Thursday, March 28, 2024

Responsibility

My sons grew up on a farm. They learned responsibility early. The land and the animals demanded constant responsible intimate care and service. That requirement fell squarely on those who created the obligation from the moment we stepped onto that ground. There is no finger pointing on a farm. If you have ever sold or facilitated the purchase of an insured chronic illness or long term care financial instrument you are directly and permanently responsible for the exercise of that leveraged risk obligation. Renewals and service are merely a friendly reminder of what is a permanent obligation. For the last twenty years we have lived in a rapidly shrinking universe of dwindling sales particularly for stand alone LTCI health policies.

In relation to new sales vs growing claims adjudication, we long ago became a negative growth industry.

Although no one wants to discuss or loudly admit it, we are in the midst of what may ultimately prove to be an extended and truly unpleasant rate spiral. All but a handful of carriers still have an open for new business sign on the front door. We are an industry of claim management. Closed blocks of premium dominate our activities including corporate priorities and expenditures. Cries in a wasteland of needed premium growth appear to be dominated by managed care strategies and a plethora of claim management vendors. We are paying claims. Last numbers I saw were in excess of 12 billion. Our sales may not ever have been what we would have preferred but it is absolutely true that we have placed on the books trillions of potential claims dollars now waiting for us just over the horizon. Our industry has no choice but to be focused on the rear-view mirror hoping the police never catch up and prove that we were speeding ahead to avoid the inevitable.

The strength and freedom of thought provided by this magazine now allow me to knock the hornets’ nest out of the tree and run. I would ask you to take a moment and review the case study complaints concerning LTCI claims readily available at your State Board of Insurance or the Better Business Bureau. In my humble opinion they are not dominated as might be expected by rate increase concerns. They are drowning in complaints about confusing policy terms and poor service. Shame on us. We should all be extremely proud of those agent advisors and brokerage centers providing advice and counseling to those already caught up in the struggle to get claims paid. Many are already actively responding to the cries for help to understand how a claim is adjudicated and ultimately paid. Simply providing a toll free number in response to the very point in time in which every financial and emotional risk we were intent on leveraging against is, in my humble opinion, morally and ethically insufficient. There is too much here to complete in one column therefore lets just begin with a few shots across the bow of an industry doing it’s best to respond to current realities:

  • Claims are already in the hands of a very limited number of seasoned claim adjudication administrators. Virtually all closed blocks of premium are not administering their own claims, they have been relocated to an experienced service vendor.
  • The majority of those blocks had some reinsurance in place. Structurally, claim growth ultimately would end up as their responsibility. It is fair and reasonable to believe they would take actions to insure that claims are paid only on a valid demand for payment.
  • There is a wide universe of benefits configurations that were sold. There is simply an endless opportunity to misunderstand, misconstrue, and misrepresent what the consumer thought was purchased or the agent thought was sold.
  • A standardized “Warning” of what to expect when you begin a claim journey is a good place to start. It is often a slow process. There is an abundance of required paperwork prerequisites. It is almost certainly going to involve a face-to-face evaluation by a certified and approved health care professional. Although live computer technologies are also growing. There will be a cognitive evaluation component to the interview.
  • Unfortunately, the devil will be in the details and fine print. Is it payment reimbursement, indemnity or cash? What are the definition nuances of the greatest major hurdle, the dreaded Elimination Period? How those days are totaled and then approved will be a major source of contention.
  • There will ultimately be a required Plan of Care. How that becomes established is critical. How will the ongoing proof that a claim is continuing be handled? How and under what circumstances will the carrier allow an assignment of benefits?

The American consumer remains exposed to the wear and tear of an extended need for custodial assistance. We created and continue to market a complicated insurance leveraging of that risk. The obligations we install with those policies will demand our attention with hands on and standby assistance. We cannot ignore the reality of an adversarial relationship between marketing and claim adjudication that may have always been inevitable. Paperwork is after all just paperwork. I’m sure attempts at fraudulent claim acceptance are also quite real. I am also absolutely certain that we are perhaps inadvertently complicit in building a consumer black eye that may be very slow in healing. We can be better prepared to help navigate choppy water. We can acknowledge that these claims are extremely time sensitive. The need for care is most often immediate and intense. Our involvement and assistance in helping to facilitate expedited claim justice is mandatory.

Other than that I have no opinion on the subject.

Leveraging Data And Analytics To Drive Marketing Success In The Insurance Industry

The use of data analytics and lead distribution tools in life insurance is increasingly gaining momentum, powered by advancements in business intelligence solutions and AI-driven sales technologies. These tools offer significant benefits to both insurance carriers and BGAs. In this article we will explore innovative tools that are transforming the way we analyze and interpret lead data, whether it pertains to insurance prospects or monitoring agent performance.

Staying ahead in today’s highly competitive insurance landscape requires more than traditional marketing strategies. To reach and engage target audiences effectively, insurance professionals must embrace innovative approaches as consumers become increasingly discerning and digital channels continue to proliferate. At the heart of this evolution across the industry lies the power of data and analytics. Harnessing the insights gleaned from data has become indispensable in the quest to maximize marketing ROI and drive sustainable growth.

As a seasoned veteran with 37 years of experience in the insurance industry, I find it imperative to highlight revolutionary solutions that equip insurance professionals to navigate the complexities of modern marketing—especially when some companies are still sticking to archaic and outdated legacy systems. Statistics support the need for constant change—88 percent of
consumers demand more personalized insurance products; 41 percent say they are more likely to switch providers due to a lack of digital capabilities. Industry leaders also realize this, as 67 percent of insurance CIOs say that SaaS will transform the industry in five years or less.1

In this regard, performance marketing automation software Phonexa—one of my partners at InsurTech Express—is a beacon of innovation, empowering insurance professionals to streamline their operations.

A Closed-Loop Approach To Reporting
Accurately tracking and measuring the effectiveness of campaigns remains one of the most significant obstacles insurance marketers encounter. With enterprise-grade tracking software solutions like Phonexa, marketers gain unprecedented visibility into their marketing efforts across various channels, from digital advertising to email campaigns and beyond. These capabilities are essential as insurance agencies focus less on lead generation and instead shift their efforts toward tracking and retargeting leads.

Since sales and marketing teams focus on different stages of the lead funnel, collaboration is necessary to optimize lead retargeting strategies. With sales solely responsible for monitoring a portion of the customer journey, crucial insights regarding lead quality and purchasing intent are obscured, leading to inefficiencies and wasted resources on leads unlikely to convert.

By consolidating data from multiple touchpoints into a single operating platform, Phonexa enables marketers to seamlessly track the customer journey from initial engagement to conversion. This closed-loop approach enhances campaign optimization and facilitates continuous improvement, ensuring marketing efforts align with business objectives.

KPIs to Prioritize
While traditional metrics such as click-through rates and conversion rates provide valuable insights, Phonexa encourages marketers to broaden their scope and focus on holistic KPIs that reflect the entire customer journey. Customer lifetime value, cost per acquisition, and return on investment are invaluable indicators of marketing effectiveness. Each enables insurance professionals to allocate resources strategically and boost profitability.

The importance of personalization in today’s hyper-connected world cannot be overstated. Research indicates that companies adept at personalization yield a 40 percent increase in revenue.2 Phonexa, for one, enables insurance marketers to deliver highly targeted and relevant messages to their audiences using advanced analytics and machine learning algorithms.

Whether by tailoring messaging based on demographic data or optimizing ad placements for maximum impact, Phonexa helps marketers forge meaningful connections with their target customers, fostering engagement and loyalty in the process.

