InsuranceNewsNet Magazine - September 2015 by InsuranceNewsNet

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Have you reached a level of success so high that you’re struggling with “What’s next?” Or are you teetering on the edge of greatness, trying to find the one thing that will get you over the mark? The solution, believe it or not, is to Star in Your Own Documentary Film. You only need 3 reasons why:

2. It can replace your seminars and give you your life back. Just send your staff to your seminars and have them play your movie, while you stay home with your family. It means that you will look your very best every single time, and never worry again about a lackluster presentation because you’re not feeling well or you have your mind on other things. It means that your prospects will perceive you as so elite, you don’t even

1. It is the Ultimate Marketing Piece that no one will be able to touch. Our 3-time Emmy Award-Winning Director, Nick Nanton, will craft a beautiful movie featuring the story of you and your business, including a showcase of the lifestyle your services afford for your clients. Your credibility won’t be in question as we show your community involvement, the respected community leaders with whom you are friends (they’ll be begging to be in your movie), and the difference your services have made in so many lives. Host a movie premiere in your town (talk about the perfect prospecting party!), invite the governor (because he or she is probably in it), then let us flood Big Media with your movie. We’ll air portions of your film on major network affiliates and write and submit national press releases. Meanwhile, prospects will be flocking into your office, ready to meet with the celebrity whom they trust to genuinely care about their families and their futures. And clients will be handing your DVD out to all their friends, bragging that they know you. (How about that for getting referrals?) Once you star in a feature-length documentary film, you will have instant elite celebrity status … which is exactly what takes you from Top Advisor to Legend.

Now, you may think no longer having to stand in front of those crowds is reason enough to start filming, but having a prospecting tool that can work without you 24/7 means even more. It means having dinner with your family every night instead of watching strangers eat while you make that same speech. It’s reclaiming your personal time and finally being able to live the lifestyle a legend is due. 3. It will be a cherished treasure for you and your family. It isn’t even possible to convey how you’re going to feel when you see your movie. Your children or your grandchildren will be captured in this moment of time, their lives illuminated in cinematic splendor. Your business, whether in its prime or on the brink, will be documented for future agents to learn from and to aspire to. And you, as the star of the film, as the legend, will be immortalized for your family and for every generation to come. It will be an heirloom like no other. This film is your legacy. And the best part is …

3-time Emmy Award-winning director, Nick Nanton, enjoying a fun day on location in Oaxaca, Mexico shooting the documentary, Armonia. attend your own presentations. We’ve seen it happen, and it’s been proven to draw in virtually the same amount of appointments as you would receive if you actually attended. This is why, when we make your documentary film, we’ll ask about your current presentation so we can weave its messages into your story.

It’s Fun and it’s Easy. In just a couple of days, with just a few hours of your own time, we will make your movie. Our multi-Emmy Award-Winning film team will plan everything out for you, and you’ll have a blast just showing up and being part of the magic. •

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Find out how you can star in your very own movie by calling 855.260.8260 or visit www.MyAdvisorMovie.com today. Your legacy awaits. Nick Nanton,

Get a closer look at our filmmaking process in the exclusive interview with CelebrityFilms CEO and 3-time Emmy Award-Winner, Nick Nanton. p. 27

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Nick Nanton, of The Dicks + Nanton Celebrity Branding Agency, is a lawyer by education and title, but all his life he’s been drawn to the creative arts. The same passion that led him to produce independent records in college now has him making feature-length documentary films. In this Q&A, Nick describes his path to becoming a filmmaker, and illuminates why he finds the stories of financial advisors so particularly interesting. Q: How did you get started using media in branding? A: I saw how difficult it is to get people to pay attention to what you have to offer in a sea of sameness. Then I realized that people who have media credentials and credibility don’t look like they’re marketing. They just look like the world is asking them for their opinion.

signed memorabilia I was able to get from some of my friends in the music industry. A few months later, he sent me this story that his wife had written for the newspaper about how the community was rallying around their son, and I thought, this is it. I lined up some producers and I made the movie. It came out great. We won a couple awards for it, including an Emmy. I saw firsthand the power of introducing someone to a complete stranger, in a movie they weren’t even lining up to go see. My partner and I started talking about it and wondered how it would work if we tried it for businesses. So I offered it to a couple of different clients, and we made two more movies, for which we recieved two more Emmy nominations. Then those two clients started using the movies in their marketing.

put some parts of your seminar in it.” He agreed, we made it, and he started using it in his marketing. We actually had it on TV as a three-part documentary series. Then one day, he had an emergency and couldn’t make it to one of his seminars, so he used his documentary and he was still able to set as many appointments as before. Now he doesn’t go to his own seminars anymore, and his appointments haven’t fallen off. We created a system where he can easily continue to bring business in, and it doesn’t feel like an infomercial. When your story is told the right way, it’s literally the most powerful thing you can do. Q: What’s it like to be filmed? A: It’s awesome. It’s so easy; that’s what’s fun. It takes about two and a half days, and it usually only takes a few hours of our client’s time. We take care of everything. We plan it with you ahead of time so

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

online

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SEPTEMBER 2015 » VOLUME 8, NUMBER 9

40 How to Turn a Discussion About Death Into an Opportunity

By Alyse Blumberg and Jay Cherney Many clients and advisors are afraid of bringing up the subject of death. But addressing the topic directly can add a new dimension to your role.

48 ANNUITY

48 G en Y’s Surprising Interest in Annuities

INFRONT

September 2015

10 Retirement Security Is the Least ‘Helped’ by the DOL Proposal By Steven A. Morelli The most unsettling aspect of the fiduciary rule debate is the real-world harm that can come to ordinary Americans who desperately need retirement advice.

17 SPECIAL INSERT: Sellers’ Guide to Life Insurance

The latest research from LIMRA and Life Happens, plus classic prospecting tips from Ben Feldman.

FEATURE

LIFE INSURANCE Sellers’ Guide to

The latest research from LIMRA and Life Happens on why people buy life insurance as well as classic strategies on how to convert prospects into clients.

People see the value, but balk at price PAGE 1

Sales legend Ben Feldman’s concepts still pack irresistible power PAGE 7

Proudly sponsored by

INNM_0915_Life_Insider_Guide.indd 1

24 Do You Have What It Takes for Advanced Sales? By Linda Koco How do you get to the advanced level of life insurance selling? One trait that all advanced practitioners share is a deep-seated commitment to designing life insurance plans and solutions that help resolve even the most complex needs.

32 Find Advanced Opportunity in the Business Market

INTERVIEW

12 The Great Presentainer

An interview with Dave VanHoose The most influential salespeople don’t just present material to their audience. They entertain and engage their audience. Dave VanHoose is a master of what he calls “presentainment.” In an interview with InsuranceNewsNet Publisher Paul Feldman, Dave describes how to craft entertaining presentations that close more business.

8/6/15 2:17 PM

By Linda Koco Advanced life insurance sales professionals have excellent expertise that no one else in the business has, but they do need to adapt to market changes.

LIFE

38 Death Benefit-Only Plan Opens Opportunity in Nonprofit Sector

InsuranceNewsNet Magazine » September 2015

By Lawrence Bell How life insurance can be part of a compensation plan for a nonprofit organization’s executive leadership.

By Linda Koco Annuities aren’t just for “old folks.” Millennials are discovering annuities as they start to think about their own retirement.

52 W hat Does $100,000 Look Like in Retirement? By Eric Taylor Today’s index annuities have features that can help clients optimize their retirement income when they need it most.

58 HEALTH

58 T hird Enrollment Season Is the Charm for Benefits-Focused Advisors By Shandon Fowler Here are some hot topics for this year’s open enrollment and how to make the most of the brave new benefits world.

FINANCIAL

64 Like a Golf Score, a Lower Risk-to-Return Ratio Wins By Craig L. Israelsen Just like in golf, the lower the score, the better, especially when taking performance and volatility into consideration.

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FOR AGENT USE ONLY

Y A W A K A E R B travel wi th ICA R5 E M A RANS ER 18, 201

N OW –

B D EC E M

ALSO IN THIS ISSUE SEPTEMBER 2015 » VOLUME 8, NUMBER 9

BUSINESS

72 NAIFA: 7 Secrets to Successful Selling

68 How to Reach the Retired Before They Retire By Sean P. Lee Corporations need financial experts to help prepare employees for their post-working years.

INSIGHTS

70 MDRT: Specialization and Collaboration Help You Become a Lead Advisor

We know how hard you work to help protect families and their dreams. Transamerica Brokerage’s Break Away incentive is our way of saying thanks for all you do. Break Away offers the opportunity to earn travel package rewards based on sales. You choose where to go! To learn more about Break Away 2015, visit www.engagengo.com/ transamerica51976 or call your local General Agent today!

View official Rules and Regulations at www.engagengo.com/ transamerica51976. Contest available only to agents appointed with Transamerica Brokerage BGA Sales Channel (866-545-9058). Transamerica Financial Life Insurance Company (TFLIC) business is not eligible. Sales of annuities and variable products are not eligible. Under current tax laws and regulations, gross income includes amounts received as prizes and awards. Accordingly, the value of your award/trip will be treated as additional compensation for purposes of any applicable tax reporting. Life insurance products issued by Transamerica Life Insurance Company, Cedar Rapids, IA. The information provided is intended for producer use only. It is not intended, nor appropriate, for customer use. DP 165 0315

74 T HE AMERICAN COLLEGE: How to Help Families Understand Life Insurance Is Not Optional By Jocelyn Wright A study shows that most consumers have an unrealistic expectation of how much life insurance costs.

By Scott D. Sorrell As a lead advisor, you will be the first person the client calls when they need expertise.

DESTINATION: SUCCESS

By Ayo Mseka Seven ideas all salespeople can use every day to enhance their results dramatically and reap incredible rewards.

76 LIMRA: Awareness Is the Key to Increased Life Insurance Ownership By Ashley Durham Americans say they need more life insurance, but few are aware of its benefits and affordability.

EVERY ISSUE 8 Editor’s Letter 22 NewsWires

36 LifeWires 46 AnnuityWires

56 HealthWires 62 FinancialWires

INSURANCENEWSNET.COM, INC.

3500 Market Street, Suite 202, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe EDITOR-AT-LARGE Linda Koco SENIOR EDITOR John Hilton SENIOR WRITER Cyril Tuohy VP FINANCES AND OPERATIONS David Kefford PRODUCTION EDITOR Natasha Clague VP MARKETING Katie Hyp CREATIVE STRATEGIST Christina I. Keith AD COPYWRITER John Muscarello CREATIVE DIRECTOR Jake Haas

GRAPHIC DESIGNER ADVERTISING COORDINATOR TECHNOLOGY DIRECTOR REGIONAL ACCOUNT MANAGER (NORTHEAST) REGIONAL ACCOUNT MANAGER (CENTRAL) REGIONAL ACCOUNT MANAGER (SOUTHEAST) REGIONAL ACCOUNT MANAGER (WEST) SALES RELATIONSHIP COORDINATOR

Copyright 2015 InsuranceNewsNet.com. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail editor@insurancenewsnet.com, send your letter to 3500 Market Street, Suite 202, Camp Hill, PA 17011, fax 866-381-8630 or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, Ext. 115, or reprints@insurancenewsnet.com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 866-707-6786, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 866-707-6786, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 3500 Market Street, Suite 202, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

Shawn McMillion Sharon Brtalik Joaquin Tuazon Tim Mader Craig Clynes Brian Henderson Emily Cramer Ashley McHugh

Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.

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WELCOME LETTER FROM THE EDITOR

The Three-Act Sale

he operative word in Life Insurance Awareness Month is the third one. In fact, it is one of the key goals of the insurance industry right now as the central importance of life insurance seems to fade. The successful products of the moment speak to other needs such as long-term care. Those address key consumer concerns, so I am not dismissing them by any means. But the essence of life insurance as a core of a family’s security seems as dated as a crinkled savings bond certificate tucked in a drawer. Yet everybody knows life insurance exists. What do we mean by awareness? Isn’t it more like appreciation? If consumers don’t appreciate the value of life insurance, then why

journey, looking down the route toward what’s next. This would be toward the end of the first act. (That previous sentence is a little foreshadowing of what’s coming later in this letter.) Publisher Paul Feldman’s interview is with Dave VanHoose, who sees sales as something of a stage show. He says that you have to capture attention and inspire imagination with your presentation. At the center of it all, of course, is the story. You will see in a sidebar that Dave describes how to tell a story in a three-piece structure, which is a fundamental form for stories. Let’s take a moment to examine how the three-act story can be a model for any message you want to convey.

The Basic Three-Act Paradigm Plot Point #1

Plot Point #2 Des cen ding

tion ing Ac Ascend

Set Up

Introduces the situation, characters, and guides us into the main body of the conflict of the story.

Confrontation The real “meat” of the conflict of the story.

should they even consider fitting it into the family budget? That, of course, is why master storytellers are the greatest life insurance salespeople. This edition of the magazine is full of the lessons they teach. A special pullout section includes sales strategies from the legendary New York Life salesman Ben Feldman. He said he sold ideas, not insurance. He achieved his greatest success when he bundled those ideas into a story arc to connect with the prospect’s imagination. Our main magazine feature is a compelling collection of stories telling how advisors became advanced. Those transitions in themselves usually followed the recasting of a person’s own story. Linda Koco encapsulated that in a paragraph: Lee Davis was five years into the business when he made the decision to become a “very valuable advisor to small business owners.” This put him on the road to advanced sales. That places you right into Lee Davis’ 8

Act ion

Resolution

The outworking of the story.

In the earlier example from Linda, we had the exposition of the first act. Who is this person? If the listener cannot identify with the character, then the story is not engaging. Paul Reiser, who created and starred in the ‘90s series “Mad About You,” used to talk about the wide variety of people who told him the show was absolutely, positively about their marriage. Even Asian immigrants would tell him this. So, it doesn’t matter if the listener looks nothing like you or is even from a different culture. When you connect honestly with the character, you are setting a scene that others can inhabit. If you are conveying a story about a client whose empire crumbled because he died and did not have insurance to sustain the business, then the listener needs to identify with the client. You don’t have to fill in all the details; people will do that if they are engaged. Sometimes the sparest stories are the most effective because they require listeners to apply

InsuranceNewsNet Magazine » September 2015

their own color. An obvious example is Ernest Hemingway. Now, if you just say, “Yeah, well, that client died and the family had to sell the business because he didn’t have insurance,” that would probably just go splat on the floor. Struggle is the essential element to any story. The beginning of the story can explore the client’s work to build his business. He’s successful and busy. And then, in steps the would-be hero — you. You tried to tell him he needed to protect the business and his family. Maybe later, he said. After all, he was industrious, young and immortal. The fickle finger of fate sends down a bolt to spark the “inciting incident,” the gunshot propelling the second act. In this case, it is incurable brain cancer. He has some health insurance to cushion some of the expenses, but costs are nevertheless draining resources from his business and family. He certainly can’t get life insurance any longer, so he watches as his family struggles while he dies with the full knowledge that they are in for a world of hurt when he goes. Might these details be too awful to share with a client? If you spare the pain, the listener will not feel the peril. Rising crisis is critical for the story’s effect. During the second act, the client dies, leading the family to sell not only the business but also their home to cover the medical and final expenses. Mom had to take on two jobs, and the three children had to fend for themselves to get through college or start working right after high school. Now we are squarely into the third act, where the action de-escalates and everything is all better. All better? But how can that be? This family is incinerated toast! This is the unique third act of the sales story. When you bring the listener out of the spell of the story and into the moment, they see their hero before them. They can resolve their own bad story with life insurance. You can build a library of these stories for different situations. Think back to your clients, and probably every one of them can illustrate some benefit of insurance when put into the context of the three-act story. You can start by putting your own story into this structure. You might be surprised by a greater awareness in your own life. Where are you in your story? Steven A. Morelli Editor-In-Chief

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INFRONT TIMELY ISSUES THAT MATTER TO YOU

Retirement Security Is the Least ‘Helped’ by the DOL Proposal hile the argument rages over W the Department of Labor’s new fiduciary standard, American consumers are drifting farther out into the retirement storm. By Steven A. Morelli

he Department of Labor’s new fiduciary rule means something different to each of the many stakeholders encompassed by the proposal. » For insurance agents, it can mean a confusing entanglement in the fiduciary standard in the normal course of business. » For fee-only advisors, it may level the playing field, so that some advisors are not operating under what they would call “lesser” rules of engagement. » For the federal versus state systems of insurance and financial regulation, the rule perhaps presages a larger federal expansion in the states’ traditional realm of regulation. (But for some reason, the National Association of Insurance Commissioners is not too worried about this prospect.) » For consumers, the meaning is far more difficult to gauge. In many ways, the central player in all of this has been lost in the dust and smoke of battle. The most unsettling aspect in this debate is the real-world harm that can come to ordinary Americans. The rule affects many more players not on this list, such as insurance and financial companies, which stand to lose and gain significantly. That impact, of course, reverberates throughout the American economy and ripples back to consumers. The central scope of InsuranceNewsNet’s coverage comprises the sales channel and consumers, so we’ll be focusing on them in this column. Most likely you have heard the clang of alarms from advocates on all sides of this debate. But you might have thought, “Aren’t people always yelling about some section of the sky about to collapse?” The clamor might be appropriate this time because of the fundamental change the rule might usher into insurance agents’ lives. 10

After all, more annuity dollars are coming from qualified retirement funds, such as individual retirement accounts and 401(k)s. LIMRA reported late last year that 62 percent of the money purchasing fixed index annuities came from qualified funds. That number will grow substantially as baby boomers wade into their retirement years. Just how big is the retirement market? It holds $24.9 trillion as of the first quarter of this year, according to the Investment Company Institute. That includes IRAs, private defined benefit (DB) programs, government DBs, defined contribution plans and annuities. Given all the regulatory attention and criticism paid to annuities, it might be surprising to learn that those products (outside of retirement accounts) occupy less than 1 percent of retirement assets, making up $2.1 trillion in reserves. Not only might the anti-annuity outcry be somewhat misaligned, but it is also manipulative, because the noise draws the public gaze away from the less-than-stellar performance of the other retirement investment options. The aggregate retirement asset value was $23.5 trillion in the first quarter of 2014, which is an increase of about 0.6 percent between last year and 2015. That is better than flatlining or dropping, but it is hardly a dramatic boost in an era of robust growth for equities and company profits. The plain fact is that all the industries revolving around retirements are not making America safe for retirement. However, the industry was more successful in increasing one particularly salient statistic — the number of Americans who are scared of outliving their money. The 16th Annual Transamerica Retirement Survey of Workers showed that “outliving my savings and investments” was American workers’ No. 1 fear. This year, 44 percent shared that fear, up from 23 percent the previous year. Put that in the context of the discussion around the Labor Department’s proposal. People who support the new rule say the

InsuranceNewsNet Magazine » September 2015

The Department of Labor expects to release the transcripts of the August hearings and take comments into September. To learn more about the rule and comments, visit www.dol.gov/ebsa/regs/conflictsofinterest.html

broader application of the fiduciary standard would protect vulnerable Americans and their limited retirement resources. That goal, by the way, is irresistible. Of course we want to protect Americans and the money they worked so hard for. But that is the right banner on the wrong crusade. The Labor Department calls its proposal the “Conflict of Interest” rule. The “conflict” is commissions, plain and simple. The rule-backers say that advisors who receive commissions are conflicted because their interest in the higher commission will shred their concern for the client. Sure, advisors like these exist across the spectrum of finance. If they did not operate in the fiduciary realm, the Securities and Exchange Commission wouldn’t need to bother with enforcement. We all know that’s not the case — SEC cops are plenty busy. Advisors who do not take commissions need to get paid in some way, so that would be from fees. Not to sound too basic here, but a majority of American families are struggling with saving any money. They don’t have the few extra hundred or thousand dollars to spend on advice. Place that in the context of the discussion around the Labor Department’s proposal in the first day of its four-day public hearing on the rule. The department arranged 75 witnesses in 25 panels, most of which featured proand anti-proposal representatives on the same panel. Except for the first panel — that was all pro-rule. Those witnesses stuck with the standbys in opposing commission-based advisors

RETIREMENT SECURITY IS THE LEAST ‘HELPED’ BY THE DOL PROPOSAL INFRONT operating under the suitability standard. They didn’t have any actual evidence, though. The first speaker was David Certner, American Association for Retired Persons (AARP) legislative counsel, who explored the precarious state of American retirees. He discussed the sorry state of retirement funds and the growing number of IRA rollovers. This is all true, but neither he nor anyone else on the panel made a case showing that the current state-based suitability system had anything to do with creating that problem. They also did not describe how this proposal will solve it. Another speaker on the first panel described how his business has it both ways. V. Raymond Ferrara, CEO of ProVise Management Group, said wealthier clients are guided along the fee-based track and lower-asset clients are served by commission-based advisors. But even the commission advisors operate under fiduciary principles, he said, so his business would not have difficulty adjusting to the new regime. He is, in effect, saying his commissionbased advisors are not “conflicted” by the way they are paid because they ascribe to the fiduciary standard. By extension, he is intimating that other firms under the suitability standard

would not have the ethical fortitude to withstand the temptation of commissions. Well, you don’t have to have religion to be a good person. Ferrara might be shocked to know that he is among a sinner or two within the Church of Fiduciary. As we noted earlier, the SEC has a large roster of fiduciary violators. A later witness illustrated the overall fundamental misunderstanding of the issues. That came in one retort from Barbara Roper of the Consumer Federation of America when she responded to another witness’s comment that the proposal would decrease consumer access to annuities at a time when Americans most need guaranteed income. “It’s not like there’s just one option to get you (guaranteed income),” she said. “There’s a wide array of products available.” She did not offer what this wide array of products that can guarantee income would be, but that would have been interesting. As far as we know, only annuities can make that guarantee. If she knows of other products that can deliver a guaranteed amount of money every month until the client dies, I am sure many advisors out there would like to learn about them. I suspect she would not be able to find something that replicates what an annuity does. That’s the point. Nothing else does

that. And what was the No. 1 fear of working Americans? Ah, yes, outliving their savings and investments. As the federal government pushes more advisors into the fee-only sector, fewer advisors are likely to focus on insurance-based products. Instead, Americans likely will be more exposed to volatile equities markets with no protection or to poorly performing bonds and certificates of deposit. That’s what securities advisors sell. In the end, more consumers will be tethered to the capricious stock or leaden bond markets. We can reasonably predict that. But no one can offer a vision of how this new system will increase real retirement security. Unscrupulous advisors will still exist, and fewer clients will have guaranteed insurance products. Is that the outcome anyone wants? Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@insurancenewsnet.com.

