You’re wrapping up an annual meeting with a long-term insurance client. She’s purchased her life and disability income policies through you and has come to trust your judgment. “I’m thinking of retiring later this year,” she tells you. “My 401(k) plan will have about $400,000. If I want to roll over my balance to an IRA, can you manage the account for me?”
Let’s face it: Many advisors would have a set of completed account transfer forms on the desk before she finished her sentence. That makes perfect business sense and it’s a key argument in favor of dual insurance-securities registration. Clients have financial goals in both areas and if you’re competent in multiple fields, why not work with them on both their risk- and portfolio-management needs? It’s an ideal solution for all parties.
Or is it? Some advisors who focus exclusively on insurance solutions believe that a narrower focus — life and health insurance-only, in their cases — is still a viable business model. Given the degree of success they’ve had within their specialties, it’s worthwhile to examine their reasons for not providing securities advice and products.
Rick Scott, partner with Freedom Dream Team in Canoga Park, Calif., does not believe in taking risks with savings. By his own admission, he is a “safe-money” person who owns “zero stocks, zero bonds, zero mutual funds.” He brings that risk-averse attitude to his work with clients.
“I’ve been in the industry for 13 or 14 years now,” Scott explains. “I specialize strictly in safe money, which is primarily fixed index annuities. Within the market that I focus on, which is pretty much (age) 50 and up, the people that come to me have already lost money and their concern is basically trying to keep it safe. This is what I focus on.”
Randy Fine, LUTCF, president of Robert Fine & Associates in Framingham, Mass., also takes a risk-averse approach to his client relationships. Fine has worked in the insurance business since 1990 and has consistently ranked as a top producer with Guardian Life. One of Fine’s goals is to avoid “uncomfortable conversations” about investment losses with clients.
He estimates that 70 percent of his business comes from life insurance sales, 15 percent from disability income and 15 percent from variable annuities with contractual lifetime income benefits. That product mix allows him to focus on guarantees instead of investment market results.
“(With) the type of business style that I run, my friends become clients; my clients become friends,” Fine says. “And I never want to have an uncomfortable conversation to let them know that their million-dollar account is down 30 percent. That’s not what I want to have told to me as a consumer and that’s definitely not the conversation I want to have as an advisor.”
Securities licensing and investment management also bring the burden of additional compliance to an advisor’s business. Susan Combs, PPACA, president of Combs & Company in New York City, considered getting into financial planning at one point in her career. Complaints from peers who were securities-licensed dissuaded her, though, and reaffirmed her decision to focus instead on insurance products and advisement.
Compliance requirements would also crimp her ability to generate publicity for her firm, she believes. “I’m interviewed for a lot of articles and I’m actually an expert for eHow.com, so I do a lot of videos,” she explains. “And if I were securities-licensed, I would be able to do none of that because everything would have to be approved by compliance.. It would just tie my hands on a lot of how I get my business and how I network and, to me, it’s just not worth it.”
Scott believes that his exclusive focus on annuities allows him to specialize and develop in-depth product and marketing expertise. His goal is to focus on one thing and do it very well, he says, using the analogy of a brain surgeon versus a general medical practitioner. “I don’t prefer to be a jack-of-all-trades and a master-of-none,” he says.
“I like to focus on one thing and do it better than or as well as the best people in the industry. I don’t like to lose focus and I don’t want to put myself in a position where I could lose focus by implementing additional areas in my business.” This specialization has paid off: Scott reports that he serves over 2,000 clients and produces about $15 million in product premiums annually.
Dean Harder with The Harder Group in Zionsville, Ind., says that about 70 percent of his business comes from life insurance, 25 percent from annuities and 5 percent from disability income insurance. Specializing in these products works well for him, he believes, and he points out that almost every other profession specializes.