Big fish in a small pond

June 30, 2006 at 08:00 PM

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Quick. Find Jackson, Calif., on a map. Can't locate it? That's fine with Ron Roberts, an advisor who has carved himself a niche out of northern California's lightly populated, rural Amador County, a part of California where a Norman Rockwell painting wouldn't feel out of place.

Jackson, population 7,000, is an old mining town 45 miles east of Sacramento. There are two main roads in or out of town. But 16 years ago, Roberts and his wife, Julie, decided Jackson would be an ideal place to raise a family, which has grown to four daughters ranging in age from 21 to 6. If it weren't for the two dogs, Roberts would be completely outnumbered in his own home.

"I come home every night and say, 'Come on, boys," Roberts says. "I sit down and they sit with me. Wherever I go in the house, they follow me."

With fewer stoplights in the whole county than most people deal with during their morning commute, Amador County doesn't seem like the place to build a profitable practice. Yet, out of this serene setting, Roberts has grown his practice to the point where he wrote $14 million in annuity premium in the last year, almost all in a county of 36,000 people. He moves his seminars and workshops around the county so people from up to 10 towns can be there, which increases attendance drastically and gives Roberts the economy of scale he needs to be successful.

Roberts makes it a point to be part of the community. He is a volunteer history teacher at a college preparatory school in nearby Ione, and he sponsors a Boy Scout troop — the kinds of things people do in small towns. It might not be what most advisors are looking for, but Ron Roberts calls it home.

SMA: What brought you to the industry?
RR: I had a friend who was in the insurance business and he was doing really well. I was looking at changing carriers, so I approached him and we discussed it. This was about 16 years ago. He said, "I think it is a thing you should do." So I decided to get my insurance license. I started out in the group health and dental business, working with small-group employers and introducing them to insurance products.

SMA: What was the transition like, going from the group market to the senior market?
RR: I think many of us who start in the industry don't really have a great marketing concept or know how to market ourselves, so we struggled. I would say we struggled for a good four years. About 12 years ago, I was introduced to a gentleman that mentored me. From that point, it occurred to me to start focusing on the senior market. From his mentorship, my practice started growing.

SMA: What did you get out of being mentored that you really needed at the time?
RR: How to market myself. How to get in front of people. He started teaching me how to do workshops, so I started doing workshops with his mentorship. We initially did what we call private workshops. We worked with groups like the Kiwanis and Lions clubs, and we also worked with AARP. They would invite me as a guest speaker for lunch or their breakfasts and their dinners. I would speak for 20 or 30 minutes. That's how I got myself exposed out there. They didn't even know who I was. From them, I was able to develop a practice. About five years ago, we started to going from private workshops to public workshops, where we sent invitations to the public and to their homes. We sent out mailers and invited them over to a restaurant or invited them to a country club and did a workshop.

SMA: Have you returned the favor and helped mentor new people to the industry?
RR: Absolutely. Since I've been helped, I believe in helping others. I have opened my door to agents around the country. I actually have an open-door policy where they can come out to my office and watch me interview. They can see me do first interviews, they can watch me do second interviews. The clients don't mind that. I ask their permission first. Advisors can watch and observe me as I am sitting down interviewing folks. Also, in between interviews, if the person has questions, we talk about their questions. I spend a day or two with them in the office. If they want to come to the workshop and watch me do workshops, they are welcome to come out and see me and witness workshops, or client appreciation events. People from all over the country have flown out here. We'll continue to do that.

SMA: What made you realize that working with seniors was the way to go?
RR: I think they are motivated. They have a desire to do some planning because they have accumulated their estates during their working years and now they are looking for a way to preserve what they have accumulated. I think that's why they are attracted to the workshops. Obviously, they have a nest egg. They have an estate that has value to it, and they need to do some specific planning. That's the reason why I focused on that, because now they are in their preservation phase. They have a nest egg to work with.

SMA: What are their major concerns when you talk to them?
RR: I think there are various concerns. One of the concerns we discuss is taxes, from taxes on their Social Security to taxes on their income, taxes on capital gains, taxes on estates, taxes on their IRAs. That's a concern because they would like to have more spendable income while they are still living and while they are transferring their estates upon death; they want their estates to go to their children. We always say that when you pass away, there are three beneficiaries: your family, the government and charity. It's up to you, with proper planning, to have it go where you want it to go. If you want more to go to your family, then you have to do proper planning and take advantage of the IRS Code Book. It explains to us how we can take advantage of the tax codes, where we can pass more to your family. If you'd like to pass to charity and have less go to the government, again, you have to do proper planning.

