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Tapping the Middle Market. Rick Forchuk, MBA, CFP, CLU, CH.F.C. Associate Vice President, Individual Distribution Empire Life Insurance Company. What we perceive isn’t always what is real …. Flight Attendant: “Would you like to join us for dinner?”.

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Presentation Transcript
slide1
Tapping the Middle Market

Rick Forchuk, MBA, CFP, CLU, CH.F.C.

Associate Vice President, Individual Distribution

Empire Life Insurance Company

slide2
What we perceive isn’t always what is real ….

Flight Attendant: “Would you like to

join us for dinner?”

Passenger: “ What are my choices?”

Flight Attendant: “Yes, or no!”

slide3
My Parents were in the iron and steel business …

My Mother ironed and my Dad would steal!

slide4
Two shoe salesmen talking on the phone

1. “No business here …”

2. “Ship the shoes …”

slide5
More Canadians than ever

before are saying …

“I have Group Insurance,

so I’m well looked

after, thanks very much.”

This is the first time since these stats have been kept

(1982) that Canadians are more likely to be covered

under Group policies than Individual policies.

slide6
LIMRA’s Canadian Life Ownership Study, 2006

- Surveyed 2,740 households comprising 6,507 people

  • The industry as been unable to maintain the proportion
  • of adults with individual life coverage over the past seven
  • years
  • Insured adults are more likely to depend only on their
  • group coverage for life, disability, and critical illness
slide7
Understanding the Middle Market in Canada*

Middle Market: $25,000 – $75,000 of income

Number of households: 12 million

Number making up middle market: 6 million

50% of all Canadian Households make up the

“Middle Market” … it is the most under-serviced

segment of the marketplace in the country

- *LIMRA Research, 2005

slide8
Understanding the Middle Market in Canada

25% of Canadian households fall below the $25,000

annual income. They are serviced largely by social

service agencies and government programs such as

social assistance, work-assist programs, and various

other plans. They are not targeted by financial advisors.

25% of Canadian households make up the “high net

worth” market. It is here that most advisors (84%)

focus their time, energy, and resources. Why?

- *LIMRA Research, 2005

slide9
Understanding the Middle Market in Canada

25% of Canadian households make up the “high net

worth” market. It is here that most advisors (84%)

focus their time, energy, and resources. Why?

Perhaps it’s because of the old Irish proverb:

“Rich people have more money than poor people.”

- *LIMRA Research, 2005

slide10
Understanding the Middle Market in Canada
  • Do the math:
  • 84% of advisors are chasing 25% of the market.
  • 16% of advisors are chasing 50% of the market

The result: The biggest under-served market in the

Canadian economy*

- *LIMRA’s Billion Dollar Baby, 2005

slide11
Understanding the Middle Market in Canada

82% (5 million) households say*

  • death or disability of a wage-earner would seriously
  • impair the family’s lifestyle and financial survival
  • 1 million households feel they will buy insurance in
  • the next 12 months

- Fewer than 150,000 (15%) will actually buy insurance

- *LIMRA’s Billion Dollar Baby, 2005

slide12
Understanding the Middle Market in Canada

They don’t buy what they need because*:

- 60% dread high-pressure sales tactics

-73% felt they could not afford it

- 60% feel the process is too difficult and too confusing

  • 76% say they have other financial priorities (mostly
  • lifestyle)

- *LIMRA’s Billion Dollar Baby, 2005

slide13
Understanding the Middle Market in Canada

What Does The Market Look Like?*

  • Far more likely to have dependent children
  • Most have two wage-earners per household
  • Debt-to-income ration is high at 50%
  • More concerned about sickness or injury than death
  • Unlikely to have any advisor relationship
  • Recognize a need for coverage of all types

- *LIMRA’s Market Facts, Spring 2004

slide14
Understanding the Middle Market in Canada

They Want To Buy From*:

