QUESTION: There seems to be a conflicting approach to building a life insurance business properly. What should I know? 

Common coaching today depends on building a growing “annuity” of trailing commissions to work properly. Unfortunately, because of very different compensation, this strategy doesn’t work in the life insurance business.

That’s the Coaching Trap - business advice that has the opposite effect expected. Here are just a few coaching traps in the life insurance business:

  • THE “MAXIMUM CLIENT COUNT” TRAP: With 2,000 hours annually and each client needing 15 hours for proper service, you can only have 2,000 /15 or about 130 clients to do the right job for your clients. 

This is a trap because insurance doesn’t work with 130 clients due to the limited a long-term insurance cash flow. Lower client maintenance is the compensation. Some top insurance agents like George Sigurdson have thousands of insurance clients. 

Avoid the trap by not holding back on prospecting and clients.

  • THE “CLIENT SEGMENTATION” TRAP: If you can only serve so many people, it makes sense to dole out your service proportionate to your compensation. And, we have A, B, and C clients. 

No one wants to be your C client. And if 20% are your A clients, then 80% just get B and C service. That waters down your brand and you reduce the recommendations you get. There’s the trap. 

Instead, because insurance requires less service you can give all your clients 5-Star service or at least give them the service they want. You never know where otherwise C clients are connected and from where your next jumbo case will come.

  • THE “REPLACEMENT CLIENT PROSPECTING” TRAP: Investment advisors are coached to replace little, low compensation clients with bigger, higher compensation clients. It’s a trap. 

Life insurance prospecting is NOT about finding 10 new clients per year to replace the bottom 10. It’s about constantly working a list of 200 or more good prospects and finding 10 new clients each month. Avoid this trap and prosper.

  • THE “PLAN FIRST” TRAP: Financial planning is good but insinuating it into the beginning of the process means that prospects plan while exposed to insurable threats like death or disability that could explode the whole plan before it’s in place. 

Life insurance is an essential financial security product, not a financial extra. It appropriately comes before a plan so that a client can plan while protected, not plan while exposed to those insurable threats. Enhance their peace of mind and avoid the trap.

  • THE “JACK-OF-ALL-TRADES” TRAP: Comprehensive financial planning across all disciplines requires extensive expertise to do very well which is what is expected. Sadly, it defies the capacity of most advisors. 

Consider this advice from a top producer: “To be a good financial planner you need to be a good banker, good trust officer, good tax accountant, good estate and tax lawyer, good estate planner, good investment advisor, good property and casualty insurance agent, and a good life insurance agent. I just don’t know many people who are smart enough to do it all well.” 

Pretending you can do it all leads to the “Poser Syndrome” where your performance declines because your subconscious doubts to deliver as you promise holds you back. Focus and avoid this trap.

  • THE “ADVISE, DON’T SELL” TRAP: Sales is a dirty word in much coaching. In an investment business built around planning, it’s supposed that you only present options from which prospects choose their favourites. No selling necessary.

But money is a greed sale. People have favourites and choose them. People aren’t picking life insurance favourites. Life insurance is still sold. Considering the client’s best interests first requires professional sales skills. Not selling in the life business is a deadly trap you must avoid.

  • THE “BIG CASE” TRAP: If you only have a few clients and you want to drive your income higher, you need a big case to make that happen. 

“If you chase a big case and you don’t get it, you won’t have any new business in the mill. And, if you chase a big case and you do get it, you still won’t have any new business in the mill. Either way, you’ll be left with no new business in the mill and that is never a good thing” said a top agent once. You always want new business in the mill. Not having it is a trap. 

Big potential paydays distract us, make us less effective and less productive overall, and we subconsciously exchange effort for hope. Hope is never a good business strategy. 

Avoid the trap by working a variety of new business sizes. Your extra activity makes the law of big numbers work for you and you’ll sell more big cases too.

Be careful of the coaching you take on. Be sure it relates to your insurance business. Avoid or escape these coaching traps and you will release your full potential.

This column by renowned advisor coach Jim Ruta was first published in the April 2022 edition of Insurance Journal magazine.

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Jim Ruta’s mission is simple – to preserve, promote and propel the financial advisor business. A former insurance advisor and executive manager of a 250-advisor agency, Jim is a highly regarded coach, author, podcaster and keynote speaker. He has spoken 4 times at the MDRT Annual Meeting including the Main Platform. Jim Ruta is an Executive Coach and Keynote speaker specializing in life insurance advisors and leaders. He works with top advisors around the world and re-energizes audiences with his deep insight and passion. 

If you have a question for Jim, you may send an email to [email protected]