Tier One Interview: Jerry Hester, CLU
In our latest Tier One interview, our CEO, Jay Judas, spoke to Jerry Hester, CLU, CEO and Founder of Hester Insurance Group, which is based in Chicago. In this wide ranging chat, the pair cover everything from diversity in the insurance industry to professional basketball to Polish delicacies.
Jay: You have a unique background which we’ll get into in a moment. First, though, tell me about Hester Insurance Group and where you focus.
Jerry: When I started in the insurance business 15 years ago, I did not set out to start my own firm. However, as my insurance business evolved, I noticed a lack of gender and ethnic diversity among insurance professionals that serviced the high net worth and the
institutional market. When I attended industry conferences there were very few women and fewer people of color in the room. Hester Insurance Group seeks to be an inspiration or an example that will highlight the insurance industry as a pathway to success for ALL who work within it.
At Hester Insurance Group, our primary business is providing efficient life insurance solutions for high net worth and institutional clients. We take great pride in our service, communication, transparency and innovation.
Jay: Maybe the best way to cover your fascinating background is for me to ask, how did you learn to speak Polish?
Jerry: Wow! I took French and Spanish in high school, but little did I know as an adult, my second language would end up being Polish! There is a great story on how I learned the language. After graduating from the University of Illinois, I had the opportunity to play professional basketball abroad. I was very fortunate to have a 7-year professional basketball career in Europe which took me on a journey visiting 26 countries and living in cities such as Warsaw, Belgrade, London and Tel Aviv. I am naturally a very inquisitive person, so I really embraced visiting new places and learning about different cultures.
My first team in Europe was in Poland. My agent received numerous offers, but the best was from a team in Poland. My initial reaction was: “Poland? They play basketball in Poland?” My wife, Simone, and I were thinking Italy, Spain, France, NOT Poland; but when my agent
sent me the contract and I saw what they were willing to pay me…I didn’t need anymore convincing. Once I arrived in Poland, I was pleasantly surprised. The people were very nice, the food was great (more on that later) and there were some good basketball teams. What I was not prepared for was the owner, general manager, coach and most of my teammates did NOT speak English! The team hired a translator, Bartek Halemba…a college kid that was not always around because of his class schedule, so I became very good at communicating through hand gestures.
Over the first year, Bartek would give me informal Polish lessons. One day, we were watching a comedy program in Polish and I started laughing at a joke before Bartek translated it for me. He looked at me and asked “Did you understand? It took a few seconds for it to register, but that’s when I realized I was learning AND understanding Polish! Over the next 6 years, I played 2 more years in Poland and by the time I retired, I could not only speak, but read and write in Polish as well. Recently, I’ve even had some of the fans in Poland send me messages on Twitter and I’m able to respond in Polish.
Jay: You are very charismatic, so I want to ask you how you go about obtaining clients. Do you target relationships, depend upon referrals or do at it another way?
Jerry: My wife jokes all the time that I have never met a stranger…It doesn’t matter if we are in the grocery store, attending an event or on vacation, I am always meeting new people. This has led to direct client relationships, centers of influence or just good friends and colleagues.
My athletic background has also had a large influence on how we acquire our clients. The dynamic of different personalities and skill sets that come together to achieve a goal is one of the most underrated aspects of sports. Hester Insurance Group embraces the approach of collaborating with a clients’ team of advisors which typically include investment managers, accountants and attorneys.
Our primary source of business generation has transitioned from predominately my direct client relationships to now 80% of our new clients come from referrals of professional service firms. This was a strategic move as we believe optimizing the best skillset from each member of the team has a higher level of successful outcomes for the client.
Jay: What are the life insurance needs of your individual clients and what types of solutions do you utilize?
Jerry: Our individual clients are high net worth with planning needs that range from simple to very complex. We utilize life insurance as a planning tool to maximize efficiency in growing and transferring wealth by eliminating or mitigating tax exposure for income and/or estate purposes. We execute life insurance solutions in a variety of strategies: Split dollar, Private Loan, Premium Financing and many more. However, our most important tool is the ability to listen. My mentor, Dave Downey has a saying “People don’t care how much you know until they know how much you care.” Taking the time to listen, not only to the financial goals, but also to the important non-financial goals and objectives gives you a blueprint of what solutions make the most sense for the client.
Jay: In the Midwest, you have a lot of ties with universities and other tax-exempt organizations. Are there life insurance solutions you can offer them?
Jerry: Yes. Tax-exempt institutions such as endowments, foundations and private pensions, are subject to taxation of Unrelated Business Taxable Income (UBTI) on certain
types of investments. The primary concern for tax-exempts is not paying the tax on UBTI, but the potential scrutiny of calling into question their exempt status. For this reason, many tax-exempt investors, either avoid investments that create UBTI or use a strategy to address it. Most widely used strategies include “Blocker” C Corporations and REITs (Real Estate Investment Trusts). However, under IRC Section 512 annuity income is exempt from UBTI which has helped establish the initial market for Private Placement Group Annuity Contracts (GAC). Historically, the GAC had only been available through a wholly owned real estate investment advisory of a large insurance company, such as Prudential.
Independent advisory firms do not have the ability to market their investment under the tax-efficient structure of the GAC. That has changed. Independent investment advisors can now partner with insurance carriers and create insurance dedicated funds (IDFs) or separately managed accounts (SMAs) that allows the investment to be managed inside of the GAC. Most tax-exempts, consultants and investment advisors aren’t aware of the Group Annuity Contract outside of the wholly owned insurance company investments. This lack of education is one reason the strategy remains underutilized. Hester Insurance Group is playing a role in not only the implementation of the GAC; but first and foremost, being a valuable resource of education to institutions, consultants and the asset managers on what is in my opinion, the most effective solution for tax-exempts to eliminate UBTI.
Jay: You know I always have a food question and you also know that I married into a very Polish-American family. I feel you are a kindred spirit with whom I can discuss pierogis. Tell me about your favorite kind of pierogi—cheese, onion, potato, mushroom….whatever, and also about any of your other favorite Polish cuisines.
Jerry: You saved the toughest question for last. I can’t pick between pierogis…just give me one of each! Growing up, I was not exposed to the Polish culture so I was a pleasantly
surprised at how much I enjoy Polish cuisine. Most people have tasted or heard of pierogis but some of my other favorites: Paczki (donuts), Mizeria (Polish cucumber salad) and Zurek soup (sour Polish soup). The advantage of living in the Chicago area (second largest polish speaking community in the world outside of Warsaw) are grocery stores dedicated to Polish foods. I can get authentic Polish dishes right here! Ok…Now that you have my mouth is watering, I’m headed to the Polish grocery store…Do widzenia! (which means “good bye”).
Read our companion Tier One blog post on Loan-Based Private Split Dollar by clicking here.
Since its inception, Life Insurance Strategies Group has solely focused on the individual high net worth life insurance market. We do not sell products. This allows us to offer unbiased, pragmatic advice. Visit us at www.lifeinsurancestrategiesgroup.com.