Even after the gold medal was draped around his neck, Australian Steven Bradbury was still shaking his head and smiling sheepishly. Steven won the gold medal in the 1000-meter short-track speedskating event not because he was the best skater, but because he was the only one left standing.
Steven was in a distant fifth place until a crash left the top four skaters sprawled on the ice. He is the first to admit circumstances delivered the gold to him on a silver plate.
Selling fixed annuities through banks in 2001 presents similar good fortune.
Some insurance companies achieved gains of 161%, 277%, 528% and 879% (yes, those are real numbers). Of the top 20 fixed annuity providers through banks, 18 had increases of at least 19%. Did 18 insurance companies crack the code at the same time? Perhaps. But I imagine most fixed annuity providers are still shaking their head and smiling sheepishly.
Many of us have experienced such good fortune first hand. “Right time, right place” plays a greater role than most of us care to admit. And in 2001, providers of fixed annuities found themselves squarely in the nexus of right time, right place.
So what has 2002 brought so far?
Just like the stock market of the past few years, I imagine we will see a return to the median. Just like tech companies that could no longer deliver 1000% returns to investors, the fixed annuity market is not likely to watch sales jump another 78%. Insurance companies and financial institutions will be rewarded not for simply being at the right place at the right time but for having the right products, the right training, the right marketing, the right wholesalers, the right sales support, the right continuing education and the right pricing.
The time to make certain you have all that in place is right now. Why? At a recent industry meeting, I found myself in the midst of a love fest. High fives all around as bank after bank, insurance company after insurance company, all congratulated themselves on a great 2001. And it was well deserved. The scary part was that the same backslapping was taking place around first quarter 2002 results. Theres the problem and potential danger.
In the first quarter of 2002, fixed annuities accounted for 58% of revenue with bank retail investment programs. So whats wrong with such extraordinarily high numbers? Nothing at all, until the next inverted yield curve. That is when we will learn who made strides in 2002 to make sure they won the gold in 2002 and beyond.
You wont be rewarded just because you didnt fall down. The gold medal in 2002 will go to the insurance companies who understand what the banks need and to those banks that have their house in order to respond to shifting markets when the wave hits the beach. And it will.
The gold will go to those who understand distribution because in the end, distribution is king, always has been and always will be.
The current environment of “build it and they shall come” will end. The gold will go to those who can adjust to a stabilization of markets and who are prepared for the expected.
The year 2002 has seen exceptional broker and licensed banker productivity and revenue contributions. During such robust times, the prudent organization will take the time and energy to strategically review the foundation and perhaps execute a strategic overhaul. Here are eight strategic issues that every bank retail investment program needs to review:
1. Organizational alignment. Simply put, who does what? How do the bank, third party marketer and insurance companies align? Who provides licensing, continuing education, administration and so on?
2. Staffing model. Do you use just brokers? Broker and licensed bankers? Or a combination–the hybrid model? What are the ratios of each to one another, to the number of branch locations and to customer demographics? How do you compensate them–asset retention, revenue growth or coaching activities?
3. Selection process. Is this a volunteer army, or were employees drafted? What are the desired characteristics? Who profiles and manages timelines and turnover?
4. Training/retention programs. Who manages the calendar/schedule? Who provides the four key components of training specific to product knowledge, sales process, time and self-management and sales management-coaching skills? When is the last time you conducted a refresher training specific to market volatility and risk-based products such as mutual funds and variable annuities? How do you know if your training is effective?
5. Marketing/sales support. Who builds and manages the 24-month marketing calendar? Are the bank executives behind this, and how do they lend support? Who sets the sales expectations and manages the results? Who sponsors? Is it coordinated with retail bank campaigns? Is it timely?
6. Technology and administration. Do you have a manual, instant issue or field issue process? Which process should you have? Does straight-through processing make sense? Who supports what function–bank, insurance company or TPM? Where does the sales desk reside?
7. Products. How many do you offer? How many should you offer? When is product clutter an issue? Should they be shelf, private labeled or proprietary? How do you know the true gross dealer concession? What sales volumes make this issue a consideration?
8. Financial reporting. Who builds the model? Does your revenue translate into earnings per share? What are your key indicators? What do you check and measure daily, weekly, and monthly to know youre on course? Who sets the course? How do you measure per-person productivity–volumes, revenue, profit? Have you asked for R.O.E. models from product providers?
Who will win the gold in 2002 and beyond? It will be the people and organizations that anticipate and prepare for when the fixed annuity wave crashes. Who take action today while their peers are standing around and congratulating each other. Tomorrows winners are implementing programs right now that increase their Brokers and LBEs ability to sell variable products.
What are you doing to get ready for the day when the fixed annuity wave hits the beach?
are partners in Cramer, Wick & Associates, Davidson, N.C. They can be reached at firstname.lastname@example.org or email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 22, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.