InsuranceNewsNet Magazine - July 2015

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JULY 2015 » VOLUME 8, NUMBER 7

ANNUITY

22

42 A nnuities’ Solution to the LTC Crisis

By David F. Royer Annuity-based long-term care coverage may be a viable alternative to traditional LTCi for clients who have reduced retirement incomes and have done a good job building their savings.

46 I n-Plan Annuities Climbing the Popularity Charts

By Linda Koco The increasing popularity of annuities in retirement plans has implications for and opportunities for advisors as well as providers, employers and participants.

HEALTH INFRONT

8 F ellow Regulators Among Critics of DOL’s New Rule Compiled From Staff Reports The Department of Labor’s proposed fiduciary standard rule has led to criticism and confusion from many in the insurance industry.

FEATURE

22 Celebrity Advisors Tell All!

By Cyril Tuohy Some advisors lead not-so-secret double lives as media celebrities.

Here’s how they got their on-air and online gigs, and how their media presences have helped them position themselves as experts in their fields.

34

50 B rokers Rise Above Health Insurance to Become Indispensable Advisors

By Jonathan Rickert Five years after passage of the Affordable Care Act, health insurance brokers are defying predictions that they would become obsolete.

FINANCIAL

54 A Retirement Prequel: Get Your Clients Off to the Right Start

By Lloyd Lofton The road to a smooth retirement begins years before the client actually leaves the workplace. Here is how you can start your client off on the right foot.

58 LIFE

10 INTERVIEW

10 Celebritize! Your Business

An interview with Nick Nanton What if you were so famous that you could make sales without having to appear in person? Emmy Awardwinning filmmaker Nick Nanton tells InsuranceNewsNet Publisher Paul Feldman how to market your practice in such a way that you become a celebrity in your own community.

2

InsuranceNewsNet Magazine » July 2015

34 Life Insurance’s Solution to the LTC Crisis

By Keith Campbell How life insurance with accelerated benefit riders can ease the cost of longterm care during the policyholder’s lifetime.

38 Five Life Insurance Horror Stories With Happy Endings

By Ron Sussman How you can save the day for your clients by paying attention to these cautionary tales of coverage that could have turned into nightmares.

BUSINESS

58 Want Fries With That Life Policy?

Upselling by Cross-Selling

By Jeff Spain The successful cross-sell happens when you persuade an existing client to purchase additional products by convincing them the products are best when used together.

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62 T HE AMERICAN COLLEGE: Proposal Highlights Need for Retirement Income Education

60 MDRT: Insurance Products That Give Clients the Best of Both Worlds

By David Appel Traditional long-term care insurance combined with permanent life insurance can give clients additional options in planning their retirement.

61 NAIFA: Regulations Must Allow Advisors to Do Their Jobs

By Juli McNeely The proposed fiduciary standard rule for retirement account advisors could do clients more harm than good.

By David Littell and Jamie Hopkins The fiduciary standard proposal has shone a spotlight on the need to provide quality retirement and financial planning services for all types of clients.

64 LIMRA: Young Advisors Motivated

by Mentoring, Making a Difference

By Breana Macken and Emily Tracey When firms recruit new talent, they should think in terms of quality over quantity.

EVERY ISSUE 6 Editor’s Letter 20 NewsWires

32 LifeWires 40 AnnuityWires

48 HealthWires 52 FinancialWires

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15 INN 07.15 July 2015 » InsuranceNewsNet Magazine 5

WELCOME LETTER FROM THE EDITOR

Your Story Is Your Sword

I

don’t know what I think about something until I write about it.

That’s when I do the thing that distinguishes us from our fellow apes: I organize my thoughts into a story. (Actually, I don’t know that apes aren’t telling stories to each other. They could be gossiping about prettier apes. It’s all about understanding their language. But let’s stick to the story at hand.)

The clarity presented by writing is why journaling has become popular. It’s also why we do some nutty things in our lives, because then there is a story to tell at the end — after we get out of the hospital.

Don’t we love to be in the company of a great storyteller? I remember many a time when a listing of a person’s loathsome character traits was pretty much erased by the conclusion “But, man, does he tell a great story!”

The story is the focus in many of the interviews of experts that Publisher Paul Feldman conducts each month. In this edition, Nick Nanton discusses how to deliver your message most effectively. He has won three Emmys for his documentaries, so he knows how to tell a story.

But haven’t you been drawn in by effective marketing only to be disappointed by the story? As in, hmm, this looks interesting: “How Did Napoleon Conquer the World? The Answer Might Surprise You!” And you click on a link to find that he ate an African root as the One Weird Trick that overcame his vertical inadequacies.

So the powerful story comes first. And who has a more important message than you in your community? You help people navigate their deepest fears to arrive at a solution that’s right for them.

Dying too soon or living “too long”? You can help with that. Worried that health costs will consume a financial legacy? You can offer a few paths to long-term-care security.

This wouldn’t be the first time you heard that the worst answer to the question “So, what do you do?” is “I sell …”

The best answer is the clearest story: “I help successful business executives retire without worry.” If that is your target, then that’s the answer. If you help teachers with 6

InsuranceNewsNet Magazine » July 2015

their retirement, it’s, “I help teachers make their smartest 403(b) choices.” If I’m a teacher, you’re talking right where I live. If I’m not, I might mention you to my brother, who’s an educator approaching retirement.

The essential question here is “How do you serve others?” Most likely, your answer is that you provide some kind of security to an individual, family or business. The better you are at providing that service, the more successful you are. It’s the One Weird Trick in this business: The winners are the people who have the most passion and then the discipline to deliver what they say they will deliver.

If your answer is that you make a lot of money selling them a particular product regardless of the customer’s situation because that product pays the best commission, that’s a whole other story.

And, frankly, you might be making life a lot more difficult for the people who sell in order to serve. That’s because regulators and legislators are using the examples of aggressive salespeople as the villains that fiduciary standard reform is supposed to vanquish.

The latest federal foray into the issue is the Department of Labor’s proposed fiduciary standard rule. The rule was introduced with the effective messaging of “putting the client’s interest first” and ending “conflicted” advice.

The conflict in question is commission sales. Apparently, the assumption is that someone who sells on commission is going to push the highest-commission product and the hell with the client. If this reasoning offends you — good! You are the person I want to talk to.

You have probably noticed a greater drift toward pulling advisors of all stripes under the fiduciary standard umbrella. Part of that push ignores that the suitability standard has served Americans very well for at least 70 years.

Are there agents who violate that standard? Yes. Are there also advisors who violate the fiduciary standard? Oh boy, yes.

In fact, the studies that the Labor Department uses to justify its new rule show more transgressions of the fiduciary standard than the suitability standard. Here is a main

difference that is not mentioned in that report: Victims of a suitability standard violation in the insurance industry usually get their money back; those who are taken by crooks under the fiduciary standard are usually out of luck.

That is just one of the ways this fiduciary campaign gets your business wrong. And there is the problem: Federal legislators and regulators don’t know your story.

If you are a typical Main Street insurance agent and advisor, you are an essential thread in the fabric of your community.

You probably even know your congressman personally. You are the last, best hope to get Washington to look out for you and your clients.

Tell your story. You can even get your best clients to help tell your story. Contact your congressman and senator. When you bang on their doors, they will listen.

Your fellow agents and advisors are tak­ ing the story directly to their representa­ tives in association fly-ins to Washington.

In fact, our own Paul Feldman planned to be part of the effort in the National Association for Fixed Annuities’ Annuity Leadership Fo­rum in the capital in June.

We have covered this rule in a few places in this magazine, particularly in the InFront feature. And we are setting up a web page at bitly.com/inn-fiduciary for background, including how to comment on the rule before the July 15 deadline.

But the important thing to remember is that you do not need to be an expert on all the nuances of the Labor Department proposal or the other efforts at expanding the fiduciary standard. You need to know that even the most well-meaning representatives and regulators are changing the rules based on an inaccurate picture of what you do.

It is all the more important at this moment for you to have a good answer to “What do you do?”

That story might save your livelihood.

Steven A. Morelli Editor-In-Chief

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July 2015 » InsuranceNewsNet Magazine

7

INFRONT TIMELY ISSUES THAT MATTER TO YOU

Fellow Regulators Among Critics of DOL’s New Rule “This strident dialogue is a disservice to a wide range of investment firms truly working to serve their clients’ interests. It also ignores the strengths of the present securities regulatory system which has evolved over decades to encourage a culture of compliance, demanding proper management and disclosure of a firm’s conflicts and holding firms and registered persons accountable if they fail to meet those standards.”

— Richard Ketchum FINRA CEO Compiled from Staff Reports

WASHINGTON — The Department of Labor’s (DOL’s) proposed fiduciary standard rule rattled the sellers of financial and insurance products but also the regulators of them.

When the DOL proposed its rule, it was doing it as the regulator of private industry pension plans under the Employee Retirement Investment Security Act, better known as ERISA. By extension, it was dictating what kind of representative can deal with all qualified money, such as IRAs, even though IRAs are not pension plans.

So, why should this affect the insurance industry? Consider that about 60 percent of the dollars purchasing annuities come from qualified funds, such as IRAs, according to LIMRA. Under the DOL rule, even if an agent is selling a fixed annuity regulated by the state under the suitability standard, 8

InsuranceNewsNet Magazine » July 2015

that agent has now ventured into fiduciary territory.

The agent can be allowed to go forth with the sale as usual under a “prohibited transaction exemption.” Clients would have to sign a statement that they know their agent is not doing business in their best interest. But the compensation would have to be “reasonable” under the rule.

Although the PTE, as the exemption is known, would allow agents to continue selling as they have, they will have another regulator in this case. The Employee Benefits Security Administration in the DOL is expected to determine what compensation level is reasonable.

Apparently that agency’s enforcement power would be limited, perhaps only allowing them to file a suit to address a violation.

Advocates for insurance agents and advisors support the exemption because it recognizes the important and dis-

tinctly different service that insurance professionals provide. Although at the same time, they took exception to the assumption that commissions always led to “conflicted” advice and that the suitability standard was always contrary to consumer security.

Also, the Securities and Exchange Commission (SEC) was directed by the Dodd-Frank reform act to investigate whether the fiduciary standard needed to be adjusted. The DOL’s proposal upset some people by saying that the SEC was the appropriate agency to review the standard.

The Financial Industry Regulatory Authority (FINRA) had problems with the proposal as well. FINRA’s chief said he believes that the DOL’s fiduciary standard proposal “will lead many firms to close their individual retirement account business entirely or substantially constrain the clients that they will serve.”

Richard G. Ketchum, FINRA chairman and CEO, embraced the DOL’s “best interest” concept as the appropriate core for a uniform fiduciary standard, but said the current DOL proposal doesn’t do the job it sets out to do.

Ketchum said he believes the SEC is the appropriate agency to set the standard, but acknowledged that “there is no question that designing such a standard is challenging.”

He made his comments at the opening of the annual FINRA conference on May 27.

At the same time, Ketchum defended the work of the SEC and FINRA, noting that bad-mouthing the current oversight environment for financial products is unfair.

“Depictions of the present environment as providing ‘caveat emptor’ freedom to broker/dealers to place investors in any investment that benefits the firm financially with no disclosure of their financial incentives or the risks of the product, are simply not true,” Ketchum

FELLOW REGULATORS AMONG CRITICS OF DOL’S NEW RULE INFRONT

What’s behind the Department of Labor’s fiduciary proposal?

The Employee Retirement Investment Security Act of 1974 (ERISA) establishes minimum standards for private industry pension plans. Although individual retirement accounts (IRAs) are not “plans” under ERISA, the DOL has authority with respect to the definition of fiduciary and prohibited transactions for IRAs, so these rules are applicable to IRAs as well.

Do DOL regulations under ERISA apply only to retirement plan advisors?

Yes. Securities outside of qualified retirement plans, as well as the advisors who provide them, do not fall under ERISA.

What does ERISA say about retirement plan advisors’ fiduciary standard of conduct?

ERISA requires advisors who provide “investment advice” to serve as fiduciaries to their clients, meaning that they must act with prudence and loyalty, diversify client assets and follow plan documents.

What constitutes providing “investment advice,” according to the DOL?

Under current ERISA rules, a broker/dealer becomes a fiduciary providing investment advice only after satisfying a five-prong test. A broker/dealer is a fiduciary if he or she: 1) provides advice, 2) on a regular basis, 3) pursuant to a mutual agreement or understanding, 4) that the advice is the primary basis for an investment decision, 5) and the advice is individualized based on the particular needs of the plan or participant.

How would the DOL proposal change the current situation?

According to the DOL’s summary of the proposed regulations, fiduciaries must provide impartial advice in their clients’ best interests — and cannot accept payments creating a conflict of interest — unless they satisfy one of two, possibly three, exemptions.

Generally, the advisor and the client would be required to enter into a written contract specifying that all advice be in the best interests of the client, that conflicts be clearly disclosed, and that procedures be in place to encourage advisors to make recommendations in the client’s best interests.

Source: National Association of Insurance and Financial Advisors

said in an implied criticism of the Obama administration’s claim that present rules eat into the retirement savings of Americans.

“Nor are they an accurate starting point to justify a new standard of care,” Ketchum continued.

Ketchum said he believes the DOL is not the agency that should establish the standard of care because its proposal sets up the likelihood for a double standard where oversight for individual

retirement account (IRAs) and 401(k)s is different than the standard of care applied for an investor’s other financial assets.

He said a “great many” investors simply do not plan for their retirement by segregating tax-advantaged vehicles from their other investment strategies.

“An effective regulatory environment would apply a consistent best interest standard across, at least, all securities investments and have the examination

and enforcement mechanisms to oversee compliance with the standard,” he said.

Ketchum said the DOL proposal “was a very good faith” effort to address an important investor protection imperative and DOL has a special interest in recommendations to move assets out of 401(k)s and IRAs. Moreover, the core features of the proposal are “aimed at exactly the right areas,” he said.

He backed the prohibited transaction exemption, saying that it protected the customer’s best interest by identifying conflicts of interest. He also spoke out in favor of the management of compensation practices to avoid improper incentives for conflicted advice, and implementation of effective fee and risk disclosure requirements.

However, Ketchum said, the warranty and contractual mechanism employed by the DOL to address their limited IRA enforcement jurisdiction, “appears to me to be problematic.”

He said, “In one sweeping step, this moves enforcement of these provisions to civil class action lawsuits or arbitrations where the legal focus must be on a contractual interpretation.”

Ketchum said he is not certain how a judicial arbiter would analyze whether a recommendation was in the best interests of the customer “without regard to the financial or other interests” of the service provider.

“I’m not sure, but I suspect, a judicial arbiter might draw a sharp line prohibiting most products with higher financial incentives no matter how sound the recommendation might be,” he said.

“Put another way, the subjective language of the PTE, coupled with a shortage of realistic guidance, may lead to few providers of these critical investor services,” Ketchum said.

To contact InsuranceNewsNet’s news desk, please write to editor@ insurancenewsnet.com.

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9

I

MAGINE BEING SO FAMOUS in your community that you don’t even need to appear at your own seminars.

Or, what if you didn’t even need to attend client meetings in your office?

Sure, you might have to add employees to handle the many prospects and clients eager to do business with you.

And when you did make an appearance at a client-appreciation event, people would bring friends to meet you because you are a celebrity.

Yes, that dream could be your reality. That was one of the cases that Nick Nanton discussed with Publisher Paul Feldman in this month’s interview.

Nick is a branding expert, but he is not one of those “experts” who shows up with a little advice and a shot of motivation. He is a branding implementer and a three-time Emmy-award-winning filmmaker who has reshaped careers in many different categories. He helps develop and publish books and consistently gets them on a best-seller list. He will help find the special something about a client’s agency, help name it and get it trademarked. He can do that because he’s a lawyer, too. Then he’ll help monetize it all with marketing.

He’s done this with countless clients, especially in the insurance and financial advisory field. When people come to him for help standing out in their community, they had better hold on, because life is suddenly about to become a whole lot more interesting.

FELDMAN: You say that the media landscape has totally shifted to what you call “The New Media.” What do you mean by that?

NANTON: The old lines of media are getting blurred. It used to be with a news station or a magazine that everything was pored over, or supposed to have been pored over, by interns and news directors who searched the world to find you the best, most relevant content in a totally editorial system.

Now it’s just become much more commonplace to see branded content or media. It’s just a much more open marketplace. I would

10

InsuranceNewsNet Magazine » July 2015

CELEBRITIZE! YOUR BUSINESS INTERVIEW

An interview with Nick Nanton by Paul Feldman, Publisher say product placement really has driven a lot of the openness on this, probably due to regulations. If I’m Apple computer and I want an Apple computer featured in a movie or a TV series, I would pay so that when the laptop was open it wasn’t just a generic laptop. It was an Apple.

Now this is happening all around us in everything. Certainly it’s really hot in movies and TV, but even in magazines and The Wall Street Journal and USA Today and on the networks. Everybody is looking at how they can get more of what they want out of these media formats.

The questions I’m answering are: How can we work together to figure out how the companies that want to use the media for their benefit can also be beneficial to the media outlet? How can we do it ethically to make sure the media outlet doesn’t become irrelevant because it’s just pandering to its advertisers?

Everyone is trying to figure it out. We’re certainly ahead of where we were five or 10 years ago. And now there’s a whole slew of ways we can do this — video, tweets, Facebook, you name it.

