Feeling too limited selling only life insurance?
Many producers have become full-fledged financial advisors, helping clients with all aspects of their wealth. We sat down with four producers who transitioned into broader roles to talk about why and how they did it.
PARTICIPANT BIOGRAPHIES
Boris Blum, MSFS, CFP, ChFC, CLU, AEP, is president and CEO of Wealth Planning and Management in Woodland Hills, Calif. Blum has written numerous articles on financial topics and has spoken to many professional groups. He is active in his community and a board member with Eliya -U.S.A., a nonprofit organization. Blum is also a qualifying member of the MDRT and the International Forum. He belongs to many professional associations, is a member of the Family Firm Institute and is a candidate in the Certificates in Family Wealth and Business Advising.
Marcus T. Henderson Sr., LUTCF, is president and CEO of Henderson Financial Group. He serves as lead financial advisor for his thriving financial services organization in Nashville, Tenn. A graduate of Tennessee State University, Henderson's professional and industry affiliations consist of memberships in NAIFA and the FPA. In private practice since 1989, he is a 20-year consecutive member of the MDRT, with 11 Court of the Table qualifications to his credit, tn 2006, Henderson was inducted into the John Hancock Financial Network's Hall of Fame. He is only the third African-American internationally to reach this pinnacle of achievement in the company's 152 -year history.
Donald F. White Jr., CLU, ChFC, AEP, is CEO of Treasure Coast Financial Services in Stuart. FIa. He is an Excalibur Knight and Inner Circle Member of the MDRT Foundation and a current Top of the Table qualifier. White holds 1 0 MDRT Top of the Table and 1 1 Court of the Table qualifications. His daily radio broadcast, God's Money Minute, is heard daily on WAY-FM in southeast Florida and on the Internet on www.tcfin.com/godsmoney. He is vice chairman of Love without Boundaries, a nonprofit organization working with orphans in China.
E. Dennis Zahrbock, CFP, CLU, ChFC, has more than 40 years of financial services experience and is nationally recognized as an expert in the areas of retirement planning, business transition planning and estate planning. He founded Business & Estate Advisers Inc. in 1977. He is a Life and Qualifying Member of the MDRT. with 23 Court of the Table and 16 Top of the Table designations. Zahrbock also holds memberships with the International Forum, NAIFA and AALU. He is a graduate of the University of Minnesota - Morris.
Many years ago, I heard a number of very good life insurance agents I knew well use some judgmental language while describing some of their competitors, This was a time when more and more agents were deciding that their practice was, or should be, more man a life insurance agency. They were becoming more involved in their clients' financial lives and were referring to themselves as financial planners, financial consultants or financial advisors.
To me, that seemed like a sensible idea. But to many of the older agents I knew, the move to financial planning was simply an excuse for a competitor who didn't like to be called "just a life insurance agent" to upgrade his or her image in the eyes of prospects who didn't want to talk to a life insurance agent. I really disliked the cynicism that surrounded those days, and for the most part, 1 think we've evolved way beyond those times.
These days, it seems like a natural progression for talented producers to move into other areas of clients' financial lives, should that be of interest to them. These days we hear more about making the transition to wealth planning than we do financial planning, but that's really because so many producers want to help their clients attain and retain wealth. And to get some practical insight into how some of today's best producers have made that transition, we've invited the following panelists to talk about their experiences in doing just that: Boris Blum, MSFS, CFP, ChFC, CLU, AEP; Marcus T. Henderson Sr., LUTCF; Donald F. White Jr., CLU, ChFC, AEP; and E. Dennis Zahrbock, CFP, CLU, ChFC.
question one
Charles K. Hirsch, CLU: You have successfully transitioned from traditional life insurance producers to full-fledged financial advisors. Could you please talk about the circumstances that surrounded your decision to make that transition, including why and how?
Boris Blum, MSFS, CFP, ChFC, CLU, AEP: I recognized about six years ago that the world was changing. Clients' financial lives were becoming infinitely more complicated, and they were getting inadequate information and advice from a variety of sources. The insurance profession was becoming more commoditized, and clients were looking for someone to help them make sense of their financial lives. It was clear to me that insurance professionals had a distinct advantage, as they were some of the few professionals who interacted with clients on a relationship basis and were less transactional focused than stockbrokers and other advisors. They also knew much more about the various facets of their clients' lives than other professionals. So I decided I would try to transition my practice to become more planning oriented and more focused on a fee-based model. I found much less resistance than I expected from clients regarding a fee approach and liked the fact I was focused on them and not products. Interestingly enough, my income went up significantly, as I became viewed as the client's most trusted advisor and the product sales came easier.
