So, your financial planning practice is up and running. In fact, maybe it has been humming along for several years now, and you’ve done a fine job for your clients. But you’re finding it harder and harder to stay on top of every latest development. Changing tax laws. Medicaid phase-outs. And then, the biggie: long term care insurance underwriting.
If you’re having difficulties managing your own LTCI affairs or driving any traffic through the door, you’re not alone. In fact, it is an area that has experienced radical changes over the past two to three years.
There’s a trend here
If you’ve noticed that the number of seniors who’ve come knocking on your door asking for help in addressing their LTCI needs has dropped sharply, you’re picking up on a much broader trend. It’s commonly known that individual LTCI annualized premiums have been slipping for several years, much to LTCI specialists’ chagrin and carriers’ dismay. And, if industry experts are correct, according to Marilee Driscoll, a speaker and founder of long term planning month based in Plymouth, Mass., a similar decline can be expected in 2005 over 2004.
Why’s that? Driscoll reasoned that advisors and producers are shifting how they run their LTCI business for three main reasons. “First,” she says, “they’re forming referral relationships and are getting serious about going after referrals as opposed to [writing the business] on their own.”
Second, there’s an industry trend where LTCI is being handled in packages known as “multi-life” plans, whereby individual policies are clustered together so that they get a “group” discount. Marketing these policies has been similar to workplace disability insurance: There has been an explosion in workplace and association long term care sales and there’s a growing awareness among employers that this is an important coverage to consider, particularly if it’s offered as an employee benefit.
Third, and perhaps most importantly, planners who are being hit with the downturn in LTCI sales are looking for other ways to market it. “[LTCI] is a complicated product,” Driscoll notes. “Most planners don’t want to go near it.”
Her advice? If you’re a planner, the best way to take care of your clients is by forging a referral relationship that allows you to farm that work out to a specialist. “I didn’t used to say that,” Driscoll says, “but now I do – even going through the underwriting process, you can really go down a bad rabbit hole.”
Why a specialist?
Given what you have to deal with as a financial planner, the idea of farming out your LTCI work is likely to strike chords that are both appealing and nerve-wracking: You may free up a difficult task, but how can you ensure you’ll do what’s best for your clients?
Perhaps this angle will win you over: Given what you already have to deal with in your practice, how do you plan to stay abreast of the latest and greatest within the ever-changing world of LTCI? And another benefit: There’s nothing better than getting a piece of the action without having to do any of the work. If you forge a solid relationship with the right LTCI specialist (where you split commissions on work that gets written), not only will your client base be well served, but the specialist wins and so, too, do you.
Case in point is connecting with someone like Steve Sanders, national director of long term care for Asset Marketing Systems in San Diego. Having worked as a long term care specialist for 13 years, Sanders understands many nuances of the LTCI underwriting process.
For starters, Sanders asserted, the client landscape itself has changed. Where the average LTCI purchaser used to be 66 years old, that person is now 55. Moreover, many advisors no longer sell LTCI because it’s too complicated.
“It has too many moving parts,” Sanders says, adding, “Plus, it’s more of an emotional sale than a financial sale: People do not buy this, it has to be sold to them.”
Another challenge in selling LTCI for financial planners is they simply don’t know how to position it so it’s affordable.
“The average financial advisor presents a plan that may cost their clients $4,000 to $5,000 per year, which they’ll end up declining.” he says. “When in reality, they often need to buy a policy to cover just three years in a nursing home, which is the average stay.”
So how does Sanders enjoy such success? “What I’ve done to be successful is I go to where [seniors] already are and I give an informational, educational and entertaining program for the monthly meeting of the AARP, the church, the civic organization,” he says. LTCI is sold based not on protecting money, Sanders asserts, but to protect a client’s quality of care and control. “Without LTCI in America, you’ll go into a nursing home [where you can easily] spend yourself into poverty and lose your control.”
If connecting with an LTCI specialist sounds like the route for you, here are a couple quick guidelines to find a good one: Find one with the proper qualifications, someone who has been in the business for at least two years, has at least 100 to 200 clients and whose focus is primarily LTCI. Lastly, he should represent at least three different long term care companies.
So, you know you want to align with a specialist. Or, maybe you’re such a rugged individualist that you still feel compelled to handle your underwriting alone. Either way, you’ve got to be able to approach the issue of introducing LTCI to your clients.
First and foremost, according to Marlys Fiterman, a partnership team member with Newman LTC in Minneapolis, avoid giving clients a quote upfront.
“Never, never, never do that; they’ll take one look at it and walk the other way,” Fiterman says. “You should instead ask to sit down and have a meeting just to give some education on LTCI. How does it work? What is involved? Consider it a teaching time.”
For Marjorie Elias, a Long Island, N.Y.-based long term care insurance specialist with Genworth, addressing LTCI boils down to really listening to the client. “I think sometimes advisors get into discussing the benefits and features before they really understand what is needed for the client,” she says. “What’s important is whatever the client wants to accomplish.”
Elias stresses considering all the options, including how LCTI can have tax consequences and how those ultimately can affect the client’s estate and family.
No matter what, LTCI is one product you’re well advised to bring up before your client is in hot water. According to Driscoll, however, “The problem with LTC is that until people are in a crisis, they don’t want to pay attention to it.”
Given that, it’s important to address LTCI as something other than something saved for a rainy day. Because once that rainy day arrives, it could be too late.
Simply understand that the landscape for providing LTCI to your clients has changed. According to Ed Jette, vice president of Elder Care Insurance Agency in Oxford, Mass., LTCI is playing by a whole new set of realities.
“Fifteen years ago,” Jette says, “Travelers was the only company selling this product. Now clients are more educated, and the cost of the coverage is more expensive.”
How that plays out for the average advisor, Jette asserts, is that advisors have to be concerned with the stock market, wills, etc.
“How can you possibly keep up with all the carriers when you only sell five policies per year?” Jette asks, adding, “You’ll do more harm than good.”
Getting to the place where you’re comfortable with how to handle LTCI inquiries will take a little homework on your part and might necessitate some experimenting: Do you want to continue to sell it as an advisor or do you want to refer that business out?
And, if you do want to refer the business to a specialist, you have to do more than give your clients a business card and send them into an environment that could be a real hard sell.
“They’ve got to get that referral to a place where there’s going to be a real education,” concludes Jette. And then you just might start to see your commissions on LTCI issues trending upward while your headaches become a thing of the past.