I got talking with a retired master plumber recently and somehow the conversation came around to the difference between what the book says and what happens out in the field. The plumber said he worked for a local firm where the owner was also a master plumber with years of experience, which is what you want when considering any Plumbing Services out there. The owner died and the daughter took over the firm. The plumber said she was nice enough and everything, but she consistently didn’t allow enough time for each job so he was often running later and later as the day went on. She would argue that the plumber worked too slowly because she was scheduling time based on some plumbing reference book that said how long a particular task would take. The plumber would try to explain that the book doesn’t allow extra time for a broken flange that needed to be dug out and replaced-or a replacement part that was incorrectly labeled so that you needed to make a trip to get the correct part. These are the things only an expert plumber, like Morris Jenkins, would know and understand. He said he never could get her to understand that practicing your craft out in the field often differs a lot from what the book says it should be.
The first seven years of my working life were spent earning commissions, cold-calling, and doing what was called belly-to-belly selling. I had a marketing degree, weeks of sales training, and manuals designed to cover every situation. However, they never explained how to handle an appointment where when you sit down at the kitchen table and you respond yes to the offer of coffee-and the prospect picks up the cup…looks inside…flips the cup to throw the cockroach on the floor…squashes the cockroach with her bedroom slipper…and then pours and hands you the cup of coffee. Do you drink the coffee? (The answer was yes, I needed that $150 commission check.)
Those that have never been out in the field do not understand how fragile the sales process is. First you have to find a viable prospect, then you have to convince them to meet with you, then you need to educate them and counter often imaginary fears to get them to buy something that is designed to benefit them, and then you hope that buyer’s remorse or some act of clerical obtuseness from the home office doesn’t kill the sale. My wife got tired of my constant refrain, “The whole world should be on commission so they only get paid when the sale closes.”
Those that have never been in the field try to add pages to the book each time a new situation is met-which is why disclosure agreements now resemble small novels -but the reality is every sales situation is somewhat unique. Agents know this and thus tailor their presentation to meeting the needs and addressing the fears of each customer.
There has been a lot of talk about “robo-advisors” and how these may largely replace many life/annuity agents. The ones spreading this message are those that have never sold annuities or life insurance, but they believe that all goods are fungible and that selling an annuity over the web is no different from selling a book. The reality is that all goods are not the same, and an agent is not typically selling a good but providing a solution.
A prime example of this is life insurance. Several Silicon Valley savants have attempted to apply the internet marketing book to life insurance and failed; despite 20 years of trying over 90 percent of life insurance is still sold by agents. This is largely due to an agent making a consumer aware of the need for insurance, but it’s also an agent persuading the consumer go through the hassle of underwriting and keeping the purchase together when the policy comes back rated requiring a higher premium.
Annuities are also an area that is difficult to “robo.” Although one life-only immediate annuity is pretty much like another, even here the differences in determining which carrier is most likely to be around for a lifetime and which annuitization choice is optimal often requires the input gained from experience-which is why over 90 percent of life income annuities continue to be purchased through agents. When it comes to other types of annuities, the book is not going to be able to get a sense whether a multi-year guaranteed annuity is a better emotional fit for this consumer than a fixed index annuity, and that an annuity with a guaranteed lifetime benefit provides a better solution than an immediate annuity for that consumer. The book expects all consumers to react as the book says they should react, but the consumer never read the book.
If I was making the rules, every home office employee, regulator and politician would have to spend a year of their life out in the field-living off of commissions-learning the realities of the marketplace. My bet is that, upon their return to their former lives, the book would be largely ignored.
