David J. Murphy

My career began in retail sales. My official title was Sales Representative. I represented the products of one carrier. The company assigned me the task of completing the Project 100. This was an opportunity to define my natural market. The idea was to record the names of family, friends, neighbors, teammates, fellow church attendees, and other people I happened to know. The expectation was that I would list 100 names. The problem? I started selling in a city I had never lived in before and where, other than my in-laws, I knew literally no one. My natural market turned out to be total strangers!

Thank heavens for orphan policyholders! My company provided me with a thick pile of orphan policy cards, small pieces of paper with the information related to a policyholder. It listed the policyholder’s name, address, policy number, policy type, issue date, premium, and premium mode of a policy written by an inactive agent. All I had to do was look up the names in the phone book (remember those?) and call them.

In addition, my company sold property and casualty as well as life and annuities. Their advice to me was, “Use the Criss Cross City Directory to look up the phone numbers for people living in good neighborhoods. Call them and ask when they had moved into their house—specifically, which month. That is roughly the anniversary of their homeowners insurance policy. Tell them you will contact them thirty days before the next anniversary in order to provide a competitive quote.” This process was called “X-Dating.” (Looking for the expiration date of the annual homeowners policy.)

My wife and I got married two weeks before I entered life insurance sales. She got used to me making X-Dating calls and orphan policyholder calls.

Interesting Start

• My very first day, the sales manager who hired me was promptly fired.
• That same day, the regional VP who prompted the former’s departure also fired another agent who he saw “windowing.” (This, I later learned from another experienced agent, was the technique of holding a form up to the window so as to trace the signature onto a part of the application that the agent had forgotten to have the applicant sign.)
• My very first week I sold a policy on the second of several scheduled appointments! The sale would earn a commission of roughly $1,000! I promptly postponed the rest of the week’s appointments to the next week based on the rationale that at age 23, I did not need to be greedy. I mean, $50,000 per year was all that someone like me needed. Well, both my district manager and my wife strongly disagreed with this decision.
• I sold a policy to a wife of a police officer worried that her husband would be killed in the line of duty. He returned home just as I was leaving. I met him standing beside my car on their driveway. He was in the process of writing me a ticket for expired license tags. The fine for the ticket exactly equaled the commission I had earned on the term life insurance policy I had written.
• Before selling life insurance I never before had a use for a briefcase. My wife helped me pick out a brown one with a leather handle and a hard case. Excitement built as I stuffed its pockets full of my business cards, brochures on whole life, blank applications, and all the other necessary forms. On the first appointment with my new briefcase I placed it on the floor beside my chair as I met with a young mom who owned a life insurance policy on her life purchased by her parents. As I enthusiastically explained the advantages of replacing her old type of policy with the sparkling new whole life products we were selling then, I suddenly became aware of a scratching noise. Looking down I saw her cat step out of the briefcase and immediately noticed the moist, stained piece of paper now covering the cat’s deposit.
• As it turned out, life insurance was very much in the news in my new community. Apparently, a small group of agents for another carrier decided to forego sending their clients’ applications to the insurance company for underwriting and processing. Instead, these enterprising agents simply printed their own policies and collected the premiums using checks made out to themselves. Actually, this had worked well for them for the previous four years. Then someone died. The newspaper headline proclaimed, “Scam Committed by Local Life Insurance Agents.” The fallout for me was that every person I met wanted proof that I was, in fact, a legitimate agent.
• My company had a marketing tool available to me. I could send letters offering prospects a free road atlas (young people, ask someone older what these were). At the bottom of the letter it read, “No agent will call.” Well, when people ordered these atlases, I promptly delivered them in person. When they would object, and point to the letter stating, “no agent will call,” I would offer the same rejoinder every time—“Maam (Sir), back in the office the other agents all took a vote. Turns out, they think I am the closest thing to ‘no agent’ that we have.” Usually, they would laugh and let me in.

The Sign I Was on My Right Path
My wife heard my X-Dating pitch dozens of times per day. Significant numbers of people were less than happy to share with me the month in which they bought their home. This was, they informed me, “None of your business.”

I canvassed the better neighborhoods and business parks letting people know what I did for a living and expressing confidence that I could surely help them. Here is how I described what I did: “I help the unprepared plan for the unexpected.” From the reactions I received, it was clear to me that most people were either already prepared, believed they had a plan, or had no idea what to expect.

Honestly, I began to question my career choice.

Until…

Marie owned a small whole life policy issued by my company years ago when she was pregnant with her first child. Now she was much older, her kids had grown and had their own families, and her husband Frank had advanced dementia. She explained why she had agreed to meet with me. “If something were to happen to me there needs to be money available to place Frank in a nursing home for his care.” The life insurance would be that source of funds.

I wrote an application for life insurance on Marie, it sailed through Underwriting, and I delivered her policy a flashing six weeks later. That was in July. I placed the file in my desk drawer and went about finding other people who needed the products I sold.

Then…

At 11:30 PM on the Friday before Labor Day, I was in bed sleeping next to my beautiful wife when the phone rang. We had a house phone (young people can look it up on Google) on the table next to the bed. I answered it in a fog.

“Hello?”

“Dave Murphy?”

“Yes.”

“This is Marie. Marie C____.”

“Who?”

“Marie. I live with my husband Frank. You sold me a Life Insurance policy about two months ago.”

“Yes. Okay.”

“I need your help. Frank somehow got out of the house. Maybe I had forgotten to lock the deadbolt. He’s gone, Dave.”

“Sorry to hear that, Marie. Truly. But why are you calling me? Did you seek help from your kids? Have you notified the police?”

“The kids won’t help. They want nothing to do with Frank. The police would only scare Frank.”

“Okay, but why me?”

“Dave, you listened to me. You helped me buy the policy that would take care of Frank. You are the only one I know who I can trust. I know you care.”

“I am heading your way immediately, Marie. It will take me about fifteen minutes, maybe twenty.”

When I arrived, she asked me to drive her pick-up truck while she sat in the truck bed yelling his name. We drove all around, in concentric circles. Sometime near 2:00 AM we found him wandering down a dark street about four miles from her house. We gathered him into the passenger seat, Marie took over driving and I climbed into the truck bed. In short order he was safe at home in bed. Marie expressed immense gratitude.
I went home to my worried wife proudly bearing the knowledge that I was on the right path.

Signs that You Are on the Right Path
I read an article in “Forbes” that contained this paragraph:

“When you do something that makes you feel alive and connected to your purpose, you’ll think ‘I am on my path now!’ You feel like you’re doing exactly what you were meant to do.”¹

As an independent financial professional, a brokerage general agent, a home office employee, or a wholesaler, you most likely already know if you are on the right path for you. If you are still wondering, here are some simple techniques for clarifying whether or not you are on your path.

Anticipation: If you wake up each day excited to see who you will meet or what the day will hold for you, you are probably in the right place. There will always be drudgery. Every position has responsibilities that are menial, repetitive, and sometimes even annoying. When these are offset by the adventure of seeing what comes next, you can persevere through the mundane. If each day feels to you like an unopened bag of snacks, and all you have to do to get enjoyment is to open it, you are on the right path.

Means, not Ends: People date other people in order to find someone to marry. People sometimes marry in order to have kids. People then want their kids to be raised so they can get their freedom back. Others work furiously so that they can retire early. In other words, people believe their fulfillment will happen someday later… after…eventually. The truth is, today is your present. A gift. To slide through the next twenty-four hours with eyes fixed on sometime later is to waste today. When you find that the work that you do, the people you meet, and the process of serving others is all the fulfillment you need then you know you have found your purpose. It is about the journey and not the destination.

Learning: When people stop being curious or give up pursuing knowledge of their work, industry, or how others in their field achieved great success, that is a sure sign they are no longer on the path. In financial services, the learning never stops. There is always an area of expertise that is waiting for exploration. If it has been a while since you learned anything new, maybe you are on the wrong path. (If you are reading this article, you are evidently still learning!)

Sharing: When we know we have something special, it is rare that we want to keep it for ourselves. (An exception might be your secret fishing spot!) A sure sign that you are where you need to be is the habit you have of sharing with others the things you are learning, doing, or the success you are having. Are you a mentor? Do you participate in a study group? Have you spoken to groups of people new to the industry? If you are doing these things, you are most certainly on the right path.

Summary
My purpose became clear the minute I heard Marie say, “You are the only one I know who I can trust. I know you care.”

To know that you are doing what you were meant to do is rewarding. Uncertainty regarding your purpose is debilitating. It is hard to dredge up energy for what is drudgery.

There is an ancient proverb that says, “Knowing what is right is like deep water in the heart; a wise person draws from the well within.”²

Nothing is better than knowing that you are on the right path, that you are constructively deploying your talents and experiences in the right way, and that you can see the impact you are having on the right people. I hope that describes you.

