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Life Health > Long-Term Care Planning

Allied for success

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Philip Gallant is a heck of a long term care insurance salesperson, writing more than $400,000 in LTCI and life premium last year. He managed those numbers while conducting extensive training for other agents and advisors. Gallant, father of Audrey, 25, and Kristen, 23, also is a bit of an aspiring comedian – maybe something he developed as a defense mechanism living in a house full of women. And while he manages to tickle others’ funny bones, he knows LTCI and the future of the long term care system in this country are no laughing matter.

Gallant, executive vice president of Clifton Park, N.Y.-based New York Long-Term Care Brokers, has been in the financial services industry for 27 years and in the LTCI game since 1987 – long enough to have seen major changes in the way LTCI is built and sold. He also has seen industry-wide sales dip over the past few years, but he doesn’t attribute that to a lack of awareness.

“I don’t think that it is a lack of awareness,” says Gallant, a huge fan of building and sustaining alliances with financial advisors, “as I think it is a lack of priority.”

In order to change that, Gallant is on a mission to educate financial professionals and consumers. Until LTCI is established as a priority in the financial planning process – right up there with annuities, life insurance, IRAs, etc. – sales will suffer. And if LTCI sales suffer, everybody suffers, because Medicaid and Medicare will collapse under the weight of 78 million baby boomers who eventually will need care.

Gallant manages to find time for his hobbies – golf, camping and going to baseball games. He also donates his time to the Double H Hole in the Woods Ranch, a charity camp established by actor Paul Newman for underprivileged children on Lake Lucerne. Mostly what Gallant does, however, is protect people’s future – and shield families from the costly burdens of caregiving.

Senior Market Advisor: Why LTCI? What made you make that jump almost 20 years ago?
Philip Gallant: One of my clients was running for political office. I was managing his campaign. We were doing a door-to-door effort one day. I said, “Let’s go here because I know this fellow. He’s a client of mine.” He asked me about a nursing home policy. Not knowing about anything about it, and not having heard about it, I said maybe Medicare pays for that, but let me look into that. As a result of looking into it, I got deeply involved early on because I found out that Medicare doesn’t pay for care in a nursing home. It doesn’t do what I thought it did back then. So I did some research and I began my career as an agent. I was a regional manager for AMEX, back when AMEX was the big player. I got involved because someone asked me about it, but then I saw a tremendous opportunity and a tremendous need. I’ve always been a fan of Dr. Ken Dychtwald, the Age Wave. I’ve read his book. Actually, I had bought a tape series prior to reading “Age Wave,” which was called High Performance Living, which was pretty influential on me. In that book, and in the tape series, he talks a lot about aging and about what’s coming down the road. It sort of all came together. It was all coincidental that I was listening to that tape series at the same time I started to get involved in long term care.

SMA: You said you saw a tremendous need for it. It seems that need is still there. What is holding people back from getting LTCI? Why is there still such a tremendous need?
PG: There are two issues going on. The first issue is that people are living longer than ever before and they see their parents living longer. The long term care that their parents are experiencing today is different than the nursing home disasters that they saw in years past. The nuclear family isn’t the way it used to be in terms of geography. People are living all over the country. You may have a mom in a nursing home, but the day-to-day impact of that isn’t the same if she lives 400 miles away. You feel badly about it and you want to help and you want to be there, but if it is your family, it is not as close to home as it used to be. I remember when my grandmothers were in the nursing home, they were in the town I lived in. We used to go see them on a regular basis. But because families are spread all over the country today, the real family impact doesn’t hit home the way it used to. There’s a tremendous amount of denial that people are going to ever experience that situation.

SMA: What is the other thing?
PG: The other issue is that financial advisors find that the product is complicated and it is a difficult subject matter. People seek advice from investment advisors and ask them about long term care insurance. Very often, I have found that the advisors will either say that you’ve got money to pay for that or that it’s not an area of expertise that I’m involved in. Or the subject kind of gets discussed and never revisited because it’s not brought to the top of the plan. Most advisors are working in helping people accumulate and distribute assets. There needs to be more partnerships between financial advisors and LTC specialists. One of the issues is that LTC specialists need to understand what financial advisors do and not operate in a vacuum.