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September 2015 » InsuranceNewsNet Magazine

InsuranceNewsNet Magazine Âť September 2015

THE GREAT PRESENTAINER INTERVIEW

reat salespeople are great presenters. It is rare to be one without being the other. Some advisors view a successful presentation as one that taught so effectively that everyone who witnessed it walked away smarter than they were when they came in. Of course, that is one of the goals of a caring advisor. It’s easy to fall into teaching mode, but this is where clients begin to drift mentally and lose interest in the important facts you are trying to share. If you look back on the best and most influential teachers, trainers, speakers and salespeople who have made lasting impressions on your life, it’s usually because they didn’t just teach; they entertained. They took you on a journey with them and connected their message to you, with emotion, energy and a few stories along the way. Winning clients and business is not just about what you know. You could be the smartest person on the planet, but if you aren’t connecting with your prospects and audiences, it doesn’t matter. People don’t want to be preached to, and certainly they don’t want to be buried with facts. Instead, they want to be engaged and entertained. Some advisors cringe at the thought of being a salesperson or using persuasion tactics during their speeches or client meetings. But often that’s exactly what it takes to get people to do what is right for them. While persuasion can guide people to a better place, persuasion can be very dangerous in the wrong hands. One of the best practitioners of the art of persuasion in sales is Dave VanHoose. Dave has made a career of selling many kinds of products, delivering more than 3,000 presentations to audiences as large as 60,000. He now focuses on helping speakers create and deliver more per-

suasive presentations that entertain and inspire people to buy without “hard” selling or using outdated techniques that no longer work with today’s consumers. In this interview, in fact, he describes how he regularly gets people in his audiences to run to the back of the room after his presentation, excited to buy his product. Getting audiences and clients to take action isn’t an accident — it’s an orchestrated event. Dave has spent more than two decades testing, learning and tweaking, to develop a proven and detailed process creating near-perfect presentations for thousands of clients around the world through his company Speaking Empire.

You might be thinking that these are unusual disciplines for insurance and financial advising to draw from. But as you will see in this interview with Publisher Paul Feldman, Dave will show you how to wow audiences by being a “presentainer.” Feldman: One of your claims is that you can teach people to sell anything to anyone, anytime. That seems like a pretty bold statement. Can you elaborate? VanHoose: Let’s start off with why people buy. Over the years of speaking in front of an audience, I found it didn’t matter what

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His mantra is not to be a presenter but a “presentainer.” While some of his methods are unorthodox, they work. He uses hypnotherapy, neurolinguistic programming (NLP) and even a little bit of meditative practices to craft a powerful sales process.

product I was selling. It was all about the presentation. People don’t buy the product; they actually buy you. A lot of salespeople try to sell the product. People don’t buy the product. They don’t buy the features of the product. They don’t even buy the benefits of

September 2015 » InsuranceNewsNet Magazine

INTERVIEW THE GREAT PRESENTAINER the product. They buy the benefit of the benefit. What I want to share with people is a technology, a system of how they can sell anything to anybody, anytime. I’ve sold houses from the stage, where people run to the back of the room to buy from me. And it was all because I understand that as a presenter, you don’t want to present or profess; you want to become a “presentainer.” A presentainer is somebody who can captivate the audience and have the audience hanging onto every word, and who can emotionally communicate and uplift people to get them into a buying decision. All buying decisions are based on emotion backed by logic. But presenters and speakers are boring people to death. I want to empower people with the technology of how to become a presentainer. Feldman: Readers might have a hard time relating to this because they don’t sell from a stage. How does being a presentainer work one on one or in a small group? VanHoose: It could be on the platform, webinar, video or even one to one. But presentainers manage their emotional state and the state of the prospect. People buy because of emotions. The more you teach, the less you sell. It’s a very hard thing for people to swallow. People don’t want to be trained; they want to be entertained. Let’s take a look at some examples of who our presentainers are: Tony Robbins, Zig Ziglar, Les Brown, Oprah Winfrey. They know how to entertain people and emotionally captivate people. What would people rather do, go see a movie or go to a college professor and be taught? Honestly, everybody wants to have fun, so this is why a strong presenter shouldn’t just present; they should presentain. Feldman: How does a presentainer influence differently? VanHoose: There are two parts of the brain, the conscious mind and the subconscious mind. If all buying decisions are based on emotion backed by logic, 14

what part of the mind is the emotional mind? Is it the conscious or is it the subconscious? It’s the subconscious. A presentainer uses subconscious communication. I have learned different techniques from being a hypnotherapist and in NLP training. I’ve learned this from speaking 3,000 times on a stage.

strategies, I’ve helped people overcome their biggest challenges: smoking, alcoholism, fear of public speaking, fear of swimming. I’ve helped people save their marriages. I’ve helped kids who have been molested empower themselves to get over the guilt that they’re feeling. This has helped so many people on this planet that I really would love people to consider opening their mind to using this for something good. Obviously as an insurance person, if you are talking to a prospect, and you ask them if they could buy a Gucci purse or insurance, which would they choose to buy? They would say the Gucci Presenters purse, right? and speakers a People buy what they want, not re boring peop what they need. What I want insurle to death. I w ance people to understand is that we a to empowe nt must help people discover that they r people with need insurance. Now, the word “disthe technology cover” is a very interesting word. of how to beco The word means to uncover me a presentaine what’s already there. We need to r. have people uncover that they need and want this. That’s truly what a great presentainer can do: take people down a path and help This is why people remember TV adver- them determine for themselves that they tisements for a lifetime: because TV talks want and need that. to the subconscious. This technology is great because I do not want you to be a pushy salesman. I Feldman: When you talk about neu- don’t want you to push people into this. rolinguistic programming and hyp- I don’t want people to buy something and notherapy, some people get a little then blame you afterward because they uncomfortable. It’s probably because bought something. What this technolthese seem to be methods of con- ogy does, as a good coach does, is lead trolling people and manipulating them people through a process in which peointo doing things they wouldn’t ordi- ple originate ideas for themselves. That’s narily do. How do you respond to that? the important part of your job — helping people discover that they need insurance VanHoose: I think people have a little bit or annuities. of fear or resistance to a technology like this because it’s so powerful. NLP can be Feldman: You describe this as a techused to help people overcome alcoholism, nology, but it’s a way to get at people’s addictions, fears and phobias. It can help needs, right? empower people to change their lives. And it can also be used for getting peo- VanHoose: Advisors don’t necessarily see ple to take the wrong actions. It could themselves selling or as salespeople. They be used for taking advantage of people. want to be the teacher, because to be a Obviously it’s a technology that can be trusted advisor you need to teach clients used for good or for bad. I think people about what they are buying. who look at it as a bad thing don’t look But when I first started speaking, I used at the true value of the technology. It is to do what all presenting typically is: teach, a technology, and that’s all it is. By be- teach, teach, teach, teach, teach, and by ing a hypnotherapist and using these the way, here’s my product and service.

InsuranceNewsNet Magazine » September 2015

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September 2015 » InsuranceNewsNet Magazine

INTERVIEW THE GREAT PRESENTAINER When I made a change by entertaining and captivating them with stories and NLP techniques, my sales went up 10 times. What I am seeing is that we want to promote and get people in action today and then teach tomorrow. Your presentations then are geared to get people into action first. After they make that first commitment, then you teach them.

So what I tell my students, prior to ever getting on the stage or in front of a prospect, is to close your eyes and take three deep breaths: breathe in deeply and breathe out. On the third breath, imagine a time in your life when you were very enthusiastic. Once you remember that moment, take your right hand, make a fist and anchor this down by saying the

move slowly and you can deliver perfectly. You might occasionally get into that zone, but the key is, how do you consistently get into it? The first thing is get rid of all expectations. All expectations are not going to be met, so you get rid of all expectations. No. 2 is you take time to take three deep breaths and get into your higher self or your higher consciousness. This is a state. Before you present, You want to become absolutely take the time to get present, because most human beyourself in the right ings are in the past or in the future. emotional state. In the past is depression. In the future is anxiety and fear. In the presThat way, you can ent, you’re in power. You must get deliver the perfect yourself in the present moment, presentation. and then you get to be with your audience completely and be one with the audience.

Feldman: To be a true presentainer, one has to get into the right state of mind. Can you tell us a little about that? VanHoose: There’s an emotional scale. Each individual is vibrating in a certain emotion. They could be in the top where they’re in appreciation, love, joy. Or they could come down to hopefulness or down further to boredom, then anger, then fear and guilt. So each person is at a certain emotion. All buying decisions are based on emotion. You need to be able to communicate emotionally and be able to transfer your emotion. People don’t buy when they’re down in a lower emotion. They buy when they’re optimistic, in appreciation or joy and happiness. Obviously our job as presentainers is to get people up emotionally, and the only way to do that is first to manage your emotional state. If you’re not in a place of joy, happiness, appreciation, love, enthusiasm, passion, how are you going to be able to transfer that power to your audience or your prospect? Feldman: How do I get myself into those states? VanHoose: Let’s talk about anchoring. If you’ve ever driven by a Dunkin’ Donuts, you smell the coffee or the doughnuts and it sets off a trigger. If you have a song that you listened to over and over again when you were in high school, and you just listen to that song now, it brings you back to that emotional state. This is a big thing about people who are addicted to cigarettes. When they hear that lighter, that’s an anchor. All of us have these anchors, these emotional triggers. How can we use anchoring to help us? 16

Feldman: Most of what we covered thus far involves speaking one on one or to an audience. Do these techniques work for a webinar?

word “power.” This will set that emotional anchor. Then imagine a time when you were passionate, and anchor that down. Do the same for certainty, confidence and playfulness. When you get good at this, you can anchor quickly just like when you smell coffee. It automatically puts you in that state. Before you present, take the time to get yourself in the right emotional state. That way, you can deliver the perfect presentation. Feldman: Do you think that salespeople don’t spend enough time getting themselves into the right mindset before presenting? VanHoose: Absolutely. Maybe they show up frustrated to their lunch-and-learns. The room’s not set up. There was traffic. So they’re not in the right state. But you need to get into the presentainer zone. This is like in sports — you get in that zone where time stops and everything flows perfectly. When you get into that presentainer zone, everything starts to

InsuranceNewsNet Magazine » September 2015

VanHoose: Absolutely. Webinars are 21st-century version of getting people to the steakhouse. Everybody’s online. People don’t want to drive to the steakhouse. So, you can invite people not to the steakhouse but to an online presentation, which is your webinar. I’ve written hundreds of webinar presentations, and it’s a great vehicle that could speed up the sales process and leverage your time and energy. Presentaining is important because if you bring people to a webinar and don’t presentain them, then they’re not going to take action. Feldman: Let’s move to the presentation. You have created thousands of presentations over your career. Is there a formula to creating the perfect presentation? VanHoose: We have a mathematical system of how you write a presentation and how every single thing affects the influence or the close. You want to take people down an educated path so that at the end of your presentation, people say they want and need this. Every pitch that I write has five key

September 2015

LIFE INSURANCE Sellersâ&#x20AC;&#x2122; Guide to

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2015 SELLERS’ GUIDE TO LIFE INSURANCE

WHO OWNS LIFE INSURANCE? Many life insurance advocates strive to raise awareness of how insurance helps form the foundation of a family’s solid financial planning. Equally important, though, is the reverse, which is helping sellers understand why consumers buy life insurance — and why they don’t. Advisors might be reassured to know that people own life insurance for many of the traditional reasons, according to the 2015 Insurance Barometer produced by Life Happens and LIMRA. Those reasons are covering final expenses, replacing lost income and paying off a mortgage. Those are motivations that the great Ben Feldman connected with in his sales techniques back when he was considered the master insurance agent. (We reprise some of his techniques in the latter half of this guide.) But even though many consumers recognize not only the value of life insurance, but also their need for it, 75 percent of consumers are either not at all likely or slightly likely to buy coverage in the next year. That fact adds a premium to the question “why aren’t they buying?” Right up top is the perceived expense. The polling shows that consumers apparently think either coverage costs more than it does (in the case of term) or they don’t appreciate the full benefits relative to the cost (when considering permanent).

Life Insurance Ownership by Gender, Age and Income Gender

Own life insurance

Age

Household Income

Male

Female

<25

25–44

45–64

65+

<50K

50–99.9K

100K+

62%

53%

30%

52%

62%

69%

40%

64%

73%

Own only individual life insurance

Own only group life insurance

Own individual and group insurance

wn life O insurance

43%

Don’t own life insurance

Own only individual insurance

26%

Own only group insurance

19%

57%

Own individual and group insurance

12%

HOW THEY FEEL ABOUT OWNING LIFE INSURANCE Feelings About Life Insurance Ownership by Gender, Age and Income Gender

Age

Household Income

Total

Male

Female

<25

25–44

45–64

65+

<50K

50–99.9K

100K+

30%

29%

30%

32%

31%

21%

37%

29%

24%

I have about the right amount

I have more than enough

I do not need any

I don’t know

I do not have enough

Adults Who Say They Need More Life Insurance by Ownership

40% 22% Not covered

Source: 2015 Insurance Barometer Study

Group

20% Individual

15% Group and individual

September 2015

2015 SELLERSâ&#x20AC;&#x2122; GUIDE TO LIFE INSURANCE

WHY THEY OWN LIFE INSURANCE Reasons for Owning Life Insurance To cover burial and other final expenses To help replace lost income To help pay off the mortgage

17%

24% 26% 24%

To transfer wealth or leave an inheritance

17% 20% 14%

To pay for home care expenses To supplement retirement income

14%

To pay for estate taxes or create estate liquidity 8%

As a tax-advantaged way to save and invest

8% 8% 9%

My parent or relative bought it for me To provide funds for a college education For business purposes

As a way to make a charitable gift

33% 34%

51%

34%

28% 27%

23%

14%

Major reason

10%

Minor reason

11%

HOW LIKELY ARE THEY TO BUY LIFE INSURANCE? Likelihood of Purchasing Life Insurance in the Next Year

6% 15%

56%

Extremely likely

19%

Very likely

Slightly likely

September 2015

Somewhat likely

Not at all likely

Source: 2015 Insurance Barometer Study

2015 SELLERS’ GUIDE TO LIFE INSURANCE

WHY PEOPLE DON’T BUY LIFE INSURANCE Reasons for Not Purchasing Some or More Life Insurance It is too expensive.............................................................................65%

I do not trust insurance agents..........................35

I have other financial priorities right now.............................61

I just haven’t gotten around to it......................30

I have as much as I need/I don’t feel I need any...............55

I don’t like thinking about death.......................29

I do not trust insurance companies.........................................38

No one has approached me about it............22

I’m not sure how much I need or what type to buy........38

I would not qualify for coverage.......................22

Source: 2015 Insurance Barometer Study

September 2015

2015 SELLERS’ GUIDE TO LIFE INSURANCE

HOW PEOPLE BUY LIFE INSURANCE The good news is the youngest consumers prefer buying life insurance from a person. But that doesn’t mean that agents can just hang a shingle and watch the traffic stream in. The survey showed that although consumers might want a person to complete the transaction, they are looking online first. That means not only do they arrive at the table more informed than yesterday’s prospects, but they also might not arrive at your table if they can’t find it online. To varying degrees, the tendency to research or even purchase, life insurance online cut across the demographic spectrum.

Most Preferred Way to Purchase Life Insurance by Age Age Total

<25

25–44

45–64

65+

52%

59%

44%

53%

67%

Complete an online form

Through my workplace

Complete an application and mail it to an insurance company/professional

Complete an (offline) application and email it to an insurance company/professional

Over the phone

In person (outside of the workplace) through a financial advisor or agent

Weight based on consumers’ top three rankings (Higher numbers indicate higher importance)

September 2015

Source: 2015 Insurance Barometer Study

2015 SELLERS’ GUIDE TO LIFE INSURANCE

HOW CONSUMERS USE THE INTERNET IN PURCHASING How Consumers Would Use the Internet When Purchasing Life Insurance by Age

15% 14%

10%

15%

33%

Total

24%

15%

12%

31%

25%

46%

18%

21%

48%

44%

<25

I wouldn’t use the Internet at all

25-44

13% 51%

46%

45-64

65+

Research online, but purchase directly from the company (via phone or mail)

Research and complete the purchase entirely online

Research online, but buy from a financial advisor or agent

Consumer Experience When Attempting to Purchase Life Insurance Online I completed and submitted the application online

23%

I don’t remember how I did it

16%

I never finished the application process

15%

I started the process online and was directed to complete the application with a financial professional in person

15%

I started the process online and completed the application with the company by phone

12%

I started the process online but had to print the application and send it to the company

12%

I met with a financial professional in person but completed the application online

Source: 2015 Insurance Barometer Study

September 2015

2015 SELLERSâ&#x20AC;&#x2122; GUIDE TO LIFE INSURANCE

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2015 SELLERS’ GUIDE TO LIFE INSURANCE

Ben Feldman Concepts

en Feldman was one of ated for the policyholder. You know, most the greatest life insurance men get their money by accumulating salesmen in history; some it—accumulating it slowly, painfully over argue that he was in fact the years. But our job is not to accumuthe greatest. Why? Because late. Our job is to create. What do we crehe was selling tens of milate? Dollars that underwrite time. lions of dollars of life insurance a year The basic purpose of life insurance is to when no one thought it was possible. create cash! Nothing more, nothing less. In a 50-year career that Everything else just confuses. started in 1942, he averaged Your job is to do what no one $30 million in sales annuelse can do. Do you know ally. And he was not rolling anyone else who can create around wealthy precincts like money? New York City, but stuck to You know what I carry in his hometown of East Livermy case? A thousand dollar pool, Ohio. Yet he still racked bill. I’ll walk up and open my up record sales. He even had case, and the prospect will a $100 million year. look at the thousand dollar How did he do it? He was a bill, and he’ll say, “What’s You can see pioneer in drawing out prosthat?” And I’ll say, pointing the wonderful pects’ problems and offering to the thousand dollar bill: thing that solutions. He always said he “That’s what I sell. This did not sell insurance—he thousand dollar bill comes in you’re selling: sold packages of ideas. packages of a hundred. How contracts This guide drawn from his many do you want?” for delivery of book, Ben Feldman’s Creative You can see the wonderful money. Selling for the Seventies, will thing that you’re selling: conshow you what he meant tracts for delivery of money. by that. Many of the concepts still ring true and some might seem quaint, but LIFE INSURANCE CREATES CASH they are vintage, old-school Ben FeldAT A DISCOUNT WHEN A MAN man. (The excerpts are straight from the NEEDS IT MOST book, and we did not change the referLook at the life expectancy tables: the ences to a “man” as the prospect, as was odds are a man will never pay in as assumed at the time.) much as we pay out. So the dollars we provide almost always come to a man at THE BASIC PURPOSE OF LIFE a discount. We don’t only provide a man INSURANCE IS TO CREATE CASH with the dollars he needs to complete When a man buys an insurance policy his plans—we provide those dollars at we put the face amount in escrow. That a discount. amount wasn’t accumulated. It was creAnd when does it deliver those September 2015

2015 SELLERS’ GUIDE TO LIFE INSURANCE discounted dollars? Exactly when a man needs them; when time has run out, when there is no more time for him to complete his plans. Discounted dollars—to take the place of the time he no longer has. Discounted dollars—to make everything he wanted to come true, come true. Go in and tell your prospect what you’re selling are contracts that guarantee the delivery of tax-free dollars at a discount. Insurance is the closest thing to getting something for nothing that I’ve ever found.

