Larry Barton: The American Way

Bulking up requirements

On its Web site and in its promotional materials, The American College repeatedly makes note of the fact that while CFP certification requires six courses, the ChFC designation now has nine required courses, thanks to the addition of a capstone case study course incorporating complicated aspects of savings, estate planning, taxation and business planning that became part of the required curriculum as of October 2009. Barton says the new capstone course is intended to help present information to the client in a manner that meets that person's needs.

Meanwhile, The College is currently in the middle of going through every course in the CLU curriculum, updating and enhancing case studies in an effort that will continue into 2011. The CAP (Chartered Advisor in Philanthropy) designation -- a graduate program for advisors who like to focus on helping families with charitable planning -- will likely see the addition of another required course in the near future.

"We're raising the standards," Barton says. "We're raising the bar, and we're not going to let up. We must continually ensure that when we say that our programs have the highest standard of knowledge and trust that we mean it and live it."

The College offers 10 higher education designations and two competitive master's degree programs.

The case for education

Despite the nation's economic woes, admissions were up 6% at The American College in 2009 with nearly 30,000 people studying through The College, and 2010 is trending toward another year with increasing enrollment.

Barton attributes the robust climate to two primary factors. "One is that the recession was a defining moment for people to realize, 'I need to go back to school ... I need to be competitive ... I need to know about the process of financial planning. I need to know more about insurance and even the kinds of insurance products that are out there. I need to know about estate planning and tax issues.' So a lot of people that survived the hemorrhage in jobs went back to school. We benefitted from that," Barton says. "And the other, not surprisingly, is those that lost their jobs realized, 'I need to retool my skill set to be competitive in the marketplace.'"

He says a transition during the past seven years from a brick-and-mortar institution to offering an abundance of online learning opportunities has also been a major benefit.

"The move to online has helped us to be a more efficient provider of education," Barton says, noting that distance learning as opposed to on-site only has opened up the institution's offerings to a much wider pool of students.

Barton also attributes much of The College's success to forward-thinking carriers who invest and promote education to their agents. He mentions companies like State Farm, New York Life, Northwestern Mutual, Prudential, MetLife, Monumental, Western & Southern and MassMutual as having leadership that makes education a priority. "These are companies that send a message early in the career of an agent: "We need you to be a CLU; we expect you to be a ChFC," Barton says. "If you're not an educated agent, we can't possibly serve the client."

A major side benefit is statistics indicating that producers with credible designations tend to earn a lot more than agents without these designations -- which benefits carrier and producer alike.

"The best investment you can make in an agent is education. Our studies show that just in terms of productivity, a CLU on average makes about 27% more total income than a non-CLU. If you combine the CLU with the ChFC, it jumps to about 51%," Barton says. "You're going to be a more successful agent if you spend the two to three years to become a graduate of The American College. Why wouldn't you do that? If you're just coming through your company training program, you'll be good, but you won't be on 'steroids.'"

Barton stressed that it's not just The American College's programs, but any designations from a quality organization. "We don't have a monopoly on quality -- I've never suggested that. If you become an RIA, if you become a CFA, if you become a CFP, all of them are going to help you with your productivity. You're going to be better at what you do," Barton says.

While some companies have an excellent stable of teachers, content and case studies that can help an agent become effective, Barton says even those companies tend to send their agents to institutions such as The American College to further boost their return on investment in those agents. And then there are some companies who take a more frugal approach.

"There are some companies in this industry that invest a scant amount of resources into their agents. They give them the bare minimum of information that is necessary to help them pass various series exams, and then ask that advisor or agent to go sell," Barton says. "Not surprisingly, those are the companies that are seeing marginal financial rewards, and often you're seeing a churn and burn of management -- they're replacing people all the time."

Those companies might be asking themselves why they have such a high percentage of orphan clients. "It's because you can't keep your agents because you didn't recruit them right; you didn't train them well; you didn't encourage them to become professional," Barton says. "Well, if that's their management philosophy, shame on them, because it hurts the whole industry."

