By Phil Calhoun
Did you know 83% of business owners have no written transition plan and 49% have done no planning at all? The stories of Dave and Steve illustrate the impact planning, or lack of planning, can have on a broker and their loved ones. Health insurance clients are positively impacted as well with proper planning.
Dave was a solo broker who had no plans in place to protect his commissions in the event of his death or disability. He grew his revenues and was enjoying life from the business he built over 35 years. He planned to slow down someday but at age 66 he was still working full time because he loved the thrill of selling. Dave had every reason to believe he had 10 more years to serve his clients and planned to ride out his commissions while he cut his efforts down to part-time and someday sell and travel. His health was good but not great. Then one night he suffered an unexpected massive heart attack and passed. His family was left with no inheritance from his commissions, which was not what he had hoped. Fortunately, there was a small life policy he had purchased which helped some. He never expected all of his commissions would vanish immediately and his family never expected his early death. The harshness of Dave’s expectations versus his ultimate reality is difficult to hear. Once the banks were notified of his passing, the carriers stopped the commissions.
Sadly, Dave wasn’t counseled by advisors to prepare for all possibilities including finding someone to protect and continue his commissions. Dave never took the time to meet with an estate planning attorney nor work with an- other broker to protect his commissions and provide for his family. Brokers and loved ones expect better. Education is critical. “Educate to Motivate” is our motto.
Sad Fact: Dave’s lack of planning gave the carriers a huge WIN.
Contrast this real-life story with Steve’s real-life experience. Steve worked in health insurance since 1975. A few years ago, he had a life-threatening medical condition. The condition required significant medical care which was successful and Steve’s life was prolonged. Although he has slowed down by choice, he remains active in his Medicare business. Knowing his medical condition was serious, Steve immediately began the process to protect his com- missions. Steve finalized a commission protection plan that enabled him to stay active while including options for his retirement. The key feature he enjoyed was the buyout in his agreement which pays his spouse or Trust in his death. Due to the planning work he completed years ago, Steve enjoys staying active with the knowledge his commissions are protected. Steve protected his life-long work with a written commission protection plan and won both his medical battle and secured his income safely.
Because Steve did complete his plan to protect his com- missions the carriers will not win when he passes, his family will benefit from his career, and his clients will be taken care of by a licensed and certified professional.
Carriers will continue to pay Steve’s commissions to him while active and then pay his designated successor upon his death or in his retirement per his Commission Protection agreement. Because he did the work and planned ahead, Steve is in an excellent commission protection position. He will receive a buyout paid either to him personally upon retirement or to his loved ones who will receive a generous payout upon his death which will be managed by his successor who follows the agreement they signed years earlier.
Carriers win if you have no successor lined up
Don’t let your commissions go up in smoke. Have a plan in place. Take control and develop your plan with professional advice. Find and complete an agreement with a solid successor and review and update your plan annually. Unfortunately, odds are that far too many brokers will not take the steps to complete a written plan and they remain at risk to lose commissions.
Next steps: Brokers are encouraged to access planning ideas that will help protect their commissions. Work with local and state-based professionals such as lawyers, CPAs, and respected industry professionals to access the education and tools needed. From our work in commission protection, we have lined up several resources which can aid in the planning process.
Look for videos on topics related to broker business planning topics such as how to complete a written plan to protect commissions. One option is https://commission.solutions offered by Lambda Insurance services. The site has several videos on planning topics for brokers.
A more formal method is to attend continuing education (CE) programs. There are many CE courses focused on planning and commission protection. One option is to join a newsletter which includes planning information and has a calendar with CE courses such as:
- Growing Commissions via Acquisition
- How to Sell Commissions
- Commission Protection Using a Professional Successor
One option is www.healthbrokerguide.com that has a subscription service for a newsletter titled, “The Commissions Chronicle.”
Phil Calhoun is president of Integrity Advisors. He and his team provide personal coaching on business planning for brokers. Phil’s team includes legal and accounting professionals with experience working with brokers and health agencies. For more information call 1-800-500-9799 or email phil@integrity-advisors.com.
Get Phil’s new book, “The Health Broker’s Guide to Protecting, Growing and Selling Commissions.”
Go to www.healthbrokerguide.com to get a free eBook version available to California Broker Magazine readers through December.