InsuranceNewsNet Magazine - June 2014

It is no secret that the retirement market is where the future is, but some new ideas about how to serve retirees might surprise you. PAGE 30

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June 2014 Âť InsuranceNewsNet Magazine

1

Ameritas leaders are industry leaders

Robelynn H. Abadie, RFC, CAP

Kim G. Allen, LUTCF

Michael S. Arteca

Peter C. Browne, LUTCF

Mark A. Cecil, CFP

Abadie Financial Services Baton Rouge, LA

United Professional Advisors Watertown, NY

Independent Financial Solutions Westbury, NY

PRB Wealth Management New York, NY

Wealth Advisors Group Bethesda, MD

Brett A. Moldenhauer

Richard C. Moldenhauer,

LeaAnn M. Moore

William C. Moore, CFP

Kevin P. Nicholson

Moldenhauer & Associates Orchard Park, NY

CLU, ChFC, RFC, CEP

Midlands Financial Benefits Lincoln, NE

Mark P. Rosenbaum Rosenbaum Financial Portland, OR

Moldenhauer & Associates Orchard Park, NY

Brian P. Walsh, CLU, ChFC, RFC Christopher B. Warren, CLU, ChFC Walsh & Nicholson Financial Group Lawless, Edwards and Warren Wayne, PA Boca Raton, FL

W.C. Moore Financial Services Walsh & Nicholson Financial Group Centreville, VA Wayne, PA

David B. Wentz, J.D., LUTCF

R. David Wentz, J.D, CLU, ChFC

Tax Favored Benefits Overland Park, KS

Tax Favored Benefits Overland Park, KS

2014 MDRT Top of the Table Ameritas salutes our valued field associates who have attained the highest levels of MDRT membership.

Keith M. Gillies, CLU, CFP, ChFC

Raneshwar K. Gupta

Jarrod F. Hirschfeld

John C. Kenan

Patrick J. Kenney, CPA

Wealth Solutions La Place, LA

Total Asset Planning Cincinnati, OH

Wilcox Financial Toledo, OH

Southeast Financial Services Greensboro, NC

Wilcox Financial Toledo, OH

Mitchell W. Ostrove, CLU, ChFC

Michael R. Ostrow, CLU, ChFC

Arnold J. Price

Stuart J. Raffel, CLU, CPC, RFC

Charles A. Rogers Jr., CFP

The Ostrove Group White Plains, NY

Senior Life Planning Group East Meadow, NY

Price/Raffel LA Los Angeles, CA

Price/Raffel LA Los Angeles, CA

Capital Concepts Hickory, NC

Michael R. Wilcox Wilcox Financial Toledo, OH

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp.

Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2014 Ameritas Mutual Holding Company

DST 1364 5-14

2014 MDRT Court of the Table

Stephen D. Andersen, RHU

Brian J. Anderson

Stephen L. Bruneau, CLU, CFP

Carl J. Buzzeo

John Elias Calles, J.D., CLU, ChFC

Midlands Financial Benefits Lincoln, NE

David White & Associates San Ramon, CA

Boston 128 Companies Weston, MA

WPA/Pittsburgh Financial Center Pittsburgh, PA

Miami Agency Coral Gables, FL

Frank G. Heitker, CLU, FLMI

Frank S. Hennessey, LUTCF, ChFC

Josh A. Jalinski

Premier Planning Group Cincinnati, OH

Premier Planning Group Phoenixville, PA

Jalinski Advisory Group Toms River, NJ

Kevin M. Grunawalt, CFP, LUTCF David R. Guttery, RFC, RFS, CAM 20/20 Financial Advisers of Mishawaka Mishawaka, IN

Nowlin and Associates Trussville, AL

Joseph S. Pantozzi, CLU, ChFC

Arnold N. Pechler III

Arnold N. Pechler IV

Kimberly S. Rosenberg

Daniel J. Scholz, CLU, ChFC

Alpha & Omega Financial Services Las Vegas, NV

United Professional Advisors Palmyra, NY

United Professional Advisors Palmyra, NY

Rosenbaum Financial Portland, OR

Ameritas Financial Center Omaha, NE

This information is provided by Ameritas速, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to, Ameritas Life Insurance Corp., Ameritas Life Insurance Corp. of New York and Ameritas Investment Corp., member FINRA/SIPC. Ameritas Life Insurance Corp. is not licensed in New York. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas速, visit ameritas.com.

Any agency referenced is not an affiliate of Ameritas or of any of its affiliates.

DST 1364 5-14

Juan Elias Calles, CLU, ChFC

James R. Christensen Jr.

Anthony A. Famighetti, CLU, ChFC

David J. Fazzini, LUTCF

inSource Benefits Group Omaha, NE

Michael J. Gilliam, LUTCF

Miami Agency Coral Gables, FL

Putney Planning Jericho, NY

Premier Planning Group Phoenixville, PA

Carillon Group Chesterfield, MO

Ivar N. Jones, LUTCF

S. Patrick Kelley, ChFC

David R. Lucas, ChFC, LUTCF

Jorge E. Mercado, LUTCF

Antonio J. Ojeda

David White & Associates San Ramon, CA

David White & Associates San Ramon, CA

David White & Associates San Ramon, CA

Miami Agency Coral Gables, FL

Midlands Financial Benefits Lincoln, NE

Learn why so many high-performing MDRT leaders and managers choose us as their primary provider. Visit www.AmeritasGA.com

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2014 Ameritas Mutual Holding Company

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JUNE 2014 » VOLUME 7, NUMBER 6

48 ANNUITY

48 A thene USA Grabs a Foothold in Fixed Annuities

28 INFRONT

14 A nnuity Sales Lagging? Look at the ZIP Codes

By Linda Koco Annuity production opportunities vary between states and between ZIP codes within each state.

18

By Linda Koco Athene USA is the big jewel in the crown of a holding company the industry had not even heard of five years ago. Here are some highlights on how this company is faring.

COVER FEATURE 30 Gold in the Gray

By Susan Rupe The baby boomers and the generations to follow will have a variety of needs as they plan for retirement. Advisors will need to address their financial – as well as their non-financial – concerns.

LIFE

40 Give Estates a Big Lift by Leveraging Split-Gifts

By Russell E. Towers The financial advantage of owning taxfree life insurance in an irrevocable life insurance trust, when compared to other taxable and non-guaranteed fixed financial products alternatives, is truly outstanding.

INTERVIEW

18 D uct Tape: The Salesman’s Silver Savior An interview with John Jantsch Are salespeople an endangered species? John Jantsch thinks so. He wants to help sales professionals adapt and remain relevant in the midst of the changing ways in which consumers make buying decisions. Jantsch, the author of Duct Tape Selling, gives InsuranceNewsNet Publisher Paul Feldman the inside scoop on how to become a sales superstar.

6

InsuranceNewsNet Magazine » June 2014

40 42 Busting the 7 Myths of Life Insurance

By Patrick Bet-David With so much misinformation out there, prospects don’t know what to believe about life insurance. Here is how you can set them straight.

HEALTH

54 I mpact of Health Care Reform in the Workplace

By Tye Elliott Health care reform has presented a number of challenges for both employers and their workers. A study examines game-changing strategies that certain companies use to recalibrate their investments in their human capital and strike a winning balance.

56 FINANCIAL

58 Couples Often Tuned to Different Retirement Channels

By Mark E. Caner Managing each partner’s expectations of retirement is a challenge financial professionals face with couples starting this new life stage together.

BUSINESS

62 S ix Ways to Generate More Sales

By John Graham Today’s customers want to tell their story and they expect salespeople to listen.

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Respond today to be eligible for an all-expenses-paid trip to the industry’s best IUL sales academy 1 in addition to extra cash bonuses for submissions in 2014! 2 Imeriti is an independent marketing organization that supports insurance agent sales of insurance products and does not itself engage in the offer or sale of insurance products. This advertisement is intended only and exclusively for insurance agents and is not meant for the general public.

1 Qualifying agents must be contracted at normal commission levels and must be in good standing with Imeriti Financial Network at time of award. Please contact IFN for more detailed information. We reserve the right to modify or cancel this program at any time. Certain rules and restrictions apply.

2 The bonus is only applicable to non-annuity business and not all life insurance products qualify. New York production is not included.

Registered representative participation is subject to broker/dealer approval

ALSO IN THIS ISSUE JUNE 2014 » VOLUME 7, NUMBER 6

INSIGHTS

64 SOCIETY OF FSP: Let Risk Tolerance Be Your Guide

By Richard M. Weber Consider clients’ risk tolerance when recommending the type of insurance to suit their needs.

FREE 2014 SUCCE SS KIT

For 86 years, your success has been our mission.

So to help make sure you accomplish your resolution in 2014, we put together a “Success Kit” just for you.

Our 2014 Success Kit includes: » A FREE article on Urban Myths about Baby Boomers » A FREE newsletter featuring “The Top 10 Reasons People are Transferring Billions into Annuities” » A FREE one-hour media program (on How to Get Referrals Without Ever Asking for Them)

66 N AILBA: Protecting Your Client’s ‘Flight Plan’

By Barbara Crowley In helping clients plan for retirement, advisors need to see life insurance products as a strategy, not a sale.

68 MDRT: Take Clients to the Big Leagues With an All-Star Team

By Albert E. Gibbons A truly collaborative process enables clients to make well-informed decisions for themselves, their families and future generations.

69 N AIFA: Camp Tax Reform Plan Shows Need for Lawmaker Education

By Diane Boyle NAIFA’s 2014 Congressional Conference provided an opportunity for advisors to tell their stories of how this proposal would hurt their business.

70 LIMRA: Barometer Measures Importance of Dealing With an Advisor Ashley V. Durham Consumers still seek good advice from someone who can explain the complexities of insurance.

72 The Last Word: The 59½ Birthday Is More Than One Reason to Celebrate

By Larry Barton This birthday celebration opened a discussion on retirement planning.

EVERY ISSUE 10 Editor’s Letter 28 NewsWires

38 LifeWires 46 AnnuityWires

52 HealthWires 56 FinancialWires

Get your free Success Kit at www.2014FSPSuccess.com or call 855-297-6545 today.

PLUS: We will mail you a FREE ISSUE of the Journal of Financial Service Professionals, which is packed with groundbreaking techniques that will help you grow your practice.

Since 1928,

the clear path to success for you and your clients.

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14 INN 06.14 June 2014 Âť InsuranceNewsNet Magazine 9

WELCOME

LETTER FROM THE EDITOR

The Killer App

R

ecently, I had the opportunity to learn whether the life insurance application and underwriting process is still a long, tedious and onerous one. Short answer: Yes! Longer answer to follow.

I was speaking to our insurance agent at the office about a universal life product that advances the death benefit if I need assistance with at least two activities of daily living (ADLs).

In addition to the product’s marketing message fitting my particular anxiety at that moment, I thought going through the application process would offer useful insight. I purchased a term life policy about 10 years ago, and it was indeed a long ordeal, but since then, I have been hearing how the industry has worked diligently to improve the underwriting process.

First, my agent asked me questions for the initial application. That was about 20 minutes.

Next up, medical exam. At first, I was going to have somebody come to the office, but with blood and urine samples, I was just a little uncomfortable with splashing bodily fluids around my workplace. So I set a noon appointment for home and fasted for the tests.

A nice enough gal took the samples, asked more questions and recorded my weight. OK, another half-hour in the process. Next up was the phone interview and questionnaire, which I was told would be 15 to 20 minutes.

The interviewer had the exact diction and nasal-yet-authoritative quality of a 1950s high-school hygiene film narrator. She had the ability to simultaneously soothe and unnerve, even though I don’t believe those sensations were meant to coexist.

We went through the basics. By that, I mean everything about anything I ever did or experienced. After some introductory interrogation about me and my family, we moved on to medical history. Actually, it was more like she went down the list of everything in the medical history book and at the end of each sentence asked me if I have ever had it.

At one point, I had a surprising sense of 10

gratitude and said, “Wow, I really did not realize how many awful things can happen to a person.”

Then she asked if I had ever fallen in the past two years. “Well, I slipped on ice a couple of times.”

“When were the dates?” She asked.

“I don’t know. I, uh, would have to check my diary.” After a few moments of silence, I added, “I am not actually checking my diary. I was joking.”

But she insisted on dates. We narrowed down that the falls occurred when it was cold outside, so we settled on “winter.”

We moved on to activities. Had I been scuba diving, hang gliding or mountain climbing, along with the dizzying array of ways to kill yourself in the pursuit of recreation? I had done none of them. That realization hit me with a sad little thud. Then she asked me if I planned to do any of those things in the next two years.

I thought, well, this could be my chance!

This could be the turning point in my life. I could leap out of this chair and climb mountains to breathe thin, clean air and scan rugged horizons. I could plumb the depths of the sea and witness wonders of color and movement. I could throw myself out of an airplane and plummet to earth amid whistling wind and the vastness of sky.

Yeah, I’m not doing any of that. An object at rest tends to stay at rest. The insurance company knows that.

Then we talked about foreign travel. Did I plan to travel or live in a foreign country in the next year? Well, how would I know?

The whim might strike me to walk the nine bridges of Paris some weekend or maybe a university might find me to be enough of a curiosity to sit me in some endowed chair for a year.

With a sigh, I admitted I had no plans to go anywhere. Did I have a pilot’s license?

Did I plan to get one? At this point I believe my head was between my knees and I had become catatonic staring at the pattern in the carpet. No, I didn’t plan on doing that or anything else. Let’s just say that for anything else on your list that looks interesting, put me down for “no.”

So, 41 minutes and 16 seconds after the start of this interview, I realized the only

InsuranceNewsNet Magazine » June 2014

risk I posed was dying of boredom.

Where do I sign up for the life insurance that guarantees me a life?

Anyway, my point before I depressed myself was that the underwriting process is still burdensome. I am sure my experience was representative of any carrier underwriting a contract beyond a simple low-value term policy.

In a quick Google search, I could see there were many consumers who were anxious about the process. There was one chat group of Washington, D.C., moms who shared notes on the process. Part of one person’s comment was, “We now have to submit to health testing and an ‘interview’ with the insurance company. I am typically a very private person when it comes to my health and didn’t realize it would be so intense.” Another said, “My experience with trying to get life insurance was AWFUL, and I gave up due to the intrusive medical questionnaire. It was so upsetting to have to answer deeply personal questions over the phone, not to mention maddening to be forced to give a specific answer when you have no way of knowing/the answer is not one of their multiple choice items that they make you pick.” And these were just a couple of points made in just this one chat.

Consider this with the latest MIB figures on new applications. The number was down 4.4 percent in March, the 12th consecutive month of declines. It seems to me that we have to make this process easier for people. I have heard from plenty of big data experts who say there is more than enough information available to insurers to make underwriting faster, far less intrusive and more accurate. IBM has been arguing that for years.

Back to me. I still haven’t heard about my insurance. My agent did stop in the other day to say, “Hey, Steve, I hear you fall down a lot. Can you give me some dates on when you did all this falling?”

Steven A. Morelli Editor-in-Chief

Stop Flushing Your Marketing Dollars Down The Toilet Every Time You Host A Dinner Seminar

What If Everything You Knew About Hosting Client Attracting Dinner Seminars Was Wrong?

WARNING:

When you put these time tested and proven celebrity marketing systems into your dinner seminars, you will no longer be seen as another financial salesman, but as a trusted advisor and Celebrity Expert® with zero competition!

My name is Greg Rollett and along with my partners, Emmy Award Winning Director, Nick Nanton, and Billion Dollar Sales & Marketing Expert JW Dicks, we have been quietly disrupting the same ol’ song and dance many advisors like you have been running for years.

After running thousands of our own events, in virtually every major city across the country and working with over 2,100 clients, we are finally pulling back the curtain and literally giving you our seminar success blueprints.

You see, right now I know you are great at using your hard earned revenue to put your target market into seats at a classy restaurant with a high-perceived value; and that’s great.

You have a good presentation that commands attention. You are good on the spot and can connect with your audience. That’s great too.

And, let’s say you are great at what you do, and on average, you close half the buying units at dinner to meet with you one-on-one.

But what about all the folks that got your invitation, got dressed, hopped in their car and attended your event…but didn’t book an appointment?

That is quite literally the million-dollar question.

Let’s say you average 20 attendees at each of your seminar events. You host a great event and book 10 appointments. If you host just one of these events per month, you are leaving 120 potential clients on the table over the course of a year. With two events per month that total is 240. That is a big hole in your profit bucket that needs to be filled.

Then what about those that come in for appointments and never close?

That’s another 60-120 waiting for you to be their expert and help them. And these were people that actually raised their hand to be contacted.

Now multiply that number by the number of years you have been hosting these events.

I’ll remind you again, how much does it cost you to put that person in that seat?

And you just go and ignore them? You left money on the table!

Greg Rollett Nick Nanton JW Dicks

It’s time you take back control of your seminars. It’s time you conditioned your RSVP’s to respect you as the financial celebrity in your market. It’s time you stepped up to the plate as an elite advisor who is no longer on the same playing field as those just barely getting by or spending more on invitations and steaks than in their own paychecks! It’s time to change the economics of your business that you didn’t even know was humanly possible.

And to help you today, I want to invite you to watch a brand new video where I break down exactly how much money you are losing on your financial seminars and the 5-step plan to turn these big ticket events into Big Paydays in your financial practice.

After watching this video you will become the financial celebrity in your market, show up like no one else they have ever done business with and close every single, capable buying unit that RSVP’s for your seminars.

To claim your FREE Celebrity Seminar System Video simply visit CelebritySeminarSystem.com or call (888) 548-4047 today.

This video will open your eyes to the financial tragedy you are putting yourself into every time you host a seminar without this system in place. Today I literally want to give it to you, as my gift to help you succeed.

Visit CelebritySeminarSystem.com or call (888) 548-4047 to go through this brand new video and see how the Celebrity Seminar System will end your current frustration and give you new hope for your seminars, your business and your own financial independence.

June 2014 » InsuranceNewsNet Magazine

11

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PruLife Founders Plus UL is issued by Pruco Life Insurance Company except in New York where, if available, it is issued by Pruco Life Insurance Company of New Jersey. Both are Prudential Financial companies located in Newark, NJ. Each is solely responsible for its own financial condition and contractual obligation.

The potential to build cash value in the Plus Account is based in part on the performance of the S&P 500® Index (using an index growth cap and floor) on an annual point-to-point basis based on a 50% participation rate (subject to change). Money that is placed in the Plus Account is not a direct investment in the S&P 500® Index. Founders Plus is not a variable contract or an investment contract.

The Index Growth Cap is generally stated as a percentage, which is the maximum rate of interest that will be credited at the end of the one year Plus Account Segment duration, regardless of changes to the designated index. The Index Growth Cap is declared for each Plus Account Segment in advance of each Plus Account Segment start date. The Index Growth Cap may be raised or lowered at our discretion before the segment is created, but will not be lower than the guaranteed minimum index growth cap stated in the policy (currently, 3% in all states).

Once a Plus Account Segment is created, its Index Growth Cap will not change. Changes to the Index Growth Cap could result in different values than shown here. Changes are not tied to the performance of the underlying index and may be based on interest rates, market volatility, and other factors. Index Growth Caps and Floors may be different in selected states.

12

© 2014 Prudential Financial, Inc. and its related entities.

