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Why a “throw it all against the wall an d what sticks” mentality won’t work whesee using social media to reach prospects.n
PAGE 18
Serving The Constrianed Investor, With David Macchia PAGE 6 When Prospects Balk At Getting Life Coverage PAGE 26
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IN THIS ISSUE
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MAY 2022 » VOLUME 15, NUMBER 05
HEALTH/BENEFITS
FEATURE
Social Selling By Susan Rupe How advisors are using social media to position themselves as thought leaders and provide relevant content to prospects and clients.
18 INFRONT
4 T he Industry Celebrates Big Wins In DC And The Courts By John Hilton Despite political headwinds, financial services wound up on the plus side of a pair of recent decisions, one in court and one in Congress. Both could help put more life insurance products in the hands of consumers.
INTERVIEW
6 Serving The Constrained Investor David Macchia believes that the various segments of the financial services industry must join together to launch a bold new era of annuity sales growth. He discusses his mission to serve what he calls “constrained investors” in this interview with Publisher Paul Feldman.
6
IN THE FIELD 12 O rchestrating A Plan
By John Hilton Cody Garrett started out as a musician, but his unusual approach to planning strikes a chord with clients.
LIFE
26 I Object! When Prospects Balk At Getting Coverage By Brian Greenberg How to deal with the reasons why a prospect is reluctant to buy.
Paul Feldman Susan Rupe John Hilton Susan Chieca Melissa Clark Jen Wingard
34 New Types Of Policies Close The DI Coverage Gap By Martin Levy Why disability insurance is a critical component of every financial plan.
ADVISORNEWS
38 Position A Portfolio: Finding Certainty In The Midst Of Uncertainty By Bryan Cannon Inflation, market volatility and world events can spook many investors.
MULTILINE
42 How Will Your Clients Protect Their Virtual Assets? By Nicholas Donarski What clients need to know about insuring nonfungible tokens and other virtual assets.
ANNUITY
30 T he Positives And Negatives Of Fixed Annuities By Harry N. Stout Consumers are awakening to the value of fixed annuity products, but need to be educated on all aspects of them.
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44 Sell More With Less: Using A Virtual Assistant By Rob Vaughn A virtual assistant can perform many back-office tasks that free your time to see more clients.
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Copyright 2022 Insurance & Financial Media Network. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail editor@insurancenewsnet.com, send your letter to 150 Corporate Center Drive, Suite 200, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 125, or reprints@insurancenewsnet.com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 717.441.9357, Ext. 125, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 150 Corporate Center Drive, Suite 200, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein. Address Corrections: Update your address at insurancenewsnetmagazine.com.
2
InsuranceNewsNet Magazine » May 2022
LETTER FROM THE EDITOR WELCOME
Ripples On A Pond? Or Spaghetti Thrown Against The Wall?
I
was listening to NPR while driving to work back in 2006 when I heard a report about something new that had the potential to take the (somewhat young) social media world by storm. This new social media platform gave users the ability to share their thoughts in short messages of up to 140 characters. The name for this platform? Twitter. Cute name, I thought as I drove along, observing a flock of birds perched along a utility wire. Soon afterward, I had a personal Twitter account and started a Twitter account for my employer. I gained a few followers on my account, and my employer’s account began gathering some steam. The employer Twitter account was one more communications tool that we used to keep in touch with our audience. Along with our Facebook and LinkedIn accounts, we had the power to get our message out beyond our traditional channels of e-newsletters and print. But although we had these fun new tools at our disposal, we lacked a strategy to use them to their fullest. What information should we post? How often should we post it? Who do we want to reach? My social media strategy wavered between two “hopes.” Hope No. 1: We should post only information that is time-sensitive and crucial in the hope that the information will spread out to our audience like ripples in a pond. Hope No. 2: We should post anything and everything that we do in the hope that, like spaghetti thrown against a wall, something would “stick” and catch our audience’s attention. Neither of these worked. However, one thing I have observed in about a decade and a half of social media use is that the 80/20 rule applies. Twenty percent of your followers (or “friends” or connections) generate about 80% of what you see on your social media feeds. The real challenge is how to engage the “silent majority” of your followers. In this issue of InsuranceNewsNet
Magazine, we get some insights from advisors who are successfully incorporating social media into their practices and some advice on how to use these channels more effectively. Although everyone has their own set of ideas on this, one idea in particular stands out: Start with a plan. Social media platforms aren’t just for sharing photos of your family vacation or for enjoying cute photos of your friend’s puppy. Consumers turn to social media when they want to buy. Consider these statistics:
» Almost half of Twitter subscribers say they purchased something after seeing it on the platform.
» 90% of Instagram users follow at least
one business, and 58% of Instagram users say they’re more interested in a brand after seeing it in a story.
» Nearly 800 million people in more than
» 1.62 billion users on average visit
Facebook every day. That’s slightly less than one-quarter of the entire world population. Social media, such as LinkedIn, Facebook and Twitter, are among the ways we at InsuranceNewsNet provide news and information to our ever-growing audience. If you haven’t yet joined our networks, we invite you to follow us on Twitter at @InsNewsNet or join our LinkedIn group or check us out on Facebook. If you want to follow our editorial team on Twitter, please do so at @INNsusan or @INNjohnh. And if you’re planning a social media strategy for your own business, please learn from my mistakes. Hope is NOT a strategy. Susan Rupe Managing Editor
200 countries use LinkedIn. The platform is also home to more than 57 million companies.
May 2022 » InsuranceNewsNet Magazine
3
INFRONT
The Industry Celebrates Big Wins In DC And The Courts Despite political headwinds, financial services wound up on the plus side of a pair of recent decisions, one in court and one in Congress. Both could help put more life insurance products in the hands of consumers. By John Hilton
F
inancial services were not expected to celebrate many Beltway wins with Democrats in control of the executive and legislative branches of government. However, two recent developments were big victories nonetheless. The biggest news came when the House of Representatives passed the Securing a Strong Retirement Act of 2022 with overwhelming bipartisan support, 4145. A follow-up to the Securing a Strong Retirement Act of 2020, industry trade associations lobbied hard for what became known as “SECURE 2.0.” “The bipartisan legislation will deliver 4
InsuranceNewsNet Magazine » May 2022
measurable benefits to America’s workers and retirees who have anxiety over whether they will have sufficient retirement income that lasts throughout their golden years,” said Wayne Chopus, president and CEO of the Insured Retirement Institute. Among other things, the bill features provisions to loosen restrictions on annuities in retirement plans in a section called Preservation of Income. It would change required minimum distribution rules to allow annuity options and raise the limits on qualified longevity annuity contracts. A second big win came when the Eastern District of Texas reinstated the Department of Labor’s independent contractor rule. The court ruling came Wayne Chopus in a lawsuit brought by the Financial Services Institute that claimed the Department of Labor’s Trump-era rule was not correctly
removed by the Biden administration in violation of the Administrative Procedures Act. The rule is effective as of its original effective date of March 8, 2021. As a result, independent agents and financial advisors are most assuredly independent contractors again.
SECURE Act Details
Repeated surveys show Americans feeling pessimistic about their preparedness for retirement. Just 40% of those ages 45-59 and only 48% of those ages 60 and over felt prepa red, accord ing to Federal Reserve System data. Sixty-two percent of Americans ages 18–29 have retirement savings, but only 28% believe they are on track with their savings. Financial professionals say loosening restrictions on access and use of financial products will greatly help
THE INDUSTRY CELEBRATES BIG WINS IN DC AND THE COURTS INFRONT address the retirement crisis. Lawmakers responded, and SECURE 2.0 includes several key provisions endorsed by industry trade associations:
» Raises the age to start required minimum
distributions. Plan participants are required to begin taking distributions from their retirement plans at age 72. The bill would raise the age to 73 this year and increase it to 74 on Jan. 1, 2029, and 75 in 2032.
» Expands automatic enrollment in re-
tirement plans in employer-sponsored retirement plans, while reducing the service requirements for part-time employees to participate in an employer plan. It requires 401(k) and 403(b) plans to automatically enroll participants, with an employee opt-out provision. The initial automatic enrollment amount is at least 3% and no more than 10%, but the amount would be increased by a percentage point each year until the total reaches 10%. It also allows employers to treat student loan payments made by their employees as elective deferrals for purposes of determining retirement plan matching contributions.
» Increases the catch-up contribution lev-
el to retirement accounts for people nearing retirement. Under current law, the limit on IRA contributions is increased by $1,000 for individuals who have reached age 50, but the bill would index such limits starting in 2023. It would also increase the limits on catch-up contributions for employees. The limit on catch-up contributions for 2021 is $6,500, except in the case of SIMPLE plans, for which the limit is $3,000; the bill would increase those limits to $10,000 and $5,000, respectively, to apply at ages 62, 63 and 64.
» Reduces administrative burdens for
plan sponsors by modifying retirement plan design rules, and changes regulations on pooled employer plans and multiple employer 403(b) plans. Small businesses with 10 or fewer employees, new businesses (those that have been operating for less than three years), church plans and governmental plans are excluded from automatic opt-in requirements.
» Expands “Rothification” by requiring
a Section 401(a) qualified plan, Section 403(b) plan or governmental Section
457(b) plan that permits an eligible participant to make catch-up contributions to treat those contributions as after-tax Roth contributions, according to a Deloitte report. The bill would also allow plan participants to designate employer matching contributions as Roth contributions and permit SEPs and SIMPLE IRAs to be designated as Roth IRAs. As of press deadline, SECURE 2.0 was in the Senate, where backers hope for swift approval.
Worker Definitions
Progressives have been pushing to redefine employee classifications as more companies are hiring contract workers. Use of contract workers allows employers to get around pay benefits, including taxes and Social Security. The reinstated rule clarifies a long-standing “economic reality test” to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. The rule also:
» Identifies two core factors that deter-
mine whether a worker is economically dependent on someone else’s business or is in business for him- or herself: The nature and degree of control over the work, and the worker’s opportunity for profit or loss based on initiative or investment.
» Cites three other factors that may also
serve in the analysis, particularly when the two core factors do not point to the same classification. The factors are the amount of skill required for the work, the degree of permanence of the working relationship between the worker and the potential employer, and whether the work is part of an integrated unit of production.
» Clarifies that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
» Provides six fact-specific examples applying the factors.
said the ruling restored important clarity to the financial services industry. “The court appropriately ruled that the DOL’s independent contractor withdrawal did not follow administrative procedure,” Brown said. “Restoring the DOL’s independent contractor rule provides clarity and certainty for independent financial advisors and independent financial services Dale Brown firms. Our members can now operate their businesses and serve their Main Street clients confidently, knowing that their choice to be independent is secure under FLSA.” Financial and insurance industry advocates said that without the rule, individual agents and brokers were subject to a patchwork of state and federal regulations. When the DOL pulled the rule last year, the National Association of Insurance and Financial Advisors said the department was incorrect in saying that the rule was inconsistent with established principles. “In fact, this new [DOL] perspective would be a departure from established legal precedents and DOL opinions and would more closely resemble the strict ABC test for determining employee or contractor status,” NAIFA said in a statement last year. “Unlike the economic realities test or any other worker classification test, the ABC test completely shifts the burden of proof by creating the presumption that a worker is an employee rather than an independent contractor.” NAIFA indicated that the DOL was working on a new version of the rule, but there are no indications of its status. The Biden administration apparently would want more workers to fall under the employee definition. Employers would be responsible for complying with laws relating to FICA, health care, retirement plans and federal regulations that protect employees. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@ innfeedback.com.
Dale Brown, FSI president and CEO, May 2022 » InsuranceNewsNet Magazine
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INTERVIEW
David Macchia
gives the annuity industry a call to action to help consumers who need retirement income for life.
