Transcript No Slide Title

Welcome To The Canadian
Institute Of Financial Planners
Cover Your Assets: Insuring
Your Practice With Insurance
Mark A. Smigel, CFP
Senior Marketing Representative
Western Region
AIG Life of Canada
Insurance, The New Standard?
•
Of 11 brokerages surveyed, 70% of all investment advisors were insurance
licenced.
Among the other designations held . . . .
24% - CFP
43% - PFPC
20% - CIM
18% - FSCI
Aileen Corr, “Insurance, The New Standard”, Investment Executive, May 2004, p. C6
Reasons To Avoid Insurance?
• Apathy?
• “My clients are looking for financial planning services, not insurance
products. . .”
• Service?
• “Too time consuming . . . ”
• “I’m an investment specialist . . ”
• Knowledge?
• “It’s too techie”
• “Insurance agents are sales shmo’s”
Three Reasons We Cannot Avoid It?
• Fiduciary Responsibility
• Preserves Livelihoods
• Augments Cashflow
Reason #1 - Fiduciary Responsibility
Fiduciary Responsibility
• FPSC Code Of Ethics?
• Insurance Council Code
Of Conduct?
• Supreme Court Rulings
(Klym et al vs Bank of
Montreal, 2005 BCSC
420 Date: 20050322)
What Is The Standard For Malpractice?
“One who holds himself out to the public as an
financial planner is required to have the degree of
skill and knowledge requisite to the calling. If he
neglects to procure the insurance or if the policy is
materially deficient or does not provide the coverage
he undertook to supply, because of his failure to
exercise the requisite skill or diligence, he becomes
liable to his principal for the loss sustained thereby.”
Ryder v. Lynch, 42 N.J. 465, 476 (1964)
What It Means If I’m A CFP?
Principal 3 – Competence
A CFP professional shall offer advice only in
those areas which the CFP designee has
competence. In areas where the CFP
professional is not professionally competent,
the CFP designee shall seek the counsel of a
qualified person and/or refer clients to such
parties.
What It Means If I’m A CFP?
Principle 7 – Diligence
Enter a client engagement only after securing
sufficient info to be satisfied that:
- the relationship is warranted by individuals
needs/objectives;
- The CFP professional has the ability to either
provide requisite competent service or to
involve other professionals who can provide
such services.
What If I’m Not A CFP?
Duty Of Care
You have an obligation,
before conducting a transaction,
conduct sufficient fact-finding
needs analysis to properly assess a client’s
circumstances, goals and needs
to
and
Insurance Council Of British Columbia, Code Of Conduct For Insurance
Salespersons and Adjusters, June 1999, p. 16
Reason #2 – Preserves Livelihoods
Let’s Look At Your Books
Account Breakdown %
2004
2003
AUM/Client <$50,000
18
23
AUM/Client $50,000
to $1 Million
75
67
9
10
AUM/Client > $1 Million
Source: Investment Executive, “Brokerage Report Card”, May 2004, p. C5
Let’s Look At Your Books
Product Mix %
In House Managed Product
3rd Party Managed Product
Equities
Fixed Income
Income Trusts
Cash
2004
2003
8
29
27
23
9
5
9
31
28
28
n/a
5
Investment Executive, “Brokerage Report Card”, May 2004, p. C5
Let’s Look At Your Books
Compensation Mix %
2004
2003
Fee-Based
Asset-Based
Transaction Based
Deal Based
6
25
61
9
15
20
62
4
Investment Executive, “Brokerage Report Card”, May 2004, p. C5
What Are The Trends?
• Client account mix reflects their focus on wealthier clients.
• Average brokers book is 280 clients, a drop from 307 a year
ago.
• Push towards asset based comp and fee for service and
away from transactions.
• Cash holdings are stable at 5%, with equities dropping to
27% from 28% and fixed income holdings falling to 23% from
28% last year.
• Insurance is said to account for 2% of assets.
James Langdon, “Brokers older, More experienced, and Wealthier”, Investment Executive,
May 2004, p. C4
So What The Problem?
“~!2*!?” Happens!!
Let’s Look At Your Book!!
