Jim Ruta's Blog

When you say "Salesman" do you mean...

...Those slippery, self-aggrandizing, arrogant shysters who steal from crying babies and gentle, trusting seniors ... or those people for whom standards mean nothing and rules are made to be broken...the get-rich-quick artists who con people our of their hard earned incomes and cheat them out of their futures...who take money otherwise destined to educate a new generation...who live it up while their hapless, hopeless and helpless victims suffer in agony for years while they sit, sipping from a coconut in Hawaii....those miserable cads who turn everything to their advantage and would steal from their mothers...who have nothing to offer other than an expensive suit, shiny shoes, a leased luxury vehicle, a Mona Lisa smile and a Hitler personality... those scourges of the earth who would sell anything to anyone just to make a buck -- what's right be damned... ?

 

If that's what you mean by a "salesman", then I'm against them. Definitely.

On the other hand, if instead by "Salesman" you mean ... Those salt of the earth individuals whose diligent, honorable and selfless efforts have made industry progress and prosperity a reality since time immemorial by advantaging generations of families and businesses...The polite and concerned men and women who have come into our homes and offices for years to help us meet the needs we'd never understand except for their help...or the friendly and experienced stalwarts who have worked tirelessly to develop industry standards and associations that have helped not only the members but also the general public... Or those honest, concerned people who worked day and night to protect widows and orphans, the sick and the suffering and the aged from inevitable lifestyle disaster by helping people understand the value of a product that no one "wants" to buy but everybody "needs"...who have endured countless hours of rejection so that they could help others who did not understand the startling value of the products they sold...who drove for an hour for a few dollars so that some hard working soul could help build their retirement lifestyle and have the peace of mind that comes from quality of life...or the kind and thoughtful leaders who have devoted their time, money and resources to building and supporting their communities because they had the flexibility and opportunity to do it... Or the personable, intelligent, friendly and giving helpers who hand people money when they need it most and they can't help themselves so they can continue on in dignity and optimism...

 

If this is what you mean by "salesman", then count me among them. Absolutely!

Despite all the protestations to the contrary, the "life insurance business" anyway is still a marketing and sales business. To what end do we profess our "Professionalism" when we some can hardly put sandwiches in their lunch pails? The products we have sold since about 1742 have tremendous intrinsic value and I believe that the greatest service we can provide is when we sell well. Selling is an honorable and noble profession and the advent of advice has not made it obsolete.

It seems to me that the more "professional" we get the less productive we’ve become and the less real "service" we provide. Why do I hear about advisors "contemporizing portfolios"...replacing business and not replacing human life value? Why do we seem incapable of selling (or advising) any product without some gimmick?

Is this an "Advisor" or a "Salesman" thing? It's neither. It's a PEOPLE thing. Bad apples make for bad pie, whomever does the baking. If we could only stick to the "Codes of Conduct" that adorn so many of our offices.

 

I'm Jim Ruta and that's just the way it is.

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The Real Story about MGAs

The Real Story about MGAs

 

Once again, hysteria reigns supreme. Government reports and media mayhem are combining to help take advisor eyes off the ball.  That just means consumers are going to get less effective service leading to even more trouble. What we need is some perspective.  We need some clarity.  Here’s a dose of reality …

 

Despite the screeching headlines written by editors who aren’t familiar with the reality of the industry, (“Insurance regulator aims to close loophole”, Globe and Mail February 14, 2011 – Happy St. Valentine’s day!) the life insurance business and MGAs are not a secret cult out to hurt the public.  That’s just drama.  (Made you look!)

 

First of all, the Canadian Council of Insurance Regulators (CCIR) report issued recently is an “issues paper”, not a conclusions paper.  It isn’t aiming to do anything until the CCIR’s Agencies Regulation Committee figures out what needs to be done.  It’s a starting place, it isn’t a finishing place.

 

As it states clearly on page 4, “Its purpose is to stimulate debate about the issues noted in the paper and launch a process of consultation on those issues as well as to educate and to build a common understanding of the topic and issues for both regulators and stakeholders.” OK, it isn’t the shortest and clearest sentence, but believe me, it’s just a start. Every process has to start somewhere.

