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The Market for Integrated Insurance Planning

Updated: Nov 2, 2023

Earlier this month, Wall Street Journal reporter Akane Otani tweeted an eye-catching chart from BofA, noting that "the 60/40 portfolio is on track to deliver its worst returns in 100 years.” The following week, Morningstar’s Lan Anh Tran wrote a more in-depth piece about the current positive correlation between stocks and bonds – in the wrong direction. She explained how bonds do not always reliably hedge equities, pointing to other periods of positive correlation in the past and warning of more of the same if inflation doesn’t reverse course soon.

These sobering revelations come on the heels of a new research report from EY examining the benefits of integrating insurance products into a long-term financial plan. The report concluded, among other things, that insurance-integrated strategies outperform investment-only strategies – even for investors with a higher risk tolerance – and offer more flexibility to achieve various financial goals. (I highly recommend reading the whole report.)

Why are these headlines connected?

Permanent life insurance – especially Whole Life, on which the EY report based its research – is fundamentally a portfolio-stabilizer and a goal-fulfiller. In Monte Carlo simulations we consistently see that even a moderate Whole Life allocation permits investors to make more high-risk, high-return allocations elsewhere without lowering the plan’s probability of success.

This is because Whole Life returns are reliably non- or low-correlated to both the equities and bond markets. In fact, policies often guarantee a minimum rate of return on cash value and/or death benefit. The fact that insurance is also a tax-free asset just raises the hurdle rate of a taxable-equivalent asset choice with a similar risk profile. (And eliminates uncertainty around future tax rates.)

I was not surprised by the EY report’s findings. It was refreshing to see objective research validate the story we've been telling clients since before it was cool to worry about volatility.

Who knows? Perhaps life insurance will increasingly take over the "40" part of the 60/40 portfolio.


Jacob L. Hartz is a Director at NFP Insurance Solutions. He joined the firm in 2020, building on a wealth advisory career that began after law school at a single-family office. His practice focuses on estate planning for highly successful families.



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