Bringing spouses into the income planning conversation is important for your clients – and your relationships.
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You probably make it a fundamental part of clients’ financial plans: Ensuring the wellbeing of the spouse that may be left behind when your client dies. While solutions such as life insurance are a key part of this conversation, you may not be approaching the topic from the perspective of income planning.
For the sake of your clients, and your relationships, you should be. Consider the impact of your client’s death on a spouse. When a client passes, the surviving spouse may be faced with a round of income hits. The survivor is likely to see a reduction in Social Security benefits. Pension benefits may be reduced or eliminated as well as whatever income may have been coming from your client’s retirement-era employment. With the proper planning, you can help ensure a potentially sudden financial loss doesn’t leave the widow or widower needing to cut expenses in a hurry.
And consider this: While a 2017 Cerulli report found that 93% of advisors work to build relationships with both halves of the client couple, working directly with their clients’ spouses, only 36% said the inheriting spouse of their high-net-worth client was actively involved in the financial planning process.1 So clearly these advisors can do more to help provide a positive income planning experience for spouses and demonstrate the value of their guidance.
Where are the opportunities for improvement?
Open a dialogue about risk
If you’re like me, you’ve found that emotional comfort and predictability can be as important to clients as financial returns. But did you know that women tend to prefer risk-protection strategies compared to men, expressing more worry about their ability to withstand financial downturns and greater interest in insurance?2 By engaging both spouses in the conversation, you can create an income strategy that suits the entire couple.
Plan for the survivor’s lifestyle
When a spouse dies, the financial disruption is the last thing the surviving family wants to worry about. You can help clients plan ahead. To minimize the disruption to the surviving spouse, help them create a solid financial plan that helps account for the potential loss of Social Security, pension, and employment income. This conversation can not only help secure better financial outcomes for surviving spouses but also may help you build more durable relationships to keep those clients within your practice.
Consider an income strategy built for two
Help clients explore the value of dependable income within their retirement portfolio, and consider the value of joint income benefits. This client guide explains one such strategy. You may find that clients receive a valuable emotional benefit in feeling comfortable that a surviving spouse will be able to depend on guaranteed income to help maintain his or her lifestyle, whatever may happen.
1The Cerulli Report - U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2017: Emergent Product Trends for Sophisticated Investors. www.cerulli.com
2Lincoln Financial Group and Hanover Research, Inc., "The Longevity Opportunity: Planning for longer lives as a family,” 2015. http://newsroom.lfg.com/wealth-protection-expertise
About the author
For more than 22 years, Christopher H. Price, JD, LLM, CLU®, ChFC®, AVP, Advanced Sales, Lincoln Financial Distributors, has helped advisors and their clients accumulate, distribute and transfer annuity assets by using a holistic approach. In 1983, he began his career as a trust officer with Sovran Bank (now Bank of America). Chris moved into financial planning, and followed that by managing an insurance agency that served some of the wealthiest families in the country. In 1994, Chris joined Delaware Investments, formerly a member of Lincoln Financial Group, where he was responsible for the product management of Delaware mutual funds and eventually Lincoln variable annuities. From 2000 to 2004, Chris used his expertise to help financial advisors and their clients with advanced case issues. In 2005, he transitioned to the Lincoln Advanced Sales team. Chris holds a BA in history from Vassar College, and law and master’s degrees from the Marshall-Wythe School of Law at the College of William & Mary.