Principles of Agency Building 13th Edition April 12, 2010 By: Roberto H. Bruce, MS, CLU, ChFC, LUTCF...

Principles of Agency Building

13th Edition April 12, 2010

By: Roberto H. Bruce, MS, CLU, ChFC,

LUTCFCavaliers Insurance Marketing

www.aalliance.com

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Agency Building Opportunity

Strong CompanyUnique ProductsGround floorAgency compensation

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The Ultimate of Selling is

Agency Building

Recruit Train

Sell

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Term – Insurance For A Specified Period

T1 T2

T age

CCOI

$

T

1 Flexible Premium2 Adjustable Death Benefit3 Current Interest Rate4 Guaranteed Interest Rate

UL

$

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Premiums

$

Tamra 88

Defra 85

Net Level

7 Pay Test

Guide

Target

Minimum

Premiums

Single

Level

eg. $5,000

eg. $25,000

eg. $2,000

YR 1— $5,000— $4,000 2—10,000 — 5,000-9,000

3—15,000 — 7,000-16,0004—20,000 — 5—25,000 — 6—30,000 —7—35,000 —

M.E.C

Annuity

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TRA’ 86

PREM

INSURANCE

Interest Income

PREM

PREMPREM

InterestIncome

ANNUITY

59 ½ - 10% Penalty

FIFO LIFO

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Life Insurance Tests

Cash Value Accumulation Test – not more than single premium for lifetime

orGuide Premium Test, andCorridor Test– Age 95

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Options

t1 95T

$

$

T

Savings

Savings

OPT ALevel Face

Amount

OPT B Increasin

g Face Amt or

Face Amt +

Savings

100,000

100,000

t1

Amount At Risk

Amount At Risk

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Policy Costs

CCOI+ Policy Fee+ PREM Charge+ Charge / $1,000

TCOI =

PREM – TCOI = Policy Fund

Cash Value

Cash Accumulation Value

Policy Fund – SURR Charge = Cash Surrender Value

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Hierarchy of Life Plans

• Whole Life

• Universal Life

• Term

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Parties To A Contract

•Owner

•Insured

•Beneficiary

Three - Gift Tax

One - Estate Tax

Two – Recommended

Disclaimer, if not taken

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Waiver Of Premium

•In case of disability

•Always recommend

•Disclaimer, if not taken

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Beneficiary(ies)

•Primary

•Contingent / Secondary

•Per Capita

•Per StirpesRights

Reserved

Annuity 1 or more premiums

(accumulation)

1 or more payments

(distribution)Tax-Deferred

59 ½ 10% Penalty

1 – Single premium

Immediate – SPIA Deferred - SPDA

1 or more - Flexible premium

FPA/FPDA

Ordinary income Capital gains

FIX – General Account VARIABLE – Separate Account

QUALIFIED

IRA (Front)-70 1/2

DEDUCTIBLE NON-DEDUCTIBLE

ROTH-IRA (Back) NON - QUALIFIED

TRADITIONAL IRA / ROTH-IRA / SEP-IRA / SIMPLE IRA

DIRECT TRANSFER / ROLLOVER /

CONVERSION

INDEX / TREASURY LINKED / MYG/MVA

1035 Exchange

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Annuity Ideal Cases

•L (FPA $100Q/mo; $10,000NQ)

•S/As (SPDA $2,000)

•A (SPDA $4,000Q; $5,000NQ)

•L (SPDA $10,000)

•L (FPA $3,000Q; $10,000NQ)Rights

Reserved

Plan Distributions – When to?

•Die, Disabled, or severance from employment

•Plan terminates, no successor plan

•59 ½

•Financial hardship**Cannot rollover to IRA

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Early Distribution Penalty(Plan, IRA, Annuity)

•10% additional tax on distributions under age 59 ½

•In addition to any regular income tax on the amount

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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 distributionsRights

Reserved

IRA Rollover

•Distribution from one qualified plan

•Contribution to IRA within 60 days

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Types of IRA Rollover

•Direct - qualified plan to IRA, no 20% tax withholding

•Indirect - qualified plan to individual to IRA, with 20% tax withholding

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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 beneficiariesRights

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

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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%

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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

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Persistency Ratio

Active over issued policies Modal payment hierarchy

1. Annual, 7 Pay, or Single2. Monthly bank draft3. Semi-annual4. Quarterly5. Monthly direct billing

Client contact/review Improve placement ratio

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Goal Setting

4. $$$$

5. Sale/Network

6. Appointment

1. Calls ——————— 3 min

NO$

TimeNeed

NameCompanyPurposeAppt.

