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Principles of Agency Building
13th Edition April 12, 2010
By: Roberto H. Bruce, MS, CLU, ChFC,
LUTCFCavaliers Insurance Marketing
www.aalliance.com
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Agency Building Opportunity
Strong CompanyUnique ProductsGround floorAgency compensation
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The Ultimate of Selling is
Agency Building
Recruit Train
Sell
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Term – Insurance For A Specified Period
T1 T2
T age
CCOI
$
T
1 Flexible Premium2 Adjustable Death Benefit3 Current Interest Rate4 Guaranteed Interest Rate
UL
$
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Premiums
$
Tamra 88
Defra 85
Net Level
7 Pay Test
Guide
Target
Minimum
Premiums
Single
Level
eg. $5,000
eg. $25,000
eg. $2,000
YR 1— $5,000— $4,000 2—10,000 — 5,000-9,000
3—15,000 — 7,000-16,0004—20,000 — 5—25,000 — 6—30,000 —7—35,000 —
M.E.C
Annuity
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TRA’ 86
PREM
INSURANCE
Interest Income
PREM
PREMPREM
InterestIncome
ANNUITY
59 ½ - 10% Penalty
FIFO LIFO
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Life Insurance Tests
Cash Value Accumulation Test – not more than single premium for lifetime
orGuide Premium Test, andCorridor Test– Age 95
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Options
t1 95T
$
$
T
Savings
Savings
OPT ALevel Face
Amount
OPT B Increasin
g Face Amt or
Face Amt +
Savings
100,000
100,000
t1
Amount At Risk
Amount At Risk
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Policy Costs
CCOI+ Policy Fee+ PREM Charge+ Charge / $1,000
TCOI =
PREM – TCOI = Policy Fund
Cash Value
Cash Accumulation Value
Policy Fund – SURR Charge = Cash Surrender Value
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Hierarchy of Life Plans
• Whole Life
• Universal Life
• Term
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Parties To A Contract
•Owner
•Insured
•Beneficiary
Three - Gift Tax
One - Estate Tax
Two – Recommended
Disclaimer, if not taken
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Waiver Of Premium
•In case of disability
•Always recommend
•Disclaimer, if not taken
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Beneficiary(ies)
•Primary
•Contingent / Secondary
•Per Capita
•Per StirpesRights
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Annuity 1 or more premiums
(accumulation)
1 or more payments
(distribution)Tax-Deferred
59 ½ 10% Penalty
1 – Single premium
Immediate – SPIA Deferred - SPDA
1 or more - Flexible premium
FPA/FPDA
Ordinary income Capital gains
FIX – General Account VARIABLE – Separate Account
QUALIFIED
IRA (Front)-70 1/2
DEDUCTIBLE NON-DEDUCTIBLE
ROTH-IRA (Back) NON - QUALIFIED
TRADITIONAL IRA / ROTH-IRA / SEP-IRA / SIMPLE IRA
DIRECT TRANSFER / ROLLOVER /
CONVERSION
INDEX / TREASURY LINKED / MYG/MVA
1035 Exchange
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Annuity Ideal Cases
•L (FPA $100Q/mo; $10,000NQ)
•S/As (SPDA $2,000)
•A (SPDA $4,000Q; $5,000NQ)
•L (SPDA $10,000)
•L (FPA $3,000Q; $10,000NQ)Rights
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Plan Distributions – When to?
•Die, Disabled, or severance from employment
•Plan terminates, no successor plan
•59 ½
•Financial hardship**Cannot rollover to IRA
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Early Distribution Penalty(Plan, IRA, Annuity)
•10% additional tax on distributions under age 59 ½
•In addition to any regular income tax on the amount
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Penalty Free Plan Early Distributions
•Death or Disability
•Distributions over life expectancy on termination of employment
•Service separation after age 55
•Qualified domestic relations order
•Medical expenses over 7 ½ % of AGI
•Distribution election by March 1, 1986
•Dividends on employer securities
•IRS levy of plan
•Qualified reservist distributionsRights
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IRA Rollover
•Distribution from one qualified plan
•Contribution to IRA within 60 days
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Types of IRA Rollover
•Direct - qualified plan to IRA, no 20% tax withholding
•Indirect - qualified plan to individual to IRA, with 20% tax withholding
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IRA Rollover Exceptions
•Series of substantial equal payments based on life expectancy, or 10 or more years period certain
•Required minimum distribution (RMD)
•Corrective distribution
•Loan treated as distribution
•Hardship distribution
•Dividends on employer securities
•Cost of life insurance coverage
•Distribution to beneficiariesRights
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Penalty Free IRA Early Distributions
•Unreimbursed medical expenses over 7 ½ % of AGI
•Not more than cost of medical insurance
•Disabled
•Beneficiary of deceased IRA owner
•Distribution in form of annuity
•Not more than qualified higher education expenses
•Used to build, rebuild first home $10,000 or less
•IRS levy of qualified plan
•Qualified reservist distributions
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Required Minimum Distributions(RMDs)
•Minimum amount to withdraw annually starting with year at age 70 ½ , or if later, year retires (except 5% business owners)
•Amount not withdrawn taxed at 50%
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Placement Ratio
Issued over submitted apps Pre-qualify prospect Concept selling Trial app / no initial premium
for borderline cases Initial payment w/ app More apps, e.g., Juvenile plans Case follow-up
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Persistency Ratio
Active over issued policies Modal payment hierarchy
1. Annual, 7 Pay, or Single2. Monthly bank draft3. Semi-annual4. Quarterly5. Monthly direct billing
Client contact/review Improve placement ratio
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Goal Setting
4. $$$$
5. Sale/Network
6. Appointment
1. Calls ——————— 3 min
NO$
TimeNeed
NameCompanyPurposeAppt.