An interview with Paul Feldman, Publisher
6
InsuranceNewsNet Magazine » May 2022
E S RVING THE O C NSTRAINED INVESTOR — IW TH A D VID MACIHC A
D
avid Macchia believes that the various segments of the financial services industry must join together to launch a bold new era of annuity sales growth. Macchia’s mission is to help those he calls “constrained investors” — those investors who get to retirement with money, but whose total amount of assets is not high relative to the income they need to fund a lifestyle they consider minimally acceptable. Constrained investors share an absolute reliance upon their savings to produce a significant share of the income they need to fund their retirement lifestyle. Macchia believes that annuities are the key to managing risk for those who have consistently saved for retirement but need those savings to last them a lifetime. The founder and CEO of Wealth2K, Macchia created “Women & Income,” the first retirement income solution expressly developed for female investors. Macchia also led the team that developed the widely used retirement income planning solution called The Income for Life Model. It has enabled financial advisors to capture investment assets totaling $70 billion, while helping thousands of retirees enjoy improved retirement security. In this interview with Publisher Paul Feldman, Macchia discusses the concept of income for life and describes why the advisory community must get on board with that concept to help more Americans achieve a secure retirement. PAUL FELDMAN: You’ve had an illustrious career. Tell us how you came into the industry. DAVID MACCHIA: I started as a life insurance agent with what was then known as The Mutual Life Insurance Company of New York. That took me into product wholesaling of life insurance, and eventually brought me to a company called EF Hutton Life, which was the pioneer of universal life. By accident, I backed into a consulting career. When the Tax Reform Act of 1986 came about, I was a young guy. I had an idea that life insurance could be used as an alternative to what that act created, which was the nondeductible individual retirement account. I said, “Wouldn’t it be better to use a life
INTERVIEW
insurance policy that has no paperwork had a glaring weakness. The glaring weakfiling with the government, and you’re not ness was that you certainly eliminated risk limited to $2,000?” In addition, you can early in the strategy. But you potentially take money out of the life insurance policy put risk later in the strategy, because in tax free. This kind of launched the way that those later buckets, which are more aglife insurance is even today, using it to pro- gressively invested, you don’t know what vide tax-free income through policy loans. the performance will be when the person At that point, I had a parallel career is older. consulting project with that life insurance About seven or eight years ago, we put a idea, and I was a wholesaler. And that layer of lifetime guaranteed income via an went on for a long time, up until about annuity inside that strategy. We created a 2007, when I sold the agency and my inde- hybrid strategy — and that hybrid strategy, pendent marketing organization, and moved almost full time into the business of retirement income distribution planning. In 2004, I was introduced to the notion of the baby boomer phenomenon — the 76 million people approaching retirement who must take their trillions of dollars in collective sav“There should be tremendous ings and turn it into inconsumer demand for annuities. come that lasts for their entire lives. I was very But we don’t have it, and I think much intrigued with that needs to change.” that challenge. I realized early on that people did not know how to turn accumulated as- in my estimation, is the best thing I’ve seen sets into income. I also realized that most thus far. I don’t know how to design a betfinancial advisors weren’t particularly ter strategy than that. It protects the client skilled at helping clients do that. against longevity risks; it protects the client I saw an opportunity to build a solu- against timing risk. tion for retirement income planning. In It provides the best mechanism for the 2005, we launched that first solution, the client to stay fully invested throughout reincome-for-life model, which is still going tirement so that they can protect against strong. That’s what my focus has been day inflation risk. It provides investment disciand night ever since — focused on the pline, it’s transparent, it’s understandable. business of retirement income planning. It just works, and there are thousands of financial advisors who use it. FELDMAN: Income for life is an interThey find it delivers a high level of satisesting concept. Tell me more about it. faction to their clients. And they routinely win 100% of the client’s assets when they MACCHIA: We have learned a lot in the bring that process to them. years that I’ve been working in this field. One of the things we started out with was FELDMAN: You work with a lot of regthe idea of bucketing, or time segmenta- istered investment advisors. How do tion, as the academics might refer to it. you get them to see that annuities are This bucketing approach has a lot of a good part of a client’s portfolio? advantages over a total return approach, where you’re simply taking a withdrawal MACCHIA: I’ve been writing articles tryof a certain amount every year — what ing to get the RIA community to underoften is called the 4% rule. The bucketing stand that their approach to retirement approach had some real advantages, and it income planning is suboptimal. And for May 2022 » InsuranceNewsNet Magazine
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INTERVIEW SERVING THE CONSTRAINED INVESTOR — WITH DAVID MACCHIA a large segment of the investors in the United States, it’s doing them a disservice by not giving them a strategy that mitigates the risks that can reduce or even eliminate their retirement incomes entirely. So I’m a huge advocate for RIAs’ embracing annuities. I think it’s important, and I think if that happens, it will bring a lot of benefits to the entire annuity industry because if RIAs embrace annuities in a widespread manner, it will bring the consumer press along. And that will create consumer demand. And annuities will attain the vision that I have for them, which is to become mainline products — no different than index funds or exchange-traded funds. There should be tremendous consumer demand for annuities. But we don’t have it, and I think that needs to change. It starts with getting the people who are enemies of annuities to not be enemies. There is no rational objection, from an RIA, for example, to using an annuity today, because they can access an annuity that perfectly harmonizes with the RIA’s business model, culture or philosophy. Those annuities have been created, and they appear in their portfolio management system like any other position. There’s no reason to forsake annuities at all. To the extent that people are working with constrained investors — which are the majority of people who get to retirement and who have saved consistently — those folks must have protection against longevity risk. They also need protection against timing risk, which I think is the scariest thing of all in the short run. I’m aggressive in my assertion here because it comes out of an absolute conviction. When an RIA is working with that type of client and doesn’t at least address longevity risk, they are not meeting their fiduciary duty to the client. FELDMAN: What about discussing other types of insurance that address longevity, such as long-term care or something like that? Isn’t that also addressing your fiduciary responsibility? MACCHIA: I think it absolutely is. And it’s similar in the sense that it addresses an event that can happen to a retiree that causes their assets to be reduced rather quickly, along with a reduction in their standard of living. So it must be raised. 8
InsuranceNewsNet Magazine » May 2022
The idea that you address a complicated need, like retirement income planning, without a toolkit is yesterday’s news. I don’t think it’s viable going forward. FELDMAN: You use the term “constrained investor.” Can you tell us more about it? MACCHIA: Here is the way I think about retirees. There are three categories of investors: overfunded investors, underfunded investors and constrained investors. Overfunded investors are the lucky minority of people who have a surplus of cash relative to the amount of money they need to produce the income that they require. They have a cushion — sometimes a really big cushion. They can use any kind of strategy; they can use a total return strategy, no problem. Underfunded investors are those people who have saved very little or nothing at retirement — they’re going to rely on Social Security. But in the middle, there are millions of people I call constrained investors. They control trillions of dollars, and they may have a modest amount of money, or they could have millions of dollars. It’s not about how much they have. It’s about how what they have relates to the income that they need to create to meet a minimally acceptable lifestyle. For the constrained investors, there is very little margin of error. There is a fair amount of pressure put on their savings to produce income. They can’t make mistakes. They can’t run in and out of the market. They have no luxury of being able to make investing mistakes. Therefore, they need a strategy that puts the priority on risk mitigation. They must mitigate timing risks. If they’re good at mitigating inflation, if they mitigate longevity risk in their strategy, then they have the best possible chance of being successful. Having a lack of understanding about how to do this properly is not an excuse. The knowledge is out there. If you’re working with a client, and they are a constrained investor, here’s the problem. A lot of advisors do not understand the idea of a constrained investor. The industry hasn’t looked at people this way. For decades, the insurance industry has tried to change the way RIAs think about annuities. That way doesn’t work — it isn’t
working and it will never work, in my view. What we must do is change the way advisors think about the client. When they look at the client differently, and when they understand that there’s a large segment of clients who need a specific type of income planning with risk management at its core, then they’re forced to do things differently. That’s the change I’m trying to help foster — to get people to do things differently. Because there’s so much at stake for these retirees. We have had a 14-year bull market that’s unprecedented. Do we think it’s going to go on for another 14 years? If so, everything that I’m saying goes right out the window, because anything works. But if it does not go on for another 14 years, if we begin to have a correction, I personally think that we’re at the threshold of a new era that will be notable for risk management and sensitivity toward mitigating risks. Stocks have turned down while interest rates have turned up, inflation is surging, and the Federal Reserve is signaling it will reverse course and start to shrink the money supply. All these factors do not argue well for appreciating stock prices. That means there’s a big scary monster of a risk lurking in these retirees’ lives that they’re not aware of. And that’s timing risk. FELDMAN: This should be our call to action in the industry, because people are seeing their wealth depleted. They think the market is coming back, but I don’t see it coming back — at least not this year. MACCHIA: There’s this phenomenon called recency bias, you know, where our memories are prejudiced. They focus on what has happened in the recent time, more than in faraway times. I remember in February 2009, I hosted a chair at a conference for advisors sponsored by the Retirement Income Industry Association. An advisor came up to me after one session, and he was visibly emotional. He was welling up. He said, “Several of my clients who are my closest friends, I could not prevent them from selling out at the worst possible moment at the height of the 2008 downturn.” He recognized the result of that was that those clients would have a permanently lower standard of living. I told him, “Don’t beat yourself up. What made you decide to come to the
SERVING THE CONSTRAINED INVESTOR — WITH DAVID MACCHIA INTERVIEW
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9
INTERVIEW SERVING THE CONSTRAINED INVESTOR — WITH DAVID MACCHIA
Timing Risk Can Have A Devastating Impact On Retirement To illustrate the devastating impact of timing risk, rather than retire all 10 people on the same day, we will separate them by one calendar quarter. This means that one person will retire about every 90 days. The sequence will look like this: The first person retires on Jan. 1, the second retires on April 1, and the third retires on July 1. It continues on in this way until all 10 are retired. Next, we’ll look at what happens to the 10 individuals over a 30-year retirement. We’ll use a historical two-year period and real market values. It’s remarkable how destructive timing risk can be. What do we learn from this story? We learn how utterly dangerous it is to let luck determine a constrained investor’s retirement security. Let’s focus on the first two people to retire. We’ll call them Ben and Jackie. Ben retires first. Three months later, Jackie retires. Although their retirements are separated by only about three months, Jackie ends up with almost $1,000,000 more retirement income than poor, unlucky Ben. Ben had been thinking that he would wait until spring to retire, but he didn’t wait. A million-dollar mistake. Imagine how Ben’s retirement lifestyle could have been improved had he been lucky enough to wait. But the situation of our fifth retiree, Steve, is worse than Ben’s. Steve suffered what academics describe as “portfolio ruin.” I call it dead broke. No wealth. No income. Bad luck. Luck, of course, can be good or bad. One retiree, Margaret, had particularly good luck. She received 30 years’ worth of inflation-adjusted income, plus a pile of cash equal to $2.6 million. Ben is broke. Margaret is rich. How can any fiduciary advisor — or any decent human being — leave a constrained investor unprotected against timing risk? The answer is the RIA can’t. Although the RIA is bound by fiduciary duty to protect the client against timing risk, an annuity is not required in order to create the protection. By organizing the client’s money in a manner that income during the first 10 years of retirement is generated by assets not subject to principal risk, the advisor can easily address the problem. However, the combination of a single-premium immediate annuity/multiyear guaranteed annuity converted to SPIA is the most convenient and bulletproof way to manage timing risk. The annuity option offers the additional advantage of 120 months of guaranteed monthly income. There are hundreds of billions of dollars in the first decade’s worth that must be protected in this way.
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InsuranceNewsNet Magazine » May 2022
conference?” He said, “I want to learn how to do it better.” I believe that’s the position a lot of people will be in if we have a substantial downturn, because it’s very difficult. If you’re a constrained investor, no one ever told you in those terms that you were. But you know, if you’re reliant upon your savings to produce income, you are a constrained investor. If the stock market starts to go against you, and you see losses — day to day, week to week, month to month — the reaction often is for people to say, “I’m out,” even though it’s the wrong thing to do. I’ll give you one more example. Later in 2009, one of my clients was a company called Securities America, which is now part of Advisor Group. It’s a company that was the first mover in retirement income for an independent broker-dealer. They had a conference online, and in one of the sessions there were financial advisors who had used their bucketing strategy. They put those people onstage and they were able to talk with other advisors about how they were able to get their clients through the disaster of 2008. The contrast between their experience and the advisors who were using, say, a systematic withdrawal was remarkable. People sometimes ask me: “What is the best retirement income strategy?” And my answer is always the same. It’s the one you can live with. FELDMAN: What are your thoughts about those who never would consider annuities? MACCHIA: They’re missing the boat. I’ll put it this way: The most important financial retirement security tool ever created is an annuity. There is nothing else that can provide an income for as long as the client lives. How can anyone reasonably say, “You should not have an annuity”? The advisor who says, “I hate annuities, I don’t recommend annuities,” would never, ever leave their home uninsured against fire. They would never get in their car if they didn’t have auto insurance. Yet they will deprive someone of income insurance. It makes no sense at all. I think this will change. And what will change it in the RIA channel is the way annuities have been designed and the business processes around them. So they operate much like any other asset that the RIA deals with.
SERVING THE CONSTRAINED INVESTOR — WITH DAVID MACCHIA COVER STORY FELDMAN: What kind of product changes do you see coming down the road, and what changes would you like to see with product design? MACCHIA: I’ll tell you what’s happened for RIAs. They have available to them multiyear guaranteed annuities, fixed indexed annuities with income riders, variable annuities, single-premium immediate annuities — all contract types are available to RIAs with no surrender charge and no commission. And they have been placed in such a way that they appear in the RIA’s portfolio management system like any other asset that they can wrap. So in terms of the business model and the philosophy, there’s no inconsistencies for RIAs anymore. But not enough RIAs are doing it. And I think the reason they’re not doing it is they still lack this magic elixir. The magic elixir is the understanding of the constrained investor, again going back to my earlier point about changing the way they think about the client, not the product. FELDMAN: How can the insurance industry do a better job of getting the word out about annuities? MACCHIA: This has been an enduring frustration of my 40-year career. The industry never has been able to communicate its own value. It’s horrible. It’s a first-order failure of communication. The insurance industry should rally around the concept of the constrained investor and explain to people why annuities are essential if they’re constrained. Any client will get it if somebody just explains it to them. Annuity sales are skyrocketing. Because once a client understands timing risk and longevity risk, and that they’re constrained and that their entire financial security and retirement are in jeopardy — the annuity is the natural logical tool to fix that. I like to tell the story about timing risk. With stocks reversing right now, I worry about timing risk more than anything else. So let me explain: Timing risk is what the industry refers to as a sequence-of-returns risk. It’s yet another example of overcomplicating something. The way I explain it is like this: Imagine you had 10 people in a room, and they were financially identical. They all had the
same amount of money — $500,000. They all had the same investment portfolio. They all were going to take out exactly the same amount of income in retirement. So what’s different? Just timing. What we would say to demonstrate this is instead of retiring all 10 people on the first day of the year, let’s separate them by roughly 90 days — a calendar quarter — so someone will retire Jan. 1, the next person on April 1, the next one on July 1, the next one on Oct. 1, etc., until all 10 are retired. Then let’s look at what would happen to them over a retirement lasting 30 years. What do you find? The difference between the first person and the second person is that the second person ends up with $1 million more than the first person. The first person, who might have said, “I’m thinking about maybe retiring on the first of the year or maybe waiting until the spring,” but decides against retiring in the spring and decides to retire on the first of the year, cost himself $1 million. Imagine how his retirement could have been better if he had another $1 million to work with. That’s nothing but bad luck and timing. Now, if you look at the fifth retiree and the 10th retiree, the fifth retiree suffers what the academics call portfolio ruin — he went broke. The 10th retiree gets 30 years of inflation-adjusted income, and a cash bonus of $2.6 million at the end. So you have two people side by side — one’s broke, one’s rich — but they started off the same. Why would anybody in their right mind have a strategy that didn’t protect against timing risk? Now you can protect against it. There are a lot of ways to do it, but here’s an easy way. For the first five years, use a SPIA. For the second five years, use a MYGA. At the end of the fifth year, beginning of the sixth year, take the MYGA and turn it into another SPIA for five years. You give the client 120 guaranteed paychecks, and you make timing risk go bye-bye. Who wouldn’t do that? Sequence-of-returns risk is the issue the industry has been talking about. It doesn’t get across very well. We must do better at communication. FELDMAN: It all sounds really complex.
MACCHIA: It’s like everything else. Everything is made to sum. And for a lot of financial advisors, this is really wrongheaded. They try to differentiate themselves by being complicated, thinking that if it’s complicated, it’s going to be more valuable to the client. But it’s really creating a lack of understanding of the client’s mind, and the lack of confidence. People will only feel truly confident about something that you’re asking them to purchase if they really understand it. They may still buy it and hope. But to really feel confident about it, they have to understand it. FELDMAN: And it must be something they can remember. If you give them a complex concept, they’re not going to remember that six months after you made the sale. Another advisor comes in there, and they don’t remember why they did what they did. MACCHIA: I wrote a booklet to help people understand this issue of timing risk. And it’s available to anybody at no cost. They can download it at my website, davidmacchia.com. And they should read it to learn how to explain it in a way that any prospect or client can understand. FELDMAN: What else would you like to tell our readers about retirement income planning? MACCHIA: If your readers are concerned that they’re not executing retirement income planning properly, they should reach out to a firm that’s in the business of doing it properly. They need to change. Because if we’re going to have an economy that looks different — and I believe it’s going to be that way — then there will be more urgency around the whole issue of income planning being done properly, with a focus on protection. We must get back to protection. And the annuity industry is well positioned, if it will only tell that story a little better.
