Indexed products are leading the way in the life insurance and annuity space. But critics continue to complain about misleading illustrations and complex products. Where do we go from here?
PAGE 12
An incredible ride with Integrity Marketing Group’s Bryan A. Adams
PAGE 6
The role of life insurance in estate and gift tax exemptions
PAGE 24 The ‘perfect storm’ driving annuity sales momentum
PAGE 28
What the end of the Chevron deference could mean for insurers
PAGE 38
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See how much 1 0 years of inaction could cost your clients – page 5
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IN THIS ISSUE
INTERVIEW
6 An incredible ride
Bryan A. Adams founded Integrity Marketing Group, the nation’s leading independent distributor of life and health insurance products. He tells Publisher Paul Feldman about his company’s journey and its goal of providing holistic solutions to all Americans.
IN THE FIELD
18 From office helper to president
By Ayo Mseka
Before Elizabeth
Dipp Metzger became New York Life’s highest-producing Latina advisor, she was a young mother helping her husband sell insurance.
FEATURE
Indexing the Market
By John Hilton
Indexed products are gaining in popularity but critics complain about their complexity.
24 The role of life insurance in estate and gift tax exemptions
By James G. Blasé
Life insurance can be an alternative to grandfathering the large federal estate and gift tax exemptions.
ANNUITY
28 The ‘perfect storm’ driving annuity sales momentum
By Susan Rupe
Interest rates, market volatility and a growing demographic are fueling annuity interest.
INSURANCE & FINANCIAL MEDIA NE TWORK
HEALTH/BENEFITS
32 What Medicare clients are asking during open enrollment
By Susan Rupe
Provider networks, out-of-pocket drug costs and the future of Medicare Advantage are on clients’ minds, advisors say.
ADVISORNEWS
36 Emotional intelligence is a soughtafter skill for advisor By Ayo Mseka
Clients and prospects want advisors to understand their needs and relieve their stress.
IN THE KNOW
38 What the end of the Chevron deference could mean for insurers By Doug Bailey
The Supreme Court decision has implications for health and property/ casualty insurers.
The evolution of indexed products
The S&P Annual Survey of Assets last year revealed $11 trillion indexed to the S&P 500. The rapid growth of new indexed products in recent years reflects how these products have transformed the industry, offering the dual advantage of potential market-linked growth and downside protection.
Indexed products, especially indexed universal life insurance and fixed indexed annuities, have evolved significantly. These products give clients the opportunity to earn interest based on the performance of a specific index, while protecting their principal from market losses. This innovation addresses the increasing demand for retirement solutions that offer growth potential and security.
Traditionally, indexed products were linked primarily to well-known benchmarks like the S&P 500. While this index remains popular due to its historical performance and familiarity, the landscape of indexed products has expanded dramatically, offering a variety of options that cater to diverse client needs and risk tolerances.
Basic indexes
S&P 500 Index: The cornerstone of indexed products, it basically represents overall market performance, encompassing 500 of the largest U.S. companies. For clients seeking simplicity and reliable historical data, the S&P 500 is a logical choice.
Dow Jones Industrial Average: Another traditional option, the DJIA includes 30 prominent U.S. companies across various industries. While it
provides a snapshot of the market, its narrower focus compared to the S&P 500 might be more suited to clients interested in a more industrial- and blue-chiporiented index.
Russell 2000: This index tracks 2,000 small-cap companies, offering higher growth potential but with increased volatility. For clients with a higher risk tolerance and a focus on capitalizing on smaller, emerging companies, the Russell 2000 may be a good fit.
Innovative indexes
Innovation in indexed products has given rise to more sophisticated and exotic indexes, enhancing the appeal of FIAs and IULs by catering to various investment strategies and preferences.
MSCI Emerging Markets Index: This index includes equities from emerging economies, providing exposure to markets with high growth potential. It’s an excellent choice for clients looking to diversify their portfolios internationally while still benefiting from the security features of indexed products.
NASDAQ-100: Focusing on 100 of the largest nonfinancial companies listed on the NASDAQ stock exchange, this index is tech-heavy, appealing to clients bullish on technology and innovation sectors. The NASDAQ-100 offers higher potential returns, aligning with clients seeking growth opportunities in the technology-driven segments of the market.
Global multi-asset indexes: These indexes combine various asset classes, including equities, bonds, commodities and currencies, offering a diversified approach within a single product. This innovation
allows clients to benefit from a balanced risk-return profile, catering to those who seek a holistic investment strategy. Risk control indexes: These indexes dynamically adjust their exposure to different asset classes based on market conditions, aiming to maintain a predefined risk level. They appeal to clients who prioritize risk management and stability, offering a smoother ride through volatile market conditions.
Exotic indexes
The more exotic indexes may be of interest to clients with specific interests or higher risk tolerances.
Volatility control indexes: These indexes aim to mitigate the impact of market volatility by adjusting the allocation between equity and fixed-income components. They are designed to provide steadier returns, making them suitable for clients looking to navigate turbulent markets with confidence.
Thematic indexes: These indexes focus on specific sectors or trends, such as technology, health care, or clean energy. They offer clients the opportunity to invest in areas they believe will outperform in the future.
ESG indexes: As awareness of sustainable investing grows, environmental, social and governance indexes have become increasingly popular. These indexes focus on companies with strong environmental, social and governance practices. Clients committed to responsible investing will find ESG indexes aligned with their values and financial goals.
Custom hybrid indexes: Some products now allow for customized indexes that blend multiple strategies or sectors, tailored to individual client preferences and risk profiles. These offer a bespoke investment experience.
Innovation in indexed products has significantly broadened the options available to clients. The diversity and sophistication of indexed products provide advisors and their clients with an ever-growing choice of strategic approaches to enhance growth opportunities while safeguarding investments. And there is no end in sight for this explosive trend.
John Forcucci Editor-in-chief
Insurers warned of risks from ‘silent AI’
As use of artificial intelligence in the insurance industry expands, global consulting firm Alpha FMC has cautioned insurers to be aware of unforeseen risks that can lead to significant financial losses — a concept they refer to as “silent AI.”
Insurers in the United States are facing increasing pressure to adopt AI, due to growing competition and client demand, while simultaneously lacking standardized regulation that would enable them to uniformly navigate AI usage. However, insurers have no empirical data or theoretical models that estimate the frequency of potential losses. Additionally, most of the related legal cases have revolved around copyright infringement rather than unforeseen risks.
Silent AI refers to potential risks in traditional property and liability insurance policies that are associated with the use of artificial intelligence but are neither explicitly included nor excluded.
For example, it can apply to an insurance policy that did not take AI-related risks into account when it was issued. Those risks could be considered “silent” because they were not specifically addressed, and the policy could unintentionally cover them because of an overly broad definition and/or the absence of specific exclusions.
MORE OLDER WORKERS FILLING THE LABOR POOL
If you think you’re seeing more older workers in the office or in the shop, you’re not imagining things — new research shows the prime working age population (25-64 years old) has significantly fallen and is being filled by older workers. At the same time, the labor force participation rate of those ages 65 or older has not reached its prepandemic level, while that of the prime working age population has reached that level.
The report, “Trends in Labor Force Participation and Employment of Americans Ages 16 or Older,” examines the U.S. civilian labor force through December 2023, using data from the U.S. Census Bureau’s Current Population Survey.
When analyzing the U.S. population ages 16 or older by age and gender, females ages 65 or older made up the largest proportion by a sizable margin. However, males of the same ages tended to make up a comparatively larger share of the labor force than females, with the labor force gaps being smallest among the youngest and oldest age ranges.
JOB SEARCHING REACHES
HIGHEST LEVEL IN A DECADE
While the prime working age labor pool shrinks, more Americans are searching for new jobs — the highest rate in a decade, according to the New York Federal Reserve. The Fed survey found 28.4% of respondents were looking for a job — the highest reading since March 2014 and up from 19.4% a year ago. That includes both individuals already out of a job and ones currently employed but seeking new roles.
Job insecurity also reached a record high, the new survey found: The percentage of those expecting to become unemployed rose to 4.4%, up from 3.9% a year ago and the highest level ever recorded for the survey, which goes back to 2014.
How much unemployment or slowdown in growth should we be willing to accept to shorten the length of time that inflation is too high?”
— Kristin Forbes, an economist at Massachusetts Institute of Technology
The increase in job searchers was most pronounced among respondents older than 45, those without a college degree and those with an annual household income less than $60,000.
HAIL CREATING HAVOC FOR INSURERS
What caused the highest weather damage costs in the U.S. so far this year? It’s not hurricanes, floods or tornadoes — it’s hail, and researchers believe hail will wreak even more havoc because of climate change.
Research suggests that climate change will cause large hailstones to become more common. Next year, scientists plan the first U.S. field study of hail since the 1970s, in which they will chase hailstorms the way some do tornadoes.
Gallagher Re, a global reinsurance firm, said thunderstorms have been responsible for about $61 billion in economic losses. Hail was likely responsible for between $31 billion and $49 billion of that total. In the same period, tropical storms and flooding together have accounted for $14 billion in losses.
Bryan Adams’ path took him from funeral homes and folding shirts to heading an industry juggernaut, Integrity Marketing Group.
Integrity Marketing Group may not have started in 2006 had it not been for Bryan Adams’ job folding shirts in a shopping mall clothing store while in college.
“One day, I was standing there and saw a sharply dressed guy — I’ll never forget him — gray suit, red tie, white shirt. He looked like a million bucks. And he’s just the friendliest guy in the world. He said to me, ‘You seem pretty good with people, you ought to come work for me.’ And I asked, ‘What do you do?’ And he answered, ‘I sell life insurance.’”
“If that guy, Gary, hadn’t asked me to do that, I don’t know where my life would be today,” Adams said.
Today Integrity Marketing Group is the nation’s leading independent distributor of life and health insurance products, and recently launched Integrity Wealth, now valued at about $50 billion.
In this interview with InsuranceNewsNet
Publisher Paul Feldman, Adams describes how Integrity has “partnered” with many firms and agencies, acquiring new talent and skills as it has built both capabilities and value, and, in the process, created an industry leader.
Paul Feldman: Tell us a little bit about yourself, and how you got into the industry.
Bryan Adams: I grew up in a small town of about 1,800 people in West Texas. My mom and dad owned three funeral homes. There’s nothing like growing up in the 1970s and ’80s with the last name of Adams and your family owns funeral homes. My sister and I worked at the funeral homes ever since we could open the door, literally — we would welcome people in. And I was washing cars, mowing lawns, cleaning caskets, all of that.I ended up spending a lot of time with people within the investment part of the company I was with. I spent time with people in corporate finance, actuarial people, as well as distribution and marketing people. I connected with and enjoyed working with people within marketing and distribution because it was all about business development and how you can leverage technology for the betterment of your business.
For my dad, it was a calling to serve people. For my mom, it was much more
of, “OK, well, let’s make sure we take care of not only everybody else’s family but our family, too.” My mom and dad worked all the time. There were a lot of times we didn’t have dinner together because there were visitations, etc.
Sometimes my mom and dad would say, “I can’t believe that family didn’t have any plans in place.” I remember those conversations. I was probably 9 years old when my parents were talking about a family in town who had done pretty well, but their loved one passed away, and they couldn’t pay for the funeral.
and straighter than most people, because I folded so many pants and shirts in that job.
One day, I was standing there and a sharply dressed guy — I’ll never forget him — gray suit, red tie, white shirt. He looked like a million bucks. And he’s just the friendliest guy in the world. He said to me, “You seem pretty good with people, you ought to come work for me.” And I asked, “What do you do?” And he answered, “I sell life insurance.” And I said, “Man, listen, I grew up in a funeral home, and I’ve been wondering this my whole
And my dad said, “Don’t worry about it, we’ll figure this out.” My mom was like, “OK, again, we need to provide for our family, so how are they going to pay for it?” And there would be this natural tension between the two of them.
I remember at an early age I asked, “Why don’t more people plan for this if they know it’s going to happen? It’s inevitable that we’re all going to pass away.” And my dad said — I think he quoted Winston Churchill — “Because Americans are the only society on earth that believes that death is optional.” And you would see families who had life insurance and how much easier it was for them — the relief in those families was evident.
