InsuranceNewsNet Magazine - August 2015

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“PEOPLE CARE MORE ABOUT YOUR $10.00 US www.InsuranceNewsNetMagazine.com

CONFIDENCE THAN YOUR

COMPETENCE.”

– KARLAN TUCKER

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7/10/15 12:33 PM

GOT CONFIDENCE? KARLAN TUCKER WILL HELP YOU REALIZE YOUR DREAMS

Karlan Tucker has been an independent advisor for over 30 years. Even now, with his own FMO (Tucker Advisors), he continues to write business. Meanwhile, he strives to provide camaraderie and encouragement to independent advisors, whose “isolation” he well understands, in addition to passing on the 33 years of expertise that has enabled him to be one of the industry’s top producers. In this Q&A, Tucker explains why he believes self-confidence is the most important thing for an agent to master, and he provides actionable tips on how to close more sales.

Why do you place so much emphasis on self-confidence?

It’s the one thing, probably in any field you’re in, that people struggle with. After I had provided independent advisors with leads for years, and set up a proprietary program to deliver actual prequalified appointments rather than just leads, I noticed there was still a significant obstacle preventing agents from closing more: self-confidence. That’s the ability to make a recommendation, and when a prospect tests the waters by throwing out an objection, you don’t back down.

activity. Increasing activity means you’ve got to spend more money. Spending more money means you have to believe in yourself — believe that the money you’re spending will come back to you.

What can an advisor do to build selfconfidence?

Come to my training. We do role-playing. We demonstrate the art of the question, and we conduct live objection battles to help you think on your feet. And for those who exude self-confidence already, we will demonstrate how to motivate your prospect to take action and buy from you at the point you ask.

THE RESULTS OF SELF-CONFIDENCE

back where my prospects are facing, there is a bookshelf. All the books on that shelf are about things that anyone would want to do in retirement: traveling Europe, cruises around the world, various tropical islands, fitness, eating healthy, becoming a great chef, funding grandchildren’s education, Corvettes, or whatever hobby they might dream of having.

A few years ago, we had a contest and gave away two Corvettes to our top advisors. I went to the Chevrolet dealership to buy the cars.

I walked in the showroom, and there was a red Corvette convertible that caught my eye.

I started to walk over to it, and a salesman cut me off. He said, “Can I help you?” and I said, “Yes, right there. I’d like to test-drive that car.”

He said, “Let me show you something.”

Then he took me down this long hallway to the parts department. We went through the door. We walked past all these bins of parts, and he pulled out a piston and put it in my hand. I said, “What are we doing in here?” He said, “I thought you’d appreciate the size of this piston. That’s how the horsepower is made in that engine.”

It’s about conviction, not pressure. It’s about exuding that confidence so prospects don’t just say, “Well, I need to think about it.” A lot of advisors just don’t have that down, and that’s where all the money is made. So I do everything I can to help them with that process, because I know exactly what they need. It’s the same as what I need.

I’d say everybody is going to pay a price for success. You either pay it in front of your prospect by not closing them and then you lose those commissions that otherwise could have been earned, or you pay it in the classroom, so when you get in front of the prospect, it just flows off your tongue.

Is self-confidence primarily an issue in the closing process, or is it across the board?

How does a confident advisor motivate a prospect to buy an annuity?

It matters in how you run your business, not just how you conduct yourself in front of prospects. No matter how good you get at closing, to make more money you’ve got to increase

No one really wants to buy an annuity. What they’re looking for is the results. So we should be selling them the results. That’s why at the end of my conference table, right behind my

I said, “Yeah, it’s okay, but you got me buried in the weeds right now. I want to go testdrive that car. I want to feel the wind blowing through my hair. I want to burn rubber. I want to feel the roar of the engine.” Later on, I might be interested in the part or I might never need to ask about that. He had it all backwards, and that’s what advisors do.

Selling is a transference of feelings, not a transference of facts. With self-confidence, you can get people to share your feelings about what you’re trying to do for them, and they will do business with you. If they view it as just a bunch of facts, then all you are is an educator.

And if all you do is educate, you’re going to get paid like a schoolteacher — and they don’t get paid enough. •

Maximize your confidence today. Listen to a special FREE audio presentation from Karlan Tucker called “How to Sell With Confidence,” plus download his BONUS companion white paper at www.TuckerConfidence.com or call 855.454.2638.

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

online

www.insurancenewsnetmagazine.com

AUGUST 2015 » VOLUME 8, NUMBER 8

ANNUITY

46 S mall Percent Look to Safety of Annuities, But Interest Grows

By Linda Koco The industry needs to do more financial education so that more people will save and build a balanced retirement nest egg that includes annuities.

46 N ew Retirement Income Challenge: QLACs, DIAs, GLBs

22

By Linda Koco The array of new products hitting the market has led advisors to examine which products to use and how much of a client’s portfolio to allocate to each one.

INFRONT

8W hen ‘Best Interest’ Might Not Be Best for Consumers

FEATURE

22 Inspired to Sell

By Susan Rupe What keeps advisors inspired to persist in a profession that is filled with rejection? Here are insights into what inspires advisors and stories of what keeps them going.

By Steven A. Morelli Advisors and others in the industry have just a few more months to make their concerns known before the fiduciary standard rule is formally adopted. After that, it is a matter of damage control.

50 HEALTH

50 D ivorce and Disability Insurance: A Marriage of Opportunity

34 LIFE

By Michael Smith If a divorced person becomes disabled and is unable to fulfill their support agreement, disability insurance can come to the rescue if it is built into the divorce decree.

34 Power of Substitution Leverages Potent Life Insurance Strategy

By Russell E. Towers The “power of substitution” concept can be used from a practical estate planning point of view to improve wealthy estate owners’ plans.

12 INTERVIEW

12 Ask and You Shall Receive

38 The Perfect Blend for Mass Affluent Needs

An interview with Andrew Sobel Most sales presentations all sound the same. And that’s not a good thing. Andrew Sobel, author of Power Questions, tells InsuranceNewsNet Publisher Paul Feldman how to ask the probing questions that make a sales presentation sound less like selling.

2

InsuranceNewsNet Magazine » August 2015

By Erik Dullenkopf Blending insurance products — permanent, term and long-term care insurance — prepares the client for any outcome.

54 FINANCIAL

56 When Is Margin Lending Right for My Client?

38

By Bryce Sanders Margin can help clients in surprising ways. But your client needs to know which situations are not appropriate for margin lending.

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Asset Allocation and the “4% Rule” May No Longer Be Viable

ALSO IN THIS ISSUE

The prevalent retirement income methodology of recent history may carry significant consequences.

This comprehensive book shares a modern approach to income planning for today’s retirees.

58 The Best (and Worst) Former Occupations to Recruit as Agents

AUGUST 2015 » VOLUME 8, NUMBER 8

BUSINESS

By Patrick Bet-David Who would think that former law enforcement agents would make great potential advisors? Or that you might want to stay away from hiring professional salespeople?

62 T HE AMERICAN COLLEGE: Millennials Are the Least Financially Literate Generation

By Jennifer DeTroye Millennials are at a prime age to begin thinking about buying insurance and financial products. But they are the generation most in need of financial education.

INSIGHTS

60 MDRT: How a Dose of Reality Gave Me the Strength to Build a Legacy

By Mary Amen The untimely death of an advisor’s husband inspired her to get her children involved in her practice.

61 NAIFA: Getting Over a Business Slump

• Create an action plan of longterm tactics for a more relaxed retirement • Realize the power of the income allocation theory and why it works

By Herman L. Dixon Everyone experiences a business slump.

Here is how to attack the slump and move your business past it.

64 LIMRA: Advisors Serve a Crucial Role in Providing DC Plan Expertise

By Deb Dupont In the world of defined contribution plans, advisors can help employers navigate the many rules and options to design and manage programs that work for both employer and employee.

EVERY ISSUE 6 Editor’s Letter 20 NewsWires

32 LifeWires 40 AnnuityWires

48 HealthWires 52 FinancialWires

• Use tested fixed index annuity strategies to help protect your client’s retirement income • Make income allocation your primary wealth-preservation strategy

For an instant download of the ‘Income Allocation’ introduction, visit IncomeAllocationHero.com.

For financial professional use only – not for use with consumers

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PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli

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WELCOME LETTER FROM THE EDITOR

Waiting for Inspiration’s Call?

M

any of us wait for the spark while another person can lose it like waof inspiration to do some- ter through their fingers. thing either with our lives The real guy from the McGraw song or with our work. But, if would likely return to being a lousy huswe are waiting for that spark, we might band who doesn’t call his dad anymore. wait forever, because that is not how in- Inspiration fades like the memory of a spiration works. movie you cried through.

I came to that conclusion after readInspiration is a lever lifting people ing Managing Editor Susan Rupe’s fea- to their higher selves. ture on what inspires advisors. In many Staying there and then of the moving stories she gathered, a rising higher is the tragic event caused people to reassess trick. their lives and find a higher purpose.

That doesn’t mean inThey remind us that life can be cruel spiration is useless, only but these moments also offer an oppor- that it helps to be in a tunity for fulfilling transcendence. place where inspiration The refrain is familiar. If you listen can grow. It is just like luck, where hard to country radio for a little bit, you will work meets opportunity. likely hear Tim McGraw singing, “I went I knew someone who fit the mold in skydiving / I went the McGraw song.

Rocky Mountain He was a former climbing / I went colleague who I two- p oint- s e ven learned had prosseconds on a bull tate cancer. He was named Fu Man Chu in his early 50s and … He said, ‘Somehad been a really day I hope you get healthy guy, a mara chance to live like athon runner even. you were dying.’”

Nevertheless, his It’s essentially a prognosis was not healthy message: good.

Don’t take your Van Dousmanis life for granted and had been the phodo the things you tographer at Bingyearn to do. The dyhamton University ing character does and was a fellow other good things refugee from the in the song. He’s crumbling world of finally the husband newspapers. PhoVan Dousmanis he always should tography was not have been. Spent just a living for him some time with his dad. Nice stuff. But but a way of life. At the university, he is that really what happens? could have become a hack, snapping When many of us have these crystal- grip-and-grin pictures all day. In fact, lizing moments, such as a close call with that was probably the extent of his job death, we might vow to live every mo- requirement. ment to its fullest. Then eventually we Instead he saw his art as a way to revert to what we’ve always done. reveal people to themselves. That was The people in Susan’s article have the what people said of him after he died. capacity to craft something meaning- “He took the photos that helped the ful out of tragedy. It is just as when one campus know itself and remember its person can take a windfall like a lottery history,” said his former colleague Anita winning and spin it into greater riches Knopp Doll.

I know he didn’t take his cancer as an opportunity to be a better single dad.

He already loved his daughter like crazy.

I knew that. Everybody knew that.

He didn’t start telling it like it is. He already excelled at that. As he would say, “If you need me to tell you what time it is, I’ll tell you what time it is.”

Inspiration is a lever lifting people to their higher selves. Staying there and then rising higher is the trick.

6

InsuranceNewsNet Magazine » August 2015

It was clear that he was never waiting for life to happen. I think you can guess what he did after his prognosis. He went skydiving.

When he learned his disease was terminal, he moved to Florida and raced motorcycles. Look at the photo here. Is that a dying man?

The thing is, I am not Van. I suspect that if I knew for sure how much time I had left, I wouldn’t jump out of planes and race motorcycles.

I might climb a mountain, though.

But I am not waiting to do that. After a business trip to Phoenix, I decided to go off to Sedona and climb Cathedral Rock. I will be forever grateful that I did.

So, even though a couple in Susan’s article took a heartbreaking moment and developed a heartwarming charity, that might not be our higher purpose.

Nothing will propel us to be the people we wish we were. These moments can help us to find the best parts of ourselves, whether that is helping people protect their families or flinging ourselves into the wind.

When you imagine living like you were dying, is it more like a fantasy or your real heart’s desire? When your vision resonates like a bell, that’s when you stop dying.

Steven A. Morelli Editor-In-Chief

Get the facts on the department of labor proposal that will have a

massive effect on the annuity industry.

The Department of Labor’s “Conflict of Interest” Rule will be devastating to consumers who seek the protection, security, and reliability of income for life. Unfortunately, the consumer’s voice is not being heard in Washington.

Americans for Annuity Protection believes that imposing both a fiduciary standard and a suitability standard on the sale of annuities will ever further erode their availability for Americans.

Help make our voice stronger.

Take Action — Download the Report Now

www.aapnow.org/DOLreport Americans for Annuity Protection is a 501c4 nonprofit formed in 2015 by insurance and annuity veterans to ensure a diverse and competitive annuity marketplace serving Americans across the economic spectrum.

August 2015 » InsuranceNewsNet Magazine

7

INFRONT TIMELY ISSUES THAT MATTER TO YOU

When ‘Best Interest’ Might Not Be Best for Consumers

By Steven A. Morelli

T

he Department of Labor’s proposed fiduciary standard rule is likely to leave everyone at least a little unhappy, which often is the mark of a successful regulation in Washington, D.C. When the DOL proposed its rule, it did so 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 individual retirement accounts (IRAs), even though IRAs are not pension plans.

Opponents of the proposal on retirement fund care say the rule extends the federal administration’s reach into other jurisdictions, limits consumer access and disrupts a well-functioning system. Proponents of the rule argue that exemptions to the rule will undermine the goal of protecting consumers from unscrupulous salespeople.

For a bit of background from the DOL, the department’s Employee Benefits Security Administration (EBSA) issued the rule in April to:

Define who is a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) as a result of giving investment advice to a plan or its participants or beneficiaries. The proposal also applies to the definition of a “fiduciary” of a plan, including an individual retirement account (IRA), under Section 4975 of the Internal Revenue Code (Code).

If adopted, the proposal would treat persons who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner as fiduciaries in a wider array of advice relationships than the existing ERISA and Code regulations, which would be replaced.

The EBSA also proposed new exemptions and amendments to existing exemptions from the prohibited transaction rules applica-

FIDUCIARY TIMELINE July 2010: The Dodd-Frank Act is signed into law and gives the Securities and Exchange Commission (SEC) the authority to establish a fiduciary standard for brokers and investment advisors if it determines there is a need.

1974: The Employee Retirement Income Security Act of 1974 (ERISA) is passed into law.

1978: The Department of Labor (DOL) is given fiduciary oversight responsibility under Title I of ERISA.

8

October 2010: The DOL issues a Notice of Proposed Rulemaking for a new fiduciary-only rule.

January 2011: The SEC releases a staff study recommending a uniform fiduciary standard of conduct for broker/dealers and investment advisors.

March 2011: The DOL holds a two-day public hearing on its expanded fiduciary standard rule.

InsuranceNewsNet Magazine » August 2015

September 2011: The DOL withdraws the rule proposal.

March 2013: The SEC issues a Request for Data and Other Information: Duties of Brokers, Dealers, and Investment Advisors.

February 2015: The White House circulates the report “The Effects of Conflicted Advice on Retirement Savings.”

The DOL sends the rule to the Office of Management and Budget for review.

April: The DOL reintroduces its new fiduciary rule, which is followed by a public comment period.

May: The public comment period is extended from 75 to 90 days.

ble to fiduciaries under ERISA and the Code. If adopted, these proposals would allow certain broker/ dealers, insurance agents and others who act as investment advice fiduciaries to continue to receive many common forms of compensation that otherwise would be prohibited as conflicts of interest.

The proposed rule, and related exemptions, would increase consumer protection for plan sponsors, fiduciaries, participants, beneficiaries and IRA owners.

Of course, both sides disagree with their opponents’ position. Rule opponents say that without the exemptions, the ordinary Americans whom the rule is trying to protect will actually be harmed because advisors would refuse to take on low-networth clients. Proponents say that broker/ dealers and insurance agents just want to be able to hustle high-commission products to the most vulnerable consumers without interference.

A main reason why the DOL called

May: Financial Industry Regulatory Authority (FINRA) Chairman and Chief Executive Officer Richard Ketchum states support for a uniform fiduciary standard under the SEC and FINRA, and not under DOL.

August: The public hearing will be followed by publication of a hearing transcript, which typically takes about a month. After the transcript is published, an additional two-week comment period will open. The rule could be further revised based on the public hearing and the second comment period.

July 21: Public comments are due on the DOL rule.

2016: Thomas G. Gallagher, an analyst at Credit Suisse, said he expects the final rule to go into effect eight months after it is published.

Aug. 3: The agenda for a public hearing on the rule is to be published.

Aug. 10-12: The DOL plans a three-day public hearing on the fiduciary-only rule. The hearing will continue Aug. 13 if necessary.

End of 2016: President Barack Obama has said he wants the new rule in place before he departs the White House in January 2017.

WHEN ‘BEST INTEREST’ MIGHT NOT BE BEST FOR CONSUMERS INFRONT the proposal a “conflict of interest” rule is commissions. Some in the fee-only part of the fiduciary duty spectrum say that accepting commissions while giving financial product advice is “conflicted” because the advisor would be likely to recommend the highest-commission product without regard for the client’s best interest.

In fact, an internal White House email message from January that preceded the DOL’s proposal shows an extreme bias against commissions and the entire regulatory system overseeing the suitability standard, which is overseen by states and the Financial Industry Regulatory Authority (FINRA).

The message was in an email from members of the White House’s Council of Economic Advisors to circulate its memo in support of the then-pending DOL rule.

The message said that “consumer protections for investment advice in the retail and small plan markets are inadequate, and the current regulatory environment creates perverse incentives that ultimately cost savers billions of dollars a year.”

What are the “perverse” incentives?

The message makes it clear that the White House advisors prefer the direction other nations have taken, namely, “banning conflicted payments (also known as commissions) entirely.” They added that parenthetical note in case people did not understand that they meant commissions.

Besides leading advisors to push clients to higher-commission products, commissions also encourage churning to yield more payouts for the seller, according to the memo.

Of course, this position and the rule itself have been opposed by people covered by the suitability standard, but also by more neutral analysts who have taken the time to look at the evidence.

Fitch Ratings issued an opinion on July 7 that said the rule would limit consumer access to advisors and add unnecessary complexity to compliance.

“Limitations on commission structures could have a disproportionate impact on the sale or fee structures of investment and retirement products sold in the middle market, which generally tends to have more fee-sensitive customers,” Fitch said.

“Effectively, the rules may encourage some brokers to adopt advice-for-fee models for their advisors as a means of compensating them for the compression (or elimination)

of their commissions.”

Consumers would suffer, but sellers would lose in a number of ways. One of those ways is the vehicle of enforcement.

It would not be the DOL enforcing the rules, but consumers themselves through lawsuits.

