July 2014
Planning for Digital Disasters PAGE 36
PLUS:
5 Letters Spell Media Mastery PAGE 10
29 Felonies from Selling Annuities PAGE 8
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JULY 2014 » VOLUME 7, NUMBER 7
42 ANNUITY
42 A thene Expected to Gain Footing in Expanding FIA Market
20 INFRONT
8 S ome Worry Conviction Could Turn Annuity Agents into Burglars By Steven A. Morelli A former agent’s arrest and upcoming trial related to annuity sales could have ramifications for the entire industry, some fear.
10
INTERVIEW
COVER FEATURE
20 How to Be a Media Rock Star
By Linda Koco Well-designed media campaigns using television, radio and/or print can help advisors promote their expertise in the local community — and grow their business too.
2
InsuranceNewsNet Magazine » July 2014
44 E arly Retirement Is Not a Recession-Based Phenomenon By Eric Taylor Financial professionals can make a positive impact in their clients’ lives by starting the retirement dialogue sooner rather than later.
50
LIFE
32 Living Benefits: Separating the Plans and Terminology By Michael Smith The development of life insurance with living benefits is a rapidly growing trend in the marketplace. But all the variations and terminology can be confusing.
36
HEALTH
50 W hich Type of DI Coverage Is Best for Employees? By Larry Schneider Group disability plans provide an important benefit, but some deficiencies exist.
FINANCIAL
54 How to Explain Bonds
10 Media Mastery
An interview with Brad Phillips It’s one thing to seek the media spotlight. But what happens after you get reporters calling you for interviews? Brad Phillips draws upon his years in TV network news to coach others in message creation and delivery. In an interview with InsuranceNewsNet Publisher Paul Feldman, Phillips describes simple steps you can take to master the media.
By Linda Koco A look at the annuity market’s firstquarter performance with a focus on this growing company’s performance.
36 Why Your Clients Should Have a Plan for Their Digital Assets By William Bissett Your clients’ online world provides a wealth of opportunities but a tremendous challenge when it comes time to settle an estate.
By Bryce Sanders Bonds are appropriate investment vehicles for some of your clients. Here is a rundown of the key facts and primary risks regarding bonds.
54
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PROTECTING LOVED ONES
ALSO IN THIS ISSUE JULY 2014 » VOLUME 7, NUMBER 7
BUSINESS
61 NAIFA: Former Music Teacher Strikes the Right Note as an Advisor
56 Community Leadership: Giving that Pays By Edward C. Auble Taking on a leadership role in a volunteer organization can help you advance your professional reputation while you serve a cause that’s important to you.
INSIGHTS
58 S OCIETY OF FSP: ‘The Music Man’ as a Metaphor for Life (Insurance) By Richard M. Weber The songs and the plot of this classic musical provide some lessons in the debate over standards of care.
60 MDRT: Clear the Waters Ahead to Discuss Life Insurance By Bill Koss To help you steer through the challenging seas of your clients’ life insurance needs, try these easy-to-implement strategies.
By Ayo Mseka and Robert Hendrickson A career change led to new challenges and rewards for this award-winning young advisor.
62 L IMRA: Thoughts About Retirement From Latin American Consumers By Lauren J. Finnie LIMRA research shows that Latin Americans are also dealing with retirement-readiness concerns.
64 The Last Word: Fire Up Your Recruiting Model By Larry Barton You can’t attract the millennial generation to the financial services profession by using the same old recruitment techniques.
58
EVERY ISSUE 6 Editor’s Letter 18 NewsWires
30 LifeWires 40 AnnuityWires
48 HealthWires 52 FinancialWires
INSURANCENEWSNET.COM, INC. 355 North 21st Street, Suite 211, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli ASSISTANT EDITOR Susan Rupe VP FINANCES AND OPERATIONS David Kefford CREATIVE DIRECTOR Jake Haas PRODUCTION EDITOR Natasha Clague SENIOR GRAPHIC DESIGNER Carlos Centeno DIRECTOR OF MARKETING Katie Hyp DIRECTOR OF SALES Anne Groff TECHNOLOGY DIRECTOR Joaquin Tuazon
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14 INN 07.14 July 2014 » InsuranceNewsNet Magazine 5
WELCOME
LETTER FROM THE EDITOR
Be the Fairest One of All
H
ere is the one weird trick to being really good at interviewing: Sound like a babbling idiot. It’s worked for me. I know people who might suggest I had a head start on that, but that’s only because they know me. Early in my career as a newspaper and radio reporter, I interviewed governors, senators, captains of industry, sergeants of police. It was a little intimidating for a college kid whose biggest accomplishment in life up to that point was inventing a recipe that consisted of adding an egg to ramen noodles. I compensated by seeming to be an equal who was worthy of speaking to these people. Or, more accurately, I thought I was appearing that way. I suspect I was looking more like a jerk with a chip on his shoulder. So, I got pretty lousy quotes. In fact, I learned that cops have a way of just staring through you until you confess everything you’ve ever done wrong. Then you invent transgressions just to get them to stop staring. After taking a look around the couple of newsrooms where I was working part time, the habits of good interviewers became apparent. I learned I was doing two things wrong: I was being inauthentic and I was not engaging the interviewee. In this month’s interview with Publisher Paul Feldman, Brad Phillips shares some excellent insight regarding how to engage an interviewer and much of it is also true on the other side of the media table. As Brad describes it, success on both sides is a matter of perspective. On the interviewee side, it is not about the interviewer but about the audience receiving the message. On the interviewer side, I had to learn that the interview was not about me – it was about the information contained within the interviewee. Understanding that, I became deeply curious about what people knew. I brought the perspective of the reader or listener to the discussion – what would they ask if they were in my place? I realized I was privileged to be that representative. I was 6
InsuranceNewsNet Magazine » July 2014
no longer concerned about what interviewees thought of me, and my authentic self showed up. The next step was engaging the interviewee. I found that intense curiosity can be a little unnerving. Creepy even. Interrogation was not working, so I listened to my betters once again. I noticed that they asked for help in understanding issues. They said things such as, “I didn’t get that, can you explain that for me?” and “This is a bit over my head, can you break it down a little bit for me?” People are flattered to be considered experts and want to help others. They tended to be certain I understood their issues and went out of their way to provide information. That was effective for “friendly” interviews. It went only so far in more combative interactions. I had a few of those when I covered the police and courts in Luzerne County, Pa., a place so corrupt that between it and neighboring Lackawanna County, three county judges, two county commissioners and two state senators were among 31 public officials recently prosecuted by federal authorities. In those cases, I told little of what I knew and stumbled a bit in my questions. Officials insulated by hubris and entitlement thought I was just a harmless idiot. I let them talk and talk and talk, explaining ev-
erything in minute detail. Then I’d take the data and their comments and start typing. They’d call back the next day, infuriated about the article. “Sorry to upset you,” I’d say. “Please help me understand your points a little better.” Then they’d talk and talk and talk. They seemed to make sense to themselves, but when their words met reality, reality was baffled. If you are doing wrong or making mistakes and try to bluster through a reporter, that’s exactly what it will look like. That’s another of Brad’s excellent points. If you are helpful and are genuinely excited about your message, that will project through media. I know that I have often wanted to help someone get their message out when I felt an affinity for them. It’s only human. That was the final and perhaps most important lesson that Brad had to convey. He told of someone who got a glowing USA Today article simply because he treated the reporter like a human being. The media is merely a mirror. What face do you want to present to the world? Steven A. Morelli Editor-in-Chief
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7
INFRONT
For the original article on this case and the latest news, visit bitly.com/innlewis
TIMELY ISSUES THAT MATTER TO YOU
Some Worry Conviction Could Turn Annuity Agents into Burglars A lan S. Lewis’ life slid from awful to horrible when he went from being depressed and homeless to becoming a defendant facing 29 felonies for selling annuities. By Steven A. Morelli
I
nsurance agents in California may become burglars if they go to a client’s home to sell annuities with surrender charges. That is one of the outcomes some observers fear in the trial of former agent Alan S. Lewis in Riverside. The proceeding was scheduled to start on June 23, but it might still be in session in July because of all the charges, testimony and evidence. The prosecutor said Lewis persuaded seniors to sell their annuities and certificates of deposit to buy another annuity and suffer a surrender charge. Court records and Lewis said the second annuity was the Allianz MasterDex 10, which is a complicated two-tier annuity that is no longer sold. The product
offered attractive benefits, but the owner had to hold the annuity for 10 years and annuitize for five years to collect the maximum returns and bonus. That was a key reason the prosecutor called it a “phantom bonus.” Lewis said he in hindsight realized that it might not have been the best product to put elderly clients into and sold some of them a third annuity, with what he said was a better bonus to offset the surrender charges. The prosecutor said Lewis was “twisting” just to collect commissions, costing 12 of his clients $300,000 in surrender charges. The charges allege that the surrender charges amounted to embezzlement and grand theft. Because he met with clients in their homes, he is also accused of burglary. He faces 19 felony counts and one misdemeanor of embezzlement, eight felony counts of burglary and two felony counts of grand theft. He has been in jail since late February. The preliminary hearing took six days, which is exceptionally long for a hearing.
“It won’t matter if you’ve got yourself an MBA, MDRT, CFP or M-O-U-S-E. Just sell an annuity with surrenders and you’re going to jail.” — BC, ARTICLE COMMENTER The proceeding took a one-day break in the middle so the prosecutor could attend a class on annuities. The trial promises to be long as well, with voluminous documents, including annuity contracts, and testimony. Reaction to the case has run the gamut, even among insurance producers. Almost all comments on the article itself, in email and phone calls, have started with at least some unease about the repeated annuity sales. A few people have said Lewis is getting what he deserved. “It’s real, real simple: we in the business are shepherds. We take care of our clients
LEWIS CASE TIMELINE
OCT. 2013 Lewis begins recovering from depression and moves in with his parents in Houston.
2002
FEB. 2009
Alan S. Lewis starts working with Family First Insurance Services, based in Woodland Hills with 11 regional offices in California. Family First and the company whose fixed index annuities it sold, AmerUs, are eventually subject to a class action suit over sales practices.
Lewis leaves the annuity business, suffers a severe episode of depression and moves to Spring Hill, Tenn. Lewis estimates he sold approximately $30 million in annuities over six years. He had three official complaints, which he said were settled “without wrongdoing on my part.”
2002
8
2004
2006
2008
2002-2005
2005
Lewis says the gathering class action suit rattled some clients, so, among options, he suggests clients can buy Allianz MasterDex 10 fixed index annuities. The prosecutor alleges the surrender charge that the clients incurred constituted embezzlement. Although the clients were promised that the bonus from the new annuity would offset the charge, the prosecutor alleges Lewis should have known it was a “phantom bonus.”
Lewis leaves Family First. Lewis says he recognized in hindsight some shortcomings in the MasterDex 10 and returns to some clients and moves them to a third annuity. The prosecutor says this constitutes “twisting.” Allianz is subject to a large class-action lawsuit over the sales practices involving complicated, two-tier annuities, such as the MasterDex 10.
InsuranceNewsNet Magazine » July 2014
2010 2010
2012
Lewis recovers from depression. He begins to receive calls from California Insurance Department Investigator June Arago, who asks about his annuity sales.
OCT. 2012 Lewis suffers severe depression and lives on the streets of Nashville for a year. He and his wife divorce.
OCT. 24, 2013
SOME WORRY CONVICTION COULD TURN ANNUITY AGENTS INTO BURGLARS and put their interests ahead of ours at all times,” said one commenter (edited slightly). “We are 100 percent truthful and honest at all times and 100 percent professional and ethical. Any other approach to our business should be run out of the business immediately! Arrested? If the shoe fits.” But even with the discomfort some felt about the sales, many others said the bigger issue is the precedent. “Sadly, it doesn’t appear some of the agents commenting have a clue as to the true danger such a case brings to their business,” another poster said. “Yes, Mr. Lewis is on trial, but so are all insurance agents. And yes, the case can be made that some of the advice he provided clients was aggressive and even extremely questionable. … [But] if they get a conviction, this will set a dangerous precedent. It won’t matter if you’ve got yourself an MBA, MDRT, CFP or M-O-US-E. Just sell an annuity with surrenders and you’re going to jail.” Another commenter had a helpful suggestion: “All agents better start working out and learning self-defense because it won’t be easy in prison.” In fact, it isn’t easy in jail for Lewis, who is 51. He is in a facility in Banning, Calif., where he said he is housed with 64 other men and lives with the constant threat of violence. Lewis is not the first agent in Califor-
MARCH 10, 2014
nia to be tried for theft in an annuity sale. Glenn Neasham in Lake County was convicted in 2011 of grand theft for selling a fixed index annuity to an 83-year-old woman. The prosecutor alleged the client had dementia but Neasham and two of his assistants said they saw no signs of it. The prosecutor argued that the client was deprived of access to her money because of the surrender charge. The conviction was reversed in 2013 and “depublished” this year so that it could not be used as precedence. But Neasham in the meantime lost his business, insurance license and house. He and his family had to rely on food stamps. Although Neasham got his license back, he is just starting to rebuild a livelihood. Few imagined that Neasham would have been convicted in that case. At that point, theft was usually associated with agents who used fraud to steal money directly from clients, especially elderly ones. In the Neasham and Lewis cases, it is the surrender charge itself that constitutes the “theft.” The convictions could mean that if a sale can be considered unsuitable, instead of going to the state insurance department, agents can go straight to jail. When that happens, not only do agents lose, consumers do also, according to Kim O’Brien, president and chief executive offi-
Lewis is extradited to California. He faces arraignment the next day but when the full scope of the case against him is apparent, the proceeding is postponed until a trial lawyer can be assigned to Lewis.
MARCH 20, 2014 Lewis is arraigned and faces 36 felony counts of embezzlement, grand theft and burglary. The maximum sentence is 40 years in prison.
LATE FEB. 2014 Lewis returns to Houston, where he is pulled over for speeding and arrested on the California warrant.
APRIL 3, 2014
INFRONT
cer of the National Association of Fixed Annuities (NAFA). She said she was not necessarily defending Lewis’ sales practices, but maintained that a conviction would have consequences for all agents and consumers. “A determination by the court that selling an annuity with a surrender charge is tantamount to embezzlement or common theft – and if the sale occurs at the client’s home, with burglary – would have a chilling effect on the ability of consumers to have access to fixed annuities,” O’Brien said in a statement from the association of fixed index annuity companies. Lewis has not been able to contact his exwife and sons directly. That is especially troubling because his older son tried to commit suicide just before Lewis was jailed and he has not talked to him since his arrest. “I don’t have direct contact to him now because my ex-wife doesn’t know what the heck is going on,” Lewis said. “When you’re stuck in these situations and you can’t get out of jail, you’re guilty, period.” Steven A. Morelli is editor-inchief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@ insurancenewsnet.com.
JUNE 9, 2014 The trial is postponed for June 23 at the request of the prosecutor, Sheronda L. Edwards. The prosecution’s expert witness, Vincent Patrick Gallagher, is in China until June 23, according to a motion. Edwards is still waiting for the alleged victims’ annuity contracts subpoenaed from Allianz Life, Genworth Life, Lincoln National, Fidelity & Guaranty Life, American Equity, American General, North American, Athene and ING. The prosecutor also says she will submit eight audio CDs of interviews of the alleged victims by June 6, according to the motion filed June 5.
Preliminary hearing starts. During the several days of testimony and evidence, the proceedings are postponed for a day so that the prosecutor may attend a class on annuities.
2014 FEB. 2014
APRIL 14, 2014
Lewis has growing success at a sales job outside of insurance, but he has to quit in order to help his older son, who had moved to Houston in December. The 18-year-old admits a prescription drug addiction and spirals into self-destructive behavior that compels Lewis to take his son to Tulsa, where his ex-wife lives.
Last day of preliminary hearing. Superior Court Judge Bernard J. Schwartz allows 29 of the felony counts and one misdemeanor to go to trial and dismisses the others for jurisdictional reasons. Lewis is in jail in lieu of $600,000 bail and scheduled to go to trial on June 9 to face 19 felony counts and one misdemeanor of embezzlement, eight felony counts of burglary and two felony counts of grand theft.
The Riverside County district attorney alleges Lewis induced 12 seniors into surrendering IRAs or annuities for a “less favorable” annuity. Court documents allege Lewis committed “twisting” and caused seniors to lose more than $300,000 in surrender penalties. He is charged with 36 felony counts of willfully embezzling from an elder for an amount exceeding $950, grand theft in excess of $400 and burglary. The prosecutor argues that the surrender penalties constituted embezzlement and theft, and because Lewis did some of the transactions at the clients’ homes, it was also burglary. An arrest warrant is issued.
JUNE 23, 2014 The jury trial is scheduled to begin. July 2014 » InsuranceNewsNet Magazine
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How to
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InsuranceNewsNet Magazine Âť July 2014
MEDIA MASTERY
INTERVIEW
be your best when you’re in the media spotlight Paul Feldman interviews Brad Phillips
I
n this month’s issue of InsuranceNewsNet, we are focusing on how you can become a media star to raise your local profile and elevate your business. But what happens if you actually get reporters to call you? What if you get on camera and you fail in such a spectacular way that your meltdown becomes a YouTube hit? Not to worry. Brad Phillips, the author of The Media Training Bible: 101 Things You Absolutely, Positively Need to Know Before Your Next Interview, says you can build confidence by crafting a bulletproof message and practicing that message before you leap. Brad knows message creation and delivery. He started with a solid career in broadcast journalism at ABC’s Nightline with Ted Koppel and CNN. Then, in 2004 he founded Phillips Media Relations, a media and presentation training firm with offices in Washington and New York City. He has trained thousands of media spokespeople and hundreds of top-level executives, including corporate executives and presidents of nonprofit organizations and trade associations. Brad is often quoted as an expert in the nation’s leading newspapers and websites, such as USA Today, The Washington Post, Chicago Tribune, The Huffington Post and The Scientist. Many successful advisors might think they have the inherent skills to stand up and be charming and informative in any venue. But the media world is its own environment with its own rules. In this interview with InsuranceNewsNet Publisher Paul Feldman, Brad provides the tools you need to thrive in this world.
FELDMAN: We have published many articles about agents and advisors reaching out to media to establish authority in a community. But we haven’t done anything on what to do once someone from media does call. Why does a successful insurance agent need media training? PHILLIPS: It’s maximizing the opportunity. I think everybody fears the disastrous media interview. Certainly, those interviews happen. But they don’t happen nearly as often as what I call the “do-no-harmers.” Those are interviews that go fine but they don’t necessarily result in more business or reputation-building after they disappear into the ether, because nothing special happened during the moment that you had to speak with the journalist. July 2014 » InsuranceNewsNet Magazine
11
INTERVIEW
» For a longer version of this article visit bitly.com/innphillips
MEDIA MASTERY
FELDMAN: How do those interviews go wrong?
tions or if it’s a softer, more feature-type story that they’re after.
PHILLIPS: One of the mistaken beliefs people have is that their job during a media interview is to share information. Educating the public is a critical part of their job. But the most important part of their job is trying to get the story told that they want to tell. One of the most important things people can do through media training is learn how to focus what they say during an interview to make sure it does lead to that next step of their potential customer logging on to a website or picking up the phone.
FELDMAN: How does someone construct effective messaging?
FELDMAN: What should a person do after getting a call from media? PHILLIPS: Don’t do the i nter v iew i m med iately. Schedule a time to talk to them, but during that initial contact, try to find out as much as you can about that news organization. Find out who will be doing the interview and what specifically they want to talk to you about. Some publications will share questions with you in advance. Some journalists bristle at the request to share their questions. But even those journalists will usually tell you the themes they intend to talk about. You should ask, “Is there anything specific you want to ask me about that I should look up before we speak?” Then do some of your own research about the publication. Read some stories the journalist has written in the past. Learn something about the outlet itself. For example, it’s really useful to know in advance whether the outlet has an edge to it. You’ll see if they’re likely to ask you very hard, devil’s advocate ques12
PHILLIPS: The most important thing about messaging is you cannot be comprehensive. The average television sound bite is just 7.3 seconds, according to the latest study on the topic. That results in
the average quote being about 18 words. It’s about being willing to sacrifice detail in order to let the things that really matter stand out and shine. We recommend that people come up with their three top line messages. These are three one-sentence messages that are the most important themes or ideas that they want to communicate during their interview. Those may also represent the gateway that will interest people enough to pick up the phone or log on to a website. FELDMAN: That sets the stage for your acronym, CUBE A, for effective messaging. Would you tell us what that stands for?
CONSISTENCY
“Like a good neighbor, __________________ is there.” “GE: We bring good things _____________________.” “The best part of wakin’ up is ____________ in your cup.” Did you find yourself singing along? If so, you’ve just experienced the first part of CUBE A, which requires that all messages be consistent.
UNBURDENED
The “U” in CUBE A demands that your messages remain unburdened by three things: wordiness, jargon and abstractions. The more a message tries to say – and the more abstractly it tries to say it – the less likely it is to be memorable.
