Ask better questions of your prospects. Always study, learn and grow. Know where you want to go. These were among “10 secrets to success” that James J. Van Ham, an advisor and principal of Strategic Financial Group Inc., delivered during a Tuesday afternoon focus session at the 2016 annual meeting of the Million Dollar Round Table, being held in Vancouver, June 12-15. The following is an abridged version of his presentation.
My friend Howard Wight once said, “Success is about making a difference, not about making money.” If you’re here, you are already making money, but are you truly making a difference? I’m going to give you 10 Secrets to Success. You may use some of them or all of them, but if you use any of them, I’ll see you next year!
See also: 3 traits of successful entrepreneurs
Secret #1: Do constant professional development for life
You need to get better every year; staying the same means that you are not growing or learning. You need to study, you need to stay informed about what is happening in your business, and you need to attend as many meetings as possible.
If you needed heart surgery, would you want a doctor who graduated from medical school and never went to another class? Or do you want a doctor who is involved and constantly learning what the best new ideas are? Most importantly, you need to join and be active in your professional association.
I prefer NAIFA [National Association of Insurance and Financial Advisors] and perhaps you’ll see why. How do you find out where the great teachers are teaching if you never hear from anyone outside of your circle of friends?
Why join NAIFA? There are two reasons:
MDRT requires a membership in a professional association, right? Why not NAIFA?
LIMRA asks: When does $600 equal $20,000? After tracking these numbers for years, LIMRA found that NAIFA member/producers increased their annual income by $20,000 compared with non-NAIFA member/producers.
In addition, LIMRA and NML did an additional study about performance. What they found was that NAIFA member/producers were paid over 60 percent more for first-year life premiums and over 44 percent more for life applications than non-NAIFA member/producers.
Secret #2: Decide where you want to go
Dr. Stephen Covey says, “Begin with the end in mind.” What do you want your business to look like 5 years from now?
If you haven’t read it yet, please read Dr. Covey’s great book, The 7 Habits of Highly Effective People. If you want to change your business model, if you want to do more financial services, this book is the best place to start.
Secret #3: Be a multi-product producer
McDonald’s increased revenue by $25 billion by asking this one question: “Do you want fries with that?”
Train your staff to ask one simple question of every caller: “When is the last time Mr. Jones reviewed your life insurance policies?”
Secret #4: Find fewer prospects to find better clients
Know whom you want to do business with and assign the rest. Do you rate your clients A through D?
New people especially pay the price for success. I have never seen a successful part-time agent.
Why do you try to cross-sell your existing households?
Learn how to ask for referrals. In order to get referrals, you must first be referable. To be referable you must be on time. Do what you say you will do, and always say please and thank you.
Secret #5: Ask important questions of your prospects
“What is your annual income?”
“What is your net worth?”
“How did you choose the level of coverage you now carry?”
“What would you like to get out of our meeting today?”
“If we were meeting a year from now, what things would have to have happened in your life in order for you to be satisfied with your progress?”
Secret #6: Ask better questions of your prospects
1. “If something were to happen to you, what percentage of your income would you want guaranteed for your family members for the rest of their lives?”
2. “If you were permanently injured, or killed, in a car accident by a drunk driver, how much would you want your attorney to ask for in damages?”
3. “What does it cost to run your household for a day/month/year and, most importantly, how long do you want to provide for your family?”
Secret #7: Increase your effectiveness
A previous MDRT presenter I had heard in Anaheim talked about “unconscious marketing.” Did you know that every major department store window is set by a psychological marketing team that studies human responses to certain products and how those products should be arranged in the windows?
He taught me to always make sure that your client sits on your left. A study was done recently with 200 people sitting in a theater. They had the theater divided, with 100 people on the left and 100 people on the right. The people looking to their right positively agreed with the presenter 68 percent more often than the ones on the left did.
We are not researchers or psychologists, but there are professional coaches and consultants who will work with you and help hone your own skills. What areas in your practice can you improve by getting professional help? Note: Coaching works!
Secret #8: Gain future opportunities and educate your clients about better ways to achieve their goals
What do your clients’ retirement distribution plans look like? Fifty percent equities and 50 percent fixed income? What if we can show them a better way?
Let’s begin with an even $1 million and do the math. Fifty percent of $1 million in equities equals $500,000, and 50 percent in fixed income equals $500,000. Let’s offset these figures for inflation, using a 3 percent inflation figure:
Equities: 11 percent gross return – 3 percent inflation = 8 percent net return x $500,000 =
Fixed income: 5 percent gross return – 3 percent inflation = 2 percent net return x $500,000 = $10,000/year.
So, $40,000 + $10,000 = $50,000 annual income per year, right? That is a 5 percent withdrawal rate.
