Center for Financial Advisor Education

Transcription

1 Center for Financial Advisor Education FA 202 WORKBOOK Techniques for Meeting Client Needs WB

2 THE AMERICAN COLLEGE The American College is an independent, nonprofit, accredited institution founded in 1927 that offers professional certification and graduate-degree distance education to men and women seeking career growth in financial services. The Center for Financial Advisor Education at The American College offers both the LUTCF and the Financial Services Specialist (FSS) professional designations to introduce students in a classroom environment to the technical side of financial services, while at the same time providing them with the requisite sales-training skills. The Solomon S. Huebner School of The American College administers the Chartered Life Underwriter (CLU ); the Chartered Financial Consultant (ChFC ); the Chartered Advisor for Senior Living (CASL ); the Registered Health Underwriter (RHU ); the Registered Employee Benefits Consultant (REBC ); and the Chartered Leadership Fellow (CLF ) professional designation programs. In addition, the Huebner School also administers The College's CFP Board registered education program for those individuals interested in pursuing CFP certification, the CFP Certification Curriculum. The Richard D. Irwin Graduate School of The American College offers the master of science in financial services (MSFS) degree, the Graduate Financial Planning Track (another CFP Board-registered education program), and several graduate-level certificates that concentrate on specific subject areas. It also offers the Chartered Advisor in Philanthropy (CAP ) and the master of science in management (MSM), a one-year program with an emphasis in leadership. The National Association of Estate Planners & Councils has named The College as the provider of the education required to earn its prestigious AEP designation. The American College is accredited by The Middle States Commission on Higher Education, 3624 Market Street, Philadelphia, PA at telephone number The Middle States Commission on Higher Education is a regional accrediting agency recognized by the U.S. Secretary of Education and the Commission on Recognition of Postsecondary Accreditation. Middle States accreditation is an expression of confidence in an institution's mission and goals, performance, and resources. It attests that in the judgment of the Commission on Higher Education, based on the results of an internal institutional self-study and an evaluation by a team of outside peer observers assigned by the Commission, an institution is guided by well-defined and appropriate goals; that it has established conditions and procedures under which its goals can be realized; that it is accomplishing them substantially; that it is so organized, staffed, and supported that it can be expected to continue to do so; and that it meets the standards of the Middle States Association. The American College has been accredited since The American College does not discriminate on the basis of race, religion, sex, handicap, or national and ethnic origin in its admissions policies, educational programs and activities, or employment policies. The American College is located at 270 S. Bryn Mawr Avenue, Bryn Mawr, PA The toll-free number of the Office of Professional Education is (888) AMERCOL ( ); the fax number is (610) ; and the home page address is theamericancollege.edu. Certified Financial Planner Board of Standards, Inc., owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER, and CFP (with flame logo), which it awards to individuals who successfully complete initial and ongoing certification requirements. Copyright 2010 The American College Press All rights reserved W-2 Workbook

3 CONTENTS The American College...W-2 Table of Contents...W-3 Assignment Schedule...W-4 Special Notes to Advisors...W-8 Course Overview and Expectations...W-9 Techniques for Meeting Client Needs Pre-Test...W-19 Action Project 1...W-21 Breakout Class 1...W-25 An Advisor Speaks: What s a Tear Worth...W-27 Case History: Lighting the Fire...W-29 Quiz Class 1...W-31 Quiz Class 2...W-35 Sales Planning Project 1...W-37 Action Project 2...W-43 Breakout Class 2...W-47 Case History: Relationship Selling...W-49 Quiz Class 3...W-51 Action Project 3...W-55 Breakout Class 3...W-59 Case History: Clean Sweep...W-61 Quiz Class 4...W-63 Sales Planning Project 2...W-67 Breakout Class 4...W-71 Case History: Double-Duty Dollars...W-73 Quiz Class 5...W-77 Sales Planning Project 3...W-81 Action Project 4...W-83 Breakout Class 5...W-87 Case History: The Reserved Advisor...W-89 Quiz Class 6...W-93 Sales Planning Project 4...W-97 Breakout Class 6...W-101 Case History: Variable Universal Life...W-103 Quiz Class 7...W-105 Breakout Class 7...W-109 Case History: A Legacy for Life... W-111 Quiz Class 8... W-115 Breakout Class 8... W-119 Case History: Temporary Help...W-121 Most Valuable Concepts...W-123 Workbook W-3