BRIEF
Most people find it frustrating to reduce their three main messages to just three sentences. Don’t despair. Frustration is an important part of the process, and your disciplined self-editing will result in stronger, more effective messages that stand a greater chance of breaking through and reaching your audience.
EAR-WORTHY
One fascinating study found that adults can understand 96 percent of all spoken English with a vocabulary of just 2,000 words. Although most native English speakers know thousands more, they tend to use a rather limited pool of words in conversation. When speaking to general audiences, you should too.
AUDIENCE-FOCUSED
Effective media messages must incorporate your audience’s needs and values; those that do will resonate much more deeply. Needs refer to things people require or desire. Values refer to the guiding principles people and communities share, including patriotism, compassion or aggression, and self-reliance or collaboration.
InsuranceNewsNet Magazine » July 2014
Excerpted from The Media Training Bible: 101 Things You Absolutely, Positively Need to Know Before Your Next Interview
PHILLIPS: The C in CUBE A is for “consistency.” Your message likely will not change very much over time. The more repetition of those messages, the more likely it is that those messages will eventually stick. If every time you do an interview with a reporter – or speak to the public or post content on your website or newsletter – your message changes, you haven’t repeated it enough to allow your message to sink in and really resonate. I always think about the example of presidential candidates who do three or four stump speeches a day in the general election season. Their speeches remain the same for weeks and sometimes for months. They and the press following them are sick to death of those speeches because they’ve delivered it or heard it so many times. But the reason they do that is because they know that individual members of the audience have not heard it that many times. For them, it’s new; it’s fresh. Or if it’s not new and fresh, they don’t remember it so well that they’re bored by it. The U in CUBE A is for
chairman, u.s. securities and exchange commission (2009-2012) The first woman to serve as Security and Exchange Commission’s Chair, MaryIFL. MYRAs Schapiro, STAY LOW VALUE FEATURE Power Producers who has dedicated her nearly three-decade career to regulatory strategy and enforcement, Conference and service on major corporate boards, provides audiences astute insight and analysis of On The MOney (ONE DAY EVENT • 9/27/2014) theWatch most pressi ng economic issues of our time. 2004 SSMP Hall of Fame Inductee and Series 65 Licensed Investment Advisor do a oliVe focusing on Prior Representative to her role at the SEC, Anil she servedVAzirAni as head of regulati n at theconsumer National AssociaseminAr tion & of Securities DealersMoney (NASD), where she oversawManageMent its merger with the regulatory body of new generation annuity the New York Stock Exchange (NYSE), forming the Financial Industry Regulatory Authori ty (FINRA), where she served as CEO. Top Producers The only person to have lead all three major national overseers of Wall Street—the SEC, FINRA, and the Trip to Rome Italy. Commodity Futures Trading Commission—Schapiro was named to Forbe’s Most Powerful Women of 2012 list. Anil VAzirAni is a Multi Million Dollar Producer who has mentored hundreds of advisors nationwide. Anil has been in the financial services industry since 1994. • 7 consecutive years qualified for Top of The Table with MDRT • Host of On The Money Radio Show in AZ AT THis evenT Anil will sHow you How To: • Position the seminar as your first appointment • Pre-qualify attendees for the workshop • Use the Risk Profile Questionnaire at the seminar • Mary Schapiro will be talking about source-of-fund issues and the pitfalls of giving investment advice without an investment licence
Impact of Source Of Funds & Giving Investment Advice Without An Investment License
Learn why the Principal Protected Low-Cost New Generation Annuity concept may be superior to the high-risk, high-fee variable annuity and the obsolete hybrid income annuity.
MARy l. scHApiRo chairman, u.s. securities and exchange commission (2009-2012) The first woman to serve as Security and Exchange Commission’s Chair, Mary L. Schapiro, who has dedicated her nearly three-decade career to regulatory strategy and enforcement, and service on major corporate boards, provides audiences astute insight and analysis of the most pressing economic issues of our time. Prior to her role at the SEC, she served as head of regulation at the National Association of Securities Dealers (NASD), where she oversaw its merger with the regulatory body of the New York Stock Exchange (NYSE), forming the Financial Industry Regulatory Authority (FINRA), where she served as CEO. The only person to have lead all three major national overseers of Wall Street—the SEC, FINRA, and the Commodity Futures Trading Commission—Schapiro was named to Forbe’s Most Powerful Women of 2012 list.
Impact of Fiduciary Standard on Annuities? Suitability v/s Fiduciary?
To learn more about how to qualify to attend this event, please call Jon Armstrong 800-957-5604, ext. 207
Impact of Source Of Funds & Giving Investment Advice Without An Investment License Impact of Fiduciary Standard on Annuities? Suitability v/s Fiduciary?
attend event, Only call if you To are wrilearn ting $1Mmore or more iabout n annuity/lihow fe premitoum.qualify We will requitore contracti ng withis th at least 3 insurance carriers. please call Jon Armstrong 800-957-5604, ext. 207
Only call if you are writing $1M or more in annuity/life premium. We will require contracting with at least 3 insurance carriers. July 2014 » InsuranceNewsNet Magazine
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INTERVIEW
MEDIA MASTERY
“unburdened” and that is to simplify your message. Avoid using these three things: wordiness, jargon and abstractions. The insurance and financial services industry is littered with terminology that doesn’t mean anything to most consumers. Even if you think your audience will understand more complicated terms as long as use them “in context,” don’t use them. If you feel like you have to use more complicated terms, make sure that you define them and make them concrete. The first thing with messaging is the importance of developing the three overarching themes and sticking with them over time. Each theme should really represent one single thought. One of the things I see constantly is that people want to cram four different ideas in each of the messages so they can get everything in. Don’t do that. The simpler the message you’re trying to communicate, the better. And by simple, I don’t mean dumbing it down. The more unburdened that your message is, the more memorable it will become. The B in CUBE A is the importance of “brief ” messaging, which we’ve already discussed. E is for “earworthy.” This is a problem when you have advisors in larger offices sitting together at a table saying, “OK, what are the three things that we want to talk about the most?” What you tend to see with that kind of groupthink is that everybody adds an idea, a thought, a word and as a result the message ends up sounding like it’s been developed by committee. It doesn’t sound like anything anybody actually would ever say. The final part of CUBE A is “audience focused,” which is the really important check that you do at the end to make sure that everything you’ve developed is consistent with what your current and prospective customers want from you.
» For a longer version of this article visit bitly.com/innphillips So this is the moment where you try to figure out what are the main things that your audience wants from you and whether your messages reflect that. If not, ask yourself how you can rework the messages to make sure that the things the public tells you they want are reflected in what you are saying publicly.
And they’ll say, “Well, it’s customers and prospects.” That is so vague as to be completely unhelpful because that customer or that client could be a 29-year-old who’s just beginning a family or an 89-year-old who’s doing estate planning. I really push them. And it becomes an uncomfortable exercise for them. But I’ll ask them to tell me, is it a man or a woman? They’ll say, “Well it could be either.” I’ll say, “I know it could be either. There are no right or wrong answers here. All I want to know is who popped into your mind when I asked you who is the target person.” “It’s a man.” “OK, how old is he?” “He’s in his 60s.” “No, no. I want a number.” “He’s 67.” “OK, what does he do for a living?” “He’s a salesperson.” “Where does he work? Is he married? Does he have kids? Does he have grandkids? What gender are they?” And finally I’ll end with, “What’s his name?” Sometimes I’ll even push a little further and say, “Can you visualize him? What does he look like? What’s he wearing?” By this point, my clients are completely perplexed because they don’t understand why I’m going through this exercise. But when I ask them to come up with this guy’s name – let’s say they said his name is Kevin – then after I do the practice interview, we’ll play it back together and I’ll say, “That answer that you just gave, is that likely to reach Kevin? Is Kevin going to be motivated and influenced by that?” That’s a great real-life test for them, because when they use jargon and industry terms and I have a specific tangible person who I can point to, they say, “Yeah, that terminology I’m using isn’t really going to work for Kevin.” So that’s a great real-life test, more than anything else, to reduce the jargon.
98%
of people PROJECT TOO LITTLE ENERGY when they are doing public speaking or interviews
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InsuranceNewsNet Magazine » July 2014
FELDMAN: I wanted to ask about unburdening and simplifying messages. This is a complex industry, and I think that people have a tendency to make messages more complicated than they need to be. How do you simplify the message for insurance or financial services? PHILLIPS: What I’ve found has the greatest power is to ask people to think of their target. It’s a really interesting exercise because I’ll ask, “Who’s your audience?”
FELDMAN: We talked a little bit about
MEDIA MASTERY sound bites earlier in our conversation. Would you describe the importance of sound bites and what should they say? PHILLIPS: Sound bites are important because they give you influence over what the reporter ends up selecting to use in the story. And the reason is because reporters are looking for really interesting quotes. For example, one of the things I say a lot in media training is, “The more you say, the more you stray.” If you think of what those sound bites should be in advance, you increase the odds they will be used. But creating sound bites can be a very difficult exercise. It’s not easy to come up with a witty line when you sit down to brainstorm. Instead, I encourage people to keep their antenna up at all times. When they’re having conversations with clients, they should listen carefully for really engaging phrases. The analogy I always think of here is it’s kind of like when you
don’t know a word and you go to the dictionary and look up the word and then suddenly over the next week you hear that word used three more times. Well, it turns out that word has probably been used around you the entire time but you just weren’t listening for it. FELDMAN: You also talk about creating a media message and having media support. What goes into that? PHILLIPS: I recommend that for each of those three main messages, come up with three types of message supports: stories, statistics and sound bites. The advisor’s value as a media spokesperson comes when they give meaning and context to those numbers. What’s the trend with those numbers? On the statistics portion of what we call the message support stool, they should think about context and meaning, and not just numbers. Stories are really important, especially
Helping your clients protect their income,
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INTERVIEW
when dealing with the general public. The stories – more than numbers – will forge emotional connection. FELDMAN: What is a good story in the insurance business? PHILLIPS: We had a client who gave me permission to post a video from one of the practice sessions of an insurance advisor giving a presentation about that year’s new insurance offerings. I titled the video, “How to Speak About a Boring Topic.” I say that tongue in cheek because what I typically hear from people in an industry like insurance is, “Well, I don’t really have a sexy topic to talk about. It’s not the most interesting thing.” The point that he made so beautifully in that video is there’s an interesting way to talk about almost anything. He started the speech off with a story about a client he had dealt with several years earlier whose husband passed away from cancer. The widow, a relatively young woman,
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July 2014 » InsuranceNewsNet Magazine
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INTERVIEW
MEDIA MASTERY
came into the office to collect on what tions are not really relevant. One thing a call to action: visit our website, call our would be only a $4,000 life insurance pay- you can do is send a recommended ques- phone number. out. It was so low because her husband tion sheet to the interviewer in advance. Even if you’re asked a question that you was ill for several years before he finally You can’t send that to The New York don’t want to answer, you should almost passed away. As the agent went through Times. But many times, you can send it to always answer the question directly. This the paperwork, he discovered there was a local radio host, who will appreciate it. is especially true in a live exchange. If the one item in it that suggested the $4,000 I have a system called the A.T.M.S. A public or the reporter believes you are bepayout was actually much lower than is for Answer the question. T for Transi- ing evasive, you will lose credibility in the what she was entitled to. tion. M for get back to your Message, or eyes of the public. So it’s not worth takHe did some research and three weeks story, statistics and sound bites. And the ing that chance. But the answer could be later handed her a check for $100,000. He S stands for Sell, which is a synonym for very short: “Yes ... no ... maybe ... perhaps said, “When I think about ... that’s unclear.” Then use what we do and the impora transition line, “But what tance of what we do, those we’re really seeing here is...,” are the moments that make and you’re right back to your it so meaningful for me.” message. So that’s one way Wow! I’m not in the busiof getting back to the things ness, I do not have a spouse that you want to talk about. dying of a terminal disease, I want to be clear that this but, man, that story hit me is not an excuse to be evawhen he told it. sive. If a reporter is asking That created a much you a question about a topic broader frame about insurthat the public or customers QUESTION: “Why should your museum get more ance products than if he had or people in your industry simply gone in and listed, are likely to be concerned money from taxpayers? Times are tough for everyone. “Here are our 10 new insurabout, your best strategy is Shouldn’t you have to sacrifice like everybody else?” ance offerings for the year.” to offer a direct and specific It’s not just about the “what answer to that question. you do,” it’s about the “why” of what you do. FELDMAN: What if you REMEMBER: don’t know the answer? “Absolutely, and we have.” Even if you’re FELDMAN: How do you asked a question that steer an interview if it’s PHILLIPS: If it’s a print going off-kilter? interview, you could simyou don’t want to ply say, “I don’t know,” find answer, you should PHILLIPS: There are two out and then get back to the “It’s important to almost always answer categories of questions that reporter. That’s straightforremember that …” the question go off-kilter: one is when the ward. Reporters don’t expect directly. reporter really doesn’t know you to have a full encyclopewhat to ask, and the other dic knowledge of everything. is when the reporter knows So it’s absolutely fine to say, “I exactly what he’s asking and don’t know.” “… we are only asking for enough money to keep our it’s something you don’t want If it’s a live exchange I like doors open and our artwork safe. A small increase would to be spending a lot of time to use a different strategy – allow us to remain open during hours that are convenient talking about. something called the “Peter The first category happens Jennings rule.” The strategy for families to visit so they can enjoy the amazing works a lot in radio interviews. there is to tell the reporter that few cities of our size have.” The average radio host may what you do know, not what host a four-hour live show you don’t know. five days a week, with three guests an hour – that’s 12 FELDMAN: Why is that guests a show, every day called the Peter Jennings “That’s why we’re asking the public to contact the times five days a week. That’s rule? governor’s office and request the funding we need.” 60 guests in a week. That host cannot prepare PHILLIPS: The late Peter for your interview as much Jennings was the host of ABC Excerpted from The Media Training Bible: 101 Things You Absolutely, as he or she would want to. World News Tonight. One of Positively Need to Know Before Your Next Interview So a lot of times the questhe correspondents who used
ANSWER:
TRANSITION: MESSAGE:
SELL:
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InsuranceNewsNet Magazine » July 2014
MEDIA MASTERY
PETER JENNINGS would occasionally ask his correspondents a question that he thought they might not know the answer to. His correspondents learned over time to say something along the lines of, “Well, you know, Peter, that’s unclear at this hour. What we do know is …”
INTERVIEW
the reporter than the planned comments. What I usually find is that when people start talking to a reporter, their guard is up. After a period of time, maybe 15 or 20 minutes, they start thinking, “Oh, OK. This person is not out to get me. I can let my guard down or relax a little bit.” And that’s when they start saying things they shouldn’t. FELDMAN: We’re far into this interview, and you’ve done a really good job of maintaining your energy level. What are some tips on doing that and keeping that level?
to work on that show told me a story that Peter Jennings would occasionally ask his correspondents a question on the air that he thought they might not know the answer to. Apparently the reason he did that was because he wanted his reporters to know the story inside and out and constantly be on their toes. His correspondents learned over time to say something along the lines of, “Well, you know, Peter, that’s unclear at this hour. What we do know is …” FELDMAN: How do you see an insurance or financial person doing that? PHILLIPS: Say someone was asked, “What was the rate of return on investment from this insurance company’s plan in 2013?” That’s a pretty specific question, and during the live exchange the person might not know the answer. So that person should say, “I don’t know the specific number. What I do know is that the rate of return from this insurance company has been consistently higher than almost all of its competitors for the past decade.” So you’ve offered something – context, meaning – instead of simply shutting down the exchange. Often, especially in radio, the host is just as happy with the more general answer. Never bluff, but if there’s comfortable ground about something related to the topic that you can move to, that’s probably a good strategy.
FELDMAN: How can you avoid finding yourself in trouble with a media interview? PHILLIPS: One of the things that really gets people into trouble is something I call “The seven-second stray.” If you’re doing an hour-long interview and for seven seconds you say something flip, sarcastic or otherwise in some way off your message, inevitably those seven seconds will be the thing the reporter includes in the story. And the reason for that, I think, is that reporters are pretty sophisticated at hearing the difference between something that’s pre-thought-out or scripted and something that’s spontaneous. And that spontaneous comment tends to have more salience or be of more interest to
PHILLIPS: Some tips for phone interviews: First, I recommend that people stand. People tend to do better when they’re standing and able to pace back and forth. There’s something about having that outlet for their anxious energy that helps them literally to be quicker on their feet. Second, I’d say give the interview complete and total focus, by which I mean shut down your email program and other audible distractions. As far as energy level, I’d say 98 percent of people project too little energy when they are doing public speaking or interviews. We think we’re louder than we are because we hear our voices inside of our skull bones as well as through our ears. I advise people to bring the most charismatic, warm and excited version of themselves to the interview. Think about when you are out to cocktail hour with some of your peers and you’re telling a story about something you’re totally passionate about: your favorite sports team, the book you read, your kid’s school play. Whatever it is that you’re excited about, that’s the version of you that you should be bringing to interviews.
Find out more about Brad and read his blog at www.MrMediaTraining.com.
For a longer version of this article visit bitly.com/innphillips to request your own PDF. July 2014 » InsuranceNewsNet Magazine
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NEWSWIRES
List names top 100 advisors on social media bitly.com/qrlist
New HHS Secretary Confirmed Less than two months after her predecessor resigned, Sylvia Mathews Burwell was confirmed by the Senate to be the new Secretary of Health and Human Services. She takes the helm of the department from Kathleen Sebelius, who resigned in April following the controversial rollout of the Affordable Care Act (ACA). The 78-17 vote showed bipartisan support for Sylvia Mathews Burwell Burwell, whose most recent job was serving as President Barack Obama’s budget director. But although Burwell seemed to have a relatively smooth road to confirmation, she doesn’t have much time to head off more ACA-related problems when enrollment opens again on Nov. 15. Despite exceeding the initial enrollment goal, the government website healthcare.gov still has a number of issues to be resolved in time for the 2015 enrollment season.
RETIREMENT FEARS ARE A GLOBAL CONCERN
41%
Fears about a secure retirement aren’t limited to workers in the U.S. A survey commissioned by the of workers globally Transamerica Center for expect government Retirement Studies and the to fund retirement Dutch insurance company Aegon showed that retirement worries plague workers across the globe. Only 28 percent of U.S. workers said they are “very” or “extremely” confident that they’ll one day fully retire with a comfortable lifestyle; a third said they are “somewhat” confident. And 19 percent of workers globally have high confidence levels that they’ll have a comfy retirement, with the greatest percentage of people feeling that way in China (41 percent) and the lowest rates in France (6 percent) and Poland (4 percent). The survey was conducted of workers and retirees in 15 nations in Europe, North America, South America and Asia. About 80 percent of workers in Germany, Hungary and France said they expect future retirees to be worse off than current retirees. About 41 percent of workers globally said they’ll rely on the government to fund their retirement to some extent, but DID YOU
KNOW
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WEST VIRGINIA GETS
only 21 percent said they expect the government to be their main source of income. When asked about a retirement-planning strategy, 56 percent of workers said they have some sort of plan, 40 percent said they have no plan and the rest said they don’t know.
HOME OWNERSHIP GETTING MORE OUT OF REACH
“There’s no place like home,” the saying goes. But for many Americans, there’s no way to afford a home. A combination of rising prices and flat income levels is making it more difficult for middle-class Americans in more cities to afford home ownership. In 20 of the 100 largest metro areas, a majority of homes on the market are not affordable for middle-income buyers, according to a study by real estate research firm Trulia. A year ago, most homes for sale were unaffordable in just one in 10 metro areas. Trulia considers a home to be affordable if total monthly costs after a 20 percent down payment – including mortgage, insurance and property taxes – are less than 31 percent of a region’s median household income. As home prices and interest rates rise
26.2%
Source: George Washington University
InsuranceNewsNet Magazine » July 2014
of its annual income from federal government programs, the highest percentage of any state.
QUOTABLE We have enormous pressures to spend rather than save. Spending will always be sexier than saving. — Nathan Dungan, founder of ShareSaveSpend, a Minneapolis-based program that teaches families about money strategies
faster than wages, home affordability becomes more difficult for more Americans. Trulia reports monthly payments for an average home are up 20 percent over last year.
ACA WORKERS MAY HAVE SAT IDLE
Former employees of an ACA processing center in Missouri said they were paid to do little or no work. And a worker at a processing facility in Kentucky said that he rarely has any health insurance applications to process. The federal government, under the auspices of the Centers for Medicare and Medicaid, gave a five-year, $1.2 billion contract to Serco, a processing and security group, to process paper applications for health insurance. Now employees are claiming there were not enough applications to generate work for them. A former worker said that she and her fellow employees played games like Pictionary because they had so little work. Others slept, she said. In addition, she alleged that employees were not allowed to have access to the Internet or cell phones. CMS did not respond to questions about how much they knew about a possible lack of productivity. A Serco spokesman said the company’s workforce “has processed more than 1 million documents and made 1.4 million outbound phone calls to applicants” from Oct. 1 through April 30.
