Pivot for success

One constant in life is change. It happens often and usually in ways we won’t like. Disruptions for financial services professionals come in the form of government regulations, technology innovations or external factors, such as when banks or insurance carriers remove or add a product or procedure that will demand resources to learn and adapt to.

Those situations call on advisors to pivot not only to survive but to turn uncertainty into an opportunity. Yet adopting a new mindset isn’t always the result of having something forced upon you. A fresh perspective can be born through inspiration from a mentor, a conference speaker or even a book that presents a new approach to deal with a challenge.

Back to school

Roy John Hall, ADFP, CCFP, was thriving. The 19-year MDRT member from Hope Island, Queensland, Australia, had qualified for MDRT early in his career and attained Court of the Table and Top of the Table multiple times. Then the federal government shook his world.

Legislation for compulsory professional standards that had been working its way through the Australian Parliament since at least 2016 became law the following year. Anyone who wanted to continue as a financial services advisor now had to pass a five-hour exam by 2022, have an approved bachelor’s degree or an approved designation by 2026, complete 40 hours of continuing education every year and comply with the regulatory body’s code of ethics. Hall hadn’t been in a classroom for 25 years when he found himself in the new realm of financial services.

“I didn’t really want to go back to school, but that was one of the minimum requirement mandates,” Hall said, adding that he had concerns about how he could run his business, be there for his family and fit in doing homework and studying for tests. So, he tapped in to his MDRT network, specifically Ross G. Hultgren, CFP, DFP, a 26-year MDRT member from Geelong West, Victoria, Australia, who had already fulfilled the new requirements, and asked how he balanced work and personal life with going back to school.

“I didn’t know how to go about completing assignments and preparing for tests because I hadn’t done it in so long, and I’m not a studier. So, I wanted to know how he did it,” Hall said. “He helped me by showing me how to break up study time into a couple of hours a day, a couple of hours a week and a little bit on weekends. I never thought I’d be a university scholar, but I got to wear the cap and throw it up in the air.”

Many longtimers loathed the prospect of going back to school and hoped that an experience clause could grandfather them into complying with the standard. Although there were alternative pathways for experienced advisors to comply, the remaining requirements were too daunting, and the number of financial services advisors in Australia dropped by 43% between 2019 and 2023, according to a report by Deloitte.

Hall not only earned a bachelor’s degree, he also steered his practice to create a process to track and execute the record keeping and administration needed to comply with a new requirement whereby clients must consent every year to renewing the compensation arrangement with their advisor. The regulation was a sea change for advisors, as fees and percentages previously were simply billed and paid. Now advisors had to document that their clients understood the services they were paying for going forward and how much it would cost. This exercise required keeping records every year for fee disclosures, consents and other notices.

“We’ve come out the other side for the better because the relationship between yourself and your client is so much stronger now because we know what’s expected of us. We work that plan together to where we provide expectations for that plan, how many review meetings we’re going to have and what’s included for the fee for service that we’re charging,” Hall said. “Every advisor in Australia is required to do it, so we’re all singing from the same song sheet.”

Though arduous, the standards and requirements for compliance have elevated consumers’ perception of the profession as one that helps people.

“Now we can prove our value to clients to not only assist them in their future journey but also help with their strategic partners like accountants, solicitors for their wills, power of attorney and trusts,” Hall said. “Now we know we have to be diligent in getting all the information required. In the past, a lot of advisors didn’t do that because they weren’t educated enough to know the answers for clients. Now, we are the hub of the client relationship and can easily connect with other professions.” 

Besides Australia, New Zealand and the U.K. are among other markets where new regulations dramatically changed standards, banned commissions and required new or more documentation. Whether such actions will move into other countries is subject to conjecture, but MDRT members can watch compliance trends through a global lens and see how other advisors responded.

“It’s difficult to be prepared for regulation change,” said Jamie McIntyre, CFP, a 13-year MDRT member from Newtown, Victoria, Australia. “I think the worst thing you can do when regulations are changing is to mentally get stuck and try to fight it. So many advisors in Australia got caught in the middle with not being happy with a certain regulation and not making the necessary change. The key to adapting to our regulation was education. Advisors around the world can be prepared by upskilling themselves and improving their education. That will make you better advisors and deliver better outcomes to clients. So, stay in front of regulations. Move quickly, put in a new system, get down to it and get it done.”

Change coming from other sectors

In May 2023, New Zealand adopted a system whereby electronic payments between banks can be processed seven days a week, including public holidays. Vendors and consumers no longer had to wait for the next business day to receive their payments. But now that automatic bill payments could fall on the actual due date, the weekend and holiday float that some consumers counted on to keep their bank accounts from defaulting disappeared. If they spent too much money during weekends, their accounts did not have enough money to cover electronic payments.

As New Zealand adjusted to seven-day banking, Katrina Ann Church, a 10-year MDRT member from Auckland, saw a 40% increase in the number of her clients who missed their insurance premium payments. Church initially couldn’t get her head around how to respond to that outcome or how to help her team deal with clients in arrears. She thought she might need to hire more full-time staff just to manage that issue, but ultimately chose to implement a better process and more training. Previously, the way her practice received arrears information varied by carrier.

So, Church and her staff fine-tuned that process by consolidating the data into a standard format across all carriers that flags clients who needed assistance. Now she can generate an executive summary with the push of a button that tells her how many clients are in arrears, from which companies and whether it’s their first, second or third time.