Targeting junk designations

In recent years, the industry has suffered from a glut of professional designations, including many that focused on advisors catering to seniors. Barton spoke out on CNN seven years ago against "rogue designations" that can be obtained in a weekend -- or less.

"I said then, as I say now, shame on any company and any CEO that supports and will reimburse weekend designations. I hope that the regulators will punish those companies, and I hope the boards will fire the CEOs that allow people to put these designations on their business card," Barton says. "Because it is not in the best interest of the consumer for someone to call themselves a financial advisor who specializes -- who specializes in senior affairs, and who went to a Ramada Inn for two days and passed a multiple choice exam. I'm proud of the companies that have said, 'we will not be a part of this,' and have begun to not reimburse and made it very clear that they will not allow you to use this designation."

"Some of these programs have excellent education. You can learn a lot. But don't call that a designation. That is not a CPA. It is not a CFA. It is not a CFP or a CLU. Don't even try to argue that this is something worthy of inclusion on your business card," Barton says.

A recently announced designation being offered by America's Health Insurance Plans (AHIP) drew the ire of Barton. The Professional, Health Insurance Advanced Studies (PHIAS) designation, a new program from the AHIP Center for Insurance Education and Professional Development, can be earned in a day by completing an online course or by attending a workshop at Institute 2010.

"I am astounded that they have come out with a new designation that can be obtained in about one day. It is dangerous for the profession, it is injurious for the public, and I'm ashamed that AHIP would promote this designation and call it as such," Barton says. "It may have excellent information. I want people to get this information. I want people to study with AHIP. But shame on AHIP for coming out with a designation that can be earned in a day. That is not in the public's best interest. And they should shut down the program or call it something different. But I hope the insurance commissioners take special note of what that organization has done, because it's egregious."

Efforts to reach AHIP for a response to Barton's comments were not returned.

Succession planning

Various statistics point to the median age of a life insurance producer being 54, and trending up.
Many of these fifty-something producers started out with captive companies, which traditionally have done a decent job of training their agents. While many captive companies still exist and maintain excellent training programs, the industry has undeniably seen a transition toward predominantly independent sales forces.

While this transition has generally resulted in more lucrative opportunities for agents and an efficient distribution channel for carriers, a less desirable effect was that it created a vacuum in the area of training and succession planning.

"There is a profound succession problem that's a borderline crisis facing this profession. It's absolutely critical," Barton says. He adds that he is impressed with the efforts of some companies with strong development plans who "get it." But he doesn't see the same thing going on at large in terms of how the industry will recruit and groom the next generation of agents.

He mentions talking with a highly successful agent (who just happens to be 54) earlier this year who recently told his home office he was retiring in two years. "This is someone who has several hundred agents. The home office isn't listening. They're in denial. They're focusing on the next quarter, and more importantly they don't want to confront the knowledge and talent gap, just hoping he'll keep showing up for work. I think that this is malpractice of common sense," Barton says.

He says CEOs should demand to have a succession plan in place for their top General Agents. "It is frightening how little of that goes on in some companies, and how other companies have mastered the science of succession," Barton says.

"I think we should also point out that there are some companies that are doing some phenomenally exciting things to bring people into this profession," he adds. "Because if you think selling life insurance is hard, you should try selling the life insurance career on a college campus."

A close eye on D.C.

Although advocacy is not part of The College's mission, Barton has made a concerted effort to keep producers abreast of potential legislative changes currently under consideration in Congress -- and how those changes could negatively affect the industry.

In late 2009, The American College polled its alumni about the biggest challenge they see for their practice in 2010. Government regulation was the top concern for 57% of respondents, more than double the 23% who listed "prospecting," which was the No. 2 response.

That 57% figure caught the attention of Barton, who nevertheless remains concerned that not enough producers are paying attention and making their concerns heard by elected representatives.

Back in December, in a 2009 American College "Year in Review" Webcast, Barton implored viewers to pay close attention to this issue. "I don't think that most advisors are aware of what's going on. You need to worry about this. You need to be thinking about this because there are some folks in Washington that are trying to rewrite the rules of what it means to be a financial advisor," Barton said during the Webcast.

