Thursday, February 12, 2009

The Unfortunate Demise of the Free Dinner Seminar

Various groups have perpetuated a false belief that insurance agents offering index annuities are predators, especially when their sales practices include free dinner seminars.

On June 25, 2008, the SEC proposed Rule 151A, saying that the growth of index annuity sales “has, unfortunately, been accompanied by growth in complaints of abusive sales practices.” At the SEC meeting where the rule was proposed, the Commission played a segment of a Dateline NBC news segment alleging rampant abuses by annuity salespeople, such as in free dinner seminars. Now, even the AARP has launched a program against free dinner seminars, starting a program where people are encouraged to become volunteer “Free Lunch Monitors” and share stories of abusive sales practices with regulators and each other.

The fact, however, is that relative to the number of retirees helped by index annuities (and reached through free dinner seminars) there are not a lot of complaints. The SEC admitted as much in its final release of Rule 151A on January 8, 2009. It responded to assertions by the annuity industry that there is no evidence of widespread annuity sales abuse by answering that “the presence or absence of sales practice abuses is irrelevant in determining whether an annuity contract is entitled to the exemption from federal securities regulation.”

So, one of the most dangerous aspects of Rule 151A is that it has created a toxic atmosphere for insurance agents who wish to offer free dinner seminars to reach out to potential consumers. The demise of the free dinner seminar, a demise which is based on false rumors and false beliefs, will hurt consumers who would otherwise have been helped by the services offered by insurance agents.

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Tuesday, February 10, 2009

Having Customers versus Clients for Life

We all know that selling an annuity or life insurance product should be based entirely on a client’s needs, not the insurance agent’s available product portfolio or desire for commission. Yet, so many insurance agents paint themselves into a corner by focusing on a limited product portfolio or insurance product type.

How many more clients could they help by broadening what they have to offer?

There is an array of insurance products that meet many needs for many people and many situations. Still, we encounter many agents that focus on one product type. The product they offer could be fixed index annuities, fixed annuities, or indexed universal life insurance to name a few. Why does this happen?

Most of the time we can say this narrow focus is due to a lack of product training made available to the agent, or even a dismal understanding of the benefits of cross-selling. As insurance marketers we should take the time to develop programs for our agent base to help them grow their business by expanding their horizons. Why? Because if their business grows so will yours.

As an example, in the presentation “Surviving a 151A World” Insurance Insight Group created with Insurance News Net we highlight how index universal life insurance can create a tax-free cash flow in retirement. The death benefit is key to providing that benefit. Now, if neither the death benefit nor the tax-free cash flow in retirement is desired, the indexed universal life product is probably unsuitable.

Keep in mind that the use of life insurance as a cash accumulation vehicle is not new. Even prior to the somewhat recent introduction of index universal life insurance, traditional fixed universal life insurance has always been used in sales where tax-advantaged growth and use of the cash value is an important objective. In fact, to limit sales of universal life insurance where there seemed to be little regard for the death benefit at all, Congress added section 7702 to the Internal Revenue Code back in 1984.

Here’s the point. A client always has more than one need. Help them meet one need and they are a customer but if you help them meet more than one, then they could be a client for life. What about you? Do you have customers or clients for life?

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Thursday, February 5, 2009

Failed Financial Beliefs and Time Tested Truths: Post 4

This is the fourth and last post in a series that reviews retirement planning beliefs that have been shattered by a failing economy. Check out Post 1, Post 2 or Post 3 in the series, What to Do When the Financial Experts Don’t Know Anything, which discusses financial risk and guarantees.

Failed Belief No. 4: Buying a home is always a good idea.
The belief that it is always a good idea to buy a home led millions of American families to buy homes using whatever mortgage they could afford. Now, in the face of a recession and dropping real estate values, these families are at best, stuck in their homes due to having less equity than the market value, and at worst facing foreclosure. No matter how you look at it, their decision to buy a more expensive home than they could really afford was a big financial mistake.

Time-Tested Truth No. 4: Control the risks that you can control.
Financial advisors can really help a client by performing a risk audit. Take a look at the risks your client faces, help him to examine those risks, and help him to purchase affordable insurance to mitigate those risks. Every family should have homeowners, automobile, health, and life insurance. Many families should also have disability, personal umbrella liability, and long term care insurance. Too many families are inadequately protected.

This ends our four post series on failed beliefs of the experts and time tested truths are coming back in fashion. It’s a risky world. Financial professionals who value guarantees and insurance products can help their clients live comfortably. That puts everyone on solid ground.

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