InsuranceNewsNet Magazine | July 2023

MAKE WAY FOR THE NEXT GENERATIONS

Millennials and Generation Z are taking over the world. Here is how you can address their financial concerns.

PAGE 12

ALSO INSIDE:

Jamie Hopkins: Financial services needs TRUST

PAGE 8

Keep sequence-of-risk returns from sinking retirement

PAGE 24

Individual DI could take your firm to the next level

PAGE 32

UNCOVER NEW MEMBERS WITH DATA-DRIVEN PROSPECTING

Extract New Member Gold with Personalized Messages that Prompt Consumers to Act

Discover the Power of Funnel from datadecisions Group

SEE HOW IT WORKS ON PAGE 3

Ease of use and convenience are key to agent productivity. Admin work does not close sales.

If your agency is actively prospecting for Medicare clients, you need:

• The best available prospect lists

• 24/7 website to supply counts and facilitate an easy order process

• A platform that records previous orders and instantly handles ongoing suppressions/lockouts

Introducing Funnel — the ultimate lead generation front end that enables you to mine for Medicare gold:

Market research – We conduct comprehensive surveys with seniors to understand their opinions and intentions.

Model - Each senior is meticulously scored to assess their likelihood of purchasing a specific plan. Our custom models developed based on your members, policyholders or responders, help drive targeted results.

Filtering Criteria – Funnel suppresses irrelevant prospects, including deceased persons, PO Boxes, and seniors only interested in enrolling in Part A/B.

Defined Profile – You have the power to define the desired profile, which is seamlessly loaded into your portal for efficient targeting.

Example profiles:

• T65 or Age-ins

• Dual Eligible

• C-SNP

• Likely to buy Medicare Supplement

• Intend to enroll in Medicare Advantage

Strike Gold with Funnel

Clients have experienced a 5X increase in their response rate, while a national agency DOUBLED their premium production within just 12 months.

With Funnel, your marketing teams gain valuable insights into territory premium potential, enabling sales teams to enjoy a steady flow of high-quality leads. Funnel also enhances your ability to recruit agents by providing a visual representation of the tremendous opportunity in front of them.

Turn to page 3 to see how datadecisions

Group helps you extract new member gold with Medicare marketing that sets your message apart and positions your plan as the superior choice for seniors.

*Offer expires August 15, 2023. DDG approval of marketing materials is necessary.

INTERVIEW

8 A matter of trust

Trust and transparency are building blocks of an advisor’s success, said Jamie Hopkins, managing partner of wealth solutions at Carson Group. In this interview with Publisher Paul Feldman, Hopkins describes why he believes the industry must focus on building trust.

FEATURE Make way for the next generations

By Susan Rupe

Today’s young adults may have different financial concerns than their parents did at the same age, but they still need an advisor’s help.

IN THE FIELD

20 The top of the ladder

By John Hilton Chlora

LindleyMyers, one of the country’s top regulators, already had a successful insurance career and earned a law degree. But she has a few more goals she wants to achieve.

LIFE

24 Help clients keep sequence-ofreturns risk from sinking their retirement

By John McWilliams

A well-designed permanent life insurance policy can provide clients with additional confidence and peace of mind.

ANNUITY

28 How annuities can be part of your client’s retirement formula

By Shawn Plummer

Americans fear running out of money in retirement. Here are some ways to ease that fear.

HEALTH/BENEFITS

32 How individual DI took my firm to the next level

By Bryan M. Kuderna

If you want to be a true financial advocate, start by incorporating disability insurance in your planning process.

ADVISORNEWS

36 Help clients turn their investment properties into retirement income

By Rob Johnson

Some considerations that might help you as you review clients’ long-term goals and strategy.

BUSINESS

38 How to get compensated with introductions

By Joe Templin

You deserve to be paid for the value you create for clients.

IN THE KNOW

40 Several major insurers post disappointing numbers even while annuity sales soar

By John Hilton

A look behind first-quarter results.

INSURANCE & FINANCIAL MEDIA NETWORK

150 Corporate Center Drive • Suite 200 • Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com

PUBLISHER Paul Feldman

EDITOR-IN-CHIEF John Forcucci

MANAGING EDITOR Susan Rupe

SENIOR EDITOR John Hilton VP, SALES & MARKETING Susan Chieca

CREATIVE DIRECTOR Jacob Haas

GRAPHIC DESIGNER Shawn McMillion

SENIOR CONTENT STRATEGIST Lori Fogle

EMAIL & DIGITAL MARKETING SPECIALIST Megan Kofmehl TRAFFIC COORDINATOR Sorayah Talarek

MEDIA OPERATIONS DIRECTOR Ashley McHugh

NATIONAL SALES DIRECTOR Sarah Allewelt

NATIONAL ACCOUNT DIRECTOR Brian Henderson

NATIONAL ACCOUNT DIRECTOR Tobi Schneier

DATABASE ADMINISTRATOR Sapana Shah

STAFF ACCOUNTANT Katie Turner

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Want to attract young clients? Learn to speak emoji �� ����

I’m a boomer. My generation didn’t use emojis. At least, not the online kind. About the closest we came to them were icons that we all recognized that were used in graffiti or on flags. Like the peace sign, or the Rolling Stones’ icon. Or this guy.

pandemic and to begin working with a financial advisor. The study also showed these young adults were more confident about their careers and in their ability to achieve financial security.

Generation Y, commonly known as the millennials, and Generation Z have left us in the dust. They have entire vocabularies of emojis. What’s interesting, though, is that the two generations interpret some of the emojis differently.

For example, take the skull emoji. There are more than one. The one I have in mind is this one.

Gen Z is also interested in having more investment and retirement options. For example, more than a third of them wish they could select environmental, social and governance investments, and nearly as many say they’re interested in fractional shares.

About half of Gen Z (52%) and millennial (48%) workers — my older daughter being one of them — are using their health savings accounts to save for future health care costs in retirement, and more than half are investing their HSAs in mutual funds and other types of investments.

making sure their financial decisions are aligned with their life goals. “Our advisors take the time to really get to know our millennial clients and discuss how they can use investing strategies to work towards their longterm objectives.”

I have found these differences in the ways my daughters approach their savings and investments.

My older daughter, the millennial, uses the tried and true — i.e., older — methods through her employer, like a 401(k) and HSA, for example. However, my younger daughter, while still in grad school, used an online savings app that had built-in access to savings advisors/counselors. Having just graduated in May, she was able to save significantly while going to school and working a part-time job.

According to dictionary.com, this emoji was added in 2015 and millennials used it in a “lighthearted way … usually to indicate playful exhaustion.”

Gen Z, says the site, is more likely to “respond to a joke with a line of skull emojis, intended to mean ‘I’m dying of laughter’ or ‘I’m dead from laughing.’”

Most likely, most of those reading this column haven’t realized that subtle difference between the generational interpretation of emojis.

How is this relevant to financial advisors, you might ask?

Well, understanding these generations — and the nuances in their differing needs and preferences — is the best way to build relationships and provide financial services to them.

Gen Z, for example, intends to retire early, according to Northwestern Mutual’s 2022 Planning & Progress Study. They were most likely to concentrate on their savings during the

These younger generations are also facing different obstacles in their investment planning than we older boomers are. While rising costs and market volatility continue to cause concern for all workers, Gen Z and millennial workers are more likely than older workers to cite unexpected expenses, education costs and supporting family members as obstacles to saving for retirement, according to a Schwab Retirement Plan Services study.

According to Linda Chavez, the founder and CEO of Seniors Life Insurance Finder, her firm takes a different approach to each age group. For example, with Gen Z investors, they are likely to focus more on digital solutions and take a more hands-on approach to engagement. Gen Z investors are used to having access to information instantly at their fingertips, she explained, so financial advisors should provide them with tailored online advice and mobile apps that allow them to see their portfolios in real time.

Millennials, she said, are more interested in planning for their future and

Both, of course, check out services and advisors online, especially via social media. Establishing a presence and building the beginnings of a relationship on those platforms — especially through financial education — are essential to reaching these generations. Though favoring apps and social media, younger generations do want a component of human advice amid the electronic do-it-yourself services. I know — a shocker.

So, delving into the particular wants and needs of each of these generations — and the individual members of these groups — will be the way forward to building a younger client base. Each of these younger generations is intent on savings and investing, and, of course, will reap the inherited wealth of the older generations. All important incentives to learn to speak their language — even if that language is emoji.

John Forcucci Editor-in-chief

Tapping into the Medicare Gold Rush

How to differentiate in a challenging member acquisition market

By Mike Hail, CEO, datadecisions

Group

Navigating the competitive market for member acquisition can be challenging, but with datadecisions Group (DDG), your Medicare marketing efforts can rise above the crowd and tap into the immense potential of the Medicare gold rush.

In 2022, an astounding 28 million individuals enrolled in a Medicare Advantage plan, comprising 48 percent of the eligible Medicare population. By 2032, the Congressional Budget Office projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to 61 percent.1

With an average of 39 Medicare Advantage plans available to beneficiaries in 2022, they are presented with a wide range of options. In fact, it’s the largest number of plans available in more than a decade. However, crucial details such as network limitations, out-of-pocket expenses during illnesses, and the limited value of supplemental benefits are often overlooked when seniors are informed about how Medicare Advantage “will cost them less and provide them more.”

The adoption of Medicare Advantage plans varies across the country, with at least 50 percent of beneficiaries enrolled in 25 states last year. Additionally, in 2022, approximately one in five Medicare beneficiaries (21 percent) lived in counties where at least 60 percent of all beneficiaries enrolled in Medicare Advantage plans (321 counties). Furthermore, nearly 69 percent of beneficiaries were in zero-premium individual Medicare Advantage plans with prescription drug cover (MA-PDs) and paid no premium except for Medicare Part B.

Medicare Advantage plans offer various benefits, such as eye exams and/or

glasses (over 99 percent coverage), hearing exams and/or aids (98 percent coverage), and dental care (96 percent coverage). Similar benefits are also provided by most Special Needs Plans (SNPs).

plans that align with desired benefits, pricing, and most importantly, address the individual consumer needs in the messaging.

Modeled audiences: Simply relying on age and income-based targeting is no longer sufficient. Our sophisticated acquisition models analyze hundreds of variables to identify seniors who are genuinely interested in purchasing Medicare Supplemental policies, not just Medicare Advantage plans.

Our platform has doubled premium production within a 12-month period for field forces.

Implications for Medicare Marketing

The good news is that each day, a staggering 10,000 individuals become eligible for Medicare. Among them, 41 percent rely on their independent insurance agent for information, as 51 percent of new enrollees express a limited understanding of their options. 2 This indicates a significant opportunity for effective marketing.

However, the challenge lies in the fact that seniors often perceive that provider choice doesn’t matter, as many seemingly offer zero premiums with dental, vision, and hearing coverage.

At datadecisions Group, we empower your Medicare marketing initiatives to go beyond the status quo and position your plan as the superior choice for seniors. Here’s how we do it:

Market research: Our approach is rooted in comprehensive market research. By leveraging results from conjoint and segmentation studies, we design

MarTech platform: Our cutting-edge MarTech platform is designed to supercharge your marketing efforts. It creates custom models tailored to your local market, taking into account factors like Medicaid expansion status. It highlights the best available audiences for the specific plan being promoted i.e. Dual-Eligible Special Needs Plan (D-SNP). The platform also provides audience counts based on geography, including zip code, county, and designated market areas (DMA). Additionally, it ensures efficient follow-up by archiving order records and managing contact frequency. Rest assured, the platform securely delivers audience data to your production vendor.

Mike Hail, CEO, datadecisions Group has over four decades of lead generation management and audience development modeling experience in the healthcare industry.

What’s in the news on InsuranceNewsNet.com

Nationwide’s claims adjusters speak out on their increased workloads, while another insurer is ordering its workers back to the office and a life carrier has decided to stop selling new fixed indexed universal life policies.

Nationwide adjusters make 6 demands to rectify overwork concerns

to “bundle” home and auto. In May, U.S. News & World Report ranked Nationwide third for home and auto bundling.

Nationwide reported one of its best years financially in 2022, with a record $57 billion in sales and $1.4 billion in net operating income. Nearly $19 billion in claims and benefits was paid to customers.

The message noted that degraded working conditions can only hurt Nationwide employee retention and also impact the company brand with policyholders.

“These circumstances not only compromise the quality of claims handling but also have the potential to negatively impact customer satisfaction and the overall reputation of the company,” the message reads. “It is imperative for Nationwide to take immediate action to address this staffing shortfall.”

by John Hilton

An email sent to all Nationwide employees aired complaints that “expectations have become overwhelming and impractical” for claims adjusters and made six demands for change.

Nationwide recalled the message the following morning, a source said. An emergency meeting held later in the day did little to placate employees, the source added.

“Over the past six months, we have noticed a significant increase in our workload accompanied by unrealistic deadlines and objectives,” the message reads. “While we understand the importance of meeting targets and providing quality service to policyholders, the current expectations have become overwhelming and impractical. This has led to a detrimental impact on

our well-being resulting in heightened stress levels, burnout, and a decline in job satisfaction.”

A Nationwide spokesman did not deny the existence of the email but did not respond to further emails and phone calls seeking comment.

Adjusters inspect property damage or personal injury claims to determine how much the insurance company should pay for the loss.

The message claims Nationwide is understaffed and asking its claims adjusters to take on too many hours. It asks for the company to undertake a workload study to determine what is the appropriate output for a claims adjuster.

The property and casualty market is highly competitive, with companies like USAA, Progressive, Allstate, Geico and others competing to convince consumers

The message, which was sent anonymously to InsuranceNewsNet, includes references to potential violations of Ohio Department of Insurance and federal Occupational Safety and Health Administration guidelines regarding work fatigue.

However, there are no federal laws that limit how many hours an employee can work in a single day. The federal law that applies to all employees is the Fair Labor Standards Act, which does not regulate how many hours a day or days in a row an employee can work.

Officials with the Ohio Department of Insurance did not respond to emails and phone calls for comment on the allegations in the message.

Farmers the latest to send employees back to the office

By John Hilton

While many Americans happily celebrate the three-year anniversary of working from home, and despite persistent labor shortages, some property and casualty insurers are mandating a return to the office.

Farmers Insurance recently informed its employees that anyone located within 50 miles of a Farmers’ office is required to be in that office at least three days a week beginning in September.

Headquartered in Los Angeles, Farmers is a private company. The insurer writes more than 19 million individual insurance policies across all 50 states through nearly 48,000 exclusive and independent agents and approximately 21,000 employees, according to the Farmers LinkedIn profile.

The move back to the office will allow employees to work together again in person, said Luis Sahagun, director, external communications for Farmers.

“We believe this will drive greater collaboration, creativity and innovation while also providing better opportunities

for learning, training, mentoring and career development,” he wrote in an emailed statement. “Over the course of the next few months, we’ll be finalizing details and working with our teams to make this transition smooth.”

Meanwhile, property and casualty insurers continue to battle fiercely for talent to fill positions such as underwriter, claims adjuster and agent. Lengthy employment ads can be found for these positions in nearly every urban area.

Working from home is proving to be an attractive and popular perk for employment seekers. Many workers value the flexibility, while others are happy to shed a stressful commute to the office.

The P/C insurance world is very competitive, and the big players are taking different approaches to the remote work question. InsuranceNewsNet reached out to several big insurers and here are their responses.

Allstate: Just 1% of Allstate’s 40,000member workforce is classified as

Global Atlantic to stop selling new FIUL policies

by John Hilton Global

Atlantic Financial Group will stop selling new fixed indexed universal life policies, effective July 1.

Employees were informed of the decision in a message from Rob Arena, co-president and head of individual markets. Officially, Global Atlantic is suspending sales of IUL, Arena said.

