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

33 Name: Date: 10. All of the following are correct regarding family life insurance needs EXCEPT The readjustment period is the interval of time after the insured's death and the surviving spouse's retirement. The dependency period extends from the insured's death until the youngest child is self-sufficient. The blackout period lasts from the youngest child's 16th birthday until the surviving spouse is aged 62 (reduced benefit at age 60). Cash needs include final expenses, emergency fund, and mortgage cancellation. Workbook W-33

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35 Name: Date: QUIZ CLASS 2 (Due Class 2) Instructions: This quiz covers the reading material found in Class 2. 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. Before a company can offer to sell a product, the company must be formally admitted by the federal government through the Securities and Exchange Commission National Association of Insurance Commissioners company who will sponsor it insurance department of the state where it will be sold 2. The last step of the five-step buyer's cycle is make a purchase buyer's satisfaction take delivery continuously monitor the plan 3. When replacement is involved in a sale, many states require the advisor, in addition to forms required in all sales, to deliver a policy summary notice regarding replacement and comparative information form buyer's guide IMSA Code of Life Insurance Ethical Market Conduct 4. The sales method that emphasizes a quick sale, then moving on to the next sale is called counselor selling transactional selling client-focused selling transcendental selling 5. Which of the following is a step in the selling/planning process (as opposed to the financial planning process)? meet the prospect establish financial goals develop a plan to achieve goals monitor the program Workbook W-35

36 6. For a prospect to initiate the buying cycle, he or she must first desire a solution recognize the need or problem make the purchase decide on the best available choice 7. Which of the following statements concerning selling is (are) correct? I. Transactional selling focuses on the product and the sale. II. Client-focused selling builds relationships with clients. I only II only Both I and II Neither I nor II 8. Which of the following statements regarding compliance and ethics is (are) correct? I. Compliance means following laws and regulations. II. Ethics means behaving according to the principles of right and wrong accepted by your profession. 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 are steps in the selling/planning process EXCEPT Identify the Prospect Obtain Referrals Implement the Plan Meet the Prospect 10. All of the following are characteristics of transactional selling EXCEPT The transactional selling relationship can be an adversarial one. The advisor must outthink, outmaneuver, and outtalk the customer. The advisor has to listen, ask questions, demonstrate empathy, and discover needs. Selling is a "numbers game." W-36 Workbook

37 SALES PLANNING PROJECT 1 Fact-Finding Analysis: Keeping Score (Assigned Class 2 Due Class 6) Purpose This project focuses on the fact-finding step of the sales/planning process. Its purpose is to help you understand the value of fact finding with your prospects. Good fact-finding and needs analysis will provide you with a firm foundation in the sales process, as well as the tools to keep your insurance sales growing in the future. Successful advisors understand what they must do to meet their selling goals. Client building is an ongoing activity, and the relationship you establish with your prospects will have a significant effect on your future business. For the next 4 weeks, you will record your weekly fact-finding activity and analyze the results. Assignment Starting this week, monitor your weekly activity by recording the date and initials of the prospects with whom you have interviews. This project will help you study your fact-finding and case development skills and results. For example, why is a particular method of case development successful with one prospect and not with another? How does good fact finding support good case development and relationship building? By keeping careful records, you can analyze the results of your efforts and use the findings to improve your performance. Procedure Each week, write down the initials of new prospects and the date you saw them. Record whether a full, brief, or no fact finder was completed, and whether a sale was made or if one is pending. If a sale is made, note the type of product sold. Add additional comments to remind yourself of significant aspects of the fact-finding interview. For example, do you know why the prospect did or did not buy? Did you notice anything in common about the buyers and non-buyers? Did you find any relationship between buyers and their personal situations? It is important that you track your activity on the Recording Form daily to have accurate records. If you wait to do it once a week, it will be difficult to recreate the week from memory. Make the completion of the form a daily habit. This project requires the completion of the Fact Finding Analysis Recording Form and the Fact Finding Analysis Summary, to be submitted in Class 6. Look at the questions that are asked for this report to prepare yourself for the type of information you will want to focus on to complete it. Please make additional copies of the forms as needed. Workbook W-37

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41 Name: Date: Fact Finding Analysis Keeping Score Weekly Summary (Assigned Class 2 Due Class 6) How many appointments did you have during weeks 3, 4, 5, and 6? Week 3 Week 4 Week 5 Week 6 Total How many fact finders did you complete during weeks 3, 4, 5, and 6? Week 3 Week 4 Week 5 Week 6 Total Comments/Analysis 1. How many fact finders were brief and how many were full/detailed? Comment on this. Full Brief None 2. Did you see any relationship between the depth of fact finding and the outcome with that prospect? 3. Did you see any relationship between the depth of fact finding and your relationship with that prospect? 4. Did you see any relationship between the depth of fact finding and the prospect's financial situation? Workbook W-41

42 5. If you did not complete a fact-finder with any prospects, why not? 6. Did you change your fact finder or the way you used it during the project's period? 7. In what ways did your use of the fact finder improve through this activity and this course? W-42 Workbook

43 ACTION PROJECT 2 Fact Finding: "What's Important to You?" (Assigned Class 2 Due Class 4) Purpose The objective of this Action Project is for you to gain first-hand experience in conducting the fact-finding process with a client using a total needs approach. Assignment Set up an interview with a prospect or client with whom you have conducted an initial interview or have a personal relationship (some level of rapport). The interview could also be done with current clients. If you have not met with the client for business purposes before, conduct a brief initial interview and then proceed directly to the fact finder. In your approach, you can tell the client that you are taking this course and would like to talk to him or her about your services. You can also indicate how you can help him or her set priorities and meet financial planning goals and needs. Mention also that you would like to collect information about the client in order to analyze his or her situation, and draft recommendations based on this information. Procedure 1. Begin your meeting by establishing an agenda and setting proper expectations. 2. Indicate to the client that you will be asking many questions about his or her personal life and financial situation. (This point should have been discussed in the initial interview before this meeting.) Reassure the prospect that this information will be treated in a confidential manner. 3. Be sure the client understands the importance of accurate and complete information gathering for you to analyze his or her situation and develop meaningful and correct recommendations that will achieve his or her financial goals and satisfy financial needs. 4. Explain the need for an adequate amount of time. Tell the client in advance that you plan to spend about 30 minutes on this activity. The amount of time needed will vary from client to client, depending on the complexity of the situation, the client s degree of interest in the process, his or her personal style, and the nature of his or her needs and goals. However, you want to dedicate at least 30 minutes to this activity to get into a good conversation and information gathering session. 5. Decide which fact finder you will use and review it prior to the meeting. When you start the session, get agreement to the ground rules above and begin filling out the fact finder. Approach When you call the client, you could say something like this: Workbook W-43

44 "(Client), I provide people with help in achieving their financial goals. In order for me to help you, I would like to spend about a half-hour with you to ask some questions about your current financial situation and your financial objectives. Does this sound reasonable to you?" Offer the client a choice of times to meet by saying, "Is daytime or evening more convenient for you?" You can also use a specific need such as educational planning or retirement planning to secure the appointment. You might say something like this: "(Client), do you have any idea how much money you will need to be financially independent when you retire? "Many people have not considered how much money they will need to retire. I'd like to suggest we set aside 30 minutes of your time so that I can show you the work I do, and collect information from you that will enable me to make recommendations to you to prepare properly for retirement." The same idea could be used for college funding: "(Client), do you have any idea how much money you will need to finance your children's college education? "Many people have not considered how much money they will need to send their children to college. I'd like to suggest we set aside 30 minutes of your time so that I can show you the work I do, and collect information from you that will enable me to make recommendations to you to prepare properly for your kids' college education." Conduct a brief initial interview in which you introduce yourself and your services, if you have not already done so. Proceed with a more detailed fact-finding interview so that you can gather enough information to make recommendations in a future meeting with the client. W-44 Workbook

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46 4. How comfortable were you in filling out this fact finder? Describe your experience. 5. What was the client s reaction to the fact finding process? W-46 Workbook

47 BREAKOUT CLASS 2 1. What is your opinion of client-focused selling? 2. What is your opinion about total needs selling? 3. How do the buying cycle and the selling/planning process relate to each other? 4. Is the financial advisor a professional, like a doctor or lawyer? Why or why not? 5. Ethical Dilemmas for Financial Advisors Listed below are some problematic situations What would you do in these situations? a. A client dies when his automobile crashes into a tree. His life insurance death benefit doubles in the event of an accident, which is how the police described the event. You learn from his widow that the client had entered into a diary his plans to commit suicide. b. A client sends you a letter complaining about your service and requests that you send it to the company president. c. You are aware that one of your associates has started to date the member of the administrative staff who has control of leads. You also discover that the advisor's sales are now increasing dramatically. Workbook W-47

48 d. A prospect you are interviewing mentions a meeting she had with another advisor who described one insurance company as being "nearly bankrupt." The prospect asks for your opinion of the company. e. Your prospect hesitates when answering a key medical question, the answer to which will significantly affect the underwriting class and policy premium. W-48 Workbook

