Episode 28 with Norm Trainor, President and CEO, The Covenant Group – Advise From a Top Insurance Sales Coach

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Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Hosts Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

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Welcome to Beyond the Challenge. Here are your hosts, Kevin and Sandy.

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Kevin: Today, we’re talking with Norm Trainor, President and CEO of The Covenant Group, about the trends and challenges and opportunities he sees for the insurance industry. Norm has coached more than 35,000 advisors and agents and has worked with over 23 of the top insurance companies in North America. This gives him a unique perspective that we’re looking forward to hearing. Norm, can you tell us a little bit about yourself and how you got into the insurance industry and a little bit about The Covenant Group?

Norm: Thank you, Kevin. I actually started in the life insurance business straight out of university and spent five and a half years in it and really developed a passion for it. And for the last six decades, starting in the mid-70s, I’ve been involved in educating and coaching. And the work has been predominantly in financial services. One of our mantras, Kevin, is the narrower your focus, the bigger your opportunity, and for us, the primary focus is financial services and as you touched on, it’s at three levels. It’s at the institutional level, primarily strategy and execution, and, as you mentioned, we’ve worked with 23 of the 30 largest life insurance companies in North America. We’ve worked across every distribution system in life insurance and financial services and we have worked with over 35,000 entrepreneurs, the vast majority of whom are financial advisors. So, the experience spans six decades personally. The Covenant Group is the fourth business that I’ve started and that began in 1995 so we’ve had a 27-year run and we hope to continue that run for some time.

Sandy: Thanks, Norm. All sectors face challenges, but for the insurance industry, the list seems especially long. Many carriers seem to be struggling to stay relevant while others are embracing new technology, reimagining distribution channels, and developing strategic partnerships. How have you seen the new standard of working from home change the way carriers look at selling insurance?

Norm: It’s a great question, Sandy. I think what it’s done is accelerate the shift to digitization. All companies, insurance companies will be moving more and more into the digital world. The pandemic accelerated it for the insurance sector as it did for many sectors. People were working remotely. Advisors who are primarily involved in face-to-face interaction had to learn Zoom, Teams, Webex, and other technologies. And the carriers really stepped up in terms of preparing their people to work in a remote environment. And I think too also, think about how they interact on a small screen with clients and I think that’s probably the biggest shift that’s occurred in the last couple of years.

Kevin: Norm, what do you see as the biggest challenges for carriers with Google and Amazon entering the insurance marketplace?

Norm: One of the models that we use, Kevin, to reference these kinds of challenges is Geoffrey Moore’s Crossing the Chasm and Moore’s thesis is that you have to define your business based on two parameters: value and volume. And you have to decide are you going to be a low-value, high-volume business or are you going to be a high-value, low-volume business? And, fundamentally, the distinction is the way in which you focus the differentiation in your business. Michael Porter at Harvard talked about three distinct ways we differentiate ourselves: product superiority, operational excellence, or client intimacy. Product superiority is very difficult in the life business to sustain. Usually it’s either operational excellence or client intimacy. In a low-value, high-volume business, you focus on operational excellence and so much of the way in which you operate is to commoditize products and services. The entry of organizations like Amazon and Google really represent this commoditization of insurance products. A lot of carriers have moved to the high-value, low-volume side of the business. They’re focused moving upmarket where advice is the differentiator. Just one example, we live in the Greater Toronto Area in Canada. The Greater Toronto Area is comprised of about 5.9 million people. In 2017, 75 percent of all the life insurance premiums that was placed in the Greater Toronto Area by the four major life insurance companies in Canada that have 78 percent market share was representative of policies with an annual premium of $25,000 or more. To pay a premium of $25,000 a year or more, you have to be in the top 1 to 2 percent of the income population. So what we’re seeing is a lot of life companies are moving to the higher end of the market where their advisors are applying a high-value, low-volume approach. They’re basically bifurcating. They’re separating out the commoditization of products with the higher value advice that differentiates. 

Sandy: Thanks, Norm. What do you see as the main barriers to growth and innovation for the traditional carrier?