WHAT DOES $15 PER HOUR BUY? Workers across the nation have staged protests and lobbied elected officials to increase the minimum wage. Most recently, the Seattle City
[NEWSWIRES] Council raised the minimum wage in that city to $15 per hour, the highest minimum wage in the U.S. But it turns out that workers in that city who earn the newly-raised minimum wage won’t be going on a spending spree anytime soon. Expatistan, a website that tracks the cost of living in cities around the world, says New York, San Francisco, Washington, Honolulu, Boston and Seattle are the most expensive U.S. cities overall, in that order. In Seattle, a gallon of milk averages about $3.60, a gallon of gas $3.94, a ride on the bus $2.50. A 16-ounce latte at Starbucks is $3.35 and a pint of local beer is $4.50. A typical one-bedroom apartment rents for $1,400.
SHINSEKI OUT AMID VA SCANDAL
Veterans Affairs Secretary Eric Shinseki took the blame for what he decried as a “lack of integrity” in the health care system for the nation’s military veterans. Eric Shinseki Investigators have determined that more than 100,000 veterans nationwide were kept off waiting lists for medical appointments, and Acting Veterans Affairs Secretary Sloan Gibson said he would determine how many patients were relegated to “secret lists.” Gibson disclosed that at least 18 Arizona veterans died while awaiting doctor appointments, though it remains unclear whether the delayed care is to blame for those fatalities. Gibson said he had details on 14 of the deaths and it appeared most had contacted the VA for “end of life care.”
HOW MUCH DOES HAPPINESS COST?
Most of us think that we would need to have a huge lottery jackpot or a windfall from a wealthy relative in order to be happy. But a CNN Money poll showed that most of us require less than $100,000 to consider ourselves happy. The most recent CNN Money American Dream poll revealed that slightly more than half of those surveyed would be happy with less than six figures. Nearly one quarter of those polled said that their happiness would come with a price tag between $50,000 and $74,999. Ten percent said they would be happy with $30,000 or less. Somewhere between
Fiduciary Proposal Will Come in January, DOL Says The Department of Labor (DOL) has announced that it will not re-propose a fiduciary rule for advisors who sell and service retirement plans until January at the earliest. Industry groups, as well as members of ConThomas E. Perez, Secretary of Labor gress, have asked DOL to meet with stakeholders and coordinate with the Securities and Exchange Commission, which is considering an advisor fiduciary rule of its own. Industry groups are concerned lest any proposed rule increases costs or limits access to investment advice for retirement savers. In particular, concerns have been raised that a poorly conceived DOL fiduciary rule could limit consumers’ access to retirement advice. Industry groups say they also fear that a DOL rule prohibiting access to professional guidance, advice and products from advisors paid by commissions would harm millions of consumers who benefit from such services. $100,000 and $199,999 would make 23 percent of the respondents happy. And 6 percent of those surveyed said no amount of money could buy them happiness.
FED COULD RAISE RATES SOONER THAN THOUGHT
The Wall Street Journal reports that Federal Reserve Bank of St. Louis President James Bullard said it is likely that the Fed will increase short-term rates earlier than most officials expected, if the economy performs as he anticipates over the remainder of the year. Bullard said he predicts that the Fed will first increase near-zero percent interest rates sometime near the end of the first quarter of next year. But he said that view is now somewhat in flux. Bullard spoke to reporters after delivering a speech on the economy to a gathering held by the Tennessee Bankers Association in Palm Beach, Fla. The Fed is currently winding down its bond-buying stimulus program and officials have widely signaled that effort will be completed by the end of the year. The next issue Fed officials will likely have to deal with is what to do with the DID YOU
KNOW
?
near-zero percent short-term rate policy that has been in place since the end of 2008. Most Fed officials say they believe the first increase in interest rates will come sometime in 2015.
16 MILLION HOUSEHOLDS HEADED BY MILLIONAIRES
The world added 2.6 million millionaire households last year. The total number of millionaire households in the world rose 19 percent last year to 16.3 million, according to Boston Consulting Group’s Global Wealth report. Millionaire households represent 1.1 percent of all households globally. The U.S. added the most millionaire households and has the highest total, with a gain of 1.1 million households last year. That brings the total to 7.135 million. The U.S. also had the most centimillionaires (those worth $100 million or more), with 4,754 households. And how did these folks get so rich? According to the report, stocks were the biggest driver of global wealth.
New York regulators are aiming to strengthen POLICYHOLDER PROTECTION GOVERNANCE of private equity and other acquisitions of insurance companies, ESPECIALLY ANNUITY COMPANIES. Source: New York Department of Financial Services
July 2014 » InsuranceNewsNet Magazine
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, radio n i g an arin Appe or printicnd of TV the k ion o t lead et recogniients nam draws cl that to you.
By
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InsuranceNewsNet Magazine Âť July 2014
HOW TO BE A MEDIA ROCK STAR
O
NE DAY A MAN WALKED into Philip Harriman’s financial services practice out of the blue. The man wasn’t an existing client, had no appointment, wasn’t a service worker and was not acquainted with anyone on staff, so his arrival was a bit of a mystery — until he explained himself. The man said he was driving down the highway and saw a sign posted on Harriman’s building in Falmouth, Maine. What caught his eye was the name Phil Harriman. He said that right then and there, he pulled off the highway, drove over to Harriman’s office and opened the front door. “Is this the same Phil Harriman that I see on television?” the man asked at the desk. When he learned that it was, he asked for an appointment. Stories like this demonstrate the impact that appearances in local media can have on the growth of an insurance and financial services practice. The name recognition kicks in, the sense of trust builds, the professional develops an aura of celebrity and consumers come right to the door. This doesn’t happen overnight, say agents and advisors who have been there, done that. But it does happen, and they have growing books of business to prove it. Following are some of their stories plus some lessons they learned about the magic of traditional media — radio, television and print — in the life of a financial practice.
The Case for Television, Radio and Print
Some advisors can’t ever imagine themselves using any of the traditional media, but Harriman, the co-founder of Lebel & Harriman and former president of Million Dollar Round Table (MDRT), has been using all three for several years. For five years, he has been hosting Inside Maine, a monthly three-hour radio show. For the past three years, he has been appearing live on a local NBC-TV affiliate and on taped segments that run throughout the month. For more than two years, he has been co-authoring Agree to Disagree, a blogged column for the Bangor Daily News. For producers who have done none or very little of this, Harriman’s big media investment might seem like a mind-boggling enterprise with uncertain return. Not so, according to Harriman. The shows and articles bring name recognition and brand building, he said. “They help establish a relationship with the customer” before the person ever calls for an appointment at his firm, which focuses on retirement, legacy planning,
business needs, wealth management and financial planning. And people do call, unsolicited, at least twice a week, Harriman said. “Seven out of 10 of the callers have financial needs in our area of expertise.”
End result: Harriman’s client base has grown by 5 percent to 8 percent over the past five years.
To keep up with the increased work
FEATURE
flow, Harriman hired someone with a Master of Business Administration degree to do the financial planning calculations and related work so he could focus on client goals and overseeing plan creation. He also schedules his media time carefully. “I write the articles at night,” he said. “For the TV shows, I go to the station, which is just 20 minutes from my office. And for the Saturday radio show, the night before, I pull together ideas I keep gathering, organize the points and prepare six topics for the six segments the show will have.” Is this something that other producers can do? Harriman said he thinks they can, if they have some special interest or background that the media find compelling. In his case, the hook is politics. Harriman previously served eight years in the Maine state Senate, and that brought him the credibility that drew media attention. “Politics is a topic that the media want to cover,” he said, so his new life as political commentator “is an unexpected outgrowth of public service.” He uses his political knowledge and connections to keep his material fresh. For instance, when he is on the air, he sometimes interviews the governor, a senator or other insiders. Other times he takes calls about current political issues. How does talking about politics help him grow his independent insurance and investment brokerage firm? During the shows, Harriman said, “I present examples or analyses taken from my practice. If the subject is taxes, for example, I might say, ‘In my financial planning practice, I have three or more clients a year who change their residence because of the income taxes.” In addition, he runs radio commercials about his practice, although not during the time slot when he is hosting his show. And when he writes articles, the author’s note identifies his financial practice. Those mentions in various media serve to remind the public of Harriman’s occupation now – financial planning. It’s subtle, but he said it works.
Check out our Media Issue Special Sponsored Section starting on PAGE 27. July 2014 » InsuranceNewsNet Magazine
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FEATURE
HOW TO BE A MEDIA ROCK STAR
“You don’t have to be in politics to do this. If you can bring something that the media want, you can build a brand that works. It can be a hobby or special interest. Ask yourself, ‘What do you do when you’re not working?’ Then try building a media program around that.” — Philip Harriman
The Case for Radio
Some media stars in insurance and financial services make one type of media their main focus. Michael Markey, co-founder, owner and agent with Legacy Financial Network and an investment advisor representative for LFN Advisors, is a case in point. He hosts Financially Tuned, a weekly Christian-based radio show that has become central to his branding program. The show focuses completely on educating people about insurance and financial matters, with “no plugging of the firm,” he said. That dovetails with the education approach he uses in his financial planning, retirement planning and insurance practice. For example, potential clients are required to go through four educational meetings before doing any business with the firm, said the Kentwood, Mich., agent and MDRT member. It can take three to six months for a person to complete these “lessons,” as the staff calls them, but Markey said the large majority sticks with it. End result: Markey’s firm has nearly doubled its production in just one year’s time.
In 2013, the first full year of the combined radio show/lesson program, “we did a total of $11 million of new business in advisory and insurance revenues,” he said. “That’s up from about $6 million in 2012.” In addition, the firm boasts over 1,000 clients today, up from about 800 a year earlier. That huge jump came from a lot of traffic. “Seventy percent of the people who have come to a first meeting have gone into our ‘lesson plans,’ ” he said, “and 70 percent of those people became clients. Among the clients, we capture 95 percent of the household assets.” How does Markey know that the radio shows are helping to support this growth? In conversations, he said, people tell him they are listening to the show. Further22
InsuranceNewsNet Magazine » July 2014
Insider Tips on Becoming an Expert Celebrity: Go Ahead, Brand Yourself Nick Nanton knows a thing or two about how to help experts become celebrities. The chief executive officer of The Dicks + Nanton Celebrity Branding Agency, Winter Park, Fla., he is a worldwide authority on personal branding and is widely known as “the top agent to celebrity experts.” The winner of three Emmy Awards, this attorney-turned-branding-powerhouse spoke with InsuranceNewsNet about how insurance and financial advisors can start building their own brand and celebrity — and their businesses. Here are a few of his tips: Choose the media. Try testing the media to see which might be best. Also, look at the demographics they can deliver and match it up with other factors, such as the market you want to reach. Mass media versus direct media. Appearing in mass media is associated with big names and big celebrity. It adds credibility and media awareness, Nanton said. “But when you use direct media, such as sending content you create to an audience that you know cares and would be good buyers, that helps you tell your story. So use mass media to get credibility, and then do direct media.” Make a direct offer or call to action. Being seen on television is not enough, Nanton said. People watch television for education and entertainment, not to get solutions. “You can interrupt that by offering something like a free report to download or some other offer that spurs them to call. What matters is the response you get, and the gain in revenues.” Get as much control as you can. Some television shows and stations do not want people to advertise products and services on their shows, he pointed out. “But it’s important to have as much control as you can so you can control the message that you are sending.” Public relations. Some people pay public relations professionals to help them reach the media for interviews or contributed articles, but it’s not always easy to measure the results. “I was quoted one time on the front page of the business section of The New York Times, but I only got one email from it — and that was from someone trying to sell me a framed version of the article,” said Nanton. By comparison, direct media marketing does help make money, often within 60 to 90 days of startup. Many who use direct media say, “That worked way better than I thought it would!” Get training for media appearances. Some people are not comfortable being interviewed on television. But “media begets media,” so Nanton recommends spending the time and effort to get some training or media coaching. Start local. Some people want to have their names appear in the major papers. “But we recommend that people start with the local media, where they will have more control.” Then build up from there. It could take a year to seven or eight years to achieve celebrity in the community, he said, but the key is to “continue to have something to talk about, and to continue to tell the story.”
— Linda Koco
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FEATURE
HOW TO BE A MEDIA ROCK STAR
What Do Radio Shows Cost to Air? “What’s it going to cost me?” That’s a natural question to ask if an advisor is considering hosting his or her own radio show. Pete D’Arruda, host of the nationally syndicated weekly radio show The Financial Safari said the weekly cost for a one-hour show varies by station, region and other factors. For example: • In North Carolina, the cost in some small towns could be as low as $100 for an hour of airtime. But in a bigger city like Charlotte, the cost could run up to $3,000, he said. • In Chicago, some stations might charge $1,700 while others charge $7,000. • In San Francisco, the range can be from $200 on up to $7,000 per hour. Other factors to weigh are the staff hours spent on scripting and the money for a professional production company. D’Arruda’s firm does the negotiating with stations on behalf of the advisors in its network. The do-it-yourselfers do the comparison shopping, negotiating and related planning on their own. “Don’t expect results overnight,” he cautioned. “But don’t get frustrated either. It will work if the show is a quality product.” more, the show appears on a “quality station” that is popular in the community, he said. “People around here leave it on all day long, even in the stores. Then, once they hear the show, they start tuning in on their own.” Another part of his business contributes too. This has to do with Medicare supplement insurance. “We get a large amount of referrals on Medicare,” he said. Here again, the firm puts education front and center. “When those inquiries come in, one of our 15 staff members goes out to the home to provide education and identify needs, but not to do a sales presentation. We want to make sure the people have time to think about this for a while first.” Then, for the second meeting, the clients come into the office. It is the focus on education, whether on the air or in the office, that undergirds the entire initiative. The show format revolves around answering questions that come up in the various client meetings. For instance, Mackey might do a segment on “What is a multi generational individ24
InsuranceNewsNet Magazine » July 2014
ual retirement account?” There are no “teaser answers,” he emphasized. “We dive deep and give details and examples.” But he doesn’t give on-air advice. “I’ll say things like ‘In my opinion’ or ‘What I have seen is.... .’” He saves the advice for in-office sessions, once he has the particulars of a client’s situation and needs. This is a hands-on operation. Markey writes the script for the radio show and records his section, and his co-host does the same. “Then we send it to our production company in Minnesota to put it all together.” (He pays a professional firm to put the show together.) The firm does pay for its spot, but Markey said it’s a reasonable rate, comparable to that for a nonprofit. “We probably get that because we don’t plug our firm,” he laughed. (Connections may have helped too: One of his clients is a relative of the station owner.) When people meet Markey in person, it can be a wow event for them. He’s a media celebrity whom they already recognize as
an authority, thanks to the radio show. “During a first meeting with a new prospect, I gave the man my business card, which includes the name of the radio show. Then came the look of recognition. ‘Oh, yeah!’ said the man, ‘I’ve heard you a few times!’”
The Case for Print
Some advisors are intrigued with the idea of using traditional media to help brand themselves, but the idea of speaking on radio and television may give them the willies, due to nervousness, a voice that cracks, the cost or any number of other reasons. But they still have another big media option – print. Brad Elman, owner and principal of Elman Insurance Services and Nine Dots Benefits and an MDRT member from Los Altos, Calif., has done it all as far as using media. But he tends to prefer print, especially for advisors who are just starting to use media to build brand in the local community. He speaks from experience. A longtime guest expert on consumer finance for a local NBC outlet, Elman has also been seen or heard on CBS and NPR. And since his first article was published in a trade magazine in 1993, he has appeared either as author or quoted expert in more than 100 trade, local and national publications. Customers can view the list of articles on his website. End result: After 13 years of his active media relations program, Elman’s personal production moved from MDRT level to Court of the Table (three times MDRT) and Top of the Table (six times MDRT).
In addition, he said, “We have gone from needing to cultivate referrals to having prospective clients call us because their financial planner, CPA or attorney told them to. Because of that, I don’t have to ‘sell’ anymore; I just educate, which is a lot more fun.” Professionals say they feel better about referring clients to him “because I am published, or because of television,” he added. Not incidentally, they learned about his print appearances from emails and tweets he sends out as part of his media campaign. Even if the recipients of those messages don’t read the articles or see the television interviews, they know
HOW TO BE A MEDIA ROCK STAR that it happened. Elman believes the credibility derived from being published or quoted is directly responsible for the changes at his practice, which specializes in life, disability, long-term care and employee benefits. “When people see that you’ve been quoted, they like you and trust you, especially when they see you in other places too.” About being interviewed on television, he said it does help with name recognition. “The ‘As seen on TV’ effect is the ultimate in branding,” he quipped. But it doesn’t necessarily trigger a deluge of calls from interested prospects. Elman believes it’s just as valuable to a financial professional to be quoted in the local weekly newspaper paper or a local daily. “Those publications go to highly targeted audiences in the socioeconomic area where you have your business,” he explained, “and they’re easier to get into than television.” As a result, “you are much more likely to get new business from being quoted in local media than from consumer publications or television interviews.” “One time, Kiplinger’s magazine, a national publication aimed at consumers, carried an article that described me as an ‘insurance agent you could love.’ That was great, but I only got one phone call from that story. But I did leverage it – by letting customers know, through emails and other means, that I was quoted there.” — Brad Elman Even better, he said, is to write articles for trade publications, especially when starting out on a media relations program. “You have more control over the content that way and also over how often you contribute,” and articles appearing under the advisor’s byline demonstrate the advisor’s expertise. “If you do the branding properly and let people know, you’ll get the same lift as writing an article for The Wall Street Journal.” People surmise that if the media trusts the advisor enough to quote the advisor or publish an article the advisor has written, that’s like “a de facto endorsement,” Elman said, adding that his own clients and referral sources “love” knowing when he’s been published. “It’s the New England Journal of Medicine effect.”
FEATURE
“If you do the branding properly and let people know, you’ll get the same lift as writing an article for The Wall Street Journal.” BRAD ELMAN
Another idea is to publish articles in the professional journals and trade magazines of referral sources like attorneys, financial planners and even surgeons. When those professionals see the advisor quoted or published in their own trade journals, they are more inclined to refer clients to the advisor, Elman said. Elman’s print campaign also includes obtaining reprints of articles in which he has been published, with permission to use the reprints for marketing purposes. “The article validates your expertise,” he said. Elman and Markey both do volunteer work in the local community, and both tie this in to their print and media messaging. For instance, Markey recently sponsored a halftime show at a local school, with some students winning prizes for making a half-court shot, the school receiving a monetary donation and his firm getting media exposure for the sponsorship. Elman is the founder, sponsor, coach and board member of the Palo Alto Giants, a Little League team for kids with physical or mental disabilities. His son Spence is a team member. When the group has events, Elman lets the local media know, and the event often gets coverage. “Caring for the community is part of my brand, and this supports that,” Elman said.
The Case for Radio and Television
Peter D’Arruda advocates using both radio and television to build an advisor’s local image and celebrity. Known as Coach Pete, he is host of The Financial Safari, a nationally syndicated radio show that
started with one local station in 2007 and now airs on more than 100 stations across the country, as well as on television (via Financial Safari TV, on Fox, NBC, ABC, CBS, etc.) and online. Local advisors who participate in his firm’s network of more than 50 advisors appear on the shows aired in their particular area. Radio and television can get expensive, and the advisor won’t see results overnight, allowed D’Arruda, who is also chief executive officer of Capital Financial Advisory Group of Cary, N.C. It usually takes one year to break even, he said, but it’s a business-building process that works if the advisor stays with it. The firm tracks results of every source of advertising it uses by deploying different call-in numbers for each initiative, to measure impact on traffic. “What we’ve learned is that we get a lot more calls from radio than television, but we get bigger net worth callers from television.” End result: Many advisors in D’Arruda’s network have to hire more staff to see all the prospects from the show. One even had to buy a bigger office.
