From the moment we all first received payment for work, we have, either consciously or subconsciously, put a dollar value on our time.
When I was 10 years old, with no earthly expenses, responsibilities, or any other place to be, $10 to mow the lawn at my parents’ house felt like a dream. If it took me an hour to do it, at $10/hour I felt like I was winning big. My expenses were zero, and I was therefore making infinity times my monthly expenses. I had nowhere else to be and no other method of earning, so my opportunity cost was also zero. Every time the lawn would get barely long enough to cut, I’d be asking to do it again, in what I felt like was a chance to cash the same paycheck.
Just a few years later, say age 15, that same $10 offer to cut the lawn seemed unfair. $10 for an hour of my time? I had other stuff to do: friends I wanted to hang out with; girls I wanted to get rejected by; football I wanted to watch. I also had a better grasp of what the things I wanted in life cost. $10 was a drop in the bucket when you’ve got your eyes set on Patriots season tickets at the then brand new Gillette Stadium (priorities!).
But more important than any of those things? I had other ways of earning more efficiently. My job at the bakery paid $10/hour and we split whatever was in the tip jar at the end of the 8-hour shift, say another $2.50/hour each, so I could make around $100 in a day’s work. The very next day, I could make another $100 back at the bakery. Now that was cashing the same paycheck. It sure beat waiting a week or two for the lawn to grow back.
So because the amount I was earning elsewhere dwarfed what I was earning on the lawn, and I had better stuff to do than earn an extra $10 when I finally did have an hour to spare, my parents found themselves looking for a new lawn guy.
The same concept can be applied to financial advisors and the struggle they face in determining which financial services to discuss with their clients, except the stakes are much higher. When talking about the risks your clients face in retirement, they are often extremely vulnerable. Luckily, excellent solutions exist to protect their assets.
But is it worth it to you to step out of your comfort zone and have that initial conversation? How much work are you signing up for? And how much do these products even pay? These are important questions to understand before committing the prospect of a short conversation with your clients.
Before we dig into all that, let’s dig into what your time is currently worth. What do you already make per hour? Take what you bring in in a given year and divide it by the number of hours you work. Say you have a successful practice and you make $500,000/year, and you work a standard 40 hour week for 50 weeks a year, or 2,000 hours. That’s $250/hour. A great living, for sure. And you’re probably right that you would never have to have a long-term care conversation to make that much.
But what’s a long-term care conversation worth? If you have a half hour long-term care conversation with four of your clients, even our least efficient brokers will convert one of those four conversations into a placed case. We’ll add a conservative two hours of additional work for illustrations/presentations/paperwork for a placed case, and that’s four hours total of work per placed case. The average commission on these products is $5,000. That’s $1,250/hour, or 5x the hourly rate of what you’re used to making if you’re the successful broker in the example above.
As you become more efficient in the sales process, which should happen quickly, this hourly rate will only rise, eventually getting to the point of there being no amount of money you can make more efficiently elsewhere.
More important than any of this, of course, is that bringing up what is likely to be the single largest risk to your clients’ financial well-being is the right thing to do. It will not only establish credibility with your clients – even the ones who don’t end up protecting themselves – it will help protect the rest of the assets that you manage.
If you’d like to learn more on why having this conversation is the right thing to do for your clients or better understand the powerful financial leverage of these products, please contact Joe today at (401) 709-6223 or (401) 573-3313.