InsuranceNewsNet Magazine - October 2019 by InsuranceNewsNet

HEALTH & BENEFITS Thought Leadership Special Section • P. 20

Olympic Medalist Paul Kingsman’s Winning Financial Planning Tips PAGE 10 Annuities In The Digital Age: What You Need to Know PAGE 32 4 Things To Consider When Selling Hospital Indemnity Insurance PAGE 36

How brokers can reduce the cost of their clients’ health insurance by taking on the cost of health care itself.

PAGE 16

October 2019

JACKSON CEO TALKS ADVISOR EMPOWERMENT, Improving Client Outcomes and Future of Retirement Full story, page 6

t h i n g s p e o p l e s ay t o t h e i r f i n a nc i a l a dv i s or s

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Presenting the Lifetime Check. It’s money your clients can receive every month in retirement for as long as they live. To learn more about the Lifetime Check, go to jackson.com/lifetimeincome Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company® or Jackson National Life Insurance Company of New York® and do not apply to the investment performance of the separate account or its underlying investments. Annuities are issued by Jackson National Life Insurance Company (Home office: Lansing, Michigan) and in New York by Jackson Life Insurance Company of New York (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC. These products have limitations and restrictions. Contact the Company for more information. Jackson is the marketing name for Jackson National Life Insurance Company and Jackson National Life Insurance Company of New York.

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Out of the Box Thinking: A Gift of a Lifetime Most people put life insurance in a mental box. They think of it as income replacement in the event of the death of the primary wage earner, a way to pay off a mortgage or provide an asset base for loved ones. Whole life insurance, however, has many other potential uses. One of the most effective ways to use whole life insurance is to purchase a policy for a minor as a way fund a child’s yet-to-be-defined aspirations and secure that child’s financial future with: A guaranteed amount of life insurance protection to help protect the child’s family. A financial resource, with guaranteed growth, available for important life events, like paying for college, funding a wedding, making a down payment on a house, or starting a business. Also, unlike popular college savings plans, like 529 plans, the policy’s cash value is not considered for financial aid determinations. Cost effective coverage with optional guarantee of future insurability. Many whole life insurance policies for minors offer additional insurance riders, which may be purchased for an additional cost. Life insurance purchased for a minor doesn’t fall neatly into people’s preconceived notions, so it requires the dispelling of assumptions and educating clients on the many lifetime benefits whole life insurance has to offer. Whole life insurance on a minor has some unique considerations which you should explore before presenting to clients: Special Considerations when writing a whole life policy on a minor Face Amount. The amount of insurance allowed on a minor child is determined on a case-by-case basis and may be limited to a proportion of insurance coverage on the lives of the child’s parents. In families with multiple children, each should carry equal coverage unless circumstances warrant otherwise. Ownership. Because minors lack legal capacity to enter into a contract, the donor could own the policy and then decide at some future date, to gift the policy. Other common forms of ownership include custodianship for the child under the Uniform Transfers to Minors Act or putting the policy could be into a Minor’s Trust or Irrevocable Life Insurance Trust.

Premium payments. Typically, the intent is to satisfy all premium obligations and not leave the child with future financial obligations, making 10, 15 or 20 pay scenarios most attractive. Ability for enhanced performance. The average age of whole life purchases is between 35-55, which gives a policy on a minor a 35-year head start to enjoy the power of tax free compounded growth. Therefore, when illustrating juvenile life insurance, the cash value over time paints a compelling picture. The policy, however, has the potential of performing even better than illustrated. Here’s why. Most juvenile applications qualify for non-medical underwriting and receive juvenile health ratings. When the child reaches age 18 and subject to underwriting evaluation, he or she may be eligible for an upgrade in classification. A rating improvement allows future dividends to be earned on a more favorable basis than currently. If your clients want to help their children or grandchildren reach their dreams, encourage them to think outside the box by exploring the lifetime benefits whole life insurance has to offer. Massachusetts Mutual Life Insurance Company (MassMutual) helps brokers keep their clients covered through local support services, a wide array of high-quality insurance products, estate and business planning expertise, and a relationshipbased approach. For more information about MassMutual Brokerage, visit www.fifthavenuefinancial.com

Melissa Teixeira, ChFC, CLTC a Vice President at Fifth Avenue Financial who has nearly 20 years’ experience assisting financial service professionals help clients establish the financial security they want for themselves, their families and their businesses. mteixeira@fifthavefinancial.com 212.642.4829

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IN THIS ISSUE

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OCTOBER 2019 » VOLUME 12, NUMBER 10

HEALTH/BENEFITS

FEATURE

Cost Cutters

36 4 Things To Consider When Selling Hospital Indemnity Insurance By Christin Kuretich More than many other voluntary products, hospital indemnity insurance is a companion to an employee’s major medical coverage.

By Susan Rupe

The “magic sauce” for helping employer clients reduce the cost of care for their workers.

INFRONT

8 I nsurers Exit N.Y.; Trump Turns Up Heat On Fed

ADVISORNEWS

40 Women Need Financial Planning That Fits Their Unique Needs

IN THE FIELD 22 A Seat At The Table

By John Hilton and Cassie Miller The fallout from the tough best interest regulation passed by New York officials has begun.

By Cassie Miller Cait Howerton is using her tenacious curiosity to challenge clients’ money beliefs while promoting diversity in the financial services world.

LIFE

28 How The Loan Ranger Can Save Policies In Peril

10 What The Olympics Can Teach Advisors About Success

Paul Kingsman was an Olympic medalist in swimming before he took his-winning ways to the world of financial planning to build a successful practice. In this interview with Publisher Paul Feldman, Kingsman describes how discipline and an eye on success turn advisors into winners.

By Marguerita Cheng Women have distinctive life experiences, circumstances and goals, and advisors must consider those distinctions when helping women plan their financial futures.

INBALANCE

46 To Fly Or Not To Fly, That Is The Question By Gerry R. Wevodau Flying must be taken seriously and it is not for the faint of heart, but flying has great rewards and will give you a sense of personal accomplishment.

By Anthony Giannone The problems associated with heavily-loaned policies do not go away, and these policies don’t magically lapse without tax consequences.

INTERVIEW

online

www.insurancenewsnetmagazine.com

BUSINESS

48 A Guide To Getting Referrals That Are Just Right

ANNUITY

32 A nnuities In The Digital Age

By Bill Cates How to increase the likelihood of getting introduced only to prospects who are a perfect fit for your business.

By Katie Thompson More carriers are incorporating annuities into digital platforms. What advisors should know about this changing technology.

INSURANCENEWSNET.COM, INC.

275 Grandview Ave., Suite 100, Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton ADVISORNEWS MANAGING EDITOR Cassie Miller VP SALES Susan Chieca

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InsuranceNewsNet Magazine » October 2019

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WELCOME LETTER FROM THE EDITOR

Actual Health Care

ou could practically hear every eye in the room roll back when Dorothy, our human resources director, explained why our health insurance rates were increasing so dramatically and what we could do about it: “You can just stay healthy!” To be fair, that was the last, impromptu “option” on the list, but it struck us as pretty obnoxious coming from an executive of a newspaper corporation. This was 1988 and health insurance was just starting to get more complicated and far more costly, with increases pushing 50% year over year. My employer did not have control over the rates, but Dorothy got the brunt of our frustration. I was just starting out in newspaper journalism, not a lucrative profession. So every dollar counted. It took me many years to realize that Dorothy was right that the aspect of my health insurance that I had the most control over was my health itself.

Whither Wellness?

Controlling cost is the hard work of the brokers featured in this month’s feature on health insurance from Managing Editor Susan Rupe. The brokers have intriguing systems of negotiating prices and structuring benefits to not only lower employer expenses but also eliminate many of the out-of-pocket expenses that bedevil us.

The brokers see it as focusing on the health care costs rather than on the insurance rates. It certainly makes sense. But what you won’t find in the article are wellness programs. That’s because even though 50 million employees are covered by them, the programs don’t work. At least, that has been the finding of a few significant studies, lately. For example, researchers on behalf of the National Bureau of Economic Research last year published the results of the Illinois Workplace Wellness Study, which may prove to be fatal to wellness programs, or at least how they are conducted. Besides looking at studies, the three researchers actually set up a wellness program for an employer with more than 12,000 workers. What they found was one of those conclusions that seems obvious in retrospect: 4

The people who were more likely to do healthy things were most likely to participate in the program and were also more likely to be healthy already. “After one year, we find no significant effects of our wellness program on the many outcomes we examine,” according to the report.

Disease Control reported that nearly all premature deaths are caused by lifestyle. “The results of this analysis indicate that, when considered separately, 91,757 deaths from diseases of the heart, 84,443 from cancer, 28,831 from chronic lower respiratory diseases, 16,973 from cerebrovascular diseases (stroke), and 36,836 from unintentional injuries potentially could be prevented each year,” the CDC wrote. It is clear that “lifestyle” means diet. Study after study shows it, but one massive study published in The Lancet this April

Years Lost Due To Disability And Premature Death, Per 100,000 Population, 2017 United States United Kingdom Germany Belgium Canada Australia Netherlands Austria Comparable Country Average Sweden France Switzerland Japan

24,306 20,121 19,580 19,465 19,227 19,058 18,716 18,621 18,533 18,002 17,833 17,048 16,214

Source: KFF Analysis of IHME Global Burden of Disease Study (2017)

It is not difficult to imagine why. Who wants to be nagged by their employer and health insurer? It would seem to be a perfect way to get the inner brat to pout and refuse to comply.

