For the purposes of a storyline, let’s assume that I heard from an investment advisor who read my article, “An Advisor’s Choice: Generate Life Insurance Premiums or Assets Under Management.” The advisor told me that their firm identified with many of the points in the article that militated against offering permanent life insurance to their clients. However, on reflection, they’re concerned they may be missing the opportunity to broaden their service repertoire and, therefore, their relationships with clients, mitigate risks to their assets under management and, yes, make more money.
A Win-Win for the Clients and the Firm
A well-funded life insurance policy gives its owner a range of options for generating the kind of lifelong income that could allow the advisors to stay the course of the investment portfolio. The advisor’s firm has many clients who’ll experience a significant reduction in income (and an increase in tax rates) when one of the spouses dies. While long-term cash flow projections can be somewhat reassuring, their reliance on so many assumptions still leaves plenty of uncertainty and cause for concern. The policy can address this shortfall, both empirically and emotionally. In turn, by shoring up the survivor’s finances, the survivor will have less of a need to draw down on the portfolio, meaning the advisor’s AUM. That also means the advisor will have much more to manage for the next generation. Having the life insurance in place seems to make sense for both the clients and the firm.
The Interview Process
So, they ask, “Assuming we think we’d like to add permanent life insurance to our service offering, how should we do it? How can we proceed in a way that won’t make today’s solution tomorrow’s problem? After getting more background on the firm, who in the insurance business they’d talked with and so forth, here’s what I told them:
- Take your time! Two or three brokerage general agencies are vying for your business. It’ll take a while for you to complete your due diligence.
- Before you contact the BGAs to initiate discussion, ask your attorneys and perhaps your compliance people to check them out thoroughly. Also, check with the references each has given you. And when you do, have a list of questions ready so you can cover all critical aspects of their relationship with the BGA. A less conventional suggestion is to follow the BGAs on social media to see whether you’re comfortable with what they post. You might be impressed by their substantive messaging and thought leadership or turned off by their overly aggressive pushing of a given product or planning concept.
- Invite the BGAs that check out favorably to make presentations to your firm. Tell them to build and staff their presentations along the guidelines set forth in “Guidelines for Advisors Interviewing Life Insurance Brokerage Firms.” I would, however, suggest that you not limit the product segment of the presentation to accumulation products, as I did in that article. Expand the discussion to products designed for death benefit as well. Along those lines, be sure the BGA offers a full range of products to accommodate the full range of your clients’ suitability requirements. That said, just like many agents, you’ll wrestle with the notion of presenting any products to your clients that you either don’t understand or wouldn’t buy with your own money. My articles on suitability, such as “Navigating the Route to Product Suitability,” should be helpful here.
- Ask the BGAs to spend a few minutes on life settlements and how they would support the advisor in assessing the merits of a settlement and then effecting the transaction. See “Life Settlements – Planning Considerations Beyond the Offer.”
- I assume that each BGA will identify at least a couple of their people whom they’ll dedicate to your firm, not just for service but for interaction with your clients in a sales mode. Carve out some time for the person who interacts with clients to make the kind of presentation they would make in a real client setting. When they do, take off the filters and ask plenty of questions. Listen closely to their words, and pay attention to their body language. Would you put them in front of your clients?
- After the initial presentations, ask those who passed the audition to return and take you, personally, through the kind of fact-finding interview they would take any prospect. Tell them up-front that the interview should have a comprehensive personal financial planning orientation, not an estate planning orientation. The former will dovetail nicely with your clients’ interests and concerns, whereas estate planning won’t. What’s more, because a life insurance presentation based on comprehensive financial planning is far more nuanced and technically challenging than one based on estate planning, your request will be a good test of the BGA’s staff’s skill set and flexibility. See “Is Your Marketing Message Missing the Mark?” Have one of your more knowledgeable colleagues, perhaps the person who’ll manage the relationship with the BGA, sit in on this meeting.
- Then review. Did the interviewer/salesperson ask the right questions and probe the right areas to develop a suitable product recommendation? Did they address your goals, objectives and constraints or just try to make you see things on their terms? Did they answer your questions, as posed, responsively and completely or take every question as an objection? Were they interviewing or selling? Over the years, I developed a list of pronouncements or responses that, if I heard an agent say to me or a client, I knew we were done. That list still comes in handy today.
I sense that an advisor’s choice of a BGA and, for that matter, their decision to proceed in this new endeavor will be based on extensive due diligence but perhaps even more on gut feelings about how confident they are in the BGA’s organization and the quality of its people.