That translates to lawyers looking for a big payday with massive litigation. Often it’s the lawyer who gets the big prize at the end of that process and the litigant who gets a small slice of the pie.

And who in the sales distribution channels are most affected by the rule? According to Fitch, it’s pretty much everybody, from insurance agents and broker/dealers on over to registered investment advisors

“Limitations on commission structures could have a disproportionate impact on the sale or fee structures of investment and retirement products sold in the middle market.”

– Fitch Ratings

(RIAs) already under the fiduciary standard.

That’s because everybody will have to jump through more hoops to show that they are meeting the best-interest standard.

Typically, those hoops are made out of disclosure forms that nobody reads but that salespeople need to get signed and filed anyway. Anybody disagreeing with the nominal value of disclosure forms should think back to when they bought a house.

So, along with broker/dealers and RIAs, annuities and life insurance agents and companies would endure a significant impact.

“Annuity products, arguably viewed by some investors as costly relative to lowerpriced products, could see fees pressured and/or commissions reduced under greater scrutiny,” according to the opinion.

“Adding to the challenge is the complexity of annuities, with guarantees that are difficult to value. Obtaining affirmations from clients that all features of any complex product are understood could become more common, but also burden the sales process and hurt volumes.”

That explains how the rule would reduce sales but not why it matters. The

lower-priced products typically don’t offer the kinds of guarantees that Americans need now. Where else but with an annuity would consumers get a reliable promise for an income they cannot outlive?

If they get a mutual fund, they are OK if they die the moment the last dollar is spent from the fund. The same goes for a certificate of deposit or any other financial product.

Is that in the best interest of the client?

Consumers are generally underestimating how long they will live. They are also not planning for their long-term care (LTC) needs. These two factors alone ensure that the wealth of millions of families will no longer go to the next generation but to the health care industry.

When individuals and families run out of money for LTC, who pays? Taxpayers, of course. As much as some demagogues like to portray Americans as benefitsucking vampires, the truth is that we are a country built on self-sufficient individuals.

Not only is public funding affected when people lose everything, but national pride suffers.

The publisher of InsuranceNewsNet, Paul Feldman, teamed up with the former head of the National Association for Fixed Annuities, Kim O’Brien, to start a new organization to advocate for annuity access.

The group is the Americans for Annuity Protection (AAP), and the DOL proposal is its main focus right now.

AAP’s website, aapnow.org, has set up a service so advisors and others can find their representatives’ contact information and help in crafting a message to them.

Visitors can also find access to a report that AAP commissioned from Jack Marrion, an annuity industry researcher. The report shows in detail the shaky foundation on which the DOL built its case for the rule.

Advisors and others in the industry have just a few more months to make their concerns known before the rule is formally adopted. After that, it is a matter of damage control.

Steven A. Morelli is editorin-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@insurancenewsnet.com.

August 2015 » InsuranceNewsNet Magazine

9

WARNING: Every Competing Advisor In Your Market W

New Media, Marketing And PR Program For In The Wall Street Journal, Appearances On Even Make You A Co-Author In A G

And Do It All In Th Hi, my name is Nick Nanton, CEO of the Dicks + Nanton Celebrity Branding Agency.

When I first started this agency 7 years ago I knew I needed to get the attention of busy and highly influential business owners all across the world. In order to do that I followed the advice given to me by my mentor and partner, JW Dicks — write a book.

Everything changed for me the minute that first book, Celebrity Branding You!® hit 7 Best-Seller lists the day it was launched back in 2008. The book opened doors. It led to opportunities. It allowed me to get into media outlets, events, private communities and most importantly, allowed me to tell my story.

A Best-Selling book armed with powerful mass media appearances help you to build trust when connecting with your market and are the most powerful tools you can insert into all of your marketing — from your website to your event invitations, your letterhead and business cards to special reports and shock and awe packages.

Over the past few weeks, JW and I have been going through our client list of successful financial advisors and top producers. We were looking at what this exclusive cream of the crop all had in common. After prodding and poking, we knew that there was a certain combination of Media, Marketing and PR that has proven to be the most effective.

“You’re really going to learn how to be a celebrity in your own right and not only with this program but a lot of the programs that this agency offers. I highly endorse the use of Dicks and Nanton. I think that what they are doing for those of us out there who are really separating ourselves from the crowd is unparalleled by anyone else.”

– Phil Cioppa Arbol Financial Strategy, LLC 10

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– Nick Nanton August 2015 » InsuranceNewsNet Magazine

11

An interview with Andrew Sobel

by Paul Feldman, Publisher

12

InsuranceNewsNet Magazine Âť August 2015

B

ASK AND YOU SHALL RECEIVE INTERVIEW

lah, blah, blah.

FELDMAN: Why are power questions Let’s face it — important? that’s what many sales presenta- SOBEL: It’s because the sales environtions sound like. ment has changed. I say this not just as If you’ve been someone who studies this and trains lots on the customer of professionals, but as someone who is a side of one, all target for lots of people who want to conyou can think nect with me and sell me things. Sophisof is when it will ticated buyers want to feel like buyers end. And if you are on the selling side and not like they’re being sold to. People of the table, you might be thinking the want to feel like they’re buyers because same thing. they’re educated now.

The way to convert a painful sales process into a powerful, productive conversation is to ask questions. Not just getting-to-know-you questions, although they are important. But getting Contact at the probing questions that provoke deep thought and produce real answers “We’ve met. for clients’ problems.

I think he works for...”

Questions are the cornerstone to building trust that leads to business, according to Andrew Sobel. He has made strategies to build trusted business relationships his life’s work. He has written eight best-selling books on the subTrusted ject, such as Building C-Suite Partner Relationships, Clients for “I view them as a long-term partner Life, Power Relationships and in growing our business. They’ve built many strong relationships with Power Questions. He has also our people, and they consistently published more than 150 artiadd value. I feel we get the best cles and contributed chapters that their firm can offer.” to four books on leadership, strategy and marketing.

Andrew has worked for more than 30 years as a strategy advisor to Trusted senior management and an execuAdvisor tive educator and coach. He has had “I’ve known him for a long time. many of the world’s leading comHe’s superb at what he does and panies as clients, such as Citigroup, has great business sense. I really Experian, Bank of America Merrill trust his judgment, and I will definitely use him as a sounding board Lynch, Towers Watson, UBS, Lloyds for tough issues.”

Banking Group, Ernst & Young, and Deloitte.

What he has learned and taught is that the best way to become trusted is to draw out clients’ or prospects’ deepest concerns or dreams. Who wouldn’t Anything we want to buy, we go on the want to be that kind of agent and advi- Internet and we research it. So, when I sor? And the best route there is through walk into Best Buy, as good as some of their the right questions. salespeople are, frankly I often know more In this interview with Publisher Paul about what they’re selling than they do.

Feldman, although Andrew is not only People really want to feel like a buyer, doing the answering, he is also presenting and questions are a great way to do that. some provocative questions that can im- It’s a fundamental part of the way you do prove just about anybody’s sales game. business with clients.

FELDMAN: Many people believe that they win sales by being quick on their feet and saying the right thing the right way. But you say that knowing the right questions is far more important to connect and persuade. Would you explain that?

SOBEL: Of course you have to be extremely knowledgeable about your subject matter and your products. But what makes people stop and listen is not when you are lecturing them or pushing some-

Acquaintance “I’ve known her for a while.

We have some things in common and know some of the same people.”

The 6 Levels of Professional Relationships

Expert For Hire “He’s very knowledgeable in that area and did excellent work for us on a project.”

Steady Supplier “We’ve had a relationship for a while now. She and her firm consistently deliver, and I’ve recommended her to a few colleagues. For this type of work we’ll continue to use them.”

thing on them, citing all the benefits of a particular product. It’s when clients or prospects think a little differently because of the thought-provoking questions you are asking.

Consider the greatest thinkers in history. Think of Socrates, who of course developed the Socratic method of teaching by asking questions. Or people like Einstein,

August 2015 » InsuranceNewsNet Magazine

13

INTERVIEW ASK AND YOU SHALL RECEIVE

Suggestions for Using the Socratic Approach

who had a very childlike sense of curiosity.

Or people like Peter Drucker, who is considered the greatest management thinker of the 20th century.

Peter Drucker had five questions he asked his CEO clients. Whenever a leadership team would come out to California to meet with Drucker for a workshop, he would walk them through five questions that he had developed.

Our greatest thinkers were all more focused on the questions that surface the important issues so that we’re talking about the right things. If you step back, you realize you can really come across as wise and experienced when you are asking good questions.

When you adopt the Socratic mindset, you approach almost every conversation differently. Here is a contrast that will help you understand this mindset:

FELDMAN: You said that you could overcome anything if you ask why.

What did you mean by that?

SOBEL: By way of background, the idea around “why” was developed by Toyota.

The company’s founder, [Sakichi] Toyoda, told his engineers they can diagnose any quality problem by asking “why” five times. Those were Toyota’s five whys. The point is when someone tells you something, usually there’s a higher-level issue that you really want to connect to.

Instead of:

You:

Telling

Ask thought-provoking questions

Being the expert

Invite others to contribute expertise

Controlling knowledge

Help draw out others’ experiences

Assuming meaning

Ask about the meaning of words

Mandating solutions

Solicit solutions from others

Showing how smart you are

Show others how smart they are

Analyzing

Synthesize and look at the big picture Sobel, Andrew; Panas, Jerold (2012-01-05). Power Questions: Build Relationships, Win New Business, and Influence Others (p. 32). Wiley.

Anyone reading this who has teenagers knows that as soon as you ask them “Why they did something, usually you’re saying, why did you do such a dumb thing? What were you thinking?”

But used the right way, “why” can be a powerful question. It broadens it from a technical discussion about

Your best friend, especially at the early stage, is curiosity. It’s a genuine abiding curiosity about other people. I like to start out with some icebreaker questions that are not going to be too deep and won’t upset anyone. An icebreaker question could be as simple as “Who are you?” or “Why did you come?” or “What’s your connection with this event?” that tells me what sort of business you’re in.

You’re just breaking the ice, but you’re making it about the other person. Always remember that the process goes something like this: We build some initial rapport that may lead to an additional meeting or additional points of contact, which creates familiarity, which may create likeability, which leads to trust, and then that can be the basis for a business transaction.

“The highest form of Human Excellence is to question oneself and others.”

— Socrates, 469–399 B.C. So, if a client says, “I want to set aside some money for my children’s college,” it may seem ridiculous to ask them why they want to do that. But you may want to ask him to tell you a little more about that: “Why did you decide to do that now? How does this fit into your overall thinking about the responsibilities that you want to have when you finally retire?” There are always bigger issues above the specific request or the specific desire.

So, “why” can be a very important question, but you have to be careful with it.

Why can come across as critical, carping or disapproving. You need to ask it with the right demeanor.

14

alternatives for saving for college to perhaps a larger discussion about that person’s goals and where they see themselves going.

FELDMAN: What are some “Power Questions” you recommend to break the ice and create new relationships?

SOBEL: First of all, let’s recognize that there’s a process. At one end, you meet someone for the first time. And at the other end, that has developed into a relationship where they’re a client. Obviously, a lot of things happen between those points, so we have to break it down.

InsuranceNewsNet Magazine » August 2015

FELDMAN: What’s the next step after you break the ice?

SOBEL: At some point, this conversation is going to shift to what you do, and here’s where it’s important to be able to describe that in a compelling way.

Someone can say, “I’m an insurance agent,” or they could frame that as a more appealing value proposition. Because if someone says to me, “I’m an insurance agent,” my first thought is probably going to

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INTERVIEW ASK AND YOU SHALL RECEIVE

Suggestions for How to Use This Question: “Why do you do what you do?”

be that I have all the insurance I need. So, I am thinking “It’s nice to meet you, but I don’t see a business relationship here.”

You can frame that differently around security or risk reduction and say: “I help people retire faster so that they can enjoy the things they want to do in life outside of work.”

That’s something just to think about because what you’re trying to do is get the other person engaged and excited. To get relationships and then drive those relationships toward possible business, you have to learn a little bit about the other person’s agenda. What are their top three to five important professional priorities and their three to five personal priorities?

We do things for many different reasons. But when you put “should” in front of those reasons, you can be certain all the pleasure and excitement will soon be drained away. You will not find passion associated with the word “should.” No one gets excited about should. In contrast, when you unveil the true “why” of someone’s work and actions, you will find passion, energy and excitement.

When to use the question When you want to understand what motivates and drives the other person.

To help re-energize other people about their vocation.

Alternative versions of the question “What are the most exciting parts of your job/of what you do? Why?” “What are you most passionate about in your professional life? Your personal life? Why?”

FELDMAN: Should you be addressing and uncovering their professional and personal priorities every time you speak?

SOBEL: Absolutely. But you don’t do this all in one conversation over cocktails.

I want to know their priorities because what I do may or may not be very relevant to their concerns. So, I’m trying to surface their concerns and learning something about what’s important in their lives. On the other hand, I want them to understand what I do and how I help people.

It’s going to be the marriage of those two that ultimately leads to a business relationship as opposed to just a nice-toknow-you relationship where you send a Christmas card every year. I do this by gently asking questions.

Follow-up questions “Why are you especially passionate about that?”

“What gets in the way of your satisfaction?”

“What would make it even more rewarding?”

Sobel, Andrew; Panas, Jerold (2012-01-05). Power Questions: Build Relationships, Win New Business, and Influence Others (p. 46). Wiley.

and then I turn to a question. The credibility part is the observation that several of my clients have undertaken this type of strategy in order to achieve a goal. Then the question is “Is that something you’ve considered?”

You build curiosity and, of course, curiosity is your most powerful tool in the sales process.

FELDMAN: How do you move from the initial conversation to a meeting?

FELDMAN: How do you turn a pitch into a highly engaged collaborative working session?

SOBEL: In order to pique their curiosity about meeting with you, you have to establish your credibility that you do some really interesting things for people just like them. One way to do that is to ask what I call a credibility-building question.

I don’t know the exact credibility-building question for insurance, but I would be asking something like, “A number of my clients who have large families like yours have looked at the following strategy as a very powerful way to dramatically reduce state taxes. I’m curious, is that something you’ve looked at?”

I state an observation, often referring to what other clients of mine are doing,

SOBEL: Most busy people don’t like to sit down and be presented to. They want to have a conversation. If you’re going to pitch a proposal to a client, think about it as having a conversation together. We’re going to have a conversation about this issue as opposed to my needing to pitch them on this proposal and walk them through every single aspect of it.

So, for example, I often will start a meeting by saying, “Our agenda today was to talk about this proposal, but from your perspective, what are the most important issues on your mind that you want to make sure we cover?”

I think most people don’t do a good

16

InsuranceNewsNet Magazine » August 2015

enough job of letting the client define where they’d like to focus the conversation. With one simple question, they’ll quickly say they read the proposal and what their concern is. It’s better to address that than waste half an hour of their time lavishly going through the slides of the spreadsheets that you’ve prepared.

Sometimes when I see a client, I’ll say, “I know we’ve got our little agenda here, but from your perspective what’s the most important issue we should be discussing this morning?”

The other thing I do early on is test for urgency, because people have lots of issues.

They have lots of concerns, but I always want to focus in on the ones that have the highest level of urgency. It could be as simple as, “Where would you position doing this among your priorities right now?” or “What is your timing on this?”

FELDMAN: What are some questions to get a deeper understanding of a client?

SOBEL: You might ask questions that increase personal understanding. Those kinds of questions often aren’t covered in sales training methodologies because increasing personal understanding doesn’t

ASK AND YOU SHALL RECEIVE INTERVIEW specifically have to do with the sales opportunity. It comes under the category of building trust and rapport with the person.

One question I like to ask is, “Wow! You’ve accomplished a great deal in your career. I’m just curious, is there still something you’d like to accomplish? Is there some dream you still have right now?”

I’ve asked some very senior executives that question and gotten incredible answers that help me understand them and help create additional opportunities to work with them.

FELDMAN: What are some other tips for connecting with the C suite?

SOBEL: One of the relationship laws in my book Power of Relationships is to walk in the other person’s shoes. If I’m meeting with a C-suite executive I’m thinking about what pressures they are under. The fact is, C-suite executives, people in senior leadership positions, are under a different set of pressures.

Turnover in those positions has accelerated. They’re time-starved. They’re under enormous pressure to perform. They’re struggling to balance their family life and their work life. And so you have to understand what that’s like.

In a C-suite meeting, focus on adding value for time. For top executives, their very first question to themselves is, “Am I going to get value out of taking half an hour out of my day to meet with you?”

Suggestions for How to Use This Question: “What are your dreams?”

This is a deceptively simple yet powerful question that most of us are afraid to ask, perhaps because we think it would be too intrusive. Maybe we are afraid of what the answer will be. Yet, everyone loves to dream, and we all have dreams. It can be a magical moment for others when you invite them to share their dreams with you.

When to use the question When you want to connect with and get closer to a loved one or friend.

When you want to help someone reconnect to their passion and their aspirations.

Alternative versions of the question “What things would you like to do in your life that you haven’t gotten around to yet?”

“If you had no constraints — children, money, your spouse’s job, whatever — what would you like to do?”

Follow-up questions “What would be most rewarding about that for you?”

“What could make that possible?”

“What’s getting in the way of doing that?”

Sobel, Andrew; Panas, Jerold (2012-01-05). Power Questions: Build Relationships, Win New Business, and Influence Others (p. 72). Wiley.

as an equal, which means you’re neither looking up to them nor looking down at them. You’re treating them as a peer or a friend. You’re not overly familiar, but you’re there as a peer because you’ve got very valuable knowledge that is going to help them. I think the third thing is it’s important to understand that C-suite execu-

which of course dates me, but it’s still a popular song. You know you have that great Keith Richards guitar hook that starts it out. Or the Beatles Help! You know the song starts out with this enormous cry for help.

You also want to be memorable in a meeting with a top executive because they meet with people all day. You might be the 50th person they’ve talked to that day, and you want to be memorable. You want them to say, “He asked me some interesting questions that no one else is asking me.”

You’ve got to take some risks.

When you meet with a C-suite executive, if you play not to lose, you lose. You have to play to win. You’ve got to be a little bolder because if you go in and you’re like, “Oh my God, we’ve got this meeting with the CEO of this company,” your tendency is often to play it safe, be anodyne, not rock the boat and not ask him too many challenging questions.

That’s often a losing proposition.

So, for example, in my context a challenge question might go something like this: A CEO might say, “Well, Andrew, we’re growing our client relationships 5 percent year in

You want to have an opening hook just the way a great rock song does.

