Principles of Agency Building
19th Edition
December 30, 2013
By:
Roberto H. Bruce,
MS, CLU, ChFC, LUTCF
Cavaliers Insurance Marketing
www.aalliance.com
Rights
Reserved
Rights
Reserved
Agency Building Opportunity
Strong Companies
Unique Products
Ground Floor Opportunity
Competitive Agency Compensation
Rights
Reserved
The Ultimate of
Selling is Agency
Building
Rights
Reserved
Six Areas of Financial Planning
Income Allocation
Management of Risk
Investment Planning
Tax Planning
Retirement Planning
Estate Planning
Term – Insurance For A Specified Period
$
CCOI
$
T
T age
T1
UL
Rights
Reserved
T2
1
2
3
4
Flexible Premium
Adjustable Death Benefit
Current Interest Rate
Guaranteed Interest Rate
Premiums
$
Tamra 88
Net Level
7 Pay Test
Defra 85
Guide
YR 1— $5,000— $4,000
2—10,000 — 5,000-9,000
eg. $5,000 3—15,000 — 7,000-16,000
4—20,000 —
5—25,000 — M.E.C
6—30,000 —
7—35,000 — Annuity
Single
eg. $25,000
Level
eg. $2,000
Target
Minimum
Premiums
Rights
Reserved
TRA’ 86
Rights
Reserved
PREM
Interest
Income
PREM
PREM
PREM
Interest
Income
FIFO
LIFO
INSURANCE
ANNUITY
59 ½ - 10% Penalty
Life Insurance Tests
Cash Value Accumulation Test –
not more than single
premium for lifetime
or
Guide Premium Test, and
Corridor Test– Age 95
Rights
Reserved
Options
Rights
Reserved
$
100,000
Amount
At Risk
OPT A
Level Face
Amount
Savings
t1
$
95
T
100,000
OPT B
Increasing
Face Amt
or
Face Amt
+ Savings
Amount
At Risk
Savings
t1
T
Policy Costs
CCOI
+ Policy Fee
+ PREM Charge
+ Charge / $1,000
TCOI =
PREM – TCOI = Policy Fund
Cash Accumulation Value
Rights
Reserved
Policy Fund – SURR Charge = Cash Surrender Value
Cash Value
Hierarchy of Life Plans
•
Why buy life insurance ????
• Because of GUARANTEES
Rights
Reserved
!!!!
Hierarchy of Life Plans
• Whole Life – Par WL (Non-Med 250k, Med),
Simplified Non-Par WL (Level, Graded, Modified),
Single Premium Par WL
• Universal Life – Lifetime Guaranteed UL, Cash
Accumulation UL (Indexed UL, Traditional UL) –
Non-Med 250k, Low Premium UL
•Term – Guaranteed Premium Term (Non-Med
350k/250k, Med) w/ or w/o ROP, Annual Renewable
Term (ART) - PS1 (Group Term Life)/PS58 (Split
Dollar) Tables
Rights
Reserved
Term Conversion
Privilege
Ability to convert a term
insurance to a permanent
plan prior to reaching a
certain age limit, usually age
65, and number of years
under the term policy.
Rights
Reserved
Parties To A Contract
•Owner
•Insured
•Beneficiary
Rights
Reserved
Three - Gift Tax
One - Estate Tax
Two – Recommended
Disclaimer, if not taken
Waiver Of Premium
•In case of disability
•Always recommend
•Disclaimer, if not taken
Rights
Reserved
1035 Exchange
Non-taxable exchange of certain life and annuity contracts
•Life insurance to life insurance
•Life insurance to annuity
•Endowment policy to annuity
•Annuity to annuity
•Life insurance to qualified LTC
•Annuity to qualified LTC
Rights
Reserved
•Qualified LTC to qualified LTC
Beneficiary(ies)
•Primary
•Contingent / Secondary
•Per Capita
•Per Stirpes
Rights
Reserved
Year 2011
10,000 baby boomers, born 1946-1964,
retiring everyday and increasing
thereafter for the next 19 years
IRA Rollover Example
$5,000/month Target Income
= $60,000/year
@3% rate = $2,000,000
@5% rate = $1,200,000
@7.5% rate = $800,000
Annuity
Rights
Reserved
1 or more premiums
(accumulation)
59 ½
Ordinary income
1 or more payments
(distribution)
Tax-Deferred
10% Penalty
Capital gains
1 – Single premium
1 or more - Flexible premium
Immediate – SPIA
Deferred - SPDA
FPA/FPDA
FIX – General Account
QUALIFIED
IRA (Front)-70 1/2
DEDUCTIBLE
NON-DEDUCTIBLE
ROTH-IRA
(Back)
DIRECT TRANSFER / ROLLOVER /
CONVERSION
VARIABLE – Separate Account
NON - QUALIFIED
1035 Exchange
TRADITIONAL IRA / ROTH-IRA / SEP-IRA / SIMPLE IRA
INDEX / TREASURY LINKED / MYG/MVA
Annuity Ideal Cases
•As
•A
Rights
Reserved
(SPDA $2,000)
(SPDA $4,000Q; $5,000NQ)
Plan Distributions – When
to?
