One of the more challenging markets for the life insurance producer is the estate planning market. The clients are generally wealthy and often have both a fairly sophisticated understanding of how they got that way as well as a compelling demand to protect what they've built. They typically have a team of advisors like attorneys and accountants, all with high expectations of any life insurance or financial advisor who wants to bring something to the table.
Of course, any advisor expecting to have any credibility when he or she sits down at that table has to have the knowledge and relevancy that commands the attention of the prospect and his or her advisors. That means it is crucial for any estate planning producer to stay educated and on top of all current planning concepts, relevant tax laws, pending tax reform, and even general trends of thought among lawmakers.
In short, this is a market for the smart, sophisticated, alert and creative producer. And those adjectives describe our panelists to a tee.
To get an idea of what's on the mind of some accomplished estate planners, I invited the following roster of professionals to discuss their practices: Richard (Dick) M. Bass; Dale Martin, CLU, ChFC; Stephen O. Rothschild, CLU, ChFC, CRC, RFC; and Michael L. Weintraub.
1. Chuck Hirsch: In these days of so much economic uncertainty, do you find it a relatively good time or a relatively bad time to work in the estate planning market, and why?
Dick Bass: It's a relatively good time to be in this marketplace. There are plenty of selling opportunities with values down, interest rates down, and the ability to make discounted gifts. There are also fewer people working this market as some have become discouraged and have left for other pursuits professionally. Confidence is also down, however, and the rating agencies have not helped with the impact on insurance carriers. In addition, we find many agents' confidence also being impacted by what's going on in the marketplace.
Dale Martin: During tough economic times like these, clients are reluctant to make decisions. They tend to take the wait-and-see approach. Lately, I have been successful by focusing on the outstanding internal rate of return (IRR) that the life insurance death benefit can provide. When you can show a client that, if he or she lives to age 90, the IRR on the life insurance premium is better than 6% tax free, the client starts to think about the losses that his or her portfolio has taken, and life insurance looks pretty good. I guess what I am trying to say is that in these economic times, I have to shift my strategy accordingly.
Stephen Rothschild: In my view, it's a bad time, as most clients and prospects are so mentally depressed and fearful that their emotions overcome the logic of current great planning opportunities. Even the billionaires are cautious.
Michael Weintraub: In times of uncertainty, people want the guarantees and stability our products provide. Forgetting about the obvious need for liquidity life insurance provides, think about a deca-millionaire who lost 50% of her portfolio and is shown how to get it back by purchasing a permanent life insurance policy that will pay the lost value to her family when they need it most. And if the market recovers by then, do you think her family will complain about too much money? While this is not strictly an estate planning concept, it sure helps restore a big chunk that otherwise could be gone forever.
2. Hirsch: What are the major issues that are positively affecting your estate planning business?
Martin: If you can get clients to focus on their "leave on" money, and show them the most efficient way to leave the money to the next generation, this can lead to some positive results. When the market is down, guaranteed life insurance is just what the doctor ordered.
Rothschild: This is as good a time as I have seen to make use of various tools and techniques to move assets downstream to succeeding generations at an extremely low cost.
Weintraub: People are reviewing their financial programs to assess the damage that has occurred over the past year. This provides an opening to discuss estate liquidity when people can actually see what happens when real estate isn't selling and even liquid assets are down. The value of a well-thought-out estate liquidity plan now makes sense, and people are ready to act.
Bass: In a positive way, we know we're going to live with estate taxes for the foreseeable future. With the deficit as it is and the feeling of redistribution of the wealth, we, for the first time in decades, have the sure knowledge that estate taxes will be with us.
3. Hirsch: What are the major issues that are negatively affecting your estate planning business?
Rothschild: The clients' perception that the estate tax issue is unresolved is still primary. The economy runs a close second.
Weintraub: Finding premium dollars is always challenging, and even when one understands the issues and recognizes that this is the best solution, the first barrier today is that, in a bad economy, the prospect will claim, "I can't afford the premium!"