You’ve got to have a very clear value proposition about what piques their curiosity to spend that time with you.

The next thing is to walk in as an equal.

If you walk in with your head stooped and you’re shaking their hands and saying, “Oh my goodness, thank you for your time. I know how busy you are. Thank you so much. I don’t know how you managed to make time in your busy day.” I’m exaggerating, of course, but you have to walk in

tives tend to process information in very short chunks.

Most C-suite executives don’t have the patience for a long drawn-out introductions as in someone spending five, 10, 15 minutes talking about something. They process things in three- or four-minute bits.

You want to have an opening hook just the way a great rock song does. Think about the Rolling Stones’ Satisfaction,

August 2015 » InsuranceNewsNet Magazine

17

INTERVIEW ASK AND YOU SHALL RECEIVE

Suggestions for How to Use This Question: “Can you tell me about your plans?”

and year out.” I might come back and say, “That sounds good but some of my clients are achieving 10 percent. Do you think 5 percent is the best you can do?” I’ll ask challenging questions like that.

Humility. The Indian spiritual leader Mahatma Gandhi said, “To discover the truth, one must become as humble as the dust.” You must believe you can learn from every person you encounter.

FELDMAN: Do you have any insight into what might be a challenge question in insurance or finance for an executive?

SOBEL: Top executives are always interested to know what other people are doing and what’s going on in the marketplace. So it’s being able to summarize very powerfully the critical things that have happened in the past 18 months that they need to know.

I’ll give you an example. I talked to some lawyers because my wife and I were redoing some of our estate-planning. One of the lawyers said, “Well, Andrew, let me summarize for you some of the trends in estate-planning among people like you who have your kinds of needs and family.”

He rattled off about five things. I read a lot and I’m pretty educated, but he told me a few new things. That drew my interest It was a great credibility-builder.

FELDMAN: What are some good closing questions?

SOBEL: I’ll give you one that I don’t think you should ask — one that starts on a negative. This guy wrote years ago that his killer question to ask at the end of a meeting was, “What question haven’t I asked you that I should have?”

I think the clients are too sophisticated for that today. Because what that question is doing is trying to say, “We’re really on the same side here and let me move my chair over to the same side of the desk as you and could you give me some advice on being a better salesperson?”

I don’t mean to be flip, but that’s a question I occasionally hear and I think it’s outlived its usefulness. I would be careful about cutesy things like that.

I would also be careful of presumptive close questions. I think you earn the business by adding value and showing how you can solve important challenges for the client.

I don’t like presumptive close questions like, “Is there anything getting in the way of your signing this today?” There are all 18

Curiosity. As we grow older, our curiosity dies. The average 5-year-old asks 200 questions a day. How many do you ask? Approach every situation with an intense sense of curiosity, and you will listen more.

Self-awareness. Your biases and prejudices will prevent you from listening to others. Women often make the decision about which new car to buy — yet, in a typical car dealership, the salespeople pay far more attention to the husband. Know yourself!

Sobel, Andrew; Panas, Jerold (2012-01-05). Power Questions: Build Relationships, Win New Business, and Influence Others (p. 120). Wiley.

kinds of questions like that. Or “For the next meeting, would you like to meet at 9 a.m. on Wednesday or would 4 p.m. on Friday be better for you?” Maybe I’m different from a lot of people, but to me I like being in control and that’s trying to take the control away from me.

FELDMAN: Those tactics can seem forced and controlling. But what do you recommend to make sure you get the next meeting?

SOBEL: The goal of every meeting is to get another meeting until you close. You create the follow-on by evoking their curiosity that you might be able to help do something unique for them or help them with something.

At the end of a conversation, I have a couple of techniques. One is more traditional, which is to say something like, “Based on this conversation, I get the sense that there are a couple of areas where you may have a need. I’d like to suggest as a follow-on that I prepare an analysis for you around issue X or issue Y that I think would help you make a better decision about it.” You suggest a follow-up step.

But the other way is to give control to the client. It’s a little riskier, but it can create “reach.” That is when they’re reaching toward you as opposed to sitting back in their chair and saying, “OK, show me how brilliant you are.”

It might be as simple as, “We’ve talked about three things today, A, B and C. From your perspective what would be a good follow-up to this discussion?” Now

InsuranceNewsNet Magazine » August 2015

some salespeople may be nervous about leaving it open-ended. In the worst case, the prospect might say, “I really don’t think I have a need.”

That’s possible. Or they might say they aren’t really sure. That’s a very different position than being aggressive and pushing something on them. They’re now reaching toward you, and that’s where I want the person to be. I want them leaning toward me, saying this was a helpful discussion and that they’d like to talk again.

I would just caution people against being overly scripted and sounding like they’ve got this list of memorized questions. Buyers your readers are calling on are much more sophisticated than they used to be. The salesman’s job used to be to inform people and give them product knowledge at the beginning.

Now it’s actually problem-solving. It’s “Tell me what you’re trying to accomplish.

Tell me your goals.” Then it’s helping solve the problem and create alternatives.

The No. 1 relationship law in Power Relationships is based on great conversations. It’s not one person showing the other how much they know.

That’s a two-way conversation as opposed to showing them how much you know about the insurance business or how much you know about financial planning.

So, we could leave it with that. You want to have a great conversation with someone that informs them, educates them, gets them interested and advances their thinking.

And it all starts with questions.

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-R.D.B., Ridgeland, MS August 2015 » InsuranceNewsNet Magazine

19

NEWSWIRES

ACA Challenges Not Over Yet The Supreme Court may have handed down a landmark ruling that health care subsidies are constitutional. But don’t think that the Affordable Care Act is free of legal challenges. Four other cases involving the ACA are working their way through the courts. Here’s a rundown: —House of Representatives v. Burwell: House Republicans are spearheading a challenge to some $175 billion the administration is paying health insurance companies over a decade to reimburse them for offering lowered rates to poor people.

—Sissel v. Health and Human Services Department: A conservative group claims that Congress imposed new taxes unconstitutionally when it created the ACA. —West Virginia v. Health and Human Services Department: West Virginia says the White House has undertaken a series of illegal changes and delays to the law.

—Contraceptive mandate cases: Dozens of religiously affiliated colleges, hospitals and other not-for-profit groups do not like the compromises the administration has put forward to allow women covered under these institutions’ health plans to obtain contraceptives at no extra cost.

BRINGING SEXY BACK TO INSURANCE

He wants to bring sexy back.

No, we’re not talking about Justin Timberlake. Hartford Financial CEO Chris Swift said the industry needs to shake up its image as part of his effort to draw young and diverse talent to his company.

“Our industry often gets knocked for being stale,” Swift said at a recent industry conference. “To borrow words from the great philosopher Justin Timberlake, we’re trying to bring sexy back to insurance.”

Swift said his company’s focus on developing technology to help the carrier deal with such hot-button issues as cyber security and climate change is one way Hartford is positioning itself to be more attractive to millennial employees. The open model floor plan in the corporate office is another bid for millennials’ attention.

Swift isn’t the only executive who has expressed the stereotype that the insurance industry is boring. Other leaders have also pointed to the dynamic naDID YOU

KNOW

?

20

THERE ARE STILL

18M

ture of insurance as a product that helps risk-takers throughout the economy.

“There are some who seem to believe insurance is boring,” Evan Greenberg, CEO of Ace Ltd., said in a conference call discussing earnings. “Well, nothing could be further from the truth.”

GENWORTH: WE’RE STILL IN THE LTCi BUSINESS

Genworth may be looking to sell its life and annuity business, but it will remain in the long-term care insurance market, said Chris Conklin, senior vice president, product design.

The potential sale would involve only one of Genworth’s companies — Genworth Life and Annuity Insurance Co. (GLAIC) — Conklin explained. “But we own multiple companies, including not only Genworth Life and Annuity Insurance Co. but also Genworth Life Insurance Co.,” among others. Some combo products are being sold by both Genworth companies, he said.

Also, he added, although the company is considering a possible sale of GLAIC, nothing has been decided. Regardless, “our

uninsured people who are eligible for coverage but have not purchased health insurance. Source: Kaiser Health News

InsuranceNewsNet Magazine » August 2015

QUOTABLE After 20 years of presenting estate planning for the alternative family seminars, I’m pleased to say that it’s no longer needed.

— Michael Wallman, managing director of the Wallman Financial Group in Winter Park, Fla., after the Supreme Court ruling on the legality of same-sex marriage

plan is to continue writing combo products” as well as other LTC product types.

To that end, Genworth plans to roll out a new individual LTCi product with lower pricing than on the existing design, Conklin said. In February 2016, it is planning to debut a new group LTCi product.

1/3 OF AMERICANS HAVE NO EMERGENCY FUNDS

The percentage of Americans who have no emergency funds reached a five-year high.

A Bankrate.com survey showed 29 percent of Americans have no funds for unexpected expenses like car or home repairs. And relatively few, just 22 percent, have enough savings to cover six months of expenses.

Adults under 30 were more likely than any other age group to have savings that would cover up to five months of expenses.

The report also found that 21 percent have some emergency savings, but not enough to cover three months of expenses, the lowest since 2012. Also, 15 percent have enough to cover between three and five months of expenses, the lowest seen in five years.

MOTHERS ARE THE MOST FINANCIALLY STRESSED EMPLOYEES

If mama ain’t happy, ain’t nobody happy — so the saying goes. A report from Financial Finesse shows that’s especially true in the workplace.

The survey showed 55 percent of women ages 30 to 55, with minor kids and household incomes less than $60,000 a year, report “high” or “overwhelming” levels of financial stress. That’s nearly two

[NEWSWIRES]

AMERICANS LOSING SLEEP OVER FINANCES

Americans are reporting sleepless nights — not because of lumpy mattresses or noisy neighbors but because of worry over finances.

A CreditCards.com report found that 62 percent of Americans said they are losing sleep because of at least one financial problem. That’s down from 69 percent in 2009 but up from 56 percent in 2007.

So what’s causing all the insomnia?

Saving for retirement leads the list of worries. The second-biggest concern is paying for education. Also staying awake at night are those who are fretting over health care bills and those who are having trouble paying the rent or the mortgage.

RETIRED BOOMERS COULD BE WORKING FOR LESS

Nearly two-thirds of baby boomers plan to work for pay in retirement, but they might be in for a surprise when those boomer

QUOTABLE I’m like, ‘Are we sure?’ Of course everyone was reading through quickly and following it at that point.

— Sylvia Burwell, Secretary of Health and Human Services, on learning of the Supreme Court’s decision in King v.

Burwell

What the Same-Sex Marriage Ruling Could Mean for Couples The Supreme Court’s ruling that legalizes same-sex marriage in all 50 states has implications far beyond the ability of couples to obtain marriage licenses.

With the Supreme Court ruling, spouses in same-sex couples will be eligible for Social Security benefits, and they will be covered under the survivor benefits rule for both defined contribution and defined benefits plans. If both spouses are American citizens, they are also able to use the unlimited estate tax marital deduction at death to pass assets to a surviving spouse without incurring federal estate taxes. They are eligible to pass unused estate tax exemptions, as well as any gift tax exemptions, to a surviving spouse.

Couples will also now be allowed to file federal tax returns using the “married filing jointly” or “married filing separately” options in order to receive state-level spousal tax breaks and benefits. dreams go bust in the workplace.

More than half of nonretirees would be willing to take a pay cut for their work in retirement; however, they are unrealistic about the compensation and work arrangements, according to a study commissioned by Bankers Life Center for a Secure Retirement. Two in 10 said they would be willing to work for much less, while 26 percent said they wouldn’t accept any pay cut. But the reality is that 53 percent of employed retirees make much less an hour than they did during their non-retirement years.

Almost all the poll-takers (94 percent) thought they should have special treatment in their older years, such as flex-time and telecommuting. But only a third of working retirees get any such arrangements.

HACKERS’ NEXT TARGET: RETIREMENT FUNDS?

There have been so many data hacks in the news within the past couple of years that the word of another hack is almost not news anymore. Whether they are hitting a major retail chain or infiltrating federal records, data thieves have been striking at the very heart of Americans’ financial lives.

DID YOU

KNOW

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and a half times the rate of 23 percent reported by all employees who completed a financial wellness assessment in 2014, and 40 percent more than similar-aged male parents in the same income group.

What’s bringing on this high stress level? A lack of a sense of control is a primary factor, with 84% of those facing overwhelming stress describing their current financial situation as “not under control.”

Who are the least financially stressed workers? Men under the age of 30, the survey said, noting that 26 percent of men in that age group reported having no financial stress at all.

16%

So watch out, because your clients’ retirement funds could be the next target of a data breach. While having online access to financial accounts, including banking and retirement portfolios, has increased accessibility to consumers, it has also increased the risk of fraud “significantly,” said Paul Martini, CEO of iboss Network Security, a San Diego network security provider.

The recent attack on the IRS used personal data such as Social Security numbers stolen in previous breaches, and cyber attackers are now “monetizing insight from personal information aggressively,” said Ben Johnson, a chief security strategist of Bit9 + Carbon Black, a Waltham, Mass., security company.

“Retirement accounts are squarely in their crosshairs,” he added.

IRA and 401(k) accounts are even more attractive targets for hackers, because most people do not track them the way they do their credit cards or checking accounts. The thefts could wind up being undetected for months.

of NFL players drafted between 1996 and 2003 DECLARED BANKRUPTCY within 12 years of retirement. Source: National Bureau of Economic Research

August 2015 » InsuranceNewsNet Magazine

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The moments Advisors share what inspires them to keep going forward while the industry looks at what inspires the next generation in the insurance business.

T

he worst day in Ryan Smith’s life turned out to be the day he found his mission in life in one of those transcendent moments that put ordinary people on extraordinary paths.

For Smith, that moment came as he peered into incubators holding his premature twins. One would hold on. The other would not be coming home with him and his wife, Katrina.

The couple, steeped in grief, looked around to see other parents enduring the same heartrending process. And here is the thing that separates them from almost everyone else: Instead of giving into their grief, they turned their sorrow into a way to help others.

This was a turning point that was a theme for many of the advisors who told us about their inspiration. The low points in their lives led them to the higher road of their future.

22

InsuranceNewsNet Magazine explored the topic of inspiration with advisors on all points of the age spectrum and in several different areas of practice. What inspires them to persist in this business?

Why do they get up every morning and do what they do? How do their life experiences carry over into what they tell their clients and prospects?

If you ever are at a loss for getting the conversation moving with a prospect or client, ask them how they got started in their current business or occupation.

Ask them why they continue doing what they do each day. The words will start to flow as they recall their own stories of inspiration.

Everyone has a “backstory” — a tale of how they arrived at where they are today and what incident marked a turning point in their life. For some, that turning point provides the fuel to continue propelling them forward in their profession.

InsuranceNewsNet Magazine » August 2015

Others are still looking for that “something” that will motivate them to continue making calls and seeking out prospects despite rejection and discouragement.

This is especially true of new advisors.

The topic of inspiration is crucial in getting new advisors past what Emily Tracey of LIMRA terms “that initial burnout period” — typically the first two years in the business.

Tracey, who is an analyst in LIMRA’s distribution research department, conducted a study of advisors age 40 and younger who have been in the business at least two years. The study attempted to find out what attracts young adults to the life insurance business and what motivates them to stay in the business. She found that young advisors are attracted to the profession mainly for the earning potential. But she was a bit surprised by what keeps those young advisors going — and it isn’t money.

INSPIRED TO SELL FEATURE

that changed advisors Young advisors “are very drawn to the fact that they can make a difference in people’s lives,” Tracey said.

After conducting in-depth interviews with the young advisors, Tracey said, “Something we got out of that was hearing that although they may have started with the goal in mind to kind

Ryan and Katrina Smith’s son, Grady, lived very briefly, but he inspired his parents to seek a higher purpose in their lives and work. of have that income potential, a lot of them said it’s extremely rewarding to see the difference that they’re making in people’s lives — and that has actually risen to the top as being the most important thing that they’re getting out of their careers.”

Tracey continued that many of the young advisors surveyed went on to tell

LIMRA that they were inspired by the clients they have helped. “It was people saying to them, ‘Because of you I was able to send my children to college’ or ‘Because of you, I can retire when I want to.’ ” Also inspiring young advisors, Tracey said, is the belief that although it can be difficult to start out in the financial services business, the eventual rewards are worth it. “They recognized they had to put in all that extra time at the beginning but it was going to pay off,” she said.

Ultimately, for the young advisors LIMRA surveyed, inspiration and passion go hand in hand.

“Our young advisors told us that the people who are going to succeed in this career should have a positive attitude and be a people person and just truly be passionate about building their career,” Tracey said.

Another LIMRA study, “Translate From Insurance To English,” revealed that advisors who suffered an unfortunate life event — such as the death of a parent or a spouse — frequently are inspired to use their experiences to help their clients protect their families from financial hardship.

In the case of one advisor LIMRA surveyed, her experience of having lost her husband at a young age “just adds that much more to her conversation with her clients, and she’s able to bring

that in and talk about the experience and how life insurance made a difference,” Tracey said.

Rod Rishel, U.S. Head of Life Insurance for AIG Consumer Insurance, has spent much of his career developing strategies to bring the next generation of advisors into the insurance world. He cited “empathy” as the factor that inspires and motivates young advisors to succeed.

“It’s really about putting somebody else first, trying to do the best thing for the client and letting that pay dividends in the long run,” he said. “The younger generation of advisors is not worried too much about hours worked per day or the paycheck but more concerned about ‘What do I do to help society?’”

Rishel said that his own family experience shaped the way he thinks about the impact that insurance products have on clients.

“My mother died at a relatively young age — she was 56,” he said. His mother had tried to do the right thing for Rishel’s father, but he said she had bought some insurance that was really not appropriate for her.

“I didn’t have the expertise at the time she bought it, but had I been involved at that time, she never would have spent the money on that product,” he continued. “So whenever I work on developing a new product or whatever the case may be, I think back to that and ask, ‘What if

August 2015 » InsuranceNewsNet Magazine

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FEATURE INSPIRED TO SELL it were my father or mother buying this product?’”

Rishel said there is a difference between those who ended up in the industry by what he called “happenstance” and those who made more of a conscious decision to enter the industry. But what keeps advisors from both of those camps inspired to persist in the business is when they say they know they are helping people.

“What keeps people in the industry is knowing that day in, day out — and this takes a long time — you know you’re doing the right thing,” he said. “It can take upwards of years, but then you experience delivering that first death benefit check. And you realize we deliver checks that people can use at the time they need it most, and that’s a powerful place to be.

That’s inspiring.”

