Insurance-Based Financial Advisors | November 2001 ViewPoint

ViewPoint: Insurance-Based Financial Advisors

Back \| E-mail to a Friend \| Print

We help clients succeed through all economic cycles.

By Arthur D. Kraus, CLU, ChFC, NAIFA CEO

As time moves us past the tragedy that occurred on September 11, the realism of how much our daily lives have changed is setting in. Americans are more cautious and thoughtful than they were just hours before the terrorist attacks.

Part of that thoughtfulness includes the recognition that social and economic conditions don't always last forever. Alan Greenspan warned us months ago about "irrational exuberance." At that time, there were unrealistic expectations that the booming stock market, particularly its technological sector, would continue on an upward spiral for an extended period. Although no one wants to look like a Monday morning quarterback, we should recognize that there are some continuing signals of the economic struggle ahead.

Risk management includes adequate protection from the certainty of death.

All of us are aware of the shrinking job market. Unemployment across the country is rising. Perhaps this is partly a result of the lowest unemployment figures in decades, but a declining stock market and unemployment have been linked before. There are economic cycles and this linkage has been part of them historically. Residential property values are softening in most areas of the United States. Have we seen a declining stock market, rising unemployment and home devaluation before? Yes, we have had economic cycles that have linked those conditions. Could we add declining interest rates as the government tries to stimulate the economy and as funds withdrawn from risk-based investments flow to savings accounts? Sure, it has happened before.

So, what's the point? We have seen economic cycles before, we are going through a downturn now, we will recover some day and we will see it happen all over again in the future. If we understand the long view (so frequently articulated but so rarely followed), we can plan wisely for our economic future. Isn't that an objective all of us should have? Doesn't it beat having a herd mentality?

There are lessons to be recommitted to. At the base of the Financial Advising Pyramid is risk management, which includes adequate protection from the certainty of death and the probabilities of expensive physical decay. Risk management also includes the accumulation of adequate funds to cover emergencies including unemployment.

Putting protection first

Being insurance-based financial advisors, we know what is required to help our clients succeed through all economic cycles. We recognize that the difficult road to accomplishing a great financial plan often includes persuading clients to purchase insurance products that their own emotions don't want them to buy. It includes helping people understand their own mortality and morbidity. My question to you and all other practitioners in our field is: If the premise of the financial advising pyramid is sound, what other financial advisors could there be if they were not insurance-based?

I'm tired of people holding themselves out as financial planners who avoid or apologize for risk management products. I am equally disturbed by those who quickly give inadequate insurance advice so they can get to the more "professional" end of the business-investment management. Yes, it's sexier to talk about asset allocation, betas and r-squared. But let's be clear about the practitioner who behaves in that fashion. That person is not a financial advisor. He or she is merely an investment salesperson masquerading as a financial advisor.

There is nothing wrong with being an investment salesperson. The world could use such people, particularly if they are knowledgeable in their field. But there is something wrong with the disguise that some use in describing their work as financial advising! People should be proud of the work they do and feel confident enough to accurately describe their pursuits.

As I travel throughout the country, I see pride in the work our members do. Some of our associates want to be no more than the best they can be in the insurance field. They have no desire to do planning. Great! After all, they are helping families and businesses with the bottom tier of the pyramid. There are others who want to do more and concentrate on financial advising for their clients. That, too, is great! Our members are insurance-based financial advisors and the pyramid is insurance-based.

With the constant reminders of economic cycles over the last months, weeks and days, I couldn't be more proud of our association, our members-and most particularly, the work you do-unmasked as it is.

A 40-year veteran of life insurance sales, financial services and field management, Art Kraus, CLU, ChFC, is CEO of the National Association of Insurance and Financial Advisors (NAIFA).

Top | Back | E-mail to a Friend | Print

If you are not receiving your magazine or need to change your address,
please contact membersupport@naifa.org.

For comments on articles on this website contact mleyes@naifa.org.