(VUL) Sell the protection, not the returns

 

If a prospect can well afford to invests millions of pesos in a VUL, it only means that he is a successful "earner" whether from the practice of his profession or running his own business, this is typically the normal definition of high net-worth clients

The high net-worth market is the most rewarding segment of our practice as it gives us the opportunity to conceptualize, design and recommend customized solutions to match an HNI's unique financial goals, not to mention the more meaningful rewards we get for a successful conclusion

Unique in the sense that our usual sales proposition of investing for education or retirement may not be of interest to them, so the challenge would be to understand how our product's various benefits can be structured in a way that would add value to their portfolio

Our typical approach is to position our products in terms of the benefits of a managed investment portfolio, how it is diversified, managed by professionals, access to foreign markets etc etc etc

In my early experience in my comeback as a financial advisor (joined Inlife June 2022), I sadly discovered that selling the VUL on the basis of possible superior returns coming from the benefits of a managed portfolio DO NOT WORK!

The simplest explanation for this is maybe because of the attractiveness of the HNI market, they have already been called upon by other advisors and even their bank (bancassurance), they have already heard all of these before and what we are telling them is just the same

I am now working on several cases using approaches based on the unique needs of the HNI market, I will blog on them as soon as any of this result to a sale

Stay tune..

#acgadvice

How optimistic would you be if Warren Buffet manages your retirement portfolio?

As of May 12 of this year, the US market as measured by the Standard & Poors Index is down by more than 18%! Retirees invested in the US market will see their retirement fund shrunk by almost the same amount! This is a serious number! Provisions intended for 10 years will now be sufficient for only 8.2 years.

Berkshire Hathaway on the other hand is UP by 3.8%! a similar 10 year retirement fund would have grown by about 5 months!

Over the last 10 years, Berkshire Hathaway grew by 336.4% over the S&P 500 195.6%!

How great would it be if we have the great Warren Buffet as our fund manager!

Some may have access and resources to invest in Berkshire, but for those without, is there any way to generate returns in a volatile market?

Success in investments is all about "choosing" the right mix of assets to be included in your retirement portfolio, as each asset class will have its own specific risk to reward characteristics, to optimize returns and to minimize risk as much as possible, the key is to decide how much percentage of each asset class should you allocate your funds to

Two guidelines?

Time horizon - the years to your retirement

the earlier you start will give you the advantage of having the ability to be more aggressive, as risk is almost always relative to return, placing a larger portion of your funds in equities may translate to two benefits, first is that the amount of money needed to achieve a target retirement fund level may be smaller (hence cheaper), as the higher projected returns may translate to a higher growth rate

the second benefit is that allocating the same amount of money may grow to a much sizeable retirement fund

Accept "volatility" as a fact in generating returns

The market will not be moving up or down in a straight line but in a series of oscillations, a proper asset allocation strategy from the onset of the investment will provide the flexibility to take advantage of these swings

a 60/40 (equity/bond) portfolio for example will have a different asset percentage distribution after a period of time, in a case where the stock market goes up, it may become 65/35 because of stock market appreciation, the idea here is to bring it back to 60/40 by moving the excess funds from equities to bonds, this is the so called re-balancing

regular re-balancing serves two purpose: first it that it sets a limit to the amount of risk to the portfolio, a 60% allocation to equities limits market risk exposure to 60% of your retirement fund, second is that it provides an automatic mechanism for profit taking, this can serve as buffer when the need to average down arises as the market moves down

we may not have the privilege of having Mr. Buffet manage our retirement fund, a structured disciplined approach (asset allocation + regular re-balancing) may be the second best approach to achieve our retirement goals

all the best my friends!

#acgadvice