If you keep your ear to the ground in the insurance industry, you will hear a lot of talk about that ever-present word, markets. Theres the high-end market, the low-income market. The long-term care market, the disability-income market. The Boomerangs, the post-retirees.
Of course, theres also the middle market. There are a lot of folks who say the middle market has been forgotten, ignored and pushed aside over the last decade. They say insurance and financial advisors have been chasing the wealthy instead.
Whether or not thats truethere are arguments both waysadvisors should embrace the middle market wholeheartedly, especially those who want not only a solid client base, but steady leads and referrals as well.
Where are you, middle market?
It can be difficult for advisors to get their arms around the concept of the middle market. The problem: the middle market may be anything but in the middle. Its reach has spread from side to side as incomes have risen and the number of dual-income households has increased. Where the middle is depends on whom youre talking to, which company they represent and where they are geographically.
By some companies standards, the annual income for a middle-income household can fall between $30,000 and $75,000. Others consider the middle market to consist of households with an annual income of up to $100,000. The variations are many.
There are a lot of folks who say the middle market has been forgotten, ignored, pushed aside over the last decade.
A geographic variable factored into the equation can turn the household income model on its ear. Clearly wages paid in metropolitan Philadelphia will be considerably different from those in Butte. In fact, the U.S. Census Bureau reports that the 2000 median income for a four-person family in Pennsylvania was $65,411, while it was only $46,142 in Montana. A $20,000 income difference can translate into a considerable gap in disposable incomemoney typically used to purchase insurance and financial products, especially in the middle market.
Advisors working or hoping to become established in this market should fine-tune their own definition to better understand their niche. As an option, they may want to sidestep the income issue as some companies and entrepreneurial advisors have done, and approach the middle market using figures other than just income. Rather, what they consider to be middle market might include characteristics like age, income and an asset base of a certain amount.
Hartford Life, for example, refers to its middle-market clients as the emerging affluent, and it doesn't focus just on an income number. Hartford's individual life division director Robert Kerzner says, “If you have a young couple just starting their careers, with two children, they will become the emerging affluent. Chances are their careers will take off.”
Robert Keeling of Commonwealth Financial Network in Hyannis, Mass., takes more than just income into consideration when he's sending out invitations to his educational seminars. Keeling markets to an age group. “We're looking for someone who is over 50 years old and is making more than $50,000.”
A look of its own
The middle market does have its own personality. There are fears (What if I have a catastrophic illness?), concerns (How am I going to pay for college for my three kids?) and vulnerabilities (What happens to my mortgage if I die?). There is too much credit card debt and there are too few plans in place for guardianship of children in the event of a death.
In the middle market, there are products that will sell simply upon an advisors recommendation, and products that he shouldnt bother mentioning. On the one hand, advisors will face typical obstacles in this market; on the other, theyll reap the benefits of a strong source for referrals.
Diversity and flexibility
Advisors looking to get into this market must recognize that the market mirrors society as a wholeit is becoming more and more diverse. And they must work hard to understand the diversity.
Embracing and meeting the needs of a diverse, middle-income community has made MetLife's Jim Ortenzio, AFP, LUTCF, a success. MetLife is known as a middle-market company. As managing partner of Baypark Financial Group in New Jersey, Ortenzios key to diversifying into the middle market was to recruit a diverse agency force, including Asian and Indian advisors.
To become familiar with diverse populations, independent advisors and small shops will have to take a different tact. One approach is for advisors to consider themselves students of all cultures. Many groupsreligious and nonreligiousare opening up their houses of worship and meetings to the community. They want others to know what theyre about and who they are. Advisors should make it a point to attend these functions.
In addition, advisors will do well to walk through ethnic communities to get a feel for how formal members are in their business and personal dealings, and when theyre willing to talk and about what. Ask them questions. Show interest in their customs, their cultures, their food, their thoughts, their trades, their businesses. Chances are they will want to share their world with you.
Reaching out to the middle marketno matter how diverse the communitywill also require flexibility. Duane Davies of Monumental Life points out that the middle market very often consists of a two-income, wage-earner household. “Youre going to have to be more flexible in your work hours, more nights, more weekends.”
What's the competition?
The hard work will pay off. Many advisors in this market say that competition from the Internet, banks and other advisors is usually not an issue. Because the middle market is so vast, there shouldnt be competition among advisors to get prospects.
The key to success is knowing what the clients need and want. Simply, what they want is for an advisor to provide quality, face-to-face advice. Were in the advice business, says Ortenzio. The Internet is not a major factor. The Internet cant hold your hand. It cant respond when the market goes down 1,500 points. And banks encourage you to use ATMs and 800 numbers, which is a benefit to us because we work face to face.”
Why the need for extra care?
Why does the middle market need handholding and a familiar face? According to Davies, it's because they don't understand the products and they need to be educated They need the advice of an agent. The middle-income market essentially buys what the agent recommends.” He also says that advisors arent competing with other insurance companies for the disposable income of the middle market. We mostly compete with noninsurance companies for their dollars. Were competing for discretionary dollars that may be going to WalMart.