While Barton says he believes the lawmakers have good intentions, he wrote a well-publicized letter to Sen. Christopher Dodd (D-Conn.), chief architect of the financial services reform bill being considered in Congress, noting concerns about specific provisions under consideration such as the fiduciary standard and restrictions on commissions.

While he doesn't see himself getting more involved politically, he does think The College has a duty to keep its universe aware of what's at stake.

"I think The College has an obligation to advise our profession that there are potentially profound changes coming in the insurance industry," Barton says. "It's up to Congress and the public to determine what the standards will be, but if we believe that public policy is being framed in a way that is going to hurt the consumer, and impair the public's ability to buy product, I think we have a responsibility to inform people."

Barton says he understands that consumers are angry with insurance companies and financial institutions, and that they are looking to penalize anyone who's attached to the profession. "But in seeking to have swift legislation, you might end up hurting the financial security of the very people we're trying to protect. And that's insanity," he says.

"I think in 12 to 18 months we could bring together policymakers, insurance agents, independent financial advisors and educators. I would love to see an in-depth study that talks about fiduciary standards and the public's best interest. Let's put it on the table in a bipartisan format, and let's have some resolution. But a quick bill is just imprudent," Barton says.

"The one thing I can say to the whole profession is if you're failing to monitor what's going on in Washington, you'd better pay attention," he adds. "Because if you don't, you might be out of a job."

In for the long haul

With the exception of four years in private industry, Barton has spent virtually every day since he was 22 working at a college or university. "I believe that this country needs professional education and I'm very passionate about it," he says.

His credentials and track record may draw interest from other institutions or industries, but Barton isn't planning on leaving any time soon.

"I see myself here for the long term. I love it. I absolutely love coming to work every day and waking up in a city where I've got graduates that want to hear about their college, about their profession, and engage in dialogue. I can't imagine a better job."

New Ph.D. program on the horizon?

The American College has Master's degree programs with the MSM (Master's in Leadership) and the MSFS (Master's in Financial Services). But The College has not been a doctoral granting institution.

That could very well be about to change. "I'm very passionate about hopefully offering a Ph.D. If we are the Citadel, if we are the West Point, we should have a Ph.D. in financial services," Barton says. "We are importing Ph.D.s into this country to teach our sons and daughters about insurance and financial security. And this college should be producing Ph.D.s that eventually will teach insurance; they'll be teaching financial planning."

The American College is in the middle of an evaluation process regarding the possible addition, and Barton says he hopes to be able to announce something by 2011.

Barton's views on...

Commission disclosure
"I personally am in favor of commission disclosure. I think commission disclosure is in the public's best interest. But when you talk about commission disclosure it comes with a responsibility. Disclosure is more than just a number. It includes the client having a better awareness of education [and] the practical dynamics of sales and underwriting. If we do both, I think clients will not be shocked when they see commissions. They will have a better sense of the due diligence, the hours of rigor, the testing, the Monte Carlo simulations. The full evaluative process that an advisor or an agent must go through before a sale is completed. If we do that, then I'm in complete favor of commission disclosure."

Fiduciary standard
o "I'm in favor of a fiduciary standard. The puzzle that's created with the coalition from NAPFA, CFP board and the FPA is one of provability. How do I prove to you that I put your best interest above my own without searching and scanning for every potential product and seeking what could be thousands of quotes on a single product? And what that will do is add to the cost of underwriting, the cost of product placement, and ultimately it will end up in a skyrocketing situation of cost for the consumers that we're seeking to protect."

o "I think it was Fidelity Investments that had a study that the average American family has total savings of about $64,000 for retirement. And the average fee for an independent financial advisor, let's just say for discussion's sake is about $1,500. What is the percentage of American families that have the ability to cut a check for $1,500 for you to give me a financial plan? Just for the plan, before I buy any product. I want you to tell me where the average Joe and Jane is going to be able to cut an after-tax check for $1,500? It's not going to happen."