The other thing that concerns seniors is interest rates. Another concern is protecting their assets from nursing care or Medicaid spend down. Lastly, having their estates passed on to their loved ones without the government attorneys or courts being involved.

SMA: What products do you recommend to meet these concerns?
RR: I focus on annuities, and we use a lot of fixed-index annuities. In our practice, on an average client, we match probably 30 percent to 40 percent, sometimes 50 percent, of their portfolio in index annuities. The rest is invested in various accounts, like money markets and CDs and stocks and bonds and funds. This past year I realized how important it is to start a company where we could provide fee-based money management. We're going in that direction right now, where we would have a product niche but also be their full-fledged financial advisor and to match their whole portfolio. Right now, I'm studying for the series 65 test to get the RIA and start doing that. We have clients come to us and say, "Ron, we want you to manage our portfolio." I say, "I'm not licensed." But we're going to be making that transition this year.

SMA: Is that an outgrowth of the older boomers who want a more comprehensive advisor?
RR: I believe so. What we are trying to do, too, is start to go to the boomers because previously we were working solely with people over 60. We are lowering our age down to 50. Obviously, there has to be a mix of investments besides the IRAs in their portfolio. So we're starting to do workshops for those who are 50 plus, which are different workshops than we have done for those who are 60 plus.

SMA: It's the 800-pound gorilla. You can't ignore the fact the boomers are coming.
RR: Exactly. So we are making that transition.

SMA: Are you going to try to transition out of commissions completely, or are you going to have a boutique-type practice?
RR: A mixed boutique practice. We're going to do fee-based as well as commissioned.

SMA: Have you seen good models for that?
RR: Yes. We have been doing our homework. We've been talking to various people that are involved with that. We are getting entered in that.

SMA: Switching gears a little bit, you seem to thrive in small towns. Why is that?
RR: About 16 years ago, we were going through this little town of Jackson, and we just fell in love with it. It was just a great place to raise a family. With four girls, we wanted to have a wonderful place to raise children. My wife and I were thinking, "How in the world are we going to market ourselves in a small community?" Jackson only has 7,000 people. In our county, there's about 36,000 people. I was doing my practice in larger areas like Sacramento and Stockton and Modesto. Then, about three-and-a-half years ago, I had a new mentor. (You could say I've always mentored with others.) He taught me how to build a practice in a small area. He said, "Ron, it's important that you have an office." About three-and-a-half years ago, we set up our very own office. He said it is very important to have staff to assist you. So about the same time, I hired my first employee. Now we have four employees that work in our firm. He taught me how to market myself using workshops, how to brand myself in the community, establish a name and a reputation, and in a period of three-and-a-half years, we're pretty well known in our community, but we had to attract at least 10 little towns to get a workshop.

SMA: Is that how you achieve your economy of scale?
RR: When we send out invitations, we do the whole county and some towns in the next county to get our numbers. Now we do workshops in four counties and we rotate in those four counties. Interestingly enough, since we live in a small community, people will travel to your office for an interview. We have had people drive as far as an hour-and-a-half to two hours each direction. They are all used to that because they have to drive to go anywhere important. When they see that your office is an hour-and-a-half away, no big deal. They'll drive down there and see you. It's a little different than in a city. If you say I'm an hour-and-a-half away, they'll think twice about coming to see you because you are just too far away. But the mentality up in the country and small communities is different. They do travel. I do most of my interviews right here in the office.

SMA: Are the small, rural areas an overlooked market?
RR: I think so.

SMA: Is that why you are successful there, because you concentrate on it?
RR: There's not as much competition. A lot of people think that in these little towns there's not enough people living here. Again, in order to make it work, you have to focus on the whole county. You can't work in the one specific little town. You have to concentrate on the whole county to make it work, to get the numbers. I don't run into a lot of competition up here. Every once in awhile, people come in and out of the county. But I think consistency has been our trademark because we are consistently doing workshops. The name recognition is there. We are establishing ourselves in the community. They know we are here and we're here to stay.

SMA: Is being there part of your success? You actually live there and can talk about the fair that took place last weekend or whatever event it is.
RR: Yes. News travels fast in these little towns. It goes very quickly. So, you are up with all the current events in the county. When you get together in the county, the neighboring counties, you have all the current events. You have something you can talk about.