4 ASSIGNMENT SCHEDULE This workbook contains quizzes, exercises, projects, and case studies that are intended to supplement the material in chapters 1 through 8 of the FA 202 textbook, Techniques for Meeting Client Needs. Class Assignments 1 Insurance- The Foundation of Financial Security Date Readings: The Role of the Financial Advisor The Financial Planning Process Life Insurance Basics Basic Insurance Principles Chapter Review Course Overview and Expectations (Read before Class 2) Acknowledgment of Course Requirements (Due Class 2) Techniques for Meeting Client Needs Pre-Test Action Project 1 The Initial Interview: Starting the Process (Begin, Due Class 3) Quiz Class 1 (due Class 2) Quiz Class 2 (due Class 2) Breakout Class 1 An Advisor Speaks: What s a Tear Worth? Case History: Lighting the Fire 2 The Selling/Planning Process for Life Insurance Date Readings: The Buying Cycle The Selling/Planning Process Sales Professionalism Chapter Review Acknowledgment of Course Requirements (Due today) Quiz Class 1 (Due today) Quiz Class 2 (Due today) Sales Planning Project 1 Fact Finding Analysis Keeping Score (Begin, Due Class 6) Action Project 2 Fact Finding: "What Important to You?" (Begin, Due Class 4) Breakout Class 2 Case History: Relationship Selling W-4 Workbook

5 Class 3 Meet the Prospect Date Readings: The Initial Interview Planning the Initial Interview Conducting the Initial Interview Assignments Total and Dominant Needs Approach Single- and Multiple-Interview Selling/Planning Chapter Review Quiz Class 3 (Due today) Action Project 1 The Initial Interview: Starting the Process (Due today) Action Project 3 The Discovery Agreement (Due Class 5) Breakout Class 3 Case History: Clean Sweep 4 Gather Information and Establish Goals Date Readings: Gather Information and Establish Goals Effective Communication Chapter Review Quiz Class 4 (Due today) Action Project 2 Fact Finding: "What's Important to You?" (Due today) Sales Planning Project 2 Interview an Experienced Life Insurance Advisor (Begin, Due Class 6) Breakout Class 4 Case History: Double-Duty Dollars 5 Analyze the Information Date Readings: Analyzing the Information Life Insurance Planning Understanding Employee Benefits Social Security Chapter Review Quiz Class 5 (Due today) Action Project 3 The Discovery Agreement (Due today) Sales Planning Project 3 Test Your Underwriting Knowledge (Begin, Due Class 7) Action Project 4 Social Security (Begin, Due Class 7) Breakout Class 5 Case History: The Reserved Advisor Workbook W-5

6 Class Assignments 6 Develop and Present the Plan Readings: Developing and Presenting the Solution The Life Insurance Product Chapter Review Date Quiz Class 6 (Due today) Fact Finding Analysis Keeping Score (Due today) Sales Planning Project 2 Interview an Experienced Life Insurance Advisor (Due today) Sales Planning Project 4 Analyzing the Life Insurance Need (Begin, Due Class 8) Breakout Class 6 Case History: Variable Universal Life 7 Implement the Plan Readings: The Closing Interview Understanding Objections and Managing Resistance The Life Insurance Application Process Date Chapter Review Quiz Class 7 Action Project 4 Social Security (Due today) Sales Planning Project 3 Test Your Underwriting Knowledge (Due today) Breakout Class 7 Case History: A Legacy for Life 8 Delivering the Life Insurance Contract Readings: Policy Delivery The Life Insurance Contract The Income and Estate Taxation of Life Insurance Date The Role of Beneficiaries Chapter Review Quiz Class 8 (Due today) Sales Planning Project 4 Analyzing the Life Insurance Need, (Due today) Breakout Class 8 Case History: Temporary Help Most Valuable Concepts W-6 Workbook

7 Class Date Date Assignments Review Session for the Final Examination Final Examination This is a closed-book exam. You cannot refer to your textbook or any other materials during the exam. The exam will consist of 50 multiple-choice questions. Workbook W-7

8 SPECIAL NOTES TO ADVISORS WORKBOOK MATERIALS DISCLAIMER While every precaution has been taken in the preparation of this material to insure that it is both accurate and up-to-date, it is still possible that some errors eluded detection. The authors and The American College assume no liability for damages resulting from the use of the information contained in this workbook. The American College is not engaged in rendering legal, accounting, or other professional advice. If legal or other expert advice is required, the services of an appropriate professional should be sought. CAUTION REGARDING USE OF ILLUSTRATIONS The illustrations, sales ideas, and approaches in this workbook are not to be used with the public unless you have obtained approval from your company. Your company's general support of The American College's programs for training and educational purposes does not constitute blanket approval of the sales ideas and approaches presented in this workbook, unless so communicated in writing by your company. USE OF THE TERM FINANCIAL ADVISOR OR ADVISOR Use of the term "Financial Advisor" as it appears in this workbook is intended as the generic reference to professional members of our reading audience. It is used interchangeably with the term "Advisor" to avoid redundancy. Financial Advisor takes the place of the following terms: Account Executive Agent Associate Broker (stock or insurance) Financial Consultant Financial Planner Financial Planning Professional Financial Services Professional Financial Services Specialist Health Underwriter Insurance Professional Life Insurance Agent Life Underwriter Planner Practitioner Producer Property & Casualty Agent Registered Investment Advisor Registered Representative Senior Advisor ANSWERS TO THE QUESTIONS IN THE COURSE The answers to all essay and multiple choice questions in this course are based on the text materials as written. COURSE COMMENTS The American College welcomes your comments about this course, particularly suggestions for its improvement. The comment cards at the end of this workbook can be used for this purpose. W-8 Workbook