Later, when I was in college at Texas Tech, I was working in the mall in retail. I was the guy who was folding the shirts. You would come in, look around, and you’d kind of mess them up, and I’d be like, “Oh, my God, I’ve got to fold them again.” To this day, I can fold a shirt faster
life. Why don’t more people own life insurance?” And he said, “Well, that’s what we do, we give people peace of mind.” So I went to work with him.
Back in those days, you were walking door to door and trying to get in to tell people about what we were offering. But I had this passion. I could say, “Look, I grew up seeing the issues when someone didn’t have life insurance, and I can help you with this.” I had some early success with that. After college, I went to work for the investment group that owned those insurance companies. The rest is history. It has been my passion to help people.
Feldman: How did you start Integrity? Where did it all begin?
Adams: I started this out of my house. I started with my dog — he’s no longer with us — literally under my desk. I worked out of my house for a long time. When I got married, I had six people
Bryan Adams, his family and Integrity Marketing Group give back to the community in many ways, including a holiday toy drive.
working in cubicles in the house. My wife and I dated for a couple of years, so she was accustomed to the situation. She was cool for about the first year, and then she said, “OK, I think it’s about time for you to get an office.” It has been an incredible ride. I pinch myself every day.
Now, we’re serving people holistically. There’s a huge need for people to be served holistically with their life, health
advisement. We think that there’s a way for us to help them plan for the good days ahead in their retirement.
As you get older, there are two main concerns that people have: their health and their wealth. Your health may determine where you might rank those two. If you’re older and you’re healthy, then you tend to be focused on how to maintain your wealth. If, all of a sudden, you have
and wealth needs. That’s really the genesis of how we started Integrity. It was those early days understanding that people need what we do. We’re in one of the most noble professions in the world. We serve people in their most important times. And everybody wins. The carrier wins, agents win, agencies win — ultimately the consumer must win, first and foremost. It’s a virtuous business, a noble profession and I’m proud to be part of it.
Feldman: Integrity is one of the largest distributors in the United States. Tell us about your distribution and how you cover other markets, because it’s not just life insurance, health insurance and annuities. Now you also have Integrity Wealth.
Adams: We’re passionate about the wealth business today. We believe that most Americans don’t have great access to wealth advisement. I think a lot of the bigger banks and institutions want to focus on the ultrahigh net worth. But most of our clients — the everyday people, like my family — don’t get great service in wealth
a health issue that pops up, then it’s, “OK, gosh, do I have the right health insurance product? And how am I going to move on from this event to make sure that I live a long and healthy life?”
Also, people inherently want to leave a legacy and be remembered long after they’re gone. We’re able to do that with life insurance. Life insurance is one of the greatest tools to help people leave a legacy, whether that’s planning for your final expenses or for estate planning — or everything in between. We have so many incredible resources and products, and incredible carrier partners that we work with on providing those.
A lot of our businesses had been involved in the wealth management business with their own broker-dealer or registered investment advisor. We decided to bring those broker-dealers and RIAs together under one roof with Integrity Wealth. That enables us to leverage all those different capabilities — so that everybody has the best-in-class technology, service, custodians and resources; and so that we can make sure that we’re giving everyday Americans the best world-class
wealth management resources. We’re able to give them those resources that you would get at any large institution or big bank. Now, we’re able to meet them and give them even better coverage on their wealth side as well. We have decades of experience through our partners. We’re excited because now we’re able to leverage all those different capabilities, and our size and scale, to give people more options and ultimately serve them better.
Feldman: How do you see wealth management evolving? How has it evolved in recent years?
Adams: We’re incredibly excited. In fact, we just brought in a new president for Integrity Wealth, Craig Walling. He has tremendous experience in the industry and has done some amazing things, including heading UBS Private Wealth. One of the things we wanted to do is holistically serve people with their life, health and wealth, and do that by using a lot of our technological resources. Two and a half years ago, we had zero wealth assets; today, in aggregate, we have almost $50 billion of assets that we’re helping people with. We think that we’re just beginning that journey. It’s a big opportunity for us to meet people where they are. With the millions of customers that we’re already serving, and the hundreds of thousands of agents that we help on a dayto-day basis, we think that there’s a big need for us to be able to serve our agents. We’re looking at opportunities to help them get dual registered and get licensed in the wealth space, if they choose. We have world-class resources to be able to do that. In addition, we think that there’s an incredible opportunity for us to leverage our platform to bring in other wealth managers, to be able to leverage our technology, our resources. We want to meet customers wherever they are. We’re just getting started on that, and that’s a big part of where we’re going from here.
Feldman: I know you’re working to bring new people to the industry. Most organizations only want to work with somebody who’s already in the business, and those people just go from marketing organization to marketing organization.
Integrity Marketing Group employees clean up a playground in Fort Wayne, Ind.
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Adams: Most people think that this is a male-dominated industry, and I think it has been for a long time. One of the things I can say about Integrity, more than half of my executive team are female and diverse. If you look at our workforce, 63% of our employees are female — more than half of our customers are female. If you look at our agent base — we have the largest agent base in the country — 46% are female, which is incredible, and 40% of them are from minority communities. We’re meeting people where they need to be met in their communities; we’re incredibly passionate about that, and I think we’re truly changing the industry in so many ways for the better.
We want to serve all Americans. I mean, I’ve gone through this with my mom and dad. My dad’s gone through some health issues recently. As we’re going through it, my dad is being taken care of with incredible Medicare products that we created. He has great long-term care insurance. He’s not in a nursing home, but in case he ever is, he had the foresight to buy that policy 25 years ago. He has great life insurance coverage through our organization, he has annuity products for his wealth management and he also has wealth management products. As I’m looking at this from my mom and dad’s situation, as the one who manages a lot of that for them, well, that’s another reason I look at it and say, “There must be holistic planning.”
As these things happen, I need to explain it to my mom. Sitting down with my mom, who is one of the smartest people I’ve ever met, she’ll ask me — because these are complex situations — “Are we going to be OK?” And I say, “Well, let me break this down for you.” And it’s something I’m incredibly passionate about, because we want to make sure that everybody’s taken care of and everybody’s invited into this process, because everybody’s going to be impacted. Whether it’s your health insurance, your life insurance or your wealth management, everybody’s impacted.
We just need to make it simpler, easier to understand, and, ultimately, more human. So people know they’re being seen and understood and we’re not just selling some product to sell a product. These are products that they’re going to need at
some point, and I’m living through this with my parents today.
Feldman: Mergers and acquisitions have been an important driver for Integrity. How do you see that playing out in the future?
Adams: We never acquired companies just to acquire companies. We are very strategic at partnering with people. And we don’t call it “M&A” or “acquiring,” we call it “partnering.” It’s how I started Integrity in the beginning with this idea, in 2006, and my two co-founders and I
We tell employees, “Whatever your title is, it should also be owner, and here is your ownership.”
came up with this concept. We thought if we all keep on beating each other up and trying to fight for every last nickel and dime, it’s going to be a race to the bottom. But if we all come together, the rising tide will raise all boats. I fundamentally believe that. That’s where we created Integrity, with this idea that let’s all work together and serve more people and leverage our scale and size.
We didn’t do that with the idea of acquiring businesses; that kind of happened later as people started needing succession planning, etc. But what we found is that if you find people that have the best distribution, you have the best resources, you have the best products and services in the best geography. By coming together, we can serve people holistically, and we can do that anywhere in the U.S. So, it has been an important part of our being able to bring in new capabilities in data and market research, like we’ve done with some of our businesses, marketing advertising with Thomas Arts, with some of the technology businesses we’ve partnered with. Product development, like Nexus, which is an incredible product
development business — Ron Schertz is one of the most incredible leaders.
Mike White innovated the Medicare space with AIMC and developed a lot of Medicare supplement products. Tim Ash has really perfected the institutional service of clients and organizations with Ash Brokerage. I mean, we brought in so many incredible partners with the idea that one plus one equals a lot more than two. And it has been a lot of fun, as we’ve been able to say, “OK, let’s look at what you are great at, what you’re world-class at, and let’s share those capabilities. Then go out and serve more people with this kind of focus on our core values of Integrity, of family, of service and respect and partnership.”
Feldman: What is one thing about Integrity that you are most proud of?
Adams: I think one of the things I’m most proud of is that we’re an employee-owned company. In 2019, we became employee owned. We decided to give some of our shares to every single employee. Every employee at Integrity — regardless of whether you’re a janitor or you’re an executive — is a shareholder in this company. Our employees and our partners are the majority owners of our company today. It’s something I’m prouder of than anything else that we’ve done.
It comes back to this philosophy that we’re a service company. I fundamentally believe that, as an owner, you will serve people better than as just an employee. We tell employees, “Whatever your title is, it should also be owner, and here is your ownership.”
Our employees on average have seven times the amount of employee ownership as they do in their 401(k) plan. We gave them the stock; we don’t charge anybody for it. They didn’t have to get an employer match, or all that type of stuff. We said, “We want you to be an owner of this company. And it should change everything. It should change the way you come to work, it should change the way you interact with your co-workers, the way that you innovate this industry, and, ultimately, how you serve the agents and their clients as an owner of the business.” I think it’s one of those things that will help us continue to differentiate Integrity, long term, in being able to serve people better.
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Indexed products are leading the way in the life insurance and annuity space. But critics continue to complain about misleading illustrations and complex products.
Where do we go from here?
BY JOHN HILTON
Americans love the idea of participating in the stock market, especially when they’re not risking any losses.
That is a true winwin, and is the concept driving indexed products to spectacular sales of both annuities and life insurance.
On the annuity side, insurers who viewed indexed trends skeptically are rushing products out to join the sales frenzy. Indexed annuity sales totaled $59.3 billion through the first half of 2024. By comparison, $55.5 billion worth of indexed annuities were sold for the entire year in 2020.
Indexed annuity sales are on pace to rise 20% over last year’s record-breaking numbers.
Life insurance is a little different story. Whole life remains the dominant product, although in a sales decline, and term life remains a source of quick, direct-to-consumer sales. But Sheryl Moore, CEO of Wink Inc. and Moore Market Intelligence, is projecting record sales of indexed life insurance.
“Right now, the rates are absolutely fantastic,” Moore said in late August. “You have to remember that we’re coming off of a historically low interest-rate environment and everybody’s kind of high on these caps and participation rates because they’re so attractive. It’s a lot easier sale than it typically has been in a long time.”
John Foard is a certified financial planner and co-founder of Crown Advisors in Mooresville, N.C. He does not recommend indexed products for every client. With no downside, they are a good fit, though, for those who shy away from risk, Foard said.
“It is the fastest-growing segment of the life insurance market,” Moore said earlier this year.
Beyond sales numbers, the indexed universal life insurance market continues to attract big-case sales as well as critics from across the industry.
Those criticisms are among many threats to the indexed sales phenomenon. The industry has no control over some challenges, such as an interest rate cut from the Federal Reserve, an action expected to take place after this issue went to press.
“The market is expecting multiple rate cuts from the Fed this year,” said Michael Normyle, U.S. economist for Nasdaq, during a recent webinar. “Close to three cuts is what markets are pricing currently.”
to not replace it with a product that has a cap of 9%.”
Insurers meeting the need
The indexed market is not lacking for products as insurers engineer new indexes and new products to meet the need. Four new accumulation-oriented IUL products hit the market within a few weeks in August.
But for many others, an indexed annuity or IUL product is the right answer in the present economy. Interest rate spikes, especially in indexed annuities, whenever there is market volatility, Foard explained. People remember the market wipeout in 2008-09, and even Black Friday in October 1987.
“You could argue the decision to implement an indexed product, such as an annuity, to protect one’s assets after a major market correction or bear market is the result of fear or emotion,” Foard said. “Nonetheless, when an individual or family sees a major portion of their life’s savings wiped out in a fraction of the time it took to accumulate it, it creates fear of the unknown.”
The Federal Reserve adjusts the federal funds target rate range in response to changes in the economy. Manipulating rates helps the Fed satisfy a dual mandate to keep prices stable and maximize employment.
