Closing Thoughts

The New Power Of Planning

How the pandemic altered client perspectives… and advisor strategies

by Howard Sharfman

Mr. Sharfman is senior managing director with NFP Insurance Solutions, in Chicago. Visit

The unprecedented impact of the pandemic has caused many people to reassess their planning, economics, family, health, wills and trusts. Financial advisors, tax professionals, and trust and estate attorneys have been busier than ever, while the insurance industry has seen record sales as people more thoughtfully consider their mortality and what they want their legacy to be.

An interesting effect of the pandemic is how financial, tax, legal and insurance professionals have become more efficient while handling increased business, due to the use of virtual meetings initially brought about by social distancing. In the past, taking a flight to meet with a client would have meant time lost in transit that couldn’t be used to service additional parties. These days, I might conduct 15 meetings a day through a series of half-hour virtual calls.

Family Focus

These meetings often include extensive idea sharing about how to revise plans due to changing perspectives. For instance, over the past two years many of my high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients have chosen to increase the monetary value of inheritance gifts for family members.

Prior to the pandemic, many more clients took a stricter view, expressing concern about spoiling their children and whether inheritance could negatively impact the children’s work ethic. In many cases, the clients’ previous plan had been to give the bulk of an estate to charity, leaving perhaps $1 million or $10 million to each of the kids.

Most of these clients have now reconsidered their stance. The pandemic made them realize that leaving a significant inheritance to a loved one isn’t necessarily just about providing security and the ability to spend money. It can also help ensure their health.

For example, if someone’s health is vulnerable amid a pandemic but they must continue to work for financial reasons, it’s likely to increase their exposure and chances of becoming seriously ill. Greater financial security allows one to take a leave from that job to avoid that risk.

Additionally, the stock market’s initial plummet and ensuing volatility due to the pandemic impacted the thinking of many HNW and UHNW clients. While they might have previously believed that their financial success stemmed largely from being smart and hardworking, many now acknowledge that good fortune likely played a contributing role as well.

Perhaps they accumulated their wealth during a time of expanding markets, plentiful opportunities and favorable tax laws that their children might not be so lucky to experience. Accordingly, they’ve now decided to provide some additional security for those loved ones.

Liquidity & Long-Term Care

Many other planning ideas we’ve shared with clients amid the pandemic address the liquidity in an estate to cover expenses following their passing. It’s not just about providing sufficient liquidity to pay taxes, but also to allow a family time to grieve and avoid forced selling of assets in an unfavorable economic environment. Since rapidly increasing interest rates have resulted in significant devaluation for some real estate and venture assets, a lack of proper planning could mean that families would need to sell low.

We’re also having extensive conversations with clients about the costs and implications of one needing long-term care (LTC). In addition to many more insurance policy purchases overall, the pandemic has driven an increase in policies with living benefits that might include LTC, critical illness or a disability waiver.

People tend to like those benefits and see a greater need for them now. Many different products have been introduced or reintroduced with living benefit riders, and some people are buying permanent policies rather than term specifically for that reason.

Many different products have been introduced or reintroduced with living benefit riders, and some people are buying permanent policies rather than term specifically for that reason...

I believe the marketplace is moving primarily to a life insurance/LTC hybrid. A $1 million life insurance policy with a LTC rider, for example, would allow one to access that money during their lifetime if they need it or leave it to their beneficiaries if they don’t.

This structure is often more appealing than pure LTC coverage, which might never provide any benefit. I talk sometimes about a former client named Dorothy whose son bought her an LTC policy when she was 75. Dorothy recently passed away at 103, having lived such a healthy life that she never needed to file a single claim for LTC. Although that scenario isn’t common, it illustrates how LTC coverage alone can turn out to be an unnecessary and expensive proposition.

On the other hand, if there is no coverage and one ends up needing extensive LTC, it could wipe out a lifetime of savings in just a few years. This can be a very difficult and unfortunate situation, especially if one had dutifully saved and invested for decades with the goal of providing multigenerational wealth or another type of financial legacy. LTC is an extremely important topic that the pandemic has greatly magnified.

Appeal of Annuities

As interest rates rise, we are finding that there’s also significant movement toward annuity products which provide guaranteed income for the length of a client’s life. A lot of analytical data points to increased health and happiness experienced by retirees with guaranteed income.

A generation ago, many people had defined-benefit pension plans that offered income for life. As very few jobs provide such pensions anymore, retirees now tend to rely heavily on Social Security income. If you can augment that with other guaranteed income, the health and happiness benefits should only increase.

I think guaranteed income in retirement can make someone a better money management client as well, because they’re less likely to panic due to volatile market conditions and make mistakes such as selling low or buying high. They can ride those waves more easily, knowing all their expenses are covered.

A high interest rate environment means that much better income planning can be conducted by utilizing life insurance policies and annuities. For most of my career, I wasn’t a big believer in annuities because I’m a tax person. From my perspective, it didn’t make much sense to give up capital gains taxation for ordinary income taxation. But I now recognize how the predictability and non-correlated nature of the asset can make this strategy appealing.

Connecting With Clients

As we move forward in the post pandemic world, I believe that many of the strategies this period brought about will show staying power. Once one realizes how precious and fragile life can be, that sentiment isn’t likely to go away. Not only haven’t we seen any policies come off the books, but many clients are even converting term insurance to permanent as they think longer term.

It’s important for financial advisors and insurance professionals to understand how significantly the pandemic has impacted so many people. If a client hasn’t contacted you yet to discuss this influence, then perhaps you should reach out to them — and not just by email. It’s better to show deeper concern for your clients by seeing their faces, whether virtually or through in-person meetings.

I believe the most successful people in this business fall in love with helping their clients. It’s not about their companies or whatever products they might be selling. I personally love talking to my clients and learning from them every day, while some people in the industry shy away from such interactions.

Keep in mind that connecting with clients is a good way to generate business too. The likelihood of a client increase their insurance or giving you a referral is much greater than earning new business from a stranger. So, let’s pay attention to the people who have already shown faith in us and who we’ve pledged our commitment to. That’s meaningful at any time, but even more so now considering the anxiety-inducing and perspective-changing pandemic we’ve all experienced over the past few years.