Breaking Into The Affluent Market

"It really has to be done, you have to show the client how its working," he explains.

Thomas will do a full insurance review with his top 100 clients on an annual basis, but some of his largest clients like to see him every 90 days. "Clients who want to meet more frequently are the higher end of the affluent."

Carroll has developed an in-house administrative system to comprehensively manage all his clients insurance policies from a servicing perspective, he says. The system keeps track of all of the life insurance policies, gift tracking, Crummey notice administration, details relating to the policies and riders, and as-sold illustrations vs. current every year.

"We are providing an administrative blueprint every year for every client," he says.

With this tool, Carroll is better able to manage a clients insurance portfolio just as a fiduciary would manage any other asset. "I can evaluate the life insurance from year to year and know whats going on," he says.

Because of all the overhead expenses associated with the service teams and administrative systems at these firms, agents in this market have to set certain minimums as a requirement for taking on a client.

"We need $100,000 of revenue to make a case an acceptable proposition for our firm," says Richards.

When taking on a new client, Richards presents a "letter of engagement" to his client, which outlines all the deliverables and steps involved in the planning process. Just to start the work, the client must commit to half of the $25,000 fee. The other half is "based on our clients satisfaction with the work," he says.

The fee not only establishes a commitment to work with his firm but also to the objectives it is pursuing, he says.

But often a prospect will have to be turned away, Richards explains. "We have to walk away from cases that have $50,000 of revenue because we have such a high cost of service," he says.

Some agents even develop a scoring system when evaluating whether or not to take a prospect on as a client.

When Thomas gets a referral for a new prospect, his firm will perform a profile of the prospect that will result in a "grade point average."

Thomas assesses his referrals across a number of different categories and rates them on a scale from 1 to 4 (1 being the worst and 4 being the best).

The categories he uses are based on a prospects net worth, income, occupation, the source of the referral and what he calls a "temperament gauge." The net worth ranges from a low of $1 million to the best score with over $25 million. The income gauge scores a 1 for an annual income of $100,000-$250,000 and a 4 for an annual income over $1 million. Thomas considers the best occupation class to be a business owner. He feels the best source for a referral is from an advisor or a joint venture partner. Finally, the temperament gauge ranges from "acrimonious to angel."

Thomas feels the temperament gauge is just as important as the other criteria because "theres a certain amount of tolerance you have for certain things." He notes that many times acrimonious clients are just difficult to do business with.

After adding up all the scores, his clients need to have at least a grade point average of 3.5 for him to take them on as a client.

The first thing Carroll looks at when reviewing a prospect is "whether they love their kids or their grandchildren; thats something we score and rank," he says.

Carroll notes that if a prospect doesnt care for the next generation, theres little chance of life insurance making an impact when planning their estates. Some other areas he scores include the strength of their advisor team, age of the prospect, potential revenue stream resulting from the plan, previous life insurance purchases, existing agent involvement, existing trusts and whether they have made any GST gifts or planning.

"There are things we test that are positive and negative; we try to get over a score of 20, which is an A client," he explains. "When someones an A client, it means theres a minimum for us of $225,000 of revenue, plus well probably pick up some new advisor relationships from having worked with the client," he says.

With such extensive service requirements, most agents in the affluent market arent able to handle a very large number of new clients. Furthermore, with the complex planning these cases demand, it typically takes much longer to bring a case from introduction to implementation, on average 12-18 months, says Carroll.

"Ill do about 20 cases this year," notes Richards. Currently, Richards has 14 active cases going on right now.

Thomas notes that his firm will do about 80 cases a year, half of which will come from existing clients.

Carrolls firm will only add five to seven new clients a year. His practice currently consists of 50 family clients, with an average net worth of $80 million. "We describe what we do as designing and implementing life insurance portfolios for generational wealth settings," he says.

Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.