o "Why don't we find a way that a financial advisor has an obligation to scan, support and provide a robust selection of options to the consumer? We all want the public to be protected from rogue advisors; people that claim to be financial experts; insurance agents that are not doing their job. The way to do it is not to force every [licensed and/or credentialed] insurance agent ... to support an additional fiduciary standard that is going to cost them more money for training, is going to cost the client considerably more money through the underwriting process, and ultimately is going to be anti-consumer. And now we're going to hold up this banner of a fiduciary standard because it sounds good, but it's impractical, unenforceable, and anti-consumer. So it plays well in the press, but it will undermine financial security for the American family. I am absolutely convinced of it."

o "You should be contacting your senator and letting them know how you feel about a fiduciary standard. Because if you are silent, then the life insurance industry in this country is likely to follow the path of what happened in Australia and the U.K., where the number of companies shrunk, the number of agents was decimated, and the public choice went from robust to virtually term only. Very limited options. Commoditized by the banks. And the life insurance industry in both of those markets is a shadow of what it once was."

Broadening the knowledge base

Education doesn't only mean designation programs at The American College these days. "We're trying to do a variety of things that help everyone understand that this college is a resource of knowledge for them," Barton says. Among some of the more recent non-designation-oriented initiatives:

The Wealth Channel

Billed by The American College as "the nation's leading online source of financial services insight and knowledge," TheWealthChannel.com was introduced in February 2009, representing a significant financial investment in technology.

With a state-of-the-art high-definition digital video studio -- complete with robotic cameras -- housed in the basement of The American College's building in Bryn Mawr, The Wealth Channel features updates on legislative events, in-depth educational presentations from academic thought leaders, weekly discussions of ethics and practice management issues and more.

"We're the first college in the country to build video-on-demand -- a knowledge center for both clients and agents. Nobody else has done it," Barton says. The Wealth Channel has more than 300 interviews archived, representing more than 200 hours of streaming video. "And we don't charge for it," Barton adds.

As an extension of the Web site, The Wealth Channel Magazine also debuted recently with a Winter 2009 issue. The quarterly magazine is mailed out to members of The College's alumni association.

Custom DVDs

The studio has also allowed The American College the production capabilities to create its own educational DVDs. A DVD titled "New Opportunities for Roth IRA Conversions" was released last fall, and coming out in late April or early May will be another DVD covering financial fraud issues.

"We have never had a program at The College that deals with financial fraud, so we've just come out with a 5-hour video," Barton says.

"I don't think people realize we do that at The American College. That we can have a special product come out and talk about helping your clients and helping your own company or agency avoid fraud by an embezzler in your own ranks," Barton says. "So we're trying to do a lot more of that now that we have an incredible hi-def studio where we can explore these things and publish them very quickly.

Veteran scholarships

Toward the end of 2009, The American College announced a veteran scholarship program designed to provide tuition support of $450,000 to honorably discharged veterans.

"When you think about all of the veterans coming back from Iraq and Afghanistan -- they'll be superb insurance agents. They're focused, diligent, mature, highly educated, they're obviously good with people skills," Barton says. "They're going to be phenomenal contributors to our industry."

CEO a big fan of the "Chairman of the Board"

It rates as no surprise that Dr. Larry Barton, president and CEO of The American College, is a voracious reader.

"I read an incredible amount, especially on weekends," says Barton, who professes to check out 10 to 20 business, insurance and financial magazines every month. He's also written four books and is presently considering a fifth. It's also no surprise that he loves spending as much time as he can with his wife and two sons.

But what you might not expect is that he's a self-professed "Frankophile."

"I'm a huge Frank Sinatra fan. I had the privilege of seeing him in concert eight times. I just have great admiration for his career, his tenacity, his comebacks, the versatility of who he was as a person, his generosity as a philanthropist," Barton says. "He was a bad boy with a big heart. An immense talent. Very complex. Misunderstood, I think, by some of the public, and durable. When you put all that together, wouldn't we all want to have at least some of those attributes?"

Brian Anderson is Editor of Life Insurance Selling.