PINPOINT A MAN’S PROBLEMS

One of the keys to selling is simply to look for the problem. If I could find a problem that’s going to cost you or your family money, you need insurance. Make sure that you have found the problem, that you recognize it, that you understand it

so well that you know the price of doing something about it and the price of doing nothing about it. I will show you that by doing nothing, it will cost you dollars, but by doing something, it will cost you pennies.

CREATE SPECIFIC IDEAS FOR SPECIFIC PROBLEMS

First, you start with a problem. The problem must have a price tag. Then you create specific ideas for specific problems. You know, ideas are the keys that unlock a case. Once the man has accepted the idea, he’s bought the insurance. Show a man simple, easy-to-understand ideas which tell a man how you can solve his problem. You’re not selling insurance. You’re selling ideas—ideas to solve a man’s problems.

HOW TO GET A PROSPECT’S ATTENTION I walk in and flip open my case. And the man looks at what I’ve got in it, and says, “What’s that?” What does the man see? A thousand dollar bill and three shiny new pennies. Now, why should I carry a thousand dollar bill? It’s money. And money’s funny — a man likes to look at money. And three pennies — that makes him wonder. “Why the three pennies, Ben? What do they mean?” I tell him: “I’m selling dollars. For three pennies each.” Now he’s going to listen. — Ben Feldman, Ben Feldman’s Creative Selling

September 2015

2015 SELLERS’ GUIDE TO LIFE INSURANCE PACKAGE YOUR IDEAS

The key to a sale is the idea, and the key to selling the idea is to package it. When I was just beginning to sell, I would say: “You want to be sure your daughter goes to college? May I show you this idea …?” And what was the idea? It was an education package. It wasn’t insurance this man wanted; he wanted his daughter to go to college. So, I didn’t talk about anything else. I showed him how we could guarantee that his daughter would go to college—and I used words and figures he was sure to understand. Or I would say to a man, “How would you like to retire with a guaranteed income for the rest of your life? Here’s an idea I have. May I show it to you?” What he wanted was a guaranteed retirement income—not insurance. And I showed him how to get what he wanted. That’s all I showed him. I made it very direct, very easy to understand. And that was my retirement package. I had lots of packages for different purposes. I would say to a man, “I have a special package of money designed for people like you.”

policy we had placed. So continue to prospect among your clients. Watch them—and see which ones grow. The ones that grow—they’re your prospects. And if you stay with them, you’ll grow with them.

THE KEY TO THE INTERVIEW IS THE DISTURBING QUESTION

In the interview, logic isn’t enough. Use logic and emotion. Get the man stirred up. There’s nothing like a disturbing question to light a fire under a man. (Some examples of disturbing questions):

There’s nothing like a disturbing question to light a fire under a man.

THE BEST PROSPECT

Your clients are the prospects for another policy – for bigger coverage. A lot of us write policies, then run away. Then somebody else comes along and writes another policy for the client we ran away from—and that new policy turns out to be a bigger one than the

What is worth?

your

life

Why should a lifetime of giving be forgotten? Ever stop to think your business will last only as long as you do?

Which would you prefer: for your family to remain locked in after you’re gone or, when you walk out, have our money walk in?

HOW TO CLOSE AN INTERVIEW: “LET ME PUT IT TOGETHER …”

I say, “Let me put it together and you take a look.” “All right,” the man will say. “You work it out and bring it back.” How can a man say, “No”? You’re not forcing the man to make a decision. You’re not backing him into a sale. Never back a man into a corner and make him make a decision. Don’t push. Lead.

•

September 2015

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INTERVIEW THE GREAT PRESENTAINER

How to Tell YOUR STORY Story Down Get Out Into the Audience While telling their stories, most speakers make a critical mistake. They tell their story from the stage. The stage is the worst place for you to be when you are trying to get connected with your audience. When you’re speaking on stage, an imaginary line gets created, resistance, you versus them. So when you tell your story, get off the stage. Come out into the crowd and start telling your story. “I grew up in Ann Arbor, Michigan, I had a great family, and in fact, my parents sent me to a Christian school …” Switch From Me to We Start talking about yourself, and halfway through the story switch from “me” to “we.” Using “we” highlights the essence of a shared experience. It’s a two-way process that engages both the speaker and the audience. Remember, all buying decisions are based on emotion; they won’t hear you, they’ll feel you.

Crash

cisions are all buying de otion based on em

• Pivotal Point/Turning Point • What Changed for You Ideally, the more failures you have had, the more vulnerable you are, and the better your story will be. Now here is the key. When you tell your story, you want to have a crash. Then when you take them down the crash, you want to have a pivotal point.

components. You have the introduction, your story, your offer, the body and the close. Feldman: An introduction seems to me a no-brainer, but you say it’s much more important than most people think. Can you tell us why? VanHoose: The introduction is one of the keys to your success. In fact, before you even get up on stage, your audience already made a buying decision. Make sure somebody introduces you correctly and you play an intro video. Make sure that whoever introduces you transfers the power. That’s the first important part. Feldman: What if you don’t have somebody to introduce you? Some of our readers are solopreneurs. VanHoose: You should always be brought 18

Take Them to That Moment What I’m about to write next is the most important secret you’ll ever learn: When you get to your crash, you want to stop time. Take them to that moment: “I’ll never forget that moment waking up in the hospital.” “I’ll never forget when my boss let me go, or my spouse left me.” The most effective way to do this is by explaining the five senses. How did you feel? What did you see? What did you hear? What did you touch? You’ll captivate us right into your story, we’ll lose track of time and then you’ll take us to the pivotal point, which is, because of your product or service, X was possible: “Since I began speaking for profit, I have made $14 million.”

Story Up

What Changed for You “Story Up” is also known as the “Hero’s Journey.” This is a pattern of narrative identified by Joseph Campbell. It describes the typical adventure of the Hero — in this case, that’s you — who goes out and achieves great deeds on behalf of the group or tribe. Remember, your audience is your tribe. Describe what changed for you, the road back, your resurrection, and speak about your results, the mastery of your experience, and link the results to the product or service you’ll be telling in your story.

and link the results to the product.

— Dave VanHoose Sell More: The Forbidden Secrets of Mass Persuasion

up to the stage in a powerful manner, because the sale happens before you show up. It’s mission-critical to have somebody introduce you. You could have a past successful client introduce you or have just one of your employees introduce you. But you must have somebody. Ideally, it’s better to have the key person of influence bring you up on stage. Then you want to grab the audience’s attention. You want to excite the imagination of the audience and bring them into your conversation. Most people want to talk at or down to people. If you’re like a football coach talking to kids, then you’re building in resistance. You want to bring people in by seducing them into your pitch. You want to introduce “The Yes State.” Small commitments equal big commitments. The very first sell of your presentation is getting the audience to agree with you.

InsuranceNewsNet Magazine » September 2015

you, Describe what changed for ection urr res your k, bac d roa the ... and speak about your results

The next principle is “framing,” which is a very powerful persuasion technique that tells people what they’re about to experience. Whatever you tell the mind it is about to experience, it will experience. It will also create a curiosity and start a process in the person’s mind during which they’ll be hanging on to every word. When you do your frame, you also want to make a promise. It’s a very strong thing. Feldman: Can you give me an example of a promise that an advisor would make? VanHoose: The crazy thing is, it doesn’t matter what promise you make; it’s just that you made a promise. It’s like the “because” statement. It doesn’t matter what you say after “because”; it’s just that you said “because.” So the promise is like that: “I promise you, by the end of this presentation …” It’s just that you made a promise.

Feldman: How do you go to the story phase? VanHoose: Stories sell, facts tell. If they don’t like you and trust you, they’re not going to buy from you. The best thing you can do is tell them your story. When you share your failures, share from your heart and you are transparent with people, then they will connect with you emotionally. The story is a covert way to sell. The hidden meaning is, they should buy your product or service. In your story, you want to have a pivotal point and do what I call the Hero’s Journey. Feldman: I love the hero’s journey. Can you share more about that? VanHoose: All human beings love stories. In fact, human beings have been programmed to love stories. Our mom reads stories to us. A teacher teaches us through a story. A movie is a story. All human beings love the hero’s journey. They love to see somebody be challenged and go through their trials and tribulations, and they love to see a winner. So you want to do the same thing in your story as they do in Hollywood. You know the movie “Rocky.” People love that Sylvester Stallone struggled, struggled, struggled, and at the end of the first “Rocky,” he didn’t even win the fight, but people loved the struggle. So you want to use that to your advantage and share the struggle. Feldman: How does your physical delivery affect audiences? VanHoose: Most presenters want to speak behind the podium. That’s the worst place for you to be as a speaker. Picture an imaginary line, like the speaker versus the audience. There’s resistance behind the podium. When you tell your story, get off the stage, go into the crowd and slightly put your hand on one person, because when you connect with one, you connect with all. This is the time for you to get out there, connect and look in their eyes, and really make that bond with them. Most speakers have no idea how important that is. They speak on the stage, and they don’t even look people in the September 2015 » InsuranceNewsNet Magazine

INTERVIEW THE GREAT PRESENTAINER eye; they look above people. But you need to connect at a deeper level with the audience. Feldman: How do you move to the “offer” phase?

At the close, you want to get more enthusiasm and more passion. You want to speed up your talk, and you want to present your opportunity. You want to give them a guarantee. You want to sell them some added bonuses, some fast-action bonuses, and then you want to go over the benefit of the benefits.

VanHoose: Most people wait until the end of the presentation to let people know what the offer is. No, that’s the elephant in the room. And they’re not stupid. They know if they’re at the steakhouse, in a webinar or in your office, you’re going to try to sell them something. A better strategy is to let them know right away that you have something to offer them and get rid of that resistance. Also, stop selling and start solving problems. Every human being has one motive: to remove pain. Everybody goes from pain toward pleasure. So right here in the preYou want to target their sentation, you want to target their problem, turn up the pain and problem, turn up the pain and then offer them a solution, which is the then offer them a solution, product. which is the product. Then you want to come down to the body of your presentation. This is where you want to presentain or edutain them. You want to take your You want to future-pace them what their teaching and chunk it down to five princi- product can look like. ples or five steps. Make it simple and easy. When you want to teach, tell a story. Then Feldman: You mentioned futureyou want to show them the new lifestyle pacing. Would you explain that? and to come into the close. VanHoose: We want to use words and Feldman: Many salespeople have diffi- get the audience to experience your prodculty transitioning to the close. Why is uct emotionally in the future. All buying that, and how can they improve? decisions are based on emotion: “Picture this.” “Imagine this.” “What would it feel VanHoose: Did you ever see people who like when … ?” are teaching, teaching, teaching and then Everybody should get rid of the word they get ready to go to the close? The au- “if.” I hear so many people say, “If you dience gets uncomfortable and everyone could sign up,” “If you could go back.” says, “Oh, he’s getting ready to close,” and Cross “if ” out and say “when”: “When the guy’s sweating up there. you go to the back table and sign up for The best way to go from the teaching to a strategy session ...” “When you get your the close is to ask a question and request insurance policy ...” “When you look back permission: “Would it be OK with all of you five years from today, this will be the best if I shared how we can help and serve you?” thing you’ve ever done.” That’s the nonresistance method. No pushing selling. No resistance. Feldman: How about the call to action At the close, most people lose their itself? energy. People get uncomfortable with the speaker. This is where you need to VanHoose: We actually need to tell the speed up. people what to do: “Get up right now, out

Stop selling and start solving problems.

InsuranceNewsNet Magazine » September 2015

of your chair, and go to that back table.” Or when you’re sitting down with them, tell them what to do: “Sign right here to get started.” Feldman: You have advocated a tight structure and actually scripting out the presentation. Some experienced advisors might say they don’t need to script out exactly what they would say. What do you tell them about scripting out their talks? VanHoose: Having the right script gives you the ability to focus on other areas of persuasion. When you have a script, you can focus on your body language, tonality and building rapport with your audience. The best speakers in the world are scripted. A true professional is somebody who’s like a singer who can make it sound like the very first time. You use the script and the presentation blueprint because every single thing affects the close. And you want to make sure that you own your talk. There are companies out there that can get as many people as you want to your steakhouse. It’s never a traffic problem or a butts-in-the-seats problem. It’s always a conversion problem. We can always get people there, but the challenge is delivering the perfect pitch where you get people not to walk or even to run to the back of the room to work with you, but to dance to the back of the room. That’s what presentainers do. They can captivate any audience and get most of the room excited to work with them. That is the art and the science of how to become a presentainer.

Exclusive Free Webinar For INN subscribers Learn how to be a Presentainer and wow your audiences with Dave VanHoose. Register today and get access to the full “Success By Design Presentation Blueprint” at

insnewsnet.com/VanHoose

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NEWSWIRES

Businesses Brace for Next Big Health Fight Beware the “Cadillac tax.” It’s the next piece of the ACA that will take effect, and it’s likely to reignite debate over the health care overhaul. The Cadillac tax is a hefty surcharge on relatively generous employer-sponsored health insurance. The tax won’t take effect until 2018, but many businesses are already bracing for it. Some estimates project roughly one-third of American businesses will need to pay the tax on some health plans during the first year. As time goes on and health costs increase, many more businesses will be required to pay up. Starting in 2018, a 40 percent tax will be levied on employer-sponsored health plans that exceed an annual limit in spending on premiums. The tax will be assessed on every dollar above a $10,200 threshold for individual coverage and $27,500 for family plans. The tax is designed to drive down overall health care spending by curbing generous plans that encourage people to use more services than necessary. But some insurance brokers and analysts warn that the tax will cause employers to dramatically reduce benefits or drop them altogether.

MILLENNIALS IN NO RUSH TO LEAVE THE NEST

Stereotypical millennials spend their days camping out in their old bedroom, wondering why that philosophy degree didn’t translate into a high-paying job. But the truth is that even after millennials have landed jobs, they are in no hurry to strike out on their own. As the economy has improved, more millennials have jobs than they did five years ago, yet more of them are living at home now, according to a new report from the Pew Research Center. Today, 42.2 million millennials live with their parents, compared with 41.9 million in 2010. In the same period, the unemployment rate for 18-to-34-yearolds has fallen to 7.7 percent from 12.4 percent. And wages have grown, but not by much. Weekly median earnings for young adults rose to $574 from a low of $547 in 2012.

11% 5% ?

DID YOU

KNOW

OF WOMEN

OF MEN

Overall, 26 percent of millennials live with their parents today, compared with 24 percent in 2010. Some research points to student loan debt as the major reason millennials aren’t striking out on their own. But this could have consequences for a number of segments of the economy, particularly the housing market, the report said.

LAST-MINUTE DOL COMMENTS FOCUS ON FIDUCIARY RULE METHOD

Insurance, brokerage and advisor trade groups rushed to file last-minute comments with the U.S. Department of Labor (DOL) on the agency’s proposal to apply a fiduciary standard of care for advisors dealing with retirement accounts. Petitions, individual letters and detailed explanations — some as long as 55 pages — from trade organizations poured into the DOL as voices numbering in the tens of thousands made themselves heard. Even among trade lobbies and individuals

say they have life insurance, but they don’t know how much. Source: Bankrate.com

InsuranceNewsNet Magazine » September 2015

QUOTABLE We’ve been hearing from our clients that they plan to do everything in their power to try to avoid that excise tax for as long as they can. — Tim Simpson, a senior consultant with Mercer in St. Louis, on the “Cadillac tax” on employer-sponsored health insurance

who supported the department’s stated goal of removing conflicts of interest real or perceived, many were opposed to the way the DOL proposed to execute and impose a fiduciary standard.

ADVISORS ‘OVERWHELMINGLY POSITIVE’ ABOUT THE FUTURE

A survey of registered investment advisors and fee-based advisors finds that most of them are wearing rose-colored glasses. The results of Jefferson National’s first “Advisor Authority Executive Report” find that advisors are focused on the long term, are embracing technology and are not particularly worried about the “roboadvice” movement. Among the highlights of the survey: Advisors are “overwhelmingly positive” about the future; focused on investing for the long term; serious about new technology; preoccupied with software integration in their business; not nearly as obsessed with the roboadvice trend as some headlines would have you believe; and, above all, want answers to mitigate market volatility. A resounding majority of advisors — 81 percent — said they believe the profitability of their practice would increase in the next 12 months. Advisors are also bullish on mergers and acquisitions activity, with 65 percent of respondents saying consolidation among RIAs will increase in the next 12 months and 53 percent saying mergers will have a positive impact on their business.

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16%

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September 2015 » InsuranceNewsNet Magazine

ADVANCED SALES PROFESSIONAL WANTED: Looking for a life insurance expert on insurance and financial needs of successful people and businesses. Must have proven experience in estate planning, taxation, business insurance, succession planning and other specialized areas of importance to this market. Must support sales reps in the office, online and on sales calls involving these clients. Must stay on top of industry and product developments and implications for our market. Bachelor’s degree or higher strongly preferred, along with industry certifications, designations and trade group affiliations. Do you love life insurance? That’s a big plus. 24

InsuranceNewsNet Magazine » September 2015

L I N DA

KO C O

DO YOU HAVE WHAT IT TAKES FOR ADVANCED SALES? FEATURE

he job description to the left doesn’t fit just anyone. It’s for advanced sales professionals — aka, advanced life underwriters. We created it to highlight the characteristics of this rarefied cadre of industry experts. These are the people who know their stuff cold. They are so immersed in life insurance — the lore, the products, the laws and regulations, the court rulings, the strategies, and, well, the “life” — that they have become the go-to insurance professionals in their towns and in many industry circles. But how did they get there? That’s what onlookers want to know, especially the up-and-comers who’d like to follow in their footsteps, if they only knew how. We checked around with some advanced life professionals to find out. These are pros in sales, since that is where many advanced experts cut their teeth. Even advanced experts in the home office usually start out in sales, as do experts in insurance brokerages and those who consult with marketing organizations, law and accounting practices, and financial services firms. What is striking about the professionals spotlighted here is that, despite many differences, they share a deep-seated commitment to designing life insurance plans and solutions that help resolve even the most complex needs. They share some other traits too, as we’ll see.

LEARN AND CHANGE: Dennis Pettinelli

Dennis Pettinelli entered the insurance business as a debit agent following his return from basic training in the National Guard. He was age 22 and was getting married in six months. A friend suggested giving insurance a try. Being an advanced professional was the furthest thing from his mind, according to the now-president of Pettinelli Financial Partners, Redwood City, Calif. “I didn’t understand insurance,” he said. “And I didn’t want to be a salesperson either, since there was a bad perception about that work.”

How did advanced sales grow out of that? Nonstop learning, that’s how. Here are some highlights: Driven to excel: “I always had high aspirations, since I was a lad. I always wanted to be the guy getting the award. I visualized that.” As it turned out, that deeply

and was willing to find out what I did not know,” he said of that period. He stressed that he did not, and does not, see himself as a specialist in one particular insurance discipline, such as estate planning or deferred compensation. He’s advanced in a lot of areas.

“I always had high aspirations, since I was a lad. I always wanted to be the guy getting the award. I visualized that.” — Dennis Pettinelli

held image drove his day and his month. Reading: “The company gave me a book and field training,” he said of his early days. “Every morning from then on, I was up reading to understand the products and how they benefited people. I kept asking myself, ‘How would I explain this to people?’” From that time on, he — like other advanced professionals — was always reading. Listening to others: “I used the wisdom of older people and combined that with my energy,” said Pettinelli. He said his sales manager helped him a lot, and he also learned from other industry people. This had an impact: By the time he was 23, he ranked No. 13 among the company’s 7,000 to 8,000 agents. The following year, he ranked fifth on sales, based on commissions on life premium. Skill: Soon he became a sales manager. Now he was accompanying other agents on sales calls, a “way harder job,” but not one where he yet saw himself as advanced. “I saw myself as skilled,” he said. Education: As a sales manager, he started selling larger policies, but “situations came up that forced me to reach beyond,” he said. So Pettinelli, like most other advanced professionals, started taking CLU courses. Today, he holds not only the CLU, but also the ChFC, LUTCF and CLTC designations. Rising to advanced: Pettinelli began seeing himself as advanced as he rose to district manager and later, at age 57, to general agent. “I knew a little about a lot,

Adjust: Today, he is starting a new venture, to align his business with changes in the life insurance and financial services industry. The new firm has a multigenerational salaried staff of 18. Its business model is service, not sales, and the business is set up so “no client will ever be an orphan” (in the insurance sense), he said.

HIS SUGGESTIONS:

» “Force yourself to be the change.” Situations came up for Pettinelli that he says forced him to reach beyond the known. “I saw guys playing it safe, playing not to lose, but they were struggling,” he recalled. » “Wherever you are, make yourself uncomfortable and figure out what the next thing is.”

RELATIONSHIPS OF VALUE: Todd S. Healy

Todd S. Healy entered the life insurance business from a completely different discipline. Today, he is principal of Dallasbased Texas Financial Partners, but before entering the business, he worked at United Way, helped along by his Master of Social Work (MSW) degree. His jump into insurance reveals the key characteristics that contributed to his becoming advanced: a drive to build relationships and a willingness to make strategic changes.

