Preneed Roundtable as seen in:

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The following article was first published in the August 2016 issue of the American Funeral Director magazine, and is reprinted with permission. Pg. 66 Roundtable (Preneed).qxp_Pg. 00 Ben Franklin 7/8/16 11:49 AM Page 66

Roundtable By Steve Cronin

Preneed Roundtable

W.H. “Bill” Williams Todd D. Mannix Todd Carlson Steve Lang Many in funeral service see preneed sales as a way to grow business, give customers what they want and guarantee success into the future. But, just like all other aspects of the profession, the sale and management of preneed accounts is subject to changing economic conditions and customer expectations and desires. In this first part of a two-part roundtable, we checked in with W.H. “Bill” Williams, president and CEO of Funeral Services Inc.; Todd D. Mannix, vice president of sales and marketing for Cooperative Funeral Fund Inc.; Todd Carlson, executive vice president and chief sales officer, Funeral Directors Life Insurance Co.; and Steve Lang, chairman, president and CEO of Homesteaders Life Co., to learn the current trends in preneed sales and what the future might hold.

What do you find has been the most in lieu of a home phone – eliminating business offers. Digital ad placement effective way to promote preneed the use of direct mail and cold calling and the use of social media platforms sales and convince the public of the as a successful way for businesses to can drive traffic to your website. wisdom of preplanning their funeral market their products and services to Outside of technology, community or services for a loved one? me. engagement is essential to building Williams: In the past our profession The future of marketing for every trust and educating others about has looked to traditional methods to industry and profession can be found planning. Identify and create oppor- reach our target audience: direct mail, in our hands and on our desks. tunities to speak with and share cold calling and newspaper adver- Whether it be a cellphone, tablet or information about preneed planning tising were considered good laptop, consumers have access to with community groups and organi- marketing tactics. These methods information at their fingertips. Design zations. These presentations benefit become less effective with each plays an important role in the dissem- potential clients as well as others, passing day as consumers become ination of information. A including health care providers, estate more reliant on technology and social well-designed website is one of the planning professionals and more. media as a tool and resource for most effective ways to share your When the question of finances information. As a consumer myself, I message and educate consumers comes, and it will, remember this: receive and pay most of my bills about the importance of preneed Preneed is not a financial investment electronically, and use my cellphone planning and the services your – it’s an investment in the emotional

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well-being of the surviving family loved one. There are many studies that culture and mission of the funeral members. call for acceptance and closure. Many home’s brand. All promotion and Mannix: First, let me preface my times, a funeral offers the opportunity marketing efforts should communicate responses by saying that Cooperative to have an event that creates a demar- the unique talents, knowledge and Funeral Fund Inc. is a preneed service cation point in time that allows the creativity you have to create an provider and does not sell directly to natural grieving process to move on to experience people are willing to consumers. However, we do help our the next stage. If there is no funeral, recommend to others. In other words, client funeral homes by sharing ideas no gathering of family, no service of we see a time in the future when and industry input to address many of remembrance, it can be difficult for funeral home advertising and PR is the same questions that are raised in some people to recognize the loss from more about what a firm does to help this roundtable. We talk to funeral a closure perspective and begin to create unique and individual celebra- homes across the country every day move on. As our consumer tions. This is not unlike how wedding that struggle with these issues, and this preplanning guide states on the cover or other types of event planners differ- experience provides us a unique (and has since 1989): ‘A funeral is a entiate from one another. perspective. To a large extent, the service of worth, a rite of passing, a The most effective programs incor- fundamentals of selling preneed have ceremony for those one leaves behind porate a varied and assertive outreach not changed. If you look at it from the to afford them a chance to say program, often including mail, family’s perspective, the goals related goodbye.’ seminars, referrals, social media and to preneed are very similar to what Carlson: At Funeral Directors Life, other proactive lead generation they have always been. The approach we believe strongly in a concept that methods. These programs also include to the service and funeral may be we call ‘community-centered active, professional sales counselors changing, but the reasons for the marketing.’ We teach our funeral and management structures. In importance of these events have not. directors and sales professionals how conjunction with these programs, it is Some of the benefits of preneed are: to be in the community and how to extremely important to select the right • Creating peace of mind for their invite the community into the funeral funding partner whose interests are loved ones left behind. home. By marketing preneed in this aligned with your interests and those • Prepaying to ease the financial manner, we see tremendous sales of the families you serve. burden on their family. results and strong corollary benefits to Additionally, the most successful • Selecting their own arrangements. the at-need side of the business. Thus, owners fully understand that an active • Creating a funeral that represents our clients’ most effective approaches and progressive preneed program is the beneficiary’s life the way they want to selling preneed include community the best promotional and marketing it represented. awareness seminars and lunch-and- strategy a funeral home can have. On • In addition, it reduces the burden learn programs. Both follow a highly a net basis, the cost of the program is of loved ones questioning what the educational format. But we can’t very low and the impact very high. deceased would have wanted and forget about direct mail. In a market You effectively get an additional group wondering if the deceased would have environment that is quickly evolving of employee advocates who meet one felt bad knowing family members from old to new media, direct mail on one with families, sharing the value chose pine instead of mahogany. continues to be a cost-effective lead of the important work done by the • Paying down assets to go on social generation option for the right sales funeral home. Additionally, as a result assistance because a funeral is not professional. of the outreach from the program, you considered in the look back. Lang: The advice we give to funeral get better brand awareness, even with We offer our clients consumer professionals is to first establish a families who don’t choose to preplan guides on preplanning and prefunding culture in the funeral home that disre- and prefund funerals. their funerals. We suggest that they gards the ‘at-’ and ‘pre-’ that precedes promote the benefits of preneed in ‘need.’ The most successful owners What is your biggest challenge when their marketing efforts, whether it be and managers work with all staff it comes to administering preneed community events, preneed, at need or members to ensure they understand plans? aftercare. that, at its very core, the firm’s mission Williams: Regulations. Cemetery While there have been many is to help families plan funerals and regulation; the Federal Trade changes in the industry centered memorial events regardless of when Commission, funeral home regula- around conducting funerals in a services will be delivered. When this tions, investment manager regulation, nontraditional way, there is still a need type of culture exists, firms can be preneed regulation, Truth in Lending for the family to say goodbye in the better positioned as the resource of Act, trustee regulation and trust grief process. So the ‘hows’ might be choice for funeral planning. taxation – just to name a few. Any one changing, but the ‘whys’ have not. The It is important that a preneed of which can land a death-care profes- human condition grieves the loss of a funeral program be consistent with the sional in serious hot water if not