After a long period of near-zero rates, the Fed got busy in early 2022. Over a 16-month period, Fed Chair Jerome Powell announced 11 rate hikes taking the fed funds rate from 0.25% to 0.50% to 5.25% to 5.50%.
On the annuity side, insurers are realizing that structured annuities — also known as registered indexed-linked annuities — are not just a passing fad. Many companies that were big in the variable annuity space have pivoted to structured annuities.
Jackson Financial is one example. Once the No. 1 seller of variable annuities, the company endured a financial downturn along with the product line. Jackson engineered a comeback on its Market Link Pro RILA suite, introduced in late 2021. RILAs were introduced in 2010 by AXA Equitable Life Insurance Co., now known as Equitable, but it took some time for RILAs to catch on. RILAs hit $2 billion in sales by 2014, the year that Allianz, CUNA and MetLife introduced RILA products.
During the first half of 2024, LIMRA lists 19 sellers of indexed-linked annuities, accounting for nearly $31 billion in halfyear sales.
“I think that we’re going to continue to see more players enter the structured annuity space, even insurance companies that don’t have variable annuities,” Moore said. “When Athene hopped in there, that was a surprise. When F&G hopped in there, that was a surprise. Because these were companies that didn’t have VAs.
“So, I think we’re going to continue to see new players hop in, and I don’t see the growth slowing down anytime soon.”
American Equity’s IncomeShield 10 was the No. 1 selling indexed annuity, for all channels combined, during the second quarter, Wink reported.
The time is (economically) right
Indexed products sit squarely in the sweet spot amid an equities market that is robust but also prone to turbulence and uncertainty, a massive market of retirees and near-retirees, and rising interest rates.
One by-product of the rising-rate environment is an eagerness to exchange annuities for better yields.
“There has been a ton of replacement activity in the annuity market,” Moore said. “There are S&P 500 caps out there of 3.5%, and it almost seems like a crime
“They’re hitting the top of the spreadsheets for income. So, that’s really what our industry has come down to when we’re talking independent insurance agents,” Moore said. “American Equity has just been killing it. They’ve been at the top of the spreadsheets for some time. Their pricing is attractive.”
Moore
Normyle
Foard
How informed are consumers?
While strong sales are good news for agents, insurers and everyone in between, the critics of indexed products are not going away. “Zero is our hero” is a marketing slogan used to promote indexed annuities and remind consumers that they won’t lose money with the zero floor.
That concept works well in a mediocre or down market. But the Dow Jones Industrial Average has more than doubled from its pandemic low of 19,200 and rose about 10% in the first nine months of 2024.
The caps and participation rates on most indexed products limit growth. Typically, annual caps on indexed annuities range between 4% and 8%, although the exact cap can depend on the insurer, the type of index and the specific product.
Likewise, once funds are committed to an indexed product, they cannot be retrieved without paying a surrender penalty. Consumers need to know what they are getting into, Foard said.
“You are committing your funds to that insurance company’s specific product for a minimum specified amount of time, such as seven to 12 years, depending,” he explained. “This means you are unable to leave that product or company for the stated number of years without incurring a penalty to do so, and the penalties can be rather steep — especially in the earlier years.”
Indexed products are often confusing even for financial professionals, said Michael Collins, financial advisor and founder and CEO of WinCap Financial.
return, and I’m just like, ‘Yeah, that’s not guaranteed, but that’s just insane,’” Moore said. “Nobody should buy an indexed annuity thinking they should get 15% every year, but it’s happening.”
there’s a gap between what I’m hearing from consumer representatives and insurance companies that’s more significant than what I would otherwise expect, and I can’t quite figure out why,”
Nobody should buy an indexed annuity thinking they should get 15% every year, but it’s happening.
— Sheryl Moore
The issue with illustrations is the same for both indexed life insurance and annuities — unrealistic projections — but is playing out differently.
On the annuity side, the National Association of Insurance Commissioners adopted the Annuity Disclosure Model Regulation in 2012. Section six covers illustrations for fixed and fixed-indexed annuities with nonguaranteed elements.
However, only 10 states have adopted the specific section dealing with annuity illustrations.
said Michael Humphreys, Pennsylvania insurance commissioner. “I’d like us to be comparing illustrations with the same basic premise so we can all agree on whether they pass or fail, but we’re not there.”
IUL in court
Problems with IUL illustrations are being fought in court more so than in front of regulators. IUL is often part of complex premium financing deals with large amounts of money at stake. Several of these deals have gone bad and led to lawsuits.
“Clients that I would not recommend indexed products to include individuals who are seeking immediate growth or guaranteed returns on their investments, as well as those who have a low risk tolerance and are not comfortable with potential market fluctuations,” Collins added.
Illustrated concerns
The confusion that comes with indexed products is rarely helped by accompanying illustrations, critics say. Rather than helping clients understand, or at least showing them a realistic expectation, illustrations often do neither.
“I have some products that are illustrating a linear 15% guaranteed annual
“Greater adoption across more states would ensure more consistency in how carriers approach annuity illustrations, providing a uniform standard that benefits both consumers and the industry,” said Mike Considine, executive vice president and head of U.S. government and regulatory relations for Athene.
Considine and Adam Politzer, chief product officer for Athene, joined a Life Insurance and Annuities Committee meeting to talk about annuity illustrations during the NAIC summer meeting in August.
“I feel like with illustrations,
In other situations, internal costs can cause an IUL account’s value to drop substantially. That puts a policy at risk of lapsing, and the policyholder is on the hook for higher premiums—sometimes significantly higher premiums—just to keep the policy intact.
The common thread with IUL lawsuits nationwide is the illustration presented to buyers.
Actuarial Guideline 49 was adopted in 2015 to address IUL products created after the original 1997 illustration model was adopted. Insurers quickly got around it by offering IUL products with multipliers and bonuses.
Collins
Considine
Politzer
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That led to AG 49-A in 2020 and, eventually, AG 49-B. Regulators referred to the latter update as “a quick fix” when adopted in 2023.
Moore called on the NAIC to reopen and amend model regulation 582, which covers life insurance illustrations. Regulators are not eager to take on that fight, with some predicting it will take three years minimum to complete.
“I’m seeing way more lawsuits on indexed life than I do on indexed annuities,”
avoid any perception of a direct investment in the stock market.
Awareness of all fixed products grew following the Great Recession of 2008-09. Millions of near retirees were crippled financially when retirement accounts lost a huge chunk in the market collapse. “Flight to safety” entered the retirement planning lexicon as new indexed products offered the opportunity to participate in market gains without ever losing valuable retirement dollars.
I do think there will be more lawsuits related to indexed annuity illustrations. I just think we haven’t had a market environment where people are getting enough zeros that they’re saying, “Hey, this isn’t what I signed up for. Let me talk to an attorney.”
— Sheryl Moore
Moore said. “But I do think there will be more lawsuits related to indexed annuity illustrations. I just think we haven’t had a market environment where people are getting enough zeros that they’re saying, ‘Hey, this isn’t what I signed up for. Let me talk to an attorney.’”
Everybody gets an index
Equity indexed annuities first appeared in 1995 as an innovative product design that gave consumers a path to earn interest based on the performance of a stock market index, most commonly the S&P 500, without any downside risk.
By 2006, the industry realized the word “equity” was too confusing. Products were renamed “fixed indexed annuities” to help
Then came the proprietary indexes. Moore counts roughly 160 different indexes now, many with grandiose names such as the JP Morgan Mozaic II index.
One issue is the lack of history with many of these proprietary indexes. A traditional index like the S&P 500 has decades of history to provide consumers with thorough illustrations based on historical performance. Newer indexes don’t have that.
“It’s been a bull run over the last 10 to 20 years,” Politzer said. “As a result, any reliance on that period of data is going to show a somewhat optimistic forecast of the contract. It’s just the nature of how the math is completed. We’ve actually added an extra disclosure to our
illustration as a result.”
Politzer conceded that some illustrations showed unreasonably high results and said Athene pulled “a couple because we weren’t comfortable putting them in front of customers.”
Then there are the “hybrid” indexes, a combination of multiple indexed asset classes or securities, often with a volatilityoverlay mechanism to stabilize returns.
Illustrations might not be as big of a factor as in the past, Moore said, because many agents are “flocking to the triedand-true” indexes such as the S&P 500.
“The conversations I’m having with agents … I’m getting feedback where they’re saying ‘I don’t trust hybrid indexes,’ or ‘My clients did not fare very well with their indexed hybrid allocation last year, and so I’m burned out on them,’” she said.
Volatility still present
The overall economy remains far from a comfortable, confident position, analysts from Nasdaq said during a recent webinar on economic trends and index innovation hosted by the National Association for Fixed Annuities.
While the Fed can exert influence through multiple rate cuts this year, there remains concern about the labor market balance and potential recession risks, said Normyle, joined by Mark Marex, senior director in index research and development for Nasdaq.
The COVID-19 pandemic highlighted the need for downside protection and diversification in a portfolio, Normyle said. Insurers can provide that through indexed products.
“The biggest thing that we continue to see and hear from clients is that investors want more choice,” Normyle said. “They don’t want to only be presented a menu of S&P 500 [volatility] control products that are fixed annuities. They want to be able to do RILAs. They want to be able to do something more exciting in the equity sleeve.”
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 X @INNJohnH.
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Before she became New York Life’s highest-producing Latina advisor, Elizabeth Dipp Metzger was a young mother helping her husband sell insurance.
By Ayo Mseka
Before Elizabeth Dipp Metzger became a financial professional, she would spend her days helping her husband, Brian, sell insurance from his downtown office in El Paso, Texas, with their young children in tow.
Today, Metzger is president and founder of Crown Wealth Strategies, a comprehensive wealth solutions firm where she and her husband work together to bring harmony to their clients’ finances and their families so that they can enjoy their success and have peace about the future. She is New York Life’s highestproducing Latina advisor.
A day at the office
As a financial professional, Metzger provides her clients with an integrated financial and insurance strategy focused on maximizing value for her clients. She primarily supports families, business owners and the affluent market in planning for retirement, as well as doing college, estate and business planning. She focuses on working with physicians, professionals and business owners in the affluent market.
Each day Metzger spends with these clients is “100% different,” she said as she described her typical day at the office. “And that’s what makes it so fun to do,” she said. “I love the flexibility of my career and the ability to work with various people from all walks of life.”
Some of the other enjoyable aspects of her job are the relationships she has been able to build along the way with her clients and her ability to use her knowledge and ability to help make a positive difference in their lives.
On any given day, Metzger will have three or four meetings with various clients. She also sets aside time for estate and retirement planning, which, she said, “Is fascinating, as each client’s plan differs and their needs and goals are different. I can be working on a retirement plan, an education plan or a complicated
estate plan for multiple generations.”
Working side by side with Metzger is her husband, Brian. She said this working arrangement has its rewards and challenges.
One reward is having a husband as a business partner who understands the way she works, as well as her personality, she said. Another is that both bring different strengths to the business.
everything about a topic, she knew how to research and get an answer.
“I’ve used this approach to this day,” she said, “as I engage clients with more complex problems. My resources allow me to work with even the most complex cases.”
She has also pushed to be a lifelong learner and continues to expand her knowledge. She obtained her master’s
“For example,” she said, “he is the best person I know for prospecting, which allows me to focus on the planning aspect of the business. And there is the accessibility that comes with working with someone who is also available at home.”
And one of the challenges? “Trying to keep work at work and not take it home with us,” she said.
Encountering hurdles
As a female professional in a largely male-dominated industry, Metzger encountered a few hurdles as she navigated her way to the top. The biggest hurdle, she said, centered on the presumptions that many people had about her knowledge of financial matters.
“At the beginning, in all honesty, you don’t have as much knowledge as you know you will with experience,” she said. So she leaned on resources and people with the expertise she needed. This allowed her to demonstrate to her clients that even if she didn’t know
degree as well as her Certified Financial Planner and Accredited Estate Planner designations.
Collecting accolades
Metzger’s years of hard work and dedication to her clients have paid off handsomely. She has received numerous awards and accolades. She is a member agent of The Nautilus Group, a service of New York Life, and a select group of less than 250 member agents nationwide focusing on business and estate planning.