49 CASE HISTORY: RELATIONSHIP SELLING Rob T. Reider met this client after being in the life insurance business for 1½ years. His approach demonstrates the success that can be achieved by mastering the techniques of client-focused and total needs selling. At the time I began working with Dr. Robinson I was 33 years old and had been in the life insurance business for about 1½ years. I had come to this business seeking a way to become my own boss and reap the benefits of working for myself. I did not have any real experience in the insurance and financial services industry, but I had always maintained a personal interest in these areas. I had worked for a large property and casualty insurance company for 8 years after graduating from college and moved for a few years from job to job. I did have sales, customer service and marketing experience, so it was an easy transition into my new career as a life insurance advisor. I was already comfortable talking with people and making sales presentations. What I did lack, as most new people in the industry, was prospects. I was constantly seeking new people to talk to through direct mail and the buying of leads. I was not really good at getting referrals, although I did always ask. Nor did I have a large natural market. I hurt my ankle and after seeing my family doctor, I was referred to a specialist, an orthopedic surgeon, Dr. Robinson. On my first visit with him, my ankle was placed in a cast and I was told to keep off my feet for a month. When I explained to Dr. Robinson that my income was dependent upon my ability to go out and see people, he agreed to 2 weeks. On my second visit the cast came off and I was scheduled for some physical therapy and follow-up visits. At the time of my third visit I started thinking to myself, "I would really like to have Dr. Robinson as a client; what is the best way to approach him?" My plan was this: Make small talk and hopefully generate some interest. My sales manager always spoke of personal observations as a great means to generate prospects, but how do I break the ice? On my way to appointment I happened to catch the stock market update and several indices were having a really bad day. In my conversation with Dr. Robinson about how my ankle was doing, I casually mentioned the market update to him and asked him if he watched the market. He said no, that he did not really have time to keep abreast of such things. I mentioned that I watched the market on a daily basis due to the type of work I did, and of course he asked me what that was. I told him I was an insurance and financial professional. He seemed disinterested, and talk turned to our families. No problem, as I was seeing him again in a few weeks. To my next visit, I brought one of my cards and my personal brochure. I suggested to Dr. Robinson that we had a lot in common. We both helped people, either with people's physical well being or with their financial well-being. I also asked if it would be okay to give him my card and brochure just in case he ever had a need of his own. He took a quick look at the brochure and indicated he needed to do some college planning. I suggested that we get together, but he did not seem very interested. Over the next two visits or so, our talks remained very casual and we did not discuss business. Finally, on my last visit he said, "I would like to make an appointment with you." He then asked me if there was anything he should bring with him. I said I had a list of "Pertinent Information for the First Meeting" which I would fax to him. Our first meeting was held at my office. After some preliminary warm-up talk, I realized Dr. Robinson had not brought any of his personal records. I took this as a sign that he was not ready to get down to business, so I proceeded very slowly. As with any initial Workbook W-49

50 appointment with a potential client, I introduced myself as a professional in the insurance and financial business, told him about my background, provided some information about my company, and talked about the way I like to work with people. In addition, I overviewed some of the products and services I provided. I indicated that in order for us to move forward, I must find out more about his current situation, as well as his goals and objectives, to be in the best position to make appropriate suggestions and recommendations. I related it to his profession in that he wouldn't write a prescription without a full history. Dr. Robinson was very impressed, and I think surprised, that I did not want to proceed without doing fact-finding and developing a relationship. As with most people who are looking for the insight of a professional in their insurance and financial matters, I immediately began to see his tension and anxiety melt away. After my talk of about 10 minutes, we set another appointment for fact-finding, at which time he would bring his records. Dr. Robinson seemed very relieved that I wasn't going to give him a high-pressure insurance talk and very pleased that I had a professional fact-finding and client-centered approach. I want to stress that I did absolutely nothing different with Dr. Robinson than I do with each and every person I meet with for the first time. I have a rehearsed talk, which evolved over some time. I have used this talk over and over again with very good success. The bottom line of the talk is that, rather than just making a sale, it reduces anxiety, builds trust, and sets the stage for building a relationship with a prospective client through fact-finding. I have come to believe in this system and will not now do it any other way. I was able to accomplish my fact-finding early in our relationship, and after several months, we formulated an entire estate plan, set up his retirement plan, helped him with college funding, and helped him with some defined benefit plan options through his employer. To highlight some of our work from a product standpoint, an Irrevocable Life Insurance Trust (ILIT) was formed and funded with a Variable Universal Life Policy. In addition, Dr. Robinson transferred some 403(b) plans from prior employers, as well as some scattered IRA's for him and his wife, into annuities. He also opened some brokerage accounts for his children using 2503(c) trusts. Not a bad few months work! I continued to work with Dr. Robinson to periodically review his plan and make sure his goals and objectives are being met. I have also enjoyed referrals to his friends and colleagues. I continue to use the same initial appointment talk I used with Dr. Robinson, even with people who have some idea as to why they are meeting with me. I have tried to deviate from this system, and every time it backfires. Therefore, I believe very strongly in this system for setting the appropriate tone for building a relationship with the client. My company promotes a relationship-selling philosophy. To me it's a mindset. I don't want someone to do business with me because of my product. I want someone to do business with me because of my belief that I can help him or her better than anyone else in the business. Once you believe in yourself and the system, a trickle-down effect occurs that drives everything you do as insurance and financial professionals. It boils down to the idea of helping people buy rather than selling to people. If a prospect understands that my recommendations are being made to help them achieve something they haven't been able to achieve on their own, the sale is a natural progression of my recommendation, and it really doesn't matter what product I'm using to achieve that goal. W-50 Workbook

51 Name: Date: QUIZ CLASS 3 (Due Class 3) Instructions: This quiz covers the reading material found in Class 3. 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. Your manners, appearance, and confidence will create an immediate impression with the prospect and refer to the aspect of developing rapport called propriety competence commonality intent 2. A single- or dominant-need sale is best thought of as an opportunity to sell a product and then move on to another prospect quickly to open up a relationship with a client that will lead to total-needs sales to work with complex situations and more advanced analyses and solutions to close quickly if either you or the prospect is not prepared for the interview 3. Which of the following statements best describes empathy? Empathy is the ability to see things from the prospect's point of view. If you do not know something, you admit it and find the answer. Empathy means stating your purpose in a clear and understandable manner. People feel comfortable with people like themselves. 4. In which of the following situations would a single-interview sale be appropriate? The prospect desires a comprehensive, total needs analysis. The prospect wants to fulfill an obligation, such as a condition for a loan or a divorce decree The spouse, who should be part of the discussion, is not available. You obtained an interview by promising to be professional and thorough. Workbook W-51

52 5. Which of the following typically occur in the initial interview? I. Uncover insurance and other financial needs and determine priorities. II. Obtain the prospect s permission to proceed, and commitment to work with you. I only II only Both I and II Neither I nor II 6. Which of the following statements concerning rapport building is (are) correct? I. Intent involves the perception of one's motives, the prospect's perception of an advisor's interest in helping and benefiting the client. II. Competence centers on the expectations of what the prospect considers proper business customs, dress, and behavior. 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. 7. All of the following are reasons for conducting a multiple-interview sale EXCEPT You need to get information from the prospect's other professional advisors. You obtained an interview with a prospect by promising to be professional and thorough. A dominant need is the prospect's primary concern. The information to be assembled and understood requires additional time to analyze. 8. All of the following are benefits to the prospect of a total-needs approach: EXCEPT All of the following are benefits to the prospect of a total-needs approach The planner becomes a trusted and respected professional adviser. The prospect is provided with a complete understanding of the needs to be fulfilled. All prospect needs are met with standardized solutions. W-52 Workbook

53 Name: Date: 9. In the initial interview, you should try to achieve all of the following EXCEPT Create a sense of rapport and credibility, and build trust. Uncover insurance and other financial needs and determine priorities. Develop alternative solutions for the prospect's needs. Obtain the prospect's permission to proceed and commitment to work with you. 10. You should try to achieve all of the following in the initial interview EXCEPT Establish yourself as a person who can help. Avoid taking notes as this will appear that you are not interested or listening to the prospect. Get a dollar commitment for the amount that can be committed to the solution. Gather subjective date, including values and attitudes towards financial issues. Workbook W-53

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55 ACTION PROJECT 3 The Discovery Agreement (Assigned Class 3 Due Class 5) Purpose The objective of this project is to understand the discovery agreement and to be able to write one. This assignment requires you to complete two discovery agreements, then deliver and review them with the prospects. Based on fact finder that you complete, you will write a discovery agreement that you will give to and review with that prospect. The discovery agreement summarizes your initial and fact-finding interviews, and offers recommendations for the next step. Assignment Your discovery agreement can be organized in the following manner, and it should contain the following information. 1. The purpose of the letter and introductory remarks. 2. The prospect's current status: the facts and observations about his/her situation, including his or her attitudes, values, and a summary of relevant issues. 3. The prospect's goals and their desired status. 4. Who is involved the process. 5. Request for the prospect's agreement, or corrections or clarifications, of the information in the discovery agreement. 6. Recommendations for the next step. 1. Purpose Discovery Agreement Checklist a. State the purpose of your letter. b. Start a conversation to set the stage for the letter. 2. Current Status a. What are the individual's financial strengths and weaknesses? b. How are they currently handling their financial plan? c. Summarize the prospect's personal data. d. What is their planning philosophy? e. What major problems and obstacles does the individual face? The problem(s) to be solved is (are): Workbook W-55

