More advisers selling insurance products

Advisers are selling more insurance, particularly long term care insurance, according to the InvestmentNews 2008 Insurance Product Survey, which polled 445 financial advisers. This year, 45.9% of respondents said they regularly recommended insurance products to their clients, up from 34.6% last year. The number of advisers who recommended the products occasionally to clients dropped to 29.7%, from 37.4% in 2007. The growth in the numbers of advisers who include an insurance solution with their advice may suggest movement to comprehensive planning as opposed to a focus on asset management. "It's a trend that if you're positioning yourself as a wealth manager, you have an obligation to look at things other than just investments," said Phil Carrasco, a certified financial planner and senior adviser at Cornerstone Wealth Management Group of Hagerstown, Md.
"If you ask me why they're doing this, you might want to be more of a holistic planner rather than an investment adviser or a stockbroker," said Mr. Carrasco, whose firm manages $150 million. Long term care insurance is now playing a bigger role in advisers' practices, as 63.4% of advisers surveyed indicated that they are recommending this coverage to a greater degree now than in the past. Genworth Financial Inc. of Richmond, Va., and Boston-based John Hancock Financial Services Inc. led the pack as the long term care insurance providers advisers recommended most often. An increasing number of older clients, as well as improved long term care insurance products, were behind advisers' move to recommend coverage more often. "As soon as one of their parents requires long term care, [baby boomers] become aware of the need and get it themselves so they won't have to go through the agonizing process of spending down assets to pay for care," said Bedda D'Angelo, a CFP and president of Fiduciary Solutions Inc. in Durham, N.C., which manages $25 million. Still, 39.5% of advisers surveyed indicated that they haven't stepped up their recommendations for long term care coverage. Cost and the decision to self-insure were the top reasons cited, but some said that the insurance wasn't necessarily the best solution to funding long term care. "At the end of the day, you're not sure of what you're getting for the premiums you pay. All you're getting for your premiums is that if you go into a nursing home, you go bankrupt a bit more slowly," said David Mendels, a CFP and director of planning at Creative Financial Concepts LLC. The New York-based firm manages $20 million. State partnership plans, through which states work with private carriers to offer citizens coverage and allow applicants to protect their assets when they apply for Medicaid, make sense, he said. Though long term care insurance is being recommended more often, annuities continue to be advisers' favorite insurance product, with 34.8% indicating they recommended them the most, down slightly from 36.7% last year. The percentage of advisers who recommended universal life insurance inched up slightly to 11.8% this year from 10.4% in 2007. But fewer respondents said they were guiding clients toward term life insurance, with 28.8% indicating they recommended it, down from 34.4% last year. Disability insurance ranked last with 6.7% of advisers recommending it, compared with last year at 5% of respondents. One reason behind falling recommendations for term life insurance could be that boomer clients, many of whom already have life insurance, are now looking at income products and long term care insurance. "Everyone's marketing to boomers, whether it's an income annuity or long term care," Ms. D'Angelo said. She primarily recommends term life to younger clients who may not be able to afford a whole life or variable life policy, whereas baby boomer clients are interested in permanent life insurance for estate-planning purposes. "When you do complex estate planning, such as a charitable-remainder trust, you're funding the estate with life insurance — not term life but a second-to-die policy," she said. "Older people are going in that direction."

GUARANTEED INCOME

Guarantees continued to be the top reason advisers recommend annuities, with 55.1% of respondents saying that they were the most important product feature, up from 52.6 in 2007. Investment options and surrender charges followed, garnering 22.8%% and 15.6% of the responses, respectively. The same lineup prevailed in 2007, with 28.2% of advisers choosing investment options and 11.8% choosing surrender charges as the most important product feature. Pacific Life Insurance Co. of Newport Beach, Calif., was the most popular annuity provider, narrowly beating ING Groep NV of Amsterdam, Netherlands, and Lansing, Mich.-based Jackson National Life Insurance Co. When looking at important features for life insurance carriers in general, 47.2% of all the respondents said that a firm's financial rating was the most important — virtually unchanged from last year at 47.3%. Price was cited as the most important feature by 41% of advisers, almost identical to last year's 41.5% response. Regardless of whether a carrier handles fixed or variable insurance and annuities, advisers stressed financial strength. "When you buy an annuity contract that gives you guarantees and options, you're beholden to the company and their integrity on what can happen down the road," said Pasquale J. Sacchetta, a certified financial planner and president of CFIG Wealth Management LLC of Westport, Conn. If a carrier is ripe for a takeover, the riders and other features on a product may not be honored by the acquiring company, he added. Health savings accounts continue to lag in popularity among advisers, with 64.2% saying that they weren't recommending HSAs more than they were previously. Advisers cited concerns over the cost of coverage for the high-deductible health plan that is used in tandem with the savings account. "I love the idea, but as a practical matter, when you go out for quotes for that excess coverage, you can buy full coverage for the same amount," Mr. Mendels said. Clients can benefit with a preferred provider organization plan and find a different way to save money, as opposed to using an HSA, he said. "It purely comes down to the economics: For the same cost to get a $5,000 or $10,000 deductible plan, I can get a [preferred provider organization plan] and save money in lots of different ways," Mr. Mendels added. Nearly two-thirds of advisers (63.8%) said that most of their clients had disability insurance either through work or a separate policy, up from 53.3% last year. HSA proponents, however, attribute advisers' lack of the use of HSA to their own limited access to the products. "The challenge is that advisers will talk about HSAs and insurance, but they refer clients out," said Eric Remjeske, president of Devenir Group LLC of Minneapolis. However, that can change if firms help provide advisers with access to the plans, so that they can sell directly to customers, he said. The InvestmentNews survey of adviser attitudes about insurance products was conducted online Aug. 4 to 15. E-mail Darla Mercado at dmercado@investmentnews.com.