InsuranceNewsNet Magazine - September 2014

Celebrating Life Insurance Awareness Montďż˝

surancenewsnet Life Annuities Health Financial

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MAGAZINE

Also Inside:

September 2014

Preventing Life Insurance Buyer Amnesia

Stephen Harvill’s Simple Steps to Success

Modern Families Live in Financial Insecurity

PAGE 38

PAGE 12

PAGE 52

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1

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2

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3

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by Minnesota Life.

4

Indexed loans are only available with the Indexed Loan Agreement. This agreement may be added to in-force Omega Builder IUL policies for no charge.

Omega Builder Indexed Universal Life is not available in the state of New York, Utah or Indiana.

The Indexed Universal Life Series is designed fi rst and foremost to provide life insurance protection. While the interest crediting options are attractive for cash accumulation, the product should always be promoted to fi rst meet the death benefit needs of families and businesses with cash accumulation as a secondary benefit.

Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender charges. One could lose money in this product. Policy loans and withdrawals may create an adverse tax result in the event of a lapse or policy surrender, and will reduce both the cash value and death benefit. Guarantees are based on the claimspaying ability of the issuing insurance company. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

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 ©2014 Securian Financial Group, Inc. All rights reserved.

F78045-25 7-2014 DOFU 7-2014 A03787-0714

For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it would be accessible to the general public.

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SEPTEMBER 2014 » VOLUME 7, NUMBER 9

ANNUITY

42 I n-Service Withdrawals Turn 401(k)s Into Paychecks

By Charlie Gipple For many of your clients, using an in-service withdrawal from a qualified plan to fund a fixed index annuity with a guaranteed lifetime withdrawal benefit rider can be a good way to protect a portion of a 401(k) or other qualified plan from a market downturn.

22

HEALTH

48 S elf-Insurance Can Ease Business Clients’ Pain

INFRONT

8 I t’s Not Safe to Say ‘Safe’ in Colorado

By Linda Koco Certain words are the target of regulators in Colorado. Life insurance and annuity advertising may need to be revised in order to eliminate words such as “safe.”

12

FEATURE

22 Why the Middle Market Loves IUL

By Linda Koco Indexed universal life is showing record growth by pulling in midmarket clients. In honor of Life Insurance Awareness Month, we provide a look behind the numbers as well as stories of clients who found IUL to be a perfect fit.

LIFE

34 Foreign Nationals an Untapped High Net Worth Market

By Gary Bleetstein Foreign nationals have unique needs and must conform to specific U.S. tax rules. Here’s what you need to know in order to serve a market segment you may have overlooked.

12 The Simplicity of Success

2

FINANCIAL

52 Survey Finds Modern Families Gripped by Financial Insecurity

By Katie Libbe A study provides the financial services industry with compelling evidence of the need to tailor products and services to meet the needs of nontraditional families.

56

34

INTERVIEW

An interview with Stephen Harvill We all know the saying “Keep it simple, silly,” but few of us take the time and do the work required to simplify our sales processes. Stephen Harvill has studied the world’s most successful companies and found that simple steps lead to success. In this interview with InsuranceNewsNet Publisher Paul Feldman, Harvill describes how to pinpoint what is really important and how to break it down into its simplest elements.

By Christopher Shoffner Health insurance premiums for the small and medium-sized employers continue to rise. Providing them with a self-insurance option can help them survive in a changing economic climate.

38 How to Prevent Life Insurance Buyer Amnesia

InsuranceNewsNet Magazine » September 2014

By Ron Sussman Too often life insurance policies are thrown in a drawer and ignored until it’s time to file a claim. But policyholders need to make sure their coverage is periodically reviewed and revised to reflect their changing needs.

BUSINESS

56 T hings I Wish I Knew When I Started Out

By John Alves If you ever wished you could go back in time and give yourself advice, you will appreciate these insights.

There Are No Baby Steps in Sales.

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ALSO IN THIS ISSUE SEPTEMBER 2014 » VOLUME 7, NUMBER 9

INSIGHTS

58 S OCIETY OF FSP: Back to the Future: Financial Intimacy

By Richard M. Weber How to deliver value through the human touch to the large group of clients who truly want and seek an active partnership in the advisor/client relationship.

59 NAILBA: What Makes Advanced Producers So Advanced?

By Barbara Crowley Top producers don’t focus on a product; instead they take a problemsolving approach to serving their clients.

60 MDRT: The Top Six Things Every New Advisor Should Know

By Danny O’Connell Finding your niche and working with others are among the ways in which new advisors can grow their business.

61 NAIFA: Patience, Perseverance Help Advisor Make It to the Top

By Ayo Mseka and Ike Trotter When an advisor found the method of conducting business that was comfortable to him, he found the way to success.

62 L IMRA: Success in a ‘Customer First’ World

By Norah Denley and Jennifer Douglas Customer experience management is not a passing fad but a new way of doing business to compete in today’s consumer-driven world.

64 The Last Word: Don’t Allow Slackers to ‘Watch the Bay’

By Larry Barton The underachievers in your office are placing an unfair burden on your highly motivated employees and putting your practice at risk.

Great Scott!

58

EVERY ISSUE From Challenge to Victory

Connecting Insight on Big Data, Millennials, and Today’s Dynamic Landscape

6 Editor’s Letter 20 NewsWires

32 LifeWires 40 AnnuityWires

46 HealthWires 50 FinancialWires

DAVID PLOUFFE Senior Advisor, President Barack Obama (2011-2013) Campaign Manager, 2008 Obama for President

Crossing the Generational Divide JASON DORSEY

The Gen Y Guy, The Center for Generational Kinetics

What Makes the Great Ones Great DON YAEGER

President, Greatness, Inc. Author and Sports Illustrated Editor

For more information and to register, visit limra.com/annualconference or call 800-235-4672

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14 INN 09.14 FOR AGENT USE ONLY. NOT FOR USE IN SOLICITATION OR ADVERTISING TO THE PUBLIC. September 2014 » InsuranceNewsNet Magazine 5

WELCOME LETTER FROM THE EDITOR

Selling the Stuff of Life

I

n honor of Life Insurance Awareness Month, I’ll relate the journey that led me to buying a term life policy.

It is often said that life insurance is sold, not bought. The implication being that people would rather not buy it and must be enticed.

But I would suggest that life insurance, especially term, is an inspired purchase. It is usually inspired by an event that reminds a person of the tick-tock of mortality. Term life is meant to make a family whole after the death of a loved one. Of course, dollars cannot completely fill the void left by a departed family member, but they go a long way to help families make it through.

(Although it would be naive to say there was never a case where somebody thought money was a fine substitute for a spouse.)

In my case, the inspiration was sleep.

I needed more of that. My wife and I had just moved to the Harrisburg area. We had new jobs and a new house. With moving expenses and selling a previous house at a loss, we were in a little bit of a hole.

Cue the demons that poke a person awake with their pointed questions at 3 in the a.m. “What would your wife do if you just up and died, hmm? … Suppose that funny bump in your armpit turns out to be an incurable, malignant tumor – what would she do then?”

I realized there was a way to take that log out of the blaze of anxiety: Get life insurance and fret no more. My wife took a bit of persuading. We were well on our way to paying things off, so why slow that down with a monthly premium? But eventually we ended up in front of an agent.

Becoming a File

It was not easy to find an agent. When I called around for our two relatively small term policies, nobody showed enormous enthusiasm. I finally found an agent, Robert, willing to do the business. I could tell, though, that his office processes and his attention to detail were not the most refined. In my first call, his secretary yelled to his office before transferring – a warning, I guess – and I had to give our names and restate my request a few times.

We finally got an appointment, but be6

tween my wife and me, we had a pile of doubts almost as high as the stacks of papers on Robert’s credenza. Robert dug out our file and verified our information. Or more accurately, corrected it.

Then he put down his file, looked at my wife and said, “Your husband loves you very much. A man does this only because he cares about his family. Life insurance is a gift of love.”

A feeling of validation washed over me and cleansed me of my doubts. My wife looked at this, and me, in a completely different light.

I have learned in my time at InsuranceNewsNet that what Robert did was essentially a sales tactic, but I can verify that it works. Always remember that just because people called you up for an appointment and showed up does not mean that they have complete confidence in their decision.

In fact, it is safe to assume they do not. They need to be assured that they chose the right path.

Becoming a Process

We decided on a coverage amount, and Robert filled us in on the medical exam.

A nurse visited for the tests and questions. Then we waited. We waited so long that we almost forgot we were applying for life insurance. I remembered one day and gave Robert a call. He dug around on his desk for our file and asked whether we had taken the medical exam, which we had taken more than a month earlier. He also had a few other basic questions that I thought we had answered.

Our confidence index took a dive that

InsuranceNewsNet Magazine » September 2014

day. My wife and I were once again wondering whether this was worth the expense.

Robert called weeks later and wanted us to review the results at his office. As we sat before him, he pulled our file from the middle of his “In” stack. The company had pronounced me even better than preferred; I had acheived the elite status of Super Preferred! I couldn’t wait to share that news with the pitchfork-poking demons!

Then Robert held an envelope and said that the carrier had found a couple of issues with my wife and she would be rated as substandard. He handed us an envelope that had the findings and suggested that we review them in private. He excused himself while we reviewed. The findings were things we already knew of, but we didn’t realize they would be big issues in life insurance. Still, it was disheartening.

Robert returned and saw that we were disappointed. He told us that people are rated across the spectrum and that the important thing was that we both qualified for insurance. We would be able to adjust the coverage amount if we needed to reduce the premium. Then he leaned forward and smiled at us.

“You both balance each other out,” he said. “I am sure there are many times when one of you has more of something than the other. I have always thought that was the beauty of marriage. One lends strength to the other when needed, and together you are a strong unit.”

Sealing the Deal

After some thinking, we readjusted the coverage and went back to sign. Although Robert’s comment helped us feel better about what we were doing, we still had our doubts. We went back to Robert’s office to sign. After Robert dug out the file from his credenza, he looked at my wife and put the file on his desk.

“I’ve been trying to remember who you remind me of, and I just got it,” Robert said.

“You look like the first person I delivered a claim check to. Sorry, I hate to bring this up, but an agent does not forget the first time he brings a check to a family.”

Continued on page 63 »

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7

INFRONT TIMELY ISSUES THAT MATTER TO YOU

It’s Not Safe to Say ‘Safe’ in Colorado C olorado frowns upon certain words in life insurance and annuity advertising. Will other states follow suit?

products and solutions.

Now, due to the Colorado measure, existing materials will need revision. Sales strategies may likewise be affected.

By Linda Koco

Colorado’s Reasons

T

he Colorado Insurance Division has Colorado took the step in response to expanded the list of terms that it said complaints that the terms “certificate of should not be used in life insurance deposit,” “CD,” “safe” and “secure” were and annuity advertisements due to the being used in ways that could mislead potential for misleading consumers. These consumers, according to Vincent Plymterms are “certificate of deposit,” “CD,” “safe” ell, communications manager in the Coland “secure.” orado Department of Regulatory Agencies The change went into effect on July 1 and spokesman for the insurance division. as part of amended Colorado Regulation Concerning the terms “certificate of de3 CCR 702 - 4, 4-1-2. The division held a posit” and “CD,” the issue was one of “bait hearing on the proposed amendments in and switch” advertising by some producers, May, but various insurance sources have he wrote in an email. For example, some told InsuranceNewsNet they were unaware producers advertise a CD with a good inof the change. terest rate, “but when someone tries to buy Thirteen states have adopted the Nation- it, they are put in an annuity,” he said. al Association of Insurance Commissioners The crux of the issue is whether the per(NAIC) model regulation that prohibits son or entity doing the advertising is an incertain words in advertising. Whether the surance producer or a bank, Plymell continban on words such as “safe” will spread to ued. “An insurance producer probably does other states is a question that not have access to sell a CD, insurance professionals else- “The words ‘safe’ while a bank may have staff to where will be looking at, since and ‘secure’ are do so. It is a question of intent regulatory concepts tend to and deception.” problematic spread from state to state.

Most of the complaints on The Colorado develop- when they are this have involved seniors, he ment may upset some insur- used in that kind added. ance apple carts. This is espe- of absolute way.”

Concerning the terms cially the case for the ban on “safe” and “secure,” Plymell “safe,” a word that appears frequently in life said problems have surfaced where “conand annuity sales and marketing materials sumers took these words to mean risk-free.” around the country. Insurance marketers Fifteen terms were already on the use “safe” to help customers understand banned list: “investment,” “investment where products stand in terms of risk, for plan,” “founder’s plan,” “charter plan,” “depurposes of asset or product allocation. The posit,” “expansion plan,” “profit,” “profits,” term is particularly evident in materials de- “profit sharing,” “interest plan,” “savings,” picting fixed policies and rider guarantees. “savings plan,” “private pension plan,” “reThe materials in which firms have tended tirement plan” and “risk-free.” to use the word “safe” include newspaper “This amended regulation is now ads and fliers, websites, brochures, business strong enough for the department to stationery, business cards, and sometimes consider the use of such terms a violation television and radio promotions. Some and, if necessary, push to the Colorado firms also show links to websites that do (or Attorney General’s Office for further remay) use the term in describing insurance view,” Plymell said.

8

InsuranceNewsNet Magazine » September 2014

Other States?

The Colorado advertising regulations essentially follow the version of the model developed in 2000 by NAIC, experts point out. This is the NAIC Advertising and Sales Promotion of Life Insurance and Annuities Model Regulation (No. 570).

To date, 13 states have adopted that version as it relates to the form and content of advertisements, including the NAIC model’s list of (generally) prohibited terms, according to research by Pamela M. Heinrich. A Wauwatosa, Wis.-based attorney, Heinrich serves as outside general legal counsel to the National Association for Fixed Annuities (NAFA). The 13 states she named are Alabama, Arkansas, Colorado, Illinois, Louisiana, Missouri, Nebraska, New Hampshire, New Jersey, Rhode Island, Virginia, West Virginia and Wisconsin.

Several sources said that the model does not include the terms that Colorado just added to its don’t-use list. However, Colorado regulators may have found that piecemeal efforts to address problems associated with those words were unsuccessful, so they turned to a blanket prohibition, suggested Cailie Currin, president of Currin Compliance Services in Greenwich, N.Y.

The Troublesome Aspects

The “CD” concern: Currin believes Colorado’s ban on the use of “certificates of deposit” and “CD” has to do with the way some fixed and fixed index annuities are compared to bank CDs. “The model advertising regulation requires that comparisons between products be complete and accurate,” she said.

Problems occur if an advertisement suggests a comparison between, say, a CD and a five-year annuity having a five-year surrender charge.

“Annuities should not be sold by making the analogy to a CD that rolls over every few years into another product,” said Currin, who is an attorney. “Annuities are designed to be long-term products, not short-term equivalents to these banking products.”

Misuse of safe: It can be misleading to describe a fixed or fixed index annuity as safe, Currin said, explaining that an annuity “is safe from some things and not safe from others.”

“The words ‘safe’ and ‘secure’ are problematic when they are used in that kind of absolute way.”

IT’S NOT SAFE TO SAY ‘SAFE’ IN COLORADO INFRONT

Still, she said her firm does not raise concerns with use of the word “safe” as long as it is clear what the product is safe from (market declines, for example) and what it is not safe from (loss of principal, for example, due to the possible imposition of a surrender charge).

Even company names and taglines come under scrutiny. At Currin Compliance, for instance, the experts believe that using the

banned terms (including “safe”) for those purposes is a red flag and creates exposure for the firm. “In all states, I recommend removing those and other equally problematic words from firm names and taglines,” Currin said.

Not a Blanket Prohibition

As NAFA’s Heinrich reads Section 5.B, it is not a blanket prohibition on terms.

“The words are prohibited under certain conditions or circumstances. They don’t say ‘never,’” she explains.

Instead, she sees them as “guardrails” for the lay of the land. The intent is to prohibit fraudulent or misleading advertising and to avoid consumer confusion, she said in an interview.

Still, Heinrich advised proceeding with “great caution” because there are still unknowns.

As for the association’s position, she said, “NAFA supports the advertising principles in the NAIC model and the objective of not misleading consumers. The association also supports having a landscape that promotes a healthy and vibrant market. Hence, we have concern if there is a tightening or a misunderstanding of regulations.”

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

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

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sented the Repeatable Successful Acts of Million Dollar Producers. It was so popular that he was called back for additional sessions at the annual meeting.

Simplicity is one of the key pursuits of the uber-successful. They know what is important and how to focus on it. Stephen applied his scientific background to understanding how the supersuccessful do it and, more important, how mere mortals can repeat those patterns.

In this discussion with InsuranceNewsNet Publisher Paul Feldman, Stephen shows how he developed his programs and how people can put the precepts to work today.

FELDMAN: A key component of your teaching is Repeatable Successful Acts (RSA). What are they, and how did they come about?

S

uccess is simplicity. That is not to say success is simple.

Boiling things down to the essence takes disciplined work.

Simplicity brings clarity to your message and can bring order to your life. In sales, simplicity makes it possible to sell the most complex products and services to clients with ease. We all know the saying “Keep it simple, silly,” but few of us take the time to do the work required to simplify our sales processes, presentations and even our own stories. While it takes time to simplify, it’s worth the effort if it 12

saves you time, makes you a more effective communicator and helps you close more business.

That is the fairly unscientific breakdown of the research that Stephen Harvill has amassed working with and studying the biggest, most successful companies in the world, such as Allianz, IBM, General Mills, Wells Fargo, Pepsi, Southwest Airlines, Samsung, Microsoft, Apple, AIA and Zappos. Along the way, he broke down the findings to small steps leading to big yet simple principles.

Stephen will be familiar to many MDRT members because he developed and pre-

InsuranceNewsNet Magazine » September 2014

HARVILL: I’m a scientist by education.

When you’re in science, you recognize early on that much of the outcome is determined by patterns. Patterns become staggeringly important to everything. So we’ve always had this idea, when we’re embarking upon a new idea or a new project, to look for the patterns. I’ll give you a quick story of how this whole thing came about.

