Leveraging insurance to ensure financial security

Dan Dyck: [00:00:02] My name is Dan Dyck. My wife Christa and I own Solomon Financial, a net worth financial. We've been in the business now for about 30 years together. What drives us? We have a motto that is, “We equip our clients for the great adventures of their lives.” We love that. We love to help families get to where they want to go without our own agenda getting in the way. So that's what fires me up every day is, I still love to deal with clients directly. I love teaching advisors, but my primary thing is, I still like to be kneecap-to-kneecap with clients, helping them to explore their great adventures.

Voice-over: [00:00:40] You have questions?

Question: [00:00:42] I was wondering, is there any way to reduce coverage costs in a smart way?

Question: [00:00:46] What should be done when a client wants to cut on their life insurance?

Question: [00:00:50] I'd like to make sure that my clients are informed enough to make the right decisions without compromising their security.

Voice-over: [00:00:57] We're here to answer them.

[00:01:00 TRANSITION]

Catherine Duranceau: [00:01:02] Hi, everyone! Welcome to a new episode of Ask the Experts. I'm your host, Catherine Duranceau. Thanks for joining. Today, let's dive into strategies to ensure your clients make the right choice about their coverage. Also, ways to reduce some of your client's protections and investments in a smart way. So, Dan, you've been working in the industry for more than 30 years, and I've heard that even if we're in an important period of inflation, your clients are not cutting out on their coverage. Can you explain to us how that happens?

Dan Dyck: [00:01:36] Yeah, for sure, Catherine. So I think the first thing I would say is that there is no perfect world. You're always going to have these challenges. So I don't want to give the idea that, you know, we've somehow, at our company, attained a perfect track record. But I would say that across the board, our advisors are not experiencing people canceling policies. Generally speaking, most of what we write stays on the books. And I think there's definitely some reasons for that. First off, we have great advisors. They're advisors that believe deeply in what they do, not just placing product. And I'm going to come back to that as we go through it. I think there's kind of three levels of serve in this industry. The first level is transactional. A lot of advisors still look to place business and it's transactional.

Catherine Duranceau: [00:02:27] Just to make money.

Dan Dyck: [00:02:28] Yeah, exactly, like it's a transaction. They know what pays the bills. And again, I don't fault them for that because you do have to look at the bottom line of a business. But I think it is misguided. And I think where it's misguided is, we spend so much of our time in this business working on the front end of the business and the front end of the business is prospecting and closing sales. We, quite frankly, don't even allow that language in our company. We don't want to spend time… We want our advisors spending time, instead of prospecting and closing sales, having real conversations with adults that can make their own decisions.

Catherine Duranceau: [00:03:05] It should be logic.

Dan Dyck: [00:03:06] It should be logic, right? So there's three levels. The first level is, we can make transactions. If you're making transactions, you will spend the vast majority of your career working on prospecting and closing. So that's a concern. The second level that gets a little bit deeper than that is what's used in our industry, or called in our industry, “needs-based selling.” So I might sit down with you, Catherine, and say, well, let's take a look at what you need and then let's sell to that need. It sounds better. In my opinion, it doesn't go deep enough, but basically what that looks like is I might ask you questions like, “So Catherine, tell me about what can you afford to put towards an overall plan for your financial security?”

Catherine Duranceau: [00:03:50] So you're adapting it, which is, I think very logic and smart.

Dan Dyck: [00:03:54] Yeah. And so that's another deeper level. But it still, in my opinion, doesn't go deep enough. And here's why I don't think it goes deep enough. Most people don't know. Most people, if you think about one word that describes most people's finances, honestly, it's fog. They just don't know.

Catherine Duranceau: [00:04:14] And stress.

Dan Dyck: [00:04:14] And yeah, actually, maybe there's two words.

Catherine Duranceau: [00:04:15] Words. I think stress takes a big space in this.

Dan Dyck: [00:04:17] Yeah, absolutely. And I think the stress comes largely from just not knowing. They don't know. Am I doing enough? Should I be saving more? My month-to-month bills versus income? What does that actually look like? Nobody wants to sit down.