More Dollars For Less Health

And it is obvious that we are not well. One look at the chart accompanying this letter reveals that. The disease burden chart shows just how miserable many Americans are. It features the total number of years lost to disability and premature death. Not an area in which the U.S. wants to be No. 1. We have all seen the statistics showing that the United States spends the most on health per capita for the worst outcomes. We spend twice as much as other developed countries for some of the worst results, such as the highest infant mortality. These findings coincide with the growing realization that Americans are committing suicide by fork. The Centers for

InsuranceNewsNet Magazine » October 2019

is the most compelling. These researchers looked at 17 years’ worth of data from 195 countries. Here is what they found: “Suboptimal diet is responsible for more deaths than any other risks globally, including tobacco smoking, highlighting the urgent need for improving human diet across nations. Although sodium, sugar and fat have been the main focus of diet policy debate in the past two decades, our assessment shows that the leading dietary risk factors for mortality are diets high in sodium, low in whole grains, low in fruit, low in nuts and seeds, low in vegetables and low in omega-3 fatty acids.” So, Dorothy turned out to be right. Pills, tests and surgery are not health care, but actually disease management. We are ultimately the best managers of our health.

Steven A. Morelli Editor-in-Chief

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are also partnering with industry-leading wealth management platform providers, such as Envestnet, so financial professionals can more easily and effectively showcase the impact annuities, and the protection of principal and income they provide, can have on their clients’ retirement plans. How have Jackson’s product suite and distribution efforts evolved to meet consumers’ needs? As the country’s population ages, there is a greater need for retirement solutions that can protect principal and guarantee income for life. To meet this need, we continue to enhance our products as we build our distribution footprint nationwide. New relationships with DPL Financial Partners, T.D. Ameritrade and State Farm have helped further expand our product reach, allowing more financial professionals and clients to access our products. We believe choice is a great thing for the consumer and the financial professional, and our current and future efforts are ensuring more consumers have access to the solutions they need. Switching gears a bit — what do you hope your kids (and today’s youth) know about saving for the future? I am a believer in the idea that people should begin having conversations about money at an early age. First and foremost, kids need to understand what it means to start saving as soon as possible. While my children are now young adults in the workforce, they’ve contributed to Roth IRAs for years and are regular savers. My wife and I recognized the importance of instilling a “save first” mindset early on, as we know strong saving and investing habits can be hard to develop and stick to. As parents, we feel it’s important for our kids to build their financial independence while saving and spending their money — not just spending ours. Discussing the importance of saving with kids will definitely pay dividends in the future. What is Jackson doing to ensure this conversation happens? The lack of financial knowledge in our country is a critical issue, and the best way to tackle this problem is to start having conversations about money early on, both at home and in school. Through the Jackson Charitable Foundation, we are committed to the advancement of financial education across the United States. Our signature program, Cha-Ching Money Smart Kids, is taught in classrooms around the country through Junior Achievement U.S.A. and Discovery Education. Cha-Ching’s storyline revolves around the four key concepts of money — Earn, Save, Spend and Donate — equipping 7- to 12-year-olds with the knowledge, tools and practice they need to make informed financial decisions and achieve their personal goals and dreams. We have reached

Thought Leadership Interview Series

millions of students through this program, and we continue to find ways to help more individuals build their fiscal knowledge and confidence. Jackson is big on helping Americans pursue financial freedom for life. Why is this concept so important? Pursuing financial freedom for life, particularly during retirement, has significant implications for everyone. Helping people retire successfully and

with dignity is our goal, and it is not just a financial goal, but also a social goal. Financial freedom for life means freedom from worry, and Jackson is helping financial professionals and their clients protect clients’ principal and their income, to alleviate the fear of outliving assets or losing money in a market downturn. Millions of Americans trust us to help secure their financial futures, and I’m excited to work for a company that upholds such a tremendous responsibility. •

What is an annuity? An annuity is a long-term, tax-deferred vehicle designed for retirement. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59 1/2. Variable annuities involve investment risks and may lose value. Principal is not protected. Add-on benefits, available for an additional fee, can provide protected lifetime income. Fixed annuities are vehicles designed to protect principal and provide protected lifetime income. Fixed index annuities are vehicles designed to protect principal while allowing access to index-linked market growth. Add-on benefits, available for an additional fee, can provide protected lifetime income. Guarantees are backed by the claims-paying ability of the issuing insurance company. Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, annuities are issued by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York). Variable products are distributed by Jackson National Life Distributors LLC. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact the Company for more information. Jackson is the marketing name for Jackson National Life Insurance Company and Jackson National Life Insurance Company of New York. PR3254 08/19

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INFRONT

Insurers Exit N.Y.; Trump Turns Up Heat On Fed to provide the highest level of service to our existing New York customers.” In the meantime, the National Association of Insurance Commissioners is hoping to finalize an annuity sales By John Hilton and Cassie Miller model law by the group’s fall meeting in December. New York regulators continue he fallout from the tough best to push the parent organization to adopt interest regulation passed by the framework of Regulation 187. New York officials has begun. Many people in the industry think that is Just weeks after Regulation the direction annuity regulation is heading. 187 took effect, two major insurers pulled “The New York regulation will become their annuity business from the state: the template for other states,” said Birny » Jackson National suspended the Birnbaum, executive director of the Center sale of fee-based annuities. A Jackson for Economic Justice, a consumer-focused spokesman called the suspension “temorganization. “It may take another life inporary” until the company sorts out surance or annuity sales scandal to speed compliance issues. things up, but the application of a robust » Penn Mutual suspended all annubest interest standard of care to annuities ity applications, effective Aug. 30. The and life insurance is inevitable.” Pennsylvania-based insurer will cease New York has a solid ally 3,000 miles away. California Insurance Commissioner Ricardo Lara’s “It may take another life insurance or annuity sales scandal office told InsuranceNewsNet to speed things up, but the application of a robust best interest in July that it wants “as close to a fiduciary standard as possible.” standard of care to annuities and life insurance is inevitable.” — Birny Birnbaum, Center for Economic Justice If the NAIC doesn’t come through with a tough standard, accepting life insurance applications in a requirement that insurers offering both “like New York, we may decide to pursue New York on Dec. 31. fee- and commission-based annuities de- laws that are stronger than the revised The Penn Mutual timeline reflects part liver a comparison between the two prod- NAIC Model Regulation,” Lara’s office two of Regulation 187. The rules will be ucts. A spokesman for the company sent said in an email. extended to life insurance on Feb. 1, 2020. InsuranceNewsNet the following: For now, the NAIC Annuity Suitability That is just one area where rule borrows “Effective Aug. 12, Jackson temporarily Working Group is holding two-hour heavily from the late Department of suspended all advisory sales in New York conference calls to work through its Labor fiduciary rule. as we and other market participants con- model language. The group is working But while the DOL rule was tossed out tinue to work through the product disclo- with a draft model that Chairwoman by a federal appeals court, Regulation 187 sure requirements in Regulation 187 with Jillian Froment, director of the Ohio opponents were not as successful. Acting the New York Department of Financial Department of Insurance, has termed Albany County Supreme Court Justice Services. We remain committed to deliv- “less than a fiduciary standard, but is more Henry Zwack ruled July 31 that the New ering helpful and relevant disclosures to than suitability.” York Department of Financial Services consumers and distribution partners and was within its authority when it issued to resuming sales of our advisory prod- I n s u r a n ce N ews N e t Senior Editor John Regulation 187. ucts in New York as soon as possible.” Hilton has covered As this issue went to press, the National A Penn Mutual statement does not rule business and other Association of Insurance and Financial out a return to product sales in New York. beats in more than 20 Advisors–New York and the Independent “This decision was made in the best inter- years of daily journalInsurance Agents and Brokers of New ests of all of our policyholders,” the statement ism. John may be reached at john.hilton@ innfeedback.com. Follow him on Twitter York, plaintiffs in the lawsuit, had not said. “We remain committed to continuing @INNJohnH. Insurers are unsure how to prepare for some of New York’s best-interest regulations, while Trump pushes for lower rates.

appealed Zwack’s decision. Speculation is rampant that more insurers will pull business from New York in the months ahead. The issue is liability. The rule requires that financial services providers consider the interests of the consumer above everything else when making the annuity recommendation, mandating that any advice be “based on an evaluation of the relevant suitability information of the consumer and reflects the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing.” But it’s the training requirements that are likely causing heartburn for insurers. The rule mandates that insurers and broker-dealers develop training programs for their producers that sell annuities. Jackson is reportedly taking issue with

InsuranceNewsNet Magazine » October 2019

INSURERS EXIT N.Y.; TRUMP TURNS UP HEAT ON FED INFRONT

Trump’s Beef With The Fed

resident Trump’s ongoing Twitter war with the Federal Reserve, and more specifically with Fed Chairman Jerome Powell, has shown a willingness to put pressure on the otherwise independent central bank. In his criticism, the president most often lashes out at Powell and the Fed for doing too little or for its inaction altogether around the issue of interest rates. Trump isn’t the first president to do so. Presidents Lyndon Johnson and Harry Truman also put pressure on the Fed to lower or maintain interest rates, to varying outcomes.

operations — “and monitor [the banks’] impact on the financial system as a whole.” 4. Promote consumer protection and community development — “through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.”