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May 2022 » InsuranceNewsNet Magazine
11
the Fıeld
A Visit With Agents of Change
Advice-only financial planner Cody Garrett spent the first decade of adult life making music. Now he’s getting noticed for an unusual and unselfish approach to financial planning. • by John Hilton 12
InsuranceNewsNet Magazine » May 2022
ORCHESTRATING A PLAN — WITH CODY GARRETT IN THE FIELD
C
ody Garrett takes a pair of 45-minute “Twitter walks” every day. He often will invite random followers to send him their phone numbers through a direct message. The results provide insight into realworld financial problems — and great content for Garrett, an advice-only financial planner who owns Measure Twice Financial in Houston. “I’ll just call some random person I’ve never talked to before,” Garrett said. “People ask me all the time, ‘How do you create so much content?’ I probably post something new and original on Twitter every few hours. I believe that the best form of content is simply documenting the conversations you have with other people.” The Twitter walks represent an intersection of Garrett’s advice philosophies. He is committed to giving away financial information and to connecting with people via social media. His approach
connecting and sharing information is a fantastic lead generator. “I have limited my personal capacity to working with only two clients per month, and 10 hours a week of work for financial planning,” Garrett said. “I spend the rest of my week just creating more educational content to give away for free. But that also means that I’m at full capacity for financial planning for the next 18 months to two years.”
Unusual Path
Until recent years, Garrett was on a much different career path. He began taking piano lessons at age 6 and later graduated from the University of Houston with a bachelor’s degree in music theory. Garrett studied contemporary piano performance at the Berklee College of Music in Boston. That gave way to a successful music career both as a keyboardist and behind the controls as an arranger. Garrett worked in several different musical genres, and with artists such as drummer Steve
Although in their early 30s, Cody Garrett and his wife, Marissa, have a meticulous financial plan that allows them to become “work optional” in 10 to 12 years.
is even more unique and adventurous once you realize that Garrett is not managing assets. “A client is only a client for three months, and then they’re gone,” explained Garrett, 33. “At the end of every year, I have zero assets and zero clients.” That kind of advice-only model would seem to add up to more work and less security, but Garrett doesn’t see it that way. The work is not really work if it’s enjoyable and fulfilling, he said. Plus, Garrett’s selfless commitment to
Smith of the band Journey, Broadway legend Ben Vereen and American Idol finalist Will Makar. Although Garrett was young, his music career became too much of a grind. “As a musician, you have to be multiple things,” he explained. “I was always working eight to five as a music director. Then I was kind of working five to eight on the flip side. I was playing either Broadway musicals at night or always playing weddings on the weekends.” By the time Garrett married his wife,
Marissa, in 2015, thoughts of a major career change were percolating. “One of my metrics of success in both personal life and business life is I wanted to be able to eat dinner with my wife every night of the week,” he recalled. The dilemma centered on the money. Specifically, how would the newly married Garrett replace the income he made, for example, earning $500 a weekend playing weddings? The couple had student loan debt and were following Dave Ramsey’s advice to eliminate it as soon as possible. Ramsey’s Financial Peace University also preaches not investing in anything you don’t understand. So Garrett set out to learn about investments and investing, devouring books and podcasts. “I became fascinated with personal finance,” he said.
Family Friend
Garrett’s mother suggested he speak with a family friend who had been a registered investment advisor for two decades. That friend was Joe Birkofer, principal and founder of Legacy Asset Management in Houston. “He recommended I enroll in the CFP education program, just to drink out of the fire hose and learn a lot more about personal finance,” Garrett said. “That was the natural gateway to the CFP education program. Within two months of that I was like, ‘OK, I want to be a financial planner.’” That was three-and-a-half years ago. “Four years ago, I didn’t even know what an IRA was,” Garrett said. “And now I’m at full capacity owning my own firm. That’s a fast transition.” It started with the CFP program at Rice University and continued with Garrett earning his Series 65 license in 2019. By that point, he was working as a financial planner for Birkofer at Legacy. “I saw an enthusiast,” Birkofer said. “That’s the best way to describe Cody. There are some folks who just show up and there are other folks who show up and they’re enthusiastic and they’re constantly wanting more.” The youthful-looking Garrett had little problem connecting with clients right away. May 2022 » InsuranceNewsNet Magazine
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the Fıeld
A Visit With Agents of Change
“There was a little bit of a concern from clients at first because I’m this young guy with no experience telling them how to manage their own money, millions of dollars and even moving around millions of dollars,” Garrett recalled. “But I’m kind of giddy about personal finance. I love it and find it fascinating, the technical and the personal side of it. So that concern went away pretty quickly.” It didn’t take long for Garrett to want his own firm. In fact, he wanted to start three businesses around the “Measure Twice” brand: Measure Twice Money, a blog; Measure Twice Financial, an registered investment advisory; and Measure Twice Planners, a concept in which Garrett will offer other planners insights on his processes. The branding name plays on the carpenter’s axiom: Measure twice, cut once. A musical arranger and keyboardist, Garrett has collaborated with such “Everybody has an estate luminaries as legendary Tony Awardplan. Everybody has a risk manwinning actor-singer Ben Vereen. agement plan,” Garrett said. “It might not be aligned with their personal objectives and values. So the couple expects to pay in mortgage interest family has already measured once, and and how their equity investments are diswhat they do is they reach out to me as a tributed. The unusual level of transparenfinancial planner to help them measure cy earned Garrett a good deal of attention twice before making important financial on a platform that sees many tweets pass decisions.” with no replies. Measure Twice Financial opened its Garrett regularly tweets long threads doors in June 2021. Garrett charges $6,400 outlining asset allocation examples and for a three-month, three-meeting process. tax-efficient charitable giving strategies. He described his clients as having an in- It’s all part of his unselfish, transparent vestable net worth between $2.5 million approach to the business, Garrett said. and $8 million. “The biggest thing missing from our in“They’re all do-it-yourself investors,” dustry is that most financial advisors act Garrett said. “But they want to have that like they have this secret sauce, that there’s level of financial independence within this kind of intellectual property that they five years that they can work because they have as a financial planner or financial adwant to, not because they have to.” visor,” he explained. “And you’re only going to get value from me if you’re working Twitter Transparency with me and paying for it.” Plenty of advisors are on social media. It is While Garrett is a fee-only financial almost a requirement nowadays. Almost planner without an active insurance lino one is posting the level of detailed, per- cense, he recognizes the value of life insonal financial information that Garrett surance and annuity products within a did in a series of tweets sent Feb. 26. holistic financial-planning relationship. In a 24-tweet thread, Garrett outlined A network of “trusted agents for life, his family’s financial picture, including health, disability, property/casualty and personal details such as how much the long-term care” help provide clients with 14
InsuranceNewsNet Magazine » May 2022
appropriate coverages and risk-transfer planning, he said. “I am grateful for the generous and transparent relationships within our industry, as insurance is an essential piece of the puzzle,” he added. “Most financial plans require insurance adjustments, whether an increase or reduction in coverage.”
Service First
Just because Garrett does not manage assets does not mean he is opposed to that financial advice model. Advisors just need to be better educated on the details and know what they want to be from the start, he said. “You have to truly understand who you’re serving, and how you’re going to provide value to them,” Garrett said. “It kind of gets people in trouble if they start with compensation first as a metric of advisor success, rather than thinking about who they’re serving and how they’re serving.” Garrett shares a home with his wife and their cat in what he calls “kind of a minimalist, simple lifestyle.” He spends much of his free time immersed in life as a financial educator and planner, as well as feeding his social media alter ego. Industry-related podcasts and audiobooks are his frequent companions. “Anytime I have an interesting idea that I think would provide value to somebody else, I just write it down and then that becomes content,” he said. “I have way more vision for content than I have time to actually create.” I nsura n ce N ews N et Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.
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May 2022 » InsuranceNewsNet Magazine
15
NEWSWIRES
Agents/Brokers Played A Big Role In ACA Enrollment
QUOTABLE
A record-setting 14.5M Americans enrolled in ACA coverage for 2022.
You could see this year looks like clear sailing, but planning for a recession down the road.
Source: CMS
The 2022 open enrollment period for health insurance under the Affordable Care Act was one of the strongest years for agents and brokers who assisted consumers in buying coverage through the health insurance marketplace, according to a Centers for Medicare & Medicaid Services official. Nearly 80% of agents and brokers who were registered to enroll consumers in ACA coverage for 2021 returned to the marketplace for the 2022 plan year, with overall participation up by more than 9,000 agents and brokers, said Ellen Montz, deputy administrator and director of the Center for Consumer Information and Insurance Oversight. A total of 59,199 agents and brokers were registered to enroll consumers through the marketplace in the most recent open enrollment period. Overall, agents and brokers assisted 62% of those who enrolled through Healthcare.gov or a private direct enrollment partner’s website. This was an increase from 48% in the 2020 plan year and 55% in the 2021 plan year. Agents and brokers also assisted 1.5 million new consumers and 3.5 million returning consumers during the 2022 open enrollment period.
THE US CAN AVOID A RECESSION, FED PREZ SAYS
With inf lation hitting 40-year highs and interest rates on the rise, Patrick Harker is a recession on the horiPresident of the zon? The president of Philadelphia the Philadelphia Federal Federal Reserve Reserve doesn’t think so. Patrick Harker told CNBC he believes the current state of the economy is strong enough to withstand tighter monetary policy. Harker said he thinks the Fed at its May meeting should increase its benchmark rate by only a quarter of a percentage point, or 25 basis points. Markets, though, are expecting a hike of 50 basis points, and Harker said he remains open to the idea depending on the data. Even with the prospect of much higher rates, he said he thinks the Fed can engineer its way through the current situation, with a focus on bringing down inflation first.
SEC LOOKS AT CLIMATE CHANGE
The Securities and Exchange Commission w a nt s aud itors to con sider ne w DID YOU
KNOW
?
16
— Michael Siegel, global head of insurance asset management, Goldman Sachs Asset Management
their operations and from the energy they consume.
PUBLIC-PRIVATE EFFORTS NEEDED IN FUTURE PANDEMICS
climate change disclosures when providing their opinions on a company’s financial statements. The SEC proposed a plan that would require companies to provide information about their greenhouse gas emissions and climate change-related risks to their businesses. Companies would have to forecast the impact of potential increases in wildfires, sea levels or heat costs and calculate their likely exposure to those. The proposal is open for public comment and would add to the list of tasks auditors are required to do in assessing companies’ climate change risks. Climate metrics and disclosures included in the footnotes of companies’ financial statements would be subject to a full audit under the proposal. In addition, companies with at least $250 million in publicly traded shares would have to undergo an independent assurance of their estimates of greenhouse gas emissions from
The best way for the U.S. to prepare for a future pandemic is one that combines private sector leadership with government action. That was the word from Dr. Mark McClellan, founding director of the DukeMargolis Center for Health Policy at Duke University, who spoke at a recent policy session by America’s Health Insurance Plans. The nation is emerging from COVID-19 but must be prepared for a future pandemic, McClellan said. Public-private collaboration is needed to improve population health while addressing disparities in how health care is accessed among various population groups. McClellan said the U.S. population is still at risk of a potentially serious outbreak because of vaccination rates. He said the overall COVID-19 vaccination rate in the U.S. is about 65% with about 25% of those who were eligible for a booster shot actually getting one. The vaccination rate among children ages 5-18 is even lower, he said. He also called for more availability of oral antiviral treatments and increased access to testing as ways to keep ahead of COVID-19.
US household net worth hit a record $153T in 4Q 2021.
InsuranceNewsNet Magazine » May 2022
Source: Federal Reserve
COVER STORY SOCIAL SELLING
Why a “throw it all against the wall an d see what sticks” mentality won’t work whe n using social media to reach prospects. BY SUSAN RUPE
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InsuranceNewsNet Magazine » May 2022
SOCIAL SELLING COVER STORY
F
eb. 20 was National Love Your Pet Day, and that inspired Nicole Letarte to post a photo of a friendly faced dog on her company’s Instagram feed. It’s one example of how she and her team like to use Instagram and Facebook to have a little fun while getting their practice in front of prospects and clients on two different ends of the age spectrum. Letarte is a fee-based financial planner with Modern Wealth Design in Irvine, Calif. Her team has found success using Instagram to attract young professionals as clients. Meanwhile, she uses Facebook as the vehicle for discussing issues such as Social Security claiming strategies and longterm care with those who are approaching retirement age. Advisors such as Letarte are finding that social media is no longer just for sharing photos of what their children are doing or for spouting off their opinions on the issue of the day. They are using platforms such as Instagram, Facebook and LinkedIn to position themselves as thought leaders and provide relevant content to prospects and clients. Instagram is a better platform than Facebook to turn millennials into clients, Letarte said, while Facebook is more of an
estimated it takes her about five hours a month to create and schedule the posts. She said her goal is to post something on social media twice a week. Some of her firm’s social media posts are personal — stemming from her team’s life experiences. For example, on March 1, National Wedding Planning Day, she posted a photo of her Nicole Letarte has found and her husband from success using Instagram to their wedding in Jamaica attract young clients. last year. “We talked about if you’re thinking more than 80% of those who schedule the about getting married, we can help with a meeting move forward with a financial plan to save for the big day.” planning fee.” Posts such as this one get clients and Letarte calls Instagram “the Modern prospects engaged, Letarte said. “We had Platform” aimed at younger clients and people comment on that post and even prospects, while Facebook is “the Design ask us questions.” Platform” for older clients with more comAnother post on the increase in travel plex planning needs. prices inspired her to ask followers to de“On our Modern Platform, we focus scribe the best place they had ever visited more on young professionals, millenni- on vacation. “It’s fun to get people to inals,” she said. “We focus on goal planning, teract and comment and tag each other — buying a home, how much they should and just engaged with our posts.” save for retirement, starting a family, Many of her team’s posts attempt to put
informational platform for the older generation of existing clients. “We have had quite a few people direct message us on Instagram and tell us they want to schedule a meeting. So we send them the link to schedule something directly on our calendar,” she said. “And
things like that. Our Design Platform is for pre-retirees or those who are already retired. We focus more on Social Security, pension analysis, long-term care and elder retirement assets.” Letarte plans a calendar of social media posts about a month in advance and
a face to the firm, Letarte said, showing photos of team members participating in various activities, celebrating birthdays or announcing team members’ accomplishments. “We try to make our followers feel as though they’re really getting to know us, rather than following another May 2022 » InsuranceNewsNet Magazine
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COVER STORY SOCIAL SELLING financial page that is trying to give them financial advice.” But other posts relate to “fun facts,” such as holidays like National Puppy Day or some other specially designated day. “Sometimes we can tie that into a piece of financial advice or sharing a fun fact about our team,” she said. Letarte advises someone who wants to plan a social media strategy to begin with considering the type of theme they want to convey throughout their posts. “We have a color scheme that we use that is consistent with the colors on our website, and we keep everything consistent with our branding,” she said. “And you need to develop a schedule for posting information so that you aren’t putting things up there at the last minute.” Although her firm’s social media strategy has led clients her way, Letarte said her favorite part of using Instagram and Facebook is that clients see a personal side of the team. “The biggest compliments we’ve received from our clients is that they really get to know us. So when they feel like they know us, they trust us more.”
» An average of 1.62 billion users visit
Facebook every day. That means just under a quarter of the entire world population is a daily active Facebook user.
» In 2021, 400 users signed up for Facebook every minute.