Marcus T. Henderson Sr., LUTCF: Well, I cannot exactly say that we were ever the traditional life insurance producer. We always knew there was something more that we were doing, even when we did not know exactly what that more was. Client service, planning with an end game in mind and sequential product implementation were always part of our practice. What we had to define was what it was we were doing, what we wanted to do and what type of professionals had to be within our organization to make it all happen. That was the genesis of our "wealth management process" platform. It was all centered on assisting our clients to the very best of our ability. "A Unique Wealth and Success Management Experience" was introduced as our firm's new tagline.
Donald F. White Jr, CLU, ChFC, AEP: As is the case with many people who have made this move, I have always had a fascination with the investment business. Unlike most of my colleagues in the life insurance business, I had the advantage of serving as a life insurance specialist in two major brokerage houses for 1 1 years prior to founding Treasure Coast Financial. As such, I saw how many of the best - and worst - investment professionals conducted their practices. When I decided to leave the warehouse to pursue my own individual practice in 1995, I had the distinct advantage of starting with a clean slate. Because I worked with other advisor's clients, I did not have a large book of insurance clients, since my clients were the clients of the brokerage firm rather than my own. While this certainly has its disadvantages, it also allowed me to recreate myself from life insurance agent to independent financial planner easily. My goal was to be a planner who incorporated the best of the life insurance practices with the best of the investment practices that I saw in my tenure. As such, when I meet with clients, I attempt to serve their entire financial needs, whether that means their investment needs or their risk management needs. Now, 16 years since making this move, I could not imagine doing business any other way.
E. Dennis Zahrbock, CFP, CLU, ChFC: The pure life insurance business was exciting to be a part of. But as we saw the financial services industry grow, we felt it important to be advising our clients on all parts of their financial world instead of only the life insurance side. We initially entered the "new world" by hiring a CFP and obtaining our own CFPs. I was a partner with another Million Dollar Round Table member at the time. What we discovered was that clients liked and trusted us, and they appreciated receiving all of their financial advice from one firm We learned, very quickly, the "offense" products of the industry - securities and annuities - were quite a bit easier for clients to feel good about and acquire than were the "defense" products, like insurance. Today our firm is 100% transitioned to a full-service comprehensive financial advising firm. Our annual gross revenue is about evenly split between our comprehensive financial business, our Section 401(k) retirement planning business and our life insurance business.
"We learned, very quickly, the 'offense' products of the industry - securities and annuities -were quite a bit easier for clients to feel good about and acquire than were the 'defense' products, like insurance."
- E. Dennis Zahrbock, CFP, CLU, ChFC
question two
Hirsch: What has been the biggest advantage (or advantages) to you and your business in making the transition to financial advisor?
Henderson: The best advantage has been becoming the primary advisor to our clients in regard to many different scenarios - investments, insurance, fee-based planning, tax strategies and entrepreneurial consulting. We are strategically positioned to effectively dispense qualified advice in each area, with each area being led by a difTerent advisor.
White: Without question, being able to serve my clients' investment needs as well as their insurance needs allows me to position myself with my clients as their most trusted advisor. It also allows me to work with less people and be more selective about the people with whom I choose to work, thus perfecting the adage less is more.
Zahrbock: When we were only insurance advisors, we were often looked at as a firm that was trying to sell a product as opposed to a service. Although our clients recognized they needed the product, it always felt like they were suspect of our motives. Were we solving their problem or were we solving our problem? When we looked at their entire picture and could show them how their offense products and thendefense products work together, our defense product sales actually increased. Our comprehensive process has clients asking and wanting to protect the offense side of their financial lives.
Blum: I think my experience as a business owner as well as my educational background were very helpful. I think the transition for me came at the right time. I had always been a lifelong student of the financial markets and thaL coupled with my personal experience over many years, helped position me as a credible advisor in the eyes of my clients, which I think would have been harder to do when I first got into the business. Having a seasoned client base capable of paying the necessary fees for my advice was critical to making the transition work.
"It allows me to work with less people and be more selective about the people with whom I choose to work, thus perfecting the adage less is more."