T1

T2

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$_______ A.P. Goal÷$_______ A.P./Sale

Sales/Year x_______ Appt/Sale

Appts/Year÷52 Wks

Appts/Wk

x_______ Calls/Appt

Calls/Wkx 3(min/call)/60(min/hr)

Hrs/Appt

Appt Hrs/Wk Call Hrs/Wk

+Hrs/Wk Total

x

___ min/call

___ calls/appt

___ hrs/appt

___ appt/sale

$_____ Annual Prem (A.P.)/Sale

$250,000 – ESD/SGA$100,000 – MDRT $50,000 – Convention

Goal Setting

20

2

2

1,000

100,0001,000

1002

200

20

80

4

12

2

8

4

3

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ESD ASM DM UM How?1) Recruit One (1) Agent Per Month 3 Agents/QTR 12 Agents/YR

Maintain 10 Producing

Agents

Maintain 6 Producing

Agents

Maintain 2 Producing

Agents

1) Mergers / Acquisitions2) Advertising3) Agency Office4) Seminars5) Business phone/ pager / 800# / Fax6) Laptop Computer7) Partnering8) Recruiting presentation9) Annuity / high premium selling10) Weekly reports11) Monitor agents 12) Awards / Incentives13) Referrals / Phone Book / Associations14) Education (CLU, CFP, LUTCF, ChFC)15) Concentration16) Delegation17) Mailers / Leads18) Convention19) Goal Setting

6 Agents Per YR

4 Agents Per YR

2 Agents Per YR

2) Participate in Regional Seminars

Yes Yes Yes

3) Conduct Agency Seminars

Yes for ESD-Aspirants Participate Participate

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

Aalliance Management Expectation/Commitment(Calendar Year)

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Agency Building Blocks1) Recruit - Producer, Recruiter2) LEG3) Magnificent “Seven”4) Rule of “Three”5) Principle of the understudy6) Bottom/Top Approach7) Recruit-Train-Sale Cycle8) Teamwork/Involvement9) Lead from the front10) Quality vs. Quantity –

Collect/Select11) Generalization-Specialization

Cycle12) Simplify - KISS 13) Sowing/Reaping - Stout-

Hearted14) Set the example15) Go forth and multiply16) Numbers game - +/-, Attrition,

Prime, Progression17) Curves- Straight line, Pulse,

Supply, Ravine / Death-defying, Crash-landing, Sine, Square, Cubic

18) Anarchya) Absence of Rulesb) Rules are impossible to implementc) Nobody is implementing the rulesd) Rules are being violated with impunity

19) Five Pillars - Professionalism, Persistency, Perseverance, Production, Proficiency

20) Management Cycle - Planning, Organizing, Staffing, Directing, Controlling

21) Goal Setting22) 7 C’s of Success -

Commitment, Competence, Concentration, Consistency, Creativity, Control, Conduct

23) Maximin = Minimax

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Recruit

A recruit is not a recruit without a recruitA recruit is both a producer and a recruiter

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LEG

A leg is not an effective leg without another leg

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Magnificent “Seven”

Tested to be the most efficientSeven members of a squadSeven days in a weekLess-not enough, inefficientMore-Too much to handle

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Rule of Three

Out of the seven, select your best

three

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Principle of the Understudy

Out of your best three, select your

understudy that can duplicate or replace

youRights

Reserved

Bottom/Top Approach

Service the bottomInform all at the top

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Cycle of Success

RECRUIT

Marketing Structure

Professional Development

Financial Independence

TRAIN

SELL

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Teamwork/Involvement

No man is an islandThe whole is more than the sum of its partsCongregation

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Set The Example

Lead from the front in sales,

recruiting, and training

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Quality vs. Quantity

Collect and collect; and then select

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Generalization/Specialization Cycle

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Simplify

K I S SKeep It Simple and Sincere

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Sowing/Reaping

What you sow you reap a thousand timesStout hearted men

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Go Forth and Multiply

The ultimate of selling is in agency buildingIf you don’t talk about recruiting, it will never happen

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Numbers Game

+/-AttritionPrimeProgression

ArithmeticGeometric

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Curves

Straight Line

$

y

Supply

$

y

Ravine/Death Defying

$

y

Crash Landing

$

y

Square

$

y

Sine

$

y

Cubic

$

y

$

y

Pulse

$

y

Why Anarchy?

Absence of RulesRules are impossible to implementNobody is implementing the rulesRules are being violated with impunity

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Five Pillars

ProfessionalismPersistency

PerseveranceProductionProficiency

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Management Cycle

Planning Organizing

StaffingDirecting

ControllingAlways go back to planning every time there is a hitch

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Book of Success

Front Cover: Goal SettingBody: 7 C’s of Success

Commitment CreativityCompetence ControlConcentration ConductConsistency

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

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