 

The CCIR isn’t even sure if the information in the document is accurate and says so.  They also don’t know if these are even significant issues and whether anything even needs to be done. They are just asking.

 

So, relax – but not so much that you don’t reply to the report as they request.  Let’s not make this another “Do Not Call List” fiasco where almost no one reacted to the legislation until it was law.

 

Now is the time to do something. Congratulations to Lawrence Geller at www.ForAdvisorsOnly.com for posting the link to the report for Canadian advisors to review. Here it is again in case you missed it:

 

http://www.ccir-ccrra.org/en/init/Agencies_Reg/CCIR_ARC_Life_MGA_Issues_Paper_Feb_2011.pdf

 

Although the paper is some 64 pages long, the actual report is less than 24 pages of it.  It’s a relatively easy read.

 

The balance is made up of CAILBA, CLHIA, Advocis and IFB reports that were made to the committee. Now those reports are interesting reading as they give you some insight into what the official industry thinks about the issue. They are reasonably accurate but you’ll notice how each group has their own spin on reality.

 

In fact, the CCIR report is pretty much a summary of the salient topics from the reports. This is not groundbreaking stuff.  It’s interesting, but basic. It’s the respective perspectives that I found intriguing.  Each association is protecting their interests and reporting “motherhood and apple pie”.

 

But, I do have some questions about the reports as you might imagine. For instance:

 

1. How come I was told recently (by people who should know) that there were nearly 400 small MGAs in Quebec alone, the reports say that there are just 300 to 400 in Canada?

 

2. Where is the MGA-supported “sales” training the CAILBA report refers to?

 

3. Why isn’t there more about the pivotal commission and compliance firewall role that MGAs play in the business – commission chargeback and compliance functions have been downloaded to MGAs to insulate insurers?

 

4. Why does CLHIA refer to PPGAs as “Personal Producing Groups of Agents”? Whatever happened to the original definition of “Personal Producing General Agencies? Would these two even be the same thing?

 

5. How many times have today’s Canadian agents been asked by MGAs or insurers to substantiate their “holding out to the public as a life and/or A&S agent” as a report suggests?

 

6. Why is the CLHIA view of an MGA’s responsibilities so much more comprehensive than the CAILBA view?

 

7. How come the CAILBA report never mentions “service fees” as MGA compensation? Have you ever heard about “permanent commissions”?

 

8. How come no one ever explains why an insurance agent’s business is much more valuable to an MGA than it is to an agent? For instance, an agent with a $1 million block of life insurance premium, will derive limited value for it on a sale because renewal commissions routinely disappear before 5 years – so, most of that block is un-commissioned. An agent might get 2 times the current renewal commissions for his insurance business but the numbers are small.  O the other hand, an MGA receives between 2.5 and 5% “permanent fees” on that same block.  Then, on a sale, it is worth at least five times the annual fees (I have seen as much as 8 times) -- in this case, between $125,000 and $250,000.  

 

9. Is it really true that “most MGAs never deal with retail customers”? If so, how come so many agents carry MGA branded business cards?

 

10. How come the part that Continuing Education credits play in MGA and insurer support never comes up?

 

11. Why does the CLHIA report sound suspiciously like they wish the system were and not so much like it actually is?

 

12. Why does the Advocis report say that “Our almost eleven thousand members across Canada provide comprehensive financial planning and investment advice, retirement and estate planning, risk management, employee benefit plans and disability coverage, to millions of Canadian households and businesses” but they don’t apparently sell life, critical illness and long term care insurance?

 

13. With all the heat on advisor responsibility, how come the Industry Practices Review Committee three principles for managing conflicts of interest of 2006 isn’t sufficient -- 1. Priority of client’s interest,  2. Disclosure of conflicts or potential conflicts of interest and 3. Product suitability?

 

14. How come no one talked about the interesting reasons some agents have “up to 5” MGAs?

 

You’ll have your own questions and your own opinions. And, it’s important to the final outcome. You need to do something. Or, you need to sit back and let the regulators, companies and MGAs map out your future for you. (I’m with the government.  I’m here to help you.”)

 

What can you do?

