How to Choose a Life Insurance Agent – Episode 118

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, got bestselling financial author and president of Partners for Prosperity, Kim Butler here with us today. We’re going to be talking about how to choose a life insurance agent. I got to tell you, right off the bat, I think most people get referred to their hairdresser’s nephew’s grandson, and that’s where they end up finding their life insurance agent. That’s probably not a good thing.

[00:50] You’ve got a string there, hairdresser’s nephew, and isn’t that the truth? It is. Somebody knows somebody who knows, and it’s more of a personal relationship than it is a professional decision, and I don’t think that’s good. Yes. Very, very true. So let’s dig into this with full disclosure, of course, because we, you and me both, are one of them, the life insurance agents, and so why don’t we use that term? So unfortunately, kind of like used car salesmen and personal injury attorneys, the term life insurance agent does not always have the best connotation, and I feel bad about that. I mean, the industry, I think, deserves its reputation to a certain degree, and yet there are many, many people out there that would technically be called an agent or

[01:39] even a life insurance broker. We could get picky on our language, but we’ll just put those together for today’s purposes, and this person, again, the word life insurance agent, is truly there to help you at your best interest. So how do we pick them? What are we looking for? And often the word agent does imply that they’re only connected with one company. But in today’s world, that’s not always accurate. Many, many life insurance agents have two or three or ten different life insurance companies that they work with. And of course, the term life insurance broker implies more that they work with two or three different companies. And so that’s good and helpful. But what is it that you’re really looking for?

[02:26] So I want to bring up, first of all, that there are actually designations in this space that people can get. And the most common one is a CLU, stands for Chartered Life Underwriter. There is a very common secondary one that often goes with it, which is CHFC, and it stands for Chartered Financial Consultant. And so you’ll see these designations on people’s business cards, John Doe, CLU, CHFC. And that means that they’ve gone through quite a bit of extra schooling. It’s almost what I would call a master’s level schooling system done by the American College in Bryn Mawr, Pennsylvania. Absolutely very helpful. However, I have to admit that in the end, oftentimes, it basically means that they can take and pass tests.

[03:21] It does not necessarily mean that they have a lot of experience out in the marketplace daily helping clients buy and use life insurance. Now, of course, sometimes it absolutely does mean that. But I’m always shocked to find on the web, people with all these string of letters behind their name, still using words like, you borrow from your life insurance. And that’s incorrect. You borrow against it. It’s not only incorrect, it’s misleading and confusing. So I will readily admit that I’m one of those people that used to have designations. I didn’t have the CLU, CHFC. Instead, I had the CFP. And I have since gotten rid of said designation because I disagreed with the approach. And the podcast today is not about that.

[04:14] But I’m just stating that designations can be helpful. You can learn a lot. But sometimes you learn a lot of what not to do in addition of what to do. And in particular, the CFP designation had one tiny little portion of its efforts focused on life insurance and don’t recall it being very helpful. So back to this person, what are we looking for here? And clearly, we want somebody that owns the product. Because if that person is not even at a small degree, you know, everybody’s starting out, it’s going to start small. But if that person is not even in a small degree putting their money where their mouth is, I think a client has to be immediately suspect. Now, this agent, in addition to putting their money where their mouth is,

[05:06] I believe needs to be able to, when necessary, prove what they’re talking about. So a lot of clients are not going to want to look at a bunch of numbers. And so a lot of proof is not always necessary. But when push comes to shove, the agent needs to be able to prove, independent of the illustration that comes from the insurance company, whatever it is that they’re saying. They need to be able to find language in the illustration and or have a suite of calculators that proves what they’re saying. And there’s a variety of calculators out there that you can use to do that. And then thirdly, of course, they need to be licensed in your state. That’s very important. And a lot of agents these days are licensed in numerous states.

