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Annual financial checkups touch on a wide range of client goals and needs, each of which can lead to multiple strategies. When reviewing client priorities, it can be helpful to add an insurance lending dimension to many of the discussions.

This form of lending comes into play when a client has a permanent life insurance policy – and if they don’t, that could warrant a discussion during review time too.

There are two main types of life insurance. Advisors know this, but clients sometimes need a primer. Here’s a simple way to explain it to them.

Term insurance lasts for a set period and is more affordable (though premiums rise upon renewal). Your clients may have purchased term insurance to provide certain protection (like covering the mortgage) for a specific timespan. In contrast, permanent insurance costs more but lasts for life, and the premiums remain the same. Moreover, the built-up cash surrender value (CSV) in the policy can serve as collateral for a line of credit.

Different stages of life can trigger conversations around insurance. That’s always important to probe. Ensuring the right protection is first and foremost. With that in place, permanent insurance brings many other advantages which can pertain to topics that come up during a financial review.

In general, you should be asking clients if they’ll need access to borrowed funds at some point in the future. You can then present them with the various insurance lending options, keeping in mind their ability to pay the premiums of any insurance policy put in place. This will give your clients peace of mind that funds will be readily available if needed, without having to go through a complicated or time-consuming loan approval process.

Be alert for needs where borrowing makes sense

If you have insurance lending on your radar, it makes it easy to discuss as one possible tool when specific needs emerge in a review meeting.

For example, you may be talking about whether an investment strategy is on track. That’s a good place to bring up an Access Line of Credit (ALOC), where people can access funds to invest and further grow their portfolios. The client may also be able to write off the interest.

An ALOC can also be used to access cash for any number of purposes that come up during a review, from home renovations, to covering expenses due to a job loss, to investing in a business improvement.

Discussions relating to retirement, cash flow and tax efficiencies – all paramount during a financial review – can also have an insurance lending component.

The Insured Retirement Program (IRP), for instance, is a great vehicle to supplement retirement income without tapping into other investments by lending against the CSV in a permanent insurance policy. For clients who are 50 and over, that’s worth thinking about.

Another useful tool is an Immediate Financing Arrangement (IFA), especially for high-net-worth clients. The IFA strategy can work for high-net-worth clients who can pay sizeable premiums. They can borrow an amount equivalent to 100% of CSV. By providing additional security, they have the option to borrow an amount equivalent to the entire premium. This may help with cash flow, tax planning and estate planning.

Other routine questions posed during a financial review can reveal lending opportunities. In discussing longer-term plans, a client might talk about wanting to buy a vacation or retirement property at some point, or gifting to children or grandchildren for a real estate purchase. Insurance lending can provide access to these funds whenever clients are ready to make that move.

Get clients thinking

In advance of or during a review, you should also ask your clients to consider some key questions, so that you can better understand how to position insurance lending:

• How comfortable are you with borrowing money?
• How do you feel about a long-term lending strategy?
• What is your risk tolerance?
• What keeps you up at night when you look at your overall financial picture?

Insurance lending can be part of a more holistic look at a client’s financial needs and can fill many roles. Use their annual review to discuss these solutions and how they can meet both short-term and long-term goals.

To learn more about the benefits of Manulife Bank’s insurance lending solutions, visit the Manulife Bank Advisor Portal.

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Beyond insurance protection, permanent life policies offer multiple potential lending benefits for policyholders. Clients aren’t always aware of them. To help give them the right support – and be of greater value – here are 10 things advisors should know and do.

• Position insurance lending as a flexible strategy. Show your clients how they can use the built-up cash surrender value (CSV) in their life insurance policy as collateral for a line of credit.

• Help clients look into the future. Regardless of your clients’ current situation, they’re almost certain to need to borrow money in the future. Anticipate this when discussing their permanent life insurance requirements. By raising the idea of insurance lending and putting everything in place, you can give clients the ability to borrow down the road, for everything from “rainy day” needs to investment opportunities.

• Point out the often-overlooked features of insurance lending. There is no specific term, and the loan can be in place until the death benefit proceeds are paid out. The minimum payment is interest only, and clients can pay down or access available credit seamlessly with no fees.