Hitting the hot buttons
Once youve made it to the table with middle-market clients, you can be fairly confident they want your advice. What types of products can you expect them to ask about?
Knowing the financial and emotional hot buttons of the middle market helps to answer this question. You can expect basic fears to emerge across this market, including how to pay for college, running out of money during retirement, and being wiped out financially by a catastrophic illness. And while there are short-term debts to addressthose heavy credit card balancesmost of the needs advisors sell to in this market are long term.
Theyre very interested in covering final expenses, short-term debts, the mortgage on their house, their childrens education and family income needs should one spouse die. They are interested in some supplemental health coverage: disability enhancement and cancer insurance, says Davies.
LTC is hot
A big hot-button issue Ortenzio sees is long-term care insurance. “LTCI has made advice to the middle market imperative because they can lose everything. If youre ignoring it, youre making a mistake. You also need to be ready to discuss retirement planning and education planning using the 529 program.”
Keeling suggests that advisors should be prepared to talk about IRAs and IRA stretching as well as about methods of tax deferral and compounding. In the upper end of this market, clients will likely be looking to build cash reserves. Those who are hoping to go a step further and eventually grow an estate will face estate-tax issues that can also provide opportunities for advisors.
Bumps in the road
Now let's say youve made some recommendations. While middle-market clients usually heed the advice of their advisors, let's face it, obstacles will surface. What might they be?
Affordability. In this market, Ortenzio points out, choices are made based on available funds. “Affordability is the major reason not to move forward. But the obstacle has lessened greatly since 9/11.” Advisors will need to demonstrate to prospects that they can't afford not to purchase life coverage or other products.
Decision making. With two-income earners in the typical middle-market household, the decision to buy is usually a family decision. This means the advisor has to get both to agree, which can be tough.
Disposable income. Middle-market prospects may also find it difficult to let go of disposable income to purchase insurance and financial products.
Lack of knowledge. An interesting twist in the middle market: prospects dont feel they need coverage because they think they dont have much to cover. Advisors should see this as an opportunity to educate these consumers on what they can do with what they have and how they can protect it.
Do seminars sell?
Another way to begin the education process is through seminar selling. The talk on seminar selling to the middle market is mixed. Some advisors haven't had much success with it. Others have found it helpful in becoming established or expanding their practices further into the middle market.
Keeling uses seminar selling extensively. He says it takes time and money but is a good way to get establishedand get those referrals rolling in. “Youve got to put some things together. But I think its a good way to market and get people to know who you are. If people like what they hear, youve got a good chance of getting them as clients. We try to educate them on planning and investing, and we stay away from product education at the beginning.”
Keeling prepares a solid seminar presentation and picks his times wisely. “A dinner seminar is far more productive for appointments. Retirees in this market are very busy and dont want to give up their time during the day. They're busy playing golf, volunteering. We present the seminar first, then feed them. Dinner is expensive, but we pick up a lot of appointments.”
At the end of the seminar, Keeling uses an incentivetwo free meetingsto get an appointment lined up. “We ask them to tell us where they are, and we give them an action plan that we think they should take.” He finds that about 40 percent of the attendees sign up for the appointment. “The majority of the times the relationship doesn't end there. Theres about a 70 percent to 80 percent chance that theyll be for business.”
Referrals from seminar attendees are impressive, too. Once they become your client, you do a good job and they like you, you just have to ask. Most say yes. Success with referrals is almost 100 percent, he adds.
And theyll tell two friends
Indeed, when it comes to getting referrals in the middle market, most advisors will tell you its not difficult. Middle-market clients are generally more forthcoming with referrals than other groups, and the referrals are solid.
The people they are referring are people who they see frequently: soccer moms, football coaches, little league dads. When you get a referral from them, the referral is going to know who you are and who referred you, says Ortenzio.
Monumental's number one prospecting method in this market is referrals. Davies says seven out of 10 of their clients willingly pass on a referral. The ratio could even be better. “The other three would have if wed asked,” says Davies. “They are very solid referrals that result in interviews almost 50 percent of the time and sales more than 30 percent of the time.
Wearing many hats
Delivering a death claim can sometimes mean the end of the relationship between an advisor and the beneficiary. This isn't likely in the middle market, where the advisor often becomes a counselor on many levels once the death benefit is presented. Davies puts it well: When its time to pay a claim, they ask advice on everythingwhere to put the money, help with other insurance companies (especially those without agents), help filing Social Security claims, advice on funeral homes. Everything.”
Some advisors would be annoyed by this dependence. Smart advisors will embrace the opportunity as a resource. It builds lasting personal and business relationships.
Remember, give middle-market consumers what they want and needa hand to hold and a familiar face. If you do, they'll take your advice for years to come.
For more information on middle markets, see Insuring the Middle Man.