Bass: Negatively, again, the confidence of the consumer and the carrier ratings have been hurt as the financial strength of the insurance carriers have been questioned for the first time.
Martin: In one word: Television. If people would just stop listening to the so-called experts on TV, we would all be better off. I realize that people want information, but they need to be more positive. Americans always find ways out of a mess. Let's get more positive in our thinking, and I believe things will get better.
4. Hirsch: As you look ahead, what concerns do you have about the estate planning market as it is evolving? Or put another way, what keeps you awake at night when you consider this market's future?
Weintraub: My primary market is the retirement plan space. Our clients are generally wealthy or they wouldn't need tax-qualified retirement plans, so an easy cross sale is life insurance for estate liquidity. The threats for estate planning are generally the same as for retirement plans -- what the government can do to change the rules. I think that threat is largely gone since, if anything, taxes will likely go up and not go away. The biggest threat is what may happen with the taxation of life insurance -- both the inside build up and the taxation of at least a portion of the death benefit.
Bass: We're concerned with government changing the rules. An example would be the proposed elimination of valuation discounts. In addition, some rules have been changed on a retroactive basis.
Martin: The one thing that always comes up is if the government decides to tax the death benefits or inside cash values of life insurance, it will drastically make my job harder.
Rothschild: Though nothing keeps me awake at night, I am concerned about Congress legislating away legitimate techniques. Potentially, why should any family member be penalized for a legitimate discount on an asset purchase or a gift when an outsider has no penalty? We should all be thankful for the Association for Advanced Life Underwriting (AALU), as membership is a reinsurance policy on your insurance earnings.
5. Hirsch: What's the best practical idea you've instituted recently that has had a positive influence on your business?
Bass: We're using life insurance as an asset class. The idea of diversification of assets has become more important to clients as they weather these financial storms. In addition, we talk about life insurance as being the only asset that has a predictable value that the client knows will be there when he or she dies. Clients don't know what real estate, equities or closely held business values are going to be, but they do know what their life insurance values will be at the time of death.
Martin: With the applicable federal rates at an all-time low, the high-net-worth client can use a private loan strategy. The client really can leverage his or her "leave on" money by making personal loans to an irrevocable trust. By doing so, clients can avoid gift taxes and buy large amounts of life insurance.
Rothschild: I'm recognizing that planning is simply a tool to achieve family goals and objectives. Our industry is broken with the silos advisors create by lack of collaboration. If I had all of a client's advisors around a table and handed them a 3"x5" card to fill out with the client's top three to four goals and objectives, many would be blank and none would be identical. This situation creates great economic leakage for the client.
Weintraub: I'm getting back to basics and explaining in simple terms the leverage of buying dollars for pennies. Everyone understands that and people buy what they understand, especially in complex deals with GRITS, GRATS and other complicated trusts.
6. Hirsch: If you were advising a young producer who was considering a move into the estate planning area, what would you tell him or her about the steps he or she would need to take? And as you look at your own transition into this market, knowing what you know now, what would you have done differently?
Martin: Develop an entr?e to the high-net-worth client. Form a network of estate planning attorneys, stockbrokers, or CPAs. Also, have a passion for helping people. People can tell if you have their best interest at heart. Taking a page from the writings of Stephen Covey, keep sharpening your saw. Continue to learn from and listen to your peers. I attend as many Million Dollar Round Table (MDRT) and Top of the Table meetings as I can. I always learn something from these meetings that I put into my practice.
Rothschild: A young producer should do joint work with someone who has experience, knowledge and success in this field, but who is willing to let the young producer manage the relationship with the client. This producer should be reading and enhancing his knowledge regularly as well as enhancing his image, confidence and credentials by obtaining meaningful designations behind their name. I would have done more joint work vs. being greedy.
Weintraub: Take formal courses, work with an experienced agent, develop relationships with a couple of young and eager attorneys also breaking into the estates and trust business, and join and become active in a local estate planning council.