Embracing Data and Analytics
The era of data-driven marketing has dawned upon the insurance industry, presenting challenges and opportunities for forward-thinking professionals. By embracing the power of data and analytics, insurance marketers can gain a competitive edge in an increasingly crowded marketplace. With Phonexa as their trusted partner, life insurance, annuities, and health insurance professionals can accommodate the specific needs of different segments within the industry.

Maximizing the full potential of marketing efforts, driving measurable results, and achieving sustainable growth in the process oftentimes comes down to making a tweak in the tech stack. To learn more about Phonexa’s all-in-one marketing automation solution, visit www.phonexa.com.

Revolutionizing Insurance Sales: The Power of Lead PrioritizerTM
In the dynamic world of insurance, staying ahead in the sales game is crucial. This is where Lead Prioritizer™ comes into play, a groundbreaking tool that is transforming how insurance carriers and brokers/agents approach their sales strategies that is offered through Spinnaker Analytics. Lead Prioritizer™ is a responsible AI solution designed to optimize the distribution, underwriting, and operations processes in the insurance industry. Its primary function is to convert high-priority prospects into placed policies efficiently. This tool is not just for carriers but is also an invaluable asset for brokers and agents.

One of the key features of Lead Prioritizer™ is its ability to assign a likelihood score to each new business prospect. This score helps organizations align their resources effectively, focusing on prospects with higher scores and a greater likelihood of sale conversion. Additionally, it provides action recommendations such as whether a quote should be provided, enhancing decision-making processes. Lead Prioritizer™ operates by identifying patterns in in-house data and augmenting this with external market data. It blends data science insights with management experience to develop actionable recommendations. The tool is equipped with autonomous learning capabilities, allowing it to adapt to the latest market shifts and management actions. This continuous learning ensures that the Lead Prioritization solution remains updated with the best proven techniques, algorithms, and libraries.

A significant advantage of Lead Prioritizer™ is its ability to seamlessly integrate new data that was not available during initial deployment. This flexibility means that carriers and brokers can start using the solution immediately with whatever data they have, bypassing the need for extensive data gathering and infrastructure investments.

Results Delivered
The impact of Lead Prioritizer™ on sales and customer satisfaction is significant. By prioritizing high-likelihood cases, which are often overlooked in traditional workflows, sales growth is driven effectively. For instance, one carrier reported a 20 percent growth in sales after implementing this tool. Additionally, it helps in identifying attractive customer segments, allowing carriers to target leads with a higher propensity to sell.

From an operational standpoint, Lead Prioritizer™ enhances the utilization and productivity of scarce resources and skill sets in distribution and underwriting. It also plays a crucial role in improving customer satisfaction, with one carrier increasing segment profit by 15 percent using this tool.

Lead Prioritizer™ has been successfully deployed across various clients, including carriers and brokers, with a track record of over four years in growing sales. It is implemented on a secure portal, customized to the client’s needs, and can accommodate technical requirements such as AWS or Azure. This integration dovetails with existing management reports, ensuring a seamless transition and operation. Its ability to prioritize leads effectively, adapt to new data, and drive sales growth makes it an indispensable asset for carriers and brokers aiming to stay ahead in the competitive insurance market.

So what are the lessons learned? During a recent deployment, the CEO’s priority was to improve efficiency. However, the underwriters wanted to improve their workflow and distribution wanted to grow sales. While the algorithmic solution addressed all of the above analytically—there was an initial resistance to adoption by various functions. It took off only after each priority was explicitly acknowledged and the solution to achieve that priority was communicated to specific audience/stakeholders. Now everyone at the carrier is happy as sales have increased 20 percent, accompanied by improvements to efficiency and profitability. More importantly, channel partners are happy because now they flow more favorable cases to the client carrier—which is an added plus! This is an important reminder that solving business problems by combining data science with management art and stakeholder priorities is what wins the day for everyone. Visit Spinnaker Analytics to learn more: www.spinnakeranalytics.com.

Reference:
1. https://www.liferay.com/blog/customer-experience/20-must-know-stats-for-insurers-in-2022.
2. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-value-of-getting-personalization-right-or-wrong-is-multiplying.

An Interview With Eugene Cohen—Individual Disability Insurance And Keys To Successful Sales: Managing Your Client’s Expectations

With the help of Victor Cohen, this is part of our ongoing series with Eugene Cohen, founder of the Eugene Cohen Insurance Agency, Inc., 2009 Honoree of the International DI Society W. Harold Petersen Lifetime Achievement Award, 2015 Honoree of NAILBA’s Douglas Mooers Award for Excellence.

From time to time, we will feature an interview with Eugene, who has dedicated over 60 years of his life to learning, teaching, and supporting brokers in the agency’s quest to help consumers protect their incomes from the tragic effects of a disability.

Disability insurance (DI) is one of those products that can change the trajectory of an individual and a family’s life and is crucial for every financial planner and insurance professional to learn about and offer to clients.

Victor: I often hear you talk about how important it is for a producer to manage a client’s expectations when applying for disability income protection insurance and other DI products. Tell me more about that please.

Eugene: As you know, many DI policies are issued exactly as they are applied, but what about the policies that are approved with other than applied? In other words, a modified offer?

After an application is underwritten by the individual disability company, it’s possible that the policy may be issued with modifications. These may include ratings, reductions in benefit period or exclusions for certain medical conditions.

Victor: And when you say, “modified offer,” you’re referring to there being perhaps certain prior pre-existing health conditions that won’t be covered, right?

Eugene: Exactly. So…to manage your client’s expectations you have to ask the client some questions before they apply for DI. This will help give the client an idea how they may be treated in underwriting.

You have to try to take some time to know your client…to know their insurability risk. Speak to your client about the types of medical issues they may have now—or have had in the past—that could impact their insurability.

Victor: What are some examples of the kind of health issues you’re referring to?

Eugene: Your client may feel they’re in perfect health with no particular problems. After questioning them, they may say they use a CPAP machine because of their sleep apnea. Well, that may cause a rating of additional premium on an offer. The producer needs to let the client know this upfront so the client is not surprised if the policy is issued with a rating related to the sleep apnea.

Or, while talking to your client, you may discover they take medication for Type 2 diabetes. The client says they feel fine, they feel perfect, and it’s possible that the diabetes may actually be very well controlled. But the DI underwriter may still be required to add a surcharge or rating to the policy of 25 or 50 percent. In addition, depending on the company and the case, the underwriter may be required to cut the benefit period down to a five-year benefit period rather than issuing the policy with longer coverage. Of course, if the diabetes is not under control, the underwriter may be required to decline the application for insurance.

We are not the underwriters but we have experience knowing on many occasions how the applicant most likely will be treated.

When questioning an applicant, be sure to inquire about any muscular/skeletal issues. Many producers forget to ask about this important part of the pre-screen. When asked, maybe they say, “I’ve had pain in my right hip.” The client thinks nothing of it. Well, that hip could perhaps be an exclusion. The client needs to know this before the application is submitted.

Health issues with the back may lead to some type of spine exclusion. If your client says, “I have a herniated disc in the cervical area of my back,” the client has to know that the company may put an exclusion rider on perhaps that portion of the back or maybe the entire back.

Victor: I see a lot of policies issued with an exclusion on mental disorders.

Eugene: Yes, that would be very common. A client’s mental health history can often lead to a policy being issued with an exclusion for mental disorders. Let’s suppose a client is being treated for depression, anxiety or other types of mental health issues. They’re going to counseling and/or taking medication(s)… The underwriter may be forced to have the policy issued with an exclusion for disabilities caused by mental disorders. The specific language of the exclusion may vary from company to company, so it’s important to read the exclusion.

Depending on the severity of the mental health issues, there could be a rating and/or a shortening of the benefit period and other modifications.

