Tier One Interview: Steve Kroeger

This month, Jay sits down with life insurance industry icon Steve Kroeger, Senior Vice President, Advanced Sales for Crump Life Insurance Services.  The pair celebrates Steve’s retirement after over 33 years with Crump.  Together, they look back at a career that has encompassed the growth of the high-net-worth life insurance brokerage, countless selling trends and a passion for serving producers.

JAY:  We have been close friends for 27 years, Steve.  You often tell the story of how we met at Prudential’s Variable Strategies Forum in New York City in September of 1998 when we attended a private dinner at an executive’s apartment on the Upper West Side.  You spilled a lot of red wine on an Oriental Rug and the executive tried to keep his cool as you apologized profusely.  I think I started chatting you up to keep your spirits high and the rest, as they say, is history.  

On July 11, you retired after nearly 34 years with the same company where you earned a reputation as a top tier advisor to advisors.  Tell me about Crump Life Insurance Services and your last role with the organization.

STEVE: I can’t tell you on honored I am to be a part of the Tier One Interview Series...even at the very last moment of eligibility!  Thinking back to that night in 1998, I couldn't have been more anxious after a social faux pas of that magnitude. Ultimately, he was very gracious about it, and you couldn’t have been more supportive. I knew right there we were going to be good friends. Especially lucky for me, that has grown into a lifelong close friendship.

Regarding Crump Life Insurance Services, we are a leading third-party broker and service provider supporting the distribution of a wide variety of insurance and retirement products. In fact, last year we processed $730 million in annual target premium for life insurance, long term care insurance (LTCi), linked benefit products, and disability insurance (DI) and $6 billion in annuity sales. Crump was recently acquired by AmeriLife, and I am excited to see Crump continue to grow as we are integrated into the broader AmeriLife family.

As you indicated, I just retired last month as the Senior Vice President of Advanced Sales. In that position, I was responsible for the development of advanced sales within all of Crump’s field offices and our various national accounts. Supporting me in that effort is a team of nine professionals who provide customized solutions, case design support, and answer technical questions for top financial professionals.

JAY:  Your upbringing, education and path to the life insurance industry have always fascinated me.  Your father was well known in his field, and I hope it has dawned on you that you achieved similar respect and notoriety in yours.  Walk me through your path to the life insurance industry and your time at a company that started out as TUG.  Definitely don’t forget to mention your dad!

STEVE: Wow, Jay, that is truly a challenging question. I think for any of us to be compared to a parent can be daunting, particularly when that parent was distinguished in their own field. To level set for those reading this, my father was Otto Kroeger who was an early and well-known proponent of the Myers-Briggs Type Indicator. He had thriving practice surrounding it and was best selling author on the topic.

Also, a little further context is needed since he left the family when I was a kid. I always worked to remain close with him; however, I was raised by my mom. Consequently, it wasn’t until I was in college and especially thereafter that I realized the influence my father had in his field. I started meeting people who told me about how he had helped them grow. This happened more frequently after the Type Talk books were published. The first one, Type Talk, is actually dedicated to my siblings and me. I even have close colleagues who are devotees, including our very good friends, attorneys Tom Morante and Jon Forster.     

Regarding my career path in life insurance, I became interested in the industry during my post-graduate work. I was fortunate to have graduated cum laude from Penn State, which allowed me to get accepted into their MBA program straight out of college without prior real world business experience. I started taking statistics courses and felt I had an aptitude for it. Where better to put that to work than in the life insurance industry?

After completing my degree, I went to work for two industry-leading companies, where I got experience with both the sales side of our industry as well as home office support. It was during the latter where I gravitated towards actuarial work. I was working towards that when a man named Tony Pascotti hired me to come to a firm called The Underwriters Group (TUG). He was a pioneer in the life insurance brokerage industry, creating the out-brokerage marketplace for career carriers and financial institutions.

At TUG, I was part of the original group that developed our first advanced sales offering. We went through several corporate transformations. We transitioned into BISYS and acquired the Potomac Group. With the latter of those changes, I became Senior Director, Advanced Sales. We eventually became Crump, and I progressed to the role of Senior Vice President, Advanced Sales. I was also very involved in the evolution of our Affluent Markets program, offering boutique assistance and training for our top financial professionals.