FELDMAN: Have you seen advisors using public relations agencies, and are they getting what they want out of the effort?

NANTON: There are advisors who will pay a PR firm to get them on the news —

whether that’s the national or the local news piece — as a financial expert. But I think a lot of people have gotten frustrated with the fact that paying a PR firm and maybe getting on TV might not be returning what they expected.

It’s not exactly a 10 times return on the dollars that you spend.

FELDMAN: How do advisors make PR work for them?

NANTON: I have a concept called the “Business Trifecta” that I teach my clients.

So, here’s the deal. When I turned 16, I had a car called a Daihatsu Charade. You might remember this “hot rod” on the road. It was a hatchback.

And it had three cylinders. So I used to have to turn the air conditioning off to get on the interstate, which was not a lot of fun in Florida.

So one time I was getting my oil changed and the guy goes, “Hey Nick, do you realize your car is running on only two cylinders?” I was like, “Wow, I had no idea this thing would still run that way.” I paid him to fix it, and then I’m running on all three cylinders and I can

I have a concept called the “Business Trifecta”: media, marketing and PR. The problem is, most people think they can do just one of them.

July 2015 » InsuranceNewsNet Magazine

11

INTERVIEW CELEBRITIZE! YOUR BUSINESS actually get on the interstate with the air FELDMAN: How does marketing fig- liant, I’m going to Google them and I’m conditioning on. I’m happy. Life is good. ure into the “Business Trifecta”? going to hire them right now”?

The reason I tell that story is because We don’t do that, because we are getmost businesses are running the same NANTON: That’s where the rubber really ting educated, but as a form of entertainway. A lot of them are running on just meets the road. It’s the only one of these ment. Mass media does give you amazing one cylinder as opposed to this trifecta of things that monetizes consistently. If you credibility. The best thing you can get three cylinders. want to accomplish any task in the world, out of it is to say later on, “I was on Good And the three cylinders are very sim- if you want to move the needle on any- Morning America. I was in USA Today.” ple. They are media, marketing and PR. thing, it’s through marketing.

But it doesn’t move the needle.

The problem is, most Direct media, on people think they can the other hand, is the do just one of them. opposite of that. It is That’s where peomedia that you create ple get disgruntled and send to a list of with PR and media, people you’ve put tobecause they don’t gether who could acunderstand the intertually hire you. connectivity between Direct media can these things. be emails, postcards, Media is using any sales letters, CDs or medium you can to DVDs, movies, autell your story. And dio courses, books, by telling your story, all that stuff. Direct you’re talking about media is awesome at what led you to where moving the needle. It’s you are, what you’re a great way to spend doing to help people the amount of time now and what your and money you want vision is for the future. to reach the audience And it should be you want. The probMedia is using any medium you can to tell your story. told so uniquely that lem is, it lacks credibila client or prospect It should be told so uniquely that a client or prospect in ity because they know in a marketplace that you created it. can’t even compare a marketplace can’t even compare you with anybody else.

The key to media you with anybody success is taking mass else because your story is so different I have clients in multiple industries who media credentials and credibility and inbecause of the way you’re telling it. will say, “Hey, I want more speaking gigs, serting them in your direct media. I have I want to get a speaker’s bureau, I need to a client who sent out a seminar invite reFELDMAN: How important is PR to get …” And I say, “NO, stop right there. cently that said, “Come see national bestconsumers?

You need to mount a successful market- selling author X, who has been featured ing campaign. Who do you want to speak recently on NBC, CBS and ABC, and in NANTON: It’s important to remember to? Who controls those audiences? And Forbes magazine and Newsweek.” Now that if they Google and they can’t find you, what do we need to do to market to those this guy’s seminar invite looks totally diffirst of all they’re going to ask if you’re in people so they know you exist?” ferent from anybody else’s. It looks like the witness protection program. Second, It’s a very simple equation. But every- there’s a rock star who happens to be in they’re going to wonder how relevant you one shies away from the marketing be- town holding a seminar and if you don’t are because they can’t find you. If Google cause it’s kind of hard. get in there, you’re going be locked out. doesn’t say you exist, you don’t exist.

And I’ll share one other little secret we So that secret formula is taking the PR online is a validation of who you say call the secret of media success. When mass media credentials and inserting you are, when people Google you. Also, all you really want to make money, there are them in your direct media. That’s really the PR you get from being in media, from two types of media that you want to use: the secret to making media work for you. being in USA Today or Forbes or The Wall mass media and direct media.

Street Journal or Newsweek, frame that Mass media doesn’t generate revenue. FELDMAN: PR and media attention are stuff and put that up on your wall.

When was the last time you saw someone always a great shot in the arm, but it You’re going to put the logos on your in USA Today or The Wall Street Journal fades quickly and most of your clients website, as in, “Have you seen it?” Now or a local paper or on TV being inter- and prospects are bound to miss it there is a validation of who I say I am in viewed and you stopped what you were when it’s run. I always say it is what you my story from my own media. doing and said, “That person is so bril- do after getting media that counts.

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InsuranceNewsNet Magazine » July 2015

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INTERVIEW CELEBRITIZE! YOUR BUSINESS NANTON: I tell clients all the time, “Don’t hire me and do this stuff if you’re not willing to come up with a plan for what is going to happen when you get that box of books that I’ve made a best-seller for you. Or you get those DVDs from being on my show on CNBC and Fox News.

If you don’t have a plan, aren’t willing to come up with a plan or aren’t willing to pay someone else to come up with a plan, you might as well not even start.”

that. What they want to know is, are you someone they can trust? Is this someone who is like me?

People always laugh when I say, “Well, you should actually talk about your family vacation — or your new car.” But if you took your family on a vacation to Washington, D.C., and you were excited about teaching them all this stuff, which led you to the U.S Treasury, which led you to think about your clients, well, not only did you tell a much more interesting story than posting a bunch of market diagnostics, but you’re building a relationship because they are starting to see that you are like them.

You show that you’re not some guy running from town to town, taking people’s money and not coming back. You are someone who has a family; you live in a community; you went to the recent Mayor’s Prayer Breakfast. These are things you talk about because they build anchor points for people to know you’re a real, trustworthy human being.

I can take all that content and put it in an e-zine or an e-newsletter or I can put it in a physical newsletter. Here’s the problem with email newsletters, even though I think they’re great and I use them. We get a bunch of sales e-mails and newsletters we signed up for, and things we didn’t sign up for. I’m just trying to get through my inbox so I can go home.

You can take the same content and put it in a physical newsletter and mail it out.

Not many people these days get regular, personalized, person-to-person correspondence in their mailbox at home or their office.

A well-written newsletter that is at the bottom of the stack of email in the inbox moves to the top of the pile in the mailbox because it becomes the most valuable content they receive in the medium of their mailbox.

Any good newsletter should be the equivalent of sitting down to have a cup of coffee with a good friend.

FELDMAN: Very true. What do you think about newsletters in particular?

NANTON: My favorite media on earth.

E-newsletters are great because they’re basically free and a great way of keeping up with people. But they’re not nearly as effective as physical, hard-copy newsletters.

There are a couple reasons for this. I like to call it the mailbox effect. I can have a newsletter that has the same content and I email it out or I mail it out. Any good newsletter should be the equivalent of sitting down to have a cup of coffee with a good friend.

In 99 percent of scenarios, it should not be talking about technical stochastics and market forecasts. People can turn on some financial network to see 14

InsuranceNewsNet Magazine » July 2015

FELDMAN: What about people who would say that my clients wouldn’t care about personal details like where I went on vacation?

NANTON: It’s not because we think the audience really cares where you went on vacation. But we want to make you relatable and a real person who is top of mind.

I’ll give you a real quick principle, which is Dunbar’s number. Dunbar’s research showed the average person can comprehend having relationships with only 150 people. So, your mom is probably there, your dad, your family, your spouse, your kids.

But as you start getting further down that list — over 100, let’s say — then your brain starts to play with you, because if you watch Oprah every day, then Oprah takes one of those 150 spots. If you watch a movie or a TV show regularly, like if you’re binge-watching House of Cards, then Frank Underwood might creep into that.

If you are showing up in their mailbox monthly and hitting them with other media, you are taking over one of those 150 relationships. Now you’re not just a financial advisor in the community; you are a friend in the business. And when you can hit that status, it’s an unbelievable change in the way things work.

How many people do we call for quotes when we have a friend in the business? If our car breaks down, we call our buddy who owns a mechanic shop. We don’t call for four or five different quotes on something that is egregious and wrong.

You can do all that by telling your story and showing up once a month, by clicking send or by printing your newsletter, putting it in the envelope and mailing it out.

FELDMAN: In order to get media attention and even to do a newsletter, you have to have a brand for yourself. How does one need to think about their brand to get more media and capture more people’s attention?

NANTON: Branding is a really misunderstood subject, and there are many people who will swindle you out of all sorts of dollars to try to tell you what your brand should be.

I try to make it really easy for people.

Your brand is simply your story — that’s it. So, branding is storytelling. Having a great brand is simply a story that the public likes to hear over and over and tell other people about.

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INTERVIEW CELEBRITIZE! YOUR BUSINESS Your brand is your wrapper that helps people understand who you are very quickly and accessibly.

One of the tactics I love in that sense is creating language that is only yours.

Starbucks has done it very well. They have their own names for sizes, and now it’s really easy to tell when someone is trying to rip them off — and how deeply they penetrate the market, when someone goes to Coffee-R-Us, the other coffee store, and asks for a venti or a tall or a grande.

those of our readers who don’t have a book, why should they start now?

NANTON: A book will take you places you could never take yourself. First of all, in our subconscious, it’s the most credible thing you can find on a subject. When we want to learn how to do something, we find a book on it. Or better yet, if we can afford it, we hire the guy who wrote the book on it.

When we were kids, we were taught that the person in the front of the room is the expert — that’s the teacher, the professor. And the book is where we get the knowledge. That’s where the professor gets the knowledge to teach us from. The book must be the most credible thing there is.

Having a great brand is simply a story that the public likes to hear over and over and tell people about.

When it’s part of your brand, name it and trademark it. That way, even if you’re selling the exact same thing as 3,000 other people, your client can’t compare it because no one else is allowed to sell this product.

We had a client come in for a private consult a couple of weeks ago. They have their own spin on how they do life insurance and annuities. But we put a name around it that sounds really good, really catchy. Now we’re going through the process of trademarking that, creating logos and expanding that. They’re going to make some videos explaining why they’re different.

FELDMAN: You talk a lot about the importance of having your own book. For 16

InsuranceNewsNet Magazine » July 2015

FELDMAN: What is your favorite way to market a book?

NANTON: We use them when a client calls in and asks for more information.

We’ll FedEx him an autographed copy of the book along with another thing to kind of build that reciprocity.

So now they’ve called three other branding agencies, let’s say. They’ve probably got a bunch of PDFs in the mail as opposed to an autographed book — that’s a best-seller that was written by the guy who signed it for you, the person you inquired about working with. Those are just a few ways.

But there are hundreds of ways to use books.

FELDMAN: Another type of media that you use very well is video. What are some strategies that you see as effective for financial advisors?

NANTON: I’m personally sick of actors and fake commercials. What I like is to know what is working for somebody else who is in the position I’m in now, somebody who didn’t know where to turn and they found the solution.

I like using short commercials. Threeto-five-minute videos of short documentaries.

I’ve even done three 30-minute documentaries for a financial advisor that helped them tell their story. Weave in a story of how they’re different and where they came from.

It helps to tell their story in a cinematic way — I mean, there is no better word for it than epic. Now you are honored to meet this person.

And then in the commercial format, if we can use testimonials, it deepens the story. Of course, that depends on the licensing and compliance. But if we can use it, I love letting clients talk about how the financial advisor helped them sleep better at night. And then back to the advisor: “If you want to be like the Joneses, come visit me.” We got all three of them playing golf — the advisor and the Jones family.

Now, I also recently did a documentary for an advisor and he actually couldn’t make his own seminar for a medical reason at one point. We advised him to just run the movie and have his staff there. It worked so well he doesn’t go to his own seminars now.

So you can do an awful lot of stuff with the format of video and film if you know what you’re doing. The problem is, the 14-year-old kid down the street or the local video production company probably doesn’t know how to sell in video without looking like an infomercial.

So if you want to utilize this strategy where you’re capturing their hearts and minds, it takes a different skill set from just shooting a commercial or a “documentary” where you’re barking at a camera and it looks bad and feels bad and the music is not right.

FELDMAN: Did not showing up to his own seminar perpetuate his celebrity status?

NANTON: Yes, and now he typically doesn’t need to show up for his meetings, because the advisors in his office will handle them.

But when he hosts his client appreciation events and other events, then everybody wants to meet him and everybody wants to bring their friends to meet him because they know this celebrity guy.

So, here is a guy who went from advisor to celebrity with one video.

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Tired of the Pitch?

One company is flipping tradition upside down by “catching” the needs of agents and consumers.

Edison Solutions has been getting a lot of notice recently as the new BGA that is rebelling against time-honored industry traditions. In this Q&A, Vince Aloisi, FIO (“figure-it-outer”) shares the bittersweet story of what motivated his passionate involvement in the company and how he’s helping turn an industry standard literally upside down.

Q: What inspired you to be part of Edison Solutions?

A: Every year I’ve been in the industry, I’d wanted to do things differently, but I never took the time to stop and follow the passion until I was blindsided by a few events that felt like a wrecking ball at each pass. I lost a parent. I then lost a sister, who was also like my best friend, and then I subdued several personal bouts with cancer, all in a matter of a couple years.

One of the last things my sister told me was, “With all that’s been going on, now is the time to stop, assess, and do what you’ve always wanted to do.” She said, “I know you well enough to know whatever you have in mind is not just for you.

It’s more for everyone else. But if it brings you that life-work balance that you talk about, then get after it.” And as much as I’m doing this for the industry as a whole, I can’t help but think of her with each “thank you” and each success story that I get from an agent or any client.

Q: So what is it that you’re finally doing, which you’ve always wanted to do?

A: This industry started out as being about personal progression, premium, and relationships and it’s become all about the pitch. It’s the constant pitch that we’re all too familiar with and tired of. I think it’s long past time for an upheaval in the industry. You know, how about more like a “catch”? To actively listen to what agents and their clients are looking for and turning it into some real premium.

If someone’s calling you and just giving you rate updates or telling you about a trip or how close you are to the golf bag or here’s the new pitch, that’s not going to get your client to sign the check. You should never let any organization dictate what you should be doing without them knowing what you currently are doing, what you’ve been doing, and what you’re looking to do. Agents need help with unique, specific cases.

Q: How does Edison Solutions help with these cases?

A: Fundamentals, implementation, and being the agents’ agent. You know, doctors have a doctor. Psychologists have psychologists. Agents truly need agents. They’re not managers. They’re not bookkeepers. They’re not designers. With constant adapting and adjusting to your clients’ needs comes a plethora of new concepts and strategies that require an expert on fundamentals, an active and responsive view of the latest riders, guarantees, underwriting guidelines, et cetera, and how to implement these items in daily practice.

How often does tragedy strike the right person?

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Q: Many agents are used to doing their own implementation, though, aren’t they?

A: Agents need to be face to face with clients, having an agents’ agency to fall back on for all the other stuff. An agent sitting around figuring out how to conduct a webinar or deciding on a house salad or a Caesar salad at their next dinner seminar is no different than if the Chicago Bulls had Michael Jordan on the side of the court selling Cracker Jacks or refilling the relish station during the game.

Q: What are some specific things that you have in place to help with implementation?

A: It’s no one thing. It’s whatever the agent’s

need is or what scenario their client is looking for. It might be an agent who’s never had a CRM and all he has are old files, so we say, “Let’s try this CRM, let’s get an idea of what your book of business consists of, and let’s move forward from there.” Someone else might just need straight product knowledge or underwriting assistance.

That’s why I call it the “agents’ agent.” It’s the overall concept of what each individual person needs or what their client needs.

There’s the pyramid structure of this industry, with the home office at the top, your FMO/ IMO in the middle, and then BGAs, GAs, and independent agents at the bottom tier. And below that, which you never see on illustrations, is the client. The way this structure has been historically presented is with the home office and the marketing organizations at the top, as the “all-powerful.”

What we’re doing is flipping that pyramid upside down, putting the clients and agents back on top, where the power and money is and where it should be in the first place. Of course everyone else in the pyramid benefits as well, but it’s not about Edison Solutions. It’s about the agents and their clients and about getting them the power and knowledge to progress.

Q: Let’s be frank. How much of an increase in income can an agent expect, working with Edison Solutions?

A: Like I said, we are our agents’ agent. Just the same as agents need to make guarantees to their clients, guaranteed income, guaranteed death benefit, because nobody wants a hypothetical check, we don’t offer our agents hypothetical checks. “Hypothetical” won’t pay your mortgage or your staff ’s paychecks. So if you’re someone who is a fit for our company, we can guarantee a 20%–600% annual increase in your premium production. There’s no hypothetical about it.

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July 2015 » InsuranceNewsNet Magazine

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NEWSWIRES

Changes Afoot at the SEC The Securities and Exchange Commission (SEC) is resembling a revolving door these days, with two commission members on their way out and a former staffer returning as chief of staff.

Daniel Gallagher is resigning his post as a Republican member of the SEC after four years, a time marked by partisan battles over the regulatory response to the 2008 financial crisis.