Some advisors said they had a life experience that provided them with that moment of transcendence. Others credit a mentor who walked with them through a rough patch as being their reason for staying in the business. Still others said they are inspired by a client whose financial situation was made brighter as a result of an insurance benefit. No matter their age or where they practice, insurance professionals find many paths to inspiration. Here are some examples.

Ryan Smith

Turned heartache into hope Ryan Smith and his wife, whom we met earlier, rode a rollercoaster of emotions along their journey through infertility, premature birth and the death of their in24

fant son, Grady. Smith is a private wealth advisor with Mosaic Wealth Consulting in Erie, Pa. “What class do you go to or what book can you read to help you prepare to deal with infertility, to lose your baby and how you go on? How do you face the world?”

Smith asked as he recalled his emotions following the twins’ birth and Grady’s death. Gianna, who had underdeveloped

stories similar to ours, and we helped them — we prayed with them and we helped them heal and we helped them say that life was going to be OK. And so we started this concept of bringing love to families who have babies in the hospital.”

The Smiths established a nonprofit charitable organization, Grady’s Decision, in honor of their son. “Our foundation is called Grady’s Decision because it

“Right then and there in the hospital, we decided that we would start helping other families.”

– Ryan Smith

lungs as a result of her early birth, came close to death several times but ultimately survived. Grady, who weighed about two pounds at birth, had underdeveloped lungs and suffered from multiple brain hemorrhages before he had to be removed from life support.

“We have witnessed both the heartache of losing a child and the miraculous turnaround of a miracle that could only be explained that God still does miracles in this day and age. And so we got to witness something really bigger than us, and we don’t feel like we deserved it. We don’t feel like we are better than anyone. It’s just that we were caught up in a bigger story,” Smith said.

Even while dealing with their grief over losing Grady and their concern over Gianna, the Smiths noticed that other families were dealing with similar situations — worrying over dangerously ill babies or mourning for infants who left this world too soon.

“So at that moment we realized that other people were really struggling. We realized that there’s a lot of help for the babies who are in the hospital — there are doctors and nurses — but there really isn’t anything out there to support the families emotionally, spiritually and financially,” Smith said.

“Right then and there, in the hospital, we decided that we would start helping other families,” Smith continued. “There were a couple of other families who had

InsuranceNewsNet Magazine » August 2015

was ultimately Grady’s decision to let his life be about something greater than being on this earth,” Smith said.

More than $600,000 has been raised, and more than 600 families have been helped in the six years since Grady’s Decision had its start.

“We do things like pay for parking passes and gas cards and put families up in the Ronald McDonald House, and we try to remove all financial barriers so that they can just focus on their baby,” Smith said. “We see to it that if they have to take time away from work, their paycheck keeps coming so that they can just focus on loving their baby during this time. It would break our hearts to know that babies would pass away and the families couldn’t be there because the rent needed to be paid.”

“Our goal is to touch and bless as many families as we can with the resources that keep coming into our organization,” Smith said.

The impact on Smith’s business: Smith was a baseball coach before he entered the insurance business. He said that his family experience and his baseball experience have led him to consider himself less of an advisor and more of a financial coach for families.

His experience with Grady’s death has helped him emphasize to families the importance of life insurance — especially the importance of obtaining coverage for young children. Grady died before he would have been old enough to be covered by life insurance, Smith said, so the family had to dip into their own financial resources for his funeral expenses.

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FEATURE INSPIRED TO SELL “I just have a much deeper understanding of the death of a loved one and how that could absolutely wreck your life at that specific point in time, and the importance of life insurance and how it provides you time to heal,” he said. “Without life insurance, you have to get back to your normal life and your work, even though you’re hurting and need time.

“And so my experience allows me to speak on such a level about losing a spouse or losing a child or losing a loved one and what life insurance can provide to someone, because we didn’t have the ability to have life insurance on Grady,” he said.

Melissa Mlasko

Fighting for the client Melissa Mlasko said her family could have used someone to fight for them when her father was killed in an accident, leaving her 39-year-old mother widowed with two children to provide for. Mlasko is an advisor with Futurity First Insurance Group in Medford, Ore. It’s not that her father didn’t have life insurance. As Mlasko explained it, her father had life insurance coverage through his union, but his employment was seasonal.

During the off-season, the family relied on unemployment compensation and didn’t have enough money to pay the life insurance premium. At the time of Mlasko’s father’s fatal accident, her mother had mailed the check to put the life insurance coverage back into effect, but the check was not received in time to activate the coverage. As 26

a result, there was no insurance in place to help the family.

“They actually would have put the coverage back into place if they had received the check before he died,” Mlasko recalled. “I think it was $50,000. That would have made a big difference to my family back then.”

Mlasko said her family had no money to pay for a burial, and her mother had to return to school to gain the skills needed to provide for her children.

The impact on Mlasko’s practice: Mlasko said that her experience with her father’s death has inspired her to become an advocate for her clients.

One example of this is when she helped a married couple obtain Medicare Supplement coverage. “Then I helped them with some annuities for IRAs and talked to them about life insurance,” she said. “I came to find out that the wife’s life insurance plan through her employer was ending Dec. 31 because she was being terminated from her job.”

The wife also told Mlasko that she had been diagnosed with cancer and the prognosis was bad. Mlasko suggested that she explore whether the life insurance coverage could be extended past Dec. 31 if the wife paid the premium on it after that date.

“And so I called the carrier probably four or five times and got a different answer each time,” Mlasko said. “Finally someone told me that the coverage could be continued but it would cost $700 per month.”

“So I was lying in bed one night, worried about her situation,” Mlasko contin-

the group policies. So I called the carrier and was told there was no accelerated death benefit rider. And I said, ‘We would really like to look at the policy; we’d like to get ahold of the policy.’ And they said we could go ahead and get that from her employer.”

After obtaining a copy of the policy from the employer, Mlasko found that page 53 of the policy contained an accelerated death benefit rider. Mlasko helped the woman file a claim, which paid 90 percent of the benefit.

“My favorite thing in the world to do is to be an advocate for my client,” Mlasko said.

“I can be extremely aggressive in helping them get the benefits they are entitled to. I fight for them the way I wish that someone would have fought for my family.”

Kenneth Lindbloom

A near-death experience taught a lesson Kenneth Lindbloom has been a businessman since he was 11 years old and selling newspapers in his hometown of Lincoln, Neb. Lindbloom is

“My favorite thing in the world to do is to be an advocate for my client. I fight for them the way I wish that someone would have fought for my family.”

– Melissa Mlasko

ued. “And I was thinking, well, is there maybe an accelerated death benefit rider on it? And I know there’s not always with

InsuranceNewsNet Magazine » August 2015

the owner of Lindbloom Insurance Service in Urbandale, Iowa.

By the time he was 16, he had

FINALLY, WHAT YOU REALLY PREDICTIVE PROSPECTING NEED FOR YOUR BUSINESS: amassed enough funds to open his own checking account. Soon after that, his life changed forever.

“My dad was kind of a smart aleck, and one day when our insurance agent was at the house, the agent asked my dad, ‘Who do you know I can sell some life insurance to?’ And my dad just went ahead and pointed to me,” Lindbloom recalled. “We sat down and the agent explained that if something happened to me, $10,000 would be payable to my family to take care of my funeral and all that stuff. And it just appealed to me, so I bought it. Then I got into a car accident two years later and was unconscious for 28 days.” Lindbloom’s family came dangerously close to having to file a death claim on the policy that he had bought when he was only 16.

Lindbloom eventually recovered from his serious injuries and went on to college. But he found that despite working full time while he was attending school, he needed to earn more money. Enter the life insurance agent who sold him a policy years earlier!

“He stopped by to pick up the premium, and he said, ‘Well, you know you like this stuff; why don’t you sell it to your friends and relatives?’ You know, the old story,” Lindbloom laughed.

So Lindbloom left college and began his insurance career when he was 20 years old, servicing debit accounts for National Life and Accident. He returned to college and completed his degree at the age of 42. His insurance career included selling products for TIAA-CREF and serving “orphan” accounts with The Achievement Group, as well as owning his own agency.

The impact on Lindbloom’s practice: Lindbloom said he frequently tells the story of his near-fatal accident to prospects. He finds that the story serves as an icebreaker and it gives him additional credibility.

“I find when I tell that story, [prospects] just kind of sit back and relax, because they now know that I’m just not a hack out there trying to sell them something just to line my own pockets,” he said. “After I get them to relax, then they can open up and tell me what’s really going on in their life and what they’re looking for.”

“My experience taught me that these

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FEATURE INSPIRED TO SELL things can happen in a moment’s notice no matter who you are and what your age is and what you’re up to,” he continued.

“So you better be prepared for the future.”

Christine PikutisMusuneggi

Keeping it in the family To Christine Pikutis-Musuneggi, the insurance business is family. She, her husband, her mother-in-law and her cousin are in business together at The Musuneggi Financial Group in Pittsburgh.

Pikutis-Musuneggi said she had always been attracted to a career in finance. But two incidents that occurred in her family when she was young cemented her belief that all families need to plan for the future.

“When I was 9 years old, our family moved for the purpose of my mom being able to take care of her mom,” she recalled. “My grandmother had had a series of strokes when she was in her early 50s. She was a quadriplegic and couldn’t speak. My grandfather actually had to retire early as well to help take care of my grandmother. As I got further into finance, I realized that it would have been different if there had been some resources for my grandfather to take advantage of or even if they could have had longterm care insurance if it was available then. I began to realize that there were things that probably could’ve helped both generations a whole lot more.”

The grandmother had two brothers who owned a service station and a towing business that served motorists and truck28

ers traveling the Pennsylvania Turnpike.

“Eventually the brothers passed away,” Pikutis-Musuneggi recalled. “My mom and her siblings inherited the business, and other than pumping gas on the weekends or during the summer, they weren’t prepared to take it over and run it. So at that point they were the third generation to inherit the business almost by default. They ended up selling off the assets, having auctions, finding someone to buy the business. There was a lot of emotion involved. I was a 20-something at the time, and I thought all of that could have been prevented. There could have been a plan to keep the business in the family.”

The impact on PikutisMusuneggi’s practice: Families, and particularly family-business owners, are the focal points of PikutisMusuneggi’s practice.

“I spend a lot of my time looking for businesses to work with, working with business owners, doing their succession planning, specifically making sure they have life and disability insurance for themselves and their partners, and then also working with their 401(k) plans,” she said. “I work with the busi-

them to work, and I want to make sure they have a lot of savings on hand. And that’s cash in the bank; that’s keeping their bills low. I want to make sure that life can be as easy as possible if something were to happen to one of my clients.”

Jocelyn Wright

Empowering women financially Jocelyn Wright’s interest in financial services began when she was a young girl and always wanted to be the banker in Monopoly games. As she grew up, she

“... I thought all of that could have been prevented. There could have been a plan to keep the business in the family.”

– Christine Pikutis-Musuneggi

ness owner who needs to stop and pause and think about what happens to my business, what happens to my family when I am not here. If I can’t work, what happens to my employees?

“I prepare my clients for any kind of extended problem that’s not going to allow

InsuranceNewsNet Magazine » August 2015

learned that life is a lot more complicated than the game of Monopoly.

Wright has her own financial advising practice in Jenkintown, Pa., and serves as director of the State Farm Center for Women and Financial Services at The American College.

Wright’s financial services career has

had her working with people at both ends of the money spectrum. Her first job after college was working in the collections department of a credit card company, talking with people who had fallen behind in their payments. Later on, she worked in the private bank division of JP Morgan, managing the bills on behalf of ultra-wealthy clients.

But it was an experience in her family that taught her the importance of planning.

“When I was a sophomore in college, my grandmother passed away,” Wright recalled. “And I come from a relatively large extended family on my father’s side. All of our cousins are from the Philadelphia area, and we found out that she only had a $5,000 life insurance policy. Even in the 1990s, $5,000 was not enough to bury someone and certainly not someone who’s the matriarch of your family. And with our family being from the South, we had a service in Philadelphia and then took her body to South Carolina. So, as you could obviously tell, that $5,000 was depleted very quickly.

“I’m sure my parents and my dad’s siblings had to go into their own savings to make sure that the money was there to lay my grandmother to rest,” Wright continued. “And it just struck me: How many other families might this be happening to?”

The impact on Wright’s practice: Wright said her experiences with people in so many different financial situations have helped her relate to her clients.

But her grandmother’s death impacted her the most. “I just think about my grandmother and ask myself what can I do to help and continue to help families through that process,” she said.

Helping women clients — especially single women — is Wright’s passion. “A lot of advisors may not see the benefit in working with a single person,” Wright said. “We have needs, and in many cases those needs aren’t being met by the industry because they don’t always think we would be good clients.”

Wright also uses the story of her grandmother’s death to emphasize to clients the importance of having their affairs in order, so that their death doesn’t turn an emotionally stressful situation into a financially stressful situation for their families.

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FEATURE INSPIRED TO SELL

Katherine Durham

Finding inspiration overseas Katherine Durham said she is happiest when traveling with a passport into a culture that is unfamiliar to her. Durham is vice president of individual disability insurance and corporate marketing and communications for The Standard.

Durham’s curiosity about other lands inspired her to join the Peace Corps, where she taught school in Thailand. “I taught school in the middle of nowhere in a tiny little village,” she recalled. “I taught school in this room that had no walls, just a thatch roof and some poles and a dirt floor that got flooded during the rainy season.”

She said it was a remarkable experience that gave her a deeper perspective.

“I think the most profound thing that impacted me was that it was a very humbling experience. It was incredibly inspiring, and I took away how connected humans are.”

Durham’s marketing career began in the high-tech realm, but she soon became inspired by the “financial wellness” that she said insurance provides. “There is a huge need for that in our country where most people tend to not do a very good job of planning for themselves and for their families.”

The impact on Durham’s career: Durham said the time she has spent working and traveling in developing nations has taught her that different cultures have different views on money, but they all have the same needs and desires.

“I’m from a modest background, but by Thai standards, I lived like a queen,” she 30

said. “I hadn’t realized how lucky we are in this country — how many opportunities we have.”

She said she also learned that people all want fairly basic things: “We want a home We want family. We want to be able to pay for our food and shelter and those fundamental things. I think you can see how happy people can be when they are able to cover the basics.”

Durham said that concepts such as financial planning are difficult to understand in a country where most of the population is just trying to survive. “Back in Thailand nobody talked about their financial lives. They were trying to get through the day,” she said.

Robert Frank

Learning from his clients Robert Frank said he owes his longevity in the business to two things: his mentors and his clients. Frank, who lives in Salem, Ohio, had a long career with the former Equitable of Washington, D.C., and with Western and Southern Life before moving on to a career in teaching continuing education classes to insurance agents.

“Robert Truman was my first sales manager when I was with Equitable,” Frank recalled. “He took me out in the field. I traveled throughout the community, as we were a home service company, and I collected premiums as well as sold insurance. So I was in a lot of homes talking to people.”

Frank said that starting out was diffi-

InsuranceNewsNet Magazine » August 2015

cult but Truman encouraged him along the way. “He always said he would be there for me, and when I was hitting some hard times he would always say, ‘You have to pay your dues upfront and then the rewards will come later.’ He was right.”

Frank traveled around his community, visiting clients and prospects in his small town and the surrounding countryside. He soon found that he was inspired by the amount of trust that his clients placed in him.

“Eventually, I had second- and third-generation clients,” he said. “I didn’t know there were so many nice people in one area. They were not rich, but they treated me like family. Just listening to them telling me stories about their families and their hopes and dreams inspired me to do all I could to serve them. My clients would tell me things they wouldn’t tell their own families — such as what problems they were facing.”

Frank served many elderly clients who lived alone. When he stopped by to collect payments, he said, they often told him he was the only person who visited them.

“I didn’t serve a big-money type of clientele. These were people who go to work every day and take care of their families,” he said.

The impact on Frank’s career: Frank travels all over Ohio presenting CE classes to life insurance agents. Stories about his time spent serving small-town “Main Street” clients frequently illustrate the points he makes in teaching his students.

“I often tell my students about the support I had from my first sales manager and how that made such a difference in my career,” he said. “I also like to use a story from my time in the field to help my students grasp a more difficult concept that I am trying to teach in the CE class.

“One of the most important things I tell my students is something that was told to me, which is that it always comes down to the clients. Agents must always remember clients long after the sale is over.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@ innfeedback.com.

PREDICTIVE PROSPECTING FEATURE

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31

LIFEWIRES

Individual Life Combo Sales Increase 4% in 2014 Despite a drop in new premium collected, more in- Almost dividual life combination policies were sold in 2014 than in the previous year, according to LIMRA. Just under 100,000 policies were purchased in 2014, a 4 percent increase over 2013.

New premium collected fell 9 percent in 2014, compared with 2013 sales results, to reach $2.4 billion. Combination life products represented 12 percent of total new premium for the individual life insurance market in 2014.

“After several consecutive years of double-digit growth, new sales premium for combination products declined in 2014, while new policies continue to grow at a moderate pace,” said Catherine Ho, LIMRA product actuary. “The decline in new premium is mainly due to a shift from single premium products to limited pay products. This trend is seen throughout the U.S. individual life insurance market, and is not specific to combination products.”

100,000 Sold

NAIC OKs NEW IUL ILLUSTRATION RULE

“More realistic” guidelines for the illustrations insurers, agents and brokers can use in marketing indexed universal life (IUL) insurance products was approved by the full National Association of Insurance Commissioners (NAIC).

The decision clears the way for implementation of the new guidelines on Sept.

1. It is intended to address existing regulatory loopholes that allow companies to illustrate unrealistic rates of return for IUL products — in some cases, rates as high as 10 percent.

The guideline will result in what are called more reasonable illustrated rates below 7 percent for products. It will require that companies be able to support those rates for the life of the product.

Agents and advisors will provide illustrations to the customer that the insurance company produced for the agent or that the agent produced using company-approved software. The company is responsible for the format and content of the illustration.

DID YOU

KNOW

?

32

with downside protection and supplemental income potential, as well as life insurance protection.

In addition to offering clients more than 80 market-driven variable investment options from the Lincoln Elite Series of Funds, Lincoln AssetEdge VUL offers three indexed accounts for moderate growth potential with guaranteed downside protection, and a fixed account for more conservative, predictable growth. Clients have the ability to adjust investment allocations over time to align with changing needs and financial goals.

AIG announced it has repriced its flagship term life insurance product, AG Select-a-Term, issued by American General Life Insurance Company (AGL) and The United States Life Insurance Company in the City of New York (U.S. Life).