• Use insurance lending to help your high-net-worth clients employ debt more strategically. Traditionally, high-net-worth clients will go to their bank to obtain personal or corporate lines of credit, usually unsecured. These can be expensive in terms of fees and interest rates. With insurance lending, there’s greater flexibility for access to and paydown of credit, at a much lower cost and interest rate.

• Know how an Immediate Financing Arrangement (IFA) strategy can help balance cash flow and insurance considerations. An IFA targets high-net-worth clients who have substantial life insurance needs and, therefore, significant insurance premiums. Such clients can afford to pay the premiums on a permanent life insurance policy but prefer unhindered access to their cash flow. IFAs provide that through annual loan advances after clients pay their insurance premiums.

• Help clients see how insurance lending can make for a more lucrative retirement. Clients with built-up CSV within their policy can access the accumulated value through an Insured Retirement Program (IRP). This line of credit becomes supplemental retirement income. Even better, the income stream is tax free.

• Learn how to match different CSV lending products to the client. Any client who has a permanent life insurance policy with built-up CSV can benefit from insurance lending. There are various forms of CSV lending solutions, from an Access Line of Credit, to an IRP, to an IFA. It’s worth discussing the various options with your clients to see what might suit them best.

• Know the best time to raise the idea of insurance lending with clients. One is the early stages of a permanent life insurance policy, even if there’s no immediate need to borrow funds. This discussion should also take place as part of an annual financial review with clients and whenever the need arises. Just probing clients’ goals and plans can reveal an opportunity.

• Dispel misconceptions about insurance lending. Clients and advisors alike can have three big ones. One, high-net-worth clients don’t need to borrow. In fact, they often look for ways to strategically borrow funds to invest in their business. Insurance lending provides quick and convenient access to funds. Two, insurance lending means clients are taking on more debt. Actually, the line of credit is there if and when the client needs it. If they aren’t using it, there’s no interest cost. Three, it’s complicated to qualify for the loan. Not so, as the loan is cash-secured. We just require evidence of debt servicing and/or a clean credit bureau history.

• Shift the perception of permanent insurance. Most clients, and many advisors, view permanent insurance as a passive asset. The reality is that it can become a valuable investment and cash-flow planning tool. Insurance lending provides quick and easy access to cash that’s sitting idle in a life insurance policy. That makes permanent insurance an active and highly versatile asset.

To learn more about the benefits of Manulife Bank’s insurance lending solutions, visit the Manulife Bank Advisor Portal.

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Cash surrender value (CSV) lending is a specialized field, and within it the Immediate Financing Arrangement (IFA) is one of its most sophisticated strategies. That’s why selecting the right IFA provider is critical.

First, the basics. With an IFA, your client enters into a contract for a permanent life insurance policy, which creates significant CSV in the policy’s early years. The policy (and depending upon the IFA structure, the ancillary collateral) is assigned to Manulife Bank as collateral to secure a credit facility.

Your client pays the annual recurring insurance premium and borrows an amount equivalent to 100% of the CSV. (Clients can also borrow an amount equivalent to the entire premium by providing additional collateral security). IFA clients use the credit facility to fund an operating business, purchase real estate or invest in a non-registered investment portfolio. When the life insured passes away, the outstanding loan is repaid from the insurance proceeds, with the remaining amount paid to the named beneficiary (ies) under the policy.

IFA clients must be able to afford the significant premiums that large policies often require and be able to manage the complexity of this strategy.

IFAs are a core business for Manulife Bank

When structuring an IFA for a client, rates often come to the fore of the discussion. At Manulife Bank, our pricing is based on the prime lending rate and, generally speaking, we often can offer lower rates for larger cases. However, rates are only one piece of the puzzle. It’s in your interest as an advisor, and in your clients’ interest, to think carefully about the provider – beyond just the lowest rate.

Why? Think of the advantage of working with lending professionals who specialize in IFAs. We pioneered this strategy and brought it to market in 1995. We’re a bank owned by an insurance company, so the IFA is a core and consistent business for us and a key contributor to our success.

Typically, IFAs are structured in one of three ways – borrowing an amount equivalent to: 100% of the cash value, 100% of the premium, or 100% of the premium and borrowing an amount equal to the net interest paid during the year. But we also work with customized IFAs all the time.