SMA: Why have alliances become as popular as they have, and what are a couple of the key elements to building those alliances?
PG: Ninety-five percent of my business comes from alliances. Referrals come from two or three primary ones. I work very closely with a credit union in the mid-Hudson Valley of New York that puts on retirement seminars. The credit union has a registered investment advisor on staff who they pay to help people keep money tied to the credit union. If it’s not in the credit union’s saving and certificate programs, they at least want to be involved in helping their members with financial planning. Of course, they generate revenue from their financial planning department. But what they found was that they were having a lot of members asking them about insurance products and, in particular, long term care products. The reason this alliance works so well is that I do not, and never plan to – and never say never, but I don’t plan to in my career – become involved in the securities side of the fence. So I’m not a threat to them. When I come in and talk to their clients, they don’t need to worry about me going after any of the other business. They know that I’m very focused on helping them with the fixed side of the fence, if that’s what they want, and particularly in long term care planning. So, when I work with financial advisors, it’s very clear that I’m part of their team. And their client is their client. I’m there as a consultant and I’m an expert in this area to help the financial advisor look better to their client and provide better service.

SMA: So you don’t carry the securities license, but the people you work with do?
PG: I really do think that’s the key. It is hard to go to a financial advisor and offer to do the long term care planning for them if you also carry the same licenses.

SMA: What are the keys to success as an LTCI salesperson? What kind of personality traits do you need to have? What educational avenues do you need to pursue to be successful?
PG: First of all, you should get a designation. I am a CLTC. I think that is an extremely good course and provides very good information about all of the various aspects of long term care planning, from the governmental issues to the building of the appropriate policies. It is important to get as educated as you possibly can. In this marketplace, the skill you need to develop more than any other is listening skills.

SMA: What does that gain you?
PG: I start every long term care interview with the same question: “Why do you want long term care insurance?” I believe people want it and they just don’t want to pay for it. But I’ll have people say to me sometimes, “I’m not sure I do want it.” I’ll always respond by saying, “Well, if it were free, if it were just a matter of enrolling, would you sign up for it? Would you enroll?” Almost universally, the answer is yes. We talk about why and what is the insurance going to be able to provide them that they can’t currently provide for themselves. Then we get into a discussion about why they want it. The knee-jerk reaction for most people is that they want to protect assets. But in reality, I’m finding that people want to be in control if they ever need care. Whether that means choosing whether they stay at home to receive the care and have the ability to pay family members, whether they can be assured that they will have the highest quality of care that they can possibly have and really ease the burden for their family. I think choice and quality of care and not being a burden on the family are really the issues in motivating people to purchase it.

SMA: Do most advisors miss that point?
PG: Early on in the long term care industry, I think we made a fundamental mistake in over-emphasizing the asset protection side of the equation. In the baby boom generation, it is going to be very hard to make the sale based on asset protection just because many of them don’t feel the same way as the prior generation in terms of passing a large estate to their heirs. They are concerned that they are not a burden to their children.

SMA: That’s a subtle shift. There is still the misconception that LTCI is nursing home insurance. How do you get past that?
PG: I’ll bring that right to the table. When I talk about why do you want long term care insurance, the discussion very often gets to, and very quickly, they don’t plan on going to a nursing home. If there’s any denial, it’s about going to a nursing home. People are petrified of ending their lives in that kind of an environment. So the first things I’ll do in my presentation – I always use a laptop and do a PowerPoint presentation – the first four or five slides present a very clear discussion about what long term care is. We talk about the activities of daily living from the standpoint that when you are born, when you come home, you have no ability to perform any of them except eating. If there is a food source, a baby can, by nature, feed itself. But everything else has to be done. Human assistance is needed with transferring and bathing and dressing and toileting and incontinence. Those are things that if you don’t help the baby to do, the baby will die. So we talk about the daily activities when you are a child and how you nurture your children that way. As you get older, you get into teaching your teenagers about the instrumental activities of daily living, or IADLs, like using a computer and telephone and learning how to do laundry and cook and clean and handle money and all of those things. We go through our working years and some of us are better at those things than others, but we mange to function during our lifetime. As we get older, sometimes we view caring for our parents or caring for our spouse, we call the IADLs care when really we are helping them. We need help again with paying the bills, driving to the doctor, cooking. Many times we’ll hear people say I’m caring for my mom and dad. I have to go over there and cook and freeze the food so it’s easier for them and so on. Then we talk about the fact that 50 percent to 60 percent of us are going to cross that line again and need human assistance again with the activities of daily living. We tend to need them and lose them in reverse order that we learned them. We need help with bathing, dressing, transferring from a bed to a chair. So it’s a kind of clinical approach to the teaching of the ADLs, explaining that is what creates the need for care as well as the cognitive issues.

