Interview with Joseph Low, Group CEO Mercer PCS on Insurance & Risks for HNW & UHNW Clients
The 2021 Private Wealth Series
How do you invest $3 million to $300 million? How do you manage $20 million to $3 billion?
The 2021 Private Wealth Series is a special coverage on private wealth in Asia. Hear from leading private wealth experts, institutes, banks, private banks, fund managers, investment managers, insurers, tax, legal, risks, regional and international experts and many more.
Learn about private wealth in Asia, how to manage $3 million to $300 million of assets, where to find private wealth services, how key financial centres such as Hong Kong and Singapore play a role in managing assets, should assets be managed regionally or globally. Find out where the wealth is growing fastest, how the biggest wealth transfer is taking shape, how managing traditional wealth and new wealth is different and many more. If you are a financial professional, professional investor or institutional investor, how do you advise clients and how do you manage $20 million to $3 billion of assets?
Interview with Joseph Low, Group CEO Mercer PCS on Insurance & Risks for HNW & UHNW Clients
The 2021 Private Wealth Series: Joseph Low, Group CEO Mercer Private Client Services
We speak to Joseph Low, Group CEO Mercer Private Client Services, who shares his valuable insights on Insurance & Risks for HNW & UHNW clients in The 2021 Private Wealth Series.
Private Client Services by Mercer (PCS) is a market leader in providing risk management propositions, with a focus on integrated life insurance solutions for High Net Worth (HNW) clients with their wealth planning needs in mind. With offices across Singapore, Hong Kong SAR, China Mainland, Geneva and Zurich, PCS works in close partnership with major private banks and trustees globally to serve HNW clients in over 50 markets. The businesses and entities of PCS form part of the global business network of Mercer, a business of Marsh McLennan (NYSE: MMC). Visit: Mercer PCS
Highlights from Interview
- Average policy value: US$10 million sum assured
- What a Client Said: “Sleep better at night after taking up a US$50 million insurance policy for his family”
- Why HNW insurance: Liquidity creation, wealth transfer, offshore safety net and asset diversification
- Why Insurance Broker: Represent Client, Independent Advise, Negotiate with Insurers
- “ Family offices and private bankers see us as a specialist in delivering risk management solutions “
- Common Issues: “Clients tend to delay their wealth planning plans, often assuming that these decisions are not urgent”
- With COVID-19: “Recognized by high net worth clients as fundamental in their wealth planning needs”
- On Offshore Structures: “Ensure that their beneficiaries acquire liquidity quickly”
- Common Reporting Standards (CRS): “Complete transparency of assets held by clients in popular offshore financial centres”
- Approval Process: The whole process takes about 1 – 2 months
- Common Prosperity: “Great interest around inheritance taxes in China”
- “HNW life insurance has become a financial instrument which is tax efficient”
- Insurance solutions: “Immediate liquidity to beneficiaries, unrelated to the investment market”
- Insurance: “The only financial tool that covers mortality risk”
- Profile of Clients: Major shareholders of listed or private companies, with a net worth ranging from US$100 million to US$1 billion
- “We see an increase in companies taking up high net worth insurance products”
- Likely first travel destinations: Singapore & China (once travel opens up)
” Sleep better at night after taking up a US$50 million insurance policy for his family “
Introduction:
Who are you and what do you do?
Joseph: Private Client Services by Mercer (PCS) is a global market leader in integrated life insurance solutions for High Net Worth (HNW) and Ultra High Net Worth (UHNW) clients. PCS is part of the global business network of Mercer, a wholly owned subsidiary of Marsh McLennan.
- Global market leader in integrated life insurance solutions for HNW / UHNW clients
- Work in close partnership with major private banks and trustees
As Group CEO of Private Client Services (Mercer), I drive the overall strategy of the group and lead the expansion of the business globally. With offices across Singapore, Hong Kong and Mainland China, we work in close partnership with major private banks and trustees globally to serve HNW clients in over 50 markets.
Hot Topics:
1. What is HNW insurance and why HNW insurance is such an important topic in managing assets, wealth & estate for billionaires, UHNWs & HNWs today?
Joseph: High net worth clients see insurance as an asset class that provides wealth protection, enables succession planning and enhances healthcare options. Through our partners, PCS delivers bespoke insurance solutions to help high net worth individuals protect, grow and transfer their wealth.
- Insurance as an asset class that provides wealth protection, enables succession planning and enhances healthcare options
- Demand for risk solutions is also surging
- Insurance is the only financial tool that covers mortality risk
- Insurance solutions also provide immediate liquidity to beneficiaries, unrelated to the investment market
The pandemic has put the spotlight on the importance of wealth planning for HNW and UNHW individuals as they think about legacy planning needs. Demand for risk solutions is also surging, along with the sustained growth in the HNW and UHNW population concerned with the preservation, growth and transfer of their wealth.
Besides, insurance is the only financial tool that covers mortality risk and hence, forms an important part of the client’s investment portfolio. Insurance solutions also provide immediate liquidity to beneficiaries that is unrelated to the investment market and hence offers clients peace of mind.
