“You and I will fight to end this era
of anxiety and instead create a new era of economic security by
helping working families save to buy a house, pay for their child’s
education and start saving for retirement. We can ensure that the
American dream of building something better is never replaced with
the dream of just getting by.”
— John Edwards
former Democratic presidential candidate
Des Moines, Iowa, Jan. 5, 2004
When John Edwards was running for president, he often spoke of “the two Americas”—one for the rich and privileged, and the other for working families who take on jobs, start small businesses and dream of houses in the suburbs. Unfortunately, these are also the families who are increasingly in danger of slipping over the financial edge.
Whether or not you agree with Edwards’ politics, his message resonated with a lot of people—particularly those in the middle class—who are in need of financial guidance, but have a difficult time knowing where to turn for help. Industry press often refers to them as the “abandoned middle market.”
“The middle market has become increasingly under-served, but to characterize them as ‘abandoned’ is probably an overstatement,” says Charlie Smith, CLU, ChFC, CEP, chairman of GAMA International’s Leadership Team. Smith adds that while the middle market may not have been abandoned, it is increasingly being ignored by an industry whose foot soldiers—the agents in the field—are stretched too thin.
While this may seem like a problem of simple economics, Smith and others believe that continuing to under-serve middle America could mean more to the industry than just ignoring a little revenue.
“A belief that I have, and that I think is pretty widely shared, is that the life insurance industry in America operates in a public trust,” Smith says. “And because of that trust, the industry and the products we sell enjoy significant tax benefits. … There is a quid pro quo here. While the industry has an opportunity to do well, it must, at the same time, do good.”
Smith isn’t the only one who foresees possible government interference if the nation’s insurance agents continue to neglect the middle market. According to Dick Harlow, CLU, CSA, managing partner of the Harlow Group, advisors can serve the middle market, or a congressional mandate can do the job.
“Nature abhors a vacuum,” says Harlow, who targets small-business owners in the middle market. “Something’s going to fill that vacuum, and unfortunately it’s going to be the government. The more government gets involved in providing for the people we are not serving, the less there’s going to be for us, and eventually we’ll put ourselves right out of business. That’s the big picture.”
“While the industry has an opportunity to do well, it must, at the same time, do good.”
Looking for a few good
So how did the insurance and financial services industry get to this point? The reasons vary, from a general shift in focus for many insurance companies, to a population explosion in the American middle class, to shrinking profit margins for the agent. However, one of the main culprits is a dramatic drop-off in the recruitment of young talent. “The industry,” Smith says, “has not provided the new or additional resources by which to penetrate this growing middle market.”
Harlow, a member of Northern Virginia AIFA, agrees, saying that agents tend to work with clients about the same age as they are—plus or minus five years. “The largest members, in terms of numbers, of the middle market are young people. As they grow older, they tend to become more and more successful, and they move out of that market segment. The same thing happens to agents,” he says. Therefore, if more young people don’t come into the business to take the place of those who have moved on to work in higher income levels, then that market will be under-served.
Remembering basic values
It’s not enough to lament the lack of service for middle America; agents and advisors need to take action. They must begin targeting this group and adding them to their client base. The best way to do this, advisors agree, is to remember the fundamental value of life insurance and the good it can do for middle-class families.
“Sometimes we get into all of the features and all of the gingerbread of a policy,” says Cliff Wilson, CLU, ChFC, LUTCF, a multiline general agent for American National Companies in Chandler, Ariz., “but if people truly understood life insurance and what it does, they’d all line up at the door.”
Smith adds that an inability to manage debt and save for the future are among the main financial worries for middle-income families. These are problems that advisors are in a unique position to address. “One of the big things that seems to be missing,” he says, “is that the life insurance industry, for a long time, preached the gospel of saving.”
Many advisors view referrals as their primary source for targeting middle-income families. Referrals work well for the middle market because its members tend to have little contact with advisors and are generally wary of the insurance and financial services industry, according to Pete Jacques, Ph.D., associate scientist and director of middle-market research for LIMRA International.
“Word of mouth and referrals are a very big choice for middle-market consumers, because they talk to their friends and family,” Jacques says. “That’s how they tend to get the names of agents, because they can talk to these folks who are in a very similar situation and ask, ‘What works for you; who do you trust?’”
Along these lines, Harlow finds that “referral” is probably the wrong word to use when trying to get new prospects from existing clients. Harlow claims he has never asked for referrals and that, if pressed, most successful agents would say they’ve never asked for them either. Rather, he prefers to collect “referred tos.”
Harlow relates the story of an Arlington, Va.-based physician who purchased a medical savings account from him three or four years ago. That physician later became a center of influence for Harlow and has since referred eight to 10 prospects a year, who, in turn, generate more referrals for Harlow’s agency. “Once you get a chain like that going,” he says, “it’s hard to turn it off.”
Direct mail has also worked for Harlow, although he insists it is only successful with proper follow through. It works, he says, because technology now allows list brokers to generate very targeted and specific prospecting sheets.
Agents tend to work with clients about the same age as they are—plus or minus five years.
“Our marketing system has consisted primarily of direct mail and then servicing the living dickens out of the client,” Harlow says. “We have one lady here in our office whose primary job is to sit on the phone for three or four hours a day calling clients just to say, ‘Hi, how are you? Is there anything we can do for you?’”
Wilson, a NAIFA trustee who targets middle-market families, has built his marketing plan around a two-interview, holistic view of insurance and a system of referrals. Generally prospects that step into Wilson’s office have two interviews with an agent. The first is to get a complete review of their insurance program and their needs; the second lays out a plan for addressing those needs. After this, the agents initiate a concept of “advocacy prospecting.”