Also out at the SEC is Luis Aguilar, the Democratic commissioner whose term expired in June. Gallagher plans to remain on the SEC until a successor is confirmed, a process that could take several months. The White House has already identified candidates to fill both his and Aguilar’s positions on the commission.

Gallagher has been a critic of many of the rules required by Dodd-Frank.

He frequently rapped the Federal Reserve for trying Daniel Gallagher to impose its oversight on firms traditionally regulated by the SEC. Aguilar has been on the commission for almost seven years. He largely supported the Dodd-Frank regulatory expansion and often advocated for stiffer penalties for wrongdoing by Wall Street firms.

Meanwhile, a former SEC staffer with experience in the fiduciary standard wars has been named the commission’s chief of staff.

The appointment of Andrew J. “Buddy” Donohue as chief of staff was made as SEC chair Mary Luis Aguilar Jo White gears up to tackle the creation of a uniform fiduciary standard for the sale of financial products. Donohue replaces Lona Nallengara, who left the SEC in June.

Donohue returns to the SEC after serving as director of the agency’s Division of Investment Management from May 2006 to November 2010. Most recently, Donohue has been managing director, associate general counsel, and investment Andrew Donohue company general counsel at Goldman, Sachs & Co. in New York, where he was primarily responsible for legal matters related to its registered investment companies.

NAIFA NAMES NEW CEO

The National Association of Insurance and Financial Advisors (NAIFA) announced that Kevin M. Mayeux will be the association’s next chief executive officer.

Kevin Mayeux Mayeux previously served as executive vice president, chief officer for North American operations, and general

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counsel for the Institute of Internal Auditors (IIA), an international professional society with 185,000 members throughout 190 countries. In his leadership capacities, Mayeux oversaw more than 100 staff members at IIA’s Altamonte Springs, Fla., location. He will relocate to the Washington area to manage operations from NAIFA’s headquarters in Falls Church, Va. As CEO of NAIFA, Mayeux will oversee a staff of 58 in Falls Church. He will

of people who signed up for health insurance coverage in 2015 under the Affordable Care Act have fallen off the rolls, many because they failed to pay their share of premiums. Source: The New York Times

InsuranceNewsNet Magazine » July 2015

QUOTABLE

We have seen this movie before. … The president has made it clear. No sequels here.

— Jeffrey Zients, National Economic Council director, on the administration’s opposition to legislation that would limit the spread of the fiduciary standard.

manage all external affairs of the association, including relationships with life, health and financial service companies, other industry organizations, legislators and regulators. He also will manage dayto-day headquarters operations, provide support and advice to NAIFA’s board of trustees and committees, coordinate association activities, and oversee NAIFA’s operating policies and procedures.

Mayeux succeeds Dr. Susan B. Waters, who served as CEO from 2010 until her passing in December 2014.

SUPREME COURT RULES IN 401(K) CASE

The Supreme Court fired off a warning shot to employers: They can be sued if they fail in their “continuing duty to monitor” mutual funds in 401(k) accounts for unnecessarily high fees.

That was the unanimous decision handed down by the high court in May. The court decision could shake up the $5.8 trillion market for administering 401(k) plans.

The ruling effectively shifts the burden in disputes over monitoring retirement plans from workers to the employers that administer them.

In a 2007 lawsuit, Tibble v. Edison International, Edison employees accused their employer of violating its fiduciary duty under the 1974 Employees Retirement Income Security Act by offering six higher-priced retail class mutual funds as plan investments when essentially the same funds were available under lowercost institutional shares.

The suit was brought as a class action on behalf of 20,000 employees and retirees.

[NEWSWIRES] Lower courts, including the U.S. 9th Circuit Court of Appeals in San Francisco, invalidated claims involving three funds because a six-year statute of limitations had elapsed. The rest were upheld.

NATIONWIDE PAYS $8 MILLION FOR MAIL DELAY CHARGES

The SEC charged Nationwide with purposely delaying its mail pickup so that it would not have to process orders for certain kinds of life insurance products until the next day.

Nationwide paid $8 million to settle the charges.

Nationwide allegedly went to great lengths to avoid handling the orders the day they came in, the SEC charged. The company was accused of requiring couriers to remain in a company parking lot until after the daily deadline for posting orders had passed.

The SEC also said Nationwide would complain to the U.S. Postal Service if the mail for these products was inadvertently mixed with other mail and delivered to Nationwide’s offices before the deadline. This went on for more than 15 years, the SEC charged.

Why Nationwide would want to wait until the next day to process orders wasn’t clear in the SEC’s order. It is possible that by waiting, a company could reduce its cost of operations. Delaying processing by a day could have resulted in either gains or losses for customers, depending on how the markets performed.

WORKERS MISSING OUT ON $24 BILLION IN EMPLOYER MATCHES

The good news is that employee participation in retirement savings plans is at an all-time high. The bad news is that workers are missing out on their company matches into those plans.

Nearly eight in 10 employees are taking advantage of defined contribution plans like 401(k)s when they have access to them, according to an Aon Hewitt analysis. But the analysis also showed that workers don’t always take advantage of the matching funds offered by their employers.

That failure to take advantage of the “free money” is adding up — to the tune of $24 billion, according to a report by the independent investment advisory firm Financial Engines. That report said one in four employees fails to receive the

Lawsky Stepping Down as New York’s Top Regulator He was known for leading aggressive investigations of some of New York’s top financial firms, but he’s leaving public life to become a consultant.

Benjamin Lawsky left his position as superintendent of New York’s Department of Financial Services in late June.

During his time in office, Lawsky became known as the “Sheriff of Wall Street” for using his office’s powers against Benjamin Lawsky many of the major players in the financial world.

His office has imposed hundreds of millions of dollars in fines on banks including Standard Chartered, BNP Paribas, Bank of Tokyo Mitsubishi-UFJ and Royal Bank of Scotland. He has also pushed for bank executives to be held personally responsible when their companies break the law. Lawsky, a former federal prosecutor, was tapped

by New York Gov. Andrew Cuomo to lead the Department of Financial Services when it was created in 2011 by combining the state’s banking and insurance supervisors.

It is believed that Lawsky will start a legal and consulting firm focusing on cybersecurity and data breaches at financial institutions. full company match because they aren’t saving enough money. By not socking away enough to be eligible for the match, employees are missing out on an average of $1,336 each year.

CONSUMERS ARE HOLDING ON TO THEIR WALLETS

Americans haven’t had the greatest reputations when it comes to saving money, but that might be changing.

The annual savings rate, now 5.6 percent, is higher than it was a year ago, and significantly higher than the prerecession norm of around 3 percent, according to the Federal Reserve. That’s significant because American spenders make up the majority — about 70 percent — of economic activity in the country. If people don’t spend, the economy doesn’t grow.

The spending numbers also indicate Americans’ lack of confidence about the economy’s future. People don’t spend if they sense stormy skies ahead.

STATE FARM NAMES NEW CEO

State Farm has had the same CEO since Ronald Reagan was president. Now Edward DID YOU

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B. Rust Jr. is stepping down from that post and Michael Tipsord, State Farm president and chief operating officer, will become the company’s CEO in September.

Edward Rust Jr. Rust was State Farm’s longest-serving CEO, having been in the top spot since 1985. Since then, the financial strength of the organization has grown to more than $80 billion Michael Tipsord from $10 billion, and the company has grown to serve more than 82 million policies and financial services accounts from 45 million policies.

Tipsord has been working with State Farm almost as long as Rust served as CEO. Tipsord joined the company in 1988. He was named vice president and assistant treasurer 10 years later. He rose through the ranks during the years that followed, and was elected president of the company in 2015.

of Americans describe themselves as “habitual savers” who always make sure they are saving for retirement.

Source: Transamerica Center for Retirement Studies

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CELEBRITY ADVISORS TELL ALL! FEATURE

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nsurance advisors don’t just help clients protect their futures by structuring life and annuity protection products. Many of them, it turns out, lead other lives — not exactly secret — by doubling as local media celebrities.

It’s a great way for advisors to reach beyond their clients and talk to a larger audience, one that is all eyes and ears when it comes to issues around savings and retirement.

Patrick Munro, an independent insurance-only representative with a practice in Wilmington, N.C., and Myrtle Beach, S.C., doesn’t just sell insurance and annuities.

He also happens to be a local media personality hosting TV and radio shows that help viewers and listeners with retirement planning.

He hosts a TV show called Retire Right TV at 12:30 p.m. on Wednesdays on WPDE channel 15, an ABC network affiliate.

He also hosts his own radio show at 9:30 a.m. on Saturdays on WRNN Hot Talk 99.5.

When he’s on the air, people listen because his audience wants to hear what he and his guests have to say.

Munro, founder of NorthStar Financial Advisors, said his radio audience consists of homeowners ages 55 to 70 with significant retirement concerns and questions.

“We try to address those and I try to do ‘news of the day’ pieces,” Munro said.

Much of the commentary that affects today’s seniors is often ignored by the mainstream media.

“The entire issue of a generation with kids coming back home and living with their parents, and those parents having to take care of elderly parents in their 80s gets glossed over and directly affects their retirement success,” Munro said.

That’s why he has made it his mission to discuss such topics on his radio and TV shows.

For a life and annuity specialist, Munro certainly is tuned in to the news. He reads eight or nine newspapers a day, he said, and even uses an internal clipping service.

Soft-spoken and urbane, Munro is the quintessential television and radio talk show host, guiding his guests through

questions from investments to coaching people to overcome challenges in life.

Recent guests have included an elder planning attorney, a reverse mortgage specialist, and even a hypnotist. He said he likes hosting shows, “because people tell me everything.”

Munro’s not shy about pushing back against broker/dealers who call in and bash guests on the show.

Munro, a Canadian by birth, said he and his team do a lot of demographic research to segment issues that affect people the most — such as retirement savings. Being from Canada gives him the Patrick Munro interviews a guest chance to comment on his show, Retire Right TV. on the United States and retirement issues as an outsider, and that brings a different perspective to elder issues for his U.S. audience.

He entered the financial services business more than 20 years ago, but in 1997 gravitated toward serving the senior market. He’s been on radio for the past eight years and on TV for the past three.

Make no mistake, though, preparing for each broadcast is hard work.

TV and radio hosts must be quick on their feet. When it comes to life insurance, annuities and retirement, you’ve got to know your subject inside out, which Munro does.

Some guests get nervous so it’s important to keep the guests focused on the topic or else the subject and the interview can get away from you, he said. The more research you do, the better your questions – Patrick Munro and the more you can engage the guest.

“I use a lot of old-time radio show expressions and techniques like ‘… and now for the rest of the show …’” he said. “That means everything to an older audience, but not to the younger folks who get everything from Spotify.”

Munro said it’s important for local radio listeners and TV viewers to hear

“I often get pistol-whipped by listeners in Massachusetts.

We have this thing called free speech.

If you have a concern, let’s talk about it.”

July 2015 » InsuranceNewsNet Magazine

23

FEATURE CELEBRITY ADVISORS TELL ALL!

Patrick Munro appears in a video on eHow.com.

“It’s gotten to the point where I joke with my staff that we sometimes wonder if I’m in the media business or the financial planning business.”

– Patrick Munro

24

InsuranceNewsNet Magazine » July 2015

his voice and see him on TV — in other words, to connect.

The more people become familiar with him, the more they gravitate to him, he said. The exposure gained from the broadcasts helps bring people out to his financial planning and educational seminars.

As for show audience metrics themselves, Munro doesn’t lose too much sleep over the numbers, calling them “amorphous.” ”We don’t track anything. Arbitron and other media tracking services don’t really qualify,” Munro said. “They can’t really tell you anything. The only thing that really matters is that you are conspicuous by your absence.”

When it comes to media, “We live in a celebrity culture, and I’m considered the go-to guy for financial planning. It’s gotten to the point where I joke with my staff that we sometimes wonder if I’m in the media business or the financial planning business.”

He said that local radio and TV are extremely effective marketing channels for his business. Munro is, after all, a big consumer of talk radio as well as a producer of it.

“I listen to Sean Hannity and Rush Limbaugh and Mark Levin — that happens to be the mindset of older folks in my seminars, but not all,” he said. “I often

get pistol-whipped by listeners in Massachusetts. We have this thing called free speech. If you have a concern, let’s talk about it.”

When Munro walks up onstage during his seminars, he makes sure he has a demo of his show running so his audience can see him on the show as they also see him live onstage. It’s a shrewd move.

“I walk on to the stage and I tell people, ‘That’s my twin brother.’ It sends a subconscious message that their broker doesn’t have a radio or TV show.”

Munro is also a major writer of annuity products. He probably could get by just fine without the media exposure, but life wouldn’t be as much fun.

He disputes the contention that TV and radio don’t readily lend themselves to insurance and annuity products.

“If you are a financial advisor and you are not seen on TV, you probably wouldn’t want to advertise that,” he said.

But every life insurance expert who isn’t on TV means an opportunity for him.

Munro said the secret to successful radio and TV is to feed the shows with fresh content every week.

“There’s always new content on my shows every week and I invite people to follow me on Twitter and Facebook,” he said. “I comment on the news of the day and say ‘ … we’ll be right back with a special guest …’”

Mostly, though, Munro likes being a broadcast host and that might be the prime ingredient to being a media rock star: you simply like it.

“I’ve been doing this since 1999, have been banging away at it since. I like it and I just consume a lot of media,” he said.

The Next Suze Orman

Advisor and certified financial planner Kimberly Foss, founder and president of Empyrion Wealth Management in Roseville, Calif., isn’t shy about her professional ambitions in the media business.

“I’d like to have my own Suze Orman show,” she said. And by the looks of it, she may just get there.

Foss appears tailor-made for television.

The camera loves her and she — by all appearances — loves the camera back.

Her entry into broadcasting happened about four years ago, quite by chance.

An article she wrote on the “sand-

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FEATURE CELEBRITY ADVISORS TELL ALL! wich generation” was appearances have taught her to have a picked up by The As- presence about herself and “speak intelsociated Press, which ligently and quickly,” especially under the led to guest appear- bright lights and sensitive sound equipances on Good Morn- ment found in recording studios. ing America and The “That’s part of the game,” said Foss, a Today Show. fee-only advisor who targets demographLocal network affili- ic client categories she calls “family stewates and cable stations ards,” “thriving retirees” and “women in followed suit, and transition,” as she was once, following her called on Foss again divorce. and again and again But for guests who do TV well, pro— still as a guest. ducers will come back to you for more, After hours of ap- so it’s a great way to gain even more expearing on television, posure.

Foss decided to create Foss said that in order to ask good a studio in her own questions that will capture the TV audioffice by blacking out ence, “You need to be able to ask questhe windows. tions that your niece wants answered.”

She had a young Foss has been featured on nationchild, so she had a al media outlets including Fox News, tight budget and she The Today Show, Good Morning Amerididn’t want to be ca, CNBC, The Kudlow Report and U.S. commuting to a stu- News & World Report. She said her media dio when she could be exposure has been a breath of fresh air. doing nearly the same She likes managing money for clients thing from home.

— “creating choices for my clients in a With the help of safe environment,” as she calls it. But afthe video production ter 30 years of living and breathing the company VideoLink, financial planning business, Foss said it’s she set up a camera refreshing to add a new layer of activity and recording equip- to her professional life.

Kimberly Foss started with just an article four years ago and made ment along with “The fun part about this is how you herself a multimedia personality. proper lighting and a keep the passion about what you do alive teleprompter. and not fall into the same old, same old,” The project wasn’t “cheap” — between she said. “The venue of TV and radio $20,000 and $100,000, she said — but came later in life for me but I love it. It’s certainly less expensive than it would like second nature to me.” have been 20 years ago before the softFoss, one of six children, was raised ware and the Internet upended the media in a modest household. Her father was a business. carpenter, although he should have been Foss, a former Merrill Lynch broker an actor, she said. Her mother dealt with who never studied media, journalism the family’s finances, which were always or broadcasting, suddenly found herself rather modest. with a number of broadcast media options.

Foss is now a Fox News regular.

She can produce a segment in-house, or the network affiliate can wire Kimberly Foss her up in her office and produce the segment from there remotely via video link, or the affiliate can do a live segment from her office. When she’s not in the studio, she can lease it out to others.

Foss said that her media

“The venue of TV and radio came later in life for me but I love it. It’s like second nature to me.”

–

26

InsuranceNewsNet Magazine » July 2015

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July 2015 » toInsuranceNewsNet Magazine

27

FEATURE CELEBRITY ADVISORS TELL ALL!

Kimberly Foss appears with Pat Robertson on The 700 Club.

“It’s like a marriage. You need that spark again and that’s what media is for me.”

– Kimberly Foss

Foss believes each advisor should have a professional makeover every 10 years, and her foray into the media industry represents just that. Technological progress is almost forcing advisors to reassess themselves every decade. “If advisors don’t get on the bandwagon, they risk being left behind,” she said.

But it was her 2013 book, Wealthy By Design, which made it on The New York Times best-seller list, that exposed her to radio.

She had done radio spots before 2013, but the book, described as a five-step plan to help people gain financial security, exposed her to the grueling back-to-

back programming required of radio.

Foss likes radio. “Radio is a lot easier than TV. You don’t have to get dressed up; you can do it in your jammies.”