Catherine Duranceau: [00:04:31] Should I look at that?

Dan Dyck: [00:04:32] Yeah. Do I even want to know? Right. So when we can get down to that level where we're actually sitting down with people and saying, okay, Catherine, let's start from the bottom up. Let's actually do the work, the hard work that very few people actually want to do, which is cash management. Like, how do we actually manage the money coming into the house and the money going out of the household and make it all mesh and make it all work? So that when we put other things in place, like a TFSA contribution, or your life insurance, or disability insurance, or long-term investing in RSPs and all that, those are not the bottom of that pyramid. They're the top of the pyramid. So the foundation is, are you solid month to month?

Catherine Duranceau: [00:05:16] Interesting.

Dan Dyck: [00:05:17] Yeah. Here's the funny part. We always say that there's natural-born spenders and there's natural born-savers.

Catherine Duranceau: [00:05:23] I want to know which one I am. This is cool.

Dan Dyck: [00:05:26] You got to take a quiz right. Neither is better than the other. And that's an important point. You know, there's a lot of people that, especially in couples, you'll have one participant that'll be like, oh, she's way better with money than me. Why? Well, because she knows how to save and I just know how to spend. And our message is always, actually, that doesn't make either one better. You know, you need to know how to spend because you guys got to have fun in your life. There's a point to this whole going-to-work-and-making-money thing. And it's not just to save money, it's to actually enjoy life. And so both of you are good with money in different ways.

Catherine Duranceau: [00:06:04] Which one are you?

Dan Dyck: [00:06:04] I'm a natural born spender. 100%.

Catherine Duranceau: [00:06:07] I would have thought the opposite.

Dan Dyck: [00:06:09] No, no, no, no, I wasn't born with a saving bone in my body. And so for me, no, when I have money, it's like, the only purpose to this is to go do something with my family, right? I just love spending money, I love travel. There's certain things to me that are just, this is what it's about. And so what's funny though, is my wife is a natural-born spender as well. So we have no tension.

Catherine Duranceau: [00:06:32] And if I'm not wrong, you work with your wife.

Dan Dyck: [00:06:35] I work with my wife.

Catherine Duranceau: [00:06:37] Good communication between the two.

Dan Dyck: [00:06:38] Absolutely. And so when we look at our clients, we're not the people that are saying, “Hey, you need to save as much as you possibly can,” and all that kind of stuff. We get very good results in terms of how much people save of their income, but that's not the focus. The focus is, what are we actually shooting for? What are we working towards? What jacks you guys up? What do you get excited about? Let's shoot for that. And then we will teach them to save, to accomplish those things. I only save money so that I can spend more later. That's my whole drive.

Catherine Duranceau: [00:07:10] And tell me, with your experience, what are the financial products that people should never cut out on? 

Dan Dyck: [00:07:10] Travel.

Catherine Duranceau: [00:07:11] Yeah, right. For mental health, we need to get out of a routine?

Dan Dyck: [00:07:20] Why do I say travel? Because that one's near and dear to me. But for somebody, it might be cars. You should never skimp on cars. So when we say financial products, of course I know what you're asking. You're asking should they be, you know, not cutting back on their TFSA contribution or on their life insurance premiums or things like that? Of course, that's all true. But when you think about what motivates people, their life insurance premium does not motivate them at all. Right? I pay a lot towards my Beneva universal life policy. Why? You already know me. Why do you think I put a lot towards my benefit policy?

Catherine Duranceau: [00:07:56] Well, you know how to deal with your money. You're quite good.

Dan Dyck: [00:07:59] I’ve good  systems. But the reality is, it's because I want to spend it later. I'm piling up money so that I can spend it. I already know what I'm going to spend it on. I'm already excited about those things. And so every month, a bunch of money goes to my universal life policy. But what's motivating me is not my premium. So really, what's motivating me is travel. Quite honestly, I love traveling with my family. And so that's what I'm doing with some of that money that gets built up in that life insurance policy. So for me, that's my motivator. So what should I not skimp on? I should not skimp on my dreams, the things that I'm excited about because it's what motivates me not to skimp on my insurance premium. So think about what actually motivates people rather than what is their duty.