“During the last several years, sales of our indexed universal life insurance products have been steadily declining, from 16% of total Individual Markets’ new business production in 2013 to less than 3% today,” Arena wrote. “During that same time, we have continued to drive growth in our annuity and preneed platforms. The decision to focus on these opportunities is the right one for our business today.”

The decision will affect the employee count at Global Atlantic. Asked for further clarification, the company sent InsuranceNewsNet this statement:

“This decision has unfortunately resulted in a small staff reduction focused on life insurance new business roles. We are working closely with these employees to assist them in their transition to new career opportunities, both within and outside Global Atlantic.”

Global Atlantic’s fixed IUL sales dropped sharply in the first quarter, said Sheryl Moore, CEO of Moore Market Intelligence and Wink Inc.

“Frequent feedback from the field left me feeling unsurprised about their exit from the indexed life market,” she added. “The word on the street is that they

“office-based,” said Ben Tobias, senior public relations consultant for the insurer. Through surveys and focus groups, Allstate learned that 95% of its workers desire more flexible work.

Allstate sold its sprawling Northbrook, Ill., headquarters late in 2022 and has repeatedly stated no interest in finding another home.

State Farm: The largest auto insurer in the United States, State Farm leaned into the hybrid model early on. In spring 2021, the insurer announced that about 40,000 employees would be hybrid, and the remaining employees either remote or in-office.

Travelers: Travelers Insurance also gives employees the option to work from home up to two days per week. Travelers is home to 30,000 employees and 13,500 independent agents and brokers in the United States, Canada, the United Kingdom and Ireland.

Read the full story online: https://bit.ly/back23

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

plan to reenter the indexed life market in 2025, but I would be surprised if they execute on that.”

Most private equity owned life insurers like to focus on fixed types of annuities, Moore explained.

The decision to exit the fixed IUL market does not impact existing policyholders, Arena assured staff. “We will continue to service those policyholders and deliver on our commitments,” he wrote.

Global Atlantic ranked 10th in total annuity sales during the first quarter with $3.2 billion, according to LIMRA. That is up from $1.95 billion in annuity sales during the year-ago quarter.

Read the full story online: https://bit.ly/globalfiul23

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

Could the insurance industry combat gun violence?

Could solving the nation’s tragic issue of gun-related deaths lie with the insurance industry? Insurers historically led the way in incentivizing improvements in auto, fire, flood and homeowner safety. Before seat belts, airbags and anti-lock brakes became standard equipment, insurance companies rewarded drivers with discounts for buying vehicles that came with such features.

Homeowners get discounts for installing smoke and carbon monoxide detectors, erecting childproof fences around swimming pools, and buying homes close to fire stations. So it follows that the insurance industry could perhaps be a catalyst for stricter gun control and firearm safety. Or does it?

A new survey by ValuePenguin, a personal finance website that analyzes and researches topics from insurance to credit cards, found that 75% of American consumers believe gun owners should be required to have liability insurance on their firearms and, insurance or not, 95% of Americans support some form of restriction on firearm access.

INSUFFICIENT RETIREMENT SAVINGS COULD BURDEN GOVERNMENTS

The chronic problem of Americans insufficiently saving for retirement has repercussions far beyond individual situations and could cost state and federal governments trillions of dollars in public assistance costs, reduced tax revenue, decreased household spending and standards of living, and lower employment.

A study by The Pew Charitable Trusts shows that every state in the country will be impacted over the next 20 years, with a combined $1.3 trillion extra burden for state governments

Populous states with aging populations are the most vulnerable, according to the study, with California leading the way with an estimated burden of nearly $200 billion, followed by New York ($103 billion), Texas ($99 billion) and Pennsylvania ($56 billion).

According to an analysis conducted for Pew, the share of households with people at least age 65 with less than $75,000 in annual income — a level that indicates financial vulnerability — will increase by 43% from 22.8 million in 2020 to 32.6 million in 2040. And as these workers age, inadequate

QUOTABLE

retirement savings will likely lead to reduced retirement income and quality of life for many. At the same time, this shortfall will put greater pressure on public spending and increase taxpayer burdens.

In addition, the survey said, Generation X is worried about retirement and longterm financial stability. Forty-three percent of Gen Xers worry their employer will suspend their 401(k) match, compared with 38% of millennials and 24% of baby boomers.

PROPERTY INSURERS EXIT CALIFORNIA

California homeowners who are looking for coverage have fewer options from which to choose as State Farm and Allstate announced they will no longer write new property insurance policies in the state.

The two insurers join AIG, which is withdrawing at least par tially from the state, as other insurers have ceased advertising and closed offices in response to huge losses from growing wildfire catastrophes and an unforgiving regulatory environment.

A spokeswoman for the Insurance Information Institute put it more succinctly. “With the five years of intense wildfires and losses that we’ve had, we pretty much lost all our underwriting profit that we had from the last 20 years,” said the institute’s Janet Ruiz.

State Farm’s displeasure with the California market has been brewing for years. In 2016, the giant insurer, which provides about 20% of the state’s fire insurance to homeowners, wanted to raise rates 6.9%. Instead, the California Department of Insurance ordered the company to cut rates by 7% and rebate policyholders more than $100 million.

IT’S CONSUMERS VS. THE FED, BANK CEO SAYS

What’s the greatest challenge to the Federal Reserve? It’s the power of the U.S. consumer, said Bank of America CEO Brian Moynihan.

“They were earning more money and they were spending it, and what you’re seeing is that’s dipping down,” Moynihan said when asked how the Fed’s policies are impacting the U.S. economy.

Regarding predictions of a mild recession, Moynihan said the Fed’s tightening policy has “had its effects.” Consumer spending for Bank of America customers is slowing down year to date. “That level is more consistent with a 2% growth economy and a 2% inflation economy, not a 4% inflation level economy,”

Source: Federal Reserve

To me, it all really is going to come down to ‘is the economy gonna touch near a recession?’ Believe it or not, if that happens, I think it will be good news.

— Michael Yoshikami, founder and CEO of Destination Wealth Management

Nearly one-quarter of Americans spend more than they earn.

“GCU will NOT put a single penny of our annuity contract owners’ money into the Bermuda Triangle or any other financially engineered arrangement that could hurt the financial promise made to our members.”

an exceptional solvency ratio of 109.9% is the FIRST insurer ever to receive a GOLDEN TSR Ratio. Based on the GCU’s solvency, surplus to risk ratio, and reliability over 130 years, GCU is a standout for transparency and trustworthiness among insurance carriers in the United States!

Don’t send your clients’ safe money offshore! If you’re missing the booklet attached to this page, you can access it here: bit.ly/gcutriangle

A Matter of Trust

Building trust and transparency are two keys to building success, said Jamie Hopkins, managing partner of Wealth Solutions at Carson Group, a national wealth management firm. A nationally recognized writer, researcher and educator, Hopkins is a regular contributor for Forbes, InvestmentNews and MarketWatch and he has been published in dozens of financial, educational and legal journals.

Prior to joining Carson Group, Hopkins was the co-director of the New York Life Center for Retirement Income and a professor in the Retirement Income Program at the American College of Financial Services.

Hopkins said his mother provided his “why,” as she raised him alone after his dad died when he was only 8. Facing retirement primarily reliant on Social Security and Medicare, Hopkins’ mother also provided another inspiration for him: to build trust in the financial services industry so that people like his mother can get the sound, honest strategy and advice to see them through their senior years.

In this interview with Publisher Paul Feldman, Hopkins describes why he believes the industry needs to focus on building trust.

Paul Feldman: How did you get into this industry?

Jamie Hopkins: In seventh or eighth grade, I wrote that I wanted to be a private equity attorney. I didn’t know what a private equity attorney was at the time — I must have seen it on TV. And I followed that path. In high school, I would tell people, “I want to be an attorney.” I went to Davidson College in North Carolina. They really pushed this notion of trust and being honorable. They have a great honor system. If you see $5 on the ground or you see somebody’s wallet, you don’t take it. That was drilled into us. You could leave your wallet with cash in it lying around for three days there, and nobody would touch it.

From there, I went to Villanova University for law school and my first real job was at a firm called Ennovance Capital, which is a private equity firm in Pennsylvania. After that, I ended up clerking in the appellate division, under

The Bernie Madoff case, says JAMIE HOPKINS, was a pivotal moment when he realized there's a need for improvement in the personal finance world. A financial services relationship must be a trust relationship. An interview with Paul Feldman, Publisher

Marie E. Lihotz, who’s one of my mentors. I worked on one of Bernie Madoff’s cases, I worked on some pension cases, some retirement benefits cases, and that kind of piqued my interest about that personal finance side of the world.

I eventually ended up doing some of my own estate planning work and then joined The American College and spent about seven years there building out the retirement income program. From there, I joined Carson Group to run its retirement division. And then on to many other things since then.

That was the physical path of my career. But my “why” story is a little bit different. My mom really is my “why.” My dad died when I was 8 and my mom took up that mantle of taking care of the family, running a business and giving us all opportunities. She’s done phenomenally well over the course of the years, but she looks like a lot of Americans: she’ll be very reliant on Social Security and Medicare, almost has her mortgage paid off — but gave all of us amazing opportunities. And what has always driven me is this: I want other people like my mom to have that opportunity to succeed and to have a secure retirement, and that’s really my “why.”

Feldman: Well, everybody needs to have a “why.” What was another pivotal point in your journey?

Hopkins: The Bernie Madoff case also was a pivotal moment when I started to realize that there’s a need for improvement in the personal finance world.

The Bernie Madoff case was about a total abuse of trust in what should be a trust relationship. A financial services relationship between the professional and the client must be based on trust.

I thought about how I could improve that level of trust so people like my mom could trust financial services. It was in that realization that I saw the opportunity to have an impact in that space. That’s usually how I look at an area: can I build something there?

I think I’ve built four or five different joint ventures. I’ve invested in a couple of different companies. I’m now running several divisions at Carson. But it was going after that trust aspect that attracted me to this profession.

Feldman: What are some strategies you give to somebody who wants to gain that kind of trust?

Hopkins: Trust is very easy to break but very hard to build. Trust can be developed, though.

From a consumer standpoint, there are certain things you can do to show levels of trust. I wouldn’t hire an attorney to represent me in court who didn’t go to law school, and I wouldn’t hire a financial service professional who didn’t emphasize their professional education in the same way. How dedicated are you to your craft? That’s one thing that’s important in building trust. The other is to be transparent.

There was some research that showed that if you were an advisor who had written a book, it was the No. 1 way that

Feldman: You’re a financial advisor, but you’re also doing insurance. How does that work together and why should everybody in this industry do that?

Hopkins: I’m a fan of comprehensive planning. Comprehensive planning to me means we look at insurance, we look at risk management, we look at investments in asset management, we look at tax planning and estate planning. So, we’re doing more of a full picture of financial planning.

I don’t want people to feel that if you’re good at insurance or you’re good at investments that you must become good at everything. You should focus on your strengths. If you want to say I’m a planner and I’m doing financial planning for my clients, you can’t ignore insurance, you can’t

consumers decided on trust. It was the biggest factor — more than your website, your education and your credentials. And if you kind of dive into that a little bit, it’s because you took the time to codify what you believe in.

You put down what you care about, and you’re able to articulate it.

I had previously done some research with data from about 1,200 or 1,400 individuals. We found that their trust with their advisor moved up when the financial service professionals were transparent with their fees before the arrangement. Meaning that the consumer understood how the advisor got paid before they engaged them.

That’s another thing that advisors can act on. I don’t know whether everybody feels comfortable putting fees on their website, but that has become more and more normal. I suggest that advisors do that.

ignore estate planning or trust services or tax services or the investment portion.

The advisory world has shunned insurance because for a while the only products out there were commission based and had to be farmed out to somebody else. That landscape has shifted dramatically. There are lots of different ways for you to place insurance today. The FMOs and IMOs all have outsourced desks now. There are advisory annuities and advisory insurance products. If you want to outsource, you can find a way today — and that has been a big shift from 15 years ago.

Feldman: Do you operate on a fee-only basis or are you a hybrid firm and how do you deal with that?

Hopkins: Carson is a hybrid firm. That allows us to be different and nimbler than some other firms. We do have a lot of advisors who have gone fee-only, but

Live recording of the Framework podcast with host Jamie Hopkins and guests Carson Group’s Will Morales, senior body engineer, and Carson Group founder and CEO Ron Carson, discussing health and wellness.

that does not mean that their clients can’t get insurance. We have a joint venture with an IMO. So, we have access to their commission products, and they have an outsource desk.

We have advisors who are still insurance licensed and so they can place the business themselves, and we do have advisory insurance products available, too. We still have a relationship with the broker-dealer, Cetera.

Feldman: How do you view life insurance in an overall plan? How does life insurance fit into a portfolio?

Hopkins: There are four or five main roles that life insurance can play in a financial plan. And we’ll start with the simplest one — which is the reason that life insurance exists — offsetting the loss of future income due to an unexpected death.

You can go further beyond the protection it provides and get the tax benefits

The main reason to have a combination of bonds and stocks used to be, “Hey, don’t worry, these things kind of move in opposite directions, so they’re not both going to go down at one time.” And boom! Bonds got crushed, investments go down and people are looking around thinking, “Man, I wish I had something else.” And that can be life insurance. It can play a role in the diversification bucket.

Feldman: There are multiple types of life insurance. You’ve got indexed universal life, universal life, whole life, term insurance, and I know that it really depends on the client you’re advising. What do you recommend most often?

Hopkins: Just from a volume perspective, term insurance is easily No. 1. We do more term insurance than anything else. And that makes sense. That’s the purest form of insurance. It’s the cheapest form

product, that’s OK. I think that we’ve shied away from that. Our industry is one of the least trusted industries out there. We haven’t been good at our value articulation.

Another thing we miss the mark on is how to attract the next generation of advisors and insurance agents into this world. That is a struggle. There’s a talent crisis occurring. We’re losing a lot of advisors and they’re not being replaced by new people coming into the field. They go through school and then they end up somewhere else and disappear from the system quickly. And that’s concerning.

Feldman: How do we fix this problem? Because it’s a significant problem.

Hopkins: I started a nonprofit three years ago called FinServ Foundation. The notion was to take college students in financial planning programs and, going into their junior year, bring them into the program. Start doing group coaching with them that last year they’re at school and help them get internships.

The year after they graduate, we continue to provide them with a coach. And they get coaching while they are entering the profession, which is where there is a gap. We’re trying to bridge the gap between leaving school and getting to that first job by creating a community, and creating exposure, education and coaching.

that occur with life insurance. Then, we can get creative with wealth generation investments. And then look at how that fits into an overall strategy. Are we trying to fund things like college education, retirement income, in the sense of being able to take distributions from a well-funded policy? And so, I’d say that bucket number two is this investment wrapper we get with life insurance.

The next one is wealth transfer, which with 2025 getting close, is becoming a bigger part of conversations. We have this estate tax that could come back in a meaningful way in a couple of years. So life insurance becomes one of the most efficient ways to transfer wealth.

Lastly, I do view life insurance as an asset and there are continued benefits usually of asset and investment diversification.

just from a total dollar standpoint. I think most people who are married, have kids, have loved ones who would suffer financially, should have term insurance.

I would probably say the type of life insurance we’ve seen the most over the last of couple of years has been anything with the linked long-term care benefit riders on it.

Feldman: From your view of the industry, where do you see financial advisors and insurance agents missing the mark today?

Hopkins: One big miss of the mark today is not being transparent about fees and conflicts. How we get paid impacts our behavior.

If you earn money because you sell a

The other program that I’ve also worked on is a program at Carson where we take people out of school and pay them a salary to learn the business. They learn marketing, advisory, investments, financial planning — and they don’t have any insurance sales requirements. They get exposure to insurance.

If you look at TikTok or Twitter, or watch TV, it’s about wealth creation. It’s about how you build multiple businesses and have ownership stakes in them. Our industry must embrace that and show that it is actually a great industry to be an equity owner in, and to have that income stream that has a good business value to it. That’s something really appealing that we’re missing.

