InsuranceNewsNet Magazine - February 2016

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How the Family Financial Miracle is Changing the Way Index UL is Sold PAGE 23

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Did you ever stop to think about the ridiculous amount of money that it costs for you to acquire a new client? One seminar lead can cost over $1,000 when all is said and done!

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MERLE GILLEY’S MY FAMILY FINANCIAL MIRACLE MARKETING SYSTEM… • Delivers hot IUL leads to you at just $7.50 each • Is tailored for annuity, life, IUL and RIA advisors • Unlocks millions with new, old and cold prospects

BUT THE BEST PART IS… Once you’ve got your $7.50 lead, Merle’s one-of-a-kind, done-for-you digital marketing system does the rest of the work for you – for FREE! Get in on the ground level of the biggest IUL breakthrough this decade – before your competition beats you to it. Watch a brief video on how the $7.50 lead can help you achieve your business dreams at www.MiracleAdvisor.com.

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HOW MERLE GILLEY’S FAMILY FINANCIAL MIRACLE IS CHANGING CONSUMER BELIEFS ABOUT INDEX UNIVERSAL LIFE

Merle Gilley is the pioneer of modern IUL sales and the mastermind behind the My Family Financial Miracle marketing system, which incorporates an interactive digital experience with his groundbreaking book.

Claim a free copy of Merle’s book at www.MiracleAdvisor.com and read the exclusive interview with Merle on page 23 of this issue.

Merle Gilley is the pioneer of modern IUL sales. Since the day he bought one for himself, he’s sold over 1500 policies of the “Greatest Wealth Accumulation Mechanism Ever,” which he believes should be the financial foundation for all households. Now, he’s taking his crusade to the masses with My Family Financial Miracle. In this Q&A, Merle discusses this breakthrough consumer education system, why it’s changing beliefs on IUL, and how it’s closing more million-dollar cases than ever for advisors nationwide.

Q. How did you discover Index Universal Life?

A. I found it out of necessity. I had sold my company after 16 years, and I was looking for a place to grow and protect what was essentially my life savings. After doing a lot of studying, I fell in love with Index Universal Life insurance as a product for protecting and growing money. The tax favorability was just icing on the preverbal cake. The death benefit for my family if something happened to me was the final benefit that pushed me over the top. I got an insurance license, learned how to structure the contracts for maximum protection and accumulation, and got extremely excited when I was told how much I was going to be paid to move my money into these great financial products.

Q. Was it easy when you decided to use your license to spread the word about IUL? A. Not at first. I had found a product that I deemed to be the financial savior of America, and the majority of people I shared the benefits of the Index UL product with blew me off. I was shocked. I didn’t know there was such a huge negative preconception about cash value life insurance in the marketplace. This is something I’ve had to work diligently to change over the last 14 years.

Q. How did you overcome the negative preconceptions?

A. I built software, PowerPoint presentations, and created simple whiteboard illustrations. The more I used these tools with my prospective clients, the faster my clients changed their beliefs about the value of Index UL and started referring me to their friends and family members.

Q. What outside forces are driving consumers to IUL?

out a safe place to put their life savings.

The internet has played a big role in helping consumers become educated about how the IULs work and where to find someone who specializes in IUL who can help them through the learning curve. For all of 2015, I’ve worked extensively to be the voice on the internet about the advantages of Index UL and to provide straightforward and accurate content.

Merle’s profound book is just one part of an entire breakthrough system. Free copies are available at www.MiracleAdvisor.com.

Q. What is My Family Financial Miracle?

A. It’s 15 years of my expertise boiled down to a series of concise instructional tools for other advisors to integrate into their practices. It’s a transformational process consisting of my book and a video library of instructional and emotional content to educate the consumer on how and why they should be using IUL for their future financial foundation. Clients are not proactive in implementing something new when they are confused and anxious. My Family Financial Miracle system was designed to educate them on how to change the way they were taught to manage money and

Miracle program reaches everyone, and it builds their confidence and gives them hope that it is possible to achieve their financial dreams.

Q. What are advisors saying about My Family Financial Miracle?

A. They can’t believe how easy it is to plug in and use, and nothing like this has ever been built before. Advisors have told me they learned more about the IUL product by going through my consumer site than from any book or training they have ever read or attended.

Q. What results are other advisors seeing?

A. The results have been better than I ever expected. I knew the information was powerful and if the consumer read the book or watched the videos, they would be compelled to seek out the agents and do something. I wasn’t expecting the case sizes that have been created from the system to be as large as they have been! I had expectations of the average consumer using this system to change their annual contributions from their IRAs or 401(k)s into an Index UL, and that has happened in a big way. But I was not expecting business owners, day traders, and entrepreneurs to embrace this system as much as they have.

I have seen more IULs built to hold a million dollars in the last two months than I have seen in 12 years.

Q. What’s something our readers can do right now to help increase their IUL sales?

A. Get a free copy of my book and read it for yourself. It will open your eyes to the power of IUL the way I build cases for wealth accumulation. Simultaneously, you’ll see the most powerful marketing system ever created to educate consumers on a new way to protect and grow their

icts d e r p a t a d A New LIMR rs accelerate IRA rollovelion by 2018. to $550 bil d? r a o b n o t e g Will annuities

PAGE 24

PLUS How to add Rocket Fuel to your business PAGE 14

Avoid an IRS tax bomb during policy exchanges PAGE 36

Why women should love annuities PAGE 42

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

online

www.insurancenewsnetmagazine.com

FEBRUARY 2016 » VOLUME 9, NUMBER 2

ANNUITY

24

42 W hy Women Should Love Annuities

By Linda Koco Few women are knowledgeable about annuities, but many women are concerned about their ability to retire.

Here is where advisors can bridge the gap.

48

INFRONT

10 Industry Rejoices Over Federal Interest Rate Hike — Too Soon?

FEATURE

24 Will Annuities Miss the Retirement Train?

By InsuranceNewsNet Staff When the long-awaited interest rate hike was announced, the industry cheered.

But is there really a reason to celebrate?

By John Hilton With Americans living longer than ever, the traditional saveand-withdraw method of funding retirement is no longer wise. So why aren’t more people rolling over their individual retirement account funds into annuities?

14

LIFE

HEALTH/BENEFITS

48 LTCi and D-I-V-O-R-C-E: A Conversation Worth Having

By Brian I. Gordon and Murray A. Gordon Long-term care planning takes on increasing importance as clients get older. But when clients in their 50s are getting divorced, this type of planning becomes even more essential.

34 29 Million Reasons to Learn About Diabetes Life Underwriting

By Michael Horbal The positive steps your clients have taken to improve their health since their diabetes diagnosis often are overlooked by agents. Here is how you can help them get a favorable underwriting.

INTERVIEW

14 How to Add Rocket Fuel to Your Business An interview with Gino Wickman When the visionary who creates and grows the business meets up with the integrator who helps put those visions into action, the results are explosive.

That’s according to Gino Wickman, author of . Gino tells InsuranceNewsNet Publisher Paul Feldman why every visionary needs an integrator and how to make that match.

4

36 36 Exchanging One Policy for Another Could Ignite an IRS Tax Bomb

InsuranceNewsNet Magazine » February 2016

By Dennis M. Axman Some types of transactions could generate an unwanted IRS Form 1099 for a client. Here is how you can help avoid an unhappy tax surprise.

FINANCIAL

54 What’s Next for Couples Under New Social Security Rules?

By Robert A. Fishbein The recent changes in claiming rules mean that advisors should place a greater emphasis on non-Social Security solutions to retirement planning.

A WHOLE LIFE INDEX-LINKED FEATURE. It might just be genius.

It’s definitely the next generation of life insurance. n

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Guardian’s new Index Participation Feature (IPF), is about to reinvent whole life – and add a new dimension of cash value growth potential for your clients. Now they can link up to 100% of the cash value of paid-up additions on select policies to the performance of an index – at a competitive cap – while the floor and policy’s inherent guarantees offer additional downside protection from stock market volatility. IPF is a patent-pending whole life rider innovation only from Guardian, a mutual company.

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Producers, please visit:

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The Guardian Life Insurance Company of America New York, NY 10004-4025

For Producer Use Only – this advertisement is not intended to be used in the sale of life insurance. All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. The Index Participation Feature (IPF) is a rider available with select Guardian participating whole life polices. IPF provides an adjustment to the dividend paid under the policy. This adjustment, subject to the cap, participation rate and floor, may be positive or negative based on index performance. Adverse market performance can create negative dividend adjustments, which may cause lower overall cash values than would otherwise have accrued had IPF not been selected. Dividends are not guaranteed.

They are declared annually by Guardian’s Board of Directors. Riders may incur an additional cost. Rider benefits may not be available in all states. Rider Form Number: 15 IPR. 2015-9597 (Exp. 08/17)

ALSO IN THIS ISSUE FEBRUARY 2016 » VOLUME 9, NUMBER 2

61 NAIFA: The 5 Relationships for Success

By Ayo Mseka An industry veteran looks back on the types of relationships that helped him forge his career.

BUSINESS

58 How to Guard Your Online Reputation

By Anthony L. Semadeni and Steve Leedom It takes only one click of a button to destroy the reputation you’ve worked hard to achieve. Here’s how you can be aware of the risk and be proactive in protecting your good name.

INSIGHTS

60 MDRT: Life Insurance Unlocks Higher Savings for High-Income Gen Xers

62 T HE AMERICAN COLLEGE: Americans Are Flunking Financial Literacy

By Jocelyn Wright There is a tremendous need for increased financial education for our youth, and the sooner the better.

64 LIMRA: Young Advisor Success Depends on Support From Their Firms

By Breana M. Macken and Emily Tracey Technology, selling skills and sales ideas were among the areas in which young advisors said they could use help from their companies.

By Brendan C. Walsh Showing clients the power of taxdeferred, compounding interest puts a whole new spin on life insurance.

EVERY ISSUE 6 Editor’s Letter 22 NewsWires

32 LifeWires 40 AnnuityWires

46 Health/Benefits Wires 52 FinancialWires

INSURANCENEWSNET.COM, INC.

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16-INN-02

WELCOME LETTER FROM THE EDITOR

DOL Threat or Challenge?

P

erhaps the most troubling answer given during InsuranceNewsNet’s webinars on the Department of Labor’s fiduciary rule was, “We don’t know.”

That was the response to what is considered “reasonable” compensation, which is what is allowed under the expected rule. In the next few months, the DOL is expected to release the rule covering money in ERISA-qualified retirement accounts.

But even then, the rule is not expected to clarify what is considered reasonable.

So, agents and advisors will have difficulty knowing whether the compensation they are accepting could be out of bounds.

The inevitable next question is who decides what is reasonable. That answer is also a little disconcerting: a judge.

The DOL’s rule not only opens the door to a greater possibility of lawsuits, but it also keeps that door open forever. That was one of the key pieces of insight that Kim O’Brien brought to the webinars.

Kim very ably hosted the seminars as she drew from decades of presenting as an association leader as well as working in the sales channel. She was head of the National Association for Fixed Annuities (NAFA) until she helped found the Americans for Annuity Protection (AAP) with InsuranceNewsNet Publisher Paul Feldman.

Problem in Perpetuity

Kim pointed out that clients will be able to look back at an annuity sale at any point and sue over what they might in hindsight say was an inadequate recommendation.

Why didn’t the agent recommend a particular annuity from another company that promised a better return?

The answer might be that the agent did not know about the other option or that product was not the best option for other reasons. But if that other option paid a lower commission, the judge might decide the agent was looking out for their own interest rather than the client’s.

Some would argue that the basis for the judgment would not be as simple as the higher or lower commission rate, but who wants to go through litigation to find out?

And, of course, it is not just a litigation 8

risk. Agents will be required to keep documentation that can be inspected by a litany of agencies: Department of Labor, Securities and Exchange Commission, Financial Industry Regulatory Authority and Internal Revenue Service. Each one has its own penalties.

Besides those realizations, another question was how many agents and advisors will be pulled under this rule. Well, let’s put it this way — it would be difficult to see how most of them would avoid it for long.

Recommendation Is the Hook

The rule would require agents and advisors to be under the fiduciary standard if they made a recommendation about money in an individual retirement account or other ERISA-qualified account. If advisors have an annual review with a client and talk about the big financial picture, they enter fiduciary territory.

Also, retirement funds tend to be where people have money these days. So, when it comes time to buy an annuity, odds are very good that the money to fund the annuity will be coming from an IRA. Those odds are likely to increase as the rollover market grows past a half a trillion dollars annually.

The INN webinar panelists were Jim Jorden, of Carlton Fields Jorden Burt; Jules Gaudreau, National Association of Insurance and Financial Advisors president; Judi Carsrud, NAIFA government relations director; and Dick Weber, founder of Ethical Edge.

The questions the panel received revealed a range of understanding about the pending rule. Some questions focused on particular products and situations. Others were more general and existential, as in, “Will I be able to stay in business?”

Of course, we can’t answer that. We never could. Only advisors themselves can.

But we can say this: When has it ever been easy? In your case, you achieved significant success in your professional life.

How did you get there?

In your earliest days, sales were probably tough to make. Odds are good that you had days, weeks, months, maybe even

InsuranceNewsNet Magazine » February 2016

years when you did not think you were going to make it in this business. But here you are, reading this magazine to secure greater success.

The DOL’s rule is likely to be implemented, although plenty of people are battling mightily against it. And they might have some or even total success. If you oppose the rule, it behooves you to support groups such as NAIFA and AAP. Even if they slow down this rule or perhaps kill it, the SEC is in the wings preparing a fiduciary rule that it plans to release later this year. It is clear that the momentum is on the side of advising.

Some webinar attendees asked if getting a securities license would shield agents from the encroaching regulators. Not if that is the only reason that they would be getting the license.

If agents are going to focus on particular product lines, they can’t also pretend to be financial advisors. So, in those cases, they will need to pay attention to the new rules as they come out and recraft their processes. As I said earlier, successful people did not get where they are by taking the easy road. They will find a way to achieve greater success.

You Got This

Most likely, you chose to be an independent agent or advisor because you wanted to be in control of your fate. Whether you work for yourself or in someone else’s agency, you usually can call your own shots. That has not changed.

In the murk of what the DOL or the SEC will establish is much uncertainty. “We don’t know” is the frustrating answer to many of the questions at this point.

But here is one thing we do know. These things that lay ahead are not insurmountable. They are merely obstacles to navigate.

The only person who can stop you is you.

It is time to test your mettle.

Steven A. Morelli Editor-In-Chief

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DID YOU KNOW THERE IS ONE TOOL THAT WILL MAKE EVERY ONE OF YOUR CLIENTS & PROSPECTS INSTANTLY TRUST YOU, GIVE YOU THEIR COMPLETE & UTTER ATTENTION AND FOLLOW EVERY STEP OF YOUR ADVICE? READ BELOW TO DISCOVER THE SECRET EVERY TOP PRODUCER ALREADY KNOWS ABOUT THIS POWERFUL MARKETING & MONEY MAKING TOOL Nick Nanton here and I wanted to talk to you about the power of being an author and what it will do for your financial practice or insurance business. I want to start by sharing an underdog story my friend Jack Canfield told me a few years ago.

Jack was a speaker, out on the circuit, as was his soon to be partner, Mark Victor Hansen. They would run into each other and start talking about how they both wanted to impact one billion people around the world. When they looked around at the events they were speaking at, continuing on this path was just not going to cut it.

So they called on some of their friends with a crazy idea.

The crazy idea was pulling together the most heart-felt stories that their friends could tell and compiling them all into a book. You may have heard of it. It was called Chicken Soup For The Soul.

This is the same strategy that we have used here at the Celebrity Branding Agency, ever since we published Big Ideas For Your Business back in 2008. We called upon 22 of our top clients to tell their best piece of business advice and turned it loose into the world. More on this in a minute.

From the day Jack Canfield and Mark Victor Hansen decided to put these stories into a book, everyone called them crazy. The book was turned down by every major publisher, some multiple times.

But they pressed on.

And finally the book was picked up by a small, selfhelp publisher in Florida called HCI. And they only took the book on a condition. The condition was that Jack and Mark pre-sell thousands of books before it ever went to print.

That didn’t stop Mark and Jack.

Since that day back in 1993, they have gone on to put more than 500 million copies into print with more than 200 titles in the Chicken Soup For The Soul series.

The Chicken Soup for the Soul brand has grown far beyond a book of stories. It has generated hope, motivation and world-changing advice for millions of people all over the world. It has also spawned spin-off products that continue to extend the brand from dog food to coffee mugs and gifts for any occasion in life.

Today, I want to invite you to associate yourself with that all-too familiar brand by co-authoring a brand new book by Jack Canfield, titled The Success Blueprint.

But I want to do more than just extend to you an invitation to co-author this new book with Jack Canfield. I want you to understand the power of being an author. It is the power to command respect from your market. It is the power to have your market pay attention to you when they otherwise would have turned a deaf ear. It is the power to have prospects hang on to every word and follow every piece of advice you give to them. This is the power we’ve helped more than 1,800 authors hold in their hands since back in 2008.

And it’s not because you are changing your message. It’s because they see you in a new light. As an author. But my team takes it one step further. We guarantee that you are not only going to publish a new book alongside Jack Canfield, but that the book becomes an instant BestSeller on Amazon.com and/or Barnes and Noble.com, forever giving you the title of Best-Selling Author®.

I want to tell you more about this publishing opportunity and how aligning yourself with Jack Canfield and the Chicken Soup For The Soul brand will impact your production, your prospecting and the growth of your business. To do so, I have just recorded a new training eld, where we talk about how he has call with Jack Canfield sold more than 500 million books, as well as my own journey going from an attorney in Orlando to writing a Best-Selling book and working with the top experts and entrepreneurs across the world.

In addition to this special call with Jack, I am also going to give you a digital copy of one of my own Best-Selling books, Celebrity Branding You®. In this book you will see how to build your own Celebrity Brand, something that cannot be taken from you by competitors and the only thing that really distinguishes you from your competition.

