How To Establish The Right Insurance Relationships | FEE045 – Transcript



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So let me just give a bit of an outline for what I want to talk to you about today. Having a supportive and proper MGA or insurance relationship is critical to the success and the successful migration to a fee based financial planning business model. The purpose of this section is to show you how choosing the proper MGA can significantly contribute to you as a business owner, feeling confident with your move to fee based. The benefit to taking the time now to really determine what support you require, what suppliers you need access to, what your technology requirements are, what your processing requirements are and how to determine if the bonus levels being offered to you are the best to support your needs will allow you to negotiate the best possible relationship with your MGA. My goal is to outline for you what I feel is important so you can establish a better relationship to properly support the insurance side of your business.

An MGA is a critical component to a fee based financial planning business model. This relationship provides you access to the insurance implementation solutions and strategies that will support the financial plans you’re implementing for your clients. Establishing a relationship with an MGA who supports what you require from the relationship allows you to experience a revenue increase as opposed to the dreaded revenue dip that financial planners face who don’t have the proper relationships, support and payout in place that lay the foundation required to make the transition to a fee based practice possible. Establishing the right MGA relationship will allow you to create an infrastructure where everyone wins financially, not just the MGA. You’re building a business and need to make a decision like a business owner to ensure your efforts are rewarded to you at the end of the day.

By not establishing a proper MGA relationship, your revenues will be lower than they need to be. Your efforts will not build equity for you from your insurance implementation efforts and your relationship with your MGA will be an adversarial one and time spent directly generating revenue from this revenue stream will be reduced due to frustrating compliance and poor technology efficiencies. All of this will encourage a drastic revenue dip during your transition to a fee based model and will reduce your overall ongoing revenue from a poor bonus negotiation that will handcuff you from making the revenues necessary to thrive. Establishing a relationship with an MGA who supports a fee based financial planning model will allow you to generate a higher revenue, build equity and be part of a community that support the fee based financial planning business model.

Building a fee based financial planning business is easy when you have the right infrastructure in place. Establishing a relationship with an MGA who supports your new business model, who will compensate you properly and who will provide you with access to a community of like-minded professionals is critical to your successful migrating your business to a fee based financial planning business model. Without a business owner’s mindset, one where you see how creating a bigger pie will garner greater value than trying to take a bigger piece of a smaller pie, this will allow you to see the value in aligning yourself with other like-minded business owners, which will provide with greater overall wealth. So that’s just a summary of what I wanted to go through today, I kind of wrote that out and just wanted to read that through to you just to give you an idea of what we’re going to be going through today.

You know, it always amazes me how many financial planners I speak to who say, “I really don’t do a lot of insurance, it’s just not a big part of my business”. Now I’ve tried to wrap my mind around why this is and I believe it’s because one or a combination of two things. You see the first thing is, they’ve probably migrated to the financial planning approach to their business from the investment side of the business and have never really honed their skills on how to properly structure an insurance portfolio to enhance the overall financial planning for their clients or they feel that by bringing insurance solutions to the table it will just kind of bring with it the negative stereotypes that come from the idea of insurance sales and if you don’t believe that those negative stereotypes are out there, I’m going to put a link in the show notes that I want you to click on. It’s a YouTube video and you watch that and it pretty much paints, and you’ve probably seen the clip before, but it will paint every stereotype that you have ever seen on sort of the smarmy insurance salesman and so watch that, you’ll get a good laugh out of it.

But the reality is that there is an underlying current from that video that kind of does carry through in that industry and it is too bad and I think a lot of it, you know at the end of the day, just comes back to the fact that that industry has really never looked at fee based and has really just always focused on embedded commissions and embedded revenue. And so it just encourages people to sell solutions that are going to generate a higher commission for the agent, not that it’s necessary, but it basically encourages the selling of the wrong product because often times the right product for a particular client might not generate the highest commission and so the agents are you know trying to find ways of doing whatever they can in order to get those high commission products sold and it just sort of encourages the wrong attitude. So anyway, there’s a video there that I think you will find interesting for sure.

