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Targeting Seniors

Today's seniors are active and living longer. That means yesterday's products and approaches may not be a good fit. Here?s what you can do to keep these clients financially healthy as they retire.

By Chuck Jones

A lot of what’s been written about senior citizens and their spending habits centers on how to approach the teetotal retiree, comfortable in his flannel shirt and tennis shoes, and his doting wife, who does laundry in the mornings and watches Oprah and Dr. Phil in the afternoons.

At least the image of the senior has changed a bit. There was a time when retirement meant rocking chairs, not Reeboks. Yet the modern stereotype is still that—a stereotype. Today’s senior may not be completely retired. He may have a pension and certainly gets Social Security benefits, but he probably has other sources of income, too, such as money from investments and an annuity. And he’s probably not looking for his children to take care of him and his wife because he’s bought long-term care insurance (LTCI).

Take the case of Dr. Jerry Langston, a semi-retired oral surgeon who works in northern New Jersey, near New York City. We’ve changed Langston’s name for the sake of privacy.

Langston has been an oral surgeon for 40 years. He is a partner with five other surgeons in a thriving dental practice with three offices. He’s married, has two grown children and no grandchildren.

About four years ago, when the doctor was 61 years old, he was making $250,000 per year. At this point, however, he realized that he did not want to continue working at the same pace. He wanted to slow down, maybe even retire in the next couple of years. Always the type of person to prepare a plan before taking action, he called someone he knew and trusted who was also an expert on personal retirement planning—his insurance agent, Irving L. Beitler, CLU, ChFC.

Beitler, 52, is a long-time member of the Westchester (N.Y.) AIFA and an agent with New York Life in the Big Apple. He describes himself as a general practitioner—as much at home selling life insurance to people just starting out as he is doing estate planning work for people approaching retirement.

When Langston called Beitler, it was out of habit. The insurance man had been handling the employee benefits for the doctor’s practice for nearly 15 years. “He knew he was loaded up with DI [disability income insurance] coverage through the practice,” Beitler recalls. “I knew that, too, because I sold it to him. But he knew that if he was going to retire, he didn’t need the DI. He had a policy that paid $8,000 per month, which was necessary during his peak earning years. But if you’re going to retire, you don’t need that. So there was some insurance that needed to be transitioned.”

Beitler had a couple of meetings with Langston. “I did a review of his financial situation,” Beitler says. “I was already acquainted with it. I had done most of his planning before—a 401(k) plan, a funding buyout, an estate plan.” Beitler suggested that the doctor consider buying LTCI. “It fit perfectly into his financial plan,” he says. He had been careful in building his assets, and he didn’t want to see them eroded by huge nursing home costs. This is a guy who is a plotter, a planner. He does everything by the book.

“After we looked at the coverage he had, but didn’t need, and at the coverage he needed but didn’t have, he decided to buy separate LTC policies on his wife and himself, drop his DI coverage and use the money to fund the LTC policies.”

Lifetime income annuity
While LTCI is a popular and necessary coverage for senior citizens, it’s not the only insurance seniors buy. It almost seems that the needs for coverage are as varied as the number of seniors in the United States.

According to the U.S. Census Bureau, the census in 2000 revealed that nearly 35 million Americans are age 65 or over. It also projected that the elderly population will grow and that by 2010, almost 40 million Americans will be 65 or older.

Some of these seniors are relying on monthly Social Security payments to get by, but many are not. Even the Social Security Administration cautions Americans to plan ahead to supplement their retirement income. These supplements include individual retirement accounts, annuities, investments and other products that licensed financial advisors can provide.

Part of the problem, says Jack Dolan, spokesman for the American Council of Life Insurers, is that people don’t plan ahead. “Most people don’t really know their retirement needs,” he says. “They focus on the here and now and fail to plan appropriately.”

By the time retirement comes along, Dolan says, those people are reluctant to spend money that will either ensure a stream of income, such as an annuity, or that will protect against the erosion of assets, such as an LTCI policy.

One product that is gaining in popularity among the over-65 set is the lifetime income annuity, Dolan says. “People are realizing now that they are going to live 20 or 30 years after they retire. This was unheard of a decade ago. Most people expected to live 10 or 15 years, then die. So they prepared to spend their assets accordingly. Consequently, outliving their assets is now their No. 1 financial concern.