[05:54] So that’s not really that big of a deal. And I’m sure there’s some other things. But let me pause for a minute, Todd. What kinds of questions do you think has come up in this area? I think one of the most important things that we haven’t touched on yet is being able to understand the philosophy that that particular advisor is following. And of course, this is where we would be promoting the prosperity economics movement and prosperity economics advisors, because there’s a unified group of principles that we have agreed to that may or may not be in alignment with what the client’s looking to do. I love that you brought that up. I really should have started with that, because if the set of principles and the philosophy are not in line with the client’s

[06:42] desires, then the game is over right there at the beginning. And frankly, those principles are so much more important than whatever individual company and or whatever individual policy gets picked. So, yes, thank you for bringing that up. You want to just ask upfront what is your philosophy about the life insurance or about over you could even broaden it about your overall approach with money or about the way that you work with people. What are your principles? What are your philosophies? What are your values even? I think that’s a fabulous question and one that’s well worth starting with. And then, of course, I know one of the other questions that’s going to come up is compensation. Now, as it relates to whole life and even term life insurance,

[07:33] compensation is pretty set. I mean, there’s a little bit of play that a particular company can have with a particular agent, but I still feel like the agent should be able to very succinctly describe and again, even prove their compensation. Don’t you think that’s important to be able to do for the client? Oh, absolutely. I think it was five or six years ago, I was approached by a couple of companies that were selling commission free products. So the person selling the product to you was paid a salary. They were not paid any form of commissions, but because the states or however, the insurance rates are regulated, is it the state level, I guess, or however they get approved, the money that would have gone to that agent as compensation was still charged

[08:28] to the client. So there was no savings for the client. Yes, the person selling you the product was not getting paid as much as a typical agent would be, but there’s no savings in it for the client. So I think I would rather have somebody who’s motivated to help me than somebody who isn’t. Absolutely. And I’ve looked at those products and the internal rate of return on them was disgusting compared to a commissionable product. And you know, it is interesting that the old saying within the industry is life insurance is sold, not bought. And it’s because unlike so many things on the web these days, it’s just pretty rare that an individual client is going to pop on the web and actually want to buy whole life insurance.

[09:14] Now we’re starting to see that a little bit more because people are so hungry for a better place to store their cash because the bank’s rates are so deplorable and of course taxed and with lots of other problems. So people are actually seeking alternatives and whole life is going to start to come up as one of those alternatives. So there is the rare occasion where somebody might be able to pop on the web or might want to pop on the web and buy whole life. But as a general rule of thumb, it just is a bit of a black box product to people. That’s not actually true. It’s a very clear box. We know exactly what’s going on inside, but people think it’s a black box, a hidden box. And so you need as an advisor to be aware of that.

[10:00] And as a client, you want help. And so you are looking for somebody that can provide you that help and be objective about it and answer your questions directly. I’m always surprised when a client will say, well, I’ve talked to this person and that person and they just won’t answer my questions directly. They beat around the bush or they hem and haw or they’re not able to answer things specifically. And that’s just indicative that the person that you’re talking with doesn’t have enough experience or training in the industry. And as we know, there are many, many times when somebody might have five or 10 or 20 years in the industry, but they truly have not had good training. And so they may literally not be as experienced as

[10:48] somebody only one or two years into the industry that has had fabulous training. And I will admit, unfortunately, that the insurance industry is not doing a good job of training its people right now. We had somebody at our truth training recently, which is something that my husband, Todd Langford, and I provide for life insurance agents and financial advisors say to us that he felt like he just got a PhD in personal finance. And this is somebody with, I think 15 or 16, I don’t remember exactly years of experience in the business helping people with their personal finance. So it is something that we find interesting. And of course, anybody can go to truth concepts.com, which is the suite of calculators that we choose to

[11:37] use for proving our principles and by the software, attend the training, watch the videos, buy the extra videos, come and check things out. Now, of course, your typical client isn’t going to want to go through all that, but some people are either curious enough or cautious enough that they want to do that. And then of course, we have some clients that actually decide to get into the industry and would want that training for their own practices as well. So help me know what other questions we should be answering for how do you pick a life insurance agent? You mentioned at least a half a dozen times the term pop on the web. How important is it that the agent that you’re selecting has a web presence?