• 300 clients
• Newly weds; 2nd
generation (25-30)
• Few business clients
• Ma/Pa investors (50s60s)
• Our elders (70s+)
• Only 25% of the book!
Our Younger/Business Clients (25 - 45)
Income Replacement/Corporate Markets
Term Insurance
Match the Product to the Market
•
•
•
•
Mortgage Market
Debt protection
Little disposal income
Combination with life
insurance is better
• Need affordable
coverage
• Convertible Later
What About Within The Corporate Market?
• Life insuring your debt
instead of buying creditor
insurance via lender
• More flexibility
• Cost effective
• Use of CDA credit
What About The
Corporate Market?
Bank Product
Corporate Collateral
• Loan Amt
$250,000
• Loan Amt After
Death Benefit
$0
• Credit To CDA
$0
• Future Tax Savings
From CDA (32%)
$0
• Loan Amt
$250,000
• Loan Amt After
Death Benefit
$0
• Credit To CDA
$250,000
• Future Tax Savings
From CDA (32%)
$80,000
Our Product Line - Term Life
Preferred Term 10...Better than Ever!
Term
Life
AIG Preferred Term 10 plan rates have improved
significantly, especially for ages under 40. The issue limits
have also changed with the introduction of the EasyTerm 10
plan.
AIG’s old Preferred Term 10 rates
$36.27
$55.35
$128.07
For ages 18 to 50, the minimum Preferred Term sum insured is
now $250,001.
For ages 51 to 75, the minimum sum insured remains at
$100,000.
Our Elder Clients (50+)
Estate Preservation Market
Universal Life
What’s The Impact of Estate Shrinkage?
Gross Estate
Settlement
Cost
Net
Estate
%
Shrinkage
Nat “King” Cole
$1,876,648
$1,577,740
$298,908
84%
J.P. Morgan
17,121,482
11,893,691
5,227,791
J.D. Rockefeller
26,905,182
17,124,988
9,780,194
69%
64%
Conrad Hilton
199,070,700
105,782,217
93,288,483
24,965,954
135,632,630
134,000
4,866,000
J.D. Rockefeller Jr. 160,598,584
Yul Brenner
5,000,000
53%
16%
3%
Deemed Disposition of Property
For example ...
FMV
Original Cost
Capital Gain
TCG
UCC
Recapture
TOTAL
Land
$200,000
$ 80,000
$120,000
$60,000
n/a
n/a
Building
$600,000
$400,000
$200,000
$100,000
Total
$800,000
$480,000
$320,000
$160,000
$280,000
$120,000
$280,000
$120,000
$280,000
“The trick to it is to try not to see it as
‘your’ money...”
Why Should I Use AIG To Solve
Problem?
Click here to view Illustration
Our Product Line – Universal Life
45 0% MER Investment
Options
Our Elder Clients (50+)
Our Boomer Markets
Critical Illness Coverage
Many Financial Consequences
There are many financial consequences to surviving
a critical illness. Here are just a few consideration...
• Absence from work
• Cost of home care during illness and recovery
• Treatment outside of Canada
– There is a financial Impact!