To gain instant access to these 2 practice-building resources, go to www.celebritybrandingagency.com/myblueprint or call (888) 893-3070.

When you do, I’ll also share how you can join the National Academy Of Best-Selling Authors® and attend their awards gala in Hollywood, CA later this year. At this once-in-a-lifetime event, you’ll walk the red carpet with your fellow Best-Selling Authors®, collect your Quilly® Award for your achievement, and meet your co-author, Jack Canfield, as he’s honored right there beside you.

But you have to act now. Call (888) 893-3070 today or visit us online at www.celebritybrandingagency.com/myblueprint.

“I love working with The Dicks + Nanton Celebrity Branding Agency. They can absolutely help you get to the next level. They do everything they promise and then some!”

– Jack Canfield, Author & Co-Creator of Chicken Soup for the Soul®

If you plan on being in business for the long haul, you must harness the power of being a Best-Selling Author, and there’s no better way to do that than by pairing up with Jack Canfield, the man who sold more than 500,000,000 copies of Chicken Soup for the Soul. Get in on it now at www.celebritybrandingagency.com/myblueprint or call (888) 893-3070.

INFRONT TIMELY ISSUES THAT MATTER TO YOU

Industry Rejoices Over Federal Interest Rate Hike — Too Soon? he Federal Reserve ended T months of speculation by raising interest rates at the end of 2015. A slowly increasing rate environment is the ideal scenario for the insurance industry.

By InsuranceNewsNet Staff

M

The Effect on Life Insurance Carriers

For life insurance carriers, rising rates ease spread compression.

Spreads compress, or tighten, when carriers, paying out liabilities to life insurance policyholders and annuitants at a fixed rate, find that they can only reinvest premiums at even lower rates because interest rates have declined.

Carriers find they can’t make enough 10

to adjust their credited interest and more appropriately match their assets with the liabilities, according to actuary Larry Bruning and researchers Shanique Hall and Dimitris Karapiperis.

Their research was published in 2015 by the Center for Insurance Policy and Research, the research arm of the National

“As the restraint from these headwinds further abates, I anticipate that the neutral federal funds rate will gradually move higher. …

That said, we will learn more from observing economic developments in the period ahead.”

— Janet Yellen, discussing the first Fed rate increase in seven years REUTERS/Kevin Lamarque

uch like a Christmas tree, the Fed’s December rate hike is not looking so fest-inducing in the wintry glare of January.

When the Federal Reserve Board raised benchmark interest rates for the first time in nearly a decade, many in the insurance industry expressed relief. After all, for at least seven years, companies have been struggling to eke some safe returns to offer rates that would attract business.

“Life insurance company executives are definitely cheering the Fed on. I can hear them yelling, ‘Yellen, Yellen, Yellen,’ ” Robert R. Johnson, president and CEO of the American College of Financial Services, told InsuranceNewsNet on the day the announcement was made.

The Federal Reserve raises its benchmark lending rate to make sure the economy doesn’t grow too fast, and the central bank lowers rates to make it less expensive to borrow in hopes of stimulating economic activity.

So, not only did the increase portend better bond returns for insurers, it was also an endorsement of an improving economy.

on their invested assets to deliver on their contractual liabilities — a phenomenon that has dogged life carriers since rates began their long decline.

As rates rise, insurance carriers will be able to invest premiums and roll over maturing bonds into higher-yielding investments. About 74 percent of the life

insurance industry’s invested assets are in bonds.

“Bond yields are going to rise in response to higher rates,” said Johnson, author of Invest with the Fed. “This initial 25 basis point change isn’t really going to have an impact on the economy,” he added. “But what it does is it signals a future course of action to the Fed. The last thing the Fed wants to do is raise rates and reverse course in the near term.”

With the Fed having been so cautious before raising rates for so long, some analysts say it augurs well for more than one rate increase in 2016.

Market watchers have been talking about how fast rates should rise this year.

A slowly increasing rate environment is the ideal scenario for the life insurance industry as management reinvests assets in bonds with progressively higher yields.

Gradual rate increases allow carriers

InsuranceNewsNet Magazine » February 2016

Association of Insurance Commissioners.

Moody’s Investors Service said it expects the federal funds rate to increase by 150-200 basis points over the next two years, half the pace of increases during the last tightening cycles in the mid-2000s.

“Life insurers will benefit from a gradual improvement of investment returns, particularly those companies that have written significant policies that provide guaranteed rates to policyholders,” a team of Moody’s credit analysts wrote in a research note to clients.

Hold the Happy Phone

Although the consensus was that the 0.25 percent increase portended better bond returns, the real world intervened.

As gas prices fell and China’s stock market unraveled like a cheap, ugly Christmas sweater from that country, investors rushed the long-term bond

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February 2016 » InsuranceNewsNet Magazine

11

INFRONT INDUSTRY REJOICES OVER FEDERAL INTEREST RATE HIKE — TOO SOON? window. So instead of rising, bond yields have dropped since the Fed raised its rate.

The worldwide web of distressing news (did we mention the North Korean atomic bomb?) and its effect on the economy may also still the Fed’s hand on the interest rate at its next meeting. Bloomberg projected only a 43 percent chance that the Fed would raise the rate during its March meeting.

But what goes down eventually bounces back up, so if the economy overcomes the early winter blahs, perhaps the Fed will reach for the rate knob again by June.

New Purchasers Will Benefit More

In that case, the band will strike up again.

Once again, new life insurance and annuity contract holders will fare better than buyers who bought a year ago because the contract will pay more, Johnson said.

Millions of people in the market want annuities to generate guaranteed income, but some advisors have found it hard to pull the trigger on an annuity purchase because terms haven’t been that attractive and carriers have been gradually ratcheting back on benefits.

“The deals out there for annuities are not very good, so for potential policyholders and annuitants, rising rates are good news,” Johnson said.

The Fed has flummoxed analysts over the past two years. In late 2014, many market watchers were expecting the Fed to raise rates. It didn’t.

But unemployment was higher then.

The November 2015 unemployment report pegged the figure at 5 percent, down from 5.8 percent the previous November and 7.2 percent in November 2013, according to the Labor Department.

Unemployment is half what it was — 10 percent — in October 2009, five months after the nation had officially emerged from recession.

Among the only buyers inconvenienced by the rising rate environment are life insurance policyholders and annuitants who bought in the past five or six years: their policies became more valuable as interest rates fell and gradually paid out less and less.

Long-Term Care Insurance Could Also Get a Lift

The long-term care insurance business also may get a lift from the interest rate 12

increase. That’s according to LTCi executive Jesse Slome.

He foresees a time when rates on newly issued LTCi policies actually may decline from then-current rates.

That won’t happen this year, because the Fed’s recent move was a modest 0.25

could change pretty quickly if this continues,” Slome said.

By quickly, he means in a couple of years, not months. If long-term interest rates go up to, say, 4 percent in a few years, it’s conceivable that new carriers may come into the market or former LTCi

"The Fed may need to tone down its interest rate rhetoric to calm the market."

— Robert Landry, portfolio manager with USAA Investment Solutions

increase on short-term interest rates, said Slome, who is executive director of the American Association for Long Term Care Insurance (AALTCI).

More increases will be needed — especially increases to 3 or 4 percent or higher on long-term interest rates — in order for LTCi carriers to reconsider pricing direction, Slome told InsuranceNewsNet. The long-term rates — currently hovering a little above 2.5 percent — need to be comparable to those before the last recession, in the range of 4 to 5 percent, he said.

Even a 1 percent increase in long-term interest rates could make a difference, he said. AALTCI data indicates that such an increase could translate into a 10 percent to 15 percent decline in LTCi premiums, if other conditions are favorable.

But even in the interim, Slome sees “a glimmer” of positive news in the Fed’s rate action.

If short-term rates continue to rise incrementally, he said, that may enable LTCi carriers to keep rates where they are on new policies. This curtailment of LTCi price increases on new business would introduce important financial stability into the pricing environment, he said.

In addition, the slow but steady increases would enable carriers to invest maturing money and new money coming in at higher rates. That would enhance both profitability and stability, Slome said.

The ripple effect “would be an increased likelihood that today’s LTCi carriers will stay in the business rather than leave.”

The thing for LTCi professionals to focus on for now is that “the interest rates are rising, and that things (in the market)

InsuranceNewsNet Magazine » February 2016

carriers may think about re-entering the business, he said. “The global economy may attract players too.”

New carriers won’t have business on the books supported by reserves from the lower-interest era, he pointed out. This may spur them to compete for business by pricing their policies below the rates of the then-current carriers.

If that happens, existing carriers might start cutting their rates too, he said.

Product Change Also Needed

The LTCi market then may enter a period of expansion. This would be all the more likely if LTCi carriers were allowed to use an increasing premium price structure, Slome contended. “Some carriers have proposed this but the regulators won’t allow it, at least not so far.”

When LTCi first came out, the target market was for people in their 70s, and the coverage was primarily to pay for nursing homes, he said. That’s when the level premium structure was established.

But today’s stand-alone policies cover more than nursing home care, and carriers are increasingly trying to sell to younger people in their 60s and 50s.

However, requiring a level premium for 20 or more years doesn’t allow carriers to adjust to unforeseen market conditions, Slome said.

If LTCi carriers were allowed to issue “increasing premiums” or “step-up premiums” with their LTCi policies, that would help stimulate more development and expansion in the market, he predicted.

Whatever happens with interest rates, he said, “the current products will still have to change.”

IN PURSUIT

Winston Benefits chooses us because of our broad portfolio of products. It’s one of the ways they Transform Tomorrow® for their clients. Find out more at www.transamericabenefits.com.

Products underwritten by Transamerica Life Insurance Company, Cedar Rapids, Iowa.

CHOBSWB-0515 CHOHIU-0414

with w e i v r e n An Innt o Wickman, Gi Feldma r ul

by Pa Publishe

Where’s the real propulsion for a successful business?

Gino Wickman says it comes from a visionary CEO, but that leader also needs an integrator to ensure that power propels the business in the right direction.

14

InsuranceNewsNet Magazine Âť February 2016

INTERVIEW HOW TO ADD ROCKET FUEL TO YOUR BUSINESS

M

ost, if not all, successful small businesses are started by visionaries: people who can see the big picture and lead other people forward. But after initial, rapid growth the company led by a visionary will plateau, being held down by that person’s very own capabilities and limitations.

As visionaries build companies, they often feel alone and frustrated, and may even feel as if they are burning out. If you are that visionary, the good news is that you aren’t alone. There is a solution that will fuel your passion and free you from the grind.

The key is an integrator. It’s a person who loves structure and the details of making things work. Integrators thrive in process-driven environments with clearcut goals. Integrators hold everyone accountable. This relieves visionary leaders to focus on the things that they do best, such as relationships and creating new opportunities.

Finding an integrator who is ready to do the usually thankless work of converting a mired mess into a smooth-operating machine is not as easy as running a help-wanted ad.

Visionary leaders have to do the work of self-examination to understand their real role and value. They have to be really willing to let go of responsibilities and tasks. They have to be ready to stop being the go-to person in the company.

Gino Wickman encapsulated this process into his book Rocket Fuel: The One Essential Combination That Will Get You More of What You Want From Your Business. The process described in the book was a distillation of what he learned from decades of helping small businesses become large companies with his consultancy, EOS Worldwide.

In this first of a two-part series, Wickman explains why you need an integrator and how to find yours. This is the first step of his process for rocket fuel-inspired growth.

Next month, we will feature part two, covering how to create the systems that will make your business run like a machine.

FELDMAN: What is Rocket Fuel and how can it help a business owner?

WICKMAN: We typically see entrepreneurs who have the ability to start a business and grow it to a certain size, 16

Those Who Have Visionary DNA • Are founding entrepreneurs.

• Have lots of ideas/idea creation/ growth ideas.

• Are strategic thinkers.

• Always see the big picture.

• Have the pulse of the industry and target market.

• Research and develop new products and services.

• Manage big external relationships (e.g., customers, vendor, industry).

• Get involved with customers and employees when vision is needed.

• Inspire people.

• Are creative problem solvers (for big problems).

• Create the company vision and protect it.

• Sell and close big deals.

• Connect the dots.

• On occasion, do the work, provide the service and make the product.

Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business, Gino Wickman, BenBella Books, 2015

but there comes a point in their growth where they simply can’t do it all.

The sheer will, brute force, passion and stamina that make them able to hold everything together unfortunately starts to become very turbulent because they can’t hold all the pieces together.

And every visionary is a little bit different. We call that founding entrepreneur who started the business the “visionary.”

During that turbulent time, they need a unique person to counterbalance that crazy visionary — as I like to call them — with all of these ideas and all of this energy and all of this creativity. And we call

InsuranceNewsNet Magazine » February 2016

that unique person the “integrator.”

There’s a visionary-integrator dynamic in every successful entrepreneurial organization, and that is what we solve. After 15 years of doing this, I finally got to dive into the pure topic of the visionaryintegrator dynamic. That’s what Rocket Fuel is and that’s what Rocket Fuel does.

This is how we’re able to cut through all of the ego titles that exist and really focus on the unique skill set required.

That wild and crazy visionary needs to be counterbalanced by this integrator.

There’s a great quote from, I believe, a Stanford University professor that says

the entrepreneur’s lust needs to be counterbalanced by the manager’s prudence.

So that’s what this dynamic is. You see it over and over in business history.

The ideal is that a visionary has this awareness as early as possible, so they can take the leap and find the right integrator because they will grow faster. But it’s the reality that most visionaries don’t have that luxury, and so somewhere on that journey they need to bring that integrator in.

And some visionaries have the luxury of finding that person right out of the chute, and so we find about 50 percent of the time that relationship is a partnership. And so two partners started a business, grew it and just by happenstance they came across my teachings and they realized that hey, this partner was the visionary the whole way and this partner was the integrator the whole way. And then we cite examples.

Henry Ford and James Couzens were one of the classic visionary-integrator duos way back when Ford Motor Company was a tiny little startup. It’s a great example because of how those two are the ones who really built Ford Motor Company, and Henry gets all the credit. There are countless examples of this thing.

C

M

Y

CM

MY

CY

CMY

FELDMAN: How do you find the right integrator as you grow as a company?

K

WICKMAN: We outline a very specific seven-step process for how a visionary finds their ideal integrator in our book.

The way we describe it is a two-piece puzzle. So if you picture a puzzle that has only two pieces, first there’s the visionary’s puzzle piece, which has its unique prongs — or whatever you call those thingies on a puzzle piece.

Those unique prongs are defined by that visionary’s personality, characteristics and style. We list about 25 characteristics of a visionary because not all visionaries have all the same characteristics. But once that visionary really crystallizes their unique puzzle piece, they then need to set out and find that perfect integrator match.

That’s still a lot of work, but creating their puzzle piece as a visionary is absolutely the first step because they will make a mistake in finding their ideal integrator if they don’t find that perfect match.

February 2016 » InsuranceNewsNet Magazine

17

INTERVIEW HOW TO ADD ROCKET FUEL TO YOUR BUSINESS

Visionary Challenges • Inconsistency.

• Organizational “whiplash,” the head turn.

• Dysfunctional team — a lack of openness and honesty.

• Lack of clear direction; under-communication.

• Reluctance to let go.

• Underdeveloped leaders and managers.

• “Genius with a thousand helpers.”

• Ego and feelings of value dependent on being needed by others.

• Eyes (appetite) bigger than stomach; 100 pounds forced into a 50-pound bag.

• Resistance to following standardized processes.

• Quickly and easily bored.

• No patience for the details.

• Amplification of complexity and chaos.

• Attention deficit disorder (typical, but not always).

• Foot always on gas pedal — with no brake.

• Drive is too hard for most people.

Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business, Gino Wickman, BenBella Books, 2015

In our experience, we have visionaryintegrator combos who take themselves from startup all the way to relatively mature $10-$20 million businesses. So our experience is that this relationship can last for years. But sometimes there needs to be a change because the industry might change, the company dynamics might change, and quite frankly the visionary might change. And in that lies the need for a new type of integrator.

Now, with that said, from startup to $1 billion, I’m certain that it’s rare for the same visionary-integrator combo to survive that ride. So what’s really important here is we’re working with 10- to 250-person companies. So in that range, and even with your clients and readers whose busi18

nesses are even smaller than that, the visionary-integrator relationship is typically sustainable and long-term because they’re not going from $0 to $1 billion.

In some cases they’re going from $500,000 to $2 million or they’re going from $1 million to $10 million, and that’s a 10-year journey. They don’t need multiple integrators, and the integrator doesn’t need to change every year or two.

FELDMAN: What are some tips to finding that individual? Do you have some sort of a process for matching that up and recruiting to find that?

WICKMAN: We cover that in the book with seven steps, and we don’t even get

InsuranceNewsNet Magazine » February 2016

into the “how” until step 5 because 90 percent of the battle is making sure that the visionary is ready. Then they have to crystallize their puzzle piece. Then the remaining 10 percent falls into place. But the visionary must clarify their uniqueness so they can know what they’re looking for in an integrator.

FELDMAN: In the case of a financial advisory firm built around a superstar salesperson with a great team around them, how do you help them take their business to the next level?

WICKMAN: We always start with what we call the five frustrations because these are all the indicators that it’s time for you to do something different.

One of the things they’re feeling frustrated about is control. They’re feeling out of control from where they started this business, grew it nicely and then all of a sudden they can’t get their arms around it like they used to.

No. 2, they’re frustrated about people and so they’re starting to realize they need to manage a person or two or three or four. And all of a sudden, the business is becoming complex because great founders and entrepreneurs are not great managers of people. But they’re frustrated about people.

Third, they’re frustrated about profits.

So they’re wanting to grow the business.

They’re wanting to make more; they’re simply not making enough.

The fourth is that they’re hitting the ceiling. In other words, for some reason growth has stopped.

This financial advisor builds a firm, starts growing the business and doing everything they can — all of a sudden they start to reach the limit of their capacity.

They’re hitting the ceiling and growth has stopped.