FOR THE EDUCATION OF PRODUCERS/BROKERS ONLY. NOT FOR USE WITH THE PUBLIC. InsuranceNewsNet 0255074-00003-00 Magazine » June 2014

LIFE INSURANCE

ALL PATHS LEAD TO FOUNDERS PLUS. PruLife® Founders Plus UL. A flexible, cost-effective alternative to traditional UL. Along with death benefit protection, Founders Plus offers both an extended no-lapse guarantee and opportunity for growth.

And, by adding Prudential’s BenefitAccess Rider, clients can advance the death benefit if they become chronically or terminally ill.* To learn more and get your Founders Plus Producer Guide, call 1-800-800-2738 or visit prudential.com/founders

The S&P 500® Index is a product of S&P Dow Jones Indices LLC (“SPDJI”); it has been licensed for use by The Prudential Insurance Company of America for itself and affiliates including Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey (collectively “Pruco Life”). Standard & Poor’s®, S&P®, and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Pruco Life. Pruco Life’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates; and none of such parties make any representation regarding the advisability of purchasing such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index. S&P 500® index values are exclusive of dividends.

The BenefitAccess Rider is available for an extra premium. Additional underwriting requirements and limits may also apply. Obtaining benefits under the terms of the rider will reduce and may eliminate the death benefit.

Benefits paid under the BenefitAccess Rider are intended to be treated for federal tax purposes as accelerated life insurance death benefits under IRC §101(g)(1)(b). Tax laws related to the receipt of accelerated death benefits are complex and benefits may be taxable in certain circumstances. Receipt of benefits may affect eligibility for public assistance programs such as Medicaid. Accelerated benefits paid under the terms of the Terminal Illness portion of the rider are subject to a $150 processing fee ($100 in Florida). Clients should consult tax and legal advisors prior to initiating any claim.

A licensed health care practitioner must certify that the insured is chronically or terminally ill to qualify for the benefits. Chronic illness claims will require recertification by a licensed health care practitioner. Other terms and conditions may apply. This rider is not Long-Term Care (LTC) insurance and it is not intended to replace LTC. The rider may not cover all of the costs associated with chronic or terminal illness. The rider is a life insurance accelerated death benefit product, is generally not subject to health insurance requirements, and may not be available in all states.

June 2014 » InsuranceNewsNet Magazine All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing company.

13

INFRONT

TIMELY ISSUES THAT MATTER TO YOU

Annuity Sales Lagging? Look at the ZIP Codes D ata analytics can help find where the best annuity prospects live.

By Linda Koco

A

retirement-focused advisor along the New Jersey shore encountered a production problem that Bill Poll said data analytics helped solve. After five years of high production, sales started dropping, seemingly out of the blue.

It happened before Hurricane Sandy in 2012, so the devastation was not the cause.

Poll said a ZIP code study of the area the advisor had been targeting found that the market had changed dramatically from five years previous. The prime buyers of annuities and other retirement products were leaving the area, Poll said, so “the hosting of steak-and-lobster dinners wouldn’t work there anymore.”

But the report also found that a market ripe for annuity and retirement-related sales lay in another ZIP code farther inland, so if the advisor wanted to refocus there, the advisor might see production pick up again.

That is an example of how data analytics can help, and is helping, advisors grow their business, said Poll, who is managing partner at Information Asset Partners (IAP), a Metuchen, N.J., analytics firm.

About Analytics

Analytics is often viewed as something for use by insurance carriers, broker/ dealers (B/Ds) and insurance marketing organizations (IMOs) in designing marketing and sales strategies. LIMRA confirms that life insurers are definitely stepping up to the plate in using analytics, including predictive analytics.

But some producers are benefitting from analytics too, according to Poll.

Typically, the carriers, IMOs and B/Ds provide salient findings from analytics studies to producers whom they believe will benefit from the data.

However, advisors like the one from 14

New Jersey sometimes seek out analytics data too. “They need a snapshot, usually for a specific need or purpose,” Poll said, “but they probably don’t need to get reports regularly.”

Types of data developed by analytics firms vary by researcher, firm, industry, target markets and other factors. At Poll’s firm, the focus is on analytics by ZIP code or other geographic codes where annuity production lags or excels compared with market potential.

To do that, the firm takes its own national survey data on current retail annuity buyers and relate it with U.S. Census Bureau “block group” data and with the annuity sales data gathered by a unit of the Depository Trust & Clearing Corp. From

InsuranceNewsNet Magazine » June 2014

that, the firm produces various reports, including those that identify performance benchmarks and trends for various regions down to the ZIP code level.

Production Levels

Annuity production opportunities vary between states and between ZIP codes within each state, Poll pointed out.

For instance, an area within a 10-mile radius of a ZIP code may have 65 producers (advisors and agents), 45 of whom are working with annuities. If that area has close to the highest annuity production in the state, that signals a highly competitive environment for annuities, and it may mean that opportunity for significant future growth may be comparatively limited.

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15

INFRONT

ANNUITY SALES LAGGING? LOOK AT THE ZIP CODES

WHICH STATE REPRESENTS THE MOST OPPORTUNITIES TO SELL ANNUITIES TODAY?

200,000 and above

Today, over 2.6 million households have characteristics similar to households that recently bought annuities. They represent the current annuity market. Within these households, there are 4-5 million individuals whom the annuity industry has as its audience and prospective 2014 clients.

160,000 to 199,999 110,000 to 159,999 80,000 to 109,999 68,000 to 79,999 40,000 to 67,999 30,000 to 39,999 20,000 to 29,999 14,000 to 19,999 13,999 and below

Source: Information Asset Partners, 2014

But if a nearby ZIP code area in the same state has only 30 producers, 10 of whom are working with annuities, and if production there is well below the state benchmark, that bears some study. If the data show that there are lots of households in this area with strong similarities to households having made a recent annuity purchase, that might signal an underperforming marketplace that has opportunity for greater sales, Poll said.

Put another way, this second area may be an “overlooked ZIP code” that annuity marketers may want to consider for targeting more frequently, Poll said. It could may provide annuity wholsalers, IMOs 16

InsuranceNewsNet Magazine » June 2014

Insurers are definitely stepping up to the plate in using analytics, including predictive analytics.

this article shows the states that represent the most opportunities for selling annuities in 2014, according to IAP research.

The advantage of data analytics like this is that it can reveal the scale of retirement income product opportunity in particular markets, Poll contended, adding that this can help everyone involved in production “to address potential opportunities more efficiently” with campaigns, products or other methods.

and B/Ds with meaningful information to share when consulting with advisors.

Analytics can identify state trends as well. For instance, the map accompanying

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda may be reached at linda.koco@ innfeedback.com.

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17

hn Jantsch Jo s ew vi er t in an m ld Fe l Pau

John Jantsch says salespeople are dooming their careers with tired, outmoded practices, but DUCT T APE SELLING can save the day! » 18

InsuranceNewsNet Magazine » June 2014

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INTERVIEW

DUCT TAPE: THE SALESMAN’S SILVER SAVIOR

IT

might seem counterintuitive to say this, but in this booming consumer society, salespeople are endangered.

That’s because marketing is reaching prospects, leading them through the door and getting their signatures – or e-signatures. From the consumer side, the world is at their fingertips. A salesperson is often the last person in a process that relegates them to order takers – when they can get in the game.

But gifted salespeople shouldn’t let that happen. That is John Jantsch’s message in his book, Duct Tape Selling: Think Like a Marketer – Sell Like a Superstar. John is a popular speaker and marketing consultant. In addition to being the author of several books, he writes the blog, “Duct Tape Marketing,” considered a must-read by the likes of Forbes.

John has taken on a considerable challenge: to change the fundamental way salespeople think. After decades of preaching the cause of marketing, he realized that the foot soldiers of sales are getting left behind, even though they were the best people to lead the marketing charge.

He says this change in thinking not only will make salespeople’s lives more rewarding, but will accelerate the fortunes of any business.

In this interview with InsuranceNewsNet Publisher Paul Feldman, John tells how salespeople can propel their careers by learning some basic tenets of marketing.

FELDMAN: What is Duct Tape Selling?

© Duct Tape Marketing

JANTSCH: The subtitle probably tells as much as anything. It’s Duct Tape Selling: Think Like a Marketer — Sell Like a Superstar. It is my attempt to address the fact that selling has changed dramatically over the past few years. It’s not just because of all the new tools and the online things that people use in the act of selling.

It’s the degree to which buying has changed. The way in which people get in formation a nd how they evaluate one product, service or salesperson over another has changed dramatically.

This book tries to bring what I think is a new way to think about selling – and quite frankly, a new way to think about marketing – to that independent salesperson, that business owner or anybody who actually is out there face-toface trying to find, educate and convert a prospect.

FELDMAN: Do you think getting in front of prospects is getting harder?

JANTSCH: A lot of my new approaches came about because the art of getting in front of somebody has become much more 20

difficult. A lot of salespeople would say, “Hey, you let me get in front of that person and I’ll tell them why this is in their best interest.”

We now have all kinds of ways to block out messages that we don’t want. For example, I am sitting here in my office without a phone on my desk. The first step of getting involved in the buyer’s journey at the earliest possible point is a lot of what I try to teach in this book.

FELDMAN: You say marketing is the new selling. Why?

InsuranceNewsNet Magazine » June 2014

JANTSCH: I started out writing this book with that independent salesperson or that sales team in mind, the people I just described who are having a hard time getting in front of the right prospect. That’s because prospects are going out there, doing all the research and making their decisions about who they’re going to buy from before they ever contact anybody, including a salesperson.

A lot of what has changed in marketing is that the term “inbound marketing” has become very fashionable. It means that we have to put content out there and that we have to be found. We have to build this journey where people come to know, like and trust us before we ever reach out to them and say, “Hey, we have something for you.”

The role of marketing has changed dramatically because now the buyer has access to that information and they really need somebody to help them make sense of it, to provide insight. That’s really where I think marketing has to go.

The best people to carry it to that place, to personalize the content, to make it relevant, and make sense and provide insight around all of this education and this journey, are the salespeople. Because these people are closest to the customer, closest to the market, closest to the actual challenges and problems that a real, live person, an individual client is having.

Marketing departments always will have a role in creating the message and the brand, and getting the culture and the purpose of the business out there. But they need to move some of the traditional marketing things, such as producing content and participating in social networks, much deeper into the sales department.

FELDMAN: Perceptive listening is an important aspect of your processes.

How do people do it?

JANTSCH: When you’re face-to-face

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June 2014 » InsuranceNewsNet Magazine (2-14) 21

INTERVIEW

DUCT TAPE: THE SALESMAN’S SILVER SAVIOR

across the desk from a prospect, your mind is spinning about the next thing you’re going to say or how you’re going to react or how you’re going to go for the close. The idea of perceptive listening suggests that you listen not only for what they are saying, but for what they are not saying.

True sales superstars, people who influence others at very high levels, the people who are trusted advisors, are actually able to have that hard conversation about what’s not being said. First off, perceptive listening requires being quiet. It requires you to watch the prospect’s body language.

In many cases, you truly do your clients a favor by listening, because sometimes this idea of what they’re not saying, people immediately interpret as, “Oh, they’re hiding something,” or “They don’t want to tell me this,” or “They don’t want to talk about this particular element.” But a lot of times, prospects don’t know what they should be thinking about.

They don’t know what’s behind that

door. They don’t know, necessarily, the right questions to ask. A perceptive listener adds value by being able to help them understand – maybe it’s to think bigger, or maybe it’s to caution them about a particular way they are thinking or maybe it’s just to suggest, “Have you considered X?” It takes a little bit of bravery, actually. Because some of the things that we need to get our clients to talk about are things that maybe we’re not comfortable talking about. Or they’re things that we think might kill the deal. Or they’re things that we think might actually come off as confrontational. If you have that mindset of delivering value, then you have to ask those hard questions.

FELDMAN: Please explain your concept of the “question workbench.”

JANTSCH: This introduces so many skills that aren’t necessarily natural to everyone.

Like all skills, if you want to develop it, you

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must practice. You must go in with a bit of a strategy for when a conversation goes a certain way or if prospects start bringing up objections. Then you can say, “OK, what are they really saying? What are they really asking?”

In the book, I list 10 or 12 questions that I think you need to be prepared to consider. They aren’t going to be set questions that you’re going to be prepared to answer or prepared to ask, but ways for you to say, “OK, what’s really going on?”

Have these practice points, these practice ideas or practice questions in the workbench so that you start to recognize situations where people really are avoiding or they’re just complaining or they really aren’t telling you what they need without you kind of calling them on it.

Then you have to start to recognize it when it happens out there in the wild. You need to become good at using those verbal cues to keep a conversation on track, to keep the engagement at the highest level possible.

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InsuranceNewsNet Magazine » June 2014

DUCT TAPE: THE SALESMAN’S SILVER SAVIOR FELDMAN: That is certainly a good way for younger salespeople to keep from sabotaging their own presentations.

JANTSCH: Many times, particularly when people are just getting started in sales, we are so desperate to get the conversation over. I can’t tell you how many times I’ve worked with salespeople who actually are just looking for the “OK, that sounds good.

Send me more information.”

Anybody who has done any selling knows that is absolutely the worst possible place to be, right? That means: “I don’t really understand it; you’re providing no value; I’d like you to leave now, please.” But a lot of salespeople want to get as quickly as possible to that, because they are uncomfortable in the situation. They don’t feel as if they have enough information or enough knowledge or enough practice to handle all the situations coming to them.

I think that there are a handful of responses that set off the trigger that tells you to go deeper immediately. I often tell

people that what they’re really after is either “yes” or “no.” That doesn’t mean that you are going to push somebody to say “yes” to buying, but you might actually push somebody to say, “Yes, that’s something I need to go deeper,” and “Yes, that’s something I need you to help me figure out,” or “No, I don’t want this. This isn’t for me. I have all the information I need.

You can move on now.”

FELDMAN: You have said educating is the new presenting. Do you find it hard for some salespeople to think of themselves as educators?

JANTSCH: Yes, because I believe the old model of “I’m here to present my information,” is unfortunate, because it packages every single situation as the same. In some cases, that information you present might be spot on, and that’s what the person needed to hear and they’re ready to sign up. In some cases, it so terribly misses what their real problem is, where they are in the

INTERVIEW

buying cycle or what other elements are impacting their decision that you lose the deal because they realize you don’t have what they need or you don’t understand anything about them or what they need.

So often, people think of a sales situation as “I’m here to sell something to you.

I’m the seller; you’re the buyer. We have different interests in mind.” In fact, in some cases, the perception is, “I’m here to trick you into buying something you maybe don’t need.” I think that those stereotypes hurt this idea of education, because the mindset needs to be, “I’m here to help us determine if we can have a mutually beneficial relationship.”

It’s just as important to educate prospects about your processes and how you get results as it is to educate prospects about the product or what it is that you want to sell them.

FELDMAN: In fact, when you deliver the value and the “why,” there is almost no close involved.

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June 2014 » InsuranceNewsNet Magazine

23

INTERVIEW

DUCT TAPE: THE SALESMAN’S SILVER SAVIOR

JANTSCH: Well, it’s funny you say that, and this makes marketing people really happy and traditional salespeople really nervous. If you do everything that I talk about, both in this book and in this new mindset, it actually takes away the need to sell in the traditional sense, because you essentially are leading people on a journey where they sell themselves on the fact that this is the right decision and that you’re the right person to get them the result that they’re after.

FELDMAN: What is an “expert platform” and why does every salesperson need one?

JANTSCH: I am going to talk about marketers again because salespeople must start thinking more like marketers. Marketers have long realized that prospects tend to be drawn to the people that they see other people talking about when they search for answers.

You must spend some amount of time developing authority and being seen as the expert. Not just in your own words and in your own mind, but as deemed by others.

That can be through search engines, clients and professional associations. You must dedicate some time and energy to working some of the tools that will elevate your authority and your expertise.

This is a challenge, because the traditional salespeople think that every minute that they’re not out there knocking on doors is a minute that they’re not going to close deals. That’s a numbers game – we just have to make calls and if we make X calls, we’ll sign Y amount of deals.

There’s no question that you have to prioritize your time. But I think that this idea of building a platform, being found online, being seen as the person who is being asked to talk about the industry as a whole has become a really essential element to get you invited to the table.

I keep going back to this idea of a longterm career. If what you’re trying to build is a long-term career, then building your expertise as a recognized expert becomes an asset for you. That asset is something that you can bring to help your existing clientele, but it’s also something that you carry with you wherever you go. So, if you don’t feel like you’re with the right organization today, it’s something that is actually quite portable, in many cases. If you, in24

The idea of perceptive listening suggests that you listen not only for what they are saying, but for what they are not saying. dividually, build your brand for being an expert or you build content that allows people to find you in search engines, it’s something that you can take with you to an organization that appreciates it more.

FELDMAN: You say that people need to write more. We all can write, but how do you become a more productive writer?

JANTSCH: Writing is a component of your business – not just to close a deal or to correspond, but to build awareness, educate, and build trust, and as a way to convert and as a way to generate referrals.

Obviously, that’s a much deeper level of writing, or at least a different intention for the writing.

It is one of the greatest challenges.

Content is a very broad term that marketers like to use now to describe how many forms of communication – video and audio and images – are all considered content assets today.

But if you’re a salesperson who says, “OK, I need to produce some content now,” you’re going to open up your Word document, stare at this blank screen and think, “OK now, how do I write 700 words?” After about 10 words into it, you’re going to decide, “You know? I think it’s time to go make another sales call.”

FELDMAN: I’ve been there before. So how do you get the momentum to get good writing done?

JANTSCH: Here’s an idea that I often use to advise people who are trying to get started with developing content. I would venture to say that many of your readers get asked some of the same questions over and over and over again, right?

Pretty much everybody could list 20 to 25 questions that are asked consistently and that they know that they must be able to address.

What if, every Monday, you sat down and thought up one of those questions

InsuranceNewsNet Magazine » June 2014

and the answer. You emailed that question and answer to a list of people in a very personal way and said, “You know, the other day, I was talking with a client, and they asked me X. I thought that you might be interested in the answer that I gave them.” It might not go to everybody on your list. If somebody is retired, they might get a different one than somebody who has school-aged children, obviously, so you would segment your list.

My guess is that some percentage of the people who receive that will think, “You know, that was interesting,” or “That was insightful,” or “I was just thinking that same thing.” So, you’re not selling. You’re not providing any information, hopefully, that has to go through compliance. But you’re providing value and you’re doing something that people might actually look forward to receiving from you, because it didn’t seem like you were trying to sell them anything. There’s a good chance that some percentage of those people will say, “You know? I should pick up the phone,” or “I should respond back and ask this follow-up question,” or “I wonder if we’re getting the right advice when it comes to this.”

FELDMAN: Most people think of sales as a funnel, but you say it should be an hourglass, which is much bigger than a funnel, isn’t it?

JANTSCH: The sales hourglass came about as an outpouring of something I’ve been using for years that I call the marketing hourglass. Both of these fit together to integrate marketing and sales into the conversation. As you picked up on, most people use the idea of the funnel to throw as many people in the top of that funnel and work on just enough of them to squeeze through that tiny end of the funnel.

That concept has been around forever.

What I suggest by the use of the hourglass shape is that only a few people find their way to you, to the end of the funnel, but

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25

INTERVIEW

DUCT TAPE: THE SALESMAN’S SILVER SAVIOR

that’s when the real work starts. That is making sure everything that was promised is delivered, making sure the experience stays high. Unfortunately, for a lot of salespeople, their job is to go out, get the order, get the signed contract and bring it back, and somebody else’s job is to fulfill the promise that was made.