Imagine a producer showing a client a DI illustration, telling them about how the policy offers full coverage for mental disorders to age 67 and then the client’s policy gets issued with mental disorders excluded and a benefit period of 5 years.

Victor: You have a disappointed client.

Eugene: Possibly a disappointed client. Managing the client’s expectations means that it’s important to prescreen the client before submitting an application. It means finding out about the client’s mental health history before the app is written and letting the client know if there is a likelihood they could have an offer with a mental disorder exclusion.

Managing a client’s expectations means knowing a client’s height and weight before submitting a DI application. You may have a client whose height and weight could be rated 25, 50, 75, 100 percent and/or cause a reduction in the benefit period. This is why it’s important when requesting your disability illustrations that you provide the height and weight of the client.

Victor: What does a typical exclusion look like in a DI policy?

Eugene: A typical exclusion rider will state that the benefits are not payable for a disability resulting from whatever the named condition is. For Example, Crohn’s Disease…or the lumbosacral area of the spine…or injury or disease or disorder of any part of the body.

The intent of the rider is to exclude or restrict coverage for a known medical condition or a condition that predisposes you to a potential disability. The specific language of the exclusion may vary from company to company, so it’s important to read the exclusion.

Victor: Now let’s shift gears a little. Let’s say a DI policy has been issued with an exclusion rider or riders. Why should the client take the policy?

Eugene: Lets’ say the client gets an offer with an exclusion rider on the cervical area of their spine. Think of all the other areas of the body that are still covered. Think of all the different diseases a person could face.

Victor: So they may still be covered for, say, cancer, heart disease, Parkinson’s disease, MS, on and on.

Eugene: Right. Again, the specific language of the exclusion may vary from company to company, so it’s important for you and the client to read and understand the exclusion(s).

You are correct in that the medical dictionary is filled with pages of sicknesses that can disable that person. It is extremely important for that client to take care of their financial needs and obligations if they were to become disabled from something else.

You want to point out to your client that even a modified offer is very valuable. If the individual has a DI policy with a monthly benefit of $10,000 with a benefit period of five years…if they were to have a qualified claim that benefit could be worth more than a half a million dollars for that five-year period.

Now if an individual does not take the policy because of one or two exclusion riders or because of a rating, you know one thing. The conditions may stay the same or get worse. And if they get worse, the individual may not be able to buy a disability policy later.

Victor: Let’s take a worst-case scenario. The client is declined. Then what? What DI options, if any, does the client have at that point?

Eugene: If your client is declined because of some kind of medical condition(s), there are DI companies that may still consider that individual for DI coverage—companies that underwrite impaired risk cases.

The company may offer a policy with an exclusion or possibly a rating. Sometimes these policies have limited renewal durations, such as allowing the policy to be active for a few years at a time, in which, at the end of the allowed period, the company may or may not allow the policy to renew.

Some of these impaired risk DI policies are issued with a graded benefit. Depending on the company and policy design, if the qualifying claim for sickness occurs during the first couple of years, the DI company would pay a reduced amount based on a preset schedule. After a certain period of time, the policy would pay the full monthly benefit. Please review the illustrations and contracts for details, as these policies are different from the ones that you may have sold in the past.

Victor: Our time together always flies by so fast. Thank you so much for your invaluable insights and passion. Unfortunately, we have to wrap up our conversation today. Is there anything you would like to add?

Eugene: By managing expectations you’re letting your DI client know in advance what to likely expect. If you are a producer unfamiliar with DI underwriting and the way certain medical conditions are often treated, it’s important to work with an experienced MGA/wholesaler that knows this market.

Individual disability income protection is a very valuable policy. Naturally, it is best to buy a DI policy when you don’t have any medical problems. But if you do have a policy with an exclusion(s), think about all of the other conditions, both medically and via accidents, that can be covered on a qualified claim.

Rethinking Seminar Prospecting

After everybody being “locked down” a few years ago, educational seminars are back and stronger than ever. And make no mistake, seminars are a powerful prospecting tool…the most powerful, at least in my opinion. With a seminar, you have an hour of uninterrupted time where you can build credibility with your audience by showing your knowledge on various topics. Furthermore, and most importantly, if you are a likable and engaging presenter there is an emotional connection that happens over an hour-long period between the audience and the presenter. This connection cannot easily happen with other forms of prospecting/marketing.

Understanding the power of seminars, years back when I started my IMO I tested various seminar systems that other IMOs and seminar vendors had offered. I was on a mission to find the best seminar system out there so I could offer that to the agents that worked with my company. After testing several seminar systems and spending a ton of money, I did get results. Again, seminars work! However, I had observed some flaws in almost every system out there that I felt could be improved upon. After all, nobody is perfect, and no “system” is perfect. But I thought there were areas where the systems could become “more perfect.” So, I eventually told myself “Self, if I want to be 100 percent bought into a seminar system that I offer my agents, I just need to create it myself so that those flaws do not exist.” After a couple of years of development, tens of thousands of dollars spent testing, scores of seminars, and losing every strand of my hair on my head, I feel that I cracked the code.

Through that process I feel that I gained a lot of information that can pass on to the financial professionals that want to conduct seminars. This article is going to address one of about twenty or so of those “improvement areas.” The other nineteen areas are beyond the scope of this article.

The improvement area that I want to focus on is extremely important for agents that want to run a good business. It has to do with money! That is, the expense of the seminars versus return on investment. After all, most of us are not 501c (nonprofit) organizations!

Paying for seminars
At the time almost all seminar systems got consumers to the meetings by direct mail. For example, with one of the seminar systems that I tested they told me that the cost per mailer was $.50. Very normal cost. They also told me that I should do around 6,000 mailers per seminar, which would be an expense of $3,000. Furthermore, I was told that I should sign up for at least three seminars to “smooth out” the results, so it more resembles long-term true statistical experience. Although $9,000 is a big expenditure, as a student of math and statistics I understand the “law of large numbers.” I also respected the statistics that they had regarding past results. For instance, based on 6,000 mailers and their quoted .66 percent registration rate, we should have around forty registrants (.66 percent times 6,000 mailers) for each seminar. Understanding that $9,000 is merely one decent indexed annuity sale, I wrote a $9,000 check for all three seminars!

Although the true registration rate was indeed less than what they projected, I did get a decent return on my $9,000 investment. However, I was bothered by the fact that there was something archaic about writing a check for $9,000, printing out pallets of mailers that may or may not work, then hoping and praying that they do work. Whether it works or not, you are out $9,000! That is you, the agent! The seminar vendors will never lose money with the typical setup. (Note: I am not bashing direct mail, because there are great direct mail vendors and systems that have made a ton of agents a ton of money! But there are better methods.)

A couple of points regarding the topics of return on investment and seminar expenditures:

  1. ROI (Return on Investment) is what matters most. Mr. Obvious here! Whether the seminar costs $1,000 or $9,000, it does not matter to me as long as the ROI is there. I know agents that will happily fork out $9k over $1k if the system that requires $9k has a better ROI. I am one of those people.
  2. What ROI guarantees are there? As I learned to a certain extent, having the seminar vendor quote ROI numbers is a moot point unless there is some sort of guarantee around it or some option to bail out if the return on investment is not happening. Although I discuss in number one that people will happily pay $9,000 if the ROI is there, the anxiety is far more intense when agents are shoveling out $9,000 versus $1,000. The problem is, with direct mail, once those 18,000 mailers are printed the expense has to be borne by somebody and that turkey is already cooked (mailers printed) regardless of what the ROI is eventually. That is the reason that seminar vendors generally do not have some sort of a guarantee or a bail out. I do know some vendors that have guarantees, but those guarantees come at a huge expense. Again, it seems to me that printing out tens of thousands of mailers and hoping and praying that they work is kind of an archaic process in this day and age.

