Your Clients’ Financial Literacy: Why It Should Matter to You 

11 Aug 2022

Your Clients’ Financial Literacy: Why It Should Matter to You

Estimated read time: 4 minutes

Financial literacy is an important life skill. It gives people the knowledge they need to make manage their money wisely, while planning for the future. As an insurance advisor, youre in a unique position to help your clients improve their financial literacysomething that benefits both of you.  

Financial literacy encompasses saving, investing, planning and protecting one’s hard-earned assets—which, of course, is where life and health insurance fits in. But as you know better than anyone, before consumers can appreciate the advantages of any insurance product, they must recognize their need for it and how it would benefit them. 

Chances are, each time you meet with a client or prospect, you’re assessing their financial understanding and calibrating your conversation accordingly. You’re automatically engaging in some financial education!  

However, when you do this consciously—when you make education part of your sales process and service commitment—you can more fully help your clients achieve financial well-being. Which, to one degree or another, can improve the course of their lives.  

The Need for Financial Education

Unfortunately, many people can’t see beyond the cycle of living paycheck to paycheck. For example, according to LIMRA’s 2021 Insurance Barometer Study, only one in eight Americans claim a high level of financial literacy. Furthermore, only about one-third of them claim a high level of life insurance knowledge 

These results are echoed on a global scale. The Organisation for Economic Co-operation and Development’s 2020 International Survey of Adult Financial Literacy—which spanned 26 countries across Latin America, Asia and Europe—found that participants collectively scored an average of less than 61% of the maximum financial literacy score.  

In both surveys, women scored lower than men.  

So, no matter where your territory is, chances are, your current and future clients could benefit from your help—some of them more than others.  

Financial Literacy Improves the Future—and Present

Not surprisingly, both surveys also uncovered links between increased financial literacy and the increased likelihood of owning life insurance and saving for retirement. The better people understand the rationale behind financial planning, the more likely they are to do so.  

Interestingly, a Secure Retirement Institute (SRI) study found that, like women, Millennials might be particularly vulnerable here. Only 55% of Millennials who say they have low financial knowledge are saving for retirement, as opposed to 84% who claim a robust understanding. 

Alarmingly, that same research demonstrates that waiting just five years to begin saving translates to tens of thousands of dollars less in an individual’s retirement fund. 

In addition to laying the groundwork for a less-secure future, limited financial literacy increases daily stress. Financial stress has long been the leading cause of personal stress, as consumers struggle to deal with situations that often feel beyond their control.   

By helping your clients change that dynamic even slightly—say, by starting with a modest, no-frills life insurance policy—you can help ease that chronic financial stress. By improving your clients’ financial knowledge, you give them the power to take back control.  

How You Can Help

For all of these reasons, it’s beneficial to keep financial literacy top of mind when engaging with clients and prospects. For example, you might:     

  1. Listen more carefully to clients, verifying that they understand what you’re saying. When warranted, be ready to slow down or add steps to your sales process to get them on the same page. 
  2. Consider offering occasional webinars or live seminars on one specific element of financial education, keeping your presentation as neutral and non-salesy as possible. Demonstrate the need, and the sales will follow. 
  3. Create a list of vetted resources, including local agencies and online sources, that clients can explore to continue their financial education.  
  4. Consciously reach out to people who might benefit from your educational approachi.e., those overlooked by many advisors. However, when approaching underserved groups like women and Millennials, be sure you know where they’re coming from first 
  5. Don’t take for granted that people understand life insurance basics, such as the difference between term and whole life. When explaining the importance of say, cash value, position it in practical terms of how they could use it to fulfill a goal: fund college, save for retirement, etc.  

Keep in mind: the LIMRA study also found that financial stress is measurably lower among people who work with financial professionals. Having financial protection in place creates a healthier sense of well-being.  

In other words, every client encounter is more than a chance to sell an insurance policy, it’s an opportunity to enhance someone’s financial literacy and all that entails. By doing so, youre performing a valuable service. And because educated clients are your best clients, it benefits you, too.  

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