56 3. Goals and Desired Status a. Summarize the prospect's objectives and goals. b. What does he or she think he/she need(s) to do to reach these goals? c. What would he or she see as the perfect situation? d. What would be gained if the perfect situation were achieved? 4. Who is Involved? a. Who cares about and is responsible for achieving these goals? b. What is the process for making decisions? c. Who gets involved? What is the role of each player? d. Where is the money coming from? 5. Obtain the Prospect's Reaction a. Request the prospect's agreement or corrections and clarifications to the discovery agreement as presented. b. What do you expect of me? c. What is the dollar commitment? 6. Recommendations for the Next Step a. What is the timetable for implementation? b. What is the next step? Provide your suggestions for how to proceed. Procedure Conduct your fact-finding process with two prospects. After each interview, review what you have learned about the prospect and write a discovery agreement, using the above bullet points and checklist as a guide. Then arrange a follow-up appointment with the prospect to discuss the discovery agreement. This will work best in a two-interview situation. A two-interview sale will allow you to complete the fact-finding and reflect on what information you have gathered to create the discovery agreement. Should you conduct a one-interview sale and are able to do it, you can present the discovery agreement orally at the end of the fact-finder. W-56 Workbook

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59 BREAKOUT CLASS 3 1. In what ways can you help your prospect? Be specific. Draft a script to sell what you offer to clients. 2. How do you prepare for an initial interview? 3. How do you begin your initial interview? What do you do? What do you say? 4. Do you use a sales presentation book? If yes, what does it contain? If not, why not? 5. Do you normally use a single- or multiple-interview sales system? Please explain. 6. Do you use questions designed to disturb the prospect about their financial needs? Why or why not? Rapport-Building Exercises Conduct the activities below and report on your rapport-building results on the form following this page. Exercise 1. Prior to your next appointment with a new prospect, write down what you currently know about that prospect and outline a strategy for using that information to build rapport, demonstrate competence, establish commonality, and express your intent. If you do not have much information about the prospect, create your strategy in a more standardized and generic format. Exercise 2. Prior to an appointment with a new prospect, write down what you know about that person and write a short (four- or five-sentence) introductory statement you can use to communicate your competence. It might contain such information as 1) your background, training and education; 2) your skills and how you have applied them; 3) your track record; 4) facts or information you have heard or read about the prospect; or 5) your knowledge of similar prospects. Exercise 3. Make a list of the benefits a prospect may receive from spending time with you. Create a summary statement of these benefits and be prepared to present it to your classmates. Workbook W-59

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61 CASE HISTORY: CLEAN SWEEP Kirby Buckner, age 28, married, with two children, entered the life insurance business after 3 years as a sales advisor for a small firm that sells automated cleaning equipment for swimming pools. A Navy veteran, Kirby was among the company's leading new advisors. Prospect A year or so ago, I had an appointment with Dana Spencer, with whom I had worked for 18 months at my former company. Dana had joined the firm after I had been there about a year and a half, but had quickly shown considerable promise as a salesperson; in fact, we had vied for the top sales spot for the last year I was there. Dana is a college graduate and is related to the family that owns the pool equipment company we worked for. They make an ingenious gadget that keeps swimming pools clean automatically. It's just what a working family needs, or anyone who doesn't want to spend an hour or so a week doing the job by hand. My friend is in line for a partial ownership of the company some day, which I learned after trying to interest him in a career in selling life insurance. Dana wants to move up to management and product development with the company. No matter what line of work he chooses, it will be a success. I had spoken with Dana about life insurance several times in the last year in connection with my efforts to interest him in joining our agency, but this was the first time we had met specifically to discuss his insurance needs. We had the interview in the living room of his condominium. Interview Dana is single, but is engaged and plans to be married within the year. Since we've both had a lot of sales skills training, I kept things light by announcing each time I went from one part of the sales process to the next. "Now that we've established rapport and explained the purpose for my visit," I said, "let's gather pertinent information about your personal situation. Is that okay with you, prospect?" This seemed to lessen the slight discomfort we both felt at this new situation. It's always tough to try to sell to a former colleague and competitor. Once we were into the fact-gathering process, we both got serious about what we were doing and it seemed perfectly natural. Dana is a fairly typical young person with a good background and education, and a drive to do well in business. Although still single, he was buying the condominium we were in and had used family funds to pay for the first 2 years of college, along with some government loan money. Dana needed about $100,000 of protection now, but could be expected to need a great deal more in the coming months and years. Another factor in the current equation was that Dana's income was well below what it would be once he had learned the business from the ground up and moved into a management job, or achieved an ownership position with the company in another 2 or 3 years. Recommendation I showed Dana an illustration of an adjustable life policy that I felt would meet current needs as well as offer the flexibility of changing the policy as his needs and circumstances Workbook W-61

62 changed. In this policy, we would be able to adjust premium, type of insurance, and face value in the future. I explained that by starting out with a $750 annual premium which fit the premium commitment he had suggested would be appropriate we could provide the $100,000 coverage that was needed now. In this case, the initial plan of insurance would be term to age 65. After Dana married and needed more protection, however, the face amount and plan could be changed (to perhaps, $125,000 of term to age 57) without changing the premium. This would make sense because Dana's income would not increase that much in the next few months, and additional expenses would be expected after marriage. "By the time you're 30, Dana, maybe you will have started a family and will be making more money. If so, you will be able to increase your protection. If you bump it up to $150,000, the premium would probably go up to about $1,500. "At any time, though, you could put more money into the policy and change the plan to permanent insurance to build cash values at current investment yields. The plan is just what its name says: 'adjustable.' That means you can change the premium amount or the death benefit (subject to evidence of insurability, of course) as your needs and financial situation change. You can also make a lump-sum payment into the policy that will extend the protection or shorten the premium payment period. For instance, a large enough payment would change a term to age 55 to term to age 65, or change a life paid-up at 70 to a life paid-up at 60 policy. "Further, if you change the policy to permanent insurance, you'll be able to use the cash accumulations and dividends if you need money for the business, for some other opportunity, or in case of an emergency. "All in all, Dana, this plan is going to take care of you today and it's going to be with you tomorrow. It is going to simplify your life insurance planning a great deal because each year when we review your situation, you can make whatever adjustments are necessary. There is no need to buy additional policies every time your needs increase or you want to increase your premium commitment to keep pace with inflation. If you want to put additional money into the plan to build more cash value, you can. This policy is a contract that permits you to do it all." Conclusion Dana took my recommendation, although the initial premium was dropped to $600 annually. Later, after he was married, Dana increased the premium to $900. I've stayed in contact with Dana both socially and as his insurance advisor. I have also sold another adjustable life policy to his wife. At our next review, I intend to recommend that they both increase their coverage to protect some additional short-term debt they have taken on. Now that Dana has moved into sales management and the business has expanded, I'd like to discuss a mass marketing/payroll deductible life insurance plan my company offers. It's just the thing for a small firm like his. As in many small businesses, the current employee benefit package is not very competitive. I think the future is bright for this client relationship, both in terms of providing Dana's personal life insurance needs and for getting a foot in the door of a business that is on the move. They can use some additional help with their business insurance and employee benefit planning. W-62 Workbook

63 Name: Date: QUIZ CLASS 4 (Due Class 4) Instructions: This quiz covers the reading material found in Class 4 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. In the sales process, the main objective of gathering information from the prospect by the advisor is to begin the underwriting process, with the advisor acting as field underwriter obtain referrals sell the advisor's skills and competence uncover meaningful information by asking appropriate questions 2. The best questions to begin an interview are open-ended leading referral driven closed-ended 3. Which of the following statements is an example of an open-ended question? "Do you want to cover the cost of higher education with insurance?" "What are your hopes and dreams for your children's education?" "How much do you think college will cost when your kids are ready to go?" "Are your parents alive?" 4. An example of a leading question is "Do you really think $100 per month is enough?" "How much is your annual income?" "Tell me about your plans for your children's education." "What is your most important financial goal?" 5. Which of the following documents should the prospect typically have ready for your review: wills, insurance policies, and employee benefit information birth certificate, passport, and Social Security information charge card numbers, employer references, and credit history personal biography, photos, and driver's license number Workbook W-63

64 6. Leaning back, crossing arms over the chest, propping feet up on the table, and losing eye contact are all typically nonverbal signs that interest in the topic is decreasing interest in the topic is increasing the prospect is pressed for time the prospect wants to be more involved in the conversation 7. Which of the following statements regarding effective communication with prospects is (are) correct? I. In effective communication, we should assume we understand the prospect's message. II. Nonverbal behavior channels communicate about two-thirds or more of the message. I only II only Both I and II Neither I nor II 8. Which of the following statements concerning the objectives of the information-gathering interview is (are) correct? I. Get a dollar commitment. II. Identify and prioritize goals, needs, and objectives. 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. The discovery agreement typically contains all of the following EXCEPT The prospect's current status: the facts and observations about his/her situation, including attitudes, values, and relevant issues The prospect's goals and their desired status Recommendations for solutions to shortcomings in the current plan Recommendations for the next step W-64 Workbook

