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Statistics say most small businesses fail, and John Kailunas II’s first foray into the entrepreneurial ranks fell short of his expectations, turning him into a statistic. He wasn’t the restauranteur he wanted to be, and his father served him up a nice warm bowl of now-you-have-to-get-a-real-job soup. So he decided the insurance industry was the place to get that real job.

After spending time as a captive agent, he joined forces with two other producers and rejoined the ranks of the entrepreneur, starting Regal Financial Group in Kentwood, Mich., serving up financial advice from a menu that includes annuities, insurance, securities, managed money accounts and more.

Nightmare is the word Kailunas used to describe the transition from captive to independent, but six years later he and his business are running smoothly. Kailunas and his partner – the man who hired him at Sun Life of Canada – are two-time finalists for Ernst & Young’s Entrepreneur of the Year award.

“We feel like Susan Lucci. We missed it both times, but we’re coming back this year strong.”

He acknowledged he has about 18 years to go before joining Lucci in the highest echelon of award-winning futility, but he says he’ll be patient. And patience must be a virtue, because Kailunas’ second business attempt is succeeding. Regal Financial has been nominated more than once as one of the 101 best places to work in the state of Michigan for new company startups. Quite possibly, he has found his niche.

Senior Market Advisor: How did you get started in the industry?
John Kailunas II: After college, I purchased a restaurant and didn’t fare too well in the restaurant business and had to get a real job, as my dad put it. So I got into the property and casualty business arena and I sold a lot of life insurance at that time and decided that what they were paying me, commission wise, wasn’t as good as what I could get from a traditional life insurance carrier. So, I joined Sun Life of Canada. My sales manager was Larry Taunt. He is now my business partner.

He hired me and I worked my way up into sales manager and into an executive position. We left and went to John Hancock. We were second-line managers with Sun Life of Canada. We went to be general agents at John Hancock and started a distribution channel and some other great things and decided that it was time to go independent in the year 2000, and we took off and ran with it. We have about $700 million under management.

SMA: What keeps you occupied outside of work?
JK: I have a daughter, Courtney, and I have a little boy, Jonathan Anthony III. We nicknamed him Tres, for the three, and he’s a little tiger. Those are my kids. I’m very traditional. I’m very fortunate that my wife stays home, and she helps with the business. I’m a big-game hunter. I’ve been to Africa. I just came back from out west antelope hunting. I’ve been bear hunting. I’ve been pretty much all around. I am making my way out to Argentina this year. We’re going to go hunting for black buck in Argentina, my wife and I.

So we’re very fond of the outdoors. I just bought a cottage up north that is on the Pere Marquette River, which is one of the top 25 catch-and-release, fly-fish-only rivers in the United States.

SMA: Tell me more about Regal Financial.
JK: We started this at the worst possible time, January 2000. Let me go back a little bit. When the banks were allowed in the financial services industry, obviously the financial services industry fought that tooth and nail. We saw that they were going to lose eventually, so we lined ourselves up with savings and loan associations. Basically, we were an endorsed carrier for them. So when they were allowed Social Security and fixed annuities and all that good stuff in the bank, we were one of the venues. We trained people and had a consulting business that did all of that. Plus, we received overrides on that. That sort of grew into us handling the securities for many different banks. John Hancock thought that was such a great idea that they wanted to come in and sort of run the show and say goodbye to us.

So we went out on our own, me and Larry Taunt, he’s a CLU, ChFC, CFP. Larry and I started a one-room office. We had a young broker that came over with us. His name was Brian Yarch, and Brian is now an equity partner in Regal of 4 percent. Larry and I own 48 percent. We wanted a group that is integrity based and hard working and we founded Regal, and I think our revenue the first year was something like $500,000 in 2000. This year, we’ll finish at $6.7 million in revenue between the securities and the fixed insurance venue. So, we’ve had phenomenal growth.

SMA: What is your business model?
JK: It’s referral only. I only work referrals. We do a multitude of planning. I’ve got an attorney, actually two attorneys downstairs who work for us and two CPAs. Our clients come in and bring everything from a disagreement regarding a cemetery plot to reserving their farmland to ESOP plans from Ford Motor Co. So we sit down and do a fact-finder with them and find out exactly what their goals and objectives are and put them in front of the right professional.

