Yesterday I had the pleasure of assisting a local financial planner with the setup of death benefit pensions for a newly-widowed mum with two very young children. This was a first-time experience for both the planner & his client.

The first thing that really struck home with me was the look of relief on the widow’s face & the calmness in her voice. Even though her world had been thrown into turmoil, & she was now faced with the task of raising these young kids all alone, I could see that a huge weight was lifted off her shoulders when we explained:

  1. That her mortgage, car leases & credit card bills were now all gone! She was now DEBT FREE!
  2. That she could now finish the extensions to the home that she & her husband had planned;
  3. That an extra $50,000 per annum was going to come into her home, TAX FREE, to replace the income that the family lost when her husband passed away, & which could be used to pay for the kids education costs & extra-curricular activities; &
  4. There would still be over $200,000 on top of all of that to fund future holidays & emergencies.

It was quite evident that the ‘light had been switched on’ for the planner as well. In my experience some financial planners have been guilty of under-valuing the importance not only of life insurance, but also in giving careful consideration to how the contracts should be owned & how the benefits should ultimately be paid to ensure that the family is placed in the strongest financial position.

Moving forward the financial planner will:

  1. Maintain the relationship with this family. He now has to do annual budgets with the widow, manage the pension accounts & payments, & restructure the widow’s insurances. In the past 100% of all proceeds from death claims administered by this planner ended up being deposited into a bank account, immediately inviting his opposition (the bank’s planners) into his client’s homes. Now, however, he has terminated the relationship between the widow & her bank, placed her & her family in a much more secure financial position, & the bank’s planners are totally oblivious of his client’s situation. On top of that, by the time the widow’s children finish their education I have no doubt who they will be turning to for advice;
  2. Review all of his clients to make certain that they have sufficient insurance & that those insurances are structured correctly as well. A little bit of care & attention to detail will ensure that his clients remain loyal, ultimately increasing the value of his business.

I am proud to say that this result has come about because the planner used The Allocator software to structure the Life Insurance for this particular family. I am delighted that he is now an advocate for the software having witnessed, first hand, the relief that this outcome has given this family.

After my recent experience with the inept telemarketers from that direct insurer, & watching in disbelief as Kelly O’Dwyer blindly implemented the Financial Services Council recommendations, it does give me some comfort knowing that, at the very grassroots level of this industry, we still have planners/advisers who genuinely care.

Sadly I am quite pessimistic about the future for my industry however. It seems that the banks will do whatever they can to increase profits so that their narcissistic execs can increase their already outrageous bonuses.

The losers in all of these recent changes will be the consumers. In the not too distant future, widows, like the one just mentioned, will be fighting a losing battle when the claims department inform her that the life insurance claim has been rejected because her deceased husband failed to disclose some petty issue that occurred 20 years prior. She will be even more horrified to discover that, even though the policy that her deceased husband purchased was sold to him via a telemarketer who cold-called him, the insurance company will not be refunding their premiums because it was the consumer’s responsibility to disclose ALL relevant information (which is ‘clearly’ explained on page 186 of the product disclosure statement).

All of these damaging industry changes have come about, not because a few unscrupulous advisers/planners have been churning their client’s insurance policies, but because of greed. And the guilty parties are the banks!

I understand that banks & insurance companies have an insatiable appetite for new business, but more new business necessitates the need to hire more new staff & the costs of administering that new business can be crippling for some organisations. For some reason though the banks give no consideration whatsoever to the hemorrhaging that occurs at the back end when there is a death claim.

It seems logical to me that if all institutions adopted the same strategy that this planner adopted for his client, then when a death claim was lodged & administered, they could retain a very high percentage of the life insurance proceeds within their own funds, & even drip feed the pension payments into newly-established bank accounts for the children. This one strategy alone could save institutions hundreds of millions of dollars each year & give them decades to expose the pension recipients (the kids) to their brand, products & services. Not only would the banks benefit from this but so too (& more importantly) would the clients.

The ripple effect would be staggering:

  1. More families would keep their homes (& their dignity) when a loved one passed away;
  2. Fewer families would need to rely on welfare thus easing the pressure on our ever-increasing welfare system which, as we all know, is funded by the tax payer;
  3. Consumers would actually see the banks in a positive light as opposed to what the Commonwealth bank is experiencing right now;
  4. There would be no requirement for banks/direct insurers to desperately try to gain new business through lies & deception of consumers;
  5. Financial Planners & Insurance Advisers could continue to focus on looking after their clients rather than watching over their shoulders for the inevitable tsunami of over-regulation & imbalanced regulatory requirements.

My experience tells me though that the banks are just simply too short-sighted. They’ll slash & burn whatever they can to reduce costs & maximize profits because their voracious appetites for money will never be satisfied, regardless of the carnage that is caused. I guess we can either hold on & try & ride out this ridiculous roller-coaster ride or simply exit at the next station.

If you are a planner/adviser & would like some guidance in this area please connect with/contact me.

If you are a consumer & would like some assistance (particularly if your current planner/adviser hasn’t addressed this with you) then touch base & we will help you out.