There are better ways to get better ROIs which do not require a massive expenditure and that provide the option for the agent to “bail out” before spending a ton of money if the results are not on track.

Through the use of social media marketing, it is not about printing a ton of expensive material and hoping and praying that it works. Social media marketing is a pay as you go system. For instance, within the first $100 that is spent on the social media campaign I can identify if it is going to be successful or not. Everything from the text to the landing pages to the videos to the colors to the algorithm is proven. However, what I am saying in that last sentence is just words in the eyes of many folks. So, because of the way social media marketing works, the agent can rest assured that if for some reason it is not successful, the agent has the option of bailing out, adjusting the seminar location, or adjusting the messaging.

The punchline is this: In this day and age, if somebody has a tested and proven social media system, you do not have to write massive checks and hope and pray that you get results.

Again, I spent a lot of money on testing to get the right formula so the agents do not have to. For much of the formula, if I told you too much I would have to, well, you know… The point is, if a system is tested and refined, you can get in front of people for as little as $20-$30 per qualified registrant. That’s right!

For a seminar, a marketing budget of as little as $1,000 can be sufficient in many cases. That can get you in front of 30 to 50 registrants. Of course, results vary based on the seminar topic. Our number one topic gets registrants for $20-$25 per household. Furthermore, with social media, after we have spent only $100 or so in marketing, an astute social media experienced eyeball can identify if that campaign is going to work or not in that geographic area. If it is not working, wouldn’t it be nice if the seminar vendor called you, the agent, and said, “Here are the results so far and you’ve spent $100, do you want to continue, adjust the location, or do you want the rest of your money back?”

With an expenditure as small as $1,000 that is effectively risk free to the agent, it is definitely a different take on seminar systems. As I told somebody last week, “Don’t take the low cost as being a Thrift Shop cheap system. I almost feel petty, and as if I am devaluing the process when I use $1,000 as an example. However, with technology today, a lot of things have gotten cheaper and higher quality. Have you bought a television lately? They are cheaper than ever and are smarter than a mainframe computer was 20 years ago. Technology is a beautiful thing.” In the seminar world, today’s TV is social media. The TV from 20 years ago is direct mail. Of course, I understand that not everybody is on social media and there is power in getting a physical mailer in your mailbox!

What I just explained is significantly different than spending $9,000 and crossing your fingers. To me, when it comes to seminar systems and the capabilities that we have with social media, the future is extremely exciting versus agents having to bear an expense that may or may not work.

We have not even discussed consumer webinars, which have grown in popularity as well.

Wrong

“The fact that man knows right from wrong proves his intellectual superiority to the other creatures; but the fact that he can do wrong proves his moral inferiority to any creatures that cannot.”—Mark Twain

In Iasi, Romania, I met an engaging 17- or 18-year-old woman named Sophia. She is a Ukrainian refugee. Sophia escaped the war in Ukraine along with her mom, sister, and aunt. Her father is serving in the military.

Sophia attended our seminars on Emotional Intelligence. The reason she requested to meet with me was to ask me, “How do I choose the right university?” And, “How can I get admission to a university in America?” I helped her think through these questions and even supplied resources to help her discover universities in America that have special programs for Ukrainian refugees.

Sophia wants to study Web Design. She knows HTML, Java, and Photoshop.

She is a ballroom dancer and model. When I asked her about the purpose of life and her worldview, Sophia said she has not thought about faith or God much. She categorically said, “There is really no right or wrong, nor is there really anything truly good or bad.”

I challenged this:

“Sophia! I am so glad to hear you say that! Poor Russia is getting criticized by everyone because they attacked Ukraine. You at least know they are perfectly within their rights since there is no right and wrong.”

This shocked her. Which was the point.

Nihilism is a philosophy that is increasing in popularity among young people the world over. The definition of nihilism is:

  • “a viewpoint that traditional values and beliefs are unfounded, and that existence is senseless and useless;
  • a doctrine that denies any objective ground of truth and especially of moral truths”1

Sophia is flirting with nihilism but, so far, she has only accumulated a shaky framework of opinions.

Right or Wrong
In November, 2023, NY Representative George Santos (who represented parts of Queens and Long Island) was the subject of a Congressional investigative panel charged with researching a myriad of accusations of “wrong-doing.” In fact, Santos faced a 23-count federal indictment that includes allegations of stealing donor identities, using their credit cards to make thousands of dollars of charges, and directing some of the money into his own account or into his campaign fund.

The scandal-plagued, federally indicted freshman representative from New York was expelled December 1, 2023, from the House of Representatives by a 311-114 vote, including 105 Republicans, to become only the sixth House member to be removed in U.S. history. (There have been over 11,000 house members in U.S. history.)

Question: Why should anyone care what Santos did or didn’t do if there isn’t any right or wrong?

Point: In a world that appears to be dismantling the traditional understanding of right and wrong, an independent financial professional (IFP) must continually work hard to conduct herself properly in order to maintain a clear conscience and remain professionally ethical.

Fascinating Etymology
The word “wrong” has an interesting history. Its origins have several sources:

  • Old English, meaning ““twisted, crooked”
  • Old Norse, meaning “crooked, wry, wrong,”
  • Middle Dutch, meaning “sour, bitter,” (literally, “that which distorts the mouth”)2

(“Wry” is used to describe someone’s face that is twisted into an expression of disgust.)

Wrong=twisted, crooked, wry, sour, bitter; that which distorts the face or mouth.

(Conversely, the word “right” has this historical meaning: “to move in a straight line,” and “not bent.”)3

Question: Who gets to decide what is straight, unbent, or pleasant tasting?

The “Wrongs” of Independent Financial Services
In financial services, we operate in a world that still believes there are such things as right and wrong, good and bad. Our clients expect us to speak and behave with integrity. There are of course many layers of governance and standard-setting. Compliance reaches as far as it can, and regulators contribute to oversight, but at the end of the day we must manage ourselves to high ethical and moral standards.

The sad reality is that as an IFP it is easy to deceive, ignore, or even cheat clients every day and not get caught. The reason is because government oversight of IFPs is highly fragmented, and regulators from the Federal and State governments are not always in sync. There isn’t a central database documenting IFP misconduct.

According to the Stanford Institute for Economic Policy Research (SIEPR):

“There are over 650,000 registered financial advisers in the United States helping manage more than $30 trillion of investable assets.”4

“One in 13 financial advisers have a misconduct-related disclosure on their record.”5

“Misconduct is geographically concentrated. The highest rates of misconduct are in areas with more elderly and less-educated populations.”6

According to the U.S. Securities and Exchange Commission (SEC), here are just a few “wrongs” that IFPs perpetrate:

  • Fraudsters may misrepresent their education.
  • Fraudsters may lie about having been awarded honors that they have not received or that do not even exist.
  • Fraudsters may pretend to hold certain professional titles to suggest that they have certain expertise or qualifications.
  • Fraudsters may inflate their professional experience.
  • Fraudsters may pretend that they have a certain position or title at a company.7

“Examples of misconduct included paying to settle customer disputes, being terminated after allegations of improper behavior, being held liable in civil litigation, or receiving criminal or regulatory sanctions.”8

Point: While we ourselves know if we are abiding by moral, ethical, and legal standards, we can sometimes fool others; and even if we get caught, we can still find ways to keep working in financial services.

Practicing in a Straight Line
It is each IFP’s free opportunity to create a reputation that aligns with personal character. It is also possible to hold ourselves to high standards of character. We can impact our clients’ facial expressions and the orientation of another person’s mouth to reflect positively on our work when our name is mentioned.

