Jeff Mose admits he is just a little old-fashioned, even though he does have a customer relationship management system.
CRM software systems enable agencies to keep files electronically and analyze customer data. The systems have been around for decades. Although agents and advisors have long been advised to adopt CRMs to expand their businesses, many have not done so.
That urging to adopt CRMs has become more insistent because the Department of Labor conflict of interest rule requires documentation demonstrating that advisors act in the best interest of clients. Financial institutions, such as insurance companies, that sign contracts with advisors will be liable for violations. That means they have a vested interest in consistent recordkeeping that they can review.
Marketing organizations and agency technology experts say a CRM system has to be at the core of that accountability, but that is not how Mose uses CRM at his practice, Retirement Life Advisors in Maryland. He emphasizes the “relationship” aspect of the system.
“I found it to be so impersonal that I use it for things like birthdays, anniversaries and that type of thing,” Mose said, adding that he gets alerts on his phone notifying him of the events.
He is not so sure that putting his clients’ information into his system or in a cloud is in their best interest.
“With all this hacking into [the Democratic National Committee headquarters] and Hillary Clinton’s files, how safe are financial files?” Mose asked. “If someone broke into your office to steal paper files, it’s sort of like breaking into the bank and stealing quarters. I want to stay hard-copy as long as possible.”
Mose said he knows it might not be all that possible to continue that way in selling fixed indexed annuities when the DOL rule goes into effect in April. The rule would require the best-interest contract exemption for FIA transactions if the advice affected retirement money.
He said he is not opposed to using technology in general. For example, he records conversations with clients, with their permission, and converts that to text with an app on his phone. (He uses Notability but many apps, such as Microsoft’s OneNote, are available.) Legal experts have suggested recording will help protect advisors if clients sue many years later, as the rule allows, and as memories of the conversations are hazy.
Mose is working with a marketing organization that he expects will be able to help him with the transition. But many say he and others will be unable to avoid picking up tools such as CRMs and becoming comfortable with electronic forms and web portals.
There Will Be Suits
Kim O’Brien, CEO of the Americans for Annuity Protection, puts it bluntly.
“They will be sued,” she said of advisors who don’t get with tech. “The whole core of the fiduciary duty is not just a duty to provide a solution that meets your client’s objectives, risk tolerance and time horizon, but to document the rationale for that recommendation on how you determined what they needed and how you assessed their needs and opportunities.”
O’Brien has been at the forefront of the effort to reverse or blunt the DOL rule’s most damaging effects. But she said she believes the fiduciary standard will expand through the DOL rule and other efforts to come – and that advisors must be ready.
The annuity business often has been product-focused and will need to move toward advising, she said. “There’s been too much ‘I have this new product with this new bell, so let’s get together and talk about that.’”
To be effective, advisors will need not only a CRM to house data but also an assessment system, O’Brien said.
“You need an assessment program to assess your clients’ needs and risk tolerance, but also to demonstrate how you understood that assessment,” she said. “And you also have to demonstrate that your client understood.”
The challenge in getting a system is finding one that incorporates insurance options, because the existing assessment programs are used primarily in finance. Many efforts are underway to provide systems with a larger insurance component. O’Brien is developing one called AssessBest in partnership with InsuranceNewsNet Publisher Paul Feldman.
As systems become available, O’Brien said advisors should evaluate them against their business model, which a CRM can help define. If clients fall within a certain age, income and asset mix, that can form an important part of the definition. Also, if clients tend toward particular businesses and industries, that also defines the client base. And, finally, what kind of products and services the advisor has offered them also enters into the picture.
Taken together, those factors can shape what the assessment program will need to take into account. But as other experts have attested, options are slim at the moment.
Hardware might also need to be updated. It isn’t just a matter of up-to-date computers, although those are important. But also simpler items. “Most systems are cloud-based,” O’Brien said. “So you will need Wi-Fi.
It’s surprising how many agents go to Starbucks to get Wi-Fi.” And say good-bye to paper. “You are probably going to need a tablet or iPad, because the days of sitting at the kitchen table with a legal pad are over,” O’Brien said. “Because even if you go back to your office and input that information, the problem most lawyers and carriers would have is that they would not know if you input it wrong intentionally because you wanted to sell them something or unintentionally because you just wrote it down wrong or you couldn’t read what you wrote.”
