Selling up in down times: even in a recession, financial advisers can take steps to build their life insurance and annuity businesses.

The recession has made the jobs of insurance agents and financial advisers tougher. Client portfolios have eroded and fewer people are willing to buy. At the expense of finding new customers, many insurance professionals have been spending more time helping shell-shocked clients understand what has happened and how to respond.

* The News: The financial crisis has made the job of selling life insurance more difficult.

* The Big Picture: New agents may be hurt more, since experienced advisers can work on supporting clients and obtaining referrals.

* The Payoff: Agents and advisers who survive the current turmoil should gain clients.

Most experienced advisers are likely to weather the storm. "A person who has been in the business for five or 10 years is going to fare better than a new agent," said Walton Rogers, president of the Million Dollar Round Table's executive committee. "A new agent who has no base has to prospect harder and smarter and will have a tougher time. He doesn't have any relationships to prospect from, none to spring off or upgrade with. That's the person who is really hurting."

Even for Rogers, who runs a five-person financial services firm in Annapolis, Md., the past six months have been tough. He's been working a lot with clients on the investment side annuities, mutual funds and 401(k)s--on rebalancing, refiguring their personal circumstances and generally providing emotional support.

At the same time, Rogers has been working harder at prospecting. "This couldn't have come at a worse time for me because I'm on the executive committee," he said. "So from that standpoint, I'm taking it on the chin. The good news is that I'm in a business where I can prospect differently. I can work more hours if I choose, and no one can lay me off." Insurance producers may have an advantage over competitors in this environment because they can offer guarantees, particularly in term insurance, whole life and certain kinds of universal life. And for clients concerned about bequeathing assets, life insurance can instantly replenish the size of their estates.

But producers face a new problem brought on by the financial crisis: concerns that insurers won't be able to keep the promises they make.

"In previous times, that was never an issue," said Bob MacDonald, a 40-year industry veteran and currently owner of CTW Consulting LLC in Wayzata, Minn. "No one ever questioned whether money would be safe with an insurance company, especially when you talk about the big companies. And now those companies are the ones being questioned. So when you ask how hard it is to sell in these tough times, that's got to be part of the equation."

Meanwhile, some insurers are finding themselves in stronger marketing positions. Penn Mutual Life Insurance Co., for example, has historically held a high surplus position. Executives at Penn decided last summer to go after market share rather than merely ride out the storm. "We thought it would be our opportunity to increase our distribution base and our customer base," said Eileen McDonnell, executive vice president and chief marketing officer. "And that's what we're doing."

So how can insurance agents and financial advisers survive the recession, or even improve their business? On the following pages, four industry veterans offer their views.

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Service Reaps Rewards

Dennis Pettinelli, General Manager, Dennis Pettinelli and Associates, Redwood City, Calif.

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The opportunity to talk with clients is great, said Dennis Pettinelli, a top adviser with the John Hancock Financial Network. "You have to take a lot more time with them to assess their needs," he said.

Pettinelli has sold a lot of variable universal life insurance. Fortunately, he has convinced most clients to fund heavily, so most policies are not in danger of lapsing. "I tell people what a great time it is to put extra dollars in because they're going to buy in at very attractive pricing." But as with other investment-oriented products, people are afraid to add to their positions in this climate, he said. "All you can do is explain rewards and consequences to behaviors, and they're smart enough to make decisions."

In fact, one client thinly funded the policy at purchase and now adds premium every month to keep it alive. "He did it on purpose, and right now he looks like a prophet, but I'm uncomfortable with it," said Pettinelli. "I can't get him to make a lump sum, but he's being attentive and keeping it in force."

Pettinelli's major bit of advice to agents: "Be sure clients understand and are satisfied with the work you do. They are talking around water coolers to lots of people about this. This is the greatest time in the world to get referrals."

He said people are afraid they can't afford permanent insurance, "and you have to be sensitive to that."

Reach Out to Clients

Eileen McDonnell, Executive V.P./Chief Marketing Officer, Penn Mutual Life Insurance Co.

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When the figurative economic earthquake hit last fall, Penn Mutual's historically high level of surplus placed it far away from the epicenter, said Eileen McDonnell. Penn Mutual offers stability for its producers and their clients, and now is the time to reach out to those clients, McDonnell said.

Many clients are not calling their advisers, but McDonnell says not to assume that's because clients are uncomfortable talking to their financial professionals. "It may be because they are paralyzed and don't know what to do."

The company has seen first-quarter sales jump 25%, led by universal life and indexed universal life. Variable universal life sales, down so steeply industrywide, fell only slightly at Penn Mutual. McDonnell attributed that performance to an indexed life fund option within the VUL so that skittish investors don't have to be in a pure cash account. As in a stand-alone indexed life policy, the option offers investors a chance for higher returns than cash without the worry of losing value.

Insurers in this economic climate also have an advantage when they help their distributors. McDonnell said Penn Mutual provides marketing materials and sales ideas. A recent popular idea has been putting whole life insurance into qualified plans, McDonnell said.

The company has added a resource center on its producers' Web site to help agents answer client questions about the economy and financial strength of the company. Top company executives participate in monthly calls to producers, and the chief financial officer and chief investment officer are available to speak with clients so that advisers do not have to discuss the underlying financials of the company, McDonnell said.

