Primerica has built its business by helping average families make the most of their money and provide security for the future.
Premier Business Magazine, Fall 2007
Saddled with consumer debt, lacking proper Iife insurance coverage for their families with little or no savings, the middle-income market is in desperate need of help. Forget about saving money for retirement, many families are treading water just to stay afloat and are one layoff away from losing everything. And with more financial-services companies looking for larger profits from affluent investors, many middle-income families are being abandoned with few choices for where to turn for help.
For almost 30 years, Primerica has taken the road less traveled in the financial-services industry. Through its network of more than 100,000 licensed, independent representatives. the company has built its business by helping average families make the most of their money while providing security for the future.
The largest financial-services marketing organization in North America, Primerica provides financial products and services, including term life insurance, mutual funds variable annuities, loans, long-term care insurance and pre-paid legal services to some 6 million clients, primarily in the United States and Canada. The company also operates in Spain, Puerto Rico and Guam.
Primerica proposes that its clients "buy term and invest the difference," a phrase that is so important to the company that it has its own abbreviation: BTID. Since term life insurance is less expensive than the whole-life policies that many insurers advocate the savings allow families to buy higher face value policies for lower monthly rates. With their savings, clients can systematically save and invest in other investment vehicles — such as mutual funds or IRAs — also offered through Primerica.
Primerica by the Numbers
- Serves 6 million clients in the U.S., Canada, Puerto Rico and Spain
- More than 100,000 licensed representatives
- Securities clients have more than $35 billion in assets under management through Primerica
- Placed in force more than $87 billion in life insurance in 2006
- An average of $2 million in death claim benefits is paid every day
- Paid out $631 million in compensation in 2006
Laying the Foundation
Art Williams, the company's founder, had a vision that simple term life insurance, not cash value insurance, was the right product for middle-income families, but it wasn't what the life insurance industry was selling in the 1960s and 70s. Emboldened by what he saw as an injustice in 1977, he founded the company that would provide financial services to middle-income families with a direct sales approach — going directly to the warm market of friends family and co-workers. Art was the heart and soul of our business," says John Addison who, with Rick Williams, has served as Co-CEO of Primerica since 1999. Addison and Williams grew up in the A.L. Williams company. "You could sell products, do what's right for the consumer, and also build your own business," Addison says. "It was the right place, the right time, the right concept and the right execution.” A. L. Williams sold the company to Primerica in 1989.
"Our view is that you always need to keep true to the principles and cornerstones of your history."
– John Addison, Co-CEO, Primerica
When John and Rick took over, their main objective was to take the best of what the company did in the 80s and 90s, and merge it into the 21st century. They focused the business in a very strong way toward recruiting and distribution growth and created the message, incentives and environment that would eventually drive toward that distribution growth.
Looking at the dynamics and challenges facing middle-income families in the 21st century, people are less-insured than ever before. This is due in part to the evolution of the life insurance industry. In the 1960s, and 1970s the industry was very active, and whole-life policies were all the rage. There were life insurance agents on every street corner it seemed. Yet, as the industry's recruiting efforts became less successful, due in part to significant barriers into the industry, the number of agents declined. As a result, from 1977 to 1997 the number of whole-life insurance policies written declined from 86 percent to 38 percent. According to GAMA International Journal, a professional-development journal for the financial-services industry the industry has lost 80,000 affiliated agents in the past 30 years, and the average age of today's agents is 56. The one glaring difference? There are not as many people out there selling cash value insurance. "Although families were sold the wrong product 30 years ago, at least families were insured." Williams says. "Today, 91.4 million people don't have life insurance. We are making, headway on changing that number."
Primerica's Global Reach
Since 2000, Primerica, operating as Citisoluciones in Spain, has been helping families find the solutions they need to reach their goals and dreams. "The Spanish market is wide open for what we can do for families," says CitiSoluciones President, Javier Monedero. "The reality many people are facing right now is they have too much debt, no savings and no income protection. As a result, they have no hope of becoming financially independent."
He continues, "Right now, almost half of the 45 million people currently living in Spain are earning below 1,000 € (approx. $1,331 USD) per month and another 2 million are unemployed. The need for Citisoluciones has never been greater!"
- Middle-income families are drowning in a sea of debt without a meaningful game plan for getting out of it.
- Average credit card debt per household is $9,525.
Middle-income families are drowning in a sea of debt without a meaningful game plan for getting out of it. Long gone are the financial lessens of frugality our parents and grandparents handed down, which said you didn't buy something unless you saved for it — and paid in cash. Want and need were clearly defined then, and if you didn't have the money to buy something, you didn't buy it. But today, with the powerful duo of media and easy access to consumer credit, we are bombarded with marketing messages telling, us we can have it all, right now. The message of sacrifice has been traded for that of instant gratification, and all we have to say is "put it on the plastic." But the bill for financing one's Iifestyle with credit is coming due — and many are not able to pay it.