September 2015 » InsuranceNewsNet Magazine

FEATURE DO YOU HAVE WHAT IT TAKES FOR ADVANCED SALES? He recounted the turning point this way: One day, he was chatting with a United Way volunteer who mentioned that he was going into the life insurance business as an agent. Healy took a shine to that right away. Healy said he loved the idea that, by being in sales, he could work with people and build relationships. He also realized that he had developed trust and confidence in his own agent, and he thought he’d like to be similarly situated. “I also thought it would be satisfying to be paid for results, not for time and effort, and to do something (in sales) that was not transactional,” he said. So he made the first of many big changes in his career: He left United Way for life insurance sales, which ultimately put him on the road to advanced sales. Here’s how it came about: Invest in yourself: Like other advanced people, Healy “immediately” began studying industry courses and attending industry meetings. By 1979, he had earned the CLU and ChFC designations and had become a full partner in an agency. To this day, he attributes much of his success to investing in himself that way. (He now has an AEP as well.) Guidance-seeking: He worked with a business coach, who nudged him along, pointing out ways to develop expertise

on building relationships not only with clients but also, importantly, with his team and the advisors who work in the agency. This high-relationship business model has been a differentiator for his firm among agents as well as clients, he said. Willing to change: From his early days on, Healy has made changes when conditions warranted. Responding to the American Taxpayer Relief Act (ATRA) of 2012 is one example. ATRA is the law that made “permanent” the $5 million estate tax exclusion amount ($10 million for couples), indexed for inflation. The market for estate tax planning with life insurance in the $5-$10 million range “shrank dramatically” after the law went into effect, Healy said. By January 2014, he realized it was time to act. The prod came from his business consultant, who pointed out that “You have all this experience and a great team, and yet you’re shooting rabbits instead of elephants.” Healy thought about that and decided the consultant was right; it was time to go after elephants. He put out the word to attorneys and CPAs that he was now looking for business from “two-tenths of the 1 percent that will pay estate taxes.” It worked. His business volume doubled in 2014, referrals grew, and 2015 is starting to look as if business will double again, he said.

“You have all this experience and a great team, and yet you’re shooting rabbits instead of elephants.” — Todd S. Healy

and increase productivity. As Healy’s knowledge increased, the coach worked with him on the importance of taking his expertise to new clients. Soon, he decided to focus on clients in need of estate planning, charitable planning and business insurance. He joined American Association of Life Underwriters (AALU), and he achieved Top of the Table. Relationships: Healy said he focused 26

In still another change, “we are now in the process of merging five firms together to focus on multigenerational planning and client continuity.” Looking back, Healy said that he didn’t set out to be advanced. But he did want to be a student and to be involved with his clients and staff. The latter point is critical. There was a time when he conducted his business nationally, but he found it to

InsuranceNewsNet Magazine » September 2015

be time-consuming and it was difficult to cultivate relationships in the way that he wanted. So he reined in his business to Dallas and grew it from there based around relationships and service.

HIS SUGGESTIONS:

» “Good relationships and teamwork produce positive results.” » “Surround yourself with a team that does a phenomenal job serving clients.”

A PASSIONATE FOCUS: Lee Davis

Lee Davis was five years into the business when he made the decision to become a “very valuable advisor to small business owners.” This put him on the road to advanced sales. The trigger was an invitation to join a group of other business owners in various types of businesses. “There were 50 or 60 of them who met every Thursday for breakfast,” recalled the owner and president of J.L. Davis Financial Corp., Greenwood Village, Colo. Davis quickly learned that the small business owners who attended the meetings had critical needs, for instance, in benefits planning, succession planning and personal wealth management. “I saw that I needed to grow expertise in these fields for this market,” he said. The rest is history: Iterative process: For Davis, going advanced was an iterative process. He had started out in personal insurance and planning. But once he made the decision to serve the small business owner market, he was on the way to something more involved—and something about which he became very passionate. But he did not see himself as advanced. He just wanted to meet the needs of his chosen market. Education: Becoming educated about life insurance was important “from the very beginning,” Davis said, echoing the other advanced professionals. Once he decided on the market he wanted to serve, the education became even more important. He took courses from professional designation programs, including the

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Q: Besides replacing their seminars, why would a documentary be ideal for an already successful advisor? A: It will take their business to a level that’s impossible to explain without them having done it. If you’re just getting started, it’s probably not for you. But if you’re growing and want to get to the next level, this is the fastest exponential way to multiply your business.

Q: One of the first things you did was your book. What did that process teach you? A: Even being in the process of writing a book gives you a huge bump in credibility. When I told people I was an author of the forthcoming book, Celebrity Branding You®, they would say, “Oh, you should come speak to my group,” or, “I should interview you on my podcast.” Q: How did you go from author all the way to filmmaker? A: After books, I got into my first major media, which was The New York Times. Next was TV, where I was interviewed on major networks. Then I started producing my own interview shows and having clients on. Then what was next? Movies, obviously. So I started looking for a topic. I had no interest in doing fiction. I always thought the best stories are true stories that people tell. I had a chance meeting in an airport with a guy whose youngest son has Down Syndrome and they were a little nervous to put him in T-ball, but he was really having a good season. This guy was involved in his local Down Syndrome Association, so he asked me if I might be able to get some autographed memorabilia for their next auction. We exchanged information, and I sent him some

Q: Why are you now making movies specifically for financial advisors? A: I’m particularly intrigued with financial advisors because I know a lot of them give presentations. I remember hearing of a guy in the credit repair business who discovered that if he didn’t go to his seminar and just sent his crew to play a video of him speaking, then his closing ratio was higher than if he were actually there. I connected with that because I know from speaking that sometimes you just get burnt out from doing too much of it. I suspect financial advisors who do a lot of seminars would rather be at home having dinner with their families. I called one of my financial advisor clients and said, “Hey, let me make a movie on you and let’s

Q: What’s it like to be filmed? A: It’s awesome. It’s so easy; that’s what’s fun. It takes about two and a half days, and it usually only takes a few hours of our client’s time. We take care of everything. We plan it with you ahead of time so you know what to expect. I’ve got client, after client who’s said, “Man, that was so easy.” Then they get it and they say, “I had no idea that my business, my office, and my family can look like this. This is just on another level. It’s amazing.” All that, plus it’s a fantastic legacy piece. After the first documentary I made for someone else, they told me how incredible it was to have fullfilm footage of their kids and their families.

Q: What’s your favorite thing about making movies? A: People are the most interesting thing in the world, and I get to tell people’s stories. Then I get to see the results. I know how much it can ease their burden when they use it correctly, and that’s just an awesome thing to do. To meet great people, to tell their stories, and to help them be more successful.

Want to go from “top producer” to “legend”? Nick Nanton is ready to make another movie about a financial advisor and is looking for his next subject!

See how you can star in your very own movie by calling September 2015 » InsuranceNewsNet 855.260.8260 or visit www.MyAdvisorMovie.com today. Magazine

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ADVANCED SALES FEATURE LUTCF, which he found to be “the most beneficial, because it was practical as well as educational.” He obtained his Series 7 in addition to his insurance license. Evolve: Davis developed a planning mechanism to help business owners meet their needs, such as for wealth management. He established relationships with CPAs and attorneys, for referrals on business succession, for example. And he started a third-party administration firm, which he sold later to a large corporation. Each step brought professional acumen. But it wasn’t until he developed expertise in the retirement planning arena that Davis began to think of himself as advanced. This started when he became a specialist in qualified planning and deferred compensation, later morphing into personal wealth management and advanced business

GROW INTO IT: Harvey Kotler

Harvey Kotler is a CLU who arrived at his advanced sales status by way of accounting. That is, he arrived by way of nurturing accountants, teaching accountants and being the expert whom accountants call for help on insurance matters. Today he is a financial planner at Kotler, Turk & Associates, Beachwood, Ohio. Getting there was a journey of many twists and turns, and yes, changes — a hallmark of many advanced sales professionals, as already noted. Here’s his story: Open to suggestions: Kotler’s journey

“I’m passionate about helping business owners become wealthy, so they can reap the rewards of all their long hours and hard work.” — Lee Davis

planning (for instance, capital events such as mergers and acquisitions and exit plans). The key to getting into advanced sales is to “determine what you are passionate about and do that,” he said. “In my case, I’m passionate about helping business owners become wealthy, so they can reap the rewards of all their long hours and hard work. I want to do this for their families as well as for the business owners. I want to be the most trusted advisor for our business clients.”

HIS SUGGESTIONS:

» “You are valuable when you become the go-to person in your industry. That’s important for your business, because you get to be referable.” » “This is critical: Let folks know that you want to be referred, and that you welcome referrals.”

started when he graduated from college in 1962 with a degree in accounting. But he didn’t go into accounting. His first job out of college was as a pension administrator. Then, when someone suggested selling whole life and term insurance inside of pension plans, he got interested in insurance. (The sales approach was allowed then, back in the days when the estate tax exclusion amount was $100,000, he said.) The news that he was transitioning into selling life insurance did not go over well with his dad. He “almost killed me,” Kotler recalled, warming to the memory. “He told me, ‘I didn’t raise you to be in the insurance business or to have a debit book. That’s not why I sent you to college.” But his dad also relented with an “OK, try it, whatever.” Surprises: Kotler did exactly that. He started out in Chicago as a career life insurance field rep focused primarily on

September 2015 » InsuranceNewsNet Magazine

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ADVANCED SALES FEATURE whole life. But that turned out to be a slow start, because “at age 25, I was too young to sell life insurance,” he said. Then came the next surprise: His dad—the one who had initially opposed Kotler’s choice of an insurance career — introduced Kotler to a lot of older people who wanted health insurance. “So I sold a lot of health insurance,” Kotler said. Management: About a year and a half later, he went into management, a posi-

made Top of the Table at Million Dollar Round Table (where he is now a life and qualifying member). The honor and the professional involvements are what started him thinking of himself as advanced. Accounting: Where is the accounting in all of this? That became central to his approach to being advanced. Having an accounting degree and the CLU gave Kotler a “comfort level” with both fields. Soon he was “constantly striving to use

“Challenge comes with the more complex issues, but it is exciting.” — Harvey Kotler

tion he held until 1969, when he moved to Cleveland to become a general agent at an existing agency. In that job, “I had people reporting to me, and I recruited, trained and educated,” he said. Mentors: One mentor told Kotler that having the CLU designation was important, so he earned his CLU in 1968, a decision he has not regretted. “Life insurance mentors are wonderful,” he said, “so use their expertise.” Industry involvement: From 1969 to 1983, he built the sales agency along with his life insurance knowledge. He became active in National Association of Life Underwriters and tried to get his salespeople involved, too. By then, he was convinced of the value of learning from others in the industry. NALU later became the National Association of Insurance and Financial Advisors (NAIFA). Independent: By 1983, tired of recruiting, Kotler left the career shop to go off on his own and “be as independent as I could be.” Soon, other agents were asking him to come along and help them. He didn’t yet consider himself advanced, even though he had participated in several advanced underwriting sessions with his former carrier. Rather, he said, “I became the insurance agent’s agent.” Achieve: In the 1990s, Kotler received a “man of the year” award from a life insurance company. During the same period, he was active in the Association for Advanced Life Underwriting, and he had

accounting as my center of influence” for referrals to clients with potential life insurance needs. His accounting background helped him build trust with accountants and their clients, he said, to the point that he began thinking of himself as advanced in accounting too, where life insurance is concerned. Accounting became such a big part of his work that, in 2002, Kotler joined an accounting firm to run its financial planning division. The affiliation gave him an opportunity to reach very substantial clients. He recalled, “I’d go on interviews, gather client policies, review client objectives, make recommendations — and also make sales.” The clients required sophisticated selling, and that led to “a need for more advanced underwriting,” Kotler said. Soon he was working on funding buy-sell agreements, key man insurance and estate planning for liquidity. Independent again: Two years later, he left the accounting firm to go back out on his own with another advisor. To this day, he said, “we nurture accountants, and most of our referrals come from accountants.”

HIS SUGGESTIONS:

» Seek challenge, even if it involves change. “Challenge comes with the more complex issues, but it is exciting,” he said, and it gives the advisor a lot of experience, which contributes to expertise.

September 2015 » InsuranceNewsNet Magazine

FEATURE DO YOU HAVE WHAT IT TAKES FOR ADVANCED SALES? » Nurture a market segment (in this case, accountants). “Show them your wares. For instance, I taught classes to accountants, such as on how to audit life policies.”

GO AFTER YOUR NICHE: Mark Perkins

Mark Perkins entered the business in 1982. By the time he was preparing to go into his fifth year, he had developed an interest in the tax advantages of life insurance and in ways to use the tax code to the client’s advantage. It was more than an interest. From a political perspective, he said, it drove his development. “I was angry over how the tax code worked,” he explained, recalling how the Employee Retirement Income Security Act (ERISA) had put limits on what successful people can do to put money away tax-free. “It seemed unfair.” So he began asking what successful people could do in response. Now an advanced concepts consultant and “sub-IMO” at Dressander BHC, Nashua, N.H., and also president of Consolidated Life Producers LLC, a financial research and life insurance marketing company, Perkins said he didn’t think about himself as becoming advanced. He thought of himself as being open to learning about this area. He still does. “I just want to know what I need to know to add value to the client. If I don’t know, I ask,” he said, adding that “there are always people around you who know more than you do.” Here are some ways that played out: Self-study: “I studied and studied,” he said. “I was young (age 30), so the only way to get credibility was to get knowledge. So I asked questions of people in the business. I read IRS publications. I read material that people sent me. I spoke with field producers and retail agents who focused their entire careers on one paragraph in the IRS Code. They knew this one area cold, including the rulings on court cases.” Home office support: For help in getting through a case, he took advantage of 32

assistance from the advanced field experts in the home office. “They sent documents, and helped me learn what I needed to know,” he said. Read, read, read: A lot of other producers did not spend time reading, Perkins recalled. But he did, for instance, by reading whatever he could about ERISA. “The other agents were better at prospecting and sales. I was better at research. So we helped each other,” he explained. “They’d bring me cases, and I had the knowledge and got back to them.” Keeping current: “There is constant change in this business,” Perkins said. For instance, the arrival of universal life in 1979 or 1980 made the industry change and adapt. And Congress passed acts that changed taxation. “I found that if I stayed on top of these changes, I could help more people.” Public seminars: In 1992, Perkins put together a public seminar on estate

help people around me who did not read this stuff,” Perkins said.

HIS SUGGESTIONS:

» “Find a niche that intrigues you, and learn it cold. Be driven by it, whether it’s the family marketplace, or an advanced way to make qualified not qualified anymore, or something else.” » “Be curious and take the time to learn.” Keep on learning, too, Perkins said, because “there is no point where you’ve learned it all.”

A Penchant for Learning

Not all advanced sales professionals started out in the life insurance business with the idea of adding “advanced” to their resumes. But most started out with a yen to learn the business, tackle complex insurance problems and adapt to change. Call them advanced or not, it doesn’t matter.

“I just want to know what I need to know to add value to the client. If I don’t know, I ask ... There are always people around you who know more than you do.” — Mark Perkins

planning and “discovered the needs that way.” There were plenty of advanced sales companies, but they were working in the captive business, he said. He was an independent, so the seminars provided him with the window to estate planning needs (and clients) that he was seeking. Technology: Perkins became selftaught in technology too. For instance, he taught himself how to create and use a spreadsheet from a manual that accompanied some software he had bought. Then he started using the spreadsheet in his seminar. “Today, I’m writing programs using it in my agency to sell life insurance developed for the estate planning market,” he said. A lot of his motivation to dig into this “was to

InsuranceNewsNet Magazine » September 2015

What they like is being the person with the insurance know-how that can help other people. And what they love is satisfying their nonstop appetite for life insurance knowledge. InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

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BONUS FEATURE

Find Advanced Opportunity in the Business Market By Linda Koco

dvanced life insurance sales professionals have excellent expertise that no one else in the business has, according to attorney Douglas I. Friedman, who often counsels advanced experts. For that reason, they have opportunity to build a practice, despite developments such as the 2012 estate tax law that made permanent the indexed $10 million exclusion amount for couples. But he said advanced professionals do need to adapt to market changes. For instance, many marrieds with estates under $10 million have been staying out of the market for estateplanning life insurance sales ever since the 2012 law took effect, said Friedman, of Friedman Law Firm P.C., Birmingham, Ala. Nevertheless, the market for larger estates continues, Friedman said, noting that he is now seeing more of the larger cases than he used to see several years ago. These are for more financially successful clients. The market for business use of life insurance presents particularly attractive opportunities. It’s not a new market, but it deserves a fresh look due to changes such as the rising value of some closely held businesses during the post-recession era, Friedman indicated. Some firms are now worth several million dollars.

A Fresh Look at the Business Market

Such businesses require expert analysis and guidance about arrangements if the owner dies, particularly if the death is unexpected, Friedman said. Examples include buy-sell agreements between partners. Even if it’s not a taxable 34

estate, the business will still need life insurance to cover administrative costs for Internal Revenue Code Section 303 redemptions, he said. This part of the code deals with redemption of stock following a shareholder’s death. According to Friedman, “Another example is using key man insurance to cover 1) key man and 2) funding administrative cost on tax-favorable business.” Tax costs can be very high to wind down a business, and people don’t often realize that, he added. This is where advanced expertise can be critical. Still another example is using life insurance for nonqualified deferred compensation plans. “These cases are complicated, and most agents don’t run into it that much,” Friedman said. When a case does comes up, the agent will typically need the assistance of an advanced professional. What if the business owner wants the business to go on after his or her death? he asked. This too presents a need for advanced sales expertise.

Find Some Advanced Support

It’s not as easy as it used to be for agents to obtain support for advanced cases, Friedman cautioned: “More advisors are selling securities as well as life insurance and other products, and few if any sell only life insurance. So there are more generalists, and fewer professionals with expertise in just one thing like life insurance.” However, agents can find the expertise if they look around, Friedman said. His suggestions include: » Check with the advanced sales departments of life companies. Although some home offices have been decreasing support in this area, he said, others still have strong departments.

InsuranceNewsNet Magazine » September 2015

» Search for life insurance agents in their 50s and 60s who have had experience in these areas. Or affiliate with aggregators or organizations that have access to such people or that “know someone.” » Look for advisors with demonstrated education in the field, such as those holding professional designations like the ChFC or CLU. » Look for a professional who has been in the business for at least 10 to 20 years, and who is perhaps older than age 35. It’s not a specific number of years that matters, Friedman added, but rather the experience and maturity of the person. » Determine whether the expert is able to explain the insurance clearly. “You’re looking for someone who knows, from experience, what is important in life and who can see what is right for that particular business or individual client” said Friedman.

The Role of Training and Mentoring

For agents who aspire to become advanced professionals themselves, this could be a good time to be in the market, since there is less competition. “People who drive advanced life sales are literally dying out,” Friedman said. “Today, virtually no one below age 50 is advanced or knows the advanced market. Most are people in their 70s and 80s.” But the up-and-comers will need to get training, a not-so-easy task given the industrywide decline in advanced sales training. It may well be that agents will need to obtain what they need on their own, as suggested above. “These are complicated sales, and insurance is not an easy market to learn without mentoring,” Friedman said. But there will always be a demand for advanced professionals, he predicted. Why? “Because the tax code keeps changing.”

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LIFEWIRES

AIG Expands in ChineseAmerican Life Insurance Market American International Group (AIG) traces its roots back to the establishment of a small insurance agency in China nearly a century ago. Now the company has launched an initiative to expand access to life insurance for Chinese-American consumers in the United States. The carrier has begun recruiting several hundred additional life insurance agents to address the needs of Chinese-Americans and is implementing an array of other measures to augment its service to them. AIG’s research indicates Chinese consumers value permanent life insurance. The Chinese-American market already accounts for a significant percentage of AIG’s U.S. life business. With the opportunity to build on this, AIG is making tactical investments to serve this community. The company plans to open a prototype AIF Financial Network office in Pasadena, Calif., specifically designed to appeal to the Chinese-American consumer. The office will feature a tea room with round tables for conversation, Asian photography and Chinese signage.

JAPANESE LIFE INSURER BUYS STANCORP

Another big Japanese life insurance company is buying a name-brand U.S. life insurer. Meiji Yasuda Life Insurance Co. Meiji Yasuda Life, Deputy President Hiroaki Tonooka a 134-year-old Tokyo insurer, said it will buy 109-year-old StanCorp Financial Group, a Portland, Ore., group insurer. The all-cash transaction is valued at $5 billion. That is somewhat close to the $5.7 billion that another Japanese carrier, Daiichi Life, agreed to pay when it announced plans to buy Protective Life last year. The new deal confirms predictions by U.S. analysts that foreign companies will be buying U.S. carriers during 2015. The prolonged low-interest-rate environment is often cited as a contributing factor along with the resulting search for relief by some carriers. Meiji Yasuda is the oldest and thirdlargest life insurance company in Japan.