She is also on the advisory board of directors at New York Life. In addition, she has been a member of Million Dollar Round Table’s Top of the Table since 2014 and is on the list of the 2023 Forbes’ America’s Top Financial Security Professionals.
Metzger is a past recipient of NAIFA’s Advisor Today’s Four Under Forty Award, which annually recognizes four financial professionals who have achieved excellence in their profession
the Fıeld A Visit With Agents of Change
by or before the age of 40.
It’s not her plan
Metzger believes that her success in the business can be attributed to many factors, including her grit and determination to succeed.
“I think my grit and pure determination to help my clients are reasons for my success,” she said. “When you have your clients’ best interests at heart, everything falls into place.”
In addition, she said, she has always had a great support system in her friends and family, who have supported all of her aspirations.
Metzger said many of her clients appreciate her honesty and integrity. “I pride myself in always giving my best financial guidance and recommendations, even if it is not necessarily what my clients came in for or what they wanted to hear. This is something that I think a lot of my clients come to me for, as they know I will maintain honesty through my practice,” she said.
The following piece of professional advice that Metzger received early in her career — and one that she has adhered to throughout her time in the business — has also played a key role in her success: “It’s not my plan, it’s my client’s plan. It’s not my money, it’s their money. When I put myself in my clients’ shoes, I can work best for them,” she said.
Metzger said her advice to young advisors is “Understand that this is your business.”
“No one tells you how to run your day. To succeed, you must set up processes and systems that are repeatable for success. The most basic piece of advice is activity. If you don’t meet with people, you will never succeed. Don’t presume that because a client didn’t engage during a meeting that it was a bad meeting. These are all steppingstones to having the experience and expertise you need for a long career!”
Giving back
Despite her busy days at the office, Metzger still has time to give back to numerous charitable organizations in the El Paso community. She and her family support the United Way, Boy Scouts and the Paso del Norte Children’s Development Center. They also sponsor
the Children’s Oncology Unit Playroom at the El Paso Children’s Hospital. The Dipp Metzger S.A.M. Foundation Oncology Unit Playroom is one of the busiest playrooms in the hospital because pediatric oncology patients spend the longest amount of time in the hospital. The playroom is the home of the hospital’s therapeutic art program and puzzles, games and story hours.
“I have always had a commitment and connection to children,” Metzger said, in explaining her support of the unit. “One of my previous jobs was as a teacher for 3-year-olds. When I saw the playroom, I knew it was something I wanted the kids to have access to during the difficult times they were going through.”
Sharing her reading list
With all that Metzger has on her plate, she still manages to achieve a healthy work/ life balance. And how does she accomplish this feat? “I schedule my family and personal events on my calendar,” she said. “I always put my family first, and this is important as well for my staff. With this focus, we are more efficient in the time we are concentrating on our work.”
Something else that is helping her maintain a healthy work/life balance is the time she makes for fun and relaxation. She loves to garden, spend time with her family during her down time and read. Among the books she has read recently:
» Conquistador — about the Spanish conquest of the New World, because she loves history and her family is from Mexico.
» Seabiscuit — Because she always likes stories about the underdog.
» Willpower — “I believe grit is a huge reason for my success, and I am always looking to expand my knowledge and my perspective of the capabilities of determination,” she said.
Ayo Mseka has more than 30 years of experience reporting on the financialservices industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@ INNfeedback.com
An annuity is intended to be a longterm, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to nonqualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as surrender charges (deferred sales charges) for early withdrawals. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its subsidiaries, have a financial interest in the sale of their products.
Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues.
Securian Financial is the marketing name for Securian Financial Group, Inc., and its subsidiaries. Minnesota Life Insurance Company and Securian Life Insurance Company are subsidiaries of Securian Financial Group, Inc.
For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it would be accessible to the general public.
Man who lost $16M in life policies revives lawsuit
A federal appeals court gave a partial win to a Connecticut man claiming that AXA Equitable allowed his life insurance policies to lapse without any payment reminder
Malcolm Wiener retired in 1986 and bought three life policies from AXA totaling $16 million, court documents say. The universal life insurance policies did not require regular premium payments. Wiener could skip premium payments or change them, as long as he maintained enough funds in each policy account to cover his monthly deductions for the cost of insurance and other fees.
AXA agreed to send two notices to Wiener yearly to remind him of the required premiums. When he bought the policies, Wiener was 51 years old and chose to delegate policy management to his former company, Millburn, which reviewed notices from AXA and made necessary payments.
AXA claimed that it sent lapse notices, but Wiener denied receiving any. Because no payment was made by Dec. 1, 2013, AXA terminated the policies, costing Wiener $16 million in potential death benefits.
WILL LIFE INSURANCE GO ‘GREEN’?
With so much consumer interest in healthy living and sustainability, will the life insurance industry begin to offer “green” life insurance? A panel of researchers gave their views during a recent Society of Insurance Research educational session.
Studies have found a link between reduced carbon footprint activity and improved mortality risk , said Matt Berkley, director of strategic research with RGA Reinsurance.
Corporate Insights also found that between 20% and 30% of survey respondents said they would be willing to share personal data such as information about their driving, diet and spending habits in return for a premium discount.
WHY MIDDLE-INCOME AMERICANS AREN’T BUYING IT
Middle-income Americans, those with annual household incomes of $50,000 to $149,999, represent the largest market opportunity for the financial services industry, according to the 2024 Insurance Barometer Study by LIMRA and Life Happens. Why aren’t more consumers in this bracket buying coverage? They believe it’s too expensive, the survey revealed.
Yet, since the first annual study was conducted in 2011, consumers have consistently overestimated the cost of life insurance, the survey said. The most recent study shows that about three-quarters (72%) of Americans overestimate the true cost of a basic term life insurance policy, and younger Americans are likely to think it is three times its actual cost.
QUOTABLE
The
consumer must prioritize life insurance as they do other expenses. If they prioritize it, they’ll find the money.
WHAT THE INDUSTRY MUST KNOW ABOUT GEN Z
Generation Z is the newest generation to reach adulthood, and the industry must pay attention to the unique needs of this age group if it expects to reach its members. Gen Z gets most of its information from social media and seeks to have a personalized experience when buying products and services. So insurers that want to reach this age group must up their social media game while delivering an experience that meets the needs of these young adults. That was the word from a recent Society of Insurance Research discussion.
Gen Zers make up about 18% of the U.S. population and have grown up using social media in their daily lives, said Kendall Gadie, associate director at Comperemedia. Gen Z is also the most diverse generation, he said, with more than one-quarter identifying as a race other than white and a large portion identifying as part of the LGBTQ+ community.
Growing up in a digital world has given Gen Zers an elevated expectation of being offered a personalized experience in all their transactions, Gadie said. “This puts more pressure on insurers, and really all brands, to be able to do that.”
— Stafford Thompson Jr., former senior vice president of life and executive benefits business management, Lincoln Financial Group
The role of life insurance in estate and gift tax exemptions
How life insurance can be an alternative to grandfathering the large federal estate and gift tax exemptions.
By James G. Blase
With the November election rapidly approaching, discussion about the need to grandfather the current $13.61 million federal estate and gift tax exemptions has heightened. “Use it or lose it” is the common pronouncement. But for high net worth individuals, are large lifetime gifts as beneficial as they may first appear? Is there any other alternative out there that can produce better overall results for the individual and their family?
Grandfathering the exemptions
The sunset of the current large federal estate and gift tax exemption is scheduled
to take place in 2026. It is likely that when we get to that sunset, the federal estate and gift tax exemptions may be reduced by 50% or more — from as much as $14 million or more to less than $7 million. For a married couple, these numbers double from as much as $28 million or more to less than $14 million. At a federal estate tax rate of 40%, the resulting estate tax differential for a married couple may be $5.6 million or more.
With tax savings this large, isn’t it a no-brainer for high net worth individuals to gift away the large federal estate and gift tax exemption before any potential sunset takes place? After all, estate planning attorneys have developed techniques, such as the spousal limited access trust (or SLAT for short), as a way for married couples to gift away a large amount of assets and still retain use of the same, directly or indirectly, during their lifetimes. The answer may not be clear-cut for several reasons, and at least one other alternative should first be explored.
One of the reasons? Because of the way the tax code is structured, lifetime gifts around $6 million or so per person have zero grandfathering effect. Individuals must gift more than this amount in order to produce any grandfathering of the current $13.61 million exemption. The problem is that this is a lot of assets to gift away during the taxpayer’s lifetime, especially if a married couple seeks to double this amount.
Further, and despite the best-laid plans of estate planning attorneys, it is questionable whether any estate plan designed to allow a married couple guaranteed access to all the transferred assets during their joint lifetimes will survive a successful attack by the IRS. Even if a “reciprocal” plan were to pass IRS muster during the couple’s joint lifetime, there is a good chance that after the first spouse dies, the surviving spouse will have at best access to only one-half of the transferred trust funds and potentially have access to none of them.
Another reason is that the after-tax benefits of large gifting are more limited than they may appear at first blush. Assume, for example, that a single individual makes a $10 million gift of securities in 2024 and that the 2026 exemption ends up at $6.5 million. The individual has thus grandfathered $3.5 million of the larger federal estate and gift tax exemptions and saved $1.4 million in estate taxes in the process. Also assume that the individual’s income tax basis in the $10 million of gifted securities was $4 million and that the donee’s combined net capital gains tax rate, including the net investment income tax and net state income taxes (i.e., after the federal tax deduction then is in effect) is 23%. The built-in capital gains tax on the gifted securities is $1.4 million, or the same as the federal estate tax savings.
Of course, the facts involved will be different than these, but you get the picture. Large gifts of securities or business interests typically carry with them a significant amount of built-in capital gains taxes, taxes that would be avoided if the taxpayer held the assets until death. And if sunset does not occur, or if the tax laws are later changed during the taxpayer’s lifetime to reinstate the large federal estate and gift tax exemptions, taxpayers making a large transfer may have only hurt their family, at least in the short term.
The potential adverse income tax consequences compound if the individual has a significant “portability election” amount available from a predeceased spouse. The portability election amount essentially is already grandfathered, and lifetime gifts by the surviving spouse use up the portability amount before they use up the surviving spouse’s own exemption amount. As a result, there is zero tax savings immediately after the transfer of the portability amount there, but as with all lifetime gifts, there can be a significant carryover income tax basis involved.
What if one of the purposes for making the grandfathered gifts is to remove future appreciation from the taxpayer’s gross estate at death? Would this make the decision to make a large gift simpler? At the assumed 23% effective capital gains tax rate, the net tax advantage in favor of a large lifetime gift should be approximately 17% (or 40% minus 23%) of the future appreciation. Now assume the original $10 million in transferred assets doubles in
value each 10 years, or to $80 million after 30 years. Of the $70 million in growth, the net tax savings to the taxpayer’s family by investing the original $10 million in an irrevocable trust would be $11.9 million ($70 million plus 17%).
The life insurance alternative
The question is whether there is an alternative that will produce the same or greater overall financial benefits to the taxpayer and the taxpayer’s family but without causing the taxpayer to lose the full economic benefit and/or control over the transferred assets.
monthly for 30 years at an annual rate of 7%, could have grown to $14 million. If the $14 million were part of the surviving spouse’s taxable estate, the net amount, after 40% estate taxes (and assuming no state estate taxes on the same) would be $8.4 million, or approximately 70% of the $12 million of income- and estate-tax-free life insurance proceeds inside of the irrevocable life insurance trust, payable when the surviving spouse dies.
Now assume that the same $148,700 was instead invested annually for 30 years inside of an irrevocable trust outside the couple’s taxable estate. The net amount,
The sunset of the current large federal estate and gift tax exemption is scheduled to take place in 2026. It is likely that when we get to that sunset, the federal estate and gift tax exemptions may be reduced by 50% or more.
Assume, for example, a couple with a 62-year-old husband and a 61-year-old wife who both are in preferred health. Instead of gifting $10 million in securities, the couple decides to keep full control over the securities and use a portion of the ordinary income generated by the same each year, or approximately $148,700 (based on their ages and health status), to pay the annual premium on a $12 million second-to-die life insurance policy owned inside of an irrevocable life insurance trust. The $148,700 annual premium would be covered by the couple’s $18,000 per Crummey power donee annual gift tax exclusions.