If it doesn’t, maybe you just need to draw more deeply from your well.

Footnotes:

1. https://www.forbes.com/sites lizryan/2018/01/23/ten-signs-youre-on-your-path-and-ten-signs-youre-not/?sh=76ce3dd054b7.
2. Proverbs 20:5, The Message.^®

This Summer my wife and I vacationed with dear friends in the mountains of North Carolina. Jon Kling started his life insurance and financial services career in 1972 with Equitable Life of New York. Jon was one of the first people to acquire his CFP^® designation.¹ He was Life and Qualifying Member of the MDRT^® for many years.² Jon and I met nearly 18 years ago and worked together for a few years. He is a wise, humble, gentle, and impactful contributor to our industry. In addition, he is a cherished friend.

Between the two of us we have something like 80 years of experience in the financial services industry. (But do not be impressed. I remember a dear friend telling me about serving in the nursery at church during the worship services: “We had 18 little people who had nearly 35 years of combined life experience, yet not one of them was potty trained!”)

While we were enjoying mountaintop views and great food, I took the opportunity to ask Jon some questions in order to capture some of his wisdom for the benefit of Broker World readers.

Me: What is your advice to independent financial professionals (IFPs) about the best thing to remember in regard to clients?

Jon: People don’t do things they don’t understand.

Me: Put meat on that. Take life insurance for example, how does an IFP best approach a client’s needs?

Jon: Life insurance falls into a broad category we call “Risk Management.” There are three components of risk and how we manage it. Risk can be reduced, avoided, or insured. To some extent, a person can control risk by altering habits or activities. What IFPs are concerned about is identifying risks that are economically devastating and very real, and in fact, inevitable. Before we can effectively discuss life insurance, we need the client to understand what risks they are comfortable accepting, avoiding, or insuring.

Me: Makes sense. What is a good way for IFPs to present the types of risks life insurance is designed to absorb?

Jon: Early in my career I created something I called “The Spectrum.” It is a way of presenting the spectrum of benefits that life insurance provides for the people who own it. Think of a vertical line…the beginning and the end. All the way to the left (low end of The Spectrum) is Final Expense. Somebody else paid their way into this world so they might as well pay their own way out. Final expenses could include medical expenses from a prolonged illness, legal and accounting fees, and income and estate taxes.

Some IFPs may choose to include Emergency Fund needs in addition to final expenses. Other IFPS present the client with suitable investments that can be earmarked as emergency savings.

Moving to the right we discuss Family Income. We cannot replace the breadwinner, but we can replace the stream of income she/he provides the family.

Next on The Spectrum is Mortgage and Debt cancellation. Life insurance is an excellent way of erasing consumer debt at the breadwinner’s death and providing the surviving family members with a place to live without a mortgage.

In the middle of The Spectrum is Education Expense. Life insurance is the best plan and only self-completing time installment for providing funds for post-secondary education expenses. I did not say the best investment. An IFP can show the client an attractive alternative through systematic investments deducted from current income and channeled into an Education Fund.

All the way to the right on The Spectrum is Retirement Income. At this point the wise IFP asks a series of questions designed to discover the client’s perspectives. These questions include:

1. How will you maintain your lifestyle if you live into retirement years?
2. How will your spouse live post-retirement if you predecease him/her?
3. At what age do you anticipate becoming financially independent?
4. Will the money you expect to accumulate by retirement age last as long as you might?
5. What risks have you assumed in the vehicles that you are using for sending money ahead into your retirement years?

Me: Did you ever share “The Spectrum” with other IFPs?

Jon: Yes, in fact I was asked by my core carrier to share it with their other career agent offices. Not long ago I received an email from Keith, one of the agents I taught early in his career. He wrote, “Without ‘The Spectrum’ I would never have made it 38+ years selling intangibles.”

Me: That is awesome! Hey, what other examples of good questions should an IFP use with clients?

Jon: I like these:

1. Do you know the difference between transition and transaction?
2. Can you tell me where your pain is?
3. What do you want to accomplish?
4. Have you ever wondered why some people retire with adequate income sources while others still find it necessary to work post retirement?

Me: Help me understand the first question.

Jon: A client minded IFP does not approach a client with an intention of selling something. Rather, he/she wants to help clients transition from ill-prepared to prepared, from unprotected to protected, from directionless to operating with a plan. Client minded IFPs seek to manage productive transitions for their clients, and do not focus on creating transactions.

Me: Understood. How about the fourth question?

Jon: An IFP will encounter two types of people: ‘Today’ people and ‘Tomorrow’ people. Today people plan and act today. Tomorrow people talk about planning and may, or may not, ever act. My branch manager said, “Someone who doesn’t know where they are going or how they will get there is a wandering generality.” People who retire comfortably are Today people. They recognize the importance and exercise the urgency to act now for their own future benefit. The bottom line is that IFPs need to help clients build a strategy and a plan built around their most important concerns.

Me: That is a helpful framework. What other salient advice can you offer IFPs?

Jon: I urge IFPs to tell stories when presenting potential solutions to clients. These can be stories of people who suffered upsets yet were prepared, as well as stories about people who refused to plan or prepare and whose families or employees were negatively impacted. For example, I worked with a business owner who experienced a fire in his building but, since he had no insurance, when the building was completely ruined all 17 employees lost their jobs. One person’s refusal to act impacted many other people.

Me: Many communication experts tout stories as the essential key to persuasion. What else?

Jon: Remember that we insult the intelligence of other people when we present only one solution. Respect is based on giving people options along with our recommendations. Similarly, we treat people as naïve whenever we claim that something we are offering is either cheapest or best. What people want is that which is right for them. They want to know that their individual circumstances dictated the proposed solutions.

Me: Agreed! Trust follows respect.

Jon: Simply said, the wise IFPs will sell their clients what they ask for. (Later, the IFP can sell the client what is also truly needed.)

Me: What about the issue of earning commissions or receiving fee compensation?

Jon: When an IFP presents fees to a client as part of his/her compensation, the fee itself requires that there be a discussion of value. Something not embedded in a product’s pricing (like commissions), but is paid directly by the client, demands a presentation of the value the client will receive.

Me: How important is follow-up and annual reviews?

Jon: IFPs should ask their clients, “Are your priorities static or the same as five years ago? Have they changed over the years?” The point is everything changes. Fees include the expectation of follow-up and periodic reviews. I learned that personal contact, face-to-face, or over the phone, “touch” in other words, is how to keep exceeding client expectations. Simply acknowledging birthdays and anniversaries, scheduling periodic reviews, or having any contact with clients that does not cost them more money created advocates for my work.

Me: Is there an inverse relationship between frequency of sales and length of client relationship?

Jon: Perhaps there are fewer sales as the relationship grows. But there are more ways to receive payment other than through fees or commissions. Receiving referrals is a form of payment. Brand new prospects with no connections to existing clients are harder to turn into clients. Referrals require less trust-building.

Me: One last question. As artificial intelligence expands into the financial services industry, will the IFP be eventually replaced by phones and devices?

Jon: To an extent, certainly. Anything strictly transactional is subject to being replaced by automation. In financial services, however, there remains the necessity of adding understanding to information. We want our clients to make an educated decision rather than an emotional one. Anyone today can learn all about life insurance using their phone, and discover the different product types, research the cost, compare product pricing, get quotes, and even apply online for a life insurance policy without the aid of an IFP. Stock trades can easily be done without an advisor. However, when it comes to understanding the proven techniques for applying financial principles to the vicissitudes of life, it is a rare person indeed who can navigate their way through the myriad insurance and investment opportunities without the assistance of someone who knows how.

It all comes down to the target of our attention, the object of our focus. In a letter written by the founder of an organization to its leaders, someone once wrote, “Let each of you look not only to his own interests, but also to the interests of others.”³ The successful IFP will make the clients’ interests first priority before considering how much the interaction will create in terms of income. Long-term relationships built on trust, mutual respect, and honest conversation will generate a lifetime of income for the client minded IFP.

Thank you, Jon Kling, my friend.

Footnotes:

1. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns a family of certification marks, including, without limitation, CFP®.
2. A Registered Mark of Million Dollar Round Table®.
3. https://www.biblegateway.com/passage/?search=Philippians+2%3A4&version=ESV.

“People will pay you a lot of money if you pretend to know how the tax code works.”—Adele Valenzuela, CPA, a partner at AVM DeMars CPAs in Williston Park, NY.

It is easy to forget that America was founded, in part, to avoid high taxation.

The CCH Standard Federal Tax Reporter includes the Internal Revenue Code (IRC), IRS regulations, the revenue rulings, and case law covering court proceedings that involve the tax code. Combined, these documents add up to about 70,000 pages. The IRC itself is around 2,600 pages.