What Exactly Is The Federal Reserve And What Are They In Charge Of?

The Federa l Reser ve or U.S. Central Bank is made up of three key entities — the Board of Governors, 12 Federal Reserve Banks and the Federal Reserve Open Market Committee. The 12 Reserve Banks follow geographically outlined districts, each having its own Reserve Bank. The district boundaries were based on prevailing trade regions that existed in 1913 and related economic considerations. During Fed meetings, policies — including interest rates — are voted on by these 12 districts.

The Federal Reserve’s five primary functions are to: 1. Conduct the nation’s monetary policy — “to promote maximum employment, stable prices and moderate long-term interest rates in the U.S. economy.” 2. Provide and maintain effective and efficient payments systems — “through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments.” 3. Supervise and regulate banking

5. Promote financial system stability — “and seek to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad.”

Is The Fed Independent?

Kind of. The Federal Reserve is independent from the rest of the federal government in that its funds come from its own operations, not from Congress. Other than funds and its governors’ extremely long tenures, it’s not as independent as it’s often described. When making policy, the Fed still has to take into consideration the information they are receiving from global markets, lawmakers, investor expectations and even presidents. This is extremely true of interest rates.

Are Trump’s Complaints About The Fed Valid?

The White House has said that the Fed is the biggest problem facing the economy, but is the Fed really the enemy?

Short answer: No. Here’s why: Trump has often touted on social media and at his rallies the triumphs and successes the economy has seen under his presidency. With a possible recession riding his coattails, Trump is pressuring the Fed to give the economy a recession-busting boost before the 2020 election. Unfortunately, the evidence suggests that interest rates aren’t the problem. Unlike past circumstances, the unemployment rate is at a record low and inflation would not prompt an interest rate drop from the Fed either, since it is currently below the Fed’s 2% target. Additionally, investors are still borrowing at reasonably cheap rates and companies are not worried about access to credit, leaving a gaping hole in Trump’s endless search for someone to blame where interest rates are concerned. What companies are complaining about are tariffs. President Trump’s ongoing trade war with China continues to be “a dagger in the body of the economy,” as one economist described it. Not only does Trump’s trade war have direct costs to the economy, but it also causes uncertainty and lack of confidence in the market among investors. If inflation, unemployment and credit were issues afflicting the economy, the Federal Reserve would be inclined to act. The economy is slowing, but stocks are still performing well. If the Fed acted too swiftly and aggressively and lowered rates prematurely, they won’t be able to cut rates when they are desperately needed, such as during a recession. AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@ Adnewsfeedback . com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.

October 2019 » InsuranceNewsNet Magazine

Paul Kingsman finishes a medal-winning race in the 1988 Olympics.

INTERVIEW

What The Olympics Can Teach Advisors About Success Olympic swimmer PAUL KINGSMAN tells how to get your head in the game to win

hat can an Olympicmedalist swimmer teach us about working with clients? Then you went on to your work life and were convinced that the older generations really needed to get out of the way. It’s the same story for every generation, right? How to win, obviously. That is universal — it just takes a plan, a team and intense focus. And, let’s face it, most insurance agents and financial planners are lousy at doing that for themselves. We tend to go it alone and go after the next thing and not look at the long haul. Sure, some do it well, but don’t we all wish we could plan, team-build and focus a whole lot better? Paul Kingsman knows about it because he took his medal-winning ways to the world of financial planning to build a successful practice. Then he broadened into writing, coaching and speaking at events 10

AN INTERVIEW WITH PUBLISHER PAUL FELDMAN

such as the MDRT annual meeting to help others learn how to do it. Among his many awards, Kingsman won a bronze medal in the 1988 Olympics for New Zealand. When he retired from swimming, he went into financial advising. He is now based in South Carolina, using the lessons he learned from two decades of athletic training. He has shared his methods of attaining focus in his book Distraction-Proof Advisor. In this interview with Publisher Paul Feldman, Kingsman tells how to create the conditions for success by getting the right mindset for planning. FELDMAN: How did you go from Olympic swimming to financial planning? KINGSMAN: I was over here on a swimming scholarship at the University of California at Berkeley from 1986 to 1990. During that time, I met my wife, who lived in the Bay Area. We got married and moved back to

InsuranceNewsNet Magazine » October 2019

New Zealand until 2001. In 1997, her mom sold her real estate company, and began a new career with Morgan Stanley. For three years, we kept hearing about how wonderful this industry was, so we came back to the U.S. in 2001 to join her in a partnership at Morgan Stanley. She had her CFP and was far ahead of the curve at that point. I think a lot of that was due to her owning her own business where she was super focused on financial planning. Most places were talking a good game about financial planning, but they were really still focused on pushing stocks and trading. In ‘01, we started a partnership and that’s how I came into the industry and came to love it. FELDMAN: In your book, you say that the steps to winning Olympic gold medals are the same steps to building a successful practice. What lessons do you take from those years of athletic training and apply to the financial services industry?

WHAT THE OLYMPICS CAN TEACH ADVISORS ABOUT SUCCESS INTERVIEW KINGSMAN: Especially when you’re building a business, you have to have a clear plan. I speak from the coaching side of it. In coaching advisors, I meet a number of advisors who can verbalize sort of broad 30,000-foot numbers: “I want to increase by 15%, or I’d like to have $30 million under management by X date.” From those comments, they don’t take the time to distill down exactly what that picture looks like, what does that arrival point look like? When I’m speaking to audiences, I use two images to juxtapose the issue — one is just a blank building site in its first stages where they’ve just broken ground. Then I point out that every building site starts with a beautiful architectural plan of exactly what’s going to happen so that everyone knows what they need to do. So when times get difficult, when there’s all that gunk flooding down the street, people recognize, yeah, this is where we’re going. It’s the same thing with advising. I did that as a swimmer. I started swimming when I was 8. In 1976, when I was 9, I saw the Montreal Olympics. I had a very clear picture — I actually cut out the picture of John Naber, who won the two backstroke events. I had a very clear picture that I was working toward, a very clear image in my mind. That allows you to get specific. From that longer-term picture, it then becomes, “OK, what are my four-year objectives? Where do we want to be in two years? Where do we want to be by the end of this year?” Advisors talk a great game about doing detailed planning for clients and the positive perspectives of doing a plan. Yet many will not take the time to actually do one for their own business or for themselves. FELDMAN: Isn’t that ironic? This is a business of planners and yet we’re the worst at planning for ourselves. KINGSMAN: That’s right. These are some of the aspects that I learned from swimming that went into winning that Olympic medal. And also being part of a successful team from the advisory side and building a speaking and coaching business. But then it’s monitoring it daily. This is not me having it dialed-in perfectly. It’s always a work in progress, but then having very clear 90-day objectives: “This is where I would like to ideally be in 90 days.”

If I have four of those a year, 16 of those over a four-year period, I should be moving the dial pretty significantly in my own life — business-wise, health-wise, spirit-wise, relationship-wise with my wife. I have objectives for all those areas. I think it’s important for advisors to do the same and not just expect stuff to happen because it doesn’t. I think advisors tend to wing it a lot. Advisors, again, talk a great game about what they’d say here or what they’d say there, but when I ask them about actually having verbiage dialed in to where it rolls naturally, they haven’t got it. FELDMAN: Let’s talk about this because language is one of the most important things that we have. We’re communicators. We’re always in front of clients and educating them. What are you seeing advisors get wrong about communication and how do they fix that?

KINGSMAN: I think a lot of them are afraid. The initial upfront claim is that they don’t want to sound canned. Frankly, that’s their hiding place. I will ask advisors what their favorite movie is or who their favorite actor or actress is. They’ll very quickly say, “It’s Robert DeNiro in this movie.” Or, “It’s Julia Roberts in that movie.” They can recite a line verbatim. When I ask them how they felt when they heard it the first time, they’ll tell you it was most memorable because it just clicked with them emotionally. Then I’ll point out that it was a learned line. The actors didn’t even write that line. They just read it, but they delivered it in such a way that it was so compelling, that it evoked emotion, and moved you to a different point. It didn’t waste time and every word was crafted and delivered to do a specific job. When advisors start seeing things that way, then they start to soften up a little bit. An example that I give is when I’m opening a presentation, I have an illustration that I use where I know the words are dialed in perfectly. I’ve done it so many times. As I point out to them, I’m not here to stand in front of you and say, “Gosh, thank you for inviting me here. It’s a pleasure to come and speak to you.” That’s a total waste of their time and money. Coming back to the client-facing meeting, they need to show the client the utmost respect and recognize, “I need to help this person move along this line as swiftly, prudently and clearly as possible.” When they get what I call those verbiage clusters very clear in their mind, the feedback I typically hear is, “You won’t believe this. I felt so comfortable saying this.” Then you ask them why, how they got to that point and they reply, “I practiced it 20 times.” That’s exactly what it’s going to take and, by the way, you’re going to mess it up the first maybe 19 times. When you know that you’ve got that language dialed in, it becomes a lot more fun talking to people because you’re not trying to do it off the cuff. I don’t want to sound critical of people out there, but there’s a lot of content out there that might have worked in the ‘80s. It might have worked in the ‘90s. It is not going to work today. You cannot sit across the table from a $2 million family and talk about your value to them and then ask them who are six other people in their family who could benefit

