Principles of Agency Building 13th Edition April 12, 2010

1. Rights Reserved Principles of Agency Building13th Edition April 12, 2010 By:Roberto H. Bruce, MS, CLU, ChFC, LUTCFCavaliers Insurance Marketing www.aalliance.com

2. Rights Reserved Agency Building Opportunity • Strong Company • Unique Products • Ground floor • Agency compensation

3. Rights Reserved Train Recruit The Ultimate of Selling is Agency Building Sell

4. Rights Reserved Term – Insurance For A Specified Period $ CCOI $ T T age T1 T2 1 Flexible Premium2 Adjustable Death Benefit3 Current Interest Rate4 Guaranteed Interest Rate UL

5. Rights Reserved Premiums YR 1— $5,000— $4,000 $ 2—10,000 — 5,000-9,0003—15,000 — 7,000-16,0004—20,000 — 5—25,000 — 6—30,000 —7—35,000 — Net Level 7 Pay Test Tamra 88 eg. $5,000 M.E.C Annuity Single eg. $25,000 Guide Defra 85 Level eg. $2,000 Target Minimum Premiums

6. Rights Reserved TRA’ 86 PREM InterestIncome PREM PREM PREM Interest Income FIFO LIFO INSURANCE ANNUITY 59 ½ - 10% Penalty

7. Rights Reserved Life Insurance Tests Cash Value Accumulation Test – not more than single premium for lifetime or Guide Premium Test, and Corridor Test– Age 95

8. Rights Reserved Options $ 100,000 Amount At Risk OPT ALevel Face Amount Savings T t1 95 $ 100,000 OPT B Increasing Face Amt or Face Amt + Savings Amount At Risk Savings T t1

9. CCOI+ Policy Fee+ PREM Charge+ Charge / $1,000 TCOI = Rights Reserved Policy Costs PREM – TCOI = Policy Fund Cash Accumulation Value Policy Fund – SURR Charge = Cash Surrender Value Cash Value

10. Rights Reserved Hierarchy of Life Plans • Whole Life • Universal Life • Term

11. Rights Reserved Parties To A Contract • Owner • Insured • Beneficiary Three - Gift Tax One - Estate Tax Two – Recommended Disclaimer, if not taken

12. Rights Reserved Waiver Of Premium • In case of disability • Always recommend • Disclaimer, if not taken

13. Rights Reserved Beneficiary(ies) • Primary • Contingent / Secondary • Per Capita • Per Stirpes

14. Rights Reserved Annuity 1 or more premiums (accumulation) 1 or more payments (distribution) Tax-Deferred 59 ½ 10% Penalty Ordinary income Capital gains 1 – Single premium Immediate – SPIA Deferred - SPDA 1 or more - Flexible premium FPA/FPDA FIX – General Account VARIABLE – Separate Account QUALIFIED NON - QUALIFIED IRA (Front)-70 1/2DEDUCTIBLE NON-DEDUCTIBLE ROTH-IRA (Back) DIRECT TRANSFER / ROLLOVER / CONVERSION 1035 Exchange TRADITIONAL IRA / ROTH-IRA / SEP-IRA / SIMPLE IRA INDEX / TREASURY LINKED / MYG/MVA

15. Rights Reserved Annuity Ideal Cases • L(FPA $100Q/mo; $10,000NQ) • S/As(SPDA $2,000) • A(SPDA $4,000Q; $5,000NQ) • L(SPDA $10,000) • L(FPA $3,000Q; $10,000NQ)

16. Rights Reserved Plan Distributions – When to? • Die, Disabled, or severance from employment • Plan terminates, no successor plan • 59 ½ • Financial hardship* *Cannot rollover to IRA

17. Rights Reserved Early Distribution Penalty(Plan, IRA, Annuity) • 10% additional tax on distributions under age 59 ½ • In addition to any regular income tax on the amount

18. Rights Reserved Penalty Free Plan Early Distributions • Death or Disability • Distributions over life expectancy on termination of employment • Service separation after age 55 • Qualified domestic relations order • Medical expenses over 7 ½ % of AGI • Distribution election by March 1, 1986 • Dividends on employer securities • IRS levy of plan • Qualified reservist distributions

19. Rights Reserved IRA Rollover • Distribution from one qualified plan • Contribution to IRA within 60 days

20. Rights Reserved Types of IRA Rollover • Direct - qualified plan to IRA, no 20% tax withholding • Indirect - qualified plan to individual to IRA, with 20% tax withholding

21. Rights Reserved IRA Rollover Exceptions • Series of substantial equal payments based on life expectancy, or 10 or more years period certain • Required minimum distribution (RMD) • Corrective distribution • Loan treated as distribution • Hardship distribution • Dividends on employer securities • Cost of life insurance coverage • Distribution to beneficiaries

22. Rights Reserved Penalty Free IRA Early Distributions • Unreimbursed medical expenses over 7 ½ % of AGI • Not more than cost of medical insurance • Disabled • Beneficiary of deceased IRA owner • Distribution in form of annuity • Not more than qualified higher education expenses • Used to build, rebuild first home $10,000 or less • IRS levy of qualified plan • Qualified reservist distributions