Getting With The Program
Entering data right into the system with clients has other benefits, too. Take it from somebody who started in insurance sales when technology still smacked of science fiction.
John Gilliam is Dr. Gilliam, now with a doctorate in personal financial planning and teaching at Texas Tech University. But he started out in the dark ages of selling when a phone had a round thing in the middle of it and a computer was exotic. He remembers what it was like keeping track of a lot of paper, a situation that has not changed dramatically over the years for many agents. He would have loved to have been able to plug in data right from the field.
“I grew up during a period when if you check this box, that means I have to go back to the office and I have to get another form, assuming that we have copies of the form in the storage room,” Gilliam said.
Paperwork is often the biggest pain in an advisor’s life. Technology can smooth out the process so that not only are the filling in and the filing taken care of, but the seller can sell more and office personnel can help with other things to help sales.
“If it’s a sole practitioner who’s been doing everything,” he said, “they need to start at the point of greatest pain. What do you hate doing the most? And how can we use technology to make your life easier?”
And advisors who already have tools, such as a CRM, already have the solution for their future problem.
“The agent who has a CRM and is using it for anniversaries and maybe birthdays and they’re not fully utilizing the technology that’s available, I think that’s a learning curve,” Gilliam said. “Once they understand the amount of documentation that's going to be required, they’re going to want a vehicle that will help them do that. The technology is going to be a solution to that.”
And they will need a solution, because Gilliam agrees with O’Brien that the fiduciary standard will expand. Companies are not going to follow two standards.
“It wouldn’t surprise me that this [the fiduciary standard] is something that will spread to other forms of insurance before it’s all said and done,” he said. “It may take 10 years. It may take 20 years.”
Under that standard, the most difficult thing for companies to control is what is actually said to the client. A uniform system helps ensure the right things are said, which is already happening with insurance e-applications.
“It has been slowly changing over the last 10 years with e-applications,” Gilliam said. “And the wonderful thing about e-applications is the next day after you go back to the office, you’re not saying, ‘Oh, gosh, I forgot to get this form signed’ or ‘I missed a signature here.’ The software does all that for you.”
Other technology agents and advisors can expect to see is one they might already use if they have grandkids who don’t live nearby. It’s a way of serving clients who are more comfortable with an electronic chat rather than visiting the office.
“They may say, ‘Why do I have to drive to your office?’ Or ‘Why do you have to come into my home?’” Gilliam said of younger clients. “’Can't we just do this via Skype?’”
Speaking of younger people, advisors will need them even if they expect to leave the business rather than deal with the new order, Gilliam said. If they bring in younger advisors, they will expect to be working with the tools that those young advisors take for granted.
As far as cybersecurity, Gilliam shares the concern expressed by Mose, the Maryland insurance agent. In fact, Gilliam and his wife recently were talking about storing pictures. When Gilliam said he just puts them into Dropbox, his wife asked if he was worried Dropbox could crash and he could lose them forever.
But the advisor’s financial institution is likely to call that tune. For example, if a distributor or carrier wants the ability to inspect an advisor’s records, they might want to be able to access them in the cloud, rather than visit an advisor’s shop.
The financial institution will have plenty of programs to choose from. Gilliam said Texas Tech has in its computer lab for students about 60 software packages that represent more than $6 million in annual fees.
The Right Pieces in The Right Places
Chances are good that not many of those systems at Texas Tech, or anywhere, are a perfect fit for the new needs in compliance. Gregg Griffin knows that, because he has been looking for one as the vice president of technology at Unkefer & Associates, a marketing organization in Phoenix.
“The platform that manages all this and gives us a certain level of oversight does not exist,” Griffin said, adding that vendors have parts of different systems but nothing unified yet. “They’re scrambling right now to put these pieces together. And some of them are for sales systems, some of them are presentations. Some of them are needs analysis or risk analysis systems.”