I was asked by a Fortune 100 company to be part of a team that was going to analyze their national and international sales force. And I kind of violated one of our laws, which is that speed should never outweigh thought. That law is written everywhere that states what we do. But I said yes to this company before I even asked them about their process.

Next thing you know, I’m on a plane, I’m in New York and I’m sitting in a room with all these people who are going to do this study. They start describing it as an objective, quantifiable study in which they ask their sales force a series of questions that have responses on a scale of one to 10, add it all up, divide by a median and come up with how many times you should do X. As I sat in the room I thought that a monkey could do that study. They’re not asking any of the questions that I think are important about the behaviors of successful people.

At the same time, I get invited by this other company to go to their annual meeting – their national sales meeting – and they want to know if their meeting serves any real purpose anymore. They’ve done it for a number of years, and it’s become rote for them. So they wanted an outside

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INTERVIEW THE SIMPLICITY OF SUCCESS consultant to come in and go to the meeting and the workshops, do all the stuff, and tell them whether this is good or whether they should look at doing something different.

On the final day is a gigantic sales dinner, the kind you have attended many times. It’s rounds of pre-plated salads and chicken and cheesecake, and on stage they’re giving out stuff to people. Stuff like crystal, triangles and plaques. And the salesperson of the year went up on stage and received a Tiger Woods-sized bonus check – one of those big cardboard checks for a staggering amount.

Then I turned to the guy sitting next to me (who didn’t know me from Adam) and asked, “How did she get that bonus?” He replied, “Well, she sold more X than anybody else in the company.” I told him that I understand that, but how did she do that?

His final reply was “I dunno.” He wasn’t even interested in what she may have done that generated this success within his own culture.

When we combined this horrible New

Really good producers have this uncanny sense of focus around what they do. They’ll build these little blocks of time in to their schedule so they’re able to focus on what they believe is important at the time.

York meeting with this sales meeting, we decided in 2011 that we were going to do our own study. Our study would be different, and it would be pattern-driven around behaviors. So we spent a year and a half in seven industries, and we asked the leaders of each industry for permission to interview their top producers, their “million-dollar club” producers. And we promised the industry leaders that we would give them the results of our study for free.

We were looking for the behavior patterns. What were all of these salespeople doing that was the same, irrespective of

what they were selling? Whether they were selling robotic surgical devices or they were selling real estate, whether they were selling financial services or they were managing a million-dollar advertising account, I wanted to know what they all did that was the same.

When we went to these companies, most of their leaders said no. They thought that their sales process was stuff they made up and was secret. Well, let’s see, in 200 BC the first coins were minted, and from that moment on everything was about sales. There are no secrets,

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InsuranceNewsNet Magazine » September 2014

7/28/14 3:25 PM

Read the full Stephen Harvill interview online at

bitly.com/innharvill there’s just who does what better than somebody else.

Every question started with “Tell me” so that every answer elicited a story. That’s where behaviors are found – in the story.

We discovered the patterns in what they were doing. It created a platform that we named Repeatable Successful Acts.

FELDMAN: How do you incorporate Repeatable Successful Acts into a business?

HARVILL: It’s a discipline. The thing about simplicity is that it takes a staggering amount of discipline to be simple.

Everybody wants to do it because it sounds unbelievably good. But the amount of discipline it takes to get to simple is difficult.

Although we take many companies on our platform called Elegant Simplicity, they aren’t willing to have the discipline necessary to do the activities it requires.

One of the disciplines is called time blocking. Really good producers have this

2

THE SIMPLICITY OF SUCCESS INTERVIEW uncanny sense of focus around what they do. In some of them, that sense is so strong that they’re actually able to work fewer hours than a junior salesperson might.

In order to maximize their energies, they create these blocks of time that are dedicated to single activities.

So, for instance, in lieu of a Pavlovian response to their email each time it bings, they’ll turn their email off. Or they’ll turn the sound off while they’re working on a request for proposals or something. They won’t allow distractions. They’ll build these little blocks of time in to their schedule so they’re able to focus on what they believe is important at the time.

Instead of being a victim of their day, they’ve learned to become masters of their day through this process.

I’ll give you one RSA that’s kind of unusual. Within the context of corporate sales, many great salespeople develop entrepreneurial traits. These entrepreneurial traits, which are great in their single approach to sales-creating zeal, often sepa-

rate the salespeople from the company’s goals. A great salesperson balances this conflict. They have an entrepreneurial sense, but they also have a sense of ownership of the company.

Let’s say you have product A and product B and you’re selling a bucket load of product A. Let’s say it’s a variable annuity that just has some great features in it.

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But if you have a sense of ownership about the company, you’ll learn to balance the needs of the company with this entrepreneurial zeal. And when you can do that, you rise up the ranks in sales. The company recognizes that they can count on you. You recognize that you still need to have this entrepreneurial thing, and you

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INTERVIEW THE SIMPLICITY OF SUCCESS create this equilibrium between these two conflicting personality sets.

FELDMAN: How do you simplify the sales process?

extraordinarily successful compared with their peers. And then you have others who struggle in the same markets with the same products and same knowledge.

How do you explain that?

HARVILL: Sales processes become HARVILL: It’s an interesting phecomplex because people don’t nomenon, isn’t it? Given equal eleview them as processes. They just ments, why are there all-star teams add to them. Sometimes they’re in sports? They all practice. They driven by compliance, but they have basic core skill sets. They’re What is the Rule of Three? In the can be driven by a lot of things. A good enough to be a professional simplest of terms, no solution, process or great way to revisit them is to hand at whatever they’re doing. systemic approach to an issue or problem somebody a pen at a whiteboard A good example would be in and say “Draw your sales process tennis, where 35 of the past Grand can exceed three parts. Period. for me. What connects to what?”

Slam tournaments have been won They’ll struggle like crazy to do it by four people. All professionHow do you simplify something that by its because of the level of complexity al tennis players hit the ball hard. very nature is complex? How do you get, that has been added to it. No one’s They all have all the strokes. They for example, a sales process to three if it’s visited it recently. can all serve at 120-plus miles an originally a 10-part process? It is called We were doing a simplicity projhour. But there are four guys who “Thoughtful Reduction,” the ability to bring ect for a client on their value-add win everything. Every single time. thinking to reducing something big to platforms, and I had them list all of There are no secret training the value-adds on this board. By techniques. Everybody knows something smaller. the time these five people were what to do in order to train. Evdone listing them, a number of erybody knows what to do for nuThoughtful Reduction is the key to The people in the group had forgotten trition. Everybody knows what to Rule of Three. The brain can handle that some of these items were still do for cardiovascular. It’s the same three. The average juggler can juggle in play. And if you’ve forgotten wind that is blowing. three balls, but only three out of 100 them, I can also assure you they’re Sometimes people can set their jugglers can juggle four balls. not of great value to your client. sails better than anyone else. The The ability to simplify has a few challenge is to separate and differStephen Harvill, “The DNA of Creative Ventures: core rules. The simplest rule is the entiate yourself in that storm, in 21 Building Blocks of Success” “rule of three.” The rule of three that wind. And most people don’t states that no matter if it’s prospend that much time on that. cess-driven, system-driven, goal-driven want, we’ll submit a brief to you. And the There are only two things they need to or whatever – you cannot allow it to have brief will have, as you probably guessed, look at – the things they can’t control and more than three parts at any given time. only three parts to it. the things they can control. You can’t conRemember earlier when I told you a People want to know how they can be trol governmental impact on health care. little bit about the difficulty of discipline? involved in setting the goal. Then they will You can’t control the economic situation This is a great example of it. People love be more enrolled in the goal. Next, they in Greece. You can’t control the insurgent 10. They like to have 10 major goals a year. want to know what they are needed to do. activity in Iraq and Syria. But you can conThey like supersizing. They like all of these Then, periodically, they want to know how trol your client experience and the skill set elements that draw away from simplicity. they are doing. you bring to your job.

With the rule of three, you get only The “how am I doing” metrics can’t be Yet if you look at people’s annual goal three. You get only three major chang- 16 pages long. I don’t care if you’re try- structures, you won’t find those two es. You get only three parts. You only get ing to discover a subatomic particle. You things in many of them. They should be in three steps. You get only three of anything. can’t have 16 elements to it. So the rule of everyone’s goal structure.

If you learn and apply this, you’ll be- three is a methodology of discipline that a come really good at discovering what is regular person can get their head around. FELDMAN: Tell us about “The Uneximportant and what is not. That idea will That’s why we use it as one of the starting pected Journey” work you did with gain traction. If you’re really, really good points for any process of simplicity. female advisors. at it, you’ll eventually move from three parts to two, which is way better than FELDMAN: Another powerful rule you HARVILL: We have a platform called The three. have is that “the same wind blows Unexpected Journey, which is all about If you come to us to do a project and for everyone.” In our business, we the client experience. We had the 23 top you haven’t really articulated what you have agents and advisors who are female financial advisors in America go 16

InsuranceNewsNet Magazine » September 2014

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INTERVIEW THE SIMPLICITY OF SUCCESS through that platform this year.

The idea is that the client experience is something you control.

You’re the architect, the builder, the deliverer. You’re the everything of your client experience.

It’s a full-day immersion program in fields outside of their profession. So if you’re a financial advisor, you’re not going to spend any time in a financial advising environment. You’re going to take a look at what other people are doing, and we’re going to garner ideas from what everyone else is doing.

So in this particular training, we held the meeting at the Mall of America near Minneapolis. We divided the day into experiential elements and classroom elements.

The women were divided into small teams. They were required to visit as many of the shops as possible in their sector of the mall.

They had a three-part template to use in judging each of the experiences that they had while visiting those shops.

Then they came back and shared their experiences with the group. We identified the top three experiences. Afterward we created a template for them to take home.

doing, I can almost assure you that three of those elements need your attention right now. The rest don’t.

There’s a pattern within the context of your change that needs your attention. Sometimes it’s little things. Sometimes it’s big things.

Whatever the thing is, it’s the natural condition of your industry, of your business. Even in my little company, we do only three things.

We present our ideas, we teach our ideas or we’re consulting on our ideas. And even those three things are constantly changing.

It’s being not driven by the 20 things but being driven by the important things that exist within the model of change. That’s the key.

The only way you can figure out what’s important is if you know what elements are in flux. Although it’s true that all elements are in flux, there are elements within that context that are more important than others.

That’s called the Law of Weight.

In any given system, certain elements of change carry more weight.

You have to find what those elements are and create a level of focus around that weight. That’s where traction and change come from.

The Law of Weight: In any given system, certain elements of change carry more weight. You have to find what those elements are and create a level of focus around that weight.

FELDMAN: What were some experiences that they brought back to their businesses?

HARVILL: A key one was attentiveness.

In a lot of the retail experiences, no one approached them. One of the women picked four things off of a rack. She had the clothing in her hand, which was a sure sign of a potential sale. But nobody helped at all.

And so they learned that one of the elements is a constant level of attentiveness.

Another experience is luxuriated. I don’t even know if that’s a word. It should be if it isn’t. One of the teams went into store called The Art of Shaving. It’s a men’s shave store. Obviously none of these women were going in for a shave, but the leader of this particular group wanted to go into a place where she would never go otherwise.

They were so impacted by their experiences that they all signed their husbands up for The Art of Shaving Club. Because

when they were in there, they felt like they were the most important people on the planet. The people in the shop had the women sit in the shave chairs, put their head back, feel the temperature of the towel. They created this unbelievable experience.

So the women took back with them the idea that they can create a sense that their clients feel they are in luxury when they’re doing business with them. Keep in mind that these are the crème de la crème of female financial advisors. It’s amazing what you can learn from other industries.

FELDMAN: We’re in a business that has experienced a lot of change. Would you explain Patterns of Change?

HARVILL: First of all, everyone knows that change is the only condition in which anything exists. Nothing in nature exists in a static condition. What people search for is balance. That’s the unicorn of popular psychological searching.

Everything is in some type of a condition of change. The question becomes, what are the important elements found in that condition of change? If there are 20 elements that are changing in what you’re

18 InsuranceNewsNet Magazine » September 2014

FELDMAN: Do you find that salespeople get caught up in details and forget to tell others what’s really important?

HARVILL: It’s horrible, and then they can’t figure out why someone doesn’t understand or know what’s going on, right? It’s my responsibility to know what’s going on, but it’s your responsibility to help me.

You can’t give a football to someone who’s never thrown one and say, “Throw a spiral.” And when they throw the ball into the ground, you can’t hold them responsible for not throwing a spiral. You never showed them how. This is part of that deal of great communication and how story drives that.

As complex as all these pieces sound, when looked at in the right order, they still follow a really simple path. And the key is to know that path.

Read the full Stephen Harvill interview online at

bitly.com/innharvill

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It could be a case of “déjà vu all over again” if the Supreme Court ends up hearing yet another challenge to the Affordable Care Act (ACA). If this occurs, it would be prompted by two federal appeals courts handing down conflicting rulings on the same day concerning insurance subsidies. The court battle is over whether subsidies are legal for those who purchased coverage on the federal exchanges.

The challenge could end up in front of the high court as soon as next year. If the Supreme Court agrees to hear the case and ultimately rules that only those who purchased coverage on state-run exchanges are eligible for the financial help, it could gut a key provision of the act and ultimately make the ACA unaffordable for millions of Americans. Only 14 states set up their own exchanges, leaving the remaining 36 states to use a federally facilitated exchange.

The plaintiffs from Virginia claim that they would have qualified for the unaffordability exemption from the law requiring them to purchase health care but for the existence of the federal exchange subsidy. They went directly to the Supreme Court instead of asking a full panel of the Virginia federal appellate court to rehear that case “because it’s important to get a resolution as soon as possible,” said Sam Kazman, general counsel at the Washington-based Competitive Enterprise Institute, which coordinated and funded the challenges to the federal subsidy.

Some believe the Supreme Court may be unwilling to hear another challenge to the ACA. The high court already has ruled twice on various aspects of the ACA: the first time ruling that the law is constitutional, and the second time ruling that some employers may opt out of providing contraceptive coverage that violates their religious beliefs.

DID YOU

KNOW

?

20

ABOUT

It’s possible that consumers could someday visit their local post offices for more than just sending packages and picking up stamps. Lawmakers and government officials looking for a way to save the cash-strapped U.S. Postal Service (USPS) are considering a proposal that would make check cashing, small loans, prepaid cards and other financial services available at local post offices.

The plan, which was floated earlier this year in a special report by the USPS’s Office of Inspector General, would use the far-flung network of post offices across the country to reach consumers who are underserved by banks.

5.4

In the report, the inspector general suggested that post offices could fill a gap left by the dwindling number of bank branches in low-income rural areas and inner cities, generating an estimated $8.9 billion in additional revenue.

It’s not sure exactly what financial services the postal service would offer. The USPS says it envisions partnering with banks to create a platform of products available to consumers, which would include check cashing or prepaid debit cards. But congressional authorization would be needed for the postal service to offer savings accounts or loans.

SENATE VOTES TO EXTEND TRIA, ADVANCE NARAB II

The Senate voted to extend a program that would cushion the blow to insur-

MILLION PEOPLE enrolled in insurance plans on the federal exchange

InsuranceNewsNet Magazine » September 2014

87%

SOME

FINANCIAL PRODUCTS AT THE POST OFFICE?

RECEIVED SUBSIDIES Source: Associated Press

Feel free to keep your house in the Hamptons and your corporate jet, et cetera.

I’m not concerned about how you’re living.

— President Barack Obama, telling The Economist magazine that chief executive officers should stop complaining about regulations and show greater social responsibility

ance companies in the event of a massive terrorism attack. The National Association of Registered Agents and Brokers Reform Act, known as NARAB II, was also amended into the bill. This legislation would establish a national, onestop insurance licensing clearinghouse for financial professionals operating in multiple states.

The terrorism program was enacted as the Terrorism Risk Insurance Act (TRIA) in the aftermath of Sept. 11, when insurance companies were reluctant to provide coverage for terrorism attacks. It is due to expire at the end of the year.

The Senate voted to extend the program through 2021. Under the program, the federal government pays a portion of the damages for attacks that cost more than $100 million. The government would then recoup the money in the form of insurance industry surcharges.

The House is considering a similar bill that treats conventional and nuclear attacks differently, providing less federal help for attacks using conventional weapons.

NEED HEALTH CARE? GO TO WAL-MART

Wal-Mart is giving customers one more reason to walk through its doors. The company has begun operating “Care Clinics” in South Carolina and Texas.

These primary care clinics are staffed by licensed nurse practitioners and are similar to clinics operated by a number of other national retailers such as CVS and Walgreen.

“For our associates and dependents on the health plan, you can come and see a provider

[NEWSWIRES] in the Wal-Mart Care Clinic for $4. Four dollars! That is setting a new retail price in the health care industry,” said Jennifer LaPerre, senior director for the company’s health and wellness program.

Customers pay $40 for appointments and additional fees for lab work. The Care Clinics only accept fee-for-service Medicaid and Medicare plans. Privately insured patients pay the same amount for services at the clinics as uninsured patients.

INSURERS TO REFUND $330M AS RESULT OF ACA

Insurers will refund about $330 million in premiums to 6.8 million consumers across the country as a result of the ACA. The payments come as insurance companies comply with a provision of the federal health law that requires them to spend at least 80 cents of every dollar on medical care. If marketing or other administrative costs eat up a larger share of premiums, insurers have to give consumers some of their money back.

Businesses that are entitled to rebates from their health insurers must reinvest the funds in action that improves the health coverage of the workforce, such as wellness activities or “premium holidays.”

The U.S. Department of Health and Human Services estimates that consumers have saved $9 billion on health insurance premiums since the rule took effect.

A THIRD OF AMERICANS DELINQUENT ON DEBT

More than a third of the country is in trouble when it comes to paying debts on time: 35 percent of Americans have debt in collections, according to a study from the Urban Institute, which analyzed the credit files of 7 million Americans.