SMA: Is it more important when you are in a small town to be involved, to show that you are part of community?
RR: I believe so. There is a small college preparatory high school academy. It's located in Ione, a neighboring town about 10 minutes from Jackson. The name of this academy is recognized in the county and neighboring counties. Since it was established three years ago, it's been growing in popularity. The name recognition is there. I teach every Monday morning. My forte is history, so I teach U.S. history and world history. I love history, and we have kids wanting to learn, and I'm there to provide the opportunity. It's been a great experience. I spend about four hours a week doing two hours of prep and grading homework and then two hours presenting the material.

SMA: Are there other events you take part in or that you sponsor?
RR: I sponsor the Boy Scouts of America. I've been a scout master and I really believe in the program. It's a great program for young boys. So it's another program that we support wholeheartedly.

SMA: That's a leap coming from a family of four daughters.
RR: Absolutely.

SMA: Does having an ethics designation or endorsement carry weight with consumers?
RR: Absolutely. We're with the Better Business Bureau. We're with the National Ethics Bureau. I encourage people to check these organizations. I tell them it's valuable that if you are going to seek financial advice, you want to have someone with ethics. You've got to check their background. It's so important to you. In fact, I just got a fax from the National Ethics Bureau that one of the appointments I had last week checked me out. This man is coming back next week, and I think he's going to become a new client.

SMA: So it works.
RR: I really believe that. It adds to your credibility. It is important to have credibility. You need to check the background. I really appreciate the National Ethics Bureau. They've been great for us to be involved with.

SMA: There's a lot of negative press out there. Do you tackle that head-on in your workshops, tell them what's being said and what's the truth?
RR: It's interesting. I haven't really had to address that at a workshop yet. We haven't had anybody come up and ask. I have had it come up periodically in the appointment when they are in the office. They'll say they've read this or heard about that. We sit down and we discuss it. I say it is important to know these things because, sadly, in any industry, you can have some bad guys, and it is important to know who you work with. There are some bad guys and some good guys. That's the reason why the media goes out talking about the bad guys and what they are doing. I find that industry-wide this is a minority.

SMA: Absolutely.
RR: So, I say it's good. It gives exposure and also explains who we are and what we are and showcases our integrity, because our integrity is very important. I also encourage people to check our integrity and check our background because it is valuable to you. So we lay it on the table. I think they are willing to listen.

SMA: Seminars, workshops and referrals are the way you get new customers. What makes your seminars and workshops so successful?
RR: The first thing is, if you want to motivate people who receive an invitation in the mail to come to your workshop, you have got to have a piece that really motivates them to come out. I believe we have pieces that do that job. Once people are sitting down and listening to the message you are giving, after the two hours, you want to motivate the attendee to set an appointment with you and get a second opinion. So my job is to motivate — that's the second thing. I learned there is a difference between educate and motivate. You can do an educational workshop, but you are not motivating them. So they are going to go home and say, "That's a nice workshop." But if you motivate them, they are going to say, "Ron made some points and I should go out and meet him." Throughout the workshop they are realizing that Ron made some important points about my trust or made some important points about my insurance policy, about long term care or about my long term policy or to check the beneficiary, or check my investments. I should get a second opinion. The whole climax of the two-hour workshop is to motivate them to come out. We have had success. An average of 70 percent to 80 percent of the attendees schedule an appointment with us.

When they come to your office, they can be a potential client. The third part is to motivate them to become a client, a lifelong client. So, I think the magic is motivation.

SMA: What do you use to motivate them once they're at your office?
RR: I use a lot of third-party materials. I think third-party materials are very important, because when an advisor speaks, you think, "I just met this person." But when you use third-party materials — a recent article from a newspaper, a well-known newspaper, a well-known magazine — and you quote it, that gives you some credibility. Because when it is the printed word, people believe it is the truth. I use a lot of third-party materials throughout the workshop. After I have a discussion on a certain subject matter, I assume we are going to get together, so I say, "When we get together, we'll review those beneficiary forms. It's vital for you to check who those beneficiaries are."

I relate stories about how I had a recent case where a lady purchased a variable annuity through a broker. She wanted to get a second opinion. We reviewed the paperwork. On the last page, it said "beneficiary." What he listed as the beneficiary was the estate. I said to this potential client, "You know what happens if you die? The company who is managing this money doesn't know who the estate is. And it is going to go through probate and the probate judge is going to determine who the estate is." I talk about another story regarding a fellow who fell in love and married a lady. He put her as his beneficiary to his life insurance policies, his annuities, his IRAs, and they fell out of love and they got divorced. Then, later on, he remarried and eventually died. He forgot to remove his ex-wife as the beneficiary on the beneficiary forms. Guess what happened? It all went to the ex-wife.

