70 General Sessions: MDRT Speaks

The Box
Guy E. Baker, MSFS, CFP

I want to share with you two ideas that have been founda-
tional to my 47 years of MDRT membership and 40 years as
a member of Top of the Table. For those of you who want to
reach Top of the Table, there is only one way to accomplish
this objective and sustain it over the years—build a prospect-
ing system that will consistently generate activity. The best
method I know of is the one I have used for 50 years—I call
it “two-a-days.” Find two people every day who will agree to
talk to you about their life insurance program. Every one of us
can find people to talk to; that is not the problem. The prob-
lem is zeroing in on their specific needs. Here is how I do it.
When you first meet people you would like to ask for an
appointment, but instead of doing that, do what every great
financial advisor has learned to do: Ask them a question.
When in doubt, always ask a question. It is a habit worth
cultivating.
Here is a question I learned from Tom Wolfe early in my
career: “Would you have any objection to discussing your life
insurance program with me?” Obviously, you can substitute
financial plan, business succession plan, or long-term care
plan into this statement. This question is to the point and is
hard to reject. Most people will not say yes to a no question.
Ask this question to everyone you call or meet.
Once you have prospects and they have agreed to meet
with you, in that first appointment you must engage them in
an in-depth discussion about their needs. What do you say?
How do you start a meaningful discussion? Again, when in
doubt, ask a question.
To learn how people think, you need to ask them. To
do this, you need to ask yourself this question: What is it
I sell? Do you sell problems or do you sell solutions? I have
asked this question to audiences all over the world, and the
vast majority will say, “I sell solutions.” Why? Because our
products solve problems.
Remember, in the final analysis, only three things can
happen to most people: They can live too long, die too soon,
or become sick and have to spend everything they have try-
ing to get well. The miracle of our products is that we can
solve their financial concerns. Our money comes in as their
money goes out. But most of our prospects don’t think this
way. They only see the costs; they are blind to the benefits.
To be successful, we have to help them see that the benefits
are greater than the costs, and we do this with questions.
Think of costs and solutions like a scale. On one side of
the scale are the costs and on the other side are the benefits.
When we show solutions, we are asking clients to weigh the
proposition. Are the costs heavier than the benefits? If so,
they will not act. The cost is too much of a burden. So what
do we do? We start talking about the benefits of life insur-
ance, annuities, long-term care, or whatever products we are
trying to sell to the clients. We tell them stories to moti-
vate them to spend the money. We call this “pennies on the
dollar.” But this puts us in an adversarial position. We are
arguing with the prospects as we try to show them that the
benefits are worth the costs.
I would like to suggest another way of thinking about
this—a paradigm shift. Let’s not focus on the cost/benefit
dynamic. Instead, let’s look at the problem.
There is another scale, and this scale is the cost/problem
relationship. If the problem hurts enough, if the problem

Guy E. Baker, MSFS, CFP

Baker of Irvine, California, is a 47-year MDRT member with 39 Top of the Table honors and a past
President of MDRT. Baker is an Excalibur Knight of the MDRT Foundation and served as its President
in 2000. He served as a board member of AALU and is a past president of the Orange County
Association of Insurance and Financial Advisors. Baker has frequently presented at the MDRT Annual
Meeting and Top of the Table Annual Meeting, has written several books and hundreds of articles for
industry publications, and was recognized by Worth as one of the top 250 advisors in America. Baker is
completing a PhD in retirement planning and investments through the American College.
BMI Consulting
15520 Rockfield Blvd Ste G, Irvine, CA 92618 USA
email: guy@btagroup.net phone: +1 949.900.0099 website: wealth-teams.com

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Annual Meeting Proceedings | 2017 ©Million Dollar Round Table