- Donald F White Jr., CLU, ChFC, AEP
question three
Hirsch: Has the transition altered your relationship with long-time clients, and if so, has that been a positive or negative for you?
White: I only had a few existing clients when I jumped from life insurance specialist to financial planner, so I can only speak to this on a limited basis, but the clients I had were very positive.
Zahrbock: I can't think of any of our insurance-only clients that did not make the transition. I think in all cases it has tied the client closer to our firm as they seek our advice about more and more of their financial lives. Our initial insuranceonly clients are much more comfortable understanding the role insurance plays in their total financial picture. This insurance includes the life insurance, long-term care insurance and variable annuity benefits.
Blum: For the most part, this has been very positive, as my best clients became closer and more ingrained with me. This was not true for all, as I had to make difficult decisions at times when I realized that the client and my new business model were in conflict. Interestingly, this was a major benefit during the financial crisis of '08, as I was able to focus on the most important relationships and not be bogged down my smaller legacy clients who had bought products in the past and were not looking to vent their frustrations on someone. 1 was able to be a counselor to the people who really were paying for my time and help them through the last few years while not being distracted by the clients who no longer fit my business model.
Henderson: If pushed, T would say the transition to charging fees for some services has been the largest stepping stone for our established client base. Many of them customarily received these services from us free of charge, as was typical with the life insurance/investment producer model. New cuente, interestingly enough, expected to be charged. Thus, setting a fair and objective hourly/retainer rate can become a task in both the minds of our established clients and our firm leadership. Once this hurdle is crossed, the response has been very positive. Clients understand and respect our firm in a different light.
"I would say the transition to charging fees for some services has been the largest stepping stone for our established client base... New clients, interestingly enough, expected to be charged."
- Marcus T. Henderson Sr, LUTCF
question four
Hirsch: Do you feel like your role in the financial lives of your clients has changed significantly, and could you talk a little bit about what that means for your business and your professional satisfaction?
Zahrbock: Our role, in my opinion, has become much deeper. We hold a much higher role in our client's lives than that of solely the life insurance person. We strive constantly to always have the client's best interest in mind in all facets of their lives. Our firm byline for the past 30 years has been "with your interest in mind." I'm not saying we did not strive to do that before, but it was only in the insurance side of their lives. Our long-term clients truly understand how deeply we care about their welfare. Our newer clients evolve into the same understanding.
Blum: My role in my clients' lives has certainly changed, and I am much more satisfied than ever before. I am very close to my clients and can confidently consider many as close friends. I know more about their lives than probably anyone and feel honored to be able to be considered one of their most trusted advisors.
Henderson: The positioning of our firm has changed significantly. Clients consult with us about everything from children's education planning to advanced estate plans, while others ask us to act as personal advisors to their family as a whole. Much like a law firm would act with multiple specialties within its walls, we operate with our clients quite the same way. Each advisor brings his or her specialty and unique flair to the client/advisor relationship.
The professional satisfaction is incalculable, with everybody working on the same page and both client and advisor appreciating the wealth management process and each other.
White: Certainly, when I was working exclusively in life insurance, I had a rewarding, enjoyable career, but I always wanted to do more. When you are managing people's financial affairs, your role is very different. It puts you in a position that not only allows you to give more input but also requires it. For me, this has increased my personal satisfaction in the business greatly because my temperament is best served in this role. As for my business, there is actually no way to tell. I did well in both roles, and I am sure, had I stayed exclusively in a life insurance role, my business would have continued to prosper. I did not do this to make more money. I did it because I thought I would enjoy it more - which I do - and I could have a greater influence upon the lives of the people - which has also happened.
question five
Hirsch: Has the change in your business also altered the kinds of clients you now do business with? In other words, are you working with a more affluent clientele because of your change to a broader planning role?
Blum: I only get clients now by referral and can be very selective about who I spend my time with. Due to the fee-based nature of my practice, I can only work with affluent clients who can afford me. This can be limiting at times, but I have forged and continue to forge new relationships with other financial advisors and insurance agents who can benefit from working together with me or can service clients who might not be a good fit for me directly. The criteria is not only financial anymore; it's not only about the size of the check they can write, but also about whether I would truly enjoy working with them and can help them in the areas where they need help. I only work with successful entrepreneurs and find them the most interesting individuals and lots of fun to be around.