That’s a place where a lot of breakdown can happen. It doesn’t mean that you must work only for organizations where you can make sure you control the entire process. What it does mean is that you need to stay involved and make sure that you are the point of contact for the client, and if they have any issues, you go back and make sure that everything was communicated and delivered in the way that they expected. With an hourglass, you also go back after some period of time and routinely make sure that the clients are still happy, satisfied and getting results.

From a practical standpoint, you will learn if they are happy and if they are being served, of course.

But it’s also the absolute best place for you to start getting referrals as well. I often tell people that the best source of lead generation and referral generation is a happy customer.

I’ve often said, “A sale is not a sale until the customer receives a result.”

When it comes to marketing, there are seven stages that we want to move people through.

They are “know, like, trust, try, buy, repeat and refer.” The marketing team, the sales team and the service team all bear a responsibility in helping people logically move through those stages. What has become increasingly difficult is, back in the marketing funnel days, we would move people through there very linearly. They 26

would see our marketing message or our advertisement. Then they would call the company, which would send out a salesperson who would convince them either to buy or not, and hopefully the salesperson would toss them to the service folks

moving forward and backward, where customers get information and how they get information. Who even produces that information? We’re no longer really in control. Now our customers easily can produce content in the form of reviews where they can discuss in social networks about how great we are or, on the flip side, how we don’t keep our promises.

Organizations and salespeople need to be right in the middle of this.

They need to be thinking OF THE HOURGLASS about organizing behavior as much as actually moving people through the funnel. In other words, create processes, content and campaigns so that people can become aware of us. Then they can move to that point where they like us, trust us and maybe even see ways in which they can sample or try our product. Next, having a very intentional process where the buying experience is just as high as the sales experience was. After that, having processes or intentional campaigns or approaches where we make sure that the customers got results and that the customers are so thrilled that they want to refer us.

Those are behaviors in which everybody wants to participate. It’s our responsibility as an organization to blend the marketing, sales and service aspects of our business to make sure © Duct Tape Marketing that people, wherever who would turn them into loyal and re- they come into the journey, are able peat customers. to seamlessly and consistently move Well, we know that people now have through those experiences. more ways to know us, like us and trust us through a myriad of channels and For a longer version of this sources. That journey is no longer a interview, please visit straight one, by any means. It is a very bitly.com/innjantsch to jagged and crooked path, sometimes request your own PDF.

InsuranceNewsNet Magazine » June 2014

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June 2014 » InsuranceNewsNet Magazine 27 I-25726 03/20/14

NEWSWIRES

Chance of an Internal Revenue Service audit is the lowest in years. bitly.com/qrirs

Financial Regulators See Progress and Threats

QUOTABLE

Some of the same weaknesses that contributed to the 2008 financial crisis persist today, the Financial Stability Oversight Council said in its 2014 annual report to Congress.

The report highlights what it called “the considerable progress we have collectively made to improve the strength and resiliency of the financial sector.” But Janet L. Yellen Federal Reserve Chair Janet L. Yellen told Congress the council’s work is not done.

The “chief accomplishment” in recent years has been the improvement in big bank holding companies’ balance sheets, Yellen said, adding that the Federal Reserve’s stress tests had “provided a level of confidence in our assessment of how financial institutions would fare” in another downturn.

The oversight council – made up of the heads of the Treasury, Fed and other regulators – also cited the completion of the so-called Volcker rule restricting certain firms from making bets with their own money, as well as new rules on bank capital, leverage ratios and swaps markets.

But threats old and new abound, and the annual report acts as a guide to what Washington is worried about when it comes to Wall Street.

The perception that big, interconnected financial firms might be “too big to fail” persists, the report warns. The markets where many banks look for short-term cash loans remain potential weak spots too.

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What do centenarians really think about living to 100? To begin with, they don’t feel like they’re 100, according to a of survey by UnitedHealthcare. centenarians live Centenarians, on average, say independently they feel 83 years young.

When asked how they feel about living to 100, centenarians’ top answers were “blessed” (36 percent), “happy” (31 percent) and “surprised” (12 percent). Not one selected feeling sad or burdened; just 3 percent said they felt lonely. And more than half (53 percent) live independently, without the support of a caregiver to help them with their daily activities.

There are approximately 55,000 centenarians in the United States, according to the U.S. Census Bureau. That number is projected to grow to 442,000 in 2050.

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FINRA MOVES TO EXPAND ADVISOR BACKGROUND CHECKS

In the wake of revelations that hundreds of registered advisors have failed to publicly disclose personal bankruptcies, criminal charges and other potentially damaging information, the Financial Industry Regulatory Authority (FINRA) is moving to toughen the reporting requirements for BrokerCheck, its public-facing system for consumers to vet their financial advisors.

FINRA’s board of directors approved new rules that would expand requirements for investment firms to conduct background checks on financial advisors.

Under the proposed rules, firms would be required to validate the accuracy and completeness of the information provided by applicants on their Form U4s, which feeds into FINRA’s Central Registration Depository (CRD). That database in turn provides the information available through BrokerCheck.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) rollover contributions in the U.S. increased 7.3 percent and surpassed the $300 billion mark with Source: Cerulli Associates

InsuranceNewsNet Magazine » June 2014

$321.3B IN ASSETS

This thing is working.

— President Barack Obama announcing that 8 million people had signed up for coverage on the health care exchanges during the first enrollment period

The regulatory body has come under fire recently over concerns that BrokerCheck provides too limited a picture of financial professionals’ records and that certain red flags can be omitted or easily expunged. FINRA has acknowledged some of the shortcomings, and earlier this year approved rules to limit advisors’ ability to remove information about customer disputes from the BrokerCheck database.

This most recent proposal would require regulated brokerage firms to adopt written policies ensuring the accuracy of an applicant’s Form U4, including a search of public records such as bankruptcies, civil litigation, judgments and liens.

GIRLS HAVE MORE MONEY SMARTS THAN BOYS

When it comes to planning the future from a financial standpoint, girls rule. But they don’t always believe they do.

Junior Achievement and the Allstate Foundation conducted a survey measuring teenagers’ financial literacy. The survey found that girls are more financially savvy than boys. Some 91 percent of the girls who responded are planning to attend college, compared with 86 percent of the boys. More girls intend to pay with grants and scholarships. Not only that, 40 percent of the girls are considering attending instate colleges to save money, compared with 30 percent of boys.

“We’ve always collected gender data, but this year it sort of stood out,” said Jack Kosakowski, president and chief executive officer of Junior Achievement USA. But a survey by the Girl Scouts of the USA’s research arm comes up with different findings. That survey found that 13 percent of girls felt that men are “better

[NEWSWIRES] with money than women,” a response that mirrored what their parents said. Only half of the girls said they felt confident making financial decisions, and only 21 percent said they felt very confident.

“Girls tend to downplay their abilities, more so than boys,” said Kimberlee Salmond, senior research strategist with the Girl Scouts.

WOMEN’S RETIREMENT CONFIDENCE IS LOW

Maybe today’s women can take a lesson from the girls.

Insured Retirement Institute (IRI) research shows that few women across the baby boomer and Generation X cohorts are confident in achieving a financially secure retirement. The report found that many women are still facing financial challenges, which are impairing their retirement readiness and outlook. Overall, only 30 percent of boomer women and 13 percent of Gen X women have high levels of confidence in accumulating sufficient savings to live comfortably throughout their retirement years.

The economy has had a detrimental effect on Gen X women: 35 percent have experienced difficulties paying their rent or mortgage, 19 percent stopped contributing to a retirement account, and 13 percent prematurely withdrew funds from a retirement account. Boomer women also have been affected, although to a lesser extent: 21 percent experienced difficulties paying their rent or mortgage, 17 percent stopped contributing a retirement account, and 9 percent prematurely withdrew retirement savings. Furthermore, a quarter of boomer women and 16 percent of Gen X women postponed their plans to retire as a result of the economy.

The report also found that nearly one in five boomer women and 35 percent of Gen X women do not have any savings for retirement. Of Gen X women with retirement savings, 44 percent have savings of $50,000 or less. More than half of boomer women and three in four Gen X women have not consulted a financial professional about retirement planning.

STATES SEEK A SPOT IN RETIREMENT PLAN LANDSCAPE

First, President Barack Obama proposed the myRA, a way for the federal government

Fed Predicts Economy Will Grow Faster in 2014 OR The Fed’s latest economic prediction is for faster growth this year, despite an anemic first quarter.

Federal Reserve Chair Janet Yellen told Congress that she expects economic growth to accelerate this year, although the recent housing market slowdown “could prove more protracted than currently expected.”

She also repeatedly refused to provide even a broad time frame for the Fed’s first increase in its benchmark short-term interest rate after her comments earlier this year roiled financial markets.

The economy barely grew at all in the first quarter, expanding at a 0.1 percent annual rate, and Yellen partly blamed bad weather across most of the nation for the weak showing.

Yellen also noted that the Fed is gradually reducing its government bond buying as the economy and labor market have strengthened. The monthly bond purchases, aimed at lowering long-term interest rates and stimulating the economy, have been pared to $45 billion from $85 billion in December. Yellen said the purchases will likely be halted sometime in the fall, barring a “notable” change in the economic outlook. to help people save for retirement. Now some states want to jump on the retirement savings bandwagon.

Lawmakers in a number of states, including Connecticut, are responding to a widespread loss of private-sector pensions, a lack of access to employer-sponsored retirement accounts in smaller businesses, and stagnant incomes that make it hard for workers to contribute to their own retirement plan or company account.

The measures vary in their details, but the general aim is to establish a retirement fund in a state agency that would collect employee contributions, invest the money and pay out benefits when employees retire.

Financial services businesses are fiercely lobbying to defeat the proposals, calling the proposed state-run enterprises unnecessary and a threat to private business.

Opponents have already claimed one victory this year, knocking off a public retirement system proposed in the West Virginia legislature.

Illinois, Indiana, Maine and Washington also considered legislation this year DID YOU

KNOW

proposing state-sponsored individual retirement accounts for certain private-sector workers. The bills died in Indiana, Maine and Washington.

FOR MILLENNIALS, RETIREMENT BEATS HOME OWNERSHIP

Millennials, like those generations before them, have their own way of doing things. Case in point: financial goals.

In a survey of American adults commissioned by the National Endowment for Financial Education, 29 percent of respondents ages 18 to 34 said retirement savings was their top goal, followed by 21 percent who said their top goal is home ownership. This is a switch from three years ago, when home ownership was the top goal for 26 percent of millennials, while adequate retirement savings mattered most to 25 percent.

Not only that, the share of millennials whose top priority is retiring early has jumped from 6 percent in 2011 to a whopping 26 percent this year.

SOUTH DAKOTA WAS NAMED THE

? BEST STATE for retirement Source: Bankrate

June 2014 » InsuranceNewsNet Magazine

29

The baby boomers and the generations to follow them will change the face of retirement. We have all heard they have a lot of money and a bundle of needs. But advisors are learning that they may have to branch out from handling merely the financial ones.

By Susan Rupe 30

InsuranceNewsNet Magazine Âť June 2014

GOLD IN THE GRAY

E

arly in his career, Randy Scritchfield took the route familiar to many advisors – helping young adults protect their financial future. Over the years, he attended his clients’ weddings, sent them baby gifts, helped them establish college saving accounts, and saw their children graduate and establish careers and families of their own.

Now, 25 years later, instead of advising clients on the risk of dying too young, he is more likely to discuss the risk of living too long.

Scritchfield’s practice, Montgomery Financial Group, Damascus, Md., has

LIMRA estimates that the value of assets held by those age 55 and above will double to nearly $22 trillion by 2020. When you combine that statistic with the numbers of people who need advice and the longer period of time that retirees will spend in their post-employment lives, opportunity exists for advisors who can distinguish themselves as experts in retirement planning.

And that opportunity has been noticed by industry trade organizations.

In October, LIMRA established the LIMRA LOMA Secure Retirement Institute (SRI), which focuses on advancing research and education in the industry to help improve retirement readiness and

FEATURE

in the way retirement is funded – and that change stems from longer life expectancy combined with a shift away from defined benefit plans such as traditional pensions.

“There is a huge group that is on the cusp of retirement, and their retirement will be very different than retirement was in the past,” she said. “People will need to create their own retirement. They will need to develop their own source of retirement income. People are either not prepared for this or they are not confident in their knowledge of how to do this.

This creates a need and an opportunity in the industry.”

Retirement income opportunity will double to nearly $22 trillion by 2020

Early Career Age 25-34

Mid-Career w/ Kids Age 35-44

Kids in College Age 45-54

Pre-Retiree Age 55-64

Retired Age 65+

of $5.9 trillion 56% assets

2010

$0.4 trillion $1.7 trillion

$4.3 trillion

$6.1 trillion

2020

$0.6 trillion $2.5 trillion

$5.6 trillion

of $10.2 trillion $11.4 trillion 65% assets

Source: LIMRA, Based on 2001, 2007 and 2010 Survey of Consumer Finances, Federal Reserve Board and U.S. Census Bureau’s Current Population Survey, March 2011 Supplement. All estimates and calculations reflect consumer segments of age 25 or more and households with assets between $50,000 and $4.9 million. Household (HH) by age group growth has been estimated by using census projections by age and assuming that the proportion of HHs that have between $50,000 and <$5 million is constant within age group over time and that the proportion in equities remains constant within each age group over time.

evolved into a full-service retirement services practice. He said he believes retirement advice will be needed more than ever over the next decades – not only because of the numbers of people in that age group but also because of the changing and more complex products that will help those retirees fund their postemployment years.

“New pharmaceuticals did not replace the need for a physician,” he said. “And advisors will be needed more than ever as retirement products keep changing.”

The retirement marketplace represents a growing opportunity for advisors.

promote retirement security.

The establishment of the LIMRA SRI “helps the industry address the retirement challenges that workers in the U.S. are facing,” said Alison Salka, corporate vice president and director of the LIMRA SRI research team. “It really reflects the recognition of the importance of retirement to our country and to the industry as a whole.”

Two main factors are driving the increasing importance of retirement planning, Salka said. One is the large segment of the population that is either at or near retirement age. The other is the change

With LIMRA SRI research showing that about half of all financial assets in the U.S. are held by those in the 55-75 age group, and with a large percentage of the population preparing to roll over funds held in defined contribution plans, “there is huge growth potential in this market and a great need for advisors to be well-positioned to take advantage of this,” Salka said.

LIMRA SRI research has shown a growing number of advisors changing their practice to offer retirement planning, Salka said.

“Our research shows that in the past,

June 2014 » InsuranceNewsNet Magazine

31

FEATURE

only about one-third of advisors offered Social Security claiming strategies as part of their retirement planning business. Now we are helping them grow it as part of their business,” Salka said. “Our research is showing that consumers are most concerned about Medicare and about health care costs in retirement.

They also are interested in preserving their nest egg. Now, advisors are more likely to think about longevity risk planning to address those and other issues.”

Consumers who are facing retirement are also facing a great deal of risks, “some they’re not even aware of,” Salka said.

As retirement planners, advisors must view their role as “reality adjusters,” Salka said. “People retire and pull their funds out of their retirement account, and often they think that they have all this money to travel or do the things they have put off.

It’s the advisor’s job to start from where the consumer is and guide them into the reality that their funds must last for 20 or 30 years, and then work with them to preserve those funds.”

For those who want to refocus their practice toward specializing in retirement planning, Salka advised to “get a good understanding of the consumer and their needs. Look at your practice and identify where the gaps are. Many advisors who are refocusing on retirement planning are looking at adding new products or services to their practice, expanding their networking with attorneys and other professionals, educating themselves on Social Security issues, looking at holistic planning through partnering with others.”

Salka said she observes that life carriers also are refocusing their marketing efforts toward members of the public who are in the prime retirement planning years. “This is a natural fit because it involves managing risk and protecting income,” she said.

Growing Along With Your Clients

Many advisors are seeing retirement planning as the future of the financial services industry. But some are taking a step further than the usual financial aspects.

When Juli McNeely’s father hired her to work in his insurance business back in 1996, she was assigned to advise the children and grandchildren of his existing clients. She quickly realized that 32

Retirement Income Certified Professionals

GOLD IN THE GRAY

Two years ago, The American College of Financial Services developed the Retirement Income Certified Professional (RICP) designation.

Today, it is the fastest-growing designation among the college’s offerings, with 500 professionals having completed the course and more than 4,000 in the pipeline.

There are several reasons for this, said David Littell, director of the New York Life Center for Retirement Income at The American College. One reason is that, with three required courses, the RICP is a quick way for an advisor to earn a first designation and then go on to designations that require a more rigorous David Littell course of study. The other reason is that, with 7,000 Americans reaching retirement age every day, advisors who already have earned their Chartered Life Underwriter or Chartered Financial Consultant designation are looking for a designation that focuses on the growing retirement market.

So much of the typical advisor’s work with clients focuses on accumulating wealth, Littell said. In studying toward an RICP, advisors focus more on working with clients to structure effective retirement income plans.

Retirement planning is all about decisions, Littell said. “If you help your client make good decisions, then you provide value to your client,” he said. “There is so much opportunity for growth in this market.”

When looking at retirement income planning, a “unified and balanced approach that provides the client with both security and flexibility” is key, Littell said.

Life insurance will continue to be part of the retirement plan, Littell said. But newer variations of traditional products – for example, life insurance/long-term care insurance combinations – are finding their foothold in the retirement marketplace.

Find out more about The American College’s RICP designation at www.theamericancollege.edu/ads/ricp. those second- and third-generation clients needed retirement planning services in addition to insurance. This realization led her practice into the future as she led her clients on their retirement journeys.

“I’ve been kind of growing up along with my clients,” she said. “They are glad they’re working with someone my age and that I’m going to be there for them as they move into retirement.”

Retirement planning makes up about 70-80 percent of the business for her practice, McNeely Financial Services in Spencer, Wisconsin. McNeely’s clientele

InsuranceNewsNet Magazine » June 2014

is made up mainly of what she called “middle to upper income and middle to upper ages – baby boomers who are preparing for [retirement] and those who are already there.”

In the beginning of her career, McNeely worked with her clients to help them accumulate wealth. Now that those clients are moving toward a new phase of their financial lives, McNeely is moving along with them, working with them on what she called “late accumulation,” as well as wealth distribution.

“The baby boomers are such a huge

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GOLD IN THE GRAY

part of the population. They need the assistance of planners for retirement and for passing a legacy on to their children,” she said. “Generation X has accumulated less, but they still need help to get started toward retirement.”

McNeely’s experience of moving into the retirement planning marketplace is part of a trend that will shape the future of the financial advisor, according to industry groups.

Earlier this year, two such groups – the National Association of Insurance and Financial Advisors (NAIFA) and the GAMA Foundation for Education and Research – released the results of a research project that attempts to answer the question: Where will advisors find business opportunities at the turn of the next decade?

“Lifestyle management for the retiree market” is how NAIFA and GAMA describe one of the main growth areas identified in their joint study, “Advisor 2020: The Forces and Opportunities Shaping the Financial Services Advisor of the Future.”

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The retirement advisor of the future will provide more than just investment products and services, Advisor 2020 predicts.

The advisor of the future will need to manage their clients’ living environments and financial assets. Financial management is spilling over into health and property management for senior clients.