Sometimes, for instance, we see advisors whose clients want to borrow an amount equivalent to 75% of the cash value or 80% of the premium. At Manulife Bank, we have the experience to ask the right questions, and try to accommodate whatever structure the advisor would like to put in place to make the IFA work best for the client. We can help you put together an IFA.

From a product differentiator perspective, we do 10-year underwriting. Other lenders tend to do 2-3 years, requiring more frequent approvals. We also have an extensive list of insurance carriers that we work with, and they know us as a lender.

Not many lenders know IFAs the way we do. That understanding is integrated across the organization, from our salespeople to our loan adjudicators to our risk management specialists.

With the volume of IFAs we’ve worked on over many years, we can also counsel advisors. Whether you’re just starting to see the value of incorporating IFAs into your practice or an expert in leveraging this strategy, we can speak your language. We are a lender that also understands insurance.

Working in partnership

As part of the process, we put a priority on ensuring an understanding of the big picture and covering all angles. We can recommend the experts to bring into the IFA strategy from the beginning, e.g., tax professional, accountant and lawyer, along with Manulife Bank. The best client experiences come when people work together in partnership.

We recognize that the advisor is driving the business. While we bring the IFA expertise, we respect the advisor-client relationship and will help you fulfill your plan to serve your clients best.

Learn how to set up a Manulife Bank IFA today.

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Cash surrender value (CSV) lending can be an ideal solution for many clients. It gives policyholders the chance to leverage the CSV in their permanent life insurance and helps turn a passive asset into an active one. To help you understand the options and serve your clients better, let’s answer 10 questions that advisors commonly have about CSV lending products.

1. How can the different products be categorized?

They generally fall into two buckets: back-end lending and front-end lending. With back-end lending, the CSV is already established in the contract. These facilities include an Access Line of Credit (ALOC), an Access Line of Credit Plus, the Insured Retirement Program (IRP) and CSV Lines. They’re all revolving in nature, with access through ATMs, online banking and cheques.

The second bucket is front-end lending, whereby the contract is new or only a few years old. This facility is an Immediate Financing Arrangement (IFA), which is done via annual advances once the premium is paid.

2. What does the client need to have in place in order to qualify?

For front-end products, the contract has to be established or about to be established. The client has to provide evidence of debt servicing.

For back-end products, ALOC and CSV Lines, clients need to have the required CSV amounts and provide evidence of debt servicing. IRP clients need to have the required CSV and a satisfactory credit history.

In both cases, clients must be approved by Manulife Bank’s credit department.

3. What are the minimum and maximum loans the bank will consider?

The minimum lines of credit are $25,000 for an IRP, $25,000 for an ALOC and $100,001 for an ALOC Plus. There are no maximums except for the ALOC program at $99,999. For the IFA, the minimum is $30,000 in advances per year. For the CSV line, the approved line of credit limit should be no less than $250,000. All amounts are in Canadian dollars.

4. What is the process for setting up the various products?

Contact your local Manulife Business Development Manager. They’ll assist with the transaction for IRPs and ALOCs, or will bring in a Business and Insurance Lending Specialist for more complex cases of those products and for CSV lines and IFAs.

5. Can insurance lending products be moved from another financial institution to Manulife Bank?

Absolutely, and that’s strongly encouraged!

6. Who can own various products?

All our products except the ALOC can be owned personally or corporately.

7. Can loan arrangements be transferred between personal and corporate?

Yes, but that would involve a new approval. We recommend consulting a tax professional before doing so as there could be tax implications with a restructure of the lending.

8. What types of collateral security are acceptable?

We can accept whole life and universal life contracts from 10 approved life insurance carriers, subject to product minimums.

9. What are the possible tax advantages of CSV lending?

Since no withdrawal is being made from the life insurance contract, taxes aren’t triggered. Clients may be able to deduct interest, so long as proceeds of the loan are used for investment purposes. It’s also possible to establish contracts that create a capital dividend account. Individuals should consult their own tax advisors with respect to their specific situation.

10. Why should I recommend CSV lending?

These products facilitate access to credit, using collateral your client may not have considered. Additionally, IRP and IFA strategies can often help clients ensure they have the insurance protection they need, while maintaining cash flow for personal or corporate requirements.

Most important, you will be providing added value to your clients by proposing a flexible and convenient solution to their funding needs.

Learn more about the benefits of Manulife Bank’s insurance lending solutions.