causes enough concern or fear, then the cost will not mat-
ter. Instead of being adversarial, become their friend, their
confidant. Get on the same side of the table with them, and
find out where the problem hurts the most. Ask questions:
“When you are lost in thought, what are your biggest con-
cerns?” “What keeps you awake at night?”
As the pain of the problem increases, the cost of the solu-
tion decreases. If the pain is great enough, there is no cost
that will stop them from solving the problem. Help them
understand all of the ways they have to eliminate the pain
without you. It will soon become obvious that they have no
pain remedy. So what do we do? We start talking about our
solution. Don’t do this. This is a trap. It could cost you the
sale. My rule is to never talk about my solutions until I have
totally eliminated theirs.
If you do this correctly, they will eventually ask you, “Do
you have a solution for my problem?” This is when you start
talking about how your solution will eliminate the pain. But
don’t do this until they ask or until they admit their solu-
tions will not work. We must become pain merchants. Be
known by the problems you solve, not the solutions you sell.
People will come to you with their pain, and you will be able
to help them eliminate it.
If you have done this correctly, they might even say,
“Wouldn’t life insurance work here?” What a beautiful thing
when this happens. They have proposed the solution. Now
what do you do? Most of us would say, “Yes it would.” And
then we will reach into our briefcase where we just happen to
have an illustration especially prepared for them that might
help eliminate the pain of this problem. Now we are into the
closing interview.
Again, don’t do this. It is a trap. People only buy what
they understand. The mystery of life insurance has prevented
many people from purchasing the greatest financial product
in the whole world.
So what should you do? Ask a question. Whenever you
are in doubt, ask a question. So before I bring out the illus-
tration, I always ask them, “Do you understand how life
insurance works?” No one knows how life insurance works,
including most agents. If you can explain to clients in simple
terms how insurance works, it will give them confidence to
buy your product.
The first thing I tell them is that life insurance is based on
the predictable pattern of death. No one knows who is going
to die, but they do know how many and the probability of
when. Assume you have 10 million healthy 45-year-olds. We
know in the first year that 1/1,000 will die. At age 50, it
©Million Dollar Round Table
The Box 71
might increase to 2/1,000, and at 60, it will be 10/1,000.
This will continue until all 10 million are dead.
Suppose each person wanted to buy $1 million of cover-
age. The actuaries will tell you that you have to pay $960 of
premium so that there is $1 million at the end of the year to
pay the death claim. As that cost goes up, the fewer insureds
there are in the pool.
So, “How much did your insurance cost?” No one
knows the answer because they don’t know when they are
going to die. I usually say, “Tell me when you are going to
die, and I will tell you the cost.” So the only logical point
for comparison is life expectancy. This is where 50 percent
of the group is alive and 50 percent are dead. You have as
much of a chance of living beyond life expectancy as you
do dying.
If we measure all of the mortality costs from today to life
expectancy, it is 74 percent of the face amount. But remem-
ber, only 50 percent are dead. Let’s look at the total cost
when two-thirds of the group is dead. This is called the first
standard deviation. Now the cost rises to 119 percent. If we
look at where 95 percent of the group is dead, the cost is 240
percent. No one could afford to keep their life insurance if
they had to pay the mortality costs every year.
Think about it—you reach your life expectancy birthday,
and you get your new premium notice. It is for $150,000 for
your $1 million policy. Are you going to pay it? Of course
not—that is what everyone says. But suppose you just came
back from your oncologist who said you had six months
to live. Now would you pay it? Everyone says they would.
Suppose you owned this insurance company, and all of the
healthy people were canceling their policies and all of the
sick people were staying. What would happen to the com-
pany? That’s right—it would have to shut its doors and go
out of business. This is called adverse selection, and it is what
companies fear the most. In fact, this problem caused all of
the insurance companies in the United States to close their
doors and reorganize in the mid-1800s.
So they called in the actuaries and told them to come up
with a solution. They went back to their dark closets and got
out their eyeshades and abacuses. Finally, they came out and
said, “We’ve got it. Here is the solution. You need a Box.”
If you put this money into the Box, the compound inter-
est earned on the cash in the Box will pay the curve. It is that
simple. You either fill the Box or pay the curve.
You can fill the Box in one year, you can fill it over your
entire lifetime, or you can short pay. It is up to you. But you
have to fill the Box so that it will pay the curve.
Annual Meeting Proceedings | 2017
72 General Sessions: MDRT Speaks
If this were the end of the story, it would have been a
great solution. But there is more to it. We know the earn-
ings in the Box are not constant. Interest rates go up, and
interest rates go down. Once you start your Box, if the
rates get higher, then you can put less in the Box. But if
rates go lower, then you will have to put more in the Box.
Our job is to help you know how much you need to put in
the Box each year.
In the final analysis, if you want life insurance for the rest
of your life, you have to fill the Box. So you have a choice:
Annual Meeting Proceedings | 2017
You can either fill the Box, or you can pay the curve. It is
your choice.
The reaction to this story, when I tell it to clients, is the same
every time. They always say, “This is the first time I have ever
understood life insurance.” Educated clients make better cli-
ents. Our job is to tell the story. People do what they want to
do when they want to do it. All we can do is show them their
options and then let them make the best decision for themselves.
I hope some of these ideas will help you get to the Top
and stay there.
©Million Dollar Round Table