» 1.3 billion people use YouTube, and
YouTube gets more than 30 million visitors per day.
» Almost 5 billion videos are watched on
YouTube every day, and 300 hours of video are uploaded to YouTube every minute. With so many people tuned in to social media and getting their information from
A Vast Global Reach
Social media platforms once were considered entertainment but are now essential parts of a successful business marketing strategy. Take a look at how much social media dominates our collective communication.
» About 330 million people are active on Twitter every month.
» About 500 million tweets are sent every day, which amounts to more than 200 billion tweets per year.
» 1.22 billion people use Instagram monthly. » 59% of U.S. adults use Instagram daily,
and 38% of those daily visitors log on to the platform multiple times per day.
» LinkedIn has nearly 800 million users
in more than 200 countries. The platform is also home to more than 57 million companies.
» Two new members join LinkedIn every second.
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InsuranceNewsNet Magazine » May 2022
An effective social media strategy begins with figuring out your personal brand, Peter Dziedzic tells his clients.
online platforms, why wouldn’t an advisor want to have a social media presence? But using social media as a prospecting tool takes planning and strategy, according to those who coach advisors in the art of social media sales. A “throw it all against the wall and see what sticks” mentality won’t work.
A Plan Is The First Step
The first step toward successfully developing a social media selling strategy is creating a plan. The second step is realizing that different platforms have different purposes
and attract different audiences. That’s the word from Peter Dziedzic, president and general counsel of Life Insurance Strategies Group in Boston. Dziedzic helps companies in the highnet-worth life insurance space build their brand identities and design their messaging. He also coaches advisors on using social media. An effective social media strategy begins with figuring out your personal brand and being consistent with how you present that brand on social media, he said. “I saw a statistic that said 56% of consumers make a decision on whether they will work with you or buy from you before they even send you an email, send you a text or pick up the phone,” he said. “So, you need to be out in those digital spaces. But you also need a consistent look and feel and a consistent message on social media.” Before you create a single social media post, Dziedzic advised, you must determine your practice niche. “Are you an employee benefits person? A life insurance person? What are your top two strengths?” After identifying these things, he said, the next step is to define your customer. “Are you seeking individual clients? Or are you looking to reach centers of influence where someone will refer clients?” Finally, Dziedzic said, you must determine the problem you solve for clients and how you solve that problem. “These are the things you must figure out before you begin doing anything on social media,” he said. After that preliminary work is done, the next part of social media selling is determining the time and resources you want to spend on it, Dziedzic said. “Think about how frequently you will be posting. And think about what your content will look like. Will you post quick little hits or will you link to white papers? Will you post photos or videos?”
SOCIAL SELLING COVER STORY The next step in social media selling is to decide which platforms are best for reaching your target audience and accomplishing your goals, Dziedzic said. “LinkedIn is the social media platform where businesspeople talk about business, so that’s definitely a place to start,” he said. “Facebook isn’t a great place for businesses to post, unless you’re paying for a sponsored post.” Instagram has become a “second website” for many businesses, Dziedzic said, and is a good platform to reach the under-45 crowd, of which Dziedzic is a member. “When I hear of a restaurant or a business, I go to their Instagram page before I go to their website,” he said. “So having an Instagram presence is important to the extent that it becomes a validator for you, especially for that younger client who uses Instagram to make sure you’re legitimate.” So you determined your niche market, your ideal client, the problem you want to solve for them, and what platforms you want to use in order to get that social media message across. What’s next? Having a strategy to deliver your message consistently, Dziedzic said. Posting on LinkedIn once a week, the same day each week, is a good place to start. Social media selling “is a long game,” Cameo Roberson said.
“Consistent messaging over a long period of time is what helps to build the kind of thought leadership and brand awareness you want. You’re talking to people so you can keep yourself top of mind, so that when someone has a life insurance question, for example, they say, ‘I’m going to call Pete. I see him posting about life insurance topics all the time. That guy knows what he’s talking about.’ That’s what you’re trying to do here.” If you’re concerned about whether you’ll have enough content to post regularly, Dziedzic recommends taking your existing marketing communications — such as blog posts and newsletters — and adapting them for social media. “You can take a blog post or a newsletter article, break it down into four smaller parts, and create a series of weekly LinkedIn posts that will take you through a month,” he explained. Consistent posting also boosts social media algorithms, leading to your posts being seen more frequently and building a bigger audience. It all can have a spillover effect on other business communication, Dziedzic said. “We assist some of our clients with their marketing, and we’ve seen that posting consistently on social media leads to
The most popular social media platforms in the U.S. are: 1. YouTube 2. Facebook 3. Instagram 4. Pinterest 5. LinkedIn 6. Snapchat 7. Twitter 8. WhatsApp 9. TikTok 10. Reddit 11. Nextdoor Source: Pew Research
The most popular social media platforms for marketing are: 1. Facebook 2. Instagram 3. LinkedIn 4. YouTube 5. Twitter 6. TikTok 7. Snapchat Source: Statista
May 2022 » InsuranceNewsNet Magazine
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COVER STORY SOCIAL SELLING higher open rates on their emails. People are used to receiving a certain type of information from advisors who are on social media consistently, and when they see that email from you, they are more likely to open it as well.”
All Strategies Are Not Created Equal
A social media strategy is actually several different strategies — with a different game plan for each different platform you plan to use. That’s the advice Cameo Roberson gives her clients. Roberson is a business coach, operations strategist and managing partner at Atlas Park Consulting in Sacramento, Calif.
face of individuals and their companies, where conversations tend to be more professional in nature,” Roberson said. “Instagram is more for sharing photos or video clips of things that are going on in your world.” Roberson said she frequently uses Facebook “to be social selling, but not direct selling. “I’m showing myself as a subject matter expert in groups where I know my ideal clients hang out,” she explained. “What I will do is listen to the conversations that people are having about advisory practices. And then I will comment, maybe share some insights, some tips and strategies for that poster to be able to take.”
And don’t write long paragraphs,” she said. Tweets are limited to 280 characters, which imposes its own set of restrictions on those who post on Twitter. “If you’re able to share short quotes or something impactful or even a video, Twitter will be the place for that,” Roberson said. Social media selling “is a long game,” Roberson said. “A big mistake I see people make is when they post one item on social media and they think they immediately will get a client out of it. Then, when they don’t see that immediate return on investment, they don’t want to do it anymore. But if you keep posting on social media, eventually you will see a return.”
This strategy accomplishes several things, she said. “It humanizes me as someone who can help people. I’m not trying to sell them; I’m answering their question. This helps to establish credibility in terms of the advice that I can give and then also helps to build the know, like and trust factor. And this is something that happens over the course of time.” Instagram is a way for advisors to show a more personal side of themselves, Roberson said. “You can share things about your business, but you will want to confine your posts to images, photos or short videos.
Roberson said that social media success boils down to figuring out what your strategy is, committing to it, getting the right content, consistently posting, and doing your follow-up.
Craig Gussin uses LinkedIn to share the latest news about health insurance with clients and prospects.
“I don’t think it’s wise to apply a Twitter strategy to your LinkedIn profile, or an Instagram strategy to your Twitter profile,” she said. Twitter is like a town hall meeting, Roberson said, “with everyone sharing relevant information in quick bites, and then others see it and engage with it.” Facebook “is more like your grandmother’s living room,” she said. “You have people talking about family and different events. And what you say on Twitter is not necessarily what you would share on Facebook and vice versa.” LinkedIn “is more of the professional 22
InsuranceNewsNet Magazine » May 2022
Thought Leadership Through LinkedIn
Posting regularly to LinkedIn is a great way to position yourself as a thought leader, Craig Gussin found. He is president and CEO of Auerbach & Gussin Insurance and Financial Services and the RWR Insurance Agency in Carlsbad, Calif. Gussin actually has two LinkedIn
SOCIAL SELLING COVER STORY
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presences and a different profile photo for each one. For his Auerbach & Gussin profile, he has a headshot and is wearing a jacket but not a tie. For his RWR Insurance profile, he is posing while standing up. The two different photos represent the two different areas that each business serves. Auerbach & Gussin concentrates on health insurance and employee benefits while RWR works with agents who plan to retire and transition out of their practices. Health insurance is in the news frequently, and Gussin uses LinkedIn to share the latest health-related news with his clients. Gussin also is active in a number of industry associations, including the National Association of Health Underwriters, and he shares the information he obtains from his association connections as well. Gussin’s LinkedIn posts give him more credibility, he said. “People look at your profile and everything you post, they read everything about you and they think, ‘This guy belongs to all these industry organizations and he knows what’s going on out there.’”
He said he wants to share his knowledge of the industry’s hot-button issues as well as open a dialogue with clients. “I think that’s what social media is all about — sharing information with others and letting your clients know you are here for them if they have questions,” he said. “It’s marketing yourself in such a way to the consumer or to other agents that they look to you as somebody who can help them.” Susan Rupe is managing editor for Insurance N ewsN et. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@ innfeedback.com. Follow her on Twitter @INNsusan.
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LIFEWIRES
New Life Insurance Premium Growth Hits 40-Year High Propelled by 26% fourth-quarter premium growth, total life insurance new annual-
ized premium grew 20% in 2021, representing the highest annual growth since 1983, according to LIMRA. Policy sales improved 2% in the fourth quarter. For the year, policy sales were up 5%, which is the highest annual growth since 1983. With the exception of term products, all major product lines experienced policy sales growth in the fourth quarter and for the year. In 2021, term new premium increased 5%, compared with 2020 results. This represents the highest premium growth for term premium since 2007. In the fourth quarter, term new premium slipped 1%, compared with fourth-quarter 2020. LIMRA is projecting term life premium to grow as much as 6% in 2022, propelled by continued consumer interest and online availability. Whole life new premium increased 27% in the fourth quarter, representing the strongest quarterly premium growth for WL in 30 years. Variable universal life new premium leapt 65% in the fourth quarter. Indexed universal life new premium rose 29% in the fourth quarter, compared with the prior year.
LONG-HAUL COVID-19 HAVING LITTLE EFFECT ON CLAIMS
COVID-19 is having a wide-ranging impact on the economy but not so much on life insurance claims, Moody’s Investors Service reported recently. Some long-haul COVID-19 claims are starting to pop up in certain life insurance morbidity product claims, with more widespread claims likely to follow, according to the report. Moody’s said that although the study of long COVID-19 is still in its early days, the virus’s credit impact on global life insurers is likely to be limited, given the insurers’ good business diversity and the flexibility embedded in the products themselves. Delayed diagnoses and long-term organ damage — for example, to the lungs, heart, kidneys — from any combination of COVID-19, long COVID-19 or preexisting medical conditions (for example, diabetes or heart problems) could also result in more elevated mortality losses DID YOU
KNOW
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for group and individual life insurance providers in the future, Moody’s said.
THE INDUSTRY IS MISSING THE BOAT
The financial services industry is leaving enormous sums of money on the table by ignoring or failing to attract women as potential customers. A recent study by global management consultant Oliver Wyman concluded that if insurers sold life insurance to women at the same proportion of their income as they do for men, $500 billion in new written premiums could be created. Another $25 billion in new fees could be generated if wealth managers invested women’s wealth in the same way they invest men’s — in stocks and bonds rather than in cash. Perhaps one of the reasons the industry treats women differently from men is that men tend to be loyal to brands and products, while women attach more loyalty to people and services, said Patricia Hausherr, vice president of Global Atlantic Consulting.
QUOTABLE Our research suggests there are more than 100 million Americans living with a life insurance coverage gap. — David Levenson, president and CEO, LIMRA, LOMA and LL Global
LIFE INSURANCE: THE CURE FOR WOMEN’S ESTATE PLANNING ILLS
Compared with their male counterparts, women are earning less, caring for more people and living longer, and these challenges can seem daunting to those facing them daily. But with proper planning and risk mitigation, women can ensure they have provided for both their futures and the care of those around them, according to Carma McCallie, vice president, advanced sales, with Crump Life Insurance Services. Life insurance can help protect families in a tax-advantaged way while also providing income for retirement or benefits for long-term care, she said. For example, a life insurance death benefit can provide liquidity to care for multiple generations of dependent family members. If that policy builds cash value, as the need to care for family members eventually wanes, the owner can use the cash value for additional income in retirement. And some policies can provide funds for longterm care if the need arises. One policy can address all three planning concerns. By understanding the unique and intensely personal challenges and goals of women, and the lasting impact those goals and challenges have on their family’s success, she said, advisors can help to craft estate plans to meet those targeted needs.
49% of consumers prefer speaking with a live person when contacting insurance providers.
InsuranceNewsNet Magazine » May 2022
Source: First Orion
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LIFE
Individuals who sell life insurance understand the No. 1 challenge is cutting through the confusion and mitigating conflicts of interest...
I Object! When Prospects Balk At Getting Coverage Five common objection scenarios and how to address them. By Brian Greenberg
A
s advisors, we strive for a higher standard when recommending life insurance, similar to how we suggest automobile or homeowners insurance: to safeguard against an event that would lead to financial hardship. While auto and homeowners insurance cover expenses in the event of car or home damage, life insurance protects an individual’s financial security. Most people recognize they need life insurance, but few own it. Consider these statistics from the 2021 Insurance Barometer Study: » Almost 1 in 3 consumers surveyed (31%) say they are more likely to buy because of the COVID-19 pandemic. » Slightly more than half (52%) of American adults own some form of life insurance coverage, a decline of 2 points from 2020. Overall, life insurance market penetration is now 11 points below the 2011 high of 63%. 26
InsuranceNewsNet Magazine » May 2022
Individuals who sell life insurance understand the No. 1 challenge is cutting through the confusion and mitigating conflicts of interest when recommending life insurance. In my experience, there are several common reasons that most often prevent people from making a purchase. Here are five common scenarios as well as ways advisors can address those objections.
Scenario 1: I’m already paying for auto and homeowners insurance on top of monthly expenses like my mortgage and utilities. How am I supposed to afford life insurance?
The most common reason clients are reluctant to buy life insurance is because of cost. In many cases, clients believe life insurance is too expensive, they have other financial priorities, or both. Particularly when life insurance competes against less avoidable monthly expenses — such as housing, car payments and food — advisors must explain the importance of life insurance and why it should be a priority. Life insurance is a safety net, making it as vital as auto or homeowners insurance — if not more so. Advisors can appeal to clients who see cost as a significant barrier by emphasizing
term life insurance over universal or permanent life. Compared with universal or permanent life insurance, term or temporary life insurance is on average around 30 times cheaper. In addition to being more popular and affordable, term life insurance can be purchased for a shorter period of time for low monthly premiums. For example, the cost of a 20-year term life insurance policy can be as low as $14 per month for a 30-year-old.
Scenario 2: Why should I trust that your company is any different from the others?