65 Name: Date: 10. Objectives of the advisor in the information-gathering interview include all of the following EXCEPT Communicate the process to the client. Completion of fact-finding and feeling-finding information gathering. Identify and prioritize goals, needs, and objectives. Analyze the data and recommend solutions to the gaps between existing resources and goals. Workbook W-65

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67 SALES PLANNING PROJECT 2 Interview an Experienced Life Insurance Advisor (Assigned Class 4 Due Class 6) Purpose As an advisor who is interested in marketing and selling life insurance, it is important to gain the perspective of experienced advisors who are doing it successfully. The information you will gain from interviewing them will give you greater insight into how to improve your production. By tapping into their experience and knowledge, you should gather ideas to increase your marketing efficiency and improve your selling effectiveness. Assignment Interview an experienced advisor in your office, agency, or association who has a successful life insurance practice. The advisor should ideally be working primarily with life insurance prospects and clients. If such a person cannot be located, a second choice would be an advisor who works in other areas of insurance and personal financial planning. Procedure Identify an experienced advisor who is successful in life insurance sales. Contact the advisor and tell that person that you are interested in learning how to be successful in selling life insurance. Ask that advisor if he or she would be willing to share constructive ideas and discuss his or her experience in working with prospects. Make an appointment to conduct a face-to-face interview (if possible). Use the questions provided on the report form on the next page as a guideline to your discussion. Add relevant questions that you think will be helpful to you. This is your chance to learn from someone experienced and to control the questions asked. Complete the questions on the Report Form and turn it in to your moderator at the beginning of Class 6. Workbook W-67

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71 BREAKOUT CLASS 4 1. Do you ever find resistance by prospects to do a fact-finder? If yes, how do you deal with it? What is the source of the resistance? If no, why do you believe you do not encounter resistance? 2. What is the most important information in the fact-finder for you? 3. How do you establish needs with the prospect? 4. How does one master question-asking (information-gathering) skills? In other words, how do you know what questions to ask? 5. Do you use the discovery agreement technique? If so, how do you use it? Workbook W-71

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73 CASE HISTORY: DOUBLE-DUTY DOLLARS Corey Combs was a retail salesperson at a local department store until he entered the life insurance business 5 years ago. Corey made MDRT after 2 years and is involved in the personal market in a medium-sized city. Prospect Since I started in the business, I ve made it a habit to send out at least 50 direct mail letters a week. This has helped supplement my prospecting activity very effectively. One letter I especially like to use is the mortgage protection letter. It s a standard company letter. I find most people are interested in guaranteeing a debt-free home for their families in the event of death. Pre-approach After receiving a reply card from Tim and Mildred Ford, I phoned and spoke with Mildred. I said that I had received the reply card and was calling to arrange the appointment. Mildred was very interested in meeting with me and suggested that they come to my office during one of Tim s lunch hours. I asked for some preliminary information, such as ages, smoking history, mortgage amount, and interest rate so that I could prepare some preliminary suggestions that would fit their needs. Tim was 35, a nonsmoker, and a junior high principal, and Mildred a housewife. Approach My office has a welcome board in the waiting area, so I made certain that the Fords names were on the board when they arrived. I had made arrangements to use the agency conference room. This was necessary for my presentation since I feel it s important to use visuals to help the prospect understand the concepts that I propose in my mortgage presentation. I began by spending a few minutes in general conversation with Tim and Mildred. This helped me get a better idea of how best to communicate with the two of them. Since time was limited, however, I started my presentation without too much of this warm-up. Information Gathering Because I had taken some preliminary information over the telephone, this portion of the interview was short. I confirmed the information that I had and found it was correct. I also laid the groundwork for further work with the Fords. Tim and Mildred, I said, this meeting will take care of one of the needs for insurance you have now. Once we have taken care of the mortgage protection, it s important for us to review your overall program to be certain that this insurance for your mortgage won t have to be used for income, education, or other debts that may someday become priorities. Both agreed to discuss other needs later, but their major concern was having insurance on their new home. Tim said they had seen the program they wanted. They Workbook W-73

74 were looking for a level premium with a declining death benefit that approximated the declining mortgage. Tim s comment gave me the opportunity to make my suggestions. Close I spent a few minutes illustrating on the flip chart how different insurance plans worked, concentrating on decreasing term and ordinary life. I used diagrams to explain the products. Then I reviewed the Ford s mortgage information. The mortgage was for $125,000 at 8 percent on a 30-year fixed loan. I showed Tim and Mildred that their actual payments would exceed $330,000 over that 30-year period. That surprised them. Neither had realized just how much interest would have to be paid and what $920 a month really added up to. If I could show you how to save some interest costs on your new home by using a particular type of insurance program, would this be of interest to you? Both were a little confused when I asked this but were interested in hearing my idea. I showed them two of the computer runs I had made. The first was an amortization schedule on their home. This illustration showed the outstanding mortgage balance at the end of each year. The second was an ordinary life illustration for $125,000 on Tim s life. I focused their attention on the policy s cash values, taking special care to point out the 23rd year s cash value. This year-end cash value was a few thousand more than the outstanding mortgage balance in year 23. To complete the concept, I showed them the money they would save if they paid off the mortgage in the 23 rd year. It would be over $77,000! My final illustration was a rough drawing on the flip chart of the cash value growth of the insurance plan intersecting with the Ford s declining mortgage. Now, back to my plan. It was making sense. If Tim were to die prematurely, the death benefit would be available to pay off the mortgage immediately. But, if Tim lived until a ripe old age, the cash value 23 years from now could be used to cancel the mortgage and save over $77,000 in payments. This added opportunity to save money really adds sizzle to the mortgage cancellation sale for me. Incidentally, I always add waiver of premium. It s the insurance on the insurance. That s how I sell it. When the extra premium for this permanent insurance plan I was suggesting was related to this mortgage cancellation program, with more than $77,000 in expense saved, it was easy to close the sale. The Fords did not mention the decreasing term insurance idea they brought to our meeting again. The application was completed, a prepayment made and Tim made it back to school in plenty of time. Comment Not everyone will buy cash value life insurance to cover the need to liquidate a mortgage. Not everyone can or will afford the higher initial premiums. Our primary goal is to cover the needs of our prospects from whatever source is necessary. For those who do, however, the security of equity in both the home and its insurance protection are quite comforting. The dollars saved eventually create a long-term benefit that greatly exceeds the short-term sacrifice needed to put it in place. There is nothing ordinary about this application of ordinary life! On another point in this sale, this was the first time a prospect had come to my office for an appointment. I had heard other advisors talk about it, but had never felt confident enough of myself to suggest it. Since then, one of my first questions after setting the date of the first appointment is to ask, Do you know the way to my office? Then we can W-74 Workbook

75 negotiate what will be easiest for the prospect. Many times, I find the prospect has no objection to coming to me. Workbook W-75

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77 Name: Date: QUIZ CLASS 5 (Due Class 5) Instructions: This quiz covers the reading material found in Class 5. 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. Under Sec. 79 of the Internal Revenue Code, the first of group insurance is not considered taxable income to the employee. $25,000 $50,000 $100,000 $150, Flexible spending accounts are employee benefit plans designed to do which of the following? Allow employees to pay for noncovered medical expenses with pre-tax income. Provide an employee's salary to continue at retirement, death, or disability. A portion of an employee's compensation is postponed until retirement, death, or disability. Employees may purchase life insurance using a payroll deduction plan administered by the employer. 3. The pension plan based on an annual contribution formula applied to an employee's earnings, offering no guarantees about the size of the participant's monthly pension benefit, is which of the following standard plans? 401(k) plans profit-sharing plans defined-benefit plans defined-contribution plans 4. The normal retirement age under Social Security for someone born in 1958 is and 4 months and 8 months Workbook W-77

78 5. Every person has an economic value in life associated with his or her capitalized potential earning ability the amount of life insurance owned Social Security eligibility standard of living 6. The basic assumption the agent must make when planning the face amount of the life insurance to present to a prospect is that the prospect will die today die sometime around life expectancy need a specific multiple of income, such as 3 times or 5 times his or her income know how much insurance is needed and work with that figure 7. Which of the following statements is (are) true regarding life insurance planning? I. A major shortcoming of the capital conservation method is that the capital fund may be totally liquidated before the beneficiary's death. II. The capital distribution method takes into account present resources of funds that may be used to help meet lump-sum and ongoing income needs. I only II only Both I and II Neither I nor II 8. Which of the following statements concerning the capital-needs-analysis approach to calculating the insurance need on the family income earner is (are) correct? I. Divide the income amount by the applicable interest rate representing the after-tax investment return anticipated on the capital sum. II. The lower the after-tax investment return rate, the higher the capital fund needed to produce the same amount of income. I only II only Both I and II Neither I nor II W-78 Workbook