SMA: That should strike a chord.
RR: People are realizing that maybe they should have their beneficiary forms reviewed. Maybe this is a good time to meet Ron.

SMA: So there are calls to action. There are things they can do right away.
RR: Exactly. But we talk about trusts and we talk about the value of A-B provisions where you can enable or double your exemptions for estate tax purposes, and I explain that. Through my years of study reviewing trusts, I'm looking for that provision in place. If that provision is not in place, your family may be stuck with a big tax bill, and I talk about a recent experience where I had a couple come to my office with no provision in place. They thought everything was handled right. I said, "Well, your estate is valued at over $2 million." We talked about the way the laws are written today. On January 1, 2011, the estate tax is going to be reversed down to $1 million. I explained to them that if something happened to both of them, and they live beyond January 1, 2011, the way the current law reads, the first million is to be exempted but the second million is going to be fully taxable. I told them what the tax bill could be. I explained it is important to have an A-B provision. I encouraged them to meet with an elder law attorney to draft an amendment to add that provision. I said it costs only $300 to add that amendment to their trust, which would save them a half million dollars in taxes.

SMA: You operate on referrals. How do you coach your clients to offer up referrals?
RR: There's three ways of getting referrals. One way is right at the workshop. After a couple hours of sitting down with them, they say, "Man, this is the greatest workshop I ever attended." Then, at the closing, I'll say, "Well, you are probably sitting here saying to yourself: 'I wish I had my friend, Mabel, or my neighbor here, or I wish the guy I go golfing with or I play bridge with were here. I bet they could learn a lot coming out here to this workshop." I say that what we have here is a worksheet where you can list their names and their addresses. I put down three places where they can put three people's names and let them know we'll be back in this area in another three months. We can invite them as a guest of yours to the next workshop. We'll invite them as your personal invitation. I say, "I also encourage you, since you've come to this workshop for the first time, you're welcome to come back to the second workshop if you'd like to. We have lots of folks that attend these workshops where they've learned so much more coming back the second time.

SMA: And that seems to work well?
RR: We get lots of people handing in these worksheets with names and addresses of their friends. We encourage people, before they come and see us in our own office, to come out to the workshop so they have an idea of who we are. So we get referrals from that. The second referral source is we do a client-appreciation event. We do a breakfast on a Saturday. We have that scheduled about eight times this year. I send out invitations to our existing clients, saying that we appreciate them, we would love to have them come to a client-appreciation breakfast and we have a guest speaker who is going to speak about 45 minutes. We have a topic. We encourage them to bring a friend. When they bring a friend, we give them a pound of See's Chocolates. If they bring the most friends, then we have a grand prize. It is a phonograph and it plays the old records. It plays CDs and it plays cassette tapes. We have an attorney speak about trusts. He speaks about trust pitfalls and how to take advantage of your trusts. He is not there to market trusts; he is out there to teach people about what to do with their existing trusts. We have people calling for reservations and they're bringing guests with them. That's a second way we get our referrals. That works great because we meet a lot of great people. I think at our last appreciation breakfast we had about 12 referrals.

SMA: That's a healthy amount.
RR: Some of those referrals became clients. This is the third way we get new clients: When people become new clients, I explain to them the way we get compensated is when we do a great service for you and you appreciate our service through the years, that you will think of us the next time you meet your friends and family and they need help or services, and you can think of us and refer them to us. That's the other way we get compensated. People do. Throughout the year we get calls from clients that say, "I want you to talk to so-and-so." We get referrals that way. So that's how we develop our referral base with those three strategies.

SMA: Do you have it broken down to where you know how much new business comes in from referrals and how much comes in from your workshops?
RR: I believe last year we did about $14 million in annuity premium. I would say from referrals we do about $2 million. I would say we did about $2 million with renewal work with clients. The other $10 million we got from the workshops.

SMA: So that's the bulk of it.
RR: Yes.