Feldman: Do you think that the future of this business is bringing people in on the financial advisory side or on the insurance side?

Jamie Hopkins speaking at Carson Group’s 2023 Partner Summit

Hopkins: I think the future of this business is bringing in people with a clear career path. I think that’s the future. I don’t think it really matters exactly how they come in — whether they come in and experience insurance and sales first or planning first or corporate life first. I think that we will see successful people come through all of those.

Very few people — I think it’s less than 12% — stay in the business five years.

things. Your value is not your ability to send an email. It is not your ability to create investment portfolios, as much as a lot of advisors and insurance professionals don’t like hearing that. You must find those strengths and delegate almost all the rest out. That allows you to do more of what you are good at.

And that is a really hard thing for an entrepreneur in a small business to do, to let go of those things. You have to realize that’s OK. The best use of your time is getting new clients in the door and working with them.

Our marketing team has started using things like ChatGPT for some aspects of their work. Now, I don’t think any of that is giving you great finished products today. It’s about the prompt, it’s about the time you spend with it, it’s about cleaning it up afterwards. But it can knock out some pretty fast versions of things that can at least give you an outline, a starting point. But it also lies really well.

Feldman: If you don’t have a human behind it, it doesn’t work.

Feldman: Let’s talk about somebody successful in the business. How do they get to the next level? What are some things you say?

Hopkins: I’m going to give them a couple of tips. In this business, if you want to move from successful advisor, insurance agent, to successful business owner, you must make that transition from being the doer to being the leader. And that is hard to do. Most of our coaching program at Carson Group is about how you make that transition from advisor to business owner.

One of the most important things you must learn to do is focus on your strengths and learn to delegate.

For example, Tom Brady was one of the best quarterbacks ever to play the game. Every once in a while, he would throw an interception and he might have to try to tackle somebody. He was probably one of the worst tacklers in the NFL. Slow, not super strong — just an awful tackler. He probably could get twice as good at tackling, and he’d still be the worst tackler in the NFL. He never practiced tackling. What did he do? He spent the off-season practicing what he was good at, and he surrounded himself with great teams of people who could tackle.

As you grow, you must let go of those

And I will also tell people to pick the right partners. When I say delegate, you can also insource and outsource things. The world is much more open to outsourcing things today. You can outsource your investment management. You can outsource your technology or your compliance. But if you are going to outsource, make sure you find good partners, because you need to trust them. If something breaks, that’s going to land on you. It’s going to land on the trust that you’ve built with your clients. And if you say, “Hey, let’s go use this other partner to come in and introduce them to our client,” and that goes south, you might ruin that trust relationship. So, pick good partners in this business.

Feldman: Are you using any artificial intelligence at the moment?

Hopkins: We are using machine learning techniques today and lead scoring and deep-level data analytics. I wouldn’t really say we’re using what I would look at as true AI today.

Feldman: AI today is all about human programming. It’s all about the human prompt at this point.

Hopkins: We have a client acquisition offering that we built out with Boston Consulting Group and Bain Capital over about the last 18 months. We have incorporated some of what I would say is closer to true AI capabilities inside that program, in the sense of learning about people, scoring, connecting them to the right type of advisor who matches up to their profile needs. And then on the financial planning part, we’re getting close with some of the programs we are using.

Hopkins: One hundred percent. So that stuff is coming. If you go back three years ago, we didn’t have anything functional. We now have some stuff that’s starting to work. In another three years, it’s going to be really meaningful.

Some of the stuff it can do is very scary, making up lies and creating some very convincing fake video. I don’t think we’re ready for it at all. It does concern me. Not all technological advancements have been good for humanity. I’m not against technological advancements — I don’t think it’s going to be the end of the world — but I do think that we’re probably not ready for it. It scares me in that sense.

Feldman: Where do we go from here? Robo assistant advisors? I think we still need a human. What do you think?

Hopkins: Most people, especially as you have more wealth, will want human interaction and that trust factor. Especially for those who didn’t grow up as digital natives, we still must learn to grow into technology.

Somebody who is 6 years old today — who grew up with iPhones and tablets in their hands, who grew up in a digitally native world — they may feel OK with it.

So, while I do think that AI and machine learning will start to become more important on the front end, the initial experience — the human behind it — will be really important. We will have more people to serve, with the number of advisors and insurance agents shrinking every year for the next 20 years. I don’t see us fixing that trend fully. But what that tells you is there’s never been a better time in the history of being alive to be in this industry as a professional than today.

Carson Group’s Jamie Hopkins, managing partner of wealth solutions, and Burt White, managing partner and chief strategy officer

MAKE WAY FOR THE NEXT GENERATIONS

Millennials and Generation Z are taking over the world. Here is how you can address their financial concerns.

By Susan Rupe

When Thomas Kopelman entered the financial services profession, he soon realized that there was a large segment of prospects who needed his help — but they weren’t retirees.

“Everybody works with retirees,” he recalled. “I don’t know anything about retirement. I also can’t relate to retirees.”

But Kopelman did relate to young adults and their financial questions.

“I asked myself how I could work with people like me, with people who are going through the exact same things that I was going through — you’re going to get married, you have student loans, you have kids, maybe you’re going to start a business, maybe you’re going to get equity compensation. There’s a lot going on when you’re in your late 20s, in your 30s and in your early 40s.”

Kopelman co-founded AllStreet Wealth, with locations in Indianapolis and Kansas City. He describes his firm as “the opposite of what you think of when you hear the term ‘financial advisor.’”

He told InsuranceNewsNet he believes the financial services industry “wasn’t built around serving young adults.”

“I saw it as more like ‘Hey, let me sell you an insurance product or let me put you into an investment account, and that’s going to solve all your problems,’” he said. “But in reality, it doesn’t. Young adults have all these big decisions they need to make, and they have nobody who really can help them.”

The young adults of today have different financial circumstances than their parents did at the same age, Kopelman said.

“Their parents had lower student loans — or maybe no student loans at all. They worked at the same job for 40plus years, they had a pension plan, everything was more affordable for them,” he said. “And most young adults’ parents don’t know anything about money, so they have no one to go to for advice.”

Millennials and Generation Z are pushing baby boomers and Generation X aside to become a force to be reckoned with. Millennials represented 35% of the total U.S. workforce in 2023, with 56 million people, according to Deloitte, and the cohort is

Concern About Financial and Insurable Risks

While concern about financial and insurable risks is high and the perceived likelihood of these risks being borne out are relatively high, younger consumers don’t necessarily translate higher incidence to higher concern.

• Between 60% and 80% of younger consumers are somewhat or very concerned about the financial impact of each of 12 financial and insurable risks. They are most concerned about accident (automobile or otherwise) and health-related costs.

• Younger consumers view the 10-year likelihood of the incidence of these risks coming true as nontrivial.

• Approximately half believe they will have an emergency savings or retirement savings shortfall in the next 10 years.

• They significantly overstate their chances of having a premature death; 23% believe it is at least somewhat likely, despite the actual 10-year likelihood of 1.3% to 3.6% for someone aged 21 to 42 today.

• A similar number believe they may become partially or totally disabled, preventing them from working at their job, despite the actual chances of disability being much higher than premature death.

• There also appears to be a disconnect between the perceived likelihood of an event and concern over it.

• These younger consumers are most concerned about being in a car accident that results in significant repair or medical costs, yet overall, they rank the likelihood of that happening lower than of four other events.

• Similarly, they believe it is most likely they will suffer a financial emergency requiring them to come up with $5,000 on very short notice, yet they are more concerned about five other financial and insurable risks.

• Other than the $5,000 emergency need, the survey did not ask about the potential severity of these events, which could be a factor in their concern level, as could whether they have adequate savings or insurance to mitigate these events/risks.

expected to grow to 75% of the workforce in 2025. Gen Z is entering the workforce in growing numbers and is expected to make up 30% of the U.S. workforce by 2030.

And these young adults recognize their need for help with securing their financial futures.

The 2023 Insurance Barometer Study by Life Happens and LIMRA revealed that nearly half of Gen Z adults (49%) said they either need to get life insurance or increase their coverage. Nearly the same percentage of millennials (47%) said the same. And they are ready to take action; 44% of Gen Z adults and 50% of millennials say they intend to buy life insurance this year.

Helping them take the first steps

Kopelman said young adults need term life insurance and disability insurance but have more of a need for planning. They often don’t know how to take the first steps, and they don’t know how to hold themselves accountable for following through on their plans.

Source: Society of Actuaries Research Institute

Although Kopelman has several clients he works with on an ongoing basis, his firm offers three different fee-based planning models that clients can choose to work with over a shorter time frame.

The first — which costs $1,500 — gets a client in to AllStreet Wealth’s financial planning software, and Kopelman spends two hours “really diving into the client’s information, getting a good understanding of where they are.

“I start to educate them on some of the things they should do, and then I create a financial plan and send it to them with a video explaining those things.”

The next model is for clients who want to get started working with a professional and want to take a do-it-yourself approach after they have compiled their plan but need to be held accountable along the way.

“We start out with a get-to-know-you meeting where we make sure we’re a good fit,” he said. “Then we have a second meeting to discuss what’s important to the client — their short-term, midterm, long-term goals and what their values are.

Kopelman

why their finances are the way they are, what their company benefits are, what their taxes look like, what insurance they have in place, whether they’ve started estate planning, what their cash flow is.”

About three or four weeks after Kopelman’s firm delivers the client’s financial plan, they schedule what they call the accountability meeting. “The goal of that meeting is to check whether the client did their homework or whether they have any questions about what they need to do to implement the plan,” he said.

The third model is for clients who want ongoing help. Kopelman’s firm meets with these clients quarterly to discuss issues ranging from tax planning to estate planning.

Tweeting for clients

Just as young clients don’t want to get advice the same way their parents did, they don’t want to find an advisor the same way their parents did. Kopelman attracts most

an avid blogger and podcaster.

Kopelman said he is careful not to use social media to sell. Instead, he positions himself as a subject matter expert and said he wants to nurture prospects along their financial journey.

“It’s really about educating people and being relatable,” he said. “I want people to think, ‘He explains things really well. He doesn’t ask for anything.’ So that when they do need help, you’re the advisor they feel they have to reach out to. That’s the goal of all my marketing.”

Young clients want advice — and are willing to pay for it

Forget the stereotype of young adults living on ramen noodles while saddled with student debt. Millennial wealth has risen faster than that of any other generation over the past five years, and advisors should begin to look at this demographic seriously as a viable market, according to a 2022 Cerulli Associates report.

Cerulli estimates millennials had an average net worth of more than $278,000 in 2021 — an average yearly increase of 23.1% since 2016, which is the highest growth rate of any generation. Millennials are raising families, buying homes and advancing in their careers. This generation is looking for formal financial advice and planning to best manage their affairs as well as to ensure their retirement goals are on track.

The research finds that 59% of millennials identify as advice seekers — those who want more financial advice than they receive currently, are interested in new ideas and are willing to pay for that advice.

Cerulli also found that younger generations stand to inherit substantial wealth over the next two decades. Cerulli projects that wealth transferred through 2045 will total $84.4 trillion — $72.6 trillion in assets will be transferred to heirs, while $11.9 trillion will be donated to charities. More than $53 trillion will be transferred from households in the baby boomer generation, representing 63% of all transfers. Silent generation and older households stand to transfer $15.8 trillion, which will primarily take place over the next decade.

What are the takeaways for advisors?

Chayce Horton, a member of Cerulli’s wealth management team, said Cerulli researchers asked high net worth advisors how to build relationships with the next generation and found the top recommended strategy was “to put the onus on the clients and their spouses, to bring their children into the relationship.”

“Nobody knows the clients’ children better than clients do. So it’s imperative to put that onus on the clients and also to do so right off the bat in a relationship. Rather than waiting until clients are in the later stages of their relationship with their advisor to be able to do that, it’s important to try and establish a household relationship instead of a one-to-one relationship rather quickly after establishing a relationship with a client.”

Listen to their story

But not every young adult wants to work with their parents’ advisor. Taven Sparks

Horton

Source: Society of Actuaries Research Institute

said successfully attracting and serving young clients often boils down to being able to relate to the needs of a younger generation.

Sparks is a private wealth advisor and partner at Sparks Financial, a Northwestern Mutual agency in Denver, Colo. His team comprises advisors from their 20s up into their 50s and serves multiple generations. About one-third of his clients are in their 20s and 30s. “Their careers are starting to take off, and they are looking for advice on holistic wealth management planning,” he said.

Sparks said he obtains most of his young clients from referrals. He finds most young adults fall into one of two camps.

“Some are working with their parents’ advisor, and that parents’ advisor is probably in their 50s or 60s and may be out of touch with the needs of the younger generation,” he said. “And some young adults want to do this themselves, and they often don’t know what they don’t know.”

Sparks said his work with young clients starts with building a firm financial foundation.

“We might start with budgeting, balance sheets, understanding their company benefits, helping clients understand the right protection that needs to be put in place — life insurance, disability insurance. Setting up that strong foundation allows us then to dive into the wealth accumulation phase for our clients once they get that foundation set.”

The best approach to begin working with a young client, Sparks said, is “to really listen to their story, their wants, their needs.” Giving clients the ability to perform many functions online is also appealing to young adults, he said.

Young clients are thinking about retirement, but not necessarily in the way their parents did, Sparks said.

“I would say that there are two types of younger clients — one that wants to work forever because they love what they do, and one that wants to retire tomorrow,” he said.

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Sparks said his firm brings together an insurance planner, an investment manager and a financial planner to help young schedule a demo

rarely get it. stress, as they carriers build earn loyalty

About 6 in 10 young consumers are concerned about premature death.

Of the nonmedical insurance products, younger consumers claim

Source: Society of Actuaries Research Institute

clients with all aspects of their retirement planning.

“When we’re able to analyze the investment plan with the insurance plan with the financial plan that actually tells us where we might be off on our assumptions of retirement, it is a huge eye-opener to our younger clients,” he said. “It shows them that they need to start planning earlier. And that if they want to retire at 55 or 60 years old and they’re going to live another 30 or 40 years, they will need to make sure they understand the impact of starting to save for retirement early.”

Young adults might think that the life insurance they have through their employer is all the coverage they need. Sparks said the COVID-19 pandemic spurred many young clients to think about how to integrate life insurance with their overall financial planning.

“COVID-19 made young families real ize they need to get protection in place in case something happened to them. But I’ve seen research about how the integra tion of permanent life insurance can play a role in long-term retirement success. And after discussing this with my young clients, they often will end up incorpo rating life insurance — whether term or permanent — into their financial plan.”

Helping them fit the pieces together

Jamie Clark’s clients come to them “when they are trying to figure out something big or something new in their lives; they’re not quite sure how to put the pieces together.”

Clark is a financial planner and founder of Ruby Pebble Financial Planning in Seattle, where they specialize in working with young adults who work in the

but want Clark to re assure them “that what they’ve been doing is the right thing.”

“Many of my clients want a partner to help them navigate all of the different pieces and figure out all the steps of what they need to do,” they said.

Young adults are more likely than their parents to move from one employer to another during their careers, so Clark frequently is asked to help those young

Desire and need are on the rise.

Gen Z is growing up — they’re adults now who are in the weeds of financial responsibilities and stresses. Half of Gen Z is now 18-26 years old, which means 19 million young adults are ready for life insurance, most of whom are non-owners; and millennials, at 27 to 42, are well into their careers and starting families.

The study took a look at life insurance ownership among different age groups and found that half of all adults (52%) own life insurance, with 40% of Gen Z adults and 48% of millennials currently owning it

As Gen Z starts hitting life milestones such as finding a partner, buying a home and having children, half (49%) say they either need to get life insurance or increase their coverage. And millennials are not far behind, with 47% saying so. They are ready to take action: 44% of Gen Z adults and 50% of millennials say they intend to buy life insurance this year.

