Successful Outcomes – Advisor Wins from 2019


Successful Outcomes – Advisor Wins from 2019

One of the most common threads I’ve seen in successful financial advisors is a tenacious focus on the client outcome. Outcomes are the results that outstanding advisors provide clients to achieve goals, solve problems and provide financial fulfillment. This is not to understate or minimize the process and client experience along the way – both of which are intensely important – but results provide advisors with tangible proof of their value to reinforce client relationships.

Let’s highlight three strategies that led to outstanding client results. I will take you through how advisors engaged with their insurance partners to solve problems and achieve the best outcome for their clients.

Outcome #1 – Business Succession Planning with Buy-Sell Partnerships

Early this year we had an advisor approach us with an opportunity to assist in putting together an insurance portfolio for two business partners. Let’s call them Jim and John. The two clients built an extremely successful manufacturing business that was well capitalized and generated significant cash flow. Jim and John needed to arrange a buy-sell agreement and funding strategy.

Based on the advisor’s discovery session with Jim and John, their goal was to ensure they had enough insurance coverage to fund the buy-sell arrangement, and they didn’t like the idea of “renting” term insurance. The clients believe that in 15-20 years they will be exiting the business and it is important to them to either have cash value built into their coverage that they could take with them or permanent insurance they could repurpose for estate planning. While this may sound relatively straightforward, the typical “cross-purchase” arrangement makes this more difficult to accomplish as the partners would essentially own each other’s policy. While cross-purchase is still a workable strategy, a more streamlined solution for this type of scenario is to establish a partnership to own the policies with an operating agreement that will govern the buy-sell.

The benefit of using a partnership to own and govern a buy-sell agreement is threefold.

  1. The structure allows the two business owners (equal owners of the partnership) to equally share in the cost of funding the coverage. Since Jim and John are relatively similar in age, it is not particularly relevant in this circumstance, but this is an issue often raised.
  2. This structure allows them to easily, upon exit of the business, distribute the policies to each insured rather than trying to negotiate a sale between two now-former business partners.
  3. The partnership structure avoids some of the transfer-for-value issues that can arise from other buy-sell arrangements (specifically for those clients considering a buy-sell trust if more than two business partners are involved).

The advisor suggested the clients consider creating a partnership agreement funded with cash-accumulating life insurance. Jim and John agreed to the strategy and began underwriting while also engaging with their attorney to draft the appropriate agreements.

Jim and John were both approved with favorable underwriting terms and put the advisor’s recommendation in place. Each of their policies is projected to last for their lifetime and have cash values at their target retirement age that well exceed the premiums paid. The outcome of this scenario is the coverage Jim and John needed with an ownership structure that accomplishes what they wanted.

Outcome #2 – Repositioning the Right Assets for Healthcare in Retirement

The fastest-growing line of business at Ash is our long-term care business or, perhaps more appropriately named, our healthcare in retirement business. In speaking with advisors across the country, there is a palpable demand from their clients for solutions to fund potential long-term healthcare events. Virtually everyone has now witnessed a grandparent or parent go through an extended care event and the strife and complexity that often accompanies it. The question is no longer if a client will need care, but when and how to fund the care.

One of our most successful advisors found a unique funding mechanism to seamlessly provide his clients with a substantial amount of LTC coverage without impacting their cash flow or investable assets. This advisor has a group of clients with significant cash accumulations in underperforming whole life contracts. These contracts were earning a relatively modest, albeit safe, rate of return every year and required an annual outlay. Few clients needed the insurance death benefit and the money in the contracts was more of a contingency pool of assets rather than dollars needed for retirement income.

Knowing that one of the primary reasons a client might need those “contingency” whole life dollars is a significant long-term healthcare event, the advisor looked for a different strategy. The advisor recommended a tax-free exchange to an asset-based long-term care policy. Asset-based LTC is relatively simple: The client deposits money with the insurance company (since this was a rollover, it was a single lump sum) and in return gets a pool of dollars for long-term care that is often three-five times the initial lump sum and is indexed for inflation. In some of this advisor’s cases, the LTC pool of dollars represents a tax-free internal rate of return in excess of 8% at life expectancy. The drawback of the asset-based strategy is a very modest death benefit –  essentially a return of the premium. Since this group of clients weren’t concerned with death benefit, but knew the impact of an LTC event, this solution fit very well.

This advisor was able to provide his clients with certainty and peace of mind about long-term care, all with very little disruption to the client’s financial picture. By repositioning an asset that was no longer serving the client’s needs, he was able to mitigate one of the biggest risks in retirement, a long-term health event. This is a very positive outcome.


Outcome #3 – Annuity Restructure

This summer, we had an advisor approach us with a client who had been oversold a portfolio of annuities. The annuities had significant surrender schedules, high fees for guaranteed income riders, and the client (let’s call him Joe) had no need for the income in retirement. These annuities were ultimately going to pass to Joe’s family, and he was relatively unsure why he had acquired them.

Joe’s advisor brought his portfolio of annuities to Ash and asked us to help model some scenarios integrating insurance. We put together projections for maintaining the current annuity portfolio but also looked at using the guaranteed income features to fund an insurance strategy for the client. The insurance strategies created a far more compelling net result for the client and added in some potential long-term care coverage as well.

The outcome for this client was a better, more sound planning result that was a custom fit for his circumstances, not an advisor’s commission statement. Our models proved the value of insurance and created a platform for this client to make the right decision.


2019 was a great year, and by focusing on bringing solutions to every client, every time, we can keep this momentum going in 2020. And beyond.   

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