I am proud to have helped many of our financial professionals grow their practices. I deeply value the work I’ve done: simplifying complex topics for financial professionals, offering specialized support designed for their clients, and crafting sophisticated life insurance strategies. Knowing I played a role in protecting clients’ legacies is incredibly fulfilling. I could not feel better about what I’ve accomplished, and I like to think my dad felt the same way about his efforts and achievements.

JAY:  When we were discussing what you have seen in your career, you reminded me that when we met, the federal estate and gift tax exemption was $675,000.  Today, we have some permanence with knowing what the exemption will be, starting at $15 million per person.  In your view, is this figure slowing down the use of life insurance in estate planning?

STEVE: To the contrary Jay, we have seen a noticeable uptick in our estate planning conversations. High-net-worth clients are starting to take steps to put succession plans in place. The Wall Street Journal recently published an article citing a UBS study that said 53% of wealthy families globally now have a will or estate plan in place, up from 47% from last year. I expect that trend to accelerate, especially among high-net worth clients who put off planning until after last year’s election. Now that the dust has settled and the OBBBA set an exemption amount at $15 million indexed for inflation, clients are ready to get their houses in order. At Crump, we recently opened some significant multigenerational dynasty trust cases.

We’ve also had success using the idea of a “political life expectancy” with clients. This is their life expectancy divided by four, which equals the number of elections a client is likely to live through. Every four years, clients face the potential of a new administration making changes to the unified credit amount. That could be five or more potential tax frameworks for a 65-year-old to plan for. Crump can help, offering flexible life insurance strategies that will be effective in any political climate.

We always say, “people hate paying taxes, but they fear giving up control.” We have solutions that can be designed to be adaptable across generations, while providing clients with peace of mind to know that they will ultimately have cash at exactly the time it’s most needed to create and perpetuate their financial legacies.      

JAY:  Over the last three and a half decades, you have seen a lot of questionable planning techniques.  There have been aggressive strategies like STOLI, reverse split-dollar illustrated with a 12% return and be your own bank with whole life insurance.  Then, there have been sound strategies where the industry has gotten aggressive in execution.  Premium financing comes to mind in that last category.   Are you still seeing premium financing positioned incorrectly?  In your experience, what might be an appropriate way to apply financing?

STEVE: Unfortunately, I still do Jay. I was given a premium financing proposal to review just last month with an initial year one loan rate of 6.51%. Currently, I would consider that reasonable. However, the rate then decreased, reducing to 3.29% by year 11 and stayed level thereafter for life. Obviously, far from realistic and ultimately unsound for effective long-term planning. This is reflective of a regular problem in premium financing sales presentations. Too many of them rely on illustration arbitrage. They’re essentially a sale in search of a client.

Appropriate premium finance clients understand the need for life insurance first and are evaluating funding strategies second. I always start by explaining premium financing in terms of any other loan transaction. It is a method of purchasing an asset now that must be accounted for later. Successful premium financing transactions start with an exit strategy.

Better stated, multiple loan payoff scenarios should be mapped out and tested for viability before entering the loan. That goes to the heart of why premium financing first was done, which was portfolio arbitrage - as opposed to an IUL proposal at a static higher crediting rate vs. artificially low loan interest. It’s designed for clients who both hold high-performing assets and have a need for life insurance. The rate of return on their assets is significantly higher than the interest rate on the loan.

Remember, the goal of buying life insurance, or any insurance for that matter, is to transfer risk. Funding your premiums through a loan arrangement adds additional risk. If applied correctly and managed appropriately, it can enhance the overall plan. However, if it is sold without a thorough understanding of that added risk, it will eventually become extremely problematic.       

JAY:  A few months ago, in my interview with Jeri Turley, we discussed her deep commitment to, and her involvement with, Finseca, our industry’s advocacy group.  You have also been a key contributor to the success of Finseca as well as Forum 400 and other industry organizations.  Why was it important for you to be so involved and what advice do you have for those starting their careers in our industry when it comes to the overall community?

STEVE: I completely agree with Jeri, and it was through Finseca when it was still AALU that Jeri and I met. The organization’s mission of maintaining the appropriate taxation of our products is critical to providing a free market solution for the financial security of our clients. Without life insurance, the dependents of clients who die prematurely or clients who outlive their assets may become wards of the state. People cannot secure their futures by relying on our already overburdened government. We must make sure Congress, and all our elected leaders understand and support this, and that’s where Finseca’s shines.

The power of Finseca is that they have created a recognized presence on Capitol Hill. It is up to the membership to put a voice to that presence. I felt so strongly about this that I joined the Ambassador Program to magnify my voice and, as you know, I always go to the Hill.

