Changing the Typical High-Net-Worth Narrative
High-net-worth individuals. Traditionally, that label certainly doesn’t encompass most Americans, but unrecognized by many in the financial services industry, it does include a broad swath of prospective clientele who are everyday searching for additional financial protection options and more-well-rounded, balanced insurance portfolios.
The moniker of HNWI is in itself misleading. It can be a turn-off to brokers and advisors spending most of their time marketing outside that space. “I work in the middle markets, my clients don’t make that kind of income” or “I work with white-collar individuals, but these days they often don’t have liquid assets of significant levels” are common retorts. My advice is to resist being discouraged or turned away by perceptions in trade journals that limit your business scope.
The perception of the HNWI needs broadening as it pertains to income protection and disability insurance. My idea of a high-net-worth individual is an employed person making over $250,000 annually. Simple as that. We’re not only talking about professional athletes, hedge fund managers, Hollywood movers and shakers or CEO’s of Fortune 500 companies. I want to dispel those misconceptions. We are also talking about accountants, physicians, attorneys and mid to upper level management employees that probably many of you know and work with already. HNWI are not necessarily “pie in the sky” prospects that you may think are off your radar. I’m talking about everyday working individuals that frequently need more insurance. Many HNWI clients are certainly within your marketing striking distance.
Most Americans making over $250,000 a year cannot typically find sufficient disability resources solely amongst the ranks of domestic disability insurers. The prescription of a traditional group disability policy and/or a comprehensive individual income protection policy from one or more domestic carriers rarely satisfies the entire need of someone at higher earnings levels. Income participation limits for domestic carriers commonly land in the 40% to 60% of income range for a HNWI. Those breakpoints are unacceptable to most economists and disability income specialists.
To maintain family expenses and a conservative semblance of lifestyle, every working American needs at least 65% to 75% (dependent upon benefit taxability) of his/her income covered by DI. And just because an affluent person might have more of a nest egg and savings to fall back on, that doesn’t mean they have less to lose. They have more to lose, which is why the insurance advisor’s attention should eventually turn to foreign specialty markets like Lloyd’s of London to fill in the financial protection gaps with excess, high-limit disability plans.
Beyond personal DI, business insurances are extremely relevant in the HNWI market. These individuals are frequently business owners and/or “rainmakers” that carry with them the extra burden of not only maintaining corporate profitability and their own financial successes, but the job sustainability of the persons whom they employ. High-limit disability products like key person insurance, business overhead expense coverage and buy/sell insurance are requisite income protection vehicles for prudent business and succession planning.
The need for high-limit income protection is more obvious now than ever. Increasing numbers of Americans lacking sufficient income protection are fitting into the HNWI category. Fortunately, the combination of prescribing disability benefits from both domestic and foreign carrier resources in a tiered-benefit fashion is readily attainable.