“There’s a system,” Wilson says, “where the agent will ask for recommendations, and there’s a brochure they will send out and then follow-up. It’s a system based on the value of the client, and the value we bring to the client. It is the value of sitting down with the agent to review the entire program and all of their coverage.”
Power to the people
Seminars and networking can also be powerful marketing tools when approaching middle-income families.
Bruce Supernault, ChFC, LUTCF, and Steven Yeh, J.D., both of Sagemark Consulting, have found great success in using seminars to market their college-planning services. However, the two believe their seminar success is built not on a sales pitch, but on a partnership with the American Education Foundation, which enables them to provide information on picking the right college for high school seniors. as well as financing their education.
“When you’re dealing with college planning, it’s not just the finances you have to worry about,” Yeh says. “You have to make sure the clients pick the right school for their child. You have to put the student in a position to succeed.”
The pair say this complete approach to college planning helps draw prospects to the seminars because they often feel overwhelmed by the process of picking a college, let alone financing the venture. Supernault, a member of Buffalo AIFA, claims that their complete college-planning seminars can net up to 200 participants, 80 percent of whom will request a follow-up appointment.
Being in a niche also helps Supernault and Yeh market efficiently to the middle market, which some advisors find frustratingly vast. Middle-income families are interested in college planning and therefore the niche creates a natural draw. Their niche also helps distinguish the pair from other advisors. “I could call the Rotary Club tomorrow and offer to speak on retirement planning,” Supernault says, “and they would say, ‘Great, that’s the third offer we’ve had this month.’ But if I offer to speak on college planning, they’re excited because everyone wants to talk about this.”
Information-driven seminars—rather than those that are sales driven—tend to work with middle-income clients.
LIMRA’s research on the middle market bolsters Supernault and Yeh’s claim that information-driven seminars, rather than those that are sales driven, tend to work with middle-income clients. Jacques says it is important for advisors to present seminars that offer prospects an opportunity to learn about an issue rather than to push a product.
“One of the key points is to gain that sense of objectivity—that the advisor is looking out for the consumer’s interest,” Jacques says. “At that point the advisor can follow up and say, ‘Do you have any questions?’ and build a relationship.”
Another great way to build relationships with clients is networking through civic and professional organizations and participating in community outreach programs.
Raymond Smith, CLIC, CSA, CLU, LUTCF, an agent with MassMutual who primarily sells long-term care insurance (LTCI), has found networking through the Jewish Business Association to be particularly productive, even though many of its members might not be in his target market. “I’ve done presentations to the group, and they know I’m the long-term care guy,” he says. “Many of them are younger than what might be appropriate for LTCI, but their parents aren’t, and they know people who are good candidates. I’ve received a fair number of referrals from the group.”
For Wilson, the best way to build trust among middle Americans is to be out there rubbing elbows with them—not in a seminar or networking session, but on their kids’ soccer fields and baseball diamonds. Wilson’s agency makes a concerted effort to get involved with the community and sponsor youth sports teams and other activities. “The objective is to have a presence, and that’s done in many, many ways,” he says. “A lot of it is image building and a lot of it is creating visibility within the community.”
The BEST and brightest
Going along with the need to approach middle-income families through sound marketing fundamentals, LIMRA has developed the “BEST approach”—Build relationships, Educate, Simplify, Trust—which provides the framework for a marketing plan to reach middle-income America.
After an advisor meets with a prospect and builds relationships with him through one or two meetings, Jacques says it is important to educate him on the basics of insurance, because he can often be confused about life insurance options. “It’s amazing when we look at some of our focus groups,” he says. “Some people will be asked what type of insurance they have, and they don’t know if they have term or permanent. They don’t understand the differences between them.”
He adds that this lack of education means middle-income families must be led through policies carefully, without a lot of talk about riders and special features. This is where “simplify” comes into the equation. “Basic term, basic whole life products are the best places to start,” Jacques says. “Unless the advisor is there to walk them through everything, it becomes a bit of an overload for the client.”
All of this, of course, leads to trust, which is key for any middle-market client who hasn’t been exposed to insurance products or advisors. According to Jacques, “If someone comes knocking on the door saying, ‘Hey I want to sell you some life insurance,’ and they don’t know him from Adam, the whole trust issue is raised before the agent even starts talking about a product.”
Masses not classes
If the middle market is so difficult to penetrate and the profits so small when compared with the affluent, why should advisors bother marketing to them at all? Why go through all this handholding for a small return on a term life policy? One answer is there simply aren’t enough high-net-worth clients to go around. Another is that if private industry doesn’t take care of these folks, people in the government just might.
However, the more altruistic answer would be that advising middle-income families and ensuring that their dreams are met are simply the right things to do. Ensuring that those who are struggling to make better lives for their children are covered should something disastrous happen not only makes good business sense, it also makes good moral sense.
As Charlie Smith of GAMA says, “When you go back through the history of the industry, it really started by serving the masses and not just the classes … and the implications of not continuing to do that are significant.”
Or perhaps Cliff Wilson puts it best, “The middle market is everyday America; it’s the fabric of our entire country.”
|How to reach the middle market|
• Meet prospects through networking and community outreach.
• Use the “BEST approach:” Build relationships, Educate, Simplify, Trust.
• Stress the fundamental value of life
• Remember: “Life insurance is for the masses, not just the classes.”
|What the Middle Market Needs|
•61 percent of middle-market
families do not own any kind of individual life insurance.
Statistics courtesy of LIMRA International
|Defining the Middle Market|
•Middle-market families earn
between $25,000-$100,000 per year.
Statistics courtesy of LIMRA International