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Permanent life insurance can double as a vehicle that makes borrowing money simple, fast and easy. Policyholders can leverage the cash surrender value (CSV) to secure a convenient line of credit for any number of purposes. With a range of CSV lending solutions, how do you match the correct one to your client?

Before you focus on the product, think about the client.

Sometimes clients have a specific need in mind, like an opportunity to invest or to make a significant purchase. Beyond asking the client what’s important to them in terms of interest rate or the ability to borrow again, widen the scope. Include questions that will offer a more holistic review. The more you know about a client’s finances and goals, the better you can make an appropriate recommendation.

There are many ways to incorporate borrowing into your client’s broader financial plan.

Even if there’s no immediate need, you can be proactive and make the CSV lending conversation part of your annual reviews.

Life milestones and other major events – such as the birth of a child, home purchases or renovations, business changes, and retirements – can also trigger borrowing discussions.

For example, consider a client who talks about wanting to retire with a certain income. As part of their financial plan, ensure that you investigate all the borrowing options available to them. Maximize the positive impact that a well-considered borrowing strategy can have on a client’s financial picture.

And if you hear the words “I can’t afford” or “I need to make a withdrawal,” that’s another cue to think about CSV lending. Clients are less emotionally attached to their insurance contract than to, say, the idea of refinancing their home or selling an asset. It also might not be the right time to withdraw from the investments they hold with you. CSV lending might be a more viable solution.

Review the options

So those are some situations that can prompt a CSV lending conversation. As for which products work best, reflect on how your client situations mesh with various options.

Access Lines of Credit (ALOC) can be a simple way to obtain credit by leveraging the cash value held in a permanent life insurance contract (or Manulife mutual funds, segregated fund contracts or GICs).

An ALOC can help secure financing solutions starting at just $25,000 (CAD) with no set maximum. This allows clients to consider our lines of credit for anything ranging from home repairs, medical emergencies and short-term job loss, to consolidating debt and funding business goals. As well, clients can leverage their permanent contracts from 10 of Canada’s largest life insurers.

If the ALOC is used for investment purposes, the client may also be able to write off interest^*.

Another useful strategy is the Insured Retirement Program (IRP), which can help retirees supplement retirement income. Rather than withdrawing the cash value from their life insurance to do so, they can leverage the built-up CSV to secure a line of credit.

Then there’s an Immediate Financing Arrangement (IFA). Here, clients can afford to pay sizeable premiums for significant death benefits but want to strategically manage their cash flow and tax planning^*.

Once the contract is in force, they can borrow against the CSV in the contract to minimize (or even neutralize) the cash flow impact of the premiums. Clients can use that cash for any purpose and pay interest only on the premium each month. The IFA is separate from the insurance contract itself.

Who uses these products?

It helps to understand the typical client profiles. For each product, they include:

• ALOC – young to middle-aged professionals with financial plans generally on track who want to establish an emergency fund.
• ALOC Plus – established professionals or small business owners.
• IRP – retired or nearing retirement (minimum age 50) individuals who want to leave a legacy to beneficiaries.
• IFA – successful business owners, medical/dental professionals and high-income/high-net-worth clients.

All these facilities have relatively low interest rates and let clients take advantage of a typically passive asset – the CSV in their insurance contract.

When is the best time to put CSV lending strategies in place? When your client doesn’t require them yet. By educating clients about these lending strategies and having the credit facility in place ahead of time, you can help them to be agile when the time comes to access capital.

Learn more about the benefits of Manulife Bank’s insurance lending solutions.

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^* Clients should consult their own tax advisors with respect to their specific situation.

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Permanent life insurance clients are often considered high net worth. They’ve built up significant cash value in their policy. This gives them an opportunity to borrow larger loan amounts and open the door to private banking.

Yet many of these clients use only traditional banking. It makes sense to turn these clients into private banking clients as well.

To even have the discussion, clients have to understand that there are other banking options. They may not. Most clients are aware of private banking in general. However, even if they’re business owners or professionals – which fits the target market – they may think of private banking as an exclusive club that’s not for them.

Most big banks do have strict entry guidelines, which may or may not meet your clients’ situation.

At Manulife Bank, things are different. Clients can bring in a line of credit based on a life insurance policy, and that’s enough to start with private banking. Even if clients don’t have an array of products with Manulife Bank from day one, they get the same level of service.