October 2019 » InsuranceNewsNet Magazine

INTERVIEW WHAT THE OLYMPICS CAN TEACH ADVISORS ABOUT SUCCESS from your help. They’d smile and give you the “let me think about it” response. They’d leave with a bad feeling in their mouth. FELDMAN: How should someone ask for referrals then? KINGSMAN: When they had an updated status review meeting or a portfolio review meeting, it’s saying to clients, “Hey, if you have friends or family who have questions or concerns about …” You can name three different things that are appropriate to that couple or that person. For instance, “If you have friends or family who have questions or concerns about retirement, about what income during retirement looks like, or Social Security and the issues around that, have them give me a call. I’m more than happy to spend five or 10 minutes answering any questions they might have. I don’t promise I’ll bring them on as clients, because it’s got to be a great fit, but I’m more than happy to see how I might be able to help.” That’s key, because if a client sends you the referral of their mother-in-law and they’re not a great fit, you’ve already covered yourself by saying, “I don’t promise I’ll bring them on as a client. It’s got to be a great fit.” When you say that, you subconsciously register with those people, “you and I are a great fit, but I’m only too happy to see how I might be able to help for those 10 minutes. That’s it.” You can repeat that every six times or every other time you see them. There’s just some verbiage that advisors are following, and they feel a lot better when it comes to the issue of referrals. FELDMAN: Do you think that advisors should have more of a scripted approach to their presentations? KINGSMAN: Yes. I think they should have far more of a process for everything that they’re doing. Atul Gawande wrote a great book, The Checklist Manifesto, from a surgeon’s perspective of taking care of processes and procedures in operating rooms. This is one of the things I point out to groups. Imagine if a surgeon came in the night before they were going to replace your knee and said, “Hey, guess what? I’ve just done 1,000 knee surgeries as of this morning and tomorrow I’m going to do it completely differently and I’m going to do it 12

left-handed and blindfolded.” Advisors laugh because it is crazy. You would walk out of the hospital very quickly or you would plead with them, “Can you just do what you’ve done every single day for the last 1,000 operations?” The point that I’m trying to make is there is security and safety in repetition. It’s why pilots go though the same checklist every single flight, even on their third flight for the day. It was the same when I was competing in swimming. There’s a process here. Where it’s very difficult now in our culture is the amount of content that is bombarding everyone where there’s a thinking of, “If I don’t keep up and if I don’t keep changing, I’m going to miss out and get behind,” and that is not true. That is the mindset that’s permeating in our culture right now and particularly in our industry where there’s just so much there. It really impacts our human nature of the fear of missing out. FELDMAN: It’s also building a support structure around yourself. Nobody’s been successful by themselves. You always need somebody. KINGSMAN: That’s a great point. I was fortunate to have a great team when I was swimming. I know people looked at me and thought I did a fantastic job, but oftentimes they don’t realize there’s a team around me. I don’t say this lightly, but I had the easy job of just taking care of one thing. My parents were dealing with the media. My mom was dealing with radio stuff. Dad was dealing with sponsorship stuff. I just had one thing to think about. So yes, you do have a support team around you. On the coaching side, even after winning an Olympic medal, I knew I needed accountability. Actually, I never thought of it this way. I would say from winning an Olympic medal, I know I need accountability because I had a coach there. I had somebody watching me from a different perspective. I have that in my own life. When I was living in New Zealand and traveling a lot, I had four guys I was accountable to. They knew when I was traveling. They had my cell number. They could call me. Good true friends where I could go and say, “Hey, this has really got me down. I’m really struggling with this,” or, “This has

InsuranceNewsNet Magazine » October 2019

Develop a Vivid Picture of Your Dream Cultivate your picture of what your diligent work will lead to. Clarify what you want. Create statements in the first person and in the present tense. Use the questions below to generate ideas to help you get specific about your “why.” Imagine your perfect day. • Where are you? • What are you doing? • Who are you with? • How does this make you feel? • What energizes and excites you? Who do you want to be? • How is your physical life? • What positive emotions do you typically feel? • Where are you spiritually? What are your relationships like— with colleagues, clients, friends and family? • What do you believe in? • What do you stand for? • How are you impacting the lives of others? • How do those who know you best describe you? What do you want to have? • What does having that allow you to do? • How does having that make you feel? — Paul Kingsman, The Distraction-Proof Advisor: Get Control, Work Smarter, Succeed Sooner

really angered me. I know anger is a secondary emotion, but that’s the only one I’m looking at right now.” People you could be genuinely honest with. FELDMAN: I noticed that whenever you talk about your Olympic days, you use the word “We” instead of “I.” You’re in a single-person sport where everything is

WHAT THE OLYMPICS CAN TEACH ADVISORS INTERVIEW on you, yet you still felt you had a team and a support network. I think that’s pretty cool. KINGSMAN: That was the same when I came over here into business. I was fortunate to be going into business with my mother-in-law, who knew about the industry by that stage. It’s a team approach. I remember the strategy sessions we had when we laid down the plan for 1988 and who was going to be covering what and how we were going to review it and what we were not going to pay attention to. Everybody knew what that page looked like and there was accountability there. FELDMAN: From what you’ve found in this industry, do you see a lot of advisors having coaches or do you see that only the successful ones do? KINGSMAN: Definitely the latter. When I hear other advisors speak — and the ones who I hear speak at events are typically the most successful advisors in their firm — halfway through the talk, they’ll mention, “I dialed in with my coach last night and he said ‘I’m doing exactly the same thing.’” And many people miss it, while top performers recognize that, “I can’t see everything.” This comes back to swimming. One of the funny things I’ll never forget is when I was 12 years old and for the first time saw myself or watched myself in a lane of swimmers. My coach had videoed that lane of swimmers. There were eight of us in that lane. I couldn’t pick myself out. I knew how I felt in the water. I knew exactly how my stroke felt, but looking at it, I couldn’t pick myself out. You need somebody from the outside providing feedback. After a while, you’ll hear advisors continually coming back to the same issues, but you’ll recognize these are all symptomatic of the same underlying challenge. FELDMAN: Is focus one of those challenges? KINGSMAN: It is important to understand that it’s OK to switch stuff off. You don’t need to listen to every commentator. I like how you cover also some life stuff in your magazine, some holistic kind of health stuff. I think that’s super important. I wish more advisors were reading that type of stuff

instead of just the hardcore, here’s how to double your business in four years and here’s how to get the next 10 $1 million clients. Those kinds of things. FELDMAN: With all the changes we are seeing in the industry and the world, what are your thoughts on the future of our business? KINGSMAN: I started in this business in February 2001 at Morgan Stanley. I then was involved for three weeks at Morgan Stanley’s training in June and July in the World Trade Center. We were the secondto-last class to go through before 9/11. I’ll never forget one of the guys saying this is the greatest time to be in the industry. Who would have thought in two months’ time Wall Street is going to be shot and the very building we’re now talking in is not going to exist anymore? And still there is no greater time to be in this industry. I don’t want this to sound harsh or negative against the industry, but it is unique in that — unlike a lawyer, an accountant, an estate attorney or a dentist - you don’t have to go through graduate school for another four years — and if you’re a surgeon, another seven years — and pay hundreds of thousands of dollars. You can literally get a securities or insurance license, and the very next day, sit across and dispense advice to a $2 million family in their mid-60s that needs everything done properly. There’s no other industry with that much influence. What’s interesting is the people who do pay all this extra money for their credentials — dentists, doctors, attorneys — have very rigid structure. You walk into a dentist’s office and there’s a process. They’ve got hygienists and these three chairs, this is their role. In these three chairs is where we do surgery or examine you. Advisors really rail against structure. It’s an anomaly, I think, in our industry. In blending those thoughts together — recognizing this is the greatest time to be in this industry. There will never be a bad time because people always need help. And then you’re going to succeed far sooner in it the sooner you implement structure and follow it.

NEXT MONTH: Now that you know process is important, how do you shut off the distractions and get it done?

October 2019 » InsuranceNewsNet Magazine

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What About That Yield Curve Inversion? The financial news brought a new

term to the public lexicon: yield curve inversion. What is that? It’s a phenomenon in the bond market where the yield on the benchmark 10-year Treasury note briefly fell below the twoyear rate. It’s typically taken as a sign that a recession is on the horizon. It was enough to spook investors about the U.S. economy and drop the Dow Jones Industrial Average 800 points, or about 3%, in its worst one-day performance of 2019. But was it really all that bad? White House trade advisor Peter Navarro didn’t think so. “Technically, we did not have a yield curve inversion,” he said in an interview on CNN. Navarro called it a “flat curve” because the spread was too narrow. The yield on the benchmark 10-year Treasury note dropped to 1.623%, briefly below the 2-year rate of 1.634%. The yield curve is actually a positive thing, Navarro said. Foreign capital is coming into the bond market due to the strength of the economy, he said, which is bidding up bond prices on the long end and bidding down yields, leading to what he called the flat curve.

