Make it Fast, Make it Last: Strategies to Build and Sustain Wealth

April 10, 2018

Intelligent, hardworking insurance professionals have the opportunity to earn an exceptional living selling insurance. The top performing producers are in high demand and are compensated very well for their ability to develop new business. Unfortunately, high income does not always lead to financial security. Building and sustaining wealth takes practice and discipline. Below are the Insurance Producers 3×3 success factors for making it fast and making it last:

Making it Fast

  1. Forget about the Joneses. The most common mistake insurance producers make is their desire to keep up with (and often outspend) their peers purchasing habits. If Bob in the office next to me has BMW X3 I need to get a BMW X5. Forget about building status and focus on building wealth.
  2. Live off the Land – As earnings go up spending tends to follow in lockstep. The most astute and financially successful producers maintain the same lifestyle even as their income goes up. Reward yourself for a good year with a nice vacation but avoid buying a bigger house and a new car every year. Lifestyle discipline during prime earning years will provide less stress and a happier retirement.
  3. Stay out of the Complacency Clouds – Keep your eye on the ball and don’t be satisfied with where you are at today. Too often producers reach an income level and get satisfied with their current book of business and stop actively growing their book. Business cycles, regulations, and markets change. Producers who are always growing their business tend to be quicker to react and capitalize on changing market environments.

Making it Last

  1. Know Your Number – If you are driving a car nowhere fast are you really driving fast? Building and sustaining wealth requires a plan. Start with the end in mind and work backwards. Determine what you want retirement to look like and then calculate what you need to save today to reach tomorrow’s goal. Similar to an annual sales revenue goal, producers should have an annual savings goal that corresponds to their long-term retirement goal. Top producers work extremely hard but often not having a plan leads to frivolous spending and a general lack of savings.
  2. Understand Tax Drag – The Tax Foundation calculates “Tax Freedom Day” every year. Tax Freedom Day represents the first day of each year that Americans work for themselves. In 2017, the average American began working for themselves on April 23rd (the first 114 days worked were for the government). Top producers Tax Freedom Day is even further out due to their income leading them into the highest tax bracket. Taxes have a significant drag on wealth accumulation. Proper tax planning and investment management can reduce one’s tax drag meaningfully as they approach retirement. It is important to understand the amount and type of taxes you are paying along with the estimated future taxes you will pay.
  3. Pay Yourself First – Commission payouts can be variable for producers. However, the successful producers have a consistent baseline income they meet each month or quarter. Before discretionary spending they automate their savings and pay themselves first. An electronic link between their checking and brokerage account with an automatic transfer on monthly basis provides a forced savings.

Insurance professionals work extremely hard and by following the insurance producers 3×3 success formula, a producer can make a living that will last a lifetime.

BDF’s Commercial Insurance Practice Group understands equity compensation and the valuation of the business and uses this knowledge to help insurance professionals develop financial plans while minimizing tax bills. Whether working with a producer or business owner, we focus on one’s individual goals, family involvement and living a full life.

Jim King, CPA, CFP® is an owner and wealth manager at BDF where he leads the Commercial Insurance Professionals Practice Group. He uses his understanding of the insurance industry to help insurance professionals maximize their prime earning years, develop a discipline around saving those earnings and put a plan in place to best utilize assets. His focus on creating financial blueprints for his clients has earned him recognition as a “Five Star Wealth Manager” by Chicago Magazine.