From time to time politicians promise to simplify the tax code. They promise to reduce the number of pages. At no point in history has the size of the Tax Reporter shrunk. In fact, the rate of increase actually grew after the 1986 tax and subsequent simplification reforms. This makes sense because the Tax Reporter includes all past tax statutes and all case law. So even if Congress enacts a new one-page statutory tax code, the Tax Reporter would keep growing as more and more cases hit the courts.

A Little History
The United States Constitution gives Congress the power to “Lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.” (Article I, Section 8)

The Federal Government first levied a federal income tax during the Civil War. Congress rightly deduced that it was going to be a long, costly war, and the government needed revenue. In 1862 the Congress established a Commissioner of Internal Revenue. The first federal income tax was progressive and levied a three percent tax on incomes between $600 and $10,000 and five percent tax on incomes over $10,000.

In 1872 the federal income tax was repealed, but in 1894 the federal income tax made a brief comeback before being ruled unconstitutional in 1896.

On July 2, 1909, Congress passed a proposed Constitutional amendment, and it was ratified on February 3, 1913. The 16th Amendment gave Congress the legal authority to tax income. In 1914 the Bureau of Internal Revenue released the first income tax form, called Form 1040. The initial 1040 form was four pages in length and included only one page of instructions!

The brand new 1913 IRC contained this progressive marginal tax rate schedule:

• One percent on income of $0 to $20,000
• Two percent on income of $20,000 to $50,000
• Three percent on income of $50,000 to $75,000
• Four percent on income of $75,000 to $100,000
• Five percent on income of $100,000 to $250,000
• Six percent on income of $250,000 to $500,000
• And seven percent on income of $500,000 and up

The Revenue Act of 1916 began the recurring Congressional practice of adjusting tax rates and income scales.

It’s Not Just about the Money
Congress asks way more of the U.S. tax code than simply raising money for the government. Through tax policy the federal government tries to nudge us to act in ways they deem preferable.

According to the IRS, “Legislators have three needs in mind as they prepare tax laws: The need to raise revenue, the need to be fair to taxpayers, and the need to influence taxpayers’ behavior.”¹

Social engineering was concomitant with U.S. tax policy from the beginning. Alexander Hamilton proposed the first domestic tax on whisky and cited the health and moral implications of the drink as reasons to support the levy of a tax.

When people think of Congressional attempts to shape society through taxes, they often refer to excise taxes. They point to so-called “sin taxes” used to discourage the use of products and services that could pose a risk to someone’s health, such as alcohol and cigarettes. Or they highlight the gasoline excise tax or the luxury taxes on expensive, nonessential items such as luxury cars.

However, the IRC is replete with attempts by Congress to drive desired behavior through the income tax system. Prime examples of incentives for activities deemed to have social merit include:

• Home ownership
• Adoption
• Child care
• Charitable giving
• Saving for retirement
• And making contingencies for expected health costs

One of my all-time favorite authors is Louis Nizer. His great works include My Life in Court, The Jury Returns, and my personal favorite, Reflections without Mirrors. On June 8, 1985, this inimitable lawyer/author wrote a piece for the Chicago Tribune entitled “Tax Law As Social Engineer.”2 Here are some quotes from that article:

• “The common conception that the sole purpose of taxes is to raise money for the government is a fallacy. Tax deductions are devices for social engineering.”
• “Tax deductions are generally not motivated to escape a just tax. Most of them are deliberate financial inducements for desirable social ends.”
• “Money is a bad master but a good servant. We use the tax code to serve the public good.”

Life Insurance Serves the Public Good
In the mid-to-late 1980’s the life insurance industry had a hot product—single premium life. This product maximized the tax-deferred build-up of cash in the policy by minimizing the death benefit. It was the product that drove changes to the IRC in regard to life insurance taxation and created MECs.

During that debate, the U.S. Government Accountability Office (GAO) was asked to weigh in. The GAO “provides Congress, the heads of executive agencies, and the public with timely, fact-based, non-partisan information that can be used to improve government and save taxpayers billions of dollars.”³

In January 1990, the GAO produced a memorandum entitled “GGD-90-31 Tax Policy: Tax Treatment of Life Insurance and Annuity Accrued Interest.” It was addressed to both The Honorable Lloyd Bentsen, Chairman, Committee on Finance for the United States Senate, and The Honorable Dan Rostenkowski, Chairman, Committee on Ways and Means for the House of Representatives.

• The memorandum was submitted in response to Section 5014 of the Technical and Miscellaneous Revenue Act of 1988. Section 5014 called for the GAO to report on:
• “The effectiveness of the revised tax treatment of life insurance products in preventing the sale of life insurance primarily for investment purposes; and
• The policy justification for, and the practical implications of, the present treatment of earnings on the cash surrender value of life insurance and annuity contracts in light of the Tax Reform Act of 1986.”⁴

The GAO saw clearly that the life insurance industry had pushed the letter of the law, and perhaps violated the spirit of the law, with these products. The report was sometimes written in twisted logic and strained syntax. This couplet is exemplary:

“It may be preferable to give the tax advantage to those who would substantially reduce their coverage in the absence of the tax advantage, and not give the advantage to those who would purchase sufficient insurance even without the incentive. Unfortunately, it is very difficult to provide a targeted incentive for something that would not have occurred without the incentive, and not to provide incentives for activities that would have occurred anyway.”⁴

Whew. After much internal debate, the report concluded as follows:

“The only reason for not taxing inside buildup that we found to have merit is that doing so would reduce the amount of life insurance coverage that some people buy. Protecting survivors against income loss is a goal that society has traditionally supported.”⁵

Life insurance is desirable and deserves tax benefits because protecting survivors against income loss is something society supports!

Remember what the IRS stated as the three-prong purposes of tax policy:

• Raise revenue
• Be fair to taxpayers
• Influence taxpayers’ behavior

However, the reason for maintaining a tax code provision designed to guide behavior is proof that it is working.

A Word of Caution
Changes in the IRC often have unintended consequences, and sometimes bring to light aspects of the system that no longer function as intended.

Consider IRC Section 163 allowing as a deduction all interest paid or accrued within the taxable year on indebtedness. This section applies to mortgage interest.

President Trump signed the Tax Cuts and Jobs Act (TCJA) into law on Dec. 22, 2017, and it brought sweeping changes to the tax code. The standard deduction nearly doubled from $6,500 to $12,000 for individual filers, and from $13,000 to $24,000 for joint filers.
Mortgage interest deductions already favored the richer citizens because low-income filers almost always used the standard deduction anyway.

It is estimated that nearly 90 percent of taxpayers simply took the standard deduction for tax years 2019 and 2020. This was a dramatic increase. Previous to the Trump tax reform law, about two-thirds of all taxpayers used the standard deduction.

Question: Who still itemizes deductions? Generally, the wealthiest taxpayers. For tax filings in 2017, 93 percent of taxpayers earning adjusted gross incomes of $500,000 or more itemized deductions. Those itemized deductions averaged $247,000.6 Are these same people waiting to own homes until Congress encourages them through tax deductions? No.

With roughly 90 percent of taxpayers taking the standard deduction, is the mortgage interest deduction working to guide behavior as Congress initially intended?

Lawmakers may wake up one day and eliminate the mortgage interest deduction if it only favors the rich.

Life Insurance as a Public Good
According to the IRS: “Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren’t includable in gross income and you don’t have to report them.”⁷

Since 1913 the IRC has recognized the social usefulness of life insurance, which helps protect widowed spouses and children and keeps them off of public assistance. Accordingly, Congress created liberal tax benefits as an incentive to those who put their hard-earned dollars into life insurance policies.

This is not an article about the tax advantages enjoyed by life insurance, especially cash value life insurance. Rather, it is a call to all independent financial professionals to proudly trumpet the public good that life insurance serves.

Question: Who is buying individual life insurance, and are the tax advantages Congress created for life insurance products leading to the intended results?

According to LIMRA’s 2020 Insurance Barometer Study, 54 percent of all people in the United States were covered by some type of life insurance in 2019. That year, 71 percent of consumers who owned life insurance had a term life policy, and 44 percent of policyholders owned a permanent life insurance policy.⁸ (Some people obviously owned both term and permanent.)

According to the ACLI 2019 Life Insurance Fact Book,⁹ a total of 10,289,000 individual life policies were purchased in 2018. This compares with 10,478,000 in 2017, and 10,207,000 in 2008. The average annual percent change from 2008 to 2018 was 0.1 percent and from 2017 to 2018 -1.8 percent.