23. Rights Reserved Required Minimum Distributions(RMDs) • Minimum amount to withdraw annually starting with year at age 70 ½ , or if later, year retires (except 5% business owners) • Amount not withdrawn taxed at 50%

24. Rights Reserved Placement Ratio • Issued over submitted apps • Pre-qualify prospect • Concept selling • Trial app / no initial premium for borderline cases • Initial payment w/ app • More apps, e.g., Juvenile plans • Case follow-up

25. Rights Reserved Persistency Ratio • Active over issued policies • Modal payment hierarchy • Annual, 7 Pay, or Single • Monthly bank draft • Semi-annual • Quarterly • Monthly direct billing • Client contact/review • Improve placement ratio

26. Rights Reserved Goal Setting • $$$$ • Sale/Network • Appointment • 1. Calls ——————— 3 min NO NameCompanyPurposeAppt. $TimeNeed T1 T2

27. Rights Reserved Goal Setting $250,000 – ESD/SGA$100,000 – MDRT $50,000 – Convention $_______ A.P. Goal÷$_______ A.P./Sale Sales/Year x_______ Appt/SaleAppts/Year÷52 Wks 100,000 1,000 ___ min/call ___ calls/appt ___ hrs/appt ___ appt/sale 3 20 100 2 2 2 200 1,000 $_____ Annual Prem (A.P.)/Sale 4 Appts/Wk x_______Calls/Appt 20 80 Calls/Wk x 2 Hrs/Appt x 3(min/call)/60(min/hr) 8 Appt Hrs/Wk 4 Call Hrs/Wk + 12 Hrs/Wk Total

28. Aalliance Management Expectation/Commitment(Calendar Year) Rights Reserved

29. Rights Reserved Agency Building Blocks 1) Recruit - Producer, Recruiter 2) LEG 3) Magnificent “Seven” 4) Rule of “Three” 5) Principle of the understudy 6) Bottom/Top Approach 7) Recruit-Train-Sale Cycle 8) Teamwork/Involvement 9) Lead from the front 10) Quality vs. Quantity – Collect/Select 11) Generalization-Specialization Cycle 12) Simplify - KISS 13) Sowing/Reaping - Stout-Hearted 14) Set the example 15) Go forth and multiply 16) Numbers game - +/-, Attrition, Prime, Progression 17) Curves- Straight line, Pulse, Supply, Ravine / Death-defying, Crash-landing, Sine, Square, Cubic 18) Anarchy a) Absence of Rulesb) Rules are impossible to implementc) Nobody is implementing the rulesd) Rules are being violated with impunity 19) Five Pillars - Professionalism, Persistency, Perseverance, Production, Proficiency 20) Management Cycle - Planning, Organizing, Staffing, Directing, Controlling 21) Goal Setting 22) 7 C’s of Success - Commitment, Competence, Concentration, Consistency, Creativity, Control, Conduct 23) Maximin = Minimax

30. Rights Reserved Recruit • A recruit is not a recruit without a recruit • A recruit is both a producer and a recruiter

31. Rights Reserved LEG A leg is not an effective leg without another leg

32. Rights Reserved Magnificent “Seven” • Tested to be the most efficient • Seven members of a squad • Seven days in a week • Less-not enough, inefficient More-Too much to handle

33. Rights Reserved Rule of Three Out of the seven, select your best three

34. Rights Reserved Principle of the Understudy Out of your best three, select your understudy that can duplicate or replace you

35. Rights Reserved Bottom/Top Approach • Service the bottom • Inform all at the top

36. Financial Independence RECRUIT SELL Marketing Structure Professional Development Rights Reserved TRAIN Cycle of Success

37. Rights Reserved Teamwork/Involvement • No man is an island • The whole is more than the sum of its parts • Congregation

38. Rights Reserved Set The Example Lead from the front in sales, recruiting, and training

39. Rights Reserved Quality vs. Quantity Collect and collect; and then select

40. Rights Reserved Generalization/Specialization Cycle

41. Rights Reserved Simplify K I S S Keep It Simple and Sincere

42. Rights Reserved Sowing/Reaping • What you sow you reap a thousand times • Stout hearted men

43. Rights Reserved Go Forth and Multiply • The ultimate of selling is in agency building • If you don’t talk about recruiting, it will never happen

44. Rights Reserved Numbers Game +/- Attrition Prime Progression Arithmetic Geometric

45. $ $ $ $ $ $ $ $ Pulse Straight Line Supply Sine Ravine/Death Defying Cubic Crash Landing y Square $ y y y y y y y y Curves

46. Rights Reserved Why Anarchy? • Absence of Rules • Rules are impossible to implement • Nobody is implementing the rules • Rules are being violated with impunity

47. Rights Reserved Five Pillars Professionalism Persistency Perseverance Production Proficiency

48. Rights Reserved Management Cycle Planning Organizing Staffing Directing Controlling Always go back to planning every time there is a hitch

49. Rights Reserved Book of Success Front Cover: Goal Setting Body:7 C’s of Success Commitment Creativity Competence Control Concentration Conduct Consistency Back Cover:Maximin=Minimax • Maximize profit, subject to minimum utilization of your own resources • Minimize cost, subject to maximum utilization of other people’s resources • Should be balanced