Common types of covered conditions
Heart Attack
Stroke
Cancer
Coronary Bypass Surgery
Multiple Sclerosis
Kidney Failure
Alzheimer’s Disease
Parkinson’s Disease
Major Organ Transplant -
Benign Brain Tumour
Deafness
Occupational HIV
Motor Neuron Disease -
(surgery or waiting list)
Paralysis
Blindness
Loss of Speech
Loss of Limbs
Coma
Severe Burns
(Lou Gerhig’s Disease/ALS)
LOSS OF INDEPENDENCE
Medical procedures costs outside of Canada
PROCEDURE & RELATED CRITICAL ILLNESS
Heart Transplant
Liver Transplant
Lung Transplant
Bone Marrow Transplant
Cardiac Valve & other Major Cardiothoracic Procedures
Coronary Bypass with PTCA
Coronary Bypass with cardiac catheterization
Kidney Transplant
Craniotomy for Multiple Significant Trauma
Craniotomy (non-trauma related)
Acute Leukemia without O.R procedure, age > 17
Chemotherapy w/ acute leukemia as secondary diagnosis
Lymphoma & Leukemia w/ major operating room procedures
Uterine & Adnexa procedure for ovarian or adnexal malignancy
Lymphoma & Non-Acute Leukemia w/ other O.R. proceudres w/ complications
Rectal Rsection with complications
Acute Leukemia without O.R procedure, age 0-17
Uterine Adnexa procedure for non-ovarian adnexal malignancies w/ complications
Lymphoma & Non-Acute leukemia w/ complications
Malignancy of Hepatobiliary System or Pancreas
Total Mastecomty for Malignancy w/ complications
Kidney & Urinary Tract Neoplasms w/ complications
Prostatectomy w/ complications
PRICE
(in US funds)
$316,481
$203,336
$165,362
$125,784
$117,764
$117,319
$100,470
$99,093
$85,658
$58,682
$48,044
$47,769
$44,539
$44,251
$43,236
$40,775
$35,359
$29,771
$24,515
$23,947
$23,836
$20,935
$20,834
Medical care costs in Canada
HOME CARE
Health care with light housekeeping
- $100/day
Registered Practical Nurse
- $175/day
Registered Nurse
- $200/day
MEDICAL EQUIPMENT
Wheel Chair
- $2,500
Walker
-
Chair Lift
- $2,000
Vehicle modification
- $7,500 - $10,000
$500
Medical care costs in Canada
HOME CARE
Health care with light housekeeping
- $100/day
Registered Practical Nurse
- $175/day
Registered Nurse
- $200/day
Nurse Visits
$175/day x 3 days = $525/week
$525/week x 45 weeks = $23,725/year
$23,725/year x 5 yrs = $118,625
Where do you get $118,625 after tax dollars???
Where does it come from?
Equity in my real estate . . . .
-
forced sale when market is poor?
intentions of reverse mortgage in the
future?
realtor fees and relocation costs?
emotional affects of forced sale?
Where does it come from?
Surplus capital in my corporation . . . .
-
expansion capital for R&D ?
cashflow needs for operation?
lender comfort given critical illness?
Where does it come from?
Cash from investment accounts . . . .
-
Liquidity risk on term deposits?
DSC charges on funds?
Time value of money calculations?
Where does it come from?
Cash from investment accounts . . . .
300 clients
1/3 – 1/4 suffer a critical illness
100 clients affected?
33 clients needs to access capital
•33 x $200,000 = $6,600,000.00
•$6,600,000 x 1% Trailer = $66,000 / year!!
•Plus no new contribution to these accounts!
Why Should I Use AIG To Solve
Problem?
Our Product Line – Critical Illness
Six New Covered Conditions
Critical
Illness
A total of 25 covered conditions on all
Living Benefit plans, including:
• Early Discovery Benefit (Advances 10% up to $25,000
for Early Prostate, Ductal Breast Cancer, Coronary
Angioplasty and Superficial Malignant Melanoma);
• Loss of Independence;
• Heart Valve Replacement;
• Aortic Surgery;
Introducing Two New Conditions to the Canadian
Critical Illness Market...
• Aplastic Anaemia; and
• Bacterial Meningitis
Contract Changes
Critical
Illness
Cancer discovered in the first 90 days will not terminate
the critical illness policy
• Cancer will be excluded from the definition and coverage will be allowed to
continue.
New Heart Attack definition to include bio-chemical
markers
• Heart Attack (Myocardial Infarction) is defined as the death of a portion of
heart muscle as a result of inadequate blood supply as evidenced by
a) new electrocardiographic (ECG) changes indicative of a myocardial
infarction, and by
b) the elevation of cardiac biochemical markers to levels considered
diagnostic for infarction.
Heart attack during coronary angioplasty is covered provided that there are
diagnostic changes of new Q wave infarction on the ECG in addition to
elevation of cardiac markers.
Age restriction removed on Alzheimer’s, Parkinson’s and
Motor Neuron Disease
• Reductions in the Critical Illness Benefit after age 75 have been removed.
Other “What’s New” Features
Critical
Illness
Return of Premium on Death now available as a rider on
all Living Benefit plans
•
Having ROP on Death as a rider allows those can keep costs low by
allowing more choice.