That means the debt is so far past due that the account has been closed and placed in collections. This typically happens after the bill hasn’t been paid for 180 days. It also means that the debt has been reported to credit bureaus and can affect someone’s credit score.

Southern states especially stand out on the list of states with the highest concentration of people delinquent. In 13 states – Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Texas, Nevada,

What Will the Midterm Elections Bring?

66%

With less than two months remaining before the midterm congressional elections, lots of folks are OF FINANCIAL trying to read the tea leaves. Financial advisors are ADVISORS predicting victory for Republican Senate candidates BELIEVE THE GOP WILL WIN in November.

A poll of 2,300 independent financial advisors by the Financial Services Institute (FSI) has found that 66 percent believe the GOP will win the Senate.

The poll also found that as many as 90 percent of independent advisors oppose a rule pending with the Department of Labor (DOL) to redefine the term “fiduciary.” The fiduciary rule, which has been delayed for several years, was postponed yet again earlier this year after opposition from broker/dealers and some financial advisor groups.

The FSI poll also found that 43 percent of independent advisors believe 2014 will end with a “strong” stock market performance, 49 percent were “neutral” and 8 percent said the stock market will end the year “weak.”

New Mexico and West Virginia – and Washington, D.C., more than 40 percent of the population with a credit file has debt in collections. Nevada has the highest share, at 46.9 percent.

Those with debt in collections owe an average of $5,200. That includes debt from credit card bills, child support, medical bills, utility bills, parking tickets or membership fees.

WEALTH GAP HAS SLOWED ECONOMIC RECOVERY

Does a rising tide really lift all boats?

That’s the theory that many economists believe about how the wealthy can influence the economy.

Now, however, Standard & Poor’s describes the economy as “a lifeboat carrying a few, surrounded by many treading water” and at the risk of capsizing. A new analysis

by S&P says the widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and slowed the fiveyear-old recovery from the recession.

Economic disparities appear to be reaching extremes that “need to be watched because they’re damaging to growth,” said Beth Ann Bovino, chief U.S. DID YOU

KNOW

?

economist at S&P. The rising concentration of income among the top 1 percent of earners has contributed to S&P’s cutting its growth estimates for the economy. In part because of the disparity, it estimates that the economy will grow at a 2.5 percent annual pace in the next decade, down from a forecast five years ago of a 2.8 percent rate.

SOCIAL SECURITY’S $300M IT PROJECT DOESN’T WORK

Six years ago, the Social Security Administration began an aggressive plan to replace outdated computer systems overwhelmed by a growing flood of disability claims. Now, $300 million later, the agency can’t get the new computer system to work and officials don’t know when it will.

An internal report says the project has been plagued by delays and mismanagement.

In the meantime, people filing for disability claims face long delays at nearly every step of the process – delays that were supposed to be reduced by the new processing system.

The report was commissioned by Social Security to save the project. It was done by consulting firm McKinsey & Co.

The AVERAGE CONTRIBUTION to an individual retirement account (IRA) reached a record

$4,150

in the 2013 tax year, an increase of 5.7 PERCENT from the previous year.

Source: Fidelity Investments

September 2014 » InsuranceNewsNet Magazine

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Previous Life Insurance Awareness Months have featured debates about why the industry is failing to reach the mid-market.

But this year, we find that the industry’s rising star, indexed universal life, is charting record growth by pulling in those clients.

22

InsuranceNewsNet Magazine Âť September 2014

N

OT LONG AGO, a middle-market couple told life insurance agent Michael T. Tierney that they wanted to discuss retirement income.

“Right off the bat, they said they have never bought life insurance and they will not buy an annuity or life insurance,” said Tierney, who does college funding through his College Tuition Coaches firm in Feasterville, Pa., but who also addresses retirement and other needs.

The more Tierney learned about the couple’s assets and income needs, he said, the more he saw that indexed universal life (IUL) insurance might be something they would like and need. IUL is fixed permanent life insurance that offers upside potential by linking its interest crediting to performance of one or more financial indexes as well as downside protection (a zero percent floor).

It turned out he was right. The couple got “excited” about the product’s taxfree loan capability, the upside/downside characteristic, the flexibility to accelerate the death benefit or not, and other features. They were so excited, in fact, that “they purchased an IUL on the husband.

Then they came back and started looking at a second-to-die IUL policy too.”

The Mid-Market Magic

Tierney told InsuranceNewsNet that this is just one example of how well today’s modern IULs can meet middle-market (mid-market) needs and preferences.

For this article, the mid-market refers to individuals and couples earning $50,000 to $90,000 a year, depending on geographic region, family size, occupation and other variables. It also includes small-business owners who have up to 25 employees, a home, family and all the other financial responsibilities of people in the middle stages of life.

That this market is buying IUL may come as a surprise to some life insurance producers, who view IUL as a high net worth solution due to its index linking, riders, associated tax strategies and other more sophisticated characteristics.

Tierney disagrees. The modern IUL is better suited to the mid-market than to the high net worth market because it is so flexible, he said, and the access to emer-

WHY THE MIDDLE MARKET LOVES IUL FEATURE gency cash through policy loans is just one example. “The high net worth market has money everywhere, so it’s not a musthave issue for them. But that’s not the case in the mid-market; these consumers really need that feature,” he said.

The built-in riders that accelerate the death benefit for chronic illness, longterm care or other medical exposures are also very important in the mid-market, Tierney said. “Unlike high net worth individuals, mid-market customers may

nine months of IUL sales in 2013, Milliman said. “The younger folks are looking for face amount,” commented Sue Saip, a consulting actuary at the Bannockburn, Ill., firm. » Average premium: IUL’s average target annual premium ranged from $8,000 to $10,000 in the first quarter, according to Moore. As for the first nine months of 2013, Milliman put the average premium per policy somewhat higher, at $12,000;

In first quarter 2014, the average age of all IUL buyers was a very mid-market 41. not have stand-alone policies that cover those expenses, but if they have an IUL with that rider, at least they have some protection.”

Other industry professionals have been predicting that mid-market consumers will not cotton to IUL because it is less well-known and less widely sold than term and whole life and it is too complex for these buyers to understand or incorporate.

But demographics paint a different picture. Industry data suggest that consumers are definitely buying IUL ($1.4 billion in sales in 2013, according to Wink) and that a lot of the buyers appear to be mid-market. For instance:

that was on sales of “accumulation IULs,” which are designed to build high early cash values and have been the leading IUL seller in recent years. With those premium ranges in mind, the premium works out to be roughly $660 to $1,000 a month; this is considered doable for many employed mid-market buyers.

» Average age: In first quarter 2014, the average age of all IUL buyers was a very mid-market 41. That’s based on the 51 carriers that Wink surveyed for the quarter. In the 40 to 45 age range, buyers tend to have assets over $200,000, noted Sheryl Moore, president and CEO of Wink. Another survey, by Milliman, found a similar trend among the 26 carriers it surveyed in the first nine months of 2013. The weighted average age, including all distribution channels, was 45 (based on face amount) and 53 (based on premium) in the first

Once mid-market individuals learn about IUL, they get seriously interested, said sources interviewed for this article. The trend is especially evident in the market’s middle- and higher-earning segments. Following are some insights on this, including some revealing case histories (highlight only, for the sake of brevity).

» Average face amount: Milliman puts the average face amount at $463,000 in 2013. Wink’s figure for first quarter came close to that, at nearly $430,000. Assuming the face amounts represent the recommended five to eight times salary, these averages suggest mid-market buyers are definitely in the mix.

Death Benefit, Flexibility and More

Terry Headley, president of Headley Financial Group, La Vista, Neb., and a former

September 2014 » InsuranceNewsNet Magazine

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FEATURE WHY THE MIDDLE MARKET LOVES IUL president of National Association of Insurance and Financial Advisors (NAIFA), said the attractions for the individual are the ability to purchase a low-cost death benefit, the flexibility in premium and death benefit (due to the universal life chassis), and the downside floor/upside potential.

The premium flexibility is “good for times when there may be job uncertainty,” he said. He also likes the built-in cost-

bonus plans, key person insurance, buysell funding in closely held firms and deferred compensation arrangements, said Headley.

Some people may not consider people with small businesses to be part of the mid-market, Headley allowed. However, many are just that. He pointed to a young family in which the parents are professionals in their late 30s – the husband

The IUL is a good alternative to 529 college education savings plans because of the tax-free growth. of-living rider on the IULs he sells. This offers automatic increases in face amount without proof of insurability, subject to an increase in premium. (If the owner rejects an increase, no more increases will be offered in future years.)

Case history of a teacher: “The husband was a teacher earning $40,000 to $50,000 a year, and the wife was a lab tech earning $40,000. They had kids in high school. When evaluating the death benefit need at the eight to 10 times earnings test, we determined the couple would need a combined face amount of $900,000 for the two of them. We chose an 80 percent replacement rate, putting $400,000 on the husband and $320,000 on the wife. After examining the budget and other factors, the decision was that $200,000 of that face amount would be in an IUL written on the husband and $120,000 in an IUL on the wife; each would also have $200,000 of convertible term insurance. This ensures that they have some permanent insurance, and the flexibility to upgrade the IUL for part of the retirement income portfolio later on.” — Terry Headley For small-business owners, who are often in the higher end of the midmarket, the IUL is effective for executive 24

an attorney and the wife an accountant/ bookkeeper – with an annual income of around $130,000.

The couple has three children and one on the way. “Our analysis showed they needed $1.5 million of life insurance. For each, we put three-fourths of the face amount in convertible term insurance and one-fourth in IUL. We funded it at a level to fit their monthly cash flow but with the ability to increase the funding in the IUL,” Headley said.

Later, the parents will be able to use the IUL to withdraw funds for the children’s college education, “as a ‘secondary bucket’ to the 529 plans,” he said.

The couple might also use their IUL to supplement retirement income, he added. It’s a good product for that, he said, because the cash value grows tax deferred and the policyowners can access funds tax-free through policy loans. The clients do need to make sure the loans do not result in policy lapse, thus triggering unwanted taxes, he said. But he added that the IULs he sells include a life paidup rider, which essentially “ensures that the contract will mature with a death benefit and not lapse or collapse.” This assumes the policy is not structured as a modified endowment contract and does not breach the annual guideline premium test, Headley said.

InsuranceNewsNet Magazine » September 2014

College Funding

College education funding is a common use of the IUL in the mid-market for families, said Wink’s Moore. This includes using IUL to fund the education of not only one’s children but also one’s grandchildren.

“Some grandmas are being pitched on this when the children are very young,” she noted. “In this strategy, Grandma pays the premiums and overfunds the IUL. The premium is so low, due to the young ages of the children, this overfunding is easy to do.”

If Grandma makes the IUL purchase when the children are young, the cash value will have plenty of time to grow before college starts. That’s important, Moore said, “because you need the time factor for compounding to work, especially for cash accumulation and when the intention is to take policy loans later on.”

The IUL is a good alternative to 529 college education savings plans, said Tierney, because of the tax-free growth, the tax-free access to funds via policy loans, and the annual reset that locks in gains.

Mid-market parents are also interested in another aspect of using life insurance for college funding purposes, he said: Life insurance policies – like retirement accounts and annuities – do not show up on student loan applications. Tierney explained, “That means the parents will have more money available for student loans and less money out of pocket for college tuition.” That’s important because if the parents take money out of pocket for college funding, they are potentially taking funds from their retirement future, he said.

Avoid Loss Due to Market Downturns

Lew Nason, a marketing and sales trainer at Insurance Pro Shop in Dallas, Ga., says mid-market customers like IUL because it offers the potential to get a better return than from other fixed products, and without experiencing exposure to losses in the stock market.

Oftentimes mid-market customers in this market have already lost money from investing in securities. “They may still believe they can make more money in the stock market, but they don’t want any more losses,” he said. When that is the case, the IUL’s flexibility and various

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FEATURE WHY THE MIDDLE MARKET LOVES IUL policy features take a back seat to the product’s upside potential/downside protection capabilities, the cash value buildup that can occur and the death benefit.

Agents need to sell what they are more comfortable with, Nason allowed. If they are independent agents who started out in the career agency system, they might be more comfortable selling whole life to such customers because of its guarantees, he said. But once they are in a competitive situation, “they often become enamored of IUL due to its total cash value or taxfree income.”

Case history of a young family: “When I was a brokerage general agent (BGA), I went with another agent to visit a schoolteacher. She and her husband were in their 30s, had two little girls and wanted health insurance, but they didn’t want life insurance. She said she had bought 20-year term insurance from her agent/mother a few months previous – $250,000 on her and $500,000 on her husband, for a total premium of $1,000 a year. She said they were tired of losing money in the stock market but still wanted to save so were planning to put

IUL is a good fit for people in age 70, as long as there is a about $2,000 a year into a Roth IRA. I came back with an apples-to-apples recommendation. Why not purchase an IUL on the husband for $300,000 plus two riders – a $200,000 20-year term rider on him and a $250,000 20-year spousal term rider on her? The total premium would be $3,000 a year, the same as that for the term/Roth plan they were considering. The term insurance on both would expire at the end of 20 years, as now. But the IUL on the husband would have face amount of $344,000 in 20 years, assuming they made no changes to the contract.

In addition, at 6.5 percent annual growth, the policy would have a total cash value of around $87,000 (as opposed to a projected Roth value of $69,000, assuming 5 percent growth). They liked it and bought it. Then, three weeks later, the teacher

$15.3 TRILLION

Estimated unmet life insurance needs in the U.S.

1

decided to convert her spousal rider to a $250,000 IUL, using some existing assets to fund the new policy. She said she didn’t want to lose her life insurance after 20 years.” — Lew Nason

Address Survivorship Issues

Mary Ann Lacey-Gray thinks IUL works well for survivorship needs in the mid-market. The president of Underwriters Marketing Service, a Mount Laurel, N.J., national marketing organization, she said her firm has been marketing IUL for about 10 years. This experience has convinced her that the product is a good fit for people in their mid-30s on through age 70, as long as there is a timeline of 10 years or more.

For mid-market people in their 60s, she said, the appeal is the potential cash value

35 MILLION

Number of Households without life insurance

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WHY THE MIDDLE MARKET LOVES IUL FEATURE

their mid-30s on through timeline of 10 years or more. buildup from the index linking for use in case there is a future need for money. In addition, she said, there are survivorship IULs on the market that appeal to couples in this age bracket. They like that they can use the cash value in such policies for taxfree loans as well as a tax-free death benefit, she said.

“What gets their attention is the loss avoidance. People are squeamish about money, and they want it protected. They like the sleep-at-night feeling about their supplemental dollars along with the death benefit and waiver of premium.” For older people, she said, it comes down to this: “They like that there is no risk of loss in the cash accumulation, that there is predictable gain through guaranteed growth, plus survivor coverage.”

Many also like the included critical

time). That amount brings them close to the premium they will have paid in up to that time. If assuming guaranteed values, which are 3 percent on the contract I am thinking of, the death benefit would go for 17 years, to their age 82. In addition, the policy includes death benefit acceleration rider for long-term care, critical illness, chronic illness and terminal illness.”

— Mary Ann Lacey-Gray

illness rider, Lacey-Gray added, noting that this takes care of the “What if I have a diagnosis of cancer or stroke?” question (by providing a lump sum via death benefit acceleration).

Case history of an older couple: “A couple, both age 65 and rated standard, can buy a survivorship IUL with a $500,000 face amount for a premium of $500 a month, or $6,000 a year. Assuming an interest rate of 6.40 percent, which I consider to be conservative based on historical performance, the policy will take them to age 95 with death benefit sustained. But if they want to surrender the contract, after 15 years, for example, when they are age 80, they would get $102,000 after surrender charges (which run for 20 years but are small by that

33 PERCENT

Proportion of Americans who say they don’t have enough life insurance 2

Retirement and Social Security

4

Michelle Ford, CEO of LifeLong Retirement Corp., Bridgewater, N.J., sees a sweet spot for IUL with clients who are approaching retirement and interested in Social Security strategies.

Many of these clients are “the millionaire next door,” she said. These are the people who have worked and saved to get to $1 million or close to it. Now they want to learn how to take income in retirement, maximize their Social Security benefits and minimize their taxes.

Because they are no longer young, she said she makes sure to use conservative assumptions in structuring the IUL, which becomes the basis for tax-free money in retirement. Her planning approach also

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September 2014 » InsuranceNewsNet Magazine

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FEATURE WHY THE MIDDLE MARKET LOVES IUL includes Social Security claiming strategy and positioning other assets with taxes in mind. The objective is to create “a coordinated, cohesive plan that the client has the ability to understand” and that provides reassurance that “there is no need to worry about what happens in the stock market.”

In general, Ford said, she prefers to use IUL rather than variable universal life with such clients. “We need to stay as realistic as possible,” she explained, and also to avoid the potential for the life insurance to fail in the event of a down market.

“IUL offers an opportunity to have enough juice for the engine,” she added.

“Due to the way the chassis works (a universal life contract that credits interest based on linking to gains in an index) and its annual reset concept (on credited interest), the IUL allows the assumptions to come as close to fruition as possible.”

IUL Keeps Hitting

Case history of a divorced man: “A divorced 57-year-old man thought he probably couldn’t retire until age 70.

He was earning $95,000 a year, had $550,000 in assets (qualified and nonqualified), was the father of two daughters, and had a significant other with whom he did not co-mingle assets. He did have some whole life insurance, but it was less than he thought. We set up a retirement plan that includes IUL and Social Security claiming strategy. He will retire at 62. Then, at age 66 and two months, he will take 50 percent of his ex’s Social Security. At age 70, he will switch to taking his own (maximum) Social Security ($39,000 a year), thus maximizing his benefit. Upon his death, the two daughters will split his 401(k) assets and the significant other will receive the IUL proceeds. The IUL is a five-pay $351,000 policy that was set up as life insurance (i.e., not a non modified endowment contract). The policy is funded by repositioned assets. At age 70, the man will start taking out $14,170 a year as tax-free loans from the IUL. This assumes 7 percent interest, and based on historical performance, the policy will pay out all the way through, along with his Social Security benefits and $4,800 a year from an indexed annuity in his Roth IRA. He will pay a small required minimum distribution on qualified money but will still have additional dollars left over.