Norm: It really depends upon what the traditional carriers choose in terms of their strategy. As I mentioned, Sandy, I came into the life insurance business back in the 70s. And in the 70s and 80s, life insurance operated within a sales paradigm. A paradigm does two things: it establishes the boundaries within which we operate and it defines the rules for success. And back in the 70s and 80s, the rules for success in life insurance were primarily sales focused. You had agents. On the wealth side, you had brokers, stockbrokers, bond traders, but the focus was, you had a sales force that went out and focused on selling products. In the late 80s, as the lines that separated banks, insurers, trusts, and securities blurred, each moved into the others’ territory and we moved from product focused, insurance, banking securities, trust, to advice, and we moved from a sales paradigm to a marketing paradigm. And now, they just became advisors. They could represent a number of companies. They could sell a broad spectrum of products. The value became a focus on the quality of advice. In the 21st century, what we’re seeing is that advisors, the front line for life insurance companies, are entrepreneurs who have chosen to be in financial services. They’re building their own businesses. And the challenge for carriers is now they’re dealing business to business. It’s no longer they’re dealing simply with an agent. Now, if they’re career companies, they’re bringing people in to start and helping them to develop. However, they’re still hiring entrepreneurs. So one of the biggest challenges for carriers is if you’re marketing through advisors, how do you help them grow their business? Because their growth drives your growth. That’s one challenge. The other challenge, though, is how do you deal with the commoditization of insurance products? How do you drive insurance products to the masses? What we’re seeing is that more and more large life companies have become wealth management businesses. They’re dealing with the whole spectrum of wealth management, of which insurance products are only one aspect. How do they continue to make those insurance products relevant to the advisors who are their frontline? Where they’re dealing with people and the margins are not sufficient to do it through an advisory system, how do they digitize the product offerings and attract those people at a lower cost? It gets back to low value, high volume, high value low volume. Are you differentiating yourself through operational excellence or through client intimacy?

Sandy: Are you seeing insurance carriers embrace innovation and transformation or are you seeing them kind of back away from that?

Norm: No, they’re very much embracing it. Innovation is the application of novelty that works. And in our work, what we’re seeing is innovation occurring in four different areas, Sandy. One is in products. What are the innovative ways in which the product can be positioned? The other in services. So, one example of that is that people today don’t buy products or services, they buy an experience. And most carriers that recognize that it’s not about the product, it’s about the needs, wants, and values of the people that they’re serving. And so in services, we have companies who are choosing to specialize in certain areas depending upon their ideal client profile. The vast majority of Americans and Canadians, for example, their goal is to retire financially secure so companies are positioning themselves in the pre-retirement market and equipping their people to be effective at retirement planning. For those companies that are focused on the business owner and entrepreneur market, is equipping their people to be effective in all the issues that business owners and entrepreneurs face, tax planning, estate planning, succession planning, exit planning. The product is a means to an end. So, the third area, markets, become really important. Companies are more and more narrowing their focus. I gave the example of the big life goals in Canada, they all call themselves wealth management companies today, 90 percent of their premium is coming from the top 1 to 2, 1 to 5 percent of the population. They are increasingly zoned in on that high level of the market and they don’t want to surrender the mass market, but for that market, they have to do it differently. And that’s where ideas come in. And one aspect of that is the growth of insurtech and fintech. The two of you would know this well. The ecosystem that supports the insurance industry is probably 10 times bigger than the industry. The last conferences I went to face to face before this year were in the fall of 2019, I was at the LIMRA Annual Conference. You were there as well. There were 892 attendees. Two weeks before that, there was an insurtech conference in Las Vegas, there were 7,200 attendees. That sector is growing by leaps and bounds and that’s where much of the innovation is coming from.

Kevin: Norm, what are the biggest changes in the life and annuity distribution you see happening?

Norm: Well, some of the challenges that we’re seeing in the business is that we have an aging sales force. You know, the average age of life insurance advisors in the US is somewhere around 60 and that’s similar in Canada. There are more life insurance advisors over the age of 80 than there are under the age of 30. So we have an aging population and that represents a major challenge for carriers. How do they prepare for the future? One of the changes we’re seeing is that when I came into the business, it was very much one where companies hired income producers. They hired agents who could drive an income. They got paid for results, we got paid for results, primarily the sale of a product. Today, we’re really hiring entrepreneurs and the complexity of the work is that much greater. When you hire to a role, you have to fit the person and the role to the level of complexity of the work. If you’re selling products, you can do it at level 1 or level 2. If you’re building a business, you have to be thinking levels 3 through 5. You have to be thinking about how you build a team or become part of a team. So one of the changes we’re seeing, Kevin, is that companies are moving more and more to supporting advisory firms or team-based practices. They’re recognizing that given the complexity of the work, the mantra today is you have to do it yourself and you can’t do it alone. And so it’s much more effective if you’re working with and through a financial advisory firm or an ensemble of advisors who share their capabilities and resources to bring greater benefit to the market. And that works all the way through from the carrier to the consumer.

