Breaking Into The Affluent Market

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has remained a mystery for many financial advisors. How does an agent go about getting into this segment, where annual life insurance premiums can amount to hundreds of thousands of dollars?

“Pay attention to what others are doing in this market,” advises Rick Thomas, CEO of Thomas Financial Group, Tampa, Fla.

Having spent the last 20 years working with the affluent market, Thomas says he learned a great deal from others who are successful in this segment. He encourages agents who want to serve this market to join organizations like the Association for Advanced Life Underwriting and the Million Dollar Round Table. Attending these meetings will give agents a venue to meet with these successful producers individually, find out what their problems are, and “get ideas from them that you can take home and put into your practice,” he says.

Thomas adds that this was his motivation for qualifying for MDRTs Top of the Table. “I wanted to be there around the guys who were really doing it.” Thomas has qualified for TOT every year since its inception in 1977.

Surrounding yourself with these successful producers who serve the affluent market is an approach similar to that taken by David Carroll, a partner at Financial Architects, Boston, Mass. Before becoming a licensed agent, Carroll spent some time working for John Hancock in a product development role, building specialized products for the M Financial Group and presenting these products to member firms across the country. “I got the unique opportunity to go out and visit the top 100 firms,” he says.

Then he struck out on his own, taking the lessons he learned from his previous experiences with the M Group firms. “Those were the only people I ever knew–I didnt know brokerage; I wasnt trained in a career orientation,” he says. Now, Carrolls own firm is affiliated with the M Financial Group and dealing exclusively with the affluent market.

But agents eager to get started need to understand that it takes time to get there, warns Mark Richards, executive vice president of The Madison Group, Denver.

“I think you need to work incrementally,” he says. Richards admits that he used to think he was in the large case life insurance market when he was doing planning for clients with $3 million of net worth. Today his clients typically have a minimum net worth of $25 million.

“There are so many nuances to these larger cases, if you havent grown into it youre probably going to fumble on the one-yard line–and quite often,” he says.

Richards feels that agents should try to “ratchet up their market” by 10%-25% every year until they gain the expertise to handle some truly large cases.

“I dont know of any shortcuts. I think its a career path that you have to systematically commit yourself to,” he says.

One step agents need to take to get into the affluent market is to become involved with the advisor community, says Thomas. “Get to know the advisors, the attorneys, the CPAs and the bankers who deal in the high end of the marketplace,” he says.

Thomas firm makes contact with the top 50 advisors in his community on an annual basis. His firm will sponsor a “private briefing” session with a nationally known speaker, a luncheon and then a golf outing.

“Its a neat way to interact with these advisors; it gets them education credits and hopefully they pick up some things that will help their practice,” he explains. “And then they think of us the next time they see a sophisticated situation where we might fit.”

Carrolls firm takes a similar approach. Through an informal visit with a contact at a law firm, Carroll will suggest his firm come in and speak with the estate-planning group; then hell do a briefing.

“From the briefing, usually someone will have a question of a technical nature, and well follow up with that person,” he says. He positions his firm so that when advisors think of implementing large cases for the affluent market, they will think of him.

Carroll has broken his advisor marketing efforts down to the level of activity needed to secure new, qualified clients. He has calculated that if he speaks with an accountant or attorney three times, he will get one referral. For every 10 referrals, two cases will result. “So when I look at 12 months of the year, I know exactly how much marketing I need to do to develop the revenue pattern for the firm,” he says.

One requirement of all agents operating in this market is to deliver a superior level of service to their affluent clientele. “Theyre used to top-notch service,” says Thomas. “They have high expectations.”

This is one of the major differences between marketing to the affluent and working in other markets, he says. At Thomas Financial Group, there are only three producers, but theres a support staff of 20. “When youre dealing with people who can get this kind of service from anywhere in the world, youve got to be a notch above the rest of the market,” he says.

Thomas entire telephone staff knows the names of all his affluent clients. Many times, his clients will call on him with questions that dont have anything to do with the area of business hes in, “but youre their resource when it comes to insurance.”