Radio, TV, blogs, print, social media — whatever you do, you need to do it with passion, which is one ingredient media rock stars have in common.

“Anybody who has a passion for what they do, people want to be with them,” said Foss, who is planning to revamp her company’s website and start a blog targeted specifically to her client demographic.

Foss said that preparing for broadcast interviews isn’t really “work” since she loves being in front of the microphone or the camera.

“It’s not work, but I need to get that spark,” she said, referring to the lust for life that many people in their 20s have but that often fades in people in their 40s.

“It’s like a marriage,” she said. “You need that spark again and that’s what media is for me.”

Social Media Rock Stars

Surveys say as many as 75 percent of financial advisors use at least one social media network.

That’s a big group. Within that bunch are the social media rock stars, a category that would surely include Ted Jenkin, co-CEO and founder of oXYGen Financial in Atlanta.

Active on several social media platforms and owner of a widely read blog, Jenkin leans on the deeper layers of social media and premium features. They open

Ted Jenkin talks about post-grad survival on HLNtv. 28

InsuranceNewsNet Magazine » July 2015

Asset Allocation And The “4% Rule” May No Longer Be Viable

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July 2015 » InsuranceNewsNet Magazine

29

FEATURE CELEBRITY ADVISORS TELL ALL!

“Business cards, name tags and hotel conference ‘meet and greets’ are passé. The game is not who you know, but who knows you.”

– Ted Jenkin

30

InsuranceNewsNet Magazine » July 2015

Danny J. O’Connell, partner with BRG in Dallas, has found social media to be a way for clients to see he is “one of them.” the floodgates to data mining and segmentation that a few years ago would have been out of reach for many advisors running sole proprietorships or small shops.

Access to premium levels of the data give users the ability to find very narrow niches of the people on a given social network, for example, all corporate executive vice presidents between the ages of 30 and 50 working for a pharmaceutical company and living within a 50-mile radius of Morristown, N.J. Segmenting 1.4 billion active Facebook users by job description, age, employer or social circle yields thousands of prospects. Multiply even a fraction of that 1.4 billion by the number of social media platforms and it’s easy to see how a single advisor’s reach grows exponentially.

Jenkin is already there, which is partly why he’s busy extolling the virtues of social media at industry conferences and why his peers hold him out as an example of an early social media adopter.

Hootsuite, which Jenkin uses to manage his social media, delivers richer data sets from as many as 26 platforms. It also uncovers contextual information that gives advisors access to better leads and shortens the sales cycle.

Plying the physical world with the traditional techniques of business cards, name tags and hotel conference “meet and greets” are passé, he said. “The game is not who you know, but who knows you.”

Jenkin, whose broker/dealer manages $400 million, said his company received about 1,250 inbound leads last year, or about 25 leads a week from LinkedIn, Facebook, his blog and his column in The Wall Street Journal.

Danny J. O’Connell is a partner with BRG, a family-owned agency in Dallas, Texas, that sells group benefits, life insurance, health insurance, disability insurance and retirement services. He uses Facebook and LinkedIn to stay in front of prospects who were former clients.

Social media has value because it allows him to apply a “soft touch” to his community of personal and professional contacts.

It’s a way for O’Connell to remind people that he is “one of them,” that he attended the local fair or the children’s sporting event.

“I’ll let people know what I’m doing,” he said. “I use it for business-related activities whereas Facebook is more personal.”

In short, O’Connell said social media allows him to stay connected with others and with others to remain connected with him.

So, whether it’s old-school print, radio or TV, or the burgeoning opportunity of social media, there’s a public out there just waiting to hear what you have to say.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@ innfeedback.com.

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RedHotMediaLeads.com July 2015 » InsuranceNewsNet Magazine

31

LIFEWIRES

LIMRA: Individual Life Sales Increase 8% in 1Q

8 5 %

%

Individual life sales started 2015 with a bang, according to LIMRA. Total individual life insurance new annuPOLICY alized premium increased 8 percent and policy count ANNUALIZED PREMIUM COUNT rose 5 percent in the first quarter. Every product line recorded positive growth in the first quarter, compared with first quarter of 2014.

Index and variable universal life insurance were the stars of the first quarter, recording double-digit growth in the first three months of 2015, while whole life rebounded after stalling at this time last year.

Total universal life (UL) insurance new annualized premium grew 7 percent in the quarter and represented 37 percent of all life insurance premium sold in the first quarter 2015. Index UL (IUL) sales drove overall UL growth, with new annualized premium increasing 11 percent. IUL sales now represent half of all UL premium and 19 percent of all individual life premium.

Variable UL (VUL) premium jumped 21 percent in the first quarter. According to the LIMRA survey, half of VUL writers experienced growth in the first quarter, including eight of the top 10. Whole life (WL) new annualized premium rose 9 percent in the first quarter 2015, enjoying the largest growth in absolute dollars. WL now represents 34 percent of the total life market.

Term life insurance premium grew 2 percent in the first quarter. This marked the second consecutive quarter of growth for term.

NEW PRODUCTS BURST ONTO THE MARKET

Two new life products have burst onto the scene.

MetLife wants to introduce you to PAUL. That’s Premier Accumulator Universal Life, a new universal life insurance product aimed at making it easier for consumers to access cash within the policy and more lucrative for advisors to sell over the period the policy is in force.

The product also benefits from MetLife’s newly developed “enhanced rate plus” underwriting process.

Gene Lunman, executive vice present of MetLife Retail Life & Disability Insurance, said in a news release that policyholders will have access to “most or all of what they put into their policy, within the first few policy years,” as a way to access liquidity.

Lincoln Financial introduced the newest addition to its suite of index universal life products, Lincoln WealthAdvantage.

DID YOU

KNOW

?

32

The new offering provides advisors flexibility in how they help clients achieve specific goals related to wealth protection and legacy planning, tax-efficient income, or business needs.

Lincoln WealthAdvantage offers three death benefit options, including a previously unavailable option on Lincoln IUL policies, which provides a death benefit equal to the policy face amount plus premiums paid.

In addition to an income tax-free death benefit, the Lincoln WealthAdvantage offers strong cash accumulation potential through three one-year point-to-point index account options tied to performance of the S&P 500 Index to cover a wide range of returns.

ELECTRONICS, DINING OUT BEAT BUYING LIFE INSURANCE

In LIMRA’s 2015 Life Insurance Barometer, 61 percent of consumers said they have not purchased life insurance be-

John Y. Kim, 54, was elected president of New York Life, America’s largest mutual life insurance company.

InsuranceNewsNet Magazine » July 2015

cause of other financial priorities. Not surprisingly, the top priority for all age groups was living expenses such as rent/ mortgage and groceries.

Additional living expenses, such as Internet, cable and cell phone bills, were next on the priorities list. Millennials and Generation X tracked higher than other groups, with 54 percent of millennials and 45 percent of Gen Xers making these “screen” expenses a high priority.

The Barometer study shows 43 percent of Americans would feel the impact of the death of the breadwinner in six months or less. Twenty-nine percent said they would be in financial trouble in one month.

“It’s too expensive” is the No. 1 response consumers give for not having some or more life insurance. When asked to estimate the annual cost of a 20-year, $250,000 level-term policy for a healthy 30-year-old, the median estimate was $400, with one in four guessing it might cost $1,000. The actual cost is $160 a year, or $13 a month.

MORE LIFE INSURERS TREAT MARIJUANA USERS AS NONSMOKERS

Time was when most life insurers had no underwriting policy regarding an applicant’s use of marijuana. But that’s no longer the case.

According to a survey by Munich American Reassurance, 29 percent of life insurers with an underwriting policy in place classify marijuana users as nonsmokers. Of the life carriers represented in the survey, just one in five has no official underwriting policy in place for marijuana users, according to the Atlanta business unit of Munich Re. However, 42 percent of those companies’ representatives said they expect their employers will have a policy in place within 12 to 36 months. In addition, 29 percent said they believe it will take less than 12 months to develop such a policy, although 26 percent feel it will take more than 36 months.

In terms of views on assessing marijuana users, 36 percent of the underwriters said they believe marijuana users are nonsmokers, despite growing concerns around respiratory issues.

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Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods.

Securian Financial Group, Inc. www.securian.com Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Both companies are headquartered in Saint Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues.

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July 2015 » InsuranceNewsNet Magazine

33

LIFE

Americans are facing a growing long-term care crisis, but they aren’t buying more LTC insurance.

Here we feature a life insurance solution. See Page 42 for an annuity solution.

Life Insurance Solution to the Long-Term Care Crisis he rising cost of living longer T may lead consumers to consider life insurance with accelerated benefit riders as an option.

By Kent Campbell

M

y dad passed away after he and my mom fought a valiant seven-year battle with his chronic illness. After he was diagnosed with Parkinson’s disease, he and my mom sacrificed some aspects of their lives for the sake of his care. My dad had life insurance, but he could not use it to help with his chronic illness. The benefit of his life insurance policy was realized only upon his death.

I am proud of my strong and inspiring mother, who is doing so well today. With all my heart, though, I wish the kinds of innovative accelerated benefit riders 34

InsuranceNewsNet Magazine » July 2015

(ABRs) that are now available for life insurance policies had been available when my parents purchased their coverage.

I can imagine all too well the difference that ABRs would have made in my parents’ lives had they been able to access part of the life insurance benefit while my dad was still with us.

Personal experiences like this are why I am so excited about the kinds of accelerated benefit riders available today. In particular, I want to share what I have learned about chronic illness riders and why, in some cases, they may be a preferred solution over other choices such as stand-alone long-term care insurance (LTCi).

The combination of life insurance with accelerated benefit riders, often called “insurance you don’t have to die to use,” can offer flexibility and access to a pol-

icy’s death benefit during the insured’s lifetime. I find myself almost unable to imagine why we all wouldn’t want this power to choose when and how we access benefits, particularly in situations that threaten to take options away. If I can add “optionality” back into my life, I want to do that!

Consumers need to know the rising cost of living longer

Let’s review the need for accelerated benefit riders, which helps us understand why consumers might decide life insurance with ABRs is their best option. When an advisor is meeting with a client about the life insurance solution that may be most appropriate, being able to describe the need for ABRs, including chronic illness riders, is crucial. Studies such as the Kaiser Family Foundation’s 2015 “Rising

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Policy ICC10 TLC-3, ICC13 TLC-4, TLC 3-P 013, TLC 2-P 0410, TFL 2-P NY 0410, TFL 2-P NYF 0410, TFL 2-P NYAF July 0410.

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35

LIFE LIFE INSURANCE SOLUTION TO THE LONG-TERM CARE CRISIS Cost of Living Longer” show the greatest amount of health care expenditures occur for end-of-life care.

Two of the trends highlighted in the Kaiser research are key components for helping consumers understand the general costs of living longer. The first trend is the multiplication of costs as we age. For example, the study stated that Medicare per capita spending in 2011 was 2.5 times greater for 85-yearolds and three times greater for 95-year-olds than for 66-year-olds. The second trend is that while per capita spending for physician and outpatient services peaked at age 83, it peaked at older ages for inpatient care (89), home health (96), skilled nursing facility (98) and hospice (104).

Add Kaiser’s results to the report from the Centers for Disease Control showing 86 percent of Americans’ health care dollars are spent on the treatment of chronic diseases, and you see a compelling picture of the need for Americans to plan for health costs related to chronic illness.

Reimbursements versus the indemnity model

As financial professionals, most of us are fairly familiar with LTCi. As a reminder, once policyholders have been diagnosed with chronic illness that prevents them from carrying out at least two of the six activities of daily living, LTCi products generally pay on a reimbursement model for approved expenses.

The need to incur expenses first and then submit receipts may not be the most convenient way for people to access benefits. Additionally, many LTCi products are limited in scope: An insured person may be able to have a home health worker’s time reimbursed but may not be able, for example, to recoup the cost of having doorways widened for wheelchair access.

Consumers may not know that ABRs give them a different choice. Chronic illness accelerated benefit riders attached to certain life insurance solutions are based on the indemnity model rather than the reimbursement model. This can 36

be a huge game-changer for people who have appropriate combinations of life insurance and riders, meet the eligibility criteria of the chronic illness rider, and choose to trigger the acceleration of a portion of the death benefit.

They can begin to access cash value in the policy sooner, rather than later, via reimbursement. Additionally, the chronic illness ABR structure allows them to use the accelerated benefit to pay for virtually any kind of expense.

remainder of the death benefit for their heirs — remembering, of course, to keep the policy in force.

Consumers may ask about flexibility to respond to certain situations, such as a medical diagnosis of chronic illness anticipated to result in decreased earnings and increased expenses. ABRs can provide flexible options depending on qualifying circumstances, and policyholders can choose how much of an allowed benefit to access. The power to choose is in the consumer’s hands.

Choice, flexibility, personalization

86 percent of Americans’ health care dollars are spent on the treatment of chronic diseases, which reveals a a compelling picture of the need for Americans to plan for health costs related to chronic illness.

InsuranceNewsNet Magazine » July 2015

What are common questions regarding ABRs?

When I talk with people about ABRs, I find they may have concerns about extra costs, loss of benefits, and flexibility with their unique situations. First, some life solutions have ABRs built in, rather than available as an option at a separate cost.

When they are built in and can provide flexibility and choice, why wouldn’t we want them?

For consumers who may have questions about accessing benefits and losing benefits, there are life solutions that do not lose value. If a covered person’s medical diagnosis meets the terms of the rider, they can access a portion of the policy’s death benefit, if needed, and save the

When we review the need for coverage and the options available, we are better able to offer clients the solutions that may make the most sense for their individual situations and help them choose how best to protect themselves and access available benefits. The potential for appropriate ABRs to empower consumers facing chronic illness with personalized choice and flexibility is one of the reasons what we as financial professionals do matters so much.

I encourage you to research life insurance policies with ABRs included (or available), referencing contingencies such as chronic illness and also critical and terminal illnesses. The products with which I am most familiar do not require financial professionals to hold specialty licenses as do LTCi riders or policies; however, the carrier-mandated training that financial professionals generally undertake in order to offer ABRs may be useful when talking with clients about the power to access available benefits when needed.

With Americans living longer, chronic illnesses more pervasive and care often costing more, the power to choose is more important than ever. The choices we bring to our clients are also more important than ever.

Kent Campbell is senior vice president of sales, AIG Partners Group. Kent may be contacted at kent. campbell@innfeedback.com.

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800-258-4525, ext. 8120 July 2015 » InsuranceNewsNet Magazine

37

LIFE

Five Life Insurance Horror Stories With Happy Endings We discussed this couple’s needs, which included providing a surviving spouse with enough income to raise and educate three children. Fortunately, we were able to obtain a more appropriate and safer option that matched their previous premium. We replaced their current policies with 30year term insurance that had a $1 million face value. Eventually, clients such as these will grow in their professional lives and often will be able to purchase a cash valuefocused policy. But until then, they can enjoy the peace of mind that comes with knowing they have satisfactory coverage for their family.

2) Lesson learned: As life evolves and changes, so should your clients’ insurance policies. Empower clients to ask the right questions and make adjustments in coverage when appropriate.

rom an early payment that cost F a client 19 years of coverage to a blunder that almost cost a client $1 million, the lessons learned from these cautionary tales can help you be a hero to your clients.

By Ron Sussman

M

ore than two decades of evaluating life insurance policies for thousands of clients has yielded a number of valuable insights about policy performance, sales practices and carrier behavior.

From uninformed policyholders who wrongly assumed they had adequate coverage to industry professionals who knowingly sold grossly exaggerated policies, I’ve observed a number of insurance policy pitfalls. Here are some cautionary tales I want to share in the hope they help you avoid these perils and better serve your clients.

Early Payments Sometimes Wreak Havoc

If a payment is due on the first of the month and your client pays early, you might think he would be rewarded for his diligence.

But in reality, there could be costly consequences. Many guaranteed universal life contracts issued prior to 2012 include premium accounting clauses that could trigger a significant loss of guarantees if premiums are paid ahead of scheduled dates, particularly in the early years of the contract.

One client had a $20 million policy that required 10 annual premium payments.

The policy, if paid accordingly, guaranteed coverage through age 115. Our client was cautious and prompt, paying each year according to schedule — or so he thought.

We conducted our annual policy audit with him in the 10th (and last) year of required premiums, only to discover his second premium payment was early, causing the guaranteed death benefit to terminate at age 96.

That’s right — advance payment cost this client 19 years of coverage. After working 38

InsuranceNewsNet Magazine » July 2015

with his carrier, we were able to reapply his second payment correctly and restore his full benefits.

1) Lesson learned: Meet with an unbiased industry advocate. Audit annually.

Know the policy terms for payment timing, and stick to them.

Young Policyholders, Wrong Counsel

A couple with limited cash flow, minimum investment experience and three young children are not appropriate clients for variable life insurance. My team recently reviewed coverage for a married couple who fit this profile, yet were convinced by their advisor that variable life insurance, funded at the lowest allowable level, was appropriate for their needs.

A major mutual company issued their current policies with death benefits of $250,000 each. An audit uncovered an enormous discrepancy: This young couple’s benefits, which were inadequate to begin with, would lapse before the couple reached their mid-50s!