McNeely, who is NAIFA’s presidentelect, is enthusiastically in agreement with these findings, and she is seeing them play out in her own practice.

“I’m seeing the day when clients rely on their financial advisor for advice on everything from travel to modifying their homes,” she said. “I see it happening where we as advisors will be the ones who will make our clients’ retirement as happy as possible.” Because retirement planners often incorporate professionals such as attorneys and accountants into the retirement planning process, McNeely said, she does not think it’s a stretch to see the financial advisory practice ex-

pand into other facets of retirement.

“I have been looking into incorporating lifestyle management into my practice,” she said. “One big question is: How do you charge a fee for that? And I would have to hire someone to do lifestyle management for our clients.”

McNeely said that one major lifestyle management need for clients is in the area of home modifications for those who need to refit their houses to accommodate the physical changes that accompany aging. A retirement advisor/lifestyle manager could maintain a network of contractors who specialize in home modification and could refer clients to experts in that network. Home modifications are a major factor enabling clients to remain independent in their own homes longer and postpone or prevent the need to move into a care facility.

The idea of a financial advisor becoming a travel agent may sound a bit far-fetched, but McNeely said that senior travel is another area that could be

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GOLD IN THE GRAY big in the lifestyle management practice.

“About 50 to 60 percent of my clients say that travel is what they most want to do in retirement,” she said. “But many of them haven’t traveled much in their lives and they don’t know where to start to plan a major trip. We could connect them with tour providers – cruise lines that cater to seniors, for example.”

Not every senior client will retire from the workforce completely. Many will transition to an “encore career,” turning a hobby into a business, doing consulting work in their current career field or exploring a career path that they never had a chance to try when they were younger.

This also provides an opening for advisors to provide transition planning for their clients. Clients who are opening their own businesses often will need an income “bridge” and start-up capital.

Another lifestyle management area is home health care. “Advisors can assist by connecting clients with social services or care services,” McNeely said. “We can

provide wellness coaching for the spouse or family member who is serving as a caregiver.”

Many senior clients are concerned with leaving a legacy to their children.

But more crucial than leaving money to the kids is letting them know basic information, such as whether the parents have a will and life insurance, what their parents’ final wishes are, and where the children can access important paperwork or the key to the safe deposit box.

“This is where an advisor can provide an important service to the entire family,” McNeely said. “We are good at initiating a dialogue on subjects that sometimes are uncomfortable. I often ask clients if they are comfortable talking about their financial situation with their children. I will sit in while clients talk with their children so that they know what their parents’ basic financial situation is and help the parents transfer the information the children will need, such as where’s the will and where’s the life insurance.”

FEATURE

How Would You Get Paid?

To answer McNeely’s question, Advisor 2020 envisions that advisors would charge fees to help households manage all facets of a retirement that may extend for 30 years.

NAIFA defines “lifestyle management” as “the art and science of managing retirement as opposed to managing assets.”

“Lifestyle management will become an essential, and perhaps a central, tool in financial management as life expectancies increase and the country’s population of seniors grows,” according to Advisor 2020. It is part of what NAIFA calls “the new retirement culture” driven by longer lifespans and the baby boomers’ desire to reshape the retirement landscape.

In transitioning from “financial advisor” to “lifestyle manager,” the core functions of your practice could include helping clients: » Invest in home renovations that would enable them to “age in place.”

Did you know? In the next 5 years, 65% of federal and postal employees will be retirement eligible – fueling a huge IRA rollover opportunity and life insurance replacement demand.

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FEATURE

GOLD IN THE GRAY

Consumers and advisors agree that minimizing longevity risk and creating an income plan are valued services But more than one-third of advisors believe lifestyle also is an important part of retirement planning.

Minimize risk that clients will run out of money in retirement

44% 45% 39% 42%

Create a retirement income plan Help clients have a more realistic picture of the lifestyle they can afford in retirement

38%

25%

Reduce portfolio volatility

24%

Help clients make difficult decisions about spending, saving and investing

30%

28%

19%

28%

Protect portfolio principal Help clients maintain perspective and think clearly about events and trends

20%

Minimize their taxes

16%

Protect against inflation

16%

Determine the sequence of withdrawals from different asset/fund classes

13%

Advisors Consumers 42%

25%

24% 22%

19%

Source: LIMRA Retirement Study: Advisor and Consumer Phases. Note: Respondents could select up to 3 services.

» Decide when it is necessary to move out of their home and into assisted living. » Undertake an encore career. » Travel or consider retiring overseas. » Navigate the governmental and health insurance bureaucracies in order to receive all the benefits for which they are eligible. » Provide bookkeeping services when the “managing” spouse of a household dies or becomes cognitively impaired.

Lifestyle management’s goal is to mitigate risk instead of to finance risk.

Because the greatest risks of aging are health-related, a lifestyle manager would need to be more aware of client health issues than financial advisors are today.

Lifestyle managers would need to refer clients to professionals ranging from physical therapists to nutritionists to grief counselors.

Providing financial management services for the elderly can be very attractive when you consider the following: 36

» One in seven Americans over the age of 70 develops dementia, according to a 2007 National Institute on Aging (NIA) study. » Nearly 10 million Americans provide free care to dementia patients, both relatives and nonrelatives, according to NIA. » Dementia sufferers incur enormous economic losses as a result of not being able to manage their finances.

In addition, one in four Americans over the age of 70 is unable to drive because of medical conditions. This loss of mobility can lead to major lifestyle changes, such as needing to relocate or needing to find services that can be delivered at home.

Helping older clients anticipate and address these lifestyle changes will become an important business, according to Advisor 2020.

Because an increasing number of seniors live more than 100 miles from their adult children, helping a client move closer to an adult child could be another way in which a lifestyle manager could provide services such as transferring fi-

InsuranceNewsNet Magazine » June 2014

nancial, tax and medical records.

But aren’t “lifestyle management services” already being performed by people who call themselves life coaches or aging-in-place specialists? Yes, said Advisor 2020, but lifestyle management is more complex an issue than coaches and specialists handle. Managing the decumulation of assets is the key to successful lifestyle management, according to Advisor 2020. The advice of these other specialists will be meaningless if your client cannot afford to implement it. Lifestyle management, and how it should be practiced, must be driven by the financial resources that your client has available.

Making the Move

Scritchfield has been incorporating some lifestyle planning in his retirement planning practice, but said that it has been “in a minor sort of way.”

“I tell my clients that retirement is a lifestyle decision rather than just a financial decision,” he said. “I tell them that you shouldn’t necessarily retire if you really don’t want to. Some people really want to keep working, and I talk with them about maybe going after more flexibility in their present job, maybe a career change or maybe a change in hours.”

One change he has made in his practice was the decision to add a life insurance agent to his firm six months ago.

“He does strictly life insurance, while I focus on the planning end of things,” he said. Scritchfield also works with a longterm care insurance specialist, attorneys and accountants. “I am a resource for many products and services, but not necessarily delivering them myself,” he said.

For advisors who are thinking about making the move into retirement planning, Scritchfield urges them to jump in with both feet or don’t jump in at all.

“If you’re at the right point in your practice where you want to specialize in retirement planning, don’t dabble in it, specialize in it.”

Susan Rupe is assistant editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Susan may be reached at srupe@insurancenewsnet.com.

IF MYRAs STAY LOW VALUE

FEATURE

June 2014 » InsuranceNewsNet Magazine

37

LIFEWIRES

N.Y. fines Aetna Life over lack of disclosure. bitly.com/qraetna

Life Insurance Apps Off 4.4% in March Applications for individually underwritten life insurance were down by 4.4 percent in March, according to the MIB Life Index. The index has reported declining life insurance application activity for the past 12 consecutive months. Declining activity across the first three months of the year foreshadowed 2014’s first-quarter losses, down 5.4 percent as compared with first quarter 2013.

Application activity declined across all age groups, with ages 0-44 down 5.3 percent, ages 45-59 down 4.7 percent, and ages 60 and older down 1 percent. The long-term trend shows declines in applications for those ages 0-44 and 45-59 for 12 consecutive months. Application activity for those age 60 and above showed mixed gains and losses during the past 12 months.

LOSS OF PRIMARY WAGE EARNER WOULD HURT

The loss of a loved one is always difficult emotionally. It can be even more devastating if that person was the primary wage earner.

LIMRA and Life Happens released findings from the 2014 Insurance Barometer, which asked consumers how long it would take them to feel the financial impact from the loss of a primary wage earner.

More than half said they would feel the impact within a year; 47 percent of them said it would take only six months.

Despite this dismal statistic, only one in five said they are very likely to recommend life insurance to a friend and only 10 percent said they are very or extremely likely to purchase a policy within the next year.

Perhaps these inconsistencies are partially explained by the responses of 28 percent of those surveyed who said they didn’t know how long it would take to feel the financial impact after the loss of the primary wage earner.

The Insurance Barometer is an annual trending study that tracks perceptions, attitudes and behaviors of consumers, with a particular emphasis on life insurance.

LA. LOOKS AT UNCLAIMED LIFE BENEFITS

Louisiana state lawmakers are considering a bill that could make it more difficult for DID YOU

KNOW

?

38

state taxpayers to collect unclaimed life insurance benefits.

The state treasury is holding about $45 million in unclaimed life insurance benefits, nearly half of which was recovered by aggressive audits of large insurance companies. Based on data from Verus Financial and the Death Master File (DMF) database, treasury officials estimate there could be an additional $61 million in life insurance proceeds that have never been reported to the state.

Legislation has been introduced that would require life insurance companies to use the DMF to determine if a policyholder has died and if insurance benefits are owed. However, the bill would apply only to policies issued after Aug. 1. This concerns treasury officials because it omits all policies that are currently in place.

METLIFE OFFERS NEW RETIREE LIFE PRODUCT

Chalk it up to another way to spur growth in the life insurance industry. After tacking living benefits riders onto life insurance policies, here comes a new option.

This time, though, it’s available to the group voluntary benefits market.

Courtesy of MetLife, advisors with clients about to leave their employer for good may want to ask if the employer offers voluntary retiree life (VRL) coverage.

Stephen Pontecorvo, vice president at

GREGORY OBERLAND was named president of Northwestern Mutual.

InsuranceNewsNet Magazine » June 2014

QUOTABLE Secondary guarantee products won’t drive 40 percent of sales the way they did in 2012.

— Milliman consulting actuary Rob Stone on the growth of indexed universal life.

MetLife, said that with millions of baby boomers expected to retire over the next 15 years, demand from people looking for ways to extend term life coverage into retirement will grow.

Retirees with access to MetLife’s VRL product have access to three plan options, the company said: $25,000, $75,000 or $150,000 worth of coverage. Only those employees opting for $25,000 in coverage don’t have to submit medical data, MetLife said.

CONSUMER DEMANDS ARE DRIVING INSURERS TO Price comparisons, ratings DIGITAL

and reviews are now old school, according to Forrester Research. Armed with digital tools, consumers are filling many legacy insurance roles.

Insurers have lagged other industries in terms of delivering the kinds of digital experiences that consumers have come to expect and soon will demand, according to Forrester’s report, “Trends 2014: North American Digital Insurance.”

To develop more ideas more quickly, Forrester recommends insurers open digital laboratories, in which they would develop products and strategies that leverage technology and address the most significant problems and opportunities in the industry. Forrester also recommends insurers sponsor “hackathons,” marathon sessions focused on designing new digital applications.

Digital also can be used to enable agent distribution. Forrester said insurers’ websites are important, but that consumers need to develop trust. Forrester notes that marketing automation firms now are offering the opportunity to match consumers with insurers based on location, language and lifestyles, much like online dating sites.

Mobilizing illustration application processes also enables distribution, Forrester said, and medical underwriting also is soon to be enabled on mobile devices.

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Ex tJune e n s i2014 o n 8120 » InsuranceNewsNet Magazine

39

LIFE

Give Estates a Big Lift by Leveraging Split-Gifts T he financial advantage of owning tax-free life insurance in an ILIT, when compared to other taxable alternatives, is truly outstanding in this continuing low-interest-rate environment.

By Russell E. Towers

A

nyone may give $14,000 annually to any number of recipients in 2014.

“Split-gifts” of $28,000 may be made annually by a married couple to any number of recipients. These annual exclusion gifts are made gift tax-free, usually to children and grandchildren. Of course, each person also has a $5,340,000 lifetime exemption in 2014 for the purpose of making large gifts (adjusted taxable gifts).

An annual exclusion gift program also has some advantages from an estate tax point of view: » Annual exclusion gifts can reduce the gross estate.

Annual exclusion gifts are totally removed from the gross estate for federal estate tax purposes. So, more goes to your heirs instead of to the Internal Revenue Service. The longer the gifting program is in place, the greater the value that passes to your heirs free of estate taxes. With a 40 percent federal estate tax rate on gross estates in excess of the federal estate tax exemption of $5,340,000, the cumulative estate tax savings can be substantial. » Future appreciation is not included in the gross estate.

Gifts can be made outright to heirs or can be made to an irrevocable trust for the benefit of those heirs. Not only are the annual exclusion gifts removed from the gross estate, the future capital growth and income from those assets also avoids estate tax. Assets gifted to an irrevocable trust may be invested by the trustee in stocks, bonds, mutual funds, annuities or real estate. For even more tax-free leverage, an estate owner may consider pur40

chasing a life insurance policy owned by an irrevocable life insurance trust (ILIT). » Irrevocable life insurance trust.

An ILIT is a powerful way to leverage gifts made to heirs that will provide liquidity at the insured estate owner’s death.

Death proceeds will be actuarially leveraged, income tax-free and estate tax-free.

This is a strong financial and tax combination.

Here is an example of the supercharged tax-free leveraging an ILIT can provide: Assume a married couple, each age 65 and preferred nonsmokers, have a significant estate that will be exposed to federal estate taxes because its value is in excess of their combined estate tax exemptions ($10,680,000 for a married couple). The federal marginal estate tax rate on the excess is 40 percent. Their estate is assumed to grow at a 5 percent rate of return. They have two adult children.

A $56,000 annual premium split-gift annual exclusion program with an ILIT will purchase $4,511,000 of no-lapse survivorship universal life (SUL) from a competitive carrier. Look at the results below in year 25 (age 90), which is the joint life expectancy of two 65-year-olds from the government table (Treas. Reg. 1.72-9, Table VI).

Situation A – Estate Taxable Option: Clients retain the $56,000 per year in their gross estate, which grows at a nonguaranteed after-tax rate of return of 5 percent for 25 years. The fund will hypothetically grow to $2,806,000 in 25 years. However, a 40 percent estate tax rate will deplete this fund to only $1,684,000 after estate taxes are paid.

Situation B – Estate Tax-Free Investment Option: Clients gift their $56,000 split-gift annual exclusion per year to an irrevocable trust for the benefit of their two children. The trustee invests these funds into stocks, bonds and mutual funds that generate a nonguaranteed af-

InsuranceNewsNet Magazine » June 2014

ter-tax rate of return of 5 percent for 25 years. The estate-tax free fund in the trust will hypothetically grow to $2,806,000 in 25 years.

Situation C – Estate Tax-Free Insurance Option: Clients gift their $56,000 split-gift annual exclusion per year to an ILIT for the benefit of their two children.

The trustee purchases a no-lapse survivorship universal life policy (SUL) from a competitive carrier with a guaranteed death benefit of $4,511,000 throughout the 25-year period of time.

The after-tax comparison after 25 years (age 90 joint life expectancy) speaks for itself:

A B C

Estate Taxable Option: Hypothetical nonguaranteed net after-tax to heirs $1,684,000 Estate-Tax-Free Option: Hypothetical nonguaranteed net after-tax to heirs $2,806,000 Estate-Tax-Free Insurance Option: Guaranteed net after-tax to heirs $4,511,000

In the example above, the after-tax internal rate of return (IRR) on the estate tax-free no-lapse SUL insurance option is 8.13 percent at age 90 joint life expectancy. In a 33 percent income tax bracket, this is equivalent to a pretax rate of return of 12.13 percent.

A good financial asset to provide the

GIVE ESTATES A BIG LIFT BY LEVERAGING SPLIT-GIFTS

The financial advantage of owning TAX-FREE LIFE INSURANCE in an ILIT, when compared to other taxable and nonguaranteed fixed financial product alternatives, is truly outstanding. source of funds for the annual exclusion premium gifts described above is the after-tax distribution from an individual retirement account (IRA). This is especially true if there are other sources of retirement income available and the IRA will not be needed to provide retirement income. Although required minimum distributions (RMDs) from an IRA must be made beginning at age 70½, distributions can be made prior to age 70½ if financially justified. The creation of the no-lapse SUL policy described previously, in which the death benefit is free of income tax and estate tax when owned by an ILIT, should certainly be considered to be a financially justified transaction.

For instance, assume that the wealthy

65-year-old couple described in the example above had a $2 million IRA as part of their gross estate. Assume there were other assets that could provide retirement income, such as rental real estate, pass-through K-1 income from an S corporation or limited liability corporation that they owned, and combined Social Security retirement benefits. They will need to start taking RMDs from the $2 million IRA anyway, beginning when they reach age 70½. Why not start taking distributions from the IRA now, while they are younger and still healthy, instead of waiting until 70½ when insurance premiums will be higher and their health might deteriorate for medical underwriting purposes? In a 33 percent income tax bracket,

Updated for 2014

LIFE

an $83,582 taxable withdrawal from the IRA each year would net $56,000 after taxes. This $56,000 would then be gifted to the ILIT each year as a premium for the $4,511,000 no-lapse SUL policy described in the example above.

As you can see, the financial advantage of owning tax-free life insurance in an ILIT, when compared with other taxable and nonguaranteed fixed financial product alternatives, is truly outstanding in this continuing low-interest-rate environment. Ask yourself a simple question.

Should no-lapse guaranteed life insurance be part of your client’s asset portfolio mix that will be transferred to the heirs upon death? I think the answer is abundantly clear when you do the simple analysis outlined above.

Russell E. Towers, JD, CLU, ChFC, is vice president – business and estate planning, with Brokers’ Service Marketing Group. He may be contacted at russ.towers@ innfeedback.com.

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Information contained in the Application is current as of January 1, 2014, and is subject to legislative and regulatory changes. All calculator results are hypothetical and for illustrative purposes only. The use of the calculators should only serve as a general guideline. The calculators are not intended to address individual situations and should not be relied upon as such. The Application is not a substitute for tax advice from a qualified professional. Columbus Life, its employees and representatives are not authorized and do not provide tax or legal advice.

CL 5.1994 (02/14)

For financial professional use only.

Cincinnati, Ohio

June 2014 » InsuranceNewsNet Magazine

41

LIFE

Busting the 7 Myths of Life Insurance

A rm yourself with the knowledge to respond to your prospects’ most common objections.

By Patrick Bet-David

A

s insurance agents, we all know the importance of life insurance and how it eases the hardship that comes with the passing of a loved one. And we all recognize that if you don’t believe in insurance, it can mean financial ruin. And as agents, we all have tragic stories that come back to “If only they had listened to me.”

The reality is yes, people are naïve and don’t want to think about their own mortality – especially those in their 20s and 30s, who think they are invincible. But the other reality when it comes to life insurance is that there is too much misinformation out there and most people don’t know what to believe. If you ask 10 different people on the street why they don’t have life insurance, you are likely to get 10 different excuses, ranging from “I’m too young” and “It’s too expensive” to “I’d rather invest the money.”