The DOL rule and greater fiduciary standard would require more analysis of annuity performance for the underlying data leading to a best-interest recommendation.
“What’s their ability to guarantee an income stream over the next three decades?” Griffin asked. “Annuities are rated in the risk tolerance spectrum like a bond, but are actually radically different than a bond, which is the asset class they typically fall into.”
The system would also need more data on commissions because “reasonable compensation” is a key DOL requirement, said Andrew Unkefer, president of Unkefer & Associates.
“You’ve got to have some type of benchmarking capture of compensation so that you can also defend that the compensation itself did not influence a negative recommendation to the client,” Unkefer said. “That there was enough line of sight there that the competition was reasonable and it can be proved at a later date. That’s the level of intensity we want to get to.”
Unkefer’s own system is pretty intense on comparing features and compensation in-house, with more than 1,000 products in a searchable database.
A key issue with current financial planning systems is that they don’t have annuity producers in mind, Griffin said. Most of them do not have what Griffin called a soup-to-nuts capability to allow customer screening, the recommendation and then the submittal of the recommendation to an overseeing party.
The system would need to help keep tabs on the responsibilities presented by the DOL rule: compliance, workflow and recordkeeping. But the first challenge, as others have said, will be upgrading advisors’ office tech.
“There are more guys right now who are managing their clients through paper files or at best Excel spreadsheets than who are using something like SalesForce or Goldmine or Act,” Griffin said.
The system that Unkefer is looking for is not a CRM but would be a stand-alone that can link to a CRM. If advisors use it as a stand-alone, Unkefer will be able to supervise the sale. But advisors would not get all the benefits of the data without a CRM.
“The best interest tracking and oversight is on us,” Unkefer said. “The sales and data mining aspect of the CRM is on you. It’s like all the good stuff in life. If you put in the heavy lifting in the beginning, the rest of it is easy.”
Begin At the Beginning
Better processes start at the data collection phase, Griffin said.
“An easy way to collect client information involves the clients themselves,” he said. “We have offices where the client goes through a data collection when they visit the agent, much like you would a doctor’s office. You get that clipboard and you fill it out. But they’re doing it on tablets and it’s feeding into a central CRM that that has all those metrics available.”
The initial questions would focus on areas such as risk tolerance, financial position, tax status, personal goals and family situations.
“That’s the kind of data that can lead toward a best interest recommendation,” Griffin said. “It’s quantifiable, and we can relate it to products and financial options that are out there.”
If it’s a different way of onboarding a client for insurance agents, it is not unfamiliar for consumers used to filling out forms whenever they visit a professional.
The information helps not only the current sale but also better informs agents for follow-ups.
“Getting the client bought into the process is far more important than getting bought into a product,” Griffin said. “The process identifies problems, and we can deliver solutions. That’s the key.”
Systematizing also makes client relations much easier, Unkefer said.
“When you do that, you will find that you can handle far more volume of activities and results, which means you get more productivity per employee, even if you’re the only employee,” he said. “You’ll become more productive, and higher productivity creates more value. More value creates more revenue. More revenue creates more profits.”
More value can be in the form of content that an advisor sends to clients and prospects. When the process is a chore, good material doesn’t get sent as often. Tasks such as creating a high-quality newsletter get buried under the daily grind, Unkefer said.
“Systematizing these routine daily activities allows you to write a nice newsletter and stay in front of people,” he said. “You get far more referrals. Clients come back and look forward to that next visit. The amount of resources you manage for each customer goes up dramatically, and you’ll do three to four times as much business.”
When the process is difficult, advisors seem to feel they need to “get” something for content.
“People try to gate-keep stuff and say, ‘I’ve got this incredible report but I’m not going to let you have it until you let me meet with you,’”
Unkefer said. “It’s conditional in its nature. That client says, ‘This guy is putting his interest ahead of mine.’” Unkefer said that he is not questioning the professionalism of people who have not adopted technology in their processes. “Some of these guys who are still into paper filing, they’re the most professional, the most capable of writing a great statement of purpose to the client. They’re intellectually gifted and highly educated. They are super professional. They’ve just lost track of technology.”
But he and Griffin said they understand the anxiety of bridging to a new system.