U.S. LIFE INSURANCE ACTIVITY UP 2% IN JUNE

Applications for individually underwritten life insurance have been on the increase

for 10 of the past 11 months. Activity was up 2 percent in June, compared with the previous year, according to the MIB Life Index. June’s activity was up slightly (0.5 percent) from May. Life insurance applications for those ages 44 and younger outpaced all other age groups in the second quarter, up 4.7 percent compared with the previous quarter. For the year, applications for the 44-and-younger group kept pace with those in the 60-plus age group, up by more than 2 percent over the first half of last year. If this trend sustains, growth in younger-age life insurance activity could surpass older-age applicants in 2015 — a welcome hand-off for the industry.

NEW PRODUCTS EMERGE

Here’s a sampling of some of the latest life insurance products to emerge in the marketplace. Voya Financial has launched a new cash value life insurance solution that allows consumers to protect the financial future of their loved ones while building cash value that can be used to supplement retirement

DID YOU

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InsuranceNewsNet Magazine » September 2015

QUOTABLE It’s important for the financial industry to start addressing the complexities of modern families. — Paula Polito, Client Strategy Officer, UBS Wealth Management Americas

income. Voya Indexed Universal Life-Accumulator provides consumers with a cash value life insurance product that is tied to the performance of the S&P 500 index. Qualifying clients can utilize Voya’s Orange Pass capability, with the potential for some policies to be issued in as little as five business days without bloodwork or a medical exam. Voya IUL-Accumulator features growth potential tied to the S&P 500. Because the policy has a floor, policyholders will not lose cash value if the index goes down or has a negative performance. Allianz Life announced enhancements to both the Allianz Life Pro+ Fixed Index Universal Life Insurance (FIUL) Policy and the Allianz Life Pro+ Survivor Fixed Index Universal Life Insurance (FIUL) Policy. In addition to helping agents provide income-tax-free death benefit protection for beneficiaries, these FIUL policies now offer a guaranteed accumulation bonus and the opportunity for clients to allocate to the new, exclusive Barclays US Dynamic Balance Index II and take advantage of Allianz Life’s in-house hedging capabilities. The guaranteed accumulation bonus provides a 0.6 percent annual bonus to the accumulation value on all new policies starting in years 11 and beyond, offering more opportunity to build the cash value of the policy. Allianz Life Pro+ now offers a lower standard loan rate of net 1 percent to newly issued policies on any available cash value income-tax-free via policy loans or withdrawals.

September 2015 Âť InsuranceNewsNet Magazine

LIFE

Death Benefit-Only Plan Opens Opportunity in Nonprofit Sector roviding this coverage to a key P employee can be a profitable venture into nonprofits. By Lawrence Bell

he nonprofit sector has a significant presence and employs a surprising number of workers in many communities. Here is an opportunity that you may not have considered in serving that sector of the economy. The death benefit-only (DBO) plan for nonprofits is an arrangement in which a 501(c) nonprofit organization agrees to pay the actuarially determined cost of the current death benefit on a permanent life insurance policy owned by the employee or the employer. The employer and employee enter into a written agreement that usually requires the employer to make premium payments as long as the employee works there. This arrangement can be part of a compensation plan for the organization’s executive leadership. In this agreement, the employee also is required to execute a “co-ownership” or “restrictive endorsement” at the time the policy is purchased. The co-ownership agreement establishes the terms of the restrictive endorsement and the timing of its release. The employee will own the policy, and the co-ownership agreement provides the employee with access to the policy. In addition, the actuarial cost of the current death benefit will be tax-deductible for the employer but not taxable to the employee. The economic benefit of the death benefit coverage also will be taxable to the employee. Any funds contributed by the employee or otherwise taxable to the employee will be a credit against the taxes levied against the employee’s economic benefit.

The employee’s nonprofit executive bonus is in the form of permanent life insurance that is owned by that employee. The policy can be continued after the employee retires or becomes disabled. The employee’s named beneficiary may receive the life insurance proceeds income tax-free. Because the co-ownership agreement will lapse when the employee retires, the employee will have access to the policy’s cash value during retirement. Unlike most forms of traditional nonqualified deferred compensation, the employee receives immediate benefits under the DBO plan. The employee can immediately name the beneficiary of the death benefit. In addition, the policy’s cash value usually is immediately vested in the employee — although subject to the restrictive endorsement. The DBO plan requires the employee to reimburse the employer for some or all of the premiums paid if the employee terminates their employment early. Qualified retirement plans are subject to restrictions on the amount of money that can be contributed by (or on behalf of) an employee. When distributions are taken from a qualified plan, they may be subject to penalties, such as the 10 percent penalty tax on early (prior to age 59½) withdrawals. But the DBO plan is not a qualified plan. Once a participant is no longer in the plan, access to the policy’s cash value (by withdrawal up to basis or by loan) is not ordinarily subject to income tax or penalty taxes. The DBO plan can play an important role in a compensation package by combining the advantages of current death benefit protection and immediate vesting of the policy’s cash value. Immediate vesting of the policy’s cash value differentiates the DBO plan from traditional nonqual-

This arrangement can be part of a compensation plan for the organization’s executive leadership.

InsuranceNewsNet Magazine » September 2015

ified deferred compensation plans with which the employee usually receives little more than the employer’s promise to pay future benefits. What’s more, the tax-favorable growth of policy cash values makes permanent insurance an attractive source of supplemental retirement dollars. One major disadvantage of qualified plans is the strict rules pertaining to participation that require an employer to make the plan available to most (or all) employees. Because the DBO plan is not a qualified plan, the employer can select which employee, or group of employees, to cover. The DBO plan can be tailored to fit each employee’s needs and can reflect each employee’s value to the employer. Unlike qualified plans and some types of traditional nonqualified deferred compensation plans, once the DBO plan is established, minimal annual reports and administration should be required. As long as the employee’s total compensation package is “reasonable” (according to IRS “reasonable compensation” limitations), the employer’s premium payments providing the current death benefit should constitute compensation and be a currently deductible expense. This differs from traditional nonqualified deferred compensation arrangements in which benefits are not deductible to the employer until they are paid to the employee.

Tax Consequences of the DBO Plan for Nonprofits

Taxation. Premium payments made by the employer are generally believed to be compensation to the employee under IRS Section 61. Therefore, subject to reasonable compensation limitations, the likely tax treatment should be current income for the employee equal to the premium paid, and a corresponding current deduction for the employer. When a “double bonus” arrangement is used, the employer also will “bonus” the employee an amount necessary to cover the employee’s income tax

DEATH BENEFIT-ONLY PLAN OPENS OPPORTUNITY IN NONPROFIT SECTOR LIFE liability. This additional bonus also should be subject to current income taxation. The DBO plan complies with the rules dealing with deferred compensation as set forth in IRC Section 457. As a death benefit plan as described in Section 457 (e)11, the DBO plan is not required to have a risk of forfeiture contingency as required under Section 457(f). Additionally, when the plan is integrated into a group carveout arrangement, IRS regulations permit treatment of the plan as an employee benefit under IRC Section 79. Tax shelter issues. The DBO plan is not a “listed transaction” under Treasury regulations, a “tax shelter” under the IRC, a “potentially abusive tax shelter” or a “reportable transaction” under Treasury regulations. Tax Circular 230 issues. Because the DBO plan is not a listed transaction and there are no conditions of confidentiality or contractual protection, the covered opinion requirements of IRC Section 10.35 do not apply. Because the employer is not subject to income tax as a nonprof-

Let’s

it employer, the principal purpose of tax avoidance or tax evasion does not apply.

ERISA Implications

Title 1 of the Employee Retirement Income Security Act (ERISA) covers all employee benefit plans. ERISA divides these plans into welfare plans and pension plans. To be covered under ERISA, there must be a “plan.” If the DBO plan is a negotiated arrangement between an employer and an individual employee, there is a strong argument that there is no plan and ERISA does not govern the arrangement. However, if there are multiple employees covered by the DBO plan, it is more likely that there is a plan for ERISA purposes. In the event the DBO plan is considered a plan, it may qualify as a “top hat” plan if it covers only select management or “highly compensated” employees. ERISA reporting requirements for “top hat” plans are limited. Whether the DBO plan is subject to ERISA must be determined on a caseby-case basis. In any event, if the plan is determined to be subject to ERISA, it is

together.

subject only to the reporting and disclosure requirements, and it is not an ERISA plan for income tax purposes. For nonprofit employers looking for a relatively simple way to reward key employees and recruit prospective employees, the DBO plan may be an answer. The DBO plan offers many of the best features of a Section 162 bonus plan with fewer costs (for example, current death benefit, current employer tax deduction and immediate employee vesting), while serving as a “golden handcuff” that encourages employee loyalty. In addition to providing an employee with current death benefit protection, the insurance policy’s cash value may be available as a source of supplemental retirement income. Lawrence L. Bell, JD, LTM, CLU, ChFC, CFP, AEP, has served as tax bar liaison to the IRS for 10 years. He may be contacted at lawrence. bell@innfeedback.com.

An affiliate of Securian Financial Group, Minnesota Life is one of the nation’s largest life insurance companies.1 Learn why so many financial professionals trust us to help protect their clients’ hopes and dreams. Call our Life Sales Support Team today: 1-888-413-7860, option 1

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For more information about our ratings, please see our website at securian.com/ratings. 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.

Securian Financial Group, Inc. www.securian.com 400 Robert Street North, St. Paul, MN 55101-2098 • 1-800-820-4205 ©2015 Securian Financial Group, Inc. All rights reserved. F82624-14 7-2015 DOFU 7-2015 17882

For financial professional use only. Not for use with the public. This material may September 2015 » InsuranceNewsNet Magazine not be reproduced in any form where it would be accessible to the general public.

LIFE

How to Turn a Discussion About Death Into an Opportunity dvisors fear that putting the A subject of death directly on the table will make clients uncomfortable and push them away. By Alyse Blumberg and Jay Cherney

n almost every conversation about life insurance, long-term care or estate planning, death hovers. This invisible force field of anxiety surrounding advisor and client usually is not acknowledged. Advisors fear that putting the subject of death directly on the table will make clients uncomfortable and push them away. Instead, in an attempt to soften that fear, agents typically tiptoe around the topic of death by framing it as risk management: how to prepare for an “if,” not a “when.” Naturally, we all fear death. In many ways, our culture does us a disservice by encouraging avoidance of this inevitable fact of life. As a result, few of us have the 40

experiences that teach us how to grapple productively with the implications of death.

A New Kind of Engagement

Perhaps there is a better way to approach this subject, one that actually deepens the relationship and serves the client in important new ways. We believe that approaching death more directly and effectively can open a huge opportunity for advisors. We are suggesting a different kind of engagement with clients. In this type of engagement, the role of the agent expands to become more like the role of a deeply trusted advisor, someone who leads clients in more conscious and constructive planning for the decline and death that inevitably hit all of us. This shift in role adds a new dimension to your service and begins to reform the sales-centric image of the industry. It

InsuranceNewsNet Magazine » September 2015

involves a shift from telling clients what they need to exploring the needs clients may not realize they have. Every professional sets a framework or context for each client relationship. This framework consists of the client’s goals, expectations and boundaries — that is, the information brought to the surface and the plan for using that information to serve the client’s needs. The more this framework of expectations and goals is conscious, clear and agreed upon, the more fully clients engage and the more successfully their needs will be served. This new way starts with the agent being more direct in labeling the fear in the room. (Alfred Hitchcock said he knew the threat that stays hidden in the shadows is the threat that sparks the deepest fear.) Calmly bringing up that deep but unstated worry is reassuring, demonstrating the advisor isn’t so afraid of it. Once the fear of death is acknowledged

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LIFE HOW TO TURN A DISCUSSION ABOUT DEATH INTO AN OPPORTUNITY directly, the agent next frames the conversation in a highly positive way: to plan for the well-being of future generations. We cannot control death itself, but it is a huge relief to clients to know they can make a positive difference in the lives of their loved ones after they are gone. In this approach, life insurance is not just a transfer of wealth, but a gift. Thinking about insurance as a gift puts it into a very different frame and so changes its meaning. When people give a gift to a loved one, they think about the recipient’s specific needs and wants — how the gift will add well-being to the life of a unique person. The heart of this process involves asking a series of questions about the client’s wishes for how this money might improve the lives of its recipients. The goal is to uncover the dreams the client wants to facilitate. Implied in this inquiry is the question of core values, what matters most to the client. Clarifying what is most important in someone’s life is not simple. People initially respond to this huge question with generalities about what they want for their loved ones, such as freedom and security. But exactly what these generalities mean in practical terms usually is not well thought out. The advisor must delve deeper. Freedom from what and for what? What would a secure life look like? These are the kinds of follow-up questions that peel back the layers of each person’s unique vision of what matters most in life. The answers to these deep questions are contained in clients’ most fulfilling experiences with money. Embedded in the stories of money as a positive force are your client’s deepest values and aspirations. To extract these goals, advisors must listen carefully to these experiences, paying special attention to how the

client found meaning in their experience. This is the question that opens the deep dive: Tell me about a time when money was the most fulfilling and meaningful force in your life. Who was involved, and what did the money accomplish? For some clients, paying for a child’s college education can give them tremendous satisfaction. This allows the client to fulfill the drive for education that may have been handed down to them from their parents or grandparents. For others, the ability to remain in the family home or retain ownership in a family business may be what is most important to them. When advisors begin the fact-finding process, they have an opportunity to ask open-ended questions that will enable clients to tell stories about themselves — their successes and failures. Clients also have an opportunity to explain how important their beneficiaries are to them. Finally, the client has the ability to answer questions about their family health history. Instead of asking a client for their occupation and title — facts that are needed on the application — ask how they chose that occupation or profession. What do they like best about their work? Have they always lived in the same place, or have they had multiple home locations? Do they travel for business or leisure, or perhaps both? What was one of their most memorable trips? Do they ever plan to retire, and if so, when and where would they most like to live? If they have a spouse or partner listed as a beneficiary, ask how the couple met. Do they both work? Are they in similar career paths? Do they have children listed as contingent beneficiaries? Asking the right questions can result in a memorable conversation instead of just a transaction. It will identify the purpose of the life insurance coverage and how

Clarifying what is most important in someone’s life is not simple. The advisor must delve deeper.

InsuranceNewsNet Magazine » September 2015

important maintaining a lifestyle is to a client, whether they die prematurely or are fortunate enough to live a long and healthy life. Do your clients have the appropriate documents to guarantee they will be treated as they wish at the end of their life, regardless of when that will be? Do they have a will, and when was the last time it was updated? Do they have a living will and powers of attorney that will enable their loved ones to execute their wishes should they be unable to do so, or when they die? Most clients live complex lives — both spouses may be working, or caring for children or elderly parents, and they don’t always take the time needed to complete these documents or to review them. There have been many instances when the beneficiary on a retirement plan or a life insurance policy was not current because no one took the time to review. Regardless of our level of education, we are all taught the skills we need to earn a living; but we are rarely taught what to do with our living. Life insurance professionals are in a unique position to be a resource for their clients by treating the process as the beginning of a relationship, not a one-time transaction. In this article, we point the way toward a new kind of client relationship. Other kinds of professionals are beginning to engage with clients in more personal ways, to go beyond numbers and explore clients’ true needs in life. Gathering such intimate information requires great care and new skills. These are sensitive conversations, and people have defenses to keep others away from this private territory of dreams and aspirations. Yet taking the time to gain the trust to explore these questions can bring great rewards for both advisors and clients. Alyse Blumberg, MEd, CLU, ChFC, AEP, CASL, CLTC, is president of Blumberg Financial Services, Philadelphia. Alyse may be contacted at alyse. blumberg@innfeedback.com. Jay Cherney, Ph.D., is a wealth psychologist who works with advisors to help them form meaningful connections with clients. Jay may be contacted at jay.cherney@innfeedback.com.

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LIFE INDUSTRY

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Life Insurance Industry Held Back by Lack of Standardization and Automation There is a key inefficiency in the life space that the industry should address sooner rather than later. While other financial markets, including annuities, mutual funds, equities, derivatives and other asset classes, have utilized widespread standardization and automation worldwide, life insurance has fallen behind. Kevin Lewis,Vice President and head of the Insurance & Retirement Services (I&RS) division at DTCC, the industry-owned utility that implements the aforementioned standardization and automation, says, “It’s not that standards don’t exist in the industry; they are just not used consistently and not used on a widespread basis.”

“It’s not that standards don’t exist in the industry; they are just not used consistently and not used on a widespread basis.”

ACORD has successfully developed standards for application, commissions and other types of transactions,but with different interpretations of these standards has come a lack of industry agreement.The same goes for automation itself. Different industry participants automate differently, and on top of this, automation often gets confused with standardization, leaving standards to be neglected altogether.

The current lack of standardization in the life insurance industry has three sobering repercussions: 1. SLOW PROCESSING TIMES. When multiple carriers and multiple distributors or financial advisors are trying to support and manage multiple ways of doing the same thing, processing times are significantly slowed. This leaves distributors and advisors frustrated, and it ultimately makes for a dissatisfied consumer who’s wondering why it takes up to two months to receive his or her policy after an application is submitted. 2. INCREASED COSTS. It is expensive for the industry to support multiple processes and ways of processing business, especially considering staffing and work hours necessitated by the processes. This cuts profit share, and unfortunately also means that a good portion of that cost ultimately gets passed to the consumer. Again, consumers are dissatisfied, expressing frustration over all the fees involved with purchasing life insurance. 3. LIMITED PRODUCT AVAILABILITY. For distributors and advisors, it’s difficult to know all the different processes that go with the different carriers, so they often limit the number of carriers they work with to just a few whose processes they’ve become comfortable with.This limits choice to the end consumer, creating situations where a “best fit” product may not be offered by the financial advisor because his or her distributor chooses not to work with the carrier that offers it. Additionally, fewer products are developed than could be if more time and funds were freed up by automation. Why is the industry failing to rectify this crippling problem? Two big false perceptions are holding everything up. The first is that some firms believe that customization creates competitive advantage.This may be true in the short term, but when a number of carriers create their own customized requirements, this multitude of processes results in a logjam effect, making for serious inefficiency in the long term. 44

InsuranceNewsNet Magazine » September 2015

The second misperception is that the life insurance industry is unique, that life products are more complex than other financial products such as stocks, bonds, and mutual funds and therefore cannot be standardized. Lewis says, “The products are different. Of course they’re different products. But the processes aren’t that different. It’s data. It’s information and funds that need to get from Point A to Point B.” As it turns out, Lewis is correct. Implementation of standardization is already happening through DTCC, the same company that is behind the automation and standardization of various asset classes worldwide — proving life insurance is not too complex. DTCC, which last year processed over $1.6 quadrillion in transactions for their clients through their subsidiaries, was able to build a successful model for the annuity space based on their standards and automation for mutual funds, and now, in the same fashion, they’re using this successful annuity model as a basis for what they’re implementing in the life space. All they need now is further refinement and the introduction of new standards for life, along with widespread adoption, to fully optimize value for the industry.

Company Brings to Life Standards that Revolutionized Annuity Industry In 1997, DTCC, a key financial industry infrastructure organization, created their Insurance & Retirement Services (I&RS) division in order to adapt their existing processes and models for the annuity industry. With widespread adoption, DTCC had a hand in revolutionizing the annuity industry. Where it previously had taken up to a month after a sale for an advisor to collect a commission, carriers can now pay daily.Where the sales process used to be complicated and fragmented, it is now faster and easier, and financial advisors are much more compelled to sell annuities—enabling them to become commonplace in the market. Now, DTCC’s I&RS division has turned their focus on life insurance, building on the successful model they established in the annuity space and DTCC’s core service offerings. The goals of this user-owned and user-governed organization are simple: drive efficiencies and lower cost (which they are in position to do with scale of services and adoption) and mitigate risk.

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Ann Bergin, General Manager, DTCC’s Wealth Management Services explains, “Our commitment is to bring this ‘utility service’ to everyone near-cost, which brings efficiency by definition.”

Unexpected Hero Helps Solve “Disappearing Agent” Crisis

Another reason DTCC is able to facilitate such a striking level of efficiency is that they go beyond mere standardization. They bring straight-through automation and reject variances in standards, and their strict enforcement prevents the inconsistencies that can slow processing times, increase cost and risk, and limit product availability.

It’s no secret that agent recruitment is one of the top challenges in the life insurance industry, especially with an aging agent demographic and comparatively few young professionals seeking careers in the insurance realm. But one achievable industry shift might make all the difference. The “hero” of this change is standardization.

