Making difficult decisions today is necessary to bulletproof your practice from inevitable changes in the industry that can negatively impact your business. I am talking about the highest level of strategy that we need to engage in to protect our livelihood.
Let’s look at an example that involves the timely topic of compliance and regulation. So many of my colleagues solely have an insurance license and are selling fixed indexed annuities as the only financial weapon in their arsenal. Now before I proceed, I must reiterate the fact that I absolutely and unequivocally love fixed indexed annuities. I have used them very successfully in my practice alongside other financial and investment vehicles.
My point here is aimed at the regulators who are starting to swarm the fixed indexed annuity industry, eyeing some of the patterns in one’s practice that can raise some red flags. For example, imagine the FIA producer who sells the same product from the same insurance company to 95 percent of his clients. This is common practice in our industry as producers gain comfort with certain products and companies. If I was a regulator, this would be a major cause of concern for me.
Just imagine the conversation: How could every one of your clients, Mr. Producer, miraculously have financial goals and needs that can be addressed by placing their money in the same exact annuity product? When you market for new clients, how are you able to target only those prospects whose financial needs will be addressed by purchasing this same product? In fact, Mr. Producer, each year you must be forced to turn down hundreds of prospects who are seeking to purchase an annuity because they want to buy a product that has a shorter surrender period, a different crediting method or is underwritten by a different insurance company than the treasure of an annuity that you strictly sell.
Now, I am being cynical, of course, as the regulators know very well that marketing has not progressed well enough to allow us to do such specific target marketing. The regulators also know that Mr. Producer would almost never reject a prospect. What I am really asking Mr. Producer to do is to take a step back and look at the decisions he is making in his practice. He should ask himself how sustainable is his practice, based on current operating procedures? Mr. Producer should put himself in the shoes of the regulator. What would you think if you saw the breadth of product selection narrowed down to essentially one?
I suggest that Mr. Producer and thousands like him re-examine the product selection in their practice. If you get audited, the fact that you’ve used the same annuity product 95 percent of the time is not a good thing. This will force you to make tough decisions today that will help shield your practice tomorrow from potentially catastrophic issues. This has nothing to do with the decision to sell fixed indexed annuities; instead it’s all about how and why you are doing it in a manner that doesn’t scream to the compliance folks.
I recommend that every producer should have a diversified means of marketing for prospects, so that if one method fails or bottoms, your practice will not implode. I also recommend that every producer have a diversified selection of products, which shows you are being thoughtful about matching clients with suitable products. If we are all more proactive today and make smart decisions, we as an industry stand to collectively benefit.
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