Catherine Duranceau: [00:08:47] But then what happens when someone calls you and says, “I'm feeling kind of uncomfortable and I want to cut out on my life insurance?” Do you have to convince them? What is your approach in those situations?

Dan Dyck: [00:08:59] No. So it's a little bit laissez-faire, honestly, because my first answer to that is, absolutely. Let's have a coffee. Okay? So I will say that I can count on one hand, maybe even one finger, the number of times I've had a client call and say, “I need to cut out my life insurance.” The reason for that is because of the planning work that goes in before we ever get to actually putting a product, a financial product in place. And even then, sometimes you still get to a point where there's nothing that you can do. Certainly, when you've had no time to prepare with that client, in other words, prepare contingency plans, it's been a short relationship, it's harder. But here's how we normally operate. So step number one is we always want to make sure that there's emergency money in place. Emergency money is critical for job losses or just even job interruptions, or lower income or higher expenses or unexpected expenses. So we put a lot of emphasis when we first start with that family on cash flow planning to make sure that we actually have some money set aside. But usually it starts with, do they have any money on a monthly basis? And we spend a lot of time doing what we call plugging leaks. And plugging leaks can be things like they're overpaying on their cell bill or they're overpaying for internet at home or things like that. And we teach them how to strip down everything that they're being overcharged for, not what they're overspending on…

Catherine Duranceau: [00:10:30] You take the time to do that, which is good.

Dan Dyck: [00:10:32] We take a lot of time to do that work. Then we free up that money and we put it, generally speaking, into a TFSA that is no fees in, no fees out. So that becomes that client's emergency money. We don't call it a TFSA. We affectionately call it their bucket. So now we have that bucket in place. If a client comes to us and says, man, we can't make our insurance premiums, the first thing we would do is look at the bucket. Do they have enough money in there to cover premiums for a period of time? The second thing that we would do is let's say that we've run the course, we've used the bucket, and there's nothing else left to keep that policy going. It really depends on what kind of a policy it is. If it's a term insurance policy, we don't have a lot of options to extend that because there's no reserve fund inside that policy. So with Beneva, we do a lot of universal life with Beneva. Even if it's universal life plus a term rider, there's at least a portion that gives them a reserve fund inside the policy for this type of an event. So then we can say, look, how much can we afford? Not how much can you afford.

Catherine Duranceau: [00:11:41] You’re including yourself in it.

Dan Dyck: [00:11:42] We're helping them with their budget. How much can we afford to put towards this policy? And let's say that it was $200 per month and they can still do 50. Well, 50 might cover all the insurance cost. It's just, they don't have anything going into the savings component for a while. That's okay. That's sustainable. Let's pay your insurance cost and we will take a pause on the portion that normally goes to your investment component of the policy. So that's one step. Another step would be, we can't even afford the 50. Okay. Let's bring it right down to zero again. As long as it's a universal life policy, it will probably sustain itself for an extended period of time because the $50 cost will just come out of the reserves of the policy for a while. So for us, if there is at least some universal life component, it gives us a ton of options. If it's pure term, nothing wrong with pure term, but if it's pure term, we are significantly more limited. We're drawing from different resources trying to pay for that policy. But if we miss, you know, a premium for more than 30 days, it's canceled. It's over. The term insurance policy collapses. So we will then look to things like, Catherine, you're not working right now. You have RSPs. RSPs are taxed in your tax bracket. So if you're not working, your tax brackets likely going to be quite a bit lower this year. It may be a good idea for us to draw a bit of money out of your RSP every month to sustain your grocery bill and these different things that you're having trouble paying for, including your life insurance. How do you feel about that? So we can look at solutions like that to fund from different areas, to try and keep those things in place.

Catherine Duranceau: [00:13:21] So you're really analyzing every aspect before getting to the emergency fund and other resources.