Further, the ACLI states that 90 million American families rely on life insurers’ products for financial and retirement security. Americans purchased $3.1 trillion of new life insurance coverage in 2019. By the end of 2019, total life insurance coverage in the United States was $19.8 trillion. To put this staggering amount in perspective, the U.S. GDP in 2019 was $21.73 trillion.¹⁰

Although the life insurance death benefit is normally paid out in a lump sum whereas the Social Security’s Survivor benefit is paid over a number of years, beneficiary payments from life insurance annually equate to about 58 percent of the aggregate survivors’ benefits from the government.¹¹

So how is the Life Insurance Industry doing?

• Nearly six out of 10 Americans have life insurance. “Even for low-income households, 34 percent of households in the lowest income quintile and 55 percent of those in the second lowest quintile own life insurance.”¹²
• Approximately 10 million new policies are sold annually.
• Total life insurance in force nearly equals the nation’s annual GDP.
• The life insurance industry pays out nearly 60 percent to survivors as does the government through Social Security.

It would appear that far more American taxpayers are benefiting from the tax advantages granted life insurance than those benefiting from mortgage interest deductions. In other words, if Congress intended to motivate people to provide protection for their families by offering tax advantages, it should feel justified to keep those advantages in place.

Summary
The Internal Revenue Code has three goals:

• Raise revenue
• Be fair to taxpayers
• And influence taxpayers’ behavior

By offering tax deferred build-up, and tax-free treatment of benefits, the IRS for the last 108 years has recognized the social usefulness of life insurance. Indeed, the life insurance industry continues to effectively provide families with income replacement for survivors.

More Yet to Be Done
Still, 40 percent of Americans do not own life insurance. Even those that own individual life insurance, they own too little and a significant coverage gap exists.

One major obstacle remains sticky—earning the trust and respect of the average citizen.

In Sylvia Plath’s novel, The Bell Jar, the protagonist, Esther Greenwood, laments, “My mother had taught shorthand and typing to support us since my father died, and secretly she hated it and hated him for dying and leaving no money because he didn’t trust life insurance salesmen.”¹³

Perhaps no one had told Mr. Greenwood about the public good that life insurance performs and how Congress has recognized that social benefit for over 108 years!
Who are you telling?

References:

1. https://apps.irs.gov/app/understandingTaxes/student/whys_thm05_les01.jsp.
2. https://www.chicagotribune.com/news/ct-xpm-1985-06-08-8502060183-story.html.
3. https://www.gao.gov/about/what-gao-does.
4. https://www.gao.gov/assets/ggd-90-31.pdf.
5. Ibid.
6. https://www.taxpolicycenter.org/briefing-book/what-are-itemized-deductions-and-who-claims-them.
7. https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds.
8. https://www.limra.com/en/research/research-abstracts-public/2020/2020-insurance-barometer-study/.
9. https://www.acli.com/Posting/RP20-010.
10. https://www.bea.gov/news/2020/gross-domestic-product-fourth-quarter-and-year-2019-advance-estimate.
11. http://files.brattle.com/files/7063_the_social_and_economic_contributions_of_the_life_insurance_industry.pdf.
12. Ibid.
13. The Bell Jar, Chapter 4, by Sylvia Plath.

As a teenager, I needed course correction. My parents sent me 1,150 miles away to North Dakota to work on my Uncle John’s farm in Benson County. Uncle John started out as a farmer with ten acres in the late 1930s. When I served with him he owned 7,000 acres.

Benson County, where the farm was situated, is mostly flat, flat, and flat. It comprises an area of roughly 1,439 square miles. The farm consisted of somewhere around 11 square miles. It abutted a large body of water known as Devil’s Lake. In addition, the farm was proximate to the Spirit Lake Dakota Reservation located on the southern shores of Devils Lake. The people represented the Pabaksa, Sisseton and Wahpeton bands of the Dakota tribe.

The four people responsible for working the farm (which also had several hundred head of cattle) included Uncle John, his son Jimmy, a hired hand named Roger, and me. We rose early six days a week, worked hard all day, attended church on Sunday morning, and managed to get in some fishing now and again. When we really wanted to go crazy, we drove into the county seat of Minnewaukan to buy snacks.

One hot summer day I was a few miles from the house plowing fields with a Versatile Tractor and wide tillage hitch with tandem discs. The tractor stalled and would not restart. I sprayed ether into the carburetor as instructed, but nothing happened. I walked the few miles back to the house on dusty, heat reflecting “roads” (gravel paths).

Uncle John saw me coming. I was sweaty, tired, frustrated, and felt a little guilty.

“Needed a walk, did ya?”
“Tractor stalled and wouldn’t start. I cannot believe it. Stupid thing is stubborn.”
“So, are you mad?”
“Yes.”
“What kind of world did you think you were born into?”
“Huh?”
“In this world things break. We get our satisfaction from fixing broken things and persevering.”

My Uncle John never enjoyed formal education beyond the third grade. He would say, “And I haven’t used up all that yet.” This moment was one of many that demonstrated how much wisdom a person can gain apart from schooling.

The World We Were Born Into
There is an ancient song that reads:
“O Lord, what is man that You regard him,
or the son of man that You think of him?
Man is like a breath;
his days are like a passing shadow.”¹

Human beings are fragile, and especially so at birth. Throughout human history, children have succumbed in high percentages from birth to five years of age. One study of burials in the Negeb suggests that in ancient times only 10 percent of people lived to age 35, mostly because 50 percent of children died before age five.² Biologist and gerontologist Caleb Finch describes the average life expectancy in ancient Greek and Roman times as short, with people living for approximately 20 to 35 years.

“Unhygienic living conditions and little access to effective medical care meant life expectancy was likely limited to about 35 years of age. That’s life expectancy at birth, a figure dramatically influenced by infant mortality—pegged at the time as high as 30 percent.”³

Life expectancy is an average. If you have two children, and one dies before their first birthday but the other lives to the age of 70, their average life expectancy is 35.

Once we eliminate the incidence of child mortality, life expectancy has remained fairly stable throughout recorded history. That is, life spans have remained steady. There is, of course, a distinction between life expectancy and life spans.

Another ancient song indicates the fact that life spans in ancient times looked similar to today’s results:

“Our days may come to seventy years,
or eighty, if our strength endures;
yet the best of them are but trouble and sorrow,
for they quickly pass, and we fly away.”⁴

For all of us fortunate enough to reach the age of majority, we are not yet out of the woods. Life can be full, at times, of trouble and sorrow. Pliny melodramatically wrote, “Nature has, in reality, bestowed no greater blessing on man than the shortness of life.”⁵

As human beings, we live in a world full of dangers, mishaps, potential injury, an alarming number of pathogens, and our own tendency to take undue risks. Misery can keep us company in an inordinate number of ways.

Consider this list from the CDC⁶ regarding the leading causes of death (and incidents) in the United States in 2019:

• Heart disease: 659,041
• Cancer: 599,601
• Accidents (unintentional injuries): 173,040
• Chronic lower respiratory diseases: 156,979
• Stroke (cerebrovascular diseases): 150,005
• Alzheimer’s disease: 121,499
• Diabetes: 87,647
• Nephritis, nephrotic syndrome, and nephrosis: 51,565
• Influenza and pneumonia: 49,783
• Intentional self-harm (suicide): 47,511

Fixing Broken Things
In independent insurance distribution and financial services, we bring people the tools to fix brokenness before it happens.

Right Tools
Consider the basic financial tools that people need to live their ordinary lives:

• Savings accounts and emergency funds
• Health insurance
• Disability insurance
• Life insurance
• LTCI
• Property and casualty insurance
• Education accounts
• Retirement accounts
• Annuities

What happens if people do not have/own these tools?

First example:
In 2009, in the United States, almost 3 million homeowners received at least one foreclosure filing. Lenders generally begin the foreclosure process once homeowners are delinquent by two or three months. The recession triggered a spike in unemployment. A foreclosure notice usually follows a pink slip by three to six months.

These people could not make three of their monthly mortgage payments. The tool they were missing? An emergency fund.

Question: Are you, as an independent financial professional, advising your clients to maintain an emergency fund?

Just 40 percent of Americans are able to cover an unexpected $1,000 expense with their savings according to a 2019 survey from personal finance website Bankrate.⁷

An emergency fund is a separate savings account used to cover or offset the expense of an unforeseen situation. Emergencies, by their nature, are unpredictable. When they happen they can derail your client’s financial stability. A sudden illness or accident, unexpected job loss, or even a surprise home or car repair can devastate your client’s life if unprepared. The size of an emergency fund will vary depending on your client’s lifestyle, monthly costs, income, and dependents, but the rule of thumb is to set aside at least three to six months’ worth of expenses.

Second example:
The Social Security Administration says, “Just over one in four of today’s 20 year-olds will become disabled before reaching age 67.”⁸ (Compared with the estimated one in nine of today’s 20-year-olds who will die before reaching age 67.)