“We want to foster an environment where our clients are comfortable to ask for help, but we also needed to be able to identify those who need help, but do not ask,” Church said, adding that the number of clients making their premium payments on time returned to levels seen prior to seven-day banking. “Now I feel like I’m in control of something that was quite messy for a while.”

Staff has to be part of building and tweaking processes.

“They have as much say in the process as I do,” Church said. “Building it together, working it through and analyzing it on a regular basis, especially when insurers change the way they do things regularly, means there’s more ownership with your team. Let your staff play a huge role in developing those processes. Let them do what they’re good at, so you can carry on with what you’re good at.”

Inspired change

Sometimes pivoting your practice or changing your mindset isn’t spurred by compulsion but by inspiration. Caroline A. Banks, FPFS, a 35-year MDRT member and MDRT Past President from London, England, UK, attended her first MDRT Annual Meeting in 1990. The overall vibe and messaging there about the true value of life insurance and associated protection products had a huge impact on her practice.

“What I heard was that I had not been doing the right job for my clients,” Banks said. “I wasn’t looking big enough for them. Affordability was essential, but I was more concerned about the cost of insurance that I could find for my clients rather than finding the coverage and services that they and their families needed.”

The perspective change helped her increase her business and even erased the embarrassment she once had to tell people that she advised on life insurance for a living. The way she saw it, the world is dreadfully underinsured, and the epiphany from that meeting gave Banks a renewed sense of mission. She was so needed in the lives of her clients to ensure that their financial futures were safe.

“Too many advisors have simply become wealth managers, not realizing that the whole foundation of a financial plan often is the insurance that holds everything up,” Banks said. “Without that insurance, the financial plan will easily fail when something goes wrong. Once I’d been to that MDRT meeting, I realized I needed clients to take out far more coverage than I probably suggested to them in the first place. My job was to look at where I had recommended policies before and determine whether it was sufficient cover. If somebody can’t afford what they need right now, make sure you go back next year and see if situations have changed. If you can give up buying one cup of coffee a day, what could that do in protecting the family? That concept is so very important, and it was a huge part of getting me to Top of the Table, as it equally applies to the business market.”

What would happen if the commission insurance carriers pay advisors is drastically reduced or even disappears?

Tetsuma Adachi, a 14-year MDRT member from Tokyo, Japan, wondered about that possibility as he attended his first Top of the Table Annual Meeting in 2019. He knew that members of that elite tier sold more than just insurance. There he met a fellow advisor who sold insurance but was also earning fees from consulting services and 10 billion yen of assets under management. 

“He told me that you can be good at selling life insurance, but some customer issues can be solved with insurance, and some cannot. While insurance can be used to manage financial assets, it has its limitations too,” Adachi said. “There are also problems with the system, the worries of business owners such as how to leave their assets to the next generation. From that meeting, I came to think more strongly than before that I would like to create an organization that can offer various solutions to these problems, using insurance as the core rather than trying to solve problems with insurance alone.”

Adachi started to diversify by hiring experts in property and securities practices and developing new products, such as earthquake coverage for small- and medium-sized companies, captive and mutual insurance, and consulting services for business succession planning and real estate. With the expansion, the practice’s unit cost of premiums received per case grew from “tens of millions to hundreds of millions.”

“It has had a positive impact on sales and recruitment not only for me personally but also for the company,” Adachi said. “If insurance agency commissions were to disappear, what would you do?” Adachi asked. “I think it’s important to prepare for that and improve your abilities so you don’t rely on them.”

More is not more

Attracting new clients plus securing more assets under management typically should equal more income and perhaps attaining MDRT’s elite membership tiers. That’s an easy formula to understand. Timothy Daniel Clairmont, MSFS, started figuring out a different kind of math early in his career.

The 14-year MDRT member from Lake Oswego, Oregon, USA, was trying to determine how he could earn $100,000 annually year after year. He looked at the income he was generating from life insurance renewals and concluded that amassing enough commissions would require too much work to chase enough clients and prospects to reach that income goal.

Next, he looked at setting up enough monthly EFT and ACH regular investment contributions from clients to hit his goal. But that income stream would be unreliable due to people deciding they couldn’t afford to make those regular contributions or stopping them altogether.

“The one reliable strategy was actually collecting $10 million in assets under advisement (AUA) and earning a percentage of that to reach $100,000 per year. Then, once I had them as clients, I just had to keep them happy. My whole business model refocused around reassigning AUA and serving those clients, so I don’t lose them. Sometimes that meant the money was invested in new products. Other times the money stayed right where it was, but I became a new servicing advisor,” Clairmont said.

He did so by “penetrating the wallet” or serving clients with multiple products and services.

“Now that I have over $300 million in AUA, my primary focus is on keeping my existing clients happy rather than attracting more or new clients,” he said. “I still take on new clients, but I only add 15 to 20 per year. If you offer more than one service within that household, the odds of those clients leaving you are much lower. Cross-selling can be one of the best ways to keep those clients in-house.”

Advisors will have a lot more thrown at them soon besides compliance like evolving client values, the coming transfer of intergenerational wealth and other triggers that could mature into trends. Even now, financial services is one of the top five industries prone to rapid transformation by generative artificial intelligence, per a study by Deloitte Access Economics. The ability to look at these changes with an open mindset rather than staying stuck in the “We’ve always done it this way” perspective can have a transformative impact and enable advisors to roll with the changes.