9 COURSE OVERVIEW AND EXPECTATIONS Welcome to FA 202, Techniques for Meeting Client Needs. This introductory section begins with an overview of the course objectives. Then it discusses the components of the course, reviewing the various assignments and activities that will help you apply what you learn. Finally it closes with a discussion of what is expected from you. OVERALL COURSE OBJECTIVES Over the years The American College s LUTC program has become synonymous with quality training, enabling thousands of students to gain the necessary skills associated with being a competent and ethical financial advisor (see the previous page for an explanation of the meaning of the term financial advisor or advisor as used throughout the materials of this course). This tradition lives on in the Techniques for Meeting Client Needs course. By the end of the course you will be able to describe the role of the financial advisor and the basic planning needs of individuals and families. describe the major economic needs for life insurance for individuals and families make an initial presentation to a prospect to begin the sales/planning process collect and analyze personal financial information to discover the financial needs of individuals and families take the information from this fact-finding process and develop life insurance plans to meet client needs implement a plan of life insurance and successfully respond to a prospect s concerns and objections review life insurance policy provisions, income and estate taxation and policy delivery objectives Achieving these objectives depends on the time and energy you invest in completing the assignments in this course. The next section provides an overview of the course components and the assignments related to them. COURSE COMPONENTS AND ASSIGNMENTS The American College s LUTC/FA courses offer practical on-the-job training. Therefore, they require students to take action and participate fully. Except for the final examination, each component of the course is designed to facilitate action and participation, which will translate into more new clients and better client relationships. The course components include: the classroom the text the workbook the final examination Workbook W-9

10 THE CLASSROOM The classroom is where the idea-sharing that gives LUTC/FA courses their unique value takes place. Of course, the value you receive in the classroom depends on your preparation and participation. Students in an LUTC/FA classroom represent various levels of knowledge and experience in the financial services industry. Sharing with one another will provide everyone an opportunity to grow in proficiency, professionalism, and productivity. In fact, the classroom s magic only happens if everyone is prepared and participates. THE TEXT The discussions in the classroom will focus on applying the concepts discussed in the text. Thus, you are expected to have read the text assignment before class. In addition to the regular textbook information, chapters will also contain a chapter review and self-test questions. Chapter Review and Self-Test Questions In order to reinforce what you learn, each chapter in the text includes a chapter review that consists of short answer, multiple choice, and matching questions. You are not required to complete these before class. Many students use these questions to review for the final examination. Answers are provided in the back of the text. THE WORKBOOK The Workbook contains an assignment schedule and all of the mandatory assignments that must be completed for each class. The assignments are primarily breakouts, case studies, quizzes, action projects and sales planning projects. All page numbers in the Workbook start with a W. For example, this is page W-10. Assignment Schedule The Assignment Schedule lists your assignments for the entire course and is located in the front of the Workbook. There is a space on the assignment schedule to write the date for each class session, which your moderator will announce at the first class. By following the schedule, you can readily determine the material that will be covered in every class and the work that is expected of you. Except for the assigned readings in the text and assignments your moderator gives you, all other activities can be found in the Workbook. Let s take a look at them. Breakouts For each class you will find a breakout, a set of questions and/or exercises designed to focus your attention on topics your moderator will most likely cover in class. The breakouts will ask you to apply what you learn. For example, many of them will ask you to explain a concept as you would to a client or prospect. You may then be asked to participate in a role-playing exercise based on your answer to the breakout. You will be expected to have breakouts completed for each class. Case History The workbook has case histories, which can be an actual sales situation or a description of how a successful advisor markets, prospects, interviews, services, and so forth. It is designed to stimulate thinking and discussion about sales ideas and activities. As you read a case history, W-10 Workbook

11 think about how you would handle a similar situation. Does it suggest a method you want to adopt or avoid? Why? The case history will be discussed in class per your moderator s discretion Quizzes A quiz must be completed for each class. (The Class 1 Quiz is due in Class 2.) The question type is multiple choice, and follow the straight, roman numeral choice, or EXCEPT formats. These questions, like those in the textbook, are similar to the ones you will see on the final exam in terms of type, content, and difficulty. Quizzes are due at the beginning of each class. Sales Planning Projects Sales Planning Projects focus on the behind-the-scenes activities that support and enable succesful interaction with prospects. They explore the planning involved with marketing, prospecting, interviewing, and servicing financial services products. In addition, a Sales Planning Project can also provide learning experiences that sharpen your ability to advise prospects and design appropriate plans for them. Thus possible activities could include market research, record keeping, interviews of other financial advisors and professionals, and so forth. Forms are provided for each project. You will be given one week or more to complete each assignment. Begin working on the project the day it is assigned. If you wait until the last minute, you will have missed the purpose and lost the real benefit. Action Projects Action Projects focus on the skills and techniques you use when working directly with a prospect. They explore the areas of contacting the prospect for an appointment, working with a prospect during an interview, and asking for referrals. In every action project there will be a specific, brief assignment that calls for personal contact with a number of prospects for a definite purpose. Sometimes, an approach will be suggested. Action Projects will typically fit into a financial advisor s daily routine. Very little preparation or extra research is involved. Sales are inevitable, but they are not required for completion of the action project. Only action is required. Project Assignment Summary Sales Planning Project Title Assigned class 1 Fact Finding Analysis Keeping Score Interview an Experienced Life Insurance Advisor Test Your Underwriting Knowledge Analyzing the Life Insurance Need 6 8 Due class Project Assignment Summary Action Project Title Assigned class 1 The Initial Interview: Starting the Process Fact Finding: What s Important to You? 2 4 Due class Workbook W-11

