Harry Markowitz’s 1952 Modern Portfolio Theory still serves as the gold standard for most advisors as they discuss the efficient frontier with their clients – that optimal mix of investments that can produce the best return for a certain level of risk. Most of these conversations center around the traditional stocks, bonds and mutual funds, and savvy advisors pepper their clients’ portfolios with REITs, commodities, currencies or alternative investments to generate additional alpha, but very few consider the importance of life insurance as an asset class.
In recent decades, financial advisory practices had become increasingly specialized, with accountants offering tax advise, investment advisors managing assets, and life insurance agents providing estate transfer solutions. However, in the last few years, the rise of the family office concept for HNW and UHNW individuals have disrupted the marketplace, and clients are looking to build relationships with advisors that can provide comprehensive solutions. Although your practice may not be well suited to offering your clients investments, one practical way to satisfy their need for wholistic financial management is to leverage the cash-value of their whole life insurance policy as an asset class.
Many agents find that by providing the analytical review of their client’s portfolios – those held at their firms as well as outside – can gain better insight as to their financial preparedness and make more accurate recommendations about their insurance needs. Furthermore, they can address excess cash positions that the client may be holding elsewhere and encourage more active management of those funds which can be offset by the cash-value of their life insurance policy in the event of a liquidity requirement. (Read our article on Tax Efficient Uses)
Life insurance is considered by most to be a tool to transfer wealth, but smart advisors and their clients are increasingly tapping into the living benefits of these policies to grow assets and estates long before their clients are ready to pass them on to the next generation. Could your clients benefit from a new and untapped asset class they already own? Call Kensington Financial Associates at 1(877) 298-7331 to learn how a cash-value loan can help them power-up their investments while they continue to grow and accumulate their wealth.