Then the fifth frustration is, they’re kind of feeling like nothing is working because even though they’re trying stuff and looking for this magic pill, there isn’t one. So the person who started the business realizes it’s time to do something different.

FELDMAN: How does someone get started in making those changes?

WICKMAN: You cannot build a great

HOW TO ADD ROCKET FUEL TO YOUR BUSINESS INTERVIEW

The Five Frustrations of the Visionary

1

Lack of Control. You started this business so you could have more control over your time, money and freedom in your future. Once you reach a certain point of growth, however, you realize that somehow you actually have less control over these things than you’ve ever had before. The business is now controlling you!

2

Lack of Profit. Quite simply, you don’t have enough. It’s a frustrating feeling to look at the monthly profit and loss (or daily cash flow) and realize that no matter how hard you work, the numbers don’t add up.

3

People. Nobody (employees, partners, vendors) seems to understand you or do things your way. You’re just not on the same page.

4

Hitting the Ceiling. Growth has stopped.

The business is more complex, and you can’t figure out exactly why it isn’t working.

5

Nothing Is Working. You’ve tried several remedies, consulted books and instituted quick fixes. None of these has worked for long. Your employees have become numb to new initiatives. Your wheels are spinning — and you have no traction.

Sign up for at Gino's newsletter ow.com www.rocketfueln and get the latest ight to thinking sent stra your inbox.

Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business, Gino Wickman, BenBella Books, 2015

organization on multiple operating systems. You’ve got to choose one.

The first thing they need to decide is, “How am I going to run this company?”

Because if they are trying to do this amalgamation of the 10 different teachings all in one, they can’t do it. What we’re in the business of doing is offering up an operating system.

With that, they can start to speak a common language and create consistency.

The next thing is for them to really see and understand their business through the lens of what we call the six key components.

There is a vision component, which means they must get crystal clear and get everybody on the same page. The next

is that they have a people component, and they’ve got to make sure they’re surrounded by great people top to bottom or else growth will stop. Then there’s the data component, where they must start to manage the business through data.

The fourth is the issues component, which is building a muscle and a sense of courage about how to solve real problems quickly through a team.

The fifth is the process component, and that is to really start to see their business through the lens of understanding that their business is made up of a handful of processes. If they can see the business as a system and start to document that and dial it in and get people to follow that system, they’ll begin to create consistency.

FELDMAN: How do you get an integrator if you can’t afford one?

WICKMAN: The painful truth is that if you want an integrator and you can’t afford one, then it’s just a matter of a waiting game. That’s not exactly the right way to say it, because it’s truly about planning.

There isn’t a perfect answer, because many times the perfect integrator for a smaller firm is a $75,000-to-$125,000a-year position, and they do not have the financial resources yet.

But we have many clients who determine they need an integrator but can’t afford one, and they are two years away from being able to put their integrator in place. They can put a stake in the ground as to when they’re going to have their

February 2016 » InsuranceNewsNet Magazine

19

INTERVIEW HOW TO ADD ROCKET FUEL TO YOUR BUSINESS

Integrator DNA • Personally accountable.

• Adept at self-management.

• Decisive.

• Good at planning and organizing.

• Strong leader and manager.

• Effective conflict manager.

• Catalyst for team cohesion.

• Goal achiever.

• Conceptual thinker.

• Employee developer/coach.

• Resilient.

• Adaptable.

• Able to understand and evaluate others.

• Forward thinking.

• Problem solver.

• Persuasive.

• Continuous learner.

Are You Ready?

• Financial readiness (affordability).

• Psychological readiness (ready to let go of some control).

• Lifestyle readiness (ready for fewer hours, or the same hours with a different focus and less frustration).

• Unique ability readiness (ready to be 100 percent you).

Rocket Fuel: The One Essential Combination That Will Get You More of What You Want from Your Business, Gino Wickman, BenBella Books, 2015

20

InsuranceNewsNet Magazine » February 2016

integrator in place and when they can afford one.

Some take bigger risks and do it sooner, and some are less risky and will wait a while. So that’s the first part of the answer.

The second part of the answer is a couple of things that can help.

Pick somebody on your team who exhibits some integrator ability, and have them help you with some integration.

And read Rocket Fuel and Traction for lots of integration things that they can do.

They can create your scorecard, run your weekly meetings and set rocks [goals]. They’re not an integrator, but you can have them carry some of the weight.

It’s not ideal. It’s not a long-term fix.

You can hire a coach. An accountability coach definitely will help a visionary stay focused and execute better. There’s no question about that. And there are also even fractional integrators available.

FELDMAN: How would a fractional integrator work?

WICKMAN: That is someone who works for multiple companies doing their integration. They will come in once, twice or three times a week as an outsource integration for the organization. It is rare, but it’s becoming more and more popular.

FELDMAN: How do you find fractional integrators?

WICKMAN: There are not a lot of them out there. We have created a community on the website www.rocketfuelnow.com.

There are people in the community who are fractional integrators. But it’s rare.

That’s why I would hesitate to suggest it.

But there have been fractional CFOs forever. That’s a very popular concept.

You could find one of those in every city in America right now.

So, once people understand themselves first and then take an interim step with a fractional integrator or take the leap with a full-time integrator, they will find themselves finally breaking through the ceiling that’s been hanging over them for so long.

NEXT MONTH: Gino Wickman will discuss how to dig in to get traction for your business.

Uprootedophobia:

HOW TO GET MORE DREAM CLIENTS IN 2016 INTERVIEW

Your clients’ fear that going into a nursing home may be their only option.

Give your clients the flexibility to stay in their home longer with Nationwide® YourLife CareMatters — currently the only linked-benefit long-term care coverage that offers: • Cash indemnity benefits that can be used for anything to help maintain independence • Freedom to use 100% of the benefit for informal care, with flexibility to use friends or family as caregivers1

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ANNUITIES | LIFE INSURANCE | RETIREMENT PLANS | MUTUAL FUNDS

Health care practitioner must state informal care is appropriate in the plan of care.

Nationwide YourLife CareMatters may not be available in every state. Please contact Nationwide to determine product availability in your state.

Guarantees and protections are subject to the claims-paying ability of the issuing insurance company.

When choosing a product, make sure that life insurance and long-term care insurance needs are met. CareMatters is not intended to be a primary source of life insurance protection, so make sure life insurance needs have been covered by appropriate products. Because personal situations may change (i.e., marriage, birth of a child or job promotion), so can life insurance and long-term care insurance needs. Care should be taken to ensure these strategies and products are suitable. Associated costs, as well as personal and financial objectives, time horizons and risk tolerance should all be weighed before purchasing CareMatters. Life insurance, and long-term care coverage linked to life insurance, has fees and charges associated with it that include costs of insurance, which varies based on characteristics of the insured such as gender, tobacco use, health and age, and additional charges for riders that customize a policy to fit individual needs.

Life Insurance is issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. Let’s Face It Together is a service mark of Nationwide Life Insurance Company. Nationwide, the Nationwide N and Eagle, Nationwide is on your side and YourLife CareMatters are service marks of Nationwide Mutual Insurance Company. © 2016 Nationwide.

February 2016 » InsuranceNewsNet Magazine NFV-0890AO.2 21 (6/15) 1

NEWSWIRES

Health Care Spending Topped $3T in 2014

While many of us are preoccupied with paying off the last of the holiday bills, here’s a news item about spending that is sure to make us stop and take notice. U.S. health care spending in 2014 grew at the fastest pace since President Barack Obama took office, driven by expanded coverage under the Affordable Care Act and by skyrocketing prescription drug costs.

Total health spending reached $3 trillion, or $9,523 for every man, woman and child. This was an increase of 5.3 percent over 2013 health care spending.

The report by nonpartisan experts at the Department of Health and Human Services provided a snapshot of the nation’s health care system. The report also found that health care spending grew faster than the economy as a whole, reaching 17.5 percent of gross domestic product. That’s worrisome because it means health care is claiming a growing share of national resources.

Among the major findings was that prescription drug spending increased by 12.2 percent in 2014, led by new medications to fight hepatitis C, cancer and multiple sclerosis. In addition, Medicare saw its fastest rate of growth since 2009, increasing by 5.5 percent over the previous year. Again, the rising cost of prescription drugs fueled this increase.

ACA HAD LITTLE EFFECT ON PART-TIME EMPLOYMENT

When the ACA went into effect, critics contended the law would shift more workers to part-time employment. A new study showed that hasn’t been the case so far.

Research published in the journal Health Affairs “found little evidence that the ACA had caused increases in part-time employment as of 2015.”

Kosali Simon, a professor at Indiana University and a co-author of the report, noted that even the slight shifts to part-time employment from full-time jobs — of just about 0.5 percent from 2013 to 2015 — in two subgroups could not be attributed to the ACA employer mandate. Those subgroups are people with no more than a high school degree and workers between the age of 60 and 64.

NEARLY 70% OF INVESTORS LOST MONEY IN 2015

Last year was a rough time to be in the stock market. Nearly 70 percent of investors lost money in 2015, according to Openfolio.

DID YOU

KNOW

?

22

Those who did make money did one of two things. They held a lot of cash, or they took on a lot of risk.

Cash remained king in 2015. Despite the fact that cash earns almost nothing in the bank or a money market fund, it still beat out U.S. stocks, commodities and even most bonds.

The S&P 500 and Dow stock indexes had wild swings and ended the year in the red. Popular bond funds like the Fidelity Total Bond Fund and the Vanguard Total Bond Market Index Fund lost money last year.

Investors who ended the year with gains had almost a quarter of their portfolios in cash, Openfolio found, even though keeping a lot of cash is not a good way to make money in the longterm.

The other winning strategy was to bet big on individual stocks, especially tech stocks. Age also carried an edge when it came to making money.

said that retirement saving is 59% oftheirinvestors top financial resolution for 2016.

Source: TD Ameritrade

InsuranceNewsNet Magazine » February 2016

QUOTABLE

I think there will be litigation.

— Fred Reish, a partner at Drinker Biddle & Reath in Los Angeles, on possible challenges to the Department of Labor’s fiduciary rule.

MORE AMERICANS SAY HEALTH PREMIUMS WENT UP OVER PAST YEAR

Nearly three in four American adults (74 percent) said the amount they pay for their health insurance premiums has increased over the past year. This includes a recordhigh percentage (36 percent) who said their costs have gone up “a lot.”

This is according to a Gallup poll, which showed that Americans are feeling health care cost increases more sharply than usual. Since 2003, the large majority of adults have reported that their costs have gone up. However, until now, many more said the costs went up “a little” than “a lot.”

Americans with health insurance are also seeing less support from employers in paying premiums. More than a quarter of insured adults (28 percent) said they pay the full amount of their premiums, the highest percentage reporting this since 2001.

72% BELIEVE THEIR FINANCES WILL IMPROVE

Despite rising health care costs and the market roller coaster, most Americans feel optimistic about their financial state going into 2016. Nearly three-quarters of those polled (72 percent) said they will be in better financial shape in 2016, according to an annual survey by Fidelity Investments.

Among the respondents, 37 percent said they were considering making a financial resolution, up from 31 percent last year, while the majority (54 percent) said their goal is to improve their savings.

Spending less was the next most popular resolution (19 percent), followed by paying off debt (16 percent). Paying down creditcard debt was another concern, with 11 percent committing to this, up from 5 percent last year.

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HOW MERLE GILLEY’S FAMILY FINANCIAL MIRACLE IS CHANGING CONSUMER BELIEFS ABOUT INDEX UNIVERSAL LIFE

Merle Gilley is the pioneer of modern IUL sales. Since the day he bought one for himself, he’s sold over 1500 policies of the “Greatest Wealth Accumulation Mechanism Ever,” which he believes should be the financial foundation for all households. Now, he’s taking his crusade to the masses with My Family Financial Miracle. In this Q&A, Merle discusses this breakthrough consumer education system, why it’s changing beliefs on IUL, and how it’s closing more million-dollar cases than ever for advisors nationwide.

Q. How did you discover Index Universal Life?

A. I found it out of necessity. I had sold my company after 16 years, and I was looking for a place to grow and protect what was essentially my life savings. After doing a lot of studying, I fell in love with Index Universal Life insurance as a product for protecting and growing money. The tax favorability was just icing on the preverbal cake. The death benefit for my family if something happened to me was the final benefit that pushed me over the top. I got an insurance license, learned how to structure the contracts for maximum protection and accumulation, and got extremely excited when I was told how much I was going to be paid to move my money into these great financial products.

Q. Was it easy when you decided to use your license to spread the word about IUL? A. Not at first. I had found a product that I deemed to be the financial savior of America, and the majority of people I shared the benefits of the Index UL product with blew me off. I was shocked. I didn’t know there was such a huge negative preconception about cash value life insurance in the marketplace. This is something I’ve had to work diligently to change over the last 14 years.

Q. How did you overcome the negative preconceptions?

A. I built software, PowerPoint presentations, and created simple whiteboard illustrations. The more I used these tools with my prospective clients, the faster my clients changed their beliefs about the value of Index UL and started referring me to their friends and family members.

Q. What outside forces are driving consumers to IUL? A. They have become very wary of the stock market, they are risk adverse, and they are very aware of our country’s unstable financial state and are concerned about future increases in taxation. Consumers have become proactive in seeking

out a safe place to put their life savings.

The internet has played a big role in helping consumers become educated about how the IULs work and where to find someone who specializes in IUL who can help them through the learning curve. For all of 2015, I’ve worked extensively to be the voice on the internet about the advantages of Index UL and to provide straightforward and accurate content.

Merle’s profound book is just one part of an entire breakthrough system. Free copies are available at www.MiracleAdvisor.com.

Q. What is My Family Financial Miracle?

A. It’s 15 years of my expertise boiled down to a series of concise instructional tools for other advisors to integrate into their practices. It’s a transformational process consisting of my book and a video library of instructional and emotional content to educate the consumer on how and why they should be using IUL for their future financial foundation. Clients are not proactive in implementing something new when they are confused and anxious. My Family Financial Miracle system was designed to educate them on how to change the way they were taught to manage money and then drive them through the sales process with their advisor. People learn all different ways; some learn visually and would rather read and see information, and others would rather hear the content from another person. The My Family Financial

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Q. What are advisors saying about My Family Financial Miracle?

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February 2016 » InsuranceNewsNet Magazine

23

New retirement data from LIMRA foreshadows a prosperous IRA rollover market expected to reach $550 billion by 2018.

Can insurance agents capture their share?

BY JOHN HILTON

24

InsuranceNewsNet Magazine Âť February 2016

WILL ANNUITIES MISS THE RETIREMENT TRAIN? FEATURE

M

ore Americans are taking charge of their retirement decisions, but fewer are choosing annuities when it comes to IRA rollover choices.

Updated research by the LIMRA Secure Retirement Institute shows that 80 percent of retirees opt to either leave their money in a defined contribution plan or roll it over to an IRA. Just 8 percent choose to invest in an annuity, according to the 2012 data, the most recent year available. That is a drop from 11 percent shown in the 2009 data.

Conversely, the percentage of retirees taking a lump-sum payout rose from 7 to 8 percent over the same three years.

This data is significant in the bigger picture. According to LIMRA, the IRA rollover market is expected to grow to $550 billion by 2018, more than doubling the total 2009 market.

When these facts are taken together, the message to agents is very clear: Business potential is high if consumers receive the right annuity information. No sales gimmicks are needed, experts say, because annuities are the right product to address major retirement fears, such as outliving your money.

With Americans living longer than ever, the traditional save-and-withdraw method to retirement is no longer wise, said Jafor Iqbal, assistant vice president with the

LIMRA Secure Retirement Institute.

The popular 4 percent withdrawal model is not guaranteed to fully fund retirement, he explained. Instead, the way to best serve retirees and pre-retirees is to offer guaranteed income products.

“The systematic withdrawal plan as we know it does not address the retirement income crisis,” Iqbal said. “Annuities are the only investment product that can provide guaranteed lifetime income, as well as for the spouse’s lifetime”

The Data

The Retirement Income Reference Book provides a snapshot of how retirees and pre-retirees view their golden years, what

Percentage of Americans Retiring by Age Group — March 2014

2% Age <50

Age 55 to 60 2% Age 50 to 54

12%

51%

Age 66 to 69

13% Age 61 to 65

9% Age 70 to 74

4% Age 75 to 79

5%

2% Age 85+

Age 80 to 84

Source: LIMRA Secure Retirement Institute analysis of U.S. Census Bureau’s Current Population Survey, March 2014 Supplement.

Retiree Options Chosen — DC Plans (Percent of Retirees)

43%

Leave in plan

45% 45% 41%

Roll over to IRA

40% 37% 8%

Receive annuity/installments

2012 Study

9% 11% 8%

Take all in lump-sum cash payment

6% 7%

2011 Study 2009 Study Source: Asset Retention: Keys to Success in the Rollover Market — 2012 Results, LIMRA Secure Retirement Institute, 2013. For this study, retirees are defined as those who had retired within the previous three years and had been participating in a voluntary retirement savings plan at time of retirement.

February 2016 » InsuranceNewsNet Magazine

25

FEATURE WILL ANNUITIES MISS THE RETIREMENT TRAIN?

Percent of Households With a DB Plan 53%

55%

Very Confident in the Ability to Live the Retirement Lifestyle I Want (Percent of Households)

40%

Own an annuity Do not own an annuity

26%

35%

26%

18%

12%

40%

35%

13%

Age Age Age Age Age Age 18 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 or more Source: LIMRA Secure Retirement Institute analysis of the 2013 Survey of Consumer Finances, Federal Reserve Board, 2015. Percent of households having access to a DB plan = either survey respondent or spouse a) has DB pension at current job; b) had accrued a DB pension benefit from a former job but has not yet claimed benefits; or c) currently is receiving benefits from DB pension.

25% 18%

10%

Mass affluent Affluent High net worth All households ($100k – $499k) ($500k – $999k) ($1 mil +) Source: Annuities: Love Them When You Know Them, Hate Them When You Don’t, LIMRA Secure Retirement Institute, 2014. The study is based on 2,000 consumers with household investable assets of $100,000 or more.