Already, the industry is seeing the savings, eliminating manual processes and situations like having one employee do nothing but stand at a fax machine all day. As more firms adopt DTCC’s standardization and automated services, more common industry inefficiencies will become ghosts of the past. The Scale of DTCC’s I&RS availability • 13+ billion annuity & insurance transactions in 2014 • $47+ billion in money settlement transactions is 2014 • Nearly 10,000 unique insurance products supported, including 3600+ life products • 71 carrier families & 141 distributors utilizing commissions & money settlement for life products • 42 carriers & 102 distributors utilizing financial activity reporting for life products • 59 carriers & 141 distributors utilizing positions & valuations for life products

Media Giants Position to Hijack Life Insurance Sales Recent buzz indicates that Amazon and Google are both looking to get into the life insurance game. For an industry that’s already bleeding agents, this sort of retail shift has understandably stirred up concern. One reason it’s even a viable threat is because both Amazon and Google can bring to the table a significant level of automation and modern standardization practices. So the hard truth is this: if the insurance industry doesn’t hit the gas on adopting standardization and centralizing processes, they’re going to lose ground to the outsiders who are experts in standards and processes and will move in and impose their own.

“One achievable industry shift might make all the difference.”

The widespread adoption of automated standardization can allow carriers to focus fewer resources on manual processes and more on strategic matters such as agent training and consumer education, along with better support for marketing and business development. This can greatly improve agent retention as agents become more comfortable with selling the products, while consumers are potentially more willing to buy. Everybody is happier when straight-through processes enable policies to be issued sooner and commissions paid faster. The elimination of cumbersome manual processes and confusing paperwork, along with more thorough product and process education, “demystifies” life insurance and makes it easier for agents who work primarily in other asset classes to more easily add life insurance to their offerings. Plus, agents who work with other asset classes have come to expect more streamlined, automated processes. Finally, Millennials who are ready to join the workforce demand speed, efficiency and standardization.

The Allure of a Growing Industry

Another way that carriers specifically can rededicate resources freed up by automation is for product development; considering agents and distributors will be willing to work with more carriers at once when they don’t have to learn multiple processes, the overall result is not only more products to hit the market, but a broader distribution of these many products. The potential here is for an exponential increase of product availability to the consumer, with a surge in sales, and a huge leap forward for the entire life insurance industry, and who wouldn’t want to be part of that?

Drive Standardization Join DTCC and help reduce costs in the life insurance industry and bring more products to more consumers. Learn more today at www.dtcc.com/ standardizelife or email insurance@dtcc.com.

September 2015 » InsuranceNewsNet Magazine

ANNUITYWIRES

FIA Buyers Getting Younger If advisors are starting to think that their fixed index annuity (FIA) clients are beginning to look a bit younger these days, it’s not all in their imagination. FIA buyers are getting increasingly younger, according to an analysis of sales data for the first-quarter periods in the past four years. The average age for buyers in first-quarter 2015 was 62, with the age range being 47 to 70, according to quarterly FIA sales trends data from Wink Inc. That may not seem especially “young” in comparison to millennials, whose ages range from 18 to 34. However, when compared with the average age of FIA buyers in the previous three years, the average buyer age has definitely skewed younger. For instance, the average age of 62 in first-quarter 2015 is two years younger than the average of 64 in first-quarter 2014, according to Wink’s Sales & Market Report for the quarters. The age range of FIA buyers also shifted younger, to 47-70 for first-quarter 2015 from 50-74 the year before.

BROKER/DEALERS EMBRACING FIAs AS DEMAND GROWS

FIAs are becoming a greater part of broker/ dealers’ annuity business, according to Insured Retirement Institute (IRI) research. The IRI report revealed that FIAs made up 10 percent of total broker/dealer annuity sales in 2014, and half of broker/dealers expect this share to continue to grow. Other key findings from the report: » Eight in 10 distributors said their sales of FIAs are growing, and four in 10 said sales are growing significantly. » Half of distributors believe FIAs will make up a greater percentage of their overall annuity sales in the future. » Nine in 10 distributors make at least five FIAs available to their advisors.

CALIFORNIA OUTLAWS ANNUITY SURRENDER PENALTIES CHARGED TO DEATH BENEFIT

California Gov. Jerry Brown signed legislation to prevent insurance carriers from levying surrender charges Gov. Jerry Brown against the annuity’s death benefit, a move government officials say will protect senior citizens. Surrender charges are designed to protect carriers that invest in longer-duration, DID YOU

KNOW

59%

liquid assets. Annuitants purchase a death benefit in case they die before the annuity begins paying benefits. Though many companies do not currently pay out a death benefit that is less than the premiums paid into the annuity, some insurers charge surrender penalties. Depending on the size of the surrender charge, the death benefit paid out can be less than the amount of premium paid in. Current law allows insurance companies to apply penalties to death benefits in the same way that a voluntary surrender is charged a penalty. The new law requires that the death benefit for fixed deferred annuities be at least equal to the annuity amount or the accumulation value for those annuities issued to consumers 65 years of age or older, the California Department of Insurance said in a news release.

NEW PRODUCT ROUNDUP

Here’s a roundup of some new annuity products to hit the scene. MetLife has entered the individual qualifying longevity annuity contract (QLAC) market. This comes as millions of baby boomers become subject to required minimum distribution (RMD) rules beginning next year. MetLife’s individual QLAC is built on the company’s Guaranteed Income Builder deferred-income annuity chassis. It will be distributed by MetLife’s Premier Client Group and third-party advisors.

of baby boomers in the Midwest plan to work beyond age 65, and the majority of them are happy about it. Source: Bankers Life

InsuranceNewsNet Magazine » September 2015

QUOTABLE An increase in interest rates could lead to a fast increase in demand for buyouts. — Richard McEvoy, a partner with Mercer Investments, on the increase in pension risk transfers among smaller companies

Fidelity & Guaranty Life announced the launch of FG Retirement Pro, a modified single-premium annuity. The company designed this product to offer protection in retirement by potentially growing the benefit base through indexed interest credits, rather than the account value. The account value then grows by an annually declared fixed interest rate. This Guaranteed Minimum Withdrawal Benefit (GMWB) feature has no explicit fee. FG Retirement Pro offers a vesting premium bonus and a range of the most popular indexed interest crediting options on the benefit base. Voya Financial announced that it has added a new flexible-premium deferred variable annuity to its suite of retail retirement solutions. Voya Preferred Advantage offers customers a lower-cost product with tax-deferred growth potential and the freedom to choose from a number of diverse investment options tailored to their individual needs. The new product is issued by Voya Insurance and Annuity Co. Northwestern Mutual has launched the first dividend-paying QLAC, which individuals can use to earmark a portion of individual retirement account dollars for use later in retirement. The new QLAC is available via Northwestern Mutual’s Select Portfolio Deferred Income Annuity (Portfolio DIA), its patent-pending income product that has the upside potential to grow base income through dividends, which can help address inflation and cost of living increases over time. In addition, individuals have access to dividends prior to taking the income. Dividends can be used to increase lifetime income payments, taken in cash or received as a combination of the two.

September 2015 Âť InsuranceNewsNet Magazine

ANNUITY

Generation Y’s Surprising Interest in Annuities, Security M any members of Generation Y are facing high student loan debt and disappointing job prospects. Nonetheless, they are considering how they will fund retirement. By Linda Koco

eneration Y had some surprising answers to a simple survey question about annuities. Posed by researchers for TIAA-CREF, the question was: Have you purchased an annuity or do you plan to in the future? Based on their ages — 18 to 34 — virtually all of these younger adults might 48

be expected to answer “no.” After all, the annuity often is described as a retirement product “for old people.” As it turned out, however, fully 14 percent of this generation answered, “Yes, I have already purchased an annuity.” That’s the same percentage claimed by older baby boomers, ages 55 to 64. Conducted earlier this year by KRC Research on behalf of TIAA-CREF, the survey polled views of 1,000 adults ages 18 and older. The results may be more reflective of people in the retirement plan environment rather than retail customers, since TIAA-CREF is a plan provider and it

InsuranceNewsNet Magazine » September 2015

offers in-plan annuity options. Still, the results provide a profile of Gen Y annuity trends not often seen.

More Surprises

According to the survey, Gen Y’s yes answers reflected close to twice the percentage of the next-oldest generation — Generation X. Only 8 percent of Gen Xers said they had already purchased an annuity. Still another highlight: The Gen Y percentage is not much smaller than that of younger boomers, ages 45 to 54, of whom 17 percent answered yes to the already-purchased question.

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Ready to GROW your business? Visit www.TALTCsecure.com to learn more. For Agent/Producer use only. Not for solicitation or reproduction. Long Term Care insurance underwritten by Transamerica Life Insurance Company, Cedar Rapids, IA. In New York, Transamerica Financial Life Insurance Company, Harrison, NY. Benefits and options are not available in all states. Policy ICC10 TLC-3, ICC13 TLC-4, TLC 3-P 013, TLC 2-P 0410, TFL 2-P NY 0410, TFL 2-P NYF 0410, TFL 2-P NYAF 0410. September 2015 » InsuranceNewsNet Magazine TLC3 INN 0415

ANNUITY GENERATION Y’S SURPRISING INTEREST IN ANNUITIES

The gap between the need for financial security and having the will and the means to achieve it may well impact this generation for decades to come.

The only age group with a larger percentage of yes answers, among all age groups, was the mature adults, ages 65 and older. That demographic included the oldest baby boomers as well as the entire silent generation (now ages 70 and older) — people widely considered as making up the primary annuitybuying marketplace. In this oldest population, 18 percent said they already had bought an annuity. This is not all that much higher than the 14 percent of Gen Yers who said they have purchased an annuity. Taken as a whole, these results reveal that while annuities are not stealing the show, they definitely have some mindshare among young adults.

Annuity-Mindedness

This annuity-mindedness showed up in other answers to the have-you-purchasedor-do-you-plan-to question too. For instance, although 18 percent of Gen Y said no, they had not purchased an annuity, they added this qualifier: “But I plan to (buy an annuity) at some point prior to retirement.” This was a higher percentage than all of the other age groups who gave the same answer-with-qualifier. None of the other generations even registered a double-digit response rate on that answer. So it appears that Gen Y is leaning more toward an annuity future than each of the other generations. The Gen Yers also topped the list of those answering, “No, but I plan to (buy 50

an annuity) when I retire.” Ten percent of Gen Y gave that answer. Only the younger boomers, ages 45 to 54, came close, with 8 percent saying the same. Not all Gen Yers have annuities on the mind, however. For instance, half of them (52 percent) stated flat-out, “No, I do not plan to (buy an annuity).” That seems to fit retail sales trends that have shown very few Gen Yers have signed on the dotted line for an annuity. However, all the other age groups had individuals who also responded with a flat-out no, and in even higher percentages than Gen Y. For instance, 60 percent of the youngest boomers said, “No, I do not plan to (buy an annuity).” Next came Gen X at 62 percent, older boomers at 65 percent, and the age 65-plus group at 75 percent. By comparison, Gen Y looks more annuity-motivated than all the other generations.

Startling but…

The Gen Y numbers are startling considering that only one-fourth (26 percent) of that age group said they are familiar with annuities. By comparison, half of the older boomers (48 percent) claimed familiarity with annuities. But the Gen Y responses appear to be in line with the receptivity the age group showed to receiving a monthly income for life. Three-fifths (61 percent) of Gen Yers told researchers that they are totally willing to commit a portion of their retirement savings to a “choice” that will

InsuranceNewsNet Magazine » September 2015

allow them to receive such a payment. No other age group registered such a high percentage on that point, although Gen X came close at 57 percent, as did the younger boomers, at 56 percent. The Gen Y annuity responses also align with the generation’s top retirement goal. Close to half (42 percent) of these young adults told researchers that if they could set a primary goal for their retirement plan, it would be “to provide guaranteed monthly income every month” to cover their living costs in retirement. The runner-up goal, at 34 percent, was to ensure their savings will be “safe regardless of what happens in the market.”

The Savings Shortfall

In the savings department, Gen Y is “falling short in some areas,” the researchers said. When asked what percentage of current annual income they are currently saving for retirement, for example, 31 percent answered “none.” That’s not entirely unexpected. Many Gen Yers came of age during the Great Recession, and “they face higher student loan debt and fewer prospects for fulltime employment with benefits than previous generations,” noted TIAACREF executive vice president Teresa Hassara in a statement on the survey. This is making it harder to save enough for a comfortable retirement, she said. Her take is, “The gap between the need for financial security and having the will and the means to achieve it may well impact this generation for decades to come.” On the positive side, though, the survey also found that 22 percent of Gen Yers are saving more than 10 percent a year for retirement. That includes employer contributions to a retirement plan at work — an important point for TIAA-CREF, given its role as a provider of retirement services. For annuity professionals in general, the positive news from the survey is that annuity-mindedness already exists in some young adults. InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

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September 2015 » InsuranceNewsNet Magazine

ANNUITY

What Does $100,000 Look Like in Retirement? By Eric Taylor

ncreasing life expectancies may require more extensive retirement plans for older clients. To put the issue of increasing life expectancy into perspective, the Social Security Administration estimates that one out of every four of today’s 65-year-olds will live past the age of 90. Some expenses — including health care, transportation and leisure costs — surface more prominently during retirement than one would expect, and that can have significant ramifications on financial plans.

The Challenge

Health care costs can increase significantly in retirement. Beyond the expected cost increases associated with growing older, seniors may experience unforeseen incidents such as serious falls and other age-related injuries that require expensive treatment. But although health care costs often are cited as a major expense area for older Americans, seniors are faced with costs in some areas that you may not have considered. The National Center for Policy Analysis (NCPA) took a look at some of these other costs that seniors incur in retirement. They found that seniors continue driving to an older age (79 percent of those ages 75 and older own or lease at least one car). This extends the risk of potentially costly accidents, particularly as the cognitive skills needed for safe driving worsen with age. Seniors also are spending more on hobbies and nonessentials than they did in the past, according to the NCPA. For those ages 65 to 74, for instance, the NCPA found that two of the top five fastest-growing expenditure categories are entertainment, pets and hobbies. 52

The German artist Hans-Peter Feldmann’s installation at the Guggenheim was created on the occasion of his winning the biennial $100,000 Hugo Boss Prize. Every dollar of his prize money is on display. But how do those dollars stack up in different annuity scenarios?

A Solution

Some point to stocks, given the current bull market and relative liquidity, as a good option to offset longevity risk. Stocks, however, do not have downside protection. For example, if clients need to liquidate their holdings during an emergency in a bear market, they might have less money available to them than they originally invested. What’s more, the options that do offer downside protection, such as bank accounts, are paying interest rates that do not keep up with inflation, resulting in a loss. Index annuities, however, can help combat longevity risk by making current savings work harder and last longer. Certain index annuities offer immediate benefit base enhancements at the beginning of the contract. This is then followed by a daily benefit base roll-up, providing the potential for more guaranteed lifetime income between contract anniversaries. In most cases, there is flexibility in starting and stopping income withdrawals as needs change, which is important as financial responsibilities and expenses grow to compete as your clients age. For example, Sally, age 55, is a college professor concerned about principal protection and outliving her savings. After

InsuranceNewsNet Magazine » September 2015

speaking with her financial advisor, she decides to purchase an index annuity with the $100,000 she has accumulated. Because of the 4 percent benefit base enhancement this contract is offering, principal at the beginning of the contract starts at $104,000. Accounting for an 8 percent annualized simple benefit base roll-up, credited daily, will help provide the potential for more lifetime income. That brings Sally’s contract at the end of year one to $112,320, which will help ensure that Sally’s principal is working as hard as it can to be maximized. In many cases, the costs associated with index annuities are relatively competitive, with some listing around the 1 percent mark, which, when subtracted from the hypothetical return illustrated here (12 percent after year one), shows considerable accumulation. For comparative purposes, let’s measure this approach against an FDICinsured money market account. The best-paying money market account, as of the time of this writing, is yielding 1.01 percent, according to Bankrate.com. When accounting for today’s inflation rate of 2.1 percent, a 1.01 percent return is dilutive to Sally’s retirement income

Image courtesy of the Guggenheim, New York

I ndex annuities can help your clients with the income and flexibility to cover retirement expenses they may not have considered.

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ANNUITY WHAT DOES $100,000 LOOK LIKE IN RETIREMENT? This chart shows the income provided by a $100,000 index annuity with an optional income protection rider on and between contract anniversaries for a hypothetical single annuitant. As shown in the chart, the benefit base enhancement and daily benefit base roll-up can help optimize retirement income when clients really need it. Benefit Base

$100,000

$112,320

$116,480

$120,640

$124,800

$128,960

$133,120

$137,280

$141,440

Contract Year

1½

2½

3½

4½

Your client’s age today

$4,493

$4,659

$4,826

$4,992

$5,158

$5,325

$5,491

$5,658

$4,493

$4,659

$4,826

$4,992

$5,158

$5,325

$6,178

$6,365

$4,493

$4,659

$4,826

$4,992

$5,803

$5,990

$6,178

$6,365

$4,493

$4,659

$5,429

$5,616

$5,803

$5,990

$6,178

$6,365

$5,054

$5,242

$5,429

$5,616

$5,803

$5,990

$6,178

$6,365

$5,054

$5,242

$5,429

$5,616

$5,803

$5,990

$6,178

$6,365

$5,054

$5,242

$5,429

$5,616

$5,803

$5,990

$6,864

$7,072

$5,054

$5,242

$5,429

$5,616

$6,448

$6,656

$6,864

$7,072

$5,054

$5,242

$6,032

$6,240

$6,448

$6,656

$6,864

$7,072

$5,616

$5,824

$6,032

$6,240

$6,448

$6,656

$6,864

$7,072

$5,616

$5,824

$6,032

$6,240

$6,448

$6,656

$6,864

$7,072

$5,616

$5,824

$6,032

$6,240

$6,448

$6,656

$7,550

$7,779

$5,616

$5,824

$6,032

$6,240

$7,093

$7,322

$7,550

$7,779

$5,616

$5,824

$6,635

$6,864

$7,093

$7,322

$7,550

$7,779

$6,178

$6,406

$6,635

$6,864

$7,093

$7,322

$7,550

$7,779

$6,178

$6,406

$6,635

$6,864

$7,093

$7,322

$7,550

$7,779

$6,178

$6,406

$6,635

$6,864

$7,093

$7,322

$8,237

$8,486

$6,178

$6,406

$6,635

$6,864

$7,738

$7,987

$8,237

$8,486

$6,178

$6,406

$7,238

$7,488

$7,738

$7,987

$8,237

$8,486

$6,739

$6,989

$7,238

$7,488

$7,738

$7,987

$8,237

$8,486

$6,739

$6,989

$7,238

$7,488

$7,738

$7,987

$8,237

$8,486

portfolio, resulting in a 1.09 percent loss. If you apply that same metric to Sally’s case, her return is still around 9 percent (subtract 2 percent inflation and an estimated 1 percent contract fee). Even if you were to ignore inflation risk and focus purely on growth, placing Sally’s $100,000 into a money market account, at a 1.01 percent return, would have grown her principal to $101,010 by year one, compared with a potential $112,320 in her index annuity as outlined. Annuities generally are not designed to be fully liquid, but withdrawals are permitted. As such, that first-year growth potential of $12,320, if Sally needs to make a withdrawal, could mean catching up on her mortgage payment or subsidizing an expensive medical procedure, all within one year of her starting the contract. In addition to the growth potential, 54

principal protection is another important factor provided by index annuities as it pertains to protecting against longevity risk. An index annuity’s contract value won’t fall below the original principal amount if there is a performance decline in the index to which it was linked. This means clients are receiving the same principal protection they would receive with a money market account, but with the added benefit of growth potential via the index annuity’s benefit base enhancement and daily benefit base roll-up. Certain annuity carriers also are offering renewal cap protection thanks to a bailout provision, which gives contract holders an “out” if the carrier sets the renewal cap below its specified bailout level. In effect, the bailout creates a renewal promise by the carrier to help ensure that renewal caps or rates are higher than the

InsuranceNewsNet Magazine » September 2015

guaranteed minimum during the surrender charge period. For financial professionals and their clients, it provides a measure of confidence in the product’s future upside potential. Longevity risk is a growing concern as life expectancies continue to increase. Health care expenses, transportation costs and discretionary spending are among the financial concerns that can extend and amplify as your clients live longer. In response, consumers are demanding safe but growth-oriented solutions that can help them keep up with these rising costs, something index annuities are well-positioned to do. Eric Taylor is national sales manager for annuities with Genworth Financial. Contact him at eric.taylor@ innfeedback.com.

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

HEALTHWIRES

Health Insurance Co-Ops Bleed Red Ink Remember co-ops, those nonprofit health care cooperatives that were created to compete with health insurance corporations as part of the Affordable Care Act? A government audit finds these co-ops are awash in red ink. Only one out of 23 — the co-op in Maine — made money last year, said the report from the U.S. Department of Health and Human Services inspector general’s office. Thirteen lagged far behind their sign-up goals for 2014. The Massachusetts co-op spent more than six times as much on administrative expenses as it collected in premiums. The Iowa/Nebraska co-op was shut down by state regulators over financial concerns. The Louisiana Health Cooperative announced it will cease offering coverage next year, saying it’s “not growing enough to maintain a healthy future.” The audit raised questions about whether co-ops will be able to repay $2.4 billion in taxpayer-financed loans provided under the ACA to help stand them up. Officially called Consumer Operated and Oriented Plans, co-ops were one of the compromises in the 2009-2010 health care debate. Liberals failed to achieve their goal of a government-run insurance program to compete with corporate insurers, and co-ops became the fallback. Under the deal lawmakers struck, taxpayers would provide two types of loans: startup money and reserve funds to meet solvency standards set by state regulators.