It is important to remind ourselves from time to time (maybe annually) of the commitments we individually make to ascribe to high ethical standards. A great place to start is reviewing the CFP Board’s Code of Ethics and Standards of Conduct.9

Another great barometer of our personal integrity is the extent to which we are willing to be held accountable by others. An accountability partner can ask us the hard questions.

Or we can simply check ourselves.

Practical steps:

  • Review what can be discovered about your educational and professional background. Is it accurate?
  • Are there discrepancies regarding your publicized background, such as conflicting information or dates?
  • Are you confident enough to direct potential clients to sources where they can independently verify your credentials and professional claims with reliable sources, such as National Association of Personal Financial Advisors (NAPFA), Investment Adviser Public Disclosure (IAPD), FINRA BrokerCheck, and the web sites of state securities regulators?
  • It is possible to operate 100 percent of the time above board and still experience a consumer complaint. If this is your experience, are you more comfortable hiding the fact or disclosing it and providing context and eventual resolution?

In general, a wise IFP invites every client to engage in open communication, to ask questions, and to demand transparency. To behave with transparency, do the following:

  • Disclose all aspects of compensation.
  • Go beyond recommending opportunities that are merely “suitable,” and choosing instead to specifically recommend only those that are in the client’s “best interest.”
  • Take the time to explain your thought processes and investment strategies.
  • Entertain all of your clients’ ideas, allowing them to have a say in their own financial future.
  • Explore ideas and educate the client about why something might be plausible or perhaps inadvisable.

Here are great ways to give assurance to prospective clients:

  • Explain how you make your money.
  • Describe your approach to financial planning.
  • Delineate the financial planning services that you offer.
  • Clearly define the particular type of clients you normally work with.
  • Make it known if you enforce account minimums.
  • Provide a checklist of the information prospective clients need to bring in order for you to develop a financial plan.
  • Notify all prospective clients regarding how many times and how often you will want to meet with them.
  • Let all clients and prospective clients know if you are willing to collaborate with their other advisors like CPAs or attorneys.

Summary
While traditional social constructs of right and wrong appear to be in flux, or eroding, those of us in financial services must diligently strive to operate in ethical, moral, and legal ways.

How much better to create sweet experiences for clients rather than leaving them with a sour or bitter taste in their mouths!

In his book, A Failure of Nerve: Leadership in the Age of the Quick Fix, Edwin Friedman wrote:

“Leaders must always focus first on their own integrity.” This is also true of IFPs.

Footnotes:

  1. https://www.merriam-webster.com/dictionary/nihilism.
  2. https://www.etymonline.com/word/wrong.
  3. Ibid.
  4. https://siepr.stanford.edu/publications/policy-brief/misconduct-under-microscope-examining-bad-behavior-financial-advisers.
  5. Ibid.
  6. Ibid.
  7. https://www.sec.gov/enforce/investor-alerts-bulletins/ia-credentials.
  8. https://www.policygenius.com/personal-finance/news/how-to-vet-financial-advisors/.
  9. https://www.cfp.net/ethics/code-of-ethics-and-standards-of-conduct.
  10. A Failure of Nerve, Revised Edition: Leadership in the Age of the Quick Fix, by Edwin H. Friedman, Church Publishing; 10th Anniversary edition (May 1, 2017).

Image by krakenimages.com on Freepik

Intentional Dizziness

We all find irony and humor in the strangest places. Like many my age I have suffered or strategically coexisted with arthritis for many years. Surgery and pain management have recycled me through a number of physical and occupational rehabilitation scenarios. For some strange reason television screens seem to inevitably decorate the walls to provide distraction to the exercise task at play. What strikes me as a little disconcerting is who gets to choose the viewing channels in this strange environment. Generic content seems to range between cooking and stupid video clips. In other words, reality programming. This therefore stands in stark contrast to why you are trapped for an hour trying to make sense of the necessity of rehabilitation in the first place. All of this to explain why one of those self inflicted wounds anthologies brought me involuntarily to this column. Remember when you were young with still unformed internal limitations having someone help you spin around and around until you were impossibly dizzy and then turning you loose allowing your internal compass to go haywire before your head stops spinning and you can reorient yourself to a stable and upright position? I found myself recently walking fast on a treadmill and watching a parade of theoretically grown men on a TV screen repeatedly performing this same childhood game with the same predictable results. I immediately thought of the history of long term care sales and this column.

Where is our learning curve? Are we simply doomed to keep getting back in line to be spun around to lose our equilibrium yet again? Each time, before we step forward again for that heavy spin, could we all just stop and remember the basic truths about the long term care insurance conundrum we should have learned the hard way over the last twenty five years?

  • 25 Years ago we spent 20 percent out of every Medicaid dollar on home based care. Today it’s more like 60 percent. COVID just put a finite point on a mass shift to basic consumer and therefore what was already a publicly mandated claims focus.
  • We understand we got initial pricing assumptions very wrong. Lapse assumptions wrong, duration wrong, utilization wrong, mortality wrong, longevity wrong, investments/inflation wrong. Whatever pricing issue I missed was also wrong. It was not intentional. It was an honest mistake or best guess based on previous experience and an economy based on polar extremes.
  • We now clearly understand the risk was simply bigger, broader and deeper than we thought. We now have the necessary history to recognize who and what becomes a claim. Through 2022 we have paid over 13 billion in claims to 345,000 unable to do two or more ADL’s.
  • Average claims now over six figures should be considered catastrophic by definition. We have also learned that a moderate amount of insurance can make all the difference and that the promise of $50,000 of initial protection can force state-wide mandatory social insurance that can possibly provide relief to state run Medicaid money hemorrhaging.
  • The LTCI industry is no longer about establishing and leveraging future benefit dollars. We long ago stopped managing new sales and shifted to managing claims. And we seem to only admit privately that, as the flow of new water reduces to a trickle, the overly efficient recognition of claim adjudication may be the last black eye we can sustain without complete collapse. It may be more than a rumor that we are systematically tightening our claims belt. This is I suspect more than a matter of carrier default from a regulatory perspective or anticipated reserve restraints. In other words there may be a method to the madness but those who participate are still certifiable.
  • Combo sales cannot just represent our new panacea flavor. They can only provide expanded options and a rock solid back up plan. Benefits are still paid with a tilted scale of justice highlighting one or the other—life or health—not completely even intentionally accomplishing both.

Now return in your mind’s eye to that short Video showing multiple slapstick crash and burns. The set up is the same based on a clear and certain knowledge of exactly what will certainly occur by spinning yourself around and around until barely able to stand and then abruptly letting go to implode into the ground or the nearest solid wall. Hold that thought in your head and you will understand with extremely vivid clarity why this column can legitimately appear to repeat itself.

Other than that I have no opinion on the subject.

The Evolution Of Life Insurance: Embracing Digital Point Of Sales Solutions For A Millennial Market

In the ever-evolving landscape of life insurance digital point of sales solutions are not just a trend but a revolution, particularly tailored to the preferences and needs of millennials—the central buyers in today’s market. This demographic, aged between 26-45, is driving a significant shift in how life insurance products are designed, marketed and sold. The key to capturing this market lies in blending self-service options with on-demand advisor support, accelerated underwriting processes, and leveraging cutting-edge AI technology.

The Afficiency Model
The move to digitization has been embraced by our industry for some time, with carriers vying to meet the needs of both tech savvy consumers and distribution partners anxious to move with the times. However, it has not always been a smooth ride. For many carriers the transition has been a long and winding road, oftentimes a road that cannot be navigated alone. Some successful life carriers have benefited from leaning on the expertise and nimbleness of the new breed of life insurtechs.