SYMETRA LOOKING TO EXPAND

Symetra Financial isn’t exactly a household name, but it plans to move into the big leagues soon. Company officials said they plan to make Symetra a national player in all three of its divisions — individual life, benefits and retirement — in the next five years.

To attack the three different markets and expand its business, Symetra has rolled out new retirement and life insurance options and expanded its network of broker agents who sell Symetra’s plans.

Symetra is not a direct-to-consumer company; all its plans are offered through agents and banks.

Since going public, Symetra’s revenue has increased 16 percent to $2.2 billion and its profit has increased 31 percent to $254.4 million.

NEW PRODUCTS LIGHT UP THE SCENE

New products are lighting up the scene this summer. Here are some of the details: Lincoln Financial announced the next generation of its Lincoln AssetEdge variable universal life (VUL) insurance offering, featuring expanded investment options for tax-efficient cash accumulation

Anthony Anderson, star of the ABC-TV comedy “Black-ish,” has been named the 2015 celebrity spokesperson for Life Insurance Awareness Month in September.

Source: Life Happens

InsuranceNewsNet Magazine » August 2015

In addition, AGL and U.S. Life plan substantial underwriting changes to give distribution partners and customers more competitive offers — in less time.

AG Select-a-Term features a mix of flexibility and reach: guaranteed level term coverage for 17 durations, including 10-year and 15- through 30-year terms. Issue ages and durations make coverage available until age 95 for older clients. AG Select-a-Term remains convertible to the earlier of age 70 or the end of the level term period.

Voya announced that its employee benefits business has launched a newly designed group term life product, offering employers increased ease and flexibility when providing life insurance options to their employees.

The enhanced features include a variety of coverage options and benefits for employees. Through an optional rider, insured employees may be eligible to receive a portion of their benefit if they should become permanently confined to a health care facility. This benefit can be paid on a monthly basis, providing a stream of income for employees or their family.

Let’s

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Call our Life Sales Support Team today: 1-888-413-7860, option 1

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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.

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

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August 2015 » InsuranceNewsNet Magazine

33

LIFE

Power of Substitution Leverages Potent Life Insurance Strategy grantor trust can use substiA tuted cash for tax-free guaranteed survivor universal life insurance that benefits heirs and offers a great internal rate of return.

By Russell E. Towers

I

rrevocable trusts have been structured for many years as “grantor” trusts for income tax purposes while still maintaining tax-free status for estate tax purposes.

A number of favorable Internal Revenue Service rulings over the years have solidified the irrevocable grantor trust “power of substitution” concept under Internal Revenue Code Section 675(4) (C). This concept allows a grantor to substitute assets of equal value for assets already in the trust without causing any of the asset value to be included in the gross estate for estate tax purposes.

How can this string of positive rulings from the IRS be used from a practical estate planning point of view to improve wealthy estate owners’ plans?

Keep in mind that the trustee of an irrevocable trust has a fiduciary obligation to ensure that any “substituted” assets are of equal value to the assets already in the trust.

34

Let’s look at a hypothetical wealthy client and their estate profile.

The client has a gross estate well in excess of the estate tax exemption (currently indexed in 2015 to $5.43 million for a single individual and $10.86 million for a married couple) so that the excess is subject to a 40 percent federal estate tax rate plus state death taxes in many Northeastern states.

Over the years, the client has made significant gifts of capital assets in a gain position to a “grantor” irrevocable trust to remove future appreciation from the gross estate. The “grantor” irrevocable trust contained a Section 675(4)(C) “power of substitution” clause. The gifts were lifetime gift tax exemption gifts (currently indexed in 2015 to $5.43 million for a single individual and $10.86 million for a married couple). Form 709 U.S. Gift Tax returns were filed to document the gifts and their value.

These gifted capital assets were real estate, publicly traded securities, and shares in privately owned S corporations or limited liability corporations. Under IRC Section 1015(a), the adjusted cost basis of these lifetime gifts “carries over” and remains the cost basis for any future sale of those capital assets by the trust. This contrasts with capital assets included in

InsuranceNewsNet Magazine » August 2015

the gross estate at death, which would get a “stepped-up” basis to date-of-death value under IRC Section 1014(a)(1).

The client kept a part of their investment portfolio liquid in the form of significant money market account or bank holdings.

Given this estate profile, are there any recommendations that could be made to improve the estate plan using the Section 675(4)(C) “power of substitution” clause of the grantor’s irrevocable trust?

The grantor and their trustee could consider transferring money market cash to the trust as a substitute for a portion of the capital assets currently held by the trust. This cash would have to equal the appraised fair market value of the capital assets now held by the trust. The capital assets would be returned to the grantor estate owner and ultimately would be included in the gross estate at “stepped-up” basis value for capital gains purposes for the estate owner’s heirs.

The substituted cash could be used by the trustee to buy a single pay or annual pay no-lapse guaranteed universal life (UL) or no-lapse guaranteed survivorship universal life (SUL) policy owned by the trust. The leveraged death benefit of this policy would be income-tax-free and estate-tax-free, and would provide an

August 2015 Âť InsuranceNewsNet Magazine

35

LIFE POWER OF SUBSTITUTION LEVERAGES POTENT LIFE INSURANCE STRATEGY excellent guaranteed internal rate of re- basis of the lifetime exemption gifts to low-interest-rate environment for fixed turn (IRR) at life expectancy. the trust ($5 million minus $500,000 cost financial assets and a significant imLet’s take a look at an example of how basis = $4.5 million potential capital gain provement over the close to 0 percent this may be beneficial to a wealthy client x 25 percent capital gains tax = $ 1.125 current yield on money market accounts. who has an estate asset profile similar to million).

As an alternative, the $5 million of the one described earlier.

The trustee uses the $5 million of sub- “substituted” cash could be invested by The client and spouse are each 67 years stituted cash to purchase a single-pay the irrevocable trust in a portfolio of old and have a gross estate in excess of no-lapse SUL policy with a face amount investments. Some of the interest, divi$30 million. They made lifetime exemp- of $17.449 million (on a man and a wom- dends or capital gains could be used to tion gifts of capital assets to a “grantor” an, both age 67 and both rated preferred) pay an annual no-lapse premium for an irrevocable trust over the SUL policy instead. Since years totaling $5 million with the trust is a “grantor” trust an original cost basis of only for income tax purposes, the $500,000. This $500,000 cost grantor will report any inA number of important IRS revenue rulings permitted “grantbasis “carried over” to the come on their personal Form or” trusts and the “power of substitution” concept: trust for purposes of any fu1040 U.S. Income Tax return Revenue Ruling 85-13 was the first ruling that stated a grantture sale, in accordance with during their lifetime. This or of an irrevocable trust would be treated as owner of the IRC Section 1015(a). Form payment of income taxes on trust assets only for income tax purposes but not for estate 709 U.S. Gift Tax returns trust income indirectly will tax purposes. were filed in a timely manner reduce the grantor’s estate for In Revenue Ruling 2004-64, the IRS ruled that a grantor’s as these capital assets were estate tax purposes. So, the payment of income taxes on investment income of assets gifted. full gain on trust investments held in an irrevocable trust was not a taxable gift to the trust.

Subsequently, the clients will be retained by the trust The IRS, in Revenue Ruling 2007-13, determined that a transsold other personally owned and could be used to pay the fer of a life insurance policy from one irrevocable grantor investment real estate. The annual SUL premiums. trust to another irrevocable grantor trust would not violate net after-tax cash received For example, a $200,000 the transfer-for-value rule. The death proceeds retained their on the sale was $6 million, annual premium (4 percent income-tax-free character under IRC Section 101. which was deposited into a rate of return on $5 million Revenue Ruling 2008-22 was the first ruling to outline how money market account. trust principal) could pura grantor trust with a Section 675(4)(C) “power of substituTheir “grantor” irrevocachase $13.524 million of tion” clause could be used so that a grantor could substitute ble trust holding the gifted SUL no-lapse protection on assets of equal value for assets already held by the grantor’s capital assets has a clause the same 67-year-old couple irrevocable trust. The ruling stated that the trust assets would that permits asset substirated preferred as was illusnot be included in the grantor’s gross estate as a retained life tution under IRC Section trated in the single-pay sceinterest under IRC Section 2036 and would not be included 675(4)(C). nario described earlier. The as a power to alter, amend or revoke under IRC Section 2038.

Here is what we would IRR at joint life expectancy Finally, Revenue Ruling 2011-28 ruled that the Section 675(4) recommend to take advan(23 years) is 8.20 percent. In (C) “power of substitution” would not cause life insurance tage of the “power of substia 30 percent tax bracket, the owned by a “grantor” irrevocable trust to be included in the tution” clause. pretax equivalent is 11.71 gross estate as an “incident of ownership” under IRC Section First, we would have the percent.

2042(2). grantor transfer $5 million in The client described in this cash by “substitution” from article has avoided significant the money market account into the trust. from a competitive carrier. The policy is capital gains taxes for their heirs by using The cost basis of this cash is $5 million. a modified endowment contract (MEC) the “substitution” technique allowed for Then the trustee transfers $5 million of under IRC Section 7702A, but death “grantor” trusts under IRC Section 675(4) capital assets that were originally gifted benefits of MECs are still income tax- (C). And the “grantor” trust has used the to the trust back to the grantor to com- free under IRC Section 101(a)(1). The substituted cash to purchase tax-free plete the “substitution” transaction under death benefit is also estate tax-free based guaranteed SUL life insurance that proSection 675(4)(C). on the rationale of Revenue Ruling 2011- vides not only a benefit for the heirs but a If the grantor holds these returned 28, which held that a Section 675(4)(C) great IRR at joint life expectancy. capital assets until death, there will be a “power of substitution” will not be con“stepped-up” basis to date of death val- sidered to be an “incident of ownership” Russell E. Towers, JD, CLU, ChFC, is vice president of ue, according to IRC Section 1014(a)(1). under IRC Section 2042(2). business and estate planning Assuming a 25 percent combined capiThe guaranteed IRR on the SUL pol- with Brokers Service tal gains tax bracket, this potentially will icy at joint life expectancy (23 years) is Marketing Group. Russ avoid at least $1.125 million of capital 5.58 percent. In a 30 percent tax brack- may be contacted at russ. gains taxes for the grantor’s heirs when et, the pretax equivalent is 7.97 percent. towers@innfeedback.com. compared with the original “carry-over” This is truly outstanding in the continuing

Pertinent IRS Rulings

36

InsuranceNewsNet Magazine » August 2015

Instant Decision Final Expense eApplication paperwork amendments hold times

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Eagle Premier Series (Policy Series 281/283) is underwritten by Americo Financial Life and Annuity Insurance Company (Americo), Kansas City, MO, and may vary in accordance with state laws. Some products and benefits may not be available in all states. Certain restrictions apply. For agent use only. Not for public use.

August 2015  InsuranceNewsNet Magazine 15-109-1 (06/15) Š Americo

37

LIFE

The Perfect Blend for Mass Affluent Needs he right blend of permanent T and term life insurance, combined with long-term care benefits, can provide financial protection for a multitude of client needs.

By Erik Dullenkopf

M

embers of the “mass affluent” — those with investable assets of between $100,000 and $1 million — are generally considered to be more sophisticated at planning their financial futures, and they typically rely on assistance from financial advisors. It also is assumed this cohort recognizes that a diversified approach to investing helps limit volatility and risk.

What seems to get overlooked, however, is the diversification of their approach to overall financial planning. In this situation, the best practice is to encourage clients to pair growth strategies with the right protection products, such as life and disability insurance policies.

The results of a recent poll conducted by the MetLife Premier Client Group suggest that protection products, such as life insurance, are underused by the mass affluent. Even more alarming, someone’s income stream is far and away their most valuable asset, yet many are reluctant to think about the possibility that injury or illness could easily prevent them from earning a paycheck, dramatically affecting their future savings. Planning for one’s death or disability is a very difficult emotional hurdle, but it needs to be done. In fact, the U.S. Social Security Administration says that more than one in four of today’s 20-year-olds will become disabled before reaching age 67.

The MetLife Financial Planning Perspectives Poll surveyed adults identified as mass affluent and provided a glimpse into their mindset. The results indicate that there is still work to do when it comes to educating investors on how to implement a well-rounded approach to long-term financial planning.

38

Blending insurance products — permanent, term and LTC insurance — prepares the client for any outcome.

» Seventy-two percent of respondents

said they have a financial plan in place and believe they are on the right track, yet 55 percent said that protecting their assets and growing their assets were not equally important to them.

» Roughly two-thirds of those surveyed

don’t know exactly how much coverage they should have in place when it comes to life insurance, disability insurance and annuities.

» Nearly 75 percent of those surveyed are

participating in retirement and savings plans, yet a much smaller number of people have invested in protection products such as long-term care insurance (34 percent) and disability insurance (32 percent).

The Conversation

The results of this poll are troubling, but not surprising when I recall interactions I’ve had with my clients. For many, discussing a potential calamity is a painful conversation, but addressing these topics helps explain the importance of implementing defensive planning strategies.

So, how do you start an uncomfortable conversation like this? It helps to take a compassionate yet logical approach. It’s a good idea to ask for permission first, recognizing the difficulty of what you are about to say. But let the client know that they need to do this for the sake of their financial plan and their family’s needs.

In the end, the client will be relieved that they have addressed any potential pitfalls and won’t have to think about it again for a while.

First, I go through a fact-finding stage in order to paint the full picture of a client’s current financial situation and what it would look like during a hardship.

What would the surviving family members’ financial situation be if their loved one passed away? What are the monthly monetary needs of the spouse and children (bills, expenses, etc.)? I lay out likely

InsuranceNewsNet Magazine » August 2015

scenarios and detail those costs so that the client can start to map out what to expect.

This approach helps the client find a place of peace with their family and their livelihood as well as relief in sitting down and getting these issues addressed.

The Solution

Let’s assume that, based on our fact-finding process and analysis, the client needs $1 million of insurance to maintain their current standard of living. I’d then start by educating them on the pros and cons of term and permanent insurance.

Term insurance is less expensive, so the client can buy a larger policy, but they might outlive that term and never realize

THE PERFECT BLEND FOR MASS AFFLUENT NEEDS LIFE a monetary benefit. That could be considered a downside for some people.

Permanent insurance policies are designed to last throughout a client’s entire life. The benefit will be there when they pass away, whether that is tomorrow or in 40 years. This is certainly a more attractive option, since the client knows they are getting a definite payout to their beneficiaries. But that certainty comes at a cost, which is significantly higher than the cost of term life insurance.

An innovative solution is to blend permanent and term insurance. Let’s suppose the same client buys $250,000 as permanent insurance and the remaining $750,000 as term insurance. They’ll have $1 million in coverage starting tomorrow and for the next 30 years. After 30 years, presumably when the client has fewer expenses (no mortgage or children living at home), the term insurance drops off and goes away, but they have the remaining $250,000 permanent insurance for the rest of their life. This approach helps alleviate some of the uncertainty of life insurance while keeping the costs in check.

The same approach can be taken with

long-term care insurance (LTCi). Traditional LTCi is a pure insurance product, like auto and homeowners coverage. If your house never burns down, you certainly are happy it didn’t. But if it does burn down, you’re relieved that you had insurance. Unfortunately, when it comes to our own lives, it’s tough for some people to make that comparison.

To further complicate the matter, clients typically consider LTCi during a time in their lives when they are getting ready for retirement. The cost of the premium, the uncertainty that they will ever need it, and the possibility of the premium increasing make LTCi an unattractive product at face value. Soon-to-be retirees typically are more focused on their projected income streams from savings, investments and Social Security. The added expense and uncertainty over LTCi is often too much to ask of those who are thinking about how they are going to fulfill their retirement needs, even though they know they are vulnerable without the coverage.

This is where hybrid life insurance-LTCi policies come in. This blended product allows the client to get a significant advance

on their death benefit for use toward longterm care later in life. It takes much of the uncertainty out of the product because the client knows the premium isn’t going to increase. For example, if a client has a $200,000 life insurance product with an LTC rider on it and they use only half of that amount, the other half is not lost; it is passed on in the form of a death benefit to their named beneficiaries.

These newer products alleviate some of the variability and uncertainty that make life insurance and LTCi unattractive to the consumer. Blending insurance products prepares the client for any outcome. I’m confident that solutions will continue to be introduced to address investing consumers’ needs, but it’s up to us as advisors to communicate the benefits of these products properly to our clients.

Erik Dullenkopf, CFP, is based in Ventura, Calif., and is a financial advisor with the MetLife Premier Client Group. Erik may be contacted at erik.dullenkopf@ innfeedback.com.

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August 2015 » InsuranceNewsNet Magazine

39

ANNUITYWIRES

Johnson Spreading Some ‘Magic’ Into the FIA World Earvin “Magic” Johnson retired from a legendary career with the Los Angeles Lakers to establish a business empire. Now his special combination of business expertise and celebrity pixie dust is moving into the annuity world. Johnson has acquired more than 60 percent of EquiTrust Life from Guggenheim Partners.

The deal gives Johnson’s firm — Magic Johnson Enterprises (MJE) — controlling interest in EquiTrust, which writes annuity and life insurance through more than 20,000 independent agents nationwide. The company is based in Chicago, with operations in West Des Moines, Iowa.

According to MJE, Guggenheim will continue to provide investment management services for EquiTrust.

ANNUITY SALES IN BANKS FELL 10%

Declining sales of fixed annuities was a major factor in a 10 percent drop in the sales of annuities in banks during the first quarter.

“Sales of variable annuities in the bank channel grew 5 percent, but the increase was not enough to compensate for the bank channel’s drop in fixed annuity sales,” said Betty Moon, managing director, Bank Insurance and Securities Research Associates (BISRA).

Fixed annuity sales were down 22 percent in banks in the first quarter, compared with the prior year’s first quarter; yet sales levels remained steady with results from the fourth quarter of 2014. The BISRA study found that annuity sales in banks totaled $8.6 billion in the first quarter.

NEW PRODUCTS

New annuity products are heating up the summer. Here are some of the latest.

Pacific Index Dimensions, a new fixed index annuity (FIA) launched earlier this month by Pacific Life, is the company’s new FIA designed specifically for distribution by Pacific Life’s Producer Alliance Program, a distribution channel launched three years ago.

Adding the Producer Alliance Program DID YOU

KNOW

?

40

16

channel has made Pacific Life’s products available to a broader range of retail financial professionals, who benefit from a higher level of service to help sell the company’s fixed annuity products, Pacific Life said.

Index Dimensions is available only to independent insurance agents and agencies that contract with Pacific Life through the Producer Alliance Program.