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properly managed. companies are compressed. It’s these clients, we see the tide is starting A clear understanding of both trust necessary to keep the expenses related to shift as cremation rates in Alabama and death-care regulations is essential. to policy acquisition and maintenance are rising. As cremation sales rise, we Regulations for most every state are as low as possible. Funeral Directors are just beginning to see contract different: some are easy while others Life’s goal is to reduce expense in averages rise as well. Progressive are more challenging. As a preneed order to keep as much death benefit death-care professionals are now trust administrator, our number one and commission in the product as offering additional services with job is to carry the regulatory burdens possible. Funeral Directors Life is cremation, which is increasing what for our clients, allowing the death-care investing heavily in automation would typically be a lower contract professionals to use their expertise to technologies, both in the field and in price and overall supporting higher stay client-centric and manage their the home office, to gain efficiency contract averages. business. while improving the level of service to Mannix: The improvement in the Mannix: There are several challenges our clients. economy has been anemic. We are to administering preneed plans. Which Lang: As mentioned above, one big growing, but at a very slow pace and is the biggest challenge depends upon challenge is finding the right partners many people, especially those in the the funeral home and the state in to support your program. It is middle class, are still waiting for the which it operates. important to have a partner that promises that have been made to them Companies like CFF and some state understands your profession, is by a fractured government. associations ease the administrative committed to win-win structures for I say this not to be political, but to burden by providing contracts, you and your families and provides point out that while Federal Reserve creating subaccounting that creates an products and services that meet the Chair Janet Yellen and the folks on account for each preneed, handling needs of your funeral home. The CNBC and Bloomberg are talking payments for payment plans, decisions can be complex, and it is about economic indicators trending in providing monthly statements and important to look at the provider’s the right direction, we have not seen providing online access so the funeral value proposition in its totality. anything to indicate the public is director knows the balances at any However, the most difficult feeling this ‘growth’ or even that they given time. challenge in running a preneed feel good about where we are going. A majority of the administrative program is finding and managing a Consumers will need to see and feel burdens are assumed by preneed team to meet the objectives set for the the growth for it to make a real service providers such as ourselves. program. It takes a lot of time, hard impact on many businesses. Until the The remaining burdens are managing work and commitment. This can be growth transforms from economists their own file system (paper or digital) difficult in an operation where serving telling tales to Main Street impact, and the ever-increasing state legal and meeting the needs of families who consumer confidence and spending reporting requirements. In many cases, have experienced a death is of highest habits won’t be moved much. the preneed service provider also priority. While I do believe the worst is over creates these reports, but if a funeral in climbing out of the financial crisis director has preneed funds in many How has the improving economic we endured, we are still a long way places, they may have to aggregate all outlook impacted preneed sales? from a strong economy where we start of the reports into one filing. Are they growing to your satis- to see consumers changing their Insurance chargebacks or paying back faction? spending habits. We have seen a commissions can also be a challenge Williams: With a few exceptions of steady stream of new preneed business with preneed if the beneficiary passes major downswings in the market – and have not seen much of an impact in a short period of time after the such as 2002 and 2008 through 2009 as we crawl along. preneed was booked. If funeral homes – the economy itself does not seem to Carlson: A true correlation between are being overly burdened by creating negatively impact the volume of sales growth and the economic passbook accounts for their preneed preneed contracts. However, conditions is hard to identify. service at the bank, they may want to economic climate does have some Anecdotal evidence suggests families investigate the services offered by a impact on contract averages. hold on to their wallets a little bit preneed service provider because many The real driver in contract averages tighter in times of uncertainty. Right of those still going to the banks are is cremation. Recently, the FSI team now we have both economic and smaller funeral homes that simply do compared contract averages of clients political uncertainty that have not have the staff to administer all of in Florida and Alabama. At the time, impacted sales to some degree. these accounts on their own. Alabama had a cremation rate less However, a stronger, more Carlson: Expense. Because of the than half that of Florida’s rate. sustaining factor might be the impact persistently low interest rate Alabama contract averages were that the persistently low interest environment and flat average policy double that of Florida’s averages. environment has on senior citizens. sizes, margins for preneed insurance However, as we continue to monitor Let me explain: If a senior citizen is

