Most Financial …

Most Financial Advisors Don’t Include Life Insurance in Planning

By Chris McMahon

Financial advisors are so uncomfortable speaking about life insurance that more than half, 56 percent, simply don’t do it, according to a recent survey by financial advisor Saybrus Partners Inc 

Further, almost one-fifth (18%) said they were “uncomfortable” or “very uncomfortable” recommending life insurance policies to their clients. Just a third (34%) of the financial advisors surveyed said they were “very comfortable” recommending life insurance to their clients.
It’s the sales process that advisors find most objectionable. 
“The process is cumbersome; the applications are long; the underwriting process takes so long. You’re putting the client through exams. It’s intrusive,” said Kevin Kimbrough, national sales manager for Saybrus Partners. “They are going through medical records and that sort of thing. It causes some advisors to shy away. That’s a factor.”
Other factors include the complexity of life insurance products and the weeks-long sales cycle, all before the application is then put on the underwriters’ desk for evaluation, assessment and rating. 
“Finding new ways of distributing the product are critical and financial advisors are one logical place to go to, because those folks already have clients who are in the throes of the planning process,” Kimbrough said. 
To improve the relationships between financial advisors and insurers, he says the insurers need to simplify the process and better use technology, using electronic forms for example, to speed and simplify the sales, application and underwriting processes.
Consumers with life insurance don’t fare much better. Fewer than half than half (47%) of the advisors said they perform an annual review of their clients’ existing life insurance policies. Just 20 percent review their clients’ policies during major life changes, like marriage or the birth of a child, and the review is typically focused on whether the policy is adequate for the client’s current needs. One-in-ten admitted they only discuss existing policies if the clients ask.
“This means that many of their clients may be lacking essential protection for themselves and their families or missing opportunities to more effectively transfer their wealth to the next generation,” Kimbrough said “Life insurance is not a set-it-and-forget-it product. It should be monitored and adjusted, if needed.”
Changing market conditions can have a strong effect on the performance of variable life insurance products, he adds, and fixed products can suffer in a low interest-rate environment, such as the one we are currently experiencing in the United States, which could lead to an unintentional policy lapse. “Other issues include the possibility of missing out on more affordable rates and newly available features like long term care riders,” Kimbrough said.
To become more comfortable discussing life insurance, 42 percent of financial advisors said they would be interested in either working with a life insurance specialist to identify client solutions or attending a seminar – aimed specifically at financial advisors – on life insurance.
“Advisors are clearly interested in integrating life insurance into their practices,” said Kimbrough. “By partnering with a life insurance specialist, they can offer a fuller range of portfolio options, solutions and overall advice to their clients without having to invest the time and effort needed to become experts. In many ways, the advisor is akin to a primary care physician performing an annual check-up and calling in a specialist for a second opinion. Through this type of partnership, advisors can ensure clients’ needs are properly addressed, without exceeding the scope of their own expertise.”
The survey of 103 financial advisors was conducted in early May at the 2012 Financial Advisor Retirement Symposium and the results were consistent with a survey of 2,410 adults, 786 of whom said they currently have a financial advisor and half of whom had never discussed life insurance with their advisor. That survey was conducted online in July 2011 by Harris Interactive on behalf of Saybrus.


Advisors need to focus beyond front end commissions

We all know August 2009 front end sales commissions were banned by the regulator which hit the financial services distributions community like a Tsunami. No one was prepared. The impact was advisors shut shop, medium and large distributors came down heavily on costs, even asset management companies scaled down operations as volumes fell. An impact which did not leave any one without a scar.

 Some two and a half years later we hear talks of the front end commission coming back. But today’s news states that the issue has been placed on the back burner. Looks like there is no immediate answer on the horizon. Indian regulators needs to do what is right for the consumer and to increase the penetration of Mutual Fund as an asset class. All stakeholders have to establish the long term nature of Mutual Fund investments. If one needs to churn then we have direct equities to play with.