If you are in your 30s and you think Social Security is going to be there to give you a comfy retirement 35 years from now, you need to read more news. The same goes for pensions. Back when our parents and grandparents were working, there was always the feeling the company would take care of you, and after 30 years your pension, would be waiting. Combine that with your Social Security and savings, that was enough for a comfortable retirement. But two legs of that three-legged stool are broken. People are concerned about the future of Social Security, and huge corporations are defaulting on their pension funds. The burden of saving and investing has shifted from the company squarely to the shoulders of the individual. They have to know more about it, and that's where Primerica comes in.
And many are starting to think that they may never be able to retire. A USA Today study noted that 43 percent of those asked plan to work after "retirement." But what about the younger generation, are they seeing the need to save? Not so much. You have generations now growing up saying. “I want it, and I want it now," and the mechanism for getting what they want is a credit card. These two dynamics coming together — not overnight but over time — lead people to overextend themselves to the point that they neglect saving for the future.
Focus on North America
"Our primary focus is to double the size of our North American business — sales force, sales, everything," says Rick Williams, Primerica Co-CEO. John Addison, Primerica Co-CEO adds, "We have a lot of technical initiatives in the United States along with product initiatives in Canada and the United States. We're also working on a strategic initiative to change licensing requirements in North America."
They note that the licensing issue is a hot one in the insurance business. And, unlike Primerica, the industry is contracting. The number of life insurance agents has fallen by 50 percent since 1987 in the United States, and the decline is expected to continue. In addition, the industry's agent retention rate after four years is about half that of Primerica's. Contrary to the industry norm, many Primerica representatives work part-time, earning a commission when they sell a product.
Primerica does not pay commissions for recruiting. When a representative recruits a new representative, they have a vested interest in getting the new representative trained and licensed, because no one makes money until the new representative makes a sale. The process gives representatives an incentive to make sure the people they recruit become licensed and begin working their warm market, making sales and producing override compensation. And Primerica's term policies, powerful sales tools and low initial-investment thresholds simplify the process. Most clients begin investing systematically through monthly bank drafts. They can begin with as little as $25, but the average initial monthly draft is $11. Those numbers create success for Primerica but, Addison says, most brokerage houses would have no interest in them.
Those modest investments and term life insurance policies work for middle-income American families, too. "What we do is more relevant for families today than it was in 1980," Addison says. "We show them financial concepts, how to save, how to get out of debt. That changes lives. After September 11, we paid death claims for every tower and airplane that went down." Williams adds, "When our representative delivers a check to a family, they get to see that their work really makes a difference in someone's life."
The Underserved Middle Market
Now that you know many middle-income families are struggling you probably think there must be thousands of financial services companies that would dream about a market this ripe for the picking. Surprisingly. Addison says, there aren't. "It's not that stockbrokers are bad people, it's their business model," he says. "It discourages them from helping those who need it most. We believe a broker gets paid to hunt for elephants, not rabbits." A stockbroker's goal is to have a handful of people who have very significant portfolios from which they earn commissions, which is how many make their living.
The sad part is 90 percent of North America doesn't meet that criteria. Protection for families. getting out of debt and saving for retirement: who is best suited to help? "In our opinion, the one company that is positioned to meet middle-income families face-to-face across the kitchen table and deliver a strategy is Primerica," Addison says. "Sitting down with a trained Primerica professional is the best way families can realistically make any headway in their financial matters."
Primerica takes a different approach from other companies: education. Their representatives not only talk about fundamental financial solutions the average consumer can understand, they equip them with the tools to help allocate their dollars among the financial products that are right for them.
The fundamental issue for middle-income Americans is they have too much month at the end of the money: too many credit cards and too much debt. They're renting a lifestyle instead of owning their life. They insure their car, their house, their boat. But if the primary breadwinner dies, the family is devastated. They don't have enough life insurance or meaningful savings to provide for tile family's education and their retirement.
It's no secret that people have always procrastinated in dealing with their finances. And although the Internet is a valuable source of information, Addison says it's not the vehicle for putting together a financial program. "The Internet is good for what people want to do," he says. "It's not good for what people need to do. When it comes to making vacation plans or searching for clothes to buy, the Internet is a great source. But if you want to create a financial program that will prioritize your wants and needs, we are the company to do that — over the kitchen table."
Primerica works hard to keep things simple for its representatives and consumers. It builds simple term-insurance contracts that are easy for representatives to explain and for consumers to understand. And it equips its representatives with technology that makes the sale quick and easy. A new innovation allows a Palm hand-held device to capture information from the client's Financial Needs Analysis, merge it into the insurance application and electronically transfer it all to the company's robust information-management system. In states where this technology is available, more than one-half of Primerica's life insurance applications are submitted using it. When clients see the incredible business support Primerica representatives can access, many join the business themselves.