MORE SENIORS FILING FOR BANKRUPTCY

One in seven Americans who file for bankruptcy is age 65 or older, an almost fivefold increase in about 25 years, according to the Consumer Bankruptcy Project. This trend is driven by several colliding social and economic forces that are making the so-called “golden years” anything but. Seniors are living longer and paying higher medical costs in return for that increased longevity. In addition, many seniors have little or nothing in the way of a company pension and scant personal savings to fall back on. Debt is an increasing problem for seniors as well. Only one in five Americans age 75 or older were in debt in 1989. But almost half of those in the 75-plus age group were in debt by 2016, the DID YOU

KNOW

Federal Reserve reports. Only 35% of older Americans have a company-funded pension plan and only 60% have any kind of retirement account or personal savings, according to the Transamerica Center for Retirement Studies. Also, one-quarter of retirees in the U.S. have an annual household income of less than $25,000.

TRADE WAR IS BIGGEST MARKET RISK

The U.S.-China trade war is the biggest obstacle to a stock market rebound, PNC Financial warned. The firm’s chief investment strategist, Amanda Agati, told CNBC that investors won’t be able to catch their breath until White House policy issues get settled. Agati uses the market’s volatility to reposition portfolios on days the market

QUOTABLE Nobody knows for sure where the economy is headed, despite the fact that we would all love to have a crystal ball. — Matthew DiGiacomo, certified financial planner with Core Financial Group

is struggling. The key to investing in this volatile environment is to have an iron stomach and a time horizon of at least 18 months, she said. Despite the market’s roller coaster ride, Agati said opportunities exist in emerging markets and in mid- and small-cap domestic equities.

DEFICIT KEEPS BALLOONING, CBO WARNS

The federal deficit will expand by about $800 billion more than previously expected over the next 10 years, the Congressional Budget Office said. Recent increases in spending are pushing the nation into debt levels unseen since the end of World War II. The annual deficit will come close to $1 trillion in 2019. This is an unusually high number during a period of economic growth, the CBO added. Federal spending, as well as a large tax cut in corporate and individual income taxes passed by Republicans in 2017, are the factors driving that number. The CBO emphasized the country is not in a recession. But uncertainty over trade policy is a drag on U.S. growth. In addition, the CBO said the economy is growing more slowly as business investment declines and the manufacturing industry struggles.

Seven in 10 Americans said they are angry at the political establishment. Source: NBC/Wall Street Journal poll

InsuranceNewsNet Magazine » October 2019

COVER STORY

BY SUSAN RUPE

How brokers can reduce the cost of their clients’ health insurance by taking on the cost of health care itself. 16

InsuranceNewsNet Magazine » October 2019

avid Contorno wants employers to imagine they are buying a car instead of buying health insurance for their workers. He describes it this way: “Imagine you go to buy a new car and your budget is $300 per month,” Contorno said. “But the salesman is so good that they wind up getting you into a $1,000-a-month car payment. And on top of that, you discover the car is really low quality. Do you think that switching your car insurance carrier would be a good strategy at that point? But what happens if you get yourself into a better car that costs less money to maintain? Don’t you then lower the cost of your car insurance, too?” Contorno’s point is to look at the health part of health insurance. “You can’t fix health care through insurance,” he said. “But you can fix insurance by fixing health care.” Contorno is the founder of E Powered Benefits in Mooresville, N.C., and wants to help health insurance brokers save their employer clients money on health insurance by cutting the cost of their workers’ health care. How is this done? By having the brokers — not the carriers or the pharmacy benefit managers — take control over the cost of medical care and prescription drugs.

COST CUTTERS COVER STORY Business Group on Health annual survey of nearly 150 of the nation’s largest employers. Employers are looking to their health insurance brokers for ways to keep their workers covered without breaking the bank. Knowing the cost of a medical procedure before it is performed is key to the success of Contorno’s model, he added. “If you don’t know what the cost of something is before you consume it, there’s no way to measure how much it cost before and how much it can cost later, and how much you can save.” The way this works is through a care navigation team that partners with a broker to find high-quality health care providers and negotiates a price for everything from joint replacement surgery to routine medical visits. Workers see no out-of-pocket costs as long as they go through the care navigators and use the doctors or hospitals the navigators direct them to use. If workers decide they want to see a different doctor — perhaps the doctor they have been seeing for years — they will

David Contorno what sits between the two is frequency. The more frequently a doctor and hospital perform a specific procedure, the better they do it and for lower cost. So what we end up doing is incentivizing members to go to places where we have a prearranged, prenegotiated price at a place that we have known quality statistics on.” Having the worker’s health plan pick up 100% of the cost of care, provided that the worker goes through the care navigator, is what Contorno called “the magic sauce.” “This is so important because so many Americans can’t afford their out-of-pocket costs,” he said. What makes the plan attractive to the employer, Contorno said, is that the broker can show the employer the cost of a health care procedure before the employee even shows up in the hospital. When Contorno talks about sending employees to high-quality health care providers, he is not necessarily talking about sending them cross-country to receive care. Walmart recently was in the news for sending some of their employees

Having the worker’s health plan pick up 100% of the cost of care, provided that the worker goes through the care navigator, is what Contorno called “the magic sauce.” In Contorno’s model, the preferred provider organization — or PPO network — used by most health insurance carriers is eliminated. “Instead, we set pricing basically on a multiple of Medicare for some of our care and then we also have a series of direct contracts where we negotiate the cost of care directly for our clients,” he explained. Controlling the cost of health care has become a critical issue for employers as the cost of employee health insurance continues to increase. The total cost of worker health benefits is expected to rise by 5% next year, topping $15,000 per employee. That’s according to the National

continue to pay the same out-of-pocket cost they were required to pay in their original health insurance plan. “We say to employees, ‘If you go where you’ve always gone, you’re going to pay what you’ve always paid,’” Contorno said. “But if you allow our care navigation team to help you find the highest quality provider for whatever you need, then we will waive out of pocket completely. The plan will pay 100%.” Higher quality health care actually costs less money in the long run, Contorno said. “There’s an inverse relationship between cost and quality,” he added. “And

October 2019 » InsuranceNewsNet Magazine

COVER STORY COST CUTTERS

Carl Schuessler

Jr.

to hospitals in distant states to obtain procedures such as back surgeries at a lower cost than they would be able to receive that same surgery closer to their homes. “The average distance one of our members needs to travel to a high-quality, low-cost place of care is 35 miles,” he said. “Maybe it’s twice the distance away, so a 20-minute drive becomes a 40-minute drive. But sometimes we have to send them farther away. It’s all about the best care at the lowest costs, those are the only two things that matter — in that order, by the way.”

the doctor perform the surgery in the specialty hospital instead of the local general hospital and have it covered at 100%. The cost of prescription drugs is another high-price-tag item for employers and their workers. “We have multiple sources of medications that are between 30% and 70% less expensive than getting it at the pharmacy through the pharmacy benefit manager,” Contorno said. “And we say to employees, ‘If you get your medication here, you’ll pay nothing, your employer will pay 100%.’ Now we help people get their insulin and their blood pressure meds and their cholesterol meds. Because when they take those medications as they’re supposed to, they work better. One of the cost drivers of health care is nonadherence to medication and the No. 1 reason people don’t take their medication is because they can’t afford their share of the cost.” How can a broker do this for their employer clients? The first thing, Contorno said, is to break away from the traditional health insurance carriers. “Once you get yourself out of that traditional model and into a model where you have actual control and insight, the broker is limited only by the

negotiate the cost of care, Contorno said. “What we’ve been doing in the last couple of years is creating true win-win situations for the hospital and the employer,” he said. He provided an illustration. “On average, it costs the hospital between 30 and 40 cents of every dollar they collect to actually collect that dollar. They have entire departments to help them with it. If I can eliminate 40% of their waste by getting them paid faster, quicker, easier with less member out-of-pocket cost that they often write off, then they can give me a 30% better discount than they give Blue Cross and still make more money than they do on a Blue Cross patient. So my client pays less, the hospital makes 5 or 10% more profit and everybody’s happy.” How does a broker make money under this arrangement? By fees, and not commissions, Contorno said. “We charge our clients a flat monthly fee,” he said. “I still get bonuses — but they come from my clients and not the carriers. “Every year, I ask my clients, what are your goals you want to achieve for your health plan this year? Usually, they tell me their goal is lowering costs. So I ask them, ‘If we hit those targets, how much more will you pay me?’ And we set a bonus structure to me from the client for me to reach the goals the client wants me to reach. So now I am fully invested in finding any solution that helps me achieve those goals.”

