Consider Intergenerational Planning for Producer Asset Retention

A family approach to planning may mitigate risk to your business

Long-term financial planning strategies require a financial professional to consider the impact of a client’s death on loved ones. However, historically, financial professionals focused only on preparing the assets for the beneficiaries. They didn’t focus on the second part of the equation: helping the beneficiaries build a strategy for those assets.

Giving thoughtful consideration to this continuum of service is beneficial not only to the client’s family but also to the financial professional, whose book of business can experience a significant impact after the death of a client, especially when beneficiaries spend their inheritance or take their business elsewhere.

The odds of a financial professional losing the family’s business upon a client’s death are high. Less than a quarter of U.S. consumers plan to use the services of a trusted financial institution or professional to handle an inheritance.¹ An April 2018 InvestmentNews survey indicates that 66 percent of inheritors change advisors. Considering these trends, plus the fact that $1 trillion will pass from one generation to the next each year, mitigating the resulting decrease in value of one’s book of business should be top of mind for financial professionals.

“You’ve spent years working with that client to build and foster the relationship, and to grow and protect their assets. If you don’t get to know the spouse, their partner or their children, and your client dies — the next generation will take over,” said Nate Lund, regional vice president, Allianz Life Insurance Company of North America. “If you don’t have a relationship built with that generation, you are more than likely going to get fired and lose those assets.”

The Value of Intergenerational Wealth Preservation and Management

With so much at stake, it’s more important than ever for producers to do their own financial planning and expand the scope of client relationships to include the next generation.

“Taking time to meet with your client’s spouse, children and grandchildren during the financial planning process can yield several benefits,” said Scott Kellen, regional vice president, Allianz.

• Asset retention at death. Building a strong relationship with the next generation before a wealth transfer makes beneficiaries much more likely to continue that relationship.
• Generating new leads. Relationship building across generations acts as a potential lead generator for many producers, increasing revenue opportunities and integrating life insurance into your business.
• Business succession planning. Expanding your book of business across generations increases interest for future partners or owners. The next generation of financial professionals wants to see a client base built on multigenerational relationships.

How to Provide Immediate Value to the Next Generation

Part of the financial professional’s job is to create a holistic financial strategy that focuses on more than just the parents.

“Bringing up wealth transfer with clients shows them that you care about the future success of their children,” said Brett Novielli, regional vice president, Allianz. “This can be a big differentiator. Only 20 percent of financial professionals are targeting younger family members², so this approach will help you stand out.”

A starting point can be asking what future clients would like to see for their children and grandchildren. Some clients are concerned about children not having enough income to support themselves or not setting anything aside for educational expenses. In particular, some grandparents may be interested in ensuring their grandchildren have adequate college funding. In addition to offering a death benefit that is generally income-tax-free to beneficiaries, fixed index universal life (FIUL) insurance can potentially provide the opportunity for supplemental college funding as well as supplemental retirement income.

For example, a client who is concerned for both her daughter and granddaughter may consider FIUL to provide for both generations. Your client may gift funds to her daughter that can be used to pay the premiums on an FIUL policy on which the daughter is both the owner and the insured.

That way, if the daughter were to pass away before the granddaughter goes to college, the policy becomes a self-completing vehicle and the death benefit would help pay for college costs. But if the daughter lives as planned, she can take policy loans¹ against any available cash value that can be used to supplement other college funding sources.

Clients utilizing a loan strategy should carefully manage their policy values so as to help prevent a policy lapse and adverse tax consequences. Clients should consult with their team of professionals, including a tax adviser, to determine what may be appropriate for their situation.

FIUL insurance can be a powerful way to help provide for a child’s future — and help supplement retirement income too — all while providing reassurance to beneficiaries through a generally income-tax-free death benefit.²

Allianz provides a variety of potential solutions to help financial professionals give their clients the reassurance that comes with protecting future generations.

Want to understand how fixed index universal life insurance products from Allianz can help your clients’ beneficiaries pursue their dreams — and potentially protect your business in the process? Visit FIULfortheFuture.com to discover more about our innovative FIUL solutions and to get the “Solution for life’s many stages” sales idea.

1. U.S. Consumers are Unprepared for Coming Wealth Transfer, New FIS Study Finds, May 16, 2018, Business Wire, https://www.businesswire.com/news/home/20180516005241/en/U.S.-Consumers-Unprepared-Coming-Wealth-Transfer-New

2. Allianz Generations Apart Study: https://www.allianzlife.com/-/media/files/global/documents/2016/06/16/20/50/ent-1743-n.pdf

3. Here’s why 90% of rich people squander their fortunes, Moneyish, Catey Hill, April 24, 2017, https://moneyish.com/upgrade/heres-why-90-of-rich-people-squander-their-fortunes/

Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or may affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change, and you should consult a tax professional.

For financial professional use only – not for use with the public. Product and feature availability may vary by state and broker/dealer. Products are issued by Allianz Life Insurance Company of North America. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

53764-18 9/2018