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Prosper with partners.

What do the dot-corn bubble and health care reform have in common? More than you might think. The dot-com bubble was characterized by amazing, even "irrationally exuberant" growth in the price of technology stocks during the period of 1995-2000. For a time, it seemed that all you needed to become a gazillionaire was to put "e" in front of your company's name and ".corn" at the end. Some referred to this phenomenon as "prefix investing."

For five years, money flowed into mutual funds in unprecedented amounts. From 1999-2000 alone, nearly $500 billion was invested. During that same period, the Federal Reserve raised rates six times, which slowed the market. The final blow was a flock of automated sell orders for a wide range of big name tech funds. On March 10, 2000, the bubble burst.

Lost during Mr. Toad's wild NASDAQ ride was a tectonic shift in the marketing and sales of mutual funds. With so much money and so many investors playing, it was inevitable that investors began to question the "load" (what you and I know as "commission") on the funds in which they were investing. The difference between the load paid to NASD registered representatives and commissions paid to (most) health insurance salespeople was up-front disclosure.

An investor who put $10,000 into a mutual fund would receive a statement showing that $9,400 had been used to purchase shares in the fund. Many were incensed that the fund was paying a 6% commission to a representative who in many cases had done little work with the client. In a relatively short time, investors were focused on no-load mutual funds which eliminated this "problem."

One old hand in the mutual fund business contends that a great number of the registered reps ended up in other lines of work. More importantly and instructively, those who remained began to morph into a business model where they delivered value and were paid by the client. Their value didn't evaporate and their advice and service became, if anything, even more important to clients who were willing to pay for it. It is interesting to wonder if something similar may be the inevitable offshoot of the commoditization and "exchanginization" of health insurance plans.

Fast forward nearly 10 years to the day from the bursting of the dot-com bubble. On Sunday, March 21, 2010, Congress passed the Patient Protection and Affordable Care Act. The next day, many practitioners arrived at their offices with more questions than answers. Chief among the questions many were asking themselves was how they were going to prosper in the "new normal." Today, more than six months later, there are still more questions than answers.

Advisor "Declaration of Independence"

One of the common threads among advisors trying to read the tea leaves of health care reform is an understanding of the need to diversify their practices. For some, health care has been the sole focus of their business model for many years. Others have offered a smattering of other benefits, but revenue from health care sales has been the chief driver of their bottom line.

Two themes seem to be emerging among those on the leading edge of this change. First, many of the firms I speak with understand that they are going to need to change focus from being product- and commission-driven, to a model where they deliver value-based services and are compensated directly by the client. In his book, Unique Process Advisors, author Dan Sullivan suggests that finding a unique process allows for the creation of value, and that the ability to deliver value is a kind of "declaration of independence" for advisors.

Once the notion of a value-based practice becomes comfortable, many advisors are faced with the challenge of gaining expertise around the deliverables to support that model. Looking back over 30 years in the business, it is clear that the complexity around today's industry requires practitioners to specialize. A generation ago, the family doctor took care of most of your health issues. Today, the medical field is a sea of specialists. Our business has taken on the same motif.

Strategic partnerships

If you are a specialist in one or two areas, how do you diversify your practice in the manner you'll need in the "new normal" without dealing with those two business evils: time to get up to speed in a market and the overhead necessary to manage those markets? The most forward-looking advisors I know have begun creating strategic partnerships with others who have expertise in complementary disciplines.

For example, our firm provides knowledge and service to general agents and advisors who want to add disability income to their portfolios. Some of the firms we work with have deep expertise in life insurance, employee benefits, group medical and other lines, but they count on our "focused factory" approach to DI to help them work in that market. Other such firms provide expertise in fixed annuities or other lines that require deep research and knowledge.

As you consider how to retool your practice to take advantage of the opportunities that recent changes will provide, seek out strategic partners to augment what you do best. Oftentimes, these relationships become reciprocal--each partner bringing their specialization to the table to create a whole that is greater than the sum of the individual parts.

When creating any strategic partnership, first consider the experience and expertise of the partner. Try to find partners who specialize in one area, so you know that all of their resources are laser focused. Be sure that you have access to a team and that there is redundancy.

The best strategic partners will work in a collaborative manner, and will play either a front or backstage role, depending on the best fit with your existing practice. Sometimes this will change on a client-to-client basis. Regardless of the visibility you chose for your partner, they should always help you to build your brand. If you are going to deliver value and charge for your work, your brand is ultimately what you are selling.

Finally, be sure that your strategic partners are willing to be completely transparent with you. If things are not clear up front, the relationship will inevitably deteriorate. That isn't good for the partners and it will likely damage your client relationships in the process. However you make these arrangements, remember that the best strategic partnerships are based on integrity, trust and a dedication to common goals.


Keep up with David each week via his blog, updated each Wednesday and available anytime on the home page at

David A. Saltzman, RHU, DIA, is national marketing director of Chicago-based Disability Resource Group Inc. The South Carolina resident is a past president of NAHU and has been a health, disability, life and employee benefits broker for more than 25 years. Readers may contact him at
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Title Annotation:TO YOUR GOOD HEALTH
Author:Saltzman, David A.
Publication:Life Insurance Selling
Date:Nov 1, 2010
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