Now, here is the reality. Properly structuring life and disability or life and living benefits insurance portfolios into your financial planning will not only create better financial planning experiences for your clients, but it will also allow you to generate a revenue stream that will enhance the value of your business. A financial plan that doesn’t include a properly structured insurance portfolio is in my mind an incomplete financial plan. I’ve just seen too many situations where a properly structured insurance portfolio could have made a significant difference to a family’s financial situation but the problem is it is recognized after the fact and poor planning just brings with it a lot of strive and frustration.

Transitioning to a fee based financial planning model without an insurance component of your financial planning process will simply make things more difficult for you. I’m not saying it is going to be impossible but I am saying that if you are not bringing this component, this sort of I guess the leg of the three-legged stool, that proverbial three-legged stool, if you’re not bringing this revenue stream and this solution and this area into your financial planning process then really you are making things more difficult for yourself. And so as I say, I have come across too many planners out there who just really don’t embrace the insurance side of the business and I think it’s one of the most critical sides of the business when done properly. But also, as I said before, it can be done in the wrong way and so by following a fee based financial planning approach, you’re going to be doing things the right way, you’re going to be bringing to the table the right solutions at the right time and so that is kind of what I want to talk about right now.

So where do you start? Well let’s make sure you’re aware of how to incorporate the development of a properly structured insurance portfolio into your financial planning process. So just as you did with the investment side of your financial planning process, you need to establish the ability to do two things. First, you need to be able to identify insurance opportunities so you can discuss them with your clients you know as you work through the financial planning process with them. And secondly, you need to be able to properly educate and motivate clients to move forward with the solutions that are right for them. So let’s focus here on the first point.

How to identify insurance opportunities to discuss with your clients, this is actually a lot easier than you think because you’ll build this into your overall financial planning process. In previous discussions and previous writings, I’ve talked a lot about how if you know that there is something that is critical to your overall business that you need to make sure never gets overlooked just build it into your process and force yourself to follow the process so that therefore you never miss incorporating that component or having that discussion with your client. I tend to have my insurance discussions with clients after I have done the review of their retirement plan and their investment plan and this is just kind of where I find it best sort of flows in with the whole process. When I present a financial plan to a client, I do it over two or three meetings.

The first meeting is what I call Plan Presentation Part 1 and that is simply where again we have talked about the whole process of leading up to getting a client and now this is the process of delivering and fulfilling the financial planning requirements to a client. So I go through Plan Presentation Part 1 and that is where I simply go through their retirement plan, their investment plan and their education plan. Then once we’ve done that and we’ve had all those discussions, we go to Plan Presentation Part 2 which is where I talk more about life insurance, living benefits and their estate planning. And then their final presentation, really it is just a review of the overall implemented financial planning strategies and this is where I establish a client’s new base plan and the place where all progress is benchmarked against going forward.

So the final meeting and sometimes it happens at the end of Part 2 but generally it happens on a third meeting, that final meeting to say okay everything is now done, we’ve implemented everything, you’ve now got your new solutions in place, we’ve implemented all of your insurance, we’ve done everything we needed to do, here is now you’re starting point today. This is what we’re going to use as you’re new base plan so that we can benchmark against it because we know where we kind of want to be in the future but if we don’t manage and monitor the progress toward that goal and see where we are you know every step of the way, we won’t know if we’re on track or not and that really at the end of the day is the value of the whole financial planning process. Not in the development of the financial plan, although that is where the heavy lifting is, the value in the financial planning process and really what people are paying you for is to keep them on track and to keep that whole plan maintained and if anything starts to sort of move off target then you want to bring them back on target.

Financial planning, keep this in mind, financial planning should never ever be rushed. I find that a lot of financial planners try to add value by being what they call efficient in their financial plan, in their plan presentations and they try to cram in as much into the plan presentation meeting as possible. Now all this does, and you’ve probably experienced this in your own work life, all this does is — well I guess the reason for doing this, the financial planner is basically saying all of this is done in an effort to kind of respect the client’s time. The planner’s mindset is one of I’m going to wow my client by showing them how much I’ve done for them through this meeting and so they go and they cram so much into it. This may be what you’ve been taught from your head office, I mean this is what a lot of head offices are preaching, you know to try and shorten the time to the sale. Well the problem with this approach is that it’s just going to lead to frustration. Frustration for your client because the client feels that things are being rushed and that it all ends with you trying to sell them something and it’s frustration for you because you’re doing so much work that you’re not getting paid for and because a client is just feeling rushed and so your implementation rates simply go down. This whole process and this whole approach simply backfires.