Rollover Market to 2018

$600

(in Billions)

$455

$517

$551

$382

$400

$317 $226

$200

$485

$205

$288

$293

$229

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Source: Investment Company Institute, The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007–2012 (2014), and LIMRA Secure Retirement Institute analysis.

Note: Rollover market size for years 2011 through 2018 are estimates/projections.

they are doing with their money and, most importantly, where agents can offer service.

LIMRA researchers paint a clear picture of where opportunity exists for agents to connect retirees and pre-retirees with annuities.

Agents need to know this information from the LIMRA study:

» A quarter of all households with an annuity are “very confident” they will achieve their retirement lifestyle, 7 percent higher than those without.

» Forty-one percent of retirees say outliving their money is their No. 1 retirement concern.

» Fifty-one percent of Americans retire between 61 and 65.

» Nearly 75 percent of non-retirees believe that Social Security and pension will not be enough to cover retirement expenses. » Only 12 percent of people ages 18 to 34 have a pension, compared with 53 percent of those ages 65 to 74.

26

» Retirees and pre-retirees who told LIMRA they are interested in owning an annuity have more than $750 billion to spend on guaranteed income products.

» Three out of four retirees move their money out of their retirement plan within six months of retiring.

Clearly, education is key to helping consumers recognize that annuities let them reach exactly what they say are their most important retirement goals.

“Engaging investors for retirement

InsuranceNewsNet Magazine » February 2016

should start long before the investors retire, with guidance in planning for savings and income,” the LIMRA report advises.

Sadly, many people don’t know much about these critical issues, even though they think they know enough.

“The average American does not have very high literacy when it comes to retirement planning,” said Jamie Hopkins, co-director of The American College New York Life Center for Retirement Income. “They don't understand the basics of annuities and the basics of insurance products and how long money will last in a portfolio.

“They really don't understand those things, but they think they do, which is really a worst-case scenario.”

People are often overwhelmed with retirement decisions. When it comes to people’s nest egg, Hopkins said they often tend to cash out an IRA to main-

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February 2016 » InsuranceNewsNet Magazine

27

FEATURE WILL ANNUITIES MISS THE RETIREMENT TRAIN?

Financial Assets

by Source of Money and Retirement Status (in Trillions)

Age 40 or under Mostly Gen Y

$0.8

$0.6

Age 41 to 49 Mostly Gen X

$1.5

$1.2

Age 50 to 59 Mostly trailing-edge boomers

$2.7

$1.8

Age 60 to 69 Mostly leading-edge boomers

$2.3

$0.8

Age 70 or older Silent Generation Source: LIMRA Secure Retirement Institute analysis of 2013 Survey of Consumer Finances, Federal Reserve Board, 2014

Retirement Accounts — 401(k)/IRA

34%

$0.1

Nonqualified

$1.4

$5.2

$1.3

$2.3

$3.6

Qualified

Nonqualified

All Assets

Not Retired

Fully/Partially Retired

86%

89%

93%

94%

95%

21%

35%

46%

57%

79%

Individual Bonds

4%

16%

16%

18%

17%

18%

2%

13%

22%

27%

46%

62%

16%

16%

18%

17%

18%

8%

11%

14%

14%

12%

4%

Nonqualified Deferred Annuities

1%

Cash-value Life Insurance

14%

27%

35%

30%

40%

39%

Others

7%

13%

12%

16%

21%

31%

Mass-Affluent $250k to $499k

Affluent $500k to $999k

Low-Net-Worth Middle-Market $100k to $249k <$100k

tain flexibility and control over their money.

Education from a trusted agent can help, he said.

“When people get more education about annuities, insurance and other financial products, you see more of a willingness to incorporate them into a retirement income plan,” Hopkins said.

“Annuities can be incredibly valuable as a way to build retirement income, but you need to know how the specific annuity you are purchasing fits into your over-

High-Net-Worth Mega-millionaires $1 mil to <$3.5 mil $3.5 mil or more

all plan and situation.”

There are encouraging signs within the LIMRA data. For example, a 2014 survey found a 24 percent year-over-year increase in the number of employees opting to participate in an in-plan annuity.

In-plan annuities are likely accompanied by some education offered to participants by the employer.

But the reality is that only a fraction of 401(k) plans offer any kind of option to take a lifetime income option, LIMRA pointed out.

InsuranceNewsNet Magazine » February 2016

$2.8

$0.1

$1.3

5%

CDs

28

$0.8

$0.2

$0.1 Qualified

$0.3

Individual Stocks

Mutual Funds

Households with $3.5+ million

Households with assets <$3.5 million

Mega-Millionaires

Percentage of Households Owning Financial Product Types

Source: LIMRA Secure Retirement Institute analysis of 2013 Survey of Consumer Finances, Federal Reserve Board, 2014. Ownership rates by products refer to products in nonqualified portfolio.

Health Care Concerns

Health care is the ailing elephant in the room. Costs could be a little or a lot. The unknowns combined with complexities and a dizzying array of choices are leaving many retirees unprepared for health care costs, LIMRA concluded.

One out of four 65-year-old men of average health will live to 93, and one out of four 65-year-old women of average health will live to 95, LIMRA noted.

Medical care inflation is rising at nearly twice the rate of other goods and

WILL ANNUITIES MISS THE RETIREMENT TRAIN? FEATURE

Retirement Income Market Projection From 2013 to 2023 Early Career

Age 25 to 34 Investable Assets

Micareer with Kids Age 35 to 44 Investable Assets

Kids in College

Pre-retiree

Age 45 to 54 Investable Assets

Age 55 to 64 Investable Assets

Retiree

Age 65+ Investable Assets

2013

$0.5 trillion

$2.1 trillion

$4.0 trillion

$5.9 trillion

$7.3 trillion

$13.2 Trillion

2023

$0.9 trillion

$3.5 trillion

$5.5 trillion

$9.4 trillion$

15.1 trillion

$24.5 Trillion

The Retirement Income Opportunity

Accumulating Assets for Retirement

Source: LIMRA Secure Retirement Institute. Based on 2001, 2007, 2010 and 2013 Survey of Consumer Finances, Federal Reserve Board and U.S. Census Bureau’s Current Population Survey, March 2014 Supplement. All estimates and calculations reflect consumers aged 25 or over and households with assets between $50,000 and $4.9 million.

Percentage of Portfolio Fully Retired Households

Other, 9% Life insurance, 3% Bonds, 5% NQ annuities, 4% CDs, 3% Cash & equivalents, 13%

Percentage of Portfolio

Partially Retired Households

Stocks, 16%

Pre-Retiree Households

Life insurance, 2% Other, Retirement/ 6% Bonds, 3% pension accounts, NQ annuities, 2% CDs, 2% 40% Cash & equivalents, 12%

Other, Retirement/ Life insurance, 3% 6% pension Bonds, 5% accounts, NQ annuities, 2% 31% CDs, 2% Cash & equivalents, 11%

Mutual funds, 16%

Percentage of Portfolio Retirement/ pension accounts, 44%

Mutual funds, 14%

Mutual funds, 15%

Stocks, 15%

Stocks, 16%

Source: LIMRA Secure Retirement Institute analysis of 2013 Survey of Consumer Finances, Federal Reserve Board, 2014.

services. This is especially detrimental for seniors, many of whom live on a fixed income.

Seniors’ medical care expenses constituted 11 percent of their total expenditures in 2011, LIMRA found — roughly double that of all other consumers.

The Employee Benefits Research Council found that male retirees need an average of $68,000 for retirement health care, while females need about $90,000.

But “there’s no average retiree, right?”

Hopkins said. “There are people who are going to have a lot less than that and people who are going to have hundreds and hundreds of thousands of dollars of outof-pocket costs. That’s the part nobody is really prepared for.”

Retirees and pre-retirees are putting health care costs higher on the priority list, according to the LIMRA survey.

Respondents listing health care costs as a “major concern” increased from 40 to 49 percent from 2006 to 2013.

Those respondents listing long-term care costs as a major concern rose from 31 to 43 percent over the same time frame.

Agents “need to understand how to plan for health care costs, including Medicare, and be able to offer clients products such as long-term care insurance,” LIMRA concluded.

Since health care costs are such a high priority for consumers, it is “a natural conversation starter” for agents, the report added.

Fiduciary Rule

The bad news? Uncertainty abounds with regard to the Department of Labor’s fiduciary rule, expected to be published by May 1.

While offering in-plan annuities is helping boost annuity awareness, the DOL proposal is threatening those efforts.

“Some employers are cautious about in-plan annuities, as they assume a fiduciary responsibility when they include in-plan annuities, as a DC option,” the LIMRA report stated.

Education is a major concern for industry observers. The DOL carved out an exemption designed in theory to preserve Americans’ access to needed education.

Critics say the rule will do the opposite.

Under the DOL plan, a one-time meeting between an agent and a plan or participants would trigger fiduciary status.

Currently, agents must be providing “ongoing” advice in order to be held to the higher standard.

The DOL rule would consider any communication that could be “reasonably” viewed as a “suggestion” that a participant

February 2016 » InsuranceNewsNet Magazine

29

FEATURE WILL ANNUITIES MISS THE RETIREMENT TRAIN?

Most Important Retirement Goals Most important

Second most important

41%

Have enough money to last your lifetime

12%

Stay and live in own home

Have enough money to pay for medical expenses

4%

Pursue your interests and/or hobbies

3%

Have enough money for emergencies

2%

22% 14%

8%

Spend time with family or friends

30

28%

25%

Remain financially independent

move in or out of an investment as “fiduciary” advice, according to a guidance authored by Drinker, Biddle & Reath.

“Under this standard, many common sales and investment education practices would constitute fiduciary advice,” wrote Fred Reish and Brad Campbell, who co-authored the piece.

Reish is a lawyer and longtime expert on ERISA law, while Campbell is former assistant labor secretary and chief of the Employee Benefits Security Administration.

Meanwhile, the impact on annuity products is under review as well. Reportedly, the DOL is considering regulating fixed index annuities under the newly created “Best Interest Contract” exemption.

The BIC would require a signed contract with the client, as well as disclosures on the product and any compensation received. Variable annuities are already regulated as securities and are covered under the DOL’s new BIC exemption. If fixed index annuities are added as well, it will only add to the difficulties agents face in trying to sell annuities.

Ever since the DOL released the fiduciary rule in April, industry officials have speculated on the impact it will have on 401(k)s and the massive IRA rollover market.

By 2023, baby boomer retirees and pre-retirees will have nearly $25 trillion in investable assets, LIMRA reported —

Third most important

6%

7%

12% 10% 10%

13%

13%

24% 25%

Slightly more than 40 million Americans are 65 and older, making up about 13 percent of the population. All the baby boomers will have reached 65 by 2030, when the over-65 crowd will reach 20 percent of the population.

What it means for agents is a market that needs servicing for decades to come.

“Retirement is one of the biggest milestones for investors,” the LIMRA report said. “Engaging investors for retirement should start long before the investors retire, with guidance in planning for savings and income.”

Retirement funds are divided between IRAs and defined contribution plans.

As it stands, IRAs account for $7.4 trillion, while DC plans hold another $6.8 trillion, according to the Investment Company Institute.

“This will be a very crowded area soon for advice and — I guess — opportunity, too, so almost everyone is getting into this market, if they're not already in there,” Hopkins said.

InsuranceNewsNet Magazine » February 2016

64%

39%

28%

or roughly double the amount in 2013.

“It's going to expand the reach of that best-interest legal binding on people doing rollovers and dealing with IRAs, which is going to force the market open,” Hopkins said. “It's going to force companies to change their practices. It will be disruptive — good disruptive or bad disruptive, we don't know.”

Huge Market

17%

71%

21% 12%

11%

12%

Source: Finding the Right Mix: Retirement Income Attitudes and Preferences, LIMRA Secure Retirement Institute, 2014. The survey is based on 2,000 consumers between ages 50 and 75 with household investable assets of $100,000 or more.

That crowded area includes everyone from RIAs and mutual fund companies to brokerage firms and others. Advisors have been joining the defined contribution space in hefty numbers since the 2008 economic downturn.

The number of advisors being paid for services provided to a DC plan increased from 150,000 in 2008 to about 250,000 today, according to figures from The Retirement Advisor University.

Insurance companies typically face barriers to capturing the rollover market, LIMRA concluded. These obstacles include “limited brand recognition, limited control over distributions, and detachment from end consumers or investors.”

The report suggests insurers look to build “alliances with other institutions” to get a better foothold on the rollover market.

Nonqualified Assets

Insurance companies would do well to strategize to capture nonqualified assets as well as qualified dollars, LIMRA concluded. Full or partially retired households with assets of less than $3.5 million who are 70 or older have a combined $2.3 trillion in nonqualified assets, LIMRA reported, nearly double what they have in qualified assets.

“Insurance companies lag behind in capturing nonqualified assets,” LIMRA said. “With education and tools, many

WILL ANNUITIES MISS THE RETIREMENT TRAIN? FEATURE

Retiree Perceptions of Retirement Risks as Major Concern Fall 2006 Spring 2012 Fall 2013

23% 24% 23%

56%

51% 49% 40%

19%

22%

39%

45% 43%

38% 31%

28% 27%

48%

47%

43%

45%

39%

36%

31%

34%

19% 20%

Providing for Providing for your spouse if you if your you die* spouse dies*

20%

Outlive your assets

Health care costs

Longevity risks *Married respondents

32%

28%

Prescription drug costs Health care risks

Long-term care costs

21%

Prolonged Decline in stock market interest rates downturn Inflation

Tax increases

Investment risks

Source: LIMRA Retirement Study — Consumer Phase, 2013. The study is based on 1,500 consumers that include 434 retirees, and 1,066 non-retirees.

Cost of Living Index for the Elderly (December 1982 = 100) 500

CPI-E: All Items

400

CPI-E: Medical Care

December 1982 – April 2015

472

300

256

200 100 0 Jan-83

Jan-88

Jan-93

Jan-98

Jan-03

Jan-08

Jan-13

Source: Table 1: Experimental consumer price index for older Americans, for all items and for CPI major expenditure groups, (December 1982=100), Bureau of Labor Statistics, 2015.

of the clients may be more likely to use insurance and income annuities to maximize wealth transfer.”

A significant amount of qualified money ($3.6 trillion) is controlled by retirees and non-retirees ages 60 to 69.

These households will need a plan for a tax-efficient withdrawal strategy to handle required minimum distributions (RMDs), required at age 70 1/2.

Qualifying longevity annuity contracts (QLACs) are a possibility for these households. Approved by the Obama administration in July 2014, QLAC rules permit owners to delay RMDs until as late as age 85.

Agents “need to establish themselves as essential to clients’ RMD planning,”

LIMRA said, “and help them find efficient and easy ways to draw assets as well as satisfy the need for guaranteed income.”

Among other financial products, LIMRA found that cash-value life insurance remains a strong performer across all wealth segments. About 14 percent of households worth less than $100,000 own life policies, with that figure rising to 40 percent of high-networth households.

Retirement planning is changing quickly. Laws are changing, methods for saving are changing and attitudes are changing. This is all happening as the largest bubble of pre-retirees move into their golden years.

Agents need to learn as much as possible and be ready to handle the business of retirement planning, Hopkins said. Start simple and be thorough, he advised.

“You really do need to prioritize your clients’ goals,” he said. “Let's figure out the most tax-efficient way for you to save, whether it's in your 401(k), an IRA or a Roth IRA. Let's take advantage of the tax breaks that are out there, and let's get a plan in place.”

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.

February 2016 » InsuranceNewsNet Magazine

31

LIFEWIRES

Individual Life Premium Up 8% in 3Q New individual life insurance premium continued to see a boost in the third quarter of 2015, increasing by 8 percent over the previous quarter. It marked the fifth consecutive quarter of positive growth, according to LIMRA. Total policy count rose 4 percent in the third quarter and 5 percent for the first nine months of the year.

Total universal life (UL) new annualized premium improved 11 percent in the third quarter, resulting in a 10 percent increase in the first nine months of 2015. Indexed universal life (IUL) new annualized premium 3Q IUL drove overall UL sales growth, rising 20 percent in the third quarter and increase 19 percent year-to-date. IUL represented 54 percent of UL and 21 percent of all individual life premium sold during the first three quarters of the year. Total UL premium represented 38 percent of all life sales in the first nine months of 2015.

Nine of the top 10 whole life (WL) insurance writers reported positive growth as WL new annualized premium increased 9 percent in the third quarter and 10 percent in the first nine months of 2015. WL now represents 34 percent of the total life market.

20%

MIDDLE MARKET OWNS MAJORITY OF PERMANENT LIFE

Just who is buying all that life insurance?

Middle-market households own the majority of individual permanent life, according to LIMRA. Although permanent life was once thought of as a product bought by the affluent, households at all income levels own it, and leading the way is the middle market at 57 percent.

LIMRA reports that 70 percent of all U.S. households have some life insurance coverage but half of U.S. households believe they need more. Among those with life insurance, 50 percent own Percentage Market Share of Permanent Life Insurance Policies Owned

15%

57%

28%

Lower Income ($10k$25k)

Middle Income ($25k-$100k)

Affluent ($100k +)

only permanent life while 32 percent have only term insurance. Eighteen percent own both permanent and term insurance.

No matter what type of life insurance they own, consumers rate income replacement as a key reason for having DID YOU

KNOW

?

32

coverage. When asked why they own life insurance, covering lost wages and income is second only to paying burial expenses. Across all income groups, the average U.S. household that has life insurance owns enough to replace 3.5 years of income.

PRUDENTIAL OFFERS LIFE INSURANCE TO HIV PATIENTS

It wasn’t that long ago that an HIV diagnosis was the same as a death sentence. But thanks to new drugs, today more people are living with HIV than are dying from it. When Prudential saw that people living with HIV were living longer, healthier lives, the company knew it had an untapped market for life insurance underwriting.

So Prudential decided to offer people living with HIV 10- and 15-year individual convertible term life insurance products. In doing so, Prudential became the first major insurer seeking to cover people living with HIV.

