What Agents Deal With In Moving To Fee-Based Planning
Two appointments–3 hours. Detailed needs analysis–4 hours. Time spent driving to and from a prospects home–2 hours, 75 miles, and a flat tire. Compensation–nothing.
This is an experience almost every veteran life insurance agent has gone through. Schedule multiple appointments with a prospect, perform a detailed needs analysis, and present a course of action to solve their financial problems, only to have them turn away and increase their group term coverage.
This is the type of experience Mark Olson swore he would never go through again; and is one reason he started charging a fee for his services.
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Olson, a MetLife senior financial planner from Berkley Heights, N.J., has successfully made the transition from a commission-based practice, to one that also charges his clients fees for a comprehensive financial plan.
“The most difficult part of the transition was changing my mindset,” Olson explains, “It was more in my own head. I felt that if I started to charge clients a fee Id make less in commissions, or theyd get their help from someone else.”
Many other recently converted fee-based planners agree that the biggest obstacle they faced during the transition was the fear of losing a client.
“The initial fear that everyone has, when youve never charged fees for planning–even though you did a lot of planning–is the fear of whether your clients will accept this change,” says Louis Genett, a fee-based planner with Prudential Financial, in Charlotte, N.C.
“The most difficult part of the transition was with our senior agents who are very traditional in their practice,” says Mike Thompson, managing partner of Thompson Financial Group, a New England financial agency in Charlotte, N.C.
Many successful producers feel that charging a fee is an unnecessary step in the sales process. Most of these agents are already performing a detailed needs analysis for clients and not charging a fee, says Thompson.
“I think its a mental hurdle, its something that we as producers need to address and step out on on faith,” Genett explains. “We need to help our clients understand that this change is not one just for economic purposes, it is a paradigm shift in our capability of helping our clients and bringing value to them.”
Genett has been in the insurance business for 34 years, but has only charged fees for the last five, when Prudential began transitioning its field force to fee-based planning.
Genett overcame his “mental hurdle” by approaching an existing client of 10 years. “I went to him with a great deal of hesitation and I was almost apologetic.”
This particular client was about to retire and Genett had all his business except his investments.
“I explained the process to him and all the training we went through and explained how were here to help add value, and were going to charge a fee for that.
“When we finished he said he was glad I was doing it. I ended up picking up all his investments, which he wouldnt even let me talk to him about before,” Genett says.
One technique that seems to have helped these agents overcome their fear of losing a client, is to offer each and every client a 100% money back guarantee on their financial plan.
Thompsons agents tell their clients that if theyre not completely satisfied, theyll get a refund for the fee. “We havent had anyone who wanted their money back,” he says.
Lou Genett has a similar experience. He tells his prospects that if they feel he hasnt brought anything of value to the table, he wont charge them. As of this writing, nobody has asked Genett for a refund. One time, he explains, an existing client was really giving him a hard time about the fee and after the meeting Genett thought he might want his money back. “I even asked this client at the end of the presentation if I owed him any money, and he said That was the best money Ive ever spent!”
But for some current clients, switching to a fee-based relationship may not be best. This is why many producers making the transition, in their good faith to service the business theyve sold in the past, will offer current clients a choice on the type of relationship they have.