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Welcome To The Canadian Institute Of Financial Planners

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. Of 11 brokerages surveyed , 70% of all investment advisors were insurance licenced.

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Welcome To The Canadian Institute Of Financial Planners

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  1. 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

  2. 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 Insurance, The New Standard?

  3. 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” Reasons To Avoid Insurance?

  4. Three Reasons We Cannot Avoid It? • Fiduciary Responsibility • Preserves Livelihoods • Augments Cashflow

  5. Reason #1 - Fiduciary Responsibility

  6. 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)

  7. “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 Is The Standard For Malpractice?

  8. 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?

  9. 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 It Means If I’m A CFP?

  10. Duty Of Care You have an obligation, before conducting a transaction, to conduct sufficient fact-finding and needs analysis to properly assess a client’s circumstances, goals and needs Insurance Council Of British Columbia, Code Of Conduct For Insurance Salespersons and Adjusters, June 1999, p. 16 What If I’m Not A CFP?

  11. Reason #2 – Preserves Livelihoods

  12. Account Breakdown % 2004 2003 AUM/Client <$50,000 18 23 AUM/Client $50,000 to $1 Million 75 67 AUM/Client > $1 Million 9 10 Source:Investment Executive, “Brokerage Report Card”, May 2004, p. C5 Let’s Look At Your Books

  13. Product Mix % 2004 2003 In House Managed Product 8 9 3rd Party Managed Product 29 31 Equities 27 28 Fixed Income 23 28 Income Trusts 9 n/a Cash 5 5 Investment Executive, “Brokerage Report Card”, May 2004, p. C5 Let’s Look At Your Books

  14. Compensation Mix % 2004 2003 Fee-Based 6 15 Asset-Based 25 20 Transaction Based 61 62 Deal Based 9 4 Investment Executive, “Brokerage Report Card”, May 2004, p. C5 Let’s Look At Your Books

  15. 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 What Are The Trends?

  16. So What The Problem? “~!2*!?” Happens!!

  17. Let’s Look At Your Book!! • 300 clients • Newly weds; 2nd generation (25-30) • Few business clients • Ma/Pa investors (50s-60s) • Our elders (70s+) • Only 25% of the book!

  18. Our Younger/Business Clients (25 - 45) Income Replacement/Corporate Markets Term Insurance

  19. Match the Product to the Market • Mortgage Market • Debt protection • Little disposal income • Combination with life insurance is better • Need affordable coverage • Convertible Later

  20. 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

  21. Bank Product Loan Amt $250,000 Loan Amt After Death Benefit $0 Credit To CDA $0 Future Tax Savings From CDA (32%) $0 Corporate Collateral Loan Amt $250,000 Loan Amt After Death Benefit $0 Credit To CDA $250,000 Future Tax Savings From CDA (32%) $80,000 What About The Corporate Market?

  22. Our Product Line - Term Life

  23. Preferred Term 10...Better than Ever! Term Life AIG Preferred Term 10plan rates have improvedsignificantly, especially for ages under 40. The issue limits have also changed with the introduction of the EasyTerm 10 plan. 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. AIG’s old Preferred Term 10 rates $36.27 $55.35 $128.07

  24. Our Elder Clients (50+) Estate Preservation Market Universal Life

  25. What’s The Impact of Estate Shrinkage?

  26. For example ... LandBuildingTotal FMV $200,000 $600,000 $800,000 Original Cost $ 80,000$400,000$480,000 Capital Gain $120,000$200,000$320,000 TCG $60,000 $100,000$160,000 UCC n/a $280,000 $280,000 Recapture n/a $120,000$120,000 TOTAL $280,000 Deemed Disposition of Property

  27. “The trick to it is to try not to see it as ‘your’ money...”

  28. Why Should I Use AIG To Solve Problem?

  29. Click here to view Illustration

  30. Our Product Line – Universal Life

  31. 45 0% MER Investment Options

  32. Our Elder Clients (50+) Our Boomer Markets Critical Illness Coverage

  33. 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!

  34. Common types of covered conditions Heart AttackMajor Organ Transplant - Stroke(surgery or waiting list) Cancer Paralysis Coronary Bypass Surgery Blindness Multiple Sclerosis Loss of Speech Kidney Failure Loss of Limbs Alzheimer’s Disease Coma Parkinson’s Disease Severe Burns Benign Brain Tumour Motor Neuron Disease - Deafness (Lou Gerhig’s Disease/ALS) Occupational HIV LOSS OF INDEPENDENCE

  35. Medical procedures costs outside of Canada

  36. 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 - $500 Chair Lift - $2,000 Vehicle modification - $7,500 - $10,000

  37. 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???

  38. 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?

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