 

1. Read the report and get a grip on the issue regulators are talking about. It’s your business they are playing with. Forewarned is forearmed.

 

2. Check out the 26 questions in the boxes throughout the 24 pages to see which you can respond to.

 

3. Respond to the questions by email well before April 8, 2011 to

ccir-ccrra@fsco.gov.on.ca  or at the very least communicate with your MGA, Advocis or IFB.

 

Everyone wants to have input to matters that affect their livelihood.  Mostly, we hear whining after the fact when no one actually took the time.  Now is the time to give input.

 

It’s not time to whine.  Just complaining that bureaucrats, politicians and “ink-stained wretches” don’t know what they’re talking about isn’t going to help.

 

In fact, it can only make things worse.  Remember, much of the whining is done in public forums of one kind or the other and bureaucrats, politicians and the media lap it all up.  When we are unreasonable or protectionist, we lose our power and actually make the case we are trying to defeat. 

 

When you argue emotionally, you lose your power and often accomplish the opposite of your intentions. I appreciate the passion in these discussions, but stay cool. And, respond. Today.

 

If you don’t, you’ll just have to be satisfied with the world created for you.

 

I’m Jim Ruta and that’s just the way it is.

 

 

February 15, 2011

 

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The Ketchup is out of the Bottle

The Ketchup is Out of the Bottle

And it will be a mess getting it back in...

 

It’s a game changer for sure.  This past weekend’s Toronto Globe and Mail exposé on the state of affairs in the Managing General Agency business will change the business as we know it.  Just like trying to put the ketchup back into the bottle, returning to normalcy will be messy and it won’t be like it was.  The article is more accurate than inaccurate.  It is also about a lot more than just the adviser they set up as an example. Here’s my take on the piece in the order the ideas come up...

 

1.      Hal Zlotnick was an icon in the life insurance industry.  I still use “The Broad Concept” that I believe he developed with Don Pooley in the 1970s.  I’m quite sure he wasn’t talking about the segregated fund business when he said “Insurance is the business of financing dreams”.  He was talking about the incredible power of life insurance to keep dreams alive even when the dreamer became an angel.  The quote is just used here to make his daughter look badly. I don’t know Lynne Zlotnick and I only know what the article tells about her situation.  But, if what we presume a hypothetical example with the facts we read, there is a lot to say.

 

2.      What the heck would somebody be thinking to get their clients to invest in their business directly? I mean come on?! Could there be a more serious conflict of interest? Then, to encourage a 90something to cash in her legacy for the purpose? Please, I’d love to see the math on that one.  Kids, please don’t ever attempt this one. Ever.

 

3.      But, I blame an industry that forgot the advice I first learned in 1985 when I got my branch manager’s mutual funds license. Then, we were told that as people approached retirement we were to move them to income and away from equity.  The 90s fixed that and the word became – that unless you were in the market, no one, even elder elders could afford to be out of the market.  The Great Recession proved that. This advice seems like a perversion of already bad advice.

 

4.      I note that Ms. Zlotnick created a firm “to sell life insurance and other investment products”.  I don’t know if this was her actual intention but it’s another problem. Life insurance is not an investment in a traditional sense and it’s an entirely different business than investments.  It’s very hard if not impossible for one person to do both jobs well. 

 

5.      I’ve been reminding advisers of this for more than 10 years but the mistakes keep piling up.  You can understand and apply one or the other, but not both.  Oh, I know that even a blind squirrel finds a nut now and again so it is done, but this is a poor long term strategy for most advisers – and most clients. Advisers should work in teams. Consumers should have teams. Period.

 

6.      Travesties like the one highlighted here are yet another example of how you can’t make any system bandit proof.  Bandits (and those with the best of intentions who are still wrong and come off like bandits) are very crafty.  From what I can tell, this is an example of more “off book” promotion.  It has nothing to do with licensing and regulation. I bet we’d never have caught it in the career system either.

 

7.      The article is more damning to the life insurance industry than anything I can recall.  “As the same of life insurance evolved over the past decade – designed to sell more policies and maximize profits for insurers and agents in an already mature market – it has also placed consumers at risk.”  You think regulators haven’t read this? You think the heat has just been turned up on the industry? Just wait.