However the best way forward is to look at delivering solutions and not products. Distributors, advisors and all intermediaries have to differentiate themselves on knowledge and advise. Hoping that product commissions will sustain us in the long term is not the business model one should strive to build. We have to move to equipping ourselves with Knowledge that creates the differentiation

 On the certification / commission front India has to evolve its own model. What we can do at this time is look at some of the mature markets and see where they are and where they are headed. That will give us an indication but surely not the complete answer. Let’s look at the 3 most advanced markets USA, UK and Australia.

United States


In the United States, the Financial Industry Regulatory Authority (FINRA) regulates and oversees the activities of more than 5,050 brokerage firms, approximately 172,050 branch offices and more than 663,050 registered securities representatives. A financial adviser or stock broker should be licensed to provide any consultation on investment in securities. Typical licenses needed to promote the sale of stocks are the: Series 7 (General Securities exam), Series 63 (State Securities exam), and Series 65 or 66 Uniform Investment Adviser Law Exam. Generally, any adviser who charges a fee for investment advice would need to also have the Series 65 or 66 license. Thus, anyone can call themselves a financial planner(although care must be taken not to be confused with a Certified Financial Planner), but they would still need FINRA licenses to provide advice for a fee or be registered as an investment adviser with the Securities and Exchange Commission in the USA. Anyone in the business of providing financial advice can call themselves a Financial Advisor. There currently isn’t any regulation on the use of this title. To charge a fee for advice, one must pass the FINRA Series 65 test—The Uniform Investment Adviser Law Examination. To be a “Registered Investment Adviser” (RIA) or “Investment Adviser Representative” (IAR), one must pass the FINRA Series 65 exam or both of the FINRA Series 7 and Series 66 exams.

United Kingdom

In the United Kingdom investment advice is given either by a financial advisor or a stock broker.

Financial advisors need to pass an exam and receive a Certificate in Financial Planning (previously the Financial Planning Certificate) or the Certificate for Financial Advisers, and also authorised by the Financial Services Authority, that must be satisfied the advisor is a “fit and proper person” before they may practice.

Financial advisors are either 

Tied – As the classifications suggest, tied advisors can only recommend ‘financial products’ marketed by the company they represent.

Multi-tied – Multi-tied agents perform a similar role, except they represent a number of different companies. This is sometimes referred to as the panel system. Tied and multi-tied advisors are nearly always rewarded via commission, though in some cases (and if the advisor is employed rather than self-employed) commission may be expressed in notional terms to justify a salary.

Independent Financial Advisor – must offer advice on all ‘financial products’ on the market (which carry commission) and, in addition, must offer clients the choice of paying a fee for advice about a product or products, rather than being remunerated  commission  from the financial institution that is promoting the product.

Fee-only –  Fee-only financial adviser designs bespoke solutions, and often by investing directly removes marketing commissions and charges from the costs that clients would otherwise pay. Fee-only advisory firms tend to accept a professional duty of care.

In addition it is worthwhile to know about the Retail Distribution Review (RDR) program in United Kingdom. Envisaged in June 2006, the UK regulator (FAS) created its Retail Distribution Review (RDR) programme which they maintain will enhance consumer confidence in the retail investment market. The RDR has a target for full-implementation of 31 December 2012 but recent reports show that it might be delayed as it is expected to have a significant impact on the way in which financial services are delivered to retail investors in the UK. It  is expected to significantly reduce the profitability of many IFA practices.