Among the most common disability insurance claims are cancer, musculoskeletal disorders, and depression.

Question: Are you, as an independent financial professional, advising your clients to purchase disability income insurance?

What would happen if your client got hurt at work tomorrow and could not go in for a few months? What resources would the client’s family have available to carry them through that period?

What about a car accident or illness that takes a year or two for your client to recover?
Disability is a common cause of bankruptcy.

If your clients’ families rely on your clients’ incomes, then as a financial professional, looking out for your clients’ well-being, you should recommend that they buy it.

And Persevering
In independent insurance distribution, we guide people to establish the wherewithal to persevere through the hard times, lean times, or long lives.

There is a staggeringly immense lack of preparedness in the United States. As seen above, too many people have no emergency fund. Similarly, too few are even preparing to afford their lifestyles into their retirement years.

“As of June 2020, half of married retirees rely on Social Security checks for half of their income, according to the Social Security Administration, revealing a lack of cash elsewhere. That number jumps to 70 percent for unmarried people.

Just half of households, per the Federal Reserve, have any retirement accounts at all.”⁹

The financial services industry has poorly served a huge proportion of the American population in regard to helping people prepare for the future and the post-working years.

Question: Are you, as an independent financial professional, willing to serve the large population of people who are unable to afford your fees, or whose purchases would generate little, if any, compensation for you?

Summary
Maybe all of us in independent insurance distribution and financial services could make a great difference in more lives if we simply began asking all the people around us, “What kind of world did you think you were born into?”

In addition, maybe those of us who are comfortable need to be reminded that another painful aspect of the world we live in is inequity and disparity. As Sophia Mowlandejad wrote recently for the Fidelity Center for Applied Technology^SM:

“Financial exclusion is a reality for millions of Americans who don’t have access to useful and affordable financial products and services delivered in a responsible and sustainable way…. Exclusion runs across the financial lifecycle—impacting many different demographics. People excluded from mainstream financial services are more vulnerable to poverty, eviction, and food insecurity because it’s harder for them to build wealth, achieve financial stability, and generate better outcomes.”¹⁰

As an independent financial professional, are you willing to roll up your sleeves and begin tackling the real needs of millions of our fellow Americans, in particular the financially excluded?

Extending yourself to the least among us might get you the highest satisfaction of your career by simply helping them fix the broken things in their lives and preparing them for persevering.

References:

1. Psalm 144:3-4, the Holy Bible, English Standard Version, ESV® Text Edition^® (2016), copyright © 2001 by Crossway Bibles, a publishing ministry of Good News Publishers.
2. Page 880, the ESV Archaeology Study Bible, copyright © 2017 by Crossway Bibles, a publishing ministry of Good News Publishers.
3. Beltrán-Sáncheza H, Crimmins E, Finch C. Early cohort mortality predicts the rate of aging in the cohort: a historical analysis. J Dev Orig Health Dis. 2012;3(5):380–386. doi:10.1017/S2040174412000281.
4. Psalm 90:10, the Holy Bible, English Standard Version, ESV® Text Edition^® (2016), copyright © 2001 by Crossway Bibles, a publishing ministry of Good News Publishers.
5. CHAP. 49.—THE GREATEST LENGTH OF LIFE, The Natural History, Pliny the Elder, translated by John Bostock, M.D., F.R.S., H.T. Riley, Esq., B.A., Ed.
6. https://www.cdc.gov/nchs/fastats/leading-causes-of-death.htm.
7. https://www.bankrate.com/banking/savings/financial-security-january-2019/.
8. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf.
9. https://www.forbes.com/sites/advisor/2020/10/06/studies-confirm-that-half-of-americans-struggle-with-retirement/?sh=7ab29c0d6f9f.
10. https://fcatalyst.com/blog/april2021/how_exclusion_affects_consumers_across_the_financial_lifecycle?utm_source=everyonesocial&utm_medium=Inclusive%20Finance&utm_campaign=Social%20Media&es_id=fa17545252.

Remember the song, “You Can Call Me Al,” by Paul Simon? Very catchy tune, and quirky lyrics.

“If you’ll be my bodyguard
I can be your long lost pal
I can call you Betty
And Betty, when you call me, you can call me Al”

Well, there is a backstory to these lyrics. The names “Al” and “Betty” in the song came from an actual incident in Paul Simon’s life. He was attending a party with his then-wife Peggy Harper. A French composer and conductor named Pierre Boulez also attended the party. Monsieur Boulez mistakenly referred to Paul as “Al” and to Peggy as “Betty.” This helped inspire the song.

Wait For It
I have had people forget my name, call me by the wrong name, and talk to me multiple times over periods of time without ever bothering to learn my name. These situations do not frustrate me as much as when I forget someone’s name, or worse, call them (confidently) by the wrong name.

True story. I have taken my cars to the same dealership for service for ten years. The service department has multiple standing desks to the right of the big service bay doors at which various service managers are stationed. I have worked with Brett, Tony, Leah, and several others, but have felt the strongest connection to Brian. This man lost 85 pounds in 2019! He talks about his kids, vacations, and is remarkably knowledgeable about the model cars we own.

For many years I have spoken his name and addressed him with enthusiasm even if I am being served by Tony, Brett, or others.

No joke. Recently I was standing at his desk after we had discussed the car’s issues, when Brian said, “My name is Jason.” Like that. Matter of fact.

I could not have been more apologetic.

He said that for many years, several times a year, the service managers have listened for me to trumpet his name! They see me pulling in and say, “Wait for it.”

I should probably be embarrassed, but in actuality, I wonder if it is my mistake to own. He does not wear a name badge, and there is no name plate on his desk. In all these instances did he ever think to straighten me out? I am totally at fault, but I also feel like I was trying to use his name to show respect.

Names and Brain Matter
Brain, not “Brian.” Whew.

According to the journal Brain Research (dedicated to publishing articles within the vastly expanding field of Neuroscience), something chemical and electrical happens in our brains when we hear our own names.

“There are several regions in the left hemisphere that show greater activation to one’s own name, including middle frontal cortex, middle and superior temporal cortex, and cuneus. These findings provide evidence that hearing one’s own name has unique brain functioning activation specific to one’s own name in relation to the names of others.”1
When we hear our name, we turn towards the speaker. Our name is a trigger for our attention.

We experience cognitive dissonance when someone uses our name to call someone else. It takes a moment to realize they are not talking to us. In my family, I am David, our son is David, my wife’s brother is David, and one of our daughters married a David. All of us turn when someone says, “David.”

At birth we are each given a name. That name is like a string that others tug to gain our attention. This began way back when our parents wanted us not to touch something, to come to them, to stop doing something, or to look in their direction for important information. When our name is spoken, not only does our brain register that someone wants our attention, but it also informs us that someone is focusing their attention on us.

Question: Are you skilled at using other people’s names when you are indeed making them the focus of your attention?

The Power of Using Another Person’s Name
When we say another person’s name in conversation it has several possible effects on them:

• When you use their name, they know you know them.
• Your tone when you say their name indicates how well you may know them.
• Your facial expression when you speak other people’s names tells them what you think of them.
• The frequency with which you use their name indicates how important they are in the context of a conversation.

These communication elements combine to create the true power of using someone’s name.

When we say another person’s name it is always in the context of making a statement, asking a question, or talking about the person to others. The use of another person’s name is usually followed by words describing feelings like happiness, concern, empathy, disappointment, or amazement. When they hear their name, they will also hear these emotions. They will feel either important and valued, or something negative.

Saying other people’s names gives you the power to shape the way people think you view them.

When someone looks back at a conversation that they had with you, your use of their name will cause them to remember how you made them feel.

Proper Use of Names
Like all the words you use in conversation, names matter. How you use them, how often, and in what context, matters.

For your consideration:

• Say a person’s name when you sense you need to bring them back into the conversation. Just their name attracts attention and reminds them that they are the subject of your attention.
• Say a person’s name to appear more competent in their eyes. They will hear your statements with personalized connotation.
• Say a person’s name when you want to instill strong feelings in them during the interaction. Using a person’s name makes them feel important and validated.
• Say a person’s name to establish trust between you. Their name on your tongue means you care and helps build an emotional connection with them.
• Say a person’s name when you are going to pay them a compliment, give specific encouragement, or acknowledge something important that they said. A person’s name is part of who they are, and if you are going to speak about them intending to build them up, they will hear it with greater receptivity.

Sometimes, the only word necessary to convey everything we want to say to another person is simply their name. When someone we are with is overcome by emotion, acting irrationally, refusing responsibility, or simply at wits end, just saying their name can be calming, reassuring, and be all the confrontation that is needed.

The Gospel of John presents the first encounter of the risen Jesus with another person. She happened to be a woman who followed him for all the years of his ministry. She had seen him die. She had come to apply essential oils for burial.