One such insurtech, Afficiency, has the unique advantage of an innovative tech stack combined with a team of talented individuals with a proven track record in digital life insurance deployments.

Understanding the importance of the agent-client relationship and the valued role that the agent plays, Afficiency has always focused their attention on a distributor-first model to deliver a true digital workflow for term, final expense and whole life products with offer rates close to 70 percent and increasing with continued underwriting innovation. These products, along with more advanced products in the pipeline, provide agents and consumers alike with an in-session decision; at times the end-to-end journey is complete in under 10 to 15 minutes. This represents a windfall for agents and carriers looking for high quality risk and keen to expand their business, especially among younger digital natives.

The Afficiency model is based on collaboration between all parties; technology, carriers, and distribution to deliver digital products that address parties’ desire to be in control of their costs and to utilize a scalable platform.

Most recently Afficiency has released the latest version of their eApp, which relies on proprietary API technology and an easy-to-navigate and configurable UI, to bridge agent experience, third party database checks and carrier connections. Guided by the agent, the client is walked through the application to collect and verify their personal data, capture eligibility, health, and lifestyle information before gaining consent via either email or text message. Once consent is provided, the real-time magic happens in the background as the sophisticated underwriting engine kicks into action simultaneously conducting applicant identification checks, implementing fraud controls, and returning a decision while the agent and client patiently standby for an in-session decision in a matter of minutes—and often a decision is returned in seconds.

Should the application proceed to an offer the agent continues the digital journey with their client, adjusting the term and coverage as needed as well as adding additional benefits such as children’s term riders or accidental death benefit rider. The client signature is captured, once again digitally via either email or text message. The client can have the financial protection they need within minutes and the agent has the added security of competitive, next-day commission payment.

Afficiency works with their carrier partners to continuously improve and fine tune the interpretation of the underwriting rules to maximize the outcome for carriers and distributors alike. Such fine tuning includes the recent introduction of a manual underwriting process to the once “fully automatic” workflow. While the overwhelming majority of applications are still decided digitally and within the same session, the refer to underwriter process allows for manual review of edge cases that may have otherwise been declined within 48 hours, further increasing the number of cases being approved.

Another recent enhancement to the Afficiency client journey is the introduction of an underwriting report on declined applications for the information of both the agent and their client. Historically agents have had to make do with the scant and sometimes unhelpful information provided on adverse underwriting decision notifications. By providing more detail on why their client was declined, the agent is armed with meaningful insight and can better advise their client on the most appropriate next steps for protecting their financial future.

In the end it’s about growing the number of families we can help distributors and carriers protect! To learn more about Afficiency visit https://www.afficiency.com.

The Millennial Influence
Millennials, known for their affinity for technology and convenience, have reshaped the life insurance industry. Their demand for quick, efficient, and hassle-free services has led to the emergence of digital point of sales solutions. Unlike previous generations, millennials are willing to pay higher premiums for life insurance policies that offer speed and simplicity—a testament to the adage “time is money.” The process has become as important as the product itself, with instant issue policies and accelerated underwriting processes gaining popularity.

Speed and efficiency is the new currency. In the realm of life insurance, “time is money” has never been more pertinent. The quicker the process of obtaining life insurance, the more attractive it is to potential buyers. Millennials, in particular, are willing to pay higher premiums for policies that offer speed and convenience. This trend has led to the concept that the process itself has become the product, a significant departure from traditional insurance models.

The Rise of Non-Medical Underwriting
One of the most significant advancements in catering to this need for speed and convenience is the development of non-medical underwriting, often referred to as “Non-Med.” This approach eliminates the traditional, time-consuming medical exams and fluid draws, relying instead on part II medical questionnaires, prescription data, Medical Information Bureau (MIB) checks, and Electronic Health Records (EHRs). This shift not only speeds up the underwriting process but also makes it more comfortable and less invasive for the customer.

AI: The Game Changer in Underwriting
Insurtech companies are at the forefront of integrating artificial intelligence (AI) into the underwriting process. By utilizing AI, these companies can quickly analyze vast amounts of data from medical questionnaires, prescription histories, and electronic health records. This technology enables insurers to accurately score and make informed decisions on policy applications at an unprecedented speed. The result is a more efficient underwriting process, leading to higher customer satisfaction and increased business placement.

The life insurance industry is undergoing a transformative phase, driven by the demands of the millennial generation. The integration of digital point of sales solutions, non-medical underwriting processes, and AI-driven technologies reflects a broader trend towards convenience, speed, and customer-centricity. As digital agencies continue to emerge and evolve, they are setting new standards in the life insurance market, making the process of buying life insurance more accessible, efficient, and appealing to a generation that values both time and technology. The future of life insurance is digital, and it is unfolding now.

Death, Disability, And Taxes: The Three Things You Can’t Avoid That Need Planning.

As we head into tax season, we are often reminded about the insurance products that we all sell and some general tax principles. When it comes to taxes, we always need to remind clients that we are not accountants and that any individual tax advice needs to be given by the client’s accountant. With that being said, let’s move on to death, disability, and taxes. Wait, isn’t the phrase, “death and taxes?” Why include disability in that well known saying?

When it comes to Merriam-Webster’s definition of “disability” you’ll see it says: “a physical, mental, cognitive, or developmental condition that impairs, interferes with, or limits a person’s ability to engage in certain tasks or actions or participate in typical daily activities and interactions.” Note, disability insurance policies have very precise definitions of what is considered a qualifying disability for a claim and will be different than the Merriam-Webster’s definition. We all know the famous expression that you can’t escape death and taxes, but given the dictionary definition of a disability, you can’t escape that as well. Before anyone passes, they will experience some sort of disability per the dictionary definition. What we don’t know is how long the disability will last before your client’s passing. It could be a few minutes, a few hours, a few days, a few months, a few years, decades, or for the rest of your client’s time on this great earth. We just don’t know and with major risk and liability on things we can’t predict, we need to plan.

Remember, need motivates action. You need to ask the right questions to expose the need for the client. Each client may be in different stages of planning as well. Take your clients who are just starting off in their career journeys. Those without children or other dependents may not be thinking about life insurance and some of the other products we typically sell. Yet, many of these individuals have built up fixed obligations that would be due regardless of whether they work or not. Let’s say your client’s daughter is 29 years old and is a young veterinarian who is a couple of years into working. She most likely, at a minimum, has rent, car payments and the appropriate insurance, credit card bills and possibly student loans. If this client were suddenly diagnosed with MS or had a car accident, those fixed expenses would still need to be paid. Having a comprehensive individual disability plan would be essential for not only her but probably for her parents too.

Need motivates action! Take another client or child of a client who is married and possibly has a child and/or one on the way. Whenever we hear a longtime producer tell us about how they have a client who is going to be a first-time grandmother or grandfather, it reminds us of the planning that is needed. Let’s take the same client mentioned previously and instead of her being 29, she’s now 35 and married to an attorney and they have a child. With the couple’s joint income probably being perhaps a couple hundred thousand, their expenses will likely have surely increased as well—a new home, a mortgage, two cars, childcare, property and casualty insurance premiums, utility bills, food, and so many other expenses. Most of these younger professionals can be classed under the acronym H.E.N.R.Y., High income Earners, but Not Rich Yet.

A major disability can have a major effect on these types of individuals and couples. They’ve assumed more contractual obligations that are almost fully funded by their current income. That’s the essence if you think about it. How much of your expenses and obligations are purely supported by the income you produce? If you can’t produce the income, how are those obligations going to be paid?