79 Name: Date: 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. Shortcomings of the multiple of income method of determining an insurance need include all of the following EXCEPT There are large differences in the multiples that are recommended. It is easy to explain and requires few calculations. It does not take into account important differences in people's lives. It ignores the financial and personal situation of the individual. 10. The definition of disability for Social Security includes all of the following EXCEPT The waiting period for application is 5 months. The disability must be expected to result in death or to last for at least 12 months. The disability must prevent the worker from engaging in a substantially gainful activity. The disability must commence before age 22. Workbook W-79

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81 Name: Date: SALES PLANNING PROJECT 3 Test Your Underwriting Knowledge (Assigned Class 5 Due Class 7) When discussing underwriting issues in the text, the LUTC program necessarily takes a very broad view of the underwriting process. Most all companies, however, have their own rules and guidelines that are very specific in nature and which vary from company to company. Purpose The objective of Sales Planning Project 3 is for you to find out and clarify your company s underwriting requirements. You must be constantly aware of them as you work with your prospects and clients. Make sure you are very familiar and knowledgeable about underwriting rules and procedures. This will improve your ability to discuss this information with prospects, but will also help you to identify favorable and unfavorable underwriting characteristics that may assist or cause problems in the underwriting process. Assignment Below are listed several questions which will help you with this process. Seek further assistance from your supervisor, agency staff, underwriters, home office personnel, and other advisors. Procedure You may use office employees, manuals, Intranet, or website provided by your company to get the information to complete this project. You will find the time spent now will be invaluable as your interaction with underwriting grows in the future. 1. What are the non-medical underwriting limits of your company for life insurance applications? 2. Describe the risk classifications of your company. Workbook W-81

82 3. Under what conditions would your company consider removing a rated premium based on substandard underwriting? 4. If there is a discrepancy in test results, what is your company's policy regarding payment for retesting or re-examination? 5. What is your company's policy in reference to issuing a conditional receipt to an applicant who may have a serious medical condition? 6. What are your company's rules regarding occupational and avocational ratings? W-82 Workbook

83 ACTION PROJECT 4 Social Security (Assigned Class 5 Due Class 7) Purpose Most workers are concerned about the amount of Social Security taxes they pay and the benefits they will one day receive. Few have more than a basic understanding of how Social Security works. Social Security provides an excellent door opener for the financial advisor because it addresses a problem of almost universal concern. Information on Social Security benefits can be a valuable source of sales activity for the pre-approach, approach and initial interview steps of the selling/planning process. The Social Security approach is a service approach. Do not give prospects the impression that the sole purpose of your approach or initial interview is to sell life insurance. This interview will almost certainly lead to a discussion of life insurance. Instead, ask for the opportunity to provide information about Social Security and its effect on your prospect's overall financial program. This is a mutual qualification process: the prospect is qualifying you, as you qualify the prospect. Assignment Contact at least three people who are covered by Social Security and were born after This will put your oldest group of prospects in their late 50s or early 60s. Surveys indicate that people in their 50s have reached an age where they have more disposable income to establish a personal retirement plan to supplement benefits from Social Security. Loss of benefits will be a concern to prospects at any age. You will want to discuss Social Security and its effect on their financial programs. Stress the following points: Social Security is only the foundation of a person s financial security program. It was never intended to replace all of the earnings lost at death, disability, or retirement. It is a base on which to build and should be supplemented with individual pensions, savings, investments, and insurance. Social Security moves with the worker from employer to employer. The worker should also have some sort of individual supplemental retirement plan personal savings, insurance, IRA, investments with the same mobility. Review the Social Security information in the text so you feel more familiar with it and confident in your knowledge. This project will help you form a firmer foundation of knowledge about Social Security. Procedure In calling your prospects for an appointment, you can use the following telephone approach, or a variation of your own design. (Prospect), this is Dan Baker of XYZ Life. Do you have a moment to speak on the phone? (Yes, I guess so.) Fine! Workbook W-83

84 Are you familiar with the recent changes in Social Security which affect your and your family s future? (What kind of changes?) Well, the normal retirement age of 65 has been changed. Everyone born after 1937 will have to work longer to receive their full Social Security retirement benefits. Does this affect you, (Prospect)? (What do you mean? I can t retire at 65?) If you were born after 1937, and I assume you were, you can still retire at 65, but your Social Security benefits will be less. Social Security s new retirement age may force you to postpone retirement or take a smaller monthly check. Don t you think you owe it to yourself and your family to get more information about these and other changes which affect your economic future? (Well, I guess so.) Fine, I can explain how it will affect you. Would it be convenient to meet at your office, or would you rather come by my office one day next week? Following a discussion of Social Security, you can open the conversation to life insurance, IRAs, or annuities with a natural question such as, how do these benefits fit into your overall financial program? Although this project requires you to contact only three people, if you follow this procedure on a regular schedule, you will find yourself making more appointments and more sales. Social Security Information A fully insured person will receive reduced benefits for retirement income between age 62 and whatever the new normal retirement age will be depending upon his or her date of birth. The percentage will change for the worker who elects early retirement. Under current law, for those born before 1937 the reduction at age 62 is 20 percent of the Primary Insurance Amount available at age 65. This reduction will be revised upward to a maximum of 30 percent when the normal retirement age is increased to age 67. It will be a great help to these prospects if you could review with them the Social Security Statement they receive each year, a few months before their birthday. With your help they can check their Social Security contributions and study the projection made for their future retirement benefits. W-84 Workbook

85 Name: Date: Action Project 4 Social Security (Assigned Class 5 Due Class 7) Enter your comments below. It is not necessary to mention names. Use the reverse side or additional paper if more space is needed. Prospect (1) Describe how you approached the prospect and how your interview was obtained. Comments: What did you discuss with the prospect concerning Social Security? What was the prospect interested in talking about? Did the subject of life insurance come up? Did you schedule an initial interview? Prospect (2) Describe how you approached the prospect and how your interview was obtained. Comments: What did you discuss with the prospect concerning Social Security? What was the prospect interested in talking about? Did the subject of life insurance come up? Did you schedule an initial interview? Workbook W-85

86 Prospect (3) Describe how you approached the prospect and how your interview was obtained. Comments: What did you discuss with the prospect concerning Social Security? What was the prospect interested in talking about? Did the subject of life insurance come up? Did you schedule an initial interview? If you made more than three calls, enter total number here Number of interviews obtained Did you create a Sales Presentation Book page to illustrate your presentation? Did you offer to review with your prospects the Social Security Administration form, "Your Social Security Statement?" W-86 Workbook

87 BREAKOUT CLASS 5 1. How do you decide which life product to recommend? 2. How do you calculate the life insurance need? 3. How do prospects respond to the calculation of their life insurance need? 4. Do you prefer the capital distribution or capital conservation method for calculating income needs? Explain your reasoning. 5. Do you expect Social Security to provide you with retirement benefits? Why or why not? Workbook W-87

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89 CASE HISTORY: THE RESERVED ADVISOR Sue Stanley entered her insurance career after 8 years in the Air Force. After separation from active duty, she entered the Reserves as a public affairs officer. She remained in touch with many of her military friends and made many new contacts both on active duty and in the Reserves. A growing number have become insurance clients over the last couple of years. This is the story of her experience with one client on the base. Prospect One friend, Peter Mitchell, asked Sue about saving money for retirement through an annuity advertised in a military magazine. She suggested that an annuity might be a good idea, but it would be better first to review his entire financial program to coordinate his military benefits with his personal savings, investments, and life insurance. She also recommended that Pete s wife Diana be part of the review. They set a time to get together at Sue s office in town off the base. She asked Pete to have copies of all insurance policies, savings and investment statements, wills, and payroll statements available for review when they met the first time. The First Appointment At the meeting, Sue took a few minutes to explain to the Mitchells how she worked. She informed them that she would ask a lot of questions, and that all information would be held in strictest confidence. It turned out that Sue began working with this couple at an important point in their lives. During the discussion, Pete said he planned to retire within the next 2 years and would return to school to complete his degree and obtain a teaching certificate to teach high school. Diana was already working full time as a teacher s aid in a school district near the base. At the time, their two children were 9 and 6. They lived in base housing and were planning to buy or build a home in the next year in the $150,000 range. This would prepare them for the transition to civilian life. They had saved $32,000 for their home purchase and had an additional $8,000 in U.S. savings bonds. Diana had a tax-sheltered annuity (TSA) with an account balance of $12,000. Pete owned a $50,000 universal life policy and had Servicemen s Group Life (SGLI) coverage of $200,000. Diana had a $25,000 universal life policy and group insurance of $20,000 through her school. Pete is a Senior Master Sergeant (E-8), and earns approximately $30,000 per year. Diana s salary is $15,000 per year. If one were to die, they feel they would need about 60 percent of their combined income to protect their lifestyle. They had been saving $800 per month in the credit union and $100 in savings bonds. The Second Meeting Sue moved the location of the next meeting to the Mitchells home. She said she finds this an effective device to establish a closer relationship. To illustrate their current financial status, Sue used a simple net worth statement and listed their goals. These were reviewed at this meeting (see box below). Sue showed that if Pete died, the current amount of coverage would cover the net liability with money to spare ($250,000 $168,000 = $82,000). In addition, there would be $3,000 payable by the Air Force, plus a payment for outstanding leave. If Diana died, there would be a shortage of $128,000 necessary to take care of the home purchase and education funding. Workbook W-89