That gives your insurance clients access to private bankers – a single point of contact who delivers an integrated banking relationship.

For advisors, Manulife Bank’s referral system means you get compensated and remain a key figure in the client relationship. Some private banks exclude the independent advisors in their offering.

Coordinated approach 

High-net-worth clients are usually busy people. They don’t necessarily have the time (or desire) to work with multiple banking experts who often repeat goals and share the same background information over and over.

Manulife Private Banking allows for a more coordinated approach. A dedicated private banker reviews a client’s financial situation and recommends banking solutions tailored to their circumstance. The benefit is a holistic view of the client’s portfolio and needs which can include both their personal and corporate situations.

This approach enables a combination of strategies. Most private banking clients have significant permanent life insurance in place as both an investment and an estate planning tool. Clients can use borrowing to invest and, in turn, add to their wealth.

Strategies include insurance-based lending up to 100% of a policy’s cash surrender value and flexible lending on non-registered investments from 75% of market value.

If anything, a smaller private bank can offer even more personalized services and new solutions. That’s a big advantage for your clients.

Look beyond immediate needs

What gets in the way of taking this sort of holistic view of a client’s financial picture and moving toward private banking?

In most cases, the client’s immediate need is the focus of discussion. The conversation revolves around a specific piece of business. It’s easy to lose sight of the bigger picture of potential opportunities.

Advisors should know their clients’ profiles well enough to see who’s suited to private banking in order to have that discussion – especially when the entry requirements aren’t quite as rigid.

Clients will be thrilled to get that extra level of service, and will be grateful when you recommended it.

To learn more about Manulife Bank’s insurance lending solutions and Private Banking team, visit the Manulife Bank Advisor Portal.

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Every insurance conversation with clients has some nuance. Needs and goals differ, as do products. Advisors can help their clients by opening up discussions about how some insurance products can provide additional value, over and above being an end-of-life death benefit.

While term insurance can be popular due to its straightforward benefits and lower premiums, permanent life insurance has its own unique features. It appeals to clients who prefer a policy that doesn’t constantly expire, offers a fixed and long-term premium, and works for estate planning.

There’s another often-overlooked advantage.

Permanent life insurance, on top of a death benefit, offers a growing cash surrender value (CSV). Clients can use it as collateral to obtain a line of credit. That turns permanent life insurance into an active asset with many uses.

The added dimension of a growing CSV is worth exploring right from the outset of an insurance discussion. While clients often use a policy loan in emergencies, a line of credit secured by the policy’s CSV can be a better option.

A CSV line of credit can be drawn on over time, with interest charged only on the amount used. The client has no obligation to use it but has the comfort of knowing they have access to cash when a need or opportunity arises. The permanent life insurance policy’s CSV is also left untouched and growing. In a low interest rate environment, policyholders could potentially pay less interest than they’re earning.

This is a proactive solution, and raising it shows that you anticipate your clients’ requirements. Over time, clients won’t have to pursue more costly lending solutions. Or they won’t have to address cash flow issues in a way that’s perhaps not advisable. Instead, they can fall back on a line of credit secured by their permanent life insurance policy.

How to position insurance lending

An essential part of any financial plan is to have access to cash to cover unexpected expenses. A line of credit can be an excellent first line of defense.

That’s from a lifestyle perspective. From an investment perspective, insurance lending also means that clients can allow their investments to grow without having to liquidate them at a time of need. At the same time, clients can use the line of credit to further add to their investment portfolio.

There are retirement planning advantages too. Clients who are over 50 can supplement their income with the Insured Retirement Program. This is a line of credit offering tax-free cash through lump sum or scheduled withdrawals.

For the short term, building cash value in permanent life insurance gives clients a range of lending solutions. Longer-term benefits include having significant growth of the cash value within the policy which is paid out tax-free upon the death of the insured.

All these points should be part of a conversation with clients. Together, they make a compelling case for what can be an insurance, lending and cash flow solution.

Raise the topic early and often

When should advisors talk to clients about this option? Early in the sale of a policy, as part of their annual financial review with the client and whenever the need arises.

Just probing clients’ goals and plans can reveal an opportunity. For instance, a client might talk about wanting to buy an additional property at a certain point. Based on the cash value in the policy, insurance lending might fill that potential need.

