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LOMA 320- ISTAR > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

Define the following terms in relation to personal selling

  1. personal selling
  2. promotion
  3. distributing
A
  1. tool for promoting products
  2. anything that links a product or service with potential customers
  3. delivery
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2
Q

Whats an advantage to personal selling?

A

creates a direct link between a company and a client ideally resulting in a personal relationship that builds trust and loyalty and enables the company to gather informaiton to improve CS.

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3
Q

define “agent”

A

an independent sales representative or company employee who is authorized under th terms of an agency contract to act on behalf of an issuuing company, or principal, during interactions with customerts.

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4
Q

What is an “agency contract”

A

a written agreement between the agent and the insuere that defines the agents role and responsibilities and describes the agent’s compensation.

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5
Q

What topics are usually covered in an agency contract between the company and the agent?

A
  1. nature of the insuere/agents relationship. (employee vs. contract)
  2. Authority of the agent to represent the insurer.
  3. agent’s duty to the insurer.
  4. compensation
  5. production requirement.
  6. terination
  7. termination for cause
  8. errors and omissions insurance.
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6
Q

Depending on the terms of the agency contract, agents can be divided into what 2 basic categories?

A
  1. affiliated agents

2. nonaffiliated agents

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7
Q

What is an affiliated agent

A

an agent who sells primarily the products of a single company.

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8
Q

what do you call an insurer’s career agents as a collective?

A

field force

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9
Q

What do you call the offices in which career agents work in?

A

field offices

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10
Q

What are nonaffiliated agents

AKA: brokers, independant agents, agent-brokers.

A

agents who do not have an exclusive contact with one company or obligations to sell one company’s products exclusive contract with one company or obligations to sell one company’s products exclusively and who may submit insurance applications to any insurer with which they have an agreement.

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11
Q

What is a producer group?

A

an organization of independent insurance agents or brokers that negotiates compensation, product and service agreements with insurance companies.

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12
Q

What do you call an independing firm that works for an insurance company and sells one or more insurance products to select independent agents or brokers?

A

brokerage general agency (BGA)

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13
Q

Rather than contract with an outside firm, insurers can establish what to sell its insurance products to independent agents and brokers?

A

in-house brokerage agency

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14
Q

What is a multiline agent?

A

an agent who distributes life insurance, health insurance annuities and property/calsualty insurance products for a group of financially interelated or commonly managed insurance comapnies.

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15
Q

What do multiagents call their own offices?

A

multiple-line agencies (MLA) or multiple-line exclusive agencies (MLEA)

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16
Q

In addition to commissioned sales agents, some companies use salaried sales representatives to distribute certain types of products. What is a salaried sales representative

A

a company employee who is paid a salary for making sales and providing sales support.

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17
Q

Define “group representatives”

A

salaried sales representatives specifically trained in the technique of marketing and servicing group prodcuts.
- promote their comapnie’s group products to agents, benefit consultants and organizational buyers of group products.

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18
Q

Define a financial advisor

A

a professional who analyzes a client’s personal financial circumstances and goals and prepares a plan, usually in writing to meet the customer;s goals, such as retirement planning or college savings.

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19
Q

What are registered investment advisers?

A

financial professions who are regisgtered with the SEC or states securities agency, and receive compensation in exchange for providing investment advice to clients.

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20
Q

What is portfolio management?

A

an advisory service designed to help a client select and manage a diversified group or portfolio, of investment products, including mutual funds, bank products and insurance products.
- goal: maximize earnings and minimize losses.

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21
Q

What other services besides portfolio management, can a financial advisor offer?

A
  1. tax planing

2. estate planning

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22
Q

T or False

in the US the individual states are primarily responsible for regulating the insurance industry?

A

yes. In most states, laws governing agent licensing are based on the NAIS producer Licensing Model Act. Which is a model law that specifies the requirements an individual must meet to be licensed as an insurance sales agent.

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23
Q

Distinguish between a resident producer and non-resident producer

A

Resident: resides or maintain their principal place of business wihtin the state and are issued a redient license,
nonresident: reside or maintain their pricipal place of buriness in another state and are issued a nonresident license.

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24
Q

How does a person become licensed?