A BLIZZARD OF NEW PRODUCTS

Life carriers started out the year with a blizzard of new products and features. Here are a few.

• Guardian Life introduced a new

U.S. life-annuity insurers will enter 2016 in relatively good financial condition, according to the 2016 Ernst & Young U.S. Life-Annuity Insurance Outlook.

InsuranceNewsNet Magazine » February 2016

QUOTABLE

We need to adapt and ultimately resonate with buyers who are intimidated by the process.

Yaron Ben-Zvi, Haven Life co-founder and CEO, on the company’s launch of a website allowing consumers to buy fully underwritten term life entirely online.

variation of whole life paid-up addition (PUA), an indexed PUA. This “best of both worlds” indexed PUA is a new rider, the Index Participation Feature, that offers investment flexibility with a new dimension in cash value upside potential. It has the potential to provide attractive whole life guarantees in tandem with the opportunity for index-linked upside potential — in a single product.

• Nationwide has debuted a long-term care (LTC) accelerated benefits rider for survivorship universal life insurance policies that company insiders informally dub the “parents rider.” The “parents” moniker derives from the fact that the rider is designed for use with a survivorship universal life policy that can cover two insureds who are far apart in age, such as a parent and an adult child, a company spokesman said. The LTC rider is available with the Nationwide NoLapse Guarantee SUL II (Survivorship Universal Life) policy.

• Minnesota Life and Annexus teamed up to introduce Balanced Growth Advantage (BGA) IUL. In addition to offering uncapped strategies subject to an index allocation and spread, BGA’s design also provides interest credit enhancements every one to five years, as well as partial interest credits when accumulation value is withdrawn from the policy’s balanced indexed accounts, including policy charges.

• AIG launched Secure Lifetime GUL 3, a flexible-premium, adjustable universal life insurance with secondary guarantee provisions, designed to offer competitive pricing and features such as built-in 100 percent return of premium rider, and optional living benefit riders for longevity and chronic illness.

WHAT’S MISSING FROM YOUR CLIENTS’ FINANCIAL TOOLBOX?

There’s one financial tool that can help your clients: 1. Ensure their family’s future is protected in their absence.

2. Protect the value of their assets.

3. Retire comfortably.

4. Efficiently pass the value of their estate to their family.

LIFE INSURANCE CAN BE THAT TOOL. To learn why your clients should incorporate it into their financial strategy, call our Life Sales Support Team today at 1-888-413-7860, option 1.

hij abc INSURANCE | INVESTMENTS | RETIREMENT

Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods.

This information is a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances.

Securian Financial Group, Inc. www.securian.com 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. Both companies are headquartered in Saint 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.

400 Robert Street North, St. Paul, MN 55101-2098 • 1-800-820-4205 ©2015 Securian Financial Group, Inc. All rights reserved.

F82833-18 12-2015 DOFU 12-2015 31593

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.

February 2016 » InsuranceNewsNet Magazine

33

LIFE

29 Million Reasons to Learn About Diabetes Life Underwriting nowing facts such as what K kind of diabetes your prospect has or the date of onset can help find coverage a client didn’t think was possible.

By Michael Horbal

M

ore than 29 million Americans have diabetes, 86 million more have prediabetes, and more than 1 million new cases will be diagnosed this year, according to the Centers for Disease Control.

What does this represent for you as an agent? Opportunity! Now is the time to learn about diabetes from an underwriting standpoint in order for you to serve your existing clients and to capture new market share.

What Is Diabetes?

Diabetes mellitus is a condition characterized by abnormally high levels of glucose in the blood (hyperglycemia) resulting from the body’s inability to use blood glucose for energy, according to the American Diabetes Association. In Type 1 diabetes, the pancreas no longer makes insulin and therefore blood glucose cannot enter the cells to be used for energy. In Type 2 diabetes, either the pancreas does not make enough insulin or the body is unable to use insulin correctly. With gestational diabetes, women experience high blood glucose levels during pregnancy.

In order to work effectively in the diabetes marketplace, you will need to learn about the handful of companies that specialize in helping diabetics. As you learn about this market, you will discover that some companies are interested in covering only Type 2 diabetics, while others may specialize in covering Type 1.

Field underwriting requires that you ask questions — lots of questions. Complete and accurate medical information about your client will yield better results when you quick-quote your clients to life 34

insurance companies. A quick quote is a summary of your client’s medical history that is sent to insurance companies for preliminary underwriting feedback.

The availability and price of life insurance will depend on the answers to these questions.

OBTAIN OPTIMAL UNDERWRITING FOR DIABETICS What type of diabetes does your client have?

How old were they when diagnosed and how long has it been since their diagnosis?

How well does your client control their diabetes?

Is your client compliant with their doctor’s advice and recommendations?

What medications does your client take?

Names, dosage and frequency are needed.

Has your client had any diabetes-related complications?

Does your client have any other health issues?

Since their diagnosis, what positive steps has your client taken to improve their health?

At this point, you want to gather as much information as possible so that you can shop for your clients effectively. Reassure your clients that the more accurate the information they can provide to you, the better you will be able to help them.

While many underwriting outcomes for diabetics will incur a table rating expense, getting your clients to the right company from the onset may save them a substantial amount of money. Remember that every table rating you save your

InsuranceNewsNet Magazine » February 2016

clients will save them about 25 percent in premium expense.

Now that you have an understanding of the potential of the diabetes market, these additional details will allow you to hone your skills and develop your practice.

Type of Diabetes and Duration of Disease

Did you know that there are some life insurance companies that publish specific guidelines for diabetes underwriting?

The guidelines provide you with detailed information about health conditions.

The information is readily available from some insurance companies.

These guidelines indicate potential underwriting outcomes based on the type of diabetes, age at policy issue, diabetes complications and the duration of time since the onset of diabetes.

Type 1 diabetics pay more for life insurance than do Type 2 diabetics, assuming similar control of the disease. Gestational diabetes is a non-factor in underwriting, assuming all symptoms have disappeared after pregnancy.

The duration of time that your client has had diabetes contributes to the underwriting rating they will receive. The younger they were at the time of onset, the higher the table rating will be. This becomes less of a factor for clients age 50 or older, assuming they have good control over their disease.

For your clients who were recently diagnosed with diabetes, many companies want to see a minimum of six months of follow-up treatment and care before they will consider coverage. However, there are instances in which companies will consider covering a client within a few months of being diagnosed.

Diabetic Control

The hemoglobin A1c (HbA1c) is the single most critical lab result that life insurance underwriters look at when underwriting your diabetic clients. The HbA1c

29 MILLION REASONS TO LEARN ABOUT DIABETES LIFE UNDERWRITING LIFE test provides underwriters with an indication of diabetic control over the past 60-90 days.

Expressed as a percentage between 6.5 percent and 10 percent, HbA1c control is broken out as follows: »» HbA1c of 7 or less is considered optimal control »» HbA1c of 7.1 to 8.5 is considered average control »» HbA1c of 8.6 to 10 is considered below-average control. »» HbA1c of 10 or greater is considered to be uncontrolled diabetes.

The most ideal clients from an underwriting standpoint are those with HbA1c ranges between 6.5 and 7.5. Clients with HbA1c ranges between 8 and 10 will be rated by companies and may be uninsurable, depending on the client’s entire medical history.

If the HbA1c is 10 or greater, your client is uninsurable with traditionally underwritten life insurance policies. Guaranteed issue life insurance may be the best option if this is the case.

7

Diabetic Compliance, Medications and Other Health Issues

Nothing derails underwriting faster than having a diabetic client who does not follow their physician’s advice or take their medication as prescribed.

As part of your field underwriting, it is important for you to find out how often your client visits a physician and whether they follow their doctor’s advice.

When asking about their medications, find out what they take, how much and how often. Ask them if they have had any changes prescribed to their medications over the past 12 months.

Other health issues may have a significant impact on underwriting outcomes.

It’s important to ask whether there is any history of complications such as retinopathy, neuropathy, kidney problems or history of diabetic coma, and if there is any history of cardiovascular health issues.

Underwriting Credits for Health Improvements

The positive steps your client has taken to improve their health since their diabetes diagnosis often are overlooked by agents.

Your client’s weight loss and exercise regimens, as well as improvements your client has made to their diet, are helpful to share with underwriters. Let the underwriters know whether your client has improved their average HbA1c over time or has good cholesterol control. Favorable cardiac workups, such as a stress test or echocardiogram, will help with more favorable underwriting outcomes.

As an advocate for your clients, you are in a position to help them obtain coverage they may have thought was impossible to obtain. When you take some time to learn about diabetes, obtain the underwriting guidelines from the companies you represent, and ask your clients the right questions, you will be well on your way to becoming the next diabetic life insurance expert.

Michael Horbal is the owner of LifeInsuranceAdvisors.com of Newtown, Pa., specializing in high-risk life insurance underwriting.

He may be contacted at michael.horbal@innfeedback.com.

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35

LIFE

Exchanging One Policy for Another Could Ignite an IRS Tax Bomb ertain types of policy conC versions could result in taxable income for your client. Here is some background on the issue and what you need to know.

By Dennis M. Axman

W

ith the number and variety of life insurance and annuity products available to the general public today, there are many times when a client may believe their existing policy may not suit their changing needs.

But you need to be aware that exchanging one policy for another could trigger a tax event.

Congress certainly recognized the changing needs of policyholders in 1954, when it enacted Internal Revenue Code Section 1035.

This section of the tax code codified the belief that policyholders and annuitants should not be treated as having surrendered or sold their contracts when the 36

difference between the old and the new contracts is not material.

Section 1035 follows the like-kind exchange rules set in IRC Section 1031 for exchanges of investment, trade and/or business property.

Assuming there is no 1035 qualification, the cash surrender of one policy and the purchase of another with the sale proceeds would result in income under the cost recovery rules equal to the cash surrender proceeds in excess of the ownerâ&#x20AC;&#x2122;s basis in the old policy. Congressâ&#x20AC;&#x2122; intent was to extend nonrecognition treatment to certain types of exchanges.

IRC Section 1035(a) provides the following. No gain or loss shall be recognized on the exchange of: 1. A life insurance contract for another life insurance, endowment or annuity contract.

2. An endowment insurance contract for an annuity contract or for another endowment insurance contract that pro-

InsuranceNewsNet Magazine Âť February 2016

vides for regular payments beginning at a date not later that the one in which payments would have begun under the contract that was exchanged.

3. An annuity contract for another annuity contract. Section 1035 was amended by the Pension Protection Act of 2006 for future exchanges which allow for long-term care riders.

Treasury Regulation 1035-1 provided even more clarification of the exchange rules provided by IRC Section 1035(a) (3) by stating that Section 1035 does not apply to such exchanges if the policies exchanged do not relate to the same insured person.

The exchange, without recognition of gain or loss, of an annuity contract for another annuity contract covered under section 1035(a)(3) is limited to cases where the same person is the obligee under the contract received in exchange as under the original contract. These rules

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37

LIFE EXCHANGING ONE POLICY FOR ANOTHER COULD IGNITE AN IRS TAX BOMB seem pretty straightforward as the Treasury and case law have refined the way in which contract exchanges will be measured. The basic requirements of Section 1035 are contained in the instructions for IRS form 1099-R. While we all know that a life insurance contract may be exchanged tax-free for another life insurance contract, for a modified endowment contract (MEC) or for an annuity, the reverse is not true.

A modified endowment contract can be exchanged into another MEC or for an annuity, but not for a life insurance policy. Finally, an annuity contract may be exchanged for another annuity but not for an insurance policy or an endowment contract.

The Pension Protection Act of 2006 created several changes to the long-term care market. Specifically, the new rules of IRC Section 1035(a), as established by Section 844(b) of the Pension Protection Act, took effect in 2010. As of Dec. 31, 2009, the tax-free exchange rules were extended to cover long-term care contracts. For exchanges that occur after that date, Section 1035 states that: 1. A life insurance contract can be exchanged for another life insurance contract or for an endowment or annuity contract or for a qualified longterm care insurance contract.

2. An endowment insurance contract can be exchanged for another endowment insurance contract which provides for regular payments beginning at a date not later than the date payments would have begun under the contract exchanged. An endowment insurance contract also can be changed for an annuity contract or for a qualified longterm care contract.

So, since 2010, a life insurance contract, endowment contract, long-term care contract or annuity may be exchanged for a long-term care contract.

However, a long-term care contract may not be exchanged for anything other than another long-term care contract. This is true even when a life insurance policy has a long-term care rider.

Since there is no single-premium, long-term care policy in the marketplace, this brought about an interest in the partial 1035 exchange. This occurred through the guidance provided under Revenue Procedure 2008-24 and was lat38

er modified by Revenue Procedure 201138. I would suggest that when discussing this with a client, you also consult with your client’s tax attorney or accountant.

Of course, a 1035 exchange to a hybrid life insurance policy with an LTC rider is acceptable. Also many insurance companies may or may not allow partial 1035 exchanges, and the long-term carrier may or may not accept the rules required under Section 1035. You will need to check with both the existing insurance company and the new insurance company to clarify their procedures for this.

The IRS does not distinguish between the types of contract exchanges for Section 1035 use, such as variable universal life versus universal life versus whole life.

Term conversions do not qualify for Section 1035 opportunities because the term conversion results in a permanent policy which comes from the exercise of a right under the old term policy, not from an exchange of it. Thus the owner’s basis in the new policy does not carry over from the old policy.

As the IRS states, “there is no requirement that the issuer of the contract received in exchange be the same insurer as the original.” In addition, there is Private Letter Ruling 9319024. This provides the nonrecognition treatment even if one or the other of the insurers is a foreign company, as long as the product meets the statutory definition of life insurance annuity and endowment contracts. Section 1035 also allows multiple life insurance and annuity contracts to be exchanged provided the other requirements of Section 2015 are all met.

Finally, the same insured requirement

InsuranceNewsNet Magazine » February 2016

is provided in Treasury Regulation Section 1.1035-1, which states that Section 1035 does not apply if the policies exchanged do not relate to the same insured. This requirement also prevents most exchanges from a single life exchange to a survivorship contract.

However, the exchange of a secondto-die contract following the death of the first insured for a single life policy on the survivor qualifies for Section 1035 nonrecognition treatment.

For exchanges with contracts containing outstanding loans, special attention must be paid to ensure that the loan is carried forward to the new policy. There are several private letter rulings that address the fact that when a contract with an outstanding loan is exchanged for a new contract and the loan is carried forward to the new policy of the same loan amount, there is no recognition of any gain.

However, any loan not carried forward or reduced by the exchange may create a tax recognition event for the owner.

When in doubt, it is best to check with the owner’s tax advisor, the insurance carrier of the old policy and the insurance carrier of the new policy in order to obtain their thoughts and processes for handling the transaction. We certainly do not want to make any client unhappy by receiving an unwanted Form 1099 for one of these types of transactions.

I have highlighted some of the most prevalent aspects of Section 1035 transactions, although there is much more that could be discussed regarding these.

The best advice for a client’s situation is that if you are uncertain, ask before the transaction is submitted to a carrier for processing. Once a 1035 exchange is processed, in most cases it cannot be reversed.

Dennis M. Axman, CLU, ChFC, AEP, CFP, RICP, is vice president of sales at Pinnacle Insurance and Financial Services, Jacksonville, Fla. He also is an independent insurance consultant. Denny can be reached at denny. axman@innfeedback.com.

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ANNUITYWIRES 3Q Annuity Sales in Billions

Some Surprises in 3Q Statistics

$2.00

$1.80

$1.20

$1.00

Allianz Life

American Equity

Great American Insurance Group

AIG

The calendar may say 2016, but annuity watchers are still looking at the third quarter of 2015. Not only did fixed index annuity sales hit a record for the quarter, but some surprises emerged during that same period. Those surprises included a new carrier at the leadership table and a surge in FIA sales at banks.

The quarterly total closed at $13.5 billion, up nearly 21 percent from the prior record set in the second quarter of 2014, according to Wink Inc. The surprises lurking in the FIA data included Nationwide’s breathtaking growth in sales. The carrier pole-vaulted to fifth place on Wink’s third-quarter FIA sales ranking. This was based on Nationwide’s FIA sales of nearly $776 million. That is up from 15th place just one quarter earlier.

In first place was Allianz Life, which surpassed $2 billion, though with a slight (4 percent) decline from the second quarter. This was followed by American Equity Companies, on sales of more than $1.8 billion; Great American Insurance Group, on sales of nearly $1.2 billion; and AIG, on sales of just over $1 billion.

Another eye-catcher in the third-quarter data is the continued growth in the proportion of FIA sales produced in banks, along with the decline in percentage delivered by independent agents.

AVERAGE ANNUITY COMMISSIONS DECLINE

Another detail that stands out in the third quarter in the Wink data is that average weighted FIA commissions have declined — again. In the third quarter, they dropped to 5.52 percent of premium, down 0.3 percent from the previous quarter.

The average weighted commission is also the lowest it has been for all quarters in the past 10 years. The previous low was 5.6 percent in the fourth quarter of 2013.

The 10-year high was 8.4 percent, back in the third quarter of 2005.

The decline doesn’t mean a lot of producers are seeing cuts. According to Wink president and CEO Sheryl J. Moore, it reflects the growth of FIA sales in banks and broker/dealers more than anything else. Those two channels traditionally use FIAs that have shorter surrender charges and lower commissions than FIAs sold in the independent agent channel. As these two channels have increased their overall sales, their DID YOU

KNOW

?

40

comparatively lower commissions are bringing down the industrywide weighted average, she said.

But producers in the independent agent channel have continued to receive commissions that are near or at 8 percent, depending on product, selling contract and other factors. “Also, a lot of ‘commission specials’ have been going on in that channel as companies try to attract yearend sales,” Moore said, so some independents may see increases.

HOW PRODUCT INNOVATION WILL SUPPORT LIFETIME INCOME

How will the industry support the continued demand for lifetime retirement income? By innovating, of course!