While this may seem harsh, it’s a legitimate question that must be answered. Most people just don’t trust insurance companies. As advisors, we sell a product that nobody likes, few understand and most believe is too expensive. In addition, many of our clients may have had prior negative experiences with insurance companies, such as poor services or unfair treatment on a claim. It’s no easy feat earning customers’ trust. To win over distrustful clients, we must learn who our clients are and why they are buying insurance. This means focusing on establishing meaningful relationships
I OBJECT! WHEN PROSPECTS BALK AT GETTING COVERAGE LIFE
Myth-Busters
According to the survey, about a quarter of people accepted five common myths and misconceptions about life insurance. Some of the top reasons they have for not owning life insurance (they can choose more than one):
• 81% • 75% • 65% • 62% • 51%
It’s too expensive Have other financial priorities Not sure how or what type to buy Haven’t gotten around to it Don’t like thinking about death
One of the biggest myths around life insurance is that it’s expensive, but the majority of people overestimate the true cost of life insurance by 3x or more, and 44% of millennials thought the cost of term life insurance policy was more than $1,000 a year when it’s closer to $160. Source: 2021 Insurance Barometer Survey
rather than focusing on our own fancy brochures and big offices. It means selling our clients only life insurance products that they need and making only the promises we can keep. When we establish meaningful connections with our customers, we not only encourage them to stick with our company, but we also increase the likelihood they will recommend our services to friends and family.
Scenario 3: The idea of buying life insurance makes me nervous. I don’t want to think about my own death.
No one likes thinking about death — least of all their own. In my experience, many of my clients are reluctant to purchase life insurance simply because they don’t want to focus on their own mortality. And yet, accepting and planning for one’s own mortality is vital to building a strong financial framework for your loved ones. Now — you might ask, “How do we find a solution?” First, we can address aversion to thinking about mortality by shifting the focus to the people our clients will leave behind in the event of their death. With life insurance, someone can have the funds to pay for daily expenses, mortgage payments and even college tuition for the people they love. To help clients realize this, ask prospects the following questions:
» Who would receive a life insurance check in the event of your death? » How would they support themselves without your income if you don’t have life insurance? » Will your loved ones suffer financially if left to handle your final arrangements?
Scenario 4: I’m young, single, childless and healthy. Why would I need life insurance?
This is a common pushback I often encounter when working with young adults. Considering that millennial consumers will likely dominate the market for a number of years, it’s particularly important for advisors to know how to sell to this age group. Studies have found that millennials — often fettered by student loans — may struggle to save money for purchases such as life insurance or buying a home. As agents, we can win over young clients by highlighting the value of investing young. Life insurance plans are the most affordable when the purchaser is young, with term plans starting around $15 per month for a $500,000 policy for applicants between 25 and 30. For every year prospective policyholders delay buying coverage, premiums may increase by around 8% to 10%. Financial advisors can also remind
millennials that in addition to replacing lost income, life insurance can help pay off outstanding loans. While federal student loans are automatically canceled after the borrower dies, private student loans do not offer the same liability protection. Parents and other cosigners will likely be held responsible for paying back the remaining balance on a private loan in the event of the student’s death — that is, if no life insurance has been taken out to cover it. Finally, no matter how healthy or young, no one is indestructible. As life insurance advisors, we can reach young, healthy millennials by gently reminding them that illness and injury can strike suddenly and unexpectedly. After falling seriously ill or getting injured, it becomes almost impossible to take out life insurance.
Scenario 5: I’m unsure of how much life insurance I need, what type to buy, or the best provider to buy from.
All insurance is invisible and intangible, but life insurance is especially complicated with its hundreds of different terms, exclusions and forms. Overwhelmed by the different policy options, model and providers, or confused by coverage formulas and puzzled by the process of purchasing life insurance, many prospects can get lost in the shopping phase. In the end, we must steer overloaded prospects in the right direction with brief, straightforward pitches that are informative and transparent. Now more than ever, consumers are becoming turned off by flashy ads and sales pitches. They are seeking real answers. To successfully market to today’s consumer, we must be more informed, transparent and concise. In addition to supplying them with honest, useful and relevant answers, we can remind prospects that completing an application is free — even after they apply, nothing is final and they still have time to make a final decision once accepted. Brian Greenberg is CEO and founder of True Blue Life Insurance. Brian may be contacted at brian.greenberg@ innfeedback.com.
May 2022 » InsuranceNewsNet Magazine
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ANNUITYWIRES
QUOTABLE
Annuities Shake Off Pandemic With Big 2021 Sales
Annuity sellers and buyers found one another again in 2021, resuming a fruitful courtship that resulted in the highest sales numbers in over a decade. Total 2021 U.S. annuity sales were the third-highest record- US Annuity Sales Growth Rates ed in history, according to the Secure Retirement Institute. Total annuity sales were $254.6 billion in 2021, up 16% from 2020. In the fourth quarter, annuity sales were $62.8 billion, 7% higher than fourth quarter 2020. Registered index-linked annuity sales broke records in the SOURCE: Secure Retirement Institute fourth quarter and for the year, SRI found. Fourth-quarter RILA sales were $10.3 billion, 22% higher than the prior year. In 2021, RILA sales were $38.7 billion, 61% higher than in 2020. According to Wink Inc. data, variable annuity sales also did well for the year. VA sales in the fourth quarter were $22.1 billion, an increase of 2.8% compared to the previous quarter and an increase of 15.9% compared to the same period last year. Total 2021 variable annuity sales were $87.7 billion. Fixed annuity sales were down for the year, but Wink CEO Sheryl Moore said not to count the products out. Sales are likely to bounce back in 2022, she added.
STUDY: TOMORROW’S RETIREES NEED EDUCATION
Today’s retirees enjoy a much stronger lifestyle than do future retirees, according to a recent survey. The study was conducted by the Insured Retirement Institute in partnership with American Equity Investment Life Insurance and Eagle Life Insurance.
For example, 46% of near-retirees do not expect income from a defined benefit pension compared to only 23% of retirees. Notably, many respondents may mistakenly believe their defined contribution plan is the same as a pension. Bureau of Labor Statistics data shows only 16% of private-sector workers have access to a defined benefit pension plan.
AIG REBRANDS LIFE & RETIREMENT BUSINESS
All survey respondents reported at least $100,000 in retirement savings, not including the value of real estate. Several key findings from the survey illustrate significant differences between current and future retirees. DID YOU
American International Group plans to rebrand SAFG Retirement Services, the parent company of its Life & Retirement business, as Corebridge Financial when it becomes a public company. The move is another step in AIG’s plan for the business to be a stand-alone company. AIG expects to continue to own more than 50% of Corebridge Financial
Nearly two-thirds (63%) of nonretirees said they fear
KNOW running out of money more than they fear death,
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versus less than half (46%) of retired respondents.
InsuranceNewsNet Magazine » May 2022
Source: Allianz Life
After 2020, there was significant pent-up demand for investment options that offered a balance of protection and growth. — Todd Giesing, assistant vice president, SRI Annuity Research
following a planned initial public offering. “As Corebridge, we will continue to proudly partner with financial and retirement professionals to help their clients feel confident and motivated today, and in control of their tomorrow,” said Kevin Hogan, executive vice president and CEO of Life & Retirement.
FORTITUDE RE STRIKES BIG ANNUITY DEALS
A pair of substantial annuity reinsurance deals wrapped up in early April. In the first, Prudential Financial dealt a portion of Prudential’s legacy traditional variable annuity block to Fortitude Re. Prudential Annuities Life Assurance Corp. was included and will be renamed Fortitude Life Insurance & Annuity Co. Included in the sale is approximately $31 billion of in-force variable annuity account values, primarily consisting of non-New York, traditional variable annuities with guaranteed living benefits that were issued by PALAC prior to 2011. Prudential will continue to service and administer all contracts in the block following the transaction. Prudential also will continue to sell protected outcome annuity solutions through other existing subsidiaries. In the second deal, FGH Parent closed a $4 billion reinsurance transaction between its subsidiary Fortitude Reinsurance Co. and Taiyo Life Insurance Co. This transaction marks Fortitude Re’s inaugural reinsurance transaction covering business in Asia.
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ANNUITY
The Positives And Negatives Of Fixed Annuities Fixed annuities can be a valuable financial tool for clients, but they must be educated on all aspects of the product. By Harry N. Stout
A
s we move through 2022, and given the economic uncertainty they face, aging consumers are becoming more familiar with the great intrinsic value of fixed annuity products (e.g., tax deferral, principal protection, guaranteed income options, unlimited purchase ability, and probate avoidance among others). Consumers are asking more questions about fixed annuities in order to improve their knowledge of the product. In opening the door to interested consumers, financial professionals should fully comprehend the positives and negatives of fixed annuities and work to educate clients on all key product aspects. Here are some major positives and negatives of fixed annuity products that can be helpful to discuss as part of the sales process.
The Positives
Fixed annuities produce higher returns than do many other available fixed-income options. Fixed annuities usually offer rates of return higher than those of comparable duration-fixed income products such as certificates of deposit and money market accounts. The insurance company manages the investments supporting the annuity. When a fixed annuity is purchased, the consumer is buying the money management capabilities of the life insurer issuing the contract. Life insurers have significant capabilities, as they manage large portfolios of assets using professional money managers. Fixed annuities have options for guaranteed lifetime income. They possess the contractual option for the purchaser to receive guaranteed income they can’t outlive 30
InsuranceNewsNet Magazine » May 2022
if a lifetime payout option is chosen. A variety of payout options are offered. These options include receiving payments for a preselected number of years. Fixed annuities offer tax-deferred income accumulation. No current income taxes are due on interest earned by the contract until funds are withdrawn from the contract. The contract owner gains the advantage of earning additional interest on the amount of taxes not currently paid. For clients who want to avoid probate, fixed annuities are one way to accomplish that aim. Assets with a named beneficiary, such as annuities and life insurance policies, typically bypass probate. Fixed annuities offer guaranteed rates of interest that are declared at least one year in advance by the life insurance company and come with life-of-contract minimum guaranteed interest rates. The buyer knows the rate of interest they will receive and for what time period. These products appeal to individuals looking for a predictable return. If your client is looking for principal protection and no risk of principal to market volatility, fixed annuities are not at risk for market changes due to fluctuations in interest rates or stock market volatility. They protect principal and are not subject to market-related losses. The full amount deposited into a fixed annuity contract begins to earn interest immediately. Most fixed annuity products have no front-end loads or deductions
from the premium deposited. Newer fixed annuity products offer contractual riders that can provide optional income or offer benefits that can be used to pay long-term care and nursing home costs.
The Negatives
One negative is restricted access to cash. Fixed annuity products are not checking accounts. They do not have complete, costfree liquidity during the product’s surrender charge period. Most fixed annuities allow money to be withdrawn from the contract but with restrictions. The three major ways to obtain access to cash from fixed annuity products are 1) by a partial withdrawal from the contract, 2) a full surrender of the contract and 3) by taking payments based on one of the contract’s options or optional riders. If the client takes more than a certain percentage of the contract’s value (usually 10%), they will be subject to a surrender charge. Most annuities come with a surrender charge schedule that requires the buyer to pay a fee if they surrender the annuity contract in a certain number of years (i.e., typically 5 to 7 years). These fees can be significant. So it’s difficult to back out of a contract once purchased. Overall, only money that is being invested or saved for the medium-to-long term should be put into an annuity contract. Income earned on fixed annuity contracts is taxed as ordinary income and not as capital gain for income tax purposes. For
THE POSITIVES AND NEGATIVES OF FIXED ANNUITIES ANNUITY
Newer fixed annuity products offer contractual riders that can provide optional income or offer benefits that can be used to pay long-term care and nursing home costs. example, suppose a fixed annuity contract is purchased for $25,000, and the contract is surrendered 10 years later when its value has grown to $50,000. The gain in the contract of $25,000 will be treated as ordinary income and taxed at ordinary income rates in effect at the time of withdrawal. Contractual bonuses come with strings attached. Many annuity contracts are sold with what is advertised as first-year bonus interest of 3% to 5%. The buyer should know that to fully earn these bonuses, they will need to hold the contract for a number of years, or, in some cases, they will only get the bonus if they take an income stream from the contract. If the consumer takes withdrawals from a fixed annuity contract prior to age 59½, in most cases, they will need to pay an
additional 10% tax penalty for taking the money out prior to that time in addition to income taxes owed on the withdrawn amount. Remember, annuities are intended to create supplemental retirement income, and withdrawals prior to that age trigger this penalty. There are some exceptions to this rule, and it is best to consult a tax professional to get the specifics. If a fixed annuity is funded with pretax or qualified funds, the purchaser will not receive any additional tax-deferral benefit. Qualified funds are already tax-deferred by law and thus get no additional income tax benefit by being placed into a fixed annuity. Another negative about fixed annuities is complexity. One of the cardinal rules of saving and investing is not to buy a product you don’t understand. Annuities are no
exception. Consumers need to understand the contract they are purchasing as well as its key features, benefits, costs and restrictions. Consumers are awakening to the value of fixed annuity products. As increasing numbers of consumers look to purchase these products, they need to fully understand that fixed annuity contracts provide guaranteed fixed rates of return, protection of principal and guaranteed lifetime income in exchange for certain restrictions. Fixed annuities are a financial tool that can be used to create tax-advantaged returns and guaranteed supplemental income in the later years of a client’s life. Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network and managing director of Insurance Insight Group. He is the author of Today’s Annuities — A Tool to Create Protected Lifetime Income. Harry may be contacted at harry.stout@innfeedback.com.
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HEALTH/BENEFITSWIRES Skipped rent or mortgage payments because of medical debt.
Medical Debt Plagues Millennials, Gen Z Medical debt is endangering the ability of some Americans to keep a roof over
25%
Gen Z
23%
Millennials
21%
Gen X
Boomers
Silent Generation
12%
14%
Source: HealthCare.com
their heads, according to a HealthCare.com survey. The survey found 25% of Generation Z and 23% of millennials skipped rent or mortgage payments because of medical debt. And it’s not only those without health insurance who are impacted by medical debt. The survey found 68% of Gen Zers who have coverage but incurred debt did so because their insurance did not cover the service they received. The reasons for incurring medical debt differ by generation, the survey found. The most common cause of medical debt for Gen Z and millennials was seeking care following an accident or injury (26% and 25%, respectively). For Generation X, the most common trigger was chronic disease, such as cancer or heart disease (18%). A similar number of baby boomers (17%) cited chronic disease as the top cause of medical debt.
