Members of the National Association of Insurance and Financial Advisors (NAIFA) provide answers to four questions on the minds of advisors as members gathered for the association's annual conference:
1. Question: Where do you meet with most of your clients — in your office, in their office, in their home, at a coffee shop, online or where — and why?
Answer: “I meet with most of my clients in my office, though occasionally we meet out somewhere. My reason is: I have everything I need in my office. For instance, if I need a form or brochure, I can get it right away. It also gives me a little more control if we meet there. Another factor is: I don’t do “selling” in the sense that I have a preconceived notion of what the person needs. I am an advisor and focus on presenting the right solution, so I need to talk with the client to learn about the person and the need. The solution comes out of that. When I’m in my office, I can pull together what applies. Also, my clients are more attuned to coming to my office. However, if the account involves a 401(k) plan or other group plan, I do go to the client’s office.”
—Donald L. Schleicher, principal, Schleicher/Witz Financial, Appleton, Wisc.
Answer: “Most of the time, we meet in my office. I have all my tools in the office, and all the information is there, so I can get my hands on it when I need it. People say that you can do that on a computer or laptop in the client’s office or out somewhere, but it’s more difficult that way. In my office, I can print out forms and materials, and do other things easily. Another issue is that it takes time to help people understand the issues and products. So we call the companies from here with no distractions. I do offer to meet in their office or home, but a lot of the time, they ask to come to me. They say they don’t want to be interrupted when talking about their personal business. In my office, there is no dog or cat jumping up, and there are no phone calls that they have to take. They can focus that way. I think they share more with me because of the minimal distractions.”
--Mike Bergquist, financial professional for Prudential, the Midwestern Agency-Agency Distribution, Jamestown, N.D.
Answer: “Most of it happens on the phone and online, typically by e-mail. That’s unusual but my office is located in Capitola, Calif. That’s about 35 miles from Silicon Valley, where most of my clients live. They are cutting edge, and very comfortable with doing business this way. That includes grandparents in their 70s who have learned that if they want to keep up with their children and grandchildren, they need to go online, use e-mail and do texting. Another factor is that most of the products I handle are property-casualty, and the phone and online approach works well for that, particularly auto or homeowners insurance. When the client needs life insurance, I do face-to-face meetings, either at my office, their office or in the middle. Life insurance is more personal and the concepts need to be presented carefully. For that, the clients need to have a personal experience, especially if it’s not term insurance.”
– Hal Judd, multiline agent with State Farm, Capitola, California.
2. Question: What is this year’s Number One advocacy issue for insurance and financial advisors, and why?
Answer: “The clarification of differences between suitability and fiduciary standards that exist for ERISA and for broker-dealers at the Securities and Exchange Commission. Different versions come out, and then the agencies pull them back and try other versions. A large number of members of NAIFA are affected or could be affected by this, depending on the version. This creates barriers to new practitioners. If the regulations focus on large sophisticated cases, for example, it will be hard for new advisors to start out managing accounts at that level. For established practices, their relationships could be severed depending on the changes. For example, under one interpretation, if an agent sets up a 401(k) plan for a family business, it might be that the agent won’t have access to the employees of the plan to handle their rollouts. Another problem is increased liability for everyone.”
–Barry Delp, agent, Ozark National Life, Davenport, Iowa
Answer: “It’s the health care reform problem. We’re being forced to educate our clients about it and we don’t know what we’re doing. There is widespread lack of understanding about the exchanges. The people who are in the business now have to get certifications, and the ones I know are struggling with it. I used to sell a little health insurance but now I am distancing myself from it because of all this. I think the federal government is trying to get into the health insurance business. Even the major benefits brokers are having problems with it. One broker who normally comes to the NAIFA annual meeting didn’t come this year because the Oct. 1 deadline for the start-up of the exchanges is almost here so he needs to be at home so to take care of client questions. Our government needs to incorporate the experts into the health insurance decisions. The public is going to need agents more than ever. When NAIFA comes calling, they should listen to us. We are the experts.”
–Milo Hagen, financial representative, Modern Woodmen, Aberdeen, S.D.
Answer: “I’m not a health insurance agent, but for the industry, all that is going on with Obamacare is a concern for all agents and the general public. The law is taking agents out of the process, and that will make it more difficult for consumers to benefit from the value of our advice. And, due the commission reductions that resulted from the law’s medical loss ratio provisions, health insurance agents now need to find other sources of income to make up for that loss. This affects all NAIFA members because, if the law affects one agent, it affects us all. We’re members of NAIFA for different reasons, but as a group we want to see agents prosper, succeed, and help their clients to make good decisions.”