“The commonality of all of the advisors I work with who are successful on the radio seems to be that they are now able to be pickier in deciding the customers they want to work with,” D’Arruda said. “In effect, this is turning the tables on the prospecting world in general. Like Hannibal used to say to Mr. T on The A-Team, ‘It’s great when a plan comes together.’” He puts it like this: “The more you’re seen and the more you are on radio or television, down the road, people say your name.” Then, when viewers or listeners July 2014 » InsuranceNewsNet Magazine
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HOW TO BE A MEDIA ROCK STAR
How to Put on a Show Pete D’Arruda, host of a nationally syndicated weekly radio show, offered suggestions on how to get started in putting on a broadcast: Create a quality product. “This is a business, not a hobby,” he pointed out. On a television show, for instance, don’t just have some people sitting around talking into a microphone. “It’s best to script it out in advance,” he said. Also, hire a production company to put the show together.
and for the same reason as Elman: “It shows you are viewed favorably by your peers.” Being quoted in, or writing for, local publications helps too, he said. He also posts material on his website and sometimes creates reports to distribute from transcribed portions of a show. But it is his expertise in television and radio that draws the most attention. “Don’t get Google-slapped. That’s what happens when people go to Google to look up a term mentioned on a show. If they find what they need, they won’t call you. To keep that from happening, use terms that are not easily searchable. For instance, instead of referring to income planning, I use terms like financial cruise control or retirement auto pilot – and I trademarked this too.” — Pete D’Arruda
It’s Media and More
Keep the show fast-moving. “You only have 15 to 20 seconds to get the attention of the audience,” he said. “So make it exciting, and plan for several segments per halfhour.” If it’s television, provide visuals that “fascinate.” Maybe interview people on the street. Plan on an hourlong show. That will give people enough time to “stumble” across the show — while driving, for instance. “If they like you, they’ll start listening all the time,” D’Arruda said. Don’t overhype things. “Remember, the goal is to get the people to like you, because people buy from people they like and want to be around.” meet the advisor, they feel awed. “They’ll say things like ‘I can’t believe I’m talking to the guy I hear on the radio.’” This works all over the country, he said, providing that the advisor doesn’t give away so much information on the air that people don’t feel the need to come for financial planning. 26
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If the advisor wants to offer a free book or a report on income planning, he suggests having the callers prequalify – for instance by savings level – before they come in. “Make it pay for itself, or it won’t last,” he said. D’Arruda does print too. For instance, he writes articles for trade publications,
Branding and customer awareness come from more than television, radio and print media. Case in point was the big sign on Philip Harriman’s office that prompted a driver to pull off the highway and visit the office. However, it was Harriman’s presence on television that was the first mover. It created awareness of Harriman long before the motorist ever saw the sign. Harriman and the other advisors brush off assertions that they have become local celebrities due to their media exposure. But they welcome their depiction as well-liked experts in insurance and financial services in their local community and even nationally. They are proud of the growth of their businesses, and they are glad they started using traditional media to get the word out about who they are, what they do and how they do it. The message for other agents and advisors comes through loud and clear: Well-designed media campaigns using television, radio and/or print can help advisors promote their expertise in the local community – and grow their business too. 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.
The Media Issue • Special Sponsored Section
Television News Helped this Independent Professional Increase his Public Profile Q&A with SKIP JOHNSON
S
kip Johnson and his business partner started their company, Great Waters Financial, in September, 2012, and he’s experienced success. He attributes part of his success to a decision he made in September, 2012 to begin an affiliation with a media and PR company that helped him get his name into the community and increase his public profile. The opportunity was presented by Brokers International to work with Media Minefield, a Minneapolis-based company that provides professionals with placements on local television stations. Since 2012, Skip has made more than 50 television appearances. Q: What was your first TV appearance, and what was it like? A: It was on the local ABC station, which was a crazy thing for me because I grew up watching these anchors. The first time you see yourself on a TV monitor and they say, “We’re going live after the break,” there are a couple of gulps in your throat. But after time, you get used to it. The way I get past the nerves is that I know I’m providing relevant content. I believe it’s my responsibility. Media Minefield works with me to create solid content. We’ll do a coaching call ahead of time. And I make sure that everything I’m talking about is congruent with who I am. If somebody sees me on TV and then comes into my office, I want them to be hearing and seeing the same thing. Q: How long were you doing this before you started to see the results? A: It was within a matter of months, which was incredible, because we were a brand new company and were getting feedback from our appearances. Television provided us with name recognition that otherwise could have taken years to develop. I think this television strategy has helped me build my brand and establish myself in the industry. Q: How has this translated into more prospects? A: The media hasn’t replaced other marketing. I still rely heavily on mailers. And while this is a challenging time in the industry as a whole for traditional marketing avenues, the television appearances have helped in the more traditional avenues. After adding a screen shot from one of my appearances on a direct mail piece, my response rates increased. But it’s not a one and done. You can’t be on the news one time and expect the phone to just start ringing.
The real power is in continuous exposure. Q: How do you make sure you get more appearances? A: The staff at Media Minefield used to work at local news stations, so they know the type of guests and content that producers and anchors want for their news segments. We believe that we are asked back because we provide content that’s geared to the consumer. The entire team at Media Minefield has been just phenomenal in helping us do that. Q: Are there any niches in your marketplace that you’re reaching now that you were never able to reach before? A: It’s been a benefit in what I call my “warm market,” which is made up of friends and family. People from church, and even my dad’s friends, will see me on the news and send an email saying “great job” and asking to schedule an appointment. Q: Have you noticed your appointments have changed, because you spend less time selling yourself and can get down to business more quickly? A: Absolutely. I feel like I’m able to dive in and start talking about a client’s situation, and they seem open to my suggestions. There’s one story that’s made an impact on me. A client had seen one of my television appearances, and liked my presentation. The client called me after making a significant real estate transaction. I was able to help the client manage their financial goals, after the sale. It was almost an out-of-body experience for me because it was a relationship that was never on my radar until after my television appearance.
Media Minefield can help you elevate your brand by leveraging the power of local news programming. Visit www.biltd.com/mediaminefield to access an informational kit and learn how to get started.
© 2014 Brokers International, Ltd. All rights reserved. July 2014 » InsuranceNewsNet Magazine 27
The Media Issue • Special Sponsored Section
FEATURE
BIG MEDIA
Propels Financial Advisor to the Head of the Pack
How this next-level marketing positioned him to attract his dream clients – in just one year!
Q&A with Insurance Media Mogul KYLE WINKFIELD yle Winkfield, who heads up the TriQuest Wolfpack with his partner, Kyle O’Dell, has created for himself a surge of big media placements. He’s been on NBC, Fox and CBS affiliates across the country. He co-authored a book with Steve Forbes and was in a feature in The Wall Street Journal. He’s also been in Black Enterprise and The Washington Post. Most of this has been just in the past year. In this Q&A, Winkfield discusses how impactful big media placements can be for financial advisors and offers some advice on making it all work.
Kyle Winkfield is a leading retirement advisor who has spent nearly 15 years helping hard-working Americans grow wealth through cutting-edge financial strategies. In 2007, he established what became the Winkfield Group, which focuses on common-sense strategies for retirement planning and financial independence. Now, he’s partnered with Kyle O’Dell and TriQuest USA to create the TriQuest Wolfpack, a family-like organization of actively working producers. Winkfield and O’dell continue to work hard producing retirement solutions for American families while providing training and mentorship for over 70 independent advisors across the country.
Q: Before getting involved with big media, what were some of the challenges you were having with your business, particularly marketing and prospecting?
Q: How do your media appearances help you stand out amongst brands like that?
K
A: Consumers in the financial services marketplace are scared to death. They got burned in 2001 and they got burned again in 2008, and not only have they lived through that, but in the recent past, they’ve also seen some of the worst financial scandals ever to take place in America. The problem is they think everybody is going to rip them off. They don’t know who to trust. And by the time they’re done watching TV, reading the paper and surfing the internet, it’s almost impossible to be optimistic about anything. I try to think like these consumers and understand their fear. They’re up late. What’s keeping them from sleeping? Their money. So they go on Google and they look for whatever financial products they’ve been pitched. The biggest problem I was having was in all that noise, I was a small voice and what I was saying seemed to go against the grain. Q: So you got involved in big media so you could be a louder voice? A: Yes. I wanted to be the light, to be the answer to all the erroneous noise that’s out there. But also what I’ve used big media for is to be in that highest credibility docket. The biggest challenge that I have and that most advisors have is credibility. Because when consumers are up late on Google, they’re going to see what CBS says, what FOX says, and if you can get that behind your name, than that elevates you in terms of credibility in their world. And the other thing is I’m an independent financial advisor, an independent retirement advisor, and I’m having to compete with the agent who’s with Merrill Lynch or Morgan Stanley. 28
InsuranceNewsNet Magazine » July 2014
A: It’s great for pre-framing. CBS, FOX, NBC, The Wall Street Journal, these are all places my consumers go for information because they’re places they trust. Now it’s not going to solve the issue of you being an actual top-notch advisor and it’s not going to solve the issue of trust totally. There are two different kinds of trust. There’s true trust and there’s social trust. Social trust is the big media. So the social trust isn’t going to just take care of everything for you, but you start to elevate yourself in their mind. I can differentiate myself from those big brands by telling my prospects about my media appearances — Well, I don’t even have to say it. By the time they walk into my office, they already know. And that’s another thing you have to remember. It’s one thing to do mass media, but it won’t do you any good if nobody knows about it. Q: You have to tell the world that you’ve done these things. How do you pull that off? And how do you do it without seeming like you’re bragging? A: You’ve got to be able to position it in a way that you’re not in people’s faces with it, but strategically position it in your practice so that you’re not bragging but you are. I mean, if you’re not going to tell them, who is? So rather than outright telling them what I’ve done, it’s on all my collateral. Like my business card, it has what I call the “credibility crawl” on the bottom of it. All the logos of all my media placements. And it’s on all the
The Media Issue • Special Sponsored Section
“Social credibility is what you get from the media, and it’s powerful. But without true credibility it’s still not going to work. True credibility is when you’re going to do the right thing for your client and they know it. They truly can, and truly do trust you.”
TRUE CREDIBILITY
Does it matter to you that my family is OK? Is this the right plan for me or is it just the product you want to sell? Are you in this for the money or do you genuinely wish to help me?
VS.
SOCIAL CREDIBILITY
Can I trust you? Can I finally stop worrying if I’ll be OK?
Are you a wellversed authority on financial and retirement planning? Do you have up-to-theminute knowledge on all the latest products and strategies? Is the plan you recommend for me really going to work?
— Kyle O’Dell, TriQuest Wolfpack marketing collateral that I send out and my staff sends out to prospective clients or referrals. Q: How much time do you spend on your big media marketing? A: I dedicate maybe an hour a month. Mass media, once you got it, it’s not too difficult. You’re either trying to create an opportunity or responding to one. Q: Create an opportunity? How do you do that? A: I might take a news clip or a video clip of me on a show and I might have somebody on my staff mail it out to the news desk editors at all the local shows. They’ve got a tough job. They’ve got to have brand new, interesting content every day. Have you ever watched the news and wondered why they’re doing a story on something just silly? It’s because they needed to fill 30 minutes. You can become the news desk editor’s best friend if you can just prove to them two things — that you’re relaxed and articulate on camera and that you have command of your subject matter. Then you’ll get an inbound call. It’s never planned and you’ve got to make room in your schedule. Q: So you truly are getting to be a celebrity in your market. How does that feel? A: Here’s the thing I’ve noticed especially in the last six months. Everybody wants to know a celebrity. Think about how we act. The minute you meet someone famous, you get a picture with them, and right away, you show everybody. If you know someone famous, you tell everyone. It’s not just bragging, it’s that we always want to outdo everyone else. The way things are going for me now, I envision my clients going to parties and barbeques or at their desk at work and someone walks up and says, “Well my financial advisor, he says I should do this and this,” and my client says, “Well my advisor, he just co-authored a book with Steve Forbes, he’s been in The Washington Post, The Wall Street Journal, and he’s actually saying the opposite. You want to meet him? I can help you get in with him.” Q: How many referrals do you get with your clients bragging about you like that? A: It’s pretty consistent. For every client who’s been made aware of my big
media appearances, I’ve been able to have at least an opportunity to talk to someone who I don’t think otherwise would have set a meeting. I know this is true, because a referral will say to my staff, “Yeah so-and-so was telling me all about him. Are you sure Kyle’s got time for me?” I believe it’s every financial advisor’s dream that when the phone rings, it’s a prospective client saying, “You don’t know me but I know you. Can you help me? Can I get five minutes of your time?” That’s starting to happen now. I’m finally able to position myself in a way to attract who I really want as a client. Q: Have you decreased your other marketing now that big media has brought you so much success? A: No. You don’t decrease anything. You’re running a business, so you just add layers. A lot of agents need to understand one thing. It’s not either/or. It’s an and. I’m doing mass media and I’m doing dinner seminars. You can’t just do one thing and expect it to do well. Mass media is a massive enhancement to your basic, already-working prospecting strategy. If you don’t have your basics down, do not try to do mass media, it’s not going to work.
How to Google-Proof Your Sale Kyle Winkfield has gotten himself a positive presence in big media. But he still has to fight off the effects of all the contrary information on the web. In this free report, get the Wolfpack’s strategies to keep your clients from going home, getting online and talking themselves out of a winning financial strategy. Instantly download your free copy today at www.GoogleProofSale.com. July 2014 » InsuranceNewsNet Magazine
29
LIFEWIRES
MetLife broadens reach in middle market bitly.com/qrmetlife
Individual Life Combinations Grow Again
12
%
Individual life combination premium saw its fifth straight year of double-digit growth – with an increase of 12 percent in 2013. That’s according to LIMRA’s 2014 Individual Life Combination Products Annual Review. Total new premium for life combination products reached 2013 $2.6 billion in 2013. Approximately 98,000 life combination policies were sold in 2013, an increase of 18 percent compared with 2012 results. All life combination product lines experienced growth in 2013. Whole life (WL) combination premium rose 16 percent, universal life (UL) combination premium improved 9 percent and variable combination premium grew 124 percent. UL combination products make up the majority of combination product sales. UL premium represents 83 percent of the total market. WL products hold 14 percent market share and variable products hold 3 percent market share measured by premium. Whole life combination policy count jumped 62 percent, UL policy count rose 10 percent and variable policy count improved 50 percent.
PRUDENTIAL CONSTRUCTION REACHES NEW HEIGHTS A construction worker carrying reinforcement rods walks on the 20th floor of the new Prudential building located on Broad Street in Newark, N.J. Photo credit: Robert Sciarrino/ The Star-Ledger
Prudential’s global headquarters in Newark, N.J., has been a landmark since 1892, when it was the tallest building in New Jersey. The company expanded its presence in Newark when the final steel beam for its new 20-story office building was hoisted into position. Richard Hummers, Prudential vice president, called it “an incredible milestone” moments before a crane raised the girder to the top floor. Noting the harsh winter, Hummers said it was “a pretty incredible feat to be where we are today. It’s an exciting time for Newark, and an exciting time for Prudential.” Work began on the site about a year ago with the demolition of abandoned stores. Construction began shortly after on the $444 million office tower.
NEW MOMS UNDER 30 LEAST LIKELY TO OWN LIFE INSURANCE
They say the hand that rocks the cradle rules the world, but it seems that the hand DID YOU
46% ?
KNOW
JAPANESE COMPANY BUYS PROTECTIVE LIFE
One of Japan’s biggest life insurers, Dai-ichi Life Insurance, agreed to buy Protective Life in the United States for about $5.7 billion. Japanese companies have looked outside their home country for growth in recent years, as business in their home markets has posted slowing growth. Insurers have been
PERCENT of senior citizens in the U.S. have LESS THAN $10,000 in financial assets at the end of their lifetimes. Source: MetLife
Source: Associated Press
30
that rocks the cradle is the least likely to belong to someone who has life insurance. A recent survey finds that women and mothers between the ages of 18 and 30 are most likely to be uninsured or underinsured. Traditionally, would-be families consulted with a financial advisor before starting a family. Today, young families consider advisors less valuable than previous generations did when they started out, writes New York-based financial planner and advisor Thomas Rockford. Rockford is the founder of Life Ant, an organization and website devoted to affordable life insurance, which conducted the survey. So how underinsured are new mothers? Less than 20 percent of new mothers under the age of 30 have life insurance, the survey found. By comparison, 35 percent of fathers between the ages of 18 and 30 have life insurance.
InsuranceNewsNet Magazine » July 2014
QUOTABLE
Sales of life combination products continue to grow at a remarkable rate in 2013, driven by three new carriers entering the market and several existing companies refining their products over the past 12 months. — Catherine Ho, LIMRA product actuary.
particularly active; nearly three years ago, the casualty insurance provider Tokio Marine agreed to buy Delphi Financial Group for $2.7 billion. Dai-ichi is not only one of Japan’s biggest life insurance companies, it is also one of the oldest, at 102 years old. Protective is no stranger to deal making: it has struck 47 acquisitions over its 97-year history, including the takeover of MONY Life Insurance. Protective will continue to be based in Birmingham, Ala., after the deal is completed.
LIFE LEADS OFFERINGS IN THE VOLUNTARY MARKET
Life insurance was once Life Insurance again the top seller in the Other voluntary benefits market last year. This marks Voluntary Sales the fifth straight year in which life insurance extended its lead in voluntary sales, according to Eastbridge Consulting. Life insurance sales were $1.88 billion, an increase of 22 percent compared with 2012. Life insurance holds a 28 percent share of all voluntary sales, Eastbridge said. Life insurance sales in 2012 increased by 11 percent compared with sales in 2011, according to Eastbridge data. Total voluntary sales for all products last year was $6.6 billion, up 10 percent from $6.0 billion in 2012. In the life insurance category, term insurance accounted for 76 percent of new business achieved profit (NBAP) in 2013, up four percentage points from 2012, Eastbridge also said. Sales growth of term life in 2013 outpaced sales growth of universal life and whole 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? IF YOU’RE LIKE ME AND HAVE SEEN THE WRITING ON THE WALL, I urge you to download my report and hear my firsthand account of how I was able to increase my income by 50% with less effort. 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.
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www.StopSellingAnnuities.com PEAK PRO FINANCIAL IS NOT AN ANNUITY FMO. We’re a Producer Development Company. We have changed the business plans July 2014 » InsuranceNewsNet Magazine 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.
31
LIFE
Living Benefits: Separating the Plans and Terminology L iving benefits can provide an answer to the question most consumers have about life insurance: “What’s in it for me?” By Michael Smith
O
ne of the most rapidly growing trends in the insurance marketplace is the development of life insurance with living benefits. More carriers are adding accelerated benefit riders. The most common is a chronic care rider, similar to a long-term care (LTC) rider. Some carriers have not only a chronic/ LTC rider, but also a critical illness rider. With all the different variations, advisors are finding it challenging to understand the plans and terminology. Unfortunately, the industry has not settled on an agreed-upon terminology and that adds to the confusion. Here is a guide to this growing product line.
Hybrid Plans: Life Insurance with a Chronic or LTC Rider
Most carriers are calling these riders accelerated benefit riders. To most veteran advisors this means a terminal illness rider. This provides access to the death benefit if the insured is deemed terminally ill, with a life expectancy of 24 months or less. To me, the term “accelerated benefit riders” is home office terminology that does not work with the general public. I prefer the term “living benefits,” and several carriers are using similar phrasing. The term “hybrid plans” is also acceptable. This is often classified as permanent 32
InsuranceNewsNet Magazine » July 2014
insurance built on a universal or whole life chassis, with flexible premiums that can be ongoing or short paid. Still, advisors are unsure who has what riders and plan designs. For example, a few carriers now provide a chronic care rider built into their life insurance coverage. There is no additional charge for the rider. However, nothing good is free. Where charges begin is at claim time should the client need to make a chronic care claim. I do not suggest this is a bad rider, but it should be understood by both advisor and client. At claim time, built-in riders will allow a percentage of the death benefit to be accessible for chronic care needs such as home health care, assisted living or nursing home care. Every plan design I’ve seen factors in a formula to determine how much is actually available. For example, one carrier allows 24 percent of the face value to be accessed each year. If the client has a $300,000 life policy, 24 percent equates to $72,000 for that year. But that does not mean the entire $72,000 is available. From there, a formula is calculated to determine actual payout. In simplest terms, if the client is 60 years old, approximately 60 percent of the $72,000 is available, or $43,200. The other $28,800 is forfeited. The formula changes as the client gets older. If the client is 74 at claim time, about 74 percent or $53,280 is available, with $18,720 forfeited. The challenging aspect for advisors is reaching a solid idea for planning for LTC needs. Because the actual payout
is not determined until there is a claim, it’s hard to pinpoint actual dollars to be received. Still, having something available for a claim is better than nothing. If you would like to know how much is available for a chronic/LTC claim, perhaps it is better to obtain a hybrid plan where the rider is optional and has a planned premium. The amount available at claim is known, and in most cases the entire death benefit is available for either death or a claim for chronic/LTC. For example, a $300,000 face value policy with a 2 percent chronic/LTC rider would pay out $6,000 per month for 50 months, or until the entire $300,000 face value is used. Any unused death benefit for a chronic/ LTC claim is paid as life insurance to the beneficiary. For underwriting, it is possible for the client to be approved for life insurance but rated or declined for the rider. Underwriting varies from company to company, so it’s best to do your homework and perhaps prequalify clients who have health issues.