HSA BALANCES SWELL TO $100B
Health savings account assets surpassed $100 billion at the beginning of 2022, according to Devenir. The HSA investment con su lta nt predicted that HSA funds will hit $150 billion by the end of 2024. Consumers had about 32 million total HSAs in force by the end of 2021, an increase of 8% over the previous year, Devenir reported. Assets had grown to $98 billion as of Dec. 31, 2021, up 19% from 2020, and hit $100.7 billion as of Jan. 31. HSAs will mark their 20th birthday next year. Federal law established health savings accounts in 2003.
supplemental health insurance. A new survey by America’s Health Insurance Plans revealed virtually all consumers — 95% of them — are satisfied with their coverage, with 90% saying that their plan helps pay for needed critical medical expenses and eases concerns about preserving financial security. The survey also found respondents were overwhelmingly satisfied with the ability to quickly receive benefits, the easy and efficient claims-filing process, and their supplemental insurance agent’s knowledge. Respondents also said having supplemental insurance prevented them from experiencing financial hardships or being
PEOPLE LOVE THEIR SUPPLEMENTAL COVERAGE
Consumers may complain about their health coverage, but not so much about DID YOU
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U.S. health care spending grew 4.2% to $4.3 trillion in 2021. Source: Centers for Medicare & Medicaid Services
InsuranceNewsNet Magazine » May 2022
QUOTABLE Navigators are getting thousands per policy while agents are getting dollars and cents. — Ronnell Nolan, Health Agents for America president and CEO
forced to make choices between their health and their financial well-being.
ANTHEM TO REBRAND
Anthem intends to become Elevance Health Inc., subject to shareholder approval. In a news release, Anthem said its new name “underscores the company’s commitment to elevating whole health and advancing health beyond health care.” The corporate rebranding is a first step in the company’s effort to optimize its brand portfolio. While Anthem Blue Cross Blue Shield health plans’ names will not change, the company does expect to streamline the number of other brands in the market to reduce complexities and improve consumer experiences. Through its affiliated companies, Anthem serves more than 118 million people, including more than 45 million within its family of health plans.
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May 2022 » InsuranceNewsNet Magazine
33
HEALTH/BENEFITS
New Types Of Policies Close The DI Coverage Gap Despite enrolling in DI coverage, many professionals are still underinsured. By Martin Levy
M
ost people insure their material possessions — their homes and their cars. But many people don’t recognize what is probably the most valuable asset — their ability to earn an income. If a person becomes sick or injured and can’t work, will that person be able to pay bills and maintain the same or a similar standard of living? What are the odds of becoming disabled? That’s an odd question. It depends on what you read and what someone considers a disability. But understanding the comprehensive nature of a client’s particular occupation — what must happen in order for them to fully be able to earn a living — may diminish their interest in the odds in favor of simply recognizing the power of protecting themselves. Let’s say it’s a much larger concern for higher earners. 34
InsuranceNewsNet Magazine » May 2022
Young professionals, and in particular law students, were taught early in their adult lives that their most valuable asset was their ability to earn a living. When choosing to go to school, they committed to an investment in their careers, took on significant debt, or committed to certain employment relationships to assure they would be able to fulfill their financial obligations. They became comfortable with a particular lifestyle, perhaps have families, acquire assets and commit to education obligations. Thus, they began to earn. Most were taught to seek and purchase disability insurance as a means of protecting their incomes from disruption. That was likely true then, and it still is today. However, much has changed in the business of protecting clients through disability insurance. Here is a brief overview of the DI scene, looking backward and forward.
Individual Disability Insurance
Years ago, professionals had many choices with respect to the purchase of a disability policy. There were many from which
to choose and contracts were broad in nature, and specific in their definitions to qualify for benefits, and had a host of consumer-centric riders that enhanced the policies. Riders included such things as a cost-of-living adjustment that kept benefits growing, a return-of-premium benefit that may have refunded some or all of the premiums, and even a nondisabling injury benefit that paid cash. They almost always included either a residual or a proportionate income rider, or both. More significantly, individual DI policies had an “Own-OCC,” or “own occupation,” definition of disability. A typical noncancelable individual DI policy defined total disability as follows: “Solely due to sickness or injury, you are unable to perform the material duties of your regular occupation — even if you are able to work in another occupation!” Your occupation meant “the occupation or occupations (if more than one) in which you are gainfully employed for the majority of your time, at the time you become sick or disabled.” Carriers further refined the definition of your occupation to a single specialty.
NEW TYPES OF POLICIES CLOSE THE DI COVERAGE GAP HEALTH/BENEFITS Contracts recognized that specialty, and for attorneys became limited. still left many professionals underinsured. they and paid benefits based on the inThe combination of a booming econ- Lifestyles and incomes had simply outsured person’s inability to do that spe- omy, a dramatic rise in incomes and the paced the disability market. Insurers were cialty. Your client theoretically could be lack of evolution in DI products meant reluctant to provide anyone with enough a trial lawyer, suffer an injury preclud- most professionals were left woefully un- disability benefits to give them peace of ing them from going to court, and earn derinsured. mind that they could meet their financial a comparable income doing office work obligations. People were simply spending and receive full benefits. That was pow- Group Disability Coverage more than they could protect and were still erful stuff! Many professionals who were underin- dependent on their health to earn a living. Even more compelling, carriers also sured sought ways to increase their protecInsurance markets responded with provided residual and/or proportionate tion. If a professional had a staff, they could supplemental buy-up coverage. These benefits — which provided that should purchase employer/association group dis- policies can offer simplified issue or, injury or sickness disrupt your income ability insurance and add a secondary layer with three or more participants, even (but not necessarily lead to a reduction in of coverage to their individual plan. guaranteed issue. These are also own-octime lost at work), so long as you suffered These group contracts were signifi- cupation-specific contracts, allowing a loss of income — you would also receive cantly different from the broad individ- professionals to become insured and sesome percentage of benefits. ual plans. These plans integrated with cure reimbursement of up to 70% of their In the mid-1990s, insurance companies government benefits and limited claims income upon sickness or injury. began to see a dramatic As a result of this offering, rise in claims. Some DI many professionals can now policies made it simply purchase coverage that suptoo easy to substantiplements both their individuate claims, and in many al and group coverage. cases, people took ad» The disability insurance industry is expected to vantage of the carrier’s Lifestyle Lump Sum earn $21.8 billion in revenue in 2022. favorable wordage. Also, A host of newer policies are when many physicians addressing areas of disabil» The market size of the disability insurance became dissatisfied ity that can protect lifestyles industry is expected to increase by 2.3% in 2022. with the way managed even better. One newer evoluhealth care changed tion of disability insurance can » The number of motor vehicle accidents is their practices, they soon now add an additional layer of expected to increase in 2022, which could recognized that their DI coverage for professionals to represent the biggest opportunity for growth in policies could hasten insure their lifestyles in the the disability insurance industry. their retirement, so they form of a lump-sum benefit. SOURCE: IBISworld began to file claims in reWith many pressures on cord numbers. Carriers our incomes and so many were unprepared for this increase in the for conditions such as spinal and mental complex matters that all depend on our number of claims. health conditions. Nonetheless, they add- incomes, it is no wonder that DI is criticalThis challenged insurance companies, ed coverage — giving the insurer more ly important for professionals. Factoring and many recognized they had issued discretion over when they would be obli- in additional drains on incomes due to policies that were simply too generous gated to pay a claim. divorce situations (alimony and child supand that made it too easy to substantiate When crafted properly, this group cov- port) education funding, real estate, vara claim. Individual disability underwrit- erage would pay in addition to what any ious business promises (leases, salaries, ing became more stringent, costs for new individual coverage would pay. Further, etc.) and medical expenses, DI is a critical policies rose, underwriting tightened, and proper design, with premiums passed component of every financial plan. the industry was challenged with lawsuits through as income, would ensure that Unless your client has an ultra-wealthy over claim disputes. benefits would be received tax free — just relative, it highly unlikely they have anyInto the early 2000s, a class action like the benefits from individual DI poli- one they can turn to for help paying their lawsuit against one of the leading indi- cies. Still, the group coverage was limited bills if they become disabled. vidual DI carriers resulted in uniform to 60% of the insured’s income. Even if the changes to contract language, easing the additional benefit was $10,000 or $15,000 Martin Levy, CLU, RHU, is president burden on claimants’ ability to collect. a month — many were and are still gross- and founder of Corporate Strategies in Woodland Hills, Calif. But policies became more difficult to ly underinsured as a relation to their ex- He is a 30-year inacquire, there were limits on claims for penses and lifestyles. dustry veteran and a lifetime member of back/neck and mental/nervous disorMillion Dollar Round ders, and individual DI carriers figured Supplemental Buy-Up DI Table. He may be conout they could no longer compete. The The limits of older individual DI plans, tacted at martin.levy@ availability of noncancelable DI options even when combined with a group DI plan, innfeedback.com.
Increased Accident Rate Could Pose Potential Opportunity
May 2022 » InsuranceNewsNet Magazine
35
Financial facts and figures powered by AdvisorNews.com
Americans Look To Bridge Financial Gaps Americans reported that their top five biggest financial advice gaps are: handling market volatility emotionally, choosing appropriate investments, estimating required minimum withdrawals, making buy/sell decisions on investments and estate planning. That’s according to a recent Hearts & Wallets report. Younger consumers especially need help in bridging those gaps, the report said. Millennials and Generation X consumers who said that COVID-19 changed their attitudes toward saving and investing are especially likely to seek help on multiple tasks, including estate planning, according to the report. More U.S. households reported seeking help for multiple financial tasks, with growth being driven by households with $100,000 to under $500,000 in assets, according to the survey. Nationally, 3 in 10 households sought help on 3-plus tasks in 2021, a year-over-year increase of 4 percentage points and up 8 percentage points since 2014. In comparison to older generations, millennials and Gen-Xers are more likely to seek help for multiple financial tasks, seeking help for 3-plus tasks, and often, as many as 7-plus. Millennials are twice as likely as baby boomers to seek help on multiple tasks.
Millennial, Gen X Families Struggling
The financial picture for today’s early- and mid-career employees looks markedly different from that of yesterday’s early- and mid-career employees. A study from the Employee Benefit Research Institute found that
Generation X families were less likely to own a home or have any retirement plan, and they were more likely to have debt than baby boomer families did at the same ages.
When looking at the financial picture of early-career employees, millennials face a dramatically different experience than Gen X did. For example, homeownership rates were lower for millennials than for Gen X at the same ages. Even more sobering, the median net worth of millennial families was lower than for Gen X families of the same ages.
In Search Of A Comfortable Retirement
A comfortable retirement is near the top of most Americans’ life goals, yet a large percentage are unsure about how to achieve it. A Principal Financial Group survey revealed only 49% of those polled have confidence that their savings will be enough, and a further 55% don’t feel secure in their retirement planning. 36
InsuranceNewsNet Magazine » May 2022
DID YOU KNOW?
64% of financial advisors have a SUCCESSION PLAN. SOURCE: Smart Asset
Investors Fear Inflation, But Also Don’t Invest Accordingly
A Hartford Funds survey shows investors are split on how inflation and the Fed impact their investment decisions. The majority of investors demonstrated an understanding of inflation, with
three-quarters (75%) identifying the correct definition of the market phenomenon. Younger generations, how-
ever, struggled with correctly defining inflation compared with older generations (54% vs. 86%) and worry more about the phenomenon impacting their day-to-day finances (78% vs. 71%). As for the Fed’s role in curbing inflation, more than half (56%) of investors believe that rising interest rates will have a “significant” or “moderate” impact on curbing inflation .
Younger generations are more likely to believe this, compared with older generations (71% vs. 47%). In fact, 35% of younger investors are more optimistic that rising interest rates will have a significant impact on curbing inflation, which is a 14% increase from the aggregate of all investors (21%). The data also suggests that the number of rate hikes investors are expecting this year will impact where they invest. If their rate hike expectations are correct, 94% of younger investors expect to change their investment decisions in some form, while only 72% of older generations are expected to do the same.
Fifty percent of workers are either unsure how much they should be saving for retirement, or know they are saving less than they should be to reach their goals. Today’s workers cite “when I’ve saved enough” or “when I cannot do the work any longer” as determining factors for retirement. The majority of workers lack confidence that Social Security will be available to them, with 64% citing its viability for them as a concern, including a whopping 73% of Generation Z workers.
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May 2020 » InsuranceNewsNet Magazine
37
ADVISORNEWS
Position A Portfolio: Finding Certainty In The Midst Of Uncertainty Just because the market is unsure does not mean that an investor needs to be unsure. • Bryan Cannon
U
ncertainty is an inescapable part of life. Google the word “uncertainty” and you will not discover ways to do away with it, you will only find ways to deal with it. The changes brought to our world by the COVID-19 pandemic revealed just how all-encompassing uncertainty can be. From infection rates to interest rates, many experts had to admit that the “new normal” makes it difficult to be certain about anything. Nowhere is this more obvious, or more unsettling, than in the area of financial investing.
Addressing The Certainty Of Uncertainty
The certainty of uncertainty always has and always will be a component of investing. Investing well does not mean you have done away with uncertainty; it simply
38
InsuranceNewsNet Magazine » May 2022
means you have found a way to manage it. Financial advisors will never be able to offer their clients guarantees. However, by understanding the various market factors that are at work, we can provide our clients with investment strategies that acknowledge unavoidable uncertainties and incorporate the necessary flexibility, diversity and responsiveness into those strategies. Just because the market is unsure does not mean that an investor needs to be unsure.
Considering Inflation Concerns
Inflation is one of the key factors to consider when positioning investment
portfolios for success in 2022. Although the current rise in inflation was initially deemed “transitory,” a recent article in Forbes reported some experts predicting inflation will last well into 2022 and possibly beyond. While history provides lessons on the impact inflation can have on investing, the uncertainty associated with inflation makes predicting fluctuations impossible even with years of history from which to glean. Not only is the course of inflation uncertain, with many variables affecting it, but the way in which investors react to inflation and their impact on the market
While history provides lessons on the impact inflation can have on investing, the uncertainty associated with inflation makes predicting fluctuations impossible even with years of history from which to glean.
POSITION A PORTFOLIO: FINDING CERTAINTY IN THE MIDST OF UNCERTAINTY ADVISORNEWS
is also uncertain. For example, the market can change in anticipation of government action, such as the raising of interest rates, that may never come. If inflation lingers, your clients must be aware of its impact and must be encouraged to adjust accordingly. Typically, growth stocks are not the best option during times of inflation. Value stocks and government bonds are better options for times of inflation.
Inflation Is One Major Concern Investors Have In 2022 United States Annual Inflation Rates (2012 to 2022)
Considering COVID-19 Impacts
The COVID-19 pandemic has added to, and will most likely continue to add to, the uncertainty of investing. The interruption in supply chains provided considerable challenges for many companies. The changes COVID-19 brought to the workforce mean companies and consumers alike have fewer resources. How long these factors will continue to challenge companies remains unclear. Should they become part of the new normal, wise investing will involve identifying the sectors and companies that have discovered ways to overcome the challenges and operate profitably.
Considering Political Risk
Regardless of your clients’ political leanings, their investments could be impacted by political risk. When governments make or influence decisions affecting taxes, spending, fiscal policy or international relations, they can affect in unpredictable ways the success of domestic and international organizations and the ways in which their stocks perform. Determining what stocks are safe from political risk is a challenging endeavor. All companies — especially multinational companies — are subject to the effects of political risk. The best investments are investments in companies that take steps to understand and mitigate their political risk.