Reinvesting Policies for Retirement May Be Unnecessary

Policyholders often lose sight of their benefits, especially if they haven’t touched their policies for decades. We were introduced to a 65-year-old client through his investment advisor, who was working with him to build a retirement income portfolio. The advisor requested a thorough policy audit to determine if his client’s cash value could be deployed for retirement. Thirty years earlier, this client had purchased a whole life policy and paid every premium, but he no longer needed the death benefit.

Our challenge was to determine whether this client should surrender the policy or use it for income. But why choose?

In fact, this client was able to create tax-free retirement income and keep his policy. Based on his tax bracket, age and retirement needs, we determined this client could keep his current whole life policy and simultaneously access an immediate stream of tax-free payouts. This man was able to reap the best of both worlds: He had access to a new income stream and avoided drawing from his investment account for many years.

FIVE LIFE INSURANCE HORROR STORIES WITH HAPPY ENDINGS LIFE 3) Lesson learned: The best solution is not always obvious.

A $1 Million Tax Blunder — Almost

We recently audited a whole life policy for a client who intended to use his cash value for retirement income. Before he came to us, his insurance agent advised exchanging his whole life contract for a new index universal life (IUL) policy.

While the client was fairly sophisticated about insurance products, he didn’t understand the intricacies of IUL. Even worse, neither the client nor his agent knew how much income his current contract might generate. And the agent failed to inquire about his client’s tax basis.

Both assumed the contract could be exchanged tax-free — a common misconception. The client also had surrendered $500,000 of paid-up additions, which reduced his tax basis from $630,000 to $130,000. With a current cash value of close to $1 million at stake, the proposed change would have resulted in a sizable taxable gain.

Moreover, the change would have resulted in any future income from the new contract being taxed as ordinary income.

After our analysis, the client retained his whole life contract, avoiding a serious tax mistake.

4) Lesson learned: The devil is in the details. Research and an audit will help clients make informed, strategic decisions about their current coverage and possible alternatives.

Fears of Uninsurability Can Limit Outcomes

Clients can be their own worst enemies.

Recently, a client asked us to audit a number of smaller guaranteed issue policies. All were unnecessarily cost-prohibitive with negligible potential to yield cash value.

During a meeting with the client, he shared reasons why he previously had assumed his health concerns rendered him uninsurable. We shared with him ways to disclose his medical situation properly. After years of worry and angst, this client was able to obtain great coverage for standard rates. In fact, his new policy has a better death benefit and costs only a fraction of what he was paying previously.

5) Lesson learned: Never assume a client is uninsurable. An unbiased under-

writer can debunk a client’s misconceptions and assist with obtaining coverage at reasonable rates.

Our responsibility as insurance professionals is clear: We must advise our clients to make decisions based on their own circumstances, families and means. Our clients deserve the benefit of our breadth of knowledge about our complex and evolving industry, and we owe them a thorough and unbiased view of their options.

While these cautionary tales shed light on the complicated nature of different types of policies, the purpose of telling them is to empower clients and ensure they’re able to use the benefits of their investments. Satisfied clients who purchase and maintain proper coverage over a lifetime should be the norm, not the exception.

Ron Sussman is founder and chief executive officer of PolicyAudits.com and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at ron. sussman@innfeedback.com.

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July 2015 » InsuranceNewsNet Magazine

39

ANNUITYWIRES

FIA Sales Were a Bright Spot in Tough 1Q All but two annuity lines saw sales fall in first quarter 2015 over first quarter last year, according to sales estimates from LIMRA Secure Retirement Institute (LIMRA SRI).

The two product stars were fixed index annuities (FIAs) on sales of $11.6 billion, and structured settlements on sales of $1.4 billion.

Sales for these products increased even though total fixed annuity sales of $22 billion dropped by 8 percent compared with first quarter 2014.

First quarter was filled with drops. For instance, total variable annuity sales fell by 5 percent to $32.4 billion from the same year-earlier period. And fixed and variable performance combined produced an industrywide decline of 7 percent to $54.4 billion compared with last year’s first quarter combined sales of $57.7 billion.

The quarter saw the gap between variable and fixed annuity products narrow a bit more than before. Variable annuity sales now represent 58 percent of total market and fixed annuities, 42 percent. In first quarter last year, the market shares were 59 percent/41 percent respectively, and in 2013, the shares were 68 percent/32 percent.

The top three fixed annuity sellers — Allianz Life, New York Life and AIG, in descending order — held their same rankings as in first quarter last year. But two of the top three reported declines from the same year-earlier period. Allianz reported sales of $2.3 billion, a modest decline, and New York Life reported sales of $1.7 billion, also a modest decline. AIG reported sales of $1.5 billion, a modest increase.

MORE WORKERS HAVE ACCESS TO IN-PLAN INCOME GUARANTEES

It is getting easier for workers to place their retirement savings into guaranteed income vehicles such as annuities. That’s according to LIMRA SRI, which reported that 3 million participants had access to an in-plan income guarantee through their employer-sponsored retirement plan in 2014, a 32 percent increase from 2013.

In addition, the new study found the number of participants electing an in-plan guarantee increased by 24 percent between 2013 and 2014.

In 2014, the number of retirement plans offering in-plan guarantees grew 41 percent, totaling 33,500. More than $132 billion in assets are in plans that offer an in-plan guarantee, up 27 percent compared with 2013.

Prior LIMRA SRI research revealed that consumers are most concerned about having enough money to last throughout their retirement. Eight out of 10 U.S. workers believe that employers should provide ways to convert savings into retirement income, according to LIMRA SRI research. Younger workers are particularly interested in this option, with 90 percent of workers ages 1834 saying they somewhat or strongly agree

32%

40

InsuranceNewsNet Magazine » July 2015

that employers should provide avenues to convert savings into income at retirement.

Guaranteed lifetime withdrawal benefits (GLWBs) and deferred income annuities are the two types of in-plan guarantees that are currently sold in retirement plans.

These products allow participants in retirement plans to protect some of their savings to provide future retirement income while they are still working and contributing to their plans.

NEW PRODUCTS SHINE IN THE MARKETPLACE

Carriers are shining the spotlight on some new annuity products this summer.

Lincoln Financial launched two new products. OptiBlend Fixed Indexed Annuity is a flexible premium-deferred FIA that blends the safety of principal protection with upside market potential. The product offers a number of interest crediting strategies: a fixed account, a one-year point-to-point cap and performance-triggered indexed accounts tied to the performance of the S&P 500 Index, and a brand-new indexed account tied to a risk-controlled version of the S&P 500 Index.

The new FIA also offers a seven-year and a 10-year surrender charge period and the option to add a GLWB.

Lincoln also has enhanced its Lincoln Deferred Income Solutions annuity with qualifying longevity annuity contract (QLAC) status for individual retirement account rollovers, providing advisors with another tool to help address their clients’ longevity income needs.

Also getting into the QLAC market is MetLife. However, unlike the handful of other current QLACs out there, the MetLife annuity is designed for use in the “institutional annuity” marketplace — specifically, as an annuity-based retirement income distribution option for 401(k) retirement plans.

Payment options for the MetLife Retirement Income Insurance QLAC include both Lifelong Income for One, which guarantees the participant will receive fixed payments for as long as he or she lives, and Lifelong Income for Two, which guarantees that the participant and his or her spouse will receive fixed payments for as long as at least one of them lives. The MetLife Retirement Income Insurance QLAC also offers an optional inflation protection feature, which increases a participant’s income payments each year. In an effort to protect a participant’s payments from an increased cost of living, participants can choose to have them increase by 1 percent, 2 percent or 3 percent each year.

Delaware Life has become the newest carrier to enter the FIA market. Its first offering is a policy that includes two volatility control index options sponsored by Deutsche Bank, the global banking giant based in Germany.

Called Retirement Chapters 10 Fixed Index Annuity, the policy will benefit from the heft that the Deutsche Bank name and indexes can provide. This is the first time the global bank has had a product included inside a U.S. annuity product, Tom Mullen, Delaware Life’s head of marketing, told InsuranceNewsNet. But the bank already has products on the shelves of U.S. firms outside the annuity market — for example, through broker/dealers — so the brand has widespread recognition.

Save it. Spend it. Leave it.

The American Custom 10 lets your clients choose the path they want to take with their money.

Whether your clients are focused on saving for the future, retirement spending needs or leaving a legacy for loved ones, you can help them find the right solution with the American Custom 10SM fixed-indexed annuity and optional riders from Great American Life® Visit www.GAannuity.com for market materials, illustrations, training and more.

Optional riders are available for an annual charge. Products issued by Great American Life Insurance Company ®, a member of Great American Insurance Group (Cincinnati, Ohio) under contract form numbers P1104314NW and P1104414NW, and rider form numbers R6046814NW, R6046914NW, R6047014NW and R6049614NW. Form numbers and features may vary by state. Not available in all states. For producer use only. Not for use in sales solicitation. 3643-SP-10

July 2015 » InsuranceNewsNet Magazine

41

ANNUITY

Americans are facing a growing long-term care crisis, but they aren’t buying more LTC insurance.

Here we feature an annuity solution. See Page 34 for a life insurance solution.

Annuities’ Solution to the LTC Crisis N ew products pairing annuities with long-term care coverage overcome many of the price and use-it-or-lose-it objections.

By David F. Royer

T

he sale of traditional long-term care insurance (LTCi) has retreated significantly since 2002. According to the U.S. Department of Health and Human Services, LTCi sales hit a record high of $1.2 billion of new premium in 2002. Also that year, 754,000 lives were written through 104 carriers.

Fast-forward 10 years to 2012 and the total LTCi premium production dropped from $1.2 billion to $580 million. The number of lives written decreased from 754,000 to 233,000, and the number of companies that issued LTCi dropped from 104 to a meager 21. LIMRA pointed out that LTCi sales pulled back an additional 30 percent in 2013 alone.

Despite the fact that the number of maturing Americans needing this valuable coverage is increasing at an unprecedented rate, the number of LTCi sales has steadily declined since the 2002 highwater mark. Iconic insurance companies who offered LTCi in the past — MetLife, Prudential, Allianz and Unum, just to mention a few — began to withdraw their products starting as far back as 2009.

Meanwhile, boomers are reaching retirement age at the rate of 10,000 a day and many will face the high cost of care at some point. The Affordable Care Act, while trying to address some of the problems with our health care system, does not address the growing long-term care crisis in the U.S. The costs of nursing home care, as well as home health care, are soaring. Today, the average cost of a one-year stay in a private nursing home room tops $91,000.

This chart shows the cost of home health care, assisted living care and skilled nursing care at the end of 2013 and projected to the year 2028 using a 4 percent 42

InsuranceNewsNet Magazine » July 2015

claims. Common rate increases have been in the 50-100 percent range. As a result, many potential LTCi buyers are unable to afford the current cost of the coverage and fear the rates will go even higher.

inflation rate. In all three cases, the cost of care would nearly double during that 15year period.

Genworth pointed out in its Cost of Care Survey: “Research shows that at least 70 percent of people over 65 will need long-term care services and support at some point in their lifetime. Long-term care can impact people and families in

2. The use-it-or-lose-it proposition — Many potential buyers have a tough time getting past the mindset that if they don’t use their LTCi benefits, they lose their premium payments. So instead of buying LTCi, they choose to self-insure, putting their retirement savings at risk.

3. Tight underwriting — When insurers can’t get needed premium rate increases approved to offset their claims liability, they are left with the choices of exiting

Annual Cost of Long-Term Care $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Home Health 2013 Cost

Assisted Living

Skilled Nursing

2028 Projected Cost (4% inflation rate)

many different ways including finances, careers, lifestyles and state of mind.”

Will annuity-based LTC policies save the day? To answer that question we must first examine some of the reasons why traditional LTCi sales have declined: 1. Pricing issues and premium increases — There were some miscalculations early on in the developmental stages of traditional LTCi. The lapse rate assumptions were higher than the actual lapse experience. The assumption that a large percentage of LTCi policyowners would decide to stop paying their premiums equated to lower claims expectations.

This did not turn out to be the case. As unexpected claims grew, the carriers were forced to increase premiums to offset

the LTCi arena or cherry-picking their insureds. Applicants who may have easily qualified for LTCi 10 years ago may find it difficult to pass muster in the underwriting department today.

4. Low interest rates — With all of these challenges facing LTCi carriers, the current low-interest-rate environment was the final nail in the coffin for some. Low yields on investments equate to lost profit to insurance companies.

In 1999, one insurance company saw the opportunity early on and introduced the first annuity-based qualified longterm care solution available for independent agents to offer their clients. This is a guaranteed tax-deferred annuity that

DELAWARE LIFE: DO YOU WANT TO OFFER YOUR CLIENTS THE BEST OPTIONS AVAILABLE? The new Retirement Chapters 10SM Fixed Index Annuity with the STAIRSM 1 income benefit rider has been designed to offer valuable client benefits in a variety of situations, whether your clients seek income or accumulation. This product presents a compelling alternative, when compared against the industry’s top sellers.

Annual Income – 10 Years of Deferral

Accumulation Value – 10 Years of Deferral

Delaware Life Retirement Chapters 10SM 2

$11,526

$143,268

Top Ten Selling FIAs of 20143,4

$10,189

$132,756

No matter what your client is looking for, Delaware Life offers a potential solution.

To learn more about this industry-leading product, please call WealthVest Marketing’s Delaware Life Sales Desk at 855-478-3673.

WealthVest Marketing PRODUCT AND FEATURE AVAILABILITY MAY VARY BY STATE. FOR FINANCIAL PROFESSIONAL USE ONLY — NOT FOR USE WITH THE GENERAL PUBLIC. Index strategies used in Delaware Life Fixed Index Annuities are subject to factors which are not reflected in the summary data contained in the Retirement Chapters 10SM Product Brochure.

Factors such as caps, spreads and participation rates will reduce crediting rates relative to the underlying index performance. Guarantees are backed by the financial strength and claims-paying ability of Delaware Life Insurance Company (Wellesley Hills, MA).

Delaware Life Retirement Chapters 10SM currently available in AK,AL,AR, CO,FL,GA,HI,IA,ID,KS,KY,MD,ME,MI,MN,MO,MS,NC,NE,PA,OH,OK,OR,RI,TN,WA,WI,WV,WY. Please see the Delaware Life product grid for most up-to-date information.

1

Optional benefit available for an additional fee

2

Figures based on a 100% allocation to the CROCI Sectors III USD 5.5% Volatility Control Index Annual Point to Point with Spread strategy

3

According to WINK Annuity Sales Report. Features, benefits, and associated fees can vary from product to product. For more information, please contact WealthVest.

Lowest rating among carriers is B++ according to AM Best. Numbers represents an average taken from carrier-generated illustrations, depicting most commonly chosen index allocations. All contracts, policies, features, and carriers may not be available in all states.

4

This Product (the “Product”) is not sponsored, endorsed, managed, sold or promoted by Deutsche Bank AG (DB AG) or any subsidiary or affiliate of DB AG. The Deutsche Bank Indices are the exclusive property of DB AG. “Deutsche Bank” and “CROCI” are proprietary marks of DB AG and its affiliates that have been licensed for certain uses and purposes to Delaware Life Insurance Company (DLIC).

Neither DB AG, CROCI, nor any affiliate of DB AG, nor any other party involved in, or related to, making or compiling the Deutsche Bank Indices: (1) is acting in a fiduciary or product management capacity or providing any endorsement of the Product or investment advice of any kind; (2) has any obligation to take the needs of DLIC, the sponsor of the Product, or its clients into consideration in determining, composing or calculating the Deutsche Bank Indices; (3) is responsible for or has participated in the determination of the timing of, prices at, quantities or valuation of the Product; (4) WARRANTS OR GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DEUTSCHE BANK INDICES OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN OR THE ADMINISTRATION, MARKETING OR TRADING OF THE PRODUCT. The CROCI Indices have been built on the premise that the CROCI Economic P/E is an effective indicator of inherent value. This premise may not be correct, and prospective investors must form their own view of the CROCI methodology and evaluate whether CROCI is appropriate for them. Please see the Disclosure Statement and Annuity Illustration for more information about the Deutsche Bank Indices and the Product.

Obligations to make payments under the Product are solely the obligation of Delaware Life Insurance Company and are not the responsibility of DB AG. The selection of one or more of the Deutsche Bank Indices as a crediting option under the Product does not obligate Delaware Life Insurance Company or DB AG to invest annuity payments in the components of any of the Deutsche Bank Indices.

While volatility controls may result in less fluctuation in rates of return as compared to indices without volatility controls, they may also reduce the overall rate of return as compared to products not subject to volatility controls.

Policies and contracts are issued by Delaware Life Insurance Company, which is a member of the Delaware Life group of companies.

For use with policy forms ICC14-DLIC-FIA-10 or DLIC-FIA-10 a nd rider forms ICC15-DLIC-GLWB-01, ICC15-DLIC-NHW, and ICC15-DLIC-TIW. Policy and rider form numbers may vary by state.

Products, riders and features may vary by state, and may not be available in all states.

DLPC 0218 6/15 EXP 06/16

July 2015 » InsuranceNewsNet Magazine

43

ANNUITY ANNUITIES’ SOLUTION TO THE LTC CRISIS also provides tax-qualified long-term care coverage. The long-term care coverage is equal to three times the annuity value at a fraction of the cost of traditional LTCi. The long-term care premiums are deducted from the annuity’s value, so there are no large out-of-pocket premiums.