A
  1. 18+
  2. submit a written application using state approved form
  3. complete any required insurance-related education
  4. pass the applicable exams
  5. pay the the applicable fees.
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25
Q

How many exams must a licence applicant pass?

A

an examination for each line of insurance for which they have applied.

26
Q

True or False;
most states require that producers annually complete a specified number of hours of continuing insurance education courses to maintain their licenses?

A

True

27
Q

What are the 7 steps to a sucessful personal selling process?

A
  1. prospect for customers
  2. establish relationship
  3. determine customers needs
  4. generate proposals
  5. evaluate alternatives
  6. close the sale
  7. provide a follow-up service
28
Q

define prospecting

A

the process by which financial professional identtify, contact and qualify potential customers
- requires interpersonal skills, planning and organization.

29
Q

what are the 3 types of prospects?

A
  1. sale leads,
  2. referred leads
  3. qualified prospects.
30
Q

What are Sales leads

A

potential contacts that mgiht become customers.
may come from
- company’s website, social media posts, articles for print, , seminars, networking, advertisements via phone contact

31
Q

What are referred leads?

A

customers who come from existing clients who have some knowledge about the referred prospect and are more likely to result ina sale than a sales lead.

32
Q

Successful financial professionals cultivate relationships with indluential people who have many contacts in a comminity and are known as what?

A

centers of influence.

  • A great source for referred leads
33
Q

What is cold calling

A

the act of reaching out to customers with whom the financial professional has no prior contact

34
Q

Who is a qualified prospect?

A

a potential buyer who has both a need for and the means to purchase a prodcut

35
Q

What is the purpose of solution-based selling?

A

ensures the customer receives the most useful product offer in relation to his needs.

36
Q

A needs analysis is a necessary state in solution-based selling with extensive fact-finding in 3 critical areas. What are they?

A
  1. current financial situation
  2. current financial products
  3. financial priorities
37
Q

What components are included in an effective sales proposals?

A
  1. several possible solutions to the customers financial needs
  2. costs of each option
  3. features and benefits of each option
  4. visual depictions of the information such a infographics and charts
38
Q

In the organizational market, the prospect usually submits a request for proposal to potential providers. What is a request for proposal?

A

a document that provides detailed infomration about the requested coverage and requests a bid from the insurer for providing that coverage.

39
Q

Whatg should be included in a prospect’s selling process presentation?

A
  1. explain how th eproduct recommended satisfy’s the prospect’s needs
  2. present product features and costs
  3. stimulate the prospect’s interrest in purchasing the product.
  4. motivate the prospect to complete a purchase.
40
Q

What is the act of “closing”

A

occurs when the salesperson secures a purchase commitment from the prospect.

41
Q

What are the benefits to a follow-up service?

A
  1. strengthens customer relationships by handling problems or answering questions
  2. obtain valuable information about product preformance
  3. obtain the names of referred leads
  4. ensure that products continue to meet customers needs’ as situations change
  5. generate future sales by reminding customers of unmet needs or discovering new needs
42
Q

What is outlines in the NAIC Unfair Trade Practice Act

A

prohibited insueres practices.

  1. churning
  2. rebating
  3. twisting
  4. misrepresentation
  5. misappropriation of funds
43
Q

describe churning

A

the illegal sales practice in which a sales representative induces a financial service customer to engage in excessive buing that is not in the customers’ best interrest.

44
Q

Define rebating

A

action where a financial professional offers a prospect an inducement to purchae a product, and the inducement is not offered to all prospects.

45
Q

define twisting

A

the illegal sales practice in which a sales representative misrepresents the features of an insurance policy or annuity contract to induce the customer to replace an existing product

46
Q

define misrepresentation

A

a false or misleading statement

47
Q

define misappropriation of funds

A

the illegal misuse of a customers or company’s money even if the use is on a temporary basis; the mixing of funds intended for a specific purpose or purchase with general-use funds or with funds owned by another person or company.

48
Q

FINRA has issed a number of rules regulating the conduct of broker-dealer and registered persons. Give 3 examples

A
  1. Rule 2110- requires members to “oberve high standard of commercial honor and just and equitable principals of trade”
    2 Rule 2120: prohibits the use of any manipulative deceptive or fraudulent device or contrivance to indue the purchase or sale of any security. This rule prohibits twisting, churning, rebating and other unfair or deveptive sales practices.
  2. Rule 2330: prohibits a memeber from making improper use of a customers funds for guaranterring a customer agasint lost in any transaction.
49
Q

Financial professionals must meet suitability requirements. What does this mean?