 

8.      But, advisers are more necessary than ever.  They just don’t do what the consumer and the media expect. “Though consumers place trust in their agents (note they don’t say adviser, that’s our word) and increasingly look to them for financial advice and to explain the complex policies and products...”  Still, most agents have turned further afield and want to do everything for everybody.  It’s wrong. Consumers expect a high degree of expertise and experience.  They reject the idea of mediocre, but they too often get it.

 

9.      What isn’t talked about in the article is what the apparent “elder abuse”.  The details certainly suggest that a very senior elder was taken advantage of badly.  This is outrageous.

 

10.  I like the definition of an MGA: “...agencies.... that assist insurers deal with a large roster of independent agents, while helping agents obtain access to various policies sold by insurers, in exchange for a piece of the action.” No training or supervision here – by anyone. Just moneychangers.  

 

11.  Reminds me of the senior insurance executive who told me years ago that his company was moving to a model where they would just “harvest production from producers”.  I’m not making this up.  Take advantage of what’s already out there with no concern for new advisers (“we’ll get HR involved when we need me agents”) or developing old ones.   It’s hard to believe that a business founded on long term concepts could be so short sighted.  I say that an industry that has built its fortunes on backs of advisers should be compelled to reinvest in their growth and development. It’s time to ante up. And, dolling out figurative pennies to new college experiments hardly cuts it.

 

12.  So... I always said that life companies would have to come back to the career system and this sounds like the first bell in that race.  Companies abandoned advisers at the worst possible time.  When the markets got crazy, products became more complex and solid advice was more important than ever they went for profits and bonuses instead.  They may be forced back into the business if they want any business in the future.

 

13.  Sure we can blame the MGA business for the poor state of affairs of advisers and their advice but really, with the deep pockets companies have, they weren’t prepared to do the job.  How can anyone expect most MGAs to step up? OK, they are making money, but not like insurers. And the idea that MGAs should be recruiting to the industry in their spare time is laughable. Fifteen years ago we paid manager/recruiters $100,000 a year to do it full time and had trouble getting the job done. Imagine the success ration of this prospective plan.

 

14.  MGAs have been set up by insurers as a “liability firewall”.  MGAs defend insurers from unrecoverable chargebacks, bad business practices, sales liability and bad advisers. That’s why they exist.  Let’s face it, much of the rest of what MGAs do could easily be done in huge service centers.  They could even ship the job offshore.  It’s already being done in some parts of the business. And here the article is right again... “insurance companies ... have yet to reckon with the unintended consequences of a revolution they encouraged to save trouble and expense.” Of all the downstream downloading that occurred since the MGA revolution, this is perhaps the most significant.

 

15.  “Insurance agents are increasingly involved in wealth management and advise people on tax and estate planning – functions that require careful oversight”.  It also requires seriously specialized expertise and focused experience to do it today’s contemporary standards.  Consumers really need Insurance agents to stick to their best skills so they can get the advice they need. Right now, as the article points out, many are overstepping their expertise.  The loser is the client.

 

16.  The top of B7 in the article also explains the compensation trail quite accurately, if a little conservatively.  So, those of you who wondered if compensation disclosure would come, you can stop wondering.  It’s been disclosed.  Consumers now know.  The change has started.  You always had to have value and earn your commissions. This is the beginning of having to demonstrate it.  

 

17.  Privacy is not quite the problem that they state though. PIPEDA has applied for years and any decent adviser protects client information or knows he or she should. This is overstatement for alarmist purposes – like the headline on the front page.

 

18.  The reason many MGAs don’t have the money necessary to provide supervision is because they were built on maximum compensation models. While the article talks about them getting a cut, the cut is sometimes so small that it barely covers their operations let alone the cost of supervision.  Another factor is that insurers demand more and more production to maintain an MGA contract which leads to some MGAs giving away all or substantially all of their override to “buy” agent business that will get them the business they need to validate an insurer MGA contract. When you give all of it away, there is definitely no money left for supervision. Why aren’t insurers involved here?