T1
T2
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$_______ A.P. Goal÷$_______ A.P./Sale
Sales/Year x_______ Appt/Sale
Appts/Year÷52 Wks
Appts/Wk
x_______ Calls/Appt
Calls/Wkx 3(min/call)/60(min/hr)
Hrs/Appt
Appt Hrs/Wk Call Hrs/Wk
+Hrs/Wk Total
x
___ min/call
___ calls/appt
___ hrs/appt
___ appt/sale
$_____ Annual Prem (A.P.)/Sale
$250,000 – ESD/SGA$100,000 – MDRT $50,000 – Convention
Goal Setting
20
2
2
1,000
100,0001,000
1002
200
20
80
4
12
2
8
4
3
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ESD ASM DM UM How?1) Recruit One (1) Agent Per Month 3 Agents/QTR 12 Agents/YR
Maintain 10 Producing
Agents
Maintain 6 Producing
Agents
Maintain 2 Producing
Agents
1) Mergers / Acquisitions2) Advertising3) Agency Office4) Seminars5) Business phone/ pager / 800# / Fax6) Laptop Computer7) Partnering8) Recruiting presentation9) Annuity / high premium selling10) Weekly reports11) Monitor agents 12) Awards / Incentives13) Referrals / Phone Book / Associations14) Education (CLU, CFP, LUTCF, ChFC)15) Concentration16) Delegation17) Mailers / Leads18) Convention19) Goal Setting
6 Agents Per YR
4 Agents Per YR
2 Agents Per YR
2) Participate in Regional Seminars
Yes Yes Yes
3) Conduct Agency Seminars
Yes for ESD-Aspirants Participate Participate
Participate
4) Provide Agency Sales and Training Support
Yes Yes Yes
5) $250,000 Paid Target Premiums/YR
$100,000 Paid Target
Premiums/YR
$60,000 Paid Target
Premiums/YR
$36,000 Paid Target
Premiums/YR
6) $500,000 Total Premiums
$250,000 Total
Premiums
$100,000 Total
Premiums
$60,000 Total Premiums
7) Quarterly Progress Review With RD
With Immediate Manager
With Immediate Manager
With Immediate Manager
8) Annual Review with RD
With Immediate Manager
With Immediate Manager
With Immediate Manager
Aalliance Management Expectation/Commitment(Calendar Year)
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Agency Building Blocks1) Recruit - Producer, Recruiter2) LEG3) Magnificent “Seven”4) Rule of “Three”5) Principle of the understudy6) Bottom/Top Approach7) Recruit-Train-Sale Cycle8) Teamwork/Involvement9) Lead from the front10) Quality vs. Quantity –
Collect/Select11) Generalization-Specialization
Cycle12) Simplify - KISS 13) Sowing/Reaping - Stout-
Hearted14) Set the example15) Go forth and multiply16) Numbers game - +/-, Attrition,
Prime, Progression17) Curves- Straight line, Pulse,
Supply, Ravine / Death-defying, Crash-landing, Sine, Square, Cubic
18) Anarchya) Absence of Rulesb) Rules are impossible to implementc) Nobody is implementing the rulesd) Rules are being violated with impunity
19) Five Pillars - Professionalism, Persistency, Perseverance, Production, Proficiency
20) Management Cycle - Planning, Organizing, Staffing, Directing, Controlling
21) Goal Setting22) 7 C’s of Success -
Commitment, Competence, Concentration, Consistency, Creativity, Control, Conduct
23) Maximin = Minimax
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Recruit
A recruit is not a recruit without a recruitA recruit is both a producer and a recruiter
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LEG
A leg is not an effective leg without another leg
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Magnificent “Seven”
Tested to be the most efficientSeven members of a squadSeven days in a weekLess-not enough, inefficientMore-Too much to handle
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Rule of Three
Out of the seven, select your best
three
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Principle of the Understudy
Out of your best three, select your
understudy that can duplicate or replace
youRights
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Bottom/Top Approach
Service the bottomInform all at the top
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Cycle of Success
RECRUIT
Marketing Structure
Professional Development
Financial Independence
TRAIN
SELL
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Teamwork/Involvement
No man is an islandThe whole is more than the sum of its partsCongregation
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Set The Example
Lead from the front in sales,
recruiting, and training
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Quality vs. Quantity
Collect and collect; and then select
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Generalization/Specialization Cycle
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Simplify
K I S SKeep It Simple and Sincere
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Sowing/Reaping
What you sow you reap a thousand timesStout hearted men
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Go Forth and Multiply
The ultimate of selling is in agency buildingIf you don’t talk about recruiting, it will never happen
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Numbers Game
+/-AttritionPrimeProgression
ArithmeticGeometric
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Curves
Straight Line
$
y
Supply
$
y
Ravine/Death Defying
$
y
Crash Landing
$
y
Square
$
y
Sine
$
y
Cubic
$
y
$
y
Pulse
$
y
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Why Anarchy?
Absence of RulesRules are impossible to implementNobody is implementing the rulesRules are being violated with impunity
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Five Pillars
ProfessionalismPersistency
PerseveranceProductionProficiency
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Management Cycle
Planning Organizing
StaffingDirecting
ControllingAlways go back to planning every time there is a hitch
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Book of Success
Front Cover: Goal SettingBody: 7 C’s of Success
Commitment CreativityCompetence ControlConcentration ConductConsistency
Back Cover: Maximin=Minimax Maximize profit, subject to minimum utilization of your
own resources Minimize cost, subject to maximum utilization of other
people’s resources Should be balanced
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