How Producers Can Succeed In These Turbulent Times
Russ Alan Prince & Arthur A. Bavelas
As producers know, it can often feel as if the life insurance industry is under siege. Not only are clients increasingly gun-shy about making any financial decisions because of the stock market, questions about the estate tax and the like, but regulators, legislators and the media appear to be on the offensive.
With an article appearing in the Wall Street Journal denigrating corporate owned life insurance as “janitor insurance” and one in the New York Times prompting the Treasury to issue regulations concerning split-dollar, there is clear justification for concern among producers.
From the producers perspective it feels as though the life insurance industry is undergoing yet another significant transition. Across the life insurance industry there is a great deal of attention to these changes: trade publications, newsletters and producer meetings are all discussing these turbulent times.
In order to get a clearer perspective on this matter we conducted a national survey of 483 producers. The majority of the sample (48.4%) had annual incomes of less than $100,000. Another 34.2% had incomes of $100,000 to $300,000. The remaining 17.4% had annual incomes of greater than $300,000 (Exhibit 1).
According to the producers surveyed, the current and proposed legislative changes will negatively affect their production and their income. The most financially successful producersthose making $300,000 or more annuallyare the most alarmed about the negative effect on their production (Exhibit 2) and their income (Exhibit 3).
The regulatory and legislative changes being talked about will be detrimental to the most financially successful producers. The reason the changes will impact the most successful producers is that they are working in the advanced markets. They are serving corporate, high-net-worth and successful business owner clients. The new legal and regulatory changes are directly impacting the products and strategies they employ with these clients.
Although they are not directly affected yet, all producers are concerned. Even though those earning less than $300,000 a year do not expect to feel the effect directly, they agree that these changes are very bad for producers overall (Exhibit 4).
In fact, there is a solid consensus (92.8%) that the current and proposed changes are very bad for producers. This sentiment is pervasive irrespective of income. While the practices of the most successful producers are being hurt today, all producers feel that the changes will be detrimental to the life insurance business.
However, there are still ways for producersat all levelsto continue to excel.
Looking forward, the most financially successful producers are going to employ the following business development approaches. They will:
Systematically source large cases by creating strategic partnerships with centers of influence.
Employ a consultative approach in contrast to a product-oriented approach.
Creatively identify monies to pay premiums.
Systematically source large cases by creating strategic partnerships with centers of influence. In order for producers to generate significant personal income, they have to close large cases. In order to close large cases, they have to open them. In survey after survey, producers agree that prospecting, especially large case prospecting, is their number one obstacle to success.
While there are many prospecting strategies available to producers, just two are especially reliable ways of sourcing large cases. One is client referrals and the other is advisor referrals.
For some producers, only advisor referrals are possible. For instance, when working with the ultra-affluent (estates of $25 million+), the only way to consistently get new clients is from other advisorscenters of influence.
We have conducted many studies with centers of influence over the years in order to understand them and their preferred ways of working with producers. Trust and estates lawyers are the top source for new, large, life insurance cases. (See NU, Sept. 16, 2002.) Accountants are second in importance. In these turbulent times, it is imperative for producers to develop strategic partnerships with these centers of influence.
A strategic partnership is one in which the trusts and estates lawyer or the accountant provides a steady stream of wealthy clients who could benefit from the producers expertise. Today, very few producers have taken the steps to create strategic partnerships even though there exists a proven methodology for doing so.
Employ a consultative approach in contrast to a product-oriented approach. With the demise (at least short-term) of proprietary strategies and some of the more aggressive products (e.g., 419 plans), the product-oriented approach, which has proven very successful in the past, will have diminishing returns going forward. In its place the truly successful producers will be increasingly consultative.
In an industry that will be increasingly characterized by greater transparency and less emphasis on wiz-bang products, producers are actually on a more level playing field. Since all producers are able to access the same technical expertise, the only remaining point of differentiation is the ability to better understand the goals, wants and overall agenda of the prospective client in order to provide highly customized financial solutions.
A consultative approach requires consultative (as opposed to selling) skills. In turbulent times that is what is needed.
Creatively identify monies to pay premiums. It is a truism that most people need and want life insurance, but do not want to pay for it. That is why top producers are skilled in finding the monies to pay the premiums. The ability to creatively find monies a prospective client can use to pay for the life insurance will continue to be important in getting life insurance sold in the years ahead.
In fact, one of the benefits of a consultative approach is obtaining a more comprehensive understanding of the prospective client. This holistic view enables the producer to see places to liquefy assets. Many producers are already following through by expanding the services they can bring to clients so they are in a position to liquefy assets to free up monies to pay premiums.
As for expanded services, one approach that is gaining greater attentions is the use of hedging strategies to unlock wealth from concentrated stock positions. The attractive loans available (using the hedge as collateral) are proving to be an excellent source of premium dollars. For larger privately held businesses, private placements that result in money for business growth have also proved effective in getting monies for key person life insurance as well as monies to purchase life insurance to fund buy-sell agreements.
There is a powerful belief among producers that the life insurance industry is under attack. And, even if one argues that it is not an attack so much as a housecleaning, the siege mentality would be the same.
Producers are looking around and anticipating that all the legal and regulatory changes will have a significant adverse effect on their production and their incomes. While most producers acknowledge that insurance companies and associations are fighting for them, this is not allaying their concerns.
In order to excel in these turbulent times, producers must focus. As part of that process, they must concentrate on a number of business development approaches. Specifically, they need to develop strategic partnerships with centers of influence such as lawyers and accountants. They need to adopt a consultative in contrast to a product-oriented approach. And, they will continue to need to creatively source premium dollars.
Russ Alan Prince is principal of Prince & Associates, a research and consulting firm in Shelton, Conn. He can be reached via e-mail at firstname.lastname@example.org. Arthur Bavelas is president and CEO of Resource Network LTD, Radnor, Pa. He can be reached at email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 7, 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.