 

19.  I have to wonder why the insurer that cashed in the disputed segregated fund didn’t bother to ask any questions of the MGA or the agent. When it seems so obviously odd now, why didn’t anyone pick it up at the factory?

 

20.  That agents are no longer “subject to any mandatory industry oversight”, and maybe any oversight at all, is a function the independent channel – hence the name.  The trouble is that without any solid training at the beginning of their agents of old had from career companies, it’s like the “Wild West” out there sometimes.  Ultimately, everyone needs a “coach” or a sounding board.  It’s time the industry, all of the industry stepped up to the plate.

 

This article is a wakeup call to everyone that things have to change.  I say the ketchup is out of the bottle.  It will never go back in without making a mess.

 

Still, the life insurance industry is still a good a decent business populated with many, many good and decent agents. The mistakes of the few cannot be worn by all. 

 

The article has it right “consumers place trust in their agents and increasingly look to them for financial advice and to explain complex policies and products”.  The consumer need for quality agents has never been greater.  I say it’s time that insurers, MGAs agents and all associates with the industry refocus on what’s best for consumers.   

 

Like the late John Savage said, “If we take care of our clients first, last and always, they’ll always take care of us.”

 

I’m Jim Ruta, and that’s just the way it is.

 

 

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"Have we Forgotten Everything We've Learned From Kindergarten?"

I was mortified by a recent article.  According to a smart piece written by my friend Vikram Barhat at www.advisor.ca, life insurance agents are getting caught up by the simplest of mistakes.  Frankly these mistakes should never be made.  Even more frankly, they are just plain stupid.  We should know better from “Life Insurance Kindergarten”.  It boggles the mind to read the most common errors and omissions claims Crawford & Company’s Ruth Mercer presented recently to a Toronto conference.  Clearly, advisers have forgotten far too much from Kindergarten…

So, as a reminder of “Life Insurance Kindergarten” (LIK) here are the seven most basic lessons that come out of Vikram’s article:

1.    You must only sell products you know and understand sufficiently well that you can explain them effectively and completely to prospects.  Apparently, agents are selling things they don’t know, understand or can explain.  This leads to clients making ignorant decisions and having bad experience at claim time.  That leads to negligent misrepresentation liability claims against agents when the policies don’t work like the client remembers they were supposed to. You think you can beat a poor little old client in court who says you never explained the contract the way it worked out?  Think again.  It’s why I promote an “Expert Identity”.  You just cannot be a “Doctor of all the Ologies”.

2.    Unless you are licensed, educated and trained in a professional discipline, stay out of it.  According to Vikram, Ruth suggested agents are quite happy to guess at advice when they don’t know for sure.  The trouble is that your “guess” is your clients “gospel”.  When you’re wrong and it matters, you’ll be sued.  And, you’ll lose.  Of course the trouble is that no one knows what will really matter to which client and when.  But, you can bet you’ll get the lawyer’s letter.  That’s a happy day. It reminds me of what Jim Bullock told me once.  As I recall, he said that fully 30% of E&O claims are for activities not covered by the adviser’s license.  Where did we get the idea this made any sense?

3.    Your client’s needs and interests are your first and overriding priority.  We’re told that some advisers play fast and loose with their clients’ instructions and take their time implementing them.  Anyone who has any experience knows that time is absolutely of the essence in this business.  Unreasonably opting out of this truth will have a big impact on either your life insurance or investment business.  Instruction procrastination will definitely cost you big money and trouble one day.

4.    Life Insurance Policy Replacement is a very dangerous game.  Think about it.  Someone has a safety net in place for their walk on the tightrope of life.  Good replacement puts a bigger, stronger and better safety net on top of the original one until it’s certain the insurer won’t pull it away. Ole!  So, having someone walking that tightrope without any safety net in place at all is just asking for huge trouble, not only for you, but especially for the family.  Existing policies can only be cancelled after the new one is definitely in place.  Doing this right takes some serious savvy. Doing it wrong is like running with scissors, in the dark.