In anticipation of the new regulatory environment being enforced the industry landscape is undergoing significant change. The most significant identifiable trends are:

  • Consolidators buying up small firms of IFAs as a result of the higher qualifications threshold and downward pressures on profitability resulting from RDR – E&Y estimate that the number of Registered Individuals will fall from 30,000 to 20,000 within the next 5 years
  • IFAs are embracing the concept of wrap account – incumbent fund supermarkets and Life Asurance Companies are in response launching their own Wrap Platforms
  • IFAs are rapidly moving from the traditional investment solution for clients: recommending a portfolio of largely equity-oriented collective investment schemes and being paid initial and annual renewal commission by the fund provider to an outsourcing model: recommending that clients appoint a discretionary fund manager to manage the client’s portfolio(s) and charging the client an annual oversight fee. A recent survey found that 89% of IFAs are considering outsourcing to discretionary managers as a result of RDR.
  • Several new entrants are making major in-roads into this market at the expense of the incumbent retail-oriented funds groups.  The larger discretionary fund managers are finding it difficult to adapt their business models to cope with these changes, given that the small average portfolio size is better suitedto multi-manager (portfolio of funds) solutions, via wrap platforms, when these fund managers tend to prefer to retain custody and investing in direct equities.


Australia issued some far reaching reforms in the Financial Advise space last year. The financial planning services were initially delineated by law by the granting of licence to deal in securities or advise on investments. Licences are issued under stringent criteria by the Australian Securities and Investments Commission (ASIC), broadly, most people embarking in financial planning will start as an authorised representative of a licence holder. Becoming a financial planner in Australia involves two main steps:

1.            Meet the training requirements of Regulation Guideline 146;

2.            Select a licence holder with whom to be affiliated.

The licence holder is the authorised representative, and will be ultimately responsible for the advice given by the planner. The licence holder therefore must make sure the representatives meet all compliance and training prerequisites.

FOFA reforms highlight

The exhaustive document covers various reforms, some local in nature and with details of process and next steps. We have highlighted the key reforms that could find its way into the Indian market in the future  :

  • A prospective ban on up-front and trailing commissions and like payments for both individual and group risk within superannuation from 1 July 2013.  
  • A prospective ban on any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers, including volume rebates from platform providers to dealer groups. 
  • A prospective ban on soft dollar benefits (benefit is $300 or more from 1 July 2012). The ban does not apply to any benefit provided for the purposes of professional development and administrative IT services if set criteria are met.     

Developments in India

The distribution community are now hearing of many developments in the Indian market as well. The formation of the Financial Stability and Development Council (FSDC) under the Honourable Finance Minister is one big development and which will hopefully ensure inter regulator coordination and not repeat the SEBI-IRDA spat.  In addition, SEBI has announced that it favours a self-regulation model for wealth managers with representation from among the wealth managers themselves. Will it cover the Advisors we don’t know?

With the Indian Wealth Management industry estimated USD 1 trillion and growing aggressively,we will see the benefits of wealth creation spreading to all strata’s of society, increasing the savings penetration in stocks and mutual funds to double digit from the low single digit we have today. When the investor starts looking at market related investments, he/she needs to get the right advise and from a person who is knowledgeable and authorised to provide such advice. To develop the framework for India, I am sure regulations like the FOFA reforms in Australian, RDR in UK and FINRA regulations in USA would be taken into consideration and adapted to suit Indian conditions.

What is happening overseas is a good way to understand what we can expect to happen in India in the near future. I am sure there will be a lot of discussions and debate before the SRO promulgates the framework.

Learning for us in India

Like the United States we see that there are multiple examinations one has to pass to be able to offer products or advise to clients in United Services. To some extent in India we have product level certifications for Mutual Funds, Insurance, and Capital Markets etc. But there is still no regulatory requirement on any financial planning type of qualification. Will it happen in the future, possible!. As of now we have noticed that National Institute of Securities market (NISM)in association with FPCIL  has launched a Certified Personal Financial Advisor (CPFA) Examination as part of its portfolio and is voluntary in nature.

The RDR program in United Kingdom  is not difficult to relate to for IFAs in India. As mentioned we saw the 1st major change in August 2009 where regulations on commission pay-outs were announced. Post that many smaller changes have been announced which is impacting the way business is being done.  The changes happening in UK due to the RDR program being implemented  sounds familiar to us. In India we are seeing some level of IFA consolidation happening where some IFAs are selling out their portfolios. Many IFAs are looking at adopting technology in order to fight competition and position themselves to be able to charge a fee from clients with superior value added services. Even though India is a different market from UK, the challenges the community faces seem similar and the way to address them also seem to gel with what we see happening around us

The IFA channel currently contributes 1/3rd of the AUM in the Mutual Fund Industry and if we classify Life insurance agents as tied advisors they contribute more than 50% in the insurance industry. The IFA channel has a bright future and is estimated to grow manifold in the coming years and continue to be one of the key pillars in the financial services distribution structure.