SMA: What’s next after you discuss the cognitive issues?
PG: The next slide always talks about how we put names on those diseases or conditions, if you will, that are more familiar and less clinical, like strokes and arthritis and diabetes and fractures and falls and Parkinson’s disease and so on. At the end of that slide, that third slide, I will always ask people the following question: “Mr. and Mrs. Prospect, is there a possibility, or even a probability that one of the two of you is going to need this kind of care for more than six months before you pass away?” It’s important to get that agreement. Not that you are going to go to a nursing home, but that you are going to need the care. Inevitably, people will say yes. It’s a possibility and it’s probable that one of us will need it. That’s an important discussion at the beginning of the sales process to get people to really focus on the fact that this is about caring for yourself, not about going to a nursing home. Once we get agreement that’s the issue, the next question is this: “What are your plans now for when your health changes?” I credit that question to Wilma Anderson. I think it’s a very powerful question and I’ll use it a lot. That’s sort of the bullet between the eyes, if you will, that people realize that they don’t have a plan. Most people realize that the government doesn’t have a plan either in Medicaid.

SMA: Do people understand Medicaid or Medicare isn’t the answer?
PG: I don’t see that it’s changed a lot from years ago where you really talked about debunking the Medicare myth. People today know that Medicare isn’t going to pay for it. I don’t spend a lot of time on that. I ask them what they think the government’s plans are. Most of the people are very pragmatic and realistic. They know they can’t rely on the government for this. Personal responsibility is really where it’s at.

SMA: What needs to change for the public to become more LTCI aware?
PG: The interesting thing is that I don’t think it is as much a lack of awareness as it is a lack of priority.

SMA: Can you explain that?
PG: People are more aware of not having enough savings for retirement because these are intimately related. Retirement planning and long term care planning are the two top issues on peoples’ minds, but I think retirement planning has the upper hand. I was reading this morning some data out of this book I just ordered called “But What If I Live?” The outline talks a lot about how unprepared we are as a nation about retirement. People don’t have the same retirement plans at work that they used to have. There’s a denigration of pension plans around the country and people are very concerned about having enough money for retirement. Even those who are retired, even those who are recently retired, are concerned about having enough money to live on, not outliving the money. When you talk about a long term care premium that is going to be a significant part of their budget, you are competing for their emotional hot button, if you will. They are worried about having enough to live on. Can I have a retirement that I really wanted to have? I know I might need long term care, but that’s not really going to happen for another 15 or 20 years, so I’ve got to focus on whether I can keep and save, keep and save. People really want to hold on to what they’ve got and continue to save for their retirement. So it’s not so much a lack of awareness as it is a lack of a priority.

SMA: Is that going to be helped as more and better alliances are made between retirement planners and folks such as yourself?
PG: Absolutely. Once the financial planning community gets it that this is the linchpin to their clients’ retirement, that without this the best retirement plan is incomplete, more planners will come around. Because a long term care event for someone who has done a reasonably good job preparing for retirement can unravel the retirement portfolio faster than anything that could happen to them. Financial planners need to be aware of that and are becoming more and more aware. Financial advisors or people in the securities industry shy away from the product because it is not a transaction-oriented sale. It’s a detailed sale and a long process. It involves talking about a client’s health in great detail, talking about issues that they are not used to talking about. They are used to talking about moving averages and rates of return and safety in liquidity and risk management and so on. But it is a financial risk-management discussion. This is really a health risk-management discussion. It is a challenging shift for financial advisors to make. If they can form an alliance with a good long term care specialist who doesn’t threaten their primary book of business and their primary method of operating and who is viewed as a team member, then the alliance will be very strong.