As we fast forward even more, take the same couple who is now in their late 40s/early 50s. Now they have three children, two in high school and their youngest just starting middle school. While this couple has been saving in earnest, the expenses keep on coming in faster than their incomes and savings are growing. Just over the horizon some of their largest expenses are coming up—college costs that the couple is planning to pay for their children. Again, a major disability to either of these individuals can cause a major derailment to their intentions and planning. Need motivates action. This couple needs to make sure that if one of them has a qualifying disability, they have disability insurance.

Changing the scenario a little, say that each one of these professionals also decided to open up their own professional practice along the way. So, our veterinarian now has her own practice and her husband, the attorney, now has his own practice as well. Those practices come with their own expenses and obligations. Each firm needs a location to practice, so rent or a mortgage, utilities, staff to support the main purpose of the practice, and other expenses. This is why a cogent adviser would also recommend these clients each own a business overhead expense policy. This business type of disability policy is designed to help protect these types of clients from many of the business expenses they have most likely personally obligated themselves.

Look in your files and take note when you have these types of clients. Needs based selling is the only selling we recommend, so when you have clients like these, remember to reach out to your disability MGA for quotes, education, and how to process with ease.

Options For Being A Registered Rep And Also Selling Indexed Annuities

“Charlie, what should I do?”

This is the question I am often asked by financial professionals on what they should do when it comes to getting set up with their securities license while also wanting to sell indexed annuities. Even folks that are already securities licensed will ask me this question occasionally, because they are looking for easier ways to offer both securities and indexed annuities. Because of technical reasons and history, the answer to the question is not as easy as “get an insurance license for the annuities and a broker-dealer for the securities.” We will discuss the issues that surround my typical response to the above question.


First, I want to preface my article with some terminology. I do not want to assume that everybody understands the vernacular I will use below. So, let’s first discuss what types of agents/reps there are, who can sell what products, who “supervises” the sale, etc.

  1. Insurance Agents: This is likely you! These are agents that have passed the state insurance exam to sell insurance products like fixed annuities, term insurance, etc. The sale of these products is regulated by the state insurance departments. The actual insurance carriers also do some review of advertising material and also suitability. Usually there is a General Agency or an Independent Marketing Organization that trains the agents on how to do the insurance business. (Note: Some of these insurance products can also be securities, like variable annuities. These products require an insurance license and a securities license, per #2.)
  2. Registered Reps: A financial professional who passed their Series 6, Series 7, etc. and is able to offer securities (stocks, bonds, mutual funds) in order to make a commission. These folks must be registered with a Broker-Dealer who supervises your sales, approves your advertising, monitors your emails, etc. BDs are tasked with keeping you out of trouble! Here, the ultimate regulatory body is FINRA (Financial Industry Regulatory Authority), who governs your broker-dealer. If you get in trouble, it is FINRA that will fine you!
  3. Investment Advisor Reps (IARs): When you think of “fee-based advisors,” this is the category. These are the financial professionals that have passed the Series 65 or 66 exams, which are different exams than those a “registered rep” would have taken. These IARs are mandated to conduct themselves in a “fiduciary” capacity and generally cannot be paid a commission in that fiduciary capacity. Again, they charge fees but can usually offer similar securities as the registered reps can. They just generally cannot be paid commission on them. For products like mutual funds, there are usually “Advisory Share” classes that do not have the sales charge/commission built into them. Those “Advisory Shares” are what the IAR might offer his/her clients, while the registered rep offers “A Shares” for example. Like how insurance agents are supervised by the states and registered reps are supervised by their broker-dealer, Investment Advisor Reps are supervised by their “Registered Investment Advisor” (RIA). The Registered Investment Advisors are governed by the state securities regulator (North American Securities Administrators Association) or the SEC, depending on the size of the RIA.

A couple of points: The first is, we all have our “supervisors,” whether you are an agent, a registered rep, or an investment advisor. Also, you can be all three of the above, as I am. So yes, I report to the states for my insurance license, I also have a broker-dealer that just conducted their compliance review in my office, and I also have a registered investment advisory firm that I work with where I am able to offer fee-based planning products and services. It seems I spend half my life doing continuing education to satisfy all of these “bosses.”

Options for Registered Reps Around Indexed Annuities
If you are a registered rep or want to become a registered rep while also having the ability to write indexed annuities, here are my thoughts.

In 2005, the NASD (which is now FINRA) announced to their broker-dealer member firms that they (the NASD) would “recommend” that broker-dealers supervise the sale of indexed annuities that their registered reps sell, even though indexed annuities were not securities (as later confirmed with SEC 151a being vacated). It was basically a suggestion, an urging, a nudge, a proposition, which left many broker dealers wondering, “Is this a mandate or merely a suggestion?” This suggestion/urging/proposition was called “Notice to Members 05-50” and what ultimately led many broker-dealers to this day to take “jurisdiction” over your indexed annuity sales! That is, that most BDs now require your indexed annuity business to flow through them, similar to securities. That also means that the broker-dealer is generally taking a cut of your commission based on your “grid” that is usually applied only to your securities business.

Option 1. Choose Wisely
Whether you are a registered rep looking for suggestions on changes you can make to make your indexed annuity life easier, or if you are a newbie getting ready to get your registered rep license, here is what I would say: There are broker-dealers that are fairly “hands off” with your indexed annuity business, and some that are extremely intrusive. Choose wisely. I can also help with recommendations.

An example of a “hands off” broker-dealer would be one that understands that indexed annuities are not securities and says that they do not even want to see the signed applications, etc., for indexed annuities. No BD supervision and no cut of your indexed annuity commission. Similar to how a typical BD would treat a term life insurance case. These types of broker dealers allow you to conduct your fixed insurance business the way you did prior to NASD 05-50.

An example of a broker dealer that is extremely intrusive would be this one: I know a major BD that not only mandates that indexed annuity business flow through them, but they also mandate that all life insurance flow through them. They use the excuse of NASD 05-50 to take authority over even the fixed life insurance products! This means the BD gets a cut of the agent’s/rep’s commission as well. Furthermore, this broker dealer has its own general agency in house that the agents are required to use, versus the agents’ preferred IMO. And that general agency does extraordinarily little to train their agents on fixed insurance products. This BD (along with their general agency) is an order taker, not a business partner. Not trying to disparage anybody, just laying out the spectrum of BDs!

Option 2: Go the “IAR” Route
Since NASD 05-50, the number of registered reps in our country has fallen. Some registered reps have ditched their broker-dealers and instead aligned with RIA firms. When it comes to the securities businesses, these reps have chosen to give up commissions and go the fee based/recurring revenue route. In other words, many of these folks moved from my category two (registered rep) to my category three (IARs).

How does being an IAR help you with the indexed annuity/fixed insurance business? In short, RIAs generally do not touch your commission-based business, such as indexed annuities, life insurance, etc. What this means is, by affiliating with an RIA firm, you can generally go about your insurance business the way you would as if you were not securities licensed while at the same time being able to offer securities if the need calls for it. Of course, the securities revenue you receive would be based on a fee, one percent of assets under management for example.

I would estimate that for my group of financial professionals getting licensed today to sell securities, about 80 percent of them choose the IAR route versus the registered rep route. For those that are already registered reps, some of them are ditching their Series 6s and 7s to go the IAR route.

Option 3: Forget the Securities License
In a world that is becoming more “regulatory,” I am on the side of having a securities license and not choosing this option. My opinion is exacerbated by recent lawsuits that I have read surrounding “source of funds” issues. In other words, insurance agents are getting sued for selling fixed insurance products (annuities) to consumers because these agents allegedly made recommendations to sell the securities the clients currently owned in order to fund the annuity. Even though the sale was not a securities sale, our rule makers are taking the stance that discussing and recommending that the client sell out of securities means that the agent should also have a securities license.