However we are seeing tough times currently with IFAs moving out to other lines of business , changing business product mix and target segments. Going forward what are the types of changes we can envisage. We could witness categorisation of IFAs like we see in UK under the RDR program and in Australia under Future of Financial Advise (FoFA) program . These changes will  impact the level of knowledge IFAs will need to gather in the coming years. So it would smart business strategy to keep tabs on how the RDR and FoFA program is rolling out in UK/Australia  as it could be a precursor of what we might witness in the Indian market in the near future.

At Infinite Touchbase we are committed to enhancing the KNOWEDGE QUOTIENT of all distributors /intermediaries so that they can bring a difference to the life of their clients even before regulation makes it mandatory. Our multitude of training programs as can be viewed in our website which helps in building the selling and technical skills across multiple product lines.

One program that we offer currently is Chartered Wealth Manager (CWM) form American Academy of Financial Management (AAFM) which is one of the most comprehensive and relevant Wealth Management program in the country. For details visit our website

A quote from Henry Ford sums up the quest for knowledge – Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young.

Course Overview of Chartered Wealth Manager (CWM)

Course Overview of Chartered Wealth ManagerTM (CWMTM)

  • 2 Levels
  • 10 Units each
  • Most comprehensive and relevant Wealth Management program in the country

Level I – Basic Wealth Management


  • The objective of this module is to enable the Wealth Management professional get a basic understanding of the Global and Indian Financial System.
  • Effective financial system is required by any nation for financial development. The concept of globalization demands integration of domestic market with global market.
  • The course covers the history and origination of the International Financial Markets, Global Financial Institutions, regulatory institutions, Monetary and Economic System.


  • This unit would serve as an introduction to Wealth Management and Credit Management.
  • The unit would cover the Wealth Management Process, Client Interaction Process, Time Value of Money Applications, Personal Financial Statements, Cash Flow Management, Debt Management,  Asset Acquisition, Loan and Credit Management.
  • The unit gives an overview of Wealth Management Industry Globally with special emphasis on the state and future of Wealth Management Industry in India.


  • Understand risk, return and investor outlook, describe the relationship between risk and return
  • Understand investor’s ability to take risk and willingness to take risk and identify optimal portfolio allocation considering the client’s risk taking abilities and financial goals.


  • This unit would cover the knowledge requirements relating to life cycle management including retirement planning for a Wealth Manager professional.
  • The participants gather an understanding of the importance of Life Cycle Issues while creating a Wealth Management Plan for a client.
  • The emphasis is on the process of wealth creation and the reviewing retirement planning strategies for clients.


  • Concept, structure, returns measurement (income and/or capital gains), tradability, liquidity and legal issues of the major investment vehicles.
  • The objective is to provide an essential understanding of the products from a risk‐return perspective, so that proper product recommendations can be made.


  • This unit would cover the knowledge requirements relating to risk analysis for a Wealth Manager.
  • It introduces students to risk analysis and insurance decisions in Protection Planning in a Wealth Management Plan.
  • Wealth Planning for clients’ involves decisions on exposures to mortality, health, disability, property, liability, and long term care. A Wealth Manager should be able to protect their client from these exposures in an efficient manner.