12 Project Assignment Summary Action Project Title Assigned class Due class 3 The Discovery Agreement Social Security 5 7 Most Valuable Concepts Reflection is an important part of the learning process. This activity is designed to allow you to think about what you have learned in each class and write the most valuable concept, marketing idea, marketing strategy, and so forth that you learned in the class. Your moderator may ask you to share those ideas with the class. Passing Requirements Read this section carefully so that you understand what you must do to pass this course. In general, there are three main components that determine your final grade: attendance moderator's grade final exam grade Attendance. In order to pass, you must attend at least six of the eight regular sessions. You are expected to arrive on time and stay for the entire class session. Missing part of a class could count as a half or a whole absence. A half absence is charged if you arrive more than 20 minutes late or leave more than 20 minutes before the class is scheduled to end. If you miss more than 40 minutes of class time, you will be charged with a full absence. If you end up with 2½ absences, you will have exceeded the maximum allowable limit of two even if the absence is due to illness or accident. You will not pass the class. The exam review does not count as a class. Moderator's Grade. The moderator's grade is the average of three separate grades: class participation weekly quizzes projects (as assigned) You will be graded on your class participation. Specifically, the moderator will evaluate over the course of several weeks whether: Your participation in class is appropriate (don't be a time-hog or a wallflower), insightful, and relevant to the discussion. You have completed any Breakout questions. You take role-playing seriously and give helpful feedback. W-12 Workbook

13 You make positive contributions in any small group activities. In addition, your weekly quizzes will be graded, each worth 100 points. There will be eight quiz grades that will be averaged together to yield your quiz grade. A quiz is assigned for each reading assignment. Quizzes for classes 1 and 2 are due class 2. The last component of the Moderator's Grade is the grade you receive for the successful completion of each of your Sales Planning and Action Projects. Each project also is worth 100 points. You will turn in your assignments before the class begins. Assignments handed in thereafter are deemed late. Late assignments up to one week will have 50 points deducted from the grade earned. If more than a week late, papers receive a zero. If you are going to be out of town or absent for other reasons, it is up to you to get the assignment to the moderator before the class. The moderator should give you his or her contact information. Write it here for future reference: Moderator's Name: Moderator's Address: Moderator's Fax Number: Moderator's Moderator's Phone Number: At the end of the course, the grades for these three areas are averaged to arrive at a Moderator's Grade. For example: 1. Weekly class participation: average grade Weekly quizzes: average grade Projects: average grade 90 The total is then divided by 3 to arrive at the Moderator's Grade: 85. The Moderator's Grade must be greater than 70 percent in order for you to pass the course. Final Exam Grade. At the end of the course, you will take a 50-question multiple-choice examination that consists of the three multiple-choice formats (straight answer, Roman numeral, and EXCEPT) similar to those in the quizzes in the workbook. All answers are based on the material in the text. The final examination will not be difficult if you have read the text and completed all of the quizzes and chapter reviews. In order to pass the course, you must pass the final examination with a score of at least 70 percent. As you can see, you will need to earn a 70 or better on both the Moderator Grade and the Examination Grade to pass the course. 255 Workbook W-13