28

InsuranceNewsNet Magazine » September 2014

New Sales Records

Researchers tally indexed universal life (IUL) insurance sales with varying parameters, but all show upward-bound results. Take a look.

In 2014: » First quarter 2014 IUL sales for 51 carriers were $330 million, up nearly 4 percent from first quarter 2013. Only one of the top 10 sellers experienced a decline from the same quarter last year. » New annualized premium for IUL rose 15 percent in first quarter 2014 versus first quarter 2013. In first quarter 2014, IUL represented 39 percent of universal life sales and 14 percent of total individual life premium. By comparison, in 2007 IUL’s share of the total life premium was only 8 percent.

In 2013: » Total IUL sales for 50 life insurers reached more than $1.4 billion in 2013, the fourth consecutive record-setting year.

That’s up by nearly 8 percent from the previous year. » IUL sales in 2013 rose 13 percent over 2012 and recorded the greatest increase in absolute dollars compared to other product lines. Measured by share of market, IUL in 2013 represented a record 35 percent of universal life premium and 13 percent of total individual life premium. » Total IUL sales as a percent of total universal life sales (including IUL) increased to 31 percent in the first nine months of 2013. That compares to 14 percent of the total in 2010. The 2013 figure represents results of 26 IUL carriers; cash accumulation IULs led the first nine months’ sales with an 87 percent share of IUL market.

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September 2014 » InsuranceNewsNet Magazine

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FEATURE WHY THE MIDDLE MARKET LOVES IUL And should he experience a long-term care or critical illness event, the IUL will accelerate death benefit for that. In sum, this plan takes care of the beneficiaries, maximizes the Social Security benefits and puts the assets in protected instruments.” — Michelle Ford

Not for Everyone

As effective as the products can be, they are not for everyone in the mid-market, several experts say. Here are a few such instances.

Limited funds. Some mid-market consumers, such as families with young children, don’t have enough discretionary income to go into a cash-value-building policy such as IUL, said Headley. Tierney agreed, noting that a similar issue occurs when job security or family issues appear on the horizon. In some cases, Tierney offers a term life policy instead; in others, he suggests coming back later when funding is easier.

Short window. If there is too short a timeline (say, under 10 years), the advantage of compounding will not have time to work, said Lacey-Gray. “You need younger buyers so they can take advantage of the loan feature later on,” agreed Moore.

Customer preference. If the customer is looking only for a guaranteed death benefit, that’s a signal to look for other types of coverage, said Lacey-Gray.

Concerns

When working with IUL in any market, producers need to be aware of concerns about the product, according to experts.

One issue is policy illustrations. The large majority of IULs are sold with illustrations, but some regulators are concerned about whether all illustrations are appropriate, said Carl Friedrich, principal and consulting actuary at Milliman.

To create the illustrations, insurers use current IUL caps (limits on interest credits) and participation rates (the percent of gain in an index). They also use look-back periods of, say, 20 to 25 years to derive an historical average on returns, Friedrich said. “The concern is, what is the appropriate look-back period? Do the periods change from year to year? How should the carriers illustrate these policies?”

This will probably lead to new actuarial guidelines in the next year or two, Friedrich predicted, saying, “That may create 30

The industry’s laundry list of positives about IUL in the mid-market or any market is quite long. constraints on how attractive the products might look.”

Another illustration concern is that some of today’s illustrations may show interest crediting rates in the double digits, for example. That has “powder keg potential,” said Wink’s Moore.

Compared to the policy’s guaranteed minimum and what other types of fixed products are offering, the double-digit returns look “enticing” to customers and producers, she allowed. But if the rate doesn’t pan out, consumers will complain. Her suggestion is for producers to talk with clients about expecting interest rates that are 1 percent to 2 percent over what traditional UL policies will pay rather than setting the expectation at, say, 12 percent.

Another issue is policy structure. To ensure the tax benefits of IUL, including the tax-free policy loans, the policy needs to be set up as a nonmodified endowment contract and must not breach the guideline premium test under Section 7702 of the Internal Revenue Code, noted Headley. In addition, clients need to be made aware that the individual exemption level from federal estate taxes on life policy proceeds maxes out at $5.34 million this year, he added.

A final concern is education. “There has been a huge lack of education among producers about using policy loans in IUL,” noted Moore. That includes education not only about types of loans that are available but also about how riders, such as the “overloan” protection rider and the paid-up rider, can help protect policyowners from experiencing a potential taxable event due to loans.

Education is also needed about adequate funding levels, said Headley. This applies to education of both customers and producers. In addition, he said, even though customers may understand their

InsuranceNewsNet Magazine » September 2014

policies when they are explained at the time of purchase, “they need constant re-education,” at least yearly when they get their annual statement, he said.

Where IUL Is Good

The industry’s laundry list of positives about IUL in the mid-market or any market is quite long. The policies can be written at low premium levels if necessary and maximum funded if desired. They can build up cash value over time through linking credited interest to various market indexes. They have downside protection through the interest rate floor. They allow dump-ins. They allow tax-free policy loans that work well in college funding and retirement income scenarios. Many offer death benefit acceleration for longterm care and various other exposures.

The products can be sold as single life and survivorship life. They work well for families, with spouse and child riders attached, as well as for small-business owners. The list goes on.

But is IUL also attractive to producers who sell in the mid-market? Those who sell it said yes. For one thing, the IUL competition is minimal in the mid-market, giving producers plenty of opportunity to sell, they said. For another, when a competitive situation does rear its head, IUL looks very attractive in the current environment when compared to traditional universal life and many other products.

Wink CEO Moore added another producer advantage that some may not have considered. Because IUL has so many features and so much flexibility, she said, “the producer gets to be trendy by offering ‘bundling.’”

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

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

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September 2014 Âť InsuranceNewsNet Magazine

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September is Life Insurance Awareness Month! This is the perfect opportunity to talk to people in your community about their life insurance needs. Find tools and resources at lifehappens.org.

LIFEWIRES

Social Media Use Jumps More than 50% Life insurance companies may have been a little slow to jump on the social media bandwagon, but they are catching up, according to LIMRA. A new LIMRA survey finds that 93 percent of life insurance companies had social media programs in place in 2013, up 55 percent from 2010.

More than three-quarters of companies report having social media programs targeted to the public, while 7 in 10 have programs supporting financial professionals’ use of social media. One in 5 companies said they plan to launch social media programs to reach these audiences in 2014.

So why haven’t life insurers been tweeting and posting as much as other companies?

Insurers told LIMRA that compliance remains a major challenge to their social media presence, with 68 percent reporting compliance concerns in 2013. However, that percentage is far lower than what was reported in 2010, when 9 in 10 insurers cited compliance concerns as their biggest worry. Instead, tactical concerns such as staffing, funding and getting executive-level support are becoming more common barriers to social media use.

MEN PAY 38% MORE FOR LIFE INSURANCE THAN WOMEN DO

Gender, age and smoking are key factors in life insurance rates, according to a new report from InsuranceQuotes. com. Men pay an average of 38 percent more than women do for the same life insurance policy, according to the report. The gap grows with age – for example, 25-year-old men pay 25 percent more than 25-year-old women for the same policy. At age 45, men pay 32 percent more than women, and at age 65, the gap grows to 40 percent.

On average, smokers pay more than three times as much as nonsmokers for the same policy (235 percent). Age is another key factor: 35-year-olds pay 27 percent more than 25-year-olds for the same coverage. The gap grows over time: 45-year-olds pay more than twice as much as 35-year-olds do (120 percent more). The increases get even steeper after that.

More evidence that getting prospects to buy life insurance while they’re young and healthy can be easier on their wallets as well.

DID YOU

KNOW

?

32

KANSAS CITY LIFE EXITS THE B/D BUSINESS

Kansas City Life became the latest life carrier to bid farewell to the broker/dealer business. The company announced the sale of its independent B/D Sunset Financial Services to Securities America. Sunset has 268 representatives, about $18 million in gross annual revenue and $2.4 billion in client assets.

The terms of the deal were not disclosed. But Kansas City Life Insurance said the sale will boost the company’s assets, net of taxes and transaction expenses, by up to $2 million, or 18 cents a share.

In an SEC filing with the Securities and Exchange Commission, the company reported a net loss of $454,000 for 2013.

The sale does not include Sunset’s B/D operations, which will continue to develop and market variable insurance products for Kansas City Life.

Kansas City Life’s action follows the path out of the B/D business that a number of other insurers have taken in recent years. Pacific Life divested three of its B/Ds in 2007. Cetera (now owned by RCS Capital) bought three independent B/Ds from ING in 2010 and snagged Genworth’s broker/dealer business in early 2012. In

GLOBAL ATLANTIC HAS AGREED TO SELL ARIEL RE, its propertycasualty reinsurance company, to BTG Pactual, a Brazilian multinational investment banking firm. The deal means Global Atlantic will be free to focus more on growing its life and annuity business.

InsuranceNewsNet Magazine » September 2014

QUOTABLE Unfortunately, unless a state recognized same-sex marriage, same-sex couples cannot get second-to-die life insurance coverage for estate planning.

— Alfred Dingler, a Fayetteville, Ga.-based financial planner

February 2012, Western & Southern sold Capital Analysts to Lincoln Investment Planning, and in March of that year, The Hartford sold Woodbury Financial Services to AIG. In April 2013, Metlife sold off Tower Square and Walnut Street Securities to Cetera.

METLIFE: SYSTEMICALLY IMPORTANT?

Could the nation’s biggest life insurer be designated as too big to fail?

The Financial Stability Oversight Council is prepared to label MetLife as a potential threat to the financial system, subjecting the insurer to oversight by the Federal Reserve, according to a Bloomberg report.

MetLife could be subjected to stricter capital, leverage and liquidity requirements as a result of Fed supervision.

The company has been under consideration as systemically important for more than a year, and its executives have met more than 10 times with council staff members to argue that the company doesn’t pose a risk.

The council already has designated three nonbank financial companies as systemically important: insurers American International Group (AIG) and Prudential and General Electric’s finance arm.

MetLife officials have insisted that the company isn’t systemically important and wouldn’t pose a risk to the broader financial system even if it were to fail. The insurer didn’t take a bailout during the 2008 financial crisis.

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Ex t e n s i o2014 n 8120 September » InsuranceNewsNet Magazine

33

LIFE

Foreign Nationals an Untapped High-Net-Worth Market H igh-net-worth immigrants may be a potential market that you haven’t considered. Some information on what drives this emerging market and details you must consider in obtaining coverage for foreign nationals.

By Gary Bleetstein

D

o you know that the largest college undergraduate dormitory in the U.S. is in New York City? The address is 25 Columbus Circle, the Time Warner Center. Over 40 percent of the building’s residents are students at Columbia University, New York University, Barnard College, Hunter College and several top-tier medical schools in New York City.

What is more interesting is the fact that these students are non-U.S. citizens who are residing in luxury units that cost their parents several million dollars apiece.

Furthermore, several national publications have described American cities such as New York, Los Angeles, Miami, Chicago and Dallas as “the New Beijing,” “the New Tehran,” “Mexico City North” and so forth.

Do you see a theme emerging here?

According to the Lusk Center at the University of Southern California, the following metropolitan areas are the growth cities of the U.S. for new high-net-worth immigrants: Miami, Denver, Colorado Springs, Los Angeles, New York and Atlanta. And the list doesn’t stop there. Tuscaloosa, Ala., has a 3-million-square-foot Mercedes-Benz assembly plant, employing hundreds if not thousands of foreign nationals.

As this trend continues, the question is not whether these foreign nationals need life insurance. The questions instead are who will be qualified to sell and service these policies, and where will they learn about this new and rewarding marketplace?

Now that we have already established the size of the market as well as its growth potential, exactly who are the potential prospects, how do we identify them and which carriers are selling products for these individuals? The 34

40

%

of Time Warner Center’s residents are students at top colleges in New York.

THESE STUDENTS ARE

NON-U.S. CITIZENS.

The Time Warner Center as viewed from Central Park West.

most important question is how will advisors be educated about this market.

Let’s take a deeper look at the foreign national market and examine some of the drivers in this space, which include:

» A solution for significant tax issues that foreign nationals must address.

» Changing demographics.

Here are a few important things to consider when proposing life insurance as a solution for a foreign national’s financial protection needs:

» The U.S. remains No. 1 in attractiveness to foreign investors. » The globalization of many parts of the world. » Increased property and business ownership by foreign nationals in the U.S. » Increased educational opportunities for foreign nationals in the U.S.

InsuranceNewsNet Magazine » September 2014

» The foreign nationals’ quest to leave their family a legacy.

» Whether the prospect is classified as a resident alien or a non-resident alien. A resident alien is a non-U.S. citizen with a permanent home in the U.S. A resident alien is subject to federal estate and gift taxes on worldwide assets. A non-resident alien is a non-U.S. citizen who resides outside the U.S. Only the U.S. assets of a non-resident alien are subject to federal estate and gift taxes.

LIVING BENEFITS: SEPARATING THE PLANS AND TERMINOLOGY LIFE

medicare supplement life insurance long-term care disabilit y income annuities

strong. stable. secure.

AFN45246

Insurance products and services are offered by Mutual of Omaha Insurance Company or one of its affiliates.

Products not available in all states. Each company is solely responsible for its own contractual and financial obligations. For producer use only.

September 2014 Âť InsuranceNewsNet Magazine

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LIFE FOREIGN NATIONALS AN UNTAPPED HIGH-NET-WORTH MARKET » Whether the prospect has a NEXUS card for frequent travelers to the U.S. » How often the prospect travels to the U.S. and for what reasons. » Whether the foreign national is married to a U.S. citizen.

The $60,000 Question

This may be one of the most crucial parts of the discussion with your prospect. Knowing the rules will make the difference in whether your discussion results in a sale or turns into just another appointment.

A non-resident alien who owns real property in the U.S. will be exposed to federal estate and gift taxes. If the property is owned directly by a U.S. corporation, a U.S. partnership or a foreign partnership, the maximum amount one may shelter from federal tax is $60,000. Bottom line: The estate tax rate applicable to the value of the property in excess of $60,000 is 40 percent, and that comes due nine months after the non-resident alien’s death. In other words, the lifetime estate tax exemption for a non-resident alien is equal to approximately $13,000.

A Few Case Studies

CASE NO. 1: A 60-year-old Israeli citizen and resident of Tel Aviv owns several pieces of residential real estate in Florida worth $8 million. Solution: He purchased a $20 million guaranteed universal life contract at preferred nonsmoker rates with an A+ rated U.S. carrier.

CASE NO. 2: A couple from Hong Kong owns a high-end apartment in New York City. Their daughter lives there and is a graduate student at Columbia University. The couple also owns a business in the U.S. worth $15 million. Solution: A Delaware limited liability corporation bought a $25 million universal life policy on the husband, who is 59 years old.

CASE NO. 3: A 55-year-old citizen of Singapore and resident of Dubai has a $10 million account that he intends to pass to his children at a later date. He wants to be sure the money is guaranteed somehow. The solution: a $15 million life insurance policy. His children will receive their inheritance, and, if needed, the cash value of the policy may be accessed via withdrawals or loans.

Although there is tremendous opportunity in this market, there are still a few things that the advisor must understand. » The prospects are there, but you must find them. Certified public accountants, attorneys, real estate agents and business associates are all good centers of influence to help you find them. » The solutions may sound simple, but they are really not.

There are many “moving parts” to this market, including the product availability, the status of the prospect, the country where the prospect resides and the prospect’s marital status. » Each carrier in this market has its own rules, underwriting regulations and solicitation guidelines. For the most part, all solicitations, exams, and application and form signing must be done on U.S. soil and the client must have a NEXUS card identifying him as a prescreened frequent traveler to the U.S. Insurable interest and financial justification also are very important elements in the life insurance sale. » Each carrier also views each individual country differently.

Each carrier has its own set of rules and regulations as well as its own interpretation of the laws that govern the purchase of U.S. life insurance policies by citizens of other nations.

As the foreign national market is emerging very quickly, it is important that any advisor attempting to get into this market work with a brokerage general agency (BGA) that has extensive knowledge in the field of foreign nationals. In looking for a BGA to help you sell to this market, the questions you need to ask include whether the BGA has the ability to write a foreign national with several carriers, whether the BGA can obtain translated medical and prescription records, and whether the BGA has errors and omissions coverage for this line of business.

Educating yourself about the opportunities available in serving new high-net-worth immigrants can help you serve a marketplace that you may not have considered previously. If you become familiar with the market, develop the right contacts, use best practices and, most of all, use a well-qualified BGA to help guide you through the process, you will be successful in serving foreign nationals.

Gary Bleetstein is a partner and principal of Agent Support Group located in New York and New Jersey. Gary may be contacted at gary.bleetstein@innfeedback.com.

36

InsuranceNewsNet Magazine » September 2014

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LIFE

How to Prevent Life Insurance Buyer Amnesia A poll suggests the industry is neglecting to educate policyholders about the importance of reviewing their terms annually and following all major life changes.

By Ron Sussman

F

or years, those of us in the life insurance industry have suspected – and bemoaned – that life insurance policies too often are tossed in a drawer immediately after being signed.

Clients, we have feared, have not given their life insurance policies the same treatment they might extend to other forms of insurance, let alone the constant monitoring and evaluation they might extend to their retirement plan.

To understand the extent of this behavior, PolicyAudits.com commissioned a national online survey conducted by Harris Poll. The survey was conducted in May 2014 among 807 holders of privately purchased life insurance policies.

Sadly, our fears were not allayed by the results of this poll.

More than a quarter of U.S. adults who have privately purchased life insurance (29 percent) said they have not reviewed their policy since they first acquired it.

Nearly 1 in 10 (9 percent) said they have never reviewed their policy.

That alarming statistic speaks to the behavior, but what does the survey reveal about attitudes of policyholders toward their coverage?