5.    Only make product and service recommendations that make real sense to your client in their circumstances as they understand it.  Know Your Client (KYC) forms only formalized long standing appropriate process.  They didn’t invent it.  It’s not like before KYC forms, good, smart advisers didn’t consider their clients’ situations. They did.  You must. Besides, good KYC is not a page, it’s a process.  If the form you use isn’t enough, you need more.  And, you have to know the difference too.  You have to document what they and you say so you do the right thing for them.  Remember the lesson of the Great Recession, “No one is as risk tolerant as they say”.

6.    Take notes about your clients meetings for your file so you can prove what when on.  The story is that many advisers have little if any documentation about their client discussions.  Jim Bullock told me years ago that in a study of 144 E&O claims only three could be defended in court.  There was just nothing to back up the adviser.  If you want a fun day, put yourself “at the mercy of the court” in a case like this. Keep records! Make them in the meeting or right after the meeting.  Use “Copy Talk”.  Notes you made yesterday about a meeting you had ten years ago just won’t cut it.

7.    Never over promise and under deliver your services.  Vikram’s article quotes Ruth as saying “Don’t promise the stars, the sun and the moon” like some advisers get caught doing. That pretty much defines overpromising, doesn’t it? And, if there is anything worse in the service business, I don’t know what it is.  A friend of mine in the PR business always writes a “retainer letter” to a new client outlining the limits of the work he can do for them.  It is expressly for the purpose of minimizing client expectations. As Bones said to Captain Kirk on board NC- 1701, “I’m a Doctor Jim. I’m not a magician!”  MDRT star, Marc Silverman told me years ago that he told his clients, “I’m not here to make you rich.  I’m here to help you not be poor.” This is a big reason he is a Top of the Table regular.

So, if these are the kinds of mistakes that make it to court, it’s no small wonder financial advisers and insurance agents are not trusted well enough.  It’s also no surprise that advisers don’t get the referrals they want – they just don’t deserve them.  And, you can see why regulators routinely take pot shots at the business and don’t value our advice.

How do we solve this problem?  Maybe I have to run a “Life Insurance Kindergarten” program for advisers who want a refresher?  What do you think?

Maybe Insurers and Distributors have to get together to remind agents about “What’s right is right”? 

As Ruth’s presentation and Vikram’s article clearly point out, the life insurance business isn’t just about filling out a form and pocketing the commission.  You really do have to “know your stuff and who you are stuffing before you can stuff ‘em.”  You really have to provide serious service when you sell. 

And, when you make a mistake, facts, your best intentions and the law you know has little to do with what happens to you.  Remember, the law is whatever the judge says it is the day you end up in court facing an unhappy beneficiary.

I’m Jim Ruta and that’s just the way it is.

 

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Life Insurance is an Art, not a Science

Life Insurance Selling is an Art, not a Science

The “dinosaur” speaks

 

Apparently, I’m a dinosaur who doesn’t understand the realities of the new financial services industry.  I’ve been left behind by a business that has moved on to bigger and better things.  I’m just wrong… or so some people would have you believe.  It seems I am the only one left who remembers the essence of the business and the true nature of a product that no one “needs”.  It’s true. They don’t.  No one needs life insurance and that’s why it is so important…

 

And, I’m not against the science of financial planning either.  I know it might look like it at times, but I want to be clear.  Financial planning is a good thing.  People should do it.  We need competent advisers who can handle that science. But, it has to be in perspective.  Who can argue with the value of putting all your financial ducks in a row and making the most of your income and assets and the least of your income taxes?  Not me. Count me in.

 

Just don’t tell me that financial planning science is THE way to help people buy the life insurance they need.  Or that without a comprehensive plan the product is not sold correctly.  To say that consumers can only buy life insurance (and the other insurances in the family) as the result of a full and comprehensive financial plan is not only to misunderstand life insurance but also consumers.  It also seriously slows down a process where time is irretrievably of the essence.

 

Professional Life Insurance Sales

 

All life insurance sales people are not created equally.  Over the years, I have determined that they can be rated depending on their presentation focus.  There are three levels:

 

• Price
• Product and
• Protection

 

If low price is the only arbiter of value, then we have a problem.  I can’t help but think about these John Ruskin quotes when price comes up.