Because the proceeds of the second-todie life insurance policy will be free of income tax and estate tax, at an annual cost of $148,700 the couple has effectively nullified the need to give up control over the $10 million in assets, even if they live into their 90s. The question is: Is this effective nullification worth the cost to achieve it?
If the couple pays the $148,700 premium for 30 years, or until the husband is age 92 and the wife is age 91, the total amount expended would be $4,461,270. The same $148,700 annual amount, compounded
after the assumed 23% capital gains rate (that could be much higher because a trust gets to the 20% basic capital gains rate much faster than an individual does) on all growth, would be $11.8 million. This is about the same as the $12 million of income- and estate-tax-free life insurance proceeds inside of the irrevocable life insurance trust, payable when the surviving spouse dies.
Although the facts will obviously vary in each situation, what the above analysis demonstrates is that grandfathering the current high federal estate and gift tax exemption may not always be necessary or even financially beneficial. Before proceeding down a path of lost control and potentially higher future capital gains taxes, studying the use of life insurance as an alternative to grandfathering the current high estate and gift tax exemptions should be considered.
James G. Blase, CPA, JD, LLM, is principal with Blase and Associates, attorneys at law, St. Louis. Contact him at james.blase@ innfeedback.com
ANNUITY WIRES
Annuity sales list tightens up at halfway point
Athene Life & Annuity again led the way in annuity sales through the first half of 2024. But the gap closed quite a bit, LIMRA reports.
Athene sold more than $18.7 billion worth of annuities during the period, bettering its 2023 pace, LIMRA announced. Athene sold $35.5 billion in a triumphant 2023.
But other annuity sellers are doing even better. Four insurers are on pace to top $21 billion in sales this year: Corebridge Financial, New York Life, MassMutual and Equitable Financial. Two companies topped $20 billion in 2023.
Sales for all annuities were $109.6 billion when compared with the previous quarter, according to Wink’s Sales & Market Report. Deferred annuities led the way.
Total second-quarter sales for all deferred annuities were $104.6 billion, up 4.1% when compared to the previous quarter and up 31.2% compared to the same period last year, Wink said.
Among other highlights, structured annuity sales in the second quarter were $15.6 billion; up 12.2% compared to the previous quarter, and up 44.6% compared to the same period the previous year.
ANNUITY INTEGRATION TOOLS SOUGHT FOR ADVISORS
Financial advisors are warming up to annuities in a positive trend for the industry.
Annuities could soon benefit from simpler integration if the Insured Retirement Institute is successful in its bid to develop a new digital, standardized infrastructure.
IRI’s Digital First for Annuities is an industry-wide annuity integration initiative that aims to introduce a single, consistent source of product data and new infrastructure for standards.
Annuities are not easily pulled into the tools financial advisors use right now because of inconsistent or missing data, which can cause the annuity to be inaccurately represented within a portfolio, IRI noted. According to IRI’s data,
while 83% of financial professionals use financial planning software, just 18% leverage annuities in those tools.
The Digital First for Annuities annuity integration initiative would address a lack of standardization and ensure the value of annuities is accurately represented in a way that works both for financial professionals and for their clients.
AM BEST: LIFE/ANNUITY REINSURERS FACE GROWING COMPETITION
Higher interest rates and more favorable mortality trends have led to improved conditions for life/annuity reinsurance companies, an AM Best report found. It also has created more competition, with some backed by alternative investment
Rates on [indexed] products haven’t been this attractive since I’ve been in the business.
— Sheryl Moore, CEO of Wink Inc.
managers or large private equity firms.
This new report states that new capital continues to flow into the segment, primarily via reinsurers owned by investment managers focused on annuity business. These newer entrants have sought to coinsure assets that can be rolled into high-yielding positions, mainly in public, private or alternative fixed income products.
These reinsurers also can offer attractive ceding commissions based on higher anticipated investment returns once the transferred assets are rolled into a wider set of investment opportunities.
STUDY: FIXED-RATE DEFERRED ANNUITANTS ARE NOT SURRENDERING EARLY
A new study by the Society of Actuaries and LIMRA found that most fixed-rate deferred annuity owners are at least waiting until their surrender charge period is up before surrendering. The two organizations jointly studied fixedrate deferred annuity surrenders from 2015 through 2022.
Dale Hall, managing director of research for the SOA, shared the data with regulators during the National Association of Insurance Commissioners’ summer meeting.
“In the previous studies, I think you’d see higher levels of contract surrenders even two years to expiry, one year to expiry of the surrender charge,” Hall explained. Surrender rates by both contract count and contract value peaked in the year the surrender charge expired, at a rate of 38.6% by contract count and 46.3% by contract value, the study found.
Source: Wink Inc.
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The ‘perfect storm’ driving annuity sales momentum
Interest rates, market volatility and a growing demographic are fueling higher demand for annuities.
By Susan Rupe
Annuity sales are on track to a third consecutive year of record sales. What’s driving that momentum, and how does the annuity market build it? Two LIMRA executives looked at the factors behind the annuity wave during a recent LinkedIn Live event.
“An interesting intersection where things have lined up perfectly over the last three years,” is how Keith Golembiewski, assistant vice president and director of LIMRA annuity research, described the current annuity sales environment.
Higher interest rates, volatility in the equity markets and a growing number of Americans approaching age 65 are among the factors that converged to create “this sort of perfect combination for annuity sales and the momentum we see behind them,” he said.
A “perfect storm” has led to a skyrocketing demand for annuities, Golembiewski said.
“Coming out of COVID-19, this is not your normal economic environment,” he said. “We have different dynamics happening, whether it’s inflation, the job market, the equity market, volatility, unemployment. There are a lot of things happening that I think have led to the need and the demand for the products that we offer.”
The prospect of the Federal Reserve cutting interest rates in the fall was one motivator for consumers to invest in annuities in the first half of the year, Golembiewski said.
“I think what we’re seeing is a lot of advisors and consumers saying, ‘Hey, you know what? I’m anticipating a rate cut coming. Let me go ahead and get maybe one of these, lock in to something at a higher interest rate,” he said.
Looming interest rate cuts open a door for financial professionals to have the annuity conversation with clients.
“Nobody has a crystal ball,” he said. “But it might be a fantastic time to lock in some of these annuity rates because we don’t know where rates will go.”
A look at products
Golembiewski broke down the annuity sales numbers and projections by product.
» Fixed indexed annuities. FIAs hit another record in 2024, with nearly $60 billion in sales in the first half of the year. Golembiewski said interest rates are making FIAs “competitive and marketable.”
will continue to sell and have strong sales through the remainder of the year.”
He noted that fixed-rate annuities began to take off two to three years ago as high interest rates and market fears led consumers to see annuities as a safe choice.
“Now we’re seeing some of those contracts are coming out of the surrender period next year, and it will be interesting to see where that money goes. Will it go into another fixed product, or will it go into something that takes on a little more risk?”
» Variable annuities. VA sales had been in decline over the past decade but picked up in the past two quarters, which Golembiewski said could indicate that
“The levels of participation rates in caps and, of course, some of the income features and solutions, continue to resonate. FIAs are definitely on a strong path for another record year.”
» Fixed-rate deferred annuities. FRD sales slowed a bit, but they are still a competitive product, Golembiewski said, especially in light of the Fed’s keeping interest rates high through midyear.
“If you compare a three-year or fiveyear FRD product with a bank CD — there’s about a 200 basis point difference between the annuity and the bank CD. They’re very competitive — especially for a lot of money that’s on the sidelines, maybe in liquid products such as CDs or money market accounts or even savings accounts. So we predict FRD annuities
VAs “finally hit the bottom” and are back on the rise.
“There’s clearly a need for a product like the traditional variable annuity, whether it’s access to tax deferral or the various investments,” he said. “And I think there might be a renewed focus on having some of those living benefit guarantees, guaranteed income. In addition, there’s a continued focus on the fee-based market. Now we have products that can support the RIA channel.
The equity market remains strong even with recent volatility, and that makes it a good environment to choose a VA, Golembiewski said. “VAs typically do fairly well in more bullish markets. I think if you throw in some of these guarantees that some of the manufacturers
are offering, and then with some of the distribution growth, I think they reached the bottom, and now this could be a more slow-growing product. I don’t think it’s going to grow as much as we see on the FIA side or the registered index linked annuity side, but it is something that we are seeing some demand for.”
» Registered index linked annuities.
RILA sales “are a big story here,” said Bryan Hodgens, senior vice president and head of LIMRA research, with record sales every year since their introduction.
Product innovation and the number of carriers entering the RILA space are two factors behind RILA sales growth, Golembiewski said. “I think the third element is getting advisors and firms more comfortable with this product.”
He predicted that the industry will launch RILAs with longer terms — six or seven years. Various custom indices within RILAs make the product easier for clients to understand, he said.
“This product will continue to grow even with interest rates coming down or if
the equity market continues to be volatile. This is where a RILA really shines. This is where we will see strong growth, not just for the remainder of this year but over the next few years.”
Annuity sales coming from ‘new money’
A “good chunk” of the $1.1 trillion in annuity sales over the past three years was “new money,” or money that had not been invested in annuities previously, Golembiewski said, and he expects that trend to continue.
“I think that in 2025 through 2027, a lot of money will come out of CDs, and it gives the financial professional another chance to sit down with their clients and ask them if they have any changing needs. Are there certain things that we need to focus on now?
Maybe its income versus preservation or protection. Maybe it’s growth. I think from the risk/reward spectrum, the industry has a lot of products that can meet various needs.”
More consumers in the ‘sweet spot’ for annuities
The U.S. population hit the “Peak 65 Zone” in 2024, with the largest surge of Americans hitting age 65 in history. More than 4.1 million people will mark their 65th birthday each year through 2027.
Peak 65 is another tailwind for the annuity industry, Golembiewski said.
“There are a lot of individuals who are in that sweet spot — those between 55 and 65 years old — who need protection and guaranteed income. These are things that resonate with that age group and should be a tailwind to help the industry over the next three to five years.”
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 X @INNsusan.
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HEALTH/BENEFITS
Cigna: No evidence of improper claim denials after
4 lawsuits
Cigna asked a California federal court to dismiss a lawsuit accusing it of improperly denying claims after plaintiffs had four chances to make their case. A class action lawsuit alleges that Cigna used a computer algorithm to automatically reject hundreds of thousands of patient claims without examining them individually as required by California law.
At issue is Cigna’s “procedure to diagnosis” or PxDx software, which reviewed and denied customer claims. The plaintiffs claimed that PxDx is an “illegal scheme” that Cigna implemented to deny plan members their covered benefits.
Cigna is one of the nation’s largest health plans and has 18 million U.S. members.
“A key part of claims administration services that Cigna provides to plans is to ensure that the plan only pays for services that (among other things) the plan actually covers,” Cigna’s motion to dismiss says. “PxDx is one way that Cigna checks incoming claims for compliance with plan benefit limitations.”
INFLATION, WEIGHT LOSS DRUGS BEHIND RISING COSTS
PricewaterhouseCoopers estimates that the cost of health insurance provided by private employers will jump 8% next year. That’s the sharpest increase since 2012, when PwC found costs for the employer-sponsored health care market rose 8.5% two years after the Affordable Care Act became law and began lowering prices.
What’s behind this surge? PwC blamed it on runaway inflation in hospital expenses, an explosion of mental illness and sharp demand for pricey diabetes and weight loss medications
Meanwhile, KFF reported that insurers participating in the ACA program will raise premiums by an average of 7% next year. The report blames rising hospital
expenses and the skyrocketing popularity of drugs that treat diabetes and promote weight loss, such as Ozempic.
MORE AMERICANS GO WITHOUT HEALTH INSURANCE
The number of Americans without health insurance climbed to 10.3% in the months before the COVID-19 pandemic. However, numbers dropped during the pandemic and remained on a lower trajectory until an upswing in 2024. That’s according to the Centers for Disease Control and Prevention.
The Centers for Medicare and Medicaid Services predicted that the Medicaid unwinding and the ending of COVID-related temporary subsidies enabling Americans to buy coverage on the ACA marketplace will cause the number of uninsureds to return to prepandemic levels by 2026.