Athene introduced a new series of fixed indexed annuities, Athene Performance Elite annuities. Athene Performance Elite Plus combines accumulation potential with optional liquidity features (for a charge) that are among the most robust in the industry.

Athene Performance Elite fixed indexed annuities feature a premium bonus along with several indexed interest crediting strategies that offer the potential for growth through interest credits linked to the performance of an external market index. While it’s possible to receive zero percent interest in any crediting period, these strategies guarantee that clients will not lose money due to market risk or losses.

GEN Y INTERESTED IN, BUT UNFAMILIAR WITH, ANNUITIES

When it comes to planning for retirement, Generation Y is interested in devoting a

insurance companies are now selling QLAC variations, up from just four in 2012.

Source: Reuters

InsuranceNewsNet Magazine » August 2015

QUOTABLE In a lot of respects, this is the golden age of annuities.

— Jack Marrion, CEO of the consulting firm Advantage Compendium

portion of their retirement savings to an investment that will provide a monthly payment for the duration of their retirement.

That’s according to a TIAA-CREF survey that also showed despite Gen Y’s strong desire for guaranteed monthly income, 72 percent of those in that age group are unfamiliar with annuities, and 62 percent say they don’t know if their retirement plan even offers an option for a monthly payment in retirement.

SURVEY SHOWS A GENERATIONAL RETIREMENT DIVIDE

The “generation gap” persists even in the world of retirement planning.

Two out of three Americans (66 percent) expect to be stressed about money in retirement based on how they are currently saving, according to a survey by Bank of America and Merrill Edge.

The latest report reveals that people with the most time to prepare for retirement — Generation X and millennials — are most likely to anticipate a financially rocky retirement, while those who have already retired are less likely to feel anxious about money today.

Respondents are most likely to feel that stress would be placed on their finances by unexpected health care costs (65 percent), followed by lack of Social Security funds (38 percent) and taking a loan from a 401(k) account (25 percent).

Generationally, more seniors (77 percent) and baby boomers (66 percent) agree that unexpected health care costs would put stress on their finances, in comparison with 55 percent of Gen Xers and half (50 percent) of millennials.

LET

be your voice for all things fixed annuity!

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 Create the best sales and education resources to help you keep on top of your field  Follow the news in the main stream media and trade publications to track (and respond to!) the good and the bad articles about fixed annuities

NAFA does this and much more every day!

NAFA also enriches its members by providing:  Influence  Professional Growth  Financial Benefits  Recognition

 Personal and Professional Enrichment  Insider Knowledge  Opportunity to Make a Difference

Join NAFA NOW to activate your benefits and support your profession. By doing so, you’ll receive a first-year discount of $99 courtesy of your IMO or Carrier.

Go to NAFA.com/membership to become a NAFA member.

August 2015 » InsuranceNewsNet Magazine

41

ANNUITY

Small Percent Look to Safety of Annuities, But Interest Grows A lthough Americans say they are interested in what annuities can do for them, a large percentage still have no money saved for retirement and are unsure what to do about it.

By Linda Koco

S

lightly less than one-tenth (9 percent) of Americans of all ages do “expect to be able to rely” on an annuity for part of their retirement income, and 43 percent are somewhat or very interested in the features that annuities include.

But 26 percent have no money saved for retirement, and 12 percent are not sure 42

about what sources of retirement income they can expect.

The findings come from a survey by the Indexed Annuity Leadership Council (IALC), a trade group that focuses on education about retirement savings in general and on fixed index annuities (FIAs) in particular.

The survey results indicate that annuity purchasing and thinking do have a foothold among consumers.

However, the industry needs to do more financial education so that more people will save and build a balanced retirement nest egg, according Jim Poolman, IALC executive director. That nest

InsuranceNewsNet Magazine » August 2015

egg could include alternative products like annuities. “We’ve been talking about this for a long time, and we need to continue to do that,” he said in an interview with InsuranceNewsNet.

About the Annuity Foothold

Conducted by GfK’s KnowledgePanel, the survey sampled views of more than 6,800 people. The personal net wealth of those surveyed ranged from none (14 percent were in debt) to $1 million or more (5 percent), with more than a third in the $25,000 to $500,000 range.

That nearly one-tenth of the total group intends to rely on an annuity for

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August 2015 » InsuranceNewsNet Magazine

43

ANNUITY SMALL PERCENT LOOK TO SAFETY OF ANNUITIES, BUT INTEREST GROWS

The encouraging news is that consumers, including younger consumers, definitely are interested in retirement savings accounts that have features typically found in annuities. retirement income shows that annuities are being seen as a retirement income vehicle, and not just an accumulation product.

The annuity joins several other retirement income sources that consumers said they expect to receive. These include the usual front-runner, Social Security (68 percent). Others include personal savings (43 percent), 401(k) plans (42 percent), pensions (32 percent) and other personal investments (32 percent).

Notably for annuity professionals, the percentage of those who listed annuities, although a smaller percentage overall, increased by age group. For instance, nearly one-fourth (24 percent) of people ages 70 and older named an annuity as an income source they expect to rely upon. By comparison, only 4 percent of those ages 3550 and only 2 percent of those ages 18-34 said the same.

How close someone is to retirement age is the main reason for some of the age differentials, Poolman pointed out. Younger adults are much farther away from retirement than are older people, and they also have other priorities to focus on.

However, the more that younger people understand the time value of money — a byproduct of financial literacy — the greater will be their interest in, and reliance upon, retirement savings products like annuities and savings in general, he predicted.

The differential between age groups also may reflect a lack of awareness of the annuity’s role in retirement income.

In general, the expected income sources that consumers named indicate that there is a “certain amount of financial literacy — and illiteracy” in the survey 44

group, particularly at the older ages, Poolman said. The goal should be to have people “become more (financially) literate earlier in life, so that they can plan earlier,” he said.

Interest in Annuity Features

The encouraging news is that consumers, including younger consumers, definitely are interested in retirement savings accounts that have features typically found in annuities, including FIAs, according to Poolman.

The researchers tested this in a question that intentionally did not use the word “annuity.” Instead, they asked the person to gauge their interest in accounts that: allow contribution of a set monthly amount, yield guaranteed payments throughout retirement regardless of stock market performance, and are guaranteed not to lose money.

All told, 43 percent of consumers said they were somewhat or very interested in “retirement savings accounts” having those features.

The surprise is that an even larger percentage of millennials (ages 18-34) said they were somewhat or very interested in those features.

Specifically, 52 percent of these young adults showed interest. That’s higher than the interest shown by Generation X (ages 35-50), baby boomers (ages 51-69) and the silent generation (ages 70 and older), who came in at 48 percent, 36 percent and 28 percent, respectively.

Poolman thinks the millennials’ interest in annuity-like features ties in with the conservative approach to investing that many millennials are displaying. In the survey, 43 percent identified them-

InsuranceNewsNet Magazine » August 2015

selves as somewhat or very conservative, he noted.

“The conservative nature of FIAs should appeal to millennials,” he said. “I think the appeal is the guarantee not to lose money.”

Concern About Millennials

That said, the IALC executive has some concerns about millennials. Nearly twofifths (37 percent) of these younger adults reported having no retirement savings, and 24 percent reported being in debt. Of those who do have assets, 33 percent said they had less than $25,000 in personal net wealth.

In addition, although half of this age group is clearly interested in the features that annuities provide, only 2 percent named annuities as an expected source of their retirement income. Instead, close to half said they expect sources like Social Security, 401(k)s and personal savings to provide their income.

The survey findings are spurring IALC to push for continued education around financial literacy, not just annuities. “We can’t stress this enough,” he said. “The industry needs to explain the time value of money, for instance. It needs to show how investing while still young impacts net worth over time.”

Even doing something as simple as nudging millennials (and others) to use retirement income calculators and other online tools will help, he said, noting that IALC offers such tools as do many other online resources.

Not Rocket Science

“It’s not rocket science. It takes just five minutes or so to use the tools,” Poolman said. “Consumers can see how skipping one night out a month can impact their savings over a lifetime, if they invest the money in a retirement savings product.”

This is not only about investing in annuities, he reiterated. It’s about the importance of financial literacy and of retirement planning. “The goal is to see how products can be used in a balanced portfolio so people don’t come up short later,” he said.

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

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45

ANNUITY

New Retirement Income Challenge: QLACs, DIAs, GLWBs T he wave of new products and features hitting the market has led advisors to ask which products are best for client needs and how much of the client’s portfolio should be allocated to each one.

By Linda Koco

A

gents and advisors have numerous retirement income tools and solutions to consider when structuring a guaranteed monthly income stream for clients. The question is, which products to use and how much to allocate to each one?

It is a question that experts at CANNEX have been pondering, especially in light of the arrival of newer options such as deferred income annuities (DIAs), qualifying longevity annuity contracts (QLACs) and newly designed guaranteed lifetime withdrawal benefits (GLWBs) options.

DIAs have been available for only a few years, but roughly 15 carriers are now in the market. Owners of these products can delay income for several years from date of purchase. In 2014, DIA sales experienced record growth with total sales of $2.7 billion, up 22 percent from 2013, according to LIMRA. The QLACs began hitting the market this year. Their debut followed the July 2014 U.S. Treasury ruling allowing their use within 401(k)s and individual retirement accounts. The rules allow qualified plan owners to divert some of their qualified assets into a QLAC, which is a type of DIA, up until age 85. Seven carriers already have rolled out QLACs. GLWBs have been available in variable annuities for several years. But, more recently, many fixed index annuities have been offering GLWBs as well.

Those retirement products join guaranteed income standbys such as singlepremium immediate annuities (SPIAs) and annuitization of deferred annuity assets.

Also on the retirement product list are investment-modeling strategies, system46

atic withdrawal approaches, and a variety plan owners must start taking at age 70½. of other income solutions, simulations But the longevity products, such as and calculations. Although these oth- DIAs, can enhance and complicate the er approaches don’t guarantee a specific planning picture. For DIAs, the average income, advisors often coordinate their age of purchase is the mid-50s, Baker exuse with a client’s Social Security, pension plained. That’s based on advisor hits to and other guaranteed about 10 DIAs in the income sources.

CANNEX database.

The question for The average deadvisors has become ferral period (from how to allocate assets purchase for a DIA among these possible to the start of income options, Gary Baker, from that DIA) is five president of CANto 10 years, he added.

NEX USA, told InsurThese purchases often anceNewsNet. correlate to the start With the DIA and of retirement, but not QLAC products in necessarily with the particular, the quesstart of RMDs. tion is how to use the As for QLACs, products for the lonthey are so new that “We’re hearing the gevity exposure and the database does not QLAC is more in what proportion, he yet reflect trends on applicable to the said. A related quesproduct use. However, higher-net-worth tion is how to explain since the QLAC buyer person who can … the ways in which they can defer income up defer income for such work in the guaranto age 85, the endpoint a long time.” teed income portion already is known.

— Gary Baker, president, CANNEX USA of the portfolio.

So is the maximum amount. According Income Considerations to government rules, it is $125,000 or Baker provided insight into some of the 25 percent of the person’s total qualified considerations that advisors are think- account value. But averages on income ing about. start date, customer demographics and “We know that the average age of peo- premium elected remain question marks ple buying a SPIA in the U.S. is age 69 or for now.

70, for both men and women,” Baker said, “As a practical reality, not a lot of peopointing to data from the CANNEX Fi- ple will want to buy a QLAC and defer nancial Exchange. The exchange is an on- income for such a long time,” Baker preline database for advisors and distributors dicted. “We’re hearing the QLAC is more who are researching various SPIA options applicable to the higher-net-worth person for clients. who can accommodate the long tail and “We also know that most people want who has the luxury of being able to defer to start income immediately after pur- income for such a long time.” chasing a SPIA,” he said. They often coorStill, agents and advisors will be workdinate the SPIA income with the start of ing with such individuals, so QLACs will required minimum distributions (RMDs), be among the products that will be on the he added. RMDs are the required mini- table. That brings the discussion back to mum amounts that qualified retirement how advisors can develop allocation rec-

InsuranceNewsNet Magazine » August 2015

NEW RETIREMENT INCOME CHALLENGE: QLACS , DIAS , GLWBS ommendations among the various available options.

One Way to Approach This

CANNEX believes one solution is to take a product allocation approach to income planning. For assistance, advisors might use professional allocation support services or request tools and support from distributors and carriers.

Either way, advisors will need to check to be sure the services reflect today’s expanded retirement income universe.

CANNEX’s own product allocation service is a case in point. Called Product Allocation for Retirement Income, it debuted in 2008 as an offering from wellknown retirement income researcher Moshe Milevsky and his QWeMA group (now owned by CANNEX).

The service has had to update with the times, Baker said. For example, the latest version now supports not only traditional guaranteed income products like SPIAs but also QLACs, DIAs, new types of GLWBs (such as GLWBs on not only variable

In 2014, DIA sales experienced record growth with total sales of $2.7 billion, up 22 percent from 2013.

ANNUITY

annuities but also fixed index annuities), fixed income and equity investments, and pension analysis.

It’s the constant evolution of retirement income products that is driving this, he noted. Advisors are looking for ways to generate optimal allocations between annuities, investments and other products with the focus on income sustainability, and considering Social Security, pension, currently owned annuities and other areas in the retirement income mix.

Where annuities are concerned, the advisor’s final recommendations may end up suggesting allocations to one, two or three annuity products, or none at all. But Baker’s point is that advisors will need to explore what’s out there before deciding.

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

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August 2015 » InsuranceNewsNet Magazine

47

HEALTHWIRES

Health Insurers Pairing Off The nation’s major health insurers had been engaged in a frenzied version of speed dating recently. And it didn’t take long for some of them to pair off and take themselves “off the market.”

The first insurance companies to announce their merger were Aetna and Humana. Aetna will buy Humana for $37 billion. Humana had announced earlier this year that it was seeking a buyer, prompting a flurry of rumors as to who would be the lucky suitor. What makes Humana attractive to other insurance giants is its strength in Medicare prescription plans and Medicare Advantage plans.

Also moving closer to a deal are Cigna and Anthem. Anthem had set its sights on Cigna earlier this year. So enamored was Anthem of Cigna that it offered $47 billion to acquire the company. It was reported that one of the potential deal-breakers in that relationship was who would lead the combined company. As of press time, that was still being worked out.

If the Anthem/Cigna deal goes through, it would make Anthem the nation’s largest health insurer, vaulting it ahead of UnitedHealthcare.

EVEN THE TOOTHBRUSH IS GETTING IN ON THE DATA ACT

Many households with young children have a “gold star chart” on the wall. You know, the chart that lists all the things the parent expects the child to do — such as brush their teeth — with a gold star affixed each time the child performs the desired task.

The chart entered the 21st century by crossing paths with a toothbrush. Not just any toothbrush, but one that lets users track their brushing and engage with an app. Now the inventor of the Beam Brush has branched out and created a data-driven dental insurance company. Beam will use the data tracked on its smart toothbrushes to determine customers’ policy rates: the more and better they brush, the lower their rates.

Consider it the Digital Age’s version of earning gold stars toward a trip to the zoo or an extra hour of TV each night.

DID YOU

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48

PROPOSED ACA RATES HIGHER IN 2016

They’re movin’ on up. Health insurance rates for Affordable Care Act policies in 45 states are projected to go up by an average of 12 percent for 2016, according to a HealthPocket study. HealthPocket analyzed rate filings for 3,771 plans in 45 states and compared premiums for 40-year-old nonsmokers in the largest city in each state.

Silver plans were the most popular exchange plan during the 2015 open enrollment period, accounting for 67 percent of marketplace plan selections, and 2016 rate proposals for silver plans averaged 14 percent higher than premiums in 2015. At a 16 percent increase, gold plans had the greatest average rate increases proposed for 2016. Entrylevel bronze plans had 2016 rate proposals that averaged 9 percent higher than 2015, while platinum plans, the top tier of the ACA plans, averaged only a 6 percent increase in rates for 2016.

Why the jump? According to HealthPocket, the 2016 rates represent the first time ACA insurers have had a full year of medical claims data (including the

UnitedHealth Group said it would leave America’s Health Insurance Plans (AHIP), the top health insurance company trade group, as of June 30. Source: Wall Street Journal

InsuranceNewsNet Magazine » August 2015

QUOTABLE Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.

— Chief Justice John Roberts, in the Supreme Court opinion that ruled ACA subsidies on the federal exchange are legal

post-deductible period) to determine rates for the new enrollee pools enabled by the law.

ASSURANT GETTING OUT OF THE MARKET Assurant said it has stopped taking applications for new individual major medical coverage, short-term health insurance and insured group coverage as of June. The company’s insurance units will withdraw from the ACA public exchange system in 2016.

Assurant said it will honor its obligations to coverage that already is in force.

In April, Assurant said it would leave the health insurance and employee benefits markets. It agreed to sell its program for small self-insured groups, its supplemental health benefits operations and its small-group sales channel to National General Holdings.

CENTENE TO ACQUIRE HEALTH NET FOR $6.3B Speaking of mergers in the health insurance world, Centene announced it would buy its rival Health Net for $6.3 billion. The merger is expected to boost Centene’s position as a manager of government insurance plans and gain scale to negotiate better prices with hospitals.

The merged Centene-Health Net will serve more than 10 million members across the country, the companies said in a statement.

Centene will also assume $500 million in Health Net debt in the deal.

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HEALTH

Divorce and Disability Insurance: A Marriage of Opportunity B uilding disability insurance coverage into a divorce decree can protect the ex-spouse and children if illness or injury makes it impossible for support obligations to be fulfilled.

By Michael Smith

W

hen couples divorce, frequently the court will order that life insurance be taken out on the party who is required to pay child support and spousal maintenance or alimony.

This protects the party who is receiving the financial support, and assures that the support continues if the ex-spouse dies.

But what if the party who is paying the support becomes disabled? Until now, there hasn’t been a way to ensure that divorce settlement and child support payments continue if the person making those payments — the payor — becomes totally disabled.

50

Some people in white collar and professional/technical jobs may have disability insurance (DI) through work or may carry personal disability insurance. But it insures only a portion of their income, typically 40 to 60 percent. Many people don’t have any disability income coverage other than Social Security. So if the payor becomes disabled, continuing divorce settlement and child support payments to an ex-spouse, on top of paying their own bills, becomes difficult or even impossible.

The payor’s only option has been to file for a reduction in the obligation based on current financial circumstances, which is costly and stressful for both the payor and the recipient.