14 Passing Requirements Attendance Your participation in the classroom discussion is crucial to the effectiveness of an FSS or LUTC class. Therefore, your attendance is vital. To complete the course successfully, you must attend at least six of the eight regular classes. Lateness of more than 20 minutes is half an absence; so is leaving early. Missing more than 40 minutes is a full absence. Two absences are permitted. If you end the course with two and one-half absences, you have exceeded the allowable limit. Moderator's Grade The moderator records grades for quizzes, projects, and participation in class sessions. These grades are combined to obtain the average grade for all classroom-related work. This average grade is called the Moderator's Grade. Examination Grade There is a 50-question final examination at the end of the course. The questions are multiple choice. A grade of 70 percent or higher is necessary to pass the exam. Three Requirements In summary, to qualify for successful completion of the course, you must meet each of the following three requirements: 1. Satisfy the attendance requirement for your course. 2. Score 70 percent or more on the final examination. 3. Score 70 percent or more for the term grade. Refund. All requests for refunds must be made in writing to the Office of Student Services, The American College, 270 S. Bryn Mawr Ave., Bryn Mawr, PA The American College will refund your tuition (less a cancellation fee) if a written request is received by the third week of class. Tuition does not include any applicable matriculation fee or shipping and handling. For more information go to TheAmericanCollege.edu. Expectations Before Class. Complete all assignments before the class meets. The average amount of time you should plan to spend on completing these activities is at least 2½ hours per class about the same amount of time spent in classroom discussion. Some classes will require more time, others less. Activities include the following: Read and study the assigned pages in the text. Complete any breakouts. Complete the class quizzes. Complete any sales planning project assigned. Complete any action project assigned. Complete all other assignments required by the moderator. Students. Turn in your assignments at the beginning of each class. The moderator has been directed to penalize late assignments by 50 percent. If more than a week late, papers receive a zero. Participate in class. Moderator. The moderator is an individual nominated by The American College. He or she is not a teacher by profession, but a full-time agent or manager. The moderator shares with you the demands of self-discipline and the constant pressure of time. Consequently, the moderator W-14 Workbook

15 cannot afford the luxury of catering to anyone who is negligent about completing work on time, maintaining reasonable order, or respecting the rights of others. The moderator needs and deserves the full cooperation of every student. Performance of Action Projects by Non-marketing Students and Managers You are expected to complete the action projects. This applies to students who are not in personal production and to those in management. It includes, for example, students who are office staff, home office executives, finance officers on a military base, and others who may not be licensed to market insurance. If you cannot do the projects yourself, you are expected to handle them in one of the following ways (listed in order of preference): 1. Select an FSS or LUTC student who is with your company or in your community to work with on the project. Base your reports on your joint work. 2. If there is no local FSS or LUTC student from your company to work with, do joint work with one of your company's agents who is not taking the course. This can be a former FSS or LUTC student or someone without any FSS or LUTC experience. 3. If you are in management and it is not possible to work with an agent/student, assign the project(s) to one or more of the agents under your supervision, and report these results. 4. If you have no agents to work with and none under your supervision, arrange to interview one or more agents each week, and use the interview as the basis of the project report. Write what the agent did on the project reporting form. 5. If the four preceding options are unworkable for you, it is up to you to suggest alternative options on which you and your moderator can agree. For example, you may develop two presentations to write or present to the class during the course. These may be on special topics or you may research a particular insurance marketing topic to write about. Give photocopies to all class members. Topics can include state laws, statistical information about insurance, actuarial studies, articles in insurance magazines, self-improvement topics, relationship insights, or a question that came up in class that needed research. Keep in mind that these five alternatives are special options for isolated instances. In almost all situations, every student in the class is expected to complete the action projects as assigned for a passing grade. You are expected to do the field activity and make the follow-up approaches yourself. Most projects can be done in a meaningful way by persons who are not producers. If you need to do the projects in one of the ways suggested above, discuss it in advance with the moderator and reach agreement on how to proceed. As a safeguard, put your agreement in writing, include both of your signatures, and file the agreement. Note to FSS and LUTC Students Please read the following page carefully, sign at the bottom, and return it to your moderator in class. Occasionally, there are misunderstandings concerning the requirements for the successful completion of the course. The purpose of this memorandum is to ensure that the requirements and the ground rules laid down by the moderator are clearly understood. Failure to sign this form does not relieve you from these requirements. Workbook W-15

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17 Acknowledgment of Course Requirements - To be signed by student - It is my understanding, from the explanation received in the first class session and outlined in the Course Overview and Guidelines section of the workbook, that successful completion of this course requires meeting the attendance requirements, achieving a passing examination score (70 percent), and earning an overall average (term grade) of 70 percent on all work for the course. Specifically, I understand that 1. Credit for the course will not be given to any student who fails to attend at least six of eight class sessions. The maximum number of absences is two. Missing more than 20 minutes of class is a half-absence. Missing more than 40 minutes of class is a full absence. It does not matter whether absences are due to illness, injury, business appointments, company or agency meetings, vacations, or conflicts in personal schedules. No attendance credit is given for attendance at an exam review session. I further understand that neither the local NAIFA officers nor the moderator has authority to excuse absences because the requirement applies impartially to all students. 2. Grades are assigned during the course by the moderator. Grades for participation in class discussions (and preparation for them), and scores made on action projects, marketing planning projects, and quizzes are averaged. That number is then averaged with the final examination to arrive at the Term Grade. 3. Written assignments are to be handed in at the beginning of the class session in which they are due. Papers up to 1 week late are automatically reduced by 50 percent and to zero after that. 4. To receive credit for the course, I must sit for and receive a passing grade on a final examination acceptable for any course offered by The American College. The correct answers to the final examination questions are based solely on the information found in the text. The American College reserves the right to set aside the final examination of any class and require another examination. 5. Course results will be mailed out within 4 weeks after the final exam date, assuming all course requirements have been met, including payment of tuition. These reports will indicate a "passing" or "not passing" status only. No numerical grade is assigned. I have read the course requirements and understand them. I further understand that recruiting or attempted recruiting of personnel of another company is not permitted in any American College course or in connection therewith. Finally, I understand that any student whose behavior adversely affects reasonable order and harmony in the classroom will not be allowed to continue with the course. There will be no tuition refund, and the student may be barred from future participation in FSS and LUTC courses. Print your name Date Sign your name Workbook W-17