Annuity-based LTC products can protect policyholders’ assets from the high cost of care. The owner maintains control of the asset and may receive up to three

3. Because the annuity value is used to pay benefits first, there is reduced claim exposure so underwriting has not tightened. Annuity-based LTCi providers have taken a simplified underwriting approach — some requiring only an interview by a registered nurse. This approach eliminates physicals, blood draws, attending physician statements, medical records and all of the obstacles that add unwanted time to the underwriting process.

4. The premium for the long-term care riders for annuity-based LTCi are significantly lower than the $100,000 cost of traditional Annuity1035 Exchange $100,000 Based LTC Annuity LTCi, so even at these current low $300,000 interest rates the Tax-Free LTC Benefits interest credited, at $50,000 Cost Basis most ages, is greater than the cost of $50,000 the rider. This creTaxable Gain LTC Claims Paid ates a scenario in TAX-FREE which the annuity value continues to times the annuity value, tax-free, to cover grow due to the additions of net interest the cost of care. If the asset is not needed that are credited to the annuity value. Best for care, the full value plus net interest can of all, if the long-term care rider is not be passed on to the heirs. used, the full annuity value plus net interBecause annuity-based LTC provides est is passed on to the heirs. all of these benefits with no out-of-pocket premiums, it is an attractive alternative to Annuity-based LTC has some unique traditional LTCi. tax advantages. As of Jan. 1, 2010, under The concept is simple: If clients de- The Pension Protection Act of 2006, the posit $100,000 into this annuity, they will annuity value used to pay for the longhave $300,000 to pay for LTC expenses, term care rider no longer is taxed. This tax-free. The annuity-based LTC concept piece of legislation created an important addresses all four of the issues currently change in the hybrid tax landscape. Hyfacing traditional long-term care insurers. brid products now offer tax-free rider premiums, tax-deferred growth and tax-free 1. Annuity-based LTCi requires no out- long-term care benefits. of-pocket premiums, so those who are Another tax advantage of annuityon a tight budget can simply reposition an based LTC is the potential to eliminate the underperforming asset or an asset at risk tax on a tax-deferred annuity. According in order to leverage the protection they to LIMRA, about $1.8 trillion of nonqualneed. ified annuities were in force at the end of 2013. A significant portion of annuities on 2. The use-it-or-lose-it proposition the books today is difficult to reposition found in traditional LTCi is changed to due to lifetime minimum crediting rates benefits if you need them or your annuity of 3 percent and higher. This is where the value plus net interest back if you don’t. suitability question comes into play. Is This changes the consumer’s mindset it a suitable transaction to reposition an about paying large premiums for benefits annuity with a high guaranteed rate and they may never use. no surrender period to an annuity with

Turn Taxable Annuity Gains into Tax-Free LTC Benefits

44

InsuranceNewsNet Magazine » July 2015

a lower guaranteed rate while the owner will be stuck with a new surrender period?

For some annuity owners, the answer may be yes. If the current annuity is transferred via a 1035 exchange to annuity-based LTC that triples in value to cover long-term care expenses, the owner will enjoy the benefits of owning LTCi with no out-ofpocket LTCi premiums.

In addition to solving the annuitants’ long-term care funding problems, annuitybased LTC offers a substantial tax advantage for some policyholders. The chart below uses an example of an annuity with a current value of $100,000 and a cost basis of $50,000. At some point, the tax on the gain ($50,000) will need to be paid.

If the owner repositions that annuity to annuity-based LTC and uses the tax-free long-term care benefits, the tax on the gain can be eliminated.

The concept of annuity-based LTC is catching on with traditional long-term care insurers and agents. Some traditional LTCi carriers are developing new products to address the current challenges in that marketplace. Shorter benefit periods, longer waiting periods and fewer “Cadillac” plans are among the changes we have seen recently. Traditional LTCi may still be the best solution for many of your clients, but for those who have reduced retirement incomes and have done a good job building their savings, annuity-based LTC may be a viable alternative.

Premium increases, tight underwriting and lack of consumer interest have led many advisors to throw in the towel rather than offer LTCi to their clients. Offering alternatives to traditional LTCi will change the landscape for both advisors and their clients.

David F. Royer is the national sales director at Guaranty Income Life. He is a nationally recognized speaker and sales trainer in qualified plan distribution. David may be contacted at david.royer@ innfeedback.com.

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July 2015 » InsuranceNewsNet Magazine

45

ANNUITY

In-Plan Annuities Climbing The Popularity Charts A s more retirement plan participants select guaranteed income options, advisors and employers need to take notice.

By Linda Koco

T

he number of people electing in-plan retirement income guarantees has increased for three years in a row. By the double digits. So has the number of plan participants who have access to in-plan guarantees. So has the number of plans offering in-plan guarantees.

They’re not mainstream yet, but they are heading in that direction. This has implications and opportunities for advisors as well as providers, employers and participants.

In-plan income guarantees are options that plan participants can elect from their employer-sponsored defined contribution (DC) plans, such as 401(k)s, according to LIMRA Secure Retirement Institute (LIMRA SRI).

Plan participants typically contribute a portion of their plan savings to the option while they are still working in order to secure a guaranteed income stream in retirement. Currently, there are two main types of options available for this purpose. They are guaranteed lifetime withdrawal benefits (GLWBs), which are the dominant type, and deferred income annuities (DIAs), which are the new kids on the block.

An Emerging Product Line

Not that long ago, LIMRA SRI didn’t even track these options. That’s because, although the products were rich with longevity DNA, few people knew they existed and few bought them.

By 2012, however, the features began gaining traction, so LIMRA SRI began following the products even though industrywide numbers were still pretty low, Mark Paracer said. Paracer is project director for LIMRA SRI’s U.S. Retirement Plans study.

46

InsuranceNewsNet Magazine » July 2015

Now, three years later, the picture looks quite a bit different. For example, LIMRA SRI has found all those double-digit increases:

with an increasing trend-line, as is occurring now.

A related factor is that not all participants are eligible to take the option their plan offers, at least not right away. De» In 2014, 71,300 plan participants pending on how the option is designed, elected an in-plan income guarantee. some must wait until they are, say, age 50 This is up 24 percent from 49,900 in or 55 before being able to elect the option, 2013, which reflected a 5 percent in- Paracer pointed out. That puts a damper crease from 47,600 in 2012. on deeper penetration too.

Even so, the forward momentum is » Also in 2014, the participants who had unmistakable. Paracer thinks it demonaccess to an in-plan instrates that U.S. employcome guarantee numbered ers are shifting their focus 3 million. That’s up 32 away from accumulation percent from 2013 when and toward income guar2.3 million had access, antees in the retirement representing a 28 percent savings plans they offer. increase from roughly 1.75 He saw the indications million the year prior. of this shift in a survey the researchers did of U.S. of employers believe retirement readiness » In addition, 33,500 plans employers that have DC is an important metric offered in-plan income plans. The survey found to follow. guarantees in 2014. This is that three-fourths (72 perup 41 percent from 2013’s cent) of employers believe total of 23,500, which in turn was up 10 that “retirement readiness is an important percent from 2012’s figure of slightly more metric to follow,” he said. than 21,000.

Since retirement income is part of retirement readiness, he views this as Reading the Numbers a sign that employers are now looking The percentage increases are eye-popping. beyond using the DC plans for accumuHowever, the underlying numbers are rel- lation and are delving into how particiatively small, making those gigantic gains pants can create income from their plan possible. assets once they retire.

For example, the 71,300 in-plan elections made in 2014 represented a healthy Impact on the Industry 24 percent increase over 2013. But those As more people become familiar with elections equaled only 2.4 percent of the in-plan income guarantees, this will open total number of participants who had ac- opportunities for advisors and providers to cess to an in-plan guarantee (3 million) demonstrate their value in the retirement that year. marketplace, Paracer predicted. Some If the guarantees were really hot, examples follow. wouldn’t there be greater uptake? Not Education: Advisors will be able to necessarily. The newness of the in-plan educate plan sponsors on the guarantee income guarantee market means plan options and how the products can accomsponsors and participants are still learn- modate participant needs for guaranteed ing about the products. Knowing the drill, income in retirement. Advisors and proproduct experts actually have been ex- viders also may find themselves contributpecting to see slow initial growth along ing to in-plan education programs aimed

3/4

FINALLY, WHAT YOU REALLY NEED FOR YOUR BUSINESS: at employees or others in a company.

Some advisors and company representatives may even be called upon to provide employees with personal assistance in understanding their in-plan option as well as with enrolling employees in the option.

Retirement readiness: If an advisor sees that a plan sponsor is becoming increasingly interested in retirement readiness, as recent surveys suggest, the advisor can show how the in-plan options help address that concern.

Data: Some plan sponsors may want to see data on how the in-plan options are working out. Advisors and representatives of plan providers that have been in the inplan income guarantee market for a while might be able to accommodate that interest by showing some numbers on actual use.

Personal clients: Advisors may have personal clients in their practice who work at companies that have started offering an in-plan guaranteed income option. Some of those clients might bring questions about the option to the advisor to gain independent insight, including questions about whether the option fits into the client’s overall financial plan and situation.

Small Versus Big Plans

In general, small plans are the ones most likely to offer in-plan guarantees right now, Paracer said. For instance, in 2014, there were 31,000 small plans (with less than $10 million in assets) that offered the guarantees, LIMRA SRI found. In addition, 1,900 midsized plans ($10 million-$199 million) offered the options. Meanwhile, there were only 80 mega plans ($200 million or more) with in-plan guarantees.

This seems counterintuitive, he conceded. Normally, innovative developments come from the larger plans and trickle down to smaller plans. However, in this case, life insurers are the firms that developed the early in-plan products, he said. Since life insurers primarily serve the small and midsized employer markets, that’s where in-plan income guarantees are showing up in greatest numbers.

Going forward, he predicted, more mega plans will likely offer in-plan options. When that happens, “the products will take off.”

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

July 2015 » InsuranceNewsNet Magazine

47

HEALTHWIRES

Could Humana Be Looking for a Suitor?

QUOTABLE

It’s the health insurance world’s version of “The Bachelor” — who will be the perfect match for Humana? Will Cigna win his hand, or does his heart belong to Aetna?

Speculation is running strong that the nation’s third-largest health insurer is on the market. Possible suitors include Cigna and Aetna.

Humana is particularly attractive to a potential buyer that wants to get a foothold in the Medicare Advantage market. Humana is the nation’s second-largest provider of Medicare Advantage plans, which will become more of a factor in the health insurance market as increasing numbers of baby boomers age into the Medicare system.

As for Humana’s interest in a potential buyer, it is keeping mum.

ACA COMING UP SHORT ON AFFORDABILITY

Here is more evidence that the Affordable Care Act is becoming less affordable.

Health insurance experts predict that the cost of coverage RISING PREMIUMS in the ACA marketplace will IN 2015 go up more significantly in 2016 than in the first two years of ACA coverage. Insurers are announcing their rates for the next enrollment period, which begins Nov. 1.

Health insurance experts are predicting that premiums will rise more significantly in 2016 than in the first two years of Obamacare exchange coverage. In 2015, for example, premiums increased by an average of 5.4 percent, according to PwC’s Health Research Institute.

The Blues in Maryland and Tennessee, both with the largest market share on the exchanges in their states, are seeking increases of more than 30 percent.

In Oregon, Moda Health Plan is seeking average rate increases of 25 percent.

Other plans released to date are seeking far more modest increases.

Insurers are seeing bigger increases in health care costs, said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation.

“But really what’s going on here is they now have data showing what the risk pool

5.4%

DID YOU

KNOW

EXCHANGES WERE SUCCESSFUL IN ATTRACTING YOUNG AND HEALTHY And just who bought health insurance on the exchanges? A University of Pittsburgh study looked into this and determined that enough of the much-desired “young and healthy” demographic enrolled to balance the cost of covering older and sicker populations.

The study also found that those who bought coverage on the exchange last year filled fewer prescriptions and spent less on drugs than people covered by their employer.

Julie Donahue, associate professor of health policy at Pitt, said the study did not examine the exact reasons marketplace enrollees had lower drug usage and spending.

The difference may have been caused by higher cost-sharing requirements in many ACA health plans, Donohue said. Patients may not have filled their

Average prescriptions filled during a nine-month period

? 10.9

48

looks like. Initially in 2014 they were completely guessing about who was going to enroll and how much health care they were going to use.”

The reasons for the rising premiums are complex. Part of it, as Levitt noted, is simply that the carriers know a lot more about the health status and health care patterns of their new customers. Another part of it is rising drug prices.

By marketplace enrollees

InsuranceNewsNet Magazine » July 2015

15.2

By people with employer coverage

Source: Express Scripts

We’re seeing 22 percent of federal spending on the program is actually going to be eaten up by bureaucracy.

— Dr. Steffie Woolhandler, City University of New York public health professor, on the ACA

prescriptions if they were responsible for paying most or all of the initial cost, she said.

23% OF ADULTS ARE UNDERINSURED Fewer Americans are uninsured since the ACA was enacted, but a new scenario has emerged — a large percentage of people who are underinsured.

A Commonwealth Fund study estimates that about 31 million adults between the ages of 19 and 64 — nearly a quarter of Americans in that age group — have insufficient funds to pay the out-of-pocket expenses that come along with their health coverage.

Some of these newly insured are coping with the lack of funds by skipping the doctor, the study said. It found that 44 percent of the people who are considered underinsured stayed away from doctor visits, skipped obtaining prescriptions or did not get a recommended medical test. Commonwealth found that 51 percent of the underinsured had problems paying medical bills or were paying off debt over time.

Almost 60 percent of underinsured adults had coverage through an employer. Rates were highest among those working for small firms.

Commonwealth considers most people to be underinsured if their out-of-pocket costs — a total that doesn’t include the premium — equal 10 percent or more of their household income. The foundation uses a lower percentage for those with incomes close to federal poverty levels.

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HEALTH

Brokers Rise Above Health Insurance to Become Indispensable Advisors H ealth insurance advisors are defying predictions of their obsolescence. In the process of remaining relevant, they are taking on more roles than ever before.

By Jonathan Rickert

T

he passage of the Affordable Care Act (ACA) spurred considerable debate on the future role of health insurance brokers. At the time the ACA was passed, many in the industry argued for brokers’ relevance, while others predicted they would become obsolete with the increasing adoption of health insurance exchanges.

Today, five years on, we can safely say that brokers are needed more than ever before — but they are needed in new and different ways. According to the 2014 Aflac WorkForces Report for Brokers, companies’ usage of brokers increased from 56 percent in 2011 to 61 percent in 2013 to 64 percent in 2014, punctuating their staying power. What is interesting, however, is that successful brokers are evolving, specializing and adding value beyond customary quoting and transactional activities. They are seizing opportunities created by health reform to become even more valuable, taking on the role of human resource/benefits consultants, business strategy partners and trusted advisors on all things insurance-related.

Historically, brokers provided valuable services to individuals and companies, such as obtaining quotes for coverage, explaining benefits and regulations, and helping solve various other insurance-related issues. A survey by the American Institute of Certified Public Accountants showed that more than 50 percent of Americans do not understand basic health insurance terms — such as premium, deductible and copay — making it clear that 50

InsuranceNewsNet Magazine » July 2015

brokers have played a vital function.

Today though, public and private health insurance exchanges have created somewhat of an identity crisis for brokers. In theory, exchanges diminish the importance of brokers. With sophisticated decision support tools and a plethora of information available online, the broker of yesteryear is no longer needed. But in practice, individuals and employers continue to seek guidance from health insurance experts, to ensure they are compliant with rapidly evolving health care reform and tax regulations. They also want to be informed about the many different medical and voluntary insurance products now available in the market. Meanwhile, businesses continue to face rising health care costs and are keen to reduce their financial risk, while still retaining and attracting talent.

The new role of the insurance broker varies depending on group size. In the short term, small businesses will continue to rely on their brokers in a more traditional way. According to the National Small Business Association’s 2014 Small Business Health Care Survey, 76 percent of small businesses said they planned to purchase insurance through their existing broker in the coming year. Fewer than one in 10 said they planned to purchase health insurance through the Small Employer Health Options Program (SHOP) exchange.

In the longer term, however, as medical products become more commoditized through both the exchanges and new e-broker offerings, the role of traditional brokers in the small-group market becomes less clear. Brokers will gravitate to new areas where they can add value, such as administering employee benefits and taking on human resource functions for small businesses.

Small business will need a number of services that brokers can provide. Those

services include giving advice about which exchange to join, managing the exchange relationship, designing comprehensive benefits strategies that include robust voluntary insurance offerings, and educating employees on their insurance options.

Brokers who serve large-group employers will specialize and be asked to play a more strategic role, consulting on issues ranging from contracting with hospitals for Accountable Care Organizations and benchmarking benefits both nationally and internationally, to providing guidance on how to create a productive workforce.

They also will create points of differentiation by extending their counsel to include predictive modeling around risk and costs, and lending their expertise on exchange infrastructure and user navigation. This may mean providing specialized services around compliance and health care or providing consulting services around the types of technologies and exchanges these businesses should be integrating with their current offerings.

Brokers in the large-group market eventually will become the essential go-to experts for all things insurancerelated. Businesses will seek guidance on insurance strategies, from picking the right property and casualty insurance to deciding what mix of voluntary insurance options makes sense for their employees.

Offering these types of sophisticated services means brokers will need to invest in new skill sets and expand their broker teams to include underwriters and other subject matter experts.