•Die, Disabled, or severance
from employment
•Plan terminates, no
successor plan
•59 ½
•Financial hardship*
*Cannot rollover to IRA
Rights
Reserved
Early Distribution Penalty
(Plan, IRA, Annuity)
•10% tax on distributions
under age 59 ½
•In addition to any regular
income tax on the amount
Rights
Reserved
Penalty Free Plan Early
Distributions
•Death or Disability
•Distributions over life expectancy on termination of
employment
•Service separation after age 55
•Qualified domestic relations order
•Medical expenses over 7 ½ % of AGI
•Distribution election by March 1, 1986
•Dividends on employer securities
•IRS levy of plan
•Qualified reservist distributions
Rights
Reserved
IRA Rollover
•Distribution from one
qualified plan
•Contribution to IRA within
60 days
Rights
Reserved
Types of IRA Rollover
•Direct - qualified plan to
IRA, no 20% tax withholding
•Indirect - qualified plan to
individual to IRA, with 20%
tax withholding
Rights
Reserved
IRA Rollover Exceptions
•Series of substantial equal payments based
on life expectancy, or 10 or more years period
certain
•Required minimum distribution (RMD)
•Corrective distribution
•Loan treated as distribution
•Hardship distribution
•Dividends on employer securities
•Cost of life insurance coverage
•Distribution to beneficiaries
Rights
Reserved
Penalty Free IRA Early
Distributions
•Unreimbursed medical expenses over 7 ½ % of AGI
•Not more than cost of medical insurance
•Disabled
•Beneficiary of deceased IRA owner
•Distribution in form of annuity
•Not more than qualified higher education expenses
•Used to build, rebuild first home $10,000 or less
•IRS levy of qualified plan
•Qualified reservist distributions
Rights
Reserved
Required Minimum Distributions
(RMDs)
•Minimum amount to withdraw
annually starting with year at age
70 ½ , or if later, year retires
(except 5% business owners)
•Amount not withdrawn taxed at
50%
Rights
Reserved
IRA Rollover/Direct Transfer
Trigger Ages
•
•
•
•
•
•
•
55 - A person separating from service after age 55 normally will not be subject to 10% tax
penalty for early distribution from pension plan before age 59-1/2.
59-1/2 - There will be 10% tax on pension plan, IRA, and annuity taxable distributions under
age 59-1/2 in addition to any regular income tax on the amount.
62 - Early retirement age for social security benefits.
65 - Full retirement age for social security benefits for those born in 1937 and earlier;
retirement age increases by two (2) months for every year over 1937; time to apply for
Medicare.
66 - Full retirement age for social security benefits for those born in 1943 to 1954; retirement
age increases by two (2) months for every year over 1954.
67 - Full retirement age for social security benefits for those born in 1960 and later.
70-1/2 - There will be a Required Minimum Distribution (RMD) from pension plan or IRA
starting with year at age 70-1/2, or year of retirement , if later, for pension plan. Five (5) %
business owner requirement remains at age 70-1/2. Amount not withdrawn is taxed at 50%.
Rights
Reserved
Placement Ratio
Issued over submitted apps
Pre-qualify prospect
 Concept selling
 Trial app / no initial premium for
borderline cases
 Initial payment w/ app
 More apps, e.g., Juvenile plans
 Case follow-up

Rights
Reserved
Persistency Ratio
Active over issued policies

Modal payment hierarchy
1.
2.
3.
4.
5.


Annual, 7 Pay, or Single
Monthly bank draft
Semi-annual
Quarterly
Monthly direct billing
Client contact/review
Improve placement ratio
Rights
Reserved
Goal Setting
Rights
Reserved
4. $$$$
3. Sale/Network
2. Appointment
1. Calls ——————— 3 min
NO
$
Time
Need
Name
Company
Purpose
Appt.
T1
T2
Goal Setting
___
3 min/call
20 calls/appt
___
$250,000 – ESD/SGA
100,000 A.P. Goal $100,000 – MDRT
$_______
1,000 A.P./Sale $75,000 – Convention
÷$_______
100
Sales/Year
2
x_______
Appt/Sale
2 hrs/appt
___
2 appt/sale
___
1,000 Annual
$_____
Prem (A.P.)/Sale
200
÷52 Wks
4
Appts/Year
Appts/Wk
20
x_______
Calls/Appt
80
x
2
Hrs/Appt
8
Appt Hrs/Wk
Calls/Wk
x 3(min/call)/60(min/hr)
4
+
Rights
Reserved
12 Hrs/Wk
Total
Call Hrs/Wk
Aalliance Management Expectation/Commitment
(Calendar Year)
Rights
Reserved
ESD
1) Recruit One (1)
Agent Per Month
3 Agents/QTR
12 Agents/YR
2) Participate in
Regional
Seminars
3) Conduct
Agency Seminars
ASM
DM
UM
How?