They also want to purchase it where they have become comfortable — online — and that goes for all generations. In 2011, 64% of people said they preferred to buy life insurance in person; by 2020, just 41% felt this way. In 2023, it dropped to 29%.

Education is key for Gen Z.

There is work to do on educating people about ownership: 42% of all adults say they’re only somewhat or not at all knowledgeable about life insurance

A quarter of Gen Z and millennials say that not knowing how much or what kind of life insurance to buy stops them from getting coverage. And 37% of Gen Z and 27% of millennials say they “haven’t gotten around to it.”

Across generations, cost is cited as the top reason for not getting life insurance. But only a quarter (24%) of people correctly estimated the true cost of a policy for a healthy 30-year-old, which is around $200 a year. More than half of Gen Z adults (55%) and 38% of millennials thought it would be $1,000 or more.

With the current climate adding financial uncertainties to Gen Z and millennials, including layoffs and inflation, it is imperative that the two age groups learn how to protect their loved ones financially.

Education around finances in general, inclusive of life insurance, will be extremely beneficial, particularly for millennials, who cite the highest overall level of financial concern (39%)

clients figure out what to do with the money they have accumulated in multiple 401(k) accounts. Many of Clark’s young clients receive stock compensation and need help planning for the tax consequences of that compensation.

Clark also advises their young clients about their need for life insurance and discusses whether the disability insurance they have through their employer is sufficient for their needs. “These things are usually not high up on a young adult’s list, but it’s something they need to think about,” they said.

An increasing number of Clark’s clients choose not to mingle their finances with their partner’s finances, something Clark said is different from the way their parents’ generation handled their money.

“I think there are times when that makes complete sense, and it totally

works fine,” Clark said. “I tell my clients not to use that as an excuse to not talk about money with their partner. I tell them to be transparent and communicate about money with their partner.”

Clients find Clark through Google search or social media, but Clark said investing in a robust website that promotes diversity when they began their firm was a good investment.

“I believe a lot of firms do not like thinking about diversity,” they said. “Who you want to serve starts with everything you put out there. If the pictures of the people on your website don’t look like someone who wants to work with you, they won’t want to talk with you. On my website, I’ve been careful with things such as making sure we have gender-neutral colors, and I don’t talk about working with specific genders. I just want people to feel that I

will respect the pronouns they want me to use and I will respect anyone who wants to work with me.”

Clark advised any financial professional who wants to work with young clients to invest in technology and “be accessible.”

“But also be yourself. I believe a lot of younger clients are picking you as a financial professional because they realize they need your expertise. And they want to work with someone they want to connect with and talk with as part of the process.”

Susan Rupe is managing editor for InsuranceNewsNet. 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.

Source: 2023 Insurance Barometer Study, Life Happens and LIMRA

Photograph by Simon Ridgway/HBO

FOR GEN Y AND GEN Z

How does the industry serve the next generation of investors?

In this year’s Financial Services for Gen Y and Gen Z Thought Leadership Series, read an interesting perspective on how younger generations can invest in an ever-changing financial marketplace.

How to Win the “Great Wealth Transfer”: The Growing Demand for Next Gen Advisors

by Tammy Robbins, Cambirdge Investment Reseaerch, Inc.

PAGE 19

How to Win the “Great Wealth Transfer”: The Growing Demand for Next Gen Advisors

Over the next 25 years, an estimated $68 trillion1 will pass from Baby Boomers to their heirs in what is often referred to as “the Great Wealth Transfer.” This massive financial shakeup will certainly impact the wealth management industry; how can today’s financial professionals position their firms to come out ahead as trillions of dollars change hands?

The key to positioning your firm to both retain current clients and attract new ones is by focusing on “Next Gen” advisors, a group uniquely positioned to understand the goals, pain points, and preferences of Next Gen investors who will soon control 57% of current investor assets2 . By welcoming Next Gen advisors into your practice, you can gain unique insight into how these new investors are thinking, including the problems they face and their financial goals. Next Gen advisors are fluent in the trends, preferences, and languages shared by Next Gen heirs, and thus are better positioned to effectively communicate with these clients and, ideally, increase client retention.

What’s more, by welcoming these Next Gen advisors into your practice, you open the door to new succession options to ensure the longevity of your business. Within the next 10 years, 37% of financial advisors, collectively controlling $10.4 trillion, or 40% of total industry assets, are expected to retire. Yet, 25% of advisors who are expected to transition their business within the next 10 years are unsure of their succession plan3 . While it is never easy to turn over the proverbial keys to the castle, by recruiting Next Gen advisors now, current advisors will be able shape and mentor their potential successors in a way that is beneficial to their own independent business model.

Of course, in order to successfully reap what is sown and create a truly long-term plan for your practice, it is critical to not only attract Next Gen advisors, but retain them as well – a tall order in today’s competitive labor market. However, there are specific ways to increase Next Gen retention:

Foster a sense of belonging and purpose:

Engaged employees are 87% less likely to leave their employer4 One way to do this when working with younger associates is taking the time to listen to their ambitions and creating a clear path to help them toward their goals. Plus, taking a more hands-on approach to development is an excellent way to help associates gain a clear sense of the firm’s purpose and values. It is also crucial to provide ongoing feedback and clear expectations to further encourage engagement.

Give them a seat at the table: New advisors are a treasure trove of fresh ideas and unique viewpoints. Recruiting and retaining Next Gen advisors who are eager to ask questions and suggest new ideas can help clarify business goals and strategies and reveal new ways to achieve them. While many younger advisors are often saddled with a large number of small accounts, it is important to make sure they are also given ample exposure to the larger, more impactful client accounts. Mentoring and empowering these advisors to participate in enriching the experiences of the practice’s best clients is key to professional development and boosting engagement.

Trust in tech: Next Gen advisors want a tech stack that will set them up for success. They are used to doing almost everything digitally, which allows them to use technology to create an experience that Next Gen investors are seeking. Look to these Next Gen advisors for honest feedback on your current tech stack, as well as input on how to further enhance the experience of both staff and clients.

Embrace diversity: Creating a diverse and inclusive workplace is mutually beneficial to both new advisors and existing practices. For example, women now make up 51% of the U.S. population and control over $11 trillion in financial assets, with more than 70% of women who are seeking an advisor preferring to work with a woman5 . Opening opportunities within your firm to embrace women and minority advisors allows for opportunities to serve markets that have traditionally been underserved while bringing in new clients.

All actively working generations of today bring skillsets that are needed within an independent business model. Together, they can create a powerful partnership that will serve an array of clients, and leveraging Next Gen advisors will help today’s practices remain relevant.

Download Remaining Relevant with Next-Gen Investors at https://www.joincambridge.com/insights. Learn more at JoinCambridge.com.

1 Moss, W. (2022). Taking advantage of the coming Great Wealth Transfer. The Atlanta Journal Constitution.

2“It’s Time to Change Your Mind about Young Investors.” Fidelity Clearing & Custody Solutions, 18 Jan. 2023, clearingcustody.fidelity.com/app/literature/ item/9907600.html.

3“Cerulli: 40% of Advisory Assets Will Transition in 10 Years...” Cerulli Associates, 13 June 2022, www.cerulli.com/press-releases/40-of-advisoryassets-will-transition-in-10-years-according-to-cerulli.

4“9 Employee Engagement Statistics You Should Know for 2023.” Wellable, 22 Dec. 2022, www.wellable.co/blog/employee-engagement-statistics-youshould-know/.

5Railey, M. (2022). Female advisors are the future of wealth management. Financial Advisor Magazine.

Tammy Robbins, Cambridge Investment Research, Inc.

THE TOP OF THE LADDER

CHLORA LINDLEYMYERS’

long career touched on nearly every aspect of the insurance industry. And she earned a law degree via night school. One of the country’s top regulators says she has a few more things to accomplish.

By John Hilton

In her first job out of college, Chlora Lindley-Myers did life and health underwriting for Aetna. She later switched to property and casualty. At night, she earned a law degree from the University of Connecticut.

That ambitious start gave her a well-rounded understanding of the insurance industry, with a side expertise in the law — all before she graduated from her 20s.

Sounds like a future regulator.

“I’ve always been interested in insurance because my grandmother and great grandmother, who I lived with most of the time growing up, used to have a guy come by every so often to pick up the premium,” recalled Lindley-Myers, director of insurance for Missouri. “It was just something that piqued my interest and I’ve been doing it ever since.”

In the decades since those early days, Lindley-Myers only added to her impressive resume of insurance roles. At the Tennessee Department of Commerce and Insurance, she headed up oversight, human resources and other functions.

She directed the Consumer Protection and Anti-Fraud Division of the National Association of Insurance Commissioners and oversaw examinations as chief compliance officer for the Kentucky Department of Insurance.

Lindley-Myers reached the pinnacle of the regulator profession this year when she took over as president of the NAIC, the first Black woman to hold the position.

Idaho Insurance Commissioner Dean Cameron wasn’t aware that Lindley-Myers had made that kind of history. She was simply a great candidate to lead the NAIC through an active period full of new industry challenges and disruptions, he said.

“She has a great sense of humor and a

wonderful personality,” Cameron said. “And that’s besides her wealth of knowledge. On top of all of that, she has a memory like a trap. She remembers every person and who did what, and when.”

Turbulent times

Growing up in Atlanta during the 1960s, Lindley-Myers could not escape the massive societal anger all around the country. Looking back from 50-plus years of experience and wisdom, Lindley-Myers credits her mother, grandmother and great-grandmother for insulating her from racism.

Still, she remembers the passion of the fight for equality. Lester Maddox, elected governor of Georgia while LindleyMyers was in high school, refused to serve Black customers at his popular Atlanta restaurant.

“I kind of was in my own neighborhood and was insulated by the neighborhood,” she said. “But it was also a situation where sometimes you couldn’t do things out in

Lindley-Myers enrolled in Mount Holyoke College faraway Massachusetts. It would set the course of her life.

“My intent was to go into medicine,” she said. “Not sure if I really wanted to see patients, or if I wanted to do research, but I wanted to go into medicine.”

Things changed quickly as LindleyMyers met leaders and mentors who would nudge her in different directions. People like Anna Jane Harrison, professor of chemistry at Mount Holyoke for nearly 40 years. She was the first female president of the American Chemical Society, and a big supporter of women in science.

People like celebrated novelist John Irving, whose breakthrough novel, “The World According to Garp,” was published in 1978. Irving finished up a three-year stint as assistant professor of English at Mount Holyoke that year.

“It was a lot of different people from a lot of different places,” Lindley-Myers said. “I sort of formed an attachment and had a feeling of wanting to belong, while

the open. So, things might have been done in people’s homes where people felt a lot more comfortable.”

But Atlanta in 1970 was also quite progressive by Southern standards at the time, Lindley-Myers recalled. Companies like Delta Airlines were bringing in flight attendants from the north, for example, and a growing Coca-Cola stocked Black restaurants as well as white.

The Atlanta Life Insurance Co., established by the city’s first Black millionaire, Alonzo F. Herndon, catered to the Black community.

“Those are the types of things that you kind of notice that you can build upon, because it was like, ‘Okay, if it worked there, maybe it will work here,’” Lindley-Myers recalled.

After graduating from Frederick Douglass High School in Atlanta,

understanding that the world that I had lived in was much smaller than the one I came to know at Mount Holyoke.”

Career moves

On her way to a career in medicine, LindleyMyers realized it wasn’t a good fit. She’s a “germaphobe,” for starters. But studying psychobiology and how drugs produce a calming behavior in patients led to a job in insurance. Her Mount Holyoke network, this time included the late Connecticut Gov. Ella Grasso, led her to Aetna.

Lindley-Myers quickly settled in at Aetna, working on high-premium national accounts across the country. In time, she switched to property and casualty and ended up on the team underwriting the movie, “Twilight Zone,” in which actor Vic Morrow and two children were killed in an on-set helicopter accident.

We want to make sure that race isn’t being used as a tool to object to certain classes of people or people as a whole.

the Fıeld A Visit With Agents of Change

The two child actors had been hired in violation of California law, which prohibits child actors from working at night or in proximity to explosions. Lawsuits related to the accident dragged on for a decade. Lindley-Myers came away with a newfound interest in legal strategy. She enrolled in the University of Connecticut School of Law.

After getting her law degree, LindleyMyers practiced law some in between insurance industry positions. In the mid2000s, she went to work for a friend in a Georgia public defender’s office.

“It was death penalty-type cases and you have to be certified,” she explained. “That was very challenging. When you do that kind of work, it was a lot different than just getting you off from a DUI. I mean, it was hardened criminals. People who were young but didn’t know any other way of life.”

Then came the call from then-Gov. Eric Greitens of Missouri offering his state’s insurance commissioner job to LindleyMyers. She turned it down. Greitens offered it again and she turned it down. Finally, after a bit more back and forth, Lindley-Myers agreed to meet with the governor and took the job.

“It was not particularly something that I had sought to do, but you know, it was an opportunity, and I was going to take advantage of it,” she said.

Rising to the top Greitens quickly fell out of favor, resigning in June 2018 amid sexual assault allegations. But Lindley-Myers thrived in Missouri. Nationally, the insurance commissioner office is marked by politics and high turnover, yet LindleyMyers is in her seventh year.

starting to feel some of that. But she’s done a tremendous job.”

When asked for her thoughts on the biggest issue facing insurance in 2023, Lindley-Myers does not hesitate. It’s artificial intelligence, cybersecurity and privacy, a tangled web of technology issues getting plenty of attention in several NAIC committees.

“We want people to understand that when you put that information out there, you may not ever know how it’s being manipulated against you and utilized against you,” she explained. “So, we’re looking at cybersecurity privacy issues.”

Like most of her colleagues, LindleyMyers is a vocal advocate for the regulation of insurance remaining in state hands. She also cited race-based insurance discrimination as another central issue for the NAIC. In 2020, LindleyMyers was among the co-vice chairs of a special committee focused on race and insurance. That committee has been meeting, collecting data and asking questions ever since.

“We want to make sure that race isn’t being used as a tool to object to certain classes of people or people as a whole,” she said.

As for Lyndley-Myers’ day job, Missouri Gov. Mike Parson’s term expires at the end of 2024. Parson has indicated that he does not expect to seek re-election. Insurance commissioner is an appointed position in Missouri.

Whatever happens on the political front, Lindley-Myers does not expect to retire anytime soon.

While she enjoyed the job, despite the often-odd hours and crazy demands, Lindley-Myers said it was often mentally taxing.

“It’s just very, very hard on you because you’re dealing with people’s lives,” she said.

Lindley-Myers still holds a law license and takes on a case from time to time. But her focus shifted to insurance regulation full-time after close friend Julie McPeak was elected Tennessee insurance commissioner in 2011.

A few months later, Lindley-Myers joined her as deputy commissioner, and they worked side-by-side for the next fiveand-a-half years.

Commissioners drive the NAIC regulatory agenda and Lindley-Myers quickly became heavily involved. She was elected secretary-treasurer in 2020, setting her on the path to the association presidency.

State insurance regulators have full plates at the moment, with climate, technology, reserving and private equity investment among the many issues dominating the agenda.

“I’m not sure, particularly last year, that she was super excited to ascend to be president,” Cameron said. “I think she has accepted the position well. It is extremely time-consuming, and an exhausting position. And I think she’s

“If the new governor and I are destined to be together, I may be here,” she said. “If not, then I will move on and be happy in whatever role that I choose for myself at that particular time.”

InsuranceNewsNet

Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

Bermuda Acting Financial Secretary Cheryl Ann Lister, Bermuda Premier David Burt and NAIC President Chlora Lindley-Myers

Life insurance sales down ‘across

the board,’ Wink reports

Life insurance sales suffered greatly from several disruptions in the first quarter, posting sales losses across the board, Wink Inc. reported. Traditionally, life insurance sales struggle in the first quarter because of the ramped-up sales efforts to close out the previous year, noted Sheryl Moore, CEO of both Moore Market Intelligence and Wink. Still, it was a terrible quarter, she added.

