11 Powerful Questions For Opening Opportunities and Engaging the Affluent
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Any one of The Center’s 11 Powerful Questions is all you need to open a meaningful conversation with an affluent client. Our hope is that by arming you with these questions, you will uncover more and larger opportunities and take your practice to the next level! This is not easy, absorb them and choose the ones most applicable to your situation and begin using them.
Question 1
What is your largest expense? The answer you’re looking for is taxes. But when you ask this question, you will almost always get incorrect answers; such as: “my mortgage, kid’s college, or health insurance,” when in reality the truth is their largest expense is taxes! The problem is that since most Americans do not think there is anything they can do about taxes they don’t look at it as an expense. It might take a while, but eventually people will answer taxes. Use this question to garner interest about the many strategies they could use to reduce their taxes and help them keep more of what they make.
Question 2
What have you done to create tax-free income for retirement? Typically, you will get a blank stare. Most prospects you speak with will tell you what they have in assets for retirement planning (for example, a 401k or an IRA), but very few will tell you how they plan to turn those accounts into tax-free income for retirement. With taxes projected to rise, they need your assistance.
Question 3
How much of your retirement accounts are yours? The client will almost always give you a puzzled look and reply with, “All of it!” or “I don’t know”. This is where you can add value by helping them see that in fact it’s not 100% or all of it, they have a partner in these plans, the IRS. When they begin receiving distributions, the IRS will be first in line waiting for their share. By helping prospects see the need for a plan to get this money out with the least amount of tax, you open their eyes to planning they most often times haven’t even considered; this provides you with instant credibility.
Question 4
Do you have the cash to pay the taxes on your IRA/Profit Sharing Plan Distributions? The government needs money, it has been said that in the future taxes will likely rise and consume your IRA? Most affluent clients believe that by investing in IRAs and other qualified plans they have cut their taxes, but they have only deferred them and what they do not realize is that what they have done is compound their future tax bill. The larger the account gets, the more the tax. They need to understand that their retirement plans will be subjected to many different types of taxes at some point in the future including income taxes, and possibly estate taxes, gift taxes, and generation-skipping taxes. The reality is that if you help your client determine how they will reduce or eliminate these taxes now, you add significant value. This question will lead to a meaningful conversation about their wealth and differentiate you from their other “trusted” advisors, even their CPA.
Question 5
Did you know you can have guaranteed income for life? We have access to plans which provide this type of guarantee even if you made bad investment choices in the stock market and lost most of your money. Many Americans believe that they have to be in the stock market to make a significant amount of money. Many still carry with them the fear of living through the second worst down market in history, in 2008, when many lost 50% of their portfolios. This new structured income that is available today can open the conversation by letting them know that even if the market crashes again, it does not have to mean the end of their retirement dreams. Rather, there are structures and strategies available to help them participate in the market’s growth while protecting against downside risk.
Question 6
Did you know that estate and capital gains taxes are voluntary? Estate Tax: Many people believe that estate taxes are not an issue because the federal estate tax exemption is approximately $11.4 million dollars. However, they fail to account for: inflationary growth of their assets or that the next congress may change the amount of exemption once again. Isn’t it better to plan and not need it, than to not have a plan and need one? Remember that while the “permanent” estate exemption is $11.4 million dollars, it is only permanent until congress changes their mind. So far, this permanent estate exemption has changed 17 different times over the decades. The truth is that if the government needs more revenue it is easy to change tax rates under the mantra of, “We are only going to increase taxes on the rich”.
Capital Gains: Some business owners and high net worth clients worry about capital gains taxes. Many of them have highly appreciated assets due to the market’s growth over the past years and/ or have large gains that will be realized when they go to sell their businesses or real estate. They are also often unaware that while capital gains rates used to be 15%, for the majority of prospects it could be as high as 23.8% plus state tax which is almost a 60% increase! If you proactively inform them that there are strategies to help sell their highly appreciated assets and avoid the high capital gains taxes, you will gain their attention and respect.
“Even innocent mistakes can cost business owners and the affluent hundreds of thousands of dollars, and in some cases millions.”
Question 7
What have you done to protect yourself from lawsuits, liens, and judgments? The United States is the most litigious country in the world. Even innocent mistakes can cost business owners and the affluent hundreds of thousands of dollars, and in some cases millions. You only have to look as far as cases like the hot coffee spill at McDonalds in 1992 to understand the mindset of the world we live in today. While that was a serious incident, the fact that those seeking judgments are not held to any “common sense” standards make everyone a target. All affluent clients and business owners worry about lawsuits, liens, and judgments, and yet very few advisors discuss the risks and solutions with them.
Question 8
Did you know you could insure your IRA/Profit Sharing Plan? This question will usually result in a look of confusion followed by, “What do you mean, insure my IRA?” According to a recent MIT age lab study, if a married couple lives past the age of 65, there is a 75% chance of at least one of them developing Alzheimer’s, Dementia, or Parkinson’s. Any one of these diseases usually means needing care for an extended period. As a result, many retirement accounts are often quickly wiped out after absorbing the cost of care plus the taxes owed when the money is withdrawn to pay for that care. In the event that a family member needs long term care, you once again add value to the planning process by educating prospects about products and structures available today. You also help them think through planning issues that are likely to cause major issues for their surviving spouse and beneficiaries if left unaddressed.
Question 9
Did you know the IRS will give you a tax deduction today for a charitable gift that you do not make until after you and your spouse pass away? Most affluent clients love the idea of charitable planning from the prospective of giving back and reducing taxes. However, what they do not like is the idea of losing control of their assets, being poorer, and perhaps even running out of money. By engaging them in a conversation about charitable planning and the significant value and tax deductions today on gifts after they are gone, you separate yourself from the generalists and position yourself as an expert.
Question 10
Have you ever lost money in the stock market? Can you afford to lose it again? Do you want to make sure that never happens again? The vast majority of affluent clients have never heard of the indexed products that provides the upside potential of the stock market without the downside risk. While you may not implement it for a given client, introducing the concept is an excellent way to get their attention and open the investment planning conversation.
Question 11
Did you know there are processes available that will pay you tax-free income if you live too long, die too soon, or need long term care coverage? The reality for all of us is that we will either live longer than expected, die sooner than intended, or need long term care at some point in our lives. Educating the affluent today on the fact that asset-based long term care products exist and provide tax advantaged growth inside of a contract that also pays a death benefit to the client’s beneficiaries. This product provides a very attractive alternative to those who do not want to pay for traditional non-guaranteed long term care coverage, can’t qualify for it, or are afraid of wasting money on premiums if they die and don’t use it.
By understanding how to open the conversation, you position yourself as a resource that understands that there is more to assisting the affluent than simply managing their assets. In addition, you also help them acknowledge and address the concerns they have that their other advisors may not be addressing. Good luck! www.centerfortaxstrategiesandresources.com TheCenterTeam@yourctsr.com (877) 258-2837