QUOTABLE
The consumer deserves to choose a professional, if they want, and then the professional deserves to be paid. We shouldn’t be asked to work for free.
— Ronnell Nolan, president/CEO, Health Agents for America
More than 8% of the U.S. population didn’t have health insurance in the first three months of 2024, according to the CDC. That percentage equates to 27.1 million Americans and marks the first notable increase in uninsured citizens since the pandemic.
NORTH CAROLINA TAKES AIM AT MEDICAL DEBT
Nearly 1 in 12 adults in the U.S. car ries some medical debt, KFF reports, and North Carolina is taking aim at that debt. Gov. Roy Cooper announced that nearly 100 hospitals in the state had signed on to participate in the Medical Debt Relief Incentive Program, which he said will incentivize hospitals to eliminate $4 billion in medical debt for 2 million low- and middle-income patients over the next two years.
Starting next year, Cooper said, the program will also take steps to prevent the accumulation of new debt in part by curbing aggressive debt collection practices by hospitals, such as adding on high interest rates or fees to unpaid bills, or selling the debt to third-party collection agencies. Hospitals will have until July 1, 2025, to forgive past debts; however, some have al ready done so.
Nearly 3 in 4 adults say they’re worried about paying for an unexpected medical bill.
Source: KFF
What Medicare clients are asking during open enrollment
Clients are concerned about out-of-pocket costs and networks as advisors gear up for a new enrollment season.
By Susan Rupe
Craig Gussin isn’t only hearing from clients going into Medicare open enrollment season; he’s also hearing from his fellow Medicare agents as part of his involvement with several industry associations.
Gussin is president and CEO of Auerbach and Gussin in Carlsbad, Calif., in the San Diego metropolitan area.
for Medicare clients and their advisors, Gussin said.
He said one big issue in his geographic area is that one of the biggest hospitals in San Diego, along with two of the biggest physician networks, announced they no longer will participate in Medicare Advantage plans because of their reimbursement rates. This is leaving clients scrambling to find alternate coverage.
“The comment I am hearing from agents is that this will be a tough Medicare season,” he told InsuranceNewsNet.
Medicare Advantage is a top issue
“One big question in all this is whether other hospitals around here will do the same,” he said.
“Clients are worried. You have clients who are paying anywhere from zero to $20 a month for their Medicare Advantage premiums and now their doctors won’t accept their plans. So they have to either switch doctors or go to a supplement that costs them more
money. And clients don’t like either of those options.”
Gussin said a big part of this year’s Medicare enrollment period will be educating clients about their options, costs and networks.
“The biggest takeaway for us will be education. It’s the education process and trying to fit that square peg into the round hole.”
Medicare Advantage clients worry about provider networks
Medicare Advantage plans are the top concern that Katie Diemer said her clients have going into the annual Medicare open enrollment season.
Diemer is an insurance specialist based in Reinbeck, Iowa. She told InsuranceNewsNet her clients who are on Medicare have the same main
Gussin
Diemer
concerns each year: their provider networks and their prescription drugs.
“They want to make sure that their doctors and hospitals will be in network with their Advantage plan, and my clients who have Medicare Supplement plans want to make sure their prescriptions will be affordable for the coming year.”
She said at least one carrier in her area still has a network that includes most of the major health care providers in the region, “so I have some peace of mind that we have one carrier we can recommend where our clients still can be in network.”
Diemer said that in Iowa, some Medicare plans have released sneak peeks of what the coming year will bring for their offerings.
“It seems like there will be some major changes coming for Advantage plans, mainly about networks that will change, and I also believe there probably will be some higher copays this year. I also believe we might see plans that are currently zero premium moving to a low premium.”
But even if Medicare Advantage plans move away from zero premiums, Diemer said she still believes Advantage plans offer her clients some economical options.
“There will still be some good Advantage plans for clients versus a Medicare Supplement because some of the supplements are really expensive and their drug plan is really expensive,” she said. “So even with a lower-premium Advantage plan, clients will still have costs; but overall, Advantage plans continue to be more cost-effective for them.”
Medicare Advantage plans aren’t going away
Deb Nelson is reassuring her Medicare Advantage clients that the plans they like are not going away.
Nelson is a licensed agent with Ark Insurance in Salt Lake City.
She told InsuranceNewsNet the biggest issue she is seeing in advance of Medicare open enrollment is client concerns about the future of Medicare Advantage.
“I hear from clients who tell me, ‘I love my Advantage plan, but I see so much on the news and on YouTube about how horrible these plans are and that they’re going away,’” she said. “And I tell them that Medicare
Clients who are on Medicare have the same main concerns each year: their provider networks and their prescription drugs.
Advantage plans are not going away.”
Nelson said she educates her clients about the pros and cons of both Medicare Advantage and Medicare Supplement plans.
“I have some clients who say they only want a supplement because they’ve heard bad things about Advantage plans. And I have other clients who say they love their Advantage plans. So clients are concerned about having options.”
Prescription drug costs are also top of mind for Nelson’s Medicare clients. The Inflation Reduction Act contains a number of Medicare prescription drug provisions aimed at lowering out-of-pocket costs beginning in 2025. Nelson said her clients are asking questions about what those provisions will mean for them.
“Anytime there’s a major change in Medicare and people see it in the news or they see advertisements that may or may not be accurate, they have questions,” she said. “It causes a little bit of confusion and concern.”
Nelson said her clients who are on Medicare Advantage plans “absolutely love them, because of the optional supplemental benefits and because the copays are so low.
“People like the predictability — they like knowing how much they are going to pay if they have to go to the hospital.”
She said her Medicare Supplement clients have faced some premium rate increases in recent years and are questioning whether they can afford to stay on their plans.
Another trend Nelson said she is seeing is with clients who are moving from
Affordable Care Act marketplace plans to Medicare. “They feel Medicare is unaffordable to them,” she said. “They are seeing huge premium increases when going to Medicare Parts A and B.
“These clients were on subsidized plans, making the premiums low for them and, in some cases, for their spouse. Many were in the $60-$200 monthly premium range on the marketplace. They don’t qualify for Medicaid, and many are over the low-income subsidy limit as well but they don’t have a high income. They then have to pay Part B at $174.40 per month. It is a huge increase for them. They also lose the tax credit that they had with a marketplace plan. If they have a younger spouse on a marketplace plan, that increases as well.”
Nelson said she has seen clients paying $200 a month for themselves and a spouse for a marketplace plan and now have to pay $174 monthly for Part B while the spouse who is not old enough for Medicare now has to pay $400 monthly for health insurance.
“So in essence, they face a $374 monthly increase for turning 65 and going on Medicare.”
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 X @INNsusan.
Nelson
Expert advice provides a boost
What advantages does someone who works with an advisor have over someone who doesn’t? A Northwestern Mutual study found plenty.
For one thing, those who have an advisor expect to retire two years earlier than those who do not have one. In addition, someone who works with an advisor feels significantly more confident about their financial preparedness for the future. Americans with an advisor also have saved twice as much money for retirement compared with those who do not have an advisor: $132,000 vs. $62,000.
Moreover, those with an advisor predict that they will pay off their student loan debt three years sooner — at age 43 instead of at age 46. They also were twice as likely to have an emergency fund, have a plan to pay off debt and be able to leave behind an inheritance or charitable gift.
Among people with an advisor, the average age their relationship began is 38. Interestingly, younger generations are engaging experts for financial advice earlier and earlier. The average millennial with an advisor said they sought formal financial guidance at age 29 — nine years sooner than Generation X (age 38) — and a full 20 years before the baby boomers (age 49).
Financial confidence grows with age and wealth
Less than half (47%) of Americans feel confident in their ability to make good financial decisions, but people’s confidence in their financial decision-making increases with their age, income and education.
A NerdWallet survey showed less than a third (30%) of Generation Z members say they are confident in their ability to make good financial decisions. Thirty-nine percent of millennials, 47% of Gen Xers and 62% of baby boomers (ages 60-78) say they are confident .
Few are prepared to pass on wealth
Although nearly all affluent Americans expect to pass down wealth to heirs either during or after their lifetime, only 50% said they are very prepared to do so and have a written plan in place, according to a recent study by First Citizen Wealth.
To retire comfortably, affluent Americans expect they will need $3 million, according to the study. To retire and be able to pass down wealth to heirs, they expect to need
Putting the ‘old’ in household
By 2033, 23 million U.S. households will be headed by someone age 75 or older.
Source: Hearts & Wallets
Weather could crack retirement nest egg
Many Americans appear to have another financial risk to worry about: the negative effect that extreme weather could have on their financial future. This is according to the 2024 Annual Retirement Study from Allianz Life.
In the survey, more than half (56%) of Americans said they have anxiety about rising costs, financial losses or even health effects from extreme weather events or natural disasters. Millennials are more likely to have this worry than Generation Xers or baby boomers. Hispanic respondents reported a higher anxiety level than did Asian, Black and white respondents.
The survey also noted that 1 in 4 Americans (25%) ranked the risks of rising costs, loss of insurance or damages due to weather or natural disasters as one of the top three risks to their retirement income. These factors ranked the same or higher than concerns such as taxes, debt or caregiving responsibilities. Yet only 10% who have concerns about weather have discussed these concerns with a financial professional.
$5.5 million. Of those who would like to pass along their wealth, about 2 in 5 (44%) said they have thought about doing so but do not have a written plan in place. Additional gaps exist, with only two-thirds of affluent Americans indicating they have a will and even fewer having an estate plan (40%).
Nine out of 10 affluent Americans credit financial advisors for growing their wealth; additional benefits of working with a financial advisor include reducing stress, saving time and enhancing feelings of preparedness, according to the study.
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Emotional intelligence is a sought-after skill for advisors
Advisors must ensure their clients feel that their needs are heard and supported.
• Ayo Mseka
Most Americans agree that it’s important for advisors to exhibit emotional intelligence with their clients. With three out of four Americans valuing emotional intelligence together with more technical skills, advisors must ensure their clients feel their needs are heard and supported and that they are helping them reach their financial goals. Those are among the results of a recent Million Dollar Round Table survey on key skills consumers look for when choosing an advisor.
What boosts consumers’ trust?
Although most Americans said they are likely to trust a financial advisor for professional advice, there are key skills that can help boost consumers’ trust in advisors overall, the survey said. More than two-thirds of those surveyed (68.6%) said they find qualified financial advisors trustworthy, with men (74.2%) more likely than women (63.3%) to consider qualified advisors trustworthy.
An advisor’s guidance on intricate financial tools is also appreciated, as 60.7% of Americans said that they are more likely to trust a financial advisor than their friends, family or colleagues. And women (56.2%) are less likely to take an advisor’s advice over that of friends, family or colleagues than are men (65.6%).
Additional advisor qualities, together with emotional intelligence, increase advisor trustworthiness as well, the survey showed. More than 4 in 10 survey respondents (45.6%) said that an advisor who listens to and acknowledges their needs is likely to increase their trust, with respondents across demographic lines agreeing on the importance of this skill.
Additionally, 44.4% of Americans said that an advisor who follows through on
their word increases their trust, and 44.4% said an advisor communicating in a way that’s easy to understand increases their trust. By guaranteeing that clients feel heard and able to process client conversations, advisors can increase their credibility and develop long-term client relationships.
What consumers without an advisor expect from an advisor
There are certain benefits that Americans who don’t have an advisor said they would expect advisors to provide — and Americans who do have an advisor confirm that those specific needs are being met, the survey said. More than 4 in 10 survey respondents (42.1%) who don’t have an advisor expect advisors to help their clients feel less stressed. And among Americans who do have an advisor, 54.8% say their advisor does help them feel less stressed, with women (58.9%) and Americans ages 50 and older (58.3%) more likely to say this than men (51.3%) and Americans ages 18-49 (50.8%).
Less than half (39.4%) of Americans who don’t have an advisor said that they
expect advisors to help clients feel protected from tumultuous financial periods that are out of their control, compared with 51.3% of Americans with an advisor who said their advisor helps them feel protected during those times. Advisors can showcase to clients and prospects their dedication to providing safeguards for their financial plans, regardless of the current financial market, the survey said.