Linked Benefits: Life Insurance or Fixed Annuities with an LTC Pool of Money
Linked benefits have been around for a long time but have grown dramatically over the past several years. Although there are only a handful of companies in this marketplace, they are top-rated companies with household names. Typically, these are single-premium products with client sweet spots being
LIVING BENEFITS: SEPARATING THE PLANS AND TERMINOLOGY those between the ages of 55 and 70. These clients have a lump sum to invest, ideally $100,000 or more, although decent planning can be done with as little as $70,000. Obviously, the higher the deposit the more benefit is available. Clients who have certificates of deposit, larger savings or money markets, stock redemptions or even 1035 exchanges are candidates for these products. Clients without these types of assets may be better suited for a hybrid plan. With life-based linked benefits, the deposit creates a death benefit and a pool of money that can be tapped, should an LTC claim be necessary. Plan design can be very flexible. If the client wants more death benefit than long-term care, that can be designed into the plan. The opposite can be true, designing higher long-term care dollars and lower life face into the plan. For example, a 60-year-old woman deposits $100,000 into a life-based linked benefit. She would get $225,000 of life insurance with a $9,350 monthly LTC
2
LIFE
Many consumers find living benefits to be highly desirable. They provide an answer to the question most of them have: “What’s in it for me?” benefit should she go on claim. When the life insurance is paid out in claim in 24 months, she would still have an additional $448,000 in her LTC pool of money, paid out at $9,350 for 48 more months. Her $100,000 deposit gets her $225,000 of life insurance, with $673,000 available for LTC needs. And to top that off, many life-based linked benefits have a return-of-premium rider. Should she change her mind, she can get her $100,000 back with no surrender charges. If there is a qualifying claim, the money received comes from the death benefit first (account value for annuity based) and, when that is exhausted, an additional pool of money for LTC needs. Any death benefit or account value not used for
claims is paid to beneficiaries. If all death benefit is used and the client has dipped into the pool of LTC money and then passes, there is a residual death benefit that is typically 10 percent of the original face amount that is paid to the beneficiaries. Annuity-based linked benefits typically do not have a residual death benefit. Annuity-based linked benefits will also provide a pool of money available for LTC needs that may provide double, triple or lifetime benefits over the original deposit. There usually are surrender charges and when the client passes, there normally will be no residual benefit and taxes may have to be paid. Still, these are fantastic options for those who already hold annuities that do not have LTC riders. You can
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LIFE
LIVING BENEFITS: SEPARATING THE PLANS AND TERMINOLOGY
Living Benefit Plan Types Hybrid Optional LTC / Chronic Rider UL or WL
Hybrid Built-in LTC or Chronic Rider UL or WL
Linked Benefit Life Based UL or WL
Linked Benefit Annuity Based
Living Benefits Critical Illness LTC / Chronic Term or Perm
Structure of claim
Indemnity or reimbursement
Indemnity or reimbursement
Indemnity or reimbursement
Indemnity or reimbursement
Lump sum, no indemnity or reimbursement
How are benefits calculated at claim time?
1%, 2% or 4% of face value paid monthly until full death benefit is paid out. 2% of $300,000 = $6,000 monthly benefit until $300,000 is used.
Formula factored in to determine actual payout from death benefit at claim. Some face value will be lost if client goes on claim.
Known benefit amount available at claim as determined by formula illustrated. Dollars for claim come from face value first, then a pool of dollars from LTC rider.
Known benefit amount available at claim as determined by formula illustrated. Dollars for claim come from account value first, then a pool of dollars from LTC rider.
Unknown benefit amount until determined at claim. Life expectancy and formula determines. For critical or chronic claim, 30-75% of face value common. 80-100% for terminal illness claim.
Living Benefit claims received are
Tax free
Tax free
Tax free
Tax free
Tax free
What is still available as death benefit or account value after claim?
Unused life insurance for claim is paid as death benefit. Ex. face value is $300,000 but client only took $170,000 for claim, remaining $130k paid to beneficiaries as life insurance.
Unused life insurance for claim is paid as death benefit. Some death benefit is forfeited if client goes on claim.
Unused life insurance for claim is paid as death benefit. Ex. face value is $150,000 but client only took $70,000 for claim, remaining $80k paid to beneficiaries as life insurance.
Unused account value for claim is paid as death benefit. Ex. account value is $150,000 but client only took $70,000 for claim, remaining $80k paid to beneficiaries as an annuity.
Some death benefit is forfeited fi client goes on claim. Some carriers provide some death benefit if money is accepted, others paid the policy ends.
Premium
Flexible
Flexible
Usually single
Usually single
Flexible
exchange the plan under Section 1035 into linked benefits, and any withdrawals taken for LTC expenses are tax free, even avoiding gain in the old contract.
Living Benefits: Life with Critical Illness and Chronic/LTC Built In
The newest version of life insurance with living benefits adds a critical illness rider. This rider provides access to the death benefit should the insured suffer a critical illness such as a heart attack, stroke, cancer, multiple sclerosis, Parkinson’s disease, renal failure or any one of up to 16 different illnesses. Suppose you suffer a heart attack at age 44. You’re going to survive, but you’ll have a rough recovery period. The life insurance company will obtain your medical records to determine the severity of the attack. If it is considered a moderate heart attack, they might offer you 35 percent to 40 percent of the death benefit. That could be $100,000 of a $250,000 policy. If the heart attack is considered severe, 50 to 70 percent might be available. Take, for example, an insured who is stricken with breast cancer and needs 34
InsuranceNewsNet Magazine » July 2014
chemotherapy, or another who is diagnosed with Parkinson’s disease, which, over time, will diminish her ability to work. How helpful would it be to those people if they could tap into the death benefits of their life insurance policies to ease their financial burdens while they are alive? How much of the death benefit can be accessed by the insured? There is no easy answer to this question. It depends upon the severity of the triggering event and a formula the carrier calculates, which takes into account past and future premiums, life expectancy of the insured and the type of coverage held. If it is considered a moderate impairment, the carrier might offer 35 percent to 40 percent of the death benefit. That could be $100,000 of a $250,000 policy. If it is considered severe, 50 to 70 percent might be available. Life expectancy is the key. The shorter the life expectancy, the more dollars available. There are a couple of different plan designs if the client accepts the payment. Some carriers will terminate the policy if the client accepts the payment, while oth-
ers will allow the death benefit to continue, but at a reduced amount. This could include a remaining death benefit that is lower than the original, minus the living benefit payment. The key point? In either design, the policy owner has the final say. If he does not accept the living benefit payment, the policy continues as normal. If he chooses to accept payment, he could terminate the remaining coverage or keep a reduced amount. Living benefits can be found in both term and permanent insurance. Many consumers find living benefits to be highly desirable. They provide an answer to the question most of them have: “What’s in it for me?” Most people can relate to having a heart attack, cancer or other critical illness, or they have a family member or friend who has suffered from a critical illness or needed LTC services. Michael Smith, LUTCF, is president of CPS Horizon Financial in Hales Corners, Wis. Mike may be contacted at michael. smith@innfeedback.com.
LIFE
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LIFE
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ANNUI
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MEDIC
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Oxford Life Cited by CSG Actuarial as one of the LOWEST Plan F Rates in U.S.1
EMENT
Female, Ag State AZ CA CO GA IA ID IL IN KS MD MI MO MT NC ND NE NV OH* OK OR PA* SC SD TN TX UT WY
e 65, Non-T obacco, Pla
Oxford Life $144.80 $131.90 $117.26 $149.90 $99.99 $136.99 $108.80 $117.90 $119.96 $145.39 $121.20 $140.10 $114.16 $114.80 $113.91 $96.88 $135.67 $128.30 $102.18 $112.98 $124.10 $120.00 $110.98 $108.21 $103.50 $108.77 $106.43
AARP United Healthcare
$147.35 $130.72 $125.82 $168.25 $134.05 $164.50 $148.22 $150.50 $150.32 $157.67 $143.15 $175.75 $128.80 $144.20 $135.62 $138.55 $137.20 $144.90 $123.20 $128.97 $137.02 $127.57 $126.00 $136.67 $149.97 $127.92 $127.75
n F*, Lowe
st Area Fa
Mutual of Om Companiesaha $179.43 $137.61 $132.58 $130.10 $103.68 $170.81 $118.90 $142.87 $189.00 $163.50 $121.72 $157.09 $127.17 $120.44 $116.53 $110.32 $138.00 $127.23 $108.75 $159.22 $139.69 $129.89 $121.67 $132.46 $129.82 $132.61 $121.51
ctor Rates
Aetna Com panies $130.61 $127.45 $139.94 $135.16 $107.37 $137.78 $125.62 $137.49 $128.78 $156.60 $126.95 $224.83 $131.36 $119.20 $125.75 $103.79 $139.03 N/A* $100.46 $127.03 N/A* $118.87 $128.08 $124.95 $119.04 $121.28 $115.29
1 According to CSG’s Premium Rate Scoreca TM *OH and PA compar rd as of 4/1/201 4. For full compar Insurance Compan e Plan C. Oxford Life does ison report go not offer Plan y, and United to http://csgactua F in these World. Aetna compan rial.com/news/m ies include Aetna, states. Aetna companies edigap-premium do not have American Contine -rate-scorecard CER USE ONLY ntal, and Contine Plan C in these states. Mutual /. — Not intende ntal Life. Rates of Omaha compan d for solicitation in the compar ies include Mutual to the public. ison are believed of Omaha, United Not connected to be current of with or endors as of 6/1/201 4 but are subject Omaha, Omaha ed by the United to change. States Govern ment
Call for rates in your state ➤ 888-203-6221 MS588P1 — FOR PRODU
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July 2014 » InsuranceNewsNet Magazine
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LIFE
Would your clients’ loved ones be able to find critical financial information or passwords?
Why Your Clients Should Have a Plan for Their Digital Assets A dvise your clients on how their loved ones can access crucial information during an emotional time. By William Bissett
I
nsurance is a hedge against the risk of loss, usually in monetary compensation. We buy life insurance to capitalize a wage earner’s income stream. Longterm care insurance is used to pay potentially catastrophic costs for years of care through debilitating diseases, such as Alzheimer’s disease. There is no insurance for emotional losses or the loss of information. We know this because the grieving process is a result of emotional loss. Unfortunately, the grieving process becomes more difficult with a lack of information. At no other time has this been more apparent than in the digital 36
InsuranceNewsNet Magazine » July 2014
age. This is shocking because the digital age is supposed to provide us with access to information. However, it is exactly this access to information that creates the issues. Digital assets are easy to create. They provide us with a wealth of opportunities but they also present a tremendous challenge when settling an estate.
What Are Digital Assets?
Digital assets are things we own or information that is stored digitally. For example, if an insurance agent sells a policy to a woman who doesn’t want paper statements, then her policy information becomes a digital asset. In essence, the knowledge of the policy only exists digitally. The policy owner has a username and password where she logs in to check when the premiums are due. Maybe it’s a universal life policy and
she checks the cash balance from time to time. However, she has no physical record of the policy – just a username and password. Maybe she set the policy to have the premiums paid automatically through her bank’s online bill pay function. Or maybe she has the policy prospectus but she chooses to store it in a virtual solution like Dropbox or Box. If she dies without ever telling someone about the policy, how will they find it? What if she never shared her usernames and passwords with anyone? Digital assets are more than insurance policies. Our parents and grandparents used to store 5x7 pictures in labeled boxes around the house. We now store photos in Snapfish or Shutterfly. They’re not valuable assets that you can sell for millions of dollars, but they are valuable memories treasured by the family.
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LIFE
WHY YOUR CLIENTS SHOULD HAVE A DIGITAL ASSET PLAN
The same thing applies to letters. I remember seeing my grandfather’s old letters from World War II and my grandmother telling me how beautiful his handwriting was. My handwriting is a mess, but that doesn’t matter because all my “letters” are typed and in an email archive. An asset may be defined as “a valuable person or thing.” That means an asset could be the knowledge of which bills I pay through my bank’s online bill pay. After all, in the days and weeks after I have died, it becomes valuable to my family to know how to keep the house running. They may not have value to the
called the Stored Communications Act, that attempts to protect the privacy of Internet users. The problem is that technology has advanced rapidly over the past 30 years and the law is extremely outdated. The law uses language associated with computers before the adoption of the Internet or mobile devices. The antiquated language in this bill along with the strict privacy protection outlined in the Computer Fraud and Abuse Act – also passed in 1986 – causes companies to be extremely protective of the privacy of their users, even after they have died.
Federal legislation makes it difficult for websites to share private information. rest of the world, but my family photos are valuable to family and friends. If we expand the definition of an asset, then we quickly start to see how our online accounts are digital assets. Facebook and Twitter accounts definitely have value. My email accounts are valuable as are my rewards programs through credit cards and airlines. In fact, most of my online accounts have some value to my family. But unlike in the days of old, when my family could walk down the hall and open up the shoebox to find the pictures, today the laws governing access to online accounts stand in the way. Without knowledge of my username and password, my family can’t gain access to my digital assets. In effect, the value of these accounts is priceless.
Why Can’t Websites Simply Share Information With Beneficiaries or Executors?
This seems silly, right? Can’t an executor just call the bank and find out the username and password for the decedent? Or even better, can’t the bank just give the executor a list of companies that the deceased paid through online bill pay? Current federal legislation makes it difficult for websites and the companies that operate them to share private information. Congress passed a bill in 1986, 38
InsuranceNewsNet Magazine » July 2014
Mark Zuckerberg, CEO of Facebook
To combat this, seven states have passed laws that provide executors with varying degrees of access to online accounts. These seven states are Connecticut, Rhode Island, Oklahoma, Nevada, Virginia, Indiana and Idaho. However, that leaves 43 states that have nothing helping families and executors to gain access to crucial information. Further complicating things is that each of the seven states that already passed the access legislation passed bills with different language. Fortunately, the Uniform Law Commission – a group representing all 50 states to promote uniformity of state laws – has been tackling the problems with digital assets since 2012. Their goal is to propose legislation – currently called the Fiduciary Access to Digital Assets Act – to the states, providing fiduciary access to digital accounts. The model legislation would essentially give fiduciaries the authority to act as the deceased and gain access to digital accounts of the decedent. This would be a big accomplishment because it would mean even if the family doesn’t know the username and password of an account, they will be able to gain access. In many instances now, not knowing the username or password all but ensures that the family is denied access.
Why Does It Matter to Me?
The digital age has impacted every profession. To some degree, it has commoditized many products. Insurance is no exception. Providing quality guidance to individuals and families on the issues that are important to them is a way many insurance professionals stand above the crowd. Helping people understand and insure their risks is what you do. The unknown world of digital assets and estate administration is a large uninsurable risk. But this risk can be mitigated by increasing awareness of the problems digital assets create.
What Can We Do About It?
As professionals who work with clients regularly, there is much that can be done and it’s not difficult. It doesn’t take much to overcome some of these obstacles – it just takes a plan. Advise your clients to follow these simple steps in order to document their digital assets: » List the websites where the individual has an account. » Provide information about where to find the username and password. » Indicate which email account it is tied to. » Provide the reasons why it is important. These simple steps help families find important information. I once had a colleague tell me that anywhere there was a risk, there was someone willing to insure that risk. While I agree with him on many counts, digital assets present a risk to our clients’ families and there isn’t a premium payment that can spread that risk. The only way for us to help our clients is to prepare them for the known issues that can occur due to the loss of information. Clients lean on their professional advisors to plan for tragic variables that cause pain in life and in death. William Bissett, CFP, is a wealth manager with Pinnacle Advisory Group and lives in Charlotte, N.C. He also is the founder of Principled Heart (www.principledheart. com), an online service helping clients plan for their estate administration. William may be reached at william.bissett@ innfeedback.com.
July 2014 Âť InsuranceNewsNet Magazine
39
Brought to you by:
ANNUITYWIRES
Fixed Index Annuity Sales See 1Q Sprint Fixed index annuity (FIA) sales were off to a great start in 2014, according to Wink Inc. Although first-quarter sales were down 5.8 percent compared with the previous quarter, sales were up nearly 39 percent over the year-ago period. Allianz Life continued as the No. 1 FIA carrier with a 25.6 percent market share. Security Benefit continued as the second-ranked company in the market, while American Equity Companies, Great American Insurance Group and Athene USA rounded out the top five. Allianz Life’s Allianz 360 Annuity was the top-selling FIA for the second consecutive quarter.
BANK ANNUITY SALES CONTINUE TO BOOM
$9.4B
Banks continued to do a booming business in annuity sales, which leaped ahead by 31 percent in the TOTAL ANNUITY first quarter compared with PRODUCTION the year-ago period. Sales of fixed annuities through banks surged to $5.3 billion in the first quarter, according to the Bank Insurance & Securities Research Associates (BISRA). This was twice as much as the $2.65 billion in sales one year ago. Total annuity production reached $9.4 billion in the first quarter, up from the $7.2 billion reached in the first quarter of 2013, but 2 percent shy of the fourth quarter of 2013. First-quarter fixed production was the highest first quarter since 2009 when sales reached $11 billion. Indexed annuity sales reached $1.74 billion in the first quarter, just short of the historic high of $1.77 billion in the prior quarter. The only negative in the BISRA report was that variable annuity sales through banks were down 9 percent in the first quarter over the year-ago period.
INCOME ANNUITY SEARCHES DOUBLE
Those increases in annuity sales coincide with another increase. Annuity advisors, distributors and sales desks have stepped up their use of income annuity searches. According to Cannex USA, these professionals made twice as many hits to the Cannex Financial Exchanges database in first quarter 2014 as they did in first quarter 2013. The database tracks the number and types of “surveys” (or hits) that annuity professionals run when they consider making annuity recommendations to clients. The 40
InsuranceNewsNet Magazine » July 2014
TOP 5 FIA CARRIERS
1. Allianz Life 2. Security Benefit 3. American Equity Companies 4. Great American Insurance Group 5. Athene MORE O ATHEN N USA E page 4 2
annuities researched include both single premium immediate annuities (SPIAs) and deferred income annuities (DIAs). In the first quarter, Cannex recorded nearly 240,000 hits to its database compared with nearly 118,000 one year ago and nearly 123,000 two years ago, according to reports from the firm. The company is the U.S. affiliate of CANNEX, an SPIA data resource in Toronto, Canada. The increase in hits equates to 103 percent more annuity surveys run this quarter than a year ago and 95 percent more surveys when comparing the first quarter 2014 total with the total in first quarter 2012.
GO IT ALONE? GET SLAMMED TWICE
Workers in retirement who don’t use advisors often find themselves slammed at both ends: They often get hit with higher expenses, particularly unanticipated health care costs, and their income is often lower. The findings are contained in a Nationwide Financial Retirement Institute consumer survey that also finds 38 percent of retirees wish they would have delayed the start of their Social Security payments in exchange for higher payments. One-third of retirees without an advisor said health care costs keep them from living the retirement they expected. This is compared with only 13 percent of retirees who use an advisor and said costs keep them from a retirement to which they’d aspired, the survey found. In addition, the survey revealed that 82 percent of retirees working with an advisor are more likely to say they are able to do the things they want in retirement. By comparison, only 62 percent of retirees not working with an advisor said they were able to do the things they want in retirement.
RETIREMENT FUNDING IS TOO MUCH OF A GUESSING GAME FOR SOME
Guessing games are fun for children, but they can have disastrous consequences when they become the basis for planning retirement funding, according to the 15th annual Transamerica Retirement Survey. The survey showed half of all workers indicated they have to guess their retirement savings needs. Little more than 1 in 5 (22 percent) have estimated this goal based on current living expenses, 11 percent used an Internet calculator or work sheet, and 5 percent said they used an amount calculated by a financial advisor, the survey found. Catherine Collinson, president of the Transamerica Institute and the Transamerica Center for Retirement Studies, said retirement budgeting presents “another opportunity” for advisors to sit down with clients and talk about clients’ dreams and aspirations for when they are liberated from full-time employment and the many commitments it entails. “Only 2 in 3 baby boomers have factored in ongoing living expenses and half of boomers have factored in health care costs, and even fewer have factored in inflation, and that goes down for tax, estate and long-term care planning,” she said. The majority of boomers – 62 percent – have a retirement strategy, the survey also found. However, only 14 percent of boomers have a written plan, while the remaining 48 percent have a plan, but it is not in writing. Putting a plan in writing and having clients agree to it “will inspire greater levels of action,” Collinson said. Sounds like a good opportunity to put annuities into the plan.
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ANNUITY
Athene USA Expected to Gain Footing in Expanding FIA Market E DITOR’S NOTE: In June’s edition, Linda Koco focused on Athene’s entrance into the fixed index annuity market. In this article, Koco looks at the market’s first quarter results, with a focus on Athene’s performance. By Linda Koco
A
thene USA tried to hold its ground in first quarter 2014 fixed index annuity (FIA) sales. It sold more than $571.8 million, qualifying it to be one of the quarter’s top five sales leaders, according to Wink Inc. However, the carrier registered a sales decline from the previous quarter and also from first quarter last year. This happened in the same quarter during which sales leader Allianz Life thundered in at nearly $2.8 billion, registering a stunning 142 percent gain over the first quarter of last year, according to Wink figures. Despite Allianz’s spectacular gains, Athene’s numbers are the ones that annuity professionals want to know about right now. That’s because Athene swallowed fixed index annuity mega-player Aviva USA in October; the sales losses it suffered during its highly publicized merger and acquisition rumpus became a heads-up for future inquiry.
