Financial advisers say pandemic pushed more planning decisions

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Prior to the pandemic, the last thing Spencer Schulz and his wife chatted about over pizza and wine on Friday nights was an unforeseen passing. But now it’s a common conversation for his family, and his clients at Northwestern Mutual, the financial adviser said. 

Life insurance sales are the highest they’ve ever been at the company.  

Not only has the pandemic forced the nation to take a long hard look at their rainy day savings — the Federal Deposit Insurance Corp. reports banks grew by a record $2 trillion in cash deposits during 2020 — but people have been forced to discuss how death could be just around the corner. With COVID-19, a trip to the grocery store, a hug could result in contracting a potentially fatal disease. 

“The pandemic made it okay for people to talk about finances in their house and to plan for something happening — not in a pessimistic way, but rather, I want to get life insurance before I contract COVID and become uninsurable, or God forbid I get it and do pass,” Schulz said. “We definitely saw an uptick.” 

Last year was Schulz’ best year as a financial advisor at Northwestern Mutual, which has offices in Charleston, Mount Pleasant, Columbia, Greenville, Spartanburg and Asheville, N.C. Additionally, the company brought on more clients than it had ever seen, reaching $31 billion in revenue and surpassing $300 billion in total assets for the first time, the company said. Client investment assets also hit a record high of $195 billion. 

With a year that saw a global pandemic and a controversial election, Schulz said the positives that came out of 2020 was the realization for the importance of planning.  

“We truly think about the folks that were waiting for a $600 or $1,200 stimulus checks,” he said. “If we’re really banking on that, we’ve got a bigger problem, right? We realize the need for a proper emergency fund.” 

Rainy day funds should total three to six months of expenses, Schulz suggested. Additional savings can be divvied into short-term, mid-term and long-term investments, which can include life insurance.  

There are two types of life insurance: term and whole or permanent. Term lasts for a specific period of time, generally five years, 10 or 30. People often buy term insurance because they can get a large death benefit amount for a relatively inexpensive premium, said Evan Hammond, financial adviser and field director at Northwestern Mutual. 

“The reason someone would buy term insurance is because they have a need, they have children or some debt that, God forbid they pass way, they want their family or beneficiary to have tax-free money,” he said. “It’s a really easy way to cover yourself for the specific term.” 

The downside of term insurance is the potential to outlive the term, they said. The insurance then expires and renewing can be harder as the individual ages or incurs health issues. 

Permanent life insurance can last for a person’s entire life as long as they pay the premiums. Some use it as a financial strategy, Hammond said. 

“The unique thing about permanent life insurance is it’s not correlated to the cash market, so you don’t have the ebbs and flows like a year ago when we saw that huge dip in the market,” he said. “Nobody’s cash value took a hit because it’s not associated to the stock market.” 

The insured can also pull out money in a tax-favored fashion, meaning what you put in can be taken out tax-free.  

Hammond recommends a mix of both when making a financial plan. There are always going to be downturns in the market and having an alternative vehicle to pull money from is extremely strategic.  

For those looking for a financial advisor, Schulz stressed the importance of exploring options, just as you would a personal trainer. There are talented people whether you choose Wells Fargo, Charles Schwabb Corp. or Northwestern. And there’s zero risk in having a conversation, he said. 

“What’s important is to work with someone who has a financial plan and is working with your best interest,” Schulz said. “That understands the household dynamic, the goals of sending kids to school, understands the goal of paying off the boat. It’s important to work with someone who works with you to get there.”