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Gaining The Ear

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For many life insurance professionals, referrals from other advisors are key

When the wealthy business owner or corporate executive needs a life insurance professional, he or she is likely to turn to one of a team of advisors in securing the contact. So, it stands to reason that winning over the affluent hinges on cultivating relationships with these all-important professionals.

That’s truer than ever, observe experts interviewed by National Underwriter, who say that a blurring of lines among once-distinct professions is heightening competition for the affluent client’s business to a fever pitch.

“Because so many advisors across professions are licensed now to sell life insurance, the opportunity to cater to the affluent has put many more people in competition with one another,” says Russ Alan Prince, president of Prince & Associates, Redding, Conn. “Advisors have to position themselves with a halo going in; that is, a referral. To get to the wealthy on a consistent basis, you have to work through other advisors.”

Those other advisors include professionals with whom life insurance agents typically collaborate on client cases: CPAs and attorneys. But Prince observes that producers increasingly are partnering with bank trust officers and securities professionals, such as registered representatives and investment managers.

Contrast this heightened focus with a decade ago. In “Marketing to the Affluent: A Toolkit for Life Insurance Professionals,” a publication that Prince co-wrote with Karen Maru File for The National Underwriter Company in 1995, the authors noted that trust officers and investment managers provided far fewer referrals to affluent clients than their counterparts in the accounting and legal professions.

Of the 1,219 advisors surveyed for the book, only 12% and 5.1% of trust officers and investment managers, respectively, indicated they refer clients to life insurance professionals. This compared with 36% of accountants and 27.8% of attorneys.

Similarly, 13% of accountants and 16.9% of attorneys provided from 1 to 5 referrals during the prior 12 months. Among trust officers and investment managers, the percentages were just 7.7% and 4%.

Even today, observers say, the latter two advisor communities can be difficult to crack. That’s especially true in cases where the referring advisor works for a large institution that has in-house insurance professionals who are more likely to get the business.

“Almost all the large banks have private client services that sell life insurance,” says Renno Peterson, a co-director of the Estate & Wealth Strategies Institute at Michigan State University, East Lansing, Mich. “So, if you go to one of their trust officers, they already have processes for facilitating [the insurance sale] internally. It’s just not going to happen.”

Life insurance professionals are likelier to achieve success, adds Peterson, approaching colleagues who work for small trust companies and banks. And if they have a formalized marketing program to facilitate such alliances, so much the better.

Example: Financial Diligence Partners, which plans to tap within the next quarter an initiative of Jefferson Pilot Financial Annuities, Greensboro, N.C. The program, dubbed Professional Analysis Review (PAR), leverages software that can identify problems with life insurance policies held in trust (e.g., contracts with underperforming or under funded assets; or “orphaned” policies that no longer have an overseeing life insurance agent).

Mark Chandik, a managing partner of Financial Diligence Partners, says his firm will charge about $200 per policy for the reviews, which pays for staff time and running insurance data through the software.

“Institutional trust officers have a high degree of fiduciary responsibility, but most are not experts in life insurance,” says Chandik. “One surprise they don’t want is to receive a notice stating that a policy they oversee will soon lapse unless their client coughs up more money.”

The PAR services-for-fee program is one among several tools that Financial Diligence Partners plans to leverage (or is now using) to secure referrals to affluent clients.

Chandik adds that his broker-dealer is now finalizing a relationship with the Newport Beach, Calif.-based office of Mellon Asset Management that will enable him to share fees and commissions with partnering investment managers employed by the Mellon affiliate. Similarly, he uses Jefferson Pilot’s CPA Security Program to split compensation with accountants who refer business to him.

He additionally hosts joint-marketing seminars on exit planning for entrepreneurs with allied CPAs and attorneys, each of whom brings clients to the educational sessions. With still other advisors, Chandik trades referrals, albeit informally.

The last, he says, is of limited value because the trades generally are lopsided in favor of the partnering advisor. While, for example, he refers “a tremendous amount of business” to estate planning attorneys, he garners little business from them in return.

Chandik’s observation dovetails with that of Prince, who strongly advises insurance advisors against making reciprocal referrals the basis of a relationship. “It’s the worst business model you can run with,” he says. “It doesn’t work.”

How much more effective are other techniques for building a referral-based business? Observers say the various incentives an insurance professional might offer–fee-sharing, joint-marketing, educational or policy review services, among others–are useful only to the extent they fit into the partnering advisor’s practice.

A program like PAR may be well-suited to the experienced trust officer who has a large book of business and many ILITs to manage. But the newly recruited trust officer may be more interested in connecting with estate planning attorneys.

“The key is to take a detailed look at the individual’s practice and devise a customized solution,” says Prince. “Insurance professionals have to spend the time to understand the other advisor’s business and what’s important to them.”

They also have to spend time apprising the prospective partner of the benefits of teaming with a life insurance advisor.

“Very few financial advisors do what I call strategic networking,” says Bill Cates, president of Laurel, Md.-based Referral Coach International. “They have to engage in a process over a series of meetings that helps their counterpart understand the value they bring to the client. That’s how they make themselves referable.”

The professional courting can last many weeks–or months. Bob Esperti, the Estate & Wealth Strategies Institute’s second co-director, says the process requires advisors to “meld with” (or assimilate into) the counterpart’s professional culture, in part through training. Then they have to create trust and implement procedures for carrying out the referral.

Esperti, whose institute educates registered reps and investment advisors, among others, about the role of life insurance in the client’s financial plan, says that formalized procedures are needed so the referral can be made with confidence and to ensure the client follows through.

So, for example, a registered rep would identify and explain to the client the need for insurance; refer the client to a partnering insurance agent; then explain that, as the client’s investment advisor, he will work closely with the referred agent to ensure the client’s insurance needs are fulfilled.

“Too often, the non-insurance professional simply makes the referral, and then assumes the process will take care of itself,” says Esperti. “The result is failure because that’s not the way the world works.”

Given the close, ongoing collaboration required to make referral-based alliances effective, observers say life insurance professionals should generally limit themselves to 5 or fewer partnering advisors. More relationships would be difficult to support, unless they serve only as a resource to be tapped on an as-needed basis.

However the life insurance and non-insurance advisors meet–through an affluent client they have in common, another other advisor or attending a conference or social event–they’ll have to connect on both a personal and professional level if the relationship is to gel, observers say.

They needn’t have similar interests, walk in the same social circles or enjoy comparable life styles. But their areas of professional expertise should be complementary. And they should be targeting–and boast comparable track records winning the business of–the same affluent clients.

“Successful people like to work with other successful people,” says Cates. “If you want to serve affluent clients, you have to have these relationships. That’s the only way you’ll meet them.”

Adds Chandik: “I partner with real estate brokers but only those doing transactions valued at $2 million and up. You have to be very selective in picking advisors whose clientele matches your own, even if you like the person.”


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