  • This unit would cover the required knowledge base for Indian Taxation System.
  • Taxation issues play a very important part in influencing wealth management decisions. This unit enables the student to:

1. Evaluate the appropriateness of tax strategies for individual family situations.

2. Integrate tax planning into the wealth management process.

3. To understand the universal nature of estate planning needs.

4. To recognize the high level of ignorance regarding estate planning among the general population as well as students.


  • Wealth transfer and preservation is as important as wealth accumulation.
  • Few things are more important to an individual than planning his or her estate. Estate Planning determines who will receive your wealth at your death, how much of your wealth will go to the government in taxes, and whether your property will pass through a probate estate or through a trust.
  • On completion of this unit the student should be able to give advice on Estate Planning, Trust Planning while taking into account the taxation of the above strategies.


  • Banking is closely related to the Wealth Management Industry a Wealth Manager should have a thorough knowledge of the banking industry, banking processes and banking products. This unit allows the participants gather the required knowledge of the Banking Industry, Processes, Products and Challenges.


  • Legalities in Wealth Management focuses on statutes and regulations affecting businesses, families, and individuals in their related roles in managing and accumulating wealth.
  • Legalities in Wealth Management is a unit designed to give students the knowledge they need regarding legal issues while managing wealth of individuals and institutions.


Level II – Advanced Wealth Management


  • This unit builds upon the foundations in Wealth Management and the knowledge requirements to enable the Wealth Manager to construct a comprehensive Wealth Plan for a client.
  • This unit also covers the strategies to setup a successful Wealth Management practice. This unit would be taught as a case study based unit.


  • Customer relationship management (CRM) is a widely implemented strategy for managing Wealth Managers interactions with customers, clients and sales prospects.
  • It discusses techniques to find, attract, and win new clients, nurture and retain those the wealth manager already has, entice former clients back into the fold, and reduce the costs of marketing and client service


  • The course is focused on behavioral factors influencing financial markets and corporate world.
  • This course targets the link between the peculiarities of human behavior and aspects of financial and investment management.
  • In addition, the course puts various “behavioral mechanisms” into more basic psychological framework spanning the mechanisms of information perception, emotions, memory, and attention.


  • This unit covers the techniques and processes which a Wealth Manager should follow to manage the wealth of their clients.
  • Excellent Planning of Wealth and creating a workable Wealth Plan is essential skills that a Wealth Manager should acquire


  • The equity Analysis unit focuses at introducing the students about the various aspects of securities analysis to find out the undervalued and overvalued securities.
  • The unit covers both the technical analysis techniques and the fundamental analysis techniques


  • This unit includes introduction to Investment Management.
  • The process followed by a Wealth Manager to manage investments and it incorporates the building blocks of knowledge required to manage investments.
  • The later part of the unit discusses various methods of portfolio analysis, portfolio evaluation and portfolio management techniques.


  • The objective of the unit is to enable the student to understand the various types of secured and unsecured loans, benefits of loans and best practices in Debt Management and debt portfolio management.


  • Explains the importance of alternative assets and discusses the sources of return to this asset class in terms of beta and alpha drivers.
  • Describes various hedge fund strategies, explains their sources of risk and return and provides historical data showing their distributional characteristics.
  • Discusses the role of incentive fees in the performance of hedge funds and analyzes several cases involving hedge fund liquidations.
  • Discuss the role and structure of Managed futures, Private equity and Collateralized Debt Obligations.
  • The unit also covers method of classification and inferring the pay off of a Structured Product


  • The purpose of the courses is to gain an understanding of the economic forces that drive real estate value in the market.
  • Students will learn the concepts, tools, and techniques for evaluating individual real estate assets, based on the application of economic theory and principles of urban economics, for the purpose of real estate valuation.
  • Upon completion of the course, students should have a broad understanding of how market dynamics, constrained by the geographic, physical and legal parameters, determine values of individual assets in the market. (In short, at the end of the course, if someone points to any property and asks, “what is it worth?” or “how much should we pay for it?” you will know how to determine an answer.)


  • Globalization of economies, signing and review of free trade agreements, increase in the number of cross border transactions, mergers, acquisitions, tax treaties, transfer pricing etc. have added to the complexities of various taxation laws.
  • While appreciating these increasing complexities in the area of International Taxation, we try through this unit to understand these complexities