From the February 2010 issue of Boomer Market Advisor • Subscribe!

Insurance lessons never learned

Why aren't more so-called "comprehensive" advisors handling insurance in-house? Can they really get a clear understanding of a client's financial picture if the insurance portion is stored across town? They lose control of the client's complete plan, and lose out on residual income from filling this critical need. Doesn't exactly sound like a recipe for success...

Which is something Joe and Jamie Stone realize. The father-son team at Stone Financial Group aren't shying from the lucrative, yet decidedly unglamorous insurance sector of the advisor business. Of course, it's easier with a history. Father Joe has been in it for 38 years (yes, 38), starting out with Equitable Life as a trainee in 1971.

"The nice thing about the insurance business, unlike the equity business, is that you really don't need anything except your head and a pad of paper," he says.

OK, so he adds that a computer and telephone would also be nice, but we get the picture. A stop at Berkshire Life followed before hooking up with NFP Securities and striking out on his own. The addition of son Jamie made it a family business with 300 clients (and a number of para-planners to help out), and one of the largest practices in the NFP stable.

Boomer Market Advisor spoke with the Stones about truly comprehensive planning, and why insurance (especially in this environment) is a critical part.

Boomer Market Advisor: Everybody freaks out about where the next generation of advisors is going to come from. It might be more important to figure out where the next generation of insurance agents is going to come from, or at least advisors that are acutely attuned to the need for insurance. Would you agree?
Joseph Stone:
That's a huge problem and that's one of the reasons I was glad that Jamie decided to do this. Everybody wants to get out of undergraduate or graduate school and become a stock jock or a benefits manager. Very few young people start in the life [insurance] business. It's a tough business because it's a lot of "no" and a lot of grunt work that people don't want to put up with.

BMA: It's critical but not sexy?
It's hard work without the glamour. And that's the problem. But he saw the lifestyle I had and figured if he learned the insurance business then the other sectors of the advisory business would follow. We do a comprehensive plan for people and small businesses. We're able to do that because the foundation is life insurance, which leads to everything else.

BMA: Does it give you a competitive edge to be able to have that insurance knowledge rather than farming it out?
I think it's crucial because there are so few people that even understand insurance and what it can do.
Jamie Stone: You can generate quite a bit of business from clients that most advisors would probably set aside. Maybe the client doesn't have enough assets under management or has some other issues. One of my favorite cases was a client who had high income but supports his parents. It was hard to get the insurance in place. He thought he should get his insurance and retirement planning going so initially that's what we thought we were going into. When I started talking to him about his biggest risks in retirement, it was actually his mom and his wife's mom, because he's supporting them both. We were able to put insurance coverage in place so he can protect their lifestyle needs. What would be going into his 401(k) and other retirement assets was going to his parents' needs. That was more important to him. So, we were able to put life insurance policies in place to help effectuate that retirement.

BMA: It essentially becomes income replacement once they pass away?
Exactly. There's very little cash value, but there are guaranteed death benefits for a certain amount of time that we specified at the beginning of the contract. And he couldn't be happier because he has the insurance on himself and his wife and now he knows that if something happens to his mother at least I can recover the expenditure that went out of the pocket to help her.

BMA: So as advisors well-versed in insurance, what do you think of 2010 in terms of the estate planning?
I think it's a mess. The Senate hasn't, as of this date, approved any changes. The House has approved a bill worth $2.5 million for clients. It's probably going to be at $3.5 million. That's what the President wants, and it's something that's not worth fighting over. But right now there is no estate tax. By the time you go to press who knows what it's going to be.

BMA: So, what are you telling your clients? Wait and see?
I'm telling them the same thing I've told them for the last 10 years, "You can only base it on what it is today." But somebody will probably die in January before this is settled and will have a huge estate. Congress will make whatever they do retroactive, so there will be a lot of problems.

BMA: Is there an insurance strategy you've recently hit upon that is particularly relevant to the current planning environment?
Policy reviews are a mainstay of what I do. Anyone who has a policy that's five years or older, the policies are most likely not performing as intended. A lot of people are with companies that have been downgraded or have taken TARP money. A lot of those people are panicking. I've been reviewing their policies and giving them options.

BMA: Are these prospects or clients?
Everyone. Referrals, new clients; I've been doing it for 38 years so I have quite a few of my own clients that send me referrals. They run the gamut from their late 40s to their 80s. People are coming to us with their parent's insurance. If the people are healthy we've replaced them, if they're not healthy we've sold them to get money for the client. We've tried to do something to make sense of these policies.

BMA: Baby boomer retirement was much more of an option two or three years ago. Are your clients going back to work?
A lot of them are continuing to work. I have doctors for clients who have changed what they're doing. They're not practicing medicine so much anymore. They're working in the offices of the hospitals. So what they bring to the table is the knowledge of how both ends of their business work. What I'm finding is that it's very easy for people like these, who have a profession, to pick up just enough extra money to make sure they don't have to worry about their retirement. So, they might have enough to give them basic income, anywhere from $35,000 to $100,000 to $150,000 a year. And they're not even working full-time, so it's a situation that works and they're not about to retire. A lot of them are young, and by that I mean a 65-year-old is not what it used to be. The combination of still being able to work and not being able to retire is a big reason (really the only reason) they keep going. If they have their health, they're going to keep working.

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