If we expect our prospects to make the 42

right decision about whether to purchase life insurance, it’s our job as good advisors to debunk the myths and misconceptions people have. This isn’t always easy, and obviously the level of resistance varies from one prospect to another.

Arming yourself with the knowledge to respond to your prospects’ most common misconceptions about life insurance will help ensure they have the right amount of coverage for their situations.

Myth No.1

I don’t trust insurance companies.

How is it possible for a company to pay $500,000 in death benefits when I’m paying them only $50 a month?

It’s a fair question and one that many prospects will ask: How can I pay so little and expect to receive so much? Approach the skeptic with this question: Why would a bank buy a $500,000 property for you and require very little money down to protect its purchase? Banks underwrite a home loan in much the same way as an insurance

InsuranceNewsNet Magazine » June 2014

company underwrites a new policy. A bank looks at your income and employment, your down payment and assets, your credit score, and your debt-to-income ratio.

This is now your opportunity to educate your prospect about how insurance companies look at different factors when determining costs. » Mortality: Insurance companies have a formula that comes up with the monthly cost of insurance based on a questionnaire they collect from the customer. This formula considers such information as health, age, height/weight ratio, medical history,

As agents, we all have tragic stories that come back to “If only they had listened to me.”

KEY PERSON INSURANCE KEEPS THE FAMILY BUSINESS IN THE FAMILY

LIFE

AND WHAT I DID NEXT THAT TRIPLED MY COMMISSIONS Let’s face it. It’s not getting any easier to sell annuities.

NEGATIVE ANNUITY TRENDS: • Reduced Commissions • Decreasing Caps Due to Interest Rates • The Income Rider Trap • Financial Risk of Chargebacks My name is J.F. Ranhofer and I was a $25M annuity producer when I first noticed a negative trend that threatened my livelihood. I was faced with either a large reduction of my income or being forced to write more to remain at the same income level.

SOUND FAMILIAR?

What if I told you there was an easier product to sell that truly benefits your clients and provides you with 3x the commission of an annuity per case?

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In my report, I will tell you exactly how to triple your commissions on each case with a product and a process that you can be proud of.

Don’t wait – you owe it to yourself and the future of your practice to find out more.

DOWNLOAD MY FREE REPORT Why I Stopped Selling Annuities and How I Tripled my Commissions at:

www.StopSellingAnnuities.com PEAK PRO FINANCIAL IS NOT AN ANNUITY FMO. We’re a Producer Development Company. We have changed the business plans and lives of agents that write $500K a year and even $20 million a year of annuities. There is no agent too big or too small.

LIFE

BUSTING THE 7 MYTHS OF LIFE INSURANCE

occupation, hobbies, tobacco use, alcohol consumption and a few more variables, depending on the size of the policy. » Interest: Insurance companies take the premium you pay and invest it. The interest they earn on their investment could determine the cost to the prospect. » Expenses: High expenses due to salaries, agent compensation, rent, legal fees and high-rise buildings in prime markets can play a role in determining the cost. » Customer discipline: If all policyholders kept their policies, life insurance companies would be in trouble.

But what you can share with your prospect is that insurance companies study customer habits. They know most customers typically cancel their policies every seven to 10 years due to the life cycle of a crisis taking place in their lives. All the premiums paid during that period are kept by the insurance company if it was a term policy, and everything but the surrender value is kept if it was a permanent policy.

Average life expectancy has changed in the last 40 years (see infographic).

Men have added roughly nine years to their life expectancy, while women have added six. These numbers help make the cost of insurance cheaper than it used to be.

Myth No.4

Only breadwinners need coverage.

One of the more popular myths your prospects will believe is that only the breadwinner needs coverage. According to an article in The Washington Post, the average value of a homemaker’s yearly work is roughly $96,261. Although that number may seem a bit high, their analysis was based on what it costs to hire a personal chef, child caretaker, housecleaner, driver, laundry service and lawn maintenance. For argument’s sake, let’s knock that number down to $50,000 a year for a homemaker. If you take that number and multiply it times the amount of years your kids will be under your financial support, it will determine how much insurance the homemaker needs.

LIFE EXPECTANCY

Myth No.2

Myth No.3

Life insurance is more expensive today because of inflation.

Many of your prospects will be under the assumption that life insurance is more expensive today because of inflation, but tell them that the normal rules of economics don’t apply. A large factor that determines the cost of life insurance is based on the average life expectancy of a man or a woman.

44

Myth No.6

I’m not going to die any time soon. I’ll get it later.

An extensive study of roughly 113 billion people shows that 100 percent of them die. The only problem with that study is we don’t know when they will die. Once the cure for aging has been invented, then and only then is it appropriate to seriously consider this myth.

I mentioned earlier how every agent has that one story he will never forget. I met with a 38-year-old restaurant manager who had three kids under age 10 and a wife who didn’t speak much English. He used that exact line on me, and six weeks later he went to sleep and never woke up.

It was very tough on me as a rookie agent, because I personally witnessed what happens when you think you’ll be living a long time. His wife was left behind with three kids, no job and a mountain of debt.

Myth No.7

I’m young and don’t need life insurance.

Regardless of your prospect’s age, remind him that he will have created some sort of debt when he dies. None of us can escape the cost of final expenses, unpaid debts and medical bills. The only question is which part of that cost are you willing to protect and pay for? One of the smartest moves a young person can make is buying himself a life insurance policy while he’s young. Most people eventually get married. If you’re smart enough to buy it when you’re young and single with a low monthly cost, you’ll benefit in the long run.

life insurance coverage. It is critical for your prospects to understand that even if they can’t afford a permanent policy, the least they should do is protect their families and their investments with a 30-year term.

WOMAN

81 75

MAN

2013

1970

76 67

Source: National Center for Health Statistics

Myth No.5

It is better to invest your money than to purchase life insurance.

Your prospects will tell you they would rather invest their money and see it grow.

One of the main reasons to purchase life insurance, however, is to protect any investments. With estate planning laws changing, the need for life insurance coverage is more important than ever. In many cases, families who are left behind are forced to liquidate their investments because of a lack of

InsuranceNewsNet Magazine » June 2014

My employer’s life insurance policy provides plenty of coverage.

Your prospects will likely tell you they receive life insurance through their employer’s benefit package, and it offers sufficient coverage in the event something should happen to them. Putting aside the fact that it’s usually not enough, it is important to remind your prospects that employment nowadays is anything but a sure thing. It is not only annoying but dangerous to get laid off from the company you’ve been with for 17 years and find yourself in your 40s with no coverage, a mortgage and no way to protect your family. Having your own policy outside of work protects you regardless of what your company decides to do.

Patrick Bet-David is chief executive officer of People Helping People (PHP), Woodland Hills, Calif., and author of The Next Perfect Storm. Patrick may be reached at Patrick. bet-david@innfeedback.com.

June 2014 Âť InsuranceNewsNet Magazine

45

Brought to you by:

ANNUITYWIRES

Banks Breaking Into Annuity Sales BANK ANNUITY COMMISSIONS Last year, banks did well selling fixed annuities.

Michael White, who tracks such data, said income earned from the sale of annuities at bank holding companies reached a record $3.43 billion, up 9 percent from 2012.

Fourth-quarter 2013 annuity commissions reached a record $932 million, up 17.3 percent from the year4Q 2013 ago fourth quarter, White added.

Banks’ annuity fee income also set records in each of the four quarters last year, according to the latest data from “Michael White Bank Annuity Fee Income Report.”

White said that posting big sales numbers across all four quarters is a measure of the consistency in annuity sales.

Separate data from the Bank Insurance & Securities Research Associates (BISRA) show that banks are in a ferocious fight with broker/dealers and advisors.

Banks were the No. 2 sales channel through which to sell fixed annuities, trailing only the independent agent channel, according to BISRA data.

17.3

%

WHERE DO HYBRID ANNUITIES FIT?

Hybrid annuities blend characteristics of variable annuities with those of fixed index annuities.

So, the question is: How to position the products with clients?

To date, four carriers are selling the products – AXA Equitable, Allianz, MetLife and CUNA Mutual Group. The designs differ quite a bit, but in general, they walk and talk like a variable annuity due to offering upside potential through two or more investment options. In addition, they resemble fixed index annuities because most or all of the options link their gains to an index. On top of that, the products offer either a downside guarantee or a downside buffer, either of which limits loss of principal anywhere from zero to some percentage, depending on the products. All are registered products, sold by prospectus. None offers a living benefit guarantee.

The products go by different names – registered indexed annuities, variable indexed annuities, hybrids, etc. LIMRA Secure Retirement Institute is classifying them as “structured annuities.”

Kelley Connelly, an investment advisor representative who focuses on annuities at JHS Capital Advisors in Sebring, Fla., told InsuranceNewsNet she might recommend them in situations where she may previously have recommended a conservative structured product.

46

“For a client who needs guaranteed retirement income, I might recommend using this product in combination with another annuity that provides a guaranteed living benefit rider,” she added. This would provide structured-like growth potential from the former and a guaranteed income stream from the latter.

3 GENERATIONS, 3 DIFFERENT RETIREMENTS

Baby boomers, Generation X and millennials – these three generations will face very different retirements, according to the 15th annual Transamerica Retirement Survey.

Baby boomers, according to the survey, were already in mid-career when the retirement landscape shifted from defined benefit plans to 401(k) or similar plans. They have not had a full 40-year time horizon to save in 401(k)s and experience the full effects of long-term compounding of their investments. The survey found baby boomers to have total household retirement savings of $127,000 (estimated median) – an increase from $75,000 in 2007 but not enough to meet retirement needs for many.

Sixty-five percent of baby boomers said they plan to work past age 65 or do not plan to retire – and most (52 percent) expect to continue working, at least on a part-time basis (42 percent), when they retire. Only 21 percent plan to stop working immediately when they

InsuranceNewsNet Magazine » June 2014

retire. Most of those who plan to continue working say it’s for reasons of income or health benefits.

Generation X entered the workforce just as 401(k)s were being implemented and defined benefit plans were beginning to disappear. It is the first generation to have access to 401(k)s for most of their working careers.

The majority (60 percent) of millennials plan to retire either before or at age 65. Most plan to continue working when they retire, with many intending to do so for enjoyment. The survey found that 70 percent of millennials are already saving for retirement, and started at an unprecedented median age of 22.

THE HARTFORD TO SELL JAPAN ANNUITY BUSINESS

The Hartford Financial Services Group will sell its Japan annuity business to Orix Life Insurance for an estimated capital benefit of $1.4 billion.

The divestiture has been anticipated for about a year as The Hartford looks to reduce its risk profile.

Selling The Hartford Life Insurance K.K., the Japan annuity subsidiary, is expected to result in after-tax proceeds of about $860 million. Additionally, the parent company’s U.S. life insurance subsidiaries will be able to reduce the required capital needed for the Japan business by about $540 million as The Hartford ends reinsurance agreements associated with the Japan block of business.

The transaction is expected to close in July, subject to approval by insurance regulators with the Japan Financial Services Agency.

Go to AnnuityNews.com for exclusive sales ideas and more!

Channels Trade Market Share Regional broker/dealers, banks, and savings and loans institutions were the big winners in the sale of fixed annuities last year at the expense of the independent producer channel, according to Beacon Research. bitly.com/qrchannels

@Annuity_ News

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Issued by Genworth Life and Annuity Insurance Company, Richmond, VA SecureLiving® Index 7 individual single premium deferred annuity with market value adjustment and optional index interest crediting is issued by Genworth Life and Annuity Insurance Company, policy form series GA3003-0711 et. al., GA301R-0312 and ICC12GA301R. Products and/or riders may not be available in all states or markets. Features and benefits may also vary by state or market. Genworth Life and Annuity Insurance Company is licensed in all states except New York.

• All guarantees are based on the claims-paying ability of Genworth Life & Annuity. Withdrawals may be taxable and a 10% federal penalty may apply to withdrawals taken before age 59½. • Although the contract value may be affected by the performance of an index, the contract is not a security and does not directly or indirectly participate in any stock or equity investment including but not limited to any dividend payment attributable to any such stock or equity investment. • This is a brief product description. Consult the annuity contract for a detailed description of benefits, limitations and restrictions. Contract terms and provisions will prevail.

For Producer use only. not to be reProduced or shown to the Public.

157761 10/17/13 ©2013 Genworth Financial, Inc. All rights reserved.

June 2014 » InsuranceNewsNet Magazine

47

For an update on Athene’s first-quarter results, visit InsuranceNewsNet.com/Athene

ANNUITY

Athene USA Grabs a Foothold in Fixed Annuities

Athene relocated to the home of fixed index annuities in West Des Moines after acquiring Aviva.

A s the first-quarter results loomed, many eyes were on Athene’s numbers. After its ambitious acquisition of Aviva, Athene seeks a steady transition and a new direction for fixed annuities.

By Linda Koco

F

irst-quarter reports on annuity sales will start rolling out soon. As usual, annuity wonks will pore over every single figure. But probably no results will get more scrutiny than the ones from Athene USA, the big jewel in the crown of a holding company the industry had not even heard of five years ago.

Athene USA is the West Des Moines, Iowa, carrier formed last year when Athene Holding Ltd. of Bermuda completed its storied acquisition of fixed index annuity (FIA) heavyweight Aviva USA. The holding company has since combined that business with the fixed annuity business of three other U.S. operating subsidiaries, now boasts $61 billion in 48

management assets, projects retail fixed annuity assets approaching $3 billion annually, and writes business through about 20,000 producers.

The company’s creation has been a whale of a tale. Regulators have challenged the holding company’s ties to private equity. The holding company agreed to certain conditions. FIA sales at the target company fell as negotiations dragged on. Employees quit or lost their jobs. New hires came on board. A smaller subsidiary – Athene Annuity & Life (Athene A&L) – ultimately swallowed a carrier (Aviva USA) that A.M. Best said was nearly three times its size.

All this year, industry people have been buzzing about how the now-combined company is faring. On the threshold of publication of its first-quarter results, InsuranceNewsNet offers some highlights.

Sales

The buzz starts with sales. FIAs make up the company’s main product line. However, its FIA sales were down at year-end

InsuranceNewsNet Magazine » June 2014

2013. According to sales numbers from Wink Inc., Athene USA ranked in fifth place on FIA sales of more than $2.7 billion at year-end. By comparison, in 2012, when Aviva USA and Athene A&L were still separate entities, Wink reported that Aviva USA was in second place on FIA sales of $4 billion, and Athene A&L was in 24th place on FIA sales of $134 million.

Athene leaders themselves appear to have anticipated the 2013 numbers. In discussing organic growth projections in a December FAQ list that was released before the year had ended, the company noted that, with the acquisition of Aviva USA, “initial estimated run-rate retail volumes” for Athene to be “$2 billion to $3 billion annually (depending on market and rate conditions).” That $2 billion to $3 billion would be on sales of FIAs and other fixed annuity products.

An FIA sales decline was not entirely unexpected, because many acquired companies initially see sales slump during periods of ownership transition. The Athene negotiations for Aviva went on for more than nine months, and that injected a lot of uncertainty into distribution.

But now that Athene USA is a done deal, the industry chatter is all about what will happen to Athene sales, especially its FIA sales. Hence, the anticipation over first-quarter results.

In March, the company gave a clue.

Athene Holding was projecting annualized retail sales for fixed annuities (FIAs and others) at $3 billion. And in a March 18 document, the company noted that first-quarter 2014 retail sales were “continuing momentum” as of that date.

The Rating Issue

While the clock ticks, the executives are talking about plans for growth – and their financial strength rating from A.M. Best.

As the executives see it, the two are linked.

Here’s the backstory: The day after the holding company closed its deal on Aviva USA, Best cut the financial strength rating on the Aviva piece of the business to B++ (good) from Aviva’s former rating of A- (excellent). At the same time, Best affirmed the financial strength rating of B++ on Athene A&L (the carrier that technically swallowed Aviva USA) as well as on the other Athene annuity affiliates.

The downgrade was not a huge haircut, and it was not altogether unexpected,

ATHENE USA GRABS A FOOTHOLD IN FIXED ANNUITIES given that rating downgrades on newly acquired companies are not unusual. Indeed, Best cited several acquisition-related factors in explaining reasons for the action – including, by the way, “anticipated new annuity sales disruptions given the change in ownership as product changes become implemented and shared among the companies.”

Still, “we want to be higher rated,” said Grant Kvalheim, president of Athene 2008 Athene Holding forms in Pembroke, Bermuda, with offices in Manhattan Beach, Calif. The majority shareholder is AP Alternative Assets, a Guernsey affiliate of New York private equity firm Apollo Global Management.

Cofounders Jim Belardi and Chip Gillis have insurance ties, with Belardi as former president of SunAmerica Life and chief investment officer of AIG Retirement Services and Gillis as former head of Bear Stearns’ Insurance Solutions Group.

APRIL 2011 Athene Holding purchases Liberty Life, Greenville, S.C., from Royal Bank of Canada. It is later renamed Athene Annuity & Life Assurance Co. (Athene A&L).

of funding” – a clear reminder that an initial public offering is where the company is heading.

Athene wants to go public via initial public offering because “the regulators like it, the rating agencies like it, the consumers like it, and it provides cheaper access to capital,” Kvalheim said. “Our end goal is to create a market-leading public company in annuities.”

A lot of work needs to be done first, he

JULY 2011 Athene Holding purchases Investors Insurance Corp., Jacksonville, Fla., from SCOR. DECEMBER 2011 Athene Holding, through its Athene A&L business, acquires Presidential Life, Nyack, N.Y. DECEMBER 2012 Athene Holding announces deal to acquire Aviva USA companies from Aviva Plc, London.

MAY 2013 New York regulator launches inquiry into private equity company ownership of life and annuity carriers.

Athene Holding Ltd. announces deal to sell Aviva USA’s life insurance business to Global Atlantic Ltd, upon completion of the Aviva USA acquisition.

Holding. In an interview with InsuranceNewsNet, he made no bones about that. The company intends to grow, he said. A rating upgrade is part of the plan to do that.

To that end, “we’re running Athene as an A-rated company,” Athene USA executive vice president Christopher Grady said in a separate interview.

The company cannot control what the rating agencies do, Grady allowed. Even so, “we believe we have a good shot of getting the rating up by the next cycle, which comes up in three review periods.”

In early April, Athene Holding moved closer to that goal. It completed a new private placement offering that raised $1.048 billion of primary equity commitments – more than twice the amount originally sought ($500 million).

The additional capital “will bolster our efforts to achieve a ratings upgrade, which will benefit our retail platform and lower our cost of funds,” Athene chief executive officer Jim Belardi said in a statement.

Tellingly, the capital raise announcement termed the raise a “pre-IPO round

ANNUITY

processes, but also office locations, staff relocations, staff additions and more. The sales force is being integrated too. For instance, the company intends to have all agents, regardless of original company affiliation, moved onto the same Athene contract. But they’re not there yet. According to Grady, the goal is to have that completed within 18 months or so.

When the agency forces are fully combined, the result will be a “robust agent

ATHENE HAS A RAPID RISE MID-YEAR 2013 Reports circulate about sales declines at Aviva USA and workers leaving or being let go.

JULY 2013 Iowa regulators hold public hearing on Athene Holding’s proposed acquisition of Aviva USA. AUGUST 2013 Iowa and New York regulators approve the Aviva USA acquisition, subject to consumer protection conditions.

