Negligent Financial Planning

As a group, the evidence-based advisors I serve through our coaching and web design companies are among thefinest people I’ve ever met.  You arecaring, competent, conscientious and dedicated to the well-being of yourclients.

Yet, I wonder if there are gaps in the financial planningyou and others are providing to your clients. My concern doesn’t have a sound statistical basis.  It’s based largely on inquiries I receivefrom readers of my books and blogs, but it’s also reinforced by industrydata. 

Lack of life insurance

Every widow who has contacted me over the last decade or sohas told me her husband had either no life insurance or “very little.”  This includes the wife of a trusts andestates lawyer who died suddenly and prematurely.

Their experience isn’t atypical.  According to onestudy, only 59% of Americans own some form of life insurance.

The lack of life insurance is particularly troublingconsidering the dire financial condition of many Americans.  One-third of families surveyed admitthey would confront a financial crisis within one month after the death of theprimary earner.

There are many reasons why Americans are underinsured, notthe least of which is the complexity of life insurance, the poor reputation ofthose selling it and perhaps ignorance of financial advisors.

Here’s something you can tell your clients who may bereluctant to buy life insurance:  Therehas never been a widow who, upon receiving a death benefit, questioned whetherthe type of life insurance purchased was the best policy available.

Instead of getting bogged down in the weeds, focus on theforest.  Your clients need lifeinsurance.  Make them aware of theconsequences of inaction.

Buy a home

Renting a home is popular these days.  It makes sense in some circumstances,especially in areas where home prices are sky high.

I can tell you this: My experience with widows has not included this comment:  I really regret we own our home, mortgagefree.

Advisors are fond of talkingabout how they provide “peace of mind.”  WhenI paid off my mortgage, it gave me “peace of mind” in way I hadn’t previouslyexperienced.  During my life, our shelteris secured.  After my death, my wife canlive in our home without the burden of a mortgage.

If you haven’t had thisdiscussion with your clients, you should.

Outliving your money

You can run the mostsophisticated financial planning software in existence, but here’s one fact youcan’t tell your clients:  When they aregoing to die.  You can discussprobabilities, but you can’t give them certainty they won’t outlive their money.That is what they want.

For a healthy couple in their mid 60s, it’s not unlikely one of them will live for another 35 years.

There are many benefits topartially annuitizing this risk.  Theyare discussed in detail here.  If you aren’t considering immediate ordeferred-income annuities for appropriate clients, you are doing them adisservice.

Here’s what I want to hear fromthe next widow who calls me:

I’ll be fine.  My husband had more than enough insurance forme to maintain my quality of life.

We own our home without amortgage. I think I’ll stay here, at least for a while.

We purchased a longevityannuity that meets some of my expenses for the rest of my life.

Will that be your client?

Resource of the week

I don’t believe you can competently provide financial planning advice without knowing about the benefits of “participating whole life insurance.”  You might start by reading this article.