Nonvariable universal life sales for the first quarter were $727.2 million, down 15.3% compared with the previous quarter and down 1.3% compared with the same period last year. Non-variable universal life sales include both indexed UL and fixed UL product sales.

“My take is that the life insurance products haven’t been able to take advantage of increased rates as much, just because they primarily use portfolio crediting, rather than new money,” Moore explained. “Second quarter will also be a challenge because of the adoption of AG49-B.”

As of May 1, the National Association of Insurance Commissioners’ Actuarial Guideline 49-B requires that index accounts cannot be illustrated above the benchmark index account and the maximum illustrated rate must include bonuses, according to Gregory Rohtstein, a Symetra assistant vice president who outlined the guideline during an NAIC webinar. The guideline also limits illustrated rates to a maximum of 145% of whatever an IUL portfolio is earning.

PAN-AMERICAN LIFE ACQUIRES ENCOVA’S LIFE INSURANCE AFFILIATE

Pan-American Life Insurance announced it has acquired the life insurance arm of Encova Mutual Insurance Group. The deal will allow Encova to focus on its property and casualty insurance business.

insurance premiums and 82,000 covered lives to PALIC’s U.S. life insurance business.

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the top 10% of the U.S. population by socioeconomic status have a life expectancy at birth comparable to the OECD average of around 80 years for men and 84 years for women. For a U.S. male born into the lowest 10% by socioeconomic status, life expectancy is only around 73 years. The U.S. trend is linked to unequal access to health care. Further, with an estimated 70% of the population affected by obesity, diseases such as type 2 diabetes are becoming more prevalent. Opioid-related deaths have impacted life expectancy, with an eightfold increase since 1999.

JOHN HANCOCK COLLABORATES WITH OURA SMART RING

Pan-American — a 110-year-old provider of life, accident and health insurance — employs more than 2,100 people and covers more than 7 million policyholders.

Encova is a superregional carrier ranked among the top 20 mutual insurance companies in the U.S. and employs than more than 1,100 associates writing in 28 states and Washington, D.C. Its premiums total in excess of $1 billion, and it has a surplus in excess of $1.96 billion and assets in excess of $4.8 billion.

The acquisition will add approximately $60 million in revenues, $600 million in total assets, $38 million in

DID

YOU

NEXT WAVE OF LIFE EXPECTANCY GAINS IS ON THE HORIZON

Gains in human longevity have tapered off over the past decade, but the next wave of improvements is on its way, Swiss Re said in a recent report. Advances in cancer diagnosis and treatment are the areas most likely to improve global longevity, according to the report. Future improvements will need to be supported by addressing the health issues of old age such as Alzheimer’s disease, lifestyle factors and access to health care.

The U.S. diverges from other advanced markets, the report said. As of 2019 only

John Hancock was the first life insurer to combine coverage with a wellness program when it introduced Vitality in 2015. Now the insurer is taking wellness a step further by collaborating with ŌURA, the company behind the smart ring that delivers personalized health data, insights and daily guidance.

Eligible John Hancock Vitality customers who have an Oura Ring and active Oura membership will be able to connect to the Vitality program to earn rewards for healthy sleep and mindfulness practices, such as meditation and breathing exercises.

The Vitality program is available across John Hancock life insurance policies. The program rewards customers for their healthy choices and motivates them to live well every day. Vitality covers a broad spectrum of activities — including exercise, nutrition, sleep and preventive care.

Indexed life was the only product line not to experience a decline in sales, over this time last year.

— Sheryl Moore, CEO of Moore Market Intelligence and Wink

Help clients keep sequenceof-returns risk from sinking their retirement

A well-designed permanent life insurance policy can provide clients with additional confidence and peace of mind.

By John McWilliams

Since the start of 2022, we’ve seen rampant volatility in markets and an overall decline of more than 12% in the S&P 500. Although this situation highlights the potential impact of sequence-of-returns risk, I’m still not sure that it receives enough attention.

Sequence-of-returns risk refers to the possibility of a steep market downturn when a person is either early in retirement or on the verge of retiring — and this risk can cause lasting damage to the value of an investment portfolio.

Withdrawing money to cover living expenses when a portfolio is significantly down might mean it won’t adequately recover even after markets rebound. So,

retirees who rely on consistent returns over time could be forced to reduce their standard of living or take greater investment risks as they attempt to make up lost ground.

However, one option that can effectively hedge against sequence-of-returns risk — and enable advisors to provide their clients with additional confidence and peace of mind — is a well-designed permanent life insurance policy. Using the permanent life insurance policy to supplement retirement needs, especially in down markets, can prove to be beneficial in meeting a client’s needs. In addition, because the monies taken from the life insurance are tax-free, the client can withdraw less than they would need to withdraw from traditional investments or even a qualified plan.

Policy provisions

Part of the reason why sequence-of-returns risk can be so concerning is its unpredictability. Although the occasional significant

downturn is inevitable due to the cyclical nature of markets, it’s nearly impossible to forecast exactly when one will occur.

That’s why having an instrument such as permanent life insurance can be appealing and reassuring. But it doesn’t fit every situation and shouldn’t be thought of as an investment. Instead of buying life insurance only to offset investment risks, there should be a specific need for the death benefit. LIMRA studies have shown that as many as 46% of Americans have put off purchasing the life insurance coverage they know they need.

Permanent life insurance policies have a cash-value component that can be maximized through overfunding, and this is where the compounding and tax advantages come into play. The key is to design the policy to avoid the current Modified Endowment Contract Rules per Tax Code Section 7702 and, effective January 2022, these limits were lessened.

To fully leverage the potential of a permanent policy, it pays to start early. If a

person begins thinking in their mid-60s about trying to manage sequence-of-returns risk, the opportunity may have been lost. But if someone buys a policy in their early to mid-40s, it could accumulate enough cash value to be used for this purpose and provide a substantial and effective death benefit as well.

Keep in mind that the majority of the policy’s costs are taken in the first seven to 10 years of a permanent policy. These include components such as the acquisition cost, taxes and mortality charges.

tax-deferred, along with the ability to pull it out on a tax-free basis. But there are two major benefits on the life insurance side.

First, if the person dies prematurely, their retirement plan can be fully funded through a tax-free life insurance policy. With a Roth IRA, you might have a goal to reach $500,000 and a plan to get there in 15 years. But if you happen to die in year five, you unfortunately wouldn’t reach that goal. Whereas with a permanent policy, there could be a $500,000 death benefit for your family.

approach or risk losing those clients to competitors. Advisors who are fiduciaries must also respect the legal obligation to look out for a client’s best interest.

Under the circumstances, advisors should consider incorporating elements into financial planning that they perhaps didn’t think about when the market was constantly going up. In some cases, permanent life insurance could be an important piece of that puzzle.

At the end of the day, a permanent life insurance policy is an economic instrument that can offer instant, tax-free liquidity to families and businesses at a relatively low cost.

The internal rate of return for a permanent policy at life expectancy generally ranges from 4% to 6%. That’s a reasonable price to pay for providing a family or business with an amount of money that can solve many potential problems. Combined with the cash accumulation aspect, a properly structured permanent life insurance policy is an instrument that should be considered for most clients’ overall financial plans.

However, once the “breakeven point” is reached after about a decade, compounding growth starts to kick in. Additionally, it’s critical to build in protections and management tools to avoid the negative ramifications of a policy lapse.

Lack of awareness

I find that investors tend to lack awareness of sequence-of-returns risk, and even advisors may not fully realize the key role permanent insurance can play in combating it. Although it’s common to hear about tax-now, tax-later and tax-free as the three main categories of investment vehicles for retirement, I believe many advisors focus primarily on the tax-now aspect.

They might also help manage the tax-later component because their clients are involved with company retirement plans such as 401(k)s and other qualified plans. But few advisors talk much about the tax-free element — and when they do, it’s usually in reference to Roth IRAs.

Roth IRAs are great opportunities for clients; however, life insurance at its core has the same basic characteristics of a Roth IRA: after-tax money growing

Second, unlike Roth IRAs, life insurance doesn’t have significant limits based on income. You could potentially put $1 million a year in a policy if you qualified for the corresponding death benefit amount. So I believe that diversification of asset classes and taxable income in retirement are key concepts that advisors could discuss more.

Economic downturn

Before last year, many financial advisors who are currently practicing had never seen a down market. It was much easier to be successful in the previous decadelong bull market because no matter what an advisor did, their clients would likely see significant portfolio gains. The current economic downturn has spawned a greater interest in permanent policies, partly because advisors now realize they must conduct more significant planning to help clients reach their financial and retirement goals.

Additionally, in an environment where it’s now harder to show clients the results they want to see, advisors face greater pressure to employ a holistic, personalized

Keep in mind that the policy must fit and make sense. There’s also the underwriting component that dictates what the IRR is. If someone is healthy enough to qualify for a preferred rate, the potential death benefits of permanent insurance are greater than if the person only qualifies for a standard or substandard rate. Ironically, for a permanent life policy with a focus on accumulating cash value, underwriting is less impactful on the long-term growth.

These are all important discussions to have with clients as advisors consider how a permanent policy can help hedge against sequence-of-returns risk while providing life insurance for their loved ones.

John McWilliams is president at Apollon Insurance Group, the insurance group of Apollon Wealth Management. He may be contacted at john.mcwilliams@ innfeedback.com

Sequence-of-returns risk, or sequence risk, is the risk that an investor will experience negative portfolio returns very late in their working lives or early in retirement. Sequence-of-returns risk is a significant threat because retirees have little time to make up for losses that are compounded by the simultaneous drawdown of their retirement assets.

ANNUITY WIRES

MYGAs lead 1Q sales parade

Annuity buyers were all in on multiyear guaranteed annuities in a first-quarter buying spree. The MYGA category recorded sales of nearly $40 billion in the first quarter, according with Wink Inc., an increase of 12% compared with the previous quarter, and up 173% compared with the first quarter last year. MYGAs have a fixed rate guaranteed for more than one year.

Overall, deferred annuity sales were $84.7 billion, up 6.8% compared with the previous quarter, and up a whopping 41.9% compared with the same period last year. Deferred annuities include the variable annuity, structured annuity, indexed annuity, traditional fixed annuity and MYGA product lines.

Those numbers, compiled by Wink Inc.’s sales and market report, put Athene USA as the No. 1 carrier overall for deferred annuity sales, with a market share of 10.2%. Corebridge Financial was second, with Massachusetts Mutual Life Cos., New York Life and Allianz Life rounding out the top five carriers in the market.

Athene’s MYG 5 was the top-selling deferred annuity for all channels combined in overall sales. The one lagging product was variable annuities, which recorded flat sales in the first quarter and were down more than 34% from a year ago.

with 21% of buyers with $500,000 to $999,999 in household investable assets citing it and 13% above and below that range picking that reason.

While the COVID-19 pandemic changed attitudes about mortality and security, annuitization has held steady as a leading reason to buy annuities.

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FastLife life insurance products.

The federal government alleges that he perpetrated a $6.3 million fraud via sales of life insurance and annuities. A second trial is expected to begin soon on tax evasion charges.

As this issue went to press, Wasserman had filed motions for acquittal and a new trial on the fraud charges. Wasserman was convicted on nine counts. The three most serious charges — wire fraud, mail fraud and conspiracy to commit wire and mail fraud, — all carry maximum sentences of 20 years

Sentencing is scheduled for Sept. 6.

GLOBAL ATLANTIC TO REINSURE $19.2B METLIFE BLOCK

Global Atlantic Financial Group signed a $19.2 billion reinsurance agreement with MetLife Inc.

INCOME CITED AS MAIN REASON FOR ANNUITY PURCHASE

Access to their money and ability to annuitize were the biggest reasons annuity buyers cited for buying their annuities — even more than interest rates and far more than fees, according to a LIMRA buyer study.

The top reason, cited by 25% of 900 buyers, was having a guaranteed lifetime income feature that allowed access to the account value, according to the poll taken mid-2022. One of the next reasons was the ability to annuitize the contract and receive a guaranteed lifetime income, cited by 15%.

Although 15% of the respondents overall cited the ability to annuitize, that reason was most important to people who had a moderate amount of assets,

“This finding, showing a stronger perceived annuitization value for mass affluent and affluent investors among investors and advisors, has been consistent across LIMRA research studies over the years,” according to the report.

‘ANNUITY KING’ GUILTY ON 9 FRAUD CHARGES

A Florida jury found the self-styled “Annuity King,” Phillip Roy Wasserman, guilty of defrauding investors with his

The deal puts Global Atlantic at nearly 40 transactions with over 25 clients and reinsuring more than $110 billion of assets. The MetLife block currently has approximately $19.2 billion in general account and separate account value, composed of $5.2 billion of fixed annuities and $14 billion of life insurance.

Under the terms of the agreement, MetLife will reinsure the block and transfer general account assets to Global Atlantic subsidiaries First Allmerica Financial Life Insurance Co. and Commonwealth Annuity and Life Insurance Co. MetLife will retain servicing and administration of the policies.

I see this a little bit as the golden age of annuities.

— Marc Rowan, CEO of Apollo Global Management

YOU KNOW ?

Source: Allianz Life Insurance Company of North America

Seventy-eight percent of Americans worry that they might not be able to afford the lifestyle they want in retirement.

Source: Wink, Inc.

All deferred annuity sales

How annuities can be part of your client’s retirement formula

Americans fear running out of money in retirement. Here are some ways to ease that fear.

By Shawn Plummer

Reaching retirement age can be a worrying time for many people, with financial uncertainty and rising health care costs.

According to CNBC, the average American receives a monthly sum of $1,666 in Social Security benefits. With Social Security providing such a low income, many retirees are searching for additional income sources.

Advisors specializing in retirement can assist with estate planning, long-term care plans and investment management. You must be familiar with the benefits of annuities to help your clients find the best financial options for their retirement.

Let’s explore the ways that advisors can help retirees formulate a plan for their future.

Why are annuities important?

A recent GOBankingRates survey revealed 66% of Americans fear they will run out of money during their retirement. An annuity is an agreement between a financial institution or insurance company and a purchaser. Annuity contributions are collected over time to generate a monthly sum that will provide a reliable income during their retirement.

Annuities play a vital role in protecting the future of Americans who reach retirement age with rising health care bills and long-term costs.

What are the benefits of annuities?

One of the major benefits is that there are various annuities to suit different financial needs. It is important to review the options with your client to ensure they receive the best annuity for their circumstances.

retirees who may face unforeseen medical costs, ongoing care or living expenses that exceed their income. An annuity can also eliminate student loans and other debts that could affect loved ones after an investor dies.

Financial growth

The financial benefits that your client receives depend on the level of risk associated with their annuity. Fixed annuities offer low-risk rewards, whereas variable annuities provide various investment options that could lead to a bigger return on investment.

Fixed annuities

Fixed annuities are a low-risk option for guaranteed interest rates during the agreed period of the investment. Some of the main benefits for retirees include:

» Tax deferral.

» Death benefits.

» Guaranteed income.

» Growth potential.

The guaranteed income of a fixed annuity can provide peace of mind for many clients who need the security of a regular income. The money invested in a fixed annuity will grow tax-free until the payouts begin.

Various payout options

Retirees can choose to receive their annuity payout immediately or at a later date. Deferred annuities allow the client to pay their premiums and receive their payments months, years or decades later.

Immediate annuities

Immediate annuities are often funded by retirement accounts such as a 401(k) to cover the shortfall between ongoing health care costs and income. Retirees can withdraw money from their retirement funds

right away. This is a great option for clients who need a quick solution to cover their living expenses during retirement.

An immediate annuity is beneficial for people who are ready to retire with a steady income to support themselves. There are many options for clients seeking immediate annuities, including fixed immediate annuities and variable immediate annuities. Variable annuities rely on market risk and performance. For this reason, many clients may choose the lowrisk, fixed immediate annuity.

