Protecting Your Client’s Investments

As an Advisor, you spend a great deal of time helping your clients grow their investments. Your clients have a general retirement goal in mind and come to you to achieve these goals. When you meet with your client, they will certainly want to know how much capital they need for retirement and how much they need to save each month to meet that goal; but the menacing question remains – are those assets protected? For example, what would happen if your client in their 40s developed life-threatening cancer? Well, in a case like this they would most likely stop contributing to their plan and start to access some or all of the capital they have already saved. This will change your client’s retirement projections and they will now have to retire on less capital or push back their retirement date in order to make up the lost money. Not good since neither option is what the client planned when they first sat down with you, their expert Advisor.

So how do you prevent this from happening?

Insurance for Your Client’s Peace of Mind

By using some simple, let’s call it “asset allocation”; you can help protect your client’s portfolio in the event of a life-threatening illness. Let’s see how this works for your 40-year-old client who makes $250,000 per year. Firstly, they will need to purchase Term to 75 Return of Premium on Surrender Critical Illness insurance, paying $5,000 in premium fees each year for $300,000 worth of coverage. If in four years from now, the same client develops life-threatening cancer, they will have options. Your client only paid $20,000 in premium payments to date, but will have access to the full $300,000 critical illness coverage. This $300,000 can then be used for whatever your client needs during their recovery and they will not have to dip into their retirement savings. A huge relief for your client during a time that is already fraught with uncertainty and stress.

The Best Case Scenario

The next logical question is what happens if the client does not become critically ill. This is the easy part. At your client’s target retirement age of 65, they will have paid $125,000 in premium fees. At this time, they could stop making payments, give up the possibility of using the $300,000 in critical illness and move that $125,000 back into their retirement portfolio. So what have they lost? The possibility of earning interest had that money been invested in their regular portfolio – a small price to pay for financial security and the peace of mind knowing they are protected should life take an unexpected turn.

At the end of the day, it doesn’t matter if your client earns $30,000 or $1,000,000 per year because the real question is, how much of their salary do they want to protect – is it six months? One year? Two years? Definitely something to consider with your client since it needs to fit their individual needs. By implementing this investment strategy, you can help your clients protect their savings and perhaps alleviate some stress during what is sure to be one of the most challenging times in their lives.

To help you decipher how much capital income your client will need for their retirement, have a look at this simple Capital Required for Income calculator (login required).

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Protecting Your Investments