85. Create "LIQUIDITY" using Life Insurance

 

One classic application of Life Insurance is the creation of "CASH" in lieu of property inheritance, I first learned of this so many years ago from Rex Mendoza during his talk in one of our agency rounds for Philam Asset Management

Rex has a wealthy client who has vast property holdings in Cavite, while she lives in a big house with all of the physical trappings of a rich landed family, she unfortunately has very little "cash" to support her lifestyle and maybe help out family members in need of financial assistance

She shared that she intended to bequeath her land holdings among her 2 grown children who are now quite successful in their chosen field, one is a physician practicing in one of the eminent hospital in Canada while the younger one is a fund manager with a global firm based in Singapore

While the plan may makes sense in a typical estate planning approach, Rex raised some issues that the client may have overlook

• First is estate tax (it was still 20% then) - while the children may be able to afford it considering their status, it is still a big chunk of money
• Second is - are the children be willing to come back to live in their ancestral home?
• Third is that while the client is rich in assets, she is poor in terms of cash

Rex suggested the following solution:

As the properties then are valued at around 10M pesos, he suggested to sell it and move to a smaller house as the client is living by herself, she can then get a 10M Life Insurance Policy with her 2 children as beneficiary (5M each)

The values created are :

• No need to worry about estate taxes as the property is sold already
• the children still gets the same amount of inheritance
• the client can use the remainder of the sale proceeds to live out her life in a more comfortable manner

Hope this help in your year-end push my friends, all the best!

#acgadvice

84. It's the "IDEA" that sells the product

 

I am re-learning a lot in my comeback as a financial advisor, concepts that I have espoused in the past has been constantly challenged in the light of recent developments in the financial markets

I am thankful for my many rejections as it forced me to re-evaluate what a prospective policy holder will accept as something that would create value for them

I may have the best product available in the market, but if I fail to demonstrate how it can help mitigate a risk or enhance value in my prospect's financial journey, the product will not be bought!

I's like to share 2 ideas that worked for me 

First, considering current market volatility, suggest to the client to stretch the frequency of payment option to as often as they can, I find the monthly premium payment the best as it maximizes the benefit of "cost averaging", the value to the client is getting the best average entry price that could mean as much as 70% more future value (please see my previous post - 78. (VUL) Sell the protection, not the returns)

second, focus on the "guaranteed" aspects of a VUL proposal, it could be the face amount, the attached riders that addresses critical illness or waivers of premiums, that for as long as the premiums are paid on time, these benefits are guaranteed, the value to the client is the "certainty" aspect of a VUL

all the best my friends!

82. Leaders in Action