It’s common to illustrate how cash value grows in permanent life insurance over time. Discussing what permanent life insurance can offer through lending solutions is a natural extension of that conversation.

By talking about these solutions, you can reinforce the value of your clients’ permanent life insurance and add to your own value as an advisor.

Learn more about Manulife Bank’s insurance lending solutions.

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What type of value does permanent life insurance have? Most clients – and many advisors, for that matter – tend to view such insurance as a passive asset. It can be far from it.

The prevailing view is understandable. After all, clients know that their life insurance will serve to provide income protection or a death benefit. The policy already fills that essential purpose.

As for advisors, their focus is on making sure their clients have the insurance solution that meets their needs. Yet the conversation may not go further, regarding how permanent life insurance can serve another objective in the living years.

The reality is that permanent life insurance can become a valuable investment and cash-flow planning tool right now. That makes them beneficial in another, often overlooked, way.

Permanent life insurance policies build up a cash surrender value (CSV). Clients can arrange to tap into that, if required. That can be indispensable, as the life insurance product also becomes a lending product.

Cash value doesn’t have to sit idle

When needs and opportunities arise, it can be prudent to employ this strategy. Here’s why borrowing against a policy makes sense.

With permanent life insurance, the cash value is growing and just sitting idle. But it doesn’t have to. Once lending arrangements are put in place, accessing that value is relatively cheap. When clients use the policy as a line of credit, the commitment is interest only – with rates usually lower than some other borrowing alternatives.

Insurance lending provides convenient liquidity. If cash is required, there’s no need for clients to withdraw from their investment portfolio, for example (which may involve surrender charges or capital gains), or to sell off properties. So those assets remain intact for now and can possibly be left to beneficiaries.

Depending on the requirement, insurance-related lines of credit can offer great flexibility. Clients can access funds and pay down as needed. Ultimately, the death benefit will still be paid out with whatever value remains.

In the meantime, clients can use the funds for immediate needs, whether to invest, purchase an investment property or for any other purpose. They can also use the cash surrender value to give a loved one a gift. Doing so during their lifetime can be quite desirable and advantageous to policyholders, and to their beneficiaries too.

Some individual and corporate clients may have large life insurance policies for tax planning and other purposes. When premiums are large, having a line of credit secured by the policy’s CSV can also help reduce financial stress and improve cash flow.

To whom are these solutions suited? Any client who has a permanent life insurance policy with built-in cash surrender value can benefit from insurance lending. There are various forms of CSV lending solutions, from an Access Line of Credit to an Insured Retirement Program to an Immediate Financing Arrangement. It’s worth discussing the options with your permanent life insurance clients to see what might suit them best.

Permanent life insurance has a core objective. The life insurance aspect is always primary. Beyond that, insurance lending is among the least expensive lending options available. One way to look at it is that clients are essentially borrowing their own money. It’s an ideal way to turn what many imagine to be a passive asset into an active and highly useful one.

Learn more about Manulife Bank’s insurance lending solutions.

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Cash flow can be the key to financial success. Your clients want accessible cash to put back into their business, increase their investments, purchase real estate or any other number of purposes.

That’s why an Immediate Financing Arrangement (IFA) can sometimes seem too good to be true. While not a mass market strategy, an IFA can be an excellent solution for the right client. These are clients who are able to afford the premiums on a permanent life insurance contract but prefer unhindered access to their cash flow. With an IFA, once the policy is in force, they can borrow an amount equivalent to 100% of the CSV. IFA clients can use the credit facility to fund an operating business, purchase real estate or invest in a non-registered investment portfolio.

Some clients can have a hard time grasping the concept, as can their accountants and lawyers. So it’s important for advisors to present this financial approach in the right way. 

Put life insurance needs first

Start with identifying candidates for an IFA. This strategy isn’t for everyone. It’s geared to affluent clients, those who can afford the insurance premiums without the loan. Our minimum eligibility is $30,000 a year in premiums over 10 years (most lenders have a $200,000 minimum). While our average case size involves premiums of just over $200,000 a year, we have many cases in the $50,000–$100,000 range.

How should you position an IFA? The life insurance need is paramount. Talk about an IFA as a means to get your client the permanent life insurance they need, with minimal impact to their cash flow.

