The Million Dollar Round Table, an annual meeting of top-producing life insurance and financial services professionals, regularly draws thousands of attendees from across the globe. But leaders of the now 90-year-old organization weren’t quite expecting this year’s outsize turnout.
The convention and hotel spaces set aside for the event being held in Vancouver, Canada, June 11-15, will be positively bursting at the seams. And, it seems, for good reason: MDRT is customizing professional development content as never before to cater to the particular interests and issues of members’ countries — and in their own tongues.
“The five tracks we’re introducing this year expand the footprint of our sessions and the ability to hear from the industry’s best and brightest in their own languages, about their own tax laws, and about the unique situations in their own regions,” says MDRT President Brian Heckert. “This is a big change for us.”
A sellout crowd of 11,500 agents and advisors will be attending the 2016 annual meeting. That attendence number exceeds last year’s record turnout of 10,000-plus. Among this year’s attendees will be about 5,500 first-timers, or about 45 percent of the event participants. The U.S. contingent, about 40 percent of attendees, remains the largest by country.
But MDRT’s Heckert observes that a growing proportion of the annual’s meeting’s rank-and-file increasingly hail from the association’s fastest-growing region, Asia. Among the continent’s long-established contingents: members from Japan, South Korean Hong Kong and Singapore.
These country delegations are being increasingly displaced by producers in emerging markets, most notably India and (not least) Mainland China. Closer to home, Mexico is also fueling the surge in new members.
“We’re seeing a huge group of members from the People’s Republic of China, where the life insurance and financial services industry is exploding in size,” says MDRT First Vice President Mark Hanna. “The top two life insurance companies in China now employ 3 million agents between them.”
The burgeoning number of MDRT members in the Asia-Pacific region more than compensates for the near-flat growth of association’s U.S. member base, which has dipped slightly in recent years, though Hanna notes that performance of U.S. members, as measured by annualized commissions and premiums, are “up dramatically” this year. The upshot: More members now occupy the top membership tiers, Court of the Table and Top of the Table.
The increasing international character of the association has prompted MDRT’s leadership team to offer more tailored content for workshops featuring best practices, tools and techniques specific to individual countries. The custom content will also be translated into six of the most widely used languages: Mandarin and Cantonese, Japanese, Korean, Hindi and Spanish.
“The track translations cover the major languages represented at the annual meeting,” says, Hanna (pictured at right), who is due to assume the presidency in September. “We’re creating a global experience where each member will feel like the program was put together just for them. The change is acknowledgement that we’re a global association offering programming around a globalized membership model.”
Indeed. When you add in translations for main platform presentations — long a hallmark of the annual meeting — the languages represented total 16. There’s more interpreting taking place than at the United Nations.
And it’s not just happening at the U.S annual meeting. MDRT has augmented its signature American event with “MDRT Experience Meetings” in Asia. More than 8,000 members attended a sold-out gathering in Hong Kong last February. The next meeting will be held in Kuala Lumpur in 2018.
Contributing to the surge of the Asian contingent, says Hanna, is a growing demand among the region’s expanding middle class for key protection products. Among these are core offerings like term and cash value life insurance, immediate and deferred annuities, plus specialty insurance products like disability income, critical illness, accident and long-term insurance.
“There is now so much demand for the products and services and skills of agents and advisors in the Asia-Pacific region,” says Hanna. “The growth there is unlike anything we’ve seen anywhere else in the world.”
Also contributing to growth of MDRT’s emerging markets is a less restrictive regulatory environment. Many of the developing markets (Mainland China’s among them) have only taken off in the last 20 years. The high product suitability and fiduciary standards that are so much on the minds of agents and advisors in developed countries are less prevalent in nascent markets, where insurance-only producers mostly work on commission and, often, on a part-time basis.
Given their narrow product focus, many also are looking for basic tools and techniques to help close more sales, reach prospects through innovative marketing strategies and manage their time more efficiently. In short: all nuts-and-bolts professional development areas that MDRT has long focused on at its annual meetings.
But Heckert points out that MDRT’s content increasingly mirrors the growing professionalization of its members. That’s prompted a shift in programming needed to support practices operating on a consulting and services model.
“MDRT has developed ways to help practices run better and more efficiently so that advisors can focus on what they do best: give advice — not just sell product,” says Heckert. “That’s one of the biggest transitions we’ve seen in the industry. The content reflects a worldwide movement among our members.”
That movement is happening particularly swiftly among producers in developed markets, for whom MDRT is also beefing up content to help them in their transition from a commissions-only to fee-based advisory model. For many, the change is being driven by the ability to generate additional revenue serving more affluent clients with advanced planning needs, including retirement, business and wealth transfer strategies. A fee for services compensation structure also permits a recurring revenue stream, freeing producers from relying solely on new sales to generate income.
Yet another factor fueling the shift to fees is a tightening of regulatory requirements that have forced on producers a fiduciary standard of care when advising on insurance and/or investment products. The transition has taken place in Australia, New Zealand and, most recently, the U.K.
On January 1 2013, the U.K’s Financial Conduct Authority (FCA), implemented one of the largest shake-ups in financial services in the last 30 years: the Retail Distribution Review (RDR). The RDR increased professional qualifications for advisors and mandated greater information-exchange and transparency in advisor-client engagements.
The most consequential change of the RDR rules impacted compensation. Agents and advisors could no longer receive commissions on new policy sales, only advisory fees. Advisors who were earning trailing commissions on bundled, pre-RDR investment products were also impacted by the new rules. Beginning April 6, 2016, a sunset clause kicked in requiring advisors to implement new fee-based arrangements on these products — or give away their services for free.
