I want to share with you two ideas that have been foundational to my 47 years of MDRT membership and 40 years as a member of Top of the Table. For those of you who want to reach Top of the Table, there is only one way to accomplish this objective and sustain it over the years—build a prospecting system that will consistently generate activity. The best method I know of is the one I have used for 50 years—I call it "two-a-days." Find two people every day who will agree to talk to you about their life insurance program. Every one of us can find people to talk to; that is not the problem. The problem is zeroing in on their specific needs. Here is how I do it.
When you first meet people you would like to ask for an appointment, but instead of doing that, do what every great financial advisor has learned to do: Ask them a question. When in doubt, always ask a question. It is a habit worth cultivating.
Here is a question I learned from Tom Wolfe early in my career: "Would you have any objection to discussing your life insurance program with me?" Obviously, you can substitute financial plan, business succession plan, or long-term care plan into this statement. This question is to the point and is hard to reject. Most people will not say yes to a no question.
Ask this question to everyone you call or meet.
Once you have prospects and they have agreed to meet with you, in that first appointment you must engage them in an in-depth discussion about their needs. What do you say? How do you start a meaningful discussion? Again, when in doubt, ask a question.
To learn how people think, you need to ask them. To do this, you need to ask yourself this question: What is it I sell? Do you sell problems or do you sell solutions? I have asked this question to audiences all over the world, and the vast majority will say, "I sell solutions." Why? Because our products solve problems.
Remember, in the final analysis, only three things can happen to most people: They can live too long, die too soon, or become sick and have to spend everything they have trying to get well. The miracle of our products is that we can solve their financial concerns. Our money comes in as their money goes out. But most of our prospects don't think this way. They only see the costs; they are blind to the benefits. To be successful, we have to help them see that the benefits are greater than the costs, and we do this with questions.
Think of costs and solutions like a scale. On one side of the scale are the costs and on the other side are the benefits. When we show solutions, we are asking clients to weigh the proposition. Are the costs heavier than the benefits? If so, they will not act. The cost is too much of a burden. So what do we do? We start talking about the benefits of life insurance, annuities, long-term care, or whatever products we are trying to sell to the clients. We tell them stories to motivate them to spend the money. We call this "pennies on the dollar." But this puts us in an adversarial position. We are arguing with the prospects as we try to show them that the benefits are worth the costs.
I would like to suggest another way of thinking about this—a paradigm shift. Let's not focus on the cost/benefit dynamic. Instead, let's look at the problem.
There is another scale, and this scale is the cost/problem relationship. If the problem hurts enough, if the problem causes enough concern or fear, then the cost will not matter. Instead of being adversarial, become their friend, their confidant. Get on the same side of the table with them, and find out where the problem hurts the most. Ask questions: "When you are lost in thought, what are your biggest concerns?" "What keeps you awake at night?"
As the pain of the problem increases, the cost of the solution decreases. If the pain is great enough, there is no cost that will stop them from solving the problem. Help them understand all of the ways they have to eliminate the pain without you. It will soon become obvious that they have no pain remedy. So what do we do? We start talking about our solution. Don't do this. This is a trap. It could cost you the sale. My rule is to never talk about my solutions until I have totally eliminated theirs.
If you do this correctly, they will eventually ask you, "Do you have a solution for my problem?" This is when you start talking about how your solution will eliminate the pain. But don't do this until they ask or until they admit their solutions will not work. We must become pain merchants. Be known by the problems you solve, not the solutions you sell. People will come to you with their pain, and you will be able to help them eliminate it.
If you have done this correctly, they might even say, "Wouldn't life insurance work here?" What a beautiful thing when this happens. They have proposed the solution. Now what do you do? Most of us would say, "Yes it would." And then we will reach into our briefcase where we just happen to have an illustration especially prepared for them that might help eliminate the pain of this problem. Now we are into the closing interview.
Again, don't do this. It is a trap. People only buy what they understand. The mystery of life insurance has prevented many people from purchasing the greatest financial product in the whole world.
So what should you do? Ask a question. Whenever you are in doubt, ask a question. So before I bring out the illustration, I always ask them, "Do you understand how life insurance works?" No one knows how life insurance works, including most agents. If you can explain to clients in simple terms how insurance works, it will give them confidence to buy your product.
The first thing I tell them is that life insurance is based on the predictable pattern of death. No one knows who is going to die, but they do know how many and the probability of when. Assume you have 10 million healthy 45-year-olds. We know in the first year that 1/1,000 will die. At age 50, it might increase to 2/1,000, and at 60, it will be 10/1,000. This will continue until all 10 million are dead.
Suppose each person wanted to buy $1 million of coverage. The actuaries will tell you that you have to pay $960 of premium so that there is $1 million at the end of the year to pay the death claim. As that cost goes up, the fewer insureds there are in the pool.
So, "How much did your insurance cost?" No one knows the answer because they don't know when they are going to die. I usually say, "Tell me when you are going to die, and I will tell you the cost." So the only logical point for comparison is life expectancy. This is where 50 percent of the group is alive and 50 percent are dead. You have as much of a chance of living beyond life expectancy as you do dying.
If we measure all of the mortality costs from today to life expectancy, it is 74 percent of the face amount. But remember, only 50 percent are dead. Let's look at the total cost when two-thirds of the group is dead. This is called the first standard deviation. Now the cost rises to 119 percent. If we look at where 95 percent of the group is dead, the cost is 240 percent. No one could afford to keep their life insurance if they had to pay the mortality costs every year.
Think about it—you reach your life expectancy birthday, and you get your new premium notice. It is for $150,000 for your $1 million policy. Are you going to pay it? Of course not—that is what everyone says. But suppose you just came back from your oncologist who said you had six months to live. Now would you pay it? Everyone says they would. Suppose you owned this insurance company, and all of the healthy people were canceling their policies and all of the sick people were staying. What would happen to the company? That's right—it would have to shut its doors and go out of business. This is called adverse selection, and it is what companies fear the most. In fact, this problem caused all of the insurance companies in the United States to close their doors and reorganize in the mid-1800s.
So they called in the actuaries and told them to come up with a solution. They went back to their dark closets and got out their eyeshades and abacuses. Finally, they came out and said, "We've got it. Here is the solution. You need a Box."
If you put this money into the Box, the compound interest earned on the cash in the Box will pay the curve. It is that simple. You either fill the Box or pay the curve.
You can fill the Box in one year, you can fill it over your entire lifetime, or you can short pay. It is up to you. But you have to fill the Box so that it will pay the curve.
If this were the end of the story, it would have been a great solution. But there is more to it. We know the earnings in the Box are not constant. Interest rates go up, and interest rates go down. Once you start your Box, if the rates get higher, then you can put less in the Box. But if rates go lower, then you will have to put more in the Box. Our job is to help you know how much you need to put in the Box each year.
In the final analysis, if you want life insurance for the rest of your life, you have to fill the Box. So you have a choice: You can either fill the Box, or you can pay the curve. It is your choice.
The reaction to this story, when I tell it to clients, is the same every time. They always say, "This is the first time I have ever understood life insurance." Educated clients make better clients. Our job is to tell the story. People do what they want to do when they want to do it. All we can do is show them their options and then let them make the best decision for themselves.
I hope some of these ideas will help you get to the Top and stay there.
Guy E. Baker, MSFS, CFP, of Irvine, California, is a 47-year MDRT member with 39 Top of the Table honors and a past President of MDRT. Baker is an Excalibur Knight of the MDRT Foundation and served as its President in 2000.