A

They must have reason to believe that a specific product is suitable for customers needs based on a customers financial situation, tax stgatus and financial objectives.

50
Q

In 2006, the NAIC adopted the Suitability in Annuity Transactions Model Regulation.
define this.

A

this regulation requires producers to take specific measurements to ensure the suitability of any purchase or exchange of an annuity contact that results in another insurance trasaction such as using the surrender value of an anuity to purchase another annuity or paid-up life insurance policy.

51
Q

How does the Senior protection in Annuity Transaction Model regulation differ from the Annuity Transactions Model Regulation.
define this. ,

A

it imposes the same suitability determination requirements but applied only to transactions involving individuals 65 or older.

52
Q

What is the FINRA Conduct Rule 2821 that became effective in 2008?

A

expands on suitability requirements by specifying criteria to be considered when making a suitability determination for the purchase or exchange of a deferred variable annuity.
- the suitability requirement must be documented and signed by the person recommending the trasnaction.
and the registered principal must review and approve and sign the suitability determinatio before the application is sent to the insurer for processing.

53
Q

What is the new Rule that the US department of labour (DOL) released with an application date of 04/2017?

A

requires a financail profession recieving compensation for providing retirement investment advice to adher to a higher standard than suitabibility
- it amends the definition of a fiduciary under the ERISA
-

54
Q

In most states, regulations that fovern replacement requirements are based on various versions of the NAIC Life insurance and Annuities RFeplacement Model Regulations (model replacement regulations). Why?

A

it was developed to ensure that isnueres and insurance producers provide customers with fair and accurate information about policies so that consumers can make purchase decisions that are in their own best interrests.

55
Q

What is financed purchase?

A

the purchase of a new policy for which the owner intends to pay premiums using funds taken from another policy.

56
Q

True or False
state laws based on the Model replacement regulation typically require that the agent and applicant for an individual life insurance policy or annuity complete and sign a replacement statement.

A

True
it lists any existing life insurance policies and annuity contracts held by the applicant that the new contractr will replce.

57
Q

The most comprehensive disclosure requirements are those mandated by regulation 60 of the state of NY. describe it

A

under this regulation the agent must provide the customer with a detailed disclosure statement comparing the features and benefits of the existing policy and the proposed replacement ppolicy.
The insured has 60 days to cancel the replacement and obtain a full refund.

58
Q

What are the standards the FINRA conduct rule 2210 impose?

A
  1. FINA members may not publish, circulate or distribute any public communication taht the member knows or has reasong to know if false or misleading
  2. members may not make false, exagerated, unwarrented or misleading statements or claims in any communication to the public or omit any material fact if the omission would cause the communication to be misleading
  3. materials must contain the name of the registered broker-dealer
  4. material must not contain promises of specific investment results, or exagerations
  5. materials must not imply that any state or federal regulatory body has endorsed or approved a product or a registered broker-dealer principal representation
  6. investment results cannot be predicted or projected
  7. any advertisement or sales literature that compares investments must disclose all material differences between them
59
Q

True or False
FINRA requires the governement to actively supervise sales personal to ensure compliance with the FINRA rules securities law.

A

FALSE,
FINRA spervisory Rule (conduct rule 3010) requires all broker-dealers to establish and maintain written procedures governing the activities of their registered representatives and pricinpals.

60
Q

What is the responsibility of a chief compliance officer?

A

responsible for extablishing and maintainig the supervisory ssytem.

  • submit detailed writen reports on systems to senior management 1x/yr.
  • d
61
Q

A company uses both quantitative and qualitative measurements to evaluate the effectiveness of the financial professionals engaged in personal selling.
Differentiate between the two

A

quantitative: involves numbers such as sales volumes, customers acquired, sales presentations given, follow-ups made.
qualitative: addresses provision of marketing intelligence, knowledge of company policies, knowledge of comapny’s products, ethical and moral behavior and effective communication skills.

LOMA 320- ISTAR (10 decks)

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