More Choosing to Become Entrepreneurs
It's been said that the entrepreneurial spirit translates into all languages — a universal appeal to control one's financial destiny. Today, more people are looking into starting their own business rather than entering the work force. "When I got out of school 30 years ago, everybody wanted to go work for a company, consulting firm or an investment bank," Williams says. "That's not what people want to do now. They want to start their own businesses. They see traditional industry as more of a risk, because of the number of layoffs they see on a monthly basis."
Today's younger generation didn't grow up with the same trust in corporate America that their parents may have had. Many of them saw firsthand what their parents went through after being laid off or their pension disappearing into thin air, all because of Corporate irresponibility. Primerica is seeing a lot more people in their 20s and early 30s from all walks of life who are joining the Primerica ranks than ever before.
"Our sales force is a snapshot of America — all races. ages and educational levels, "Williams says. "Our demographics are within a percentage point of the demographics of the country." The most important factor about Primerica's sales force? Addison says it's the desire to be financially free. "All of our representatives have one thing in common: They want something better for their families, and they want to be financially free. They want to control the means to their income instead of having the means of their income control them."
New Initiatives on the Horizon
At its convention in August 2007. Primerica introduced a new life insurance product that focuses on the over-40 market. "We don't add a product just to add a product," Addison says. "We want to add a product that strategically improves our business model." For example, their auto and homeowner's insurance referral program: they believe it will be a home run because it's a great door opener to new business. Auto and homeowner's insurance is something everyone has to have, and who doesn't want to save money on it? Better yet, the referral program will be a great benefit for Primerica clients, because it gives them the ability to one-stop shop and get competitive rates for their insurance needs.
In the past, one of the hurdles hampering new representatives was the initial cost and time required to obtain a license. Primerica is introducing a $99 licensing fee program they feel will take recruiting up another level as well as drive the number of life insurance and securities licenses. It will also plug more people into their online support system, Primerica Online, and keep representatives more connected to the business.
"Our sales force is a snapshot of America – all races, ages and educational levels,"
– Rick Wiliiams, Co-CEO, Primerica
By Rick Williams, Co-CEO, Primerica
The Financial Needs Analysis (FNA) works for two reasons. First, it goes to the core of what someone's financial situation really is. You could have a couple who looks like they are doing well, with high paying jobs, a nice house and SUV — all the signs of success — yet when you open up the books, they are drowning in consumer debt. The FNA takes into consideration their income, assets, liabilities, hopes and dreams. The second thing it does is highlight the options available and how clients can allocate their funds according to their priorities, not the priorities of a salesperson. Those unique aspects speak to our client base.Also, the FNA is a living document. It has changed some over time, as we have figured out what worked and what didn't. It's a very thorough, professional document for the client and also a very user-friendly recruiting tool for the representative. This document also gives the sales force confidence — especially new representatives — because it gives them a track to run on; they can know they are doing the right thing for their clients in a very consistent and easy-to-understand manner. It has been very successful for both the client and for our sales force.
One of the reasons Primerica has been so successful in executing its vision is the experience its management brings to the table. In fact many of their top management team have several years of experience in two or three different business units, so they bring a complete review of the operation, not just a functional view. They know every aspect of it, which helps us serve the needs of our representatives better." Williams says.
Primerica is unique in the financial services industry because of its business model, and it takes a certain type of expertise to make it run like a well-oiled machine. "It's hard to parachute into the middle of this business and have any clue about flow it works," Addison says. "Our management team has been around the track a couple of times; they know how it works. lt's a huge advantage to have this experienced knowledge base that is helping shape the future of what we do and where we go."
Tenure, however, is not a sure barometer for experience. For many at the corporate office, it is the only job they've ever had. They got out of school, came to work for Primerica and learned the business from top to bottom while witnessing the business' twists and turns. "They genuinely love their jobs and the representatives they serve," Williams says. "That makes you approach something, differently than if you just punch a time clock get a check and go home."
Vision for the Future
The game plan Addison and Williams have for the company is the main topic of discussion at every local and regional meeting and conference. In a sense, it's reaffirming the theme Addison and Williams brought to the company when they signed on as Co-CEOs: grow the sales force. "Our vision for the future has been outlined in great detail to our representatives," Addison says. "It all leads where we want to be in 2010 in licensed representatives and compensation." Primerica's first priority is to have 180,000 licensed representatives that will generate checks to their sales force of over $1 billion a year. In 2006 they paid out $631 million. For 2007 they are on track to pay out almost $700 million.
When John and Rick took over in the late 90s, the company was paying out a little over $400 million in compensation to their representatives. “Our No. 1 goal is to help drive this business by building a strong and vibrant distribution system,” Addison says. "And that means helping our representatives be as successful as possible. This isn't just one big pep rally where we all get fired up but no one makes any money. We want this business to be a genuine cash machine for our distribution system. That's our goal.”
The Next 30 Years
"Our view is that you always need to keep true to the principles and cornerstones of your history. " Addison says. "Although we respect our history, we don't want to live in it. And one way we are honoring those who came before us — those who helped build our foundation — is by launching a platform that will take us through the nest 30 years with even better results. And that's something everyone can celebrate.”