 

“The bitterness of poor quality lingers long after the sweetness of low price is forgotten” and…

 

“If you want good clean oats, you have to pay a good, fair price.  If, on the other hand, you are prepared to accept oats that have already been through the horse, well they, of course come a little cheaper.”

No, price isn’t it.

 

Just choosing or promoting one product over another based on what’s considered the “right product” is not the right idea either.  In today’s highly competitive and regulated mark, there really are no good or bad products – just bad applications of products.

 

That takes us to protection.  It is the highest level of professional insurance sales – comprehensive protection of the consumer’s needs.  When the amount of protection is sufficient to meet the wants and needs of the client, family and or business, you can then start dealing with product and price.  But, the right decision always cascades down from protection.

 

So when I am talking about selling, this is the approach I am talking about.  It’s covering needs for “cash at death”.  It’s not just pitching some product at a low price.

 

Life insurance selling is so much more an art than a science.  The face to face part of it means understanding people and their needs, even those often unexpressed. It means understanding insurers and their underwriting idiosyncrasies.   It means persistence in the face of resistance to help people do for themselves what they wouldn’t likely do on their own.  Sure there is some “science” in the process too, but it really is secondary to the discussion of protection needs.

 

Three Levels of Financial Care

 

Here’s another idea you don’t see either.  There really are three levels of financial care too.

 

Tertiary

Secondary

Primary

Tertiary – Advanced life underwriting needs, sophisticated income, estate and tax planning, wealth management, family office arrangements

 

Secondary – comprehensive financial planning, investment planning, business insurance needs, uncomplicated estate planning, personal banking, accounting and wills trusts and estates, group benefits

 

Primary – Simple insurance protection for individuals and families, wills (and will funding), income tax preparation, basic banking, savings plans

 

 

Each level of care has a requisite level of expertise and experience.  And, the usual gatekeeper to the system is the primary care professional, just like in the medical profession. The system is built on the primary care professional in the medical profession.  It is the same in the financial profession.  

 

Here are some serious reasons why life insurance selling is an art and not a science:

 

1. No one needs life insurance – there’s not usually any objective science to this purchase.  People buy it because they love someone or something.  No one has to leave money for their families.  No one is forced to live under a bridge if they don’t have any means of support. The government buries the unfortunate.  You buy it because you want to be different.

 

2. Life insurance is a character product. If you have some, you buy some.  The more you have the more you buy. People of character buy life insurance because the way they leave their world is meaningful to them.  That takes character.

 

3. Life insurance backs up financial plans.  Its works when the financial planning doesn’t get enough time to work. This of life insurance as time insurance... the time for your financial planning and personal discipline to work.  If you run out of time, your insurance clicks in.

 

4. Regardless of how much life insurance you buy you will be wrong.  Because no one on Earth can tell you the exact date your insurance will be activated, however much you plan to buy will likely be wrong.  If you buy the large amount of insurance you’ll need 20 years from now to account for cost of living and income increases, buy dies tomorrow, your family will have too much.  On the other hand, if you buy just the amount that makes sense if you died today, and didn’t die for another 20 years, you’ll probably have too little.  You’re wrong either way.  This is not science.  It’s art.

 

5. We’ve overvalued the Capital Needs Analysis part of the buying process. It’s only a guess anyway, and for some reason includes “self-insurance” for a large part of the cover.  Some version of the old CNA is built into so many financial planning calculators and it is a scientific interpretation of a personal, emotional decision. And, buying life insurance products is the only insurance buy that discounts your needs based on your other assets.  Imagine not buying car insurance for your Jag because you had sufficient cash in your RRSP to buy a new one.

 

6. How much you buy is not really up to you.  It’s controlled by insurer underwriting limits.  This is why advisers need experience to help the consumer through the process.  Consumers have to qualify to buy the coverage they want.  Their insurability is not the same as their needs. You can need a ton of cover but not qualify for any.  This “Insurability Factor” is a big part of the art of field underwriting. 

 

7. Time is irretrievably of the essence.  You can think about implementing your financial planning with little downside.  Maybe you’ll just get a little further behind in your objective? But life insurance is very different.  No one knows when they will cross the insurability line and can no longer buy it.  When you lose your insurability (and it can happen in a heartbeat) it’s gone forever.  It’s why the “impending doom close” is not a close in the life insurance business.  It’s reality.  Time is never more of the essence.

