Case 1: Cross-Selling Opportunities with Pensions

We all know doing a full needs analysis for a qualified pension prospect is well worth the time when that commission check arrives after a case is placed. The possibility for sales should not end there, however. Through that full needs analysis you may uncover a need for a buy-sell agreement, estate-planning needs or additional insurance coverage needs.  For example, during a recent interview with a qualified retirement plan prospect, it was revealed that the client had a 10-year mortgage on the building that housed their business. They didn't feel it was appropriate to purchase a whole life contract (nor did the agent) for what was clearly a term insurance need. Therefore, we ran a 10-year term illustration for $1,000,000.  Obviously, this created a cross-selling situation. After further discussion, the agent discovered that the business continuation plan included the kids buying the business from the dad. There was no buy-sell in place as the prospect indicated, "It's all in the family". The father who owned the business was 59 years old and believed he would live well into his 80's. The agent asked, "What if you die at 59 ½?"  How would the kids be able to buy you out?" The gentleman had no response for this. The agent has since set up a follow-up meeting to discuss the buy-sell arrangement and fund it with life insurance. We recognize how time consuming it can be to "earn the right" to discuss retirement planning and death benefit needs. The above scenario represents a few possibilities for cross-selling opportunities. So, the next time you diligently fill out a full needs analysis, be sure to ask yourself:

• Does the business owner have a need for term insurance (truly term, i.e. a mortgage for a period certain or a business loan for a period certain, etc.)?
• Does the business owner have a business continuation plan in place?
• Does that plan include a formal buy-sell agreement?
• Does the buy-sell agreement include life insurance?
• Does the client have a formal estate plan?
• Does the client have estate tax problems where additional life insurance may be needed? 

These are a few of the questions that can assist you in generating ancillary sales from pension prospects.  Happy Cross-Selling!

Case 2: The 412(i) Pension Plan

Take, for example, a 412(i) plan with two key employees and about five others (two of which are eligible the first year) that generated a first-year plan contribution of approximately $225,000. Of this amount, approximately $125,000 was annual whole life premium.  The producer is a financial planner and had dealt with the husband and wife for about five years. The husband and wife “owners” are in their forties. Recently, their business had exploded and they were looking at several hundred thousand dollars in business income taxes. All signs pointed to a very successful future with a continuing stream of very large income to the business so it was now time to find a way to save income taxes. While they were at it, they explored future wealth replacement.  As the producer put it, “We took advantage of something today and something tomorrow!”  The “something today” was a large tax deduction for the business. The “something tomorrow” was planning for estate purposes. There was a need for a large amount of life insurance on each owner and the pension plan was the cost effective method of purchasing it. They also desired some guarantees. They had a plan for investments in equities and needed a plan with a floor guarantee for a future income stream. The end result was a large sale for the producer and some large problems solved for the client.  Some key quotes from the producer on this case:

• Lead with the plan, not the product. The plan will justify the product and the product will justify itself. This family does not view this as a “life insurance sale” but rather a plan providing a large business deduction and future wealth replacement. Concentrate on outlining the problem and the pension plan will ultimately be the solution.
• The 412(i) market is a very narrow market but lucrative when you find the right situation. That right situation is a very small firm making a lot of money and very generous if they have employees. Preferably, the fewer employees, the better.
• You need to establish a commitment. That is a major drawback to a defined benefit plan and why you need to find someone with a substantial continuing income stream. 

Many Life Insurance Companies have pension teams that will help you find solutions for your prospect’s problems and help lead you to some lucrative sales!