OCTOBER 2, 2013 Athene Holding, through its Athene A&L business, completes its Aviva USA acquisition for $1.8 billion, renames the U.S. annuities business Athene USA, and follows through on its deal to sell the Aviva life business to Global Atlantic.

conceded, but ideally, he would like it to occur “within the next two years.”

Integration and Sales

Another critical piece of the growth plan is completing the integration of acquisitions. Published mergers-and-acquisitions literature makes clear that integration is not an easy process for any company, not even for small ones. In Athene’s case, it is a massive undertaking.

Athene Holding has bought four companies since its creation in 2009. These are Liberty Life and Investors Insurance Corp., both in 2011; Presidential Life in 2012; and Aviva USA in 2013. So the leaders are not strangers to integration.

But the Aviva USA purchase was the biggest buy of the four, making the integration process considerably more involved. Asked how it’s going, Rod Mims, senior vice president and national sales manager at Athene A&L, credited staff with being “incredibly positive” and possessed of “a can-do attitude.”

That’s probably good, because Athene is combining not only operations and

OCTOBER 3, 2013 A.M. Best downgrades the acquired Aviva companies from A(excellent) to B++(good), citing acquisition-related factors.

LATE 2013/EARLY 2014 Athene USA integration begins.

Investors Insurance Corp. and Presidential Life merge into Athene A&L. Athene USA establishes headquarters in the former West Des Moines, Iowa, offices of Aviva USA. Leaders aim for rating upgrade, plan for IPO.

2014 The main subsidiaries of Athene Holding Ltd. are: • Athene Annuity & Life Assurance Company and Athene Life Insurance Company (Delaware-domiciled); • Athene Annuity and Life Company (Iowa-domiciled); • Athene Annuity & Life Assurance Company of New York and Athene Life Insurance Company of New York (New York-domiciled); and • Athene Life Re Ltd. (Bermuda-domiciled).

base,” Mims predicted. Athene is “excited” about that, he said, because “Aviva brought in many more agents and many more people to talk to.”

Athene USA is also integrating the internal sales staff and leadership in the Iowa office (the former home office for Aviva USA). Twenty-seven are now on the team, and that will grow “as we grow into other distribution channels,” Mims said.

There are also seven “relationship managers” in the field.

Distribution Channels

The reference to “other distribution channels” never fails to raise the ears of independent agents to a sharp point.

The former Aviva USA organization had sold its products through independent marketing organizations (IMOs) and independent agents. But Athene executives have said many times that Athene intends to pursue a “multichannel growth strategy.” The agents keep wondering what that multichannel strategy entails and what it will mean for them.

The answer, according to Mims, is that

June 2014 » InsuranceNewsNet Magazine

49

ANNUITY

ATHENE USA GRABS A FOOTHOLD IN FIXED ANNUITIES

Athene plans to deepen its reach into the independent agent channel and to grow into other channels “as the time is right.”

Athene is “110 percent committed” to the independent channel, he said, and “we’re giving it everything we have, because we have the capacity to grow there.”

Grady shed some light on the multichannel part of the plan. That is to partner up with select IMOs and to build a product for them to sell exclusively. Some partnerships occurred at Aviva before the acquisition, he noted. “Now, we are taking it to the next level, and succeeding at it.”

Some of the IMOs have relationships with small regional and community banks, small independent broker-dealers, and credit unions, he said, “so we can expand distribution in the independent space” and also enter those channels through them.

Does that mean Athene has no big money-centered banks on tap? “It takes a few years to get agreements in those banks – and it’s the same with wirehouses,” Grady said. “Working with the IMOs is much quicker for us.”

What about going direct to consumers? “That’s almost all technology; it’s a pretty big build internally, and it would take our eyes off the ball with our existing channel,” Grady said. By comparison, independent agents provide a “very strong consumer value proposition” for Athene.

That said, “We won’t own distribution,” Grady stressed, reiterating a point that company executives keep making. The plan is to partner, not to own.

Products

Product line is another big piece of the integration, and of future focus. What will the products be? Where will Athene USA go with them?

For one thing, the company has moved all remaining sales from the Aviva USA brand to Athene as of March 3, Athene Holding said in an update. “Now 100 percent of sales are as Athene.” (For Athene watchers, this will make it easier to do quarterly sales comparisons this year.)

For another, Athene plans to consolidate the legacy platforms from the original companies into a full suite of products. The former Aviva companies contribute the majority of FIA products, and the Athene A&L companies contibute most of the multiyear guaranteed 50

Grant Kvalheim, president of Athene Holding

annuities (MYGAs) and single-premium income annuities (SPIAs), Mims said.

For now, producers can sell the products they sold before, said Grady, “but they don’t have to sell all of them.”

As for new product innovation, Grady said “we will only innovate in the fixed annuity space. We want to be a leader in manufacturing here.” That includes the FIAs, MYGAs and SPIAs, “and maybe book-value annuities, and maybe registered indexed annuities.”

“We want to have very competitive products in the fixed space,” added Mims. The focus will be on accumulation with use of guaranteed living benefits for income.

What are definitely not on tap are variable annuities, life products, health insurance products and property-casualty products, Grady said.

Some companies want to be well-diversified, Kvalheim observed. However, that has “the presupposition that diversification is good and that you’re good at diversification. We want to be really good at what we do and focus on that.”

The Private Equity Aspect

Kvalheim noted that the tone of complaints about Athene’s ties to private equity has changed since the company completed the Aviva acquisition last October. The noise has died down considerably, agreed Mims.

The noise was about Athene Holding’s connection with private equity investors – namely that the relationship would bring private equity’s short-term business model

InsuranceNewsNet Magazine » June 2014

For an update on Athene’s first-quarter results, visit InsuranceNewsNet.com/Athene

to an insurance company, which by its nature is long-term, and that this could diminish policyholder protections.

“I know that we’re painted with a private equity brush,” Kvalheim said, but he said the company is not private equity.

Here is the corporate lineage: Athene USA is the U.S. business of Athene Holding Ltd., a Bermuda company owned by several institutional investors. Athene Holding’s majority shareholder is AP Alternative Assets, a closed-end, publicly traded permanent capital vehicle listed on Euronext as AAA and based in Guernsey. AP Alternative is managed by Apollo Global Management, a publiclylisted firm that makes private equity investments and is headquartered in New York City.

It is the corporate link to private equity (in particular, Apollo) that caught widespread attention, to the point that regulators in Iowa and New York required Athene Holding to agree to certain conditions (such as higher reserves) before approving the deal.

Looking back on it now, Kvalheim said there was an assumption in the private equity concerns that “unsuccessful insurers were doing a good job, though they wanted out or were capital impaired.”

Athene did agree to the conditions laid out by state regulators, but Kvalheim still bristles at the idea of state regulators requiring private equity-affiliated companies to meet separate standards that do not apply to traditional life insurance companies. “We support the prudential standard, and are happy to live by it, but this should apply to everybody,” he said.

As for the criticism that Athene’s focus will be short-term, he said that is “frankly nonsense.”

Reiterating a point he has been making since last year, he said there is “no time fuse” on the money that’s in the company.

“We want to be in this business forever,” he said. “We have a great relationship with Apollo and want to make it better.

We keep acting and behaving and doing business on a long-term basis, and we think we will be in business for years to come.”

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda may be reached at linda.koco@ innfeedback.com.

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June 2014 » InsuranceNewsNet Magazine

51

HEALTHWIRES

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Uninsured Rate Continues to Fall

UNINSURED RATE

13.4

%

The percentage of U.S. adults without health insurance reached its lowest rate in more than six years. The uninsured rate for U.S. adults in April was 13.4 percent, according to Gallup.

APRIL 2014 The uninsured rate peaked at 18 percent in the third quarter of 2013, but has consistently declined since 3Q 2013 18% then. This downward trend coincided with the health insurance marketplace exchanges opening in October, and accelerated as the March 31 deadline to purchase health insurance coverage approached.

The uninsured rate fell most among blacks, Hispanics and lower-income Americans. The percentage of uninsured blacks was 13.8 percent, down 7.1 percentage points from the end of 2013. Hispanics had an uninsured rate of 33.2 percent, which is still the highest uninsured rate among key demographic groups. Nonetheless, that rate was still down 5.5 points since the end of 2013. Those with annual household incomes of less than $36,000 saw their uninsured rate drop by 5.5 points to 25.2 percent.

The uninsured rate among 18- to 25-year-olds fell 4.5 points, to 19 percent, from the end of 2013. However, the uninsured rate declined even more among 35- to 64-yearolds, falling 4.8 points to 13.2 percent. The uninsured rate among 26- to 34-year-olds continued to decline, but at a rate more similar to the national average.

80% HAVE PAID THEIR HEALTH PREMIUMS

Represent at ives of t he nation’s health insurers went before Congress to answer one of the biggest questions that surfaced in the wake of the first enrollment period under the Affordable Care Act. That question is: How many people actually paid their premiums after they enrolled in coverage?

According to the insurers, more than 80 percent of people who signed up under the new health care law went on to pay their premiums. Company representatives testified at a hearing run by House Republicans who questioned the Obama administration’s claims of 8 million sign-ups.

Aetna and WellPoint were among the insurers represented at the hearing.

Republicans said there still are questions, and they note that the administration hasn’t released its own payments data.

Democrats said the hearing was politically motivated.

DID YOU

KNOW ALMOST

?

52

23

HEALTH CARE – AND PATIENTS – GO SOUTH FOR TREATMENT

Even though the Affordable Care Act has expanded coverage to millions of Latinos, many still seek health care in Mexico.

Naturalized citizens and legal residents are expected to continue traveling for checkups, minor surgeries and dental care, drawn to treatment that is less expensive and a medical culture that is less hurried. Doctors speak their language and patients often can get appointments without long waits.

In fact, it’s possible even more U.S. residents may seek care with Mexican doctors, said David Hayes-Bautista, director of the Center for the Study of Latino Health and Culture in Los Angeles. Many Latinos in the U.S. live in areas with a huge undersupply of providers, and as new coverage increases the demand for care, waits for appointments could grow longer and more frustrating, he said.

“If you don’t have access to care, going to Tijuana may seem like a reasonable alternative,” he said.

The majority of these patients are Mexican immigrants with green cards or U.S. citizenship who can travel freely across the

of those who enrolled in health insurance through ACA picked plans.

Source: Centers for Disease Control

InsuranceNewsNet Magazine » June 2014

“silver”

QUOTABLE

Rising medical costs have prompted employers to shift a larger share of health care costs to workers, many of whom are already feeling financially stressed from the recession and benefit cutbacks.

— David Speier, a senior consultant at Towers Watson

border. One 2009 study found that nearly half a million Mexican immigrants living in California receive medical, dental or prescription services every year south of the border. s

oop OREGON DROPS TROUBLED EXCHANGE

Oregon became the first state in the nation to give Gov. John up on its state-run online Kitzhaber health exchange and switch to the federal website.

An early adopter and early enthusiast of the Affordable Care Act, Oregon was once seen as the national leader in health care reform. However, Oregon failed to enroll a single person in coverage in one sitting through its exchange, which was developed by Oracle. State officials decided to ditch the exchange because officials said fixing it would be too costly at $78 million and would take too long.

Switching to the federal system will cost just $4 million to $6 million and is the least risky option.

Oregon’s exchange is seen as the worst in more than a dozen states that developed their own online health insurance marketplaces. Oregonians must use a time-consuming hybrid paper-online process to sign up for insurance. The state also had to hire more than 400 workers to aid in the manual enrollment process.

Oregon received a monthlong enrollment-deadline extension because of the technology problems.

Several other states, which have experienced major problems with their exchanges, are also debating their futures – although it’s unclear how many, if any, will switch to the federal portal.

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HEALTH

Impact of Health Care Reform in the Workplace E mployers need advisors to guide them through the changes brought about by health care reform.

By Tye Elliott

T

he adaptation to health care reform has progressed through several phases, each unique in its dynamics and challenges for both employers and consumers.

According to the 2014 Aflac WorkForces Report, many companies were caught off guard last year and had to implement changes they hadn’t originally expected to make. For example, more than a third (36 percent) of companies that implemented a high-deductible health care (HDHC) plan in 2013 hadn’t planned to take that step, nor had 27 percent of companies that increased their employee copays.

Companies faced a number of decisions in 2013 related to the Affordable Care Act (ACA). These included offering employees health insurance through the new public exchange for small businesses (SHOP), giving employees a stipend to use to purchase their own choice of insurance through the government exchange and decreasing employee hours from full-time to part-time.

Going forward, the companies that are able to strike the right balance between profits and principle will be the most successful at leveraging benefits to drive good business. Agents who can coach companies to recognize the relationship between the well-being of their workforce and enduring profitability will also share in that success.

Years of tracking companies that dominate their industry and are branded as employers of choice has enabled the Aflac study to identify select game-changing strategies that certain companies use to recalibrate their investments in their human capital and strike this winning balance.

Strategy No. 1: Understand the financial and physical state of the workforce 54

Companies need to better understand the connection between the personal finances of their employees and the insurance choices they make. For instance, few American workers understand or acknowledge the impact of medical expenses on their overall financial health. In fact, an unprecedented number of workers face financial crisis today and are greatly underprepared for their future retirement. The

86%

of employees believe the expenses they’re responsible for will continue to rise, but many aren’t prepared to absorb the financial burden.

Source: 2014 Aflac WorkForces Report

reality is that for most workers, their health care costs have risen more than twice as fast as wage growth (1.8 percent) and four times as fast as inflation (1.1 percent).

Rising health care contributions take their toll on employee take-home pay – an issue that should directly concern today’s employers. Yet only 14 percent of companies believe that offering workers a comprehensive benefits package is a major influence on employees’ overall financial health. Companies will need to make other investments or changes to their benefit plans to help contain high medical expenses for workers and offer greater protection and peace of mind, especially since nearly 9 in 10 workers (86 percent) at least somewhat agree the medical costs for which they are responsible will increase as a result of health care reform.

These financial concerns result in lost productivity at work and can greatly affect a company’s bottom line. One-quarter (24 percent) of workers named “personal financial issues” as the top non-work-related issue that distracts them during the day, meaning financial issues are more distracting than even work or life balance issues.

Strategy No. 2: Retool benefits plans for a better competitive advantage

Employers must begin to examine the implications of health care reform decisions on benefits and workforce strategies, as well

InsuranceNewsNet Magazine » June 2014

as the opportunities and risks that reform has generated. Employers need to track the outcome of changes to their benefit plans and recalibrate their plans to generate value-creating options. For many companies, the impact of benefit plan changes will materialize in undesirable ways – including a more financially stressed workforce, loss of top talent and productivity declines among distracted workers.

Leading companies are taking this opportunity to make no-regret moves to ensure that their benefits and rewards programs continue to drive talent recruitment, retention, productivity and, ultimately, competitive advantage. These moves include: » Using benefits to drive employee engagement and organizational performance. » Using survey and research tools to determine the preferences of employees so that benefit plans emphasize what employees value most, while minimizing other features. » Tailoring plans to maximize what employees value most about employer-sponsored insurance beyond 2014. » Elevating the role of ancillary benefits in the company’s overall rewards program.

Employees do value benefits, and they can be a significant driver of both recruitment and retention. According to the Aflac study, nearly 6 in 10 workers are at least somewhat likely to take a job with lower pay but better benefits. Nearly half (48 percent) of workers say they are at least somewhat likely to look for a new job within the next 12 months, and of those workers, 41 percent say “improving my benefits package” would keep them in their job.

Elevating the role of ancillary benefits

IMPACT OF HEALTH CARE REFORM IN THE WORKPLACE in an overall rewards program continues to prove valuable, as workers seek ways to cover out-of-pocket costs. More than half (52 percent) say they are at least somewhat likely to purchase voluntary benefits if offered to them. Workers are 30 percent more satisfied with enrollment methods when they’re voluntary benefits are included. They’re also 18 percent less likely to be distracted by personal financial issues when they’re enrolled in voluntary benefits, and 88 percent more likely to understand the concept of consumerdriven health care. Most important, workers enrolled in voluntary benefits are 50 percent more likely to feel they’re able to cope with unexpected medical expenses.

Strategy No. 3: Embrace the move toward consumer-driven plans

The health care system is complicated. Few employees have the medical knowledge necessary to evaluate provider quality, treatment appropriateness or medication needs. Nor do they have the information needed to understand the true cost of medical services. This lack of knowledge and information makes it difficult for employees to embrace and leverage the consumerism of health care.

Advocates for consumer-driven health care plans (CDHPs) state that these plans hold great promise for promoting patientcentered care and for reducing health care costs. For CDHPs to be successful, however, employees must be provided with the education, resources and decision-support tools they need to become effective consumers.

It will be important for employers to measure employee readiness for change – even a well-designed program will not be effective or successful if employees are not ready for it. Making a true assessment of employees’ readiness will help steer educational and marketing initiatives around new consumerdriven plans and may help determine the ultimate success of the launch of new plans – and even the participation rate.

According to the Aflac study, only 13 percent of workers strongly agree that their employer has prepared them well for the impact of health care reform, and 43 percent strongly or completely disagree that their employer has properly prepared them.

Clear and frequent communication about what consumer-driven health care means and requires is extremely important, especially considering that most employees do not want more control over their health

HEALTH

Source: 2014 Aflac WorkForces Report

care expenses and options.

A lack of communication not only exacerbates an already dangerous information gap, but also forgoes opportunities to communicate benefits that can both satisfy worker demand and improve key aspects of the workplace, such as voluntary and supplemental offerings.

Strategy No. 4: Customize benefits options to generations and demographics

One size doesn’t fit all anymore. Demographic and generational dynamics necessitate tailored options and customized communications of those options. For instance, some companies offer their workers customizable worksheets to plug in their own individual information and calculate their potential medical costs for the year. Others hold informational meetings or make sure they diversify their materials to encompass print, Web and email, utilizing social and mobile media such as texts, Twitter and Facebook to communicate key messages and remind workers of upcoming open enrollment deadlines.

In designing benefits programs for multiple generations, it’s imperative to take a holistic look at each age cohort, including varying education levels, experiences, life factors and even personality characteristics. Each of these aspects plays a role in determining which options are best suited to a particular generation and, more important, which options appeal to those workers enough to drive participation and enrollment.

At no cost, and with minimal administration, an employer can provide a variety of levels and types of voluntary coverage to

meet individual needs and life stages. Often, having these policies can save individuals from debt and may even prevent bankruptcy, helping employees focus on getting better and getting back to work. Supplemental insurance benefits pay for unexpected costs associated with serious illness, injury or loss that can result despite major medical insurance coverage.

Leveraging – not bracing for – the impact of health care reform

The current economic landscape, combined with a lack of basic knowledge about financial principles, has left many American workers financially insecure and with high debt. Employers need to find the right balance between profits and principle, providing health care options and benefits packages that take into consideration the tangible connection between workforce well-being and profitability. Brokers can help companies make those decisions – and ultimately ensure that workers have a financial safety net and peace of mind – by sharing the strategies outlined above.

Helping workers learn to manage their health care choices effectively presents an opportunity for employers to demonstrate they care about their employees and to curb potential absenteeism, low morale and low productivity. Workers may well be the ones responsible for their health care decisions, but the wrong choices can affect their performance and state of mind in the workplace.

Tye Elliott, a 20-year insurance industry veteran, is Aflac’s vice president of core broker sales.

