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Life Health > Life Insurance

One solution to the RMD dilemma: Life insurance

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A recent survey of over 3,000 agents and advisors from across the country were asked, “What is it that keeps you up at night?” The majority (57 percent) responded with “prospecting to those that have a need and the money to solve that need.”

Unfortunately, the industry has allowed the life insurance sale to become a commodity (transaction) sale. In the many cases, prospects research products on the Internet, then informs the agent how much, and the type, of coverage they want to purchase.

But life insurance is not a commodity and successful agents do a good job demonstrating the problem that life insurance can solve.

Making the transition

How can you be as successful as they are?

Start by changing your marketing and prospecting to focus on a specific market where you can gain access to those with a need and the money to solve the need.  Examples: individuals with estate and business planning needs.

There are, however, barriers to entry that keep most agents from being successful in these markets. Among them:

  • Access to the high net worth prospect for estate planning;
  • Access to the business owner for the various types of business planning;
  • A CPA, attorney or other advisor is already established with the prospect.

How can you eliminate these and other challenges and set the stage for success? One way is through “differentiation” distinguishing yourself from other life insurance and financial service professionals. By that I mean you’re not going to chase the same prospects in the same way others are chasing them.

Consider a market opportunity that is large and growing: The 10,000 baby boomers who daily are turning age 65. These boomers are being chased by advisors pitching, estate planning, annuities, long term care, etc. Yet, the majority in this demographic is totally ignorant of IRS rules governing qualified plans, including required minimum distributions (RMD) rules. While a good percentage of the boomers will need income from their qualified plan, the more affluent boomers will not. Since the more affluent have been successful creating other sources of income, typically their plan is (or was) to leave the qualified plan to the kids, grand kids, church or charity.

You will be amazed by the number of affluent boomers who are not aware of government RMD rules. When you educate these boomers about the rules and the various solutions available to them, you position yourself to solve a problem that other advisors are not informing them about.

There is a tremendous urgency to solve the problem now. And there is money available to solve the problem!

Take an educational approach by informing prospects that their qualified plan could lose significant value. Prospects who don’t need or want the income and might prefer to pass this asset to others may be forced into liquidating the asset to accommodate IRS rules.

They can avoid doing so, however, if they have life insurance to cover potential tax liabilities. If you work with annuities or managed money vehicles, you can move qualified plan money to one of those products prior to the insurance purchase or simultaneous to the insurance purchase.

No need to do seminars

While IRS RMD rules have been around for sometime, most advisors have not been aware of the opportunities. Traditionally, advisors that specialized in RMD planning used seminars to reach prospects. While seminars can be effective, they are expensive – and totally unnecessary.

Resources are available to life insurance sales professionals to assist with prospecting to boomers in need of RMD planning. And you should have at least a few clients or prospects who can use life insurance to cover RMD-related tax liabilities.

The prospecting is simple when you design and ask the right questions of your prospects. In addition, I encourage you to invest a little time to understand how RMDs work and how to best use life insurance to replace lost wealth.

Take the first steps down this path and you will not have sleepless nights about prospecting or where the next case is coming from. In fact, you will have created a very lucrative business for yourself.


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