In a previous article, I wrote about how investment advisors should exercise caution before selling life insurance. Since the publication of the article, I have received several requests to suggest some guidelines that a consultant should look for in a firm that would help the consultant incorporate life insurance into their range of services.
Suppose you are a partner in a small investment management firm that has an upscale clientele. Your company does not sell life insurance, but has decided to look into this on a limited basis, ie only to certain customers in certain situations.
Several full-service insurance brokerage firms are vying for the opportunity to put your company in the business. Your colleagues have placed you and the firm’s attorney in charge of interviewing these companies and reporting with a preliminary assessment of whether you should proceed with this new line of business, and if so, with whom.
Cover your career risk
Not all of your partners are familiar with selling life insurance. The naysayers insist the firm can and should grow its business by doing exactly what it does, but for more customers. They are uncomfortable diverting current or potential money under management into life insurance. In addition, they seriously question the strategic wisdom of adding life insurance to the firm’s repertoire. “Don’t you read what’s going on with life insurance? What do we need this for? Do we really think we can do it without getting hurt?” The point is, you have a lot at stake here. Some would call it a career gamble.
due diligence
Start your due diligence process by talking to friendly competitors from across the country whose companies have gone down this route, albeit with mixed results. They were happy to share their good and bad experiences and gave you some tips on what to look out for when meeting the agents for the first time. They consistently gave two pieces of advice: control the narrative and trust, but verify.
After thorough background and back-channel checks of brokers seeking your business, you narrowed the list to the three firms that appear to offer the best value proposition and organizational stability. Each of the companies would like to offer companies like yours a 75 to 90 minute virtual presentation of their service offering. Since you want to control the narrative, let them know that you will send an agenda for the presentation detailing what they should cover and who in their organization should report on it. It’s important that you hear directly from the people you deal with at the brokerage firm.
The agenda
You and your attorney have prepared a preliminary draft agenda with annotations, ie a draft written in colloquial language so you can remember why the agenda item is there in the first place (and because I am writing the article).
First, it’s about you, not her
- “What would you like to know about us?” – They will be very interested in how thoroughly they understand your business and how they can support you. They expect you to ask about your company’s business model, growth strategy, customers, services, staffing, insurance licensing, etc. The depth and succinctness of her questions will tell you a lot about her.
Now it’s about her
- “We would like the directors of your company to tell us about your ownership structure, leadership and management team, succession plan, position in the industry, key markets, key relationships, distribution channels, staffing, use of technology and anything else you know would believe us Giving confidence in your value proposition and organizational stability.”
- “Suppose a client wants to see how a policy fits into their investment plan. Walk us through the process, from our initial contact with you, through illustration, application, underwriting, policy selection and design, to policy issuance and policyholder service. Discuss procedures, compliance, compensation, and whatever else you think is relevant. Again, this is only at a high level. We’ll get more specific in a moment.”
Litmus Test Questions
The following questions, with comments for now, address the brokerage process and support services in several critical areas. These “litmus test” items will help you put presenting brokers on par.
- Internal Marketing – “You probably understand that before we can sell a life insurance policy to a client, we must sell it, or the concept, to the client’s advisor. We speak of “gatekeepers”. I’ve attached an article by Charlie Ratner that talks about approaching gatekeepers. https://www.wealthmanagement.com/prospecting/getting-through-gatekeeper-your-potential-client After you have shared your professional background and experience with us, your marketing manager should use this article as a template to describe how you would help us with this “internal” marketing.
- Marketing to our clients – “We have an affluent, discerning clientele, many of whom have worked with experienced life insurance agents. They’ve heard it before, and now when they hear a “talking lane,” they’re taking the “walking lane.” So your Marketing Director should tell us about the training and support services you offer to help us introduce our life insurance program and value proposition to discerning customers.”
- Underwriting – “We want the person running your underwriting department to tell us about your process, the current underwriting landscape, finding the ‘right’ niche for a client with a specific health issue, etc.”
- Freight forwarders – “Some of our partners are particularly concerned about this topic. We would therefore like the person leading the carrier due diligence group to tell us first about their professional background and experience and then about their processes and resources for evaluating and monitoring carriers, tracking their performance for existing policyholders, etc .reported. Sample reports that you provide to your sales force would be helpful. Show us the current list of carriers and tell us about any carriers you recently stopped representing and why you did so.”
- Products – “We have a lot of questions about products as this is another area of concern. We would like the person(s) responsible for this area to tell us about their professional background and experience and then:
- The suite of products that would be available to us, broken down by type. We believe that our clientele will be particularly interested in “accumulation-type” products that build cash value efficiently and distribute it efficiently as well.
- How products of each type are selected, tested, compared and so on, i.e. how they manage to get on your list and stay there. Give us some examples of well-known products that didn’t make it and tell us why they didn’t make it.
- The specific tools, resources, services and publications you use in your due care process.
- Product selection and design – “We have around 7,702 questions for your specialist in the area of policy selection, design and financing, particularly for investment purposes. Give some examples that illustrate how you select and design strategies and their funding patterns to achieve different goals. (If the person responsible for this aspect of your service is not the same person who would present the above points, then that presenter should start with their background and experience.)”
- Planning Applications – “Right now we are interested in the use of life insurance in investment and income tax planning, not estate and gift tax planning. We are concerned that the complexity and gift tax sensitivity of so-called “advanced planning techniques” used in estate and gift tax planning may only exacerbate the risks associated with policy performance and policyholder service.”
- Policyholder Service – “The person(s) responsible for this area should give us an overview of what you’re doing, when, what your reports look like, etc.”
- Other Notable Services and Resources – “What other services and resources should we be aware of at this point?”
- Our next call – “If this call goes well, we will develop a list of topics for a follow-up call/presentation.”
You are satisfied that you know what you are asking and why. They refine the agenda and make it more formal and factual. Then click on the “Send” button.