There are people in my office who I trained six or seven years ago in long term care insurance – and to be quite honest, they are a lot better than I am now. So I sit down and I explain the process to my clients and then I bring in one of these gentlemen who is quite talented. We don’t have any closing talks or anything. Being independent, we don’t have any proprietary products or any initiatives or anything. We’re just helping our clients and it is amazing how our business has flourished with that attitude.

SMA: How do you put prospects and clients at ease in your office?
JK: In our office, we have theme rooms. There is a sports memorabilia room and the other one is a memories room. It’s collected stuff like you see at Friday’s restaurants and our clients love it. We have a big fireplace and they come by and it’s truly a boutique. We bought our own building and did it the way we want. There’s 10,000 square feet here that is dedicated to customer service.

SMA: Is it a customer-first attitude that sets you apart?
JK: That’s all it is. If I look at all the other advisors, the products they sell are the same products I sell. The variable annuity or the equity-index annuity is the same one that I sell. Where I am very confident is I can beat them in service and caring. I have a lady whose title is relationship manager. All she does is build relationships. She sets everything up: “Mr. Kailunas is coming in at this time. Here’s the packet of information. Here’s the forward to the book he wrote.” And this and that. She sets it up so I have instant credibility when I walk in the room. No. 1 because it is a referral, and No. 2 because of how my staff has taken care of them. So we get over a lot of those sales barriers and obstacles. We take care of them.

SMA: Is that the key to the referral-only business?
JK: Yes. It’s customer service. We do goofy events. We were traveling in Thailand and I got some custom suits made. [The tailor] was coming to the United States, so I paid for his airfare here and we had a wine-and-cheese event where we had the custom tailor in and he measured clients for clothes. They had to pay for it, obviously, but they got clothes for 50 cents on the dollar.

We do events like that. We do a pig roast. We do a rooftop at the Chicago Cubs. We rent a rooftop outside Wrigley Field. We had 110 people that came to the rooftop last year. We pour a good drink and make sure everyone is having a good time, and they know that we care about them. So, it’s inevitable that when they say, “What are you doing this weekend?” And [my clients] say, “I’m going to go see the Cubs.” “How did you do that?” “Well, my broker.” “Your broker?” That leads to a conversation that we generate business from every single time. It’s seriously taking care of the customer. I think if our industry did more of that, we’d have a lot less of the bad press we get.

SMA: Are you able to work your interests into your business?
JK: That’s exactly what I do. Last week I went to a pheasant range. I have a broker who raises dogs. We took out eight people pheasant hunting. We basically walked the fields in the day, went bird hunting, and had a chef come in and make a gourmet lunch. In the afternoon, we went out hunting again. I got a referral, from a business owner I do a lot of charity work with. He called me up and said, “I’ve got a buddy who is in tool-and-die. We do a lot of joint work together.” He said, “Would you sit down and take a look at his business for him and his books?” He faxed over the account statements and it’s $400,000 or some odd dollars that he’s got sitting there and doesn’t know what to do with. He doesn’t have a relationship with his broker. I’ll sit down with this guy and go through and give him that concierge-type service. There is a tremendous marketplace for people who have $100,000 to $400,000 of assets to invest. You don’t see anybody talking about that.

I have a friend who has a boat out on Lake St. Claire, which is a phenomenal lake for walleye fishing. So I took two trips out there walleye fishing, and lo and behold, they were all referrals and we’ve written business. So it’s sort of fun. With this cottage, I’m going to take people fly-fishing, so I get to cheat a little bit I think. It’s worked out real well. People see that you are sincere and honest. Because if you go on a hunting trip or you go on a fishing trip and you spend time with somebody, one of two things is going to happen. Either he is going to like you or he is going to think you are a jackass. You cut through a lot of it.

SMA: Something else you do outside of work is take part in Hunt for a Cure. What is that and how did you get involved?
JK: The gentleman’s name is Pete Odland. His little boy Dylan has cystic fibrosis. Pete is a self-made man. He came from very sparse beginnings. He has built a nice tool-and-die shop here in Michigan. He’s an avid outdoorsman. He found out his son has cystic fibrosis. He thought, “What can I do? How can I go after this thing?” So he decided he was going to start this Hunt for a Cure. It’s a 501(c)(3) organization that raises money for research for cystic fibrosis. The main event each year is the camouflage ball. You dress in camouflage. The women dress in camouflage gowns. We raised $92,000 last year in one evening with silent auctions, live auctions, the tickets, the sponsorships. Ted Nugent has been very gracious to give to the charity. I am the vice chairman. We will have wild-game dinners at our country club. All the proceeds will go to Hunt for a Cure. What we’re trying to do is raise money because it feels like there is a clock on every kid, and we want to keep that clock running instead of it being stopped. It’s a race against time.

