4 ways to replace life insurance sales lost due to the fiscal cliff deal

By Roccy Defrancesco

The Wealth Preservation Institute

Did you hear the collective groan coming from two types of advisors when the fiscal cliff deal (FCD) was passed by Congress? Which advisors? Life insurance agents and attorneys.

Why would both type of advisors bemoan or be upset at the FCD? Simple. For insurance agents, the need for millions of Americans to buy life insurance to pay for estate tax planning just disappeared. For attorneys, there are millions fewer who need “advanced” estate planning (FLPs, IDGTs, etc.) and many will think they no longer need any estate planning.

Yep, when Congress codified the approximately $5+ million per person estate tax exemption, panic, fear, anger and other emotions came over many insurance agents and attorneys. The practical consequence of the FCD being passed is that advisors who focus on helping clients with estate taxes are going to make less money.

Replacing lost income

If you agree that the FCD will cost advisors income, the question that then needs to be answered is how do these types of advisors replace that income? Let me give you my list.

1. Medicaid planning — There are 7,000 seniors turning 65 every day. There are literally millions of clients in needs of proper Medicaid planning. What’s better is that very few advisors (including estate planning attorneys) know how to give proper advice. What’s equally as good is that there can be significant money for advisors and attorneys when helping clients with Medicaid planning. In short, there is a huge opportunity to grow your business and earn more money by learning Medicaid planning.

2. Become an IAR — I’ve been telling advisors for nearly eight months that if they don’t get an IAR, they are making a mistake for two reasons. First, state laws are changing to require a securities license if you want to sell FIAs and EIUL. It is best to be prepared for the legal changes that will inevitably come to your state. Second, when under the right RIA that can teach/mentor you on how to pick up millions of dollars under management, you can create a substantial and reccurring revenue stream.

3. Buy/sell planning — Over the next 10–20 years, there will be more privately held businesses transition to new owners than at any time in our country’s history. The great thing about buy/sell planning is that life insurance is almost always a component and attorneys can help understand this (which is nice). The opportunity in this area is huge because, like Medicaid planning, few advisors know how to give proper advice to clients who are looking to sell a business.
4. Income tax planning — Helping clients save on income taxes never goes out of style, and considering the fact that income taxes on all Americans just went up (payroll taxes, upper-end income taxes, health care surtax), now is the best time in a long time to talk about strategies to reduce income taxes.

To be unique in this space, at a minimum, you need to learn the following:
  • Captive insurance companies (CICs) — This is the most underutilized income-tax planning/wealth protection tool in the industry today; and with the advent of the “affordable” CIC, advisors can bring CICs to more clients than ever before.

  • 401(h) plans — These are tax-deductible plans that not only allow the money go to in tax deferred and grow tax free, but allow the money to be removed 100 percent tax free.
Bottom line

If you made part of your living selling life insurance to clients who needed it to pay for estate taxes, a new and not better day is here. While that is sad for many, there are ways to make up this income using the topics outlined above.