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living on Social Security and has a This Missouri firm guarantees, slowly and gradually rise in response modest retirement account of except for cash advances, all goods to the economy slowly getting $300,000, in the past that senior and services selected for one year only gradually stronger. With interest rates citizen was able to supplement their at the current prices. If a contract rising, those who were not willing to Social Security by investing those becomes at-need within the year, the sacrifice margin to obtain the business funds conservatively in a certificate products and services are guaranteed with a guarantee may be rethinking of deposit at 5 percent generating at the cost used to establish the that strategy. $15,000 per year in interest income. contract. An additional ‘premium’ – a Carlson: I think the decision on how, In today’s economic environment, percentage of the total goods and or if, to guarantee is the funeral home that same account might earn services sold – is paid for a five-year owner’s. We view our role as that of a $1,500 in interest instead of guarantee; a larger premium is paid consultant. Our field sales $15,000. That is a huge decrease. for a 10-year guarantee and so on. management team has been trained to Despite these challenges, Funeral Assuming the purchaser does not walk the funeral home owner through Directors Life has seen annual sales pay the premium and settles for the the decision-making process. growth over the past 10 years in one-year guarantee, the firm will then Together, we need to factor in local excess of 11 percent per year. So, have the opportunity for an additional market conditions, the preneed yes, our board of directors is satisfied touchpoint with the client as it insurance product’s growth rate, and with our rate of growth. approaches the contract’s one-year the funeral home owner’s business Lang: Back in 2008 we did see anniversary. The firm can offer the goals. The right decision might be to about a 1 to 2 percent decline in the purchaser the opportunity to pay the guarantee services and merchandise, to average policy amount. We believe premium for an additional time guarantee services only, or to this was due, in part, to the guarantee. guarantee nothing. We are also economic downturn as well as the It is important to note that all helping our clients with strategies for increased demand for cremation charges, including any preneed providing the guarantee for a fee. It’s with fewer or no services. This trend ‘premium charge(s),’ are listed on your critical to understand that each option has flattened out, both because the General Price List. has consequences that need to be economy is getting a little better and Mannix: Many will argue that the carefully considered. Regulations need funeral professionals are getting one significant change in the low to be understood. Business processes better about having a conversation interest rate market is that funeral need to be modified. And thorough about funeral service options to directors should not offer price retraining of both the preneed and at- consumers who choose cremation as guarantees. As a general rule, there need staff is a must. the preferred means of disposition. will be greater risk of covering Lang: We believe that this is a We are experiencing a 10 percent inflation the lower the interest rates decision each funeral home owner increase in the number of policies go. However, if the guy down the needs to make giving consideration issued year to date, which can be street is offering it, a funeral director to their local competitive attributed to a variety of factors, may have to offer it just to match the environment, their long-term including the improving economy. competition. financial objectives and overall value According to our most recent policy Some may measure whether they proposition. There is no question owner study, ‘Finally had the money should offer the guarantee as a black that funeral home customers do see to do it’ is the third most often and white issue. If they feel the real value in the ability to lock in stated reason why a person interest rates will not preserve their prices. We have noticed many prearranged when they did. margin against inflation, they don’t owners considering different ways of think it’s a good idea. Others might answering this question, including Do you think funeral homes should look at guarantees as a way of being eliminating price guarantees, offering allow families to lock in the service competitive and securing future guarantees for an additional fee (with charge, merchandise charge or both business. These funeral directors which they purchase additional when it comes to prearranged understand that their margins must insurance), guaranteeing services funerals? How does your firm be eroded with low interest rates only, etc. I do believe we’ll see more approach “the guarantee”? before they actually lose money on creative approaches to this aspect of Williams: This is a hot topic in the the funeral. To these folks, they prearranging and prefunding in the industry. ‘Guarantee’ options depend would still rather have the business very near term. It is important for on the firm’s business model and state and get some profit (even if it’s less owners to consider what is allowable law. Whatever approach a business than their full margins) than to let it in their state before choosing a chooses, proper implementation is key potentially go to a competitor. different approach to guarantees. • to making it work. A firm in Missouri Furthermore, we are once again in a The second part of the Preneed uses a ‘guarantee’ approach that I rising interest rate market. Roundtable will appear in a future have come to appreciate and support. All indicators are that rates will issue of American Funeral Director.

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