In its annual State of the Insured Retirement Industry report, the Insured Retirement Institute (IRI) notes that ongoing product development is creating a wide array of choices regarding life-

The number of companies offering deferred income annuities has doubled since 2012.

Source: Insured Retirement Institute

InsuranceNewsNet Magazine » February 2016

QUOTABLE

The demographic case for lifetime income has never been more pronounced.

— IRI President and CEO Cathy Weatherford

time income products, allowing advisors to create retirement plans that better meet the needs of their clients. These product development efforts include new launches of investment-oriented variable annuities (IOVAs), new product designs of FIAs and the introduction of new deferred income annuities (DIAs) that meet qualifying longevity annuity contract (QLAC) criteria.

RATE INCREASE BODES WELL FOR FIXED ANNUITY SALES

The fixed annuity industry could harvest some happiness in the months ahead.

That’s because new sales of fixed annuity products will likely increase in the wake of the 0.25 percent jump in a key interest rate the Federal Reserve announced near the end of 2015.

The growth actually will be a continuation of the strong sales seen in the third quarter, well before the Fed’s rate announcement. That’s according to Jeremy Alexander, president of Beacon Research.

Carriers have been making gradual increases in their crediting rates in traditional fixed annuities and in their cap rates in fixed index annuities for several months, Alexander explained.

The rate increases seem small, Alexander said. However, they can make a lot of difference to annuity buyers who, for instance, want to lock in a rate in multiyear guarantee annuities as they dig out from the era of prolonged rock-bottom interest rates.

Now that the Federal Reserve has moved to increase its benchmark interest rate for the first time in nearly a decade, “we’re expecting continued gradual rate increases going forward,” Alexander said.

He predicts that fixed sales will continue to be strong as a result.

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41

ANNUITY

Why W men Should Love Annuities A study shows that few women have any knowledge about annuities, but the research shows that annuities would be an excellent solution for women’s retirement concerns.

Saving enough for retirement

By Linda Koco

N

ot even one-quarter of American women surveyed are knowledgeable about fixed or variable annuities, according to a study from Insured Retirement Institute (IRI).

Annuities are not the only source of mystery for women. According to the study, women are also shy on knowledge about corporate bonds, exchange-traded funds, government bonds, bond funds, individual stocks and stock mutual funds.

Less than half the women surveyed claimed to be very or somewhat knowledgeable about these products.

The annuity finding may be discouraging to annuity professionals, but the IRI researchers see it differently.

This lack of familiarity can set the stage for annuities to be presented as solutions that address concerns many women have about retirement, the researchers said in “Women’s Perspectives on Saving, Investing and Retirement Planning.”

In general, women are “more receptive to financial products, such as annuities” that can help protect against future

Being able to stop working when you want

Women

0%

events, the researchers said, alluding to events that may adversely impact certain areas of their lives that concern them most.

Greenwald & Associates conducted the survey for IRI in July 2015. It polled 1,000 Americans; they were women and men, ages 25 to 65, who earn at least $30,000 annually.

Annuity Implications

A possible implication of this for advisors is: If women are informed about how annuities work in retirement, they may take the time to become more knowledgeable about the products. That is, those who don’t know about annuities might begin to show interest if only someone WOMEN

MEN

Men Women

22% 17% 36%

A little behind schedule

41% 29% 30%

On track

0%

6% 7% 1% 3% 10%

20%

30%

40%

50%

Greenwald & Associates survey conducted in July 2015 for IRI

42

76% 28%

36%

38%

74%

53%

30%

34%

38% 54%

20%

82%

83%

72% 27%

40%

60%

81% 80%

100%

Greenwald & Associates survey conducted in July 2015 for IRI

6%

Ahead of schedule

33%

54%

Men

Men

SOMEWHAT CONCERNED

43%

Men

Women

3%

Far behind schedule

Far ahead of schedule

Women

Being able to afford the lifestyle you want throughout retirement

RETIREMENT SAVING PROGRESS Not Sure

VERY CONCERNED

CONCERN ABOUT ASPECTS OF THE ABILITY TO RETIRE

InsuranceNewsNet Magazine » February 2016

would explain their use and value.

Another implication: Many women may accept advisory guidance on the subject of annuities, since many are open to advisor input. For instance, 43 percent said they want to work with advisors in a “do it with me” or “do it for me” capacity.

Only 20 percent described themselves as “do it yourself ” investors.

In fact, nearly half the women (46 percent) said they already seek guidance from a professional advisor.

This tilt toward advisors is especially pronounced among older women, ages 55 to 65. More than half (58 percent) of this age group said they personally work with a professional advisor “very often” or “sometimes.”

Some younger women (39 percent of those between the ages of 25 and 39) also said they work with a professional advisor.

But 70 percent of this group said their top resource was “friends and family.” This suggests that the annuity discussion with the younger segment 1) could be harder to open up or 2) will have to be run by the younger woman’s personal network for an A-OK. Significantly, older and younger women also differ in the knowledge level they claim to have about annuities. One-third (33 percent) of women ages 55 to 65 said they are very or somewhat familiar with fixed annuities, for example, while half as many (15 percent) of those in the 25-39 age group said the same.

And while 29 percent of the older

WHY WOMEN SHOULD LOVE ANNUITIES ANNUITY women claimed knowledge of variable annuities, only 15 percent of the younger group said the same.

By extension, if advisors bring up the topic of annuities, especially with older women, they have a chance of being heard.

That makes sense because women in the older group are near or at retirement, a point in time when the annuity’s multiple

retirement features are head-turners.

But a word to the wise on that point: Some findings in the study suggest that educational discussions with women need to be effective and interactive.

For instance, 58 percent of the women said “an advisor’s ability to explain concepts clearly without talking down to me” is extremely important. Only 35 percent

of men said the same. Also extremely important to women is that the advisor listen well (60 percent), be responsive (55 percent), and talk to them and not just their spouses (60 percent).

Life Insurance Surprise

One surprise in the study results is that life insurance was near the very top of the

CHARACTERISTICS OF FINANCIAL ADVISORS Is trustworthy

Men Women

Has my best interests at heart

Men Women

Listens well

Men Women

Is responsive

Men Women

Consistently follows up as planned

Men Women

Has deep financial product expertise

Men Women

Explains financial concepts clearly without talking down to me

Men Women

Is proactive in making suggestions

Men Women

Is proactive about planning for possible or likely changes in my financial needs

Men Women

Uses my preferred method of communication to provide me with info

EXTREMELY IMPORTANT

67%

32%

89%

67%

27%

46%

94%

42%

88%

60%

33%

45%

93%

42%

87%

55%

38%

41%

93%

46%

87%

55%

38%

38%

93%

49% 51%

87% 90%

39%

35%

50%

85%

58%

33%

29%

91%

54%

83%

43%

44%

31%

87%

51%

82%

44%

45%

89%

67%

26% 74%

Men Women

Talks to me, not just my spouse/partner

Men Women

46%

Suggests creative approaches for meeting my financial goals

Men Women

45%

Has excellent support staff

Men Women

Is personable

Men Women

Is comfortable using new technologies in working with clients

Men Women

Has one or more professional credentials

Men Women

Coordinates with other professionals to help me achieve my goals

Men Women

0%

93% 94%

20%

57%

Is forthcoming about how he or she is compensated

Greenwald & Associates survey conducted in July 2015 for IRI

26% 74%

Men Women

93% 94%

20%

57%

32%

89%

67%

27%

94%

42%

88%

60%

33%

93%

42%

87%

55%

38%

41%

93%

46%

87%

55%

38%

38%

93%

49% 51%

87% 90%

39%

35%

50%

85%

58%

33%

29%

91%

54%

83%

43%

44%

31%

87%

51%

82%

44%

20%

VERY IMPORTANT

45%

40%

60%

89%

80%

100%

February 2016 » InsuranceNewsNet Magazine

43

ANNUITY WHY WOMEN SHOULD LOVE ANNUITIES

CONCERN ABOUT FINANCIAL ISSUES The value of my investments decreasing

Saving enough for children's college education

Level of personal or family debt

VERY CONCERNED

Men

24%

Women

29%

Men

Selecting the best investment options

Being able to afford the house I want

Inflation

32%

27%

Men

54% 30%

23%

25%

Men

27%

27%

21%

22%

18%

Women

29% 34%

18%

Women Men Women

42% 27%

16%

50%

25% 26%

0%

57%

24% 23%

10%

41% 32%

20%

30%

63%

47%

23%

Men

63%

48%

41%

Men

58%

48%

36%

Women

62%

27%

28%

Women

Having enough to pay bills

53%

30%

Women

SOMEWHAT CONCERNED

40%

58%

50%

60%

70%

Greenwald & Associates survey conducted in July 2015 for IRI

list of investment products about which women said they are knowledgeable. Fully 64 percent of the women claimed to be very or somewhat knowledgeable about this product line.

Only two other product categories came in higher: a “savings account” (92 percent) and “a 401(k), 403(b) or 457 plan” (67 percent).

Not even certificates of deposit or stock mutual funds outranked life insurance on this knowledge metric.

This is surprising, considering that women’s knowledge of annuities ranked so much lower (no more than 20 percent) in the same survey.

The report offered no insight as to why life insurance ranked so high. However, it is possible that life insurance industry messaging has played a role. For example, the women may have heard how wives tend to outlive their husbands and how the life insurance proceeds help families move on after a breadwinner’s death. Or the women may have built up life insurance knowledge courtesy of the indus44

try’s literacy initiatives over the years.

Or maybe the advisors for the women have been successful at focusing more attention on life insurance than on many other products (including annuity products).

Whatever the reason, the prominence of life insurance on the knowledge metric may be a booster shot, not a drawback, for annuities. The advisor might, for example, approach the woman’s life insurance knowledge as a foundation on which to branch out into discussion of how annuities might fit into her portfolio too, if needed.

Women’s Concerns

Conversation about annuities may resonate with women for another reason as well. The reason is that annuity products can help address some of the concerns that women have, including retirement concerns.

In the study, 54 percent of the women said they are concerned about saving enough for retirement; 53 percent are concerned about being able to afford their de-

InsuranceNewsNet Magazine » February 2016

sired lifestyle throughout retirement; and 54 percent are concerned about being able to stop working when they want.

The tax-deferred savings features of annuities, along with the annuity’s guaranteed retirement income options, may be of strong interest to these women.

In other financial areas, 62 percent of the women said they are concerned about the value of their investment decreasing.

A fixed annuity or a variable annuity with embedded guarantees may be of interest here.

Also, more than half (58 percent) voiced concern about inflation. The tax-deferred buildup in annuities may be of interest here. So might the various strategies inside some of the products to help hedge the inflation risk, as well as the option in some annuities that provides for cost-of-living increases during the payout phase.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

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HEALTH/BENEFITSWIRES Big Changes As Medicare Marks 50 Years As Medicare marks its 50th birthday this year, it’s safe to say that it’s not your grandpa’s health insurance program anymore. Medicare is undergoing some of the biggest changes in its history this year.

These changes focus on ways to better balance cost, quality and access instead of merely paying senior citizens’ medical bills as they come in. The changes have been building slowly and could redefine the doctor-patient relationship.

The 2016 change getting the most at- President Lyndon B. Johnson signs Medicare into law as former President Harry S. Truman looks on. tention is that Medicare will pay clinicians to counsel patients about options for care at the end of life. But that’s not the only change. Medicare is attempting to remake the way medical care is delivered to patients, by fostering teamwork among clinicians, emphasizing timely preventive services and paying close attention to patients’ transitions between hospital and home. Primary care doctors, the gatekeepers of health care, are the focus of much of Medicare’s effort.

Patrick Conway, Medicare’s chief medical officer, said that nearly 8 million beneficiaries — about 20 percent of those in traditional Medicare — are now in accountable care organizations. ACOs are recently introduced networks of doctors and hospitals that strive to deliver better-quality care at lower cost. Under the ACO model, clinical networks get part of their reimbursement for meeting quality or cost targets.

A major expansion of the ACO model is planned for 2016, and beneficiaries for the first time will be able to pick an ACO. Currently they can opt out if they don’t like it.

ACA WAS GOOD FOR VOLUNTARY SALES

Despite all the doom and gloom surrounding insurance sales under the Affordable Care Act, one group appears to be positive.

Half of the executives in the voluntary/worksite benefits market who participated in a recent Eastbridge survey said that the ACA had a positive effect on their sales. However, 39 percent said they were unsure and 11 percent said they believe that ACA has had a negative impact on their voluntary sales.

Overall, carriers with higher voluntary sales in 2014 are more positive about ACA’s impact on their voluntary sales than carriers with lower sales numbers.

In light of ACA and the exchange environment, executives were asked how they believe the broker role will change in the next five years. The top four changes they listed include “fewer in-person enrollments,” “a more consultative role with DID YOU

KNOW

?

46

the employer,” “lowering of commissions” and “decreased interaction with the employees.”

LONE PROFITABLE CO-OP IS NOW LOSING MILLIONS

Health insurance co-ops formed under the ACA have been noteworthy for bleeding red ink. Now the only co-op that made money last year on the public exchanges has cut off individual enrollment after losing millions of dollars last year.

Maine's Community Health Options lost more than $17 million in the first nine months of 2015, after making $10.9 million in the same period last year. A spokesman said higher-than-expected medical costs hurt the cooperative.

The announcement casts further doubt on the future of insurance cooperatives, small nonprofit insurers that were created during the ACA's creation to inject com-

The number of Americans under age 65 who are in families struggling to pay medical bills decreased from 21.3 percent, or 56.5 million people, in 2011 to 16.5 percent, or 44.5 million people, in the first half of 2015.

InsuranceNewsNet Magazine » February 2016

Source: Centers for Disease Control and Prevention

QUOTABLE Clearly the remaining health care co-ops are in dire circumstances. I don't know how any of them can survive another year.

— Robert Laszewski, a health care consultant and former insurance executive who has been a frequent critic of the Affordable Care Act

petition into insurance markets. These coops immediately struggled to build their businesses. A dozen of the 23 created have already folded.

3 OUT OF 4 EMPLOYERS TO BE HIT WITH CADILLAC TAX BY 2022

Many employers falsely assume that the Cadillac tax will apply only to the richest plans. However, the 2015 UBA Health Plan Survey shows that even the lowest-quality bronze-level health insurance plans on the exchanges are at risk of triggering the tax, potentially affecting 74 percent of employers by 2022.

The Cadillac tax, which takes effect in 2018, will levy a 40 percent tax on health insurance plans that cost more than $10,200 for individuals and $27,500 for families. The excise tax is not currently based on benefit levels but is solely based on annual premiums. Current regulations also will include employer and employee contributions to health reimbursement arrangements (HRAs), health savings accounts (HSAs) and flexible spending accounts (FSAs).

Using a 6 percent rate or “trend” increase, compounded each year, UBA found that by 2018, 30 percent of employers will be subject to the Cadillac tax; by 2020, 50 percent will be affected; and by 2022 it will hit 73.79 percent of employers.

Indexed UL Can’t Should Be Sold to Seniors IT’S ABOUT TIME SOMEONE SET THE RECORD STRAIGHT.

Nobody can deny that seniors dominate as the biggest and most sought-after market for agents and retirement planners. But advisors are getting some bad advice these days when it comes to selling Indexed UL to this lucrative group.

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HEALTH/BENEFITS

Tammy Wynette had a hit with D-I-V-O-R-C-E in 1968, but little did she know she was heading for real T-R-O-U-B-L-E when she married fellow country star George Jones the next year, a marriage that ended in the big D as well.

LTCi and D-I-V-O-R-C-E: A Conversation Worth Having Part of your client’s divorce agreement might include purchasing a long-term care insurance policy for the soon-to-be ex-spouse while dividing assets.

By Brian I. Gordon and Murray A. Gordon

C

hances are, some of your clients are in the midst of a divorce. In fact, you often may be asked to help sort out their life and health insurance plans, which are common negotiating points in divorce agreements. But it’s easy to overlook long-term care insurance when clients don’t already have coverage.

You can perform an important service for your clients by raising the issue of 48

long-term care planning with those who are divorcing or recently divorced. This is because while long-term care planning is important for everyone, it’s even more important when someone is shifting from “couple” to “single” status.

For one thing, when spouses split, they typically lose their primary health care advocate, whether that translates to someone who provides hands-on care or the person who arranges for professional care.

For another, following a divorce, both parties will have a smaller pool of assets to fund potential long-term care expenses.

For the higher-earning party, a long-term care event may impact the ability to meet spousal maintenance and child support commitments. For the lower-wage earner,

InsuranceNewsNet Magazine » February 2016

it even can create greater financial hardships, which in turn can limit their care options.

Either way, the lack of long-term care planning may place a massive emotional and financial burden on the couple’s children, regardless of age. Younger kids may find themselves deprived of their caregiver and/or their financial support.

Adult children might be asked to share in the expense of care for a parent, whether they’re ready or not.

Regardless of the situation, most couples would agree that minimizing the divorce’s impact on the kids should take priority, short term and long term, which is among many reasons why LTCi should be part of the divorce conversation.

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HEALTH/BENEFITS LTCI AND D-I-V-O-R-C-E: A CONVERSATION WORTH HAVING

Building LTCi Into Divorce Agreements

anyway, so coverage is not linked going forward.

Some asset-based life and LTCi policies also offer spousal discounts, which divorcing couples also can take advantage of. However, while most carriers issue separate policies to each spouse, at least one carrier issues a joint policy with individual LTCi benefits.

Provided there is an insurable interest (say, the welfare of the children), this policy

of Americans who have Alzheimer’s are women.

The objective of a divorce agreement is to achieve an equitable division of assets What About “Gray Divorces”? and property. The higher-wage earner is The number of “gray divorces” — divorces expected to make concessions to provide occurring among people ages 50 years and for the lower-wage earner. Part of this older — have doubled in the past 20 years, agreement might include purchasing an according to a recent Bowling Green State LTCi policy for one’s soon-to-be ex-spouse University study. while dividing assets.