The Scorecard
Considering its own target, Athene looks to be on its way to achieving its projected $2 billion to $3 billion in total annuity sales for all of 2014. If Athene’s FIA sales merely replicate first quarter results in the following three quarters, the carrier will have sold roughly $2.3 billion in indexed products by year-end. Becuase the company also sells some singlepremium immediate annuities and multi-year guarantee annuities, the annuity total will be slightly higher. 42
InsuranceNewsNet Magazine » July 2014
First Quarter FIA Sales Rank FIA Sales Market Share Change from Previous Qtr Change from 1st Qtr 2013
1 $2.79 billion 25.65% 20.68% 142.22%
5 $0.57 billion 5.26% -15.12% -13.46%
Total fixed index annuity sales: $10.8 billion Change from previous quarter: -5.85% Source: Change in 1st quarter sales: 38.60% Wink Inc. Relative to industrywide sales, the carrier came in fifth place on Wink’s list of first quarter fixed index annuity sales leaders. That’s the same position it held at year-end 2013. On Wink’s list of top companies in the independent agency channel, Athene took fourth place in the first quarter, better than in the fourth quarter 2013, when the carrier did not make that list at all. Overall, Athene sales were down 15 percent from the previous quarter and down 13 percent from the first quarter of last year, according to Wink. By comparison, the overall industry experienced a 5.8 percent decline in sales compared to fourth quarter – but a nearly 39 percent increase over first quarter last year. It’s likely that Athene will pick up steam as the year wears on, Sheryl Moore said in an interview. The president and chief executive officer of Moore Market Intelligence and Wink, Moore has been watching the carrier for signs of potential hiccups as it begins its new life. “It can take a couple of quarters for a company to get its bearings following
an acquisition,” Moore said. But once things are running smoothly, she expects Athene’s sales to start growing, probably in the second quarter, she said.
Competition Is Growing
If the company does increase its sales this year, as Moore predicted, it will happen in the face of increasing competition. Carriers are making enhancements to their products to stimulate sales, she said. For instance, the average commission paid to the sales agent has gone up – to 5.9 percent in the first quarter from 5.6 percent in the fourth quarter, according to Wink’s Sales & Market report for the first quarter. The report also shows that sales involving products paying 7 percent to 8.99 percent in commission have accounted for an increasing share of sales over the last four quarters, reaching approximately a 55 percent share in the first quarter. “It’s a sign that carriers are slowly getting their products back to the way they were before the market collapse in 2008 when commissions were in the 8 percent range,” Moore said.
ATHENE EXPECTED TO GAIN FOOTING IN EXPANDING FIA MARKET To achieve these increases, several carriers have introduced “commission bonus programs.” The most common increase to agents who qualify is 0.5 percent, but this rate varies. The carriers are introducing this cautiously, Moore said, “so they won’t have to claw back the increases if market conditions should decline later in the year.” Even so, the fact that the average is up – at all – is a sign of increased competition. In addition, carriers are increasing the cap rates, participation rates and fixed account rates in their products, according to Moore. This is a reflection of the modest improvements seen in 10-year Treasury rates, she said, and distributors are responding to the changes by advertising they now have “uncapped annuities.” Another increase has occurred in the premium bonus percentage that many carriers pay to policyholders. The carriers have started increasing this percentage, and that stimulates sales, Moore said. (The premium bonus range in the first
ANNUITY
pay lower commissions and have shorter surrender charge schedules than products sold in the independent channel. They also tend to be issued by carriers rated A- or higher that do not feature premium bonuses, Moore said, noting that some carriers definitely want to be players in this market.
Read last month’s article detailing Athene’s entrance to the FIA market at www.insurancenewsnet.com/athene quarter was 0.5 percent to 12 percent.) Not all companies offer bonus products. In fact, in the first quarter, the percentage of FIA sales with bonuses actually declined, to 66 percent from 75 percent in the fourth quarter, according to Wink. But those that offer the products are carriers in the independent agent channel, where bonus annuities sell very well and competition is keen. Another trend in the competitive environment is the rising sales of fixed index annuities through banks and wirehouses. Banks increased their share of sales to 13.5 percent in the first quarter, almost twice the 7.6 percent share they held in first quarter 2013, according to Wink. Meanwhile, wirehouses more than tripled their share, to 4.3 percent from 1.3 percent in the same quarter a year ago. Products sold in these channels tend to
The Long View
Overall, Moore takes the long view in assessing the first quarter decline in industrywide sales. First quarter sales are normally “abysmal,” she said in a statement. That’s because fourth-quarter sales tend to be high as agents rush to complete sales before year-end. “However, when you consider that this was second-greatest quarter ever for indexed annuity sales, it was a pretty good quarter!” 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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July 2014 » InsuranceNewsNet Magazine
43
ANNUITY
Early Retirement Is Not a Recession-Based Phenomenon A n unplanned early retirement can create numerous financial planning challenges. By Eric Taylor
W
hen the Social Security Administration originally set 65 as the retirement age for receiving full Social Security benefits, 65 became the de facto age at which many Americans expected to retire. But that hasn’t played out extraordinarily well for many people. We know from our latest survey of retirees that 46 percent actually retired sooner than they planned, and it’s not always because of the recession. Among retirees who retired sooner than anticipated, 36 percent did so because they had lost their job or had been encouraged by their employer to take early retirement. The other top reasons cited by those who retired earlier were having saved more money than expected or having a financial plan that exceeded expectations, “did not want to work anymore” or health issues. In fact, the median age of retirement is 62 and has remained relatively steady for the past 22 years, according to the Employee Benefit Research Institute (EBRI). Unplanned early retirement obviously creates numerous financial planning challenges, stemming in large part from the fact that many Americans simply haven’t saved enough. Compounding the problem is that senior costs are rising at rates higher than average and people are living longer. The experience of actual retirees demonstrates that these money concerns are well-justified. Genworth’s “Future of Retirement Income Survey” found that whereas 54 percent of pre-retirees expected expenses to go down in retirement, 64 percent of actual retirees found expenses increased or remained flat once they retired. Part of the reason for this is that seniors consume a greater-than-average 44
InsuranceNewsNet Magazine » July 2014
Fewer dollars available for longer retirement Income gaps can be created if clients retire earlier than expected or live longer than anticipated.
BEGIN WORKING
INCOME GAP
INCOME GAP
ME INCO
CAREER SPAN
RETIREMENT SPAN
(62?) Actual Retirement
Source: Genworth
LONGER LIFESPAN
Income Anticipated But Not Actually Earned
share of goods whose prices tend to rise more rapidly than average, particularly health care and housing. From medical services to nursing homes, costs are rising at a pace that challenges the financial wherewithal of most seniors. Financial professionals who help their clients create a retirement plan with the flexibility to cover life’s curveballs will undoubtedly have the most satisfied clients. Because for half of us, it’s not a matter of whether our retirement plans will change; it’s a matter of how much they will change.
Challenging Your Clients’ Assumptions
(65?) Planned Retirement
Financial professionals can make a positive impact in their clients’ lives by starting to speak to clients sooner and having them write down their retirement expectations. Aggressively challenge their assumptions, and then insist on working with them to create a written plan that is flexible enough to adapt to the realities of life. Use data and graphics to bring this home to your clients. When creating a plan for retirement, make sure the expenses for which your clients are planning also have some flexibility. For example, are they locking themselves into high essential expenses by virtue of where they plan to retire? Will those expenses be sustainable? Have they built into their plan costs they
may not have now or that will rise, such as health care and housing? Because the probability of retiring when planned is as unpredictable as a coin toss, it’s important to stress-test that plan – and you are in the best position to do that – to make sure it provides enough income should they indeed find themselves retiring earlier than planned.
Reducing Unknowable Risks
An extraordinary number of things must happen in order for a person’s retirement date to line up with having enough money to retire. So much is out of our control that, as individuals, our plans can’t hope to take all of it into account and get it exactly right. In those cases, insurance solutions can help take some of the risk off the table, reducing some of those unknowable risks. For clients who are on the fence about the value of insurance products, it helps to remind them that insurance products create value we can’t create ourselves as individuals. Pooling risks with others, as we do with homeowners or auto insurance, makes good coverage less expensive (and much less worrisome) than “self-insuring.” Even people who are considered wealthy still buy auto insurance. That’s because it’s much cheaper to buy auto insurance and lay off the risk to an insurance company,
Going our way? The push for greatness doesn’t have to be an individual pursuit. Now you’ve got an entire company behind you. We are Athene. And we are relentless when it comes to creating an innovative portfolio of fixed annuities that help you perform at a higher level. We see every day as a new opportunity to measure ourselves against the best—and then we don’t stop until we’ve set the bar even higher. We’re ready to help you achieve more. Athene © 2014
Driven to do more.
SM
For more information on all Athene products call 1-800-255-5055 or visit www.iamsinc.com.
July 2014 » InsuranceNewsNet Magazine
45
ANNUITY
EARLY RETIREMENT IS NOT A RECESSION-BASED PHENOMENON
which is in the business of managing that risk. Similarly, with respect to a “safe withdrawal rate” from your retirement savings, the amount of money you can withdraw from a portfolio is likely to be significantly lower when you are self-insuring than if you give that risk to an insurance company. 90%
91%
Annuity owners like them more than nonowners
70%
68% 50%
Positive
30%
Neutral Owners
Nonowners
Source: Genworth
Not All Products Are Created Equal
You’re already aware that not all products are created equal. Annuities are a good example. Many popular annuities only permit contract owners to begin receiving income or to increase their lifetime income benefit on a contract anniversary date. Let’s look at a hypothetical situation to understand how important this is. Assume for a moment that the phone rings on July 1 and your client is on the line. Excitedly, she announces that she has decided to retire earlier than planned and now wants to begin taking lifetime income from her annuity. However, her contract anniversary date is not until January 5, meaning she must wait half a year before she can begin tapping into her income stream. Her excitement may well turn to anger as you inform her
she must delay income payments for six months until her anniversary date. Many times when comparing annuities, you may look at the illustrated income payable on the contract anniversary date. A good question to ask is, “What will the income be if my client needs it to start on a date other than the contract anniversary?” An annuity that does not restrict when income payments can begin offers a flexible solution for consumers who may retire earlier than expected. As an additional measure of protection and value, look for annuities that also have a “daily roll-up” optional income rider. Together those features let you start taking income any day of the year and can help maximize the client’s lifetime income value at any given point in time. Some types of annuities, such as fixed index annuities, also can provide the opportunity to accumulate greater growth while at the same time protect principal – an important benefit for clients who have been burned by various down markets and can’t bear the thought of losing another penny due to market declines. Many clients who have been through the last 14 years of ups and downs in the stock market are now extraordinarily risk averse and have a cash position that is significantly above what most financial professionals would consider optimal. For example, many people in their late 40s and early 50s, in particular, have an inordinate amount of cash earning paltry interest because they are so fearful of losing money. This could be a terrific time to introduce the concept of a fixed index annuity. With its ability to protect principal from losses due to downturns in the market, a fixed index annuity may provide the safety net that will encourage them to put
People feel more confident and comfortable when they have a written plan. Confident their money will last their lifetime
59%
46
Pre-retirees confident their money will last their lifetime
45%
InsuranceNewsNet Magazine » July 2014
74%
44%
76%
Retiring depends upon having enough money. 36% 21%
Won’t have enough money
22%
11%
Expenses Will have Will have Other may be too much too much too high debt responsibility
Source: Genworth
Costs keep rising, even in retirement. Expense
Retirees reporting an increase
General cost of living 77% Healthcare
41%
Real estate/mortgage
26%
Financial dependents
18%
Debt
9%
Long-term care
9%
Source: The Future of Retirement Income Study 2012, Genworth
their money to work, and can put them on a path to accumulate enough money to fund a comfortable retirement.
Planning Boosts Confidence, Satisfaction
As a financial professional, you are in the best position to help your clients stress-test their retirement plans against what we know can be far different than their actual experience. And because real life doesn’t always coincide with a contract anniversary date, you can help them see the value in insurance products that are designed to be part of a contingency plan. Helping your clients develop retirement plans that are flexible enough to cover early retirement and other unexpected events will not only provide them with confidence in their futures, but will also increase their confidence in you. There is no greater satisfaction than being able to tell your clients, when you get that panicky call, that because of the choices they made, they’re going to be OK. Eric Taylor is national sales manager/annuities with Genworth. Eric may be contacted at eric.taylor@innfeedback.com.
According to LIMRA, more financial planners are becoming technology leaders. Smartphones can be used for quoting on websites or apps during a meeting (try MobileSuite from Legal & General America). Tablets are useful for accessing product information, underwriting guidelines, and forms. Have difficulty explaining a topic to a client? Show them a presentation or video on your tablet! Send documents to your client during your meeting to give them instant access.
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EVERY DAY MATTERS.ÂŽ BANNER. WILLIAM PENN. July 2014 Âť InsuranceNewsNet Magazine
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HEALTHWIRES
U.S. Law Prods States to Revisit Health Care Rules. bitly.com/qrrevisit
QUOTABLE
2M ACA Applicants Have Data Discrepancies Remember those 8 million people who reportedly signed up for health care coverage under the Affordable Care Act? It turns out that one in four of them may have their coverage in jeopardy because of data discrepancies. We’re talking about more than 2 million enrollees here. This amounts to a mountain of paperwork for the feds. The Obama administration said it is triple-checking information given by enrollees to make sure that only those who are entitled to health care subsidies are getting them and receiving the correct amount. Some consumers may be forced to repay their subsidy for coverage if they received more of a subsidy than they were entitled to. In the worst-case scenarios, some may be faced with loss of coverage. House and Senate lawmakers are also looking into the data issues, which involve not only income but citizenship, immigration status and other factors.
2 STATES COULD MOVE TO FEDERAL EXCHANGE
One state is getting rid of its health care exchange in favor of the federal site, while a second state is giving signals that it possibly could be moving its residents to the federal exchange. Nevada officials fired the software contractor for that state’s health care exchange and announced Nevadans will enroll for health insurance on the federal exchange when the next enrollment period begins in November. In Massachusetts, officials from that state’s exchange are seeking $120 million in federal funds to pay two technology firms to fix the state’s glitch-ridden website. But those same officials also are looking for a way to transition Massachusetts residents to the federal exchange, HealthCare.gov.
HEALTH CARE COSTS ABOUT $9K PER PERSON
The U.S. spends about $2.8 trillion – or 17.2 percent of its gross national product – on health care. Med-Certification, a provider of online DID YOU
KNOW
?
48
medical career training and certification, broke down U.S. health care figures and found the cost of health care comes down to about $9,000 per person. Of that $2.8 trillion, $882 billion went to hospitals, $565 billion went to physicians, $263.3 billion went for prescription drugs, and $76.4 million went for other professional services such as physical therapy, optometry or chiropractic care. The federal government covered 26 percent of medical costs, with Medicaid covering $421.2 billion, Medicare costing $572.5 billion and $917 billion going to private health insurance companies. Patients paid $328.2 billion in out-ofpocket costs on their health insurance plans.
INSURERS ON THE FENCE TO JOIN EXCHANGES
Several insurers that have been sitting on the sidelines said they will sell policies on the new exchanges in the coming year, and others plan to expand their offerings to more states. That’s according to the Kaiser Family Foundation, which estimates that next year’s ACA enrollment could reach 13 million people. In New Hampshire, for example, where Anthem Blue Cross is the
MINNESOTA is the state with the
HEALTHIEST SENIOR POPULATION, followed by
Source: Centers for Disease Control
InsuranceNewsNet Magazine » July 2014
HAWAII.
Insurers continue to see this as a good business opportunity. They see it as an attractive market, with enrollment expected to ramp up in the second year. — Larry Levitt, Kaiser Family Foundation health policy expert, on the number of insurers expected to enter the health marketplace for 2015 enrollment.
only insurer offering individual coverage on the state exchange, two other plans, both from Massachusetts, say they intend to offer policies next year. UnitedHealth Group and Cigna, which were notable in their caution about the exchanges last year, are expected to enter more markets this year. In Washington state, United is among four new insurers that have told state regulators they are interested in offering plans in 2015. Assurant Health, a unit of a for-profit specialty insurer in New York, sold policies off the exchanges in 41 states last year and said it now intends to offer plans in some exchanges.
60
COST THE MAIN REASON FOR NOT GETTING COVERAGE
%
Why didn’t people buy health insurance now that the ACA is in effect? A survey of those who OF PEOPLE didn’t buy coverage revealed BELIEVED THEY that 60 percent wanted to, but COULDN’T AFFORD believed they couldn’t afford it. COVERAGE The poll by Enroll America, a nonprofit group formed to help implement the Affordable Care Act, showed only 15 percent of people who didn’t enroll did so because they said they had no desire for insurance. Instead, the reasons they cited were more practical: 43 percent said they “wanted to sign up but couldn’t find anything,” 18 percent said they meant to sign up but “things got in the way” and 15 percent said they didn’t know they could sign up. Of those who looked into insurance but didn’t purchase any, the top reason for their decision, at 39 percent, was “the costs aren’t worth it.” Website problems and general confusion about the law were cited by 27 percent and 26 percent, respectively.
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HEALTH
Which Type of DI Coverage Is Best for Employees? A look at some of the deficiencies that exist in group disability income insurance plans. By Larry Schneider
A
re employers really doing their employees (or themselves, for that matter) a favor by providing them with employer-paid group long-term disability insurance (LTD) coverage? You betcha, maybe! Most employees wouldn’t have income protection coverage at all if disability insurance were not a company-paid benefit, because most employees either can’t afford it, haven’t recognized it as a real need or don’t believe they will ever become disabled. But are the employees really being done a favor? If more employers really knew of the many deficiencies of these group plans, which can affect even employers themselves, 50
InsuranceNewsNet Magazine » July 2014
they might think twice and look at some other options. This article makes more mention of group plans as opposed to association plans, simply because most group plans have a more consistent set of deficiencies, and association plans suffer from a wider variety of deficiencies
Underwriting
Typically, underwriting a disability insurance application, either for group LTD or association coverage, is less involved compared with underwriting individual plans. Sometimes, coverage can be issued even on a guaranteed basis. Individual plans require much more underwriting (health, financials, duties, etc.), due to the guarantees and liberal wording in the contract, all of which allow a claim to be paid in more circumstances and conditions. On the other hand, there are reasons
why group and association plans are more forgiving and have less underwriting. If the carrier’s claims experience becomes too high (thus reducing the carrier’s profitability), one of two actions may result. Either the group or the association plan may get canceled unilaterally by the carrier, or the carrier may raise the rates (which are not guaranteed as individual plans are). Neither of these two scenarios is a pretty picture. However, coverage might be issued on a guaranteed basis by group and association LTD plans. This can be a very desirable element, especially for an association member or a company employee who is applying for group coverage, and is uninsurable or has a pre-existing condition that would normally be excluded from coverage (as it would be under an individual plan). A word to the wise in connection with pre-existing conditions: When applying
WHICH TYPE OF DI COVERAGE IS BEST FOR EMPLOYEES? for any type of coverage, because a claim begins with the application, the applicant must fully disclose all pertinent information on the application. Omissions, misstatements or fraudulent statements can cause a claim to be denied or a policy to be rescinded. I know this firsthand, because over the years, I have been called in as a claims expert witness/consultant in dozens of lawsuits in order to help claimants overturn inappropriately denied claims.
Policy Wording
Definition of total disability: Generally speaking, all definitions, terms and conditions in an individual policy are more liberal and can include a true own-occupation definition of total disability (i.e., even if the claimant is working in another occupation, benefits will still be paid for the full benefit period) versus the restrictive and split definitions found in most group and association plans. For example, depending on the various occupation classifications of the group, the following definitions for total disability might be offered: own-occ for two years or five years (the initial period), and thereafter not working in any occupation or unable to work in any reasonable occupation (given the claimant’s education, training or experience). What that means is that after the initial period of time has expired, in order to continue collecting benefits for the remainder of the benefit period (which might be to age 65), the claimant must be unable to “flip hamburgers,” for example, or must be not working at all! These split definitions give the carrier some form of control of the claim and helps to keep the premium low. Mental and nervous conditions: These subjective conditions are covered for only two years by all group plans. Currently, some individual plans are treating these conditions like any other illness and will pay benefits for the full benefit period. However, there are more carriers who also limit this type of disability benefit to two years, and some offer an even shorter benefit period as an option, in order to lower the premium.
Portability
This is a serious deficiency in both group LTD and association plans. Normally there is no portability at all! If a member leaves the group, or is no longer
in good standing with the association, coverage terminates. Individual plans have no such limitations.