“This makes an annuity the insurance product best suited for retirees,” he adds. “You’re going to see this product take off because the tidal wave of aging Baby Boomers is making this a real opportunity.”

Not planning properly for retirement is what Dolan terms “financial illiteracy.” As an example, he tells a story of an acquaintance who retired nearly 20 years ago. “He retired when he was in his early 60s,” Dolan explains, “and he arranged for his pension plan to pay him for 20 years. He figured he’d be gone before the payments ran out. Now he’s 80 years old and as healthy as a horse, but his income stream is about to dry up. Now he’ll have to start working again for an income. I think people should bet on living a long and healthy life, rather than gamble on dying before their money runs out.”

Easing the transition
Growing older can be a confusing and frightening time. “Your focus changes as you grow older,” Irving Beitler says. “When you’re younger, your focus is on making money, growing assets. After retirement, you go from accumulating money to trying to keep the money you’ve saved.”

In the case of the oral surgeon, Dr. Langston, when he made the decision to slow down, he had the two classic worries that nearly all seniors have: having inadequate income and having his assets eroded away by catastrophic health-care costs, such as an extended stay in a nursing home.

“When we did a review, it was a real easy meeting,” Beitler recalls. “My client is an approachable guy. For one, he knows that whenever I call him, it concerns something of consequence. He knows that I wouldn’t contact him unless there was something positive I could do for him.”

At a meeting in Beitler’s office, the agent and Langston talked frankly. “I knew he was a good one for planning,” the agent recalls. “He was 61 years old then, looking to ease his work activity by the time he was 65. He didn’t have any health problems yet, but that could change, especially as he got older.” When Beitler brought up the idea of LTCI for Langston and his wife, the doctor readily agreed. “He liked the idea of picking and choosing with dignity his future care,” Beitler says. “He knew that without long-term care insurance, nursing home costs could quickly erode the assets he had built up. In the New York area, nursing homes typically cost more than $100,000 per year.”

Buying LTCI, then, seemed the logical thing to do, Beitler says. “It was a natural progression. My client didn’t want to end up being a burden to his children or wife. He didn’t want to have to count on anybody to take care of him but himself.”

The doctor agreed to purchase New York Life LTCI policies on his wife and himself, and to buy it with the money he was spending on his DI insurance coverage. ’’I was under no restrictions from the client,” Beitler explains. “There was no family pressure. I just dealt with the husband and wife. It was their decision, and they kept the kids out of it.”

At a second meeting at Langston’s home, the agent and the doctor implemented the plan. “He signed the apps and wrote the check,” Beitler says. “They were each getting a $100,000 per year benefit, unlimited benefit period. We didn’t run into any underwriting problems, and the coverage was issued six weeks later.”

The second thing the doctor did was drop his DI insurance coverage about six months later.

Beitler describes the sale to the oral surgeon as easy, but only because the client trusted his advisor. Although the quality of trustworthiness is important to clients of all ages, it is essential to senior citizens, says Larry Klein, CPA, author of Marketing Financial Services to Seniors.

“If a financial advisor is trustworthy, he’ll always have the upper hand in dealing with elderly clients,” Klein says.

There are several ways to develop trust with seniors, and the first is to be confident about what you are selling. “Seniors have an astute antenna for detecting self-confidence,” Klein says. “They can smell no confidence 50 miles away. They can tell when somebody doesn’t know what he’s talking about.”

Another way to gain trust is to modify your approach. “Seniors react negatively to being sold,” Klein says. “They don’t like a sales pitch. Instead, try asking many questions. Seniors react positively to that because it shows you have a genuine interest in them.”

Related to this is the concept of plain speaking. “Don’t try to impress a senior with language,” Klein says. “That’s the biggest mistake, taking the ’features and benefits’ approach. That’s where you whip out a piece of paper that lists the features and benefits of a product. If you do that, you’re going to lose them.”