What I recommend is that you slow the whole process down. Remember when a client pays you a flat fee for you to take the time to take them through your financial planning process, the more meetings you have the lower the cost per meeting to the client, the less the client feels rushed and the more rapport you’re able to develop from the relationship. So simply take your time, present things in a logical manner, don’t overwhelm them at each meeting. Go through Plan Presentation Part 1 in the first presentation meeting, the place where we present their retirement plan, their investment plan and their education plan and let that be the building blocks for Plan Presentation Part 2, the place where we present their life and living benefits and their estate planning and you know we incorporate tax into that as well. Doing too much too soon simply overwhelms your client into inactivity. I mean imagine if you went through and took Plan Presentation Part 1 or what I call Plan Presentation Part 1 and Plan Presentation Part 2 and put them into one meeting. I believe and I’ve seen it happen, clients would simply their eyes would roll back in their head, they would be overwhelmed with information and they just wouldn’t be able to make a decision on anything because there is too much going on. So put it into bite sized pieces for them.

So now the purpose of this section is really not to teach you how to present your financial planning, the purpose of this section is to educate you on how important it is when migrating to a fee based financial planning business model, how important it is to incorporate insurance into your financial planning process and to ensure you have a solid relationship with an MGA who will provide you with access to the solutions you will need to implement for your clients. So by now you really have desire to migrate your business to a fee based model and I’ll be showing you how to build your own financial planning process later when we discuss how to productize your financial planning process. You recognize that you need a solid investment solution to turn to and now you can see the importance of where insurance solutions fit in. So these are the other two sides, we’ve got the fee based side of your business where you need to productize your business and turn it into a process that you can sell to your clients, you need the investment solutions to turn to, you need to have high quality investment solutions which we’ve gone through and discussed on how to form those and you need to have a very solid relationships on your insurance solutions.

Now let’s talk about the types and structures of insurance relationships you need in place in order to support the insurance side of your fee based financial planning business. Now if you already have a relationship with an MGA or a managing general agent, the company that provides you with the access to the various insurance companies, then this section will allow you to evaluate your existing relationship with that MGA. If you’re new to the business or have not yet established a relationship with an MGA then this will be a valuable section for you to review. Either way you will by the end of this section be able to determine what a good relationship structure is with an MGA and be able to determine if what you have is right to support your business going forward. Now there’s simply one core reason for establishing a relationship with an MGA, it’s just simply to gain access to an insurance company’s products.

MGAs will simply pool together the volume with other insurance agents, put in place a contract with an insurance company that commits to a minimum volume level with that company. So basically it’s just everybody pools together, that allows the MGA to say listen we’ll deliver to this insurance company a certain minimum volume level and in exchange for that we’re going to receive some compensation from the insurance company. So in exchange for the volume the insurance company will pay the MGA a bonus on the first year commission generated by that volume. The MGA will then pay to each agent they bring on and that they contract with a percentage of that bonus. The spread, the difference between what they pay to the agent and what they keep, the spread is generally what the MGA will earn as their gross revenue. There’s also a service fee that each insurance company will pay the MGA based on a percentage of the annual premiums being deposited in each insurance contract, but you can only gain access to that if you’re an owner or part owner of the MGA. But basically then we align ourselves with an MGA because on our own we’re simply not able to meet the minimum production required to establish a contract directly with each insurance company and when an MGA aligns enough agents, they can contract with more and more insurance companies so the product shelf that’s available to each agent who is part of that MGA it just simply grows.

