Many Financial Advisors Miss Opportunity to Incorporate Life Insurance into Planning, Saybrus Survey Finds

Survey Shows Opportunity to Better Educate Clientsabout Advantages of Life Insurance as a Financial Planning Tool

HARTFORD, Conn.--(BUSINESS WIRE)-- Financial advisors often miss the opportunity to speak to their clients about the important role life insurance products can play in financial planning, according to a recent survey by Saybrus Partners, Inc. Results of the survey showed that only about half of adults who currently have a financial advisor and a financial plan have ever discussed adding life insurance to their plans. The survey was conducted online within the United States by Harris Interactive^® on behalf of Saybrus Partners between July 22-26, 2011 among 2,410 adults aged 18 and older, of which 786 said they currently have a financial advisor.

“We believe life insurance is foundational for a well-designed financial plan, not only for the protection it provides but also its tax efficiency, and potential for cash accumulation and wealth transfer,” said Kevin Kimbrough, national sales manager for Saybrus Partners. “The survey affirmed statistically what we have heard anecdotally for years – financial advisors often do not discuss life insurance during the financial planning process. They are missing an opportunity to fill a critical gap in some existing financial plans while at the same time differentiating themselves and expanding their practices. Additionally, there are benefits to including assets such as life insurance that are not tied to the financial markets and therefore not subject to the same volatility we are currently seeing.”

Starting the Discussion About Life Insurance

About half (49%) of U.S. adults who have a financial advisor and a financial plan have spoken with their advisor about adding life insurance to their financial plan.

Among those who have discussed life insurance with their advisors, 15% said the conversation took place more than 10 years ago, while 40% have discussed it within the past year. While this may indicate that discussions about life insurance are becoming more common, they do not necessarily include a review of existing policies for critical issues such as performance, affordability and potential policy lapse. According to the study, nearly half (47%) of U.S. adults who have a financial advisor and have life insurance said their advisors have never reviewed their existing life insurance policy with them.

One-third (34%) of U.S. adults who have a financial advisor and a financial plan said that over the last two years, their advisor has recommended that they add some form of insurance to their financial plan. However, less than one quarter (24%) were advised to include life insurance specifically. Only 10% said their advisor had recommended long-term care insurance.

“Life insurance can be complex, and many advisors are reluctant to introduce it into the financial planning conversation. However, some of these financial professionals are finding that they can use outside specialists to help them advise their clients on the most effective and efficient life insurance uses for each unique portfolio,” Kimbrough said.

Understanding What Life Insurance Can Do

The most fundamental role of life insurance is to protect families/heirs with a death benefit, and 81% of U.S. adults who have a financial advisor and have life insurance said the a primary reason they carried such policies was to protect their family and/or heirs. Only 17% cited wealth transfer as a primary reason they had life insurance and 15% cited the potential for cash accumulation, which is a key feature of many permanent life insurance policies.

“These statistics demonstrate that typical life insurance policyholders may not be aware of the many other uses for life insurance beyond family and heir protection,” Kimbrough said. “They may be relying on IRAs or annuities for wealth transfer, which are designed for asset accumulation and retirement income but not for wealth transfer, especially from a tax perspective. Life insurance offers potential for tax-efficient cash accumulation, which can be accessed for a variety of reasons including supplemental retirement income or health care costs, as well as a tax-efficient vehicle to provide for heirs.”

Going Beyond the Traditional

According to the survey, more than four out of five U.S. adults who have a financial advisor and life insurance (83%) said they would be interested in life insurance policies that carried additional features not present in their current policy, with varying degrees of interest in specific features. For example, 30% said they would find a feature that would allow them to receive the life insurance payout as income if they were diagnosed with a terminal illness beneficial. Another 28% of indicated coverage for long-term care needs would be beneficial, and 18% thought a waiver of premium payments if they became disabled would be a beneficial addition to their policy.

“Clearly, consumers are interested in getting more from their life insurance policies. Given the well-known concerns about healthcare costs that dominated the national news last year, this relatively modest interest in health-related benefits is likely due to lack of knowledge of how they would work. This is another opportunity for financial advisors to help their clients maximize the benefits they can get from their life insurance,” Kimbrough said.

Exceeding Expectations

The survey asked U.S. adults with a financial advisor to indicate areas where they expect their advisor to be knowledgeable. The highest expectation (70%) was for mutual fund knowledge, followed closely by stocks and equities (68%). Just 38% said they expected their advisor to be knowledgeable about life insurance.

“These clients’ relatively low expectation about their advisors’ expertise in life insurance probably reflects the lack of discussions they have had on the topic. This presents an opportunity for advisors to go beyond their clients’ expectations and address a critical element of the financial planning process,” Kimbrough said.

IRS CIRCULAR 230 DISCLOSURE

Any information contained in this communication (including any attachments) is not intended to be used, and cannot be used, to avoid penalties imposed under the U. S. Internal Revenue Code. This communication was written to support the promotion or marketing of the transactions or matters addressed here. Individuals should seek independent tax advice based on their own circumstances.

ABOUT THE SURVEY

This survey was conducted online within the United Statesbetween July 22nd and 26th, 2011 among 2,410 adults (aged 18 and over) by Harris Interactive on behalf of Saybrus Partners via its Quick Query omnibus product. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the adult population. Because the sample is based on those who agreed to participate in the Harris Interactive panel, no estimates of theoretical sampling error can be calculated.

ABOUT SAYBRUS PARTNERS

Saybrus Partners, Inc. is a Life Insurance Partnership firm that helps institutions and financial professionals nationwide deliver added value to their clients with dedicated support, product expertise and personalized insurance solutions for basic protection, as well as policy recommendations for estate, business and income planning. It is a subsidiary of The Phoenix Companies, Inc. (NYSE: PNX) For more information, visit www.saybruspartners.com and www.phoenixwm.com.

Saybrus does not provide tax or legal advice. In California dba Saybrus Partners Insurance Agency, CA license #0G81229.

ABOUT HARRIS INTERACTIVE

Harris Interactive is one of the world’s leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American, European, and Asian offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us – and our clients – stay ahead of what’s next. For more information, please visit www.harrisinteractive.com.

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