“Jesus said to her, ‘Mary.’” (John 20:16)
Saying a person’s name says, “I see you. I am here.”

Summary
All people want to be treated as human beings, and not as prospects, projects, statistics, and certainly not objects. The simplest way to communicate to someone that they matter to you is to use their name. There is a danger, however, in using a person’s name in order to manipulate them. They will know if that is the intent. Misusing another person’s name will only diminish your own.

A proper, respectful use of another person’s name can elevate the value they receive in a conversation. Always end every conversation by using the other person’s name. They will leave the encounter feeling it was intimate and friendly.

Just make sure you are using the correct name. Remember “Brian?” (Actually, Jason).
Maybe he will write a song entitled, “You Can Call Me Brian.”

Reference:
https://www.sciencedirect.com/science/article/abs/pii/S0006899306022682.

Knock, knock
Who’s there?
Adore
Adore who?
Adore is between you and me so please open up!

I have a small extended family. In my family growing up I had two sisters. While one sister (deceased) never had children, my other sister has four (two girls and two boys). My wife also grew up in a family of three children. She has two brothers. Her one brother never had children, and her other brother did not first marry until into his fifties, to a woman who had three daughters. We really do not have relationships with these young women.

Effectively, I have two nieces and two nephews.

One of my nephews recently observed, “I think we’ve all always known that our family and your family were very different from each other—having different beliefs, different temperaments, even a different socio/economic status.” He is correct. The way our families behave is quite different. We previously gathered as one large family every now and again, especially at Christmas when the children were growing up, but that ceased when the glue of our family—Grandma (my Mom)—passed from this earth in December, 2015.

Since then I have used texting as a means of keeping in contact with my nieces and nephews. In sorting through old files I discovered drawings they had given me, when they were young, as well as letters and cards. I scanned these and texted these images to them. In addition, I frequently texted photos of my family members, shared what I was up to, and passed along quotes from what I was reading.

In my mind, I was being an uncle who wanted to stay connected.

Ann Landers once said, “Don’t accept your dog’s admiration as conclusive evidence that you are wonderful.” True! And trusting your own opinion of yourself is even more unreliable!

Wake Up Time
In August of 2020 I was in the midst of planning the Fall Webinar season with the non-profit I serve. My team and I had exciting opportunities to conduct Leadership and Emotional Intelligence Training for university students in Romania, Ukraine, Latvia, Poland and Russia. I sent my nieces and nephews an enthusiastic text about all the work ahead of us.

What was I expecting to receive in return? I don’t really know. What I did not expect is what I received from one nephew. He wrote:

“That’s nice. Congratulations. And I appreciate this as an attempt to stay in touch with us, but I can’t help but feel that a conversation requires inquiries as well as statements. We receive updates on your life and your children’s lives, but I don’t believe you’ve ever asked what any of us are doing.”

Whoa. Whatever it was I thought I was doing was not at all being received as I had hoped.

Emotional Intelligence (EQ)
I train university students in emotional intelligence, which of course includes self-awareness. Huh. I thought I had some. Self-awareness, that is.

Look again at the Knock-Knock joke. It is funny, right? Except, it is also instructive. Sometimes there is a door between us and other people. Sometimes, it is “adore” that separates us. Our English word “adore” comes from the Latin adorare which combines ad—“to”—and orare—“speak.” What we adore we tend to “speak to” or “speak of.” Apparently, when it comes to my nephews and nieces, what I adore is me, mine, and myself.

My son-in-law tells his three daughters this quip when they argue over toys: “Sharing is caring.” I thought that was what I was doing—showing care by sharing. Turns out, we show care by showing we care.

Emotional Intelligence (EQ) is based on two factors: 1) What we see; and, 2) What we do. EQ is about seeing and managing ourselves, but also seeing and managing relationships with other people. There are the four components of EQ:

• Self-Awareness
• Self-Management
• Social Awareness/Empathy
• Relationship Management

Awareness is seeing. Managing is doing.

In regard to my interactions with my nephews and nieces, I was neither seeing myself, nor them, and managing neither myself nor our relationship.

EQ and You
If you are in independent insurance distribution, or an independent financial professional, your business is people. EQ is a requirement!

A study by the Association of Financial Advisers found that what differentiates leading advisers in the eyes of clients are actually the interpersonal skills and emotional intelligence that complement the adviser’s technical skills. “Clients rated capabilities such as empathy, listening and understanding client needs a massive 82 percent above professional reputation, quality of advice and other factors.”¹

Earlier this year, thought leaders in the financial planning space gathered online for the AICPA’s 2021 Personal Financial Planning (PFP) Summit. “Looking to the future, the vast majority of attendees said it will be more important for financial planners to manage their clients’ emotional state moving forward than it has been in the past. And to be successful in the future, the top three most-cited skills planners will need, in addition to technical skills, are emotional intelligence, interpersonal communication, and adaptability.”² (Author’s emphasis)

I like this definition of EQ:

“Emotional intelligence is that ability you have that allows you to be smart about your feelings and emotions. Those who are emotionally intelligent are also smart when it comes to sensing the feelings and emotions of others.”³

It helps to begin by looking at the background of the word “intelligence.” The term comes to us from two Latin root words legere—to “choose or select”—and inter—“between.”
Combined, these words literally mean “the ability to choose between” options and to make the better choice.

What is the impact of emotions on our ability to make good choices?

• Managing ourselves: During normal, unemotional times, we can see many options available to choose between. But when a strong emotion rises up in us what happens? That emotion can become so strong it blinds us to other choices so that we only see one option.
• Managing relationships: Using social awareness and empathy, we can create strong relationships. Making appointments with other people virtually or in person is what we do to build relationships. Practicing empathy is how we do it.

Test Your Level of EQ:
1. Are you someone who listens with your eyes as well as your ears? Do you listen beyond just what is being said by paying attention to the manner in which it is being said? Are you hearing the meaning of what is being said?

2. In your work or practice are you asking questions that convey care and concern when interacting with others? (What I obviously failed to do with my nieces and nephews.)

3. Are you able to distinguish between your personal reactions to facts and circumstances and the reactions of your clients and associates?

4. Are you in the moment, and very present when speaking with others? Or, when they are speaking, are you thinking of what you are going to say next?

5. Do you control your anxieties, anger, frustrations, and disappointments such that they are not influencing what you can see in others?

6. Do you control your own biases? Do you keep yourself from assuming what someone else believes by actively seeking their viewpoints?

Leaning into Empathy
I think the response from my nephew hit me hard because I saw my failure to demonstrate empathy. Empathy is purposefully tuning in and sensing the emotions of others.

“There are three main types of empathy: Cognitive, Emotional, and Compassionate.

1. Cognitive empathy means putting yourself into someone else’s place and their perspective.
2. Emotional Empathy means when you feel the other person’s emotions alongside them, like you have their emotions.
3. Compassionate Empathy is described as feeling someone’s pain and acting to help.”⁴

Empathy is where independent financial professionals, brokerage general agents, and wholesalers can add a lot of value to the people they serve. The better we can understand why people feel, act, and do what they do, the more successful we will be.

Practicing Empathy:

• Begin taking written notes of how the people you are working with handle relationships.
• Take special note of how other people express their feelings in words, how they describe their needs, and what concerns are top of mind.
• When relating to others one on one use a system that orients you towards others, not necessarily just being friendly and personable but rather curious and compassionate.
• Practice persistence. People admire someone who does not give up, lose patience, or simply move on.
• Control your impulses by not interrupting, not filling in another person’s word when they pause or not completing another person’s sentences.
• Look for opportunities to insert humor and hope.
• Remember that empathy is not an action. Empathy is an internal commitment that causes you to experience something from another person’s standpoint.
• When you discern someone’s emotional pain, stand with them, sit by them, and lend just your presence.

Summary
The title of this article is “EQ=2xTC.” This stands for: Emotional Intelligence Yields Twice the Number of Trusting Clients

In May of 2020, the MDRT published a study that found that Americans deem emotional intelligence the most trustworthy quality in an advisor.

“Americans would be more likely to trust advice from advisors who:

• Listen to and acknowledge their clients’ needs (57 percent)
• Communicate in easily understood ways (57 percent)
• Follow through on their word (55 percent)
• Show they care about their clients as people (52 percent)”⁵

Bottom line: Unlike IQ which we are born with and cannot change, EQ can be improved. It starts with internal reorientation, redetermining purpose, reevaluating priorities, and choosing to change.

In our roles in financial services we want to influence or inspire others. This begins with being transparent and genuine, by being our true selves. More than friendliness, trust is required. Trust is built through empathy. Empathy leads to genuinely discovering the best outcomes in each situation and finding common ground with people of all backgrounds.