So now we know why we need or would want to work with an MGA, so the real question is what do we need from our MGA other than access to insurance companies products. Well at this point we need to break things into two groups because I believe there are two distinct groups who will be establishing a relationship with an MGA and each group requires drastically different things. So Group 1, this is really the new or newer insurance agent, Group 2 is what I consider the established or the veteran insurance agent. Now I get a lot of emails from people asking me this one question, they say listen “I’m new to the world of financial planning but really resonate with the whole fee based financial planning approach however since I’m new to the business will following your methodology in transitioning to a fee based financial planning model, will it work for me since I don’t have a business to transition, I’m just starting from scratch, you know if I don’t have any clients to migrate over can I still follow this approach”. Well my answer to this question always goes something like this, what an opportunity you have. The biggest challenge a practicing planner who wants to transition over to a fee based business model, their biggest challenge is how to transition over their existing clients. Starting from scratch is simply the quickest and easiest way to get up and running because you don’t have any baggage you have to deal with. However, when it comes to insurance you need to put yourself into one of two categories. So the category is either the new agent or the established agent.

Now the bottom line is that your goal is to always move into Group 2. So now the difference between the two groups comes down to how much we’ll call it training you need on how to identify the insurance needs of your clients. If you need assistance with this you will want to look for an MGA who has programs and solutions available to you to assist you in learning how to identify needs. I mean this is really the crux of the insurance side of the business. In this case you’re going to place less of an emphasis on your product options and payout options and more emphasis on your education. However, if you’re really focused on following a fee based financial planning module, I have found that it’s a challenge to find an MGA who supports and understands the fee based financial planning approach. They may say they do but they really don’t support it, they don’t really get behind it because really what they need and remember where their revenue stream comes from, their revenue simply comes from the product sales. As a result their sales training is more product focused, more quick needs focused and more of the traditional sales strategy focused, where they’re trying to shorten the sales cycle from meeting a prospect and to getting a sale. So at the end of the day I believe that if you’re going to be following a fee based financial planning business model you may just want to jump into Group 2 and get your product knowledge from the various insurance company wholesalers.

So following this approach and sort of following the methodology that I am teaching through this Fee Based Financial Planning Mastery process, that might allow you to sort of say, “okay I’m not even going to bother going into Group 1 even if I am a rookie agent or even if I am new to the insurance side, I’m just going to go directly into Group 2” and you know really the learning curve is not that long. If you already know how to identify needs during your financial planning conversations then really move your focus to Group 2 and this is really the essence of it. Group 1 is really all about how do I learn to identify the needs of my clients, how do I learn to identify those opportunities. If you already have that under your belt or if you feel confident that that muscle is being flexed enough, where it’s starting to build and you’re getting more confident at that then just move yourself into Group 2, this is where you’re going to find the biggest bank for your buck. Group 2 is all about finding an MGA who really keeps an eye on the strategies that truly help clients. This is where MGAs will focus more on what is really working for solving client problems today, what solutions are working as opposed to what’s the next product that this insurance company is bringing out and how can I sell that.

So here’s what you will look for in an MGA who supports the second group. First off, they’re probably going to be a smaller MGA. The reason is that they are more focused on establishing a relationship with their members to really get an understanding as to what their needs are. You can’t do this very well with a large MGA, all you can do in the large MGA is put together training courses and have big classroom sessions to sort of teach people the methodology that they’re going to follow. But it’s very difficult to really get in to and understand each agent’s or each member’s business to really find out what’s really working for them. Small doesn’t necessarily mean small though. Chances are pretty good that a quality small MGA, and when I mean small I mean small in number of members, will be recognized in the industry as a large producer because although their members may be smaller in number comparatively speaking their volume of business will be huge on a per member basis. The MGA will have a keen interest in you and your business for the purpose of seeing how your business model will fit in with its other members. This is important because one of the greatest points of value I’ve ever gotten from an MGA was the quality of the community I became a part of. Every time I left an MGA, and I’ve actually left two MGAs in my history over the past 20 plus years, I left not because the MGA wasn’t doing their job, it was because the MGA was being acquired by a larger firm and the resulting community that I was being put into was not who I wanted to align myself with.

