Who Will Emerge as the Apple of Retirement Income Solutions? The Organization That Focuses On the Number One Deliverable: “Confidence”
Written on April 29, 2007
I believe it was Winston Churchill who said, “A young man who isn’t a liberal has no heart. An old man who isn’t a conservative has no brain.” Leaving behind the politics, I enjoy the symmetry of these words. Churchill’s quote inspires me to fashion my own:
“A new retirement income initiative that isn’t focused on product has no brain. A mature retirement income initiative that isn’t focused on communications has no chance.”
I define a “mature” retirement income initiative as one that is ready to roll-out, set to be unleashed upon a waiting world. Many financial services companies are devoting huge levels of resources to the development of their own retirement income solutions. Which will emerge as the retirement income version of Apple? And which will land with a thud in the junk heap of failed efforts? I won’t predict which will flourish and which will fail; I will predict how success will come to some.
Unique Experience and a Distinctive Perspective from Which to Make Predictions
In terms of my career in financial services, over much of the past thirty years I’ve been like a fish swimming simultaneously in two separate and distinct ponds. The breadth of my work experiences is unusual, to say the least.
For 25 years, one-half of my business life was devoted to the wholesaling and distribution of insurance and annuity products. Call this advisor-centric place, the salt water pond. In the salt water pond large networks of financial advisors were recruited, trained and serviced. Their business challenges became my challenges; solving them, even partially, led to production loyalty, referrals to other advisors, and business growth.
So, when advisors made comments to me like, “compliance is driving me nuts”, “that damn insurance company screwed-up my 1035 exchange”, “I can sell, I just need a way to get in front of more people”, “each seminar is costing me $8,500 but I’m getting only half as many people to show-up as I used to”, “my biggest in-force life policy was just replaced”, “I’m losing annuity sales to (insert name) bank”, “I need a higher commission on this product”, or, “I need a product with higher interest rates”, I understood the pain and frustration behind each of these statements.
The other half of my business life was spent in (and, in fact, is now entirely spent in) the fresh water pond. The fresh water pond is habitat to the product manufacturers and, to some extent, broker-dealers. The language spoken in the fresh water pond is different than that spoken in the salt water pond. Different issue and challenges take form. Whereas the advisor is vexed over the insurance carrier’s or the B-Ds “insane compliance”, the carrier or broker-dealer seeks to limit insane levels of potential future liability.
In the fresh water pond I originated all manner of marketing tools, programs, strategies and technical innovations that insurance companies and, or, broker-dealers used to boost their value to both producers and consumers. I developed numerous, highly successful marketing programs and presentation tools that collectively ignited multi-billion dollar increases in new sales. I served as one life company’s de facto CMO for 12 years as it navigated through a myriad of mergers and name changes (Commercial Union, CGU, CGNU, Aviva). Over the years I consulted with another twenty or so life companies on a variety of projects.
I delivered hundreds of motivational speeches, training seminars and product rollout presentations. As a consultant to PaineWebber I traveled across the U.S. to provide training on life insurance to its stockbrokers. To jumpstart sales of life insurance in the PaineWebber network, I was sent to major cities to deliver seminar presentations to the clients and prospects of PaineWebber stockbrokers.
I wrote scripts for consumer presentation on many life insurance and annuity products. I then was video-taped as the talking head, delivering the seminar presentations I had written. More than 200,000 duplications of these video tapes were created and distributed to agents who successfully used them to close sales and gain qualified referrals.
In recent years more than 1,000,000 CD ROMs containing sales presentations I wrote covering a variety of products have been distributed to agents by insurance companies. These companies have been rewarded with sales growth as their agents become better educated. The presentations are now being delivered over the Internet through technology I designed that meets rigorous compliance and distribution complexities.
I became an early mover in the retirement income space by developing web-based, time-weighted, open-architecture income distribution solutions that are backed by peerless, compliant communications tools.
Interestingly, for years I used many of the innovations I developed in the fresh water pond to boost sales in my own salt water company.
I tell you all of this not to make myself sound ego-centric, but rather to explain that I’ve accomplished a lot in both ponds, and that I’ve had a lot of success in both ponds. I believe this experience gives me a unique perspective to make some judgments about the future.
Experience also helps me to understand the Yin and the Yang: For instance, the producer wants “higher interest rates” or “higher caps, but the insurance company wrestles with sub-optimal spreads owing to a flat or inverted yield curve, unmovable ROI targets, asset liability matching, hedging, reserving- all of which impact the ability to deliver crediting rates that may or may not satisfy the advisor’s perceived need.
Building a Bridge
Between the two ponds there exists a massive and institutionalized failure of communications. As a result levels of cynicism and mistrust are high. Although the two ponds clearly require each other’s unique capacities, they co-exist in a relationship which is seldom completely satisfying and too often is only temporary and designed to fulfill both the advisor’s immediate need for compensation and the provider’s quarterly need for increased sales.
So, for instance, we have today’s deferred annuity industry where four-fifths of annuity business in 2006 was the result of advisors moving the very same assets from one insurance company to another. This is a maddening and ultimately destructive cycle brought about by low productivity, ineffective marketing and, not uncommonly, gimmicky product innovation made to appear as genuine innovation.
As The Conversation Shifts to Retirement Income, “Confidence” Becomes Your All Important Deliverable
Just as surely as poor communications and its component elements- lack of transparency, lack of clarity and lack of confidence among purchasers- serve to perpetuate the status quo, effective communications strategies will be the linchpin in providing thrust behind newly introduced retirement income solutions.
To all of my friends busy at work developing “your company’s” retirement income solution, take note: your solutions will not realize their marketplace potential unless you wrap them in a strategy capable of conveying clarity and confidence to consumers who will be expecting nothing less. “Confidence” will be the key deliverable in the retirement income phase.
We’re in a period of transition from an era when, in order to gain a sale, it was sufficient for the consumer to have confidence in the advisor. Going forward, the consumer is going to demand confidence in the solution. You will commit your organization’s future success to history’s retirement income dustbin if you believe that you can meet this emotional need exclusively with a product focus.
No issue is of greater importance to you as you work to pin last minute tweaks on your income-generation solutions. Here’s why: The stakes around this issue are just as high for the customers you are targeting, not to mention the advisors you will rely upon.
Based upon my salt water experience, I’m certain that consumers will view their decisions over whether to turn their retirement assets over to you as virtually life or death in terms of its intrinsic importance.
This is not accumulation. A bad purchase decision in accumulation may have resulted in a customer earning, say, 200 basis points less over a few years, not in injury beyond repair.
If you fail to link your solution to communications tools that engender clarity and confidence, you will not make this sale. Moreover, your advisor-distributor will abandon you in favor of your competitor who delivers what you fail to deliver. Write this down.
About individuals who may view this assertion skeptically, I know that you live in the fresh water pond.
About individuals who immediately recognize the accuracy in what I’m saying, I know that you live in the salt water pond.
Each of you needs to merge into an understanding of the other’s pond, with the conduit for that merger communications between you that is satisfying and meaningful. When you merge you will eliminate mistrust and craft a bright future. And your retirement solutions will flourish, perhaps, even, as one or more retirement income versions of Apple.
©Copyright 2007 David A. Macchia. All rights reserved.