SMA: Advisors get a lot out of their communities. How important is it to get involved and get a little back?
JK: I think they have to. It’s imperative. If you look at any of the people profiled, if you look at any successful producer out there, it’s difficult to find someone who isn’t involved passionately with a cause. If the intent of doing something charitable is to get business, it won’t happen. If you have a passion to help somebody or do something, people will see that and note your sincerity and note your integrity.

SMA: What was your transition like going from a captive agent to having your own business?
JK: It was a nightmare. If I didn’t have my partners, Brian Yarch and Larry Taunt, it might not have happened. We all leaned on each other through a very difficult transition. There’s a clich?(C) going around in sports, “It is what it is” or “You know what you know.” You are hearing athletes saying that now. It’s amazing, when you are in a captive situation, all you know is what you’ve been told. When you get out there in the real world, it’s absolutely amazing. The more you educate yourself, the more ignorant you realize you are. Every day, I’m learning something new and I’m learning how my practice is going to evolve. I thought at one time, when Larry and I had a million dollar growth, that it was more than we’d ever be able to handle. I’m envisioning a $20 million to $25 million dollar gross in the next 10 years. It’s matching the client’s concerns and issues with products and then servicing the power out of them.

SMA: Which gets back to the customer service.
JK: Yes. To be honest, I’m not that great at it. I’m great at a point of sale. There are people that are much greater at customer service than I am, so I hire them. Jennifer Berry, who works for me, used to run the dining room at our country club. It’s a high-end country club. She knows how to deal with people, all types of people, because of the country club. Lo and behold, we brought her over here and she handles all of that stuff for us and communicates with the clients so we can get through the issues that we need. I’m not worried about beneficiary changes and things like that. I’m sitting down worrying about bigger issues. It’s much more time efficient, and much more profitable.

SMA: Why do you like working with seniors so much?
JK: I prefer to work with seniors for several reasons. They’ve had so many life experiences to draw from. It’s easier for me to communicate. I’m only 41, but it is easier for me to communicate with them. Maybe it’s the closeness with my grandparents or my parents. To me, they are easier to relate to because they know what their issues are. A senior has several issues. No. 1, they might outlive their money. No. 2, you’ve got health care issues. They are simple issues to address and take care of. They are willing to look at those. They understand mortality and morbidity, whereas a younger client doesn’t. They also understand risk and reward a lot better. If it is articulated properly, it’s an even match to do business with them.

SMA: Are there any products that are working better for the seniors that they like a lot?
JK: We are starting to see a lot of our seniors go to managed money.

SMA: Really?
JK: It’s probably because it is a focus of where we want to be as a firm. We see with a lot of the managed money that it’s a trust issue. It’s what Will Rogers said: “I’m not concerned with the rate of return on my money, I’m concerned with the return of my money.” That’s very true with seniors. If you explain to them the process, we’re seeing a lot of them in managed money; they like that. They want to know they are paying consultants to help them and that we’ll be there so that if they call we’ll give them service. People aren’t afraid to pay money as long as they get perceived value from it. They’ve been around long enough that they have seen salesmen sell them things and never call them again. I love those people that have had those experiences. They don’t get that from us.

SMA: What are your thoughts on how the senior market will change as boomers age and become seniors?
JK: I think it is going to be a windfall. And I don’t say that arrogantly, I just say that very confidently that we’ve put, with the attorney, with the legal people we have, the accounting people, we’re seeing a lot of this one-stop shopping. We’re seeing people like that. If they have a problem, there are people with professionalism and intelligence that will handle the issues. You’ll never hear around here the excuse that it wasn’t my job. It’s everyone’s job to make the client happy. I think the baby boomers are going to be a huge windfall for this firm. With the amount of money that is transferring to this generation, there is going to be a lot of new issues that the economy has never faced, a lot of new issues that advisors aren’t ready to really dig their teeth into. I think it is going to be a great opportunity for Regal Financial Group.


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