An upshot of the expansion program is that the company so far this year is at 150% of its recruiting plan, both on the independent and career sides. "The phone is ringing off the hook," she said. "They are saying that they value stability."

Never Been Needed More

Walton Rogers, Founder and Owner, W. Rogers & Associates

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During the 2003-2007 bull market, customers often said everything was great and that they didn't need an annual review, said Walton Rogers. Today, they appreciate attention. "The [financial] crisis gives us a chance to make face-to-face contact, to rebuild a relationship, to deliver something of value," said Rogers, who has represented New York Life and other select insurers since 1974 and has been a qualifying member of MDRT for 32 years. "If anything, appointments should be easy to get, and the good adviser networks from there."

But while meeting with existing customers has become easier, prospecting has become harder, even if the prospect has been referred by a client. Rogers said three conditions make people good life insurance prospects: They must be willing to meet with an adviser, have discretionary income and feel confident about the future. That is why Rogers said he has to work harder at prospecting in this financial crisis. "Businesses are being cautious and are watching their budgets," he said. "Many are closing down, and some are downsizing."

A positive side to the situation, however, is that there are more disenchanted policyholders who might be willing to switch advisers. "Advisers will lose some clients because they haven't built a relationship," Rogers said. "There's a whole market out there that has not been serviced well."

Rogers also said that insurers have a role to play in the success of an adviser's business. To be effective, advisers should expect their major carriers to give them verifiable, honest information about the financial strength of the company, he said. In addition to what rating agencies say, this information should include such underlying factors as problems with products, whether a company is planning to change its riders, or whether a new product line is going to look like what an adviser or agent wants to sell.

"This honest expectation, this transparency, is very important," he said.

"We are basically manufacturers' representatives. We have a relationship with the companies. And we need to make sure we're getting the straight and skinny."

Keep It Simple

Bob MacDonald, Owner, CTW Consulting LLC

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Companies may slow down sales if they fear parting with capital. Bob MacDonald said some large companies have multiple billions of dollars in unrecognized losses in their investment portfolios and are afraid to spend their capital because they don't know where or when they're going to need it.

But MacDonald does see opportunity for product writers and advisers if they go back to doing simple things. "You don't need the fancy wham-bam bells and whistles in this kind of marketplace," he said. "What people are looking for are quality and stability."

MacDonald said his argument in recent years has been that insurers "have kind of junked up the annuity products" and taken on risk "because we as an industry were trying to compete on top-line growth and stuff like that. And my argument has always been that insurance companies have lost sight of the fact that they should not take risk, but manage risk?' Insurers especially should not take risks they don't understand or risk they can be anti-selected against, he added.

Advisers can protect clients in today's environment, said MacDonald. One way is to diversify business. That means doing business with enough writers to ensure that the value of each policy is within the limits backed by the guaranty fund in the buyer's state. The other is to sell products that are easy to understand and offer strong financial security.

"What differentiated the insurance industry from the investment industry was that we never surprised anybody," he said. "We need to get back to the concept that when you buy an insurance product, you're never going to be surprised."

Learn More

Penn Mutual Life Insurance Co.

A.M. Best Company # 06903

Distribution: Career and independent agents, broker-dealers

New York Life Insurance Co.

A.M. Best Company # 06820

Distribution: Career and independent agents, brokers and alternative channels

John Hancock Life Insurance Co.

A.M. Best Company # 06601

Distribution: Career and independent agents, third-party producers

For ratings and other financial strength information visit www.ambest.com.

Watch a video about this article on bestreview.com/videos

7 Sales Tips

Advisers can build business by remembering that the recession has changed the rules for dealing with clients:

1. Contact clients. They may be shell-shocked and in need of your expertise.

2. Rebuild relationships. Set up face-to-face meetings that may lead to referrals now, and sales when the economy recovers.

3. Stress guarantees. Annuities and life insurance provide the safe harbor people are seeking,

4. Underscore strength. Be prepared to address concerns about the financial condition of insurers you represent. Ask your carriers how they are dealing with the financial crisis.

5. Seek transparency. Consult with your carders about product changes.

6. Stay informed. Avail yourself of any special resources your carriers make available, such as Web sites, communications and turnkey sales ideas.

7. Avoid stress. Seek out simple products to sell so that clients will never be surprised,

Sales in a Slump

Individual life insurance products were a hard
sell in 2008, especially in the fourth quarter.
(% of change, 2008 vs. 2007)

Product            Time    Annualized    Face    Number of
                  frame     premiums    amount   policies

Universal    4th Quarter          -23      -14          -9
Life                 YTD           -8       -3          -1

Variable     4th Quarter          -41      -40         -55
Life                 YTD          -33      -31         -40

Var. Univ.   4th Quarter          -18      -25         -33
Life                 YTD          -17      -17         -21

Term         4th Quarter           -3       -3          -5
                     YTD           -1       -1          -4

Whole Life   4th Quarter            2        0         -14
                     YTD            2        2          -2

Totals       4th Quarter          -14       -6         -10
                     YTD           -7       -2          -4

Source: LIMRA International