Personal application:
My nieces never contributed to the conversation last August. I have made no progress in their direction. However, I listened to my two nephews. Since I do not live near them, last September I invited them to speak with me over Zoom. Starting then we began to meet for 60-90 minutes on Saturday afternoons twice a month. They appreciate the fact that I am asking questions about them. I promised them that I would act differently than before and am following up on that. They are both avid readers. I asked them if they would enjoy reading a book and discussing it on our Zoom calls. They said they would and suggested the book, “To Begin Where I Am: Selected Essays,” by Czeslaw Milosz.
Not only has my self-awareness improved, but I have also gained close relationships with these amazing young men!

What about you? I invite you to join me in growing your EQ!

References:

1. https://www.afa.asn.au/news/whitepapers/the-trusted-adviser-2.
2. https://www.cpapracticeadvisor.com/accounting-audit/news/21212231/the-tops-skills-financial-planners-need-to-succeed.
3. https://positivepsychology.com/emotional-intelligence-goleman-research/.
4. https://newplannerrecruiting.com/enhancing-your-eq/.
5. https://www.mdrt.org/emotional-intelligence.

“Good fiction creates empathy. A novel takes you somewhere and asks you to look through the eyes of another person, to live another life.”¹ —Barbara Kingsolver

Over the years I have heard many people cite the fact that the Bible frequently talks about money. Depending on the translation you use, there are as many as 2300 verses that reference money, wealth, or possessions. You may be familiar with some of these:

• “The borrower is a slave to the lender.” Proverbs 22:7
• “For the love of money is the root of all kinds of evil.”1 Timothy 6:10
• “It is more blessed to give than to receive.” Acts 20:35

The Bible of course is literature. It turns out, money is a vast topic in many forms of literature (second only to love, perhaps).

There would not be literature without people, nor would there be money.
To succeed in the financial services business, a business about money, we must first understand people. To understand people, we must collect stories about them. Humans are not predictable and determinative like algebraic equations. Human lives display “narrativeness.”

To apply knowledge about the human experience we need both to read about people in the form of stories, and also share what we learn from those stories.

Question: Are you reading fiction, whether short stories or novels? Are you gathering stories to help you better understand your clients?

Gaining Financial Education through Fiction
I came across an intriguing paragraph while reading articles posted on Knowledge@Wharton, an online business journal of the Wharton School of the University of Pennsylvania.

“When you read a great novel and engage with its characters, you sense from within what it is like to be someone else. You see the world from the perspective of a different social class, gender, religion, culture, sexual orientation, moral understanding, or other features that define and differentiate human experience. By living a character’s life vicariously, you not only feel what she feels, but also reflect on those feelings, consider the nature of the actions to which they lead and, with practice, acquire the wisdom to appreciate actual people in all their complexity.”²

Fiction, when well-written, helps us to understand real people by first seeing the world through the experience of fictional characters. Such insights are as necessary in financial services as in any discipline. If we are not equipped to understand what motivates people, how can we possibly grasp their limitations, clearly see their problems, or recommend appropriate solutions? People do not always act rationally or, seemingly, even in their own self-interest.

This is the point Barbara Kingsolver made. Empathy is necessary to successfully build a trusting clientele.

Sometimes we need empathy to understand the collective actions of an entire people. (Macro.) Usually, we need empathy to better understand the individual people we meet. (Micro.)

Macro View
Consider the Brexit vote. People on that occasion seemingly voted against their own economic self-interest. This could have been foreseen by economists who were familiar with Dostoevsky’s Notes from Underground, in which he astutely observes that human beings will sometimes willingly act against their self-interest precisely to demonstrate their unpredictability.

“To care only for well-being seems to me positively ill-bred. Whether it is good or bad, it is sometimes very pleasant, too, to smash things.”³

Micro View
First Example: Edith Wharton was born Edith Newbold Jones on January 24, 1862. As a novelist and author of short stories, she “drew upon her insider’s knowledge of the upper-class New York aristocracy to realistically portray the lives and morals of the Gilded Age.”⁴ The expression, “Keeping up with the Joneses,” is said to refer to her father’s family. Wharton was the first woman to win the Pulitzer Prize in Literature, for her novel The Age of Innocence. Her novel The Custom of The Country provides insight into a behavior still common today. Insatiable greed.

The novel’s subject is Undine Spragg, a beautiful, vain, spoiled, ambitious, and selfish woman. Undine feels entitled to live a luxurious lifestyle and she intends to live it to the fullest. Her indulgent overspending leads to marital stress and financial strain.

“She had everything she wanted, but she still felt, at times, that there were other things she might want if she knew about them.”⁵

Second example: Honoré de Balzac wrote a series of some 90 novels and novellas collectively known as The Human Comedy. The books that made up the series were published between 1829 and 1847. Eugénie Grandet is one such novel first published in 1833. The novel is a provocative, entertaining, moral tale about avarice and stinginess that remains astonishingly relevant.

Honoré de Balzac was no stranger to the tyranny of money. He studied law and philosophy but to his family’s dismay (some things never change) he settled on a literary career, in which he was not initially successful. He failed in his publishing and business ventures and landed in debt. He wrote at a feverish pitch, fueled by gallons of coffee, and an urge to be financially successful.

In Eugénie Grandet we meet Felix Grandet, a master cooper, who married the daughter of a wealthy timber merchant. This took place when the French Republic had confiscated the lands owned by the Catholic Church. Felix Grandet auctioned his wife’s dowry in order to buy substantial property. At this time, his only daughter, Eugénie, was ten years old. Soon more wealth fell into Grandet’s lap by way of inheritance of the estates of his mother-in-law, grandfather-in-law, and grandmother.

With all this wealth, he was an unhappy miser. No one but his banker was invited into the house. Wealth made him powerful, but not generous.

“The miser does not believe in a life to come; the present is everything for him.”

Other novels explore similar important financial lessons:

• “Money doesn’t buy happiness.” Read more about the depth of this truth in The Great Gatsby, by F. Scott Fitzgerald.
• “You cannot count on an inheritance.” This is graphically depicted in The Nest, by Cynthia D’Aprix Sweeney.
• “Only fools treat their money with childish contempt.” This, and other valuable lessons are learned from reading , by J.D. Salinger.
• “Spend within your means, or misery will ensue.” Like the reality of this experience, this subtle lesson is discovered in Gustave Flauebert’s Madame Bovary.

Fairy Tale and Fable View
Aesop’s Fables are so prized as a source of proper moral and practical education (including financial education) that the entire collection is available free on a website hosted by the Library of Congress.⁶ Consider The Miser and His Gold:

“A Miser had buried his gold in a secret place in his garden. Every day he went to the spot, dug up the treasure and counted it piece by piece to make sure it was all there. He made so many trips that a Thief, who had been observing him, guessed what it was the Miser had hidden, and one night quietly dug up the treasure and made off with it.”

The Miser valued the gold so much that he continually wrapped his arms around it and whispered his affections for it. His world revolved around it.

“When the Miser discovered his loss, he was overcome with grief and despair. He groaned and cried and tore his hair.

A passerby heard his cries and asked what had happened.

‘My gold! O my gold!’ cried the Miser, wildly, ‘someone has robbed me!’

‘Your gold! There in that hole? Why did you put it there? Why did you not keep it in the house where you could easily get it when you had to buy things?’

‘Buy!’ screamed the Miser angrily. ‘Why, I never touched the gold. I couldn’t think of spending any of it.’

The stranger picked up a large stone and threw it into the hole.

‘If that is the case,’ he said, ‘cover up that stone. It is worth just as much to you as the treasure you lost!’”

The Moral: “A possession is worth no more than the use we make of it.” In other words, wealth for the sake of itself—merely for bragging rights—is worthless.

Aphorisms and Maxims
The writings of Benjamin Franklin (under the pseudonym Poor Richard) often tackled topics of money and business. Entitled Poor Richard’s Almanack, this collection contains many truths that are simple to use when instructing clients.

Examples:

• “Rather go to bed supperless than rise in debt.” Franklin had a great disdain for being in debt. In those days, if you were in debt, the whole town knew it. He would rather be hungry than owe money.
• “Tis easier to suppress the first desire than to satisfy all that follow it.” Franklin compared “Wants vs. Needs.” Fighting the urge to spend money makes it easier to suppress future desires to spend.
• “For age and want, save while you may; No morning sun lasts a whole day.” There is no time like the present to begin saving for old age and times of need.
• “Beware of little expenses; a small leak will sink a great ship.” Franklin knew that little things add up. Spending just $1.50 per day, five days a week, for fifty-two weeks = $360!

Summary
A successful independent financial professional is someone who seeks to understand people. To gain this understanding requires reading stories, nourishing empathy, and listening closely to the client. None of us will live long enough to gain the wisdom that humanity collectively has accumulated. This collective wisdom is found in novels, short stories, fables, and aphorisms.

