For many advisors, the end of the year provides a good time to take an honest look at their business and assess what worked and what didn’t. Don’t look now, but we’re at that time of year again, and many advisors are doing just that kind of business examination.
In an effort to understand where the long-term care market currently stands – and by extension, what kind of a year it’s been for this important product – I recently posed some questions about the market to two of the best LTC advisors I know. Matthew Brotherton, AIF, CLTC, president of 1752 Financial, Inc., in Richmond, Va., and Debra C. Newman, CLU, ChFC, LTCP, founder of Newman Long Term Care in Richfield, Minn., were kind enough to share their thoughts with me.
• Editor’s note: This is the first part of our exclusive two-part interview with noted LTCI experts Matthew Brotherton and Debra Newman. Stay tuned for Part II next week.
Passion for the business
It’s been my experience that many long-term care advisors have an interesting back story that provides a context for why they sell long-term care insurance. And I discovered that this is indeed the case for these two. Brotherton told me, “My grandfather worked at Ford Motor Company his whole 45-year career. Six months after he retired at age 66, he suffered a massive stroke. Because of the stroke, he needed care. Unfortunately, he chose not to purchase the Ford group long-term care plan that was offered to him as an employee. Because of this, he had to use his savings and 401(k) assets to cover the cost of a home health care nurse, assisted living facility, and ultimately the nursing home. During his 18 years of care, he exhausted his hard-earned savings and investments and wasn’t able to leave the legacy to my dad and uncle that he intended.
“Once I graduated from college,” Brotherton continued, “I was recruited into an agency system to educate people about long-term care. My personal situation and experience of seeing what happens to someone without long-term care led me to become passionate about educating people about the importance of planning for a long-term care situation.”
For Newman, it started with her parents. “My parents, who were great planners, and were age 72 and 63 at the time, told me that they were going to buy long-term care insurance, and if I did not sell it to them, they were going to buy it from someone else! That was 25 years ago, so I quickly gained the knowledge I needed to in order to help them by reading everything I could get my hands on and attending all of the relevant continuing education and Medicaid planning seminars. And I quickly learned that no one in our marketplace knew much about long-term care insurance. So, I decided to become that expert in Minnesota, and because I was so active in the National Association of Insurance and Financial Advisors and with other organizations, I became the one that was speaking on long-term care insurance anywhere and to anyone who would listen.
“After a short time,” Newman continued, “I realized that 60% of my business was coming from other agents and financial advisors. So I decided I better create an organization that could be a resource, not only for people wanting long-term care insurance, but for agents who needed not only help selling but also access to product.
“And as for those who got me started with LTC – my mom died of a stroke and heart attack in 2013 without using her policy. But my stepfather used his for both home care and facility care and was able to afford the highest quality of care available in their community because of his long-term care policy.”
Prospecting and working niches
These are two of the best, most high-profile LTC advisors you’ll find, and so I was interested to hear about some practical ideas on their activities in the market.
Newman told me, “Our unofficial motto has become – ‘All roads lead to Newman Long Term Care.’ We offer three distribution channels for people to choose from – financial advisors and insurance professionals can team with us through our brokerage, or do joint work with one of our specialists. We also work direct to consumers to serve those whose professionals are not proactively solving this problem for them.
“We work very hard to become the resource in long-term care. We raise consumer awareness through radio ads, newspaper and magazine articles, consumer education events, networking events, involvement with Rotary clubs and other civic groups, and partnering with insurance advisors, financial planners, and attorneys. The best referrals come from those professionals who recognize the need to solve this for their clients, but who do not have the time or inclination to become an expert on their own.”
I asked her about the demographics in the marketplace, and she told me, “Based on our own experience, and from research done by Mutual of Omaha and America’s Health Insurance Plans (AHIP) among others, the typical long-term care buyer looks like this:
• Slightly more females than males
• Ages 50 to 65
• 75% married, 25% single
• Often have adult children
• Working in a white-collar profession; not yet retired
• College educated
• Likely living in a metropolitan area
• Likely a homeowner with 11 or more years in the current residence
• Affluent; upper middle class with a household income of $100,000 or more
• A ‘planner’ who is interested in financial issues; owns life insurance and other conservative investment products
• Family oriented
• Exposed to LTC issues; knows someone (a family member or friend) who has needed LTC services
• Research oriented; an online user; self-educated about LTCI.