[12:27] How do you evaluate that? Oh, that’s a great question. Well, I’ll admit that I feel it’s very important because we do business in all 50 States. And the only way anybody has a chance to check us out is via the internet. There are many people in the insurance industry that still operate on the knee to knee, toe to toe, handshake, referral to referral basis. And they circulate in their own town and their own communities and their presence on the web may not be as important today, but tomorrow, I believe it’s important. It’s something that I think more and more people are expecting and a website presence is a way for the typical advisor to put themselves out there and for a prosperity economics advisor to differentiate themselves.

[13:20] So if I were a client, I absolutely would go and look on the web and do a little research before I ever spoke with anybody. And I think that’s fairly common these days. I think most clients are interested in doing research ahead of time. They want to come into the meeting with some preparation and as an advisor or an agent, if you don’t have at a minimum a website and to take that even further, some type of way to update it, whether it’s blog posting or podcasting or writing articles or what have you. As we know, an updated website is way more valuable than a static boring one. And yet a static boring one, of course, is more valuable than nothing at all. In addition to that, a little bit of presence on

[14:06] LinkedIn where the person can again, go and check you out and see who you know, which is a very helpful thing around LinkedIn and possibly even Facebook as well. And I’ll readily admit this was a challenge for us, but it’s something that we’ve embraced and we’ve spent some money on trying to get right. And I encourage clients to continue to check people out on the web and seek out the videos and the audios and the books and the articles and the blog posts and the podcasts that various people have because it’s great way to learn. And you can learn in the method that works best for you. So if you like to watch videos, but you won’t read, you can seek the videos that are there. If you wanna listen or you wanna read,

[14:53] but you don’t wanna do the opposite, you can look at the podcasts or the articles. So I do think it’s a very, very important thing. And I’m very grateful for that. It certainly enabled us to help a lot more people because of the web presence and the ability to do business in all 50 states, which is not normal for the typical life insurance agent. They’re probably doing business in maybe one to 10 states, but that’s fine. It doesn’t mean that there’s better or worse. It’s just different. I would also add to that when you’re evaluating somebody’s online presence, you really want they be able to understand their opinion and philosophy again, you want some black and white there, not the generic boiler plate stuff that, you know,

[15:36] basically they believe in everything and nothing at the same time. Absolutely. And that goes back to that. The answering of questions specifically, you need to be looking for that. Confident, strong, specific answers, or them telling you, you know what? I don’t know the answer to that. Let me go check that out. There’s nothing wrong with that. I mean, we’re all human beings. We’re not gonna be able to get it all right to begin with the very first time. So there’s nothing wrong with saying, hey, I don’t know and doing a little research. But people better be specific in their answers. Either they don’t know or they know. And if they don’t know, they’re gonna go check it out. Super. Well, before we wrap up today,

[16:16] is there some additional resources or an additional place that people could go to learn more about Partners for Prosperity? Absolutely. I think the best place is for people to get our ebook, which is called Financial Planning Has Failed. There’s a fairly large section in there about the people that you’re dealing with. The financial advisor, the life insurance agent. And then there’s also a fun history of the various designations and the things that happened in our marketplace to cause some of the economic things that happen. So if I can say history’s fun, so if I can say this, a well-written piece that made it very clear why we are where we are in America today. So that book, Financial Planning Has Failed,

[17:05] is available at partners4prosperity.com slash ebook. And there is an audio version available as well. That’s partners4prosperity.com slash ebook. Super. And I’ll also mention that that is available to just the people who have that link and there is no cost. So again, thanks so much to our listeners. Thanks so much to Kim Butler for all of the contribution she’s made to our industry and the education that she continues to put out. This is No BS Money Guy Todd Strobel. Take care everybody. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partners4prosperity.com. If you liked this episode, make sure you subscribe and leave a review.