SMA: What makes you unique and successful in a pretty difficult arena, the LTCI arena?
PG: I’ve had the good fortune of having the opportunity to teach others how to do it while I do it. I spent 10 years in the home office environment. For five years, I was in charge of long term care sales nationally for John Hancock and then for five years in charge of sales for New York Life. During both of those home office parts of my career, with both of those companies, I spent a lot of time training. It was interesting trying to train established agents on this product and the need and how to sell it and how to design it properly and so on. At Hancock we implemented a program called the Fast Start program, which was my brain child. The concept there was to bring new agents into the industry and to teach them only long term care insurance. It was a successful program. It’s still in use at John Hancock. So I had the ability to teach it.

SMA: What happened when you left that environment?
PG: When I came out of the home office, I realized that the environment had changed. For example, the emphasis on debunking Medicare and Medicaid when I came back into the field in 1997 was not as significant as I had thought it was. I found that this is much more of a conversational sale. What has made me successful is teaching the agents to ask probing questions, the important questions. Why do you want long term care insurance? People will tell you. The answer to that question includes very important family issues and things that really matter to them. People buy this because they love someone. They care about someone. I think I’m a good listener. I think I’m a real good teacher of this product and the selling process. If you want to get good at something, learn to teach others how to do it. That’s how they teach doctors. Observe one procedure, do one procedure, teach one procedure. I think you should do that in this industry. You should observe, do and teach. Any time you can help someone else become successful, you become successful as a result.

SMA: What kinds of cross sell opportunities exist because of LTCI?
PG: One thing that should always be done at a long term care sale is you need to have a discussion about income and assets. You need to take an inventory of what assets your clients have. You need to understand the Medicaid implications associated with those assets in terms of what is countable and not countable. You need to be able to explain the vulnerability to your client from a governmental issue. If the client thinks that they can get government assistance, you have to be able to point that out, and that’s why education is so important. You need to have that in your back pocket. You don’t need to emphasize that unless that becomes an objection in the sale. Sometimes you can overemphasize the threat that Medicaid poses. If clients are talking to you about long term care insurance, generally they are not really serious about doing Medicaid planning. As a result of doing the asset fact-finding and the income fact-finding, very often we’ll see an opportunity to talk to clients about how annuities can lower the tax liability, for example, or how immediate income annuities can be a tax advantage for them and reduce their Social Security tax liability. They don’t like paying taxes on Social Security. Seniors really object to that. When you can show them how to do that, it opens the door to that sale.

SMA: What is another regular sales opportunity?
PG: The other sale that is very common in this marketplace is when we talk about IRAs. We still do have a large number of prospects in the long term care market who are fortunate enough to have defined benefit plans. We’re seeing the last generation of large numbers of people who have defined benefit plans and fairly rich Social Security benefits and no expenses. And they are facing mandatory required minimum distributions on their significant IRA accounts. In one of the columns in my fact-finder, next to the asset, I always list the assets and find out how they are owned. For example, if they have a stock portfolio, I always ask them whose names are on the accounts. We talk about how accounts should be titled and why and how you can avoid probate by doing some simple planning in terms of how you own your assets. Then I’ll ask another question that I think is more important: What is your intention to this money? What is it for? So if someone has a mutual fund, for example, that’s got $150,000, I will ask how they saved the money. How did this money come to be in this account? I’ll talk about how they saved it and then I’ll ask what their intention is for the money. I don’t think they get asked that question a lot. I get a lot of blank stares. What do you plan to do with this? If they say it’s for emergencies, we talk about the fact that the only real financial emergency they face is long term care, and that has just been taken care of.