Moving Beyond Diversification
Guiding your clients toward a diversified investment portfolio is a good strategy for investing during uncertain times. Diversification manages uncertainty by relying on a varied group of investment vehicles, each of which can be reasonably expected to respond differently to the factors that affect markets. As a result,
Source: US Inflation Calculator
when one sector of the economy loses ground from any of the factors explored above, another sector may gain ground. Diversification typically will keep a portfolio on an increase that tracks with the market. However, for those looking to provide sound investment guidance during uncertain times, diversification is only the beginning of a good strategy. Those who are familiar with the stock market know that in 2008, the market experienced a historic decline, ultimately dropping more than 55%. Even the most diversified portfolios were not safe from considerable losses during that season. I realized at that time that I needed a better solution than diversification to guide my clients through times of uncertainty. My research led me to a solution that manages uncertainty by combining diversification with a trading discipline known as technical analysis. Obviously, healthy investing begins with identifying healthy companies with a proven track record and a promising future. Once that is done, technical analysis analyzes statistical trends to guide the timing for buying and selling stock in those companies.
My personal experience during the 2020 market drop caused by the COVID-19 pandemic proved the wisdom in this strategy. When the market fell from peak to trough over 36%, our all-equity aggressive portfolio served our clients well, outperforming a conservative 60/40 blended index on the downside, as well as beating the S&P 500 on the upside for the year. The best guidance you can give your clients in 2022 and beyond is that uncertainty will continue, and you will analyze the market on an ongoing basis so that you can help your clients continue to invest with clarity and confidence. Bryan Cannon, CFP, is a stock market technical analyst with more than 25 years of financial planning and investment experience. He may be contacted at bryan. cannon@innfeedback.com.
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May 2022 » InsuranceNewsNet Magazine
39
MULTILINEWIRES TRUE or FALSE
Home or renters insurance policies will cover your personal belongings even if they’re stolen from outside your home.
Misinformation About Coverage Is Common, Survey Finds 58% TRUE
(correct)
Source: ValuePenguin
Many policyholders have misconceptions about what their insurance covers and what it does not, according to a ValuePenguin survey. Fewer than half (43%) of Americans don’t know that homeowners or renters insurance covers personal belongings even if they’re stolen from outside the home. Seven out of 10 wrongly believe auto insurance would cover belongings stolen from a car. Three out of 10 correctly answered that homeowners or renters insurance would cover those stolen items. Most people (69%) do realize that comprehensive auto insurance may protect them if their vehicle is stolen or damaged during a break-in. But nearly 25% of those with collision auto insurance wrongly believe they’re covered in these situations. The survey showed that many Americans are more vulnerable to becoming victims. In particular, 78% don’t have motion sensors outside their home, 38% don’t lock their front door while at home, 16% sometimes leave their car unlocked, and 10% occasionally leave their wallet in their vehicle.
STATE FARM FACES ANTI-BLACK BIAS CLAIMS
ANOTHER FLORIDA HOME INSURER IN TROUBLE
Lighthouse Property Insurance Corp. lost its financial stability rating, which means it will likely be placed under state receivership and dissolved. It’s another ominous sign for Florida’s failing property insurance market. The loss of Lighthouse’s rating follows the failure of four Florida-based property insurers since April 2021. Together, about 50 Florida-based insurers reported more than $1 billion in operating losses in 2021. Insurers say the industry is being torn apart financially by severe weather claims, roof replacement claims, contractor fraud and excessive litigation. More than 100,000 lawsuits were filed against Florida insurers last year. Florida accounts for 76% of all property insurance litigation in the country, state insurance regulators said last year. DID YOU
KNOW
?
40
QUOTABLE
43% FALSE
State Farm is facing a wave of racial discrimination claims from employees and clients who say the nation’s largest home and auto carrier denied claims from Black homeowners on false fraud allegations and treated Black agents and employees unfairly. A New York Times article focused on a Black landlord in a Black neighborhood who was denied a claim for damages due to a water pipe break. State Farm denied the landlord’s claim because of what it said was a history of fraud in the area, according to the article’s allegation. A former State Farm employee who was already suing the company came to the landlord’s defense, saying that the carrier had a system of limiting losses by categorizing many claims as fraud in Black areas. The employee was later fired. A group of seven Black former agents are
Rush hour is our biggest exposure time as insurers. That’s when people have accidents. — Don Hendriks, actuary and data scientist at CARFAX Banking & Insurance Group
part of a class action filed in State Farm’s home state of Illinois in 2020, alleging the carrier treated them unfairly and assigned them to less lucrative areas and did not have Black agents take over existing books of business. State Farm released a statement saying it is an inclusive company and will defend itself in court.
IOWA BILL WOULD LIMIT POSTDISASTER HOME APPRAISALS
The Iowa House of Representatives passed a bill that critics said will make it harder for homeowners to successfully submit insurance claims for damage caused by natural disasters. The bill would limit the appraisal process used in disputed claims to only determining the cost of the damage to the home. Appraisers would no longer be able to determine what caused the damage. Critics said that would force more Iowans to go to court to have their claims resolved, rather than using the appraisal process, which is typically faster and cheaper.
The typical motorist will spend $1,771 on auto insurance in 2022. Source: Bankrate
InsuranceNewsNet Magazine » May 2022
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MULTILINE
How Will Your Clients Protect Their Virtual Assets? With more Americans investing in nonfungible tokens and other virtual assets, security and protection become issues. By Nicholas Donarski
A
ccording to a Statista survey published last year, nearly three-quarters of American adults either have avatars in the metaverse already or are considering building some type of virtual life soon. Inevitably, more of us are considering our virtual security these days. Hacks are way up, and while Mark Zuckerberg’s Facebook Connect keynote video envisaged a kind of 42
InsuranceNewsNet Magazine » May 2022
Mayberry-verse populated entirely by polite coworkers, cute puppies, family members and friends, the reality is that phishers and scammers will clearly show up in that world as well. What these phishers and scammers see is a whole new environment in which to operate. An obvious target will be nonfungible tokens, or NFTs. NFTs are unique, digitized art, gameplay, video or any other type of intellectual property, or IP. Christie’s sold more than $100 million in NFTs during the first three quarters of 2021 alone. Over the coming years, this number should rise exponentially as NFTs go mainstream and avatars go shopping. This begs the question, how will your
clients protect their virtual assets? So far, the protection of digital assets has been considered from a proactive standpoint. For example, both cold wallets and decentralized verification processes trace their roots to the blockchain, and both seek to prevent hacks. But what if something nefarious happens while acquiring a digital token or afterward? What kind of insurance would apply to a virtual asset, if any? Can NFTs even be insured at all? If so, are there any insurance agents in the metaverse who will sell policies — now or in the future? The answers to these questions may have less to do with technology and more to do with the unique risks involved — and how they present themselves.
HOW WILL YOUR CLIENTS PROTECT THEIR VIRTUAL ASSETS? MULTILINE
Rights Of NFT Ownership
As with any financial transaction, the first risk that an NFT buyer takes is in trusting the seller. What happens, for example, if the seller does not own the rights to the IP being sold? Equally important, though less common: What if the web address, or the URL, where the IP is stored disappears? Or what if the hyperlink is broken, and the NFT no longer directs to the image that it’s supposed to? No insurance is yet available for these scenarios, though they all are eminently insurable risks. Title insurance, for example, is a common way to guarantee that the seller owns the real estate being purchased, while property insurance can protect the owner of all sorts of assets against loss, no matter how that loss occurred.
Theft
But what if the loss occurred after the transaction? This scenario is the one we most commonly read about. For example, a crypto-owner’s keys are stolen, probably in a phishing scheme or as the result of a wider hack of a trading platform. Theft happens to be an unfortunate but not an uncommon occurrence. It’s also an eminently insurable one. Coincover.com is a noncustodial crypto platform that sells security technology that comes with insurance backed by underwriters at Lloyd’s of London. The company insures more than 200 types of crypto from theft, promising to reclaim hacked or lost funds up to a fixed amount.
Fraud
Fraud is a more nuanced type of theft, and one that has been increasingly common in the NFT space. Although frauds can be enormously creative, the scourge of NFT platforms is a remarkably straightforward one: the rug pull. This happens when NFTs are presold but then never minted. In this scenario, being proactive is essential, and we will probably see proactive, third-party verifications of NFT marketplaces in the future. In the meantime, there is nothing stopping an insurance company — or anyone else — from guaranteeing the completion of a contract. Indeed, that’s the idea behind completion bonds and escrow apps such as PayPal, both of which are used by millions of companies every day.
Who's Investing In NFTS? .*.*.*.*.*.*.*.*.*.*.* > The first NFT emerged in 2014, five years after the first bitcoin was mined. > More than half of all NFT sales are below $200. > An estimated 250,000 people trade NFTs each month on the OpenSea platform. Coinbase is expected to launch its own trading platform in 2022. > 23% of U.S. millennials collect NFTs. > Men are three times more likely than women to collect NFTs. SOURCES: Alternative Press, Morning Consult, Artnet, CNET
Royalties
Another common type of guarantee that could be applied to NFTs is contract insurance. NFTs are essentially contracts — or licenses, more specifically — that give the owner certain rights, usually digital ownership of a unique piece of IP. Some NFTs, like some licenses, generate royalties. This makes the NFT indistinguishable from a financial instrument such as a bond. Of course, financial instruments are insured regularly, sometimes as a condition of issuance. As long as the NFT creates a fairly predictable revenue stream, an insurance company would theoretically be able to insure it, although there is not yet enough history — or volume — to generate interest from major insurance companies. This will change, and sooner than most of us think. In the meantime, the security industry will continue to focus on preventing hacks. Coincover.com, for example, offers a “hack checker,” as well as biometric identity verification and multi-wallet protection for crypto owners. It then insures the efficacy of its technology, and by extension, its clients’ NFTs. This makes Coincover.com
more like a LifeLock or LoJack than a real insurance company, although the outcome is very similar, if not identical. In the coming years, increased adoption of NFTs will make them insurable. This is because enough data will exist to produce actuarial tables, and also because their values will be much easier to calculate — and far less dynamic, i.e., volatile. Who knows? Maybe we’ll even see an agency like the Federal Deposit Insurance Corp. emerge that guarantees a minimum amount of crypto and NFTs against loss in the event of a major hack or exchange event. Nicholas Donarski is founder and chief technology officer of ORE System, a blockchain technology. He may be contacted at nicholas. donarski@innfeedback.com.
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May 2022 » InsuranceNewsNet Magazine
43
BUSINESS
Sell More With Less: Using A Virtual Assistant A virtual assistant can free you up to spend more time selling, while eliminating human resources responsibilities. By Rob Vaughn
I
nsurers are buckled up to accelerate growth in 2022, Deloitte reported in its 2022 Insurance Industry Outlook. “But attracting (and retaining) talent in an evolving hybrid work environment will be key,” the report said. The latest Jacobson and Ward Insurance Market Labor Market Study found 62% of insurance businesses plan to add staff, but “recruiting difficulty is increasing.” For the first time in the study’s history, from IT to sales to operations, all roles are rated moderately to extremely difficult to fill. The average salesperson spends only 35% of their time selling. The primary drags on sales productivity are administrative. According to insurance marketers at Zip Quote, the tasks that get in the way of advisor productivity are:
» Email and inbox management — a black hole that renews itself every day.
» Poor customer relationship management
data hygiene. Inconsistent and incomplete contact information and status.
» Lack of a lead management system. 44
InsuranceNewsNet Magazine » May 2022
Physical leads on business cards and Post-it notes vanish.
» Time spent prospecting. Researching and finding qualified leads, building lists and reaching out are time-consuming.
» Inconsistent lead follow-up. A lack of a formal process for following up with leads.
» Cumbersome manual workf lows. Tracking new applications and renewals.
The Vanishing Administrative Assistant
The Wall Street Journal wrote about “the vanishing administrative assistant” in 2020. The decline has been gradual but massive. The number of workers with the title administrative assistant has decreased by 65% since 2004. The U.S. has shed more than 2 million administrative assistant jobs since 2000. Meanwhile, job board Lensa reported that administrative assistant is the third most challenging job to fill in 2022. It turns out that all the productivity apps designed to make executives self-sufficient and had the opposite effect. Research by Service Now found that salespeople spend only 35% of their time selling. The rest of their time is spent on day-to-day tasks such as email correspondence, scheduling meetings, entering the CRM data, prospecting and chasing leads.
Enter Managed Admin Services For Executive Teams
The shortage of administrative assistants is particularly challenging for businesses with larger executive teams that need to scale up support quickly. According to LinkedIn, the tight labor market and surging demand mean it takes a median time of 33 days to hire an administrative assistant. Stretch that time out for multiple executives, and you have a daunting challenge. Companies realize that paying executives to do admin work is lousy business, and they instead can outsource the work to experts — managed remote virtual assistant services. In a managed virtual assistant service, the service provider hires, trains and supervises assistants — the assistants work for the service provider. Executive teams get a professional administrative layer of support without the time and cost of recruiting, hiring, training and managing more people. Executive teams can:
» Hire faster. Service providers maintain a bench of qualified, trained assistants.
» Scale more quickly. It is far easier to hire multiple assistants to form a cohort.
» Lower overhead. The assistants are ser-
vice provider employees, with no human resources or performance management lift for businesses.
SELL MORE WITH LESS: USING A VIRTUAL ASSISTANT
What Else Can A Managed Virtual Assistant Do For You? All kinds of back-office tasks distract producers from their core mission: to win new business and serve existing clients. Among those tasks that managed virtual assistants perform are:
Underwriter communications, so you are not on hold for hours.
BUSINESS
Lead follow-up. The HubSpot report also revealed that 80% of customers buy from the first business to respond to an inquiry, but most sales teams take five days to respond. Your virtual assistants will:
» Reach out to qualified leads who fill out forms on your website or respond to campaigns.
» Schedule calls for you to meet with prospects.
» Confirm meetings to reduce no-shows.
New business and quote preparation.
Build and manage workflows. According to Salesforce, it takes six to eight touches to make a sale, but 70% of salespeople stop at one. Here is how virtual assistants help:
Invoicing and payment processing.
» Create automated email drip campaigns
Endorsement processing as plans change.
Tear sheet prep for sales calls. » Lower cost. Assistants are engaged on a
fractional basis, and you pay for hours used.
What Can Managed Virtual Assistants Do For Insurance Sales Teams?
Virtual assistants can perform many of the tasks that slow down agency productivity. The beauty of a managed service is that this work happens in the background while the sales team focuses on selling and client relations. Managed virtual assistant providers train assistants to do the following functions. CRM management. The latest Validity and Demand Metric CRM data management study revealed that although 86% of companies said their CRM system is “important or very important” to achieving revenue objectives, 39% said they have no CRM data management process or said the one they have is ineffective. Your assistant can:
Lead management. Anywhere from 30% to 70% of lead data “decays” each year (job changes, promotions, phone number and email address changes). A virtual assistant prevents that by:
» Continually updating contact information. » Logging all communications such as calls, emails and meetings so you have a record of all your touches with leads.