Of my three options above, #2 is where I see the most activity.

Serving As You Ought

Mary Flannery O’Connor (1925-1964) was an American novelist, short story writer and essayist. During her short life, she wrote two novels and 31 short stories. O’Connor’s best-known work, a novel entitled “A Good Man Is Hard to Find,” was published in 1955. As a Southern writer, she wrote intentionally in a style that relied heavily on Southern history and culture and featured grotesque characters encountering violent situations. As a woman of Irish descent and Catholic beliefs, O’Connor wrote in such a way as to present the created world as being charged with God. Haunted by Him.

In April 1959, O’Connor wrote a letter to fellow writer, Cecil Dawkins. The letter contained this very personal revelation:

“The other day my Mother asked me why I didn’t try to write something that people liked instead of the kind of thing I do write. Do you think, she said, that you are really using the talent God gave you when you don’t write something that a lot, a lot, of people like? This always leaves me shaking and speechless, raises my blood pressure 140 degrees, etc. All I can ever say is, if you have to ask, you’ll never know.”1

Point: We are all constantly evaluated by other people who have their own experience, opinions, and ideas for how things should be done. If they have to ask, maybe we are not making our purpose clear.

What Makes You, You
As an independent financial professional (IFP), you provide advice and guidance to clients regarding investments, insurance, and other financial planning matters. You propose solutions and actions which align with your clients’ goals, you listen to their needs, and you act in accordance with their best interests.

You may be extremely prudent in the advice you offer, professional in your practices and methods, and knowledgeable in your areas of expertise, but there will still be people who will find fault with you or reject you as their personal advisor.

What kinds of criteria do people use with which to select an IFP? Consider the following:

  • Professional Certification (CFP, CWM, CLU, ChFC, or CFA)
  • Education (university degrees, Masters, etc.)
  • Experience (including the path to becoming an IFP)
  • Range of Services
  • Specialization(s)
  • Compensation Structure (flat or hourly fee, commissions, or a combination of both)
  • Reasonableness of your fee(s)
  • Investing Approach
  • Transaction Based Service Model or Consultative
  • Whether or not you serve as a Fiduciary

Beyond these important factors, there is something that generates the most important value of working with you: Your individuality.

Question: As an IFP, have you zeroed in on your personal definition of “success?” The foundation of your individuality is the “why” behind what you do and how you do it. The “why” dictates what you consider to be success.

Oughteries
In my faith tradition, God is Love. He invites us into a loving relationship with Him. The same tradition makes one thing utmost above all else: We are to love others. But human beings can be geniuses at taking an invitation from God and turning it into a burdensome obligation–what someone once described as “hardening of the oughteries.”

Oughteries can obstruct the essence of who a person is. A person might be driven by love, and yet behave as if following some set of rules, trying to live strictly by a standard of dos and don’ts. This person’s freedom is restricted by a “hardening of the oughteries.”

As an IFP you must abide by all pertinent regulations, maintain all the record-keeping standards, and at all times avoid serving your own personal interests ahead of the clients’ interests. In addition, every direction you recommend that a client takes, each product you recommend, and the decision trees you utilize when making recommendations, all come with guiding principles. These collectively create the oughteries of being an IFP.

Point: It is tempting to construct a practice as an IFP that is entirely defensive, or primarily built on maintaining the right boundaries. Doing so will eliminate the joy and wonder that you hoped to experience in the profession you chose.

Rediscovering Your “Why”
Something attracted you at first to the financial services industry. You felt driven to gain the proper certifications. You sat for exams. You studied the broad array of products. Your fulfillment came from something in particular at first. What was that driver?

Examples:

  • A huge passion for helping people achieve the freedom that is true wealth. As James Clear (@JamesClear) wrote on X:
    “Real wealth is not about money. Real wealth is: not having to go to meetings, not having to spend time with jerks, not being locked into status games, not feeling like you have to say ‘yes,’ not worrying about others claiming your time and energy. Real wealth is about freedom.”
  • Protecting widows and orphans. This was my reason for getting into the career of selling life insurance. It felt religious as well as fulfilling:
    “Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress.”
    —James 1:27 (NIV)
  • Deploying an in-depth analytical ability across all areas of financial planning (cash flow planning, retirement planning, investment management, insurance planning, estate planning, and tax planning).
    “Happiness comes from solving problems. […] Happiness is a constant work-in-progress. The solutions to today’s problems will lay the foundation for tomorrow’s problems.”—Mark Manson
  • Excelling at salesmanship. This is a key requirement for successful IFPs. There is an art to persuasion. There is, however, a higher goal than making a sale or getting a client to act. The joy comes from seeing the client’s life improved.
    “Engaging people is about meeting their needs—not yours.”—Tony Robbins
  • Releasing native curiosity. Some IFPs delight in uncovering precisely what each client needs and therefore approach financial planning like detective work. They like nothing better than piecing together minute details, fashioning a road map to success, and wrapping it all into a comprehensive plan.
    “I’m naturally curious, and I’ve always been driven by my curiosity. Curiosity gets people excited. Curiosity leads to new ideas, new jobs, new industries.”—Anne Sweeney

Point: The easiest thing is to let the work interfere with the joy of the career. The joy is rediscovered when you revisit the reason you chose to be an IFP.

Application—Serving As You Ought
Once you remember what it was that led you to choose a career in financial services, the next thing is to make your approach to business flow from that joy-giving purpose.

It starts with aligning your practice with transparency and authenticity.

Practical ideas:

  1. Clearly explain why a client should choose you as an investment advisor. Plainly lay out the training, certifications, experience, and successes you have had.
  2. If you are recommending an insurance product, pull out your own policies and demonstrate that you recommend what you also own.
  3. Enthusiastically explain how you choose specific investments to recommend to clients. What have you learned that can benefit them? Why are you oriented to specific categories?
  4. Willingly and honestly help your clients understand how your fees and the underlying costs might affect their investments. Use an example of a specific amount of investment to show how much will go to fees and costs and how much will be invested for the client.
  5. Exemplify accountability. Who can the client talk to if they have concerns about how you treat them or what they consider to be disappointing results?
  6. Reveal any past experiences of having clients complain, of being fined, or disciplined in any way. Lay out the facts. No one is perfect. Successful people attract detractors.

Summary
Flannery O’Connor’s own mother questioned the value of her work. You can be sure that people will look at what you do with dubious eyes.

If you love what you do, it should be evident in how you do it.

If you can stay focused on the reason for your career choice, and keep your work habits aligned with that purpose, you will be seen as authentic.

Do not succumb to the trap of oughteries. Yes, obey all laws, follow all regulations, conduct yourself ethically, hold yourself and your practices above reproach—but do not make all this effort the goal.

Flannery O’Connor knew who she was and what she was all about. She had no problem in explaining why she wrote the way she did. In an essay she described her use of the grotesque this way: “Whenever I’m asked why Southern writers particularly have a penchant for writing about freaks, I say it is because we are still able to recognize one.”2

If you have read all the way to this point, I want to encourage you to practice the art of your profession with authenticity and transparency. Remain committed to the cause that attracted you to the industry in the first place, and don’t get distracted by the “hardening of the oughteries.”

One last piece of encouragement (again from O’Connor):

“Accepting oneself does not preclude an attempt to become better.”

Footnotes:

  1. “The Habit of Being: Letters of Flannery O’Connor,” page 326, edited by Sally Fitzgerald, published in 1979 by Farrar, Straus, and Giroux. ISBN 9780374521042.
  2. “Some Aspects of the Grotesque in Southern Fiction,” an essay by Flannery O’Connor, 1960.
WordPress › Error

There has been a critical error on this website.

Learn more about troubleshooting WordPress.