–Robert D. Farabaugh, financial professional emeritus, the Prudential Insurance Company of America,Camp Hill, Pa.
3. Question: The economy is improving slowly this year, and the stock market has been mostly up. How is this impacting your practice?
Answer: “It actually started in 2008. The recession opened up planning areas for pre- and post-retirees, ages 50 and up, who were seeking professional advisors who could help them learn what to do and how to restructure their personal assets. The economy goes in cycles, but people still have to plan their retirement distribution. Now that the market is up and the economy is improving, the focus is still on retirement. There are three areas they are looking at: reallocation of portfolios; working with alternative investments whether on a fee or commission basis; and protection of the portfolio, such as through use of variable annuities with a living benefits rider. People have learned they really can’t do it on their own. Taxes and inflation are no longer the only big issues for this market. People also have to deal with health premiums, longevity, and how and when to take out money from their accounts.”
--Marta Cornejo, financial advisor, Jacobson Wealth Management & Insurance Services, Napa, Calif.
Answer: “Clients are a little more confident than last year and their confidence keeps improving. They feel as if they are gaining ground again. But they are still cautious, because they don’t trust that this will be a long-term recovery. As a result, they are investing some money in the stock market (to get some long-term growth and beat inflation) but they are putting other assets in fixed buckets. If they have a big expense come along, we’ll take the money from the bucket that is earning the least, and replace it from the ones that are still growing. The stock bucket might be invested in the market or in a variable annuity, and the fixed bucket might be in a single-premium deferred annuity. If we use a variable annuity, the clients buy a product with a lifetime income rider, so that even if another big market correction comes along, they will still have that guaranteed income stream. It’s like a security blanket.”
–John Lozar, benefits and financial advisor, Comprehensive Financial Services, Muncie, Ind.
Answer: “The impact of the stock market improvement on my business is probably not as much as it might have been in the past. A lot of my clients are retirees or close to retirement. When the market crashed, a lot of them pulled out of the market and they say they are not going back in. What is on their minds now is how the low-interest rate environment is affecting their everyday life. They are trying to figure out how retirement will be enjoyable if the rates stay low. They are also afraid of what health reform will do to the economy — that it might take away any of the improvements that we’ve seen so far.”
–Rick L. Frank, registered representative, Ameritas Investment, Paullina, Iowa
4. Question: Do you practice on a commission-only basis, fee-only basis, or commission and fee basis? Why?
Answer: “I am a financial planner, and I do both. I offer products that pay commission or I charge a fee for my service. I chose this business model 15 years ago because of the direction the industry was going (toward more products that are designed to be sold without commission). Before that, I was a commissioned agent for 15 years. Today, I am an insurance agent and an insurance broker. In Oklahoma, you need a separate license to be a broker; that’s pertinent because having the broker’s license allows me to waive commission on certain products. So, I am an agent/broker with insurance and securities licenses. I give my clients a choice on my compensation; it’s either/or. Either way, I want them to know how I get paid. My firm is a registered insurance advisor.”
–Jim D. Duncan, financial advisor, Benchmark Financial Group, Oklahoma City
Answer: “I am currently commission-only because I am not licensed to do fees. However, I am looking into getting licensed to allow me to charge fees, because we service clients a lot after the point of sale. Because of increased numbers of market corrections that we are seeing and the market volatility, clients need more monitoring of accounts and more advice than in previous years. I think they would be better served if they could pay me on a fee basis.”
–Tammie Myers Sharp, financial specialist, Wealth Strategies Group, Greenwood Village, Colo.
Answer: “I practice on a commission-only basis because I am a multiline agent for State Farm and it’s the only way I can earn compensation for selling products. We are not financial planners, so we don’t charge a fee for planning. I have been with State Farm for 33 years so I never was fee-based. We get ‘compensated’ in other ways as well -- by the referrals our clients send us, by their loyalty and by the joy we get from helping people when they need us. It is such a pleasure and joy to deliver a big life insurance check to someone who has lost a loved one, and to provide comfort and support to those who need help if, say, they are hurt in an auto accident or have a family member in the hospital. You don’t know how good it feels until you’ve done that.”
–Rick Chimento III, agent, State Farm, Springfield, Ohio