Now there is a better solution. Did you know that there is a disability insurance product specifically designed to help honor the divorce decree? It can pay most of the expenses dictated by the divorce decree (i.e., alimony, child support, children’s

InsuranceNewsNet Magazine » August 2015

medical insurance premiums, tuition, school activity fees and expenses, etc.) if the payor becomes disabled.

It makes sense to build this coverage into a divorce decree. Although the coverage is designed for those in white collar and gray collar occupations, coverage for those in blue collar occupations is possible, depending upon affordability and the terms of the divorce. The policy can be customized individually to meet the requirements of almost any divorce decree.

The payor is assured their obligations can be met stress-free should they become disabled, and the payee can rest assured that they will not have to worry about support payments stopping or lowering if the ex-spouse becomes disabled.

Underwriting is modified guaranteed issue up to $1 million of obligation. Usually no exam or medical records are required. Obligations over $1 million likely will require some underwriting.

DIVORCE AND DI: A MARRIAGE OF OPPORTUNITY HEALTH Ideally, quotes for this coverage would be obtained and used in the negotiations between the divorce attorneys and then coverage would be put in place when terms are agreed upon. Who pays for the coverage can be part of the divorce negotiations.

Divorce DI also may be obtained after a divorce is finalized. Interested parties may obtain a quote and coverage at almost any time, assuming there is no pre-existing condition. If coverage is obtained, the divorce decree will need to be modified to reflect it.

If divorce DI is not practical, the payor should consider obtaining a life insurance policy with a critical illness rider.

Some companies will allow for access to the death benefit should the insured suffer a heart attack, receive a cancer diagnosis or contract another serious illness.

Even term insurance is available and with very affordable pricing.

Divorce DI or life insurance with living benefits can make the difference when protecting the terms of the divorce decree.

Sample Case Study 1: Divorce With Two Minor Children

The divorce decree requires $5,000 per month of alimony, and child support is payable for 60 months. Alimony stops at the end of this period. During the next 60 months, $2,500 per month of child support is payable. Child support for the oldest child stops at the end of this period.

During the next 36 months, $1,250 per month of child support is payable and then

stops for the younger child. The payor is obligated to pay $20,000 per year of college expenses for four years, when each child goes to college. This is an additional $160,000 in total obligation for the two children. The cost of the children’s medical insurance is $500 per month.

Here is how the policy payment structure works.

When the policy is issued, the payor has an obligation of $5,000 per month for 60 months plus $500 per month in medical insurance premiums, totaling $5,500 per month.

The policy is issued with a 90-day elimination period, so the payor will have to make the divorce settlement and child support payments from their own funds for the first three months. This reduces the total amount insured by the policy to $716,500. This breaks down to $733,000 (the payor’s total obligation) minus $16,500 (the amount paid by the payor in the first 90 days of total disability).

As described previously, the policy has a 90-day elimination period and the payor

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51

HEALTH DIVORCE AND DISABILITY INSURANCE: A MARRIAGE OF OPPORTUNITY continues to make the monthly payments of $5,500 for three months. So, the policy is written to pay $5,500 per month for 57 months, which is the balance of the payor’s $5,500-per-month obligation after the elimination period has been satisfied and the policy begins paying benefits.

Because the $5,500-per-month obligation lasts for only 57 more months and the policy pays benefits for 60 months, the policy also would pay $3,000 for three months. This breaks down to $2,500 child support plus $500 medical premium, beginning after 57 months.

Assuming the payor is deemed permanently totally disabled from their regular occupation, the lump sum benefit, payable after 60 monthly payments have been made, would start at $394,000.

This amounts to $716,500 total obligation after the payor has made the first three months of payments. This breaks down to 57 months’ benefit multiplied by $5,500 minus three months’ benefit multiplied by $3,000.

For every month in which the policy is in force and the payor makes the $5,500 payment to the recipient, the $5,500 monthly obligation is reduced by one month.

So the policy’s monthly benefit reduces by one $5,500-per-month payment and increases by one $3,000-per-month payment (to maintain a total of 60 monthly benefit payments), and the lump sum benefit is reduced by $3,000.

In month two, if the payor becomes disabled, the policy would pay $5,500 for 56 months, plus $3,000 for four months, plus a $391,000 lump sum benefit. In month three, if the payor becomes disabled, the policy would pay $5,500 for 55 months, plus $3,000 for five months, plus a $388,000 lump sum. In month four, if the payor becomes disabled, the policy would pay $5,500 for 54 months, plus $3,000 for six months, plus a $385,000 lump sum.

A “benefit payment table” will be included with each illustration showing the maximum monthly and lump sum benefits payable over the term of the policy, based on the date of disability.

52

The policy is a five-year renewable policy. So every five years, the policy is rewritten based on the payor’s remaining obligation. If the policy is no longer necessary because the obligation has been reduced to a level where the payor can “self-insure,” it may be cancelled.

Premiums decrease every year, because

the policy pays a reducing benefit. For each month in which the payor makes a payment, it reduces the remaining obligation to pay by the amount of the payment.

The plan is designed with a 90-day elimination period and a term of five years minus one day.

Here is how the benefits would stack up: Year 1 benefits of $5,500 per month for 57 months plus $3,000 per month for three months (to pay for alimony, child support and medical insurance premiums).

InsuranceNewsNet Magazine » August 2015

A lump sum benefit of $394,000 after 60 months (to pay for the balance of child support, college and medical insurance).

The total initial insured obligation would be $716,500.

Sample Case Study 2: Divorce With No Minor Children

A 54-year-old man is required to pay $22,000 per month in alimony for 11 years. The total obligation is just under $3 million. Similar to the first case study, premiums would decrease each year as the obligation is lowered. The initial annual premium to insure $22,000 of monthly income for five years followed by a lump sum of $1.5 million in the sixth year is roughly $13,200. The ex-wife should consider protecting her $22,000 of monthly income with a divorce DI policy on her ex-husband. Who pays for it can be negotiated.

His attitude might be, “If I become disabled and need to go to court to ask for relief of payment, so be it.” But the ex-wife could fight that and demand that all financials be opened again. It could get ugly fast, and the stress and cost of going through the divorce all over again would reopen old wounds. Think of the complications if one is remarried or has started a new family. I think it is in both parties’ best interests to consider obtaining divorce DI coverage.

This is intended to provide you with a general overview of risk and how to insure it with a divorce settlement disability policy. Because each divorce is different, policies may be customized to fit almost any divorce decree.

Michael Smith is president of CPS Horizon Financial, a brokerage general agency in Hales Corners, Wis., and speaks on the topic of linked benefits and living benefits.

Contact him at michael. smith@innfeedback.com.

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FINANCIALWIRES

Families Have a ‘Don’t Ask, Don’t Tell’ Attitude Toward Money You can picture the scene: an enormously wealthy family, wearing button-down shirts and ascots, gathered around the dinner table. They’re saying very little, smiling even less and never, ever talking about money.

It’s a clichéd tableau, to be sure, and it is one that plays out less and less as deep demographic change alters the profile of the U.S. population. Nevertheless, it may help explain an irony found among high-net-worth households, which is that many parents have little faith that their children will be able to manage the family’s wealth.

According to the 2015 U.S. Trust Insights on Wealth and Worth survey, only one in five parents in a high-net-worth household believes the children will be well-prepared to handle the family wealth they are likely to inherit.

The survey of individuals with at least $3 million in investable assets also found that fewer than 33 percent of households have discussed details of an inheritance with the children.

The survey found that 64 percent of respondents said they offered no or little disclosure about the level of wealth to their children. Two-thirds — 66 percent — of baby boomers and just under half — 48 percent — of “mature” parents, those born before 1946, have disclosed little or nothing about their family wealth to children, the survey also found. Four in 10 parents over the age of 70 said they don’t believe children are ready to handle family wealth at least until they reach the age of 40.

SURVEY FINDS COMMUNICATION GAP AMONG COUPLES

He says “to-MAY-to” and she says “to-MAH-to.” If only differences in providing financial planning services to couples were as simple as that!

Couples account for more than half of a typical financial advisor’s client base, yet 44 percent of couples assign just one partner to handle their advisor relationship. That’s according to a TIAA-CREF survey, which found that attitudes of men and women toward communicating about finances with their partners highlight significant differences.

According to the survey, while more than nine out of 10 couples say that communicating with their partners about DID YOU

50% ?

THE AVERAGE RETURN ON AN INITIALplanners PUBLIC OFFERING wasan 20increase percent of CPA financial have seen this year. The average increase in the first day (or “pop”) is 13 percent.

APPROX.

KNOW

Source: Renaissance Capital

54

finances and investing is as easy as deciding on where to go to dinner, many (60 percent) entrusted one partner to make most of the financial decisions. Furthermore, when hiring a financial advisor, 41 percent did not even include their spouse in the decision-making process at all.

Gender stereotypes appeared to play a role in financial decision-making among couples. Male respondents were much more likely to view themselves as the primary financial decision-makers (62 percent vs. 43 percent of women) and twice as likely as female respondents to say they are more knowledgeable about financial decisions than their partners (78 percent vs. 37 percent of women).

“The ‘Couples Conundrum’ translates into real risks for financial advisors,” said Jennifer Pedigo, managing director and head of institutional business

in elder fraud or abuse in the past five years.

Source: American Institute of CPAs

InsuranceNewsNet Magazine » August 2015

QUOTABLE Gen Xers aren’t counting on pensions or Social Security to fund their retirement. Instead, they’re taking matters into their own hands.

— Marcy Keckler, vice president of Financial Advice Strategy at Ameriprise

development at TIAA-CREF Asset Management. Pointing to industry research that found 70 percent of women leave their financial advisors within a year of being widowed, she noted that “it’s critical that advisors are able to make a real connection with both partners.”

9 IN 10 CONSUMERS BELIEVE THEIR ADVISOR HAS THEIR BACK Who’s looking out for you? Nine in 10 consumers who work with a financial advisor believe their advisor is the one looking out for them. A new LIMRA Secure Retirement Institute study showed that 90 percent of those surveyed said their advisor always puts their interests first.

The report, “Spotlight on Advisors: Consumer Perception, Assessment and Experience,” states that nearly one in three Americans works with a paid financial professional. Fifty percent of consumers report working with their financial advisor for five or more years, and nearly one-third have had the relationship for 10 or more years.

“The high prevalence of longer-term relationships suggests that clients are satisfied with the services they are receiving,” said Matthew Drinkwater, assistant vice president, LIMRA SRI. “In turn, the financial professionals who have long-standing clients are more likely to have a deeper understanding of their clients’ needs and preferences.”

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FINANCIAL

When Is Margin Lending Right For My Client? Hint: This is not one of them.

M argin can be a lender of last resort when clients need money fast, but they need a plan to pay it back.

By Bryce Sanders

M

argin originally was created as an investment strategy to leverage stock purchases. Today, margin can help clients in surprising ways.

If you are Series 7 licensed, you know the basics. Are you discussing margin’s benefits and risks with your clients?

When Might a Client Use Margin Outside the Stock Market?

Margin lending can help solve several problems life puts in front of clients: • The Great Investment – Most advisors have received this call: “I have the opportunity to buy this great piece of real estate. Unfortunately I will need to liquidate those securities I hold with you.

Please sell them and send me a check.”

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• The Tax Bill – “I just heard from my accountant. You won’t believe what I owe in taxes. I need to liquidate some securities.”

• The Catastrophe – “My son was injured on a ski trip overseas. He’s being treated, but the hospital wants to be paid before they release him. I need to sell some stock.”

You see the bigger picture. Your client does not. These investments are in place to help secure their retirement. The market moves in cycles. This might not be a good time to sell. They have a big bonus coming in four weeks. Can’t they wait?

You must follow their instructions, but are they aware of their options?

How Can Margin Lending Help?

Memories of your exam days remind you margin is a form of leverage allowing an investor to buy a larger amount of stock than their cash on hand allows by using borrowed money. The investor takes all the risk. If the stock goes down, all the

InsuranceNewsNet Magazine » August 2015

losses are felt in their wallet. If the stock goes up, they reap the rewards. They are responsible for repaying the loan plus interest. They must keep their equity above a certain percentage. The firm can sell them out under certain circumstances.

In the 1980s, margin was rebranded as an “investor credit line.” Although separate paperwork is needed, new account documents for securities accounts with checking and a savings sweep often have margin lending built in. Clients can borrow money today simply by writing a check.

Now you can offer an alternative solution to your client who is facing the problems described previously. For clients who have plenty of money in securities (outside of retirement accounts), they can borrow money by writing a check. It’s immediate.

There’s no approval process because that was done in advance. The loan is secured by their investment portfolio. Their securities remain in place.

Clients must understand the difference between good debt and bad debt. Margin

WHEN IS MARGIN LENDING RIGHT FOR MY CLIENT? FINANCIAL lending shouldn’t be viewed as one more credit card they can run up to the max.

Consider it a lender of last resort when clients need money, need it fast and have a plan to pay it back. They are their own lender.

Back to Basics

Your client might want to borrow money for a different purpose. They may want to invest in the stock market, for example. They are prepared to take more risk for the potential of a greater reward. By understanding how the movement of the stock market combined with margin affects your client’s wealth, you can explain the risks and benefits of borrowing against their securities.

To borrow money from your brokerage firm and trade on margin, the firm first requires signed, approved paperwork on file.

Next, the investor puts up money and the firm will match it up to dollar for dollar.

Expressed another way, initial margin is 50 percent. The firm charges interest on the loan. Unlike banks, the firm doesn’t require the interest to be repaid monthly.

Your client can let the loan, called the margin balance, grow by rolling in the interest.

The stock needs to be eligible for margin and to trade over $3 per share. In practice, the number is $10 per share because $3 per share is the required minimum equity the investor must maintain.

Margin works great if your client’s stock goes up a lot. If the stock rises, all the gain is on your side of the equation. If the stock declines, the firm wants to be confident it will be repaid. The loan amount never goes down. When the stock falls, all the losses are applied against your funds.

If your client’s 50 percent initial stake declines from 50 percent to below 30 percent of the current value of the position, the firm issues a maintenance call instructing the investor to add enough money to bring their portion back up to the required 30 percent minimum. The investor can sell some stock to meet the call; however, every $100 sold only releases $30 toward the maintenance call. Seventy dollars goes toward proportionately reducing the loan. If the investor ignores the maintenance call or doesn’t get funds delivered in a timely manner (usually three days), the firm automatically sells enough stock to meet the call. Investors also have the alternative of adding fully paid-up stock as a

Should They or Shouldn’t They?

Imagine your client with that large stock portfolio suddenly discovers they have a checkbook (and a debit card) that they can use to access plenty of money anytime. It’s tempting to go off the rails. Here are some times they should use it and times they should not.

The Stock Investment – They believe in the stock. The fundamentals are good. They don’t want to disturb their other holdings. Margin allows them to borrow money that would be repaid when they sell out of their position.

The Tax Bill – Usually people prepare for these, but sometimes capital gains come as a surprise. Margin allows them to pay the tax bill now and sell securities later to close out the loan.

Bill Due Now, Money Comes Later – The client has a tuition bill. They didn’t plan for it.

They have a bonus payment coming in four weeks. Margin allows them to borrow now, pay the bill and repay the loan when the bonus arrives.

The Bridge Loan – They are buying real estate. They need to make an all-cash offer and settle quickly. Margin makes money available. They refinance with a conventional mortgage afterward. They still have some of their own cash invested afterward.

The Trip to Las Vegas – They need more money to play at the tables. Unfortunately, they are on a losing streak. There’s no plan to pay the money back.

The Splashy Vacation – We should treat ourselves well. Let’s book the Presidential Suite.

It’s an indulgence. How will you pay the money back? Putting it on a credit card instead gives a sense of urgency for repayment.

The Scam – They have the chance to buy a great diamond on the Caribbean island they are visiting. Unfortunately, the seller wants cash, not credit cards. If it’s a scam, they have little or no recourse to recoup their funds when they pay in cash.

means of meeting the call and increasing their equity.

The Good and the Bad

Margin lending has good and bad points.

Here are the good points: It’s a great tool when the market is rising – Leverage can be your friend.

Paperwork is required to establish a margin account – You need to understand what you are doing and be approved prior to trading.

Stocks need to be eligible for margin – The exchanges and regulatory authorities make these decisions. Heavily traded blue chip stocks usually qualify.

Ready cash in emergencies – Having a credit line in case of catastrophic unexpected expenses is a good thing. If your roof blows off in a hurricane, you could repair it now while waiting for the insurance check.

The stock must be worth more than $3 per share – This disqualifies penny stocks. At $3 or under, it’s all your own money at risk. Over $3, the firm lends you some money, but you always have $3 per share personally committed. Ten dollars per share is the threshold at which the 30 percent rule begins to apply.

Here are the bad points regardingmargin lending:

It’s a terrible tool when the market is falling – Your losses are magnified.

Commissions and interest come from your piece of the pie – Your capital pays the fees.

The loan never gets smaller – Rises and falls in the market directly affect your money.

Loan interest compounds – It gets added to your loan unless you choose to add money to the account.

Maintenance calls are due quickly – You usually have a maximum of three days to add money. This can vary.

If you don’t act, they will – If you don’t respond to a maintenance call by adding more cash or securities, the firm will sell a portion of your position to satisfy the call.

The firm can act first – They have the right to meet maintenance calls by selling stock without giving you the option of adding money. This is rare.

Margin is a good tool to use when the market is rising. It’s a bad tool when the market is declining.

Bryce Sanders is president of Perceptive Business Solutions in New Hope, Pa. His book Captivating the Wealthy Investor is available on Amazon.com. Bryce may be contacted at bryce. sanders@innfeedback.com.

August 2015 » InsuranceNewsNet Magazine

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BUSINESS

The Best (and Worst) Former Occupations to Recruit as Agents W ith the industry always hungry for new talent, here are some suggestions about where you should look — and where you should not — in recruiting.

By Patrick Bet-David

H

istory has a way of repeating itself. The life insurance industry is a great example of this, as it has witnessed many business models over the last few decades. Now, as the industry goes back to heavy recruiting, it’s important to look at which former occupations make for the best future life insurance agents.

I’ve recruited approximately 28,000 people in the industry and have studied to 58

see which work backgrounds make the best agents.

Here is my Top 9 list of former occupations that make good life insurance agents, and why.

Teachers

There’s something special about teachers when it comes to dealing with clients. Their approach is educational, and clients trust that. Most teachers feel they are underpaid for the amount of time they spend working after hours, so the transition to a more lucrative industry such as life insurance is appealing to them.

InsuranceNewsNet Magazine » August 2015

Nurses

The unique thing about nurses is that they’re usually driven by helping people get into a better situation. They just can’t help but have the spirit of making sure their clients are taken care of. Once they learn the value of life insurance, they look past the commission and they view life insurance as a cause instead of a career.