Guarantees
Renewability: There are a couple of different contract types. Obviously, guaranteed renewable or conditionally renewable contracts found in individual plans are the best. Without exception, these types are not offered to group or association plans. This means that coverage can be canceled by the carrier. (Otherwise, plans would be underwritten aggressively and would be higher in cost.) Premium: Only (non-cancellable) individual plans offer guaranteed rates. Once again, if group/association rates were guaranteed, the cost would be much higher than their initially published rates. I say “initially published rates,” because these rates may be increased by the carrier at any time. Group rates will certainly be increased as the average age of the group rises, and rates for association plans are usually age-banded.
Most employees wouldn’t have income protection coverage at all if disability insurance were not a companypaid benefit. Participation
Salary: Usually group LTD coverage is limited to a maximum of 60-70 percent of wages, sometimes including commissions, normally excluding bonuses, along with a typical maximum monthly benefit amount (cap) of $5,000 per month (or higher). A word of caution here: Be aware that a $5,000 cap may cause a “reverse discrimination” situation for most highly compensated employees, such as those with annual incomes above $100,000. The reason I refer to this situation as reverse discrimination is that although executives earn $200,000 annually, for example, they still will get only $5,000 per month – not
HEALTH
$10,000 based on 60 percent. As a result, they are then covered for only 30 percent of their wages! This is not too good, in view of the fact that it can be hard enough to live on 100 percent of income! Bonus: This form of income, as previously mentioned, is usually not covered by LTD. As a result, the insureds (even those making less than $100,000 annually) will not receive their full 60 percent of coverage.
Offsets (Reductions to the Benefit Amount)
Standard offsets, or reductions to the benefit amount payable from group plans, are: [1] Workers’ Compensation; [2] Social Security disability; [3] benefits received under a retirement plan that has been triggered prior to the retirement date; and [4] other disability income policies. However, there are some carriers who do not offset. Those who do not will charge a higher premium for this option. It must be noted that employer-paid group coverage plans will be taxable. However, there are ways to circumvent this taxable event, i.e., to have the premium paid by the employer and still receive benefits tax-free! What can be done to fix some of these group coverage deficiencies? The easiest and most “doable” fix is to correct the “reverse discrimination” problem. There are two ways to accomplish that. One way is to have certain classes of employees “opt out” and then have the employer provide a tax-free individual plan for the full amount for which the employee is eligible. The other way is to provide a tax-free individual plan to supplement the taxable group coverage, or raise the cap if that is economically feasible. Larry Schneider has more than 40 years of experience in disability income insurance. He owns and operates Disability Insurance Resource Center in Albuquerque, N.M., one of the nation’s largest brokerages exclusively specializing in disability income insurance (including risks that are hard to place). Larry may be contacted at larry. schneider@innfeedback.com.
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FINANCIALWIRES
Grandparents Want to Help Fund College
College grads staring at piles of debt bitly.com/qrgrads
72%
OF GRANDPARENTS Although grandparents’ main job is to spoil their grandWANT TO HELP WITH children, today’s grandparents are kicking it up a notch. COLLEGE EXPENSES Not satisfied to provide the grandkids with too much candy BUT ... and an occasional trip to the amusement park, most grandparents now think it’s important for them to help pay for their grandchildren’s college education, a new survey shows. But although a Fidelity Investments survey said that about 72 percent of the surveyed grandparents want to help with college expenses, only 37 percent said they are saving for those expenses. The ones who are already saving or planning are expecting to be generous. Grandparents said they will give a median of $25,000 to all their grandchildren, and 35 percent plan to give $50,000 or more. Why such generosity? According to the survey, 37 percent of grandparents worry about their grandchildren’s ability to go to college without coming out with significant student loan debt. But although many grandparents want to contribute to college for their grandchildren, some may not have the financial means to do so, said Keith Bernhardt, vice president of college planning at Fidelity Investments. “Grandparents have to look out for themselves as well. They have to be purposeful and thoughtful and not risk their own financial well-being in retirement.”
ONE IN FOUR AMERICANS’ NEST EGG BALANCE: $0
It’s bad enough that many Americans are not saving enough to retire when they want. A COUNTRY Financial Security Index survey revealed that one-quarter of Americans, across all age groups, admit they are not saving anything at all for retirement. Even more alarming are the four in 10 (38 percent) of those 40 and older who said they regret decisions they’ve made with their retirement savings, namely not starting to save early enough (47 percent). Nearly half (46 percent) said it’s not possible for a typical middle-income family to save for a secure retirement. Other pessimistic news from the survey showed that the majority (55 percent) of those who said they are saving for retirement said they are not participating or do not know if they participate in a 401(k). On the positive side, though, 43 percent of those who said they are saving for DID YOU
KNOW
?
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retirement said they check the health of their retirement savings every few months. Of the 45 percent who do have a 401(k), nearly one-third (30 percent) do not know where their contributions are invested.
WHAT IS ATTRACTIVE? A GOOD CREDIT SCORE
What attracted you to your partner? Half of married adults said that it wasn’t just a sense of humor or being a certain “type” – it was their credit score. A new survey from Experian Consumer Services showed that when asked about important attributes when considering a spouse, 95 percent of respondents rate “financial responsibility” as important, with “physical attractiveness” and “career ambition” trailing at 86 percent and 77 percent, respectively. “Personality compatibility” won the top spot of desirable attributes, at 98 percent. “Survey findings show that once someone identifies a compatible partner, his or her next thought is about how that person
$62.5M
WELLS FARGO Source: Renaissance Capital
THE AVERAGE RETURN ON AN INITIAL PUBLICto OFFERING was 20 percent settle a class action suit this year. The average increase in the first day (or “pop”) is 13 percent. over securities lending.
WILL PAY
InsuranceNewsNet Magazine » July 2014
Source: Minneapolis Star Tribune
QUOTABLE It’s a real wake-up call to see that so many Americans are not putting money towards their nest egg and are, in turn, generally concerned about retirement prospects. — Troy Frerichs, director of wealth management at COUNTRY Financial
manages personal finances, and credit plays a key role in that scenario,” said Ken Chaplin, senior vice president at Experian Consumer Services. “This holds true for both genders, and the study further shows that working toward compatible financial goals matters to the vast majority of married adults.”
PERSONAL FINANCE WORRIES PLAGUE WORKERS
Employees are distracted during working hours, but not necessarily because of gossip around the watercooler or surfing the Internet at their desks. It’s because they are stressed out about their personal finances, according to a survey from the Society for Human Resource Management (SHRM). This worry about finances is having a negative impact on job performance and potentially sapping company productivity, according to the SHRM. Many employees face significant financial challenges and remain concerned about their ability to cover financial obligations. In the 2014 SHRM survey Financial Wellness in the Workplace, human resources professionals specified the extent of financial challenges employees and companies are facing. Seven out of 10 surveyed indicated that personal financial challenges have an impact on their employees’ performance. Almost 40 percent of employees are facing more personal finance challenges now than compared with the onset of the Great Recession in 2007. While some companies provide their employees with “financial wellness” education programs, a number of them experience challenges in doing so. One reason: They are often seen as too expensive.
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FINANCIAL
How to Explain Bonds K nowing the key facts and primary risks regarding bonds can help you serve your clients. By Bryce Sanders
I
f your prospects say, “I only buy bonds,” what do you need to know in order to serve them?
What Is a Bond?
It is a security representing a loan between the borrower and investor. Bonds usually are issued in $1,000 denominations, called principal, par value or face value. Bonds are designed to return the principal at maturity, which is a set date in the future. Along the way, the investor receives interest payments at a fixed rate, usually at six-month intervals. Those payments are often called coupon interest because years ago people used to “clip coupons.”
Who Buys Bonds?
Investors who seek to lock in a fixed rate of return and hold the bond until maturity. Retirees like bonds because the interest checks are similar to a paycheck and they receive the face value at maturity. Many investors use an asset allocation of stocks, bonds and cash when building their portfolios. Bonds help soften volatility because they usually don’t move in lockstep (correlate) with the stock market.
Where Do Bonds Come From?
There are three broad categories: government, municipal and corporate bonds. » Government bonds are issued by the federal government through the Treasury Department or various federal agencies. Treasury bonds are the primary form of government bond. They are attractive because Treasuries are backed by the full faith and credit of the U.S. government. It is assumed that the federal government can print money to pay off the bonds. Interest earned on Treasuries is not subject to state income tax but is subject to federal tax. » Municipal bonds are issued at the state level. They might come directly from the 54
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state, a city or even a state agency. States cannot print money, so investors want a level of assurance they will be repaid. General Obligation bonds (GOs) are often considered the safest because they are backed by the taxing power of the state or city issuing the bonds. It is assumed that they can raise taxes as necessary to repay the bonds. Revenue bonds are often tied to a project that is run by the issuing agency. Consider a new bridge funded by a bond issue. Toll revenue collected pays the interest and the return of principal. It’s like lending money to a business. Income from municipal bonds is free from federal income tax but subject to state income tax, unless the bond is issued in the investor’s home state. This is why municipals are often called “tax-free bonds.”
to repay the principal at maturity. The corporation usually specifies the use they plan for the money raised, just as your bank might ask, “Why do you want this loan?” Interest earned on corporate bonds is taxable.
» Corporate bonds are issued by businesses. They may or may not be companies whose common stock trades on a stock exchange. The investor makes a loan to a business. The business promises
» Call Features – If interest rates fall, the issuer can issue another bond for a similar amount at a lower interest rate to different investors and pay the bond off early. The bond stipulates the earliest
Why Issue Bonds?
Why not just go to a bank? Rates may be higher. The bank might limit the amount they will lend or place restrictions on the loan. The amount needed might be immense. For example, in September 2013, Verizon Communications raised $49 billion in a corporate bond sale when they bought out Vodaphone’s 45 percent stake in Verizon Wireless. Selling bonds lets the issuer retain greater control. For example:
HOW TO EXPLAIN BONDS date it can be called, often 10 years in the municipal market. In this case, the feature would be described as 10-year call protection. If the issuer intends to get out of their obligation early, they often pay a set premium. The buyer of a $1,000 bond might receive $1,020 if the bond is called early. Generally speaking, U.S. Treasury bonds are noncallable. » Sinking Funds – Municipalities sometimes redeem a small percentage of the bonds annually over a long period. This substantially reduces the amount they are required to pay off at maturity. As an investor, you assume it’s easier to repay a small debt than a large one. However, you are subject to a version of a reverse lottery.
What Else Do I Need to Know?
» Who can sell bonds? A Series 7 license is required. A Series 6 license allows you to sell a limited selection of packaged products but not the actual bonds themselves. » How are bonds priced? Buying bonds on the initial offering is attractive for investors because they are usually issued in $1,000 increments (par value). The underwriting syndicate builds in a payment for the advisor placing the bonds. Assuming the buyer holds the bond to maturity, the buyer pays no extra fees, although brokerage firms might charge account fees or the client might use a feebased account structure. » Do bond buyers pay other fees? When investors buy a bond, they pay the purchase price plus accrued interest – they pay the previous owner the interest they’ve earned since the last interest payment. The new owner collects the next six-month payment on schedule, even if they owned the bond for only a few weeks. » How are bonds traded? Almost all bonds are unlisted, meaning you can’t look up a specific issue like you would look up the price of a share of common stock. Advisors sell bonds through their firm’s trading department. Bonds are bought by traders at wholesale and sold to investors at retail. » How do bonds fluctuate? If a bond were priced daily, it would reflect movements in the interest rates. How attractive
is this “used” bond compared to a “new” bond? The longer the term (time until maturity), the wider the fluctuation. If an investor held a bond with a coupon paying 8 percent with 10 years remaining until maturity, the bond would be worth more than the par value of new bonds being issued at only 4 percent. On the other hand, a client owning a 4 percent bond would find their bond was less attractive if new bonds were being issued at 8 percent. Assuming the issuer is creditworthy, bonds gradually return to face value as the maturity date approaches.
If something goes wrong, some bonds are farther ahead in the creditor line than others. » Can you make money trading bonds? If investors sell early, the bond might be worth more or less than they paid, depending on interest rates. Increasing your return through capital appreciation in addition to income earned is a strategy used by professional investors and bond funds. » What is duration? A complicated concept measuring risk in a changing interest rate environment. The calculation takes into account various inputs (present value, yield, etc.) and calculates a number that is measured in years. This number is most commonly used by investors to gauge a bond or bond portfolio’s interest rate sensitivity. » Are bonds safe? Consider four risks: Duration measures interest rate risk. Credit risk relates to solvency, which is a big issue for corporate bonds. Secured bonds are backed by a specific asset. For example, airlines would secure bonds by pledging specific aircraft as collateral. If the company ran into financial difficulty, the investor knew those assets were
FINANCIAL
connected to that bond. “Debentures” are unsecured bonds. All bonds are not equal. If something goes wrong, some are farther ahead in the creditor line. Reinvestment risk and inflation risk are also important. » How are bonds rated? Standard & Poors, Moody’s and Fitch are the most familiar rating firms. Bonds in tiers ranging from AAA to BBB are considered “investment grade.” These represent the top four rungs on a 10-rung ladder. » How are bonds packaged? Many people buy individual bonds and hold them until maturity. Others want monthly income. Defined Asset Funds are a basket of specific bonds structured to provide monthly income. Small fees are involved. Mutual funds and separately managed accounts use professional money managers seeking to maximize returns through capital appreciation in addition to interest income. The benefits include monthly income and the ability to reinvest those payments. The liabilities include fees paid for the structure and that monthly income is not fixed. » Are there exceptions to the “rules”? Plenty. Most bonds pay a fixed rate of interest. Variable rate bonds help stabilize principal value when interest rates fluctuate. Not all bonds pay interest along the way. Zero-coupon bonds are purchased at a fraction of face value and return their par value (usually $1,000) to investors at maturity. Because their only payment comes at maturity, long-term zero-coupon bonds tend to experience more price volatility than coupon-paying bonds. Some investors find them useful when saving for a child’s future college expenses. Bonds are referred to as fixed income instruments and are appropriate for certain investors seeking income and investors using an asset allocation strategy. Bryce Sanders is president of Perceptive Business Solutions in New Hope, Pa. He provides high-net-worth client acquisition training for the financial services industry. He is the author of Captivating the Wealthy Investor. Bryce may be contacted at bryce.sanders@innfeedback.com.
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BUSINESS
Community Leadership: Giving That Pays “ Kicking it up a notch” by assuming a leadership role in an organization in which you already volunteer will help you develop skills you can use in advancing your practice. By Edward C. Auble
I
n a recent InsuranceNewsNet article, I discussed the value of volunteering in your community. In this issue, I would like to take the discussion a step further, to the value of assuming a leadership role. It is usually difficult to find dedicated volunteers, and it is even more difficult to find those who are willing to assume leadership roles. Have you ever heard anyone in any organization say that their group has too many leaders? Why should you be interested in a volunteer leadership position? First of all, you should be a leader in an organization whose mission statement dovetails nicely with your beliefs. If your interests are not aligned with the mission of the organization, do not get involved. You will eventually be perceived as a carpetbagger, as an opportunist. Leadership in a community organization 56
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provides 1) an opportunity to give back, 2) a training ground for developing personal skills important within your business and 3) a way to enhance your reputation in the community. What do you have to give? That can be summed up in “time, treasure and talent” or “work, wealth and wisdom.” Surely, you will need to give of your “time” or perform some “work.” There will be moments when you may be counted on for a financial contribution, which is your “treasure” or “wealth.” And, I hope, you will bring some “talent” or “wisdom” developed during previous business and volunteer roles. In this world, there are givers and takers. We are familiar with both types. Givers make that extra effort to help, often unsolicited. My “taker” example is an agent who used to work with me, who constantly took candy from my secretary’s candy dish, never adding to it. And when we played tennis, he never provided the tennis balls. What skills do you develop? Public speaking is an important skill, one that is needed in even the smallest organization.
The larger the organization, the more you will need to know Robert’s Rules of Order. Then you must pay attention to the organization’s mission statement, vision, goals and strategic plan. In addition, there is the need to be able to work closely with the disparate personalities, experiences and skills of the organization’s board members and general membership. And perhaps there will be the need to write for those inside and outside your organization. By assuming a strong leadership role, you will enhance your reputation in the community. Often, you will enhance your reputation in ways never revealed to you, perhaps during informal conversations among members. You may be asked to write an article for a local newspaper, participate in a panel discussion or appear in a photograph with other local leaders. Just remember that these occasions are a result of your strong leadership role, not the objective. A research study by the Shapiro Group and Market Street Services showed that when consumers know a small business is a member of their local chamber of commerce, they are 44 percent more likely to
COMMUNITY LEADERSHIP: GIVING THAT PAYS think favorably of it. And if an individual from the company sits on the chamber board, consumers are 12 percent more likely to think that the company’s products beat those of the competition. The consumer infers that the company is trustworthy, involved in the community and an industry leader. This redounds favorably to the individual leader involved. Might you fail in a leadership role? Possibly. Abraham Lincoln failed in business twice and failed in seeking political office a number of times before becoming president in 1860. Winston Churchill was out of office from 1928 until 1940 and, despite his unwavering leadership during World War II, was defeated again as the war ended. Recently, I was asked to resume the role of president of our local business association. Shortly thereafter, a member whom I had recently met and recruited as one of our chairs asked me for a $1 million life insurance quote on her husband. I can only assume that I was given this opportunity because of my leadership role.
In a recent survey conducted by Prudential, more than 80 percent of respondents said that referrals were the best way to generate new clients. No surprise there! The next best way was to volunteer in the community. No other activity was remotely close. Remember that you only “rent,” not own, your leadership role. The role is that of a “servant,” to be transformational, to increase the value of the organization by utilizing the skills of the members. As Peter Drucker said, a leader wants to make the strengths of the members effective and the weaknesses irrelevant. The effective leader leads. He creates a vision with the help of others, selects strong committee chairpersons, then delegates, communicates, motivates and thanks, frequently, those who also serve. Insurance salespersons are conspicuous in their communities for being involved. By assuming increasingly important leadership roles and performing them well, you enhance your visibility and
BUSINESS
reputation. And reputation is the sine qua non of our profession. If you can give honestly to an organization with no expectation of immediate reward, you will eventually be rewarded, sometimes in the approbation of those you serve, sometimes in the new clients drawn to you, but mostly in the satisfaction of a job well done. Ralph Waldo Emerson said, “It is one of the most wonderful compensations in this life that no man can sincerely try to help another without helping himself.” Edward C. Auble, CLU, ChFC, MSFS, LUTCF, FLMI, CASL, a 42-year insurance professional, has been president of the National Association of Insurance and Financial Advisors-Pennsylvania, served on the alumni boards of The American College and Lafayette College, serves on the Chester County (Pa.) Parks & Recreation Board, and is president of the Paoli (Pa.) Business & Professional Association. He is an elected auditor for his township. Ed may be contacted at ed.auble@innfeedback.com.
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July 2014 » InsuranceNewsNet Magazine
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SOCIETY OF FSP INSIGHTS
For more than 80 years, the Society of Financial Service Professionals has been helping individuals, families and businesses achieve financial security.