Deferred annuity

Deferred annuities are a suitable choice for people who want to continue working and accumulate wealth for their retirement. The funds in the annuity are not taxed until they are withdrawn, which provides an opportunity for maximum growth.

If your client has time for their annuity to grow, then a deferred annuity boasts many benefits. The most common payout methods for deferred annuities are lump sum, systematic withdrawal and distribution plans. Clients can contribute unlimited amounts to their deferred annuity and watch their investments grow before they retire.

Joint-life annuities

Joint annuities are an excellent option for retirees with loved ones in their care. A joint-life annuity is based on the life expectancy of two people — for example, spouses or partners. This type of arrangement is useful if a client’s spouse does not have a pension plan or investment to support themselves.

A single-life annuity is better if your client does not have any financial dependents. Some of the benefits of joint life annuities include:

» Financial support for loved ones.

» Tax liabilities spread over a longer period.

» Financial protection for clients with a short life expectancy.

For many clients, protecting a spouse or family member will often outweigh any disadvantages associated with a joint annuity. Death benefits are also available with most types of annuity and are often equivalent to the initial contribution.

Helping clients choose the right annuity

Your clients should start looking at annuities as soon as possible to take advantage of interest rates. Many companies will not sell annuities to people over the age of 80, so it is important to buy annuities as soon as possible. It is best to advise your clients to buy annuities between the ages of 70 and 75 to maximize their payout.

It is also important to remind clients that they cannot change their minds after they sign an annuity contract.

The Benefits of an Annuity

Choosing the right annuity depends on the following factors:

» Age group.

» Premium sum.

» Income needs.

» Long-term health care requirements. Annuities provide various options for clients who want to leave money behind for family members. Ask your client about beneficiaries to help them decide which annuity option is right for them.

Updating your knowledge on the latest annuity options for your clients could improve their quality of life. Some of the main advantages of annuities include:

» A guaranteed lifetime income.

» Saving is easier with deferred taxes.

» Complements pension plans and Social Security income.

Annuities are an excellent option to provide retirees with a reliable source of income. By broadening your knowledge, you can help retirees understand annuity contracts and find the best option for their circumstances.

Shawn Plummer is CEO at The Annuity Expert. He may be contacted at shawn.plummer@ innfeedback.com.

If your clients are looking for guaranteed income, accumulation potential or to leave a legacy, look to American Equity for a solution.

ICC16 R-MVA, ICC20 R-LIBR-FCP, ICC20 R-LIBR-FSP, ICC20 R-LIBR-W-FSP, ICC20 R-LIBR-W-FCP, EstateShield 10: ICC21 BASE-IDX-MSP, ICC20 MSP-10, 21 MSP-10, ICC20 E-MPTP-C, ICC20 E-PTP-C, ICC20 E-PTP-PR, ICC16 R-MVA, ICC21 R-LIBR-W-BAV, ICC20 R-EBR, AssetShield Series: ICC22 BASE-IDX, ICC22 IDX-10-10, ICC22 IDX-10-7, ICC22 IDX-10-5, ICC20 R-ERR, 21 R-ERR, ICC18 E-MPTP-A (Patent Pending), ICC20 E-MPTP-C, ICC20 E-PTP-C, ICC20 E-PTP-PR, ICC18 R-WSC, ICC20 R-EBR, ICC16 R-MVA, FlexShield 10: ICC21 BASE-IDX-SP, ICC21 IDX-12-10, ICC21 E-SC, ICC20 R-EBR and state variations thereof. Availability may vary by state. LIBR with Wellbeing Benefit not available in California. Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC. Other retirement solutions may also support similar goals. American Equity Investment Life Insurance Company® does not offer legal, investment or tax advice. Each client has specific needs that should be discussed with a qualified legal or tax advisor.

Colorado takes aim at health care sharing plans

For a number of years, the Colorado Division of Insurance has received many complaints and questions about health care sharing plans and arrangements in that state, although the division had limited information to address these concerns.

Now the DOI has issued its first annual report on health care sharing plans and arrangements in Colorado. The report is a result of 2022 legislation, NB2201269, which requires HCSAs operating in Colorado to report data annual to the DOI. This first report focuses on 2021 data.

Colorado is only the second state to require collecting information on HCSAs. Massachusetts began requiring HCSAs to provide information in 2022. In a news release, the Colorado DOI said this “represents a new avenue for consumer protection and transparency for the DOI, which is important as the Division has deep concerns about HCSAs in light of the complaints it has received from consumers.”

HCSAs do not offer the same protections and benefits as Affordable Care Act plans. Many of the HCSAs reported excluding benefits such as contraception coverage, mental health services, alcohol use disorder treatments, ADHD treatments, prescription drugs for chronic conditions, comprehensive reproductive health coverage (in most cases including coverage for abortion) and some preexisting conditions.

MAJORITY OF MEDICAID RECIPIENTS WILL TRANSITION TO EMPLOYER COVERAGE

Medicaid recipients who obtained coverage during the COVID-19 public health emergency must prove they are still eligible for the program now that the public health emergency is over. An estimated 18 million Medicaid recipients must reapply or risk losing coverage. But a recent study funded by an insurance industry trade group showed that the majority of those Medicaid recipients will transition to employer-provided coverage.

An AHIP-funded project, carried out by NORC, provided statewide estimates for the number of Americans predicted to lose their Medicaid coverage during redetermination. The research found that in nearly

QUOTABLE

In this competitive job market, offering an attractive benefits package is only an advantage if the employees are aware and understand the benefits available to them.

people in the workplace.

More than half of 1,000 employers Mercer surveyed said they intend to revisit their workplace rewards strategy in the next six to 12 months. An additional 28% are unsure, while 16% said they do not intend to do so.

all states, the majority of those impacted by the Medicaid redetermination will obtain coverage through an employer. However, not everyone will remain in coverage, the research found. About 3.8 million (or 21.2%) of people who lose Medicaid coverage during redetermination are estimated to become uninsured.

WORKPLACE BENEFITS STILL STRONG AMID INFLATION, RECESSION

Despite inflation and a looming recession, employers continue to invest in workplace benefits. Mercer examined the ways in which employers and workers are taking a fresh look at benefits as fears of a possible economic downturn replace COVID-19 concerns in the minds of

MORE PEOPLE DELAYING CARE BECAUSE OF COSTS

Health care costs have been rising more slowly than other costs in the past couple of years. But a growing number of people are putting off medical care because of the cost, according to a survey from the Federal Reserve. Some 28% of people say they skipped some form of health care last year because they couldn’t afford it, which is up 4% from the year before.

Matthew Fiedler at the USC-Brookings Schaeffer Initiative for Health Policy said he believes people’s decisions about accessing care aren’t determined only by the cost but also by whether they are insured and what other financial challenges they face.

The Fed’s survey found that people are also likely to skip follow-up visits with their doctors, mental health care and prescriptions.

DID YOU KNOW

New IRS guidance will allow older couples in the U.S. to contribute more than $10,000 to tax-free health savings accounts next year.

— Patrick Leary, corporate vice president and head of LIMRA’s workplace benefits research

Source: Mercer

Top reasons to get an Independent Vested Direct Agency Contract with Kansas City Life Insurance Company

Grow your agency

• Customized targeted recruiting plan, agent recruiting leads, onsite and virtual open house recruiting events.

High-touch personal attention

• Producers enjoy direct access to underwriters and sales support teams.

Elevate your agency with customized training

• Advanced and business markets, sales concepts, case design, and support staff assistance team.

Exceptional regional team to support your agency

• Annual business planning and monitoring, onsite training, team-building events.

Full suite of products to help you stand out from the crowd

• Innovative term insurance to age 85.

• Outstanding return-of-premium products.

• Streamlined indexed universal life insurance design.

• Unique ability to add a commissionable policy enhancement that allows the policyowner to customize the way the death benefit is paid out.

Stability

• Founded in 1895, a producer-focused Company with fourth generation family leadership that has great financials and no debt.

For information about a vested independent contract with Kansas City Life Insurance Company, call Tom Morgan, Vice President, Agencies, 855-277-2090, or visit join.kclife.com.

How individual DI took my firm to the next level

Disability insurance, often overlooked, is crucial for financial planning, protecting income and enabling clients to achieve goals despite illness or injury.

By Bryan M. Kuderna

Think about why you got into the business, whether your business is insurance, investments or a combination of the countless financial planning products and strategies that comprise our industry. It may have been 30 years ago, 10 years ago or just a few months ago. Chances are a recruiter, a mentor or some other contact in the business said something that resonated with you and your passions.

Over the years, I’ve seen advisors enter the field because of the popular lure of investing, hoping to emulate Warren Buffett and other icons referenced in business school. Others were intrigued by the timeless benefits of life insurance, being there to deliver a check to a widow in her gravest time of need. Some

advisors just love business and the idea of consulting entrepreneurs on how to become better entrepreneurs. Since 2008, as a financial advisor straight out of college, I have yet to hear a single one of the hundreds of professionals I’ve worked with ever say they dreamed of selling disability insurance.

So, it may be ironic for me for me to describe how disability insurance launched my firm to heights I could not have expected. I believe there are two reasons for this unfortunate disconnect between industry professionals and the individual disability insurance marketplace.

Reason No. 1: There are two types of advisors — those who know how important disability income protection is and those who do not. It’s the industry’s job to inform the latter.

Reason No. 2: Advisors already are well aware of the importance of disability income protection but simply do not know how to sell it. I’ll address both the why for reason No. 1 and the how for reason No. 2.

If you find your clients do not seem interested in having the disability

conversation, it may often be a symptom of your not being fully interested in it. So go back to any of those motives that began your career in financial services — retirement planning, college savings, estate planning, business consulting, etc. Put yourself in your client’s shoes and you’ll quickly see the goals are the same — achieving wealth through any of these areas of focus, and doing so efficiently and with peace of mind.

There’s a quote from Aristotle that says, “The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else.” I empathize with the great philosopher and spend much of my narrative in financial planning referencing wealth in its original meaning, from the old English word “weal,” which means well-being.

Once the stage has been set and the client’s vision of wealth has been defined, along with your expertise to help them get there, then you can take a step back.

Achieving any of these goals, whether modest or opulent, requires money, and

Disability = Poverty

that takes work. If they lose the ability to work, the ability to generate an income, the rest of your client’s plans become secondary, even if still possible.

People often go to great lengths to accumulate stuff, including cars and houses. They spend money on vacations, education, retirement and so on. They take what they consider necessary steps to protect that stuff — auto insurance, homeowners insurance, flood insurance, student loans, retirement planning and life insurance. But every piece of that plan starts with money, with income and with a healthy, able-bodied worker.

Health vs. wealth

There is a popular saying: “People spend their health chasing wealth, only to then spend their wealth chasing health.” This is a common scenario, common because it’s the result for many people when things go as they’re supposed to go (i.e., work a long career and then encounter health issues in the later years of retirement).

Imagine a scenario in which “People spend their health chasing wealth and then have no wealth to chase health.” This is the sad instance in which someone does not complete their career according to plan and unpreparedly encounters illness or injury while still in their prime. Data shows that this is not a “can’t possibly ever happen to me” case, as the Social Security Administration reports more than 1 in 4 20-year-olds will become disabled before reaching retirement age.

So if reason No. 1 has been solved and all advisors understand the importance

of disability income protection in their planning process, it is time to understand how it can be sold. In line with the narrative introduced above, I coach clients through a holistic planning process inspired by protection first. I often reference a four-step planning process:

1. Gain protection.

2. Build liquidity.

3. Eliminate bad debt.

4. Accumulate wea lth.

After the advisor and client agree on these steps, disability insurance is natural to the conversation. However, misinformation often becomes the holdup to the sale. Semi-informed clients understand the need for disability insurance but not necessarily individual disability insurance.

Employer coverage isn’t enough

Many clients think they are already adequately covered through the government or their employer. However, Social Security disability, on average, only awards 31% of claims. This is a result of the SSA’s fairly strict definition of disability: “The law defines disability as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

As for being covered through work, many people confuse short-term disability insurance (which has a benefit period of three months or six months)

with long-term disability (which may extend until the policyholder reaches retirement age). Furthermore, even with group long-term disability insurance, this coverage is often not portable, meaning that when the employee leaves the employer, they leave the coverage. In addition, group long-term DI offsets other disability benefits or earned income, may be taxed as ordinary income to the beneficiary, can only cover a portion of the employee’s income, and is subject to rate and benefit changes.

In contrast, individual DI may offer the opportunity to fully protect your client’s income with own-occupation definitions and guarantee rates and benefits by being noncancelable/guaranteed renewable.

I have leveraged individual disability insurance to market to the medical and dental market. While these professions have an elevated need for specific coverage due to the physical aspects of their job, all humans are susceptible to injury and illness, making IDI universally applicable. I’ve also worked with carriers that offer a student loan protection rider to help many young professionals concerned about not being able to pay their biggest debt if they are knocked out of work.

IDI has served as a great entree to further financial planning. Some advisors might even find themselves focusing, or even limiting, their practice to disability insurance. This profitable product line often holds less liability, maintenance, consumer confusion and compliance than the investment realm or full-scale financial planning.

I’ve used these concepts to take my firm to the next level while protecting clients from arguably their biggest financial threat. If you want to be a true financial advocate, start by incorporating disability insurance in your planning process.

Bryan M. Kuderna is a Certified Financial Planner™ and the founder of Kuderna Financial Team, a New Jersey-based financial services firm. He is the host of The Kuderna Podcast. His new book,” What Should I Do With My Money?: Economic Insights to Build Wealth Amid Chaos ” is available wherever books are sold.

Can your client afford to become disabled?

The average monthly benefit for a disabled worker receiving Social Security disability insurance is $1,483 in 2023. That’s slightly above the federal poverty level of $1,215 per month for a single-person household.

Most can’t count on Social Security

Nearly 3 in 4 of the respondents to an Allianz Life study said they can’t count on Social Security income when planning for their retirement. The 2023 Quarterly Market Perceptions Study also noted that fewer Americans (57%) are worrying about the possibility of a major recession right around the corner. By contrast, 41% said that they are concerned about being laid off because of an economic downturn in 2023.

Regardless, most Americans are still very cautious about investing. More than half (63%) are keeping more money out of the market than they think they should, and 62% would rather have their money sit in cash than endure market swings.

Current economy hurting young adults’ financial independence

• 7% of Gen Xers said that they are keeping more money out of the market than they should, compared with 66% of millennials and 54% of boomers.

• 85% of Gen Xers are worried that they might not be able to afford the lifestyle they want in retirement due to the increased cost of living, compared with 80% of millennials and 72% of boomers.

More Americans are also expressing concern about their long-term financial health. For example, 78% worry that they might not be able to afford the lifestyle they want in retirement because of the increased cost of living.

Parents sacrifice for their adult children

A Bankrate survey found nearly 7 in 10 parents with children 18 or older said they have made a financial sacrifice to help their adult children. Thirty-one percent described that sacrifice as “significant,” while 37% said it was “somewhat significant.”

How have parents sacrificed to help adult children? By reducing their emergency savings (51%), impairing their ability to pay off their own debt (49%) or save for retirement (43%), and making it hard to reach some other financial milestone (55%).

Low-income parents — those making $50,000 or less a year — were most likely to say they have made financial sacrifices to help their adult children.

Consumer debt reaches new high

Despite a slide in mortgage demand, U.S. consumers racked up big debts in the first quarter of 2023, with consumer debt topping $17 trillion for the first time. Meanwhile, new mortgage originations, including refinancings, totaled just $323.5 billion, the lowest level since the second quarter of 2014.

Nearly 70% of millennials and Generation Z believe the current economic environment is hurting their ability to be financially independent adults, according to an Experian survey.

In addition, more than 1 in 4 don’t feel optimistic about their current financial situation.