” Insurance solutions also provide immediate liquidity to beneficiaries “
2. What is the typical range (policy value) of HNW Insurance / the lowest possible? Can the policy value be topped up in the future?
Joseph: The minimum for high net worth insurance is US$1 million sum assured and the average policy value we handle is US$10 million sum assured. Clients can “top up” in future by taking up new policies, but their premiums will vary based on their age.
” Average Policy Value is US$10 Million Sum Assured “
3. You have many years of experience advising HNW clients, private bankers & family offices, do you have any interesting or horror stories to share?
Joseph: One of our clients told us that he could sleep better at night after taking up a US$50 million insurance policy for his family.
” Sleep better at night after taking up a US$50 million insurance policy for his family “
4. What are some of the hot topics in HNW insurance today?
Joseph: When the industry first started, universal life was the main offering to provide jumbo protection to clients, coupled neatly with the premium financing available from the private banks. However, we’ve seen growing interest in from other products including Whole of Life, Variable UL (VUL), Indexed UL and Private Placement Life Insurance (PPLI) in recent years, with Whole of Life and VUL in particular, offering life protection and wealth and succession planning, to create a safety net for liquidity and the next generations should something happen to the client. The Savings Plan is another product that has generated strong interest, especially in a low-interest rate environment where clients are hunting for yield.
- Universal life – Jumbo protection & premium financing from private banks
- Growing interest in Whole of Life, Variable UL (VUL), Indexed UL and Private Placement Life Insurance (PPLI)
- Savings Plan – for clients hunting for yield in a low-interest rate environment
- Common Reporting Standards (CRS) – Complete transparency of assets held by clients in popular offshore financial centres.
- HNW life insurance has become a financial instrument which is tax efficient
- Common Prosperity: Great interest around inheritance taxes in China
The introduction of the Common Reporting Standards (CRS) meant that there is now complete transparency of assets held by clients in popular offshore financial centres. HNW life insurance has become a financial instrument which is tax efficient to provide HNW individuals in their respective home jurisdictions. We’re also seeing great interest in developments around inheritance taxes in China as it eyes wealth redistribution to achieve “common prosperity”.
” CRS – Complete transparency of assets held by clients in popular offshore financial centres “
On Mercer, Private Client Services, HNW Insurance
5. If you could briefly share the difference between HNW insurance and other insurance products?
Joseph: Our definition of HNW insurance covers mainly clients in the Private Banking space and our solutions focus more on jumbo coverage for wealth planning purposes. Insurance products for other client segments focuses more on income replacement and may include critical illness coverage and annuities.
” jumbo coverage for wealth planning purposes “
6. Which are the key or most popular HNW insurance products? What are the typical profile of clients taking up HNW insurance? Which region are they from?
Joseph: High net worth individuals typically go for life insurance products like Universal Life, Whole of Life and Indexed U-Life with jumbo coverage, and single premium savings plans.
Clients from China, Southeast Asia, Middle East and Africa, who take up high net worth insurance are usually major shareholders of listed or private companies, with a net worth ranging from US$100 million to US$1 billion.
” major shareholders of listed or private companies, with a net worth ranging from US$100 million to US$1 billion “
Most of us will know a Bank, Private Bank, Insurance co., Asset Mgmt firm.
7. What is Mercer & Private Client Services (PCS)? Are clients, family offices and private bankers familiar with Mercer / PCS?
Joseph: Private Client Services (Mercer) works mainly with the Private Banks, as well as with-external asset managers. Family offices and private bankers see us as a specialist in delivering risk management solutions for their clients.
” Family offices and private bankers see us as a specialist in delivering risk management solutions “
8. What is an insurance broker and why an insurance broker? What are the benefits?
Would it not be easier for clients to go direct to the insurance company or the bank / private bank / advisory firm?
Joseph: As a broker, we represent the client and provide independent advice (and choices) to our clients. We also negotiate with the insurers taking into account the clients’ best interests. We play an important role as an effective conduit between insurer and client as the insurance product application process and underwriting could be complicated.
” Represent Client, Independent Advise, Negotiate with Insurers “
On HNW Insurance: Wealth Structuring, Asset Protection, Estate Planning, Key Man Risk, Financing
9. What are the most common reasons why clients take up HNW insurance?
Joseph: Clients take up HNW insurance for a multitude of reasons but the most common are liquidity creation; wealth transfer; offshore safety net and asset diversification.
” liquidity creation, wealth transfer, offshore safety net and asset diversification “
10. How fast can a client / private banker / advisor get the HNW insurance policy in place?
Joseph: Typically, the whole process takes about 1 – 2 months. However, the pandemic has provided new perspectives for our clients that have been almost entirely foreign in their successful lives. Therefore, despite COVID-19 restrictions, we are also spending more time talking to our clients, deepening our relationships and reassessing their priorities, before we deliver the right solutions that work best for their needs.