When you present a permanent life insurance option, your client may well say that they can do a lot more with what an annual premium would cost than to buy insurance. You then have the IFA in your back pocket to overcome that objection. With an appropriate IFA strategy, the client will continue to have access to cash flow which can be redeployed for their business or investment purposes.

This positioning is critical, as is getting all the relevant parties on board. It’s important to dial in the client’s tax advisor, lawyer and bank in the early stages of introducing an IFA.

This provides an opportunity to educate the client’s other advisors, if needed, about the IFA strategy. Other matters to consider include who owns the contract, who acts as the borrower, how the arrangement is structured, what the tax implications are, etc. With everyone involved from the start, you can set proper expectations with your client on how this strategy will work. We can help you put together an IFA.

Simplify a complex process

The right experts can simplify a complex process. Insurance lending is a highly specialized field, and within that field the IFA is among the most sophisticated of strategies.

When you’re putting together an IFA for a high-net-worth client, keep it simple. Work with the IFA experts at Manulife Bank. Unlike many commercial loans, IFAs involve a high degree of customization. An experienced IFA lender is able to ask questions and uncover opportunities to help you optimize the efficiency of the structure.

Our goal is to support and enhance your own client relationships. With an IFA, you can give your clients a solution that will satisfy both their life insurance and cash flow needs.

Learn how to set up a Manulife Bank IFA today.

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Consider your high-net-worth clients, people who you’d advise to have permanent life insurance. They can afford the premiums but don’t want to tie up their cash in that way. These clients have other opportunities in mind.

With an Immediate Financing Arrangement, they can take advantage of these opportunities, plus secure that needed insurance policy. Clients pay the premium, and once the policy is in force, we release up to the full premium amount back to them.

Clients can now use that cash for any purpose. Their only obligation? Pay interest monthly on the IFA advance. Repaying the full amount is open at any time. Any outstanding loan is repaid out of the death benefit, with the remaining proceeds paid to the beneficiaries.

For advisors, an IFA serves multiple purposes. It can overcome price objections and help deliver the needed insurance solution. It can be a tax strategy: if the funds are used to generate income, clients can often deduct the interest^*. It’s also a valuable cash flow planning tool. We can help you put together an IFA. 

Who can benefit from an IFA?

An IFA offers clients endless flexibility. They can apply the cash for any number of purposes, including growing their investment portfolio, funding an operating business or purchasing real estate.

Some clients use the IFA to make a charitable gift without adversely affecting their cash flow or capacity to purchase an investment. Others use a Corporate IFA to increase the size of their Capital Dividend Account (CDA).

To imagine even more possibilities, here are a few actual examples from Manulife Bank.

We have a client who is a wealthy auto parts manufacturer with rising income in his operating company, which he planned to leave to his son. To address capital gains that would be triggered upon this client’s death, the advisor recommended a permanent life insurance policy. The company generated sufficient cash flow to pay the premiums. However, the client needed those funds to modernize his factory.

Here, Manulife Bank issued a discussion paper in a matter of days, and the client’s accountant reviewed and supported the structure. The IFA was then put in place and the client was able to both obtain the permanent life insurance he needed and invest in the factory upgrades.

In another instance, a doctor and her husband wanted to create an estate for their children via a permanent life insurance policy to be owned by the doctor’s corporation. The doctor’s holding company includes real estate. She used the IFA proceeds to acquire more properties. When the time comes, the death benefit and CDA of the life insurance contract will allow the disposition of the real estate to be handled as efficiently as possible.

The client first approached two other banks to secure an IFA. With one, their minimum loan size was too high. With the other bank, their approved life insurance carrier list was limited. Manulife Bank, on the other hand, has a lower minimum loan size and a wider range of approved life insurance carriers. As a result, the client was able to put the IFA in place with the insurance carrier her advisor recommended, and the premium amount that was right for her.

Presenting the IFA option adds value to your client relationships. It shows that you care about both the insurance your clients need and their overall financial plan.

By taking a holistic approach to your clients’ cash flow and their business, you can help them open up any number of financial opportunities. How should you present an IFA to your clients? I’ll discuss that in the next edition of this specialized lending series.

Learn how to set up a Manulife Bank IFA today.

^*Clients should consult their own tax advisors with respect to their specific situation.