SMA: Do you host other client-appreciation events?
RR: We do an annual Christmas event. We hold it up here at the Jackson Rancheria. We have a nice grand ballroom. It's a wholly social event. We encourage people to bring friends. We just let them know how much we appreciate them as a client. We have a live band that plays the old standards, the '40′s and the '50′s standards. We have a big dance floor. We have valet parking so they can just roll right up and right there into the double doors and they're right there in the ballroom. Then we have a nice big sit-down dinner. We have door prizes. Last year we gave a door prize for the person who drove the farthest to the event. Someone came from San Diego, which is a good drive. We had another prize for our longest client, who was there at the event, who had been with us 14 years. We had another prize for those who were married the longest. We had two couples who had been married 60 years — there was a difference of just one week.

So we gave those door prizes. Then we had door prizes from the fish bowl. We gave away an additional 11 door prizes. It was a fun event. We also had a professional photographer taking pictures. We had him placed right by the Christmas tree where he took their pictures. We received all the proofs. We sent out all the pictures as a memento to the event. We get a lot of calls from people who said, "Thank you for the pictures. It was a wonderful occasion. And by the way, when is the next event?" So they put it on the calendar. We have about 250 people out to the Christmas event. It's fun.

SMA: Do you think that does as much for you in getting referrals as anything else, even though you don't ask for them during the event?
RR: Yes. At the workshop, someone will come up and say, "By the way, Ron, I just sold my house. I got some money and I'd like to meet you." Or, "Ron, I've got some additional money; I'd like to make a move with you." So during the workshop or during the event, we'll meet three or four of those.

SMA: The state of California has some of the strictest standards for annuity sales, especially to seniors. Do you think what is being done in California is going to eventually be done in the rest of the country? If so, is that a good thing for consumers?
RR: I think, all in all, it is a good idea because sadly, in our industry, there is a lot of — I hate to use the word — but riff-raff. People are there to make a quick buck. Annuities tend to have good compensation. So you have these people that sell these annuities and they are here today, gone tomorrow. And, I really believe with restrictions and laws, it cleans up our industry very much. If people are going to stay in the industry, like ourselves, I think it is good for our industry all in all. I think this is good. I believe California is taking the lead; eventually, other states will duplicate California.

SMA: What has you excited to be in this industry?
RR: This is so much of a people business. I enjoy working with this group of people. This is what Tom Brokaw called the greatest generation. It's so true. These people come from another generation that I fell in love with. I love history, and I love sitting down with these guys who have been in World War II and the Korean War and hear the stories they have to tell. I just love sitting with them and working with them. I love working with the widows. They are wonderful people. I was at an appreciation dinner not long ago and I had three ladies fighting over me to be their son. They were like 'no, he's my son'… 'no he's mine.' I enjoy working with these people. It's just a great group. Since we are going to start going to the younger folks and going to the boomers, I'm looking forward to that. I've not been exposed so much to that yet, but it's something I'm looking forward to, but I enjoy the industry. I enjoy the people I work with. This is a people's business. It is a relationship business, developing lifelong relationships. I've been called to be a pallbearer for my clients, which has been an honor. I just enjoy this industry and I enjoy the people I work with.

SMA: Are you less a salesperson these days and more a service provider?
RR: I believe so, because obviously there is a lot of competition out there. I think when people realize you are the real thing and you are the person who is really concerned about their welfare and people refer you to others and you have these relationships, people are going to want you to be their advisor. But it takes time to develop that. You have to be consistently involved with that. When a person calls and has a concern, an existing client, you have got to serve them. You've got to turn around that service as soon as you can, because if it deals with their money, that's their world and they want you to focus on them. So you have to be there and be available to them at all times. I think service is important and I think, like I said, we're more on the service side. It's going more and more like that.

SMA: Do you see fixed-index annuities becoming a bigger part of people's retirement plans?
RR: I do. I like the idea. I write a lot for Midland National; it's one of the carriers I write with. I like their short-term products. I like the idea of having short-term annuities. I write long-term annuities, like a 14-year annuity or a 10-year annuity, but the only way to justify that is if it is qualified money, like IRAs. They're not going to pull out their money all at once. They are going to have this paid out through their life as a retirement income. Then it's all right to put them into a longer term annuity. I like four-year annuities. I like seven-year annuities. We write a lot of four- and seven-year products in our practice.

SMA: Is that something other carriers will pick up on, those shorter term annuities?
RR: I think so. I see that if the NASD gets their way that this is going to be a securities product. If it does become a securities product, I'll be securities licensed. I think a lot of the broker/dealers like shorter term annuities anyway. I think that's the direction the industry is going to go. To provide those who are securities licensed and working for a broker/dealer, you are going to start to see four-, five-, six-, and seven-year annuities.

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