Adapt for more business today and a better price tomorrow

By Jim Ruta | March 18 2011 03:53PM

The biggest problem with many blocks of independent advisor insurance business is that there is not a lot of “saleable value” in them. With very limited renewal income streams, there is little recurring income to “value” in the block. It’s pretty much a client list with some potential. That’s a soft and speculative asset with limited value.

Unknown potential liability is also a concern. Many general practices leave buyers potential “embedded liability” from poorly written business. It’s like selling the proverbial “pig in a poke”… and the pig might be very angry.

But, if you still have a few good years before selling, you can make some adjustments that can give you a better asset to sell. Better assets get better prices.

Make the tangibles look good. Clean up your client files. Make them look like they are worth something. Messy, tattered files with too little or too much in them scare buyers off. Be sure you have engaged all clients in writing, have appropriate permissions especially for a sale and client information in them. Sales rationale is a big concern.

Make sure clients are happy. Complete annual reviews regularly so your value to clients is obvious. This enhances client retention on a sale. That increases value. It also enhances the value of your client list.

Make your business easier to buy. Tighten your focus on a specific, easily identifiable market. Top advisors want to bulk up in their market. Yours could match. A team of advisors may want your block to complement theirs. If your block fits their specific need, it’s worth more to them. Be identifiable.

Clean up your block. Focusing on your core business requires that you sell off non-core business to advisors focused on it. A small side group business is a good example of “addition by subtraction”.

Add value to your block. Start to write appropriate new core market product that has recurring income. Disability insurance has recurring income, but only if it suits your market.

Develop “Client List” value. Connect with your clients all the time. Use online services like to develop and publish a regular email newsletter to make your clients part of your family. A great, active list could have a marketing value beyond the net present value of any recurring income.

The business case for these business adjustments pays off now and in the future. These changes will drive more business your way today and make your block more valuable in the future. The future sales price is your reward.

How do I position myself to take advantage of the shift from asset accumulation to de-accumulation as boomers approach retirement?

This is not just an investment advisor issue. It clearly applies to insurance advisors too. Sadly, many have never even thought about it.

The obvious and current answer has been to hop on the new “pension-like” income product bandwagon. Problem solved. But, that worries me.

I wonder about miraculous solutions. Putting all client eggs in one product basket is dangerous without being fun. Regulator, company and market “elephants” could appear anytime to step in the basket and squash it.

I have two questions. First, is there a better, more thoughtful approach to creating retirement pension income than the “one size fits all” approach? Second, what insurance needs arise in retirement “de-accumulation” that should be handled early?

Income strategies remind me of the “laddered GIC strategy” that I first saw in the 1980s. Staggering maturity dates over years rather than choosing the current best rate, was inspired. It maximized growth potential while minimizing market risk. It was a smart and simple way to make reality work for clients.

Where’s that thinking today? Maybe combinations of life annuities and deferred annuities along with the current hot product can create a stronger and better approach. Is there a “strategy” rather than a product? Can we defend against dancing “elephants” and under promise and over deliver? Think, “I’m not here to help you be rich. I’m here to help you not be poor.”

Fulfilling boomer insurance needs supports retirement income strategies but it doesn’t get the same market play. Help your pre-retirement clients insure their retirement plans and legacy interests while the prices and chances of insurance acquisition are better. Use Long Term Care Insurance to preserve family legacies. This is really taking advantage of the shift.

Combinations of life insurance and annuities have always been valuable tools for retirement income. They still are. Help prepare boomers for a better retirement and legacy by showing them how to cover more bases while it is still economical and easier to do.

Properly prepared, boomers also won’t have to depend on premium priced TV life insurance for their final expense costs like many of their parents have either. When you create this solution before boomers start to take an income, you have impact. Saving irreplaceable retirement income dollars is a very compelling service. It attracts referrals.

Finally, help boomers “fund” their wills. Wills create a handful of serious financial obligations. Only money can fulfill them. It’s “Good Will Funding” to help provide the tax-free cash to make wills “come to life” to do their bidding. Our “Un-Will” is a great handout to get the discussion started. Ask, and we’ll send you one.

As your clientele ages, there are changes to make it your business so they you can help them meet their future financial needs. When you go beyond the obvious hot product to consider other needs, you will stand out and get a larger share of the market.

Jim Ruta

The Insurance & Investment Journal - Volume: 15 - Number: 6 - Page: 36