Selling for the sunset years

Most of us need look no farther than the bathroom mirror to be reminded that we are, in fact, aging. And we’re not the only ones. The U.N. projects that by 2050, there will be 3.7 million centenarians across the globe. Japan seems to already have a head start. The Land of the Rising Sun is home, ironically enough, to the world’s largest percentage of people in their sunset years. More than a quarter of its population is older than 65. Japan also has distinguished itself with long life expectancy, as evidenced by its record 86,510 citizens older than 100.

The country’s notable life expectancy — 87.74 years for women and 81.64 for men — presents many opportunities for its MDRT members. While the government provides a pension, some ultimately outlive that source of income. Additionally, there is low financial literacy and an emphasis on saving via traditional means, so more than 50% of individuals’ financial assets are tied up in bank CDs, where they are earning minimal interest (Japan’s interest rate has been at less than 1% for more than 25 years).

“We, as financial advisors, have important roles under the circumstances,” said 26-year MDRT member Yasuhisa Kojima of Tokyo. “There is a need for highly ethical sales representatives who will prioritize the benefit of our clients in providing financial and insurance products.”

Daisuke Kabata, an eight-year MDRT member from Osaka, says Japanese people naturally are savers, so they look to financial professionals before investing their money in riskier options.

“They tend to seek advice from insurance advisors, who are known for being conservative and reliable financial professionals,” Kabata said. “Advisors still have good opportunities and work to do because much of the assets are sitting in the bank earning little to no interest.”

But with such low interest rates, advisors direct clients’ attention to the true purpose of insurance.

“I remind my clients that insurance and savings are two different things,” said Naoyuki Sekiguchi, an 18-year MDRT member from Tokyo. “When the interest rates were good enough, you could use insurance to protect and save at the same time. However, now that the interest is too low, I recommend term insurance to secure protection, then use other products, such as annuities and scholarship insurance, to save money.”

In 2019, new accounting rules in business insurance came into effect, preventing business owners from exempting premiums from their taxable income. Kojima says this had a “huge impact” on selling.

“As painful as it was losing business, the tax reform reminded us to use insurance for its primary and true roles and our mission, not to save taxes,” he said.

Sekiguchi says he also felt the effect of the regulation. “The tax reform on business insurance made it extremely difficult to sell,” he said. “Insurance cannot be a tax-saving tool anymore.”

The methods by which advisors sell also have changed. The majority of MDRT members in Japan are tied agents representing one company and are paid through a traditional commission structure. However, there has been a recent increase in the number of independent agents.

“I feel the demand for independent financial advisors is increasing because clients need advisors who can manage assets, discuss inheritance/estate planning and business insurance, and meet a wider range of needs,” said Naoki Masuda, a 12-year MDRT member from Tokyo. His specialty is the intersection of life insurance and inheritance tax planning.

“I am particularly interested in the effective use of life insurance to prepare for inheritance,” he said. “Taxation on inheritance will increase going forward, and I am confident that more clients will need my services and the effective use of life insurance to pass wealth to the next generation.”

Chikara Nozawa, CFP, an 18-year MDRT member from Tokyo, also points out that the need for inheritance tax planning and retirement planning, especially for an aging population, is unaffected by the twists and turns of the economy.

However, Masuda recognizes that many Japanese people have begun to utilize less traditional methods to obtain financial advice.

“Consumers have access to financial information via the internet, and it has become a norm for the younger generation to do some research in advance,” he said. “Our role is to advise that some problems can be solved only by insurance, and it is important to have a relationship with a professional when proceeds are
to be delivered.”

And while many advisors are skeptical of, or even downright pessimistic about, the role of technology in their work, Masuda takes a more open approach, even anticipating the development of the metaverse as a boon for financial services.

“We should not be scared of technology, but learn to adapt, take advantage and coexist,” he said. “I am willing to adopt AI (artificial intelligence) and technology to delegate so that I can focus on what only I can do, such as enhance my skills to tell stories with passion.”

Kojima also believes AI has the potential to drastically change the profession in the coming years.

“Perhaps AI can recommend the best insurance products derived from big data. However, I don’t think AI can be caring in times of need and cannot predict the future,” he said. “We should learn to effectively use AI to understand customers’ needs, provide better consulting and enhance relationships with clients.”

Ultimately, Nozawa, who was drawn to the profession by its “social mission,” says it comes down to looking out for the clients and their well-being.

“The commitment to placing the customer first is the universal and eternal truth,” he said. “Please prioritize the true benefit of your customers; never prioritize
your profit.”