Community, as you may have guessed, is extremely important to me. I am much more concerned with the who than anything else. Who are the other members in the MGA, are they people I feel I can learn from and share with. I found that when you get to the top levels of your game the people around you at that level are more inclined to support and help than not. It seems at the lower levels of the spectrum people feel that if they can steal your ideas this will make them more successful. These are the groups you want to avoid. I talked about this briefly earlier when I said as a business owner you need to find ways of making the pie bigger as opposed to trying to take more of a smaller pie. In the smaller or lower levels of this spectrum, so to speak, the focus is on how can I steal market share, how can I take more of the pie that I feel exists whereas when you get to the higher levels it’s all about creating a bigger pie and even if you maintain your percentage of that bigger pie, when the pie gets bigger your slice gets a lot bigger as well but you’re doing it in conjunction with others. You’re supporting others and they’re supporting you.

So you know it’s important to really take a look at who the community is. The community is probably the most important part of your search. So when you’re looking around at MGAs find out who their other members are. Don’t just find out what the MGA is offering you, find out who the other members are and how often they get together and what they do when they get together. I tell you, I never realized the power of a community until I started the Fee Based Financial Planning Mastery podcast. This podcast really garnered a community of people who just resonated with the topic and really supported it. My giving back to this community has done two very important things. First, it’s provided me with a forum where I can offer my experiences in return for some quality feedback and critique and comments from others. Opening myself up and sharing my experiences has brought more like-minded people to the community who are also willing to share and as a result has elevated everyone’s game. It’s also made me feel part of something that I never really felt part of before and this feeling of support and inclusion keeps me coming back over and over and over again and sharing more and more of my experiences. It seems the more I share the more others share and the better everything gets.

The second thing that my sharing into this community has done for me is it has really forced me to work on my business and this is one thing that you’ll find is that if you’re going to start sharing with this community and if you’re going to be aligning yourself with an MGA community and start sharing, you’re actually going to elevate your game. It’s just going to happen because you don’t want to share if you have a crappy business. If your business practices are just not up to snuff, it kind of makes you go the extra mile to do things the right way. So it kind of encourages you to go down the path of quality as opposed to the path of, I don’t know, a different path. As a result my business performance has never ever been more solid and really I owe a lot to the fact that the more I share it’s forced me to really look at my business and make it as good as possible. So finding an MGA with the right community attached to it is paramount to your ongoing success with the insurance implementation side of your business.

If you don’t have much of an insurance business then take the time to find an MGA who can provide you with access to a great community of great people and you’ll see your implementation rates soar simply as I have. Building a fee based financial planning practice relies on a consistency of process and practice. A fee based financial planning practice needs to fire on all of its cylinders to run profitably. The first cylinder is your fee revenue, the second cylinder is your investment implementation and oversight revenue, the third cylinder is your insurance revenue. If you’re not firing on all cylinders you are just simply not running as efficiently as you could be. So by focusing on this part of your business and really learning about who can I align myself with, it really becomes critically important for you to make those alignments, make those decisions to find and become part of a community that gives you access to the insurance solutions that you need, and remember that by gaining that access to the insurance solutions you can then gain all the product knowledge you need simply by dealing with the insurance companies directly through the channels that you now have available to you through the MGA.

So learning about the product is not going to be difficult, what you want to be learning more about is what strategies and solutions are currently working to provide existing clients great quality solutions and implementation strategies and so on. So really focus on that and by doing that you’re probably doing to find that you’ll be able to negotiate higher bonus levels, you’re going to be able to negotiate higher revenue which simply means by migrating your business over to a fee based financial planning business you’ll just simply avoid the dreaded revenue dip and I tell you it’s one thing that is probably the number one obstacle of planners who are wanting to migrate over to a fee based practice. Their biggest obstacle is how do I make that leap from the revenue I’m receiving now, transitioning over to where my revenue doesn’t come in all front end loaded. Well the answer is by setting up your solutions so you’ve got the diversified revenue streams, you’ve got the fee revenue which is cylinder one, you’ve got the investment revenue cylinder two and you’ve got the insurance revenue cylinder three and believe me when you put it all together the revenue per client that you start to generate goes way up, your client satisfaction goes way up, your client referrals go way up. It’s just the right way to build your business.

So with all this knowledge you now have you now know how to choose the investment side of your business, how to choose the insurance relationships in your business and you need to simply get out there and build yourself a better business.

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Copyright © Scott E. Plaskett 2014 All Rights Reserved. No part of this document may be reproduced without Scott E. Plaskett’s written permission.

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