Case Study: We ‘Churned’ A Client and He Won!

Do you know one of the hardest things to say for your Financial Advisor?

It’s this:?

‘I know I sold you this plan. But I’ve got an even better proposition for you now.’

And because this statement can be so difficult to digest, most advisors will just let their ‘old’ clients sit with their existing policies.?

An ethical advisor might also want to avoid being accused of ‘churning’ his books for new money from old clients.

This case study is to give both sides of the table – Clients and Advisors – a new way to think about upgrading policies and plans.?

It does not have to be the sticky proposition that most make it out to be.

Background: Where It All Began

I was introduced to my client, Chirag, through a dear mutual friend. Back in 2019, Chirag was 41 years old, ran a successful business with his brother, and was on the lookout for a Life Insurance policy.?

As is the case with entrepreneurs, and typically family business owners, Chirag’s Life Insurance needs went beyond just providing for his family in the event something happened to him. We looked at all the various ways in which entrepreneurs use Life Insurance, and explored options.?

Chirag decided to start with his personal Life Insurance needs. He went ahead and did his medicals and got offered US$ 4 million worth of Life Cover at Preferred, Non-Smoker pricing.?

The Life Insurance company had a fairly conservative proposition at the time, and offered Chirag a 21-year plan with US$ 48, 500 in annual premiums.?

This being a Universal Life policy, premiums were flexible and could change based on any changes in the clients’ financial standing – ideal for an entrepreneur’s potentially varying cash flow.?

Chirag decided to get this policy in place.?

A Better Proposition

One part of my job as a Life Insurance Advisor is to sell my clients the right plan and proposition for their needs.?

But a large part of my job comes after the sale:

It is regularly reviewing these plans to ensure that they are performing optimally, and to recommend moves that might help my clients further secure and grow their financial future.

We meet up with our clients once a year to present the technical performance of their policies and plans, and incidentally, Chirag’s annual meeting coincided with the release of a major 2024 upgrade to his plan.

From my 25 years in the game, I’ve seen that every 3-4 years, financial products tend to undergo a vertical upgrade that could potentially benefit a client majorly, if implemented in the right way at the right time.??

You see, until a certain point in time after a policy has been purchased, it is in the clients’ best interest to go in for the upgrade. Assuming their health and medical condition is the same, and they are able to get an offer for the new plan at the same pricing tier as before, the client would stand to gain from the shift to the new policy.

And Chirag fit that bill.?

In his case, the plan now had an improved growth rate, projected at nearly 8.3% per annum as compared to the conservative 4.5% upon purchase.

This would mean that Chirag’s annual premiums for the same level of cover would drop by about US$ 9500 per annum for the remaining term of the policy: 17 of the total 21 years. (He had already been paying premiums for 4 years since 2019)

So, I prepared to present the new proposition to him.?

How Clients Respond to Being ‘Sold Again’?

I’m at the point now where I can almost tell you verbatim how a client is going to respond when they see this proposition. And I got that same expected response from Chirag too:

‘But Rickson, you sold me that previous policy…’

My response:

‘Yes, I did. And it was the best option for you at the time. But when something better hits the market, it is my duty to bring it to you. Can I show you how it would benefit you?’?

Chirag agreed and over the next few minutes, I walked him through the numbers and the reasons I was recommending the upgrade.?

Upon seeing that this could work out in his favor, Chirag agreed to undergo a fresh medical examination and health check, submit updated travel and financial questionnaires, and take a look at the new offer the insurer puts on the table for us.

We also let the insurer know that Chirag might consider not just a policy upgrade but also additional coverage should the proposition make sense.?

My Client’s Options

Now, an important move here for any advisor is to communicate with their client that the benefit only makes sense if the ratings scale on their policy remains the same or gets better.

So, for instance, if Chirag had become a smoker since the last policy, or had any major health complications since then, the possible upswing from upgrading wouldn’t pan out as planned.?

In Chirag’s case, he got offered the new plan with better premiums at the same rating scale and due to a change in his financial situation, he got cleared for close to US$ 13 million of Life Cover.?

He now had two options:?

Option 1: He could stay at the same level of Life Cover he had previously: US$ 4 million, and pay lower premiums.??

Option 2: He could increase his level of cover based on the new offer and improved premiums?

Chirag’s Decision?

Chirag ultimately decided to up his level of cover to US$ 7 million.

He decided to take advantage of the higher growth rate attached to the new 2024 plan and the consequent drop in premiums.?

Now there are a lot of numbers to break down here but let me give you the gist of it.?

Essentially, Chirag went from US$ 4 million of Life Insurance cover, which cost him US$ 1.1 million to US$ 7 million of Life Insurance cover at US $ 1.26 million.

Seems like a no-brainer, right?

Once Chirag saw the numbers and the benefits, it was.?

But the challenge is that most clients don’t get to the point in this conversation where they see the benefit laid out so clearly.

Not because they refuse to see it, but because so many advisors are afraid of disturbing an old policy or proposing to ‘dismiss’ a previously sold policy in lieu of this new, improved one.

Your Takeaway

Change is almost always good! Heck, it’s always good, even if it might sometimes take a while to see the benefit of that change.?

Advisors: Don’t shy away from putting these new and better propositions in front of your clients. If you don’t, someone else might, or worse, your client might never be served the better proposition!

Clients: Actively engage your advisors in conversations around upgrades. Encourage them to present new and better propositions to you.

Remember: Your financial advisor is your partner in building the financial future you want.?

The caveat? Both of you need to view the relationship with that same lens. When you do find an advisor who sees it like that, it’s going to be a win-win all around.?