Some say they don’t want to outlive their money. Are you outliving your money now? “No.” Are you saving some of your income? “Sure.” What do you plan to do with it? “I want to leave it to my children.” Very often at that point, I’ll talk about maximizing their legacy. Especially with IRAs. I will show them the advantage of doing a paydown of an IRA earlier than required, not all of it, but carving a piece out and buying second-to-die insurance, for example, to guarantee the legacy. With the guaranteed death benefit riders, I tell them, I guarantee that you are going to leave your children a substantial cash estate and it’s going to be there for sure. We put in these guaranteed premium structures now and don’t have to worry about the policies exploding. We used to have to worry about that. These policies are going to be there for their children, without having to go through probate. That’s a very popular concept. People do want to help the next generation and see the advantage of maybe spending some of that IRA money now to create that legacy rather than have that legacy passed tax free rather than pass that money on a taxable IRA. There’s a lot of those clients out there who really like that concept and that sort of frees them up to spend the other money and enjoy life.

SMA: It sounds productive.
PG: You see annuity sales, you see second-to-die sales, a lot of single-premium life sales. You see sales with the new products that are on the market today, where your cash value is 100 percent of your deposit from the very first day, as an alternative to a CD or a money market account. If you can move that asset that is intended to be passed on to the next generation anyway into a single-premium product, you can walk away from it at any day with 100 percent of your cash value, many clients see the logic in doing something like that. Single-premium life sales, fixed annuity sales, index annuity sales and legacy planning are the key sales that we make from the LTCI sale. Most of my sales are multiple-product sales.

SMA: How has the industry changed over the last 20 years you’ve been in it?
PG: Certainly the products have become more complex. If I knew nothing about long term care insurance and I went out there and tried to find out about it, there’s any number of Web sites and any number of articles they can read. It’s all over the place. But to find someone who is going to sit down and explain long term care to them and do it appropriately, I think it’s the age of a specialist today. It’s come to the point where general practitioners really do need to partner with someone who knows this business inside and out. I don’t think that was the case when products were much easier to understand. Now with the implementation of Partnership products in more than just the four states that have been there, it’s become more and more complex for the producer. It’s become a much greater challenge for the client to feel that they are buying the right product. In New York state, for example, we have had in the past six months a fairly aggressive marketing campaign by the state of New York about the New York State Partnership. It’s generated a lot more client inquiries to us about the Partnership. The Partnership isn’t for everyone. Yet, because the state has been advertising it, the consumer thinks that’s what they ought to have. So there’s a lot more education that has to go into the design of a product because there is so many more options. Cash plans vs. indemnity plans vs. expense reimbursement plans vs. the partnership and traditional. There’s a lot more to know than there was 10 years ago. Also, the clients are younger, so showing them how they can afford [the coverage] by selecting an asset that is going to generate the interest to pay the premium or create an annuity to pay the premium is important. Finding ways to fund the sale has become more and more important in the last several years.

SMA: What advice would you offer someone who wants to enter the LTCI arena today?
PG: You don’t want to have one arrow in your quiver. You should have more than one product in your portfolio to offer your clients. You need to become educated. You should seek the CLTC designation, in particular, as soon as you can because it forces you to study what you need to know to be able to answer the questions that your clients have or that a financial advisor might have. Education, education, education – it’s very important. It’s also important, if you are thinking about getting into this industry, you have to assess whether or not you enjoy working with this marketplace. I consider myself a very low-key salesperson in the sense that I don’t have fancy closes. I’ve taught many of those closes, but one of the things I learned when I got out of the home office is that it’s not about closing the sale as much as it is solving the problem. You have to view yourself first and foremost as a problem-solver. When you do that and you have your client’s best interests at heart all the time, it sells itself. People understand that this is a tremendous risk. It will sell itself.

SMA: Anything else?
PG: The other thing is to get your client involved in the product design. I don’t know how you can operate today without a laptop. Working with a laptop at the point of sale is one of the things that helps me a great deal.