90 For family income, Pete s current income would suffice if Diana dies as long as he remains in the Air Force. But this will soon change when he retires because his income will be reduced, and he will return to school. Pete and Diana elected to discount his expected income to his retirement level ($1,200 per month). Their current income is $45,000 ($3,750 per month), and desired income is 60 percent of that ($2,250), leaving a shortfall of $1,050 per month. They felt this would be necessary for a period of 5 years, until Pete was able to work full time as a teacher. Total coverage needed: $1,050 x 12 x 5 = $63,000. If Pete died, Diana would need the same level of income per month ($2,250). From his military benefits, Diana would receive $861 Dependency and Indemnity Compensations, and the children $75 each until age 18. If Pete died after retirement, Diana s survivor benefit would depend upon the level of survivor benefits elected under the Survivor Benefit Plan (SBP). Pete and Diana elected to accept the level of benefits currently provided and look at the retirement problems closer to Pete s actual date of separation. Talking It Over In summary, they felt the amount of coverage on Pete s life ($250,000) was adequate for the present. They agreed to purchase additional coverage of $186,000 for Diana. They spent some time discussing various kinds of life insurance with Sue, pointing out both advantages and disadvantages of each. They liked the concept of lifetime coverage and equity of the permanent plans, but were unsure that it was totally right for them with so many changes in their life coming up in the next few years. Sue recommended universal life since they had experience with this type of protection that was flexible and still offered the option of tax-deferred savings for the children s future college expenses and their own retirement. Peter and Diana Mitchell LIABILITIES ASSETS Lost Expenses $ 10,000 Home Purchase 150,000 College Fund (2 $30,000) 60,000 Savings $32,000 Bonds 8,000 TDA 12,000 TOTALS $220,000 $52,000 Net Liability $168,000 Goals and Priorities 1. Home purchase if either dies 2. College education for children 3. Survivor income if either dies 4. Accumulation of money for (a second) retirement W-90 Workbook

91 An Unusual Recommendation Sue did not look closely at the savings for retirement issue that had originally brought them together. She suggested they use Diana s TDA at school and invest up to her legal maximum before buying another annuity. She told them nothing else could match its tax advantages now and in the future. Conclusion Sue described how this sale opened what will be a long-term business relationship. The Mitchells have become occasional social friends as well. Diana introduced her to faculty members at her school and she made additional sales and obtained other referrals. Sue says her endorsement of the TDA was what got her in the door. Early on Sue has learned the lesson of generosity in praising the good decisions that clients have already made. Pete, on the other hand, considered his own future professional plans confidential and was unwilling to refer Sue to others he knew on the base. Sue was surprised over the next few months when Pete stopped her on two occasions to suggest she call someone. She followed up and did so, armed with Pete s reasons why the person might be a prospect. She got an appointment each time. Workbook W-91

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93 Name: Date: QUIZ CLASS 6 (Due Class 6) Instructions: This quiz covers the reading material found in Class 6 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 level-premium concept creates which of the following results when purchasing an ordinary life policy? It is the most expensive form of cash value insurance. It matures at age 65. It has an increasing cash value and decreasing risk amount. Both the cash value and amount at risk increase annually. 2. Which of the following statements concerning yearly renewable term is correct? The insurance company may experience some adverse selection at renewal time. The premiums increase either every 5 or 10 years. Evidence of insurability must be furnished at the time of each renewal. The insured can renew the policy each year by completing a medical exam. 3. The most likely marketing application of a life paid-up at 65 policy would be the prospect who wants to pay a minimum premium for the minimum number of years possible needs permanent protection for only a specific number of years wants to create a personal, qualified retirement plan through life insurance wants to emphasize cash growth and stop paying premiums at age Which of the following best describes a 20-year decreasing-term policy? The policy premiums decrease while the death benefit remains level for 20 years. Both premiums and death benefit decrease. The death benefit decreases while the premium remains the same. The death benefits decreases while the premiums increase. 5. If a policy becomes a modified endowment contract (MEC), the death benefits will become income taxable. the policy will lose its tax-deferred status. tax free withdrawals to the cost basis of payments are permitted. distributed gains are subject to a 10 percent penalty prior to age 59½. Workbook W-93

94 6. The standard policy design upon which variable life, interest-sensitive whole life, adjustable life, and universal life are based is annual renewable term insurance endowment life insurance permanent life insurance industrial life insurance 7. Which of the following statements concerning methods for determining the cost of life insurance is (are) correct? I. The net payment index is useful in comparing costs when the death benefit is emphasized. II. The net payment index takes into account premiums, dividends, and cash values. I only II only Both I and II Neither I nor II 8. Which of the following statements concerning limited-pay whole life insurance is (are) correct? I. The limitation on the number of premiums to be paid may be expressed as either a number of years or an age beyond which premiums are not payable. II. If the insured dies during the premium-paying period, the total premiums paid will exceed those paid for an ordinary life policy of the same face amount issued at the same age. I only II only Both I and II Neither I nor II W-94 Workbook

95 Name: Date: 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 concerning the interest-adjusted indices are true EXCEPT The NAIC developed these methods and model regulations for adopting their use. These methods treat premium payments as if they were put into an interest-bearing account to accumulate to the end of the interval. The net payment cost index is similar to the surrender cost index except it does not consider cash value at the end of the interval. The surrender cost index is useful in comparing costs when death benefit protection is emphasized. 10. All of the following statement concerning universal life are correct EXCEPT The level death benefit option has a constant amount at risk to the insurer. If the universal life policy is under-funded, the policyowner has the choice to either (a) increase the premium or (b) reduce the face amount. Universal life policies do not require premium after the first policy year if the policy s cash value is adequate to cover the next 60 days of expenses and mortality charges. Money can be withdrawn without creating a loan or interest payments. Workbook W-95

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97 SALES PLANNING PROJECT 4 Analyzing the Life Insurance Need Evaluate Your Life Insurance Need and That of a Relative, Friend, or Prospect (Assigned Class 6 Due Class 8) Purpose It has been said that the shoemaker's children are the ones with holes in their shoes or no shoes at all. The shoemaker is so busy with his business that he may neglect his own needs and the needs of his family. Do you fit this description as well? Are you working hard for your prospects and clients but neglecting your own life insurance needs, or those of a loved one or friend? This assignment is meant to open your eyes to your own life insurance need and that of a selected relative, friend, or prospect. It is intended to give you practice in using portions of the fact-finder to calculate how much and what type of life insurance to purchase. Assignment Using a fact-finder, either provided by your company or the one provided in the textbook, complete the appropriate fact-finding information on yourself and a selected friend, relative or prospect necessary to make a responsible life insurance recommendation. You should focus primarily on completing the information in the cash and income needs section of the fact-finder in order to calculate the amount of life insurance that should be recommended. You must complete at least two fact-finders for this project. Based on the amount of insurance needed, the premium commitment, and the feelingand fact-finding done, make some initial recommendations for life insurance, including the type and amount you would recommend. Procedure You should perform the insurance calculation using the human life value method and one of the following methods: 1) the financial needs analysis method (capital distribution), 2) the financial needs analysis using cash and income needs to determine a life insurance calculation, and 3) the capital needs analysis method (capital conservation), where a principal sum will be created to produce the family income requirement. You will need to use questions from the fact-finder and from your conversation about financial goals in order to choose what types of policies to initally recommend. Of course, the premium commitment is another key determinant of your recommendations. Analyze the information gathered and make a recommendation regarding the type and amount of life insurance you feel will meet the prospect's need. Then complete the attached form and turn it in at the beginning of Class 8. Workbook W-97

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101 BREAKOUT CLASS 6 1. Convert the following features into benefits: 1. waiver of premium 2. policy loan 3. nonforfeiture options 4. dividend 5. renewability 6. level premium 7. flexible premium 8. option 2 universal life 9. children's rider 2. How do you present the life insurance solution to your prospect? 3. What are you favorite life products, and why? 4. What are your favorite life riders, and why? 5. What are your thoughts on buying term and investing the difference? 6. Are there any life products you would be reluctant to sell? Workbook W-101