Do The Opposite

Carl Schuessler Jr. is managing principal of Mitigate Partners and BenefitStrategies outside of Atlanta. He is a fan of the TV show Seinfeld, and loves to quote one of the show’s characters, George Costanza. In a famous episode, George decid— Carl Schuessler Jr. ed to do the opposite of whatever his intuition creativity that the broker themselves can told him to do. do,” he said. Schuessler urges brokers to do the opA number of companies provide a bro- posite of what conventional wisdom says ker or an employer with access to prene- if they want to save their clients money on gotiated bundled care from providers and health care. facilities. ”My point is, the richer the benefits, the Brokers can work with providers to lower the claims — that’s the opposite of

“My point is, the richer the benefits, the lower the claims — that’s the opposite of what everybody tells you.” Sometimes an employee can continue to use their regular doctor, but in a different setting, he said. This is particularly true when it comes to orthopedic surgery. If the patient’s doctor has admitting privileges at an orthopedic specialty hospital, the care navigators can arrange to have 18

InsuranceNewsNet Magazine » October 2019

COST CUTTERS COVER STORY what everybody tells you. They tell you to raise deductibles and out-of-pocket costs on employees, but you end up with a functionally uninsured population that isn’t going to use their health plan because they can’t afford to. And then when they get to the point where they do need health care — boom! — they have a blowup catastrophic claim with out-of-pocket costs they can’t afford.” Schuessler created health plans for employer groups by building those plans from the ground up. “We practice employer-built health care, not insurer-built health care,” he said. Each employer group is different, Schuessler said, and he looks at each group’s particular needs in designing a plan for their health care. For example, one of his firm’s clients is a school district with 10,000 people. In working on their health plan, he is attacking the costs of imaging and durable medical equipment. Schuessler employs what he called bottom-up pricing strategies as a foundation where his company — and not a traditional insurance carrier — sets the price. “We try to create safe harbor relationships with hospitals and try to steer employees to those facilities, assuming the quality of care is good there,” he said. “We do practice some direct contracting. We do direct pay. We have a cost and quality

employer decides,” Schuessler said. “Normally it’s up to $1,000. So the employee has a chance to get $1,000 back to offset any costs they might have. They’re happy. The employer is happy because there’s no balance bill. And our partner who’s doing the cost and quality is happy because they get a success fee for that.” The first thing brokers must do to bring their clients’ health insurance costs down, Schuessler said, is to fix the cost of the care itself. “The formula for the cost of care is: cost equals price times utilization. The price is the cost of care. So you first have to get that fixed. No matter what you do, if you don’t bring the cost of care down, you’re really wasting your time.”

Transitioning To A Next Gen Advisor

The health insurance broker of the future will need to move beyond Dan Meylan selling policies to become what Dan Meylan calls a “Next Gen advisor.” his company created a health risk financMeylan is national sales director at ing system for a manufacturer with 700 Allied National, a third-party adminis- employees. It took about 600 man-hours trator of group and individual benefits in to put all aspects of the system into place Overland Park, Kan. and management it appropriately. “Here is the question on that table,” Meylan said. “If you had to bill an hourly rate for the commissions you earn on the account, what would that rate need to be? Is that adequate to cover the cost Brokers have what Meylan called a big of the services you provide? In 85% of the hurdle to overcome in creating solutions cases, it’s not.” for their clients that go beyond selling Brokers who are experienced in conhealth plans. sulting with their clients on all aspects of “The Next Gen advisor will be the eco- employee health care “have a lot to offer, nomic equivalent of a CPA or an attor- but don’t get paid for all they do. It’s a difney” Meylan said. “If they’re good at what ficult transition,” he said. they do and they understand compliance; they understand risk financing; they un- Susan Rupe is manderstand self-funding; they understand aging editor for InsuranceNewsNet. medical underwriting; they work with a She formerly served client to educate their employees — they as communications will not get paid enough doing all that on director for an insurcommission. They will have to transition ance agents’ association and was an award-winning newspaper to a fee for services model and figure out reporter and editor. Contact her at Susan. their hourly billable rate.” Rupe@innfeedback.com. Follow her on As an example, he cited a case in which Twitter @INNsusan.

“The Next Gen advisor will be the economic equivalent of a CPA or an attorney.” — Dan Meylan

company we employ and we use a nurse navigator to guide the employees to care.” It works similarly to Contorno’s model. If the employee uses the nurse navigator to help them arrange for care, “maybe we waive the copay; maybe we waive the out-of-pocket cost,” Schuessler said. “We normally don’t have deductibles in our plans anyway. We find the better the coverage, the lower the claims.” The nurse navigator always tries to get a cash price for any care rendered by a provider. “So if they get a cash price, and it’s less than our plan document states, then the employee has a chance to get 50% of the savings back, up to the cap the

October 2019 » InsuranceNewsNet Magazine

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Outsource enrollments to add value, increase opportunity —Michael Milos, Washington National vice president of sales and strategic growth and business development lead for WN2 Enrollment Solutions

The demand for voluntary benefits is increasing to help reduce employer operating costs, fill coverage gaps and support recruiting and retention, plus improve employees’ financial well-being. Yet many brokers haven’t yet capitalized on this opportunity, saying they need more time to sell, lack knowledge of carriers and products, or want more assurances from carriers about administrative and billing support.

If you’ve had hesitations around offering voluntary benefits, now is the time to partner with WN2 Enrollment Solutions to expand into this dynamic market, especially among small to mid-size employer groups. This premier service combines expertise with a people-first model structured to help you grow your business.

Flexibility, fewer missed opportunities WN2 Enrollment Solutions' career agents are uniquely qualified to manage broker enrollments—regardless of group size, location or working conditions—variables that could be more restrictive among traditional enrollers. This flexibility allows brokers to expand their reach and frees them up to focus on what they do best: engaging with potential new clients and building up existing ones.

Employers, employees seek the right support » 1 in 3 employers—especially groups of up to 1,000 employees—prefer a one-on-one meeting with a professional enroller.1 » 1 in 3 employees say their employer or benefits company offers no benefits education or advice.2 » 78% of employers say the main reason they don’t offer voluntary benefits is the “administrative burden.” 3 Eastbridge Consulting Group, A Closer Look at Employer Demographics in the Voluntary/Worksite Market, MarketVision™—The Employer Viewpoint, May 2019; 2 Lisa Greenwald and Paul Fronstin, The State of Employee Benefits: Findings From the 2018 Health and Workplace Benefits Survey, EBRI Issue Brief, no. 470 (Employee Benefit Research Institute, January 10, 2019); 3 Willis Towers Watson, 2018 Willis Towers Watson Emerging Trends in Voluntary Benefits Survey, 2018. WN2 Enrollment Solutions is a division of Washington National Insurance Company, home office: Carmel, Indiana. Policies and benefits are subject to state availability. 1

Resources, tools and more for benefits brokers Brokers seeking the knowledge or bandwidth to enter the voluntary benefits market can now capitalize on enrollments— single or multi-site, or even a full block-of-business reservice solution. Support from the WN2 Enrollment Solutions team includes: • Education and expertise. During enrollments, agents aren’t technology-dependent, they interact face-to-face with employees taking time to review products and benefit options, answer questions and find what best fits their needs based on age, lifestyle and goals. Education is vital; it’s not a benefit if an employee doesn’t truly understand it. • Products. Brokers don’t need to be carrier and product specialists—save time researching and leave that to WN2 Enrollment Solutions. We have the flexibility to enroll broker products or we have a robust portfolio of in-demand supplemental health and life products we can make available, including popular premium return options. • Administration. This service implements effective communication strategies by conducting employee surveys to identify how employees use current benefits, what’s driving costs and uncover any gaps. Additionally, it provides a benefits administration platform if needed for online enrollment. Custom websites can be created for a single access point for enrollment, plan documents, forms and so on.

Adding value—for employers, for employees, for you WN2 Enrollment Solutions helps brokers underscore potential savings for both employers and employees, which encourages repeat business and fosters long-lasting client relationships—a win-win for all. If you’re ready to accept high-quality support you need, with less time and expertise required from you, adopt a fearless approach to enrollment solutions. No matter the challenge, rely on WN2 Enrollment Solutions for services ranging from sales and quoting to employee education and enrollment.

Visit WNES.info to download a broker resource guide on outsourcing enrollments.

October 2019 » InsuranceNewsNet Magazine

the Fıeld

A Visit With Agents of Change

“N

o, no, don’t touch that!” her vigilant grandfather would yell. From an early age, Cait Howerton became a master of semantics and rebellion — not touching that same precious breakable again, but moving on to the next curious, yet-to-be-held object. Again, her grandfather would yell, “No, no, don’t touch that!” to which a toddling Howerton would retort, “Paw Paw, I’m just wookin.” This “tenacious curiosity,” as Howerton described it, is a trait that she still possesses. Howerton, 29, is using that tenacious curiosity in a much different way than her younger self. She is a certified financial planning candidate, taking her exam for the CFP designation next month, and is also the recipient of the Financial Planning Association’s 2019 Diversity Scholarship. Along the way, Howerton has put her curious nature to good use, always trying to understand the “why” or “how come” and even the “why not.”

Money Matters

Cait Howerton challenges the status quo as she works to promote diversity in the financial services world.

By Cassie Miller 22

InsuranceNewsNet Magazine » October 2019

Growing up in a rural town in Arkansas, Howerton saw the numerous ways money affected everyone around her. “I watched my parents struggle to figure out how to make money work for them,” she said. “They both were overcoming impeding money scripts that each had learned amid their development while learning healthier financial strategies as a couple.” What Howerton didn’t know, was that these early experiences would lay the foundation for her pursuing a career in personal finance. Looking back, Howerton said, she wants to share what she’s learned with her clients. “I strive to help make a difference in the financial trajectory of those whose stories echo my own,” she said. A former marketer, Howerton has a strong interest in how people behave, especially with their money. “I am passionate about helping people uncover their ideal life goals, navigate their values and money beliefs and helping them shift behavior to achieve their dreams,” she said. Howerton has made it her mission to Photo credit: Kaia Lola Lola Land Photography

A SEAT AT THE TABLE IN THE FIELD

provide clients from all walks of life with access to information to help them better manage their money. “As a lesbian financial planner, I hope to help individuals of all backgrounds understand their financial options,” she said. “I want to ensure that individuals

That same night, Howerton met future mentor Elizabeth Jetton. Jetton is a former FPA president and mentor for the FPA’s youngest (NexGen) members, and said Howerton’s young and inquisitive nature caught her attention at the CFP Board event.

from the programming at the 2019 FPA Retreat, Jetton preemptively wrote Howerton a letter of recommendation and encouraged her to apply for the FPA’s Diversity Scholarship. The Diversity Scholarship is rewarded yearly to financial services students and professionals who demonstrate and act upon an intense desire to promote diversity in the financial planning profession.