The survey revealed “better understanding personal finance” as a goal for most millennials and Gen Zers. Nearly 4 in 5 (77%) are striving to be more financially literate while 75% stated they would feel more optimistic about their financial situation if they had a better understanding of personal finance.

About 70% are actively searching for a trusted source for personal finance information.

However, young adults believe the current financial situation won’t last forever. Around two-thirds (64%) feel confident that they will be OK financially.

That was the word from the New York Federal Reserve, which reported the total for borrowing across all categories increased by nearly $150 billion, or 0.9%, between January and March.

In addition, delinquency rates for all debt increased, up 0.6 percentage point for credit cards to 6.5% and 0.2 percentage point for auto loans to 6.9%. Total delinquency rates moved up 0.2 percentage point to 3%, the highest since the third quarter of 2020.

Student loan debt edged higher to $1.6 trillion and auto loans inched up as well to $1.56 trillion.

Source: Allianz Life

Source: Edward Jones

Help clients turn their investment properties into retirement income

Guide your clients when they are unsure of what to do with the wealth generated by their real estate investments.

• Rob Johnson

The current state of the market is likely causing investors and their advisors to reevaluate existing plans for retirement.

The U.S. Gross Domestic Product is potentially signaling early signs of a recession. Inflation levels recently hit a 40-year high and seem to show no signs of slowing as quickly as once predicted. Several interest rate hikes continue to increase the amount it costs to borrow money.

Real estate is traditionally a hedge against inflation and an asset that has historically appreciated over time, which is why it may be in a client’s retirement portfolio alongside traditional asset classes such as stocks and bonds. Home prices are still high for the time being, which may make the current market the time for investors to sell their investment property

to harvest their profits.

What does it mean for your clients who may have some of their retirement wealth trapped in their investment properties? How can you use these properties to create a comprehensive strategy to help them maintain the wealth they have accumulated and generate passive income in retirement?

If you have clients approaching retirement who are unsure of what to do with the wealth their investment properties have generated, here are some considerations that may help as you review their long-term goals and strategies.

Should they sell their properties?

Clients who are approaching retirement age might be considering selling their investment properties, either to remove themselves from the financial burdens of property ownership or to eliminate the responsibilities that come from being a landlord. Additionally, they may be inclined to sell their properties outright to unlock the current value they can receive for their

investments before the market goes cold. But without a strategy in place, investors may risk paying up to 40% or more in capital gains taxes, which can erode a lot of the wealth they’ve accumulated over the years. This tax bill could potentially undermine their plans if not handled properly.

For your clients who decide to sell their properties, leveraging a 1031 exchange to defer their capital gains taxes can keep more of their wealth working for them. But it’s important for investors to understand the costs associated with a 1031 exchange and how they may impact returns and other benefits.

For investors who decide to use a 1031 exchange to defer capital gains when they sell their investment properties, they will need to identify a replacement property of equal or greater value 45 days after the sale of their original property. Replacing one investment property with another can be challenging in the current market as home prices continue to remain high and inventory remains limited.

However, there are alternative

investment opportunities for your clients who want to keep real estate within their portfolio but don’t want the hassle or financial burden that comes with direct property ownership.

What are the alternative investment solutions?

Accredited investors who are completing a 1031 exchange can consider a Delaware Statutory Trust as their replacement property instead of another real property. DSTs offer investors fractional ownership of professionally managed, institutional-grade properties such as multifamily properties, self-storage facilities, manufacturing facilities and more.

These properties are managed by professional sponsors who are responsible for the day-to-day operations of the building, eliminating the financial burden and hassle of having to own an investment property directly.

Potential benefits of DSTs in today’s climate

While investment property owners have likely seen their properties appreciate over time, rising inflation means the expenses and costs associated with operating these properties have also increased. This could potentially erode some of the net income investors receive each month.

By investing in a DST, the investor not only removes the day-to-day hassle of tenant management, but they might also see a decrease in costs associated with property management as the responsibilities are split among several investors and managed by the sponsor.

Sponsors have economies of scale with their property management resources, which can help reduce the direct cost to the investor compared to owning and managing an investment property on their own.

Another benefit DSTs can offer over direct property ownership is a larger potential for rate increases. If an investor owns four rental homes, they will have only four opportunities per year to adjust rents (one for each household).

For DSTs that feature multifamily properties, there may be 300 to 400 tenants per building — increasing their chances to adjust rents as needed to keep pace with market demand and

What is a 1031 exchange?

Real estate investors have long used 1031 exchanges to defer capital gains and other taxes. This common investment strategy allows you to sell or relinquish an investment property and defer capital gains taxes on profits by reinvesting the proceeds in a replacement asset.

pricing. In inflationary markets such as the ones investment property owners are seeing today, large amounts of inflation will hit smaller investment property owners harder than if they had fractional ownership in DSTs, which allow regular rate increases.

DSTs can also offer investors geographic diversity in their investment portfolio. Because DSTs are professionally managed by the sponsor, investors are not limited to only investing in properties that are near the investor.

This can be potentially beneficial if the investor lives in a state with a high income tax rate or in an area where state or municipal taxes are expected to increase. This tax advantage can help investors keep more of their net income and offer portfolio diversification. DSTs offer investors an option to be strategic with the location of their investments in a way direct property cannot.

Considerations before investing in DSTs

DSTs can be a potential passive investment solution for your clients who are considering selling their investment properties to unlock wealth they have accumulated over the years.

However, there are several factors to take into consideration before investing. DSTs are illiquid and have a holding period, anywhere from five to 10 years. The DST sponsor also makes all decisions related to professional management and

operational decisions, which may be challenging for investors who have typically maintained control over their properties. There are also several fees associated with DST investments, including broker-dealer allowances, offering and organizing expenses, disposition costs, and more. As your client’s advisor, you should weigh these alongside the potential benefits to ensure the investment still meets your client’s needs and objectives as they approach retirement.

The current state of the economy and the real estate market could have many investors curious about whether they need to adjust their strategy or make changes to their retirement planning. By exploring different types of investment vehicles, such as DSTs, you can help your clients transition their property wealth into tax-deferred, passive portfolios that can meet their needs as they transition from wealth-growing strategies to wealth-harvesting strategies. In addition, the potential cash flow generated by a DST investment can help adjust your client’s overall portfolio as needed as they enter retirement, giving you the ability to provide a more comprehensive wealth management solution.

Rob Johnson is head of

and

wealth management

chief revenue

officer at Realized. He may be contacted at rob.johnson@ innfeedback.com.

individuals access to commercial investment properties that can be significantly larger than what they could acquire on their own. These properties are often the same type and quality as those owned by large institutional investors such as pension funds, insurance companies or real estate investment trusts.

How to get compensated with introductions

You deserve to be paid for the value you create for clients.

By Joe Templin

Let’s assume all of us who are reading this article are capitalists, because you probably wouldn’t have gone into sales if you didn’t believe in a free market exchange of value as a way to make a living. Otherwise, you would be working for the government or be living on a commune someplace.

So if we agree that we are all capitalists, it is fair to assume that we like to be paid for our time. That we believe that when we receive something of value, we should pay for it (there are no free lunches), and that if we create value for another person, we deserve fair and reasonable compensation for our efforts. And this is exactly why you deserve more introductions from your clients.

If you sell a client a life insurance policy and their family receives a large taxfree check after your client’s death, you obviously created a huge amount of value. But there are numerous other ways you create value for a client even if they don’t buy anything. Some ways we create value for our clients without receiving monetary compensation include:

1. Getting them to contribute to their work retirement plan and receive matching employer dollars.

2. Getting them to have a will and other legal documents drawn up.

3. Making sure their ex-spouse is no longer the beneficiary on their retirement plan.

4. Introducing them to the accountant or babysitter or anyone else who helps them.

5. Getting them to create a budget.

6. Helping them strategize paying down debt.

7. Convincing them to not buy bitcoin at $60,000.

8. Being an accountability partner for them as they train for a 5K race or remain sober.

9. Getting them to have discussions with their spouse that they normally wouldn’t have.

10. Assisting them in planning for college.

11. Acting as a sounding board for their business.

12. Being there through the rough patches such as a divorce or a parent’s death.

These are all real-world examples of how I have helped my clients recently. You can probably think of numerous times you have done something similar.

Now, did my clients write a check to me for any of these? No. Did they receive value (economic, emotional, psychological or other)? Absolutely. So as a good capitalist, I deserve to be paid for adding value, and my clients agree and pay me handsomely with introductions because I have trained them to do so.

At the start of our professional relationships, I tell clients, “If I create value for you, then you will introduce me to other people who can benefit from sitting down and talking with me.” And they agree, because that is how I always work, and I have confidence in stating the deal. After they agree to the terms, I proceed with our discussions and add tremendous value for them. I have no problem creating hundreds of thousands of dollars of value as long as I get compensated with quality introductions.

The key is to remind clients of the deal at the end of the meeting and ask for your compensation. I literally say, “Was this helpful today?” They always say yes, but I go deeper by asking, “What was the most valuable thing to you?” They then verbalize specific points of value to them, thus cementing that I delivered on my end of the bargain.

So we had a contract where I would give them value, and they agreed that I did so and as such I earned my pay. Then

they pay me for the value I created by giving me introductions. No, I do not hand them an invoice that says, “Amount due: seven introductions,” because that would be weird. But I do hold them to our agreement. I present my bill by saying, “Good. As we agreed roughly an hour ago when we started talking, if I created value for you, then you would introduce me to other people who could benefit from sitting down and talking with me.” And then I give them a list (a good capitalist does their market research or due diligence!) of around a dozen names of people they know. It is that simple.

Here are a few reasons why this works. The first reason is that I absolutely know I will create value in that meeting, because

trained and would actually show up for reviews with typed lists for us because they knew the deal. Consistency is key.

Most importantly, though, I absolutely believed that I was paid with introductions. Yes, a $10,000 check is always nice, but I knew that the fuel of my business was referrals and the five introductions I needed each day just to keep the lights on and the machine running were critical. You can’t have a manufacturing business without the raw resources to process, and my raw resources were favorable introductions. I actually would prefer a half-dozen awesome introductions to a $10,000 check because there is more potential in the introductions. Understanding the economic value of

Introductions are part of every agenda!

How to make asking for them part of your standard operating procedure:

1. Tell your client you will ask them for introductions.

2. Earn the right to ask for those introductions through your presentation, client service, etc.

3. Ask!

4. Make it easy for them to give you introductions...

a. Have them give you a list of people they want to introduce you to, and ask them to cross off the names of any jerks.

b. Ask for something unusual but specific. For example, ask if they know any technology teams of five to 10 employees who are in the video game space.

c. Have them look at their cellphone and ask them the names of the last five people they texted.

I always create value for clients. I am a capitalist, and that is what I do: I create value and get paid for it. I focus on creating value, on helping clients in every single interaction I have with them. This is why clients from two decades ago still randomly call me and say, “Hey, go talk to so-and-so. You can help them, and they are expecting your call.” I have a reputation for creating value.

The second reason is the consistency of my message. Every client, every time I worked with them, would be asked what was helpful or valuable (and there always was something profitable for them in the discussion), and I would ask for introductions as compensation. If they called my office, my staff would help them, ask whether they had helped them and then remind them that we worked strictly on an introduction basis. The clients were

each name is important to solidify your belief in being paid this way and conveying that belief.

So be a capitalist. Create a verbal contract with your clients that states if you create value, then you will be paid via introductions to people they know and you could potentially help. Then add value and be paid with referrals and repeat the cycle. That is how you build an introduction-based business.

Jay Moyer VP-Director of Marketing

Our campaigns with INN have enabled us to target agents in the specific markets in where we are selling with successful results. Their account reps and support teams are always responsive and point us in the right direction!

Several major insurers post disappointing numbers even while annuity sales soar

Sales figures don’t tell the whole story when it comes to first-quarter results.

The end of the first-quarter reporting period found insurance companies in a precarious position — interest rates continued to rise, generally a positive for insurers, and annuity sales jumped off the page.

Yet several major legacy insurance companies posted uninspiring 1Q results. In fact, some insurers limped to bottom-line losses more common in a sales slump.

Jackson National reported a net income loss of $1.5 billion in the first quarter, and adjusted operating earnings of $271 million were down 28% from the first quarter of 2022. Likewise, Lincoln Financial reported a net income loss of $881 million, compared to a $1.4 billion profit in the year-ago quarter.

Compare those numbers to the first-quarter annuity sales results. Overall annuity sales totaled $94.1 billion, a whopping 49% increase over prior-year results, LIMRA reported.

Analyzing the seeming disconnect between these two data sets requires an understanding of how insurers make money. It doesn’t always correlate directly with sales. It generally comes down to what insurance companies can do with the money they take in from sales.

And those investment decisions have not turned out as well in recent quarters.

“Results are challenged primarily by less favorable feebased income with lower assets under management and less favorable variable investment income,” said Doug Baker, a director in Fitch Ratings’ U.S. insurance group.

An unsettling combination of economic conditions is not helping insurers make money either.

Markets down

While COVID-19 pandemic fears began to ease in 2022, insurance companies had even bigger issues threatening their investment performance. Rising inflation and geopolitical tensions kept markets volatile and hurt performance.

By John Hilton Baker Zaffino

Insurers had already been chasing gains for several years as interest rates remained near zero. That led to several partnerships between insurance companies and private equity firms. Other old-guard insurers split life insurance and annuity units into separate companies.

American International Group’s life and retirement unit became Corebridge Financial, for example. AIG is several years into a proactive plan to leverage what it does best — global commercial insurance — while isolating the more

financially sensitive aspects of its business.

The insurer’s life and retirement plans took shape in 2021, when AIG sold a 9.9% equity stake in the segment to Blackstone for $2.2 billion in an all-cash transaction. A March 2022 deal allows Blackstone to manage up to $60 billion of the global AIG investment portfolio and up to $90 billion of the now-Corebridge investment portfolio.

An initial public offering of Corebridge in September raised $1.68 billion. After the IPO, AIG controlled 78% of Corebridge’s shares, with Blackstone holding about 10%, according to filings.

Like many life/annuity insurers, Corebridge recorded massive sales and small earnings.

First-quarter premiums and deposits of $10.4 billion were up 44% year over year, supported by record sales in fixed annuities and fixed indexed annuities, said chairman and CEO Peter Zaffino. Flows into the general account from individual retirement were approximately $1.3 billion, he added.

However, the unit’s adjusted pretax income of $886 million declined 5% from first-quarter 2022. The APTI for both the group retirement and life insurance lines decreased 20% to 30%.

The decline was “due to lower alternative investment income and lower fee income, partially offset by higher base portfolio income and improved mortality experience,” AIG said in a news release.

AIG’s diverse portfolio made it easier for the insurer to nimbly execute and remain profitable. Overall, AIG reported a first-quarter profit of $30 million. Earnings, adjusted for nonrecurring costs, came to $1.63 per share, results that exceeded Wall Street expectations.

“Fitch generally views diversification as a positive, as weakness in one line is offset by gains in others,” Baker said. “Throughout the pandemic, the diversification benefit was exhibited with poor mortality results partially offset by longevity benefits.”

A tougher road

Managing the bottom line is proving more difficult for other insurers with less-diverse product lines.

It was an especially tough quarter for Jackson National. Traditionally the leading variable annuity seller, Jackson ended up in a bad spot when VAs posted their worst sales year since 1995.

The sales numbers were not good at Jackson. Total annuity sales of $3.1 billion in the first quarter were down 35% from the year-ago quarter. Variable annuity sales were down 46% compared to the first quarter of 2022.

Jackson stock tumbled about 40% from mid-February to mid-June. Company executives touted future opportunities in the growing retirement planning market during a May earnings call with skeptical analysts.

Scott Romine, president of Jackson National Life Distributors, said the insurer has a diversified product mix and a strong distribution network.