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103 CASE HISTORY: VARIABLE UNIVERSAL LIFE Tony Tyler entered the insurance field after spending 8 years as a real estate loan officer. Tony had met several insurance advisors at the mortgage company and saw the career opportunities. With a year in the business, Tony has no regrets and is eager to learn more. Prospect E. Francis Mindlin was a member of our town s Chamber of Commerce when we first met. At our monthly luncheon meeting we had shared the same table. During lunch, I found that Fran was an associate attorney at one of the larger law firms in town. When given the opportunity to talk about my background, Fran expressed some interest in insurance. Fran remarked that she had many clients ask for advice, but really didn t know much about the product. We scheduled an appointment at Fran s office for later that week so I could explain the different products. I knew a center of influence in Fran s position would be helpful. The Interview When we met, I suggested that I explain the different programs by using Fran s situation as an example. Fran was a little embarrassed by this, and said that someone who didn t have a family really didn t need insurance. I told her that many of my clients were in this position when I first met them, but that with today s products, insurance could be useful to almost everyone. Besides, the uses and examples of life insurance I was about to show her would be more real if we used her as the insured. I asked if she could design a perfect program, what would it be? Fran thought for a long time, and it was tough for me to keep quiet. After what seemed like an eternity, Fran said, I would want a policy that could grow in equity; it would have to keep pace with inflation. I would want control over the equity. I asked if the plan should feature tax-deferred growth and flexibility in payments. Fran asked for an explanation about the premium. I said I was suggesting a premium, which within certain guidelines, could be raised or lowered. I don t believe it! If you have an insurance program that lets me set a premium, invest the money, and control the equity, I may buy it today, Fran said with a laugh. There is such a policy, I said. It s called variable universal life. If you are really interested, I would suggest a meeting tomorrow at my office to see what we can build. Fran agreed and the appointment was set. Close I decided to make my presentation on the assumption that Fran had become a prospect. I made arrangements to have a computer available for the meeting. Together we began to look at the different alternatives and played out the assumptions on the computer. After we had run four alternatives, Fran sat back in her chair and said, I m really impressed. I didn t realize life insurance was so flexible. Workbook W-103

104 Does this policy meet your criteria of what your perfect policy would accomplish? When she answered yes, I brought up the previous day s remark, took out an application, and started to complete it. I fully expected Fran to stop me, but to my surprise each question was answered as I asked it. Fran decided on a $50,000 death benefit to complete the process. Summary I was taught a valuable lesson. First, I learned that everyone I speak to is a prospect, even when you are not more than luncheon seatmates at a Chamber luncheon. My second lesson was that if you can meet a person s needs, the sale is a natural event. No struggle at all. W-104 Workbook

105 Name: Date: QUIZ CLASS 7 (Due Class 7) Instructions: This quiz covers the reading material found in Class 7 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. Which of the following is true concerning a prospect's questions, concerns, objections, and excuses? All questions and concerns are excuses, and not really objections or real issues. All the prospect's questions and concerns are objections, not necessarily excuses. Not all questions and concerns are objections; some may be just excuses. A prospect will always ask questions and make comments as a smoke screen to avoid buying. 2. The most compelling reason for getting cash with the application is a matter of: meeting company sales goals putting the insurance in force getting your commission on time guaranteeing that the prospect is serious about wanting life insurance 3. An applicant for life insurance may be classified as a substandard risk for several reasons. One of these is the applicant's gender health marital status current level of earned income 4. When is an insurance contract completed? when the prospect signs the application. when the prospect makes a premium payment when the beneficiary receives the policy proceeds when the policy is recorded in the insurer's home office Workbook W-105

106 5. Which of the following statements regarding underwriting outcomes are correct? Only 3 percent of issued policies are rated, while only another 2 percent are declined. About 90 percent of all applications are issued as standard or better. About 7 percent of issued polices are substandard and about 5 percent are declined. Underwriting is becoming more stringent, with about 12 percent of life insurance applications being given substandard ratings or declinations. 6. Which of the following statements regarding life insurance applications is (are) true? I. If the insured is to be someone other than the applicant, you will typically need the signatures of both the applicant and the insured. II. If the insured is a minor, you will need the signature of a parent or guardian. I only II only Both I and II Neither I nor II 7. Which of the following statements concerning closing techniques is (are) correct? I. The decision to buy is not directly asked and presumes the prospect has decided to buy with the implied consent technique. II. "Are you ready to start this plan?" is an example of the direct question technique. I only II only Both I and II Neither I nor II W-106 Workbook

107 Name: Date: 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. 8. All of the following statements are included in taking a problem-solving approach to objections EXCEPT building trust and rapport with the prospect dealing with the needs involved, not personalities instilling a sense of urgency implying that the prospect really does not love his or her family 9. All of the following are purposes of the underwriting process EXCEPT analyze the risks of prospective insureds determine the appropriate premium to charge reject clearly unacceptable risks the first step in the process to eliminate unacceptable risks is the medical exam 10. All of the following are steps in the process for responding to objections EXCEPT listen to the prospect rephrase what the prospect has told you use the "yes, but" approach to dealing with objections wait for the prospect to respond after you rephrase their concern Workbook W-107

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109 1. How do you close a sale? BREAKOUT CLASS 7 2. What is required at your company to get a preferred (best class) rating? How hard is it to get? 3. What are the three most common objections you get? 4. What are your favorite ways to respond to objections? 5. "I want to think about it." What do you say or do when you get this objection? Workbook W-109

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111 CASE HISTORY: A LEGACY FOR LIFE Emilio Ortero was born and raised in Argentina. He became an American citizen many years ago, and worked as an engineer. After signing an application for insurance, Emilio asked the agent to arrange an interview with the agency manager and in no time was out in the field persuading others to put their estates in order. Emilio calls it "falling in love with life insurance." Prospecting In approaching the educational and juvenile insurance market, I look for people with three qualifications. 1. a good income 2. an awareness of the value of life insurance, to the extent that it is a definite part of their own financial pictures 3. one or more children or grandchildren Preapproach Most of my prospects in this market are clients or referred leads. Before approaching them, I already have considerable information on their backgrounds and circumstances. I use no letters but find the telephone invaluable for making appointments. I try to control the sale from the very beginning. The initial step is to tell my prospect that I am going to come by between 9:00 and 10:00 the next morning. The technique is telling not asking the prospect that I ll be calling. Also, I never state a precise time. By estimating the approximate time of arrival, I allow myself a little leeway. If the time suggested is inconvenient, the prospect won t hesitate to say so. When this happens, he or she is likely to concentrate on convincing me that there really is a conflict and goes on to arrange a mutually convenient time. By being definite and affirmative during this telephone contact, I build more prestige and am accorded a better reception at the interview. Approach If the interview is with prospects who have children, my opening remark is, Mr. and Ms. (Prospect), would you surrender your life insurance today? Invariably the answer is no. Why not? This question puts them on my side immediately. Since they don t feel they should drop their insurance, they must think highly of it. I point out that their children will feel the same way in 25 or 35 years, and doubly so if their insurance had been purchased at a younger age. Reactions to this approach are always favorable. I follow by stressing that their children will reach certain stages in life when they will need money in varying amounts. After they agree to this generalization, I turn the tables and ask the prospects to estimate the amounts that will be needed, and when. My recommendation is determined by their responses. Interview Of course, you would do anything in your power to help your children, wouldn t you? Right now they re at the threshold of life, dependent on you for everything they have, and Workbook W-111

112 they will be for a long time not only for all the material things, but for the building of character, the forming of habits, the knowledge of what to do and what not to do. No other human beings, as long as your children live, will ever have as much influence as you on the kind of people they become. As the years pass, they will stand more and more on their own feet. Whether you are around to guide those footsteps or not, your influence will be felt by them for many years. I have an idea for their benefit that I am sure will interest you. Let me explain it with the help of this chart. Assume that we arrange an umbrella of life insurance to cover each of them throughout their lives. For the sake of an example, let s say $25,000 of whole life insurance the same kind as you own. Perhaps the wonders of life insurance are never so clearly portrayed as when it starts at so young an age. It stands behind the children, through their lifetimes, ready to help in the emergencies they will face. At this point, I draw my prospect s attention to a chart showing cash values, at various ages from 18 to 65. For instance, when the children are about 18 years old, they will be ready to start college. Am I correct in assuming that you want them to have this opportunity? In that case, there will be a financial demand. Of course, if you are around, this problem will not be too serious; if you are not, your own insurance program may provide enough. But if cash should be scarce then, they are going to be hit hard. If all other sources fail, these contracts you have arranged for them as little ones stand ready to serve. They will make money available to start your children on their way so they will have a chance to help themselves as they go along. Later, when they marry, they will be thinking about life insurance for the benefit of their own families, just as you and I did. Perhaps they will be able to meet the requirements of good health, but perhaps not. In either case, don t you think they ll be mighty glad to have the $25,000 of insurance provided by their parents, and won t they be particularly grateful about the accumulated cash reserve? If you had been so fortunate when you married, wouldn t it have been a great contribution toward solving your own problems? It won t be long before they will have the age-old desire for a home of their own. Again your plan comes to the rescue by making money available to finance their homes. They ll certainly appreciate the privilege of using the cash value as collateral at an interest rate that is likely to be substantially lower than the market rate. At age 65, if they want to take it easy, as I am sure we ll want to at that age, this plan which has been available for emergencies through all the past years can provide a guaranteed monthly income that will be paid for the rest of their lives. The great advantage in arranging this lifetime program for your children now lies not only in the tremendous savings in cost, but in the assurance that they will have something that may not be available to them later. There is no way to be sure that they could qualify for life insurance when they re older. Even if they could, here is what it would cost to delay this plan until later ages. At this point, I show a second chart illustrating the total of all premium payments for starting ages from 2 to 45, extending to age 65 and retirement. Of course, the lowest total occurs at the youngest starting age. Would you like to pay the premium annually, or would you prefer paying through our automatic monthly bank-o-matic withdrawal service? Usually I recommend ordinary life for children and, sometimes, limited payment plans. Although the latter calls for a higher premium, the cash values are proportionately higher. W-112 Workbook

