"So the insurance will cost X. Any other fees, penalties or special charges in the fine print? I know life insurance can be complicated, I read so in Businessweek. By the way, how much do you make on this?"
This is not necessarily a common question from the would-be life insurance consumer; on occasion, however, it seemingly arises out of nowhere. Be forewarned: This can be a perfect time to solidify the transaction and impress the consumer with candidness. On the other hand, if articulated poorly, it could be disastrous.
Such a question or a variation thereof usually ends up one of two ways: The agent/registered representative sifts through the illustration looking for the left corner of the signature page for "Target Commissionable Premium," and reads of the number in a sort of "raffle ticket" manner as if he himself does not know. You know, the way a car dealer responds when you ask him or her for the total check amount you plan on writing each month free and clear, and the dealer has to back step, calculate tax or act as if he or she has to check again because the MSRP might have changed since last Tuesday along with state sales taxes and dealer fees.
This type of answer has been known to make a consumer sympathetic to a bumbling-but-in-a-charming-way sales professional. If this is working and you are placing enough premiums to be content, so be it; no need to read any further. If such is not the case, however, here is something to consider: In the same way you get excited about making a presentation, tabulating numbers and delivering a policy (hopefully), the successful agent maintains that level of enthusiasm throughout the process. This premise implies one should feel as though he or she is designing a plan or providing such a high level of service and problem solving, he or she has absolutely no problem retorting with a perfectly natural, straightforward response: "I am paid very reasonably for what we are discussing."
Another viable response could be: "The insurance company adds policy fees and surrender charges to finance overhead including sales and marketing personnel, risk underwriting and the costs associated with having you examined, lab reporting, meeting state legal guidelines, and its own profit also."
Veteran producers say it is not about the precise verbiage used in an agent's response, but rather the tone of voice or attitude being projected. The key ingredient is conveyance of absolutely no regret or shame in being paid well for what you have done.
I have visited the same dentist for 20 years and have never asked how much Dr. I makes for a cavity filling. On my way out once, I asked his office manager though. Sandy, without hesitation, said, "We are given a list of fee allowances for procedures by insurance companies and bill them the maximum allowed in most cases. Fillings cost you $79 and the fancy white fillings you prefer more like $150." End of story. Too many agents and investment advisors have a tough time with this part of the sales transaction, especially with higher dollar amount deals.
It is important to have an accurate assessment of a consumer's personality so you can either expect the compensation inquiry and be prepared or pay it no mind and be assured of no awkward moments. In some instances, it makes sense to incorporate it into a candid explanation of charges before the consumer (or their accountant or attorney) asks.
More sales are probably lost by the sales professional being caught off guard when the subject of applicable charges/policy fees and anything else pertinent to the actual money/cost come up. If one senses the subject of compensation arising inevitably during the discussion, an ideal time to incorporate the marketing costs is together with explanation of surrender charges [on permanent life]. Remember something: Just about all products have fees and penalties and pay compensation. The single most significant contrast between the agent who can address the question and complete the transaction and those who struggle with it is miniscule yet potent. Any salesperson sitting at a desk with consumers explaining a plan or product should have the guts to honestly tell a consumer about how compensation is paid just as naturally as its selling points and technical ramifications.
Convey (in whichever way comes across most politely and sincerely) that insurance companies pay salespeople for selling their products, period. "We are talking about designing a plan to ABC. It works like this and costs that and will provide EFG. What comes with the benefits are the costs, which are XYZ, including policy fees, mortality charges and compensation the insurance company pays agents like me for marketing and the transaction with consumers like yourself in this equation."
I used to work with insurance agents who called themselves "advisors." Those advisors have to sign appointment forms in order to transact business with a given company and receive compensation. The contracts usually read "Agent/Registered Representative/Producer" or something similar with commission split information thereafter if applicable. Case in point: Advisors and consultants would not qualify if this were a valid premise. Agents and registered representatives are who sign and specify their Social Security numbers on the appointment forms. Do not be afraid or ashamed of conveying you are not just advising but providing the insurance and being paid for it if that is the truth; the client will probably respect your legitimacy and gracefulness.
Annuities, bonds, mutual funds, and other financial instruments have compensation costs built in. Life insurance products are among the most complex in the industry for varying reasons, which is why compensation tends to be calculated in a unique way. An exception is an agent who works on a fee-only basis. Some fee-based agents do very well and consumers pay them for recommendations or time the way an attorney providing several services over time is perpetually retained by a corporate client as opposed to an individual wanting a specific document drafted or criminal defense where the fee or compensation is a specific number.
If you ever find yourself up against a rival agent vying for a client's insurance business, know this: The fee-based agent has limited options. He or she either makes the insurance plan and asks a partner or affiliate to conduct the application/sales process as a third-party specialist (whereby the compensation from the insurance company pays to that third party) or the fee-based agent must have a rebating schedule authorizing a refund of the would-be agent compensation involved authorized by the state insurance department. In short, the consumer should realize someone is being compensated the exact same gross payout by the insurance carrier as you would be (unless it is being rebated back to the consumer and filed with the state insurance commissioner legitimately).
If a consumer has an aversion to a salesperson being compensated by an insurance company, his or her expectations are unrealistic. Be vigilant, however, as sometimes compensation/commissions are used as a scapegoat for a consumer wishing to forego conducting business with an agent altogether. This is a discussion for another time, but could stem from the initial consultation about putting together some illustrations and a plan to address what the consumer asked for from the start.
Rule of thumb: The more sophisticated the consumer, the less probable a compensation-related question or judgment as to its amount will come into question. The millionaire buying a joint survivor policy to pay his estate taxes might indeed be the cheapest businessman in the world; it might be how he amassed his fortune in part. Even that individual operating at his level knows the agent designing his plan and doing the underwriting legwork is paid well by the insurance company when the policy is placed in force.
Corey Weiner has spent nine years carrying the life insurance torch within the complex world of wealth management. He spearheads insurance sales concepts for registered investment advisors, CPAs and other fiduciaries, often providing them point-of-sale assistance to ensure they maintain a leading edge in today's competitive marketplace. He has served in marketing roles for the two high-profile life insurance field marketing organizations and works from offices in Palm Beach and Los Angeles. He can be reached at (888)467-6755.