” the whole process takes about 1 – 2 months “
11. Do clients take up the policy in their name or use an offshore vehicle (company)? What are the common structures used to setup such policies? Is this important?
Joseph: Offshore structures, such as trusts and entities are common for more efficient distribution. Clients want to ensure that their beneficiaries acquire liquidity quickly and hence the right offshore structure allows them to achieve that objective, often in a tax-efficient way.
” Why Offshore Structures: ensure that their beneficiaries acquire liquidity quickly “
12. Private banks are providing financing (loans) for HNW insurance policies. How is this possible and what is the typical financing cost and risks for clients?
Joseph: Loans for high net worth insurance policies are possible because insurance policy collateral assignment is allowed. A premium loan also allows the client to take advantage of the differential between the loan rate and the crediting interest rate offered by the life policy, thereby achieving a gain in a carry trade.
” take advantage of the differential between the loan rate and the crediting interest rate “
On Trends
13. What has changed for HNW insurance and clients since COVID-19?
Joseph: Insurance solutions are increasingly recognized by high net worth clients as fundamental in their wealth planning needs, with savings plans becoming more popular as a wealth transference tool. Virtual processes have emerged as an alternative to traditional face-to-face processes in view of travel restrictions put in place due to COVID-19, opening up new opportunities for the industry.
” Virtual processes have emerged as an alternative to traditional face-to-face processes “
14. China is fast growing and producing lots of billionaires, UHNWs & HNWs. Do clients from China (look at HNW insurance differently) from other region / countries?
Joseph: In North Asia and especially in China, where there has been an explosion of wealth in the past decades, the business landscape and opportunities have changed dramatically. High net worth and ultra high net worth individuals, especially the ones who created their wealth under different conditions, recognize it’s now much harder to achieve the same magnitude of success. More and more, they are prioritizing wealth preservation over wealth creation as they want their children to enjoy the assets of their success and not the liabilities.
Moreover, the importance of wealth transference is more apparent for families with a single child, which are very common in China. The uncertainty around the pandemic, coupled with volatility of the global markets have also affected their risk aversion. For clients in China, their instinct to protect and defend is much higher than what we have observed in the past.
High net worth individuals are therefore more likely to take up insurance products as it covers mortality risk and provides immediate liquidity to beneficiaries that is unrelated to the investment market, giving them better security and peace of mind.
” China Clients: much harder to achieve the same magnitude of success “
15. Do you also see an increase in companies, businesses and investment firms taking up HNW insurance products for their senior management or key man?
Joseph: Yes, we see an increase in companies taking up high net worth insurance products for talent retention purposes. We have also helped a number of families in using private placement life insurance products for corporate structuring.
” we see an increase in companies taking up high net worth insurance products “
Final Word
1. You have many years of experience interacting with Billionaires, UHNWs, HNWs, Entrepreneurs, CEOs, Family Offices, Private Bankers. How is the journey for you so far? What are some of the most common problems / issues / mistakes you have seen?
Joseph: Clients tend to delay their wealth planning plans, often assuming that these decisions are not urgent. However, more clients have started to enquire about insurance protection, propelled by the current pandemic.
The risk assessment process for insurance solutions has also evolved. In some cases, we see insurers delaying their offers to clients who have contracted COVID-19, even when the client is willing to pay a higher premium.
” Clients tend to delay their wealth planning plans, often assuming that these decisions are not urgent “
2. Everyone is hoping the pandemic will end soon. Do you look forward to travel again? What is your first likely destination once travel opens up again?
Joseph: Definitely! I’d like to visit my colleagues in Singapore and China.
Thank you Joseph for sharing your valuable insights on Insurance & Risks for HNW & UHNW clients in The 2021 Private Wealth Series.
Joseph Low, Group CEO Private Client Services by Mercer Group
Joseph Low is the Chief Executive Officer of PCS by Mercer Group and Chief Executive Officer of PCS by Mercer Limited in Hong Kong, playing an active part in the development of the overall strategy of the Group while continuing to lead the expansion of the North Asia business in China and other markets. Joseph joined PCS by Mercer in 2006 and was instrumental in setting up and driving the PCS business in Hong Kong. He is also responsible for developing the strategic plans for the North Asia market, managing key partner relationships in this region. Prior to joining PCS by Mercer, Joseph was at Zuellig Insurance Brokers Pte Ltd (Singapore) where he served as a Marketing Director for Private Client Services. He has over 20 years’ experience in the financial industry and holds a Bachelor of Accountancy (Hons) degree from Nanyang Technological University of Singapore.
About Private Client Services by Mercer
Private Client Services by Mercer (PCS) is a market leader in providing risk management propositions, with a focus on integrated life insurance solutions for High Net Worth (HNW) clients with their wealth planning needs in mind. With offices across Singapore, Hong Kong SAR, China Mainland, Geneva and Zurich, PCS works in close partnership with major private banks and trustees globally to serve HNW clients in over 50 markets. The businesses and entities of PCS form part of the global business network of Mercer, a business of Marsh McLennan (NYSE: MMC). Visit: Mercer PCS
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