At the same time, it goes without Asset-based LTCi plans have proved to saying that health problems increase be a very helpful tool here, with age and so does the thanks to their guaranteed need for long-term care. rates and flexible payment And thanks to medical options, which allow preadvances, Americans are Divorce is difficult, period. As their agent miums to be paid off in a living longer. or advisor, one of the best ways you can set time period.

Interestingly, people For example, we were are now buying LTCi in serve your clients proactively is to make asked to suggest an LTCi younger middle age. It used LTCi part of your conversations. policy for a 55-year-old to be that most consumwoman as part of her ers purchased their poldivorce agreement. Both icies when they reached she and her husband were their 70s. Now people are eager to separate their buying it when they are in financial affairs. For this their 50s. In 2014, 80 perreason, a traditional paycent of new LTCi policies as-you-go LTCi policy were purchased by peodidn’t hold much appeal ple between the ages of 45 to either party. Working and 64, according to the with the client’s financial AALTCI. advisor, we recommended The bottom line is, longa life insurance policy with term care planning takes an LTCi rider and a 10-payon increasing importance ment premium plan. Preas clients get older. But miums would be paid in when clients in their 50s full after 10 years, at which are getting divorced, this time the ex-husband’s responsibility would can remain in effect post-divorce. How- type of planning becomes even more be fulfilled. Both parties signed off on the ever, although some ex-couples might find essential. arrangement. it expedient to share a joint policy, it goes Divorce is difficult, period. It’s a diffiAnd when ample assets exist, a sin- without saying that others might not be cult time for clients and their families at gle-payment plan — in which premiums are open to the idea. any age or stage of life. But it’s also a time paid in one lump sum — can be extremely when clients are re-evaluating and planuseful in the distribution of assets.

LTCi, Divorce and Women ning for the future. As their agent or adviLong-term care planning is especially sor, one of the best ways you can serve your Spousal Discounts During important for women, from a number of clients proactively is to make LTCi part of Divorce? Yes! statistical angles. Multiple studies over the your conversations. A little education and We have been in situations where both years have shown that a woman’s stan- planning go a long way. members of an amiably divorcing couple dard of living is likely to drop following a have decided to apply for long-term care divorce, while a man’s standard of living Brian I. Gordon is president of MAGA Ltd., a long-term insurance — jointly. is more likely to increase after a divorce. care planning specialist. Brian Interestingly, a couple who are engaged In addition, industry statistics indicate may be contacted at brian. in divorce proceedings typically can take that women are more likely than men to gordon@innfeedback.com. advantage of spousal discounts offered require long-term care. Women live lonMurray A. Gordon, under traditional LTCi policies. These dis- ger than men. Alzheimer’s disease is the CEO, founded MAGA in counts typically range from 10 percent to leading and most expensive medical diag1975. Murray may be 30 percent and, in our experience, remain nosis for LTCi claims, according to the contacted at murray.gordon@ in place even after the divorce is finalized. American Association for Long-Term innfeedback.com.

Each individual receives their own policy Care Insurance, and nearly two-thirds 50

InsuranceNewsNet Magazine » February 2016

February 2016 Âť InsuranceNewsNet Magazine

51

FINANCIALWIRES

Gen Y Influenced by the Great Recession When it comes to managing their financial lives, Generation Y is influenced by two things: the Great Recession and their parents. That’s according to the Bank of America Year-End Millennial Snapshot.

Millennials say it is Almost a third of Gen Y said that the Great Recession impossible to find a job affected them personally. Nearly half (46 percent) said the recession made it difficult to find a job, with one out of five (21 percent) saying the recession made job-finding impossible. Nearly half said the recession also changed the way they think about saving, investing and spending (49 percent), making them more hesitant to invest in the stock market (40 percent), buy a house (36 percent) or put money into a retirement savings account (19 percent).

Optimism among Gen Y small-business owners has been strong, however, with 88 percent of millennial entrepreneurs expecting their business to grow over the next five years. Confidence in the economy is also up: 74 percent think their local economies will improve in the next 12 months.

In addition to the Great Recession, another influence on millennials’ financial behaviors has been their parents. Forty percent of millennials admit the successes and failures of their parents drove them to make a positive financial decision; in comparison, just 12 percent of Generation X, baby boomers and senior citizens had this experience.

1 in 5

AVERAGE HOUSEHOLD HAS $15,355 IN CREDIT CARD DEBT

Household debt is on the rise, and credit card debt continues to contribute to that.

The total amount of debt owed by U.S. consumers has reached $11.91 trillion, with the average indebted household owing $15,355 in credit card debt alone. That’s according to NerdWallet's Annual American Household Credit Card Debt Study.

Credit card debt costs consumers an average of $2,630 per year in interest, assuming an average interest rate of 18 percent.

Why so much credit card debt? According to NerdWallet, the following factors contribute to Americans’ reaching for the plastic more frequently.

• The cost of living is outpacing income DID YOU

KNOW

?

52

growth. While median household income has grown 26 percent since 2003, household expenses have outpaced it significantly — with medical costs growing by 51 percent and food and beverage prices increasing by 37 percent in that same span.

• Interest payments add up. The average household already is paying a total of $6,658 in interest per year, which means that 9 percent of the average household income ($75,591) is being spent on interest alone.

MONEY VIEWS VARY ACROSS GENERATIONS

A Lincoln Financial Group study found that Americans fall into one of two groups when it comes to money. Either they are in control of their money or they are not.

But when looking at generational groups, a love-hate relationship with money seemed to emerge.

According to the 2015 American Consumer Study, 36 percent of Americans said they are in control of their money

THEThe AVERAGE RETURN ON AN PUBLIC OFFERING was 20 including percent median male investor lostINITIAL 1.8 percent over the past 12 months, thisfees year.

The averagewhile increase in the (or “pop”) is 13 percent. and dividends, women lostfirst onlyday 1.4 percent, according to a review Source: Renaissanceinvestors Capital of 360,000 using robo-advisor SigFig to track their portfolios.

InsuranceNewsNet Magazine » February 2016

Source: CNBC

QUOTABLE

Less than half of the consumers we surveyed feel it’s important to make room in their budgets today for insurance and retirement products.

— Kristen Phillips, senior vice president of Insurance and Retirement Solutions Marketing and Strategy at Lincoln Financial Group

and 40 percent said they are not. However, millennials were more likely than any other age group to say that they are in control of their money and that they “love” the relationship they have with it.

Gen Xers and baby boomers were more likely to describe themselves as not in control of their money, and the majority said their relationship with money was “easy come, easy go.”

THE LATEST JOB BENEFIT: HELP PAYING OFF COLLEGE LOANS Forget unlimited vacation time and free food in the company cafeteria. Companies desperate to hire the best and the brightest young workers are starting to offer a new perk: help paying off college loans.

It’s a powerful lure for a generation of graduates struggling to pay off college debt as they set out on their own. The number of companies offering loan help is small but on the rise.

Natixis Global Asset Management said that it will contribute up to $10,000 to pay federal student loans of employees who have worked there at least five years. Fidelity Investments said it will launch a student loan assistance program this year, also offering $10,000. PricewaterhouseCoopers will roll out a plan on July 1.

MassMutual officials said they are considering their own program.

Student loan help as a workplace perk was pioneered by the federal government, which offers debt forgiveness to attract people to lower-paying public service jobs such as teaching. Private firms are now following suit, as college costs continue to skyrocket.

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FINANCIAL

What’s Next for Couples Under New Social Security Rules?

E ven with the loss of two options for maximizing Social Security benefits, planners have a few remaining strategies to discuss with their clients.

By Robert A. Fishbein

T

he recently enacted Bipartisan Budget Act of 2015 is a popular topic among financial planners these days. This is particularly true because in 2016 it will eliminate two options married couples have been using to maximize Social Security benefits.

The first option, commonly called “file and suspend,” allowed a person who earns less money than their spouse to claim a spousal benefit while the higher-earning spouse’s benefit continued to grow until that spouse reached age 70. The second option, commonly referred to as a “restrict54

ed application,” allowed a higher-earning spouse to restrict their application for benefits and enjoy a spousal benefit while his or her own benefit continued to grow until age 70. Both of these planning options have been deemed “loopholes,” and they are now prohibited, with some brief transition periods that close this year.

Many articles have been written about the loss of planning opportunities for future retirees. Maybe what’s more important than describing the now-forbidden loopholes is considering planning options that remain for the vast majority of future Social Security beneficiaries.

Although each couple’s situation is unique, one way to approach analyzing the remaining Social Security planning options is to consider a same-aged married couple under two different scenarios. In Scenario 1, the lower-earning spouse expects a So-

InsuranceNewsNet Magazine » February 2016

cial Security benefit greater than half of the higher-earning spouse’s projected Social Security benefit. In Scenario 2, the lowerearning spouse expects a Social Security benefit less than half of that of the higherearning spouse.

Benefits Scenario 1

When the lower-earning person has a projected Social Security benefit greater than half of their higher-earning spouse’s benefit, the spousal benefit will not be of interest to the lower earner because their own benefit will be greater. The question then becomes, “When do you turn on both benefits to maximize the amount of Social Security payments the couple receives?”

The answer depends on the ages and health of the spouses. A Social Security recipient can increase the benefit payment by delaying the starting date from age 62

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55

how does the

FINANCIAL WHAT’S NEXT FOR COUPLES to either the full retirement age (the FRA), which is between 66 and 67, depending on your year of birth, or age 70 (the maximum starting age).

Assuming a healthy 65-year-old couple, there is a 60 percent chance that one of them will live to age 90. The general view is that the delayed benefit pays more if the beneficiary lives to at least age 83.

So the better choice might be to delay the larger benefit to age 70 to allow that benefit to grow and possibly provide a richer surviving spousal benefit to the lower-earning spouse.

What about the lower-earning spouse’s benefit? One reasonable approach would be to start the lower earner’s benefit earlier, say at age 62, because there is less than a 50 percent chance that both spouses will live past age 81. Of course, if you have the means to live without Social Security and if both spouses are in good health and have families with longevity, then you can maximize the longevity protection embedded in Social Security by delaying the lower-earning spouse’s benefit to the FRA, or to age 70.

gevity probability into consideration when planning how to maximize Social Security benefits. However, there’s a compelling argument that the most important feature of Social Security is how it can help your clients better ensure they will not outlive their assets. This perspective puts greater emphasis on delaying Social Security benefits so that your clients have the greatest possible payout, without regard to whether they get back some or all of their contributions.

If your clients value longevity protection, the general rule always should be to wait until age 70 to start benefits (with possible exceptions for those who are the least healthy). Although this may leave some economic value on the table in some circumstances, it does provide your clients with the greatest protection should they live longer than expected.

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rule affect put you you? out of the Department of Labor proposal and upcoming ruling may Benefits Scenario 2

If the lower earner has a Social Security benefit that is less than 50 percent of their higher-earning spouse’s benefits, the spousal benefit of the higher earner will be especially valuable to the lower-earning spouse.

Under the new rules, the only way to start that benefit for the lower-earning spouse is for the higher earner to apply for their own benefit payment.

Given that the spousal benefit stops growing at the FRA, a couple in this situation may reasonably decide to wait until reaching the FRA to start both the spousal benefit and the higher-earning spouse’s benefit. This means, unfortunately, that the higher-earning spouse’s benefit will not grow between the FRA and age 70.

But it does start the spousal benefit when it has reached its maximum value. If this couple feels good about their health and combined longevity, then it still may make sense for them to delay both benefits until they reach age 70.

The above scenarios are just a starting point for analyzing your clients’ own circumstances. For example, you may need a different analysis under both scenarios if the spouses are different ages.

These strategies focus on taking lon-

Changes Mean a Reduction in Benefits for Most

The bottom line regarding these changes is a reduction in Social Security benefits for most future beneficiaries. These changes, like the previous FRA increase from age 65 to age 67, reduce the overall value of Social Security. Moreover, future reductions in the value of Social Security — whether in the form of a reduced cost-of-living adjustment, increased payroll taxes or a reduction in benefit payments — have been proposed as a means for addressing the Social Security solvency issues.

The changes already enacted to Social Security and the possible future changes to Social Security suggest two actions that your preretired clients should take. First, place a greater emphasis on non-Social Security solutions to retirement planning, such as increasing the savings in their 401(k) and individual retirement accounts and considering annuity solutions to manage their longevity risk. Second, place a continued focus on maximizing Social Security benefits, which will still be the single largest source of retirement income for many individuals.

business!

The answer coulD be WORSE than you think.

56

Robert A. Fishbein, is vice president and corporate counsel with Prudential Financial. Robert may be contacted at Robert.fishbein@innfeedback.com.

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InsuranceNewsNet Magazine » February 2016

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February 2016 Âť InsuranceNewsNet Magazine

57

BUSINESS

How to Guard Your Online Reputation H ow negative search results can cause you grief, damage your personal brand image and hurt your sales.

By Anthony L. Semadeni and Steve Leedom

I

t’s common for people to turn to online search engines to verify information related to any business or individual. Consumers trust the information they find on search engines, whether or not that information is accurate. Having a good online reputation is crucial in earning consumer trust.

Have you ever Googled your name? If you have negative search results associated with your business or your personal name, it’s time to implement a damage control plan. And if you don’t have negative search results, you should think about being proactive to protect your online reputation.

Even though reputation is an intangible, it is the most important asset a company possesses. The Economist Intelligence Unit has found that 75 percent of a company’s value is tied up in its reputation.

“There are two kinds of reputation insurance that matter,” said Michael Fertik of reputation.com. “The first is ‘informal insurance’ — building up online digital reputations before problems occur by making sure companies control the top 20 Google results for their names and own the Twitter, LinkedIn and Facebook accounts for those names. Businesses manage their reputations proactively by making sure the Internet accurately reflects their offline successes. When such companies suffer Internet attacks, they already enjoy ‘prophylactic’ layers of technical protection.

“The second is ‘formal insurance.’ Over the past few years, a growing number of organizations have been demanding dedicated reputation insurance products in the same way they buy errors and omissions insurance, data breach insurance, and professional liability insurance. It’s a 58

classic use of insurance, a classic hedge, and it makes perfect sense when 75 percent of a company’s value is tied up in its reputation.”

For the average business owner, however, reputation insurance is out of reach at the moment, and the cost for protecting themselves against a few bad Yelp reviews will far outweigh the benefits. This type of insurance was developed for the big kids on the playground, such as BP, which dealt with the Deepwater Horizon spill, and Accenture, which dropped Tiger Woods after the discovery of his extramarital activities.

Besides cost, another reason reputation insurance hasn’t attracted a following is that the capabilities, tools and resources companies need to “insure” their reputations are already available, on both strategic and tactical levels. On the strategic level, companies can use the experience and judgment of public relations and communications executives who have a seat “at the management table,” counseling CEOs. The tactical level includes things such as monitoring social media, publicity, crisis communications planning, media relations, public affairs, and other components of public relations or reputation management.

In today’s connected world, no smart company is going to wait until a threat emerges before addressing its reputation.

Instead, it views reputation management as a function of company management itself, working to shape opinion of the company while continually preparing for any potential threats to its reputation.

For an individual, those basic principles also hold true. Be aware of the risk and be proactive in your protection.

Reputation Management: Why Is It So Important?

Reputation can change instantly these days. Decades ago, a company’s reputation was more or less the sum of what appeared in the mainstream media. That

InsuranceNewsNet Magazine » February 2016

Don't let bad results happen to you.

made reputation easier to control. Today, reputation is influenced by decentralized processes on the Internet: search engine results, online customer reviews, social media activity, Wikipedia pages and more.

Deloitte recently published its latest Reputation@Risk report, a global survey of hundreds of top executives. The main takeaway from this report: The importance of reputation management keeps growing, with 87 percent of respondents rating the risk of a negative reputation event affecting their business higher than any other strategic risk they face.

Losing Your Good Reputation With the Click of a Button

Your reputation lives on the Internet, meaning it isn’t just about the word-ofmouth reputation you’ve achieved. If a disgruntled former client is slandering you and your business online, it doesn’t matter how strong a word-of-mouth referral you’ve been given. Potential clients probably won’t take the time to evaluate you and your company’s products further. They’ll do business with your competitor instead.

It’s no wonder that the majority of Deloitte respondents said they were making reputation risk a priority in the coming year. Of those surveyed, a full 57 percent planned to increase the resources spent on reputation management, by investing in people, data, technology, and the development of reputation risk and crisis management protocols. These kinds of preparations are crucial, because reputation threats often appear without warning. News stories and scandals go viral within hours via Facebook, Twitter, blog posts and other online outlets, so the most successful companies are the ones that are ready before a crisis strikes.

The Insurance Industry’s Reputation: An Uphill Struggle

On the list of most trusted professions, life insurance agents fall near the bottom, with the likes of door-to-door salespeople

HOW TO GUARD YOUR ONLINE REPUTATION BUSINESS Ask for a testimonial when your clients are most satisfied. Written testimonials and online reviews are important for building a good reputation. Ask your clients to write testimonials for your website, LinkedIn profile and marketing material.

Perhaps it’s easier for them to give you a verbal testimonial. If so, write it down and repeat it back to them. Ask them if you have their permission to use this online, and then start posting it in customer review websites as well as in website pages you control.