Hungry For More

In May, Howerton was recognized by the FPA for her work to promote diversity in the financial planning profession. As Visibility: Making Awareness: Being sure people can see the recipient of the FPA’s 2019 Training: Educate aware of your firm themselves in the Diversity Scholarship, Howerton your team on the Mentorship: Be a Listening: Ask spaces that they or association's difference between guiding light for questions, open received a complimentary trip to want to be as a need for more or tolerance and others. dialogues professional by better diversity and the FPA Retreat in La Jolla, Calif., acceptance. showing diverse inclusion efforts. and one year of membership to faces in these roles. the organization. Howerton called her experience at the retreat a game-chang5 Ways The Financial Services Industry Can Be More Inclusive er for her as a NexGen planner. “I had access to meet and learn from absolutely amazing and who have been historically overlooked Jetton reassured Howerton that her brilliant minds in financial planning,” she by financial professionals are not denied presence in the industry was necessary said. access to financial education or wealth and important, and this encouragement FPA 2019 President Evelyn Zohlen management as the result of institution- motivated Howerton to continue pursu- expressed enthusiasm over Howerton’s alized discrimination.” ing a career in financial planning. achievements and how they might help “She said I needed to keep going and the association represent diverse groups Blazing The Trail not to give up and that there was room for better. “Diversity in the financial planHowerton immediately saw the need for me here in this field,” Howerton said. “She ning profession inspires inclusivity and more diversity in the financial planning said that she was one of the first female creativity, and is key to helping financial world after attending her first CFP Board event. She vividly recalled how the room looked that night. She remembered being just one of seven women in a room of more than 300. She recalled seeing just three people of color, 15 NexGen members and one person who identified as LGBT. Howerton, baffled by the lack of diversity and representation in financial planners in Georgia and she’s planners reach a growing, diverse poputhe room, wondered if there was a place still at it. She’s still taking her seat at the lation who all can benefit from the value at the table for her in the financial ser- table of financial planning and making of financial planning,” she said in a statevices industry after all. sure that others feel welcome.” ment. “I felt defeated. To look around and From the beginning, Jetton and Howerton said that another mentor’s see a room or an industry primarily of Howerton developed a close friendship, guidance and wisdom has taught her inCaucasian, cis-gender males, and then to learning about each other and sharing valuable lessons about being her true self, look at America today, it didn’t look like insights about the financial planning in- as well. an accurate representation of who we are dustry. Laura LaTourette is a financial planner as a populace,” she said. Believing that Howerton would benefit and a member of the LGBT community.

Howerton, baffled by the lack of diversity and representation in the room, wondered if there was a place at the table for her in the financial services industry after all.

October 2019 » InsuranceNewsNet Magazine

IN THE FIELD A SEAT AT THE TABLE

Jetton, who introduced LaTourette and Howerton, had been friends and colleagues with LaTourette for more than a decade. Jetton knew that LaTourette’s insights on being an LGBT financial planner would help Howerton picture herself in the industry as a planner who is authentic to herself and her clients. Through LaTourette, Howerton was able to see a mentor who looked most like herself. LaTourette was able to show Howerton that she didn’t have to change herself or her business to be successful. LaTourette encouraged Howerton to self-identify. “Know who you are and then that’s who you are in your career,” she said. LaTourette believes that’s important because “you’ll attract those people and you’ll have a nice day. It really is a valuable experience; you’re doing it for another person who is similar to you and needs your help and guidance.” Howerton wasn’t the only one learning about from her mentorship with LaTourette. LaTourette said that she learned a lot from Howerton, too. “The hope for the future is in good hands. You know, I like millennials, but I think being around her more has helped me have more enthusiasm. She’s given me that extra spark again — that ‘we can do this, it’s our turn,’” LaTourette said. As Howerton’s mentor, LaTourette has a front-row seat to all of her achievements and triumphs. Watching her continued growth, LaTourette said, “She’s like a sponge. She’s just been so invigorating to work with. I love her enthusiasm!” Even now, while she is studying for the CFP exam, Howerton and LaTourette meet monthly to discuss the business. These meetings give Howerton the opportunity to ask questions. In between her studies and advocating for diversity and inclusion in financial planning, she still makes time for one of her favorite activities — hiking. Howerton enjoys hitting the trails of northern Georgia with her girlfriend and their golden retriever, Charlie. After a relaxing hike, it’s back to work for Howerton, and that dedication hasn’t gone unnoticed by others. Howerton is hungry and has a gift for saying “yes” to opportunities when they present themselves, Jetton said. “All of this began by showing up at a CFP Board event one evening,” she said. Proof, Jetton said, that small actions can equal powerful results.

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InsuranceNewsNet Magazine » October 2019

“It is easy for any of us, at any stage of our lives, to start living out of our assumptions and our past experiences to the point that we’re not as open to something new and good,” she said. “So, watching her experience and her willingness to be open and to grow and challenge herself reminded me of all of that.”

Diversity And Inclusion

Not long ago, it was hard for Howerton to envision herself in the financial planning industry, knowing that not everyone was as open to her as she had hoped they would be. “I interviewed with a planner and he said, ‘Cait, you’re great, but I just don’t know that you would resonate with my clientele,’” Howerton said. “It’s very, very hard to reconcile how someone carries anger or judgment or prejudice against someone simply for being who they are.” Today, Howerton knows that obstacles like this still exist for the LGBT community, but she says those obstacles are “getting smaller.” “The future is diverse,” Howerton said. Among other financial planning needs of the LGBT community, Howerton said that parentage (important in wills and trusts) is a daunting issue for LGBT families where the child is adopted or where only one parent is a biological parent. “Money beliefs and disorders through gender norms are also very different in same-sex relationships,” Howerton said. “When combining finances, there’s also a changing of language — it’s not his and hers, it’s yours and mine or yours, mine and ours.” Howerton also said that LGBT lifestyles influence their finances. “Women are stereotypically more risk-adverse, so that could equate into the way that they invest,” she said. “You’ll still see spenders and savers, and you’ll see a lot of other behaviors that crop up, but there are a lot of other considerations where and how the money is spent.” For planners who want to serve more members of the LGBT community, Howerton said to “lead with curiosity,” adding “You don’t have to get it right, you just have to start trying.” To bring more diversity, representation and inclusion to the field, Howerton believes it’s all about creating a dialogue. “When you walk into a space where there aren’t a lot of people like you, or there aren’t a lot of people who understand who you are, you can either turn around, or you can start having conversations that bridge the gap in between.” AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@ Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.

Got a Story? Tell Us!

Do you know someone who would make a compelling profile story? Shoot us a quick email telling us who it is and why you think so. Send it to editor@insurancenewsnet.com, and put PROFILE in the subject line.

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LTC-Hybrid Policies Keep Driving Life Sales Life insurance policies sold with a long-term care rider jumped from 228,000 in

2015 to 461,000 in 2018. Today, more than 40 carriers are selling these products with a long-term care element, said Steve Schoonveld of the Society of Actuaries. “That’s a really robust market,” Schoonveld told the National Association of Insurance Commissioners’ Senior Issues Task Force. In 2018, combination products represented 27 percent of the overall U.S. individual life insurance market, LIMRA reported. Task force members seemed especially interested in hybrid policies as a better alternative to straight LTCi, which continues to see major premium hikes. From an actuarial standpoint, hybrid policies come with much less volatility for insurers because they are a blend of a traditional life insurance or annuity with LTC coverage.

DID YOU

KNOW

As the insurance buying age population increases in size, industry level in-force policy counts are not keeping pace. — Steve Webersen, Head of Insurance Research at Conning

to help MetLife test or discover new ideas that will benefit its customers, its own employees or its bottom line.

INSURERS’ INCOME FLAT IN FIRST HALF

To t a l i n c o m e in the U.S. life/ annuity industr y essentia l ly remained flat in the first half of $422.6B $422.4B 2019, dropping 2018 2019 slightly to $422.4 billion compared with $424.6 billion in the same period in 2018, according to A.M. Best. A $24.9 billion increase in premiums and annuity considerations in the first half of 2019 was negated by a $26 billion decline in other income, the report said. In addition, pre-tax operating gain declined 4.9% from the prior year to $25 billion. A $1.2 billion increase in federal and foreign taxes and a $3.8 billion reduction in net realized capital losses boosted total industry net income by $1.4 billion from the period in 2018 to $18.8 billion. The trend of reduced cash and bond positions in the industry continued during the first half of 2019, with further increases to mortgage loans and other invested assets, Best said. Mortgage loans, which have grown steadily in the first six months of the last five years, are up 44% from the first six months of 2015 and now make up 12.8% of total invested assets.