“The transition of anything when you break one system to use a more efficient one is always a moment of panic for everybody,” Griffin said. “But the one thing that we’re trying to help them understand is that when you go through that transition and you accelerate anything that you can turn into a routine system, you’ll find you’re doing a one-to-many type of relationship.”
The reward can be paid in lifestyle or growth.
“With that productivity, they’ll either enjoy a lot more free time or if they’re willing to work with that time to lift their income,” Griffin said. “One of the great things about being an independent agent is the lifestyle. But actually achieving a lifestyle that has a lot of free time and a high income, that’s acquired through the use of technology. “
Unkefer and Griffin said advisor David Holland of Holland Financial in Ormond Beach, Fla., is an example of someone who has leveraged technology to propel his organization. They call him the advisor of the future because he’s an insurance agent, an RIA and a CPA. He also has a daily radio show and is dipping into TV.
When Process, Practice and Tech Align
Holland is a fee-based advisor, working primarily with no-load and exchange-traded funds. On the insurance side, he sells annuities, focusing on fixed indexed, along with long-term care and life insurance.
He started as a CPA so he has a documentation mindset. He started his own insurance agency in 1997 and later became an RIA. He’s used to rigorous processes because RIAs get audited. It’s a discipline that he sees carrying over to the non-RIA world.
He believes agents should become hybrids so they can advise across the service and product spectrum, which entails a whole new mindset and practice.
“If an agent’s going to become a hybrid and get away from the swashbuckling, ‘Just put me in front of ‘em and I’ll close ‘em’ attitude and become an advisor-fiduciary,” he said, “then he has to have a process.”
He has 20 people in his practice, which includes an insurance agency, fee-based advisor, reverse-mortgage division, mortgage broker, tax department and a trust department.
When prospects call the office, they get the receptionist, who transfers them to Holland’s assistant, who also coordinates new business. His assistant briefly interviews the caller, sets the appointment in the CRM’s calendar and sends out a packet of information. She will also add notes into the file in the CRM, which is Redtail. He houses it on a server in his office, which he prefers to a cloud.
Holland reviews the notes, so he understands their particular concerns and who may have referred them. His staff gathers data by sending people a questionnaire and Holland asks prospects to bring in particular documents.
The first appointment is a fact-finding interview. It’s a bit of a way-finding discussion, as well.
“You have to be flexible because sometimes people will fill out your questionnaire, bring all the documents, and say, ‘Here’s what we want,’” Holland said. “And, a lot of times, they come in just to interview you and find out who you are before they’re willing to share any information. Some will come in and they don't know what they want, and they haven’t brought half the documents.”
Holland tells clients he is going to examine their situation and help them with a better understanding of their position. At this point, he also gives them the option of compensation. He tells them the advice is free and he can be paid by commission or they can just do a plan and pay a fee.
“The end of the first meeting is not, ‘Hey, would you like to buy an annuity?’ or ‘I really believe this or that,’” Holland said about the meeting wrap-up. “It’s, ‘Let me start with looking at where you are. Let’s see what’s working, what’s not. Then I'll tell you what I think.’ That lends itself to the more sophisticated buyer, or people with more money, which is who agents want to work with.”
He takes whatever documents are available and places them along with his notes into a folder that he gives to his assistant. She scans the material because they have a paperless office. Holland suggests advisors invest in a high-quality multipurpose printer.
Once the material is scanned in, it goes to his planning department. His vice president of planning, who has been with him for eight years, is a Chartered Financial Consultant, Chartered Life Underwriter, national certified Social Security advisor and annuity specialist. She reviews his notes and assists in analysis for the second meeting.
“One of the things that an agent should not do is jump the gun,” Holland said. “A lot of times, I am helping the client analyze what they've got now before I start talking about what they should do. It's a second opinion. I'm using Morningstar, primarily, to do that and then I make it pretty by putting it into PowerPoint.”
The second meeting is for further clarity and maybe some potential solutions. He presents the PowerPoint on a 32-inch TV in a conference room. But it is not a closing meeting.