Henderson: The rebirth of our firm has definitely given a "build it and they will come" type of effect. We frequently find ourselves competing with like firms that, as a strictly insurance/investment firm, we had never heard of before. This has been professionally rewarding for us because we are able to compare and fine tune our services with firms that have been in the wealth management marketplace for years. At every attained level, you find that there are still additional levels to aspire to. Affluent clients appreciate the options and the multi-specialty approach.
White: This change has allowed me to be more selective with the clients, but my clientele has always been affluent. So, no, it has not altered the type of people I serve.
Zahrbock: Definitely, when we were insurance only, we were looking for any client with a need. Today, perhaps because of the costs of taking on a client and because of the extensive services we provide, we are not for everyone. Our clients are considerably more affluent than when we were strictly insurance. Our reputation in both of our markets - the Twin Cities and a small northwest Wisconsin community - is that of high-quality, very knowledgeable advice. It is not uncommon to hear the words, "We felt we may be too small for you to take us as clients." Two of the best comments that have been shared with us are: "Where were you guys 25 years ago?" and "The best thing about dealing with you is that I know I'm going to get an idea from you two years from now that you don't even know yet!"
"The criteria is not only financial anymore; it's not only about the size of the check [clients] can write, but also about whether I would truly enjoy working with them and can help them in the areas where they need help."
- Boris Blum, MSFS, CFP, ChFC, CLU, AEP
question six
Hirsch: Any further thoughts?
Henderson: In closing, I would like to say that the wealth management platform may not be for every financial services firm. You truly have to be focused and want to work as a team while appreciating the differences and specialties of the other professionals within the organization. Everybody has a unique role in the advising process. Learning to make those roles work in harmony and concert, for the client's ultimate benefit, produces beautiful music.
White: Transitioning or, I like to say, jumping to wealth management is not for everyone. You need the right temperament and must be willing to learn what, one can argue, is a totally different business. I also believe that if you are not going to jump in the deep end and make this your entire practice, you should not do it. I meet a great deal of lite agents who are in wealth management no-man's land. They do a little investment work but not with everyone. This is too difficult and too important to do halfway or half time. Nevertheless, if you are suited for it, wealth management can be a remarkably rewarding career.
Blum: I think this is one of the best times in history for insurance professionals to make this transition. Clients have been burned by brokers, bank advisors and the like, and are looking for an independent advisor who they can trust and who will look out for their best interest. Taking on the fiduciary role is a different mindset and not well-suited for all, but for those who are willing to put their clients' interests above their own, it can be very rewarding. You need a way to differentiate yourself from the crowd, and products won't get you there. If an insurance professional has the right relationships and can align himself or herself with the right business model and resources, there is no better way to build a rewarding financial services career that has massive opportunities in the future.
"Everybody has a unique role in the advising process. Learning to make those roles work in harmony and concert, for the client's ultimate benefit, produces beautiful music."
- Marcus T Henderson Sr, LUTCF
Why trail compensation works: E. Dennis Zahrbock, CFR CLU, ChFC
Many years ago the life insurance industry paid a reasonable first-year commission and a reasonable annual renewal commission. Today the industry has chosen to pay a very high first-year commission and a very low renewal commission.
This compensation structure may be good to attract new production for the industry, but it is not good for the fiscal health of the firm that provides the services. Td say the renewal income we receive from life insurance is in the range of 50% of the amount we were receiving 10 years ago. and yet, the amount of annual premiums our clients are paying has increased.
The good news is that when we first entered the comprehensive financial planning business we elected the trail concept. We were charging trails in the 1980s when most didn't even know what trails were. Today, our offense products all have trails, and the revenue of our firm is known, to a great extent, on Jan. 1 each year. Our firm today has three partners -all members of Top of the Table - and six full-time associates. Our overhead is significant. But our trails account for 60% to 80% of our yearly budget, so we are not under constant pressure to produce, produce, produce. This allows us to continue to always do what is right for the client and never be in position where we're solving our problem.
All three partners are paid a salary, and all three partners know what is taking place with each client, with a minimum of two partners involved with most every client. I think the benefits of trail compensation and the goal of "with your interest in mind" really work best in a comprehensive approach.
[Author Affiliation]
By Charles K. Hirsch, CLU
[Author Affiliation]
Charles K. Hirsch. CLU. is a contributing editor to Life Insurance Selling. He is the president of Hirsch Communications Consulting LLC. in Florissant, Mo.
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