The survey demonstrated that 60 percent of life insurance policyholders think their policy terms are “set in stone,” while another 60 percent believe that their policy benefits are guaranteed forever.

As we have seen time and again, neither statement is universally true.

From my business role – and as a policyholder myself – I understand the vast array of complicated products, features and benefits sold by insurance carriers who fail to provide adequate and timely 38

communications with their clients.

Policyholders, through no fault of their own, often are ill-equipped to interpret the dense legal language contained in standard policy forms and often overlook opportunities to take advantage of benefits. Sometimes they don’t realize these opportunities even exist. Some policyholders unknowingly allow coverage to lapse – a tragic albeit preventable situation I've seen in my practice – when that consequence could easily have been avoided with an annual audit.

The life insurance policy you think you have may not be the one you actually own.

Life Insurance Agents as Client Advocates

I was not surprised to learn the survey found nearly half (47 percent) of those with a privately purchased life insurance policy agree their agent has never encouraged them to monitor their policy’s performance. This is not purposeful or by design; it is often because of the life insurance agent’s simple lack of knowledge about a complicated policy’s intricacies.

Consumers are not being educated about the products they purchase, and they lack the tools to ask the right questions.

Life insurance is a dynamic product that requires continual review and revision to meet a policyholder’s specific needs. As life circumstances change, so do the needs for the benefits life insurance provides. Life evolves; so should life insurance.

The poll results suggest the life insurance industry is ignoring opportunities to assist the buying public in making the most of their insurance products, not to mention neglecting to educate policyholders about the importance of reviewing their terms annually and following all major life changes.

Obtaining the Right Policy for Your Clients

A common mantra in our office is “The life insurance policy you think you have may not be the one you actually own.”

InsuranceNewsNet Magazine » September 2014

The survey findings bring a specific client to mind. This client’s corporation funded a significant amount of insurance on a key shareholder when he was in his early 70s. His accountant made the purchasing decisions and determined all the policies should be funded to provide coverage to age 92. The insured is now 94, and the premiums to maintain coverage have increased three to five times.

Some coverage has been terminated, and the corporation will likely have far less coverage than necessary to repurchase the insured’s shares of the company.

The corporation was caught unaware because it never had access to updates and did not understand the magnitude of this problem.

By the time this company hired an auditing team, there wasn’t enough time to rectify the issue – one that was devastating to company leaders who assumed they had great coverage.

I share this cautionary tale to shed light on the gross misinformation many policyholders and companies believe regarding their policies and also as a plea to agents and clients alike to seek a knowledgeable advocate in the industry.

HOW TO PREVENT LIFE INSURANCE BUYER AMNESIA LIFE If a policyholder pays early or late just once, or if he fails to monitor a policy at least annually, his coverage may change dramatically. Terms can be altered by 10 years or more; premiums can increase without notice. An annual audit will identify and correct these issues before it’s too late, but only if a policyholder knows this resource exists in the industry. Without a system for review and remediation, clients may find themselves without coverage at the time it is most needed.

Have a team take an in-depth look at your financial goals and a policyholder’s existing policies to find the optimal terms and benefits. Discuss specific needs, future goals, lifestyle, financial situation and dependent considerations.

Most important, educate and empower clients, enabling them to begin to see the power of their life insurance policy as an investment similar to their retirement funds.

The Benefits of an Annual Audit

Our survey found only 2 in 5 (44 percent) of those with privately purchased life insurance believe their life insurance policy is an investment like their 401(k) – and this is a huge area of opportunity for policyholders.

Although life insurance is clearly not the same as an employer-sponsored retirement plan, permanent life insurance policies offer the opportunity to enhance retirement income by virtue of their tax-deferred accumulation and potentially tax-free distribution features.

These features are often overlooked by owners of whole life, variable life or universal life policies.

And since 47 percent of those policyholders report never having been encouraged by their agent to monitor their policy’s performance, it’s easy to see how many important opportunities are lost due to this level of apathy about consumer education.

Empower your clients. Help them un-

derstand that life insurance policies are an investment. They should track performance the way they would monitor an individual retirement account or 401(k).

By advocating for consumers, you can bring attention to the issues and encourage a more engaged and dynamic conversation between life insurance producers and the clients they serve. An educated consumer is your best customer!

The life insurance industry is an important part of the fabric of our society, not to mention our nation’s economic health. By continually evaluating and improving the value we bring to clients, we ensure the future of our industry.

Ron Sussman is founder and chief executive officer of PolicyAudits.com and CPI Companies. He counsels high-networth individuals through risk management analysis and life insurance planning strategies.

Ron may be contacted at ron.sussman@ innfeedback.com.

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39

Brought to you by:

ANNUITYWIRES

Life, Annuity Disclosure Bill Signed Into Law Beginning July 1, 2015, when immediate annuities are sold in California, the product will need to be accompanied by new disclosure language. That was the point of a bill signed into law

by Gov. Jerry Brown.

Backers of the law said that clearer disclosure language was necGov. Jerry Brown essary in the wake of what they say are questionable sales tactics.

Insurance Commissioner Dave Jones said in a news release that the new disclosure requirements offer consumers important new protections.

Cancellation rights must be printed on the front of the policy jacket or on the coverage page of every individual life policy and every individual annuity contract, the new law stipulates.

In addition, the law requires cancellation and refund disclosures to pertain to modified guaranteed annuity contracts, as they are already with variable individual life insurance policy and variable annuity contracts.

Insurers must also call a “surrender charge” a “withdrawal penalty.”

Policies and annuity contracts that contain a surrender charge or a penalty of any kind must contain a notice disclosing the location of the charge, the charge time period, charge information and any penalty information in bold, 12-point print on the front of the policy jacket, California Insurance Department officials said.

AMERICANS INTERESTED IN ANNUITIES BUT UNFAMILIAR WITH THEM

How can people buy annuities if they aren’t familiar with them? According to a survey

by The Phoenix Companies, 71 percent of Americans said they would consider buying an annuity. But more than half of those surveyed said they were not familiar with annuities, and only 20 percent said they actually plan to use an annuity to convert their retirement savings into an income stream.

“This survey confirmed statistically what we have heard anecdotally for years – that the majority of Americans don’t have a deep understanding of today’s annuities,” said Mark Fitzgerald, national sales manager for Saybrus Partners, Phoenix’s distribution subsidiary. “They don’t necessarily understand the basic income protection traditionally offered on all annuities, and they also are not aware of the range of benefits available on newer products, such as accumulation and chronic care features.

“At the same time, when these newer types of features are described, a lot of people say they would consider buying the product,” Fitzgerald said. “Annuities available today are ‘not your grandfather’s annuity.’ ” No matter what features today’s annuities have, some folks still aren’t convinced.

anfinuxeitdies indexsed rider

40

Twenty-five percent of those surveyed said they would not consider purchasing an annuity for any reason.

FORETHOUGHT EXPANDS PRODUCT OFFERINGS WITH NEW FIAs

Forethought Life recently launched two new fixed index annuities (FIAs) exclusively designed for broker/dealer distribution. With these products, Forethought’s annuity line now includes fixed index annuities, fixed annuities and a fixed annuity with long-term care benefits as well as variable annuities.

These additional products mark the company’s first index annuities designed exclusively to meet the needs of broker/ dealers, helping their advisors serve clients in one of the fastest-growing segments of the annuity market. According to LIMRA, index annuities account for 17 percent of annuity sales today.

One of the new index annuity products, ForeAccumulation, is designed for clients seeking savings potential and protection, while the second, ForeIncome, offers a guaranteed lifetime income stream for retirement.

SINGLE PARENTS PRIORITIZE COLLEGE SAVINGS OVER RETIREMENT When faced with the question of whether to save for retirement or for their children’s college education, most single parents are

InsuranceNewsNet Magazine » September 2014

choosing to put their money toward college.

That’s according to the LoveFamilyMoney Survey by Allianz.

When asked about their motivation for developing and executing a long-term financial plan, nearly half (45 percent) of single-parent respondents identified “saving for my kids’ education.” However, this savings strategy is proving problematic for them, as more than three-quarters (76 percent) said that preparing for retirement and their child’s college expenses at the same time causes them a great deal of/some stress.

Although single-parent respondents seem willing to prioritize their children ahead of themselves, they also recognize that this can have negative repercussions. Thirty-seven percent of single parents agree that they are putting their financial future at risk to take care of their children. As a result, nearly half (49 percent) of all single parents say they cannot possibly save enough for retirement.

WOMEN, LOW EARNERS LEAST LIKELY TO EMBRACE MATCH

WOMEN

72% 82%

When it comes to retirement saving, women and those in the CONTRIBUTED ENOUGH lowest wage brackets are the least FOR EMPLOYER MATCH likely to take advantage of their employers’ full matching retirement contributions.

MEN That’s the result of a TIAA-CREF survey, which showed that although 77 percent of those who have matching contributions save enough to receive the full employer match, only 72 percent of women contribute enough to receive the full employer match, compared with 82 percent of men, and only 64 percent of those earning less than $35,000 a year receive the full match.

Women, Generation Y respondents and those earning less than $35,000 a year were the most likely to underestimate how much the employer contributions will translate into long-term retirement savings.

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

Retirement Uncertainty Up as Social Security Faces Long-term Challenges Reports released by the trustees of the Social Security and Medicare programs paint an uncertain picture of those programs’ future. bitly.com/qruncertain

@Annuity_ News

Those who soar launch from a solid foundation.

We are Athene. Our reputation of doing more for clients has made us a leader in xed annuities with over $58 billion in assets, 595,000 policyholders and the second-largest portfolio of xed-index annuity reserves in the U.S. Together with our acquired companies, we have been advising customers for more than 117 years.* Discover how we can help you achieve more. Visit Athene.com or call 1-866-838-6153.

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Driven to do more.

SM

* “Athene” refers to Athene Holding Ltd. together with its subsidiaries. Asset and policyholder information is stated on a consolidated basis for such entities, and total assets of $58.5 billion is management’s view for total assets; see reconciliation to 1Q Athene Holding Ltd. GAAP Financial Statements, set forth by Apollo Alternative Assets at www.apolloalternativeassets.com. The most recent year-end audited nancial reports are also available there. Information relating to Athene’s ranking as the second-largest portfolio of xed-index annuity reserves in the U.S. was taken from the 2012 LIMRA U.S. Individual Annuity Yearbook, and includes such information relating to Athene Annuity & Life Assurance Company, Aviva Life and Annuity Company (now known as Athene 2014 » asInsuranceNewsNet Magazine Annuity and Life Company), Athene Annuity & Life Assurance Company of New York, and Aviva Life and Annuity Company ofSeptember New York (now known Athene Life Insurance Company of New41 York).

ANNUITY

In-Service Withdrawals Turn 401(k)s Into Paychecks A nnuities can leverage the 90 percent of defined contribution plans that allow for in-service withdrawals.

By Charlie Gipple

A

major concern of many clients who are nearing retirement is safeguarding their hard-earned money from future downturns in the market. They have good reason to be concerned: The S&P 500 index has nearly been chopped in half twice over the past 14 years! Additionally, between 2007 and 2010, median U.S. household net worth dropped by 39 percent, according to the Federal Reserve, substantially reducing 18 years of prior gains.

This does not necessarily mean that retirement is a thing of the past. It just means that people nearing retirement need to be smarter about managing the risks that market volatility presents to their retirement savings. In fact, it’s a golden opportunity to educate your clients, particularly those who are sensitive about the potential loss of years of savings. It’s also an opportunity to talk about the solutions that are available not only to protect their principal but also to make that money work harder for them than by using traditional conservative financial products.

Clients who are relying on the wealth they have accumulated over the years in their 401(k)s and other qualified plans may be relieved to know that there is a way to protect a portion of their nest egg from market declines while they are still working. It’s called an age-based in-service withdrawal, and it works by completing a direct rollover of a portion of their employer retirement plan into a fixed index annuity established as an Individual Retirement Account (IRA). In addition, on many fixed index annuities, clients can elect to purchase an optional guaranteed lifetime withdrawal benefit rider, which creates guaranteed lifetime income that is ready when they need it.

42

It is important to note that although age-based in-service withdrawals may be allowed within Internal Revenue Service (IRS) guidelines, each plan may have its own set of restrictions. However, according to a recent study by Aon Hewitt, 90 percent of defined contribution plans allow for age-based in-service withdrawals.

How It Works

So what exactly is an age-based in-service withdrawal? Simply put, an agebased in-service withdrawal (also known as in-service non-hardship withdrawal) allows active employees – typically age 59 ½ and older – to initiate a direct rollover of funds from their employer-sponsored or other qualified retirement plan into an IRA while they continue on the job and continue to contribute to the plan, without incurring income taxes or penalties. Again, although the tax code generally allows such rollovers, some plans impose more restrictions. This is especially useful for employees who are concerned about loss of principal between the time they are eligible for withdrawals and the time they actually retire.

Guaranteed lifetime withdrawal benefits can ease this concern.

Laying the Groundwork

The first step for you and your client to take is to ascertain whether in-service withdrawals are permitted from the plan and to identify any limitations that may be in place (such as withdrawal amount, type of funds, etc.).

Your clients also should discuss potential tax implications with their tax advisor before initiating an in-service withdrawal of their current plan. Generally, the tax code permits the following types of funds to be rolled over from a 401(k) as part of an in-service withdrawal plan (subject to plan approval): » Employer-matching and profit-sharing contributions.

InsuranceNewsNet Magazine » September 2014

» Employee after-tax contributions (non-Roth). » Employee pretax and Roth contributions after the employee turns 59 ½.

However, the tax code prohibits rolling over some types of contributions prior to the employee reaching age 59 ½, including employer safe harbor match and employer safe harbor nonelective contributions as well as employee pretax or Roth contributions.

And although many defined contribution plans allow in-service withdrawals once a participant hits age 59 ½, others may allow them based upon years of work or service credits instead of by minimum age. Withdrawals also may be subject to a vesting schedule. Some plans, such as 457(b) plans, have greater IRS restrictions governing in-service withdrawals than others do. However, like other defined contribution plans, any plan sponsor can restrict some or

September 2014 Âť InsuranceNewsNet Magazine

43

ANNUITY IN-SERVICE WITHDRAWALS TURN 401(k)s INTO PAYCHECKS all of the in-service withdrawal options allowable under the tax code.

Once you have determined that an in-service withdrawal is possible, it’s important to ensure the withdrawal is handled properly – via a direct rollover. Because of tax regulations, qualified plan administrators usually are required to withhold 20 percent of any distribution made directly to the plan participant for federal income taxes, even if that participant intends to roll it over within the 60-day time limit. With a direct rollover, however, the funds are transferred from the plan trustee directly to another qualified retirement plan or IRA and are not subject to this withholding.

Of course, getting the paperwork right is critical. Most qualified plans have specific forms related to direct rollovers. Additionally, each insurance carrier usually has transfer paperwork that can hold rates steady while the transaction proceeds.

Choosing a Fixed Index Annuity

The next step is to choose a fixed index annuity. As you know, not all fixed index

annuities and riders are created equal. In addition to product features such as cap rates, participation rates and surrender charges, consider other fixed index annuity product and optional guaranteed lifetime withdrawal benefit (GLWB) rider features, such as the flexibility to initiate income payments when they are needed.

Why is this important? Many of your clients likely have a date or age in mind for retirement; however, according to a study

by Employee Benefit Research Institute (EBRI), 50 percent of retirees retired sooner than expected. This can be the result of job loss, health issues or the need to care for a family member full time.

Many popular GLWB riders, which are available for an additional cost, have the increase (“rollup”) in the withdrawal benefit base only on the contract anniversary. As you have seen and the statistics support, retirement does not wait for the contract anniversary. So, another feature to consider is a GLWB with a daily rollup. Make sure your clients can start taking income any day of the year and help maximize their lifetime income when they need it.

A Golden Opportunity

For many of your clients, using an in-service withdrawal from a qualified plan to fund a fixed index annuity with a guaranteed lifetime withdrawal benefit rider can be a good way to protect a portion of a 401(k) or other qualified plan from a market downturn. It can also provide secure lifetime income in a world where “guaranteed paychecks” have become scarce but remain extremely important.

Your expertise as a financial professional is vital to help your clients choose an appropriate fixed index annuity and execute this transition properly. You will be helping them take advantage of one of life’s golden opportunities to help protect their accumulated wealth and create the retirement lifestyle they hope to achieve.

Charlie Gipple, CLU, ChFC, is national director of index products with Genworth. Charlie may be contacted at charlie. gipple@innfeedback.com.

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InsuranceNewsNet Magazine » September 2014

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HEALTHWIRES

Health care “gating” strategy expected to gain in popularity with employers bitly.com/qrgating

ACA Website Has Cost $840 Million The much-maligned HealthCare.gov website wound up costing a bundle. The Obama administration has spent roughly $840 million on the site, including more than $150 million just in cost overruns for the version that became infamous for its numerous glitches when it launched last year. of gold (at $1.3K/oz.) will Obama administration officials said that the cost of the federal pay for the ACA website health insurance exchange was growing because they were assigning new work to contractors in an effort to prevent a repetition of the problems that crippled the website last fall.

Andrew M. Slavitt, the No. 2 official at the Centers for Medicare & Medicaid Services, told Congress that the administration was making improvements in the federal exchange but that the second round of open enrollment, starting in November, would not be perfect. “There will certainly be bumps,’’ he testified at a House hearing.

646,150 oz.

FEDS CAP FINES FOR NOT BUYING COVERAGE

Those who don’t buy health coverage will be fined. How much? Federal officials have capped the amount of money scofflaws will be forced to pay at $2,448 per person and $12,240 for a family of five. The amount is equal to the national average annual premium for a bronze-level health plan.

The penalty for the first year starts at $95 per person and can rise to as much as 1 percent of annual income. The latest figure limits what the government can charge people using the personal income computation. The penalty is due when people file their 2014 taxes.

