Redefining The Million-Dollar Producer

Consider these million-dollar producers:

1) One producer specializes in brokering lottery winnings. He is a cash flow broker who works in the 16 states where lottery winnings are assignable. Cash flow brokers arrange for the purchase of income streams such as annuities, workers’ compensation, privately held mortgage notes and lottery winnings. In less than five years, he has generated more than $4 million in fees brokering lottery winnings. In addition, he is often asked to invest a portion of the lump-sum payments as well as develop comprehensive financial and estate plans for lottery winners–activities that more than double his fee income.

2) A financial advisory (offices in New York, Paris and Geneva) with an unusual approach to client development: The firm has a minority stake in four executive protection firms that provide bodyguards and other personal protection services for high-level corporate officers and wealthy families. The average net worth of one of these clients is north of $15 million. The advisory firm specializes in international asset protection planning and has been able to grow its business on referrals from the executive protection firms.

3) Another producer noticed that many of his clients were quite concerned about privacy and very interested in maintaining their anonymity. To meet the needs of these wealthy clients (and ensure an ongoing and consistent dialogue), he hired a computer programmer to create an encryption program, including anonymous e-mailers, for these clients to use. He provides his wealthy investor clients with the software so they can communicate on a regular basis. His efforts have resulted in his building a clientele worth in excess of $2 billion.

4) When wealthy people get divorced, a lot of money often moves around. One producer leveraged this insight as well as her background as a former divorce attorney to help very affluent women with their transition through divorce. She obtains clients through a well-developed referral network of divorce attorneys. She helps her divorced clients prioritize their financial concerns and creates financial and estate plans for them.

5) A producer founded a virtual advisory firm with official headquarters in Greenwich, Conn., that provides an array of highly sophisticated and customized proprietary strategies for a very select group of onshore and offshore clients, usually just three clients per year. For economic reasons, each client must have a minimum net worth of $1 billion.

All these examples are million-dollar producers. All market life insurance as a significant part of their practices. Their examples raise a lot of questions. Just what is a million-dollar producer? What criteria should we employ to define a million-dollar producer? How many are there?

In the life insurance industry, for the most part, success has traditionally been based on production. Production has traditionally been a function primarily of how much life insurance and related products were sold. Thus, the term “producer” specifically relates to products. This is a very logical approach if you are a product manufacturer, as insurers are.

However, this is not very useful thinking if you are a producer. If you only think in terms of your revenue coming from the sale of insurance products, you will miss many lucrative opportunities.

Although the sale of insurance products is the mainstay for the overwhelming majority of producers, it is actually becoming less consequential. This is especially the case for producers concentrating on the ultra-affluent or high-net-worth markets. Producers working with the wealthy are finding more and more that traditional production does not correlate very well with personal success.

As these cases show, there is a strong need to redefine the million-dollar producer and move away from production as the sole criteria.

should take two steps. The first is determining a viable definition of success. The second is extending this definition to the producer and exploring the implications.

Lets start with determining success. For these purposes, lets also measure success in strictly financial terms. We will take as a given the personal satisfaction producers gain in helping others, and set aside ego-driven factors. For these purposes, success is defined purely as income. Note that we are talking about income, not revenue. Revenue is a sales number whereas income is that portion of revenue that translates into personal wealth.

In fact, production and income–at the higher levels of affluence–are often not that closely correlated in the insurance industry. There are many producers putting up great production numbers who are not making money in terms of real income. This is because they have not structured or managed their practices to be sufficiently cost-effective to generate great incomes from great production.

To get a feel for how the life industry tends to define success, let us look at the producer associations: the Million Dollar Round Table, including Top of the Table; the Association for Advanced Life Underwriters; and the International Forum (see chart).