Whether serving groups or individual clients, there are certain actions that all brokers should consider as they make the

BROKERS RISE ABOVE HEALTH INSURANCE TO BECOME INDISPENSABLE ADVISORS HEALTH shift away from providing transactional services and toward becoming consultative partners.

Partner with an exchange. Given that brokers are being asked to do more than ever with less commission, exchanges offer a tremendous opportunity to both reduce administrative burdens and increase voluntary insurance sales. Aligning with a strategic technology partner can help brokers leverage technology to speed up and streamline complex processes. This will allow the broker to focus energy on other areas such as compliance or other specialized services that cannot be managed by a technology solution.

Support new product lines. On the medical side, employers are interested in a wide range of coverage from carrierprovided preferred provider organizations and high-deductible health plans to self-funded arrangements. Beyond medical coverage, there is a collection of voluntary products that are now easily available through private exchanges, and fit perfectly with defined contribution models. These

voluntary offerings help create a robust benefits package at little to no cost to the employer.

Get smart on the available technology.

Not only must brokers understand all the cutting-edge technology as it relates to human resource information systems, benefits administration and exchanges, they must fully understand the older internal insurance carrier systems that weren’t necessarily designed with the needs of the broker in mind.

Integrating new technology with carriers’ legacy systems can be challenging. Brokers should engage with carriers to ensure that internal and external systems are integrated in a way that creates a positive user experience for all stakeholders.

Embrace the consumer-centric world we live in. Providing world-class service is paramount to the success of the insurance broker. And today’s consumers are online 24/7 with a variety of communication methods available to them. According to an analysis from IDC Health Insights, 65 percent of consumer transactions with health care organizations will be mobile

by 2018. Brokers will need to be equally tech-savvy to improve their customer service and overall reachability. While technology can improve customer service, ultimately brokers who are skilled advocates for both employers and employees are the ones who will build a loyal following.

Health insurance has always been a relationship business. The new type of insurance broker who emerges from this period of disruption will have even deeper ties to their clients by providing advisory and consultative services not easily found elsewhere. While exchange technology will only continue to become more sophisticated, it can’t replace specialized and personalized counsel from a trusted partner.

The broker will remain an important part of the health insurance ecosystem for the foreseeable future.

Jonathan Rickert is CEO of Array Health. Jonathan may be contacted at jonathan. rickert@innfeedback.com.

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July 2015 » InsuranceNewsNet Magazine

51

FINANCIALWIRES

Over-55 Group Burdened

by Student Debt Think of “student debt” and you most likely imagine an underemployed 20-something wondering how he will ever pay off the loan that helped him get that degree in Renaissance poetry.

But research shows a different picture of student debt – one with a much older demographic. A new LIMRA Secure Retirement Institute study found that preretirees (ages 55-64) and retirees (ages 65-74) are carrying unprecedented amounts of student loan debt. LIMRA SRI looked at federal data on consumer finances and found that in 1989 education loans made up 4 percent of pre-retirees’ installment debt. By 2013, the share of debt for student loans totaled 30 percent. Among retirees, education loans made up less than 1 percent of debt in 1989 but grew to 15 percent by 2013.

It’s not that older Americans are going back to school. It’s that they are helping their children or grandchildren finance their educations. With college costs increasing every year, the average education debt has increased to over $19,000.

Prior LIMRA SRI studies revealed that parents are helping their children with debts and expenses beyond student loans. Sixteen percent of parents are paying the bill for their adult child’s credit card or car loan. In addition, 36 percent of parents are picking up the tab on their adult child’s cell phone bill.

WHAT TO DO ABOUT MOM AND DAD?

As if helping the younger generation pay for college didn’t already empty their wallets, Americans also are worried about how they will take care of aging parents.

A Harris poll found that more than one-quarter (28 percent) of Americans whose parents are living believes they will need to, or already do, support their parents financially in their senior years.

Additionally, 86 percent of that demographic has concerns about their capacity to do so.

But despite these fears, people seem to be reluctant to have “the talk” with their parents. The poll showed that 42 percent of Americans have not discussed anything with their parents regarding how they will be cared for in their senior years.

Even further, 27 percent of those who believe they will need to help support their parents financially as they age admit that they have not discussed anything regarding their parents’ care in their senior years.

4 in 10 ?

DID YOU

KNOW

Does your client believe only those who lead a life of privilege can retire early?

Think again! Those who are able to retire early share a few key characteristics, but being wealthy isn’t necessarily one of them, according to an Allianz Life survey.

The Allianz “LoveFamilyMoney” study showed that the following traits were common among those positioning themselves for early retirement. They share good financial habits with a spouse or partner who has a “practical” approach to money.

Having a spouse is also important because those on track for early retirement are more likely to be married and still in their first marriage.

Potential early retirees compare their financial status with that of their parents to track how they are doing financially. They are more likely to find it “very easy” or “somewhat easy” to talk with their spouse or significant other about family finances. They have also done more to teach their children about money, including encouraging them to work with a financial professional.

THE AVERAGE RETURN ON AN INITIAL OFFERING was 20 percent Americans spentPUBLIC savings from lower gasoline this year. The average increase in the first day (or “pop”) is 13 percent.

Source: Renaissance Capital

52

YOU DON’T HAVE TO BE WEALTHY TO RETIRE EARLY

prices on necessities such as groceries or rent.

Source: Bankrate.com

InsuranceNewsNet Magazine » July 2015

QUOTABLE It is not easy being X. — Rebekah Barsch, vice president, financial planning, Northwestern Mutual, on a survey that found Generation X is the generation that has the poorest financial habits.

MEN, WOMEN EXPERIENCE RETIREMENT DIFFERENTLY

Men and women have differing points of view on almost everything, so why should retirement planning be any different? MassMutual looked at the way men and women view retirement and found that women are more likely than men to report both positive and negative emotions surrounding their post-working years.

The study, “Men, Women & Retirement,” finds that women are more likely than men to be stressed, both before and after retirement, and more often give in to negative emotions such as frustration, sadness, nervousness and loneliness. Conversely, women more often report having positive experiences in retirement such as enjoying new opportunities, spending more time with friends and family, and reinventing themselves. And women are more likely than men to have higher expectations for life in retirement.

The study did not find a correlation between emotional well-being and the respondents’ level of retirement assets.

However, those who have a defined contribution (DC) retirement plan were more likely to report experiencing positive emotions compared with those who did not have a DC plan. Seventy-four percent of DC plan participants said they were “extremely” or “quite a bit” happy compared with 68 percent who did not participate in a DC plan; 70 percent of DC plan participants said they were “extremely” or “quite a bit” relaxed, compared with 61 percent who did not have a plan.

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FINANCIAL

A Retirement Prequel: Get Your Clients Off to the Right Start S ome of the most crucial decisions your clients make will occur in the year or so before they retire. Here’s how you can guide them on the journey.

By Lloyd Lofton

T

he financial quality of life your client will have in retirement depends on decisions that they will make a year or two before leaving the workforce.

Here are some issues you and your client will need to consider as their retirement approaches.

One of the first issues is selecting a retirement date. In deciding on a date, your client will need to consider how many years they have been working for their employer. They also will need to consider whether they are eligible for longevity payments from their employer, and how to continue health insurance and other coverage for a spouse or dependent after leaving the workplace. Your client will need to consider the income difference incurred by taking early retirement as opposed to waiting until full retirement age.

In addition, they should consider whether they will qualify for an annual cost of living adjustment (COLA) from their retirement plan, if a COLA is provided.

The decision to choose early retirement versus waiting to reach full retirement age 54

InsuranceNewsNet Magazine » July 2015

can be influenced by a number of factors.

Those who take early retirement often will take a permanent reduction in their retirement benefit. Your client’s employer will have its own set of rules surrounding when retirement may be taken, so you and your client must become familiar with them. In some companies, if COLAs are offered, they frequently require the employee to retire by a certain date in any given year in order to qualify for any COLA that may be given in a specific month of the following year.

Your client may be required to be in active pay status the day before the last day of the month directly prior to the month of their longevity eligibility in order to receive the payment. If they are not in active pay status on this date, they could forfeit their entire longevity payment.

For example: If your client was hired June 17, their longevity date is June 1.

They must be in active pay status as of May 30 in order to qualify for their longevity in July.

Retirees often are paid for unused annual leave not to exceed the maximum allowable accumulation. In many cases, any amount in excess of the number of hours listed for any retiree is rolled into their sick leave balance.

The sick leave balance frequently is creditable for retirement service. For

some employees, sick leave is only applicable toward total years of service for retiree insurance eligibility.

Money matters — understanding their income in retirement

Optional Retirement Program (ORP) is usually a market-driven defined contribution plan. The amount of your client’s income at retirement is based on the value of their account and their age. Employees in this ORP usually work with their individual provider to begin distribution of their funds. Their individual provider will provide payout options to the employee at the time of retirement.

Some employees may participate in an ORP and may not be required to begin drawing a benefit at age 70 but may do so at any time after they separate from their employment. There could be requirements for personal retirement plans.

Some options your clients could be offered may be a monthly benefit after their retirement for the remainder of their lives.

This could lead to a number of decisions for your client.

Your client may have the option to provide a monthly annuity for a beneficiary in the event of the client’s death. If they take this option, they could see their benefit reduced because the plan now must provide for their beneficiary for the remainder of

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FOR PRODUCER USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. S1000515 July 2015 » InsuranceNewsNet Magazine 55

FINANCIAL A RETIREMENT PREQUEL: GET YOUR CLIENTS OFF TO THE RIGHT START the beneficiary’s life. For this reason, the age of the beneficiary most likely will affect the reduction of their benefit.

Your client also could choose to receive the regular maximum monthly benefit payable to them for a lifetime, and have all benefits cease at death.

Another issue to consider is Social Security leveling. This provides the retiree with an increased benefit until they reach age 62, at which time their retirement benefit may be reduced, and they may be eligible to begin receiving their Social Security benefit.

Usually, retirement benefits are paid on the last working day of the calendar month.

Your client may be offered the option to provide bank account information for

It is advisable for your client to begin the retirement process 12 months prior to their expected retirement date. direct deposit of their benefit. The benefit is subject to federal income tax, so you may want to work along with their tax advisor to help them decide the best option for taxation of their benefit.

Employees making contributions to 401(k), 457 and 403(b) plans usually are provided with the provider’s contact information. Employees must work directly with the provider to begin any form of distribution or rollover of the funds in these plans. That is because there are tax implications involved, based on the employee’s age at retirement.

Clients who are interested in drawing their Social Security benefits should contact the Social Security Administration directly or go online to www.ssa.gov.

Application for Social Security may be processed online or at the local Social Security office.

Upon retirement, your client will be asked to list one beneficiary. Usually, this beneficiary can be changed only if the regular maximum option is selected. The beneficiary is eligible for the last retirement payment in the event of the retiree’s death. If a survivor option is selected, the 56

InsuranceNewsNet Magazine » July 2015

beneficiary cannot be changed after retirement. Provisions may be made in the event of the beneficiary’s death or divorce.

from the carrier concerning their eligibility to continue coverage. Payment of premium is made directly to the carrier.

Employee benefits — when they end and continuation issues

When to begin the process

Employee health and dental insurance usually are paid for a month in advance.

Your client should have coverage through the end of the month following their date of retirement.

This coverage usually is payroll deducted. Employees who work partial months must consider whether their hours worked will yield enough compensation to cover their health premium.

After retirement, employees are required to contact the benefits administrator for changes and administrative or coverage issues.

Retirees usually are subject to state rules for insurance changes. If a retiree does not elect coverage at retirement, there is often a five-year window for enrollment, subject to health questions. Rates usually are based on some formula relative to years of creditable service.

If your client and/or their dependents are age 65 or older, they will need to sign up for Medicare and purchase a supplement if their employer does not offer one through their group plan.

Many flexible spending plans require employees to incur the expenses in their plans prior to their retirement. Employees usually have 90 days to submit documentation for reimbursement, or they may use their final paycheck to pay the entire amount and continue to make claims for the remainder of the year. Any unused funds typically are forfeited.

Employee coverage in basic life insurance typically ends on the last day of the month following the separation of employment. Employees usually are entitled to an individual policy by the employer’s carrier. No evidence of insurability will be required. This coverage will not be the same as that provided to them as an employee, and the premium is affected by the amount of the policy and their age. The retired employee should receive a notice

It is advisable for your client to begin the retirement process 12 months prior to their expected retirement date. During that time, they should prepare to lower their debt, make large purchases (car, appliances, home renovations) while they are still employed, consider the impact of retirement on their income and taxes, decide what types of activities will keep them occupied in retirement, and review their wills, trust and insurance needs.

Retirement paperwork must be completed three to five months prior to retirement. Forms that typically need to be completed include but are not limited toemployer retirement application, health insurance continuation and Medicare Supplement.

What to do now?

Help your clients know where they stand.

Creditable service is not the same as the amount of years that they have worked.

This time is calculated based on their years worked and their percent of effort. Other factors, including unpaid leaves, will affect their creditable service.

If your clients think they should have credit for previous employment or military service, do not wait until they plan to retire to verify or apply for this credit. This process takes several months, and it can affect their smooth transition into retirement. If your client is concerned that they are not being given credit for all eligible service, they should request correction of discrepancies immediately.

As their advisor, complete a fact-finding interview to help them think of the things that will matter as they age. Have the plans in place to help your clients have a successful retirement, regardless of changing circumstances. Remember that these times of their lives are predictable and you can help your clients plan for them.

Lloyd Lofton, CSA, LUTCF, is the chief operating officer of American Eagle Financial Services Inc., Smyrna, Ga. Lloyd may be reached at lloyd. lofton@innfeedback.com.

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July 2015 » InsuranceNewsNet Magazine

57

BUSINESS

Want Fries With That Life Policy?

Upselling by Cross-Selling W aitstaff in restaurants seem to have no problem with asking whether we “want fries with that.” So why do insurance professionals struggle with cross-selling products to clients?

By Jeff Spain

W

e know many businesses in which cross-selling is successful. Restaurants, auto dealers, even hairdressers have excellent cross-selling techniques.

Think about all the times when someone at the restaurant asks, “Do you want fries with that?” And then there’s the hairdresser who offers to sell you a shampoo specific to your type of hair.

If cross-selling works for those businesses, why does the insurance industry seem to struggle with it? We may have some cross-selling experts in the insurance business, but the majority of agents 58

InsuranceNewsNet Magazine » July 2015

struggle with crossing over from a life sale to, say, a critical illness sale, or from selling a home and auto policy to selling a life insurance policy. Why this struggle?

The key to the cross-sale lies in my definition of cross-selling: the practice of persuading an existing customer to purchase additional products by convincing them the products are best used together.

Here are two things to remember: 1. Cross-selling is a practice, and we must practice it. Professional athletes, musicians and actors must practice for hours before they perform. Shouldn’t insurance professionals hold themselves to the same standard?

Practice, or rather the failure to practice, is our first problem. A professional usually has a coach, someone who helps them perfect their talents. Do you have a coach who can map out your talents, strengths and weaknesses? Do you practice in the mirror, on the way to work, in

your office? Do you create your scripts and objections, and practice them?

2. Products are best when used together. If you cannot convince clients that the products are best used together, you will struggle at cross-selling. For property/casualty agents, ask the clients how a life policy helps their auto policy. And for life agents, ask clients how a critical illness policy helps their life insurance policy. If you cannot connect how the two go together, the cross-sell is doomed.

The cross-sell must help or enhance the primary policy the client currently has. That’s why a restaurant cross-sells mushrooms on a steak. The auto dealer can cross-sell to the extended warranty, and the hairdresser can cross-sell to a product that promotes hair growth.

These are easy cross-sales because they make the original purchase better.

The insurance professional first must

WANT FRIES WITH THAT LIFE INSURANCE POLICY? UPSELLING BY CROSS-SELLING BUSINESS be able to describe how an additional policy can enhance the client’s own annuity, long-term care policy, health policy or life policy. If you cannot convince yourself, don’t try to cross-sell it.

Perhaps the easiest cross-sell that enhances a client’s primary product is the health insurance policy. A common health insurance policy purchased is the bronze plan. The bronze plan has a deductible of approximately $6,350. Most folks will have a hard time coming up with $6,350, but they can direct $50 to $100 per month to purchase a plan that helps offset that deductible. Health insurance agents have been adept at cross-selling hospital indemnity plans, accident plans and critical illness coverage. These plans enhance the primary plan by covering the expenses as well by adding additional benefits.

Imagine a family of four with a bronze plan. The youngest son breaks his leg playing baseball. The emergency room bill and follow-up doctor’s office bill add up to just over $3,500. Well, the bronze plan didn’t help at all, but the accident policy paid cash to the family to pay the bills and offset the deducible. A small monthly premium helped the family avoid a large credit card bill.

Let’s dig a little deeper and consider the life insurance agent. A home buyer usually recognizes the need to buy some sort of life insurance policy to cover the mortgage. Here is where the cross-sale comes in. Although more people today are surviving heart attacks, cancer and strokes, they are living with the consequences. The consequences of lost wages, extensive out-of-pocket expenses and medical bankruptcies are common even when clients have major medical insurance. Thus the cross-sale is the critical illness product. Term life insurance is for the worst-case scenario — when you go into the hospital but you don’t come out.