New rates now calculated on an “Age Nearest” basis
•
Change in age calculation is keeping in line with all of AIG’s other
insurance products and eliminates confusion of age between the
other plans.
New lower minimum $25,000 coverage available with all
plans
•
Reduction in minimum for Living Benefit 75 and Living Benefit 100 to
allow more financial options for more clients.
What’s New
Critical
Illness
Best Doctors Inc. services extended to a Life Insured’s
immediate family member in AIG’s Critical Care Assist Benefit
A one-time use of Best Doctors, Inc. service is now also available at no charge
to an immediate family member (spouse or dependent children) for the
illnesses covered under the base Critical Illness plan. This one- time free
usage for immediate family members can be elected at any time while the
policy is in force. The Life Insured always has access to the Best Doctors’
service even if a family member elects to use their free access.
There is a 12-month pre-existing condition clause for the immediate family
members, but not for the Life Insured. Immediate family members would be
excluded for critical care assistance on any pre-existing illness.
Competitive Rates / Low Cost Protection...
Critical
Illness
Male, Non-smoker, $100,000 of T10 CI coverage
Company
Pure Protection
Age 30
Age 35
Age 40
Age 45
Age 50
Age 55
AIG Life
$35.01
$42.21
$53.37
$71.73
$106.74
$174.78
Canada Life
$30.19
$37.33
$52.12
$83.18
$127.03
$177.31
Industrial Alliance
$33.75
$40.50
$52.92
$75.51
$106.56
$173.16
Manulife Financial
$32.13
$39.51
$53.73
$75.96
$113.85
$183.24
All monthly premiums are based on March 2005 LifeGuide.
Male, Non-smoker, $100,000 of T20 CI coverage
Critical
Illness
Company
Pure Protection
Age 30
Age 35
Age 40
$37.26
$49.68
Canada Life
n/a
Industrial Alliance
Manulife Financial
AIG Life
Age 45
Age 50
Age 55
$70.83
$106.83
$163.53
$251.55
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$40.14
$49.95
$71.73
$104.58
$158.13
n/a
All monthly premiums are based on March 2005 LifeGuide.
New ROP on Surrender Options
Critical
Illness
Living Benefit 75
• Return of Premium on Surrender Benefit Rider available
that will pay 100% ROP at age 75; and
• An early ROP options starting from the later of age 50 or
the 10th policy anniversary at 50% and grading equally
to 100% by age 75.
New ROP on Surrender Options
Critical
Illness
Living Benefit 100
• Starting after 10 years, the percentage of the Annual
Base Premium returned is 50% and increases 10% each
year to 100% after 15 years.
• Living Benefit 100 will pay the inforce face amount, if no
claim is made, on the anniversary age nearest the Life
Insured’s 100 birthday...with or without the ROPS rider!
Reason #3 – Augment Your Cashflow With
Insurance Business!!
Let’s Look At Your Book!!
• 300 clients
• Newly weds; 2nd
generation (25-30)
• Few business clients
• Ma/Pa investors (50s60s)
• Our elders (70s+)
• Only 25% of the book!
Insurance Compensation – 25% of 300 Clients
Term Product
(Creditor/Markets)
Universal Life
(Estate
Preservation)
$250,000.00 $200,000.00
40 m n/s & 35 f n/s 60 m n/s & 55 f n/s
$364.80/case $2,700/case
15 cases
20 cases
Term Total
$5,460.00
FYC + 100%
Bonus
UL Total
$54,000.00
LB 75 With ROP
(RRSP Protection)
LB 20 (Mortgage
Market)
$50,000.00 $100,000.00
47 m n/s
30 f n/s
$1,042/case $708/case
5 cases
15 cases
LB 75 Total
$5,210.00
GRAND TOTAL
LB 20 Total
$10,620.00
$75,290.00
Why Do We Avoid Insurance?
• Apathy?
• Service?
• Knowledge?
Why Do We Avoid Insurance?
• Apathy?
• Service?
• Knowledge?
• Vancouver Office:
• #1001-543 Granville Street
• Vancouver, BC V6C 1X8
• 604 682-4157
• Calgary Office:
#500 –11012 MacLeod Trail South
Calgary, Alta T2H 2K6
403 265-7030
The Producer Is The Customer!!