Moving NAIFA Into the 21st Century:
A Speech by NAIFA CEO David Woods
NAIFA CEO David Woods, CLU, ChFC, LUTCF, made the following presentation during NAIFA's 2006 Annual Conference and Career Conference in San Francisco.
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George Norris opens "Voices From The Field," his wonderful centennial history of NALU/NAIFA, with the words, "There had been clouds over Boston earlier that morning, but by 9:00 the sky began to clear as the delegates gathered." He was describing the first convention of the new National Association of Life Underwriters on June 18, 1890.
The world has turned many times since then and much has happened. But the sun that shone on Boston that day has shone brightly on our industry ever since, in large measure because of the work of NALU and NAIFA, the oldest of all the industry organizations.
And, despite an industry today that would be almost unrecognizable to our forefathers in Boston, NAIFA continues to hold a steady course, never forgetting that its purpose is the protection, preservation and enhancement of the agent/advisor in delivering high quality products and services that help Americans create financial security at death, disability and old age.
Over the years, NAIFA has been at the forefront of such major industry challenges as the Armstrong investigation of the early 20th Century, the McCarran Ferguson Act of the 1940s, the Federal Trade Commission attacks of the 1980s and innumerable tax and other legal battles in between. In fact, one of the most significant victories was in the fight to exempt death benefits and the inside buildup from inclusion in the first income tax act of 1913, a battle our forefathers won. That battle, of course, is not only historic, but is as current as today.
Indeed, virtually all of our current partners were born out of NAIFA. MDRT was founded at the NALU Convention in Memphis in 1927.
The formal announcement of the formation of The American College of Life Underwriters was made by one of its founders, Edward Woods, a NALU past president and long time NALU leader, at that same NALU meeting in Memphis. Woods and NALU, by the way, were also an important factor in the creation of what is now LIMRA.
The Life Underwriter Training Council was created by NALU leaders in 1947. GAMA International, AALU and AHIA all were born out of NAIFA.
The LIFE Foundation was created by NAIFA and the other field organizations in response to the public relations challenges of the early 1990s.
Our history is rich with myriad examples of NAIFA's vital role in the growth and development of the private financial security industry in America. And that's why the message I bring to you this morning is so vital.
Yesterday President David Smithkey shared with us the outline and purpose of the major strategic review the Board has just approved. This will not be an inexpensive exercise, but in the Board's view, a view I strongly endorse, we are at the most critical juncture of our 117 year history. The situation demands this investment. When I became President exactly 20 years ago our membership stood at 140,000. On June 30 of this year we had 62,221 members. And while we are not losing members at the calamitous rate of 5,000 to 10,000 per year of the recent past, we have continued to drop at the rate of 1500 or so each year for the past several. And this is in spite of the most dynamic, sophisticated and intense membership drive this year that I have ever seen.
There is no question fundamental change is needed.
Lest anyone think we are overreacting, I asked our Chief Financial Officer, Steve Siesser, to do a five year projection showing the financial results of a continuing slide in our membership at the same rate as the past five years. (See slide 1)
Despite Treasurer Peter Browne's excellent financial report yesterday, there are black clouds on the horizon and the storm flags are up.
Because of the fact that we have two conventions in the same fiscal year this year, 2006 is a little distorted, but the five year projection is the key. If our membership continues to decline at the average rate of the past five years and if expenses increase at only a 2-percent rate, by 2011 expenses will exceed revenue by nearly $2 million.
Our choices are not happy ones. 
We could spend our net worth. But even with our strong current financial position, losses like that would bring us to insolvency in just 4 years.
We could cut programs. But in order to maintain even a balanced budget between now and 2011 we would have to cut $500,000 from our political advocacy budget, $500,000 from our member benefits and association services budget, $150,000 from our education and professional development budget and $125,000 from our communications budget. And that is adding not one penny to our reserves. (See slide 2)
But those are just numbers. In real terms it means fewer, if any, lobbyists, no outside counsel, no National Leadership Conference, no PIC, no PAC, no LILI, no YAT, no FSS/LUTC, no Association Executives Conference, significant staff cuts etc. In short, no NAIFA.
We could raise dues. But every business person knows that raising prices when sales are falling without improving the product is a recipe for disaster.
Well, that's the bad news. The good news is that your Board is convinced we can turn this around. The nationwide survey we are about to conduct will ask not only members, but more importantly non-members and recently lapsed members what their needs are. What can NAIFA do to help them grow their practices? What are we not doing or what are we doing that keeps them from joining. Are our programs simply not relevant? Is our delivery system ineffective or antiquated? Is our basic structure out of date? Is our governance model archaic? Are our priorities out of line?
The answers to these and many other questions will position us to reshape NAIFA to meet the real needs of agents/advisors today. Think of this; there are, according to LIMRA, about 250,000 producers who are NOT members of NAIFA. With the right product and 250,000 prospects, it is not unrealistic to think in terms of a 2,000 member annual growth over the next five years. (See slide 3)
With it here is what the picture will look like. Revenue will exceed expenses. We will have a growing bottom line with money for new and enhanced programs as desired by a growing membership.
We will have a healthy surplus. More importantly, we will have a fully funded reserve to meet the legislative and regulatory challenges that are sure to increase as we face growing federal deficits and the resulting challenges to the essential tax advantages of our products. (See slide 4)
I don't like to stand here and make this kind of presentation. But facts are facts. And all of us in this federation need to know them and to face them. To put it in different terms, NAIFA is driving a 19th century horseless carriage or more charitably, our father's 1950s Oldsmobile on a 21st century super highway. It's time to trade in the old model and get up to speed before everyone passes us by.
If we are willing to accept the challenge our rich heritage demands, then we must accept change, no matter how awkward and painful that change might be. We must be prepared to let go of what is comfortable and familiar and grab hold of new ideas, new concepts. We must accept the fact that we may have to give up some personal privileges for the sake of the growth and prosperity not only of NAIFA, but of the industry and its essential financial security role in our society.
Over the past three years your leaders have stopped our ship from sinking through the work of the Transformation Task Force. But that's not enough. I have the utmost confidence this Board, without question one of the finest of the 12 with which it has been my privilege to work, and you, the members of the National Council, will not shrink from the challenge or pass up the opportunity. The future is ours if we are not afraid to seize it, if we will think big, if we will embrace change and if we will ACT NOW!
Why, some may ask, is this important? Who really cares what happens to NAIFA?
The most fundamental truth of our business is this: very few people provide for their financial security on their own.
You know as well as I that you are the crucial difference. Only you have the people skills to move people from an "I'll do it later" attitude to "I'm going to do it now." And NAIFA is about you. Without NAIFA there is no you. Without you the financial security of the American people is sunk. America needs you and you need NAIFA.