Conservative lawmakers and groups who are critical of the Affordable Care Act encouraged consumers to skip buying insurance, arguing it would be cheaper to pay the $95 penalty, but often failed to mention the 1 percent clause.

AFLAC MAKING CRITICAL SALES CHANGE

Aflac aired a series of TV commercials in which its “spokesduck” recovered from a broken bill. The company’s chairman and chief executive officer Dan Amos determined the duck’s bill wasn’t the only thing that was broken – Aflac’s U.S. sales model was broken as well. So it’s time to make some changes.

The biggest part of this strategy: DID YOU

KNOW

?

46

dumping the firm’s system of commission-based state sales coordinators.

The coordinators are being replaced by company-paid employees called market directors, who will be eligible for bonuses.

The current 76 state coordinators can apply for one of the 66 market director positions.

Some states have multiple regions.

District sales coordinators and front-line sales associates will continue to be paid on commission as independent contractors. But Robin Wilkey, Aflac’s senior vice president of investor and rating agency relations, said the company will have more control over sales efforts by making the top management – the market directors – company employees and thus more accountable and responsive than their counterparts have been in the past.

Asked if this is one of the biggest changes in sales in the firm’s nearly 60-year history, Wilkey said it is “the” biggest she can remember.

TAKING A STAB AT HSA GROWTH PROJECTIONS

How much money could be accumulated in a health savings account (HSA)? The Employee Benefit Research Institute (EBRI) did an analysis to find the answer.

A worker who contributes the maximum allowable amounts into an HSA for 40 years without any withdrawals could accumulate as much as $360,000 at a rate of return of 2.5 percent, according to EBRI. At a rate of return of 5 percent, the account

UnitedHealth Group, the nation’s largest health insurer, said that it will PARTICIPATE IN AS MANY AS 24 OF THE LAW’S INDIVIDUAL HEALTH INSURANCE EXCHANGES in 2015, up from only four this year. Source: Associated Press

Source: Centers for Disease Control

InsuranceNewsNet Magazine » September 2014

QUOTABLE The good old days were not as great as [people think].

— Dr. George Chastain, a retired anesthesiologist from New York, speaking about health care prior to the implementation of ACA

would grow to $600,000 over 40 years, and at a rate of return of 7.5 percent, the account balance could reach nearly $1.1 million over the same period.

“Depending on the rate of return in an HSA, these accounts have the potential to generate significant assets,” said Paul Fronstin, author of the report.

NEW HOSPITALS TAKE CUES FROM HOSPITALITY INDUSTRY

Is it a hospital? Or is it a hotel? Some hospital patients and visitors might be a bit confused by the latest trend.

A number of new hospitals are abandoning the The “living room” (lobby) institutional look and feel of Palmetto Health Baptist (Brad Nettles/ for the vibe of a luxury hotel Parkridge.

The Post and Courier) or spa. In fact, the new Baptist Parkridge Hospital in Columbia, S.C., will have an actual spa when it’s finished later this year.

Everything from complimentary, fruit-infused water for visitors to relaxation-inducing lavender placed on patients’ pillows at night is designed to promote healing. Cafeteria staff wear chefs’ jackets and fix made-to-order meals with fresh, local ingredients. Instead of a waiting room, there’s “the family room.”

But some economists question the extent to which all this luxury really influences health and, more important, how much it’s costing the health care system.

“There’s an interesting debate here,” said John Romley, an economist at the University of Southern California. “There is a question here of what’s the value of this to patients. If patients care about it, should we respect that preference to some degree?”

It also makes sense that patients choose nicer, newer hospitals because they’re not responsible for the full bill. Private health insurance companies or the Medicare and Medicaid programs usually pick up most the tab.

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HEALTH

Self-Insurance Can Ease Business Clients’ Pain A well-managed employer health ownership plan can reduce spending by as much as 15 percent per participant.

By Christopher Shoffner

A

s health care payers and providers struggle with the transformation to value-based care, employers are looking for new solutions and consultative brokers who can help them navigate these rough waters. Small and medium-size businesses (SMBs) are especially in need of help.

Health insurance premiums for these employers have risen 113 percent over nine years – a growth rate of nearly 9 percent annually, according to the Kaiser Family Foundation. Although corresponding information on the rate of premium growth for self-insured employers was not available from the Kaiser study, what is known is that more employers are looking at alternatives, such as an employer health ownership plan, as a way of managing costs and improving their workers’ underlying health issues. In fact, a well-managed employer health ownership plan can drive savings of anywhere from $980 to $1,450 per participant annually, while reducing spending by as much as 15 percent per participant, according to an SHPS study.

The Centers for Medicare & Medicaid Services announced early this year that nearly two-thirds of small businesses will pay more for coverage as a result of new rules in the Affordable Care Act (ACA).

Not surprisingly, millions of small-business insurance plans were canceled last fall, and industry analysts estimate that further plan cancellations will affect millions of people by the end of 2014.

Moreover, in a recent development, the federal government granted 18 states permission to delay implementing the ACA’s “employee choice” provision that enables small businesses to offer their employees multiple health plan options. This situation could disadvantage not only employees but 48

also small businesses. These employees will have only one choice of health plan in the coming year. And small-business advocates argue that employers with smaller employee rosters in those states will be at a competitive disadvantage for attracting workers relative to companies in states that offer choices to their employees.

All of this isn’t necessarily bad news for insurance brokers, though. The confusion and churn in the SMB market create an opportunity for brokers to step in and be a hero to employers. By keeping up with the latest innovations in the market – rather than relying on traditional solutions – brokers can offer SMBs creative options in a difficult economic and regulatory climate.

Innovative Self-insurance Options for Small and Medium-size Businesses

One significant change in the market is the appearance of employer health ownership plans that give SMBs a viable alternative to traditional group health products. These plans combine self-funding, population health management, clinical informatics and the direct purchase of primary care services.

By making self-insurance a practical solution for SMBs, the plans give companies control of their health care costs for the first time.

The benefits of self-insurance are not unknown to small- and medium-size employers. In contrast to a fully insured employer, whose health care costs are 100 percent fixed, a self-insured employer’s costs are only 30 to 40 percent fixed. Employers with the right plan design can become adept at managing the financial risk associated with their employees’ health. In addition, they can take advantage of any cost savings that result from better management of or improvement in their employees’ health. Employers also benefit from transparency about their health care spending, enabling smarter purchasing decisions that were previously out of their control.

Buying Care, Insuring Risk

The employer health ownership plan is the first to utilize value-based payments and

InsuranceNewsNet Magazine » September 2014

How An Employer Health Ownership Plan Works

(Physician Care Direct)

risk management strategies with primary care as the foundational component to self-insurance. In this approach, instead of paying insurance premiums for primary care, employers pay the providers a fixed per-patient/per-month fee that goes directly to the participating patient care providers. Because providers receive enhanced revenue, largely through this fixed monthly fee, it empowers them to focus completely on the value – instead of the volume – of care they deliver. And because the plans pay for all forms of patient contact, not just office visits, care can be provided in the most appropriate venue to save the employer money and the employees time.

The direct relationship is a development that both employers and providers should welcome. A 2012 Oliver Wyman survey of employers revealed that 40 percent were interested in contracting directly with provider organizations for a value-based network.

Such a high number is surprising considering employers’ long reliance on traditional insurance. We can expect employer interest in such options to grow. For their part, providers are drawn to direct contracting because it allows them to gain access to the purchaser directly and demonstrates their value and eliminates the administrative costs of a traditional payer.

Making primary care more accessible to employees can help them improve their health, assist in managing or improving chronic conditions, and provide access to

SELF-INSURANCE CAN EASE BUSINESS CLIENTS’ PAIN HEALTH 85 percent of the care they will need. Increased accessibility to care – particularly the removal of financial barriers to seeking primary care – is an important strategy for improving employee health, especially for those employees with chronic conditions.

And improving the underlying health of the employee population is the real key to reducing health care costs. Seventy-five percent of the nation’s current health care spend is directly linked with chronic disease, according to Johns Hopkins University research. The employer health ownership plan seeks to identify employees at risk and engage them in their own health.

One example of an engagement strategy in the plan design is cash incentives for employees to improve their health – a practice that has been proven to reduce spending by 15.1 percent (savings of $1,165 per employee), according to an SHPS study.

Furthermore, the plans align reimbursement with quality care by tracking physician performance against common quality measures. Aligning incentives with outcomes in

mind, for providers and patients, is the right way to purchase care no matter the size of the organization. This value-based contract for primary care services truly separates health care from health insurance while saving money. In fact, a well-managed employer health ownership plan can drive savings ranging from $980 to $1,450 per participant per year, according to a SHPS study.

For health care needs that are not met within the primary care setting, employers enrolled in one of these new plans have insurance for expenses that exceed an appropriate deductible. This insurance covers specialist and hospital care from providers within the network.

Be the Hero

In these early stages of ACA implementation, employers are desperately seeking solutions that will allow them to continue to offer affordable health insurance to their employees. With all the turmoil (and inertia) in the industry, however, they’re not sure where to find them.

Helping your clients protect their income,

Now That’s a PLUS!

Now is the time to be a hero to your current clients and prospects. Instead of offering the same old traditional plans, this is your opportunity to present fresh ideas that reflect the realities your clients are facing. Your willingness to be a problem-solver will help differentiate you from your competitors and secure the relationships that will lead to greater success for the long term.

Success lies in offering SMBs what they need: affordable plan options designed on a foundation of value-based care; complete transparency regarding their health care costs and the ability to control those costs; and satisfied employees with low-cost, extensive access to health care services.

Christopher Shoffner, a former broker, is chief risk officer of Physician Care Direct, a Cary, N.C.-based company that partners with employers and health systems to make health care more affordable. Christopher may be contacted at christopher.shoffner@ innfeedback.com.

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September 2014 » InsuranceNewsNet Magazine

49

FINANCIALWIRES

Americans Tap Retirement Savings and Regret It

Money: It’s what millennials want. bitly.com/qrwant

29%

They’ve done it, and they’re sorry. Against the better advice of advisors, 29 percent of Americans who participate in a of Americans took out a retirement plan say they have taken out a loan from the sav- loan from savings in their ings in their plan, and 44 percent who did so said they lived retirement plan. to regret their decision. These confessions are from a survey by Teachers Insurance and Annuity Association of America-College Retirement Equities Funds (TIAA-CREF).

“Too many people have struggled since the 2008 financial crisis and have looked at loans from their retirement plans as a way to ease financial stress,” Teresa Hassara, executive vice president of TIAA-CREF’s institutional business, said in a news release.

The top reasons for borrowing from retirement savings were paying off debt (46 percent), paying for an emergency (35 percent), purchasing or renovating a home (26 percent), paying bills due to a layoff (24 percent), education (20 percent) and a special event such as a wedding or a vacation (15 percent), the survey found.

Women were more likely than men (52 percent versus 41 percent) to take out a loan to pay off debt, but men were more likely than women (40 percent versus 20 percent) to take out a loan to pay for an emergency expenditure, the survey also found.

INVESTORS FEAR LOSING MONEY

What motivates investors in deciding how much risk they are willing to take in putting money in the stock market? Simple – it’s the fear of losing money.

That is according to the University of Missouri and The American College, which analyzed the causes of risk tolerance. Researchers found that loss aversion, or the fear of losing money, is the primary factor that explains investors’ risk tolerance.

Traditionally, it was believed that spending habits were the major motivation behind risk tolerance, meaning that the more variation investors were willing to accept in their spending, the higher the investors’ risk tolerance, said Michael Guillemette of the University of Missouri.

However, he added, the study found no such relationship between spending and risk tolerance.

What else drives investors? According to the survey researchers, changes in consumer sentiment levels also play a role.

MILLENNIAL SAVERS FACING AN UNCERTAIN FUTURE

The Transamerica Center for Retirement Studies (TCRS) studied the retirement savings habits of millennial employees and found some good news and some bad news.

First, the bad news. Millennials (41 percent) expect that they will need to provide financial support to aging parents and/or other family members when they are retired.

Moreover, the vast majority of millennials (81 percent) are concerned that Social Security will not be there for them when they are ready to retire.

But the news gets better from there. The study found that millennial workers are focused on retirement in a big way. Three out of four are already discussing saving, investing, and planning for retirement with family and friends.

Because many millennials began to enter the workforce right when the Great Recession hit, it would be easy to conclude that their prospects for achieving a financially secure retirement are uncertain.

But, said TCRS president Catherine Collinson, “Much to our surprise and delight, our research found employed millennials

33% ?

DID YOU

KNOW 50

OF WOMEN surveyed gave themselves Source: Renaissance Capitalan “A” FOR MANAGING MONEY. THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING was 20 percent this year. The average increase in the first day (or “pop”) is 13 percent.

InsuranceNewsNet Magazine » September 2014

Source: Prudential

QUOTABLE You can throw away a bad meal and order pizza. But you only get one shot at retirement.

— Joe Clark, managing partner of Financial Enhancement Group in Anderson, Ind., who has become known for cooking dinner in clients’ homes once or twice a month.

to be an emerging generation of retirement supersavers.”

THE SANDWICH IS GETTING SQUISHED!

The “sandwich generation” describes those midd le-aged Americans who are caught in the middle between caring for older and younger generations. The sandwich generation’s challenges are compounded by the fact that they are in the crucial retirement-savings years of their lives.

What to do to keep the sandwich from getting squished? Here’s what Certified Financial Planner Board of Standards consumer advocate Eleanor Blayney advises: » Define expectations and set boundaries. If a young adult can’t find a job and turns to the Bank of Mom and Dad or checks into the Mom and Dad Hotel, it’s important to define some terms. Similarly, the type and amount of care for elderly adults should be clearly articulated and put in writing, especially for other siblings or family members. » Do not compromise your capacity to earn a living. Sometimes working while taking care of others becomes just too much and it seems necessary or easier to quit. Avoid this if at all possible, as retirement and Social Security benefits will be permanently reduced and re-entry into the workforce at a comparable level can be extremely difficult. » Learn what assistance is available from the government, community and other resources. In some cases, you may be eligible for payment for taking care of an aging relative on Medicaid.

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FINANCIAL

Survey Finds Modern Families Gripped by Financial Insecurity M ore families defy the “traditional” label, and those families have unique needs and goals in regard to financial planning.

By Katie Libbe

I

n 1970, nearly 40 percent of families in the U.S. identified as “traditional,” meaning those headed by a married opposite-sex couple having at least one child under age 21 living at home.

Fast-forward 40 years and the picture of the American family looks quite different.

Less than 20 percent of families now fit that traditional structure, according to the U.S. Census Bureau. This means that several new family types have emerged and, with them, new challenges.

With that in mind, Allianz conducted the LoveFamilyMoney study of more than 4,500 Americans to seek insights into the financial needs of today’s families. In addition to traditional families, the study evaluated six distinct modern family structures, including same-sex couple families, single-parent households, those with adult children returning home (boomerang families), multigenerational families, blended families, and families with older parents and young children.

The study revealed surprising differences in their responses to questions related to the financial security of traditional versus modern families. These responses provide the financial services industry with compelling evidence of the need to tailor products and services to meet the needs of these unique family structures.

Middle Class Feeling Financial Pressure

The most startling finding from the study was the extent to which all families – not just modern ones – are feeling financial pressure. Even though 85 percent of survey respondents identified themselves as “middle class” – a status that traditionally has afforded a level of financial security – nearly half of traditional families (47 52

The Allianz LoveFamilyMoney Study, 2014

30%

of modern families felt a high level of financial security, versus 41% of traditional families.

Unexpectedly lost a main source of income, compared with 23% in the traditional category.

31%

35%

as many modern families have declared bankruptcy versus traditional families (22% compared with 11% of traditional families).

of modern families say they have “too many expenses and/or debts to pay off before I can think about planning for the future,” compared to about a quarter (26%) of traditional families.

percent) said that they are either “making ends meet,” “struggling financially” or “poor.” However, this response was a full 10 percentage points higher for modern families than for their traditional family counterparts.

Also worrisome was the finding that 49 percent of modern families said that they currently live paycheck to paycheck, versus 41 percent of traditional families. In addition, 25 percent of modern families said

InsuranceNewsNet Magazine » September 2014

TWICE

they are not saving any money at all.

Modern families also are feeling less confidence when it comes to their finances. This perhaps is because they have experienced more financial hardships in the past than traditional families reported.

Only 30 percent of modern families reported feeling a high level of financial security, versus 41 percent of traditional families. The split becomes more pronounced when looking at financial

hardships. Thirty-six percent of modern families have collected unemployment benefits, versus only 21 percent of traditional families. And 35 percent of modern families have unexpectedly lost a main source of income, compared with 23 percent of families in the traditional category.

Moreover, twice as many modern families have declared bankruptcy versus traditional families (22 percent compared with 11 percent of traditional families).

Modern Families Not Focused on Future

Perhaps more concerning, modern families also are struggling with their future financial outlook. Only 34 percent of modern families believe that they have “excellent/ above average” financial planning knowledge or expertise, compared with 44 percent of their traditional counterparts.

And only 51 percent of modern families (versus 60 percent of traditional families) think that they are on track to achieve their financial goals. The reason? Fifty-eight percent of modern families said that covering current expenses takes priority over planning for the future.

However, there were some positive takeaways from these families’ responses.

Despite the challenges they face, today’s modern families are, in fact, striving to achieve financial success. More modern families said they talk openly to their children about their personal financial situation than do traditional families (54 percent versus 47 percent of traditional families). Moreover, 47 percent of modern families have actively encouraged their children to invest and save for their own retirement goals, compared to only 38 percent of traditional families.

Yet despite this encouraging and open environment regarding managing family finances, modern families are unlikely to rely on professional assistance to build their own financial plan. Less than half (43 percent) of modern families said they have ever used a financial professional, versus 53 percent of traditional families.

This lack of professional guidance may be a factor in the way many modern families approach financial planning. More than a quarter (26 percent) said they “don’t make enough money to think about financial planning for the future,” versus 18 percent of traditional families. Nearly a third (31 percent) of modern families said they have

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53

FINANCIAL SURVEY FINDS MODERN FAMILIES GRIPPED BY FINANCIAL INSECURITY haps more important is the fact that so many of them said that they are struggling financially and in need of assistance.