“If you're competing against somebody else, the incumbent, you could be driving a humungous wedge between them and that relationship,” Holland said. “If they're not really happy and they're not sure why, they feel like they're lagging. You can give them clarity on what's going on.”
Holland enters notes from that meeting and consults with his planning department. That resulting plan may include a mix of investments, insurance and maybe a reverse mortgage, he said.
After each meeting, it is critical to enter notes into the CRM as soon as possible.
“Maybe somebody wants to get out and play golf,” Holland said, “but you have to put your notes in.”
During the third appointment, Holland presents the recommendations, which include an income plan and asset reallocation. He explains the details, answers questions and presents the plan in a wire-bound color binder organized in sections.
“That does so many different things,” Holland said. “One, it gives them something to review. It also takes care of compliance because if I've got an annuity brochure and the statement of understanding for the product, that all gets bound into that presentation.”
He tells them to take the plan home to review it and says, “I expect you to have at least 10 questions. Let's get back together and we'll talk about what I've presented.”
At the fourth meeting, he expects questions but he does not move to a sale.
“I might be throwing it back up on the machinery to change the plan,” Holland said. “They might say, ‘We love everything you're doing here, but we think we want to have more like 60 percent in annuity, as opposed to 40 percent,’ or ‘We decided we want to hold on to a little more cash. What would that do to the plan?’”
He will make adjustments and perhaps set up another meeting. But even then, there is no paperwork. That’s a separate meeting.
“I never ever have paperwork ready when I present the recommendation,” Holland said, acknowledging that is unusual. “I really want them to go home and think about it.”
If during the meeting, clients say they want the plan, Holland opens the calendar in the CRM right in the conference room and sets the next meeting.
Holland said that in his 20 years, he’s had only four people walk away from the deal, so he is not worried about losing them during the process.
To make a process like Holland’s work requires some basic tools.
“They're going to need an actual phone system,” he said. “They're going to need a real presentation system, a computer system, screen on the wall. They will need the software and the tools, so, for example, they're going to need a Morningstar subscription so they can go in and do an analysis of the portfolios. They will need a calendar-integrated system, a CRM.”
They are also going to need a shift in thinking.
“I am in a much better place because I do more than one thing,” Holland said. “That doesn't mean I have to be an expert in all of them, but it does mean that I have latitude. I build a financial plan that has multiple pieces to it and the person sees me as much more of a planner. And the irony is that you will sell more annuities doing this. Is it easy and free? No, it takes time and it takes energy, but a lot of agents put a lot more time and energy into vacationing and watching sports teams than furthering their education.”
Holland also said agents and advisors should take a good look at their marketing organization and see if they are getting what they will need for the future.
“I think a lot of marketing organizations and insurance companies have put way too much emphasis, energy and money on trying to train agents to be better salespeople and how to overcome client objections than on how to actually be better planners and better financial advisors,” Holland said. “So here we have the DOL saying, ‘OK, well, we'll fix it for you then. We're going to make you fiduciaries.’”
Definitely Not Out
Andrew Unkefer sees Holland and other multi-faceted advisors as the future, but he has faith in the resilience of insurance-only veterans.
“What I’ve learned about these really good producers who didn’t adopt technology is that they don’t worry about the same things you or I might,” Unkefer said. “They have always been able to figure out stuff and they’ve always been able to make a living, because they have these great personalities. So they may worry a little bit but they say, ‘I know my abilities. I’m not that worried about it.’”
Mose, the insurance agent in Maryland, is among those not too worried because he has had many evolutions in his 63 years, from sales rep for Nike and Hiram Walker, to on-air talent for several TV stations and corporate communications director, among other careers.
He has seen the economic gyrations from the dot.com crash through the trying times since. And he has seen how annuities helped average Americans ride out those storms. When the DOL started talking about its rule, Mose had hopes that it would help the industry. But what came out in the end wasn’t quite what he expected.
“A friend of mine who works on the Hill suggests what comes in as steak goes out as sausage,” Mose said.
He still is bullish about the role annuities have in improving consumers’ financial health.
“It’s all about individual income now, because pensions are going away. This is why annuities are so important,” Mose said. “We are going to find a way.”