How Thinking Big Can Change an Advisor’s Career

This is an excerpt from a focus group presentation, “When Life Insurance Becomes the Lifeline,” during the Million Dollar Round Table’s 2012 annual meeting in Anaheim, Calif.

By Frederick T. Scruggs

Today I have been asked to talk about real-life cases. The first involves a 30-plus-year client who started a construction company. This story was a Life Foundation story winner in 1997.

Buzzy started his company in 1971 with a 50/50 partner, Vince. Their success formula was a big secret then, and still today, called HW and LH, which translated means “hard work and long hours.” So despite recessions, high interest rates, inflation and economic uncertainty, the company flourished.

When I met Buzzy and Vince, they had already bought life insurance, but over time, with patience, persistence and a professional relationship with the CFO, I gained confidence and credibility. We handled their health insurance plan first, and later they bought a couple of $100,000 face amount buy-sell key man policies.

Several years later, when exit planning gained momentum for the two partners, I was there. I allied myself with professionals I had met and interviewed, and believed in life insurance and I trusted, to work with me to develop a plan to establish an ESOP (employee stock ownership plan, a qualified retirement plan under the U.S. tax code) and sell the company to the employees and thus maintain local ownership, control and share future profitability with the new owners — the employees. (I will not be discussing ESOPs in detail today.)

There were many steps to building the sale and years of service to earn their business. Much like a construction project, the sale involved a business plan and a valuation (first meeting with advisors), new wills (next meeting with advisor) and ESOP consultants (third meeting with advisors). I always kept my client’s goals in mind because distraction is easy.

I know the business sale has lots of complexity ? lawyers, brokers, CPAs, advisors ? all future prospects or referrals.

Nobody blinked

The valuation of the company came in at $5 million. Nobody really blinked at the number, so I told them they needed to buy $5 million of whole life on Buzzy, who now had become the key shareholder. This would protect the company and ensure that Buzzy’s family would get paid for his stock. The idea made sense. 

By doing joint work, we were successful. Napoleon Hill shares this concept, called the mastermind alliance, in Think and Grow Rich.

Now, if you had told me Buzzy was going to pay a $100,000 premium, I am not sure I really would have believed it. I did not know anybody who could or would write that kind of check back in 1985.

Well, I learned then, and have continued to learn today, that business owners who have the financial capacity and feel they are solving their problems will write checks that size and larger. Tony Gordon said, “Rich people have more money than poor people, and rich people write bigger checks than poor people.”

 We need to show them why and how. However, you must create a sense of urgency and get them to do it now. 

When Buzzy asked what the premium was, we were all seated around the lawyer’s conference room table—the lawyer, the consultant, the CFO, and me. I was nervous, yet confident, because I was prepared. I had asked ahead of time if the CFO thought the valuation number was right. He said yes. I had run policy illustrations, and it never occurred to me to run anything else except whole life for $5 million, even though I had never sold that face amount before.

My response was $95,810. Buzzy looked at me and then at the CFO and said, “Can we afford it?” The CFO said yes, and the sale was done. No objections, no buy term, no shopping.

Buzzy believed that he was getting what he wanted, and I got that message about “thinking big,” which has changed my career.

Frederick T. Scruggs, CLU, CHFC, is a Life and Qualifying member of Million Dollar Round Table, 10 times Court of The Table and three times Top of The Table. The principal of Financial Designs, Forest, Va., and the creator of the Vision Advocate Experience, he has worked with business owners and personal clients in Central Virginia and the Southeast since 1977. He is also a member of the Advanced Association of Life Underwriters, the National Association of Insurance and Financial Advisors, and the NCEO and the ESOP Association. In this excerpt from his MDRT 2012 focus group presentation, “When Life Insurance Becomes the Lifeline,” he tells how he learned the value of thinking big.