets could also provide for much needed or wanted insurance coverage they didn’t really want or know how to pay for.

Q: How might advisors start the conversation with their clients?

Morrow: An article written by Wayne Miller1 and Sally Murdock2 about par as an asset class is a great way to get a client’s attention; send it to them directly or to a centre of influence — their lawyer or accountant. Mention that you came across this article, have some opinions about it and want to find out what they think. Ask them to write down 3 things they liked about it and 3 things they weren’t sure of. Then arrange to meet; walk them through the ‘safe money’ conversation,3 starting with their current safe money allocation and what their allocation may be in the future.

Keep in mind that clients who allocate toward safe money assets now will likely want to increase those allocations as they age. For example, someone who’s age 55 today with a 30% position in money may want to have a 50% position by age 65. So part of that conversation will be about the option to continue making deposits to a policy, over time. Don’t treat it as an expense — treat it as an investment into an asset class that’s guaranteed to go up in value.

Q: What can this approach do for advisors?

Morrow: I think it gives advisors a great opportunity to move ‘up market’ and be more holistic in their approach to financial and estate planning. Too many advisors position permanent life insurance as a commodity when, in fact, it can offer so much more.

Q: How can advisors learn more?

Morrow: They can contact me directly or reach out to their Sun Life Regional Sales Director or Regional Sales Associate. Life insurance as an asset class – white paper and Can life insurance be held as an asset class? are also well worth reading.

A properly structured insurance portfolio requires insight and careful planning direction; it will be unique to each client. We have excellent resources to help you learn more.

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1 Wayne Miller is Regional Vice President, Central Region Insurance Distribution, Third Party (Wholesale) Channel, at Sun Life Financial.

2 Sally Murdock is Director, Portfolio Management, Asset Liability Management, at Sun Life Financial.

3 Based on Morrow’s ‘Let’s talk safe money’ presentation.