Maintain 10
Producing
Agents
Maintain 6
Producing
Agents
Maintain 2
Producing
Agents
6 Agents Per YR
4 Agents Per YR
2 Agents Per YR
Yes
Yes
Yes
Participate
Participate
1) Mergers /
Acquisitions
2) Advertising
3) Agency Office
4) Seminars
5) Business phone/
pager / 800# / Fax
6) Laptop
Computer
7) Partnering
8) Recruiting
presentation
9) Annuity / high
premium selling
10) Weekly reports
11) Monitor agents
12) Awards /
Incentives
13) Referrals /
Phone Book /
Associations
14) Education
(CLU, CFP, LUTCF,
ChFC)
15) Concentration
16) Delegation
17) Mailers / Leads
18) Convention
19) Goal Setting
Yes for
ESD-Aspirants
Participate
4) Provide Agency
Sales and Training
Support
Yes
Yes
Yes
5) $250,000 Paid
Target
Premiums/YR
$100,000 Paid
Target
Premiums/YR
$60,000 Paid
Target
Premiums/YR
$36,000 Paid
Target
Premiums/YR
6) $500,000 Total
Premiums
$250,000 Total
Premiums
$100,000 Total
Premiums
$60,000 Total
Premiums
7) Quarterly
Progress Review
With RD
With Immediate
Manager
With Immediate
Manager
With Immediate
Manager
8) Annual Review
with RD
With Immediate
Manager
With Immediate
Manager
With Immediate
Manager
Agency Building Blocks
1) Recruit - Producer, Recruiter
2) LEG
3) Magnificent “Seven”
4) Rule of “Three”
5) Principle of the understudy
6) Bottom/Top Approach
7) Recruit-Train-Sale Cycle
8) Teamwork/Involvement
9) Lead from the front
10) Quality vs. Quantity – Collect/Select
11) Generalization-Specialization Cycle
12) Simplify - KISS
13) Sowing/Reaping - Stout-Hearted
14) Set the example
15) Go forth and multiply
16) Numbers game - +/-, Attrition,
Prime, Progression
17) Curves- Straight line, Pulse, Supply,
Ravine / Death-defying, Crashlanding, Sine, Square, Cubic
18) Anarchy
a) Absence of Rules
b) Rules are impossible to
implement
c) Nobody is implementing the rules
d) Rules are being violated with
impunity
19) Five Pillars - Professionalism,
Persistency, Perseverance,
Production, Proficiency
20) Management Cycle - Planning,
Organizing, Staffing, Directing,
Controlling
21) Goal Setting
22) 7 C’s of Success - Commitment,
Competence, Concentration,
Consistency, Creativity, Control,
Conduct
23) Maximin = Minimax
Rights
Reserved
Recruit
A recruit is not a recruit
without a recruit
A recruit is both a producer
and a recruiter
Rights
Reserved
LEG
A leg is not an effective leg
without another leg
Rights
Reserved
Magnificent “Seven”
Tested to be the most efficient
Seven members of a squad
Seven days in a week
Less-not enough, inefficient
More-Too much to handle
Rights
Reserved
Rule of Three
Out of the seven,
select your best
three
Rights
Reserved
Principle of the Understudy
Out of your best three,
select your understudy
that can duplicate or
replace you
Rights
Reserved
Bottom/Top Approach
Service the bottom
Inform all at the top
Rights
Reserved
Cycle of Success
Financial
Independence
RECRUIT
SELL
Marketing
Structure
Professional
Development
TRAIN
Rights
Reserved
Teamwork/Involvement
No man is an island
The whole is more than the
sum of its parts
Congregation
Rights
Reserved
Set The Example
Lead from the front
in sales, recruiting,
and training
Rights
Reserved
Quality vs. Quantity
Collect and collect;
and then select
Rights
Reserved
Generalization/Specialization
Cycle
Rights
Reserved
Simplify
K I S S
Keep It Simple and Sincere
Rights
Reserved
Sowing/Reaping
What you sow you reap a
thousand times
Stout hearted men
Rights
Reserved
Go Forth and Multiply
The ultimate of selling is in
agency building
If you don’t talk about
recruiting, it will never
happen
Rights
Reserved
Numbers Game
+/Attrition
Prime
Progression
Arithmetic
Geometric
Rights
Reserved
Curves
$ $
$$
$$ $ $
Pulse
Supply
Sine
Straight
Cubic
Ravine/Death
Crash
Landing $
Square
Line
Defying
y
y
y y
y
y
y y
y
Why Anarchy?
Absence of Rules
Rules are impossible to implement
Nobody is implementing the rules
Rules are being violated with
impunity
Rights
Reserved
Five Pillars
Professionalism
Persistency
Perseverance
Production
Proficiency
Rights
Reserved
Management Cycle
Planning
Organizing
Staffing
Directing
Controlling
Always go back to planning
every time there is a hitch
Rights
Reserved
Book of Success
Front Cover: Goal Setting
Body: 7 C’s of Success
Commitment
Competence
Concentration
Consistency
Creativity
Control
Conduct
Back Cover: Maximin=Minimax
 Maximize profit, subject to minimum utilization of your own
resources
 Minimize cost, subject to maximum utilization of other
people’s resources
 Should be balanced
Rights
Reserved