Clients deserve the wisest advice we can give. That wise advice is readily available—if only we will read.

References:

1. https://www.brainyquote.com/topics/novel-quotes.
2. https://knowledge.wharton.upenn.edu/article/could-a-bit-of-tolstoy-and-austen-improve-economic-forecasting/.
3. Notes from Underground, Fyodor Dostoevsky, Vintage; Reprint edition (August 30, 1994).
4. https://en.wikipedia.org/wiki/Edith_Wharton.
5. The Custom of the Country, Edith Wharton, page 362, Bantam Classics; Later Printing edition (May 1, 1991).
6. http://read.gov/aesop/112.html.

On December 7, 1965, the writer E.B. White wrote a letter to a friend. From this same man White had previously heard about a boy telling his teacher that alligators eat herons, pigs, small dogs, and beer bottles.

“I am writing simply to report a development of the story…While drifting south this morning on Route 17, trending towards Brunswick, I regaled my wife with this yarn, hoping to relieve the tedium of mid-morning on a national highway. She listened attentively and made no comment. About five minutes later she said, ‘I wonder how an alligator eliminates a beer bottle.’

‘That’s simple,’ I replied. ‘He Schlitz.’

I did not get a very strong response to this witticism, and we knocked off another couple of miles in silence. Then I asked Katherine, ‘Do you know how an alligator feels after he has passed a beer bottle?’ She said no, she didn’t know.

‘He feels sadder, Budweiser.’

The response was still rather weak, and silence fell upon us again.

A few minutes later, my wife broke the awful stillness. ‘Pabst he does, and Pabst he doesn’t.’”¹

This incident is as much an insight into their relationship as it is an indication of their personalities. At this point in their lives, E.B. and Katherine had been married for 36 years, he was 65 years old and she was 72 years of age. Many couples no longer enjoy lively conversation after so many years of marriage.

“The more you get to know a person, the easier it becomes to run out of things to say.”²

This is not only true of life partner relationships, but also of long standing Client-Advisor relationships.

Independent financial professionals (IFPs) are in the relationship business. Clients place as much value having a close relationship with someone they trust as they do in securing strong investment returns. IFPs who build their practice over several decades have many relationships. The question is, how can these relationships be kept strong and active?

Authentic and Fresh
The Client-Advisor relationship is similar to every other important relationship. It is kept strong and active by the application of several skills:

• Regular, personal, and effective communication.
  • The relationship takes priority over simply seeking successive revenue opportunities.
• Continuous assessment of the goals of the relationship.
  • With each life stage, the IFP has the ability to assess new and pressing financial realities and open new doors.
• Expressed commitment from both parties.
  • No relationship can rest on past glory, so the IFP and the client need to make fresh commitments to one another.
• Courage and the willingness to be true and authentic.
  • If at any point either party feels like the other is hiding an ulterior agenda, or harboring unsettling concerns, there is no point in the relationship continuing unless the air is cleared.
• The assumption of positive intent.
  • Every single relationship will encounter road bumps, twists and near accidents, which means, each party must assume the other did not intend harm or have malicious motives.
• Most important—trust.
  • The IFP needs to take the client at his/her word and vice versa.

The First Quarter of a New Year is the perfect time to take stock of our most important asset–relationships. This is particularly true of IFPs and their clients. (It is also true of wholesalers and their BGA relationships, and BGAs and their advisor relationships.)

In the mature phase of the Client-Advisor relationship, clients do not come into the office as often, and may not be as responsive to emails or phone calls. Still, because of the work done together, the client is enjoying regular retirement income, or experiencing handsome returns on assets invested, or seeing the account values grow in the life insurance and annuity products they purchased.

Note: Past success is no reason to cease making progress.

Best Practices with Mature Relationships

• Trust is maintained when care is expressed. While a client’s financial life can be in order, other aspects of their world can change and cause upheaval. The IFP who cares, really cares, inquires, respectfully, into the other aspects of a client’s life such as family dynamics, health, career advancement, and achievement of dreams.
• Three magic words: “How about you?” If a client asks a question, the wise IFP responds and then asks the client to do the same. This deflection adds to the impression of interest and care.
• Client Reviews are conducted just as professionally as always. No short cuts are taken. At the same time, nothing superfluous is forced on the client. There is nothing worse than an IFP telling a client, “Thanks for coming in today. I guess we had nothing to talk about, nothing to review.”
• It is unwise to start driving to a new destination without first researching the best route to get there. Similarly, it is unwise to start a conversation without a goal in mind. A conversation without a game plan is like driving without first planning the route.
• The wise IFP freshens the relationship with mature clients by asking thoughtful questions. Examples:
  • You have come a long way. Are you pleased with the direction you are heading now?
  • You have achieved great success in your career. Do you still enjoy what you do?
  • At this stage in life, how are you building new relationships?
  • What is left on your bucket list?
  • What fears do you have regarding your kids’ and grandkids’ futures?
  • Can you describe the ideas you have for how you can give back?
  • Is there a group of people or type of person you care deeply about?
  • Have your risks changed?
  • Are you seeking different kinds of rewards?
• The IFP is wise to ask these kinds of questions because the answers can lead to more planning and perhaps product purchases.

Light and Life
Perhaps the most important opportunity in close relationships is leaving every encounter with both people feeling better. We easily recognize an enjoyable conversation by the fact the persons involved in it are laughing a lot.

A. Humor: I found four pertinent quotes about the importance of humor.³

• “I think the next best thing to solving a problem is finding some humor in it.” –Frank A. Clark
• “Laugh as much as possible, always laugh. It’s the sweetest thing one can do for oneself and one’s fellow human beings.” –Maya Angelou
• “A good laugh makes any interview, or any conversation, so much better.” –Barbara Walters
• “The more I live, the more I think that humor is the saving sense.” –Jacob August Riis

Question: Are you bringing humor into your long-standing relationships?

Example: My wife and I have homes in two locations separated by a five-hour drive. We experience the togetherness of the car’s passenger compartment four times or more every month. That translates into twenty hours together in close quarters!

Sometimes we drive along in silence. In these moments she is often on her phone while I drive. Recently, I waited until she was off her phone but indicated that I had a serious question to ask her. When she was ready, I asked:

“Do you know the Muffin Man?”

Without hesitation, she said, “I’ll answer your question if you answer mine.
… How much is the doggy in the window?”

B. Positivity: Enjoyable conversations stem from positive content that two or more people share. In this era of craziness and disruption, we all need to hear good news. In reality, good things are happening all around us. However, these instances generally do not make the front page or cable news. When we can share good news with others, we provide lift in the conversation.

Question: Are you able to bring good news into your conversations?
Suggestion: get a daily dose of good news via email from this web site: https://www.goodnewsnetwork.org/category/news/usa/

C. Encouragement: “The word encourage comes from the Old French word encoragier, meaning ‘make strong, hearten.’”⁴ Encouragement is not the same thing as praise. Encouragement acknowledges what people do, the effort expended and the improvement someone makes. It is a means of lending others courage to continue to do the hard, right thing. Everyone everywhere wonders if they are doing the right things well.

Question: Are you able to sense when another person needs encouragement?

Consider: Make use of each contact with mature clients to:

• Instill confidence
• Feed hope
• Give support
• Give empowerment

D. Something New: Successful IFPs working over many years with the same clients know they cannot change everything for these people. That knowledge, however, does not keep these IFPs from helping their clients change the things they can.

• What was once a dream is now simply impractical. The mature client once asked the IFP for ideas to achieve certain goals. Life, somehow, got in the way.
• The IFP must now apply rigor and creativity to assist the client to search for new, achievable goals, while ensuring suitability to the client’s current circumstances and life phase.
• The word “innovation” comes from the Latin noun innovatio, derived from the verb innovare, which means to introduce “something new.” New can mean repurposed. Clients may have saved money for a goal that no longer is meaningful. How can those funds be applied to some new goal?

Summary:
Longstanding relationships mean that the IFP and the client have seen one another’s ups and downs and have watched each other move through several phases of life. To continue taking these relationships deeper, the wise IFP will introduce authentic freshness, light, and laughter into their conversations.

Humor, positivity, encouragement, and something new are relationship elements that mature clients appreciate universally.

“What do we live for, if it is not to make life less difficult for each other?”—George Eliot

References:

1. Letters of E.B. White, Collected and Edited by Dorothy Lobrano Guth, Harper & Row, 1976, page 537.
2. https://www.lifehack.org/articles/communication/15-things-happy-couples-talk-about-that-draw-them-closer-together.html.
3. https://www.psychologytoday.com/us/blog/here-there-and-everywhere/201101/25-quotes-humor.
4. https://www.vocabulary.com/dictionary/encourage.