At The Madison Group, Richards explains, he has a dedicated service team of about eight people. Servicing his affluent clients involves much more then just sending an in-force illustration every year, he adds. Richards reviews his clients policies and how they interact with the plan at least once a year.

“It really has to be done, you have to show the client how its working,” he explains.

Thomas will do a full insurance review with his top 100 clients on an annual basis, but some of his largest clients like to see him every 90 days. “Clients who want to meet more frequently are the higher end of the affluent.”

Carroll has developed an in-house administrative system to comprehensively manage all his clients insurance policies from a servicing perspective, he says. The system keeps track of all of the life insurance policies, gift tracking, Crummey notice administration, details relating to the policies and riders, and as-sold illustrations vs. current every year.

“We are providing an administrative blueprint every year for every client,” he says.

With this tool, Carroll is better able to manage a clients insurance portfolio just as a fiduciary would manage any other asset. “I can evaluate the life insurance from year to year and know whats going on,” he says.

Because of all the overhead expenses associated with the service teams and administrative systems at these firms, agents in this market have to set certain minimums as a requirement for taking on a client.

“We need $100,000 of revenue to make a case an acceptable proposition for our firm,” says Richards.

When taking on a new client, Richards presents a “letter of engagement” to his client, which outlines all the deliverables and steps involved in the planning process. Just to start the work, the client must commit to half of the $25,000 fee. The other half is “based on our clients satisfaction with the work,” he says.

The fee not only establishes a commitment to work with his firm but also to the objectives it is pursuing, he says.

But often a prospect will have to be turned away, Richards explains. “We have to walk away from cases that have $50,000 of revenue because we have such a high cost of service,” he says.

Some agents even develop a scoring system when evaluating whether or not to take a prospect on as a client.

When Thomas gets a referral for a new prospect, his firm will perform a profile of the prospect that will result in a “grade point average.”

Thomas assesses his referrals across a number of different categories and rates them on a scale from 1 to 4 (1 being the worst and 4 being the best).

The categories he uses are based on a prospects net worth, income, occupation, the source of the referral and what he calls a “temperament gauge.” The net worth ranges from a low of $1 million to the best score with over $25 million. The income gauge scores a 1 for an annual income of $100,000-$250,000 and a 4 for an annual income over $1 million. Thomas considers the best occupation class to be a business owner. He feels the best source for a referral is from an advisor or a joint venture partner. Finally, the temperament gauge ranges from “acrimonious to angel.”

Thomas feels the temperament gauge is just as important as the other criteria because “theres a certain amount of tolerance you have for certain things.” He notes that many times acrimonious clients are just difficult to do business with.

After adding up all the scores, his clients need to have at least a grade point average of 3.5 for him to take them on as a client.

The first thing Carroll looks at when reviewing a prospect is “whether they love their kids or their grandchildren; thats something we score and rank,” he says.

Carroll notes that if a prospect doesnt care for the next generation, theres little chance of life insurance making an impact when planning their estates. Some other areas he scores include the strength of their advisor team, age of the prospect, potential revenue stream resulting from the plan, previous life insurance purchases, existing agent involvement, existing trusts and whether they have made any GST gifts or planning.

“There are things we test that are positive and negative; we try to get over a score of 20, which is an A client,” he explains. “When someones an A client, it means theres a minimum for us of $225,000 of revenue, plus well probably pick up some new advisor relationships from having worked with the client,” he says.

With such extensive service requirements, most agents in the affluent market arent able to handle a very large number of new clients. Furthermore, with the complex planning these cases demand, it typically takes much longer to bring a case from introduction to implementation, on average 12-18 months, says Carroll.

“Ill do about 20 cases this year,” notes Richards. Currently, Richards has 14 active cases going on right now.

Thomas notes that his firm will do about 80 cases a year, half of which will come from existing clients.

Carrolls firm will only add five to seven new clients a year. His practice currently consists of 50 family clients, with an average net worth of $80 million. “We describe what we do as designing and implementing life insurance portfolios for generational wealth settings,” he says.


Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 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.