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Succession Planning 2019: Converting Challenges into Actions (Executive Summary Part 2)

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In Asian Private Banker’s fourth year of research partnership with Transamerica Life (Bermuda) Ltd. (TLB), APB has been following the financial protection consumption trends, and investigating the market challenges and gaps HNWIs/UHNWIs face in meeting their financial security goals.

This report focuses in particular on the factors which are preventing Asian HNWIs/UHNWIs (primarily in Hong Kong and Singapore) from taking action towards their succession planning. It also examines Asia’s life insurance market and the role that life insurance plays in supporting the financial health and succession planning of Asian HNWIs and UHNWIs, including their successors.

Download your complimentary copy of the executive summary of Succession Planning 2019: Converting Challenges into Actions today to read exclusive findings.

The Role of Life Insurance

Our 2018 study identified a rising interest in life insurance products amongst surveyed RMs’ clients. The percentage of RMs who reported that more than 10% of their clients had life insurance policies increased to 79% in 2018, up from 13% in 2016.4 This finding validates the continuing optimism in the last few years surrounding the prospects for the life insurance market in Asia that was initially recorded in APB’s 2017 life insurance research report.5

Indeed, in times of political and economic instability, clients tend to seek shelter in financial products that will help protect their economic security and mitigate external risks — to that end, life insurance products can serve as a valuable solution. According to our 2016 life insurance study, 35% of RMs responded that in times of market uncertainty, private banking clients purchased more life insurance policies.6

Life insurance’s rise in popularity as a succession planning tool is due to its various favourable features: in addition to its traditional protection coverage, it can offer support in areas such as estate liquidity and portfolio diversification, amongst others. For many HNWIs, life insurance is an integral part of their financial plans and is often used as a tool to manage mortality risk, provide protection for their loved ones, and support their financial legacy.

In 2019, life insurance ranked as third most popular succession planning tool amongst RMs’ clients, only behind cash equivalents and trusts.

The penetration of life insurance products has increased to 59% among end-clients compared to 50.4% in 2018. Amongst those with more than US$5 million in assets under management (AUM), 73% held a life insurance policy in 2019.

Changing taxation and compliance related issues are furthering the interest amongst HNWIs for life insurance products as these are increasingly seen as a financial tool to help mitigate against jurisdictional, compliance, legal and tax issues involved in the transfer of wealth.

The rise of HNWIs/UHNWIs in Asia needing to plan their wealth transfers offers a clear opportunity for providing effective life insurance solutions. In parallel to this increased interest in life insurance, Asian clients have started demanding a wider variety of life insurance products to meet their changing needs.

Universal Life insurance (UL) remains the dominant product of choice for HNWIs (accounting for 61% of life insurance products purchased), with 29% of RMs reporting that more than 80% of their clients make use of UL insurance as part of their wealth transfer plans, compared to 26% in 2018.

However, over the past year we have seen an increase in demand for other life insurance products such as Whole of Life (WoL), Private Placement Life Insurance (PPLI), and Variable Universal Life (VUL), all of which have slightly different structures that offer differing benefits — reflecting the changing goals and priorities of clients.

Despite this increased interest in life insurance products, challenges remain in promoting life insurance as a critical succession planning tool. Lack of education and awareness about the key features and benefits of life insurance among end-clients remains a hurdle and needs to be addressed in order for life insurance products to be widely viewed as an important financial solution.

Over 60% of end-clients who have not been introduced to life insurance during the past 12 months indicated that they were unsure about the actual benefits of life insurance products or had no perceived need for it.

Amongst all surveyed RMs’ end-clients, 39% claimed to have different investment priorities while 35% indicated that they were somewhat unsure about the actual benefits of life insurance products.

As the greatest intergenerational wealth transfer gathers momentum in Asia, it comes somewhat as a surprise that only 36% of end-clients were introduced to life insurance policies during the last 12 months. Amongst this group, 56% of end-clients stated that it was their RMs who recommended life insurance product(s) to them while just 6% of end-clients said that the recommendation came from their insurance providers.

Read Part 1 of the executive summary of Succession Planning 2019: Converting Challenges into Actions published in January 2020.

Part 3 of the executive summary will be published in the coming days.

Download your complimentary copy of the executive summary of Succession Planning 2019: Converting Challenges into Actions today to read exclusive findings.

4 Source: Exploring the HNW Life Insurance Landscape 2016 report.
5 Source: Exploring High Net Worth Retirement Solutions 2017 report.
6 Source: Exploring the HNW Life Insurance Landscape 2016 report.

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