We can never be sure what the future holds in store, but not knowing shouldn’t stop us from looking for potential problems in this uncertain future and creating action plans to follow if the threat occurs. Look at your business, think about possible threats and then create a list of actions you would take for each threat if it happens. The action plan is revised as you learn more and the uncertainty of the effect of your actions is reduced. Here’s an example: Say that you primarily rely on selling fixed annuities paying an average commission of 6 percent. The regulators intervene one future day and determine a “reasonable” annuity commission should be no more than 4 percent and commissions are cut to that level. This action would cut your income by a third. Assuming that is unacceptable, what do you do?
The first step in the action plan is done—we’ve identified the potential threat. Now, what is the solution? Actually, there are several. Perhaps the most obvious step is to increase the number of sales to compensate for the reduced commission rate. How do we do this? We could increase the frequency of the prospecting method currently used—if you’re holding two seminars a month, start holding three. Or we could add additional methods—lead cards, professional referrals and client referrals are effective prospecting tools and all could bring in enough new business to balance the lower payout.
We could also increase our average sales size. Annuity sales that involve monies coming from a defined contribution plan or from an existing annuity tend to be much larger than annuity sales in which the source is the client’s bank account. Revise your prospecting approach to concentrate on 401(k) rollovers and annuity exchanges.
You could also expand your offerings beyond annuities. Single premium life is an annuity-like insurance product in the way it works, but the compensation is better. For clients looking to fill an insurance need, adding life could offset lower annuity commissions.
You could guard against a decline in future income by creating it today. Although you may currently choose to receive commissions in an upfront lump sum, many annuities are available that pay less initial compensation but an ongoing trailing commission. We’ve now identified four action plans to follow if the rates are one day reduced. We have several tracks to run on. In fact, we could put several of these into motion today to see how effective they are and make revisions as needed before the threat hits.
There are many threats out there. Some we can see and thus create ready-to-use action plans. It makes sense to set aside some time to think about possible threats, develop a list of actions to take, and then file these plans to be available if and when the threat hits. Most threats are invisible until they hit, but the action plan process eliminates paralysis by telling us when they do occur to 1) identify the threat, 2) create a solution(s), and 3) revise the solution as needed. The usual response to many threats is to do nothing. By creating an action plan mentality you are always prepared.