1. Someone they trust – preferably referred to them

2. Someone who applies no high-pressure**

3. Someone who makes it simple and easy

**In SYNOVET’s 2006 Consumer Opinion Poll, only 11% of non-buyers said there was

any pressure used at all – and only 3% of buyers said there was pressure

- *LIMRA’s Billion Dollar Baby, 2005

slide15
Understanding the Middle Market in Canada
  • The Situation:
  • There is a huge market in Canada virtually untapped
  • It has told us what it wants
  • It’s not getting what it wants because we aren’t calling
  • When we do call, we don’t offer what the market wants
slide16
The New Reality …

“… a clear delineation between behaviour and

life stage is becoming fuzzier.”

- Journal of Database Marketing

slide17
Aspirational Segmentation:

“Financial Planning based on the aspirations (the underlying

beliefs, motivations, and attitudes that an individual carries

through life.”

Translation: Ask them what they want!!

slide18
Life Cycle Planning

- Dinks: Dual Income, no kids

- Sitcoms: Single Income, two kids …

overwhelming mortgage

- Empty Nesters

slide20
Carolyn & Ward’s Story:
  • Age 63 and 65 respectively
  • She: retired business-owner (dry cleaners)
  • He: retired schoolteacher

Family:

She: father deceased, mother age 91, healthy (sort of)

He: father deceased, mother age 92 (Alzheimer’s)

Kids: four – two from each previous marriage

Grandkids: four (all from her two kids)

slide21
Carolyn & Ward’s Story:
  • Lifecycle planning would indicate:
  • focus on preservation of capital
  • possible cash gifts for grandchildren
  • travel
  • recreation property
  • focus on health and well-being

Advisor’s recommendation: laddering GICs, resource

funds as hedge, annuitize

as much as possible

slide22
Carolyn & Ward’s Story:

-Retirement savings compromised by care needs of

elderly parents

  • Savings further compromised by life issues of adult
  • children (one divorced, in need of mortgage help,
  • another in desperate need of cash to keep a small
  • business alive)

- lawsuit threat from business sale

slide23
Wally’s Story …
  • age 64
  • mortgage = $125,000
  • widower
  • self-employed
  • divorced daughter with two kids living with him
  • struggling to survive financially – no retirement savings

Advisor’s Recommendation: diversify into global funds

slide24
The Middle Market used to be served by:

- Door-to-door sales: Fuller Brush, Watkins, the Milkman

the Bread man, the Veggie man

- Doctors who made house-calls

- Small appliance repair shops

- Neighbourhood gas station and mechanic

slide25
Today it’s being largely ignored by advisors …

Yet another blow to this market that is being exploited in

so many ways, but doesn’t realize it …

- ATMs

- Self-check-in at airports

- Online reservations for hotels, travel, etc.

Every one of these businesses is losing touch with its

customers … is that what you want?

slide26
Understanding the Middle Market in Canada

They don’t buy what they need because*:

- 60% dread high-pressure sales tactics

-73% felt they could not afford it

- 60% feel the process is too difficult and too confusing

  • 76% say they have other financial priorities (mostly
  • lifestyle)

- *LIMRA’s Billion Dollar Baby, 2005

slide27
A farmer had a donkey … and he also had a well that

his wife had been after him to cover for many, many

months … and one day …

slide28
The Moral of the Story?

Life is going to shovel dirt on you … all

kinds of dirt. The trick to keep from getting

buried is to shake it off and take a step up.

Each of our troubles is a stepping stone. We can get out

of the deepest of wells by never giving up, by shaking it

off, and by taking a step up.

That would be the moral if that were the end of the story …

slide29
… the donkey

came out of the

well in a rage …

it knocked the

farmer over and

bit him several

times causing

serious wounds,

which later

became infected

and he died.

The Moral: When you do something wrong, then try to

cover your ass, it’s going to come back to bite

you and you’re worse off than if you had just

done the right thing at the outset!

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