HEALTH CARE COSTS TO ACCELERATE, REPORT SAYS

Spending on health care will outpace the nation’s overall economic growth over the next decade, the government predicted. This increase will underscore a coming challenge for the next president, not to mention taxpayers, businesses and individual Americans. A combination of expanded insurance coverage under the ACA, an aging population and rising demand will be squeezing society’s ability to pay. By 2019, midway through the next president’s term, health care spending will be increasing at roughly 6 percent a year, compared to an average annual rise of 4 percent from 2008 through 2013. Health care as a share of the nation’s overall economy is projected to grow from 17.4 percent in 2013 to 19.6 percent in 2024, the report said, accounting for nearly $1 of every $5 spent. The higher rate of increase is still DID YOU

KNOW

“relatively modest,” said the report from the Office of the Actuary in the Health and Human Services Department. The forecast, through 2024, does not foresee a return to pre-recession days of rapid health care inflation, as the government and private employers try to revamp the way they pay hospitals and doctors to emphasize quality over quantity.

THE NEW ‘BIG THREE’ OF HEALTH COVERAGE

Anthem’s $48 billion purchase of rival Cigna is set to create the nation’s largest health insurance company. The combination, in addition to Aetna’s pending purchase of rival insurer Humana, would leave three health insurers that would dominate the rapidly changing industry landscape in the U.S. The other “big three” health insurer, UnitedHealth Group, reportedly

About 6.6 million U.S. taxpayers paid a penalty imposed for the first time this year for not having health insurance. Source: Bloomberg

InsuranceNewsNet Magazine » September 2015

QUOTABLE We got the pricing wrong. — Shaun Greene, CEO of Arches Mutual Insurance, a Utah health insurance co-op that lost $19.9 million last year

had been in merger talks with Aetna and Humana but so far has not reached any agreement. What’s behind this rush to merge? Analysts say it is being driven by sluggish growth in traditional employer-paid health care combined with faster growth in government-sponsored health care such as Medicare or the subsidized plans created by the ACA. Health insurers also hope to cut their own costs with increased purchasing power over drugmakers and health care providers.

MICHIGAN MOST EXPENSIVE STATE FOR RETIREMENT HEALTH CARE The high cost of health care can take a bite out of retirement savings. But in some states, that bite is more like a chomp. Michigan, Florida, Nevada and Maryland are the most expensive states for key components of retirement health care costs, according to Health View Services. Meanwhile, Hawaii, Vermont and Maine are the least expensive. An app developed by Health View shows that supplemental insurance, which is set at a state level, is 72 percent more expensive for a 65-year-old in Maryland than for a 65-year-old in Hawaii. Medicare Part D premiums, a smaller component of total costs, vary across states by as much as 74 percent. Federally mandated Medicare Part B does not vary across states. The app reveals that a person retiring this year at age 65 in Michigan will spend $3,707 in their first year of retirement, and will have a lifetime projected cost of $152,175 for Medicare Parts B and D and supplemental insurance premiums, assuming a 20-year retirement. This is nearly $40,000 more than a retiree in Hawaii, who will pay lifetime projected costs of $112,528 and a firstyear cost of $2,818.

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HEALTH

3rd Enrollment Season Is the Charm for Benefits-Focused Advisors I t’s time to gear up for another open enrollment season. Here are some things to keep in mind as you get ready to serve your clients through this busy time of year. By Shandon Fowler

ere we are, approaching the third open enrollment season under the Affordable Care Act (ACA). We were never certain that there would be three open enrollments post-ACA. However, the landmark legislation not only survived numerous legal and other challenges but has reshaped the benefits business in ways that nobody could have predicted, as well as in some ways that we did predict. We knew that the individual market would grow, but who could have predicted the boom in private exchanges and new options for brokers to extend health care consumerism to their customers? Who would have known that private exchanges, combined with the growing ranks of 58

individual coverage, would reshape the benefits business and the brokers who have served it for decades? The coalescence of legislative action and new technologies is driving change like we’ve never seen in the benefits business. As we embark on another open enrollment season, it is important to recognize this change and the challenges it may bring. It’s equally important to know that with every challenge, there is opportunity. Here are some hot topics for this year’s open enrollment and how to make the most of the brave new benefits world.

Understanding the Options for You and Your Client

Today, dozens of private exchange options are available, all of them claiming to be the only exchange you need. Some tout a model that will control costs above all else. Others accentuate consumer choice. Still others are pretty straightforward about preserving a broker’s commission. How do you determine which choice

InsuranceNewsNet Magazine » September 2015

is right for your clients? The same way you always have: Determine what is most important to them. Is it saving money, taking care of their employees or being on the cutting edge of benefits strategy? Now you have options and you can help guide your clients to what’s right for them. However, be wary of platforms that are underdeveloped or simply trying to buy your business. Private exchange platforms that are untested or financially unstable may be able to earn you more money for one or two open enrollment cycles. However, if they are unable to mature their platform or provide quality administration in addition to a shopping experience, what could seem like a good strategy in the short run could end up alienating your clients over time.

Benefits Are Good for Everyone

Private exchange technology, combined with broker expertise, seems to be having a positive impact on sales beyond health coverage. Voluntary benefits sales have,

September 2015 Âť InsuranceNewsNet Magazine

HEALTH 3RD ENROLLMENT SEASON IS THE CHARM FOR BENEFITS-FOCUSED ADVISORS by some estimates, increased by as much as 25 percent within the employer sales channel over the past two years. What was once a manual, paper-form process of selling voluntary benefits is now integrated into platforms that allow employees to see all of their benefits in one place online. Plan adoption has increased on the platforms that have figured out the interconnectedness between core and voluntary benefits. So as you work with your clients to plan out benefits programs, think of voluntary benefits in a different, mutually beneficial light.

renaissance of sorts because of problems with the Healthcare.gov website and the navigator programs. In other words, brokers appear to be more important than ever in the individual space. As you look at employer-based coverage, don’t rule out that the best coverage for your clients’ employees may be a subsidized public exchange plan combined with voluntary benefits through the employer. Resourceful brokers may be able to increase the business in both the employer and individual space by considering their clients’ entire workforce.

Consider the Whole Workforce

Data and Cost Transparency Are Fundamental

The Congressional Budget Office has projected that employer-based coverage could decline by as many as 5 million people by 2020, potentially eroding employerbased brokers’ business. Yet, a funny and unexpected thing has happened in the individual market. Individual market brokers, thought to be going extinct because of new technology and the ACA’s navigator program, are experiencing a

In spite of all these new factors, some things remain foundational. For employers, choosing the right mix of health plans is essential for controlling costs. It requires analyzing claims data, workforce demographics, industry trends and more to determine the best path moving forward. Online environments have made it possible to bring together behavioral science

principles and the wealth of data to create guided shopping experiences that provide consumers with a higher level of cost transparency and decision support. And as your chosen platform increases that transparency, consumers become more likely to trust you as a partner.

Personalized Communications and Options Support Good Choices

Today’s workforce is more diverse than ever, spanning four generations. As noted previously, employers are recognizing that they can no longer expect to offer the same one or two health plan options and stay competitive. With more choice come more challenges. How will employees know their eligibility status? What can employers do to steer their workers in the right direction? How do employers expand benefits packages with shrinking budgets? Tailoring the message to a specific audience is another way to connect directly with consumers. Delivering relevant content at the right times in a consumable format will be key for building trust and

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InsuranceNewsNet Magazine » September 2015

3RD ENROLLMENT SEASON HEALTH engagement. This will require looking at data — demographics, member profiles, usage, etc. — to create campaigns that fit the audience well before open enrollment begins so that clients can be prepared to make the decisions that lie ahead.

Flexibility and Interoperability Are Paramount

The ACA has brought about some changes to the benefits landscape while contributing to its unpredictable nature. Some employers are shifting to a defined contribution funding model for cost stability while others are providing a defined contribution for specific populations such as retirees. As part of being flexible, systems should operate together to ensure efficient, accurate and secure delivery across the multiple systems required to manage benefits data. This means connecting with the various workforce management systems and voluntary benefit providers employers may be using. Serving the modern-day benefits landscape takes flexibility. Other industries have adopted flexible platforms, and now the benefits business has as well.

Service Means More

With private and public exchanges providing viable alternatives to traditional benefits enrollment, carriers need to consider the entire customer experience in order to keep members coming back. In fact, a recent Accenture study found that in 2014, more than half of U.S. consumers switched companies they do business with because of a poor experience. Employers and their workers are looking for the best bang for their buck, but customer service and experience play a more critical role. This will require insurance carriers to place a greater emphasis on direct consumer engagement in addition to their traditional relationship management with employer groups.

We’re All B2C

It was thought that perhaps brokers would face elimination because of the ACA. Although that challenge is ever-present, as the ACA has rolled out and its complexity has hit home with employers, the role of the broker as a consultant and advisor has become more important than ever. A business — health insurance — that already was complex has become even more so. Plus, millions of people who have never had health coverage have entered the market — and they need people who understand health insurance and can help them make choices. Add it all up and you get a business that needs expertise and service. You must be ready to serve customers’ needs for education, decision support, plan navigation and so on. In the end, you’re serving consumers, and those consumers need you. Luckily, technology is advancing at a rapid pace and can help brokers and consumers alike as they navigate this complex benefits landscape to get to something better for everyone. Shandon Fowler is director of product management for marketplaces at Benefitfocus. Shandon may be contacted at shandon.fowler@innfeedback.com.

September 2015 » InsuranceNewsNet Magazine

FINANCIALWIRES

Americans Saving More, but Skimping on Retirement Contributions The good news is that Americans are saving more. But they are not putting more of those savings into their employer-sponsored retirement plans. That’s the word from a new analysis by retirement market researcher Hearts & Wallets. Average annual household savings increased to 5.5 percent last year, up from 4.6 percent in 2013, based on Hearts & Wallets’ annual survey of 5,500 U.S. households. But the percentage of household savings that went into employer-sponsored retirements plans like 401(k)s dropped 7 percent, to 22 percent in 2014. The percentage of households participating in employer-sponsored plans declined to 56 percent last year from 60 percent in 2013. “Our research shows that the average saver was more focused on building an emergency fund than saving for retirement last year,” said Laura Varas, co-founder of Hearts & Wallets. The percentage of households reporting they set aside money to deal with unexpected expenses grew from 37 percent in 2013 to 45 percent in 2014.

STUDENTS GRADE THEMSELVES ‘C’ OR WORSE IN FINANCE

It’s back-to-school time and time for students to resume worrying about their grades. But if money management were a course in school, half of college students would be in the bottom half of the class. A U.S. Bank study of students and personal finance showed that half of college students surveyed said they would give themselves a C or below when asked how successful they are in managing their money. The good news: Parents can help. The survey found that 91 percent of students learned about money from their parents, either directly or by example. In addition, 55 percent of students identified their parents as the No. 1 inf luence on their financial habits, as well as their go-to source for financial advice.

63% ?

DID YOU

KNOW

A LOOK AT MONEY AND THE MODERN FAMILY

Among high-net-worth investors, “modern” families — including blended, samesex and multigenerational families — are nearly as common as “traditional” families. That’s according to “Beyond the Picket Fence,” a report by UBS. The survey of 2,715 high-net-worth and affluent U.S. investors found that the rise of modern families is a burgeoning trend as traditional families become less and less common by generation, currently making up 46 percent of the World War II generation, 37 percent of baby boomers and only 25 percent of millennials. Blended families — those with children from a prior relationship — represent 14 percent of the HNW and affluent investor population, and experience heightened financial and emotional challenges relative to traditional families. The survey found that, overall, blended families feel they lead more complicated lives compared with traditional families, and more so when it comes to their finances and retirement planning.

THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING wasthink 20 percent of college students surveyed said they 401(k) this year. The average increase in the first day (or “pop”) is 13 percent.

investments are guaranteed or don’t lose value.

Source: Renaissance Capital Source: U.S. Bank survey

InsuranceNewsNet Magazine » September 2015

QUOTABLE Americans have a love-hate relationship with debt. They know they need debt, but they don’t actually want it. — Diana Elliott, research manager for financial security and mobility at Pew Charitable Trusts

Sixty percent of same-sex couples said they believe that there is not enough financial guidance for families like theirs. They continue to believe that financial advice and support systems (e.g., Social Security, health and retirement benefits) are not constructed to support their type of family. Seventy-two percent are actively seeking guidance to understand how the legalization of same-sex marriage affects their benefits.

THE LATEST EMPLOYEE BENEFIT: COLLEGE SAVINGS PLANS Employers could be making it easier for their workers to save for college. A few states and more employers are making college saving a little easier by offering workers incentives to contribute to 529 college savings plans. Nevada passed a law that gives employers a 25 percent tax credit on matched contributions to 529 college savings plans, up to $500 per employee. The tax credit goes into effect on Jan. 1. Nevada is the second state to promote matching contributors for 529 plans. Illinois has allowed employers to claim a 25 percent tax credit of up to $500 per employee contributing to a 529 plan since 2009. Employers are moving slowly when it comes to offering 529 plans at the workplace. Only 7.6 percent of employers allowed workers to contribute to a 529 plan through payroll deduction in 2014, up from 6.8 percent in 2012, according to a survey. Larger employers were twice as likely as smaller employers to allow workers to contribute to 529 plans through payroll deduction.

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FINANCIAL

Like a Golf Score, a Lower Risk-to-Return Ratio Wins T he lower the score, the better with an investment strategy that takes performance and volatility into consideration. By Craig L. Israelsen

erformance always comes with a catch: volatility. Volatility simply means that the investor will experience more highs and lows — highs are fun, lows are not. Moreover, negative returns punish a portfolio disproportionately. For example, a 50 percent loss requires a 100 percent gain to break even. A 75 percent loss requires a 300 percent gain to break even. Thus, avoiding large losses is (or should be) an investor’s primary mantra — particularly if they are drawing money out of a retirement portfolio. 64

But performance also is important. So, not surprisingly, it’s important to consider performance and volatility together. That’s where the risk-to-return ratio comes in. Risk-to-return ratio is like a golf score — the lower the score, the better. The ratio is shown below:

InsuranceNewsNet Magazine » September 2015

In general, a risk-to-return ratio of 1-to-1 is excellent. In fact, achieving a 1-to-1 ratio among equitylike asset classes is very difficult to do on a consistent basis. For example, as shown in the Risk-to-Return Ratio: 1970-2014 table, U.S. large cap stock (as represented

In general, a risk-to-return ratio of 1-to-1 is excellent. In fact, achieving a 1-to-1 ratio among equitylike asset classes is very difficult to do on a consistent basis.

by the S&P 500 Index) occasionally can achieve a 1-to-1 risk-to-return ratio over 10-year periods, but the ratio can spike upward in a subsequent 10-year period. There were 36 rolling 10-year periods examined in this analysis. For example, in the 10-year period ending in 2000 (1991-2000), the S&P 500 Index had a 10-year rolling return of 17.46 percent and a 10-year standard deviation of annual returns of 15.28 percent, which produced a risk-to-return ratio of 0.88. That is an excellent ratio. In the subsequent 10-year rolling period, the ratio increased to 1.34, and then to 2.22 for the 10-year period ending in 2002. The ratio shot up to 22.24 for the period ending in 2009. In short, the risk-to-return attributes ofIacan single ly Insurance, I’ve finally found a place callasset class can relatively unstable. in the insurance andbe financial services industry in contrast, percent ost agents, I’veBy worked hard consider and spentaa 60 lot of money large cap U.S. stock/40 U.S. rs and consistently write business. Withpercent First Family ble to not just work hard, but(also also shown work smart. bond portfolio the table). As is evident, the risk-to-return ratio limited free for leads to every agent, high and a blended portfolio ofcontracts, equities and t, web-based CRMincome systemistofar manage, track and build fixed more consistent and om anywhere. The in system allowed me to period produce lower everyhas rolling 10-year commissions over the phone, without ever having than a 100 percent U.S. large cap stock and leave the office. First Family Insurance is the perportfolio. The 60/40 portfolio had the y agent who wants to maintain their independence lowest risk-to-return ratio in seven of from the marketing and lead support of a $100-milthe 36 rolling 10-year periods — or 20 percent of the time. (The — 100 Billiepercent M., agent U.S. large cap stock never had the lowest risk-to-return ratio.) Finally, a diversified seven-asset portfolio is shown. As shown by the yellow highlighting, the seven-asset portfolio had the lowest risk-to-return ratio (compared with the 100 percent U.S. stock and a 60/40 model) in 29 of the rolling 10-year periods (or 80 percent of the time). The seven asset classes in this model included large cap U.S. stock, small cap U.S. stock, non-U.S. developed stock, real estate, commodities, U.S. bonds and U.S. cash — all held in equal 14.29 percent allocations and rebalanced at the start of each year.

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September 2015 » InsuranceNewsNet Magazine

FINANCIAL LIKE A GOLF SCORE, A LOWER RISK-TO-RETURN RATIO WINS

Summarizing the Results

The summary table shows the performance statistics in this analysis: 10-year annualized return, 10-year standard deviation of return and 10year risk-to-return ratio (with the superior result highlighted in yellow). The 100 percent U.S. large cap stock model had the highest average 10-year rolling returns. The diversified seven-asset model was close behind, with an average 10-year rolling return of 10.88 percent (versus 11.21 percent for all U.S. stock). The 60/40 portfolio had an average 10-year rolling return of 10.35 percent. In terms of volatility (as measured by the rolling 10-year standard deviation of annual returns), the seven-asset portfolio was the winner with an average of 9.65 percent. The 60/40 portfolio was in second place, and the all-U.S. stock model with a 16.88 percent average standard deviation came in third place. The average risk-to-return ratio over the 36 rolling 10year periods was lowest for the seven-asset model (1.08), followed by the 60/40 model (1.42) and then the all-stock model (3.05). As you recall, a 1-to-1 risk-to-return ratio is an enviable goal for an investor. The diversified sevenasset model achieved that goal over the past 45 years while delivering 97 percent of the return achieved by an all-equity model. Equitylike return with a 1-to-1 riskto-return ratio is the holy grail of investing.

Implementing a Multi-Asset Portfolio

Building a multi-asset portfolio (such as the sevenasset model illustrated here) is easier now than it ever has been. Many mutual funds and exchange traded funds (ETFs) are found in the asset classes being highlighted (large cap U.S. stock, small cap U.S. 66

stock, non-U.S. stock, real estate investment trusts, commodities, U.S. bonds and money market funds). A diversified asset allocation model

InsuranceNewsNet Magazine Âť September 2015

can be built with actively managed funds, index funds or ETFs â&#x20AC;&#x201D; or a combination of each. Frankly, the asset

allocation recipe has more impact on performance than what components (i.e., funds) are used. This means that a perfectly good investment model can be built with actively managed funds, passively managed index funds or ETFs. If a client has a preference for one type of fund over another, fine — use that type of fund. Spending a lot of time attempting to find the “perfect” large cap U.S. equity fund or the “perfect” non-U.S. equity fund is largely a waste of time if you intend to use those funds in combination with other funds in a broadly diversified, multi-asset portfolio. I’m not saying that all funds are created equal, but adding value to a portfolio is achieved primarily through the asset allocation itself, whereas fund selection has less impact. One issue to consider is the “style purity” of the funds being used in a broadly diversified portfolio. In other words, you likely won’t want to use a large cap U.S. equity fund that has a significant allocation in other asset classes (such as nonU.S. equity or fixed income), because you already have those other asset classes explicitly included in the model. For this reason, a multi-asset portfolio often is built with index funds and/or ETFs because they are very “style pure,” whereas actively managed funds are more likely to dabble in several asset classes according to the dictates of the fund manager. All that said, if you build it, performance will come. But don’t expect miracles in the short run. A diversified approach means that you will hit singles and doubles — not home runs. But it’s worth remembering that home run hitters often strike out a lot. Craig Israelsen, Ph.D., is the developer of the 7Twelve Portfolio and is a principal at Target Data Analytics, which develops indexes for the benchmarking and evaluation of target-date/life-cycle funds. He is also the executive-in-residence in the financial planning program at Utah Valley University. Craig may be contacted at craig. israelsen@innfeedback.com. As seen in the

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BUSINESS

How to Reach the Retired Before They Retire E mployees who are nearing the end of their working years are prime prospects for advisors. With the right amount of preparation, you can get a foot in the workplace door. By Sean P. Lee

rospecting is often a test of patience and perseverance. But what if you could turn this process into a more successful one, establish yourself as a go-to resource of financial knowledge and give back to your community? The solution: knowledgebased prospecting at its highest level – retirement training at corporations. As more baby boomers reach retirement age, corporations are turning to outside resources for assistance in preparing their employees for their post-working years. With such a high demand for retirement education, advisors have an opportunity to share their knowledge and develop new relationships while positioning themselves to grow their client base dramatically. Knowledge-based prospecting can substantially increase your success in attracting qualified prospects and converting them into clients. Corporations are home to what I considered my ideal target audience: people in their 50s and 60s who have developed decent nest eggs and are nearing retirement. Positioning yourself as an informational resource in front of this audience could potentially double your business, as it did for mine last year. Here is the prospecting method that I have used to team up with corporations in my community and help their employees make more informed retirement planning decisions.