Dan Dyck: [00:13:27] Yeah, you've got it. And it might be too, at some point we have to reduce coverage rather than eliminate coverage, which is sort of the last stage. Many, many more things that can be done that we haven't touched on. Because if I know your situation inside out, we can have those good conversations. If I just sold you a product, you're probably canceling that policy.

Catherine Duranceau: [00:13:48] And we trust you so much more, I guess, in those situations since you've been there for the past couple of years. But there are probably some people that did cut out, is it their life insurance or they stopped investing in whichever branch? Did that ever happen and how could you help them out?

Dan Dyck: [00:14:03] Yeah, yeah. No, certainly. And that's fair, Catherine. That's what I said at the beginning. There is no perfect world. There still will be clients that literally… like, I still remember a specific client, doing all of their work with them. And we went slow and it was methodical and we hit everything we could possibly hit. And then when we finished, one of the things we did is we put insurance in place on him and her. And two weeks into the underwriting process, they both worked at the same oil field company. They were both fired in the same day. So situations like that, it's not like, okay, you know, there's got to be a way around this to keep these policies in force. There just wasn't. So what did we do in that case? Get back in here, guys. The policies are on hold. We get it. Let's work on how do you survive now for the next three, four, five, six months until you're both back at work? And then we'll do a reset. So there are obviously extreme situations where there's just nothing that we can do.

Catherine Duranceau: [00:15:05] Uncontrollable also because you could lose your job at any day.

Dan Dyck: [00:15:09] Yeah. Yeah. You got it. So it's naive to say that you can save every policy you ever write, but it should be the hallmark of your business that that stands out as an absolute anomaly. Literally, I had to go back about eight years to remember that case because it's anomalous. It's not the norm. We want to make sure that almost all the business we put in place is good, solid business.

Catherine Duranceau: [00:15:33] And tell us, what do you think about group coverage? Is it a decent protection for everyone? How could you like be sure everyone has the right protection?

Dan Dyck: [00:15:43] Great question. And I've wrestled with that myself because you see people that have group coverage. What's interesting is a lot of times you'll be working with a client and they have really no frame of reference for how much insurance is enough. So this is somewhat undergirded by this belief: insurance is not a need. And I believe that insurance is not a need. It doesn't go far enough. But again, because they didn't have any choice in that whole thing, they were just assigned it. Right? They might have been given the choice, you can have one time in your annual salary or two times, but nobody sat down with them and went through, what is for you an ideal amount of insurance that you would like to have? Not what's the need, but what's the ideal amount? Nobody went through that exercise with them.

Catherine Duranceau: [00:16:29] I find it interesting because you were talking at the beginning how important the real conversation is, and I think you're getting that with the one-on-one situation, instead of having the group coverage where you're not getting everybody's needs and really understanding what every person wants and desires. But there are some great advantages of having group coverage, too.

Dan Dyck: [00:16:48] Yeah. And the reality is, for a lot of clients, group coverage is the only coverage they can get. Their health is such that they can only get group coverage, in which case it's not just good; it's the greatest, if they can't get coverage elsewhere. Group coverage is also incredibly cost effective. So we want to make sure that when clients have group coverage, they know the value in it. We typically recommend to beef it up to the top level they're allowed. So if it's standard, they get one year's income, and they're allowed to beef that up to two years’ income, we will recommend they beef it up to two years income. Obviously, group life coverage generally also comes with a lot of other benefits. And in some cases, even when a client retires, they can take some of those benefits with them into retirement, which is not always the case. But it's a solid product. So we encourage people to participate in their group coverage to the fullest extent. And then on top of that, look at what do they want for an ideal insurance need? Again, I don't use the word need; I use the word desire. What's your desired amount that you want? And then we'll make group coverage a part of that. Generally speaking, they will beef it up a little bit on the personal side anyway, because the difference in cost is fairly negligible, to ensure that they have that coverage, even if they leave their group.

Catherine Duranceau: [00:18:35] Dan, is there a personal story that you'd like to share to our listeners today? 