Many modern families may feel uneasy about sharing their stories, but knowing that so many of their contemporaries are facing the same issues can be very comforting and can prompt them to take action.

[2] Higher hurdles need more planning: As the study revealed, far more modern families have experienced financial hardships in the past, including The Allianz LoveFamilyMoney Study, 2014 collecting unemployment benefits and “too many expenses and/or debts to pay off declaring bankruptcy. This no doubt has before I can think about planning for the an effect on whether these families believe future,” compared with about a quarter (26 that they can achieve their financial goals. percent) of traditional families.

However, a bigger issue may be the unexpected additions to many of these modOpportunity for the Financial ern families that can throw their financial Services Industry plans off track. Whether they are adding a The attitudes and opinions about money child later in life, combining families or are and financial planning revealed in the taking on the burden of caring for an adult LoveFamilyMoney study point to an oppor- relative, new responsibilities require an entunity for financial professionals to make tirely new approach to financial planning. an impact with modern families and their approach to managing their finances. It’s [3] Encourage financial inclusivity: clear that modern families have a different Both traditional and modern families derelationship with money, so they also need scribed a supportive family environment, better feedback about what they are doing saying they are supportive of one anothwell, what habits need to change and how er, trusting, cooperative and emotionalthey can plan for a more successful finan- ly close. However, as noted previously, cial future. modern families reported that closeness The following insights from LoveFami- extends to more open family discussions lyMoney can be a useful way for financial about finances. This is a positive trend that professionals and financial services firms should be encouraged and can be used to to build more understanding about the dif- create a more inclusive family financial ferent modern families that exist today and plan. Modern families want their children how the financial industry can be more ef- to have a better financial foundation. A fective in fulfilling their needs. greater percentage of modern families reported that they are helping their kids [1] Modern families are not alone: Sta- employ better financial habits, from entistics about the sheer number of modern couraging better savings habits to helping families that exist today are telling, but per- them create a budget. An effective way to 54

InsuranceNewsNet Magazine » September 2014

connect with these families is to harness this focus on total family involvement and build it into the larger plan.

[4] Live for today but plan for tomorrow: The respondents in LoveFamilyMoney were clear about their dedication to their families and ensuring that they are building lasting memories today. In fact, more modern families said that they were interested in “providing my children memorable experiences and opportunities today” than traditional families, who were more focused on “providing my children with a stable financial future.”

Unfortunately, this strategy can come at the expense of retirement planning. More modern families than traditional families said that they worry about running out of money in retirement, and fewer said that they know exactly what steps they need to take to ensure a more comfortable retirement. Modern families need help balancing these goals and also determining how to save for middle-term priorities (house, education, etc.).

[5] Embrace diversity, realize opportunity: In 2014, the American family has taken a variety of shapes and sizes. Most financial professionals are well-aware of this fact, but the great diversity we see in this country through these modern family structures necessitates a more specialized approach to financial planning than ever before. For example, same-sex couples in the study reported a low amount of debt and a high level of financial security. The majority also indicated that they would prefer to work with a financial professional who is “knowledgeable and sensitive to my specific financial needs as a same-sex couple/family.” Financial professionals should challenge themselves to use these detailed insights to make better connections with their clients.

Modern families are here to stay and have a number of unique factors impacting how they approach financial planning. The more our industry recognizes this reality, the better we’ll be able to respond to their needs and help them achieve their financial goals.

Katie Libbe is vice president of consumer insights for Allianz Life. Katie may be contacted at katie.libbe@innfeedback.com.

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September 2014 » InsuranceNewsNet Magazine

55

BUSINESS

Things I Wish I Knew When I Started Out

Ever wish you could go back in time and give yourself some advice?

R eturning to some of these basic ideas for getting started can help even a veteran advisor refocus on their practice.

By John Alves

T

he most important thing you can do as a new agent is to set yourself up to succeed. Although the life insurance industry is extremely rewarding, it can and will challenge you straight out of the blocks.

If you’ve experienced some difficulty in your new career, I recommend you use some of these best practices in the hope that they bring value to you and your newfound practice.

I spent my first three years in the business working with an agency that provided excellent support and weekly training, which I believe are extremely important to anyone starting out. Yet at the same time, the agency restricted my growth as an individual. Being new to the industry, I needed this growth.

Here are some of the basics that may seem simple but are essential to building your foundation.

Associate yourself with a company that supports you continuously, promotes your individual growth and helps you get started on the right foot. Work closely with your mentor and start with the goal of completing the sales cycle. When you start out, your sales cycle could be different from what it becomes after you’ve been in the business for a year or two.

As a new advisor, you’ll find out that work extends beyond the four walls of your office.

I found it very important to set up and prepare to do business at home. Yes, at home!

A home office is essential if you are to build your practice. Set yourself up with a computer, printer, scanner and a filing cabinet.

I would recommend this be in a quiet and secluded area or room in your home.

I use several online services to help me stay synched between office and home or out in the field. Having access to your prospects’ and clients’ information is critical in making your business run smoothly when you’re not in your office.

When you’re starting out, it’s crucial that 56

you complete your first sale as soon as you can. This will give you a taste of success and enable you to enjoy the feeling that comes from completing the sales process. Most advisors join a company, find no initial success and end up leaving the company and, most likely, leaving the industry.

After you have both your office and home locations set up, it’s time to get to work. Set high expectations for yourself and create a system that you can follow with every client.

It’s important to meet with your manager or mentor and plan out your first prospects.

Those first prospects, in my opinion, should be your family and friends, your low-hanging fruit. In the insurance business, most often than not, your client is buying you and not a specific product. Work with your manager on closing those family and friends, complete that sales cycle, and as always ask politely for two or three referrals.

There are dozens of insurance carriers with a seemingly endless number of products for you to sell. I believe this can be very daunting to any advisor, and it was for me.

Learning about all these carriers and products can make you the expert on none. The

InsuranceNewsNet Magazine » September 2014

best way to get a thorough knowledge of what products you’re providing to your clients is to start with just a handful of products and learn them inside and out. It makes no sense to know 30 products by their names but not know what those products can do for the client. Be an expert, build your brand and, before you realize it, people you don’t even know will want to meet with you.

It didn’t take me too long to start marketing my services to my community, which included people who knew me yet did not know of my new career and the services I could provide them and their families.

Several methods I used to market my services back then are methods I still use today.

These include personal letters, email marketing, niche postcards and social media.

Even dropping by someone’s place of work just to say “Hi” worked for me. Get creative, develop your online and offline marketing strategies, and stick to what works for you.

One important thing to consider is your online presence. The more positive and informative “real estate” you have online, the better you will look in front of your prospects and clients. Trust me, most people

THINGS I WISH I KNEW WHEN I STARTED OUT BUSINESS are savvy about looking you up through Google or another online search engine.

Now there is an easier way of prospecting, and it’s called “buying leads.” Online, offline, free, expensive. Some of the questions I would ask myself when I began to buy leads were “Which one suits me?” “Which one should I get?” “Can I trust this lead company?” The answers can be different for everyone. Through trial and error, I’ve found that “free leads” are aged contacts from a data source, and you’re basically cold-calling as a result. If you’re looking to build a large database for future marketing, this might be the way to start. On the other side of the coin, expensive leads won’t guarantee you sales either. An efficient way to find a lead system that could work for you would be to get to know an agent who prefers the niche you like and ask them about their system.

It took me a while before I got settled with such a source, which provides me with 60 percent of my business. I would say the other 40 percent comes from my own marketing efforts, along with referrals.

I believe that once you really grasp the basics of your profession, you have the privilege of mentoring another advisor in the industry. Some agencies tell you to recruit new advisors right off the bat, to focus on building your profession so you can help others.

Building a team of advisors can be very rewarding. Given the opportunity, when you reach a certain level of experience, you should seriously consider becoming a mentor and a team builder.

Just as it is in anything in which you want to excel, building a team all starts with your mindset. Building a team of advisors is not as easy as it seems. Depending on the number of advisors with whom you want to work, you will have to recruit many more and spend valuable time mentoring people who might not stick around.

But if you understand this in advance, the reward is well worth the sacrifice.

In building a team, first and foremost you will need to develop a system to make your job and the job of your future “builders” much easier. Without a system, there is no road map

for your new advisors to follow and duplicate.

Duplication is the goal! If you can duplicate 10 solid advisors like yourself, you can imagine the increase in your income as a result.

Whether your practice is large or small, you will need to have support. I believe that the benefit of having the right support is immeasurable. Working alongside the right marketing organization can make a huge difference in your business, from expediting your new business applications to assisting you with difficult carrier situations and providing you with high commissions. I’ve been extremely fortunate with my marketing organization, and I’ve seen an increase in my business every single year as a result. Take the time to seek the backbone of your business and you will be on your way!

John Alves is founder and partner of Freedom Annuity & Life Insurance Solutions, Simi Valley, Calif. Contact him at john. alves@innfeedback.com.

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September 2014 » InsuranceNewsNet Magazine

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

SOCIETY OF FSP INSIGHTS

Back to the Future: Financial Intimacy et’s get into our souped-up DeLorean and travel back to that fateful day in November 1994 when Netscape Communications announced the widespread availability of its Internet browser.

This event irreversibly changed the future for those professionals providing legal, insurance, accounting, planning or investment products and services to clients. Until then, there was no SelectQuote, LegalZoom, Ameritrade, Mint or QuickBooks. Before

Rapidly, the influence exerted by universally available information changed the course of that relationship. Oversight had become increasingly self-directed and perhaps even devalued. At the same time, advice had become widely available from multiple sources and perspectives, generally at little or no cost. Fortunately, intimacy had increased in value to particular clients who had become awash in impersonal financial information and advice that may or may not have been accurate or relevant to their situations.

So the future is now and the question has become "What type of client values and craves financial intimacy?"

Forrester identified three major categories of consumer behavior: Delegators, Self-Directors or Validators.

the Internet became ubiquitous, consumers who needed insurance, investment, legal, financial planning or accounting services consulted with the appropriate professional. Producers and advisors held the reins on the availability of – and the advice provided about – those services.

In the late 1990s, Forrester Research examined changing consumer behavior in light of the relatively new and soon-to-become widespread use of the Internet. It found that the classic role of the advisor was going through a radical transformation. Forrester saw a balance among three important aspects of the advisor-client relationship: The advisor provided advice on which research to read and which products to buy, oversight of changes due to financial or life events, and intimacy, the emotional insight into a client’s unique approach to managing money.

» The smallest of the three groups, Delegators, at first seem like ideal clients. Once they like and trust us, they’ll respond with “Whatever you say; just tell me what to do, where to sign …” and, as appropriate, “when to get the exam.” They don’t want a lot of details – they just want things to get done. Unfortunately, they also are the first to complain or sue when something goes wrong. » The somewhat larger group of SelfDirectors are those who are lined up outside Home Depot at 5:55 a.m. most Saturdays to load up on supplies for the weekend’s projects. They tend not to want to pay for professional advice and are comfortable tackling do-it-yourself (DIY) wills, tax preparation and online term insurance.

Unfortunately, the financial consequences for the DIY group can be much more severe

D espite the availability of advice online, research shows that consumers crave the human touch in financial decision-making.

By Richard M. Weber

L

58

InsuranceNewsNet Magazine » September 2014

than a poorly installed faucet or an out-ofalignment crown molding! » The good news is that more than 50 percent of consumers are Validators. These individuals don’t want to know everything that I know – but they want to know enough to be engaged in the planning process. Better yet, when they ask a question, they want to be able to reasonably apply the answer to their own circumstances. Validators want engagement, and financial intimacy is the hallmark of the ideal client.

Financial intimacy is the one essential domain that the future has provided to us after product access – and, to some extent, advice – has fallen from our sole provenance. Creating an appropriate sense of financial intimacy with a Validator is the way we add significant value to the advisor-client relationship. The ability to work with other specialists – for the benefit of the client – also enhances intimacy and collaborative value.

Understanding and advising clients on optimizing Social Security is just one example that comes to mind in thinking about the need for collaboration among advisors. We all know that the decision about when to begin taking Social Security benefits can be complicated and that there are a lot of moving parts. Social Security election decisions may be influenced by family and financial circumstances. The arcane formulas surrounding how Social Security benefits affect income taxes – exacerbated when required minimum distributions (RMDs) kick in at age 70½ – add to the overall complexity of the decision as to when and how we take benefits. And how might we structure distribution timing from taxable qualified plans and Roth accounts and other nontaxable sources?

Certainly, it takes advisors able to assess all the moving parts and formulate an understandable strategy.

Our brief trip back in time has revealed how dramatically our landscape has changed, yet the future is not bad – it’s just different. It’s about delivering value through financial intimacy to the large group of clients who truly want and seek an active partnership in the advisor/client relationship.

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

NAILBA INSIGHTS

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

What Makes Advanced Producers So Advanced?

F ocusing on solutions instead of products is a common denominator among top producers.

I

By Barbara Crowley

’ve been asked this question many times.

It is a simple question without a simple answer. If there were a “one size fits all” approach to being successful in this industry, everyone would be successful. When I sit in a room of top-producing advisors, the group is as diverse as the products they sell and the solutions they provide. On the surface, they have little in common, and they all have attained high levels of success in different ways. Upon closer examination, though, I’ve discovered that these diverse advisors have certain things in common.

They Are Focused on Solutions …

Not Products

Most top advisors understand that the various products in the marketplace are simply vehicles designed to take the owner to a certain destination. Top producers don’t focus on a product; instead, they take a problem-solving approach to serving their clients.

And top advisors follow the same steps in problem solving, even if they don’t realize it.

Step 1: Identify the Problem. The best advisors understand that the first step to serving a client properly is to identify the issue that the client faces currently or is likely to face in the future. Whether they simply need to ensure that their family’s livelihood is not compromised should the unforeseen happen or they realize that their heirs will face significant estate tax issues because of the wealth they have accumulated, clients have challenges. Top advisors must spend time with clients to identify the issues important to them.

Step 2: Consider Multiple Solutions.

After a problem or a challenge has been clearly identified, advanced producers go into their toolkits and carefully examine different solutions. This is where a top advisor understands that products can be strategic in nature when used appro-

priately, and many products are available to solve any given challenge. After an advisor has identified some potential solutions, it is time to assess the pros and cons of each option.

Step 3: Select the Best Possible Solution. After considering the pros and cons of each potential strategy, the best advisors identify what they believe will best suit the clients’ needs and solve the challenge. After the best solution has been identified, advisors meet with the clients to discuss and execute a plan.

Step 4: Implement the Solution.

When clients believe their challenges have been understood, they welcome the advisor’s recommendations. The best advisors are skilled at restating the challenge that the clients face in order to gain mutual agreement and then clearly presenting how the chosen products will solve the problem. Once the clients agree, the advisor implements the plan.

Step 5: Perform Ongoing Evaluations. Top advisors know that any plan is a living and breathing document. Even though a solution may be appropriate today, life changes can quickly alter its appropriateness. It is therefore necessary for advisors to continually review their solutions and change when necessary to ensure that the solutions remain viable.

Annual client reviews are critical for ongoing success.

They Surround Themselves With the Best

No top advisor can be all things to all people. When you focus on solutions, you must surround yourself with other professionals who can play a key role in the most appropriate solution for the client. Most top-producing advisors have formed strategic alliances with attorneys, certified public accountants and other financial professionals. Too many advisors see these strategic relationships only as opportunities to get referrals.

Top-producing advisors understand that although referrals are great, the expertise

that these professionals bring to their clients is the real value.

By developing and maintaining these strong relationships with other professionals, advisors are able to keep abreast of the ever-changing legal and tax laws that can impact their clients. This ongoing education allows top advisors to continue to be strategic with the use of the products developed by our industry.

They Belong to the Best Organizations

Another common theme with top advisors is membership in industry organizations.

These organizations allow advisors to be well-rounded and stay ahead of the curve – not to mention the fact that these organizations continuously advocate for the best interests of the advisor’s clients.

What is it that makes advanced advisors so advanced? They simply understand that they are only as strong as the people, organizations, professionals and solutions with which they surround themselves. They understand that they alone can never be the solution to every client’s needs. They know that there is no perfect product that will be ideal for everyone. They see the value that other professionals bring to their clients.

And they are constantly involved in industry organizations and giving back as much as they take in.

After more than 30 years in this industry, I’ve found that the one constant has been change. Changes in products, companies and laws as well as the ever-changing needs of consumers make it necessary for advisors to dig in and be heavily involved in many areas of the industry. Top advisors embrace change and remain flexible as they continue to address the challenges created by change.

Barbara Crowley is the president of Brokers Clearing House, West Des Moines, Iowa, and the 2014 NAILBA Chairman of the Board.

Barbara may be contacted at barbara.crowley@innfeedback.com.

September 2014 » InsuranceNewsNet Magazine

59

MDRT INSIGHTS

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

The Top Six Things Every New Advisor Should Know L ook for ways to get out of your comfort zone, continue to improve your practice and find new ways to reach clients.

model to fit these clients and their needs.

To find what niche fits you best, focus on what you’re passionate about or an area where you already have connections.

By Danny O’Connell

3. Write Joint Work

N

ew advisors often ask their more experienced counterparts about bad advice they were given throughout their professional journey in the hopes of avoiding the same mistakes.

Instead of teaching them about ill-advised information, I have found it more valuable to shine light on the positive guidance that led to my success. To help you lead those new advisors through the complexities of the financial industry, I've identified the top six things every new agent should know.

1. Get a Mentor

It’s important to connect with an experienced and credible professional in the business who is willing to provide you with information and resources to help you better serve your clients. A mentor not only gives you guidance as you launch your career, but a mentor also can be a valuable resource for advice every step of the way. If you are looking for a mentor, the Million Dollar Round Table (MDRT) Mentoring Program gives aspiring agents the opportunity to be mentored by a veteran MDRT member. You will learn how to enhance your productivity, elevate your service capabilities and gain motivational insight to reach your goals.