“With the value of emotional intelligence still sky-high for clients and prospects, financial advisors must continuously improve their ability to connect with clients on a deeper level,” said MDRT President Greg Gagne. “Demonstrating trustworthiness and emotional knowhow as an advisor is necessary to guide clients toward a continuous path of financial security and growth.”
Areas for advisor improvement
Among Americans who have an advisor, many of them feel their advisor could improve certain emotional intelligence skills. Only 41.3% of Americans with an advisor think their advisor can resolve conflicts and communicate well.
Similarly, only 33.8% of Americans with an advisor think their advisor is disciplined in managing their own emotional reactions during discussions, and 44.6% said their advisor helps them to have no regrets about their finances. With only 27.5% of Americans with an advisor saying they think their advisor is aware of their own emotions and how they affect others, it’s pivotal for advisors to take the time to learn the ways they can unintentionally impact their clients emotionally and how to improve.
American consumers have made it clear that emotional intelligence is a necessary skill for any financial advisor, the survey said. Financial advisors must be prepared to forge stronger connections with clients and highlight their ability to be a trustworthy support system. By demonstrating the ability to manage their emotions as well as their clients’ during discussions, advisors can build more trusting, mutually beneficial client relationships.
Defining emotional intelligence
What is emotional intelligence? It is the ability to recognize, understand, manage and effectively use emotions of oneself and others, explained MDRT member Carla Brown, managing director at Oakmere Wealth Management, NED at The PFS. “It involves a range of skills, including self-awareness, empathy, self-regulation, motivation and social skills. In the context of financial planning, EI allows advisors to connect with clients on a deeper level, enabling them to better understand clients’ needs, concerns and goals beyond the numbers,” she added.
Why should advisors cultivate and use emotional intelligence?
“For financial advisors, emotional intelligence is crucial because our work is inherently about people,” Brown said. “Clients often come to us with hopes, fears and life goals that are deeply personal. By employing emotional intelligence, advisors can build stronger relationships based on trust and empathy.”
This approach fosters open communication, allowing clients to feel understood and valued, which, in turn, leads to more effective and personalized financial planning, Brown added. “Advisors with high emotional intelligence can navigate challenging conversations, such as discussing
financial setbacks or adjusting plans due to unforeseen life changes, with sensitivity and care,” she said.
Developing and applying emotional intelligence
Emotional intelligence is a continuous journey that involves both self-reflection and practice, Brown said, in explaining how advisors can develop EI and apply it with their clients.
Brown said advisors can begin to develop EI by:
1. Enhancing self-awareness: Regularly reflecting on their own emotions, triggers and responses can help advisors better manage their reactions in client interactions.
2. Practicing active listening: Truly listening to clients without interrupting or thinking about the next response allows advisors to understand the underlying emotions and concerns. “This can also involve asking open-ended questions that encourage clients to share more about their values and aspirations,” Brown added.
3. Cultivating empathy: Putting oneself in the client’s shoes to understand their feelings and perspectives is key. This can be developed by engaging in empathy-building exercises, such as imagining different scenarios that clients might be facing, she said.
4. Seeking feedback: Regularly asking for feedback from clients and colleagues on communication style and emotional responsiveness can provide valuable insights for improvement.
5. Training and development: Advisors can also benefit from formal training in emotional intelligence, whether through workshops, courses or coaching. These programs can offer practical strategies for enhancing EI and integrating it into client relationships.
“By applying these skills,” Brown said, “we can create a more collaborative and supportive environment.”
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-inchief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.
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the Know In-depth discussions with industry experts
What the end of the Chevron deference could mean for insurers
A Supreme Court ruling will make it easier to challenge administrative rules and will have implications for health and property/casualty insurers.
By Doug Bailey
A6-3 ruling in late June by the U.S. Supreme Court in the case of Loper Bright Enterprises v. Raimondo was hailed as an earth-shattering decision that killed a 40-year practice of leaving it up to regulatory agencies to interpret ambiguous federal laws. The high court essentially said, “Hey, it’s our job to determine what the law says, not yours.”
The decision was hailed as a victory for businesses and conservatives who have long felt too much power was vested in the hands of regulators and that the avenues to challenge questionable rules and laws were narrow and difficult to navigate. It extinguished the socalled Chevron deference, set in 1984 in a case involving the oil company, which gave federal agencies wide powers to interpret laws and decide the best ways to apply them.
Pundits declared the overturning of Chevron was a “seismic decision,” the aftershocks of which “will be felt throughout the federal government.”
Although there was little question the decision shifted significant authority from regulators to the courts, the immediate impact of the ruling was confusion, as the Supreme Court offered little
guidance on how lower courts would decide challenges to agency rulemaking.
The confusion ran the gamut. Some lawmakers such as Rep. Lauren Boebert, R-Colo., wrongly believed the decision rendered unconstitutional all questionable regulations proffered by government bodies such as the Environmental Protection Agency and they would be immediately suspended. Meanwhile, some on the other side believed the agencies would simply adjust to the new world and not much would really change.
The truth, as always, is probably somewhere in the middle. The justices clearly gave the courts the final say over regulations not explicitly detailed by Congress, thus limiting the ability of federal agencies to interpret their own statutes. However, the high court did not single out any specific regulations as unconstitutional, nor did it require agencies to immediately suspend regulations without a court hearing.
So what has changed, and what are the more likely repercussions to heavily regulated businesses such as insurers, financial institutions, airlines, transportation companies, broadcasters and telecommunications firms?
A weaker administrative state
“The SCOTUS decision will make it easier for courts to challenge administrative rules and will require Congress to pass more specific legislation,” said Pete Potente, CEO of San Diego-based global law corporation POTENTE. “The likely direct impact is that the administrative state gets weaker.”
With courts having more power to review and potentially overturn agency regulations, we can expect more legal challenges and uncertainty for agencies that may become more cautious in issuing regulations. This will lead to slower rulemaking and more litigation.
“A regulated entity litigating against its regulator was considered the nuclear option,” said Elizabeth Tosaris, an attorney in the regulatory and administrative law practice group at Michelman & Robinson in San Francisco. “But entities with enough vested interest in a different interpretation of the laws will think of challenging the interpretation and relying on the Loper case to discount whatever the interpretation is.”
It may take some time to discern the full impact of the court’s tossing of Chevron. But legal experts, corporate attorneys and analysts point to some likely
scenarios for certain areas, such as health care, insurance, environmental and financial regulation.
Health insurers may have the most federal laws governing them, so it may be the area where the first challenges under the new ruling appear. Judicial review of the Health Insurance Portability and Accountability Act and the GrammLeach-Bliley Act, which require financial institutions to explain their information-sharing practices to their customers, is expected. The Food and Drug Administration’s authority to regulate drug approval and safety could be more closely scrutinized, and regulations related to Medicare and Medicaid could face increased legal challenges, experts said.
“The Affordable Care Act, by virtue of the complexity of our health care system, left a lot of room for interpretation, and the previous Chevron decision deferred to the agencies to really decide exactly what to do,” said Mike Prindle, senior vice president at insurance broker CAC Group. “So now there will likely be a lot of challenges to existing rules, and you could have different regulations from jurisdiction to jurisdiction, depending on the outcome of litigation.”
Prindle said the court may have to issue a clarification of its ruling to settle jurisdictional differences or confusion that could erupt.
“Otherwise, you’re going to have a lot of patchwork of regulations across the United States that differ depending on where you live, in an already extremely complex health care system,” he said. “But the biggest downside might be the cost of the litigation other than just confusion.”
Others agree. “You might have all the red states following the U.S. Supreme Court and the blue states deciding to keep the rules as they’ve always been,” said Tosaris. “Chevron had a rationale that an individual state court could say what still applies given the law in their state.”
Impact on health care regulations
Frequent legal challenges to the ACA, particularly the legality of Medicaid expansion under the act, could destabilize the health insurance market, potentially leading to increased premiums or reduced coverage options, Prindle said. Even the basic foundation of what “essential health
services” means under the ACA could face legal challenges.
Public health measures, such as vaccine mandates or pandemic-related restrictions, might also be subject to more stringent judicial review.
Insurers should monitor and adapt
Because states regulate insurers for the most part, the industry may not be impacted by the overturning of the Chevron deference, experts said. But that might not be the whole story. Some fear the balance of power between state and federal insurance regulation could shift, impacting not just health insurance but also property/casualty insurance and other insurance lines.
Overall, the insurance industry can expect a more complex and challenging regulatory environment. Insurers will need to closely monitor legal developments and adapt their business strategies accordingly, say attorneys.
Regulations related to natural disasters, climate change and insurance fraud could be subject to increased scrutiny. In addition, coverage for emerging risks, such as cyberattacks and autonomous vehicles, could be more contested.
Insurers may face more legal challenges to policies, coverage and claims-handling practices, and those challenges would increase costs and operational burdens. Regulations related to catastrophe modeling, risk assessment and pricing could be subject to increased scrutiny, which could affect insurers’ ability to accurately price policies and manage risk. Courts may be more inclined to interpret insurance contracts in favor of policyholders, leading to increased insurance payouts.
Overall, the P/C industry can expect a more complex and challenging regulatory environment. Insurers will need to invest in legal expertise, risk modeling and regulatory compliance to navigate these challenges. International insurance and reinsurance contracts may be subject to increased scrutiny and potential disputes.
Nithya Das, chief legal and administrative officer at Diligent, a governance compliance software company, said risk management will be more difficult with the Chevron deference gone.
“By overruling the Chevron doctrine, the Supreme Court didn’t remove or
obviate regulatory requirements,” she said. “They called into question the ability of agencies to interpret and enforce legal regulations. This does not mean legal requirements fall away or give companies any certainty about how agencies will react, but it adds more uncertainty on compliance.”
But business leaders reading the coverage of the court’s decision to overturn Chevron could be lulled into a false sense of relief that strict environmental regulations will now be easier to challenge.
According to Enhesa, the leading provider of regulatory and sustainability intelligence worldwide, the Supreme Court decision could make environmental law more complicated to navigate for large corporations. The reason: State regulators and federal courts will now wield an outsized influence over environmental regulation.
“Because legal challenges to federal agency statutes will now be decided by the courts, the venue for these challenges will become more important than ever,” said Nhat Nguyen, chief analyst at Enhesa “There could be a surge in efforts to challenge environmental regulations, with industry groups looking to challenge regulations in more-conservative, pro-business courts like the Fifth Circuit Court of Appeals, while environmental groups and others push for more stringent interpretations of environmental statutes in courts like the Ninth Circuit, which has historically leaned left.”
The anticipated increase in legal activity following the decision in Loper Bright Enterprises, et al. v. Raimondo will push businesses into a greater need for a granular, state-by-state understanding of laws — and multiple possible interpretations of those laws — that could affect their businesses, Nguyen said.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com
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Talking about it: Industry voices on retirement income
In-plan investment options should be something advisors bring to the table for consideration in retirement plans’ investment lineups.
By Deb Dupont
Retirement remains a common investment goal for nearly all working Americans; 401(k) plans and similar workplace retirement savings accounts often represent individuals’ and families’ single largest non-home investment.
Turning that investment into income, however, has become an increasingly prominent and important conversation in the financial services industry — and one that has potential repercussions for you and for your clients.
How to use the defined contribution plan itself to generate income is the topic these days, and there are a variety of “voices” in the discussion, most likely with an equal variety of opinions and thoughts.
At LIMRA, we study the DC industry, monitoring developments and solutions to help stakeholders — from product manufacturers to distributors, consultants and advisors — create and bring to market relevant solutions for both employers and employees.
We recently tackled the subject of retirement income — soliciting those voices from professionals across the financial services industry. Approximately 40 DC industry professionals from recordkeepers, distribution firms, research firms and industry utilities completed our survey, giving us a diversity of opinions and voices seldom heard in discussions of industry issues.
Most industry experts agree that solving for retirement income is an industrywide problem
Most industry professionals believe that income solutions should be incorporated into a plan’s investment lineup as opposed to simply being available for election/
allows plan participants to choose (or be automatically enrolled in) an investment option designed to provide income at retirement. Often this option is an annuity feature attached to a fund chassis or platform (such as a target date fund), but other constructs can include (or be part of) managed accounts, managed payout funds or even the purchase of annuity “units” via ongoing contributions.