Newman indicated that it may make good sense for the advisor to focus efforts on a certain demographic group. “Most lead generation options,” she told me, “from radio to print to online ads, have optimal demographics they serve. You just need to find the right fit for your best prospects. That might require some costly trial and error, though. Professionally, what really works is small business owners, or groups of executives, who can pay some or all of their premiums through their businesses. They understand the need, and can take advantage of tax incentives to pay for the coverage.”
On the topic of the practicalities of prospecting, Mr. Brotherton said, “When I started in the business, the system I started under was a cold calling system. After six months of cold calling, I realized there had to be a better way to educate people on long-term care. At that point, I started to get in touch with statewide associations. Many insurance carriers offer a discounted product to association members. From meeting with the associations, I learned that they wanted three things: First, retain the members they already had; second, attract and recruit new members; and third, build a non-dues revenue stream. By offering a discounted members-only long-term care program, I was able to help them with the first two goals that they have as an organization.
“Today,” he added, “I focus a lot of my time with medical and attorney-based associations.”
Educating the prospect
When long-term care insurance first arrived on the scene, educating the prospect seemed to be a major part of the advisor’s approach. Now, there is much more information in the consumer press about the products and the need as well. I wondered whether prospects are now better-educated about the need, and if so, how that has changed the advisor’s approach.
“Today prospects are more educated on long-term care and the importance of protecting their assets and income,” Brotherton said. “The approach today is fine tuning the product for their situation. I dive deep into their financial picture and learn if long-term care is needed; for example, finding out where their income will come from in retirement and if leaving a legacy to their loved ones is important to them.”
Newman agreed. “Many are more educated, and have done some preliminary research – especially if they are already looking to buy. They just want to find the best coverage for their dollars. We survey our recent policyholders, and on a scale of 1 to 10 ask them to grade their knowledge level on LTCI. Most give themselves between a 2 and a 5 before meeting with one of our advisors. When we’re done working with them, most give themselves a 9.
“There is a still a lot of misinformation out there. Most people are not informed on what government programs do or do not cover. It’s the same for what isn’t covered by their other insurance.
“There’s also a lot of misinformation on the cost of LTCI,” Ms. Newman said. “I want to share with you three numbers: $7,000, $4,500 and $2,400. The $7,000 is what consumers believe the average annual premium is for a 55-year-old couple. (This comes from “Exploding Myths About Long-Term Care,” Carlson, Bob. Investing Daily. July, 2013.) Then $4,500 is how much you, as their advisor, are telling them it costs for that same 55-year-old couple. We know that, because we run the quotes for which you ask. This figure is based on the actual quotes we run for advisors. And $2,400 is what people in their fifties say they will spend for this protection, according to a consumer study John Hancock conducted last year. (Forbes Consulting Group prepared a consumer behavior online survey for John Hancock.) That’s $100 a month. For someone under 50, the amount is only $75 a month.”
So there’s better understanding in some respects, but still a lot of misinformation.
• Editor’s Note: Next week in Part II of this exclusive interview, long-term care insurance experts Debra Newman and Matthew Brotherton will share:
• their sales approaches
• how to match prospects with products
• advice for breaking into the market
About the experts:
Matthew D. Brotherton, AIF, CLTC, is President of 1752 Financial in Richmond, Va. He attended Roanoke College and earned his B.S. in business administration. He and his wife, Kathryn, currently live in Richmond with their three children. Matt is active in Greater Richmond SCAN (Stop Child Abuse Now), NAIFA-Richmond, and the Richmond Alumni Chapter for Roanoke College.
Debra C. Newman, CLU, ChFC, LTCP, is a long-term care insurance industry pioneer and founder of Newman Long Term Care, one of the largest LTCI marketing organizations in the United States. Ms. Newman is a nationally known speaker, writer, advisor, and educator. She has received many honors during her 31 years in the financial services business, being named one of the top 25 Women in Business, a Five Star Wealth Manager, and one of the top ten on the Power List of Who’s Who in Long Term Care Insurance. Ms. Newman holds leadership positions in many insurance industry groups, including the Life Insurance Foundation for Education (LIFE), the National Association of Insurance and Financial Advisors (NAIFA), and the Association of Health Insurance Advisors (AHIA).
Charles K. Hirsch, CLU, is contributing editor of Insurance Forums. He is also the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, Mo. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine and wrote the monthly column, What’s Going On in the Life Insurance Business. From 1999 to 2008, he was the publisher of several of the leading industry magazines in the life insurance, property/casualty insurance, and mortgage markets. These days, Chuck’s firm specializes in the development and execution of many kinds of communication strategies, particularly in the financial services business.