Secondly, and equally important, those two organizations, and particularly Forum 400, are where the brightest and most creative minds in our industry are active. Obviously, to be effective in my career, I wanted to be part of that environment; however, you can’t just take from the well. To get the most out of it, you must be willing to contribute. It is that mindset which I would encourage anyone starting out in our industry to adopt. Join Finseca or your local professional organizations. Bottom line, get active and participate with those groups that will help you focus on professional growth and promote what you and your industry do.

Steve at Finseca, including with past Tier One Interviewee Jen Fox

JAY:  Well said, Steve – advocacy matters.  Going a step further, anyone who has ever met you knows that you love our industry and have a passion for helping producers learn and to see them place life insurance with clients.  Looking back, what are some of the most rewarding highlights of your career.

STEVE: Throughout my career, I’ve had the privilege to work on many interesting and high-profile cases. Given my passion for split dollar, the loan regime cases that I was involved with for a collegiate women’s basketball coach, an athletic director, and a men’s basketball coach were certainly highlights. These were all at prominent NCAA D1 schools and all three made this year’s tournament. One even went as far as the Sweet Sixteen!

Consequently, if you want your alma mater involved in the March Madness, I recommend a loan regime split dollar on your coach or athletic director done through Crump!

On the private level, we worked with a family whose household appliances you have probably owned. We were working with the grandchildren of the founder, and they were now in their early 70s. Gen 1 had established a trust, but it was in a jurisdiction with a rule against perpetuities and it would be terminating along with the resulting distribution after this third generation. They were still well off with no need for the money and their concern was doing something for Gen 4 and subsequent generations.

We proposed a loan from their trust to a new one created for their descendants. In the new trust, an account was established to service the loan and pay premiums on a policy with an option 3 death benefit. That way the loan would be fully indemnified and could be paid back to the original trust while creating a new foundation for future generations. Not only did their prestigious law firm sign off on the idea but agreed to do all the administration and servicing. However, the main reason I consider it a success is that the policy has matured into death benefit and the plan played out exactly as the client intended.

JAY:  I would be remiss if I didn’t mention you are doing some consulting for Crump in your retirement.  That said, you and your wife, Mary, have some immediate travel plans and are looking forward to your new life.  How do you plan on spending these next few years?  Hopefully, visiting Pete and me is on that list!

Steve and Mary in Hawaii

STEVE: We do have some travel plans, Jay. I was born in Gettysburg and Mary grew up on a 500-acre hunting preserve called Bull Run Ranch which bordered the Manassas battlefield, so we’re both big history buffs. Combine that with our love of travel going back to when I was an exchange student in both high school and college and you two can count on seeing us in Boston at some point.

We already have a small ship cruise scheduled for the end of August on the Tennessee River. It starts in Chattanooga where we’ll see the Battle of Lookout Mountain before going down the river gorge through Florence and Muscle Shoals, seeing the Shiloh Battlefield, and ending in Nashville. Besides the local attractions there, we’ll do the Franklin Battlefield and see Andrew Jackson’s home, the Hermitage.

A few years ago, we took a trip that retraced Lewis and Clark’s return trip up the Columbia River to the Snake River and loved it. We’re also planning on checking out the foliage in the Catskills and the historical areas of the Hudson River in October. My close friend and top Crump regional director Ben Basile and his wife Lisa have a vacation place there. Next year the plan is to do Japan and Thailand along with Alaska.

Steven at Camden Yards in the Oriole batting circle, with Aron Ralston is the hiker who got his arm trapped by a bolder in Utah and had to amputate it by himself with a pocketknife and partying in Hawaii.

JAY:  Wow, I think I am getting a little weepy and emotional as we come to the end of our interview, Steve.  Your absence leaves a big hole in the top tier of the life insurance industry, and I will definitely miss a major role model.  Before I completely fall apart, let’s move on to our famous restaurant question.  Without naming a steakhouse or a steak dish, give me some recommendations on where I should eat and what I should order when I’m there.

STEVE: You are much too kind my friend and you know it goes both ways. We hope you and Pete will find time to visit us in Fort Myers. For good comfort food, we’ll take you two to Fancy’s Southern Café. When we’re ready for something a little higher end, we’ll do either the Veranda or Courtney’s Continental Cuisine. Also, Naples is just a 30-minute drive from us and a gourmet nirvana. Bha Bha there can’t be beat for Persian delicacies.

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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.