Bass: We would advise the young producer to balance current sales with future sales. Don't get stuck in a market that you can't get out of. Remember, businesses fail and businessmen fail for one of two reasons -- they focus on the short term and ignore the long term, or they focus on the long term and ignore the short term.
7. Hirsch: What's been the most personally gratifying aspect of your own work in estate planning?
Rothschild: Seeing the plans succeed! Now I am working with the next generation, as assets have passed. Now my clients are seeing the wisdom of asset protection after a child divorces or is sued but the assets are kept in the family. With tears in her eyes, one client hugged me as she finally understood the protection provided by great documents created a decade ago as her children matured and are following her and her deceased husband's wishes. One client took my advice to stop punishing and forgive a 53-year-old child who never left the drug culture. At this point, he wasn't going to change. They now have their best relationship since he was a young teen-ager.
Weintraub: Meeting remarkable people of wealth who shared stories of their life's work and taught me about philanthropy and about how random and special life is for those who are smart, who work hard, and who care about others.
Bass: Getting individuals to focus on their legacy -- leaving more than just financial assets and wills. We work hard to get our clients to produce video biographies about what's important to them. We emphasize that their legal documents will tell their heirs what's going to happen and how it's going to happen, but the purpose of the video biography is to give clients the legacy that goes beyond the financial legacy.
Martin: For me, it's been getting to meet so many people who have made millions by having a passion for what they do. It is amazing to find out how a millionaire made his or her millions. I will reiterate that you can't focus on the estate tax. No one knows what the estate tax laws will be in the future. Rather, focus on "leave on" money and show clients the most efficient ways to pass to the next generation or charity. Regardless of their net worth, clients all have money that they want to leave to someone or to a charity. I have been in the life insurance business for more than 28 years. I firmly believe that I was put on this earth to do this. I have not done this yet, but it would be interesting to figure out how much death benefit has or will be paid out to families because of my actions. Just think of all of the families that you are helping. This is a wonderful profession.
Charles K. Hirsch, CLU, is president of Hirsch Communications Consulting, LLC, in Florissant, Mo. His company provides consulting services to life and health insurance companies and marketing firms. Before launching his Hirsch Communications Consulting, Hirsch spent nearly 27 years in business-to-business media. He served on the editorial staff of Life Insurance Selling for 18 years, becoming editor in 1993 and publisher in 1999. He is also a former vice president of Summit Business Media, parent company of Life Insurance Selling.
Richard (Dick) M. Bass is a founding member of IP Advisors Inc. in Dallas. He has more than 39 years experience in the life insurance business. He has served on the board of the Dallas Association of Life Underwriters, and he is a Qualifying and Life member of the MDRT, where he served as Chairman of the Program General Arrangement Committee for the 1991 MDRT annual meeting.
Dale Martin, CLU, ChFC, is a wealth management and insurance specialist in Bloomington, Minn. He has more than 28 years of financial services experience with specialization in estate, wealth, charitable and business insurance planning. He is a Qualifying member of the MDRT and the Top of the Table.
Stephen O. Rothschild, CLU, ChFC, CRC, RFC, is president of Rothschild & Sale, a St. Louis wealth planning firm established in 1927, with clients in 37 states. He is a Qualifying and Life member of the MDRT, with numerous Top of the Table and Court of the Table qualifications. He was president of the MDRT in 2006-2007. A highly respected and popular speaker, he lectures internationally to attorneys, accountants and financial services professionals.
Michael L. Weintraub is president of Contemporary Pensions Inc., in Walnut Creek, Calif. He is a former member of the board of directors of and current member of the Qualified Plans Committee of the Association for Advanced Life Underwriting (AALU). He is a Qualifying and Life member of the MDRT, where he has chaired committees for many of its annual meetings. He currently is chairman of the MDRT's Leadership Development Committee. He is also a member of the board of directors of the Life Insurance Foundation for Education.
