By Cecily Bishop

In recent years, the insurance business has been in the spotlight, sometimes in a negative light. Articles in the media, court cases and potential legislation have shaken our industry. But under the bright lamp of reality, individuals and businesses of all sizes know that our products play a necessary and important role.

One group in particular that needs our products, services and expertise is the owners and managers of small and medium-sized businesses. Business owners are dedicated to making their operation a success.

To that end, they need to recruit, retain and reward their key employees. This is not an easy task, and business leaders need guidance in identifying and offering the most appropriate benefit packages (qualified and nonqualified) to their key employees.

Key employees, in turn, need help planning and saving for their retirement years, obtaining adequate insurance coverage and providing for the possibility of long term care costs. Because of limitations on qualified plans, key employees are often prevented from participating in or receiving benefits from such plans at the same percentages as the rank-and-file and are, in effect, “penalized” because of their higher level of income.

Many financial representatives who have focused on the personal market find themselves wanting to expand their practice, enhance business with existing clients or find new ones. They also may be seeking work that is more exciting, intellectually challenging and enjoyable.

While many financial representatives have personal clients who are owners or managers of businesses that need help in this area, they often miss an important opportunity by not having a conversation about the benefit needs of the key employees. When talking to clients about personal needs or employee benefits such as disability insurance or 401(k), don’t leave business on the table by neglecting this topic. The client likely needs a nonqualified benefit plan, too.

The most enduring client relationships are typically founded on needs-based planning rather than product-focused sales. Uncovering all the needs of the client who owns or runs a business should be a primary goal.

This includes finding out what issues the client may have relative to compensating and providing benefits for key people. Discovering this need and articulating it to the employer is often the biggest challenge. Doing this in a first meeting and listing employees for whom the employer might want to do something special opens the door to providing one or more solutions.

While there are numerous questions to ask a business owner when doing a proper fact-finder, here are some of the basics:

o Is the business a corporation (S, C or professional), a sole proprietorship or partnership?

Does the employer want total control or is he or she willing to share control with the employee?

Is providing an insurance benefit or giving a future cash payment more appealing?

Does the business demand a present tax deduction or is it more interested in recovering its costs in the future? Or does it want both?

What is the cash flow availability?

An appropriate recommendation requires a thorough analysis of these and other issues, plus a familiarity with plan designs and products available. Tax, accounting, ERISA and other legal requirements will also help determine the proper solution.

Because executive benefit plans can be complex, joint work with a veteran in this area is the path many take to expand into the market. Nonqualified plan sales take time to close, usually months and sometimes years.

So it’s important to have a solid business already established when entering this advanced market. Once the employer establishes a plan, it must continue to manage its obligation and will likely need help in preparing the plan documents, monitoring the policies and benefits, and administering the plan.

The good news is these clients often provide new sales opportunities down the road, especially as their business and number of employees grow year after year.

Cecily Bishop is a specialty markets consultant in the Life Product department at Northwestern Mutual in Milwaukee, Wis. You can reach her at cecilybishop@northwesternmutual.com


Reproduced from National Underwriter Edition, June 11, 2004. Copyright 2004 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.