A Conversation with Barry Goldwater: Handling High Net Worth Clients

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As CPAs get deeper into financial services and wealth management, they will have to solve more and more complex financial problems which often cut across unfamiliar planning territory. One group of clients many firms hope to close, can be both challenging and rewarding. They are high net worth individuals, those clients who fit into the $10 million-and-above club. If you are fortunate in grabbing the opportunity to inform and perform for high net worth clients, you must stop and think about what is important to this group.

What drives and motivates them? By tapping into their passions, one can customize extremely focused conversations that grab their attention and curiosity. For instance, based on the experiential data gathered from estate planning attorneys in Boston who recommend life insurance to fund trusts, the gestation cycle from recommendation to funding of the trust is between 6 and 18 months. When an estate attorney recommends insurance, it is because there is a disparity between the tax the client owes and the ability to fund the obligation. So the question is: Why the reluctance to bulletproof the estate plan with life insurance? CPAs, seeking this type of client, must be prepared to address these issues from within the firm.

High net worth clients are successful people who do not like being told what to do. They made their hay by watching, learning, observing and honing their personal desires to be successful in spite of the obstacles. Because of their nature and indomitable spirit, they believe they will figure out a way to solve a problem or address a goal. They are more used to delegating their low-profit responsibilities to others so that they can concentrate on their own success. So when a CPA advises his client to purchase a $10 million life insurance policy for estate and intergenerational planning purposes, he may find resistance, even though it was explained that without this valuable protection asset, half of their estate would be lost to taxes. Why would they not be ripping at their breast pockets grabbing for their pens to sign applications to stop this giant crack in their foundation? The reason is they do not want to pay for it, even if they can afford it and that issue seldom gets addressed satisfactorily by planners.

When a client pays a $250,000 premium for a $10 million life policy, he or she is taking away from the principal and growth of their investment portfolio. They step back to analyze the situation and it takes a long time to figure out how to bite that premium bullet given the information and options presented by their advisors. They know that they might lose wealth to the government but their first reaction tells them it is an expensive protection proposition and they are hot-wired to go around or over obstacles. As advisors, we have to anticipate these reactions and be able to address them from the client's perspective and certainly be able to offer a solution that speaks to their resistance.

What I have found to be extremely successful talking about is an alternative type of premium financing of life insurance. Traditional premium financing strategies have too many moving pieces of cooperation attached and not enough creative exit strategies which do not involve death. There are collateral demands, re-qualification demands and the possibility that if the client lives too long, it can become an expensive loan interest proposition.

So it is imperative to address the breech in this philosophical approach to using other people's money.

Today we are using premium financing strategies that synchronize the exit strategy with the lenders interest rates and the insurance policy performance. We have longer qualification periods for loans from international sources, interest rates well below traditional financing option rates and policies that completely eliminate the downside risk when building value. Whereby traditional financing methods use sales to defective trusts and grat engines to pay back principal and interest while encumbering the collateral, we now use the insurance policy as the majority collateral at inception and we collateralize 100 percent as the policy matures. Our exit strategy is funded from our collateral source and not from outside asset liquidation. We have revolutionized premium financing and have taken it to the next logical level based on observing the buying behavior of our best clients.

Without the cooperation of CPAs working with advanced planning insurance advisors, this type of best-in-class planning makes it to their desks very slowly. We are receiving data on CPA firms losing great clients to the competition because of the lack of planning knowledge connected to the firm. As more CPA firms enter the wealth management arena, they will need to decide their level of commitment to expanding client services. The logical point of cooperation between our professions create these combination creative methodologies which work extremely well for our clients. The CPA firms who will learn from strategic alliances will lead at integrating the new paradigm of wealth management with their core accounting model.

About Barry Goldwater
Barry Goldwater is the Principal of the Financial Resource Group and a 20-year veteran of the insurance industry. He focuses not only on working with the business and affluent clients of CPA's and attorneys, but also in helping CPA's form and develop a business model to include financial services. His expertise lies with using insurance and tax deductible solutions and their applications in the areas of Business Planning, Pensions, Retirement Protection Planning and Wealth Transfer Planning. He is an insurance specialist who is a member of the Bisys Exceptional Producer Group, the New York and Boston Chapters of the Estate Planning Council and he currently sits on the board of the Society of Financial Service Professionals. He can be reached at 617-527-9736 or [email protected] His web site is http://www.frg-creative.com.

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