 

8. Consumers really don’t understand life insurance products.  It all started in about 1980 with the advent of Universal Life.  Soon as that cat was out of the bag, the number of gimmicky products exploded.  You know they are gimmicky because of all the work tax authorities had to do to rule on them. Good insurance agents have to know how to explain these products so people can understand them.  That’s no mean feat in this world.  It takes focused expertise and real world experience doing the job every day.  You can’t do it part time and know it well enough.  And it’s a key to financial literacy for the public too.

 

 Keep Life Insurance Selling an Art

 

It’s when Life Insurance becomes too scientific a sale that the trouble begins.  Consider the gimmicky insurance plans that depend on obscure tax loopholes or markets that never go down to work.  These products only exist because advisers stopped dealing with life insurance in primary financial care.

 

The Art of “Primary Financial Care” – life insurance selling, is a great business.  It does not have to take a back seat to anything else in the industry.

 

I’m Jim Ruta and that’s just the way it is.

 

October 18, 2010

 

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"The Missing Question in your Presentation"

I bet you miss it every time.  It’s an obvious question but very few advisers ask it.  When you do, you address your prospects’ number issue right off the bat.  You’re speaking right to them.  Then, you have your prospect paying close attention to the rest of what you have to say.  But, if you miss it, you can get way off track and talk for hours about something that glazes their eyes over. You might never even get to their most important concern.  This simple question has the power to give all your presentations a turbo boost!...

What’s the question that’s missing from most presentations? You’ll want to write this down, because it’s pretty complicated.  “Is there a particular reason you agreed to meet with me today?” Simple isn’t it?  And it’s pretty obvious too.  But do you ask it every time?  

I bet not and it’s not because you aren’t interested in knowing either.  Of course you want to know why you got in to see your prospect. The bigger the potential business, the more you want to know what specifically attracted them. It’s the ultimate “hot button”.  Collect enough of them and you will have a dynamite presentation every time. 

Of course, what usually happens is that we are so intent on what we have to say, that we almost don’t want to give prospects an opportunity to interrupt up our script.  We dive right into our stuff without considering what might be on the mind of the prospect. We miss a huge opportunity for engagement.

I had a chance to sit in on a sales interview recently to experience this first hand.  Taking in the interview from the prospect’s perspective, I sensed immediately that they had something they wanted to say. But, when the formal part of the interview started, they never got the chance. It became all about the agent and her presentation.

OK, I guess you could say that it was time for the agent to take charge of the conversation but she missed a big opportunity.  As it turned out, she went on for over 30 minutes before the prospect got a chance to slip the question in.  Then, it came out as “The reason we wanted to speak to you today was...”

Wouldn’t that have been better as “Is there anything you wanted to discuss with me before I get into my presentation?”(It’s just another version of the same question.)

Imagine how this can work to your advantage.  If the prospect has nothing to ask, then you are getting approval to move forward in your direction.  But the question gets them listening and on track with you.  What’s more, your question made the interview about them and that concern makes you stand out as a “client centered adviser”.  You win, and so do they.

On the other hand, if they have an answer, either positive or negative, you are now moving in the direction they want.  You have their approval again.  They are included and engaged in the discussion.

If the answer is something like “Actually, I really wondered why I said ‘yes’ in the first place”, you know you have some extra selling to do if you want to proceed effectively.  This way, if you get past the comment, you are ultimately more likely to give an on target presentation.

The best answer from a prospect might very well be something like:  “The reason you’re here today Jim is because I need to know a lot more about .... and I feel you are just the person to help me with that.” Wouldn’t that be perfect?

With that you’d be off to the races on a topic that is foremost in their mind.  It doesn’t get any better than that.  Either way or any answer, it all works to help your prospect be more engaged in the process and “helped” by your service.  Everyone wins.

Be sure to engage your prospects and clients at the outset of any meeting.  Checking for their rationale saves time and increases sales.  “Is there any reason you’re reading this today? How can I help?”

I’m Jim Ruta and that’s just the way it is.

October 4, 2010
 

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