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In a previous article, I wrote about how investment advisors should tread carefully before selling life insurance. Since the article was published, I’ve received several requests to suggest some guidelines for what an advisor should look for in a firm that would help the advisor incorporate life insurance into its service offering.

Assume that you’re a partner in a small boutique investment management firm that has an upscale clientele. Your firm doesn’t sell life insurance, but has made a decision to explore doing so on a limited basis, meaning to only certain clients in certain situations.

Several full-service insurance brokerage firms are vying for the opportunity to bring your firm into the business. Your colleagues have tasked you and the firm’s counsel with the responsibility of interviewing these firms and reporting back with a preliminary assessment of whether to move forward with this new line of business and, if so, with whom.

Cover Your Career Risk

Not all of your partners are comfortable with selling life insurance. The naysayers are adamant that the firm can and should grow its business by doing just what it does, but for more clients. They’re uncomfortable with diverting current or potential money under management into life insurance. What’s more, they seriously question the strategic wisdom of adding life insurance to the firm’s repertoire. “Don’t you read about what’s going on with life insurance? What do we need that for? Do we really think we can pull it off without getting hurt?” The point is that you have a lot at stake here. Some would call it career risk.

Due Diligence

Start your due diligence process by talking with friendly competitors from around the country whose firms went down this road, albeit with varying outcomes. They were happy to share their experiences, good and not-so-good and give you some tips on what to look for in the early meetings with the brokers. They uniformly offered two pieces of advice: control the narrative and trust but verify.

After thorough background and back-channel checks on the brokers seeking your business, you narrowed the list to the three firms that appear to offer the best value proposition and most organizational stability. Each of the firms wants to do a 75-90 minute virtual presentation of their service offering to firms like yours. Because you want to control the narrative, you tell them that you’ll send an agenda for the presentation, indicating what they should cover as well as who in their organization should cover it. It’s important for you to hear directly from the individuals that you’ll be dealing with at the brokerage firm.

The Agenda

You and counsel have crafted a preliminary, annotated draft of an agenda, meaning one that’s phrased colloquially so you can remind yourself of why the agenda item is there in the first place (and because I’m writing the article).

First, it’s about you, not them

  • “What would you like to know about us?” – You’ll be very interested in how thorough they are at understanding your firm and how to support you. You expect them to ask about your firm’s business model, growth strategy, clientele, services, staffing, insurance licensing and so forth. The depth and incisiveness of their questions will tell you a lot about them.

Now it’s about them

  • “We’d like the principals of your firm to tell us about your ownership structure, leadership and management team, succession plan, position in the industry, primary markets, primary relationships, distribution channels, staffing, use of technology and anything else that you believe would give us confidence in your value proposition and organizational stability.”
  • “Assume that a client would like to see how a policy might fit within their investment plan. Walk us through the process, from our initial contact with you, to illustrations, to application, to underwriting, to policy selection and design, to policy issue and policyholder service. Talk about procedures, compliance, compensation and whatever else you think is relevant. Again, this is just at a high level. We’ll get specific in a moment.”

Litmus Test Questions

The following questions, annotated for now, address the broker’s process and support services in several critical areas. These “litmus test” items will help you put the presenting brokers on a level playing field.

  • Internal marketing – “You presumably understand that before we can sell life insurance to a client, we have to sell it, or the concept anyway, to the client’s advisor. We’re talking about “gatekeepers.” I’ve attached an article by Charlie Ratner, who talks about how to approach gatekeepers. https://www.wealthmanagement.com/prospecting/getting-through-gatekeeper-your-potential-client After telling us about their professional background and experience, your head of marketing should use this article as a template to describe how you would help us with this “internal” marketing.
  • Marketing to our clients – “We have a wealthy, sophisticated clientele, many of whom have worked with sophisticated life insurance agents. They’ve heard it before and, by now, when they hear a “talk track,” they take the “walk track.” So, your head of marketing should tell us about the training and support services you offer to help us introduce our life insurance program and value proposition to discerning clients.” 
  • Underwriting – “We’d like the individual who leads your underwriting department to tell us about your process, the current underwriting landscape, how you find the ‘right’ niche for a client with a particular health issue and so forth.”
  • Carriers – “This is a topic of special concern to some of our partners. So, we’d like the individual who leads the group responsible for carrier due care to tell us first about their professional background and experience and then about their process and resources for assessing and monitoring carriers, tracking their performance for existing policyholders and so forth. Sample reports that you make available to your distribution force would be helpful. Show us the current list of carriers and us about any carriers that you’ve recently stopped representing and why you did.”
  • Products – “We have a lot of questions about products, as this is another area of concern. We’d like the individual(s) responsible for this area to tell us about their professional background and experience and then:
    • The suite of products that would be available to us, delineated by type. We believe our clientele will be particularly interested in “accumulation-type” products that build cash value efficiently and distribute it efficiently as well.
    • How products of each type are selected, stress-tested, compared and so forth, that is, how they make the cut to get on your list and then stay there. Give us some examples of well-known products that didn’t make the cut and tell us why they didn’t.
    • The specific tools, resources, services and publications that you use in your due care process.
  • Product selection and design – “We have about 7,702 questions for your specialist in the area of selection, design and funding of a policy, especially for investment purposes. Give some examples that illuminate how you select and design policies and their funding patterns to meet differing objectives. (If the individual responsible for this aspect of your service isn’t the same individual who would present the above items, this presenter should start with their background and experience.)”
  • Planning applications – “For now, we’re interested in the use of life insurance in investment and income tax planning, not estate and gift tax planning. We’re concerned that the complexity and gift tax-sensitive nature of so-called “advanced planning” techniques used in estate and gift tax planning could only exacerbate the risks associated with policy performance and policyholder service.”
  • Policyholder service – “The person(s) in charge of this area should give us an overview of what you do and when, what your reports look like, etc.”
  • Other noteworthy services and resources – “What other services and resources should we know about at this time?”
  • Our next call – “If this call goes well, we’ll develop a list of topics for a follow-up call/presentation.”

You’re satisfied that you know what ask and why. You refine the agenda, making it more formal and businesslike. Then you hit the “send” button.

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