Tread Lightly When Adding Life Insurance to Your Repertoire

I’ve recently noticed an uptick in chatter, both in print and conversation, advancing the point of view that investment advisors who don’t offer cash value life insurance to their clients are missing the boat. In some cases, the boat is revenue from the sale of products. In other cases, the boat is a shortfall in an advisors’ obligation to bring their clients such a fundamental tax planning tool. In some cases, it’s both.

The source of the chatter is most often those who would, in whole or in part, facilitate or somehow be involved in the expansion of the advisors’ practices to include life insurance. There are variations on the theme of expansion. At one end of the spectrum, advisors would gear up, get licensed, sell the insurance themselves and keep the revenue. At or near the other end of the spectrum, advisors would call in the cavalry and let them sell it. The revenue will sort itself out in one way or another. In either case, advisors are being told that clients who are looking for ways to take what the lax law legitimately gives them will be happy to find it in the advisors’ shops!

There’s an important and, I think, sensible contextual component to the suggested expansion. Advisors should offer life insurance primarily in the context of tax-efficient investment planning for or in retirement, which is where they focus today. It shouldn’t be done in the context of tax-oriented estate or wealth transfer planning, which is probably not where they focus today. So, in that context, advisors would just be rounding out their current service offerings to include life insurance as another investment vehicle. For a broader discussion on this topic, see my recent article.

Robust Infrastructure

I understand the expansion point of view. At first

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