“Income options” included in a plan can be guaranteed (i.e., with an annuity component) or “best effort” but no guarantees. Only half of those surveyed agreed that a guarantee must be part of a successful income solution, although the majority allow that there is a place for both guaranteed and nonguaranteed income solutions within DC plans.
Although there is strong consensus among industry experts about the need for in-plan income investment options, there’s also a strong feeling that helping individuals with retirement income is a financial advisor’s role. All respondents believed that personal financial advisors have a high-to-medium responsibility for helping individuals create an income stream from a DC balance. At the same time, however, our research shows that only about a third of consumers (and mostly older and higher net worth consumers) regularly work with
the question of how do the rest create their personal income strategies? The answer may very well be that these in-plan investment options will help them do just that. What can you do with this option, and how will it help your own clients? As inplan options become more common, at least considering their role in your clients’ strategies should be part of your planning efforts. When it comes to clients’ 401(k) or other DC investments, understand what income options are available to them. The convenience — and potentially the price — of in-plan options may make them a good fit for many.
In-plan investment options should be something advisors bring to the table for consideration in plans’ investment lineups. When you work with plan participants, especially those who may not have the resources or assets for full-fledged financial and formal retirement planning, leveraging the options available within the plan itself may prove an appropriate solution for creating a reliable, predictable income or income base.
Recent court decisions are affecting financial professionals
Financial professionals and their professional associations are turning their attention to the courts as the legal system scrutinizes actions of federal agencies.
By Michael E. Gerber
Financial professionals know their work can be affected by all sorts of laws, regulations and rules from legislatures, regulators and the courts. The good news is financial professionals have professional associations — such as NAIFA — to help them navigate an ever-changing legal landscape.
Financial professionals look to NAIFA to engage with state and federal legislators and regulators. Recently, however, it’s the courts that have captured their attention — by scrutinizing the actions of federal agencies.
In May, a group of industry associations, including NAIFA, NAIFA chapters in Texas, the American Council of Life Insurers and others, filed suit challenging the Department of Labor’s fiduciary-only rule. The coalition argued the DOL rule exceeded the agency’s authority under the Employee Retirement Income Security Act and is invalid — and misguided — for multiple reasons. As of this writing, the Northern District of Texas federal court agreed and stayed enforcement of the rule. The court’s July decision reflects a theme in many cases decided in 2024 — judicial skepticism about broad agency rulemaking and a willingness to halt actions deemed beyond a regulator’s authority.
Pushing back on agency rulemaking
Two other northern Texas decisions from 2024 pushed back on agency rulemaking.
In July, the judge who granted a stay in NAIFA’s case stopped enforcement of new rules from the Centers for Medicare & Medicaid Services that would change the
compensation framework for Medicare Advantage and Part D plans. In Americans for Beneficiary Choice v. HHS, the court found it likely that association plaintiffs would prevail in challenging the new CMS rules as arbitrary and capricious. As open enrollment looms, financial professionals in the Medicare market will want to follow this development.
The same month, another judge in northern Texas granted a preliminary injunction against enforcement of a Federal Trade Commission rule that makes most noncompete agreements unenforceable. In Ryan v. FTC, the court agreed with a tax services firm and association plaintiffs that the FTC lacked authority to issue the sweeping noncompete rule and blocked its use against the plaintiffs. Again, financial professionals who could be affected by this rule should keep an eye on this case.
The Supreme Court also issued several decisions in 2024 with implications for the financial services industry.
In Loper Bright v. Raimondo, the court decided a case involving New Jersey fishermen who challenged a regulation requiring them to bear the cost of having agency-mandated observers on their boats. Since the agency’s authorizing statute didn’t clearly grant such power, the court revisited — and overruled — the decades-old Chevron doctrine, which had required courts to give deference to permissible agency interpretations of ambiguous statutes.
The Loper Bright case means courts must not simply defer to agencies in those circumstances and must instead use their own judgment to interpret laws administered by regulatory agencies. This may lead to more challenges to administrative rules in every field — including regulations governing the financial services industry.
This may also impact how legislation is drafted, as lawmakers take greater care (and time) to make laws less ambiguous,
and how regulations are written and enforced, as regulators adapt to an environment where courts no longer defer to an agency’s statutory interpretation.
Tax treatment of life insurance
Moving from sea to land, in Connelly v. United States, the Supreme Court ruled on the tax treatment of life insurance.
Connelly involved two brothers whose St. Louis building supply company owned life policies on both owners. When one brother died, the estate excluded the value of the policy from the value of the company. The IRS objected, and the courts agreed that, for estate tax purposes, the value of a company must include the value of its life policy that will redeem the shares of a deceased owner.
Connelly demonstrates the importance of ensuring that buy-sell agreements and other succession plans are reviewed for compliance with the latest laws that may impact expected tax treatment.
Looking ahead to future tax battles, a third case from the Supreme Court’s 2024 term, Moore v. United States, has implications for potential wealth tax efforts. The court in Moore upheld a tax on undistributed income of American-controlled foreign corporations, as provided for in the 2017 Tax Cuts and Jobs Act.
The Moores argued that taxing undistributed earnings was an unconstitutional tax on unrealized income. The court disagreed, finding the income was realized, and did not address whether the Constitution permits taxing unrealized income, allowing for wealth tax proposals — and challenges against them — to be raised in the future.
Michael E. Gerber is NAIFA’s chief operating officer and general counsel. Contact him at michael.gerber@ innfeedback.com
We can help couples find common financial ground
Couples can vary drastically in their approach to money. Financial professionals can coach them to a plan that works for them.
By Claudia Cypher Kane
In the modern world, where everyone comes from different backgrounds and value systems, it’s infrequent to find a couple who are in lockstep in what they believe and value regarding money. It’s how they come together and do the work to identify common ground and develop a path forward where their values and differences are recognized and considered.
In all my years as a financial planner, I have found it more common that couples have divergent viewpoints about money, whether it’s about what they are doing today to enjoy what they are earning or how they will plan their long-term financial journey together. I believe, and my personal experience tells me that this is true, that a bridge can be built to connect couples who are financial opposites around understanding and appreciation of those differences.
As financial professionals, we know that working with couples with divergent financial approaches is quite common. These divergent financial preferences manifest in several key fundamental areas, including (but certainly not limited to) priorities, investment approach, spending and saving, and division of financial duties. Priorities. People have different priorities when it comes to saving and spending. Some may want to ensure upcoming vacations are funded and college tuition can be paid (short-term), while others prioritize saving for retirement and future health care expenses (long-term). Neither approach is right or wrong; priorities differ.
Investment approach. Some people are more comfortable taking on additional risk in their investment strategy.
Risk tolerance can vary widely within a couple, but it’s important to find a joint approach to investing that works for both individuals.
Spending and saving. One person takes a live-for-the-moment approach with their money, spending most of what they earn from week to week and month to month, while the other prefers to set aside a portion of what they earn to fulfill longer-term goals.
Division of financial duties. In many cases, one person in a couple often makes most of the financial decisions, leaving the other person in the dark about their financial situation when there isn’t open communication about finances.
When we encounter these couples in our daily work, we are uniquely positioned to help them find common ground before their differences become divisive or destructive to their relationship and, eventually, to their financial well-being. I have worked with couples with these and other divergent attitudes and beliefs about money. Here are a few tactics I have employed that have bridged the divide between couples and, quite frankly, made it easier for us to develop a long-term financial plan they both could embrace.
» Help them identify common goals and priorities. Each client must identify their priorities so that they can determine how to align their efforts and decide which goals to pursue first. Encouraging these conversations early in the planning process can reveal unexpected common ground and lead to a shared understanding of financial objectives. Once consensus is reached on the goals, outlining the necessary steps to achieve them becomes much easier and more pain-free for the couple.
» Encourage open-mindedness and compromise. We must help our clients recognize that financial issues are
nuanced, often complex and sometimes emotionally charged. Our challenge is to find a financial pathway that works for the couple as a unit. The better we can help navigate these conversations, the higher the chance of finding the right pathway for the couple.
» Give them each a role to play. In cases where one person dominates financial decision-making and other money-related duties, consider advising the couple to divide these responsibilities. This can help ensure that both individuals have a better understanding of their household finances and what it takes to manage them. This promotes transparency and empowerment within the relationship, leading to better overall financial health for the couple.
» Ensure the plan meets everyone’s needs. Through your work, you help the couple find common ground and appreciate each other’s views and beliefs. When developing the long-term financial plan, ensure each person can see themselves and their individual goals as part of it.
Coaching and counseling have become increasingly important aspects of our work as financial planners. With the growth and acceptance of behavioral finance and financial therapy/coaching, our work has evolved over the years and now requires us to go beyond the numbers when working with clients. When we can successfully help client couples navigate their divergent money values and beliefs, we set them up for financial success and position ourselves as indispensable partners in their journey.
Claudia Cypher Kane, CFP, CIMA, CPWA, ADPA, CDFA, is the 2024 president of the Financial Planning Association and is based in Roseville, Calif. Contact her at claudia.kane@innfeedback.com
Are you ready for the Super Bowl of tax?
Five core tax priorities for 2025 to help more Americans achieve financial security.
By Jennifer Fox
The Tax Cuts and Jobs Act will expire on Dec. 31, 2025. This law contains two types of provisions to watch: those that will completely expire and those that may change, such as individual tax rates. The Congressional Budget Office estimates that extending these provisions could cost the federal government around $4 trillion. Finseca has outlined five core tax priorities for 2025 aimed at helping more Americans achieve financial security.
1. Protect the tax treatment of life insurance, annuities and deferral.
In 2016, then-candidate Donald Trump’s tax plan proposed taxing the inside buildup of these financial products. Similarly, President Joe Biden’s Greenbook and statements from senior
Democratic leaders have suggested taxing capital gains at death or eliminating the step-up in basis. Although these ideas remain popular in certain circles, they have not gained significant support among moderates. However, with growing populist sentiment on both sides of the political spectrum, our profession must remain vigilant.
2. Promote a sustainable and bipartisan estate tax and other wealth-transfer policies.
The TCJA temporarily doubled the exemptions for estate, gift and generation-skipping transfer taxes. Still, these increased exemptions expire at the end of 2025, reverting to 2016 levels, adjusted for inflation. Extending the current doubled exemptions is estimated to cost $100 billion over 10 years. Finseca will continue to push for a bipartisan solution, similar to the 2013 agreement that set the top estate, gift and GST tax rate at 40% and established unified lifetime exemptions for these taxes.
3. Preserve nonqualified deferred compensation and uses of corporate-owned and businessowned life insurance.
An early draft of the TCJA nearly wiped out the deferred compensation market by proposing to eliminate nonqualified deferred compensation plans as a revenue-raising measure. As we look to the future, we must recognize that threats to NQDC and COLI/BOLI can arise from various quarters, often due to a lack of understanding. Continued advocacy and education on these topics are essential.
4. Ensure carrier tax rates are balanced and fair.
The TCJA permanently cut the corporate tax rate from 35% to 21%, and additional tax changes targeted the life insurance industry.
As lawmakers consider raising the corporate tax rate, reviewing the tax provisions specific to life insurance companies is critical. If the corporate tax rate increases, these industry-specific tax hikes should be adjusted to ensure more stable tax treatment for life insurance and prevent negative impacts on customers. Without such adjustments, carriers may reduce product offerings or make them less competitive and affordable.
5. Extend or make permanent Section 199A, the small business deduction.
Section 199A, which provides the most significant tax relief in the profession’s history and offers numerous client planning opportunities, will expire at the end of December 2025. Currently viewed as a Republican initiative, Section 199A needs broader bipartisan support, including backing from Democrats, to ensure its sustainability beyond 2025.
The November election results will greatly impact the tax reform process. While Finseca continues to prepare for all outcomes, we believe these are the core tax priorities that will help our members continue to provide holistic planning for millions of Americans.
Jennifer Fox is vice president of federal affairs with Finseca. Contact her at jennifer. fox@innfeedback.com
