How to protect your client’s future

By Subhas V. Nathan

Subhas V. Nathan

Nobody wakes up in the morning and thinks, “I want to buy some insurance today.” Insurance is not a desirable product to buy. It means you might have to think about something such as cancer, retiring or dying. Most people would rather think about buying an iPhone.

The reason why this business can pay so well, though, is that we have the ability to have a conversation and influence someone to think about their future. I tell clients not to wait for a disaster to happen and then think, “I’d better do something about it.” It’s too late then. You have to plan for it before it happens.

I have a process I use with clients to make sure they’re comprehensively covered. It’s called CSI.

C — coverage. Under coverage, five components to look at are

• Life
• Disability
• Critical illness
• Accident
• Hospitalization

I tell clients, “I’m not asking to put every single cent of your income toward buying insurance, but a portion of your income has to be set aside to protect yourself. This is non-negotiable. If you drive a car, having an airbag is non-negotiable. You can’t buy a car and request that the airbag is removed to lower the cost of the car. In the same way, setting aside a portion of your monthly income for insurance is non-negotiable because it’s certain that you’ll need life insurance. Furthermore, I tell clients that unless you have a special deal with God, the chances are high of a critical illness, disability or hospitalization happening.

“S” stands for savings. There are short-term and long-term savings needs. People save money for short-term needs, such as buying a house, starting a business or getting married. Long-term savings can go toward retirement planning and education planning.

“I” stands for investments. You invest money to grow more money. Bank interest rates are low, though. If you simply leave your money in the bank — the interest rate in Singapore is about 0.125% — it limits how hard your money can work for you. By investing it, however, you could make anywhere from 3 to 8 percent. This is why the wealthy get wealthier, because they’re knowledgeable about investing and growing money. People who don’t have the knowledge struggle.

The general rule of thumb for your monthly income is that 10 percent should be set aside for coverage, 10 percent for savings and 10 percent for investments. Don’t talk about savings and investments with clients until they’re comprehensively covered. Otherwise, if they experience a disability, illness, accident or hospitalization, it’s going to wipe out their savings and investments. Focus on coverage first, and then you can focus on savings and then investments.

Those are the components of financial planning I discuss with clients to protect their future, as well as their family’s future.

Subhas V. Nathan, a 14-year MDRT member, is a director at Prudential Assurance in Singapore, where he leads a team of 20 advisors.

Hear more from Nathan in his video, “Protecting clients’ futures: The value of financial advisors.”