The diversification move your clients are probably missing (and the numbers to help prove it)

byPatrick Waters

If you're still building retirement strategies and plans for high-net-worth clients using only qualified accounts and taxable investments, the new Ernst & Young 2025 IUL study should be required reading. Because the data doesn't just suggest integrated strategies work better—it proves they dramatically outperform investment-only approaches.

The advisor edge

Your affluent clients aren't just worried about accumulating wealth. They're worried about keeping it. And in a tax environment where RMDs, capital gains, and ordinary income rates can erode 30-50% of their retirement assets, traditional accumulation strategies can leave massive value on the table.

That's where Indexed Universal Life (IUL) can become your differentiation tool—and the E&Y study gives you the hard numbers to prove it.

What the Ernst & Young analysis reveals

E&Y ran comprehensive Monte Carlo simulations comparing investment-only portfolios against integrated strategies that included IUL allocations. The findings are significant for advisors serving high-net-worth clients:

35-year-old couples (accumulation phase): A 30% IUL allocation increased median legacy values by 8.1% while maintaining equivalent retirement income.

45-year-old couples (peak earning years): The same allocation drove legacy values up 13.8%—representing an additional $700,000+ in wealth transfer.

55-year-old couples (pre-retirement): Legacy values jumped 20.9%, demonstrating that even late-stage IUL integration delivers measurable results.

Clients facing Social Security uncertainty: A combined 30% IUL and 30% FIA strategy increased legacy values by 78.2% while reducing failed retirement scenarios by 47.1%.

The tax arbitrage opportunity

Here's the value proposition your affluent clients will understand immediately: tax efficiency isn't a side benefit—it's the primary driver of IUL outperformance.

While qualified retirement accounts force ordinary income taxation on every dollar withdrawn, and taxable accounts generate ongoing tax drag from dividends and capital gains, properly structured IUL offers:

• Tax-deferred accumulation during working years
• Tax-free access to cash value via policy loans (when properly structured)
• Tax-free death benefit to maximize legacy transfer
• No RMD requirements that force unwanted distributions and tax acceleration

For clients in the 35-40% marginal tax bracket, this isn't theoretical—it can be a multi-hundred-thousand-dollar difference over retirement.

The three-bucket framework

Your affluent clients likely already have two buckets well-funded:

1. Tax-deferred (401(k), traditional IRA)
2. Taxable (brokerage accounts, non-qualified investments)

But most are missing the third bucket: 3. Tax-advantaged (IUL, Roth structures)

This creates a dangerous concentration risk—not in asset allocation, but in tax allocation. When retirement arrives and distributions begin, clients without tax diversification face a brutal reality: every dollar they pull triggers a tax event.

IUL can help solve this by providing:

• Flexible access during retirement without forced distributions
• Tax bracket management through strategic policy loan structuring
• Downside protection via indexed crediting strategies with floors
• Legacy optimization through tax-free death benefit maximization

Real client impact: The numbers don't lie

Let's talk about what this means in your practice.

A 45-year-old couple with $500,000 in annual income and growing investment portfolios faces a predictable problem: they're building a tax time bomb. When they hit retirement, RMDs will force large distributions whether they need the income or not. Every distribution gets taxed at ordinary income rates. Every year, they're writing checks to the IRS instead of keeping more in their pocket and passing wealth to heirs.

Now run the same couple through an integrated strategy with 30% allocated to IUL. The E&Y data shows you could increase their median legacy value by 13.8%—that's an additional $700,000+ that transfers tax-free to the next generation.

But it's not just about legacy. It's about optionality. When clients can access cash value tax-free, they control their tax bracket in retirement. They can avoid forced distributions. They manage Medicare IRMAA brackets. They protect Social Security taxation thresholds.

This is the conversation affluent clients need to have—and one that separates sophisticated advisors from order-takers.

Addressing the Social Security wild card

Your wealthier clients may not be counting on Social Security for lifestyle maintenance, but the uncertainty around future benefit reductions creates planning complexity. The E&Y study specifically tested scenarios with Social Security shortfalls, and the results are striking.

Integrated portfolios combining IUL and FIA reduced the number of failed retirement scenarios by 47.1% compared to traditional investment-only strategies. Even when facing benefit cuts, the tax efficiency and guaranteed elements of insurance products provided a buffer that pure investment strategies couldn't match.

Change the trajectory of your practice

Here's what advisors often miss: IUL isn't just a solution for your clients—it's a practice differentiator for you.

When you can walk into a client review and demonstrate:

• How their current plan creates a tax concentration risk
• The specific dollar impact of adding tax-advantaged strategies
• Sound research like Ernst & Young studies proving integrated approaches outperform investment-only strategies
• A holistic framework that addresses income, legacy, and tax efficiency

You're no longer competing on performance and fees. You're delivering comprehensive wealth planning that extends beyond portfolio management.

That's the conversation that helps retain high-net-worth clients, generates referrals, and builds a sustainable practice.

Implementation considerations

Obviously, IUL isn't appropriate for every client or situation. But for affluent clients who:

• Are in high marginal tax brackets (35%+)
• Have maxed out qualified plan contributions
• Want legacy transfer efficiency
• Need tax diversification beyond qualified and taxable accounts
• Value downside protection alongside growth potential

The E&Y data suggests this conversation should be happening in every comprehensive planning engagement.

Your next step

The research is clear: integrated strategies that include IUL consistently outperform investment-only approaches in both income sustainability and legacy value.

The question for advisors is simple: are you having this conversation with your affluent clients? Because if you're not, someone else will.

Ready to explore how IUL fits into your high-net-worth practice? Let's discuss how to position tax-advantaged strategies that differentiate your planning approach and deliver measurable value to clients. The numbers are on your side—it's time to put them to work. Call 866.866.7050 ext. 2 or email patrick@peakprofinancial.com.



*Analysis based on Ernst & Young 2025 study "Holistic planning: Integrating insurance products for better outcomes in retirement." Results shown are based on Monte Carlo simulations and may not reflect actual client outcomes. IUL products involve insurance costs, surrender charges, and other fees. Consult carrier illustrations and policy documents for specific product details.