Why do people choose the 50/50 option? You know the answer. It’s because their advisor told them it was a safe rate of return — a low risk.
Morningstar recently released data showing a revised recommended, safe rate of return of 2.85 percent in the current low-interest rate environment. But what does the old 50/50 formula mean to your clients?
1. Money passes to their heirs, usually with the worst possible income and estate tax consequences.
2. Our government forces withdrawals out of qualified plans at age 70½ (RMDs). Why? To increase current taxation on what would otherwise be tax-deferred income.
3. Reduction in clients’ annual income and living standard is common in order to conserve principle in down markets; otherwise, they risk running out of money (the law of sequence of returns).
The short definition of ALPHA is this:
1. Less risk in the portfolio
2. Higher return on investment
How can we show our clients how to achieve this?
Secret #9: Show your clients how to maximize their options
By annuitizing the fixed income portion of your client’s investment fund, you can guarantee that portion of their income for life. In most cases you should consider a combination of annuity products, such as an SPIA, a DIA, or an SPDA with settlement options, or a variable annuity with a lifetime income rider.
By using annuities, you can take a client’s $500,000 fixed income account and provide a monthly income of around $3,000 per month. This is why it is so critical to educate yourself about all your products and options.
How would your clients like a 52 percent increase in their retirement income? Let’s do the math.
The same 50 percent in equities $500,000 x 8 percent net = $40,000 per year.
The new annuity income $3,000 per month x 12 months = $36,000 per year.
$40,000 + $36,000 = $76,000 per year
That is $76,000/$50,000 = 52 percent higher income for life!
What does our new formula mean to your clients?
1. The guaranteed income for life increases their spendable income for life.
2. The guaranteed income for life allows for more lifestyle choices throughout retirement.
3. The guaranteed income for life enables your clients to be more aggressive with their equity investments.
4. The death benefits pass to their heirs in a much more tax-favored way and, most importantly, create cash when it is needed the most.
How do we replace the principal that may be lost in an SPIA or a DIA purchase? Permanent life insurance! If they don’t have enough when you meet with them, you will create not only the need for more life insurance but also the additional income to pay for those new premiums. Add a long-term care rider on the life policy and you solve two of their biggest retirement risks at one time.
1. According to the Wall Street Journal, 62 percent of all investors choose a different advisor at retirement. Why not choose you?
2. According to the U.S. Department of Health and Human Services, there will be 10,000 people turning age 65 every day from now until 2030. To steal a quote from my friend Van Mueller: Has there ever been a better time to be in this business?
3. According to LIMRA, 40 million people today say that they need life insurance and want to buy a policy from a live person, not online. Don’t people need your help?
4. According to the most recent data, approximately 90 percent of investors today haven’t decided what to do with their 401(k) plan just two weeks before they retire. People need your advice, regardless of what the Department of Labor says.
Secret #10: A life of significance is measured by the size of the problems you solve
Let me close with a story that highlights my philosophy. A good friend taught me a phrase to use when clients ask, “Can you beat this?” Your answer from now on should be “We can do better than that!”
There was a mother and child who lived in Arizona. One day the mom was told that her 7-year-old son had leukemia and had only months to live. Naturally, she was stunned, as we all would be. She decided that her son should have an opportunity to experience the fullness of life in those last few months. And so she asked him, “What would you like to be when you grow up?”
He immediately replied, “Mommy, I want to be a fireman!” So like any good mom, on the following Monday she called the local fire chief. She explained her son’s condition and asked if she would be able to bring him by the station to see a fire truck and perhaps visit the fire station.
The chief said, “We can do better than that. Could you come by around 10:00 a.m. on Thursday?”
“Of course,” she said. Elated, she set the appointment for that Thursday.
Imagine their surprise when they pulled up to the station and the fire trucks were out front with the ladders fully raised and crossed. Every fireman was in full dress, lined up facing each other leading up to the fire chief. In front of the fire chief was a small pair of fireman’s boots, a small uniform, and a little fireman’s helmet that fit just right.
That day little Frank went on every fire call. He got to ride in the fire truck and the chief’s car. He even helped clean the truck when they returned and he took a nap in the firehouse, in his own bunk. For that day he was a real fireman!
Several months later, Frank’s mom called to tell the chief that Frank had taken a turn for the worse and that he was in the hospital with only days to live. She asked the chief if he could stop by and say goodbye.
The chief said, “We can do better than that.” So that very afternoon, Frank heard the sirens, as the entire fire department drove their truck up to the front of the hospital and raised the ladder, and the chief, followed by every member of the fire department, came up the ladder and in through Frank’s window!
When we look back on our careers, are we just doing what we have to do to get by? Or can we look back and say, “We can and we did do better than that”?