Critical illness coverage is for coming out of the hospital and facing the consequences of surviving. The two products work together.

When it comes to annuities and investments, you are now looking at income protection products. In the case of the family of four and the broken leg, what if they are trying to build a savings account, perhaps a 401(k) at work or an individual retirement account? A $3,500

hit is hard on their finances. It’s easier to invest in a protection product than cash in their savings.

Let’s consider the property and casualty agent. This is the holy grail for life insurance agents. If only a life agent could get a P/C agent to work with them!

P/C agents have the trust and the relationships to do the cross-sale but most

Now the truth about cross-selling: Your clients expect you to cross-sell to them! Do you go anywhere or buy anything in which you are not cross-sold?

Clients expect you to educate them on new products and trends. Clients like to know their agents are taking care of them, keeping them informed and giving them options. Be a value-added resource.

The cross-sell must help or enhance the primary policy the client currently has. That’s why a restaurant cross-sells mushrooms on a steak.

of them don’t do it. Why? Because they don’t need to. There is enough money in the P/C business, especially in commercial P/C, that the P/C specialist will not risk their core book of business over a life or health policy. So forget the commercial P/C agent.

Focus instead on the personal lines, home/auto/umbrella account specialists. These agents can easily cross-sell into the term life and critical illness space just by offering the protection.

Your client can’t buy it unless they know you offer it! Term insurance to cover mortgage debt is an expectation, so having one agent to cover it all makes sense.

A simplified issue term product or nonmedical term product is ideal.

I am also a fan of the critical illness cross-sell for homeowners protection.

Statistics say that one in 310 homes is lost due to fire/wind/hail, but one in 96 is lost due to medical bankruptcies.

Thus the critical illness policy should be standard issue for any personal lines risk manager. How much coverage? A simple rule is enough for two years of mortgage payments. However, the more you discuss the value and use of a critical illness policy — to cover everything from travel expenses, deductibles and co-pays to experimental treatment — the greater the need for additional coverage.

You are investing in your practice, whether you are buying leads, getting referrals or making cold calls. This is time-consuming and expensive, so you need to get the most out of your prospecting activities. Increasing your revenue per account is easier to do than prospecting for new clients.

Increasing your retention also is important. This not only increases your income but defines the type of agent you are. Cross-selling identifies you as a true consultant and resource, instead of a product pusher.

Cross-selling helps you diversify your practice and be prepared for changes.

For example, many health-only agents were not prepared for the impact of the Affordable Care Act (ACA) and are no longer in business. Some agents saw the ACA as an opportunity and made the most of it by packaging the complete sell.

A successful multiline agent told me his secret to cross-selling: Just ask them.

Give clients the opportunity to say no and you will be surprised by how often they will say yes.

Jeff Spain is vice president, channel sales, with Surebridge Insurance, North Richland Hills, Texas. Jeff may be contacted at jeff.spain@innfeedback.com.

July 2015 » 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.

Insurance Products That Give Clients the Best of Both Worlds family in two ways — leaving a legacy if the plan isn’t used and providing assistance to a partner in need.

While this type of plan would be best for couples since they can tap into each other’s funds, if a single person has beneficiaries — nieces, nephews or charitable intentions — this may be a good option for them as well. If a client doesn’t have beneficiaries, they’re not as apt to leave a legacy with life insurance so the combination plan discussed may not be the best fit.

T raditional long-term insurance, traditional permanent life insurance or a combination of the two can give clients an individualized solution to their retirement planning or legacy funding needs.

By David E. Appel

W

e work almost our entire lives, building funds and planning for our retirement. Some of us are lucky enough to work for a company that’s truly vested in us, working toward enjoying our future with the benefits we receive from our employer.

One of my clients had the great fortune to work for someone who wanted to make sure the retirement and financial plans they provided for her would benefit her in the long run. As she retired from her 35-year tenure as director of a private school, the school worked with her to choose which option would benefit her most. Due to her hard work and dedication to the school, from both an academic and charitable aspect, the school wanted to do something special for her as part of her retirement benefits. They wanted to take a closer look and evaluate the money they were putting forth to make sure they were providing my client with the most beneficial plan for her lifestyle. When the school compared the premium they were currently allocating for traditional health insurance versus additional options I presented them, they saw an opportunity to help this deserving individual.

Consider Multiple Options PostRetirement Planning

I presented three different options for a post-retirement plan, including traditional long-term care insurance (LTCi), traditional permanent life insurance and a combination of the two, which includes a long-term care (LTC) rider.

The solution of combining traditional LTCi and permanent life insurance with a 60

InsuranceNewsNet Magazine » July 2015

LTC rider was seen as the most beneficial choice for my client. Because my client is married, this solution gives her the best of both worlds with her insurance, as well as a potential benefit for her spouse and beneficiaries.

The combination plan is more beneficial because, although a traditional LTCi plan covers home health care and home care needs, it also can provide a zero-day home health care elimination period rider. If a client needs home health care, they can start receiving benefits from their contract immediately while still satisfying the elimination period for nursing home or assisted living care under the life insurance policy with LTC rider.

Traditionally, Medicare pays in full for the first 20 days in a nursing home and a portion of the cost for the next 80 days.

After 100 days, Medicare no longer pays any benefit. During that time, a client is typically satisfying their 90-to-100-day elimination period on their LTC or life insurance policy, which will not kick in until the Medicare period is through.

Piggybacking the plan with life insurance also provides the client with a death benefit. This enables the return of all premiums to the beneficiaries if LTC is never used. Additionally, if both spouses are being insured and one partner uses all their funds from the plan, they can tap into their partner’s funds with a shared care rider. This provides a security to the

How to Know Whether It’s the Right Plan

Until we meet a client for the first time, we as insurance and financial advisors are unfamiliar with their thought process, or such information as whether they have beneficiaries. During the first meeting, it’s important to gather as much information as possible to help provide the best financial planning decision for each unique client. Be upfront with your clients and present them with all the potential options. Some situations call for a singular plan while others may further benefit from a combination of products.

When looking at the most beneficial plans for clients, it’s important to factor in multiple variables — overall financial background, geographic location, marital status, children or beneficiaries. In my experience, the best way to help a client is to present them with each potential outcome, the advantages of each product and how that product can help in the long term for life and beyond.

David E. Appel, CLU, ChFC, AEP, is managing partner of Appel Insurance Advisors, Newton, Mass. He is a 19-year qualifying and life member of the Million Dollar Round Table (MDRT), with seven consecutive Top of the Table qualifications and eight Court of the Table qualifications.

David may be contacted at david.appel@ 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.

Regulations Must Allow Advisors to Do Their Jobs T he agency’s “best interest” rule for retirement account advisors would do more harm than good.

By Juli McNeely

A

s a financial advisor, I have a lovehate relationship with regulations.

Did I say “love”? That word may be a little too strong.

Frankly, I don’t need to be tightly regulated. The vast majority of financial professionals don’t need to be tightly regulated either. We look out for the interests of our clients because it is our professional responsibility, and because our success depends on getting and keeping our clients’ trust.

Yet, I understand that we need regulations. Government oversight of our industry not only safeguards our clients, it helps protect financial professionals whose reputations can be harmed by the careless or unscrupulous actions of others. Regulations ensure that those who wish to be our colleagues are properly educated and abide by strict ethical and legal standards.

It is important for consumers who entrust their financial security to professional advisors to be confident that they are receiving competent and valuable advice.

At the same time, it’s important that regulations allow advisors to do their jobs.

Regulations should encourage market competition and refrain from restricting consumer choices or disrupting beneficial relationships between advisors and their clients.

The DOL Proposal

Unfortunately, I have grave concerns that the new “best interest” rule the Department of Labor (DOL) has proposed for retirement account advisors would do much more harm than good. The rule would require the vast majority of registered representatives in the retirement space to sign best interest contracts (BICs) with clients in order to receive third-party

compensation, such as commissions from financial institutions.

BICs would make advisors vulnerable to lawsuits for alleged breaches of contract in state courts and alleged breaches of fiduciary duty under the Employee Retirement Income Security Act (ERISA) in federal courts. Increased liability would raise advisors’ errors and omissions insurance premiums. Also, the contracts, along with the proposal’s increased disclosure and reporting requirements, would create additional red tape and paperwork for advisors, their broker/dealers and their clients.

I am in the risk-assessment business and, from what I can tell, the BIC exemption is a risk that may not be worth taking for smaller accounts. The risk-reward is not great enough. Advisors would be forced to enact account minimums due to the added liability and other costs. Rather than helping small- and middle-market investors, the DOL proposal would likely leave many of them with nowhere to turn for advice as they prepare for retirement.

The proposal also could place a stumbling block in the crucial process of building relationships between advisors and their clients. For example, a simple educational conversation with a client would require a signed contract if the advisor mentions any product examples.

I know from experience that when you’re with a client or prospect, often your general conversation switches to recommendations quickly. To halt the conversation and have the client sign a contract would not be well received. It is particularly counterproductive during conversations that require clients to open up about their financial situations. Additional paperwork isn’t always perceived as more protection. Instead, it often shuts the client down.

Real-World Implications

A client in my hometown has been a “small account” for the last 15 years, and we have

built a retirement plan for him. The company he worked for was sold recently, creating job uncertainty for him. After meeting three times and discussing a number of possible solutions, we agreed upon a plan of action and finalized his plan for the rollover funds that included a C share mutual fund, an index annuity and a variable annuity.

This alleviated my client’s concerns about ensuring a guaranteed income stream and reducing his market risk. It’s the type of solution he would not be able to devise or implement without the help of a professional. Yet, he is the type of client likely to be left out in the cold if the DOL proposal becomes final.

Fortunately, the proposal is not yet final. Along with my NAIFA colleague Terry Headley, NAIFA acting CEO Michael Gerber and other NAIFA staff, I recently met with officials from the White House and DOL to discuss our concerns about the rule. The administration seemed receptive to our input. DOL has invited us for a follow-up meeting. NAIFA is also working with industry partners and members of Congress on potential legislative remedies.

It is crucial that regulators get this right. When it comes to preparing for retirement, Americans need all the help they can get. I love the fact that I am in a respected profession where I can help people enjoy financial success. And I will admit that I owe part of that to the regulations that help give consumers the confidence to work with me. But I hate the fact that unintended regulatory consequences could prevent me from helping some of those who need my services the most.

Juli McNeely, CFP, LUTCF, CLU, is president of NAIFA and president and owner of McNeely Financial Services, Spencer, Wis. Juli may be contacted at juli.mcneely@ innfeedback.com.

July 2015 » InsuranceNewsNet Magazine

61

THE AMERICAN COLLEGE INSIGHTS

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

Proposal Highlights Need for Retirement Income Education N o standard definition of “best interests” exists in the area of retirement income planning.

A number of variables are involved in retirement income decision-making.

By David Littell and Jamie Hopkins

The need to understand a variety of complex legal, financial and other issues will require many retirement advisors to seek out additional education...

T

he reintroduction of the Department of Labor’s proposed changes to the Employee Retirement Income Security Act’s (ERISAs) fiduciary rules illuminated a variety of challenges ahead for retirement planning professionals.

The proposed rule changes were reintroduced in April after a five-year hiatus. They seek to expand the range of the ERISA fiduciary requirements to include scores of pension advisors, broker/dealers and other financial service professionals not previously held to the ERISA fiduciary standard. In addition to, and in support of, the DOL’s proposed changes, the White House published a memo highlighting areas of concern regarding conflicts of interest and the impact of fees on retirement savings. While the proposed rules are not law yet and will likely be modified before they are finalized, a new level of scrutiny has been placed on retirement advisors, and the industry must act accordingly.

As a fiduciary, one is required to act in the best interests of his or her clients.

While almost everyone agrees with this notion, there is no standard definition of “best interests” in the area of retirement income planning. For example, when planning for a client’s retirement, not everyone agrees that certain insurance products or investment products — such as annuities, real estate investment trusts and long-term care insurance — should be a part of the retirement income plan.

We see several competing approaches to building a retirement income plan. Life cycle investment theory leads to solutions that use low-risk investments such as Treasury bonds and annuities to meet 62

InsuranceNewsNet Magazine » July 2015

basic income needs. Other practitioners believe clients are better off staying more heavily invested in equities, and taking systematic withdrawals from their portfolios to meet income needs.

Another concern is that certain decisions that may be prudent at the time they are made may be challenged as market conditions or other variables change over time. For example, using a portion of a portfolio to purchase an income annuity to meet basic expenses may be the right decision to meet client objectives, but if soon after the purchase, interest rates rise and so does the stock market, the decision may look a lot less prudent.

At the same time, if you advise a client to invest heavily in equities and the market later plummets, the client might then begin to wonder why they did not purchase more guaranteed income.

In order to meet a client’s retirement savings and income needs under a fiduciary standard of care, the retirement advisor will need to adopt a comprehensive process that involves extensive fact-finding, considers income and other financial goals, and addresses the numerous risks faced in retirement. While the exact strategy employed by every retirement advisor will not be identical, nor should it be, the client’s needs should come first.

To ensure client ownership of a plan, the advisor needs to offer alternative courses of action and explain the tradeoffs involved in each choice. Ultimately, a plan must tell a story about how each of the client’s goals will be met, and how the plan will work if the market drops, inflation rises or a long-term care event occurs. If a client chooses not to address certain risks, then that decision needs to be included in the plan as well.

Furthermore, documentation will be incredibly important in order to show that each recommendation was for the client’s benefit, even if the client later decided against your advice.

The need to understand a variety of complex legal, financial and other issues will require many retirement advisors to seek out additional education and training in order to take a more confident view of comprehensive retirement planning.

The newly proposed fiduciary rules and the dynamic nature of retirement income planning will require advisors in the retirement income field to pursue a more rigorous education in order to view the world in a more comprehensive manner. Even if the rules do not change, the impact of more specialized education and training is extremely important for the retirement planning industry as a spotlight has already been placed on the need to provide quality retirement and financial planning services for all types of clients.

David Littell is director of The American College New York Life Center for Retirement Income. David may be contacted at david.littell@ innfeedback.com.

Jamie Hopkins is associate director of The American College New York Life Center for Retirement Income. Jamie may be contacted at jamie. hopkins@innfeedback.com.

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July 2015 » InsuranceNewsNet Magazine

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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.

Young Advisors Motivated by Mentoring, Making a Difference C ompanies must adjust their hiring strategies in order to attract the advisors of tomorrow.

By Breana Macken and Emily Tracey

I

t’s no secret that the financial services industry faces an ongoing challenge in recruiting and retaining new advisors. With so many advisors in their 50s, the industry needs new talent to enter and stay in the industry to replace those advisors who retire or leave for other reasons.

With these concerns in mind, LIMRA surveyed today’s young advisors to find out which aspects of their careers are meeting their expectations and which ones are not.

Although many of the attractions and early challenges to the financial services career have remained the same through the years, today’s advisors are approaching their careers differently than previous generations did. Companies that understand this are adjusting their strategies to attract and retain the best talent for the future.

Our research shows that when independent, investment-affiliated and insurance-affiliated firms recruit new talent, they should think in terms of quality over quantity. One common industry practice is to hire a large number of candidates, provide them with minimal support and then wait to see who survives.

Millennials are known for their mastery of self-expression, their desire for customization and the need to feel special. The young advisors who spoke with us made it clear that this mass hiring tactic directly conflicts with their principles.

I interviewed with [company name] and thought it was a “cattle herding” approach of whoever makes it. I wanted a company that would have a commitment to those it hired rather than weeding people out to find the right one. … Once you hire someone, make a commitment to them.

— Insurance-affiliated financial professional, age 31 64

InsuranceNewsNet Magazine » July 2015

Top 5 Attractions to a Financial Services Sales Career Income potential Opportunity/belief that I can make a difference with clients

39%

11%

Career potential

Percent ranking in top three

59%

24%

Opportunity to be my own boss

Flexible work schedule

65%

26%

33%

16% 6%

28%

Percent ranking first

Income potential is still the reason most young adults chose a career in financial services, but only one in four named it as the top reason. While 65 percent overall cited income potential as a reason for seeking a financial services career, 59 percent said they want to make a difference in people’s lives. Many advisors said they initially chose a financial services career for the income potential but now their greatest reward is seeing how they have changed their clients’ lives in a positive way. When candidates are driven by income potential and the desire to help others, their chances for long-term success greatly improve. Recruiters who communicate how the career reflects both qualities increase their chances of hiring the best candidates.

More than half of young advisors agree that the most difficult part of establishing their career involves building their book of business and gathering enough leads.

They also found difficulty with time management, handling rejection and asking for referrals early in their careers.

These are all areas where a mentor can make a significant difference. Three in four young advisors said they had a mentor. However, formal mentoring programs were evident only 18 percent of the time. Most mentoring relationships developed naturally. Young advisors said

Source: LIMRA

the most important benefit of having a mentor simply was having access to an experienced colleague who could answer their questions.

The survey also revealed that partnering with other professionals is important to today’s young professionals. More than half said they partner at least some of the time and 44 percent said they plan to partner more in the future.

The most encouraging finding from the study revealed that young advisors have a 91 percent satisfaction rate with their careers. The combination of income potential, making a difference in people’s lives and a flexible work schedule all contributed to the positive satisfaction rate.

Supporting today’s young advisors makes good business sense. By retaining today’s professionals, companies can build a sales force to succeed with future generations of consumers.

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

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

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