SMA: Why is that so helpful?
PG: When it comes time to design the policy, the way that I explain the policy is to go through the building of the rates with the client. What I’ll do is, I’ll take a company and use their software and I’ll zero it out as best I can – the lowest, least expensive benefit. When you do that with the longest elimination period and the lowest amount of insurance a person can buy and no inflation, 50 percent home care and just strip it right down, you’ll see a premium that’s almost ridiculously low. Clients have a misconception that it is so expensive they can’t afford it. I will show them this and say that here’s a policy that will provide $100,000 of long term care insurance, but it’s $50,000 on the husband, $50,000 on the wife and it’s maybe $500 a year for a couple maybe in their early 60s for both of them. That takes away the premium. I will tell them, “If you wanted to buy this, I probably wouldn’t sell it to you. I won’t sell it to you because it’s got some flaws in it. That’s why it is so cheap.” Then we start talking about the policy one feature at a time and we change the numbers together. I’ll start, for example, with the elimination period. A lot of magazines will tell people to buy elimination periods to save money. That’s exactly the opposite, in my view, of what you should do.

SMA: Why is that?
PG: You should buy the shortest elimination period possible because, according to Society of Actuary studies, this is a front-end-loaded claim for half the claimants. Half the people who need care are going to need it for less than four months. If you have a policy and you are going to have a three-month waiting period, you’ve defeated the purpose of ever getting an opportunity to collect on the policy. We’ll take the elimination period and I’ll show them how that impacts the premium at that level. We’ll talk about that and say that’s why you want a shorter elimination period. Do you agree? And they do. Then we’ll go to the percentage of benefit that is paid for home care. Many policies are designed to have a lower payout for home care than a higher payout. That’s contradictory to what the client wants. They want to stay home. We talk about the fact that home care is where four out of five claims are happening, that if you have insurance, you are less likely to go to a nursing home. Therefore, it makes sense to have as much home care built into your plan as you possibly can to accomplish that goal to stay out of a nursing home. So we’ll bring the home care up to 100 percent of the nursing home benefit and have that discussion. That’s kind of put to rest.

SMA: What next?
PG: Then we’ll talk about the inflation option. How old are they? What’s their life expectancy? What’s their family history? Has there been a history of Alzheimer’s in the family, which tends to be a longer claim, and we have those discussions while we are building the policy together so that the logic of what they are buying is inherent in the discussion because they are part of it. Rather than flapping an illustration in front of them and saying here’s what you should buy, we do it together and they are seeing what it costs and what the premium levels are. When we get to a premium that is about the top range, then we can tweak it a little bit if it is a little bit longer benefit period or maybe a shared care rider or maybe moving the inflation from compound unlimited to compound two-times maximum. There’s so much of an ability today to design the contract within the budget of your client and you can still have it be a meaningful policy that they took part in building that there’s no close involved. They do it themselves. They really feel like they own it and I think that’s critical, at least to my success. I’m not saying this is how much it is and this is what you should buy and then forget it. They’re involved in building the contract. I think that’s really important.

SMA: Where do you see the industry changing in the next three to five years?
PG: I am an eternal optimist. Every year we think this is the year that LTCI sales are going to explode. Here’s where I think we are. We went through, in the early years, a pretty good period of time when there were a lot of people who were looking at this policy who were already retired. The average age of a buyer when I was first in the industry was 72. Now it’s in the mid- to late 50s. All of the low-hanging fruit, if you will, has been taken care of. They made the decision one way or another. Or it’s been made for them by virtue of the fact that they can’t get it. Their health has deteriorated. We’re in the first year of baby boomers turning 60. There’s 78 million of them at the rate of 4 million or 5 million a year that are coming into their retirement planning mode. If you are in the financial services business, you know there is someone tapping you on the shoulder that you must be discussing this with these clients, and they are being told by countless articles in the newspaper and by consumer magazines and so on that they ought to consider it. I’m not sure I always agree with the recommendations of who needs it and who doesn’t need it. I think if you can afford it, it’s a product that pretty much everyone should have. When you think about the fact that you’ve got 78 million people – someone turns 60 every six seconds in the United States – coming into this market, I see a tremendous future in long term care. I think we’re about two years away from having a real uptick in sales because you’ll have about 15 million people by that time who have reached age 60. The first wave will start to turn 62 in 2008, and they’ll be dealing with Social Security and soon thereafter Medicare, and then they’ll realize that part of their retirement plan is going to be to figure out how to allocate dollars for the important financial issues that they are going to face. There is none more important than to pay for long term care if it happens. So I think we’re in for a very, very bright future.


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