More Than Dollars And Sense: The Business Plan

“If all you have is a hammer, everything looks like a nail.”
—Bernard Baruch

Up to this point we have determined the “why” and the “purpose” of the partnership. Now it is time to formulate the quantifiable objectives your new partner(s) is/are seeking. Asking questions like those asked in the home interview with the client makes this a dynamic experience.

In about 30 percent of the relationships you establish, commission splitting will not be an issue because your strategic partner is not [insurance] licensed and it is illegal to share commissions with them. For this reason, attorneys, fee-based planners, and other non-licensed professionals will not care about this aspect of the partnership. For these people, one alternative method in which you can still “sweeten the pot” for them would be for you to absorb some of the marketing expenses, e.g., you pick up the tab at your joint breakfast/lunch/dinner events. This may sound cost-prohibitive to you, but trust me that picking up a $1200 dinner tab with the prospect of generating $75,000 of commissionable premium is truly a win for you!

For those who do desire to share in the commission, I suggest that the conversation go something like this:

“Jane, in terms of income, just how much money would you like to generate from introducing long term care insurance to your clients?” This is often the moment of truth, and this is when you will ascertain her sincerity, level of commitment and true objectives. Based on your “warm up” conversation, you may know that your partner is contemplating sending a child off to college or desires to purchase a vacation home or new car. Knowing the source of this newfound motivation will certainly make it easier for you to keep them focused and engaged.

If they throw out a number such as $100,000—a number that I have very commonly encountered—be prepared to break down what it will take for them to achieve this number.

I have an actual Excel spreadsheet that will do this for us, but I will often explain it this way:

“Okay Jane, you want to bank $100,000 in long term care insurance commissions. To do this we will assume that we are going to be 50-50 partners; that we will close 80 percent of the clients with whom we sit (this number will be closer to 100 percent with proper Need development), and that 80 percent of them will in turn have the requisite health to qualify for this coverage. If they are already working with you, I am not going to worry about whether they have the financial assets and ability to pay for this coverage.

Further, assuming that you are in line to receive 50 percent of the sale, at $4000 per average household premium, that means you will net $2000 of premium per sale. At 65 percent commission, you will garner $1300 per sale in first year commissions. That means that we will have to place 76 policies, submitting 96 annually, and setting 120 interviews per year or about 2.4 interviews per week. If you can get me in front of that many people on an annual basis, I will put $100,000 in your pocket. This of course will be sweetened by the stream of annual renewals that you will also be receiving for the life of the policy.

Regardless of the answer, we remind them that they will have the ability to earn up to 50 percent of the production credit or premium, which will then be subject to the commission structure of their personal contract. In most cases, street compensation is more than enough to keep them actively engaged and, after receiving their first commission check, very enthusiastic.

Over the years I have worked with any number of producers who have used arbitrary methodology to determine how the production credit will be split between the advisor and planning specialist. I would suggest that you make life easier on yourself and the advisor and eliminate this stressful aspect of the discussion by simply being honest and forthright and suggesting that the standards of the Million Dollar Round Table (MDRT) be applied to the partnership. This is especially important if you are working with multiple partners in the same firm. Having different compensation structures in place is a recipe for disaster.

Before jumping into that aspect of the negotiations I have found it useful to preface it with a quick review of some basic assumptions that goes something like this:

“Jane, as I mentioned to you earlier, I have no desire to take your client list. I personally do not like cold calls, I know your clients won’t like receiving cold calls, and, upon learning that you gave me their name and number, may take great exception to that and may want to have a few choice words with you. It is a lose-lose-lose proposition and may even create problems for both of us in terms of violating Do Not Call statutes.

I also want to reiterate that you earn your portion of the commission by retaining control of the relationship with your clients. They trust you; they appreciate you and know that you have their best interests at heart. For this reason, I want to become your trusted associate on this one aspect of their financial plan. I don’t merely want “access to your book of business” but rather are offering you a turnkey marketing system comprised of me, thirty other agents, a general agent and his staff, as well as multiple carriers fully equipped and capable of providing support at every stage of the process to bring this valuable coverage to your clients.”