“We’re seeing a dramatic regulatory shift away from traditional commission- and product-suitability based regime in some countries and toward a fiduciary standard, like we have now in the U.S.” says Hanna. Probably almost every member country is evolving regulations and rules around financial services to protect the public and impose social policy. Advisors need to constantly adapt to these changes.”
To accommodate the growing number of advisors working on a fee-basis (fee-only or fee plus commission), MDRT earlier instituted an income qualification method to gain admission to the association. Supplementing two traditional measures —annualized commissions and premium production levels — the income method offers a third way for both current and former members to qualify for membership. For 2017, the income benchmark is pegged at the equivalent of USD $47,000 in new business and $47,000 in risk protection business. Annual gross income from the sale of insurance and financial products must be at least USD $162,000.
“The addition of the income qualifier was driven mainly by a recognition of the changing environment for the 6 or 7 countries in which commissions are no longer allowed,” says Heckert (pictured). “Gathering information about fee income offers a way to recognize the work they do.”
Qualifications aside, a growing concern for members in western countries (as well as Japan and South Korea) is “regulation creep,” or the ratcheting up of compliance requirements governing product sales and advice-giving. In the U.S., the issue is particularly pronounced in the wake of the Department of Labor’s new conflict-of-interest rule for producers advising on retirement accounts subject to the Employee Retirement Income Security Act of 1974 (ERISA).
Dealing with the DOL rule
For those faced with the potentially daunting task of navigating the DOL rule, MDRT will be offering a primer. Caleb Callahan, a principal of Valmark Financial Group who testified before both the DOL and U.S. Congress during the final rule-making process, will explore details of the final rule, strategies for complying and best practices for running a practice in the rule’s aftermath during an afternoon focus session.
Tools, tips and techniques for operating a compliance-friendly practice will be also be featured in the Connextion Zone, where attendees can hear short presentations in small theaters, sit in on panel discussions and Q&A sessions in the “Big Idea Theater,” check out new technologies in the Technology Zone and chat with vendor representatives in a the Exhibitor Zone.
For many MDRT members, keeping the regulators at bay will be less of a priority than pursuing opportunities in one of the most promising market segments: helping the huge population of baby boomers (both in the U.S. and internationally) achieve a comfortable retirement. To that end producers will need to be well versed in both insurance and non-insurance-based solutions that support what Hanna terms the “three legs of the stool” — mortality, morbidity and longevity.
Thus, financial protection products are needed to protect against physical injury and illness (health, disability income, and long-term care insurance), dying too soon (life insurance) and outlasting one-retirement assets (annuities). Rounding at the model retirement portfolio will be others assets — mutual funds, individual retirement accounts and fixed income vehicles — that can help fulfill near- and long-term funding needs in retirement.
The growing focus among advisors on retirement income planning is so significant that the topic will occupy (in conjunction with wealth planning strategies) an entire content track at the annual meeting. Examples: “7 Steps to Retirement Security” (Tom Hegna presenting); “4th Generation Retirement Planning (Guy Baker); and “Social Security Benefits – No Longer Just a Retiree’s Lunch Money” (Cheryl Robertson).
The one wildcard in retirement planning is healthcare, which are rising worldwide, but nowhere more so than in the U.S., where spiraling costs for doctors, hospital treatment and medicines (most notoriously cancer-fighting drugs) are fast outstripping inflation. A May report of HealthView Services estimates healthcare costs for a 65-year-old healthy couple retiring today at $288,000 — a potentially significant chunk of a nest egg. The survey also projects inflation at 7.3 percent (well above a current annual inflation rate of about 1 percent); and anticipates that a 66-year-old couple will require 57 percent of Social Security benefits to cover healthcare costs throughout retirement.
“Hyperinflation in healthcare costs, combined with sequence of returns and long-term care costs, are risks that have to be factored into a retirement plan, as they can decimate a budget,” says Hanna. “The evolution of insurance-based risk management tools to address these risks has been amazing. The opportunity has never been better for agents and advisors to help retiring boomers deal with these risks.”
Often overlooked among these risk management tools, he adds, is critical illness insurance, a comparatively new product that can offer protection against potentially crippling expensing resulting from (most commonly) heart attack, stroke, cancer and by-pass operations. Advisors unfamiliar with CII — a product that pays to policyholders a lump sum they can use as they see fit — will be among the afternoon sessions tailored to Korean and Chinese attendees.
Exit, stage left
The ultimate challenge for veteran advisors will be planning not for older clients, but for their own departure from the business. The issue is especially acute in North America, where the profession is not generating enough new producers to replace those lost to retirement and industry churn. Key to facilitating a smooth exit is the cultivating of young advisors who, through careful mentoring, learn the fundamentals of a running a successful practice and servicing segments of a older’s advisor’s clientele. Later, they can assume control of a practice — and provide an ongoing retirement income to the departing advisor.
Heckert says MDRT has significantly expanded the association’s mentoring program in recent years, both to aid veteran advisors with their own succession planning and to help aspiring members to achieve MDRT-qualifying production levels.
“MDRT recognizes there is a big need for mentoring,” says Heckert. “What we now offer through our program is the pre-screening of people who have a similar backgrounds and commitment to excellence.
“That’s enabled agents and advisors to make more informed decision about partnering with someone,” he adds. “We’ve been very successful with this initiative.”
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