Twentysomethings prove to be a tough sell to insurers

Although the insurance industry knows that it has to sell products to twentysomethings, it is having a difficult time understanding just how to do that.

The health of the industry, as well as the challenge of going after younger clients, was a top focus at the Falls Church, Va.-based National Association of Insurance and Financial Advisors’ conference in San Diego last week.

Major misconceptions keep boomer agents and advisers from understanding their younger cohorts.

One is that boomer agents think twentysomethings have the same attitudes and approach to life that they do. Another is that Generation Y and its ilk shouldn’t be taken seriously as employees or clients.

“At some level, there’s no doubt that the boomers are a major target, and the most short-term profitable target, but the future of the 25-year-old is worth more,” said Generation Y consultant Peter Sheahan at a presentation on targeting the younger set. “You have an obligation to your own practice to give it long-term sustainable value.”

The message couldn’t be clearer to the insurance industry, which generally relies on a sales force of agents mostly in their mid-50s. In a survey performed by KRC Research in Washington, although 55% of 704 polled adults between 18 and 27 said they either worked in the insurance industry or would consider it as a career, 65% of these adults said that the industry had a poor public image and that it was old in general.

To tap into the base of younger clients, boomer agents and advisers must consider the background that these twentysomethings came from: Growing up, the younger generation was always told that its opinion mattered in home and school settings, Mr. Sheahan said. Similarly, when advisers work with young clients who may have come in as a referral from a parent, they must see that twentysomething as a separate person with his or her own needs rather than the child of a boomer client.

“Regardless of their financial situation, they will expect to be treated with the same level of respect as you treat your older clients,” Mr. Sheahan said. “Just because they’re young doesn’t mean they’re not a profitable opportunity, but they bring the same expectation from home and school that they are important and special.”

Young clients also appreciate having advisers who address short-term concerns now instead of jumping right to any product recommendations, some observers said.

“The approach is simple,” said C. Mali Phonpadith, a Fairfax, Va.-based financial representative with Northwestern Mutual Financial Network, a division of Northwestern Mutual Life Insurance Co. in Milwaukee.

“There’s lots of basic fact-finding and questions about three-year and five-year goals,” she said. “We identify gaps that are important for them to consider, and discuss the products if they are appropriate.”

Ms. Phonpadith was one of NAIFA’s 2008 Four Under 40 award recipients.

Although the transition of the industry into the hands of the younger set may not be the easiest change for advisers and agents, it will be a necessary one in order to ensure that the industry survives.

“The reality is that the senior advisers get in a spot where they have more clients than they know what to do with,” said Scott J. Sernett, a certified financial planner in Waterloo, Iowa, with Northwestern Mutual Financial Network.

“But the new advisers with few or no clients can be matched up in a buyout arrangement or a mentorship,” he said. “This transition is one of the most critical issues we face as an industry.”

Even younger adults who opt to get into the business hit hurdles from the very beginning as they find clients within their peer group.

“For me, the challenge was finding people who were forward-thinking enough that they could take action today for something that would help them for another 30 or 40 years,” said Mr. Sernett, who is also the departing chairman of NAIFA’s Young Advisors Team.

He began his career as an intern for Northwestern Mutual when he was in college and has been with the company for 12 years. Mr. Sernett’s first clients were fellow twentysomethings, who had to be taught that education and planning was the best way to prepare for the future.

On a related front, young-adult employees are also difficult for insurance industry, which is notorious for high turnover within the first five years of employment. Instead of aspiring to internal promotion as their boomer predecessors have done, twentysomethings prefer to gather working experience and then take off when another employer offers up-ward mobility, Mr. Sheahan said.

“These guys are too ambitious for the hierarchy, but you can help funnel them into starting their own business,” he said.

Mr. Sheahan suggested that employers help their brightest young workers spin off an affiliated practice that isn’t in direct competition, sharing a book of clients and other resources to give the top young workers a leg up on succession.

E-mail Darla Mercado at [email protected].