The Preparation

The first step is to consider the information you will present at the corporate meeting. A well-thought-out course, along with the proper support materials, will help make your first impression memorable. 68

Begin with identifying and creating any collateral materials prior to contacting any businesses. This includes the training course itself, as well as the marketing materials describing your expertise and the benefits the employees will receive by participating in the course. In addition, you will need to provide examples of any supporting materials you may use during the training. I have adapted my workplace training to focus on five fundamentals of retirement planning: income, investment, tax, health care and estate planning. I created a class specifically for corporations that consists of two sessions, each two hours long. The classes are informative, but also concise and efficient. Our firm has gone a step further and submitted our training program to the Financial Industry Regulatory Authority (FINRA) for review and approval. I submit the FINRA review letter in my presentation packet as well. It has proven to be a great piece to help further establish credibility. Not only does a FINRA review letter support your content, but it also takes some pressure off the employer to review your content extensively. However, keep in mind that the FINRA review process isn’t easy and is very time-consuming, so plan in advance and make this one of your top priorities from the start. When deciding which corporations to target, I recommend reaching out to your current clients and centers of influence, looking for high-level employees or executives (such as CEOs or chief financial officers). Approach them by identifying their problems and explaining how your course can solve them. Explain the premise of

InsuranceNewsNet Magazine » September 2015

your training and ask if they would be willing to make an introduction to their employer or to the owner or human resource director of a local corporation with whom they have a relationship. I also encourage getting involved in your local chamber of commerce and other networking groups, because this will help you develop new business relationships. After the introduction has been made, we typically set up a meeting for me to come in and present my course to the appropriate parties. At the meeting, I review my materials with the group. I walk them through my step-by-step training and the benefits it provides their employees. I explain the FINRA letter and how the presentation materials have been approved by the financial services industry’s governing body. I emphasize my education and experience in providing retirement training for employee groups. I illustrate the benefits that the corporation and its employees may gain from participating in the training. Throughout this process, it is vital to position yourself not as someone with ul-

HOW TO REACH THE RETIRED BEFORE THEY RETIRE BUSINESS terior motives, but as someone who can provide valuable information and answer important financial questions. I always emphasize education and steer clear of any sales presentations or jargon. I want to position myself as a trusted resource and provide information to everyone in the organization so they can make more informed decisions about their financial future. The conversations should be tailored around what their business needs, how you can meet their expectations and that the ultimate benefit of this training is to help their employees.

The Presentation

After the corporation has committed to holding a training program, it’s important that you already have begun planning the implementation process. There is still work to be done between the time you get a “yes” and the time you actually present to the employees. Be sure to tell your contact at the corporation what you will need for your presentation — from technology to time frame to training room preferences.

Also, you need an action plan to make the workers aware of the training. Can you add an article to the company’s internal newsletter? Can information be passed out to the employees? Can signage be placed around the office? In order for the employer to maximize the benefits of your training, workers must know it exists. See if you can take an active part in generating interest. By setting expectations and communicating effectively, you will solidify your role as a resource. There is no need to “sell” your services at the presentation. You simply need to let the audience know that you will make yourself available if they have any additional questions afterward. Their employer already has endorsed your expertise by having you present to the group. You already have illustrated your expertise on financial and retirement planning during the presentation. Someone coming to see you for personalized insight on their financial situation is not a stretch. If they need you, there’s a good chance they will seek you out. After you have one or two organiza-

tions on board for training, it becomes easier to prospect to additional corporations. You have a point to reference and experience you can refer to. Soon enough, you will have corporations reaching out to you for access to your training programs for their employees. While avoiding sales-type pitches is crucial, positioning yourself as a resource will help catapult you into becoming an expert. As more baby boomers transition into their post-workforce years, corporations continue to be one of the best untapped resources for advisors. By getting in front of your ideal audience and offering important retirement knowledge, you open the door for ongoing opportunities. This will give you the ability to grow your business significantly for years to come. Sean P. Lee, founder and president of SPL Financial, specializes in financial planning for retirement and assisting individuals with creating retirement income plans. Sean may be contacted at sean. lee@innfeedback.com.

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September 2015 » InsuranceNewsNet Magazine

MDRT INSIGHTS

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

Specialization and Collaboration Help You Become a Lead Advisor S pecialize in the area in which you bring the most value to your client, and then build a team of trusted advisors who complement your strengths. By Scott D. Sorrell

how the process of a cross-purchase versus an entity agreement works and how that affects the taxation of the entire opportunity. You need to grasp concepts in order to get hired and stay engaged with the client instead of merely quoting a product.

uccess in financial services comes from bringing your client more value than your competition could and finding a unique way to market yourself. To get off to the right start, one question you must ask yourself is: What excites you and what thrills you about the financial industry? Two of the most effective ways I’ve found that lead to success are specialization and collaboration with other seasoned advisors. First, find the area in which you bring value and specialize in it, and then build a team of trusted advisors who complement your strengths. When advisors begin their careers, they typically start in a place of product sales, a focus on price and the desire to take on as many clients as possible. However, once they move to a position of value and experience, these things begin to make a large impact on their bottom line. I felt like a product salesperson early in my career. When I transitioned from being a product salesperson to being a co-advisor, I was able to qualify for Court of the Table status inside of the Million Dollar Round Table (MDRT) and run an even more efficient practice. With each passing year, I continue to develop techniques to grow professionally. The following tips have helped me become my clients’ lead advisor and reach new heights.

Have Confidence

Understand Key Concepts

Enter into a Mentoring Relationship

It is crucial to master the concepts behind the product and area on which you focus. A simple example would be a businessowner who considers a buy-sell agreement. This typically involves life insurance, so you have to know the product as well as how a buysell works. It is also imperative to know 70

When you are confident, your enthusiasm and experience will shine through to your clients. I have noticed, as a co-advisor, that sometimes the client already will have either a Certified Financial Planner® in charge of their investments or they will have an attorney. I am typically brought in to be the insurance representative. Even if they do not hire me, I know that I prepared myself based on my experience with insurance. In addition, I do not need to bring another professional into that scenario. I might talk to my advance market team, but from a client perspective, the client would see only me and I would have the role as lead advisor. I am aware of which subjects are not my specialty, and it excites me just as much to bring in an additional expert because I am confident in my own area of expertise.

but can be a valuable resource for advice every step of the way. One of my influential mentors is a Top of the Table member of MDRT. Both of our areas of specialization overlap, but I went through training with him and brought him into client meetings. The opportunity to learn and earn was extremely valuable in my career. He helped me master the craft and refine my ability to effectively communicate in front of clients with their other advisors. These tips, along with focusing on one area and building a team, have helped me become a lead advisor. As a lead advisor, you will bring solutions related to your field and provide value in other planning capacities. You will be the first person the client calls when they have a question. Even if their question relates to something that is not part of your practice, you will help them select the planning team versus walking into an already established group. Or, if the client already has a planning team, you have the opportunity to run the meeting. Success in the financial business is attainable if you stay focused and committed, and believe in yourself and your team.

Two of the most effective ways I’ve found that lead to success are specialization and collaboration.

It is important to connect with an experienced and credible professional 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,

InsuranceNewsNet Magazine » September 2015

Scott D. Sorrell, CLU, ChFC, AIF, RICP, CASL, CLTC, of Raleigh, N.C., is a nine-year MDRT member with three Court of the Table honors. Sorrell is an investment advisor representative for Capitol Financial Solutions. Scott may be contacted at scott.sorrell@innfeedback.com.

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NAIFA INSIGHTS

7 Secrets to Successful Selling “Positive people associate with other positive people, and winners associate with winners.” –Brian Tracy

N ow is a great time to be in the profession of selling, according to a noted author and personal-development expert. By Ayo Mseka

idely recognized as a sales training and personal-development authority, Brian Tracy believes that in spite of the challenging new realities salespeople face today, now is a great time to be in the profession of selling. In his book Unlimited Sales Success, Tracy condenses the best of what he has learned throughout his more than 40 years in sales into a source of information for salespeople. And in the book’s final chapter, he offers seven ideas all salespeople can use every day to enhance their sales results dramatically and reap incredible rewards: 1. Get serious about your work. Make a decision to go all the way to the top to join the top 10 percent in your field, Tracy advises. “Anything less than a commitment to excellence is an unconscious acceptance of mediocrity,” he writes. When you make a decision to 72

be the best at what you do, your life will begin to change, and you will be on your way to joining the top 10 percent in your field. 2. Identify your limiting skill to sales success. What one skill, if you were to develop it to the point of excellence, would help you to double your sales and income? Write down your answer to this question, determine what you need to learn and do, and then begin. When you have mastered this one skill, ask the question again. For the rest of your career, Tracy advises, become a do-ityourself project, always working hard to develop the skill that can help you the most at that time. 3. Choose your friends carefully. “Positive people associate with other positive people, and winners associate with winners,” Tracy writes. “When you change your thinking and become a total optimist about yourself and your potential, you will begin attracting into your life other people who think and feel the same way.” Simultaneously, he adds, negative and unhelpful people will drift away.

InsuranceNewsNet Magazine » September 2015

4. Decide to live forever. Determine the level of physical fitness and energy you would like to enjoy for the rest of your life — to age 90 or more. Then examine your current health habits, with a priority on making some improvements. “Your job is to take excellent care of yourself today so that you do live that long, and you feel great about yourself the whole way,” he writes. 5. Practice creative visualization. Tracy writes that “when you visualize and see yourself as calm, confident, positive and successful, your subconscious mind accepts that picture as a command and organizes your external behavior so that it is consistent with your inner picture.” You change your outside life from the inside by creating exciting mental pictures of the person you would like to be and the life you would like to live. The person you “see” is the person you will “be,” he adds. 6. Practice positive self-talk. Tracy writes that the most powerful words in the world are the words that you say to yourself and believe. When you repeat these positive messages, you program them deeper and deeper into your mind until acting consistently with them comes naturally to you. 7. Get going and keep going. Be intensely action-oriented, with a sense of urgency. Keep repeating to yourself these magic words, “Do it now! Do it now! Do it now!” until they become programmed into your thoughts and feelings. “As Albert Einstein said,” Tracy notes, “nothing happens until something moves. Your job is to move. Be sure that you are the fastest-moving person on your sales team — the one who is in continuous action.” Ayo Mseka is editor-in-chief of NAIFA’s Advisor Today magazine. Ayo may be contacted at ayo.mseka@ innfeedback.com.

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THE AMERICAN COLLEGE INSIGHTS

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How to Help Families Understand Life Insurance Is Not Optional W hen families understand the real cost of life insurance, they realize that not only can they afford it, but they cannot afford to go without it. By Jocelyn Wright

eptember is Life Insurance Awareness Month. If you are suppressing a yawn at this point, the startling statistics revealed by the 2015 Life Insurance Barometer Study should serve as a wake-up call. According to the study, which was conducted by Life Happens and LIMRA, more than 40 percent of Americans have no life insurance at all. The problem is even more chronic for women, who historically have been underinsured. It is estimated that the amount of life insurance owned by women is about 69 percent of that owned by men, and 43 percent of women do not have any life insurance at all. It is unfortunate that our society still tends to undervalue the contributions of women to the household, especially if they are stayat-home mothers or caregivers without a quantifiable salary. To help with the guesswork, salary. com in its Annual Mom Salary Survey estimated that the total annual salary for a stay-at-home mom in 2014 should be $118,905. The number of women who are the primary breadwinner of the household, or in many cases the sole breadwinner of the household, continues to increase. It is imperative that these women have adequate life insurance to provide for their families in the event of a premature death. Women also are more likely to be the main caregivers for an aging parent or loved one. With so many depending on women, the importance of proper coverage is critical. While 66 percent of single mothers do have life insurance policies, only 33 percent have sufficient coverage to satisfy their dependents’ expenses for any substantial length of time. 74

The Insurance Barometer Study also indicated that 30 percent of those surveyed believed they needed more life insurance and 43 percent said the loss of the primary breadwinner would have a financial impact within six months of their death. Despite these facts, 54 percent said they were unlikely to buy additional life insurance in the next year. Why the disconnect? If consumers recognize they are underinsured and are aware of the potentially devastating financial effects, why are they not taking corrective action? The Insurance Barometer Study found that mistaken perception about the actual cost of life insurance was at the root of the problem. The study showed that most consumers have an unrealistic expectation of the cost of insurance. About 80 percent of respondents overestimated the cost. Millennials in particular missed the mark by as much as 213 percent, and members of Generation X were off by 119 percent. Insurance protection is not nearly as expensive as people think it is. When compared with other monthly costs like cable, lunches out or the occasional stop at the coffee shop, life insurance is very affordable. When families understand the real cost of life insurance, they realize that not only can they afford it, but they cannot afford to go without it. As advisors, we know firsthand the importance of life insurance in the overall planning process. We have either seen or heard how the premature death of a loved one without adequate insurance can completely derail a financial plan. Yet it seems that many of us have fallen short in raising the consciousness of the growing segment of the population who remain uninsured or underinsured. This is where the industry, with robust campaigns like Life Insurance Awareness Month, can step up to the plate in order to provide the additional educational tools advisors and consumers need to make appropriate decisions about their family’s financial security.

InsuranceNewsNet Magazine » September 2015

Here are a few ideas for advisors to use during Life Insurance Awareness Month: [1] Use the resources provided by Life Happens in client meetings and educational seminars. At lifehappens.org, you will find videos, downloadable brochures and infographics, and real stories about real families and the impact of life insurance. [2] Offer complimentary policy reviews and life insurance needs analyses. Make sure to include couples so that both parties are adequately covered. [3] Contribute an article to your local newspaper about the importance of life insurance, or share a story about how life insurance may have impacted you or a client. [4] Sponsor “coffee and conversations” get-togethers, and encourage your female clients and prospects to attend. [5] Implement a life insurance campaign in your office with the goal of protecting a certain number of lives by the end of the year. [6] Record a message on your voicemail informing clients of Life Insurance Awareness Month and welcoming them to contact your office for more information. [7] Engage your social media audience with posts, facts and figures about the real cost of life insurance, with messages provided by Life Happens. Take advantage of Life Insurance Awareness Month and its resources as an opportunity to engage consumers, but don’t stop there. Keep the conversation about the benefits of life insurance going 365 days a year. Jocelyn Wright is the chair of The State Farm Center for Women and Financial Services at The American College. Jocelyn may be contacted at jocelyn.wright@ innfeedback.com.

MARKETPLACE

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ADVERTISER INDEX Advertiser

Website

Phone

3-Mentors

www.iul73.com

AccordiaLife

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Aflac

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American College

www.theamericancollege.edu/clu

888-263-7265

American Equity

life.american-equity.com

888-647-1371

Assurity

www.lifeischanging.com

BackNine Insurance

www.back9nevermiss.com

29, 31

Bankers Fidelity

www.bankersapp2lead.com

Brokers Alliance

www.eliteagentsonly.com

Brookstone Capital

www.brookstonetraining.com

IBC

BSI

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Celebrity Branding

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FC, 27

Cigna

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DTCC

www.dtcc.com/standardizelife

Equitrust

agents.equitrust.com

800-811-9733

First Family Insurance

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800-962-2219

First Income Advisors

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Fortify Insurance Group

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Guggenheim

www.guggenheimkit.com

855-782-8039

Illinois Mutual

www.welcomelifeagent.com

800-437-7355 ext 775

Imeriti Financial Network

www.topiul.com

855-601-9442

Impaired Disability Underwriters

www.toughestdicases.com

844-209-9633

Kansas City Life

www.kclife.com

800-258-4525 ext 8120

Levinson & Associates

www.ultimatedooropener.com

800-375-2279

LifeSecure

www.yourlifesecure.com

866-582-7701

Minnesota Life

www.securian.com

888-413-7860 opt 1

Morgan White Group

www.premiumsaverplan.com/cadillac

877-759-5728

23 855-887-4487 opt 3

51 59

44-45

75 15

Mutual of Omaha

Mutual Trust Financial Group www.mutualtrust.com/bpc

800-323-7320 ext 5309

NAIFA

www.naifa.org/itpays

877-866-2432

Nationwide

www.nationwidefinancial.com/uprooted

Oxford Life

www.oxfordlife.com

888-203-6221

Pacific Life

www.defendretirementnow.com

855-584-0661

Paperback Expert

www.24hourpaperback.com

Peak Pro Financial

www.incomeridersolution.com

866-268-2640

Petersen International

www.piu.org

800-345-8816

Protective Life

www.sellwhatmatters.com

Prudential

www.prudential.com/benefitaccess

844-606-7873

2-3

Safe Harbor Financial

www.fiaperformance.com

844-803-7640

Sagicor

www.sagicorlifeusa.com/accelewriting

888-724-4267 ext 4680 IFC

Super G Funding

www.supergfunding.com

800-631-2423

Tucker Advisors

www.tuckerartofselling.com

855-454-2638

Transamerica

www.engagengo.com/transamerica51976

Transamerica LTC

www.taltcsecure.com

WealthVest Marketing

17, Ins

6 49 855-478-3673

September 2015 » InsuranceNewsNet Magazine

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

Awareness Is the Key to Increased Life Insurance Ownership Median Estimated Yearly Cost for a $250,000 Term Policy $600

The actual cost is $160 per year* $500

By Ashley Durham

“T

he first step toward change is awareness.” That quote, attributed to psychotherapist Nathaniel Branden, fits nicely into the spirit of Life Insurance Awareness Month. Each September, insurers, agents and financial advisors are encouraged to remind their clients and the public of the importance of life insurance in their financial plans. The good news is that the industry will be speaking to a group already on its side. LIMRA research shows nearly nine in 10 Americans already believe most people need life insurance, and one-third of Americans believe they themselves need more coverage. Consumer belief, however, does not always translate into action. Only one in 10 is likely to purchase life insurance this year. Perceived expense and having other financial priorities are top reasons consumers say they don’t buy life insurance. The perception that life insurance costs too much is due in part to a lack of awareness. When consumers were asked how much a $250,000 term policy would cost for a healthy 30-year-old, 80 percent overestimated the price. In fact, their median estimate was more than twice the actual yearly cost. So a key message to convey to consumers is how affordable life insurance can be. Putting the price of life insurance in perspective also may help motivate consumers to buy. The actual cost of term life insurance in the example mentioned previously is $160 per year. That’s less than 50 cents a day, or cheaper than a cup of coffee. By illustrating the actual cost of the coverage, financial professionals can help their clients justify making life insurance part of their budgets.

$400

All consumers

$400

Consumers <25

25 or older

$360

Consumers with life insurance

Without life insurance

*Best annual cost of a 20-year, $250,000 level-term policy for a healthy, nonsmoking 30-year-old consumer, as quoted by Quick Life Center

In the 2015 Insurance Barometer Study, consumers said the top financial priorities that kept them from buying some or more life insurance were necessary living expenses (mortgage, groceries, etc.) followed by additional living expenses (Internet service, cable, cell phones, etc.). More knowledge of permanent insurance’s potential benefits also can motivate consumers to purchase it. LIMRA research shows that just under half of Americans know permanent insurance can accumulate a cash value they can borrow against. This could be of particular interest to the one in three people who hasn’t purchased life insurance because saving for emergencies and for retirement rank as higher priorities. In retirement planning, life insurance can provide important protection throughout a worker’s career as they save for their future following their working years. While eight in 10 consumers say they research life insurance online before they purchase it, the advisor continues to play a significant role in the process. Once the main source of life insurance knowledge, successful advisors now serve in a coaching role to help consumers make the best decisions for themselves and their families. Despite all the Internet access, faceto-face is still the most preferred way to purchase coverage.

InsuranceNewsNet Magazine » September 2015

Life Insurance Awareness Month, sponsored by industry trade association Life Happens, is the perfect opportunity to reinforce how essential financial protection can be to families. One-third of Americans say they aren’t sure how soon their family’s financial well-being would be affected if they lost their primary wage earner. Thirty percent said their family would feel the impact in just one month and half would feel it within a year of their loss. Our research also found that life insurance ownership had very little impact on these results, suggesting a good number of those who have coverage need more protection. So as the quote above suggests, before consumers take action and purchase life insurance, they first need to increase their awareness of it. Life Insurance Awareness Month can be that first step to helping consumers get the proper protection for their families. Ashley V. Durham is an assistant research director in insurance research for LIMRA. She is the project director for the U.S. Individual Life Insurance Sales Studies, the U.S. Individual Life Insurance Yearbook and the Insurance Barometer Study. Ashley may be contacted at ashley.durham@innfeedback.com.

As seen in InsuranceNewsNet Magazine

Source: 2015 Insurance Barometer Study

C onsumers’ perception that life insurance costs too much is due in part to a lack of awareness.

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