Tye may be reached at tye.elliott@innfeedback.com.

June 2014 » InsuranceNewsNet Magazine

55

FINANCIALWIRES

Weak economy idles Class of 2014. bitly.com/qrweak

DIY

When DIY Is Not the Best Approach

FINANCE

The “do it yourself ” approach may save you money when it comes to painting your house or changing the oil in your car. But it can be disastrous when it comes to making financial decisions, according to a new study.

Guardian’s Workplace Benefits Study reveals that although four in 10 employees identify themselves as DIYers (do-it-yourselfers) when it comes to making financial decisions, they are significantly falling behind their peers on prioritizing and meeting key financial objectives. This is especially true for millennials, who may need professional advice to achieve their long-term financial goals.

According to the study, 52 percent of DIYers attribute all or most of their financial preparedness to the benefits and retirement plans available through their employers. Yet because DIYers are emotionally resistant to being helped, employers and providers alike need to rethink their approach to reach this segment.

DIYers overall underperform on key financial objectives compared with the one-quarter of survey participants who identify themselves as DIFMs (do-it-for-me).

For example, when asked how well they are doing on having financial security if a wage earner can no longer work due to a disability or serious illness, 64 percent of DIFMs answered positively, compared with 51 percent of DIYers.

CLIENTS ARE GETTING OLDER

50

%

If it seems as though more of your client base is in the over-50 age group, you are OF right. New research from CLIENTS Cerulli Associates finds ARE 50-70 YRS OLD that 53 percent of advisors’ clients are between 50 and 70 years old.

“Advisors are finding it increasingly difficult to attract young investors,” said Kenton Shirk, associate director at Cerulli. “The endless availability of online resources, as well as easy-touse direct platforms, is diminishing the need for advisors within the do-it-yourself generations.”

Cerulli encourages advisors to branch out beyond offering only asset allocation and retirement advice to attract new clients. If advisors can offer or team with tax planning professionals, they will be able to offer tax and estate advice to clients. Long-term care decisions also impact the financial picture of families and should be considered a part of retirement planning.

DID YOU

KNOW

?

56

42%

ARE YOUR CLIENTS FISCALLY FIT?

We hear a lot about the importance of physical fitness, and more Americans seem to be taking that message to heart.

But fiscal fitness? Not so much.

New research from Principal Financial Group shows that American workers view themselves as more physically fit (57 percent) than financially fit (28 percent).

Some 46 percent feel stressed about their current financial situation, although stress seems to diminish with age and among those seeking help. Among baby boomers, 35 percent report they feel stressed about finances compared with half of millennial workers (51 percent).

Those working with a financial professional were much less likely to feel stressed about their finances (33 percent compared with 51 percent).

As a way to give themselves a financial checkup, 52 percent say they have monitored their spending levels in the past year. Nearly 39 percent created a budget to keep finances in check, up from 28 percent two years ago.

OF ADULTS AGE 25 AND OVER

THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING was percent say20 they expect this year. The average increase in the first day (or “pop”) is 13 percent. their financial situation to improve this year.

Source: Renaissance Capital Source: Northwestern Mutual

InsuranceNewsNet Magazine » June 2014

In order to help maintain their financial health in the event of a job loss or other unexpected event, 57 percent have an emergency fund in place. Those who work with a financial professional are 1.5 times more likely to have a fund in place.

Nearly one in five admitted they recently dipped into their emergency fund to cover monthly expenses.

MILLENNIALS PASS UP DC PLANS

Millennials are snubbing defined contribution retirement plans and stashing their money into taxable brokerage accounts instead.

One reason? The retirement plan industry is overly focused on a goal – saving for retirement – that doesn’t resonate with young investors, said Chris Brown, a principal of Hearts & Wallets, a research firm based in Hingham, Massachusetts.

Millennials aren’t thinking about or even looking to retire, Brown said. They’re looking for financial freedom and greater control of their work-life balance. Almost two in five (38 percent) are focused on saving to have enough money to be able to work less, according to a new Hearts & Wallets report.

In the report, Hearts & Wallets found that 74 percent of affluent millennials – those with more than $100,000 in investable assets – have assets in online brokerage accounts, while only 67 percent have assets in a defined contribution plan. This cohort is alone among working age segments to be more likely to invest assets in online brokerage accounts than retirement plans, according to the research.

Millennials hesitate to invest too much money in retirement plans because they don’t have access to the money without paying a penalty. The penalty-free access to capital and greater investment choices of online brokerage accounts make them a far more attractive choice for younger investors generally focused on short-term goals, such as saving for vacation or an emergency fund.

Rather than focusing on retirement savings, the retirement plan industry should stress benefits that appeal to millennials, such as tax deferral and employee matches, the research firm urges.

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FINANCIAL

Couples Often Tuned to Different Retirement Channels E ach partner may have a different view of retirement. Your job is to help them agree on a common vision as they plan for this phase of life.

By Mark E. Caner

R

emember The Newlywed Game?

The premise of the long-running TV show was simple: Pose questions to recently joined couples about their relationship. The twist: Spouses had to respond without knowing how the other had answered.

Because the marriages had just begun, the responses were uncertain. Answers that 58

agreed spurred celebrations. Answers that differed – sometimes widely – prompted surprise, chagrin and even dismay.

Viewers watched to see how well a couple starting their life together really knew one another. And while it was played for laughs, at the game’s end, the future did seem brighter for partners who shared mutual perceptions and expectations.

Managing a similar dynamic is a challenge financial professionals face with couples starting another new stage together – namely, retired life.

Who Has the Remote?

Advisors often work with clients as couples.

InsuranceNewsNet Magazine » June 2014

In doing so, it’s important to be mindful that while husbands and wives become one in marriage, they remain individuals as well.

That’s not always readily apparent.

Although one partner may manage the household finances with scant input from the other, when both spouses are seated together with you to discuss retirement scenarios, they may paint a broad-brushed vision of their post-work life. On the surface it may seem unified.

But it may be more different than even they realize.

When you get down to the details, the fine-tipped brush version emerges. Each spouse brings personal thoughts, ideas

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June 2014 » InsuranceNewsNet Magazine

59

FINANCIAL

COUPLES OFTEN TUNED TO DIFFERENT RETIREMENT CHANNELS

and dreams to what retirement should hold. And not all those thoughts, ideas and dreams may even be fully articulated.

That is why a measure of separate interaction, probing personal insights expressed free of the other partner’s influence, is so essential. Some couples jointly gloss over areas of disagreement. It is the advisor’s job to understand this and help a “client couple” plan in the way that is best for both of them – separately and together.

The Same, but Different

Both partners likely will profess the same ultimate goal: to retire comfortably. The question is, do they share a common understanding of what that really means?

Have they really discussed it in depth? Do they know what retirement will look like, where it will be or even when it will be?

For instance, a couple may agree in general that they want more time to better connect with people in retirement.

However, to one spouse that can mean traveling to visit family and friends as well as making acquaintances in new places.

But the other may view it as the couple staying near home, reaching out to family and friends through social media while immersing themselves in local community activities and causes. Both of these scenarios are worthy pursuits, but ones that may be at odds.

More fundamentally, a client couple may not even agree on their respective retirement dates or ages. Or they may not agree on how much preparation for retirement each one believes is necessary. And they also may not agree what all this may mean to their individual retirement plans, individual Social Security claiming decisions and a host of other retirement factors.

Divide and Conquer

To bring clarity and specificity to a client couple’s retirement planning, it helps to work with the partners separately for a portion of the time. Private fact-finding apart from one another fosters candid sharing of outlooks and opinions. Individual planning opportunities with each spouse facilitate this.

This simply can be meeting with each at a different time. Or, if they’re together, it could mean having them complete your preferred retirement planning fact finder or program separately to document their responses individually. If 60

A couple’s transition into a life lacking the structure of work and careers can be stressful in its own right. that’s the situation, put them in separate areas as they complete it. The objective is to capture baseline knowledge of what really matters most to each partner, free of the other’s influence.

Doing this will help them compare and contrast their retirement feelings and allow you to understand similarities – and more important, differences – that can be addressed in the planning process.

Some of the items that must be covered in this process include: » Individually, what elements do they foresee for their preferred retirement lifestyle? What activities? What pursuits?

What desired standard of living? » How prepared do they feel for retirement? One partner may believe the couple is basically well-prepared. The other may feel much remains to be done. » Will “retirement” mean stopping work entirely or perhaps continuing some part-time employment? » Do they agree what risks in retirement most concern them? Inflation? Longevity? Volatility? Liquidity? Health care? » Do they agree on how they will pay for expenses in retirement? » When does each intend to start taking Social Security payouts? » When does each plan to tap other retirement income sources? Which sources and in what order?

Help Client Couples Tune In to the Same Channel

Because much of this process centers on personal views and preferences, you may want to begin with a consultative

InsuranceNewsNet Magazine » June 2014

approach that defers any discussion of specific plans and detailed provisions. One such method is to pose questions about how clients see themselves in retirement and probe their assessment of preparedness. After capturing individual snapshots of each spouse’s retirement outlook, in subsequent joint planning you can then conduct follow-up joint planning that can help the couple paint the big picture that integrates and aligns their ambitions.

Ultimately, this is all about initiating independent discussions, finding differences and helping couples speak a common retirement language to address those differences. LIMRA research identifies getting clients to articulate their vision of retirement as one of a financial professional’s greatest challenges. A structured, interactive process that helps users visualize personal preferences fosters more information to be shared, understood and addressed.

Marital discord is no game. A couple’s transition into a life lacking the structure of work and careers can be stressful in its own right. If there are points of surprise, chagrin and even dismay regarding retirement plans and ambitions, it is better to identify them sooner rather than later.

So see where their expectations and preferences mesh. Discuss where they differ.

Then work with client couples to address their needs consultatively with the products and services that make the best sense for them individually and together.

Finally, remember that retirement goals and circumstances change over time, so it will be beneficial for a couple to complete this process every few years.

Sustaining a mutually fulfilling post-employment life helps determine the satisfaction of what is a decades-long period for many couples. Begin by collecting frank individual perspectives, then work to convey, integrate and reconcile them in solutions that value each partner’s needs and goals.

Ultimately, a clearer, more cohesive retirement picture promotes a couple’s overall relationship and helps to guide the advisor in serving them for years to come.

Mark E. Caner, AEP, ChFC, CLU, CFP, is president of W&S Financial Group Distributors.

Mark may be contacted at mark.caner@innfeedback.com.

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2014 Âť InsuranceNewsNet Magazine

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BUSINESS

Six Ways to Generate More Sales

F ocusing more on solving the prospect’s problem and less on making the sale will lead you to greater sales success.

By John Graham

O

ne seminar leader opened a workshop for insurance agents by asking this question: “Why do people buy insurance?” After the participants offered a variety of responses, the leader said there is only one correct answer: “To take care of claims.” What seems rather intuitive to most consumers may not be quite so clear to insurance salespeople.

How could they miss something that seems so obvious? It’s easy. Insurance salespeople are knowledgeable about analyzing and managing risk. This is their job. It’s what salespeople know. It’s ironic that the strength of knowledge shifts to weakness when they blindly approach solutions from their perspective. But today’s customers want their issues and 62

their interests addressed by salespeople.

They want to tell their story and they expect salespeople to listen.

To be a salesperson today isn’t easy – in fact it’s difficult. So, here are six ideas that will help you become a more effective salesperson.

1. Embrace a changing role. A recent Silverpop white paper referred to a study that directly affects salespeople: 83 percent of consumers are willing to spend more on a product or service if they feel a personal connection to the company, while 20 percent said they would spend up to 50 percent more if they felt the company put customers first.

While this may help explain the near fanatical customer loyalty enjoyed by such companies as Amazon, Apple and others, it also calls into question the traditional and cherished role of salespeople as intermediaries operating between a company and its customers.

InsuranceNewsNet Magazine » June 2014

This should not cause anyone to conclude the change diminishes the salesperson’s value. But it does suggest that salespeople now have the task of aligning a company with its customers in ways that result in ever-increasing loyalty. Those salespeople who are most successful in accomplishing this objective, a role that some call “customer experience facilitator,” deserve to be compensated appropriately for their efforts because of their ability to understand customer needs and expectations clearly.

2. Make “now” the only acceptable response time. When business email recipients are asked who they should respond to first, the most common answer is “the boss.” And it’s downhill from there.

Perhaps this explains why so many customer emails fail to receive priority attention or why “I’ll get back to you as soon as I can” is insulting.

When Boston Business Journal asked Adam Kennedy, the regional property manager for Peabody Properties, about his guiding management principles, he put communication at the top. “Response needs to be immediate,” he said. Those few words say it all. “Now” is the only acceptable answer. This is what customers expect and how they “score” those with whom they do business.

3. Always think strategically. “It’s absolutely appalling – and I never use that word – that there are large public companies with chief executive officers who cannot tell what the company’s unique vision and value proposition are,” writes management consultant Steve Tobak of Invisor Consulting.

If this is accurate, then is it any wonder that others in these companies are focused on what they are doing, but they don’t have a clue as to the mission of the enterprise? Ask someone in sales their mission and chances are they will say, “Make the numbers.” On and on it goes – no strategy.

“Tell me what your business was born to change?” asked Christoph Becker, global chief executive officer of gyro. “Who are the people? What is their dream? How is your business set to change the world?”

He notes that this is what it takes to make a brand relevant to people.

SIX WAYS TO GENERATE MORE SALES 4. Don’t jump to a solution before understanding the need. Sending customers the message that your goal is “making the sale” rather than “helping to solve a problem” is the most common mistake in sales. Today’s customers don’t want any part of “being sold.” What they’re looking for is help. Salespeople who don’t understand the difference are headed for trouble.

The path to the right solution starts with asking questions – taking time to ask lots of questions. “At first it bothered us that she was asking so many questions,” said the manager regarding a meeting with a salesperson. “It was irritating because we knew what we wanted.” Then, with a sheepish smile, he added, “It didn’t take long before we realized that we had been going in the wrong direction.”

If there were ever an overlooked truth in selling, it’s this: Questions, not presentations, close sales. Why? Customers recognize the value of salespeople who understand what it means to help.

BUSINESS

5. Make compelling statements that deliver the right message. Jim Corliss is the owner of Braintree Printing, a successful company that has long been known as an early adopter of new technology. “Some things work better than others,” Jim said. “But I feel it’s important to be on the leading edge.”

When asked about his new 3-D printing capabilities, Jim said, “It’s going slower than I would like, but people need to get a feel for what it can do for them and that takes time.”

It takes powerful, compelling messages to put a company “out in front,” to attract customers and to separate it from the competition.

alty.” Customers conclude, “I’m not important to them.”

Customers are amazed that so few salespeople ever bother to follow up after a sale, let alone follow up as time goes by.

When auto dealers fail to stay in touch with car buyers after more than a few months or maybe a year, the customers fall off the database cliff, which then gives them “permission” to shop elsewhere the next time around. If salespeople want loyalty from customers, they must demonstrate loyalty as well.

Today, there are so many available buying channels for customers that continuing to engage them is a salesperson’s most important task.

6. Never stop engaging customers.

This may seem so basic and obvious it’s not worth taking time to talk about it.

But the evidence suggests otherwise. In effect, most companies don’t make engaging customers an ongoing activity.

Stupidly, they actively promote “anti-loy-

John Graham of GrahamComm is a marketing and sales consultant and business writer.

He publishes a free monthly eBulletin, “No Nonsense Marketing & Sales.” John may be contacted at john.graham@ innfeedback.com.

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June 2014 » InsuranceNewsNet Magazine

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For more than 80 years, the Society of Financial Service Professionals has been helping individuals, families and businesses achieve financial security.

SOCIETY OF FSP INSIGHTS

Let Risk Tolerance Be Your Guide A client’s risk tolerance is a crucial consideration in determining the type of insurance that best suits his needs.

What type of “lifetime use” policy is in my best interest?

There are only two basic lifetime-use design/pricing “platforms”

By Richard M. Weber

I

n last month’s column we considered “What’s it gonna cost?” when it comes to buying life insurance. In MetLife’s cute commercial series featuring the “Peanuts” characters, Lucy seems to think, “It should cost five cents.” And why not? The various forms of universal life (UL) – the most popular form of “permanent” life insurance being purchased today – allow the buyer to pay as little as they want as infrequently as they want. Hey, Lucy – what about 5 cents?

Obviously, life insurance has to cost something. In my May column, I addressed the technical issues about why an illustration-calculated planned premium’s sufficiency may be more complicated than it appears when 1) the intention is to keep the planned premium as low as possible, and 2) the UL policy is of the indexed or variable variety.

We’re now aware of the underlying issues of complexity with the typical UL illustration using a snapshot rather than a high-definition video to portray a moving target. But there’s a second underlying issue that often gets lost in the conversation: How did we decide to sell that indexed universal life policy in the first place? That’s right – the illustration looked good and it is the product many companies are encouraging their agents and brokers to sell. And the price certainly seems right without having to take the kind of volatility risk associated with variable universal life.

But in considering the broader arena of financial planning, a planner or investment manager will begin the conversation with a new prospective client by inquiring about the client’s risk tolerance. The advisor typically will ask the client questions and review a list similar to the following. In doing so, the advisor also will instruct the client to choose the statement that most closely reflects the subjective “from the gut” answer to the 64

GUARANTEED

CURRENT ASSUMPTION

Whole Life No Lapse Guaranteed UL

Universal Life Variable Universal Life Indexed UL

Little/No Management

Active Management

following question: “What about money and the risk of losing principal wakes you up in the middle of the night?”

1. Preservation of principal is paramount. In other words, I want to minimize my risk, if faced with the choice of whether getting a return of my money is more important than getting a return on my money.

2. Current income and stability of principal is important to me, and my investments should be relatively safe.

3. Current income and stability of principal is an objective; however, I would also like to see the value of my investments reasonably increase over time. I am willing to incur a moderate level of risk to achieve this objective.

4. Growth of the value of my investments is important. However, I would also like to have some current income.

I am willing to expose my investments to a fair level of risk to achieve this objective.

5. Substantial growth over time is important to me. I do not need to generate current income. I am willing to incur a considerable level of risk to achieve this objective.

Those questions will guide the investment manager in assembling an investment policy statement (IPS) that will in turn generally include several custom portfolio options that best respond to achieving the clients’ style needs within their consideration of risk tolerance.

InsuranceNewsNet Magazine » June 2014

In my own practice, clients who express a conservative approach to investing should know about both of the two guaranteed life insurance products in which premiums, death benefits and cash values are fully guaranteed. A secondary consideration to a conservative investment style is a desire not to have to manage their investments. When selecting a carrier of high financial strength, clients have an extremely high probability of achieving their objectives both as to the guarantees and the low or nonexistent management requirements.

On the other hand, clients who have experience investing “in the market” – and have the resources, time horizon and willingness to actively manage their life insurance – might be drawn to a variable or indexed universal life policy. The sophisticated client – and the insurance professional – will collaborate to come up with one or more policy styles that will meet those needs and expectations. And as we saw last month, although the illustration is capable of drawing attention to the appearance of a low “price” – that is not an appropriate basis on which to select a policy. If a policy is recommended on the basis of price alone, the client will miss the objectivity, planning focus and customization to risk tolerance that is clearly needed with today’s sophisticated and complicated life insurance products.