2. Find Your Niche

Once you identify the practice area in which you enjoy working, make sure you become an expert in that field. It is better to specialize in one thing and be very good at it than to be mediocre by trying to do everything.

Begin by identifying a target clientele, which leads to developing a unique expertise for working with those clients and the problems they face. This in turn leads to developing services and a business 60

Although it helps to be an expert in one area, it’s also important to have a network of qualified professionals in other specialties to learn from, direct clients to and potentially work with. If you make a partnership such as this, those professionals also may come to you for help in your area of expertise. Find a professional in the financial industry who has a different practice area than you and who is considered the best in that area. For example, if you don’t focus on retirement planning, connect with someone who is an expert in that area. Partnering with professionals who vary in expertise is a great way to gain exposure and experience in many different financial markets. If you’re not sure with whom you should partner, ask a credible source in the industry for a recommendation.

4. Join a Professional Organization

Becoming a member in an association such as MDRT is one of the greatest ways to learn from other advisors. You not only share ideas and strengthen ways to do business, but you are also challenged to attain even higher levels of success. An additional benefit to becoming a member of a financial association is the stature and assurance you gain by being with some of the greatest leaders in the industry. The amount of knowledge you receive is immeasurable.

5. Sharpen the Ax

It takes time to develop your technique, learn to interact with clients and understand the technical details about products/services. I highly encourage you to attend at least one to two conferences each year and try to take at least two new pieces of knowledge away from each meeting.

InsuranceNewsNet Magazine » September 2014

Consistently work on new certifications and renewals to keep yourself educated in your practice area. Consider enrolling in continuing education classes that are relevant to your practice area and have a practical application to help you with your certifications.

6. Track Everything

It’s important to know how many people you saw last year, where a lead originated, what your closing ratio was, etc. All these tracking points can help you develop a more effective marketing plan, set goals and monitor the pulse of your success. You also will learn where your best leads came from so you can go back to them if you identify new opportunities that would be a similar fit.

These top six things have led me to a better lifestyle and greater success than I ever could have imagined. It all starts with getting out of your comfort zone and continuously evaluating your business to identify where you can be more efficient. If you are an aspiring advisor, I recommend looking for ways to improve your daily routine, working on areas to reinvent procedures and trying new ways to reach clients.

Danny O’Connell is a partner at BRG, a family-owned agency in Dallas, Texas. He has been in the industry since 2001 with four MDRT Top of the Table qualifications, one Court of the Table qualification and seven total years of membership with MDRT. He was recently named one of Advisor Today’s 4 under 40 for 2014. He serves on the board of NAIFA-Dallas and is an Ambassador for MDRT.

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.

Patience, Perseverance Help Advisor Make It to the Top U nderstanding market dynamics and following the Golden Rule are among the factors that have paved the way to success for one NAIFA member.

By Ayo Mseka and Ike Trotter

N

AIFA’s Advisor Today recently spoke with longtime NAIFA member Ike Trotter to find out what it takes to make it to the top. Trotter’s insights may be just what you need to move your career forward.

NAIFA: What are some of the secrets to your success?

Ike Trotter: I owe what I have achieved so far to both patience and perseverance.

For example, it took me 10 years to qualify for the Million Dollar Round Table.

My early challenge was finding a way of conducting business that was comfortable to me and gave me the most reasonable chances for success. Fortunately, I had a loving dad who brought me into the business and allowed me the opportunity to find my way.

I also relied on the teachings of the late Tom Wolff, who taught agents the skills to identify their prospects’ and clients’ financial needs. After decades of conducting business my way and learning from industry greats, I feel very comfortable in working with my clients.

NAIFA: What strategies do you use to sell financial planning to the middle market?

Trotter: When I started out in this business, I had to find the best way to get in front of prospects and to be the most productive. As a 22-year-old just starting out, I tended to do well in the middle market. I sold lots of small life and term policies as well as health insurance policies. Today, I remain in the middle market, even though I have some affluent clients. Frankly, my focus today is more on the investment side of the business. I serve lots of near-retiree

and retiree clients with accumulation products designed primarily for the middle class, and I advise them on the best ways to distribute their retirement money.

NAIFA: What investment advice do you give to your clients?

Trotter: At the end of the day, the money you have at retirement is the sum total of what you have been able to send ahead of you. As an advisor, you have to know the market in which you are working. In the Mississippi Delta where I live, for example, I work with customers who generally earn between $80,000 and $100,000 a year.

In Mississippi, we have, percentage-wise, the largest number of people who rely on Social Security for most of their retirement income. Our task is to let those who are financially able know that they must do better than that, and we work with them to make sure they meet their financial goals.

NAIFA: What should mid-career agents do to get over a career slump?

Trotter: They should keep on doing what they are doing and persevere – success will come their way. They should also attend as many NAIFA conferences as possible to recharge their batteries. I have attended more than 25 national NAIFA conferences over the years, and I continue to get energized at every meeting.

In addition, they should make full use of their NAIFA member benefits and should not forget to network with other NAIFA members. They truly can serve as a support system for them.

NAIFA: What is your best advice for agents who are new to the industry?

Trotter: Their job is to pay close attention to what their prospects and clients are saying so that they can help them solve their financial needs.

If they will try to acquire these habits at the beginning, the income will follow.

It is all about putting the interests of the customer first.

I have to mention the late Tom Wolff again, who taught us to “look for the loss.”

Ask your prospects and clients the following question: If something were to happen to you, where is your greatest financial exposure? When you talk to a client about his retirement holdings, for example, help educate that person about the opportunities inherent in income annuities, which take mortality and market risk off the table because they offer an income that one cannot outlive. Remember that most people need sound financial advice that will help protect their assets.

“Ask your prospects and clients the following question: If something were to happen to you, where is your greatest financial exposure?”

NAIFA: What three things would you like readers to take away from this interview?

Trotter: First, understand the dynamics of your market. This means that you must know what you can and cannot do. Second, remember the Golden Rule, which teaches us to treat people in the same way we would like to be treated. Finally, as NAIFA president John Nichols says, “Remember that as financial advisors, we answer to a higher calling. And that calling is about service to others.”

Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Ayo may be reached at ayo.mseka@innfeedback.com.

Ike Trotter, CLU, CASL, ChFC, AEP, is with the Ike Trotter Agency in Greenville, Miss.

Ike may be contacted at ike.trotter@innfeedback.com.

September 2014 » InsuranceNewsNet Magazine

61

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

Success in a ‘Customer First’ World A greater focus on customercentered business strategies could reap great rewards for the life insurance and financial services industries.

By Norah Denley and Jennifer Douglas

T

he drive for companies to understand their customers seems to be everywhere today. From the near-ubiquitous “How did we do?” on receipts to emails received after nearly every online transaction, companies are aggressively looking for customer fe e dback. Companies now have far more information on the wants, needs and exp e ctations of their target markets (and their competition) than ever before. The key to success with these customer experience management (CEM) efforts lies not only in gathering the information but also in understanding what to do with it.

The Industry Challenge

Consumers do not view life insurance or the broader financial services industries as fun or engaging. Their interest in life insurance tends to be low, with people focused on the topic perhaps only a handful of times in their lives.

Despite this situation, insurance companies are like most companies today – working to become more customercentric. Understanding the customer experience and, more specifically, improving it through CEM offers carriers the potential for a number of positive outcomes, including new business, increased retention, decreased costs and competitive differentiation.

CEM at Work

In a recent study about CEM practices within the industry, LIMRA surveyed 50 62

companies and found the majority of them have one or more CEM initiatives in place.

Although many programs address multiple customer groups, the bulk of the initiatives focus on the ultimate customer – the individual policyholders and/or employees.

Capturing the Customer’s Voice

To better understand customer needs, nearly all CEM initiatives engage in “voice of the customer” efforts to learn about con su mer at t itudes, preferences and behaviors via direct or indirect questioning. Further, a majorit y of programs conduct “touch point/ moment of truth” a s s e s sment s to understand consumer experiences at the points where the customer interacts with the company. Insurance companies are using a variety of methods to solicit the feedback. Most request feedback directly from customers via tracking surveys, market and benchmarking research, and touch-point questionnaires.

Driving Change

CEM isn’t simply about understanding the customer; it involves making changes based on that understanding to improve the experience. Insurers vary greatly in both the number and types of actions they are taking as a direct result of customer-centric initiatives. The most common actions taken as a result of customer experience insights are internal changes, such as educating employees in an effort to increase the quality of customer interactions.

At this point, many CEM initiatives in the industry are fairly new. In fact, twothirds of the initiatives in our study have been around for five years or less. So although companies are making changes as a result of their newfound understanding of customers, many still believe it is too soon to determine their success.

InsuranceNewsNet Magazine » September 2014

Often the ultimate measure of the program’s success is tied to tangible return on investment (ROI) factors, including number of new customers, retention of existing customers, cross-selling, sales and revenue, and employee productivity.

Success also relates to indicators of future ROI, such as visits to local offices, the company website and social media pages; call center activity (incoming calls and inquiries); and the number of referrals.

Success Factors

All companies, regardless of where they are in the CEM journey, tend to cite challenges that center on three core areas: Commitment to the cause »M anagement commitment at the corporate level or with corporate involvement. »A lignment of company goals and resources with customer needs.

Employee engagement »E mployee awareness/training. »E mployee accountability.

Customer access and assessment »G reater number of objectives and supporting efforts. »A ssessment of customer experience at more touch points, using more methods.

An Important Step Forward

It appears that CEM is not a passing fad but a new way of doing business to compete in today’s consumer-driven world.

Norah Denley, senior research analyst for LIMRA’s Distribution and Technology Research, is responsible for research in areas such as social media and big data analytics. Norah may be contacted at norah.denley@ innfeedback.com.

Jennifer Douglas, LIMRA associate research director in developmental research, is part of a team responsible for identifying new research opportunities. Jennifer may be contacted at jennifer. douglas@innfeedback.com.

ADVERTISER INDEX

MARKETPLACE

Advertiser

Website

Phone Pg

American Equity

www.american-equity.com

888-647-1371

5

Ashar Group

www.lifesettlementkit.com

800-384-8080

17

Athene Annuity

www.athene.com

866-838-6153

41

Assurity Life

www.assurity.com

800-276-7619

31

Celebrity Branding Agency

www.celebritybrandingagency.com

888-798-6809

1, 51

First Financial Partners

www.addaumnow.com

304-723-4596

36

Foresters Equity

www.feproducers.com

858-550-4844

53

Guggenheim Life and Annuity

www.guggenheimspia.com

855-782-8039

44

Learn why different is better at:

Illinois Mutual

www.illinoismutual.com

800-437-7355 x 775

37

www.DiscoverOurDifference.com

Imeriti Financial Network

www.expertiul.com

866-871-0964

3

Kansas City Life

www.kclife.com

800-258-4525

33

Legal & General America

www.lgamerica.com

800-346-4773

19

LifeAgain

www.bluemetricprogram.com 858-436-1072 39

LIMRA

www.limra.com

800-235-4672 4

LISA

www.halfofflisa.com

407-894-3797 17

M&O Marketing

www.sspowerhouse.com

800-519-2920

MetLife

www.metlife.com/incomeguard 800-506-0896 29

Minnesota Life

www.securian.com

888-413-7860 opt 1

IFC

Morgan White Group

www.mwgpremiumsaver.com

877-759-5728

47

Mutual of Omaha

www.mutualofomaha.com

800-228-7104

35

Mutual Trust Group

www.mutualtrust.com

800-323-7320 x 5308

IBC

NAIFA

www.naifa.org

877-866-2432 55

National Life Insurance Company

www.nationallifegroup.com

800-906-3310

14

Nationwide Financial

www.nationwidefinancial.com

800-321-6064

25

Peak Pro Financial

www.millionaireinwaiting.com

866-268-2640

43

Petersen International Underwriters www.piu.org

800-345-8816

45

Public Sector Retirement

www.publicsectorprofits.com

888-781-3112

57

The Plus Group

www.plusgroupus.com

855-758-7477

49

Protective Life

www.myprotective.com/closethegap

877-778-3500 opt 1

26-27

Prudential

www.prudential.com/founders 844-606-7873 10-11

QuoteWizard

www.qwlifeleads.com

866-603-7184 63

Royal Fund Management

www.royalfund12reasons.com

352-750-1637

63

Safe Harbor Financial, Inc.

www.gettheannuityreport.com

855-638-8009

7

SBLI

www.nononsensewl.com

888-438-7254 9

Sentinel Security Life

www.sentinelpersonalchoice.com

855-478-4037

13

Superior Mobile Insurance

www.discoverourdifference.com

800-898-3926

63

Tucker Advisors

www.tuckeradvisors.com

877-475-1965

BC

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» Continued from page 6 It turned out the widow was not even aware of the life insurance. Robert had heard that his client had died, looked up the obit and obtained a check.

“I went over to the house and there were all these cars there, and I realized it must have been right after the funeral. I was really self-conscious and didn’t want to go in and disturb anybody. But I looked at the envelope and thought that I really wanted to carry this out, now.”

Robert knocked at the door and was brought to the living room, where the widow sat with her head down. The client was young and had school-age children. It was apparent that the death was a shock.

He asked if she would speak to him in the hall. He told her about the policy and the envelope. She took out the check and looked at it without expression.

15

“I went over to the house and there were all these cars there, and I realized it must have been right after the funeral.”

“I didn’t know what to do, so I was about to say something and leave when she hugged me,” he said, looking off as if watching the scene. “She just started crying like all this worry came spilling out. I couldn’t help it – I started crying too. It seemed like quite a while, but then she let go, wiped away her tears, said thank you and went back into the living room. I left there knowing that I picked the right career for myself,” he said, apologizing for the diversion and handing us the contracts to sign.

I cannot even think about that story without tearing up a little. But I have to

confess I often wondered how much truth there was to the story and whether my wife really reminded him of that beneficiary or if that was a tactic.

All I can say is that we signed without hesitation.

Steven A. Morelli Editor-in-Chief

September 2014 » InsuranceNewsNet Magazine

63

THE LAST WORD WITH LARRY BARTON

Don’t Allow Slackers to ‘Watch the Bay’ Y our agency’s success depends on your ability to root out those employees who are not pulling their weight.

By Larry Barton

O

tis Redding’s biography doesn’t include his talents as a clairvoyant, but this whimsical slice of life reminds us that right now your team likely includes some wonderful people who are watching the tide roll away. Guess what?

They’re also collecting a paycheck.

Slackers exist in most sectors of our economy: public, private and nonprofit.

Many studies have been conducted by organizational behavior specialists about who they are, how they morph into agencies and organizations, and how they survive under the radar of management.

Their cost to your business can be enormous. As part of a recent research project on behalf of an insurance company, nearly 30 agency managers were brutally honest when they were asked to evaluate those employees who watch the tide and those who challenge to sail the tide. Here is what they said.

Slackers Can Be Actors

In recruiting talent, we know that many applicants can emanate a false sense of confidence and talent that charms us into hiring them. Some agencies hire these folks in a belief that “some will make it, and the others will be filtered out” after six to nine months of sales effort. Even though many agency leaders have low confidence in various personality and competency tests that are used in the hiring process, they still use the tests in a belief that “they must be useful or the industry wouldn’t embrace them.”

My insight is that the interview, and specifically three separate interviews with different people, is emerging as the best method you will have to detect a candidate’s consistent behavior and personality, a candidate’s passion for the insur64

ance industry, and whether a candidate has the ability to embrace your culture.

Look for more than eye contact and a firm handshake. Were they punctual? Did they do more research after the first meeting or none at all? Did they send thank-you notes to those they met in the first and second interviews? You won’t find any of these issues raised in a “fit test.”

The consensus is that the cost of a new hire in the life and health insurance industry can exceed $70,000 when one considers recruiting, screening, onboarding, and a minimum of six months of effort and expenses.

Replace a Slacker

Some agency leaders acknowledge that their mid- to lower-level performers are retained because of an innate fear that the talent pool to replace these folks could be weaker. What? Consider all the returning military veterans who are great patriots, talented, fierce in their devotion to duty.

I’d consider them to be priority candidates to become licensed and to sell the very products that insure life because they placed their own lives on the line in the defense of others. Then consider those whose careers were derailed merely because the companies they worked for could not weather the storms in the marketplace. Although these employees may have had exceptional talent and performance, their companies’ leadership stunk.

Find those ex-employees. They are looking to join your organization – now.

Then say good-bye to a slacker as you bring new talent on board. This sends a message to all – the high performers as well as those watching the tides – that says, “I will not tolerate someone who collects a paycheck while not having fire in the belly every day.”

The Family Slacker

Finally, our interviews with various general agents reflected remarkable honesty about a sensitive issue: Sometimes

InsuranceNewsNet Magazine » September 2014

"Sittin' in the morning sun, I'll be sittin' when the evening comes…

Watching the ships roll in and then I'll watch 'em roll away again ... yeah ...

I'm sittin' on the dock of the bay, Watching the tide roll away ... " – Otis Redding, December 1967 (recorded days before he died in a plane crash)

the biggest slackers may be our sons and daughters.

Sure, we love them. They were so adorable as kids. We also sometimes recognize that the likelihood of their finding a sizzling career elsewhere is moderate at best. In other cases, we see real opportunity for success, and we are right – the next generation is stronger than we are, more astute in building client relationships. But for many, the phones are answered and the back room is managed by – well – underachievers. In these cases, love is not only blind, it’s also expensive.

Three agency managers acknowledged that they rarely if ever tell clients that Janet at the front desk or Manuel in claims processing is a family member. There may be incredibly good reasons to mask that information, but I’m still scratching my head about why you wouldn’t want to celebrate a family-owned, family-driven, successful agency. That’s the pride of a community and what so many seek to achieve.

Beware of those who allow their kids to “watch the bay,” escaping accountability. And shame on them for not driving each person in the organization to be accountable and help the clients who need our products and insight more than ever.

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

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