![](\"https:\/\/insurancenews.s3.amazonaws.com\/InnMagazine\/a-simple-thank-you.jpg\")
<\/p>\n\nAndy Albright wanted to give his top producers and corporate leaders a bonus \u2014 a half a billion dollars\u2019 worth.<\/p>\n
\nIt was not in cash but in face value. It was a retention tool that many insurance agencies have used for business clients, but not for their own employees.<\/p>\n
\nThe strategy can take different forms. In Albright\u2019s case, he wanted to reward the top 71 people at his agency, North Carolina-based National Agents Alliance, with an indexed universal life policy that they can keep, as long as they stay at the company or don\u2019t work for a competitor if they leave.
Albright got the idea when he was helping his alma mater, North Carolina State University, work out a plan for coaches after the University of Michigan sweetened head football coach Jim Harbaugh\u2019s already-significant salary by adding a multi-million-dollar life policy funded by the school.<\/p>\n
\n\u201cSo, I’m sitting here saying, \u2018Man, what a way to give a gift and a retention play at the same time,\u2019\u201d Albright said. \u201cAnd if they’re doing it for big-time college coaches who are making two million, three million dollars, my guys are making millions. Why can’t I do it for them?\u201d<\/p>\n
\nNot only did he pull together a package of 71 policies worth more than a half a billion dollars for his top people, he turned the presentation into an emotional ritual. The evening before his annual company meeting in January, 1,000 producers and others gathered for the surprise announcement.<\/p>\n
\nAlbright spoke to the audience about the legacy they would all leave their children and grandchildren.<\/p>\n
\n\u201cThen I looked at my top guys and I said, \u2018What are your grandkids going to say?\u2019\u201d Albright recalled. \u201cIs your picture going to be mounted over the fireplace? Are your kids going to talk about your character? Are they going to talk about your integrity? Are they going to talk about your philanthropy? Are they going to talk about how you set them up in business and life and how you paid for their college education? What are your grandkids going to say?\u201d<\/p>\n
\nAlbright admitted he got caught up in the moment and teared up as he spoke, building to the big reveal: \u201cI have a legacy-changer today.\u201d<\/p>\n
\n<\/p>\n
\nHe pulled the policies one-by-one out of a box, starting with the lowest. The policies ranged from $2.5 million for a staff member on up to $38 million for his top-producing couple. Although the recipients had applied for the policies, they did not know the policies\u2019 face value and when they would be presented.<\/p>\n
\n\u201cThey knew something special was going to happen but they didn’t know what,\u201d Albright said of the pre-conference gathering.<\/p>\n
\nThe policies rewarded the company\u2019s top producers, who were able to receive more face value insurance than they would be able to obtain on their own. Albright was able to leverage premium financing for the highest IUL policies.<\/p>\n
\nThe gift also inspired others, who asked how they could qualify. Albright said agents had to have an income of $100,000 to qualify and then it was a matter of production. Although he could not say when, Albright said he would revisit the bonus system periodically.<\/p>\n
\n\u201cI told them, \u2018We’ll do it again in two years. We’ll do it in five years, we’ll layer this,\u2019\u201d Albright said. \u201cWhen we can do it as the company grows, and we can justify more, and to more people.\u201d<\/p>\n
\nAlbright pays the premium and the recipient keeps the policy. All he asks is that the agents stick with him \u2014 or retire. Albright was clear on what would happen with the coverage if the agent left for another company.<\/p>\n
\n\u201cIt reverts back to the company ownership,\u201d he said. \u201cThey can retire. They just can’t become an enemy of the state, an enemy of the community, an enemy of the family.\u201d<\/p>\n
\nAlbright\u2019s joking reference was for agents who join another distributor and poach other agents from Albright. Then it\u2019s no life insurance for you.<\/p>\n
\nAgents are familiar with the retention strategy, also known as \u201cgolden handcuffs,\u201d because many offer it to business clients. But insurance marketers themselves are not particularly known for using the strategy with their own agents \u2014 even though the small pool of successful producers creates a hypercompetitive recruiting environment.<\/p>\n
\nJordan Smith, vice president of advanced design at Schechter Wealth in Birmingham, Mich., has helped companies with retention strategies. He is helping a few marketing organizations structure a plan but is not aware of any having started one yet. But his description of a typical case seems to illustrate why marketing organizations might want to consider the strategy.<\/p>\n
\n\u201cThe type of business that we look for is one where they have key employees who would be difficult to replace or if you have a business with had a lot of turnover in a particularly critical position,\u201d Smith said, adding that the strategy recently helped a client keep somebody who holds a critical position.<\/p>\n
\nThe company is a property development management firm that went through three chief financial officers in as many years.<\/p>\n
\n\u201cThey had spent the time training them and had gotten really excited about each of the people they’d hired only to have them hired away by a competitor for a better offer,\u201d Smith recalled. \u201cThen they have to go back to square one and find a new person and train them. So, this was an attractive approach to differentiate themselves from any of the competitors who might try to steal their key employee and to engender some positive feeling and some firm loyalty.\u201d<\/p>\n
\nAlthough it has only been a few years, Smith said the company has been able to hold onto its latest CFO. Typically, it is the cash accumulation of the life insurance more than the death benefit that keeps employees interested.<\/p>\n
\n\u201cThese are all designed for maximum cash accumulation,\u201d Smith said. \u201cIt’s really designed to create this asset that can be drawn upon in retirement, tax-free.\u201d<\/p>\n
\nFor example, the policy is structured so that if the policy hits historical returns, the owner could pull out $100,000 a year for 15 years starting at age 66, Smith said. But the employee could hold onto the cash buildup instead if the policy is performing well. At that point in the policy\u2019s life, the cost of insurance should have dropped considerably.<\/p>\n
\nBut it could be the gift that keeps on giving if the IUL is going strong at that point and other money is returning on lower rates.<\/p>\n
\n\u201cYou might get to age 66 and have other places to draw cash from,\u201d Smith said. \u201cAnd by that point, with maximum funded IUL policies, the annual charges are infinitesimally small because with these policies, the charges are high in the early years. By the time you’re in Year 11 and beyond, in a lot of cases, it\u2019s eight basis points, 12 basis points.\u201d<\/p>\n
\nIf the IUL is getting 7%, the fee would reduce the return to 6.9%, far higher than the 3% of fixed investments and products.
And not only is it attractive for the employee, if the employer is an insurance agency, as in the case of National Agents Alliance, the agency also has the benefit of receiving the commission, Smith said.<\/p>\n
\n\u201cThat really helps reduce the overall out-of-pocket costs to the employer,\u201d Smith said.<\/p>\n
\nIt was a considerable IUL sale for Albright, whose agency has been expanding beyond its mortgage protection insurance roots. Albright wanted to thank and retain the people who helped him do it.<\/p>\n
\nIn fact, the life insurance plan started out from a place of gratitude.<\/p>\n
\n\u201cIt started as a gift play, as a thank you, and then the retention is just natural,\u201d Albright said. \u201cThen I said, \u2018Oh, wait, all they have to do is stay with me and this is life-changing for them.\u2019\u201d<\/p>\n