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19 Name: Date: TECHNIQUES FOR MEETING CLIENT NEEDS PRE-TEST This quiz will not count as part of your grade. Its purpose is to help you see some of what this course covers and what you already know. Toward the end of the course, your moderator may administer the exam again so that you can see how much knowledge you have learned. 1. What are settlement options and what settlement options are available in a life insurance contract? 2. What are the primary objectives of the client-focused sales approach? 3. Explain how the capital distribution and capital conservation methods of life insurance planning differ? 4. What is the surrender cost index for a life insurance policy and what is its purpose? 5. Explain how mortality, interest and expense are used to structure and create the life insurance product. 6. What is the procedure to determine the income tax treatment of a life insurance policy upon lapse or surrender? 7. What are two advantages to the applicant of paying cash with the life insurance application? 8. What is meant by a unilateral contract? 9. Name at least three of the five categories of beneficiary designations. 10. What is insurable interest, why is it important, and when must it exist? Workbook W-19

20 11. Explain the conditions under which life insurance premiums are tax deductible. 12. Identify four objectives of the initial interview. 13. Explain the differences between the dominant and total needs approaches. 14. Discuss the purpose and content of the discovery agreement. 15. List five active listening techniques that can improve your relationship skills. W-20 Workbook

21 ACTION PROJECT 1 The Initial Interview: Starting the Process Purpose The objective of this project is for you to implement or refine your initial interview to mirror the recommended actions of step three of the selling/planning process. Assignment In your initial interview with a prospect, implement the actions recommended in step three of the selling/planning process. In general, introduce yourself and your company, discuss insurance planning and why it is needed, and outline the nature of the relationship you would like to establish with the prospect. Prospects can be people you already know or come from your prospecting list. Successful interviews are the result of careful planning. They don t happen by chance. They begin well before you meet your prospects face to face. In fact, much of what happens during the interview depends on how you prepare for it. Your success depends in part on making a strong professional impression. That impression can be enhanced by the materials you present. If you have business cards, brochures, fact finders, prospectuses, and literature about your company in your briefcase, you may feel you are always prepared. However, a folder prepared specifically for each prospect will make a stronger, more professional presentation. Procedure 1. Set up an appointment with a prospect on the basis that you want to discuss insurance and financial planning to help with him or her achieve their financial goals. Select a prospect from people you know or from your prospect inventory. 2. Think about the actions described in the Meet the Prospect step of the selling/planning process and create an outline for the initial interview. Below is a summary of the steps to be covered in the initial interview. Establish rapport Discuss the need for insurance and financial planning Clarify the overall planning process and what is involved in the process Explain the services you provide and the time and cost involved Present briefly your qualifications to assist the prospect through this process. Explain the prospect s and advisor s responsibilities. This includes any documents the prospect needs to provide the advisor for proper case analysis. Discuss the expectations and desired outcomes of both parties Explain the method and sources of advisor compensation for the services provided. Workbook W-21

22 Discuss and prioritize the prospect s goals, needs and concerns. Mutually define the areas of concern that you and your prospect will address in the planning process. Obtain the prospect s permission to continue the process with a fact finding session. Schedule an appointment for a fact finding interview. 3. Conduct an initial interview and complete the report form. W-22 Workbook

23 Name: Date: Action Project 1 Report Form The Initial Interview: Starting the Process The Initial Interview: Starting the Process Outline your steps for the initial interview. Briefly, but specifically, describe what will do to accomplish each step. Indicate the language you will use. For example, list a few questions you can ask to establish rapport. What questions will you ask to open a discussion of the prospect s needs and goals? You can use the blank space below or attach a copy of a document you create using a computer word processor. This is the recommended approach, since it will enable you to make changes easily and also reformat the document to create an agenda to give to your clients. Summary Questions Describe how the client responded to the initial meeting. What seemed to appeal to the client? What seemed to distract the client? Did you set a fact finding appointment? Was the client a qualified prospect? What goals, needs and concerns did the client express? What changes would you make to your initial presentation? Workbook W-23

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25 BREAKOUT CLASS 1 1. Identify and discuss the needs of individuals and families for which life insurance can provide a solution. 2. Identify the benefits of life insurance. 3. What does life insurance mean to you? 4. What does life insurance selling mean to you? 5. How would you use the financial planning pyramid in your presentations? Workbook W-25