113 Every family is different in their approach to premium payment periods for insurance on their children. Comment I find a superstition among many people who feel that the purchase of insurance on a child s life is bad luck sort of a death omen. Fortunately, this idea has greatly diminished in the past few years, thanks largely to the fact that tax legislation favors juvenile insurance. Wealthy parents and grandparents have found it especially attractive as a means of making gifts to potential heirs, thereby reducing tax liabilities on their estates. Both annual premium and single premium plans are used for this purpose. The policy serves as a depository for the funds until the child is ready for college or is off on his or her own. Obviously, safeguarding insurability is another, and probably more important, buying motive. Guaranteed issue options are an extra incentive not only for today s sale, but for repeats in the future. By keeping in touch with children through birthday greetings, graduation cards, and so forth, I have developed a fine nest of future prospects. Some of my young policyowners will be leaders in business not too many years from now. The importance of insurability to a successful businessperson is becoming increasingly evident to the public. This has made the market more receptive than ever to juvenile insurance. As a result, I have great success in obtaining interviews using this approach. Best of all, my records show that three out of five prospects approached with this idea buy more insurance on their own lives. Workbook W-113

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115 Name: Date: QUIZ CLASS 8 (Due Class 8) Instructions: This quiz covers the reading material found in Class 8. 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. Mr. Jackson owns an insurance policy on the life of his daughter Julie's new husband, Andy. Julie will be the irrevocable beneficiary. Whose signature(s) will be needed on the policy change forms in the future? Mr. Jackson Mr. Jackson, Andy, and Julie Mr. Jackson and Julie Mr. Jackson and Andy 2. To avoid potential problems at the insured's death when naming children as beneficiaries, one should always name the family, not the children, so all family members are beneficiaries name the surviving parent or a trustee to have full control of the proceeds during the child's minority never name children as beneficiaries of life insurance, to avoid problems name the children as a class of beneficiary, so that those born or adopted later will not share in the proceeds 3. Which of the following is a settlement option for the death proceeds of a life insurance policy? extended term lump sum payment paid-up additions life income 4. Life insurance is an aleatory contract, which means it is one in which both parties contribute to the terms and conditions of the contract the values exchanged are not equal and are subject to an element of chance and uncertainty only one party makes a legally enforceable promise one party has the option of affirming or denying the contract Workbook W-115

116 5. The spendthrift clause is intended to protect life insurance against attachment of proceeds by the insured's creditors proceeds against attachment by the surviving spouse's creditors proceeds against attachment by the beneficiary's creditors policies against attachment by both the insured's and the beneficiary's creditors 6. Which of the following is the settlement option that will pay both principal and interest until a specific time period is over? life income fixed-period income specified amount interest income 7. The insured and the primary beneficiary of a policy die in a common accident. The primary beneficiary lives in a coma for one week after the insured's death, then dies. If the interest settlement option rather than the lump-sum cash settlement had been chosen, whose interests would have been protected by a common disaster clause? primary beneficiary primary and contingent beneficiaries contingent beneficiary primary beneficiary and insured's interest 8. It is not recommended that the estate of the insured be named as the policy's beneficiary except when there is no spouse the insured is elderly proceeds will just cover debts and the estate's settlement there is a executor named in the will 9. Which of the following statements regarding the policy loan provision is (are) correct? I. Interest rates may vary up to a maximum set by state law. II. A life policy loan must be repaid on a fixed schedule set at the time of the loan I only II only Both I and II Neither I nor II W-116 Workbook

117 Name: Date: 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. 10. Premiums paid for individual life insurance policies in the United States are usually tax deductible for income tax purposes in all of the following circumstances EXCEPT life insurance in an alimony agreement premiums paid for individually owned life insurance on a family member life insurance that is owned by and paid to a charity as beneficiary premiums paid by a business in the form of a bonus (salary) to an employee Workbook W-117

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119 BREAKOUT CLASS 8 1. What should be included in a good policy delivery? 2. How can you ensure that your client will be pleased with the policy you sell to him or her? 3. What is the meaning of the following terms and how do they impact a life insurance policy? 1. unilateral contract 2. aleatory contract 3. contract of adhesion 4. What is the meaning of the following contract provisions? 1. entire contract clause 2. incontestable clause 3. grace period provision 4. reinstatement clause 5. policy loan provision 6. misstatement of age provision 7. nonforfeiture provision 5. Under what conditions will a life insurance policy on a decedent be included in his or her estate? What are some ways to avoid this situation? Workbook W-119

120 6. How are the following events treated for income tax purposes? 1. payment of life insurance premiums 2. payment of death benefits to the beneficiary 3. payment of dividends to the policyowner 4. policy loan 5. cash surrender 6. a modified endowment contract (MEC) 7. During this course, we have discussed meeting with and helping a prospect identify needs and purchase insurance for the right reasons. You have learned new skills in working with people as they go through the buying process with you. The LUTC program hopes that you have gained new confidence and are on your way to a more successful career because of this experience. The next three questions are designed to help you focus on your future. 8. What is your primary business goal for the next 18 months? 9. How do you plan to accomplish this? 10. Of everything you have discussed in class or read in the text, what one thing has helped you the most to increase your sales, to become more knowledgeable about the products your offer to the public, or helped you professionally? Good luck on the final exam. W-120 Workbook

121 CASE HISTORY: TEMPORARY HELP B. Tracey Gunter had been an accountant for 6 years before giving up tax forms for insurance applications 3 years ago. The clientele Tracey has worked hard to develop consists mostly of two-income families. Many were initially Tracey's tax clients. It has been a natural extension for many clients to continue to work with Tracey. Prospect. After 2 years in the business, I was beginning to spend more time servicing my clients. At first I thought it was nothing more than busy work, but I soon found that a service call could be profitable. Like any other aspect of this business, I wanted to plan to be profitable, so I designed my approach to service to create additional sales opportunities. I made such a call on the Murphys. Preapproach. Every year, 2 weeks before each policy anniversary date, I send a letter to my clients to arrange a service appointment. This letter informs them of the upcoming anniversary and says that I will be calling. This way, I am certain to make the call for the appointment within a week after sending the letter. "Hank, this is Tracey. Did you receive my letter?...great. As I noted in the letter, your life insurance policy is a year older now, and I think it is important for us to review it together. I will be in your area next Thursday and Friday. Which day is best for you?" Hank said that he and his wife Sue could both meet me Thursday evening at home. I have personally begun to enjoy doing service work in the evenings when I can relax a little with clients with whom I have already established a good relationship. Approach. I arrived and spent a few minutes with Hank and Sue talking about things that had happened in their lives since I last saw them 6 months earlier. It was during this conversation I learned that their oldest child, Ronnie, had recently started a business. Sue and Hank had taken a second mortgage on their home to help get the business started. The Interview. I reviewed the policies that Hank and Sue had purchased from me and brought them up to date on their other policies. When we had finished, I asked for more information about the loan to Ronnie. Sue told me that Ronnie had been interested in starting a small business for some time. A good opportunity had presented itself, but Ronnie needed some financial help from them to take advantage of it, so Hank and Sue had decided to loan Ronnie the money. To accomplish this, they had to take out a $40,000, 7-year second mortgage on their home. This represented about half their total equity. Close. I asked Hank and Sue, "What have you done to protect yourselves and insure your equity against sudden loss?" Sue said that they had not really thought about it, and Hank added he did not consider that additional insurance necessary. After all, they had loaned the money to their son. I asked if additional insurance had not been considered because of cost. They agreed it was the primary concern. I explained to them that although I was sure Ronnie would repay the loan, if something happened to Hank in the meantime, and there was a downturn in business causing difficulty for Ronnie to meet the loan obligation, Sue would have to use personal income sources to repay the loan. I could tell that I had disturbed them so I went right to a trial close. "Hank and Sue, if I could show you a low-cost insurance program that will protect the other income sources you have, would it interest you?" They said if it is affordable they would be interested. I then showed them a $40,000 yearly renewable term policy. I explained this program was meant to be used for short term, temporary situations only, Workbook W-121

122 and carried only for the protection of the death benefit. Hank and Sue were pleased at the low premium cost and thanked me for bringing the option to their attention. We completed the application and Hank gave me a check for the full annual premium. Dividend. The Murphys also shared a concern for Ronnie's security and protection, not just relying on the business blossoming for the future. They asked me to meet with Ronnie to find out the details of the situation, and give him some counseling and advice. I had a good referral even before asking. Using my standard "Who else might need my help?" talk, I also received four more qualified referred leads! Summary. The commissions on this case did not add up to much money, but the situation provided other rewards. The most important thing, however, is that through the service I was able to provide, more protection was put in force and more qualified people were made available for me to meet. The needs of my clients were satisfied first, and then I reaped the benefits. W-122 Workbook

123 Name: Date: MOST VALUABLE CONCEPTS Reflection is an important part of the learning process that is often overlooked. Take a minute to think about what you have learned and write the most valuable concept, sales idea, marketing strategy, and so forth that you learned in class. Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 Class 7 Class 8 Workbook W-123

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