‘The Music Man’ as a Metaphor for Life (Insurance) T he debate over standards of care must end in a harmonious resolution. By Richard M. Weber
S
carcely 100 years ago, there was “Trouble in River City” and “the Wells Fargo Wagon was a-comin’.” Oddly enough, the Broadway musical “The Music Man” mirrors the modern era’s financial services industry and its anticipation and anxiety about higher standards of care for client-facing practitioners. It is intriguing when life imitates art. But it doesn’t have to end with imitation. It can provide excellent and useful ideas for change – if only we follow the essential plot lines and resolve any discordance. “The Music Man” is often considered one of the most perfect American musicals, capturing a nostalgic time in our history. In the story, there are multiple levels of tension requiring resolution. Music and plot lines are used as metaphors to explain River City and its people. River City is a town steeped in traditions focused on “this is the way it’s always been – and we like it that way.” The extraordinary singer-actor Robert Preston portrays Harold Hill as the fasttalking out-of-towner ostensibly arriving to perpetrate another scam. In reality, he is just a good heart seeking the right woman! Of course, Marian the librarian is right there to fill that role. She is misunderstood and lonely, with a great deal to share, if only she can trust someone to see her for who she is as a person. The wonderful backdrop of this light drama is in the music and lyrics, wooing us through our auditory senses with tone, rhythm and syncopation that are in perfect pitch and harmony with the story. Ah, harmony! Now there’s a word we don’t actually use much outside the world of music. In music, harmony reflects the technical reality that single notes, sung or played, can be lovely and magically transformative. So, too, can disparate and even discor58
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dant concepts ultimately coalesce into a harmonious result reflecting differences, yet harmonizing into something much better than might otherwise be possible. This brings my metaphorical musical musings to consideration of the different anxieties and points of view surrounding standards of care in the insurance, investment, advisory and planning segments of financial services. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act required the Securities and Exchange Commission (SEC) to consider – and if at all possible, harmonize – the fiduciary standard of care between the registered investment advisor (RIA) and the suitability standard of the registered representative (RR). Concerns in favor of a fiduciary standard include examples of harm to customers for the failure to put the client’s interests above those of the (selling) practitioner. The insurance industry, often caught somewhere between the RIA/RR factions, is generally opposed to such a standard. It is alleged that the level of advice is limited and insurance agents, whether newly minted or experienced and serving many diverse markets, shouldn’t be lumped into a single category of responsibility. A core issue, of course, is that a product solution that is suitable may not necessarily be in the client’s best interest. Compensation and fees are often at the heart of conflicting positions over standards of care. One intriguing quote from a recent letter to the SEC from six prominent organizations championing elevated standards of care states that “… while opposition to fiduciary rule making is often presented as being motivated by concern over the well-being of middle-income investors, the academic literature strongly suggests that it is precisely these less wealthy, often less sophisticated investors who are most at risk from harmful practices permitted under a suitability standard.” Can we harmonize – or make coherent and reasonable to our senses – just these
few examples of the many differing positions that are in conflict regarding the appropriate standard for client-facing advisors and the anxiety-ridden consequences that often result? I don’t pretend to have the answers, but I have some suggestions as to the process of achieving harmonization: 1. Minimize demonization of the motivations behind the differing positions. Each faction has good counterpoints, but often makes assumptions about what’s behind the original proposition. Commissions are not inherently against a client’s best interest any more than charging a fee is a virtue. It’s not how we make a living – it’s how we honor our relationship with our clients and hold their interests at the same level as or better than our own “Golden Rule.” 2. Each faction should consider creating a coherent statement of purpose along with supporting facts and evidence. Minimizing apocryphal assumptions does wonders for resolving an argument! 3. A forum should be created in which the different positions can be shared and understood in a nonconfrontational environment. This is a good basis for understanding the likely congruencies while working through the discordant issues that might ultimately lend themselves to a pleasing harmonization. (It’s a shame health care reform didn’t get started this way!) Or perhaps we should break out the popcorn and – streaming from Netflix – together enjoy the ultimate harmonic resolution offered in Meredith Willson’s “The Music Man.” 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.
This is the story of financial professional Pete D’Arruda and his fast rise to fame and unimaginable success. Read the whole thing – The best part is when you find out this Pete accepting a Quilly® Award
EXACT STORY CAN HAPPEN TO YOU.
Financial Advisor, “Coach” Pete D’Arruda understood the powerful Business Trifecta – that you need media, marketing and PR working for you at all times. He also understood that in today’s financial marketplace, you need to build and continue to establish trust within your market. And like it or not, the most trusted figures on the planet are celebrities. In fact, in 2013, Reader’s Digest completed research that found Tom Hanks to be the most trusted person in America. Knowing this, Coach Pete turned to the Dicks + Nanton Celebrity Branding® Agency to help him grow his media portfolio and turn it into an all-out marketing assault to get the attention and the trust of his marketplace. It started with a 12-month media, marketing and PR program in which Pete was selected to contribute to a new book being helmed by legendary success mentor, Brian Tracy, called The Secret to Winning Big. This book became an instant Amazon Best-Seller, propelling Pete to a status most business owners dream of but never achieve. Next, Pete traveled to Orlando, FL for an appearance on America’s Premier Experts, a TV show that is seen on ABC, NBC, CBS and FOX affiliates across the country. These 4 media logos are 4 of the most trusted on the planet and now Coach Pete could use them in his marketing for the rest of his life. To round out the first 12 months of this program, Pete was recognized in USA Today and The Wall Street Journal as a Financial All-Star and a Financial Best-Seller. Both pieces got a lot of attention just when he framed and displayed them in his office But Pete didn’t stop there. In fact, he was just getting started. Due to the success of The Secret to Winning Big, he was recognized by the National Academy of Best-Selling Authors™ with a Quilly® Award. And just this past April, he was off to New York City to receive an EXPY® Award by the National Association of Experts, Writers and Speakers™.
Through the process Pete has been introduced to celebrities like Jack Canfield from Chicken Soup for the Soul and Kevin Harrington, star of the hit TV show, Shark Tank. And he has even shared the stage with Steve Forbes at the 2013 Success in the New Economy Summit. Never one to slow down or let his competition keep up, Pete Pete with Steve Forbes welcomed Emmy®-Award Winning Director and the World’s #1 Business Agent®, Nick Nanton into his offices to film a 30-minute documentary on his life, his business and his clients. The feature was aired on a series entitled Profiles of Success on the Bio Channel and is a staple in Pete’s new client marketing experience. This entire process did not happen overnight, but it did happen quickly, over the span of about 18 months. And it has played an important role in Pete upgrading to new facilities and teaching adult education classes at local colleges, all the while growing his financial advisory business. Pete has joined over 2,200 clients from 33 countries who have worked with Nick Nanton and the Celebrity Branding® Agency. Not every client pushed the envelope like Coach Pete, some want to become Best-Selling Authors and others want to appear on TV to use the credibility in their marketing. Others see how powerful it is to have a film to share with a prospect when they are weighing their decisions. No matter where you are in your business, you can benefit from the transformation that comes with being a client of the Celebrity Branding® Agency. And to show you our commitment to you, we want to give you a free gift today. It is the same gift we gave to Coach Pete when he began his journey with the Agency. It is a copy of our Best-Selling book, Celebrity Branding You®.
Don’t spend another day being less than famous! Start by getting your free digital copy of Celebrity Branding You® at www.CBAAdvisor.com or call us today at (888) 419-6125. Coach Pete with Nick Nanton on location in Times Square July 2014 » InsuranceNewsNet Magazine
59
MDRT INSIGHTS
The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.
Clear the Waters Ahead to Discuss Life Insurance economic performance of contracts sold many years ago.
P rospects often are uncomfortable discussing life insurance. Here are some suggestions to smooth the way to a conversation.
Fulfill Promises
By Bill Koss
You need to present the characteristics of a life insurance policy as the bond side of the investment strategy.
E
very business needs a rudder to help it navigate through the choppy economy. Finances can be confusing, emotional and just plain daunting, especially when life insurance is involved. Over the past 50 years, four key principles have contributed to our firm’s smooth sailing. To help you steer through the challenging seas of your clients’ life insurance needs, try these easy-to-implement strategies.
Make the Connection
People often resist meeting with an advisor because they fear they will be pushed to buy products they don’t need or because they are trying to avoid discussing life insurance altogether. That makes your introduction to a client extremely important. As a member of Million Dollar Round Table (MDRT), I learned a simple and nonthreatening way to ask permission for a meeting. When you preface a meeting by saying, “Would you have any objection to discussing your life insurance with us?” clients feel you are putting the power in their hands instead of pushing forward without their consent. Regardless of the situation, you can use this phrase to introduce any subject. Would you have any objection to allowing us to look at your asset allocation or discussing your overall financial planning? Posing the question this way takes the pressure off, opening the door for a fruitful discussion.
Alleviate Hesitation
Most people don’t like to think about their mortality. However, when you position life insurance as an asset class in overall estate assets, you move the discussion in a more positive direction. Proper asset allocation always includes some downside 60
InsuranceNewsNet Magazine » July 2014
protection, but you need to present the characteristics of a life insurance policy as the bond side of the investment strategy. It fills the role of a life raft when the market pressures make other assets less liquid. Also, the death benefit always holds its own compared to any discussion of having long-term bonds over extended periods of time. During the recent market corrections, clients saw firsthand the long-term value of permanent life insurance as a sinking fund with cash value reserves, as a stable cash asset to address transfer costs and as something that preserves the core value of their personal wealth.
Due Diligence
Clients want to know you are looking out for their best interests, so you must be diligent in understanding the possible issues facing them and the best solutions to alleviate their concerns. This is particularly significant when presenting a life insurance policy. We must hold life insurance companies accountable in providing financial products that meet the highest standards of actuarial integrity. Have your business partners help you examine the way companies are treating your existing policyholders. They should be treating the relationships with old and new policyholders the same. This will ensure money spent on developing and selling new products is not compromising the
On the front page of every life insurance policy are the words “We promise to pay.” For those of us active in helping people buy life insurance, it is our personal credibility that is on the line. Especially when we propose a life insurance solution, we must do everything in our power to assure people that the promise will be fulfilled. The public has come to trust that when they pay a premium, the company will deliver on their end of the contractual bargain. You can accomplish this by giving clients an inside look at the great lengths to which you go to understand the products and ideas you propose to them. For example, show them the resources and technology you use to manage and monitor the information that is pertinent to their financial situation. We are the captains of a business enterprise that has served the public extremely well over the ages, and it is our duty to preserve the integrity of this profession for the future. By adopting the philosophy inherent in these four straightforward principles, perhaps you can build a road map for your own success and, most important, a life’s work that will add significant value to the lives of others. Bill Koss has worked in estate planning and investment management since 1965. As one of the founding partners of Koss Olinger in Gainesville, Florida, he specializes in helping clients preserve their wealth and transfer it to successive generations. Koss is a life and qualifying member of the Million Dollar Round Table (MDRT). His 47 continuous years of MDRT qualification, along with his professional designations, place him among the top 100 professional planners in the world. He has also qualified for Top of the Table the last nine consecutive years. Bill may be contacted at bill.koss@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.
Former Music Teacher Strikes the Right Note as an Advisor T his NAIFA member owes his success in the business to hard work and a commitment to continuing education. By Ayo Mseka and Robert Hendrickson
S
uccess has come early for NAIFA member Robert Hendrickson, who has been working as a financial advisor for small businesses and individuals since 2007. In a recent interview, Hendrickson, a past recipient of Advisor Today’s Four Under Forty Award, shared some of the steps he has taken on his way to the top. NAIFA: You started your professional life by teaching music to schoolchildren and switched to the insurance industry in 2007. Why did you make the switch from teaching to financial services? Robert Hendrickson: Although I have always had a love of teaching, the idea of enjoying the freedom that a career in the financial services affords was foremost on my mind after observing the 30 years that my dad spent in the business. NAIFA: What are your areas of expertise? Hendrickson: I work primarily in retirement planning, as I help my clients maximize their income, minimize taxes and handle volatility in the markets. I also have a huge passion for mentoring. NAIFA: Your practice is built mainly on referrals. Tell us your secret for getting clients to refer you to others. Hendrickson: Other than providing the standard great service and asking questions all the time, a new development has been the incredible resource of social networking. People actually create a list for you of the people they know. All you have to do is show this list to them and ask them, “So, whom on this list wouldn’t you call?” NAIFA: You achieved career success at
an early age; in fact, you were one of the 2012 recipients of the Four Under Forty Awards. What advice would you give to young agents seeking to advance in the business? Hendrickson: Before you start, clearly define your “why.” Mine comes from a fervent love of my family and God. Once you start, focus on high activity and an impeccable process for a couple of years. Then, join organizations you believe in, but make sure you aren’t joining them in order to get clients. Finally, get involved in NAIFA. We tend to get “inbred” ideas from the companies for which we work, but at NAIFA, you will meet members from other companies and they will give you a fresh perspective or a great idea that may well change your career. NAIFA: You are the proud owner of many industry designations. Why do you spend your time and resources getting designations, and how have they helped you in your career? Hendrickson: At first it was sheer survival. I started out not knowing the difference between a hedge fund and a hedge trimmer, and as I am an analytical person, that was unacceptable to me. Since then, I have found myself to be a lifelong learner. NAIFA: A couple of years ago, you wrote a book for new business owners, titled Who Empties My Trash? What main message were you trying to convey in the book, and why is it important to new business owners? Hendrickson: To summarize the book in one sentence: All businesses need one or more advisors. The book is designed essentially to share ideas about what we do with these businesses and how we position ourselves as their advisor. NAIFA: With your busy workload, you must have developed some excellent time-management skills that enable you to do all that you do. Describe one or two techniques that help you make the most of your time.
Hendrickson: The best advice is to follow the “four quadrants,” the time management grid that is part of Stephen Covey’s book The 7 Habits of Highly Effective People. Some days you live in the “Urgent Important” quadrant, and on other days, you make it to the other quadrants. The key is to always start there, give the day your best, and you’ll be less stressed and go home without worry. NAIFA: How has NAIFA membership helped you grow personally and professionally? Hendrickson: From NAIFA I have gained the ability to learn from people who don’t think the same way I do. And NAIFA’s Leadership in Life Institute is the best leadership and personal-development program I know. NAIFA: How do you maintain a healthy work-life balance? Hendrickson: At work I stay in the quadrants I mentioned earlier, and I always remember that I work to live – not the other way around. Randy Marshall once said, “Work as if everything depends on you. Pray as if everything depends on God.” NAIFA: What two things would you like readers to take away from this interview? Hendrickson: 1. Work hard. 2. Pray hard. Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Ayo may be reached at ayo.mseka@innfeedback.com. Robert Hendrickson, CLU, ChFC, CASL, LUTCF, CLTC, CFP, has been working as a financial advisor for small businesses and individuals since 2007. He has taught a number of seminars and is a sought-after industry writer, speaker and teacher. Rob may be contacted at robert.hendrickson@innfeedback.com.
July 2014 » InsuranceNewsNet Magazine
61
LIMRA INSIGHTS
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.
Thoughts About Retirement From Latin American Consumers R etirement readiness issues are not unique to the United States. By Lauren J. Finnie
W
e are all familiar with the phenomenon of an aging population in the U.S. Those in financial services are only too familiar with the harsh realities of that population’s lack of retirement readiness, such as the fact that 62 percent of pre-retirees have less than $100,000 in financial assets and less than half of pre-retirees are confident they will be able to live their desired lifestyle when they retire. The coming “Silver Tsunami” is hardly a U.S.-exclusive trend. LIMRA examined retirement concerns of consumers in “younger” nations such as Brazil, Chile and Mexico. Traditional pension plans, government retirement benefits and personal savings/job earnings are the most common retirement funding sources in Latin America. Work-sponsored retirement savings plans, which have proven effective in the U.S., are less common in Latin America. In Mexico, for example, only 14 percent of retirees have a work-sponsored retirement plan. These plans are growing as 39 percent of pre-retirees have enrolled or plan to enroll in a work-sponsored plan. Mexican consumers score the highest among Latin Americans in terms of product diversification and awareness. Mexican workers use a large variety of retirement funding sources and are more knowledgeable about what products are offered. In Brazil, a considerable percentage the country’s gross domestic product is spent on providing guaranteed government benefits on which consumers rely for retirement funding. The ratio of active employees to pensioners is less than 5:1 and is projected to be close to a 1:1 ratio in 2050. Without more diverse product offerings, Brazil will have 62
InsuranceNewsNet Magazine » July 2014
50%
50%
10% I Don’t Know
I Don’t Have Enough
of Latin American retirees do not feel they have the funds to live comfortably in retirement
40% I Have Enough
Consumers from Mexico, Colombia, Chile and Brazil are represented in the survey. Source: LIMRA Report: Are Latin Americans Ready for Retirement?, 2014.
a tough time sustaining this program in its current state. Latin Americans in general are not confident about their savings lasting through retirement, and pre-retirees are even more pessimistic. Half of them believe the outlook is so grim that they won’t even be able to afford day-to-day necessities. Surprisingly, the greatest expressed concern about retirement life emerges from Chile, which has more experience with retirement planning than any other country in the Western Hemisphere. Chile established a national social insurance system in 1925 and designed its long-term savings plan in 1980. Many nations today still follow Chile’s lead. Their shift from a pay-as-you-go defined benefit system to a defined contribution system resulted in economic growth to the nation and will reduce long-term social security deficits. Yet Chilean pre-retirees are the most pessimistic of all the age groups. Pre-retiree doubt is influenced by the sentiments from current retirees, more than half of whom report that retired life is worse than what they had imagined. Chilean employees deposit their social security money into individual retirement accounts, making a portion of each account vulnerable to market volatility. When respondents across Latin America
were asked why they felt they wouldn’t have enough money in retirement, the Chileans’ top response was low investment returns. That’s a far different concern than in other countries, where respondents cited increases in the cost of living as their main concern. As in the U.S., retirement is a top reason for saving in Latin America. But many in Latin America have unrealistic perceptions and lack product literacy. In the U.S., 71 percent of pre-retirees who work with an advisor said they are confident about having enough savings to last through their retirement. By contrast, Latin American pre-retirees report high levels of trust for advisors but are not very likely to seek out their advice. For those doing business in Latin America, the retirement market represents an enormous opportunity. Although each country has its unique circumstances, one constant remains: people need help to plan for a secure retirement. Lauren J. Finnie, associate research analyst, joined LIMRA’s international research team in 2011. She is responsible for conducting LIMRA research for the regions of Asia, Latin America and the Caribbean. Lauren may be contacted at lauren.finnie@ innfeedback.com.
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THE LAST WORD
Fire Up Your Recruiting Model I n order for your agency to attract and cultivate young talent, you need to show job candidates what’s in it for them. By Larry Barton
“T
here has never been a better time to be in the insurance business.” We hear that phrase at so many company and industry meetings. It sounds trite, but whenever I hear it, I often look at the young people in the audience to see how they respond. The good news: They know it, feel it, sense it. As your business cultivates young talent – and we certainly need it – here are a few thoughts that may help you leverage that young talent in your practice. 1. Millennials are not impressed when, at a first interview, we talk about administering a personality or aptitude test. Why would we throw that at job candidates so early in their career journey? Find a sizzling recruiter, and they begin the conversation by talking about social networking. They say, “Tell me about Twitter and Facebook – how much do you leverage those resources? Let me show you what we’re doing within our agency, and I’d love you to critique our approach.” Engage the candidate to become part of the team immediately. Seek their insight. Throw them off. Test their creativity and ability to articulate. Then talk about product, helping clients with financial security and your compensation model. 2. Etiquette Frisbee. One of the top agents at New York Life used that term in one of my classes at The American College. I asked her to explain. She replied, “Well, we were always taught to write a thank-you note to the recruiter, and we still look for that as a sign of politeness from those we are interviewing. But at my agency, before the candidate arrives back home, I email the candidate a personalized note and indicate how great it was to meet them. I want them to know, immediately, that this is varsity.” I love it. 3. Ask candidates what they read. They 64
InsuranceNewsNet Magazine » July 2014
If you haven’t updated your recruiting model, you know what Ricky Ricardo would say…
will inevitably not expect this question, so just think about the portal of insight you will gain from their answers. Write down what they say! They may mention news, financial commentary and marketplace websites that are unfamiliar to you. They may read journals and blogs you’ve never discovered. They will also be impressed that you are curious enough to respect what they consider to be important. Also, to be brutal, if a candidate’s answer is weak, I’m not sure you have a winner in that candidate. Anyone who wants to succeed in insurance and financial services must be well-read. They must be engaged with markets, products and client needs. 4. Turn recruiting upside down. An independent insurance advisor who has recruited about a dozen rock-star young agents in the past two years tells me that during the first interview, which the candidate’s parents are invited to attend, he brings out a single piece of paper that is a capsule of a client opportunity. Here is how he describes it: “The sheet is used for all candidates. Here is a couple 52 years of age with three children. They have $3 million in total assets, including their home, cash value of insurance, individual retirement accounts – everything. Their insurance is shown as $500,000, 20-year term on only the working husband. Their debt is about $120,000 on their home equity loan. Without making it complicated, I tell the candidate: ‘This is all we know. If this couple asked for advice and you were sitting with them at the kitchen table, where would you begin?’” You might reply that you’re doing this already. If so, bravo! But if you are focused on education, grooming, the “fit” with your
team and related issues at the first meeting, maybe this is an opportunity missed. What does your agency really want? I suspect you seek characteristics such as persistency, winning personality, curiosity, problem-solving ability and engagement. Rather than showing job candidates incredibly boring videos about your company and your agency, followed by a visit to your trophy case, focus on them. Then consider explaining how a career with you can be financially rewarding. Emphasize how education, designations and degrees will enhance their ability to be successful. Explain the profound difference they can make when their clients achieve financial independence and security with life insurance, disability coverage and sound retirement planning. It sounds pretty basic, but somehow a few seem to mess it up. We have all heard that millennials believe that “it’s all about them.” I’m not sure it’s true for all, but it certainly is true for many of them. So let’s turn to Machiavelli. He would argue that we should capitalize on this generational shift and allow the candidate to speak and solve problems. He would also say that we need to speak less, especially in the first phase of recruiting. Then we need to listen more attentively, to be astute and responsive but strong on observing the traits of a potential winner. So many agencies are on fire right now. They are growing with young talent – young men and women who are so bright, so driven to success and so educated. They are achieving sales targets at a pace far in excess of the generations before them. Find them and encourage them to be part of your interview process even though they may not be managing partners or directors. Showcase them as role models. If your recruiting model hasn’t changed, I’d ponder the wise words of that great Cuban philosopher, Ricky Ricardo: “Lucy, you got some ’splain’ to do.” Larry Barton, Ph.D., CAP, is Chancellor of The American College. Larry may be contacted at larry.barton@ innfeedback.com.
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