Dan Dyck: [00:18:38] Sure. Yeah. So it was at a point in my career, about 15 years into my career, where I had had this, what I called a crisis of conscience. And I was going back to all of my current clients, and I was trying to sort of, if you will, throw my mouth over the bar and then figure out how to fix it. So what that looked like to me was saying, whatever you guys want in your life, let's figure out how to go there, and we'll work together until we get it, and then leaving the house and going, “I have no idea how to get them there.” And that forced me to become significantly more creative and more resourceful and bring more people to the table to try and solve those issues or to shoot for those things. So as meeting with this one couple and I was talking to them about, what is it that you really want? And honestly, my impression was the wife was all in and the husband was all out, right? I was talking to her because she was giving me…

Catherine Duranceau: [00:19:41] Very motivated.

Dan Dyck: [00:19:41] Yeah, she was motivated. She was participatory, and he was just staring out the window like he wished I would leave. And all of a sudden, he started to cry. And I was like, I did not see that coming. Maybe he is listening. And he looks at me and he says, all I want to do is take my kids to Disneyland. And I said, okay. As he's crying, right? And I said, okay, can you tell me more about that? And he says, I have been promising my kids since they were little kids that I would take them to Disneyland. My oldest turns 18 next year and I've never done it. I've lived paycheque to paycheque my whole life, and I've never delivered on that promise. Immediately, for me, that was like, this is what it's about. It's not about life insurance and TFSAs and RSPs. He doesn't give a rip about that stuff. All he cared about is he wanted to send his kid or take his kids, rather, to Disneyland. And so from that point forward with that family, all we talked about is how do we get there? Now, what did it require? It required some debt work. It required some TFSAs. It required all kinds of things to bring it together. And they took their kids to Disneyland. And it was a celebration for them and for me. Right? It was extraordinary to have participated in that and watched him take his kids to Disneyland.

Catherine Duranceau: [00:21:03] It's such a personal story where you're helping him like, just get that goal that's so rewarding for you.

Dan Dyck: [00:21:08] 100%. And did he buy life insurance? Yeah, he did, but it wasn't the point, right? It was, we tapped into something that he was passionate about and it was helping his family, doing things for his family. So life insurance later was a no-brainer. But it wasn't what we led with. You know, his TFSA was a no-brainer. It's not what we led with. We led with, how do we get you to Disneyland? So yeah, that was a cool turning point in my career.

Catherine Duranceau: [00:21:34] Yeah. A human story where you just wanted to change your way of seeing your job.

Dan Dyck: [00:21:39] Yeah, absolutely.

Catherine Duranceau: [00:22:00] All right, Dan, so it's time to sum up our great conversation. Can you briefly tell us what we should absolutely remember when clients maybe want to just cut their savings?

Dan Dyck: [00:22:08] Yeah. Thank you, Catherine I've really enjoyed this time together, too. So I think to sum it up, if a client is asking to cut costs, it’s for a reason. So rather than thinking about ourselves in that situation, we need to put ourselves in the shoes of the client. We need to feel that pain a little bit, if you will. But most importantly, that's where we need to roll up our sleeves and go to work. And rolling up our sleeves and go going to work looks like us sitting down, going back to the basics again, providing we've done our job in the first place of helping them with their cash flow planning, helping them with their emergency fund establishment, all those pieces, then we've earned the right to go back into that situation at that point and say, okay, where does it hurt? How do we fix it? And how, therefore, can we defend the really important products that you've put in place so that we're not back to the drawing board later? If we've done our work at the beginning, that conversation, we've earned their trust to have that conversation when the crisis comes up.

[00:23:08 TRANSITION]

Catherine Duranceau: [00:23:09] Thank you for your time and expertise, Dan. It was so interesting to know how to deal with customers who want to cut back on their protection. And thank you for listening. I hope these tools will be helpful for your ongoing and future practice. If you have any questions, don't hesitate and contact us at [email protected]. If you would like to have more information about this topic and discover other episodes, go on Beneva's website in the podcast section. Stay tuned for another conversation that will guide you for future insurance and business needs, until next time.

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