Four Strategies to Enhance Your “Plant your flag” firmly in promiOwn Online Reputation nent Internet properties. You’ll want Achieving a fair and accurate online repre- to “own” your name (and your agency’s sentation of you and your agency is accom- name) in Twitter, LinkedIn and Facebook. plished through your online brand, voice Yelp and the Better Business Bureau are and website in addition to what your cus- other key websites you should get listtomers are saying. The better your online ed online with. However, if you do little else, be sure to create a named page within Twitter, The only way to get rid LinkedIn and Facebook. of a negative result is Businesses manage their to bury that result with reputations proactively by positive information. making sure the Internet accurately reflects their reputation, the more likely potential cli- offline successes by posting information to ents are to engage with you and ultimately sites such as Twitter, LinkedIn and Facebecome part of your customer base. book. When such companies suffer InterYour first step in managing your rep- net attacks, they already enjoy a layer of utation is to be fully aware of the con- protection because these three sites usually sequences of not doing your job to the show up within the first page of any name best of your ability when your client calls search if those sites have been claimed. you with a claim. An agent’s reputation is Leave no room for confusion. If you frequently verified or destroyed in a crisis, have a common name, you risk being such as how you and your company han- mistaken for someone else online. Rather dle a death claim. than taking the blame for others’ mistakes, By being aware of how your client in- look for ways to differentiate yourself. teractions can have a direct positive or For example, someone with the name negative impact on your reputation, you “Tony Semadeni” who is a chief problem can focus on performing successful crisis solver could use “Tony Semadeni, CPS” management activities, which include: in online profiles or consider including a middle name or initial or full legal name » Demonstrating decisive remedial action. like “Anthony L. Semadeni.” Register a unique URL with your name — such as » Having access to the right information. www.tonysemadeni.com or www.facebook.com/tony.semadeni — for your so» Communicating rapidly. cial media accounts. This improves the chances that your own profile pages, in» Having a consistent corporate message. stead of those belonging to someone else with the same name, will turn up when » Demonstrating a full appreciation of the someone does a name search on you. needs of all stakeholders. and politicians. Since 1977, no more than 15 percent of Gallup Poll respondents have said our industry’s ethical standards are high, while no fewer than 25 percent have ranked us below average. The ethical standards of accountants, bankers and lawyers are all rated higher.

If you get only one takeaway from all of this information, it should be that your own reputation should not be just a footnote in your personal business plan. You should have a chapter dedicated to it!

» Being able to admit to a mistake. » Outlining a clear recovery strategy.

When a Good Reputation Goes Bad

“What happens in Vegas stays in Vegas” is true only if it didn’t get posted online.

Perhaps something unflattering to you is out there or you’re being mistaken for an ex-con. Unfortunately, you can’t simply remove a result from search engines; it doesn’t work that way.

So whether you’ve had a career blip, a personal misstep or are being stalked online by a vindictive ex-lover, you must be aware of the potential negative consequences those online search results could create when a prospect is doing their due diligence on you.

The only way to get rid of a negative result is to bury that result with positive information.

Site owners aren’t required to remove false or negative information. And even if they remove it, it’s still archived by Google and many other online repositories, so it may continue to show up.

“The best place to hide a dead body is Page 2 of Google search results!” This saying shows to what extent negative results on the first page of Google pose a risk, because Internet users usually stop scrolling at the end of the that first page.

So, content that enables negative links to be hidden on the second page of results is a good strategy for managing an online reputation. Analytics show that when users search for information on Google, only 6 percent advance to the second page. This means that 94 percent of users are satisfied with receiving only 10 results, or else they restructure their search query looking for more relevant results. The key to this strategy is to create enough strong new pages to bump any negative pages off the first page of a name search.

Besides doing your own proactive online management, there are companies that can build you a positive online reputation shield as well as provide crisis management service when you need to fight off negative online results. Don’t let a few unfair reviews ruin your and your agency’s reputation.

Anthony L. Semadeni and Steve Leedom are licensed insurance agents as well as consultants working with business owners. Their company, Business Checkup, they helps protect owner and business brand reputations. They may be contacted at anthony.semadeni@ innfeedback.com or steve.leedom@innfeedback.com.

February 2016 » InsuranceNewsNet Magazine

59

MDRT INSIGHTS

The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.

Life Insurance Unlocks Higher Savings for High-Income Gen Xers not subject to penalties if they access their cash values prior to age 59½, nor do they need to make required distriBy Brendan C. Walsh butions at age 70½. In addition, if they t seems as if a day never passes when structure the policy properly, clients can we don’t hear something about retireaccess their accumulated wealth on a ment planning. The media seem fix- What are the options for tax-preferred basis through withdrawated on how ill-prepared we all are for our clients? als and policy loans. Understanding retirement and the myriad things we can Walk your clients through a process cash-value life insurance — the prodo to catch up. The many retirement prod- designed to examine a variety of options tection component, its ability to meet uct offerings in the marketplace can make for their retirement savings, and discuss retirement planning objectives tax effieven thinking about retirement planning a the advantages and disadvantages of each ciently and the opportunity to save even stressful exercise. However, retiremore money for retirement — is ment planning doesn’t need to be often a very positive revelation for stressful. There are ways to plan clients. tax-efficiently, which is increasingly After we show clients the power important to our younger, successof tax-deferred, compounding inful clients. terest, many quickly come to the To start, it helps to be realistic conclusion a tax-deferred bucket about the challenges of retirement is more effective than one taxed planning. The unfortunate reality every year as the funds accumufor many members of the younger late. Inform your clients this is not generations (I am at the tail end of a “silver bullet” and is not the only Generation X myself ) is that few place where they should be saving if any of us will receive pensions. retirement dollars; however, it is a Many of us have concerns about great complement to the planning how much we will see in Social they have already done.

Security retirement benefits. In This creates an outstanding opaddition, as our younger clients’ portunity for advisors with clients and prospects’ incomes grow, the who have children in their prime Showing clients the power of taxpercentage they can contribute earning years and are experiencdeferred, compounding interest puts to their employer-sponsored reing success or looking for new opthe lively in life insurance. tirement plans gets smaller and portunities outside the traditional smaller. On top of that, as their wealth transfer market. As youngincomes grow, they earn their way out of one. The first option to present is a non- er, higher-income clients realize the gap their next most tax-efficient retirement deductible individual retirement account, they face in their retirement savings, life vehicle, a Roth IRA. which offers tax deferral. Next, review the insurance can play an integral role. Life For example, let’s take a 35-year-old pros and cons of annuities. Similar to a insurance not only solves a need to creprospect who earns $300,000 a year in nondeductible IRA, an annuity gives the ate an estate that has not yet had time to income. Their maximum possible 401(k) client tax-deferred accumulation. Clients accumulate in the event of their untimecontribution for 2015 is $18,000, which do not have the same contribution lim- ly death, but it also assists in growing amounts to 6 percent of their income. its with annuities that they face with an wealth to a point where they can retire Every piece of literature they have read IRA. Withdrawals and/or distributions comfortably. tells them to contribute to a Roth IRA. from the annuity may be subject to taxes Brendan C. Walsh is co-foundHowever, they now exceed the federal in retirement. income limit of $116,000 for individuNext, discuss tax attributes of er, president and managing partner of Catalyst Solutions als and $183,000 for married couples cash-value life insurance, which, similar Group, Birmingham, Mich. He in 2015, and they can no longer make to annuities, does not have contribution may be contacted at Brendan. contributions. A variety of reports on limits like an IRA has. Policyholders are walsh@innfeedback.com.

H igh earners have few options for tax advantages for saving.

I

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retirement savings inform our client they need to save anywhere from 15 to 25 percent of their income to retire comfortably. We cannot blame them if they feel they are facing an uphill battle.

InsuranceNewsNet Magazine » February 2016

NAIFA INSIGHTS

Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

The 5 Relationships for Success T he 2015 recipient of NAIFA’s most prestigious award highlights the five types of relationships that are critical for moving ahead.

By Ayo Mseka

W

hen Peter Browne was presented with the John Newton Russell Memorial Award at the 2015 NAIFA Career Conference and Annual Meeting, he expressed his profound gratitude for being chosen for the award. The John Newton Russell Memorial Award is the highest honor bestowed on a living individual in the insurance industry.

Browne also took the opportunity to share the five types of relationships he believes are essential for success in the financial services industry. His words of wisdom are based on decades of experience and will come in handy as you map out your strategy for success now and in the months ahead.

The Path to Success

The first type of relationship needed to succeed is family, Browne said. For his part, his wife has been his best friend and confidante for 54 years, providing him with undying support through long nights as he worked with clients and colleagues.

Client relationships are another ingredient for success. Browne’s earliest client relationships were with his fraternity brothers while he was in college. These relationships gave him his first sales idea.

He would ask each fraternity brother to buy a $5,000 whole life insurance policy on himself, and they would name a family member as a beneficiary — but the dividends would be assigned to the fraternity.

The policies would become a great source of reliable, repeatable revenue for them, he added. Chief among Browne’s fraternity relationships was the president, Cecil, who got his own policy in place and encouraged the rest to do the same. As their lives grew, so did Browne’s career, and at a tender age, he was asked to manage Union Central’s New York City agency, at one time the largest agency in the country.

Along the way, he learned another

Peter Browne, founder of Price, Raffel & Browne of New York City, shares insight into the success that led to the John Newton Russell Memorial Award.

lesson — the value of peer relationships in achieving success. Although his recruiting training had not prepared him to hire Juan Calles, an agent who was looking for a job, Browne’s instincts told him Calles would succeed, and he did. Calles rose to stardom in the company’s sales force and was asked to begin a new agency in Miami, where his understanding of the local market would be unrivaled. He took the challenge and grew the agency from nothing to one of the most powerful agencies in the company.

“This peer relationship,” Browne said, “grew from recruiting and mentoring to one of the best peer relationships. He made me complete and improve myself and taught me to trust the unique individual potential in recruits. Juan’s meteoric rise lit fireworks in my imagination, and I would never again look for standard-issue recruits.”

The fourth kind of relationship critical for success is the one you build with people in the companies you represent, Browne said, because company relationships are important in caring for clients.

He said one of his great blessings was to represent a company that made agent relationships a priority. Cecil, the president of the fraternity mentioned earlier, became such a great advocate in helping him establish his practice that Cecil became a lifelong client and friend. Cecil’s leadership skills took Browne far in his career, and he became president of the company.

When Cecil died in a plane crash, there was a grieving family to care for and an entire company of employees who were uncertain about their future. Browne sat down with the company’s chief financial officer, who was thrust unexpectedly into the company’s top role. Browne delivered several checks to the company and to family members.

Great industry relationships represent the fifth criterion for success, Browne added. During his career, he has met some of the best leaders in the field through his industry involvement, including Lester Rosen, the 1972 John Newton Russell Award recipient NAIFA past Presidents Bob Brown and Alan Press; and NAIFA Secretary Keith Gillies. “These relationships have built bridges for shared success — success for our industry through advocacy and education, success for our practices through sharing of ideas, and ultimately success for our clients,” he said.

A Challenge for the Next Generation

Toward the end of his remarks, Browne challenged the next generation of leaders to take on these roles: » Fight to reinforce our role as personal financial advisors in building lasting relationships — not executing transactions. » Uphold and guard the industry that is vital to the well-being of humanity. » Reach for a bright future, realizing that the future is not a place we are going to but a place we are creating.

Browne ended his presentation by pointing out a truth that resonated with many in the audience: “Paths are not to be found but made, and finding them changes both the maker and the destination.”

Ayo Mseka is editor in chief of NAIFA’s Advisor Today. Ayo may be contacted at ayo.mseka@innfeedback.com.

February 2016 » InsuranceNewsNet Magazine

61

With over 87 years of experience, The American College is passionate about helping students expand their knowledge and opportunities as financial professionals.

THE AMERICAN COLLEGE INSIGHTS

Americans Are Flunking Financial Literacy U .S. students ranked between eighth and 12th place in financial knowledge.

By Jocelyn Wright

F

inancial literacy has been a hot topic in the financial services industry for more than a decade, and with good reason.

As financial professionals, we are constantly reminded that Americans have limited financial knowledge. An understanding of basic economic concepts is necessary for recognizing both the risks and the opportunities individuals encounter at every stage of their financial lives. Saving for a specific goal, managing a household budget, deciding on credit card plans, planning for retirement and investing money are all areas requiring informed financial decisions. These are decisions that can maximize one’s financial well-being or, in the case of uninformed decisions, put that financial well-being in serious jeopardy. Financial problems expand when consumers lack the basics of financial literacy. Our youngest Americans are most at risk.

The Organization for Economic Cooperation and Development recently conducted an international study to measure the financial proficiency of 15-year-olds in 18 countries. China scored the top spot, with 603 points. Our students scored eight points below the global mean of 500 points and ranked between eighth and 12th place. These results come as little surprise given that just 20 percent of U.S. adults received a passing score in The American College Retirement Income Literacy Survey conducted in 2014. Such dismal results underscore the tremendous need for increased financial education for our youth, and the sooner the better.

The level of outstanding student loan debt continues to rise at the rate of about 12 percent a year, doubling since 2009 to a whopping $1.3 trillion. A typical student will graduate with a loan balance of just 62

There is a tremendous need for increased financial education for our youth, and the sooner the better. under $29,000 — $28,973, to be exact.

It is important that we equip our young people with the tools needed to tackle the day-to-day financial decisions they will face in adulthood. This economic education should begin as early as possible and be reinforced throughout their lives. One way to teach financial lessons to children at a young age can be as simple as playing classic board games such as Life and Monopoly. These games helped pique my own interest in money and finance as a young child growing up in the 1970s, and I am sure they could have a similar impact even in this age of technology. There is much more that can be done to address the need for financial education, and some organizations are already involved.

There are a number of nonprofit and private entities, such as the National Endowment for Financial Education (NEFE) High School Financial Planning Program, the Jump$tart Coalition for Personal Financial Literacy and the Federal Deposit Insurance Corp. Money Smart programs, that are committed to providing financial education to young people. These organizations have developed extensive educational material for every level of learning.

Potential educators cannot assume that just because the organizations “built it” the students will come. These organizations need the support of individuals like us to make sure that the tools needed to develop financial literacy are delivered to students in schools, local community centers or Boys and Girls Clubs. They need volunteer instructors to deliver the curriculum to students. They need concerned parents

InsuranceNewsNet Magazine » February 2016

and community groups to urge their local schools to take advantage of the free curriculum materials available for teachers. It takes a village to educate and we, as financial professionals, can and should be an integral part of that village.

As we set our goals for the coming year, make a commitment to promote financial literacy. I encourage you to include volunteering a few hours a month with one of the aforementioned organizations or another one of your choosing. I know that I will — starting with my alma mater.

There could be added bonuses to having more financial service professionals teaching students. Not only will the students increase their financial knowledge, but the regular interaction with financial professionals also could consider make future clients more comfortable about consulting financial planners. It also could acquaint more young women and men with the important roles financial professionals play in helping families reach a higher level of financial security. It may inspire more young people to pursue career opportunities in our industry.

At a time when we are facing a decline in the number of millennials entering the field, this could provide a valuable introduction to an important profession that is needed now more than ever. How about that for a win-win proposition?

Jocelyn Wright is director of The American College State Farm Center for Women & Financial Services. Jocelyn may be contacted at jocelyn. wright@innfeedback.com.

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BC

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More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.

LIMRA INSIGHTS

Young Advisor Success Depends on Support From Their Firms Y oung advisors want help in learning how to find leads, ask for referrals and develop skills to run a business.

By Breana M. Macken and Emily Tracey

W

hen recruiting new prospects, financial services companies and firms often make promises to support these young advisors throughout their sales careers. Once they begin, young advisors rely on this promised support so they can achieve long-term success and remain in their careers.

LIMRA research on young advisors found those who are just starting their careers face many of the same challenges as their predecessors. Finding leads, asking for referrals and developing skills to run a business remain difficult and important hurdles to success. Like previous generations, today’s young advisors crave support in all these areas. But unlike their predecessors, young advisors differ in their approaches and the types of support they require to tackle these problems As part of our research, we asked young advisors to place a value on different types of support. As a result, a number of supports related to technology rise to the top in terms of their importance to young advisors (see chart). This is hardly surprising, as younger generations have grown up with technology and expect to use it in their careers. At the same time, there are still some areas of financial services in which more traditional (perhaps out-of-date) methods are often taught, so young advisors should not assume technology support will be immediately available to them. As firms and advisors gain more access to technology and data, they need to take advantage of these tools. Young advisors want to fully leverage technology resources for themselves and their firms. They see that using technology benefits them by giving them 64

Importance of Support Tools Technology tools to provide service to clients Financial planning tools/ software Technology tools to help manage my practice

76%

40%

76%

55% 66%

44%

Mobile technology (e.g., tablets, smartphones)

55%

65%

Source: Delivering on the Promise: Young Advisor Series, LIMRA, 2015.

increased efficiency as well as additional time to prospect and interact with clients.

Fifty-eight percent of young advisors said they also seek support for one of their biggest challenges — building their client base. To grow their books of business, young advisors can turn to familiar methods in technology or social media, along with some support from their firms to provide leads. Social media is a natural way for young advisors to engage with both current and prospective clients. Millennials are extremely connected to their peers through social media. Compliance restrictions and other factors, however, can limit their ability to leverage these tools. Firms that find ways to enable advisors to use social media to market their business and connect with people at the right time will be a step ahead of their competition.

Also evident from our research is that young advisors want more than just technology support. They acknowledged the importance of selling skills and sales ideas, identifying them as valuable areas where they would like more support. They tend to prefer interactive training, which often means “learn by doing” instead of sitting in a classroom or reading online.

Because sales ideas and techniques don’t resonate on paper the way they do in person, young advisors place a high value on mentoring from experienced professionals so that they learn the right techniques

InsuranceNewsNet Magazine » February 2016

78%

58%

Selling skills, sales ideas

*Of those who find the support important or very important

Find it important or very important Not receiving enough*

firsthand. In fact, only 5 percent of the young advisors we studied did not have a mentor and didn’t want one. Everyone else either had a mentor (75 percent) or wanted one (20 percent). There is also a mutual benefit in “reverse-mentoring,” when young advisors share insights with their experienced counterparts on how to reach younger clients and help them with technology challenges.

The promises made during the recruiting process are important ones to keep as new hires begin their careers. Advisors will rely on the training and resources their firms provide to further develop themselves and their practices. Failing to provide that support is a loss for the hiring firm as well as the new recruit.

Firms that hire the right talent and provide the proper support will see a solid return on their investment through the long, successful careers of their advisors.

Emily Tracey, MBA, is an analyst in distribution research for LIMRA. Emily may be contacted at emily. tracey@innfeedback.com.

Breana Macken is a senior research analyst in distribution research for LIMRA. Breana may be contacted at breana. macken@innfeedback.com.

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