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27 AN ADVISOR SPEAKS: WHAT S A TEAR WORTH Paul R. Jeffers, CLU, ChFC, wrote this article for LUTC several months before he died. He was a well-known national figure who spoke about the sale of life insurance to groups in every state and from the main platform at MDRT. He was a past president of California's ALU as well as his own Sacramento association and served as a national committee chairman. When I began selling life insurance about 40 years ago, I came across an advertisement in one of the magazines of the day. This ad was for tombstones and covered two pages back-to-back. The first page showed a picture of the front of the tombstone, facing the lettering. A small boy, about 8 or 9, stood with his back to the camera, facing the tombstone. He wore a Cub Scout shirt, a hat, and an old pair of scruffy jeans. Just over the little boy's shoulder, you could read the word "Daddy" carved on the tombstone. As you turned the page, the same scene was photographed on the reverse page, but from the opposite direction. It showed the back of the tombstone and the little boy's face. This picture showed the boy giving the tombstone his Cub Scout's salute as a big tear rolled down his cheek. The caption read, "What's a Tear Worth?" As I looked back and forth between these pages, suddenly I realized that this was an ad about life insurance, not the sale of tombstones. That father's dreams for this little boy's life rested with the plans he had made in the past. Had he protected his family's future? Would dreams of home, education, and the pleasures of growing up in a loving, sheltered environment be there for this young boy? Was this the tear of sorrow or of desperation? If that father could do it again, how much life insurance do you suppose that tear would mean to him? Don't you think that he would buy all the life insurance he could afford and then some? I think he would. As I have thought about this ad with the tombstone over the years, I have been inspired again and again to urge my clients to buy all the life insurance they could afford. There is but one life for each of us to insure. None of us knows how long it will last, and there is no second chance. As an advisor, I have felt the obligation never to miss the opportunity to push for the maximum protection a family could be provided by a policy the family's breadwinner(s) purchased. I believe I know what our life insurance product is. It is, in fact, the greatest language of love ever known. Let me give you a couple illustrations to show you why I believe this to be so. Not long ago, I delivered a death claim check of $800,000 on a 42-year-old doctor who went out one morning for his usual 5- to 6-mile run. He came back to the house after running and walked into the kitchen to say something to his wife. He fell to the floor with his head on her slipper. He was dead! He had an aortic aneurysm and had died instantly. He left his widow and two children with the $800,000. His practice that had been paying him $436,000 per year was sold for $0. The widow didn't get a nickel for it. Do you know why? The other doctors told her, "Why should we buy it? Those people have to come to us anyway." The widow had a house that was paid for and the $800,000 in a trust. This money in trust was given to her as monthly income. With every check, that doctor told his widow, "I love you." I delivered another check to a friend of mine who lost his 54-year-old wife to cancer. I laid the $200,000 check on his office desk. He started crying and so did I. After he Workbook W-27

28 regained control, he told me the following: "Paul, do you remember the trouble I gave you when you sold this policy to me? I told you it was the dumbest thing I could do." He continued, "You persisted and I probably bought it just to get rid of you. Paul, let me tell you this: If I did not have this insurance money right now, I would lose everything I have. My business would be gone and I would have to start over. Your insurance policy is keeping me from going bankrupt and, thank God, you kept after me to do something that I should have done without any urging. You saved my business and my life." So, what is a tear worth? If you don't have life insurance, is it worth the suffering your family will go through because you just didn't have enough sense to buy adequate amounts when you had the chance? I like to think that life insurance premiums are always paid, either during your lifetime by paying for a life insurance policy, or at death by the family doing without those things that are so important to them. Which way is the best way? I spend my life helping people decide what the worth of that tear really is. W-28 Workbook

29 CASE HISTORY: LIGHTING THE FIRE C.W. Girard, LUTCF, CLU, ChFC, has been an insurance advisor for 25 years in a large Midwestern community. He related this story about the experience he had as young agent that awoke him to the true value of life insurance. It was a policyowner's death that made him into a salesman. My Frame of Mind I awoke early and went for a long walk to get some exercise before my family woke. My early morning walks have always been one of my stress relievers they give me a chance to get out and think through the things on my mind without distractions. Shocking News When I returned home, my wife met me at the door, almost in hysterics. In a halting voice, she told me that Kathy one of our closest friends had died suddenly, unexpectedly, during the night. Kathy's father-in-law had called and asked that I come over as soon as possible. After my wife assured me she was all right, I drove to Kathy and Dave's home. I was met at the door by Dave's father. He told me Dave was at the hospital and would be home soon. He wasn't sure what had happened to Kathy perhaps an aneurysm or stroke while she slept. Everyone was in a state of shock. Remembering the Sale The next few days passed in a blur. I thought often of Kathy and Dave, and their three children. They were among my first clients and I'm sure their first purchases were made with more concern for my welfare than theirs. I remembered Kathy laughing when we wrote up her first policy $250,000 term when I called it "a small one." We converted part of it 2 years later, but that was all the coverage she had in force. At her funeral, I cried for all the usual reasons and some special ones too, knowing Dave would have enough money to take care of the kids' college education. Help From the Agency I talked with my manager about how to file the claim before I worked up the courage to talk with Dave. My manager told me to wait a few days, and just be a friend for now. Three days later she called me into her office and had a settlement check for me she had called the home office to explain the circumstances, obtained a copy of the death certificate from the funeral home, faxed a copy of the obituary from the paper, and took care of the paperwork for me. She suggested I meet with Dave, hand him the check in a sealed envelope, and simply offer to help when he was ready. I went to Dave's home that afternoon and found him there with his dad. They were looking at old photo albums and talking of Kathy and also Dave's mother, who had passed away several years before. After looking at the photos, the kids came home from school. Following a hug and a snack, Dave's dad said he would take care of them for a while so we could talk. Help From the Beneficiary I didn't know what to say, but Dave made it easy for me by asking if I had paperwork for Kathy. I nodded and handed him the envelope. "I know we can't bring Kathy back, but she wanted you to have this. I suggest for now you put this into a money market account, and we can talk some more when you are ready." He agreed, signed a form, took my hands in his, and said, "Thank you." Three months later, I reflected on the events that had happened. Dave did invite me over after a few weeks passed. He asked about investments for college, and I suggested a mix of mutual funds. He wrote a check for most of the settlement proceeds immediately. Workbook W-29