Seniors would also rather be shown evidence of what you’re talking about than take your word for it. “The financial services industry is a culture of speaking,” Klein explains. “Seniors don’t operate that way. They’d rather be shown a Morningstar report or an article from The Wall Street Journal. It has to be from a credible source they’re familiar with, not some technical journal.”

Seniors also have respect for authority. “If you’re well respected in your discipline, seniors will think positively toward you and what your message is,” Klein says. “They’re very open to the value that people bring to a situation.”

The best way to prospect among seniors is by conducting seminars, Klein says. “They’ve got the time to attend, money in their control that’s not tied up in long-term programs, and they’re motivated to gather information.

“Seniors are scared,” he continues. “They don’t have a paycheck anymore, so there’s this financial insecurity of ‘Will I have enough money to take care of myself? Is there something I can learn that will help calm this fear?’“

The most popular seminar topics, Klein says, are on the subjects of tax reduction, increasing retirement income, distributions from IRAs and LTCI. “Long-term care insurance is popular if you don’t call it [that],” he says. “Seniors will perceive it as a product seminar, and product seminars die on the vine. They see them as hour-and-a-half commercials, and who wants to sit through that?”

Despite this, LTCI is probably the easiest sale to make to seniors, Klein says. “It’s the sale that addresses a need that is the most pressing to seniors: Who will pay for my nursing-home care?” he says. “They may be initially reluctant to purchase coverage, but you can help them decide by telling them they have 30 days after applying to back out. In reality, by the time they’ve completed the app and signed the check, they’re 98 percent committed.”

The hardest products to sell, Klein says, are any type of equity investments, including variable annuities, mutual funds, equities and variable life. “These are all tied to the market, and that’s a hard sale,” he says. “Plus, seniors have a shorter time horizon. You can’t sell them things that are designed to reach their peak in 20 years.”

In addition to being sensitive to the financial needs of seniors, advisors need to be aware of their physical needs and comfort zones. Klein offers the following tips for advisors who specialize in the senior market:

  • Don’t have your offices on the 10th floor of a downtown office building. Have them on the first floor in a neighborhood where many seniors live.
  • Make parking easy. Seniors don’t want to park 200 yards away, nor do they like parking in an eight-story garage.
  • You can keep your working hours between 8 a.m. and 6 p.m. Seniors don’t want to talk business in the evening or on weekends.
  • Have a small, round meeting table surrounded by uncomplicated chairs. The idea is to simulate the kitchen table. Sitting across a desk from your clients is too adversarial. You want to give the impression that you are on the client’s side.

Profitable relationship
For retiring oral surgeon Jerry Langston, his agent, Irving Beitler, was at his side well before his decision to slow down, and is still there now that the doctor is semi-retired at the age of 65. “He’s still working at the practice part-time, although he doesn’t really have to,” Beitler says.

Langston was a bit of a dream client, Beitler admits, because “he did the right things at the right time. He bought the LTC coverage before health problems had emerged. A few years after buying the policies, he developed heart and prostate problems, which, if he had waited until he was older to buy, would have made the coverage more restrictive and much more expensive.”

Beitler, who has dozens of senior citizen clients, still reviews and services the employee benefit plan of his client’s practice, and he contacts the doctor about four times a year either by phone or mail. As a result, the doctor has given him at least four profitable referrals.

“I may have gotten lucky with him,” Beitler says of his client. “He’s not the type who just lets things happen. He makes them happen. If I hadn’t been there at the time he needed me, he would have simply searched for someone like me; someone knowledgeable—a problem solver.”

  • The lifetime income annuity is gaining popularity among seniors, because their No. 1 concern is outliving their assets.
  • While trust in the advisor is important to all clients, it is essential to seniors.
  • Confidence about what you’re selling is important. Seniors can tell when you don’t really know what you’re talking about.
  • It doesn’t work to try to impress seniors with technical terms. You’ll lose them.
  • Seniors want to be shown evidence, such as an article from The Wall Street Journal.
  • The best way to prospect among seniors is through seminars. The most popular topics are tax reduction, increasing retirement income, distributions from IRAs and long-term care insurance.
  • Working with seniors means accommodating their physical needs, including having your offices on the ground floor, making parking easy and having a small, round meeting table to simulate the coziness of a kitchen table.


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