Recently my entire neighborhood here in Iowa was hammered by a storm that came with baseball sized hail. My roof was damaged, gutters destroyed, paint on my house was chipped, the deck was pelted, and my garage door looked like it had been used as a pitching backstop. Although the insurance company was great with stating that they would cover everything, it quickly became clear to us that the logistics were going to be very stressful.
Many of the contractors we spoke to only did one thing or the other. One contractor only did roofs, no garage doors. Another contractor only did siding painting but didn’t want anything to do with replacing decks. One contractor was willing to deal directly with the insurance company, the other was not.
All these contractors doing their own thing but yet working independently of one another made the choreography of tasks extremely stressful for us to plan out. For example, the painting of our siding and the replacement of our deck should be done in the right chronological order. In other words, if you were going to paint the house, it is easier to paint the house with the deck removed. And in our case, if the deck needs to be replaced, then why not remove it, paint the house, then build the new deck. The painter and the deck builder being two separate people made the planning of this a bit cumbersome. This is why choosing the right contractor is incredibly important, meaning that you should be vetting them beforehand to see what they can do, when they can do it, and if they’ll do it in order. No matter where you are, whether you need a deck painting service in Texas or a Deck Oiling sydney service, you have got to get all your ducks in a row before saying yes to any work.
As you can imagine, talking with several contractors about the choreography of everything became stressful, and that doesn’t even include the stack of multiple quotes that we would have to collect and send to the insurance company.
Well, we finally found a general contractor that said he would do it all. He had subcontractors that he worked with that specialized in each of the areas we needed addressed. Furthermore, he was at the top of the hierarchy and would handle all the choreography, paperwork submission to insurance companies, etc. Needless to say, we went with him.
Although a painful process, the need to get all of this done was obvious to us because of the “realization of necessity.” We could clearly see that our house was almost destroyed, and we knew we had to get the roof fixed-ideally before it rained again. With tangible items like cars, houses, etc., it is very easy to have a “realization of necessity” when it is destroyed. We can see it! Unfortunately, with non-tangible items like finance, that “realization” rarely happens for many consumers. And it is the realization that drives people to go through the process, even though that process might be painful for the consumer.
That last paragraph is very important because finance is indeed painful to many consumers, just like dealing with contractors and insurance companies was painful for me. It’s not breaking news when I say that people are “pain averse”-which is why many people don’t want to think about their finances. What I would like to discuss in this article is taking the “pain” out of the process by you working as a “General Contractor” for your clients. And by doing so, you can relieve some of the pain that typically comes along with discussing finances. You can also help the client with the “choreography” that many times is required with their finances.
Here are the steps that I would suggest taking to become the general contractor for your clients.
- Simplify with stories: Simplification and storytelling take the stress out of finances, as alluded to previously. Learn to be a great storyteller and simplifier.
2. Understand financial planning and have the right software: Recently I have been training agents on how to have this conversation while using financial planning software that uses “Monte Carlo Analysis.” Many have said it was some of the most valuable training they have received. Financial planning software generally allows you to work with the client’s entire portfolio because it allows you to answer questions like the below:
- When can they retire?
- How much can they be “projected” to take from their portfolio at retirement?
- What would a long term care event do to their retirement portfolio-at age 80 for example?
- How does inflation impact their portfolio, especially if “healthcare inflation” is five percent per year?
- What is projected to be the size of the estate when they pass away at age 85, 90, 95, etc.?
- Does the client need any trust work done?
- What would happen to the size of their estate if you added a second-to-die policy payout upon the client’s and spouse’s death?
- What happens to their portfolio’s “chance of success” when you add an annuity with guaranteed lifetime income?
- What are the confidence levels if the client were to withdraw various levels of income during retirement?
3. Create Your List of “Subcontractors”: You may be thinking, “What if I am not a trust attorney? How can I implement trusts?” or “What if I am not a registered rep and cannot recommend selling or buying securities in their plan?”
You are right by asking those questions, this is where I believe you should take the time to interview these folks in your local area:
- Estate Attorneys: You can just do a Google search for “estate or trust attorneys near me.” As you interview these attorneys, get a feel about their philosophies. A good marketing organization would help you with a script of what to ask these estate attorneys. At CG Financial Group we have “cheat-sheets” on how to navigate these conversations. There are several things to ask, such as: Do they do wills, living trusts, and power of attorneys? And for the higher net worth clients you might have, does the attorney do irrevocable life insurance trusts? Also ask if they are licensed to sell insurance! If they are, that can create a conflict. If you have a good impression of the estate attorney, maybe ask if he/she knows of any good CPAs as well.
- CPAs: This is so you have a resource for your clients to file their taxes. Very similar to the estate attorneys, ask about how they do their jobs. Do they recommend tax mitigation strategies like traditional IRAs, Roth IRA‘s, or life insurance strategies? One thing I have observed with many estate attorneys and CPAs is that they are more about what the client’s current situation is than they are about planning for the future. In our profession, we don’t have the luxury of ignoring the future! Does their philosophy align with yours? Of course, make sure there is no conflict-such as the CPA also being licensed to sell insurance.
- Mortgage Brokers/Bankers: As I speak with a lot of clients, it amazes me how much in unnecessary interest they are paying when a quick conversation with a trusted mortgage broker or banker could save them thousands of dollars per year in interest. Consumers are in debt and if you can help them in this area, you will be their hero. Know a good mortgage broker/banker. By the way, reducing their mortgage payments can be input into the financial plan and thus show a better retirement portfolio!
- Financial advisors: Of course, if you are already a financial advisor dealing with securities, you would not want to direct your clients to a financial advisor. But for those of you that are insurance only licensed, it would make sense to interview various financial advisors that deal with the securities. There are many financial advisors that do not work with annuities and do not like to deal with underwriting on life insurance, and therefore they stay away from these products. There are opportunities for you-the insurance agent-to have great conversations with the financial advisors.
- Financial planning software that I mentioned previously often will show the client that by adding an annuity to their portfolio that they can be more aggressive with the rest of their portfolio. The end result is a “probability of portfolio success” that is much higher than before the annuity was introduced. However, if you are an insurance only agent, you cannot make recommendations on buying or selling securities. This is where a “subcontractor” can come in. I promise you, if you speak with a financial advisor about this logic, he/she would be all ears in affiliating with you.
I really want to emphasize that last paragraph. Helping to put a portion of the client’s money into a “conservative product” like an indexed annuity with a guaranteed lifetime withdrawal benefit should impact the rest of the client’s portfolio. Meaning, the financial advisor should be able to be more aggressive with the rest of the client’s portfolio. Many times, the insurance agent and the financial advisor work independently from one another and that is equivalent to my deck guy and painting guy working independently of one another. Or, heaven forbid, working against one another which is common in our industry.
Your clients need a “General Contractor.” Be that guy/gal.