The value of failure and the future of structured settlements

I was reading the news online this morning and came across some articles and information that confirm a lot of what I've been hearing whispered by those of us who make our living in the life insurance, annuity and structured settlement profession. That being that we are in the midst of a 50 year slow down in the sale of financial products, life insurance, annuities and other long term saving vehicles as consumers deal with the reality of almost 10% unemployment, record low interest rates, 20 year high levels of bank failures, the collapse and now subsequent rise of the stock market and a general fear of the future.

On the brink?

LIMRA reported that sales of life insurance are down 23% year to date for the biggest six month decline since 1942. Structured settlements have had the worst 2 quarter performance in over 25 years and if you talk to anyone in the business they will tell you that starting in January of 2009 that buyers have simply vanished for entire lines of business, relative to past trends and experience. In general it is beyond dispute by anyone in the financial services, life insurance, annuity or structured settlement business that for the vast majority of agents and brokers this has been a very rough year with little hope for improvement.

So, what do we take from this and where do we go next as a profession?

I was reminded in a conversation with an associate the other day of a lesson I learned very early in my professional life. That being that the seeds of our destruction, or that of a great company or profession, are usually not sewn in hard times, but during the greatest period of prosperity and success. I was relating to him the story of when I was a young manager in the home office of New England Mutual Life back in the early 1980s that the company was selling a ton of whole life, riding the stock market boom and the division I was in had gone through a huge transition from a paper back office, to one that was fully automated and cross trained. The result of which was the company was rolling in cash and with the automation, I found that I had 5 open slots in my division that were empty due to the ability of less staff to do more work.

I was called into the VP's office and asked about the openings, at which time I said, well we really don't need them, in fact I could cut 3 or 4 more by attrition and still get the job done and save the division over $150,000 in salary. He looked at me and said something I never forgot. " Mr. Wahlstrom, in the corporate world, people are power. The more people you have, the more power you have. Now I don't care if they make paper airplanes all day, you fill those slots by next Friday or you'll be the one looking for a job." I, being a pragmatic guy filled the slots, but shortly thereafter started my structured settlement business as it was clear to me I was never going to be cut out for corporate life, and then as you might expect, a few years later New England Life ran into huge capital and operating issues due to it's bloated over head and stagnant sales, and was merged with Met Life and is essentially no more, the end of a really great company.

I relate that story as I watched with amazement the life insurance and financial industry over the last 10 to 15 years turn certain departments or divisions into fiefdoms that sucked up policyholder or shareholder money and then used it for travel, entertainment, marketing and salaries that stunned me as a businessman, as I could see how little value it often provided to anyone other then the lucky few who had the expense account access. That largess and the big budgets in turn led to the structured settlement profession feeling they were entitled to "marketing support" from various life companies, something I also fell into the trap of at various times, with the result being an unhealthy reliance and Alliance between brokers and agents who should have doing the best for their clients, but instead felt more obliged to "send premium back home" to their benefactors.

It only took one phone call from a life market that had provided some marketing assistance, reminding me that I "owed them some premium" ( even when their rates were the worst in the market ) for me to end the practice permanently of accepting any form of assistance or marketing support from any life company ever again to promote structured settlements. To me, taking life company money to promote your firm is akin to taking money from the government or a foundation to run your company. It comes with strings that ultimately pressure you to do things that may not be in you or your clients best interest and you should avoid it like the plague.

So what does this have to do with the title of this post?

Simple, we are now seeing the humbling of not only many major life companies and the divisions inside them who thought they were marketing geniuses, but who in fact were really just riding a historic capital market boom and asset management surge. We are also seeing that same humbling of the brokers, agents and settlement professionals who considered marketing to be playing golf, buying lunch and waiting by the fax machine for the next case to show up. Much of that "marketing money" and genius turned out to be squandered with awareness of our products, respect for our profession and the need for our services at an all time low, relative to the tools at hand to effectively market in this new age world. It's not debatable, the numbers show it, and if people would just be honest we'd come to grips with the fact that what we did to get us here sewed the seeds of the measly harvest we are enjoying today. There were a lot of golf tournaments, campaign fund raisers, contributions to trial lawyer groups, crazy marketing schemes and alliances that may have been well intentioned, but were not followed up with the hard work of real marketing of converting prospects to clients.

A lot of people ask why I work so hard on my blogging, broadcasting and building The Legal Broadcast Network. The answer is pretty simple. I've had people at every stage over the last five years who wanted to "help" LBN, but were really into either riding our coat tails, stealing an idea, milking the start up or sponsorship money and claiming some degree of "ownership" for their perceived contribution. While LBN is building to be a true success, the fact is it "failed" on about 4 separate occasions as people stole our idea, stabbed us in the back, over billed for services to extract every sponsorship dollar they knew we had, tried to hijack our technology or simply worked to ride our coat tails to success. I don't believe in failure, as you only fail when you fail to get up after life or someone has knocked you down. I have worked this hard on the project as it's part of my character to be relentlesslly stubborn, but also because it honors those who HAVE supported us, invested with us, grown with us and to do less would be to dishonor their belief in what we have told them we intend to build. Someday i'll write the history of what it took to build LBN and you will be amazed that we are now a solid development phase company with over 1 million views, listens and reads per month and growing at 30% per month and operating in the black with out taking a dime of life insurance company money.

I relate this as I believe the Structured Settlement profession is also now in one of those times where it has been knocked down, times are tough, the business model is changing and a lot of people are waiting for someone "to do something". Coming off the plateau of success, easy money, easy marketing and prosperity is never easy, but I and others are convinced we are about to see the greatest period of growth and prosperity for the profession since it's inception. So what in my opinion is it going to take for professionals to succeed?

1. Get off the golf course, cut back on the vacation time, dig in and get to work. No one promised us a perpetual monopoly on our product or that markets and perceptions wouldn't change. It's going to take some hard work, working smarter and really MARKETING instead of just selling. ( Thank you Randy Dyer for pointing out that distinction.)

2. Create a marketing plan. Get real about your numbers, sales, assets and prospects and get started talking to trial lawyers, self insureds, small mutual and casualty companies, many of whom do not have a settlement professional who even attempts to get their business. If you don't have a marketing plan or can't hire someone to help you create one, your going to have a tough time in the next 5 years.

3. Expand your vision and markets. Non-qualified annuities, structured legal fees, structured sales, litigation consulting, Medicaid and workers comp, all offer huge opportunities. Prepare to educate yourself and add some product lines to your marketing plan.

4. Go back to what you know works. Those of us who started in life insurance know the 10-3-1 ratio. Ten phone calls, gets you 3 appointments and generates one sale. It has always been and will always be about that ratio. Use what worked in the past and start calling and contacting new prospects.

5. Stop being so intimidated by new media. The world is moving to search engines, social networks, online broadcast and education. Learn it, get involved or get left behind.

In short, take this opportunity and tough environment to get rid of old bad habits and practices and reinvent your professional practice. The demand for tax free, guaranteed, life time income will never be greater then in the next 5 to 10 years. It's time to get started building for the future.

Posted on September 5, 2009 .