At the 2014 MDRT annual meeting in Toronto, NU Senior Editor Warren S. Hersch interviewed John Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA) and president of Chicago-based Disability Resource Group Inc., a national insurance agency he founded in 1999. The following are excerpts of the internew.
Hersch: How well is your DI practice doing? What plans do you have to grow the business?
Nichols (pictured below right): Our goal is to double premium revenue in the next three years. We're currently at $5 million of premium; we want to get to $10 million. With a team of 17 people, the practice is focused on the disability income insurance market because (1) I was trained in this area; and (2) at age 32, I had a water skiing accident and near-death experience that rendered me for a time a quadriplegic. This incident has really fueled my passion for DI.
Hersch: There seems to be a continuing disconnect within the advisor community in that many fee-based financial service professionals view life insurance as a component of planning outside the scope of their practice. How do you account for this? Is NAIFA doing anything to bridge this chasm — for example, cross-promoting NAIFA and FPA [Financial Planning Association] membership at the organizations' respective annual meetings?
Nichols: Financial planners understand that life insurance is important, but they generally view it from a planning — not an implementation –perspectiv
e. They'll have a conversation about life insurance, but it's your decision, as the client, to decide whether to purchase a policy and from whom. That's the distinction.
As to NAIFA, we have not had discussions about cross-promoting with FPA, only with sister organizations in the life insurance space: MDRT, GAMA and NAILBA. This is done through the Joint Executives Committee (JEC) meetings, the next of which is coming in July. There are multiple associations represented there with which we connect to explore how we can help each other.
Hersch: As an MDRT member, have you observed common regulatory issues and concerns among MDRT members globally?
Nichols: I'm more familiar with what's transpired in the U.K., Australia and Canada than I am with regulatory changes impacting our members in Asia. In respect to the U.K., I can't say whether its regulatory regime — which now prohibits commissions on life insurance sales — will be replicated the U.S. But if it is, we're likely to see a significant reduction of agents and brokers, as has happened in Britain.
There are about 350,000 advisors in the U.S. A comparable regulatory environment could reduce the number of advisors to, say, 30,000 — a dramatic decline. Yet given the number of uninsured and underinsured people, especially in the middle market, the need for life insurance professionals has never been greater.
Harmful regulatory changes could play out in other ways vis-a-vis the proposed SEC and DOL fiduciary standards. To boot, registered reps have to stay abreast of compliance requirements imposed by FINRA and their broker-dealers. Some broker-dealers have even stricter compliance requirements than FINRA.
Hersch: Staying on the topic of compliance, have you had to make changes recently to meet heightened FINRA or broker-dealer rules?
Nichols: Yes, though the changes have not been significant. However, when you do small incremental changes over a period of 10 to 15 years, it adds up. Some of the compliance work involves continuing education; other parts entail more paperwork. These changes add to the complexity and/or time we spend on the job.
Hersch: Have new technologies helped to alleviate the regulatory burden or kept pace with your practice needs?
