“Decades of Income”
An effective way to approach to the DI conversation…. especially effective with the millennial market… is to help your clients see the risk exposure and consequences of not protecting their income. This approach often results with the client reaching the logical solution….”perhaps I should at least protect some of my income”. Let’s take a look at the conversational flow of this approach….
Step 1: Ask your client to think about their income in terms of decades of income. Ask them what they think their average annual income would be for each decade of their working years. As you move forward each decade, ask them what do they envision will be different for them and their future family in that decade vs. the decade before. Then ask them if they envision their income playing an even more important role in supporting their family’s lifestyle and goals as they get older.
% of lifetime income
30 – 39
Step 2: Ask your client … “Suppose you had a money machine that could print this much money (i.e., $6,250,000), would you insure it?”
Step 3: Next, help your clients to imagine this total income amount as if it were their investment portfolio worth that amount. Then ask…“Imagine you had an investment portfolio worth $6.25M. How much sleep would you lose if you lost about 50% of it over night? (draw a line through the 50’s decade of income (example $3,000,000) and say “you see, a serious illness or accident in your 50’s could prevent you from ever earning about $3,000,000 of the $6,250,000.
Step 4: “Let’s take it one step further… How much more sleep would you lose if you lost about 80% of it over night? (draw a line through the 40’s decade of income (example $2,000,000) and say, a serious illness or accident in your 40’s could prevent you from earning $5,000,000 or the $6,250,000.”
Step 5: “But, if you actually did have this much money in your portfolio today and you lost 50% or 80% of it in the market overnight, if you’re young, you have something on your side….TIME! Time could help you recoup some or all of that loss. But it is a completely different scenario if you had a serious illness or accident that keeps you from ever being able to earn this income in the first place. In that case, time won’t bring it back. So, $6,250,000….that’s an impressive number. And it sounds like you have big plans for your lifestyle and your family with this income you could generate.”
So I just have one question for you….Do you suppose it makes sense to protect any of it?
So, when we get back together, do you suppose it would make sense for me to share with you some ideas to help you implement a strategy to begin protecting your income?