Kevin: Norm, what do you see as the future of distribution for the industry?

Norm: Well, the future ties back to innovation, innovation and product services, markets and ideas, and what we see is a bifurcation that companies will create a parallel direction. Some will choose to specialize and some will generalize. But what we’re seeing in the market, Kevin, is that at the higher end of the market, the future is with financial advisory firms, and I’ll come back to that in a moment. For the mass market, it is through digitization. It’s through specialty products and services that are direct to consumer. When you stay in the middle, you have the potential of being roadkill. It’s moving to each of the extremes.

Kevin: Norm, what do agents need to do to stay relevant in a disruptive marketplace?

Norm: In our experience, Kevin, there are three characteristics of high performing financial advisory firms. The first is the ability to attract and retain the right clients, to build relationships for life. The second is comprehensive planning. Now, as I touched on earlier, planning means different things to different people. For the vast majority of people in the US and Canada, it’s retirement planning. For business owners, it may be tax planning, estate planning, succession planning, business transition planning. For high net worth and ultra high net worth, it may be the transition of wealth to the next generation, assuring the future for their children and further generations, charitable and philanthropic giving. So it’s fundamentally a very planning focused approach. And then the third element is effective portfolio management. And, increasingly, what we’re seeing, especially at the high end of the market, is life insurance, whole life, permanent life insurance, is an asset class. It’s part of a client’s portfolio, a very important part of the portfolio. Those three things are what distinguish the high-end advisory firms: the ability to attract and retain the right clients, comprehensive planning as your market requires it, and effective portfolio management. At the other end of the continuum where we have the needs of people with mass market, it’s going to be increasingly digitization. We’re seeing that with carriers making it easier for people to buy life insurance online. They’re increasing the non-medical limits. We’re gonna see more data analytics and science being applied to make underwriting easier and more effective without as much human intervention. It’s making the efficiencies of how insurers operate that much better to serve a market where the product is increasingly commoditized.

Kevin: What do you see carriers need to do to stay relevant?

Norm: Carriers need to do what every business needs to do. There are three questions every business has to get right. The first is, “Who is the right client?” Carriers need to become much clearer about whom they’re serving and how they serve them. I touched on one of our mantras, the narrower your focus, the bigger your opportunity. Carriers need to become clearer about their focus with regard to whom they serve. The second question every business has to get right is, “What is the right value proposition?” The clarity of your value proposition drives everything. People don’t buy products or services, Kevin, they buy an experience. We live in an experience economy. Carriers need to get better at addressing what are the experiences that have meaning for people. And the third is, “What is the right exchange of value?” What’s the value, first and foremost, for the consumer? You always start from the outside in. What do the clients or policy owners of carriers receive? What’s the fair compensation for the distribution system? And what’s the benefit to the carrier to their policy owners and to their shareholders or their mutual company that’s combined? But those three questions are critical at every level of business, and particularly so for carriers today.

Sandy: Thanks, Norm. Can you share one of your coaching tips with our audience?

Norm: Well, one of our coaching tips is, and this I think is particularly true at the advisor level, one of the most important questions that people are asked is, “What do you do?” And one of the challenges, Sandy, is when people are asked that question, most people, this is true of life insurance advisors and wealth advisors, most of the people answer what they do. “I’m a life insurance advisor,” “I’m a wealth advisor,” “I’m an investment advisor.” And that does not differentiate you. When people ask what you do, they’re really interested in three things. The first is why you do what you do, the second is what relevance does what you do have for me, and the third is what makes you different or unique, what makes you separate. And I’ll give you an example. One of the advisors we work with is Dean Harder. Dean is someone you know because he lives in your area. We just helped Dean write his first book, Stop Pitching! The Role of Conversations in the World of Sales. Buying is a series of micro decisions. Each decision point involves a conversation. The first conversation that you’re likely to have with a prospect or prospective client is when someone who fits your ideal client profile asks, “What do you do?” and the way you answer that would either create curiosity and invite them into a conversation or attract them to learn more about what you do or they’ll go on to another subject. Dean is the master of conversations. So when someone says to Dean, “What do you do?” he answers in a very simple way, “We help people spend and enjoy,” then he pauses, “as well as share their money.” Now, if somebody said to you, “We help people spend and enjoy as well as share their money,” what would you wanna know? 

Sandy: How?