I then suggest that you again confirm what financial expectations that the advisor or firm may be harboring. After they have put this number on the table, you can then proceed to outline the terms of the MDRT program. If I accompany the agent to this interview, the dialogue will often go something like this:

“Jane, as you may recall, there are five aspects to the MDRT Standards for splitting commissions. We have found that utilizing them has made life simpler and more agreeable for everyone.

The first 20 percent is assigned to the owner, or agent of record, of the client. In this case, you clearly own the client relationship and are entitled to this first portion.

Secondly, who is setting the appointment? As I mentioned, your value to our partnership is the ownership of the client relationship. If you are broaching the subject of long term care with your clients in the course of annual reviews, phone calls, and other follow ups, and are the instrument of getting me in front of your client, ideally here in your office so that you can be involved as well, you earn that 20 percent as well.

The third piece of the puzzle is the actual sale. Now, if you are here in the office, make the introductions, do a review of their portfolio, and then excuse yourself while the agent conducts the interview, but come back at the end to validate the plan design and to solidify the sale, we will split this 20 percent with you, bringing you to 50 percent of the commissioned sale.

The fourth piece is awarded to the person who is doing the heavy lifting in terms of the application processing, obtaining medical records, and completing all aspects of the sales process. This clearly will rest with the agent.

The final piece is awarded to the agent of record who will conduct post-sale activities and additional follow up. Again, this will go to the agent.

When all is said and done, you are now 50-50 partners, and you earn your portion by managing your client relations, setting appointments, and facilitating the introductions here in your office. Should you opt to do less than this, then we can naturally adjust the split accordingly. So, again, you have the opportunity to earn up to 50 percent of the sale. Does that sound fair to you?”

I have found that when you position the split in this light, there is no disagreement, and you are still affording them choice on how to conduct their business. I would also recommend that you frame up a mutually agreed upon Vision and Mission Statement that adequately portrays your common goals for the partnership. With this plan in place, you can now move on to the marketing plan which is key to all success that you will enjoy in this budding relationship.

Take A-ways:

  • Be in the position of offering your strategic partner a choice on how much of the commission they are willing to work for.
  • Using the MDRT standards for commission splitting eliminates both subjectivity and oftentimes any feelings of greed on the part of your strategic partner.
  • It is important that there just be “one deal” on the street associated with your agency in terms of commission and premium splits. More than one can be a disaster and ruin your reputation.
  • Since many consider money as the root of all evil, it is imperative that you establish a clear understanding regarding the sharing of commissions or how they will be compensated if commission-splitting is not an option.
  • Other motivating factors for the partner may include client retention, asset protection, and the concern for client well-being. This is the Need aspect of the arrangement. Emphasize these points on a regular basis.

Don Levin, JD, MPA, CLF, CSA, LTCP, CLTC, is now the Strategic Relations Director for the Krause Agency following their acquisition of USA-LTC. Levin is the past three-term chairman of the board of the National Long Term Care Network and the past president and CEO of USA-LTC.

Levin has been in the long term care industry since 1999, during which time he has been an award-winning agent, district manager, regional sales manager, marketing director, associate general agent, general agent, and divisional vice president. Levin is also a former practicing Attorney-at-Law, court-appointed arbitrator and is a retired U.S. Army officer.

In addition to his various law and life and health insurance licenses, and the above designations, Levin has also earned Green Belt certification through GE’s Six Sigma program and is a graduate of GAMA International’s Essentials of Leadership and Management. He has also taught Managing Goal Achievement®, Integrity Selling® and The Way to Wealth® to hundreds of leaders and salespeople over the past fifteen years.

He previously possessed FINRA Series 7, 24, and 66 licenses. Levin earned his Juris Doctor from The John Marshall Law School, his MPA from the University of Oklahoma, and his BA from the University of Illinois-Chicago. He is also a graduate of the U.S. Army Command and General Staff College and the Defense Strategy Course, U.S. Army War College.
He is a published author of fourteen books in a wide range of genres.

Levin may be reached via telephone at (800) 255-1932. Email: