Lincoln Financial Group hopes to boost sales of its variable life insurance for estate planning through a new alliance with Salomon Smith Barney.
The alliance, which went live last week, pairs dedicated wholesalers from the Philadelphia insurance company with estate planning specialist stockbrokers from Salomon, a Citigroup Inc. subsidiary. Travelers Group, an insurer also owned by Citigroup, is not participating in the alliance.
Selling variable life through Salomon may prove lucrative for both companies, which have similar client bases.
The average Salomon sale of a Lincoln variable life policy brings in annual premiums of $25,000, more than the industry average, said Wes Thompson, chief executive officer of the insurer's distribution arm, Lincoln Financial Distributors.
David Kittredge, the unit's vice president of business development and operations, said stockbrokers and other estate planners do not always offer life insurance when it is appropriate. This is partly because selling variable life can be complicated, requiring a detailed understanding of the customer's estate planning needs as well as the ability to explain the complexities of the product, he said.
Mr. Thompson said Salomon's estate planning client base can be split into two groups, by net worth: people with $1 million to $5 million and those with more. Both groups are good prospects, as estate taxes will affect individuals with assets over $675,000 in the 2000 tax year and those with more over $1 million by 2006, he said.
Michael D. White, a Radnor, Pa., bank insurance consultant, said Salomon's affluent clients can use variable life to fund estate taxes and probate costs as well as to pay down the debts of their estates.
To sell variable life policies for estate planning purposes, stockbrokers "are going to need some advanced planning knowledge and expertise," Mr. White said. They will need "somebody who can help them close the sale, and teach them how to approach the client," he said.
Mr. Kittredge said that as insurers try to help motivate stockbrokers to sell variable life insurance, "one of the things that's missing is consistent delivery of training and education."
The Salomon representatives will receive education and training from a group at Hartford, Conn.-based Lincoln Financial Distributors that will be focused solely on Salomon Smith Barney, "who will intimately understand their processes and allow us to be more effective in their system," he said.
The core of the alliance will consist of the 30 to 35 new variable life wholesalers Lincoln Financial Distributors plans to hire over the next year. All of these wholesalers will be exclusively dedicated to Salomon, and each will be assigned to work with a Salomon estate planning specialist. The wholesalers will help teach the estate planners about the products and help them identify prospects.
Lincoln Financial will pay for the initial recruiting, hiring, and training expenses, as well as the ongoing costs for items like training materials.
The first group of eight to 10 variable life wholesalers will begin working with Salomon Smith Barney representatives in the first quarter.
Mr. Thompson said Lincoln Financial will also train Salomon representatives in how to sell variable life products to consumers for purposes other than estate planning, including the funding of deferred compensation plans and for buy-sell agreements between business partners.
"I think that's what makes variable life so attractive," he said. "It's a highly flexible product."
While the arrangements directly affects only the sale of Lincoln's products, Salomon Smith Barney said in a press statement that it expects its overall life insurance sales to rise. Only a small percentage of its 11,700 financial consultants currently sell life insurance, but the company said it expects that figure to reach 30% within three years through this alliance.
Mr. Thompson developed the alliance with Jerry Hampton, executive vice president of estate and trust services for Salomon. Lincoln does not have any similar alliances, and would not say if any others were in the works.
Mr. Thompson also declined to discuss the financial arrangements between the two companies, but said "We both feel very strongly that this will be a very profitable endeavor."
Mr. Hampton was unavailable for comment at press time.
Salomon Smith Barney has 492 offices, and its financial consultants manage over $1 trillion of assets for over 7.1 million clients.
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