Military

They’re already accustomed to protecting people. It’s in their DNA. And their work ethic is

THE BEST (AND WORST) FORMER OCCUPATIONS TO RECRUIT AS AGENTS BUSINESS usually strong. The only challenge you may have with them is dealing with rejection, since the military tells you to take orders and customers don’t follow that same rule.

Coaches

Most coaches are great at motivating and persuading athletes to do things they usually wouldn’t do on their own. Coaches also have a big market of parents who trust them with their children, so you’re not only recruiting someone who could do very well in the business, but you’re also getting entrance to a great market.

Certified Public Accountants

This is probably one of the best fits if you can recruit the right kind of CPAs. I prefer those who run their own independent practices, and who are looking to expand by introducing other products into their mix of services. CPAs usually have the fastest learning curve among anyone entering the life insurance business.

In addition, CPAs have eight months out of the year to focus on building their life insurance practices. They also usually have an established market to start selling to.

Former Athletes

The great thing about recruiting former athletes is that they have the right mindset to win in the life insurance industry. They already are accustomed to long practice sessions, competition, being challenged by their coaches to improve and having to study their competition. If you’re a good teacher and a great coach in our industry, you’ll have an easy time developing former athletes into great agents.

Mortgage Loan Officers

There are hundreds of thousands of loan officers who are free agents looking for an industry to get involved in. The mortgage industry

Whom to Stay Away From Recruiting The Professional Sales Guy

These people have sold every single product you can imagine. They thrive on closing anyone they encounter.

Although that may sound great, life insurance should be an educated and emotional sale instead of a pressured one. As convincing and tough as the professional sales guy may be, he usually doesn’t have the thick skin to stick it out for the few charge-backs that may occur in his career.

The M.I.A.

Have you ever heard the term missing in action? We’ve all met these types of sales reps. They couldn’t care less about building a relationship with a client. They are interested only in closing the sale. When they do, you never hear from them or see them again. We all know that life insurance is a relationship-building business and industry. If you don’t have a relationship with clients, they usually won’t keep their policy.

is getting more and more regulated, with loans not being as easy to qualify for as they once were. This means loan officers are dissatisfied. If you find the right moneymotivated loan officer with integrity who hasn’t burned out from the mortgage meltdown, you could have yourself a winner.

Human Resource Specialists

Their job requires them to be great with people. Moving to the life insurance industry actually is a very simple transition for them. They also know that the salary of their current position usually caps at around $80,000 a year if they’re with a larger company. If earning a sixfigure income is their goal and you can show them how to make that kind of money, you could have yourself a great candidate.

Police Officers

Yes, cops. Not because it’s a great strategy to remove a few speeding tickets off of your record that your wife doesn’t know about, but because police officers actually make good life insurance agents. They already are accustomed to protecting people, and life insurance shares that concept. If

you could teach them about the business on a part-time basis and get them to start selling, not only will they be happy about the transition but so will their spouses.

Just as there are candidates who can be instrumental to your business’s success and growth, there are also those people who could be detrimental to your business. I have found that the ideal recruits are young couples starting a practice together. If you can find a young, ambitious couple with big dreams and they are coachable, then you have yourself a winner.

A great tip to determine if your next candidate is “The One” is to pay close attention to their character. These types of people usually sound very convincing when you first recruit them, but in reality, you’re just in the way of their finding out the next thing they’ll want to try selling after life insurance. Simply let them go.

Just as in any business, there are exceptions to this rule, but I usually don’t recommend building your business on exceptions.

Patrick Bet-David is chief executive officer of PHP Agency, Glendale, Calif., and author of The Next Perfect Storm and Doing The Impossible: The 25 Laws for Doing The Impossible.

Patrick may be reached at patrick. bet-david@innfeedback.com.

August 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.

How a Dose of Reality Gave Me The Strength to Build a Legacy A life insurance advisor never could have predicted that her first death claim would be for her own husband.

By Mary Amen

I

was recruited to join a life insurance company in 1979, when I was 20 years old. I had a strong Type A personality and was basically a sponge trying to soak up everything I could in my first few years. Just 10 years later, an endorsement from a large hospital sent my business booming and I was at the top of my game. What I didn’t know was that a huge challenge was coming my way.

The Life-Changing Challenge

It’s hard to appreciate what we do as life insurance advisors until we pay our first death claim. In this business, we often hear widows talk about the “magic of life insurance” without truly understanding the experience firsthand. Who would have thought that my first death claim would be for my own husband?

At just 50 years young, my husband, Oscar, was the picture of good health.

He had just passed his physical and was issued a preferred plus life insurance policy. However, he was struck by a flu that he couldn’t shake. His energy was not coming back, so we went to the doctor to see if he had walking pneumonia. Due to his anemia, the doctor thought Oscar might have a bleeding ulcer. After a few tests, the doctor found a softball-size tumor between his stomach and esophagus.

In 24 hours, we went from the flu to walking pneumonia to a bleeding ulcer to a malignant tumor.

The doctor told me the news and left, saying the surgeon would be in shortly to see us. Imagine our shock when the surgeon told us the CT scan showed the tumor already had metastasized to Oscar’s liver.

60

The Magic of Life Insurance

idea that their loved one might be gone.

Upon hearing this news, Oscar pulled The truth is, no one knows when it’s going out a yellow notepad. He wrote things to happen — whether it’s at age 35 or age like “Show Mary the accounting system,” 75. But being prepared gives everyone the “Be home from the hospital in time for ability to enjoy the time they know they Michael’s fifth birthday,” and “Write let- have left. ters to my children.” His list was about doing everything we planned for our lives. Building a New Legacy Thanks to life insurance, that’s what he Today I am using my experiences to build was able to give us. He didn’t have to say, a greater legacy with my company by “Sell the house,” “Take the kids out of pri- mentoring my children in the business. vate school” or “I’m sorry I waited to plan My daughter Celina has been in business for our family.” with me for 12 years. During that time, she Our life insurance plan gave us the has taken the employee benefits division peace of mind to experience the rest of from 25 groups to more than 85 groups, our days together as a tripling revenue. MenLife insurance is for toring has brought back family. My husband was those who live. It able to write those letters my strong passion for gives those who are the job and reminds me telling our children he loved them and provided about to die the peace every day why life insurfor their education. He of mind and security ance is so important. My even got to see our son of seeing their loved son Michael is pursuing a Danny play baseball and degree in computational ones provided for. pre-arranged for flowers finance at Columbia Unito be delivered on Mother’s Day and our versity. He may join the firm when he anniversary. graduates. My eldest son, Danny, has his Oscar’s legacy was one of love and license and helps out when he is not teachconsideration. Without our financial plans, ing school and pursuing his real passion, those personal thoughts would have gone which is coaching football. by the wayside. Instead, his days would Whether or not they join me in my have been spent worrying about leaving practice, our children know how Oscar his family in a financial mess. I was able to and I planned and provided for them and focus on grieving, healing and eventually their education. They have the same story trying to get my career back on track.

I do, but from a different perspective.

We know life insurance is for those who They joined me in my practice because live. It gives those who are about to die the they wanted to be able to give their peace of mind and security of seeing their children the same experiences that Oscar loved ones provided for in the future. and I were able to provide for them.

Before he died, my husband saw the good in what happened to our family and Mary Amen, LUTCF, CLU, knew I would have a story to tell. I didn’t has been in the insurance and financial services want the story — I wanted the nine months industry for 36 years and they said he had remaining, instead of the spent the last 23 years three months we got. I wanted not to be with Guardian Life. She is widowed with four children when I was a member of Million Dollar Round Table’s 35 years old. Overcoming this personal Quarter Centurion Club with 33 years of qualification, is a six-time qualifier for the loss and obstacle has shaped me into the Court of the Table and qualified for Top of person I am today, compassionate and the Table in 2012. Mary may be contacted relatable to my clients who can’t bear the at mary.amen@innfeedback.com.

InsuranceNewsNet Magazine » August 2015

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.

Getting Over a Business Slump W hen you redirect your efforts at “keeping the main thing the main thing,” you will be pleased at what happens.

By Herman L. Dixon

A

s every business owner knows, there are times when productivity is not at its optimum level, resulting in a business slump. Unless this slump is faced and overcome, its impact can be devastating.

So how do you attack a slump and move your business results higher?

These simple tips can help you refocus when you believe that your best efforts are not producing the required results.

Meet with your team and decide to accept responsibility for your performance. If you research the situation you are facing, there is probably a sound reason for the underachievement. Examine what you were doing prior to the slide, and refocus. The bigger issue is to realize that all things — both good and bad — begin with us. Once we accept personal accountability, positive things can happen.

Accepting responsibility promotes greater attention to living your performance instead of simply talking about it.

You must live and act in the present to overcome the shortfalls and embark on activities that lead to new levels of success.

Re-examine your business plan.

Plans are road maps that, if followed, can lead us to our destination. However, we must be enthusiastic about the journey.

If your business plan does not provide that potential, develop a plan that you can get excited about. A sound business plan enhances your commitment to meeting critical functional demands.

This, in turn, will enable you to take your business to a place where new opportunities will appear.

Pay more attention to your goals, desires and solutions. So much more can be accomplished by seeking solutions instead of praising problems.

Once you are committed to focusing on what you need and you leverage your strengths to produce new opportunities, your positive self-image will enable you

to alter your direction. Goals are life’s chauffeurs that enable you to enjoy the ride to your destination. Desires provide you with the thoughts and perspectives that encourage you to create new avenues of direction. And solutions offer you the answers you seek to maximize your opportunities.

Never fear asking for help. Whether you use a professional business coach, a trusted mentor, or a fellow business owner or leader, having an outside set of eyes and ears can provide you with insight into a new dimension. Seeking help does not mean you are weak — it simply shows your desire to find the best solutions. Keep in mind that success comes not when people think alike, but when they think together.

Put things in perspective. Interact with your team and come up with ideas that enable you to recommit to doing the right work. Set aside the “can’ts” and reapply your actions to what is possible.

Remember that you have the power to control your actions and to influence the actions of those around you.

Stop worrying and start winning.

Worry does not promote success. In fact, worry will delay your ability to attain the success you planned and rightly deserve.

When you invoke a winning determination that is solution-minded, you unleash your creativity to higher levels, and your ability to strategically focus on your

clients’ needs will be enhanced.

Re-examine your developmental needs. Solving clients’ needs sometimes may require pursuing a new educational achievement to help you better yourself and deliver enhanced value to your clients. The more you know, the greater your potential for understanding and satisfying your clients’ needs.

Challenge your attitude. When your attitude is bright, you see possibilities.

When your attitude is dim, all the world’s issues come crashing down on you. Success in any business undertaking demands an attitude that encourages you to see the glass as half-full. So change your attitude and that of your team, and make sure it is brightly guiding you to the possibilities you need.

Get to work. Becoming engrossed in your business activities will allow your mind to begin to work and will produce activity that will keep you busy. Busy people always find ways to be successful.

Your success or shortfall will be determined by whether you take control of your actions or whether you allow your situation to control you.

Herman L. Dixon is a NAIFA member and president and CEO of Think BIG! Coaching and Training. Herman may be contacted at herman. dixon@innfeedback.com.

August 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.

Millennials Are the Least Financially Literate Generation A ll of the news surrounding the baby boomers’ retirement wave has overshadowed the fact that the youngest adults need help in securing their financial futures.

By Jennifer DeTroye

H

ave you heard anything lately about the baby boomers retiring?

You’d pretty much have to be living under a rock to answer that question with a “no.” As a Center for Financial Security, we serve a variety of audiences across current topics that have the potential to affect our industry’s future. One particular issue that spans all generations has captured our attention: financial literacy.

Although much is being asked about what the boomers know about basic retirement concepts, we have turned our attention to the opposite end of the financial planning timeline — the millennials. Born between 1980 and 2000, the oldest members of this generation are in their early to mid-30s.

This means they are at a prime age to begin thinking about financial products and services.

We set out to establish a baseline of what this generation knows, thinks, and feels about money and investing.

So we partnered with Texas Tech University’s Department of Personal Finance on a research project. We wanted to produce fact-based, substantive research to shed some light on millennials’ current reality — starting with their financial literacy.

Well, the results are in — and after we lifted our jaws off the table, we knew that we could not turn a blind eye to the absolutely tragic statistics about this generation’s aptitude regarding basic financial principles. Our research shows that millennials are the least financially literate of all generations. In fact, only 5 percent of millennials can demonstrate a basic understanding about borrowing, saving and investing.

62

How are we judging what makes someone financially literate? Let me introduce you to FLAT. FLAT stands for Financial Literacy Assessment Tool, developed by Texas Tech University.

It comprises 20 questions. Sixteen of those questions assess knowledge and ability across the four primary areas of financial literacy: basics, borrowing, investing and protection. Four additional questions capture the respondent’s self-assessed confidence to put their knowledge to use across these four key areas. This makes FLAT uniquely objective compared with other financial literacy assessment tools.

It’s important to note that none of the generations did particularly well in this assessment. Only 16 percent of boomers and 14 percent of Generation X are deemed financially literate. But what makes the millennials’ 5 percent statistic especially alarming is that this generation is coming of age in a financial environment that requires them to make more numerous and more increasingly complex financial decisions than any previous generation — and they are the least equipped to do so.

The obvious justification for the millennials’ lower scores is that this group has the least amount of financial decision-making experience. Which begs the next question: Which comes first?

Do millennials become financially literate and, as a result, make sound financial decisions? Or, as they build their knowledge through the experience of making good (and sometimes not so good) financial decisions, do they become financially literate? Just like the “chicken or egg” dilemma — the answer is not entirely clear. In the case of financial literacy, it’s most likely a little of both. Our challenge is to help make their learning more efficient — so instead of a potentially costly trial-and-error approach, they are equipped to make better financial decisions from the start.

InsuranceNewsNet Magazine » August 2015

It’s not all bad news for this generation.

Millennials are becoming a financial force to be reckoned with. By 2017, their spending power will hit $200 billion.

And the “great wealth transfer” from the boomers that is already underway is expected to reach $30 trillion.

With all of this untapped potential — who is helping this generation? Our industry is focused on the boomers right now — and rightfully so. They also desperately need our help. So if the boomers represent your target market and your comfort zone, why should you turn some of your attention to the millennials? What’s in it for you? We are all here because someone brought us in and helped us in some way.

Let’s offer a hand up to a millennial in the same way we were offered one.

Let me leave you with one last reminder. Your clients’ children do not want to work with “their father’s advisor.”

Some of your more savvy clients may have turned the tables on you already and asked about your succession plan for your practice. Maybe their question made you stop and think — but perhaps not enough to take meaningful action.

Now is the time to address this challenge.

Go out and find a smart, savvy, ambitious millennial to be part of your team. Start introducing them to your clients — or better yet, to your clients’ kids. That way, when the transfer of wealth from their parents occurs, the relationship remains with you. And more important – you’ve helped what could be the next “greatest generation” become more financially successful, to plan for their future and to protect their assets. And that’s good for everyone.

Jennifer DeTroye most recently served as executive director of The American College Northwestern Mutual Granum Center for Financial Security. Jennifer may be contacted at jennifer. detroye@innfeedback.com.

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August 2015 Âť InsuranceNewsNet Magazine

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

LIMRA INSIGHTS

Advisors Serve a Crucial Role In Providing DC Plan Expertise R esearch showed an important difference between plan specialists and generalists who incorporate plans into their broader offerings.

By Deb Dupont

A

s the baby boomers retire, they will rely more on their own savings to create the foundation for their retirement income. Because of this, implementing and managing a defined contribution (DC) plan has become more involved and complicated for the employers who sponsor them.

Occupying an expanded role in the whole DC system is the advisor, the financial professional who “sells” and services DC plans. The advisor acts as a key go-between for employers and the myriad service providers offering DC products and services in the DC space.

There are many ways to look at advisors and their qualified plan practices. But the industry is seeing an important and growing dichotomy between advisors who specialize in qualified retirement plans, or “specialists,” and those who incorporate qualified plans into their broader practices, known as “generalists.”

LIMRA Secure Retirement Institute and Pulse Logic explored the difference between these two approaches to the qualified plan business. We surveyed 123 advisors who sell qualified plans, and supplemented survey responses with indepth interviews with 60 of them.

In the world of DC plans, advisors can help employers navigate the many intricate rules, regulations, and options to design and manage programs that work for both their organizations and their employees.

Not surprisingly, specialists have more plans under management and derive a greater percentage of their revenue from plans; they also offer a wider array of plan services. Generalists are more likely to focus on investments, with plans representing a smaller portion of their practice income.

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The industry is seeing an important and growing dichotomy between advisors who specialize in qualified retirement plans, or “specialists,” and those who incorporate qualified plans into their broader practices, known as “generalists.”

For the most part, specialists tend to be younger and have less tenure in the advice business. The practice of the generalist is more settled and mature. Specialists also have fewer years in practice, but they are far from inexperienced; three-quarters have been in practice for 10 or more years.

Our research found there is room for new advisors in both categories. It’s quite possible the trend toward specializing in retirement plans will continue and grow, with fewer general practice advisors including qualified plans in their mixes. The role of the specialist may become even more “specialized” and technical.

When partnering with providers, most services and features “rank” similarly for specialists and generalists — placing the highest emphasis on client capabilities.

Specialists, however, are more likely to consider a wider variety of features and capabilities — such as strong financials, qualified plans’ track records, investment options and operational scale — to be highly important.

Specialists place less value on whether a record keeper offers fiduciary services to qualified plans, perhaps because they are more likely to report that they themselves assume a named fiduciary role. Generalists, on the other hand, are more likely to look for record keepers who focus on the

InsuranceNewsNet Magazine » August 2015

advisor-sold channel and offer fiduciary services.

Nearly half of specialists (44 percent) feel that record keepers’ lack of understanding about their practices forces them to develop their own solutions (compared with only about a quarter of generalists).

Helping these advisors supplement their divergent fiduciary inclinations is an area in which providers and record keepers can also develop approaches and offerings targeted to each type of advisor.

Never before have DC plans been so important (to individuals), so scrutinized (by the media, regulators and others) and so complex (especially for employers who sponsor them).

Both generalists and specialists perform essential roles in the DC system. They connect the various entities and stakeholders such as providers, employers and employees/participants, and help make the system work for everyone.

Deb Dupont is the associate managing director of institutional retirement research for LIMRA Secure Retirement Institute, and manages research related to workplace retirement plans and planning.

Deb may be contacted at deb.dupont@ innfeedback.com.

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