30 I mentioned also that this might be a good time to review his life insurance coverage and look at converting his term policy. For premiums, he could use some of the interest and growth from the investments, and the growth in cash values would be available for college or retirement, too. Dave liked this idea and then mentioned his dad wanted to talk to me. Asking if there was anyone else who might be able to benefit from my services, he brought out his address book and gave me 21 more names and told me to use his name. Never had a client been so willing to help me. What I Learned I learned a great deal from the loss of my friend. It was the first time I had experienced the death of someone my own age, someone I knew so well. It made me appreciate life even more. My wife and I grew closer than we ever had been, and we made a real effort to spend more time together with out family. We saw first-hand how life insurance can help, and my commitment to the business became stronger than ever before. The Outcome I am also closer to my associates at the office, many of whom have heard me relate over and over how much we help people when they need it the most. Our ties with Dave and his family are closer than ever before, too. He was able to take time off to be with his family and not worry about money. Kathy's dream that the children attend college is still alive. I know, too, that the next time I get discouraged, I will remember my friends Kathy and Dave, and I will persevere to help others help themselves. W-30 Workbook

31 Name: Date: QUIZ CLASS 1 (Due Class 2) Instructions: This quiz covers the reading material found in Class 1. Study the reading assignments, then circle the correct answer for each of the following questions. Each question is worth 10 points (100 points total). 1. The human life value concept is a measure of which of the following? the production potential of an individual over his or her life expectancy. the difference between an individual s value today and his or her value in the future. the value actuaries are able to attach to the average mortality of a group of people. the group sharing of losses of people exposed to a specific risk 2. The three major building blocks of a life insurance policy are profit, persistency, and mortality mortality, morbidity, and risk exposure liability, risk tolerance, and suitability mortality, interest, and expense 3. Which of the following statements regarding financial planning is correct? Most advisors and clients engage in comprehensive financial planning. In most cases, you will be addressing one or a few of the client s most important financial needs. Most people are looking for help with financial planning, and proactively seek it out. Knowledge is the most important factor in success as a financial advisor. Activity (prospecting and approach) is secondary. 4. The financial planning pyramid illustrates that the most fundamental and beginning foundation of financial planning begins with: distributing estate assets. accumulating retirement income and assets. income tax management. adequate protection and cash reserves 5. Liability risks involve the possibility of loss of income due to disability or unemployment. loss from the physical or financial injury to others. indirect losses that are caused by direct losses. direct loss associated with the need to repair or replace damaged or missing property. Workbook W-31

32 6. The financial statement that shows a client s net worth at a specific point in time is called the income statement balance sheet cash flow statement budget. 7. Which of the following statements concerning the human life value concept is (are) correct? I. It is the capitalized value of an individual's net future earnings after subtracting self-maintenance costs. II. It is the measure of the value of benefits that dependents can rightfully expect from their breadwinner or supporter. I only II only Both I and II Neither I nor II 8. Which of the following statements regarding a will is correct? I. The will is legally enforceable at death and is not operative until that time. II. Prior to one s death, a will cannot be amended, revoked or destroyed by the maker. I only II only Both I and II Neither I nor II READ THE FOLLOWING DIRECTIONS BEFORE CONTINUING The questions below differ from the preceding questions in that they all contain the word EXCEPT. So you understand fully the basis used in selecting each answer, be sure to read each question carefully. 9. All of the following statements regarding insurance (risk management) principles are correct EXCEPT insurance reduces financial risk by transferring that risk to an insurer insurance spreads the risk of losses to all members equitably through risk pooling the law of large numbers states that as the size of the sample increases, the actual loss experience will more closely approximate the true underlying probability Mortality rates reflect the income the company expects from the investment of premiums that will be added to the reserves. W-32 Workbook