Norm: How do you do that? How do you do that? Gee, I’m glad you asked. So, most advisors confuse familiarity and mastery. They’re familiar with what they have to do in the sales process but they have not mastered it. I can’t tell you how many times, Sandy, I — you know, as Kevin said, we’ve worked with literally thousands of advisors. I ask advisors when I first meet them “How do you answer the question, ‘What do you do?’” Whether they have three months’ experience or 30 years’ experience, nine out of ten say to me, “I really struggle with that question.” That’s the most important question that someone will ask you. The clarity of your value proposition drives everything. We help our clients become very, very clear is what’s the value you deliver to the people whom you serve and want to serve.

Sandy: Thanks, Norm, great advice. What do you see as the biggest opportunity for the insurance industry over the next three to five years?

Norm: I think the biggest opportunity for companies, distribution organizations, and advisors is to become very clear about where they differentiate that two different points of intersection with consumers and clients. One is low value, high volume. How do they deliver more of their products at a lower cost to more and more people? And that’s primarily digitization. That’s where we’re seeing the impact of insurtech have the greatest effect. But the other end of the continuum is where insurance companies are building relationships for life with their clients and, there, the most important measure is client capital. Client capital appears nowhere on a balance sheet, on an income statement or a cash flow statement, yet it is the most important measure of how you build relationships for life. And client capital is the sum of three elements, the depth of relationship you have with clients. Do they view you as a trusted adviser? One of the things we know statistically is the typical individual will buy eight life insurance policies in their lifetime. Families might own — in my family, we probably own 25 life insurance policies and living benefit policies on top of that. Most advisors don’t create relationships for life. Most companies don’t build relationships for life. That’s the single biggest opportunity in terms of depth of relationship. But the second is breadth of relationship. The best form of marketing is word of mouth, the degree to which your clients become your evangelists. And the third is the degree of engagement. There’s a difference between client satisfaction and client engagement. Satisfaction is ephemeral. It waxes and wanes. I’ve been married for over 50 years, I can tell you my wife isn’t always satisfied with me, but we’ve been engaged for a long, long time. It’s the same in business. You have to focus on engagement. Those three areas, depth of relationship, breadth of relationship, and degree of engagement, are the fundamental cornerstones of client capital. Client capital drives financial capital. That’s the biggest opportunity at the higher end of the market.

Kevin: Norm, in your opinion, what is one of the best decisions that you made that had a positive impact on your career?

Norm: I hired my first coach when I was 26 and that was one of the best decisions I’ve ever made and, 50 years later, I still have a coach, still have coaches. The best decision I ever made was you have to do it yourself and you can’t do alone, that the wise person learns from their own experience, the very wise person learns from the experience of others. That coach transformed my life. That’s how I got into this business. I wanted to be like him.

Kevin: Very good. What advice would you give to someone looking to get into the financial services or insurance industry?

Norm: I would say the best advice I would give anyone in any field or endeavor, Kevin, is do what you are passionate about. Do what comes naturally to you. There are four levels at which you find people in the work they do: those who find the work hard to learn and hard to do, those who find the work easy to learn but hard to do, those who find the work hard to learn but easy to do, and those who find the work easy to do and don’t remember learning it. The fourth is talent. So figure out where your natural talent lies and then find the vocation or the work that fits your natural talent. And for advisors, I mentioned there are three distinguishing characteristics of high performing financial advisors and advisory firms. One is the ability to attract and retain the right clients, and I say “attract and retain.” So those people who have a natural tendency to build relationships for life tend to do well in financial services. The second is comprehensive planning. You have to have the ability to help your client strategize, to figure out how they get from where they are to where they want to be, whether it’s to retire financially secure, to transition a business to the next generation, to sell a business, to achieve your financial goals. Whatever it is, you have to have that ability to understand that you help people develop a strategy and execute. And that gets back to effective portfolio management, that you understand that financial services involve a lot of moving parts. You may not be an expert in all of those moving parts but you know where to go to get the information and knowledge to solve the problems that your clients will invariably encounter throughout their life. So think about what is it you love doing and what are you really good at and does it fit with what’s required in the role. Don’t go to work for money, go to work for meaning, the money will follow.

Sandy: Norm, thank you for your time today. It’s been great to hear your insights on how carriers and producers can stay relevant and the opportunities you see for the industry over the next few years. Your perspective has been very unique.

Norm: Sandy, it’s always good to be with you and Kevin so thank you for the questions and for the time. It was my pleasure. 

Sandy: Thank you, Norm.

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