“The hallmark of our success has been the depth and breadth of support we offer our distribution partners,” he said. “It’s meaningful advisor engagement. It’s not just a transactional relationship, but rather we focus on building that mutually beneficial long-term relationship.”

Meanwhile, Lincoln National Corp., parent company to Lincoln Financial,

faces a dire situation if bond losses and excess mortality trends go against the company, one analyst said.

Lincoln “has significant exposure to a decline in asset prices over the coming years, as it will soon see retirement payments grow due to the demographic situation,” wrote Harrison Schwartz, a Seeking Alpha analyst.

“Unlike banks, most insurance companies cannot place securities in the ‘held to maturity’ category, where they do not need to realize bond devaluations,” Schwartz explained. “Most insurance company assets are ‘available for sale’ because insurance providers are expected to sell many of their holdings as benefits.”

Lincoln has seen a $10 billion asset devaluation due to declines in the value of its fixed securities assets. Benefit payments surged in 2022, and mortality remains above pre-COVID-19 levels, Lincoln executives have said. The combination of higher mortality and potential bond losses is not good, Schwartz noted.

Product shuffle

Insurers are continuing to cut products and reshape existing product lines to perform better financially. Global Atlantic Financial Group will stop selling new fixed indexed universal life policies, effective July 1.

“During the last several years, sales of our indexed universal life insurance products have been steadily declining, from 16% of total individual markets’ new business production in 2013 to less than 3% today,” said Rob Arena, co-president and head of individual markets. “During that same time, we have continued to drive growth in our annuity and preneed platforms. The decision to focus on these opportunities is the right one for our business today.”

Global Atlantic’s fixed IUL sales dropped sharply in the first quarter, said Sheryl Moore, CEO of Moore Market Intelligence and Wink Inc.

“Frequent feedback from the field left me feeling unsurprised about their exit

from the indexed life market,” she added. “The word on the street is that they plan to reenter the indexed life market in 2025, but I would be surprised if they execute on that.”

Most life insurers owned by private equity like to focus on fixed types of annuities, Moore explained. Annuity sales bring in large capital that PE firms can invest to make money, while deferring any payouts until years in the future.

Interest rate traction

Fitch has a neutral outlook on the North American life insurance sector. The rising interest rate environment could provide a financial boost to insurers, Baker said.

In May, the Federal Reserve chose to push its funds borrowing rate by a quarter percentage point — the 10th consecutive boost in rates — as it wrestled with stubborn inflation trends, a falling gross domestic product, a potential U.S. debt default, a likely looming recession and even a surprise banking crisis. The move hiked the rates to a range of 5% to 5.25%, a number unmatched since 2007.

Higher rates help with investment returns and make many insurance products more attractive to consumers, but that isn’t necessarily all good.

“Higher rates should lead to more favorable results for the life industry over the longer term,” Baker said. “However, there are some notable near-term challenges associated with rising rates, including declines in the value of insurers’ fixed-income portfolios, lower assets under management and the potential for policyholder behavior to deviate materially from expectations. Additionally, a severe or prolonged economic downturn would likely pressure the industry.”

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. Follow him on Twitter @INNJohnH.

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Female financial professionals outpace their male counterparts

Having more female financial professionals can help companies reach new and different customers.

By John Carroll

During recent years, female financial professionals had a higher growth rate in client base expansion compared to their male counterparts. They also experienced a larger growth rate in life and annuity production.

According to “Reimagining Growth: The LIMRA-EY Experienced Financial Professional Study,” from 2019 to 2021, female financial professionals grew their number of life insurance policies by 13% (compared to 5% for their male counterparts). The study showed a similar pattern of growth in number of annuity contracts, with female financial professionals growing their contacts by 23% versus 13% for male financial professionals.

Women financial professionals tend to offer their clients a broader range of services, such as retirement planning, insurance planning and expense budgeting — taking a more holistic view of clients’ needs. They also have a higher number of licenses and designations than they did in 2018.

Female financial professionals make an investment in services that may not pay off in the near term but can ultimately result in stronger, longer-term relationships over time. Offering a wider breadth of services may explain their rising volume of life insurance policies and annuity contracts.

When we look at other measures of growth, female financial professionals (as a whole) outpaced their male counterparts in both income growth and increasing their number of clients. More than half of these women financial professionals attributed their upswing in income to client growth.

ences are a function of female financial professionals starting from a smaller client base. However, there are indications that they are also thinking and acting differently than their male counterparts. For example, women are two times more likely to want to diversify their client mix, and they indicate more than men do that serving the lower-to-middle market is economically feasible.

When asked if part of their strategy was to diversify their client mix, 16% of female financial professionals said it was (as opposed to only 8% of male financial professionals). Targeting these underserved markets may be paying off, as 72% of women versus 65% of men reported an increase in referrals.

Similar to the growth seen by women financial professionals, multilingual financial professionals grew their client base by 30% from 2019 to 2021 compared to 16% by financial professionals who speak only one language. Multilingual financial professionals also have notably more-diverse client bases; 59% of their clients are white versus 82% of the clients of monolingual financial professionals. They also have more clients with household incomes over $1 million (11%) than their monolingual peers (6%).

Insurers and investment firms would be well served to consider focusing on female financial professionals — as well as multilingual financial professionals — to diversify their client base while reaching currently underserved market segments and boosting overall sales revenue. Sharing lessons learned from these leading financial professionals can also help all financial professionals identify top ways of penetrating underserved markets.

However, carriers should be aware that these diverse or underserved clients may have different needs, requiring different types of products and services, than more traditional customers do. New methods and communication channels may also be needed to engage these new segments.

Methodology: The LIMRA-EY study surveyed more than 900 experienced financial professionals from six common insurance, investment and advisory practice models. Respondents had a minimum of three years of sales experience in the industry and met minimum income thresholds for their practice models.

John Carroll is senior vice president, LIMRA and LOMA. He may be contacted at john.carroll@innfeedback.com.

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.

How financial professionals are like the minutemen

From providing policies to advocating for policies, financial professionals work in the best interests of all consumers.

By Joshua O’Gara

Insurance and financial advisors work in the best interests of their clients and all consumers in numerous ways. Of course, we provide planning products and guidance as well as risk protection and wealth-building tools that offer the promise of financial security. Many of us are also active in our communities, giving back through our charitable work and involvement.

I am passionate about political advocacy and my ability to give a voice to my clients, colleagues and community that is heard at the state and federal levels.

It might not occur to many advisors that their political involvement is part of serving their clients’ best interests, but to me and many of my colleagues, it rings true. Lawmakers and regulators — whether they are in Washington, Boston or your state capital — make good and bad policy decisions that have direct impacts on our ability to do business and serve our clients.

My state, Massachusetts, is known as the home of the legendary minutemen who, as we all learned in grade school, would spring to action on a moment’s notice to defend their friends and neighbors. As NAIFA’s Grassroots Chair, I have seen many of my colleagues answer the call to protect the financial security of the Main Street Americans we serve and care so deeply about.

We are not facing down enemy cannons and putting our lives on the line to forge a new nation, but many of our efforts have revolutionary outcomes.

» My NAIFA colleagues and I formed a groundswell of grassroots activity that helped pass the SECURE Act and SECURE 2.0, federal laws that overhauled

and improved retirement planning by incentivizing more employers to offer plans, expanding opportunities for workers to prepare for retirement and giving American families greater flexibility in their retirement planning.

» On the same day in May that more than 500 NAIFA members met with more than 300 congressional offices, the leadership of influential House and Senate committees sent a letter to the heads of the Securities and Exchange Commission and the IRS, saying that Congress would introduce corrections and clarifications to SECURE 2.0, which NAIFA members had asked for.

» Last year, on very short notice, my NAIFA-Massachusetts colleagues and I headed off a bill to create a pilot single-payer health coverage program that sneaked onto the legislative calendar during the last few days of the session and could have had consequences for advisors and their clients throughout the state.

» Similarly, my colleagues at NAIFAKentucky took quick action to get a financial planning and investment management exemption in legislation imposing a 6% sales tax on services in their state.

These are just a few examples of how insurance and financial professionals can use grassroots political involvement to work in their clients’ best interests. Often, our products and services are associated with Wall Street, but the reality could not be further from the truth. We are as Main Street as it gets, working with teachers,

firefighters, members of the military, and small business owners and their employees. We spring to action to defend our communities and our hardworking neighbors, whether by providing comprehensive insurance coverage or opposing legislation that could negatively impact their ability to achieve their financial goals.

Every agent and advisor can make a real difference through their political advocacy. Your expertise is invaluable to policymakers in your state and Washington, and they truly want to hear your clients’ Main Street stories. The clients you serve are the voters who are their constituents.

The best part is that political advocacy is easy. You don’t have to face down a line of musket-bearing redcoats. NAIFA provides numerous opportunities to get involved. We held our annual Congressional Conference fly-in earlier this spring, but now we are gearing up for August in-district meetings with lawmakers. Many NAIFA chapters also hold legislative days in state capitals around the country. You don’t have to be a NAIFA member to participate.

We serve our clients and communities with great passion. To truly work in their best interests, I believe political advocacy must be part of the equation. I strongly urge every agent and advisor to explore ways they can get more involved.

Joshua O’Gara, CLU, ChFC, CFP, is the chair of NAIFA’s National Grassroots Committee. He is the owner of O’Gara Financial Group in Woburn, Mass. He may be contacted at joshua.ogara@innfeedback.com.

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.

Are fees better than commissions?

indispensable ingredient.

A few months ago, Shlomo Benartzi — a former UCLA economics professor who is doing research to quantify the value of professional financial advice — published an article in The Wall Street Journal in which he noted “there is little data on holistic financial advice.” But his initial research has concluded that such advice could equal a 7.5% pay raise.

So despite what some may believe, the simple truth is that the commission-based model is a more effective tool in some instances. The reality is consumers must be allowed to make the choice for themselves as to which path they will pursue.

Get the regulatory framework right

This is why it is so important that we get the regulatory framework right on this issue. As we’ve already seen because of New York’s Regulation 187, consumers can be hurt when we get the regulations wrong.

There is room for both fees and commissions if we want more people to have access to holistic financial advice.

By Alex Kim

Are you of the mindset that fees are better than commissions? Or do you fall into the camp that believes commissions are better than fees? Either way, you’re wrong

The right answer is that there is room for both if the objective is to ensure more people have access to holistic financial advice so they can achieve financial security for themselves and their families. And given how many millions of people have a tremendous need for financial security today, we all should be firmly in the all-of-the-above category.

The need for financial security is staggering. LIMRA research finds there are an estimated 60 million uninsured

and underinsured American households, with an average coverage gap of $200,000. In total, that equates to roughly $12 trillion. Add this to the serious problems looming with Social Security, which the Congressional Budget Office projects will become insolvent in 2034 — at which point, without reform, the finances will require a 25% cut in benefits. Clearly, more planning and advice, not less, is the solution.

For those of you who aren’t familiar with it, Ernst and Young did a study comparing investment-only strategies with those that incorporate permanent life insurance and annuities. The conclusion was notable. By deploying 30 cents of every dollar saved into permanent life insurance and annuities, consumers achieve better outcomes — for both retirement and legacy goals.

We also know that the best way to achieve holistic financial security is by working with a financial security professional. The trusted human guide is the

For us, a metric that clearly points to the harmful effect of the regulation is the decline in the number of people covered by individual life insurance. In 2021, for example, the policy count in New York state was down 15% from 2018, the year before the rule took effect. Over the same period, however, the policy count nationally increased by 3%. So, fewer people were getting life insurance in New York at a time when New Yorkers and the rest of the country clearly needed far more of it.

Another thing to remember is that financial professionals who are compensated by commissions reach a broader spectrum of Americans of different incomes, ages, genders and ethnic backgrounds. To reach our goal of financial security for all, we certainly need more of that too.

The next time you hear someone trying to argue for one form of compensation or another, please encourage them to remember that consumers should make the choice that best fits their need. And regardless of which option they pick, we should celebrate everyone who takes the steps to get themselves and their families to a place of financial security.

Alex Kim is vice president, public policy, with Finseca. He may be contacted at alex.kim@ innfeedback.com.

Finseca is the home of the top financial security professionals. This member-driven community serves as a credible source for the profession and provides exclusive access to the brightest minds in it.

Breaking down the bamboo ceiling

The lack of diversity and inclusion can have serious consequences, not just for Asian American individuals but also for the entire financial planning profession.

By James Lee

We recently observed the month of May as Asian American and Pacific Islander Heritage Month. It’s a time to celebrate the many contributions the AAPI community has made to our nation’s history and culture. I am humbled to be the first Asian American president of the board of the Financial Planning Association.

The fact that a first-generation Korean American can rise to lead the nation’s largest membership organization for certified financial planner professionals is a testament to the profession’s intentional focus on diversity, equity and inclusion.

Many of those efforts have been focused on increasing the diversity of the financial planning profession in its entirety. All major financial planning organizations have made DEI a priority, recognizing that a diverse workforce is important to deliver the benefits of financial planning to more Americans and is correlated with financial outperformance.

The CFP Board of Standards provides a great service to the profession by publishing the demographics of CFP professionals each month. As of May 1, 24% of CFP professionals are female, while females make up 51% of Americans. Blacks and African Americans make up 1.9% of CFP professionals, while making up 14% of Americans.

Hispanics and Latinos represent 2.9% of CFP professionals, while making up 19% of Americans. Asians and Pacific Islanders comprise 4.1% of CFP professionals, while representing 6% of Americans. Clearly, the profession has much work to do if we desire a profession that reflects the demographics of our nation.

Although increasing overall representation is important, it’s equally important to ensure that planners from underrepresented communities are provided opportunities to advance after they enter the profession.

Data shows that underrepresented communities in financial services face significant barriers to advancing to senior leadership positions. According to McKinsey & Company, approximately 40% of entry-level positions in financial service firms are held by people of color, about the same percentage as in the American population. However, this share falls sharply during their careers. People of color only represent 10% of C-suite positions, a decline of 75%.

Within the AAPI community, this phenomenon is called the “bamboo ceiling.” It’s particularly prevalent in the financial services industry, where Asian Americans are often stereotyped as being good at math and are expected to excel in technical roles but are overlooked for leadership positions. While Asians represent 17% of entry-level positions in financial services, they represent only 6% of C-suite positions.

This lack of diversity and inclusion can have serious consequences, not just for Asian American individuals but also for the entire financial planning profession. It’s often said that you must “see it to believe it.”

To attract more underrepresented financial planners to the profession, next-generation planners need to see women and people of color in leadership positions. When there’s representation at the highest levels to see, it’s easier to believe.

Addressing this issue in financial planning requires taking specific actions. And we all can do our part.

» Companies must recognize the importance of DEI and commit to making real changes. That means creating a culture of inclusion, where diverse perspectives are valued and promoted and everyone has an equal opportunity to advance.

» Actively seek out and recruit diverse candidates. That could involve partnering with organizations that focus on supporting underrepresented groups and expanding outreach efforts to reach a wider pool of candidates.

» Provide training and support for employees from underrepresented groups regarding technical skills and leadership development. That could involve mentoring and coaching programs and opportunities to attend industry conferences and other networking events.

» Create an inclusive and supportive work environment for all employees, regardless of their background or identity. That could involve offering flexible work arrangements to accommodate cultural or religious practices and creating affinity groups or employee resource groups for underrepresented employees.

The invisible barriers underrepresented groups face are a significant challenge for the financial planning profession. Still, it’s a challenge that can be overcome with the right strategies and commitment to DEI. By promoting diversity and inclusion, providing support and development opportunities, and creating an inclusive work environment, companies can help break down these barriers and create a more equitable profession that lifts the financial health of all Americans.

James Lee, CFP, CRPC, AIF, is the 2023 president of the Financial Planning Association and president of Lee Investment Management in Saratoga Springs, N.Y. He may be contacted at james.lee@ innfeedback.com.

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