Richard M. Weber, MBA, CLU, AEP, is immediate past president of the Society of Financial Service Professionals. He may be contacted at richard.weber@ innfeedback.com.

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65

NAILBA INSIGHTS

The National Association of Independent Life Brokerage Agencies (NAILBA) is a nonprofit trade association with over 350 member agencies in the U.S. and Canada.

Protecting Your Client’s ‘Flight Plan’ G uiding your clients toward their retirement goals is much like flying and landing an airplane.

By Barbara Crowley

R

ecently someone asked me, “What role do insurance products play in the lives of people who are approaching retirement age?”

When I think about this, an analogy comes to mind.

For most people, retirement is a destination that they hope to reach. For the purposes of my analogy, I will choose Hawaii as that destination.

An airplane en route to Hawaii from the mainland will fly off course 98 percent of the time because of shifting winds over the ocean. Although the winds vary in severity and direction, the plane always arrives in Hawaii. How is that possible? The plane lands in Hawaii because its crew has the qualifications, training and resources to ensure that the plane reaches Hawaii.

Although they don’t always know how strongly the winds will blow or what kind of weather may occur during the journey, the crew understands that these things will happen and they are able to make the appropriate adjustments to ensure that our clients’ final destination is reached safely.

To me, this example accurately depicts the journey to retirement and the role that we play.

The Destination

Before planning your clients’ retirement journey, the first step is to decide what is important to them so you can determine the destination that makes the most sense.

Only by analyzing each clients’ needs and finding out what is important to them will the advisor have any hope of assessing the likelihood that the clients will be able to get to where they want to go. Once the analysis is complete, the advisor can clearly identify the clients’ destination – their retirement goals.

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The Flight Plan

Once a destination is chosen, it is important to pick the route with the greatest odds of reaching the destination safely and efficiently. This requires an advisor to analyze which products and services will meet the client’s needs and ensure that the client reaches that destination with the lowest risk and volatility possible. If significant weather is predicted, a pilot will choose to take a different direction and so must the advisor.

The Takeoff

To me, the takeoff represents the early phases of the plan. It is the stage when the plane is most aggressive and consequently where the passengers also face the most risk. This is typically when an advisor is more aggressive with client assets and focused primarily on growth – taking a higher risk in order to achieve a higher return. It takes unique skills to handle a plane at takeoff, just as it takes unique skills for an advisor to get a client’s financial plan off the ground.

Leveling Off

At some point it makes sense for the plane to ease out of its aggressive ascent and gently level off. There may be somewhat of a slow climb at this stage, but it is controlled and the passengers feel safe. In our world, this is when clients shifts from aggressive growth products with high risk to moderate investments designed to keep them protected while they continue gradually ascending.

The Landing

At some point all the crew’s hard work should lead to a gentle and controlled landing. This is when the advisor must work with the client to ensure that the assets that are built up can be distributed and enjoyed when the client reaches the ultimate destination. You cannot land a plane in the same way that you take off. You must be more disciplined and

InsuranceNewsNet Magazine » June 2014

conservative to ensure a safe landing.

When you think about this analogy, it can closely mirror the life of all who are hoping to land safely in their destination: retirement. So what does any of this have to do with the initial question about the protection products that our industry represents? During any flight, there is risk. The most masterfully executed takeoff (growth), leveling off (conservation) and landing (distribution) becomes irrelevant when the flight plan is diverted because of unexpected events.

Too many advisors focus on growth and distribution but ignore protecting the flight in the first place. Unexpected turbulence will happen for everyone who flies and everyone who prepares for retirement. Thanks to progressive product development, many protection products can help in the ascent or growth phase, the leveling-off phase, and the landing or distribution phase.

As insurance professionals, we need to help people understand how we can protect their flight plan. The future of our industry lies in educating all the professionals involved in all phases of a client’s plan about the importance of protecting that plan. Advisors need to see life insurance products as a strategy, not a sale. They need to form strategic partnerships with those who help clients during takeoff, leveling off and landing to ensure that they see how protecting the flight will alleviate their clients’ fear. Relentlessly educating not only clients but the other financial professionals in the industry about the importance of our products and services is critical.

Now, if you’ll excuse me, I have a flight to Hawaii to catch.

Barbara Crowley is the president of Brokers Clearing House in West Des Moines, Iowa, and the 2014 NAILBA Chairman of the Board. Barbara may be reached at barbara. crowley@innfeedback.com.

NAIFA

PROTECTS

YOUR BUSINESS Your business – and your ability to help families save for their future - is at risk from threats on Capitol Hill.

Only NAIFA has the reach to make your voice heard. When you join NAIFA, you’re speaking to legislators in one, clear voice.

Go to www.NAIFA.org/iavoice or call 1-877-866-2432!

June 2014 » InsuranceNewsNet Magazine

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

MDRT INSIGHTS

Take Clients to the Big Leagues With an All-Star Team speaking at industry conferences are also great ways to differentiate themselves in the marketplace.

[ 3] Maintain Relationships

C ollaborating with a team of professionals is a great way to design and implement an effective plan for your clients.

By Albert E. Gibbons

I

t’s no secret that the world is extremely complex – especially the financial world. In today’s volatile market, people are bombarded with advice about how to manage their portfolio, what products to purchase and where to invest. Collaborating with a team of professionals can be a wonderful solution to help clients cut through the noise. Working with excellent attorneys, accountants, investment professionals, bank trust officers, valuation experts, etc., can produce extraordinary results and move projects along quickly, completely and confidently. A great planning process should include reliance on collaborative teams when designing and implementing effective solutions for clients. To put together a strong team of advisors, try these tips:

[1 ] Evaluate Client Needs to Assemble the Appropriate Team Members

A successful team starts with first understanding a client’s needs. Excellent professionals share similar characteristics.

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For example, they are competent – they know what they are supposed to know.

They believe in continuing education – they have the appropriate designations and are active in professional associations. Top-flight professionals have integrity – they always act in the best interests of their clients by providing valuable advice and ongoing service. It’s important for collaborative teams to do what they say they will do, to know what they are supposed to know, to communicate in an easy-to-understand manner and, most important, they should always put the client’s best interests ahead of their own.

[2 ] Get In Front of Quality Professionals

Advisors must demonstrate that they are competent by building their resume. This can be accomplished in several ways, e.g., earning their Chartered Financial Consultant and/or Accredited Estate Planner designations. They should also become active in industry organizations such as the Million Dollar Round Table (MDRT) and their local estate planning council.

These associations will increase their visibility, help them build relationships with other professionals, and confirm that the advisor is trustworthy and reliable. Writing in financial trade publications and

InsuranceNewsNet Magazine » June 2014

In order for collaborative teams to effectively meet their objectives, they need to articulate their goals and set deadlines. If team members don’t communicate, they are not going to get the stellar results they promise their clients. All team members need to stay up-to-date on their priorities, attend team meetings to ensure that everyone understands their unique role, and continuously stay in contact with clients to keep them abreast of any changes that would impact their financial plans. The creation of well-organized and highly effective teams also includes clients as key partners and team members.

A truly collaborative process enables clients to make well-informed decisions for themselves, their families and future generations. When appropriate plan design has been achieved, collaborative teams have a responsibility to ensure flawless implementation. This often requires the overlapping knowledge of the team members and the tenacity of each to make sure all the “i’s” are dotted and “t’s” are crossed – with each team member being 100 percent responsible for the well-being of the client. When that has been accomplished, all participants can sit back and take pride in their work.

Enjoy the journey as your practice moves to the next level!

Albert E. Gibbons, CLU, ChFC, AEP® (Distinguished) specializes in estate planning and life insurance planning for high-net-worth individuals, high-level corporate executives and successful entrepreneurs. He is a life member of the Million Dollar Round Table (MDRT) and Top of the Table. Albert may be contacted at albert.gibbons@innfeedback.com.

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.

Camp Tax Reform Plan Shows Need for Lawmaker Education A t the NAIFA Congressional Conference, members educated lawmakers about the adverse impact of the Camp Draft.

By Diane Boyle

T

he Camp Tax Reform Discussion Draft – proposed by House Ways & Means Committee Chair Rep. Dave Camp, R-Mich. – underscores an urgent need for NAIFA members to continue their ongoing efforts to educate Congress about the value of and need for current tax rules that govern life and health insurance, retirement savings, and employee benefits.

The Camp Draft extracts more than $583 billion (over 10 years) from almost 50 proposals that directly or indirectly impact the insurance industry. The adverse revenue impact hits customers, agents and insurance carriers. Some experts project that the Camp Draft would stimulate the economy and fuel jobs growth, but it comes with a hefty price for the retirement savings and financial security of many Americans.

Virtually all the proposals in the Camp Draft are technical changes that would dramatically increase life insurance company, agent and/or policyholder tax bills or substantially raise the cost of doing business as an insurance agent or advisor. Thus, the need for lawmaker education is acute.

NAIFA’s Congressional Conference

NAIFA, in conjunction with allied trade associations and insurance companies, is strategically responding to this threat.

Among the most important of these responses was the 2014 NAIFA Congressional Conference held last month in Washington. The conference brought together agents and advisors from all over the country to educate lawmakers about the serious adverse impact of the Camp Draft as it is currently written.

During the 2014 Congressional Conference, NAIFA members visited over 90

percent of their congressiona l officials. They also spent days on Capitol Hill in NAIFA meetings, with the Secure Family Coalition, and in House Ways & Means joint efforts with Committee Chairman other agents Rep. Dave Camp, and companies. R-Mich.

These initiatives demonstrated the power and effectiveness of constituent lobbying.

The Camp Draft does not suggest a new, direct tax on life insurance or on annuity cash values – and that is largely attributable to this kind of grassroots effort.

NAIFA will again use the strength of constituent expertise to defeat the adverse proposals of the Camp Draft.

poses changes in how life insurance companies calculate the deductions they take for reserves. These reserve deductions mirror the cash values inside each life insurance or annuity policy. Enactment of these changes inevitably would reduce every policy’s performance.

And the Camp Draft hits hard at the deduction that insurance carriers take for the commissions they pay their agents (the deferred acquisition cost [DAC] proposal). Inevitably, if enacted, these proposals would either hurt policy performance or reduce agent compensation.

The hits to retirement savings are numerous:

Impact of the Proposals

» The repeal of traditional individual retirement accounts and the proposal to cut in half the annual pretax contribution limit (the other half would get Roth treatment – after-tax contribution with tax-free distribution post-retirement).

The proposals are complex, but their results are simple – they hurt! More than $85 billion in new revenue would come from insurance product and company taxes. Another $225 billion would come from adverse changes to retirement savings, and some $272 billion would come from changes to the cost of doing business.

It may not be intuitive to see a proposed repeal of Internal Revenue Code (IRC) Section 409A with its policy based on constructive receipt as a significant threat. But in fact, these proposals would essentially wipe out nonqualified deferred compensation arrangements.

These arrangements – usually constructed around life insurance – are the foundation of many a middle-management professional’s retirement planning.

And even though one’s eyes may glaze over at the sound of “pro rata interest disallowance rules,” this company-owned life insurance (COLI) proposal would restrict, to the point of eliminating, virtually all company uses of life insurance.

The list goes on. The Camp Draft pro-

» A 10-year freeze on cost-of-living adjustments, which is equivalent to reducing the allowable contributions by 20 percent over time.

All of these serve to disincentivize employers from offering plans. The revenue from switching to Roth treatment doesn’t account for the revenue lost from tax-free distributions in the “out years.”

There are also many business proposals that hurt. For example, the Camp Draft significantly reduces a businessperson’s deduction for advertising expenses.

And once again this proposal is complex, but half of all advertising expenses would have to be “amortized” – i.e., they would have to be spread out over 10 years instead of being taken in the year the expense is incurred.

Diana Boyle is NAIFA vice president, federal government relations. Diane may be reached at diane.boyle@ innfeedback.com.

June 2014 » InsuranceNewsNet Magazine

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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

Barometer Measures Importance of Dealing With an Advisor C ommunications methods may change, but the importance of the personal touch remains.

By Ashley V. Durham

T

o stay current with consumer insurance perceptions and behaviors, LIMRA and Life Happens jointly publish the Insurance Barometer Study. Now in its fourth year, it measures consumer financial concerns and attitudes about financial products, with a particular focus on life insurance.

Some of the responses are not surprising and reflect attitudes held about life insurance for years. For example, 80 percent of adults still agree that most people need life insurance. However, while one in four adults admits they themselves need more life insurance, only one in 10 said they are very likely to buy a policy within the next year.

When they are ready to buy, most people still want to work with a financial advisor or agent, because life insurance can be a relatively complicated purchase. Just over half of the respondents in the 2014 Barometer Study prefer to purchase from an agent or financial advisor in person.

At the same time however, one in four under the age of 45 said they’d prefer to apply for life insurance online. There is also a strong preference among all age groups, even among seniors, to use the Internet when researching life insurance.

Despite increasing Internet involvement, the financial professional’s presence remains essential. Communication in person or over the phone is still the way most consumers want to work with their financial advisor or agent. Email is almost as popular among the under-45 crowd, but only 30 percent over the age of 45 prefer to communicate by email.

Financial advisors and agents have heard a great deal about the importance of staying current with technology. This is especially true with younger consumers, who cite several tech-based pref70

Source: “2014 Insurance Barometer,” LIMRA and Life Happens

erences of communication with their financial advisors or agents. Video Web conferences are favored by one in five of the under-45 consumers. Other methods increasing in popularity include instant messaging, text messaging and communicating through a social media site.

What does all this mean for a financial advisor or agent running a business? It actually reflects the larger “omnichannel” trend in life insurance, with consumers wanting to interact with the life insurance purchasing process on their terms. Today’s consumers will sometimes seek life insurance information inperson and other times they will browse a company Web page, as 40 percent of consumers told us they had done (half of them within the past year). In the end, consumers want to understand what they are buying and to make sure they

InsuranceNewsNet Magazine » June 2014

are getting the right amount of coverage for the right price.

We conduct the Barometer Study each year because it allows us to identify and monitor emerging trends with consumers. The survey also reinforces that consumers still seek good advice. Whether it’s a phone conversation with an agent or a discussion held on a financial advisor’s Facebook page, the methods of communication may change, but the importance of the personal touch remains.

Ashley V. Durham is a senior analyst in Insurance Research for LIMRA. She is the project director for the U.S. Individual Life Insurance Sales Studies, the U.S. Individual Life Insurance Yearbook and the Insurance Barometer Study. Ashley may be reached at ashley.durham@innfeedback.com.

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71

THE LAST WORD

The 59½ Birthday Is More Than One Reason to Celebrate A novel sales idea relates to the difficult decisions that your clients need to make in planning for retirement.

By Larry Barton

J

erry Borrowman of Salt Lake City is one of the more progressive advisors in the field. Not only is he an outstanding insurance agent, but he is also the author of more than a dozen books of fiction, mostly focusing on the “Wild West.” That may be one of the reasons he is also a bit of a cowboy when it comes to exploring new ways to generate interest from existing clients.

“I decided to send invitations to my clients to my 59½ birthday party at a local restaurant. I thought maybe a half dozen would show up,” Jerry said. “Instead, the restaurant was packed. It was jammed.

Everyone was intrigued about why I was celebrating 59½, and when I explained over dessert about the importance of individual retirement account planning, there was applause and laughter – and then, the serious ‘Hey, can I talk with you?’ discussions continued for the next week.”

There is no question that Congress must examine the massive debt with meaningful tax reform. The notion of a flat 2 percent tax on everything – from a gallon of milk to a new home – is far too simple and effective a solution for lawmakers. Estimates by various economists suggest that such a solution could cut the deficit within 15 years by effectively half. Such an effort doesn’t target merely those who start businesses and create wealth for others – it is a fair and flat tax.

No, progressives say, just keep taxing the wealthy. That antibusiness sentiment will continue to slow our economic recovery.

Thus, the lens of Congress turns to our collective attempt to save for retirement.

Over the last decades, policymakers told us that we needed to save for retirement, and the baby boomers listened. Now there will be multiple attempts to penal72

ize them for making sacrifices while they raised children and bought homes.

Some proposals call for “exempting” the boomers who have more than $1 million in retirement accounts from accessing any of their Social Security funds.

Please note that I don’t refer to this as an entitlement, because Social Security is not an entitlement – it is a contributory contract you and I made with the government. Our employer matched those contributions dollar for dollar. Prohibiting access to your funds will not only be challenged in the courts, but would likely cause boomers to throw eggs at town hall meetings when our congressmen visit our districts. I’ll be first in line.

So, back to Jerry Borrowman. Let’s say he was a good citizen and decided to be benevolent and wait until he was 69½ to access his annuity. The legislation in place when he made the contribution called for withdrawals at 59½. Personally, I think that he not only did the right thing. But his clients should, if circumstances are appropriate, be doing the same thing now, while they still can and before they are precluded from doing so. As marginal tax rates increase, the benefits of doing so will only become more challenging.

Many insurance agents are hesitant to provide specific withdrawal advice. David Littell, who leads The New York Life Center on Retirement Income at The American College, reminds me that his father, now in his 90s, has enjoyed a satisfying, quality retirement life not only because he had the foresight to save and the prudence to live within his means, but also because he took distributions as early as possible. If you have the opportunity, read some of the data about retirement income on his Retirement Center website at theamericancollege.edu.

David Walker, who led the Congressional Budget Office (CBO) and who is now a candidate for lieutenant governor in Connecticut, warned Congress repeatedly during his tenure that massive cuts

InsuranceNewsNet Magazine » June 2014

will need to be made in a variety of programs now. Of course, his admonitions are provided in an atmosphere where no member of Congress wants to be held responsible for voting to ease Social Security benefits or IRA withdrawals. In fact, President Obama’s new program of myRAs seeks to create an entirely new platform of savings, specifically geared for younger workers who often avoid any retirement plan participation.

Your boomer clients face some hard choices. If they are prudent and moderately wealthy, they are playing roulette and hoping that someone else will foot the bill for the national debt. If they withdraw from their annuities as early as possible and then claim their Social Security benefits in their 60s, they are hoping that they will be grandfathered if any punitive changes are made.

No decisions will be made this year by a Congress that has proven itself to be inept at making the hard decisions that will bring us to the next level of economic security. But your clients cannot be frozen in time just because our representatives are out shaking hands and avoiding these topics.

It’s time to call your favorite restaurant, rent a room, and invite your best clients for salad, soup and a discussion about turning 59½. Isn’t it worth $10 a person to reconnect with clients you haven’t seen in years?

Larry Barton, Ph.D., CAP, is Chancellor of The American College. Larry may be contacted at larry.barton@ innfeedback.com.

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Focus on the human element rather than the product, and how it can fill a need in her life. Remember to listen. Learn about her. Tell some true stories. Make some new sales in this underinsured market.

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Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, MD and William Penn Life Insurance Company of New York, Garden City, NY. Banner is licensed to do business in 49 states and the District of Columbia. William Penn does business exclusively in New York; Banner does not solicit business there.

Banner Life OPTerm policy form # ICC12OPTN and state variations. In New York, William Penn OPTerm policy form # OPTN-NY. Two-year contestability and suicide provisions apply. Competitive rank based on CompuLife comparisons as of 3.17.2014 against top 13 brokerage term carriers. Rates as of 03.31.2014. LIMRA MarketFacts, Spring 2010, “Help Is On the Way”. Time Magazine, 11.22.2010, “Rise of the Sheconomy.” 14-175

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