There are only a handful of insurance carriers that play in the corporate owned life insurance (COLI) and business marketplace, yet actively working with them can identify significant opportunities for brokerage general agencies (BGAs) and their sales professionals. The market opportunity remains strong, with 24 million family businesses in the United States contributing 50 percent of the gross domestic product and creating over 75 percent of all new jobs. Additionally, the family owned business market makes up 60 percent of the nations workforce.
Due to its accumulation qualities, variable life insurance has been the preferred product for business planningkey person insurance, non-qualified deferred comp, executive bonus plans, and buy-sell agreementsand each carrier in that market caters to it with specifically designed product features.
The Company Valuation Entre and Buy-Sell Review
As a point of sale professional in the field, there are many advisors in your territory that work in the 401(k) and retirement plan space, either by accident or intentionally. Most advisors have a few 401(k) plans that they service per the request of a client, who is a small or medium sized business owner in the community. These clients are good opportunities for you and the advisor to address business insurance needs. However, it is challenging to approach these clients with something substantial that will open the door to further discussions. All businesses, regardless of their size, need to thoroughly consider their business insurance needs before proceeding with any other aspect of their company. This is so that they are protected if anything should happen to them which is out of their control. By looking at EINSURANCE or other insurance companies in your area in detail, will allow you to get all of the information you need before deciding to come to a final decision when it comes to insurance, as this could prove to be valuable in the future.
The business owner is usually accustomed to working with consultants, accountants, and attorneys specifically for his business planning needs. Some financial consultancies like Holland Parker provide customizable financial planning and forecasting solutions for a company. A great way to break the ice with a business owner client is to offer a complimentary, informal company valuation. Two industry-leading insurance carriers offer informal company valuations free of charge. These valuations have proven to be quite accurate, even when compared to formal valuations conducted by expensive business consultants. There are some prequalification metrics for those valuations and the company needs to be of adequate size, but if they are large enough for a 401(k) plan, they likely will exceed those requirements. The advisor should be more than willing to incorporate this new valuation tool into their product offering during their regularly scheduled review meetings with those specific clients. Once the information is gathered, and a valuation is completed, a meeting can be set to review the results and determine if insurance applications exist. You are there to help the advisor and the business client along the way and to uncover those opportunities.
The most natural follow-up to the business valuation is to inquire about the existence of a succession plan and buy-sell agreement. In the family owned business market, 60 percent do not have a succession plan or dont have a defined, written plan in place. The other 40 percent have a plan incorporated into the estate plan or have a written succession plan. The buy-sell agreement, if it exists, may not be funded or may need adjustment to reflect a new company valuation. If one doesnt exist, then that can be addressed with the client, together with their attorney, making it clear that you and the advisor have the product to serve as the funding mechanism. In the event of an owners death, a funded buy-sell agreement within a succession plan can create immediate cash for purchase and ensure the successful ownership transfer of the business entity.
Possible Buy-Sell Scenarios:
There is not a buy-sell agreement in place.
There is a buy-sell agreement; however, it is not properly funded.
It has been many years since it was updated or the company value has changed; needs review.
There is no need for one or an adequate, funded agreement exists (explore other opportunities).
The buy-sell review is a valuable first step in developing a deeper relationship with the business client. The company valuation created a follow-up opportunity for you and the advisor to gather more information about the business entity and the client. You have provided a valuable service to the client, enhanced the advisors service offering and proven yourself to be a helpful resource to the advisor for future engagements. Other insurance applications such as non-qualified deferred compensation, key-person insurance and individual insurance needs for employees or owners can also be uncovered.
Networking with 401(k) Carrier Wholesalers
Outside of the typical advisors, there are unique advisors in your territory who specifically focus on 401(k) plans; the retirement plan specialists who are either a part of a large branch and service those needs, or have a separate practice affiliated with an independent broker-dealer or registered investment advisor (RIA). These advisors are perfect to approach with business insurance applications and company valuation offerings with the majority of their clients being plan sponsors and business owners. It just may be difficult to get a meeting with such advisors because they dont deal with you on a regular basis or they are outside the normal advisor channels you frequent. This is where collaboration with the insurance carrier resources proves to be invaluable. The insurance carriers that have the greatest presence in the business or COLI markets are also those that have significant retirement plan assets through their 401(k) platform. It is likely that these specialty 401(k) advisors use that platform, among many others, to service their clients needs. The carriers have dedicated 401(k) wholesale teams who call on retirement plan advisors every day and have existing relationships with them. It would be advantageous to find a way to work with these wholesalers through a friendly introduction from the insurance carrier.
What if there was a way for you to network with these wholesalers, share leads, and conduct joint meetings with these carrier wholesalers across the territory? They bring the 401(k) expertise and you bring the wealth of insurance applications that can be applied la carte to the advisors existing book. It makes perfect sense to approach this marketplace in such a collaborative manner. As the point of sale professional in your territory, it would make sense for you to reach out to your carrier 401(k) counterparts, introduce yourself, and inquire about joint opportunities.
Opportunities with the Plan Participants
Working with advisors that specifically work in the 401(k) space can lead to opportunities beyond the business owner clients and plan sponsors. These advisors are typically very active with the plan participants (employees) in the plans they manage, or at least interact with them during enrollment and educational meetings throughout the course of the year. It is a terrific opportunity, with the plan sponsors permission, to work with some of the employees on their financial planning and insurance needs. As the life insurance specialist, you can propose to the advisor that they conduct financial assessment meetings to gather information about the needs of the participants through means of a confidential survey. You may then review these opportunities for individual life sales and planning needs. This technique has generated a lot of success among retirement plan advisors and life insurance specialists in the field. Particularly if the plan sponsor is in a potentially high income generating industry such as medical, finance, or engineering, it creates a fantastic opportunity for planning needs with that advisor. Some of the carriers also have programs to help you implement these campaigns and offer sample surveys.
Conclusion
Broadening your exposure, using your carrier partner wholesalers, and approaching the 401(k) advisor marketplace with an open mind will lead to more opportunities for business planning. Most of these advisors simply dont know this is something you offer, so it must start there; approaching your existing advisor clients and uncovering those business valuation and planning opportunities with them. As you gain some traction and develop a comfort level with it, then you can begin to prospect in your territory for those retirement plan advisors who may be open to discussion. At the same time, networking with the carrier 401(k) wholesalers in the area may be a terrific opportunity to increase your exposure. As you become established and develop deep relationships with these advisors, you can begin to implement the plan sponsor and participant campaigns to uncover more opportunities.
Footnotes:
Statistics from multiple sources: Mass Mutual, Kennesaw State University, & Family Firm Institute: American Family Business Survey, 2007. The Connecticut Business and Industry Association (CBIA): 2013 Survey of Business Families, 2013. Conway Center for Family Business: Family Business Facts, Figures, and Fun, 2015.