» Maintaining lead status and ownership in your CRM.
» Tracking applications, renewals and policy changes.
and fill in missing information about them.
» Keep your contact data clean and up to
» Search contact databases such as Sales
» Run reports and send them to you so you
» Build lists for email outreach.
date by changing statuses as needed, removing duplicate data, etc.
have access to the latest insights about your pipeline.
» Schedule social media outreach. » Set up alerts and outreach for client
Prospecting. More than 40% of salespeople say prospecting is their biggest challenge, according to the HubSpot 2021 Sales Enablement Report. Prospecting is tedious and time-consuming. Virtual assistants can:
» Input all your contacts into your CRM
for your leads.
Navigator and ZoomInfo based on lead qualification criteria.
» Launch and manage email campaigns.
milestones such as renewals, birthdays and holidays.
More Tasks A Managed Virtual Assistant Service Can Deliver
All kinds of back-office tasks distract producers from their core mission: to win new business and serve existing clients. Among those tasks that managed virtual assistants perform are: » Underwriter communications, so you are not on hold for hours. » Endorsement processing as plans change. » New business and quote preparation. » Invoicing and payment processing. » Tear sheet prep for sales calls.
Finding The Right Solution
There are multiple virtual assistant business models, including hiring a local freelancer, using freelance marketplaces such as Upwork, using a contracting agency and using the managed service model described here. Review sites such as Investopedia and The Balance SMB provide helpful guidance for finding the right solution to ensure you do not fall behind the growth curve in 2022. Rob Vaughn is head of sales at Prialto. He may be contacted at rob.vaughn@ innfeedback.com.
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INSIGHTS
The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.
How To Successfully Frame Client Expectations Some tips to help you and your client be in alignment on their financial goals and how to achieve them. By Michelle Hoesly
C
lients often come to an advisory firm with preconceived notions about what we do, who we are and how we can help them. Whether you’re meeting with a prospective client or continuing work with a longterm client, I encourage you to use these tools to help establish solid expectations and ensure both you and your client are aligned on their financial aspirations.
Use open-ended questions to gauge expectations.
Clients typically know what they hope to achieve when they seek financial guidance, but they aren’t always fully aware of the full scope of our offerings. When meeting with a prospective client, I like to start the conversation by asking open-ended questions, such as: “What made you choose to call me and set this up?” or “What are you financially unsatisfied with right now? What problems are you currently facing?” As they respond, I try to remain an active listener and avoid interjecting as best as possible. When you give a client the floor to speak, you will often uncover their true motivations for seeking an advisor and identify any unrealistic expectations that you will need to address during the remainder of the meeting.
Present visuals to bolster understanding.
One of the most common issues I run into with clients is the age at which they’d like to retire. Clients often have unrealistic timelines of when they want to retire based on their savings. To help put this into perspective, I like to use a financial modeling software to visually show them how long their current retirement savings will last 46
InsuranceNewsNet Magazine » May 2022
them if they were to retire at the time of their choosing. When clients see visual evidence that their savings will last them only a year or two at most — and the difference even a couple extra years of work can make — they are much more willing to reframe their expectations. Visuals not only help clients understand complex subjects more easily but are also easier to remember than a verbal explanation. Using visual tools is a powerful way for advisors to help clients better understand their point of view and align on realistic goals.
Be transparent about risk.
Managing risk is a key part of our job, and it requires open and honest conversation with clients in order to manage expectations. Although dips in the market are often viewed as negative, they’re perfectly normal and necessary for a healthy market. I like to start out all initial conversations about risk by making this disclaimer and framing fluctuations in the market as a positive. This reassures clients that ebbs and flows in the market are not a cause for major concern. Additionally, it’s important to discuss how different investments react to risk. For example, an annuity with an income guaranteed rider is relatively low risk; however, it will require a higher level of investment and will most likely have a lower return in comparison to a higher-risk investment. When evaluating a client’s portfolio, I like to discuss the risk protection of each of their investments and how that may alter its return potential. Establishing these expectations is key to reducing the possibility of clients being upset or surprised by the performance of their investments.
Take your clients’ temperature randomly.
This last tip may seem a little unconventional, but I like to call clients randomly and simply check in, especially if I haven’t spoken to them in a while. Even if I have
nothing in particular to talk about, clients almost always appreciate hearing from us, and it often leads to us discussing a question they’ve been meaning to ask but haven’t had the time to connect on. This is a great way to keep the lines of communication open between you and your clients and ensure you are aware of any challenges they may be facing. If they are facing challenges, this provides an opportunity to proactively discuss and realign. By simply picking up the phone, you grant yourself and the client the chance to naturally discuss potential miscommunications in expectations and restore them. Michelle Hoesly, CLU, ChFC, MSFS, CPC is president of Resource 1 Inc., a registered investment advisory firm. Hoesly is currently a registered representative with Ceros Financial Services, Member FINRA/ SIPC. She is a 43-year MDRT member, past chair of the Top of the Table and served as MDRT president in 2014. She currently resides in Virginia Beach, Va. She may be contacted at michelle.hoesly@ innfeedback.com.
INSIGHTS
Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.
Use Your Relationship-Building Skills For Political Advocacy Developing trust and proving yourself takes time, but they can be worthwhile in establishing positive relationships with your elected representatives. By John Davidson
H
ave you ever stopped to consider how important relationships are in your life? I mean, when was the last time that you really thought about the people, issues or organizations that are the most important to you? How much time and effort did you put into developing those relationships? How deep and meaningful are they? Have the relationships changed over time? After careful examination, you probably will find that you put the most effort into establishing “personal relationships” versus “business relationships,” although there is very little difference between those relationships in the insurance industry. We tend to take our business relationships personally. So, what’s the big deal about making friends and developing networks, referral sources or political connections — connections that count? Well, after more than 41 years in the insurance business, I think I have figured it out. Having solid relationships is one of the keys to finding the fulfillment that you are looking for in your career and your life. And it is those relationships that allow you to grow personally and professionally while investing in the lives of others. As insurance agents and advisors, we also have a unique role in providing financial guidance and advice to our clients who count on us to help them. It is our “relationship” with them, built on credibility and trust, that affords us the opportunity to make recommendations that affect their lives. Our clients can count on us because we have proven, over time, that we have their best interests at heart. We have
made the investment and have earned their respect.
Relationships And Political Advocacy
It is those same types of relationship-building skills we use in our everyday practices that we need to employ in dealing with our legislators at the state and federal levels. Believe it or not, lawmakers are people just like our friends and clients (well, some are anyway). But, in the same way that we would invite friends over for dinner, stop by their offices or send them a kind note from time to time, we can build relationships with those legislators too. It is vitally important that we have solid, genuine relationships with those legislators before we need to ask for a meeting to discuss important matters that impact our clients, our communities and our industry. Although making financial contributions to a political campaign can be an important part of the “political relationship,” I respectfully would submit to you that investing your time to help a legislator understand our industry and the products that we provide to our clients (who are, after all, their constituents) is valuable in distinguishing you from others who just write checks. As we head into the 2022 election
season, won’t you take the time to meet your members of Congress or your state legislators? Get to know them and share with them the Real Life Stories that motivate you every day to make a difference in the lives of the people you serve. NAIFA’s Congressional Conference, May 23-24, in Washington, presents a great opportunity to meet with lawmakers, introduce yourself and start (or continue) the process of building those meaningful relationships. I promise that if you make the effort to meet with your elected officials and their staff members and develop new relationships, wonderful things are sure to come. But it won’t happen immediately, because developing trust and proving yourself take time. You never know what the future holds, but the value of having great relationships with elected officials will give you opportunities, confidence and optimism that can change the world. Invest in a relationship today, and start making a difference. John Davidson, LUTCF, FSS, is the owner of Davidson Insurance & Financial Services in Thousand Oaks, Calif., and a national past president of NAIFA. He may be contacted at john.davidson@innfeedback.com.
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More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.
INSIGHTS
Consumer Confidence In Agents And Insurers At All-Time High A LIMRA survey shows consumer opinion of the industry is at its highest point since 2008.
How much confidence do you have in insurance agents and brokers?
By John Carroll
T
wo years into the pandemic, people are still uneasy about the economy, the effects of inflation, and the health and well-being of their family members. According to LIMRA research, only three in 10 Americans said their lives are, for the most part, “back to normal.” In light of COVID-19, nearly half of those surveyed said financial issues became more of a priority. A third of workers said their employment is more important today than it was before the pandemic. Although consumers may be unsure about their financial situations, consumer confidence in the financial services industry is at or above pre-pandemic levels. When it comes to life insurance companies, 38% of consumers said they were “extremely” or “quite a bit” confident. Our research also shows consumer confidence in insurance agents and brokers accelerated during the pandemic, with 33% of consumers saying they were “extremely” or “quite a bit” confident. This is the highest level of confidence recorded since LIMRA began this survey in 2008 to gauge consumer opinion of the economy and the financial services industry. The pandemic also had more Americans saying they planned to purchase life insurance. LIMRA research shows COVID-19 has increased awareness about the importance of life insurance. In general, 31% of Americans say they are more likely to purchase coverage due to the pandemic. According to our research, approximately 73 million Americans own life insurance but know they need more. This perception of the need for (or the need for more) life insurance was particularly pronounced among women, Blacks and Hispanics. Even before the pandemic, the proportion 48
InsuranceNewsNet Magazine » May 2022
Jan ’20
May ’20
July ’20
Oct ’20
Jan ’21
Apr ’21
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Jan ’22
Source: Consumer Sentiment in the Time of COVID-19 (January 2022)
of women with life insurance coverage was falling. Today, only 47% of women have coverage, compared with 58% of men. For Black Americans, the pandemic had a significantly higher impact on their perceptions of life insurance. Four in 10 Black Americans said they were more likely to purchase life insurance due to the pandemic, compared with only 31% of the general population. Similarly, almost four in 10 Hispanic Americans (37%) said they are more likely to purchase life insurance due to the pandemic. Our hope is that this increased interest in life insurance, along with increased confidence in the companies and agents that provide it, will translate to more people getting the life insurance they need in order to protect their loved ones. We’re already seeing an uptick in individual life insurance sales as people have become more aware of the financial impact of losing the primary breadwinner. Life insurance premium increased 20% and policy sales grew 5% in 2021, representing the highest annual growth since 1983. With the COVID-19 pandemic
highlighting Americans’ financial vulnerability, it is becoming even more critical for our industry to engage and educate consumers about the important role life insurance plays in a family’s financial security. This is one of the reasons LIMRA is continuing its Help Protect Our Families campaign. We are working with seven other trade associations and 76 insurance companies and distributors to raise industry awareness of the role life insurance plays in providing peace of mind and financial security. As an industry, there is so much we can do to have a positive impact on consumers’ financial concerns and reduce the number of Americans who are financially at risk because they do not have the life insurance coverage they need. John Carroll is senior vice president and head of insurance and annuities, LIMRA, LOMA & LL Global. He may be contacted at john.carroll@innfeedback.com.
INSIGHTS
With nearly 100 years of experience, The American College is passionate about helping students expand their knowledge and opportunities as financial professionals.
A Simple Strategy To Use Life Insurance For Income Protection A death benefit is an income distribution portfolio waiting to happen. By Jim Karthaus
A
s a Marine helicopter pilot, I was the unfortunate witness of too many young families losing a loved one. The pain of sudden death is overwhelming. Our hearts and minds seem to lack the ability to comprehend the magnitude of such loss. Time may heal all wounds, but it is excruciatingly slow at healing the wounds of untimely death. This is particularly acute when those lost are young and they leave behind a family that depended on them. Life insurance can minimize the financial strain experienced by untimely death. It can help provide stability and keep a family in their home, in the same school district, and around their friends and community. These stabilizing influences in the face of such a destabilizing event can help families heal over time. But how much insurance do we need to protect our families? Without delving too far into the differing methodologies that focus on either a capital needs analysis or the economic value of the life of the insured, I want to offer a simpler, more flexible methodology. It’s one that we planners use all the time. And it’s one that is particularly suited for the possibility of an untimely death, as it marries up needed inflation-adjusted income with actual expenses of the protected loved ones. As I would tell the investment advisors that I worked with — a death benefit is an income distribution portfolio waiting to happen. Let’s flesh out some of the questions that this approach may raise. Why are we protecting for the rest of the spouse’s life? When a family loses a parent, the surviving spouse must effectively become both parents. The emotional load is effectively doubled. The surviving spouse now has emotionally
traumatized children to nurture, as well as the deceased spouse’s parents. Do we want the surviving spouse working full time as well? I would think we all would agree that we would want to plan to give our surviving spouse all the resources they need. Why aren’t we paying off all the debt? First and foremost, as a planner and as a business owner, I want to protect cash flow. Paying off debt in this situation is not always the best decision. Paying off an expensive car loan is fine but paying off the mortgage on a family residence may not be. The effective mortgage interest rate can be lowered by accelerating the payments. We still get a deduction for home mortgage interest if we itemize. We can reduce the financial cost of the loan on a monthby-month basis to where arbitrage can be realistically obtained repurposing assets — say, to preserve our income distribution portfolio. Is the current mortgage rate low in comparison to where we are trending? Lastly, my mortgage payment is fixed. My income distribution portfolio is pacing with inflation. We can incrementally pay off the mortgage as we gain space from our rising income distribution. I’m not saying that paying the house off is the wrong idea; I just don’t want to siphon assets from an income distribution portfolio. If we are going to employ an income distribution portfolio, how do we solve for it? The calculation can be straightforward. We can provide an estimate of our income requirements based on our real and envisioned expenses. We can add accumulation goals such as investing for the children’s education or ensuring that the family can go on a yearly vacation, if those
were not already budgetary items. Importantly, we may be talking about a super long distribution portfolio. We need to think conservatively when deciding on a withdrawal rate. The best research I have seen on super long income distribution portfolios is Optimal Withdrawal Strategy for Retirement-Income Portfolios by David Blanchett, Maciej Kowara and Peng Chen. It suggests a 2.7% withdrawal rate to start, and then adjust for inflation moving forward. So if you need $50,000 of after-tax income, for example, you will need around $60,000 of pretax income assuming 20% average federal, state and local tax combined. Divide the income stream of $60,000 by 2.7% and you get $2,222,222. Recall that our life insurance death benefit is income tax free but the income distribution portfolio we run from it is not. If the amount of insurance is too large as we get older, we can reduce death benefit along the way. It seems to make sense to employ widely accepted, time-tested methodologies where they have application. To my mind, an income distribution portfolio designed for retirement would be very similar to what our loved ones would experience over time through the loss of a parent. What are your thoughts? Jim Karthaus, CFP, is an adjunct professor with the CFP Certification Education and ChFC programs at The American College of Financial Services. As managing principal of Nautic Financial Group, Karthaus has been offering his clients investment and insurance advice for more than 22 years. He may be contacted at jim.karthaus@innfeedback.com.
May 2022 » InsuranceNewsNet Magazine