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MULTILINE AGENTS HAVE OPPORTUNITIES WITH LIFE

METLIFE LOOKS FOR THE NEXT BIG IDEA

MetLife’s newest building in Cary, N.C., is the place where the insurance giant hopes to find the next big idea to upend the industry. Teams of startups are busy developing technology that could make life insurance more efficient and profitable while keeping potential customers healthier. The Cary office employs more than 1,000 workers and has been designated MetLife’s Global Technology Campus. The third tower at the campus opened this summer. The company is taking a page from Silicon Valley’s playbook in finding new ways to keep life insurance relevant in an era of disruption, said John Bungert, an assistant vice president of innovation at MetLife. MetLife is nurturing startups working in insurance technology or related areas. The company created a tech accelerator with Techstars, an organization that helps grow young startups through mentorship and by connecting them to resources, like venture capital. The plan is

Multiline agents have a unique opportunity to connect clients with life insurance, a LIMRA study showed, although only about 14% of the average multiline agent’s income is derived from life sales. Why are multiline agents in a good position to sell life insurance? Several reasons, according to LIMRA. Multiline agents primarily serve the middle market, with three-quarters of their clients below $125,000 in household income. In addition, multiline agents have a client base at least double that of all other types of financial professionals, and they have relationships with clients of all generations. Multiline agents also are unique in that they have clients seeking them for property/casualty products such as car insurance. With all those advantages, you would think multiline agents would sell more life insurance. So why don’t they? Agents told LIMRA that the primary reason life insurance isn’t a bigger part of their practice is that other products are a priority and the sales process is burdensome. Agents cited limited product selection as another reason, and noted that clients either don’t need life insurance or are not asking about it.

Only 31% of Gen Xers understand that benefits paid from life insurance are not taxable versus 38% of baby boomers. Source: LIMRA

InsuranceNewsNet Magazine » October 2019

Source: Allianz Life

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In-force illustrations showing projections of the policy not lapsing exacerbate the issue. Now is the time to replace these policies.

How The Loan Ranger Can Save Policies In Peril If you see clients starting to take out loans to pay premiums, do not assume they are suddenly going to repay the loan or start making premium payments. By Anthony Giannone

here are many sales ideas that revolve around the idea that the cash value of a whole life policy is akin to the policyholder having their own private bank from which loans can be taken. And there is absolutely no reason a policy owner would not do exactly that. Makes sense. What does not make sense is that many agents who sell these plans forget to monitor those loans to make sure clients do, in fact, either repay them or plan for the potentially negative tax implications, if they don’t. Our non-scientific data, obtained from decades of trying to untangle the knots clients tie themselves into after years of borrowing and non-repayment, indicate that the mutual carriers’ whole life products are the most borrowed against and also the most difficult to remediate. 28

To be fair, this is not a criticism about the product itself, but rather the reality of the complexity of how loans affect the structure of a product that clients, and some agents, clearly do not pay close enough attention to. To understand the problem and turn it into an opportunity you need to know a few things about the cause and effects. Generally, clients take loans from their policies when they are in financial stress. It isn’t hard to imagine a policy owner using their whole life policy or policies as a convenient back-stop for cash flow during

repeat this process, compounding the problem over time. Unfortunately, most of these loans are not being carefully monitored. By the time we see them, most loaned policies are so deeply underwater that they are almost impossible to rescue. And the results are not pleasant. Either the client loses the coverage and creates a large taxable gain, or they accept a steeply discounted death benefit that is insufficient for their needs. By the time these issues surface, the clients are typically distressed by having tried to work out the problem directly

By the time we see them, most loaned policies are so deeply underwater that they are almost impossible to rescue. economic downturns or market declines, or for college funding, etc. Many planned loans also are taken out for retirement income, deferred compensation and other purposes. And the reality is most mutual company salespeople encourage their clients to purchase multiple policies and

InsuranceNewsNet Magazine » October 2019

with the carrier, whose policy service representatives are woefully under-trained to deal with these issues. If there is a clear message to agents it is this: If you see clients starting to take loans to pay premiums, do not assume they are suddenly going to repay the loan

HOW THE LOAN RANGER CAN SAVE POLICIES IN PERIL LIFE or start making premium payments. You opened the door to owning insurance without paying for it. Policy owners do not understand the long-term consequences. The trend will continue, and the policy will deteriorate. In-force illustrations showing projections of the policy not lapsing exacerbate the issue. Now is the time to replace these policies. Do not push the problem down the road until it’s unsolvable and you’re left explaining to your client that their only option is to pay a very large premium or recognize a very large taxable gain. Do the right thing today! To that point, here are the details of a loan rescue that we recently completed. The client is an 81-year-old man in good physical health. He had eight Northwestern Mutual whole life policies with: » Gross death benefit of $540,716. » Net death benefit of $379,554. » Total loan value of $161,162. » Tax basis of $19,469. » Taxable gain of $407,061. » Interest rates on loans a mix of 5% and 8%. The client in this case had first spoken to his semi-retired agent and had been told to ignore the loan notices and not to worry because, “the policies will take care of themselves” and “there are no tax consequences to concern yourself with,” even though he was receiving notices from the carrier warning about the danger. The client, on the advice of another agent, then contacted the carrier directly and spent considerable time on the phone with policy service, only to become even more concerned when he learned that there is not only a high probability that the death benefits would continue to precipitously decrease, but that some of policies could lapse and create a large tax problem. The client was unprepared for this outcome and wanted to preserve his death benefits and avoid the tax on any gains. By coincidence, we sent this agent an educational e-mail discussing rescuing old whole life policies that have large loans. The agent contacted us.

We took the data to a large carrier that has one of the best loan rescue teams in the business. Here is what happened next. First, I spoke with the agent for about 30 minutes, discussing the minefield the client was facing and various ways it can be repaired. The agent e-mailed me policy statements, and my first suggestion was to arrange a conference call between us and the client. We also invited the client’s son so that another family member could be part of the process to ensure that everyone was on the same page. Throughout the discussion, the consistent message was that the primary obligation in this process was to protect the client. At the meeting, we advised the client what was about to happen to those policies and suggested how to rescue them. We participated in several more conference calls — sometimes including the relinquishing company — so that there was total transparency. As a result, the client successfully had his eight policies rescued using mirrored loans, preserving the death benefit and no longer having a tax catastrophe on the horizon. Unlike the agent who handled the client’s old policies, the client’s current agent has marked on his calendar to have subsequent policy reviews to communicate that everything is progressing as expected. The client no longer worries about his policies lapsing. This agent not only helped his client, but made a well-earned new commission for his efforts. The final result was that this 81-yearold client received a preferred rating, the new policy provides more net death benefit for less premium outlay and will last well past age 100 at very conservative interest rate assumptions. The problems associated with heavily-loaned policies do not go away, and these policies don’t magically lapse without tax consequences. Now is the time to review your client’s policies, before their health issues limit their options. Anthony Giannone is a partner at CPI Companies. He has more than 15 years of experience in sales and providing support to financial advisors. He may be contacted at anthony.giannone@innfeedback.com.

October 2019 » InsuranceNewsNet Magazine

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The annuity sales hot streak keeps on burning. Second-quarter annuity sales were up sharply again across the board, continuing a sales rebound that began with the defeat of the Department of Labor fiduciary rule early in 2018. Fixed indexed annuity sales led the charge, with sales hitting $20 billion in the second quarter, 14% higher than prior year results, according to the LIMRA Secure Retirement Institute. Second-quarter FIA sales hit their highest quarterly point ever, LIMRA SRI reported. Other annuity products saw sales gains in the second quarter. Indexed annuity sales increased by 11% over the prior quarter and by nearly 14% over the same period last year. Multi-year guaranteed annuity sales increased by 15% over the prior quarter and were up nearly 20% over the same period last year. Variable annuity sales increased nearly 17% over the prior quarter. Total annuity sales were $63.9 billion in the second quarter, up 7% compared with the prior year results. This is the highest quarterly sales recorded since the first quarter 2009, and the third consecutive quarter where total annuity sales surpassed $60 billion.

GEN X NEEDS RETIREMENT HELP

The oldest members of Generation X are staring retirement in the face, and they are not ready for it, according to an Employee Benefit Research Institute study.

Whatever generation a worker belongs to, more workers are interested in guaranteed lifetime income products, EBRI found. Half of workers said they expected a guaranteed income product to be a source of retirement income, an increase from 35% in 2018.

WORKERS FEELING ANXIOUS OVER RETIREMENT FUNDS

High levels of debt are keeping Gen Xers from saving for retirement, and the Great Recession hit this age group particularly hard, said Neil Lloyd, partner and head of U.S. defined contribution research with Mercer. Gen Xers show less confidence than baby boomers or millennials in their ability to live comfortably in retirement, have sufficient retirement income, and not outlive their retirement savings. DID YOU

KNOW

Eight in ten non-retired Americans are worried that their savings may not provide enough to live on in retirement, according to a survey conducted by the Alliance for Lifetime Income. Sixty-three percent of Americans are unprotected for retirement, meaning they have no source of protected lifetime income — such as pensions or annuities — other than Social Security.

Fee-based FIA sales were $193 million in the second quarter.

InsuranceNewsNet Magazine » October 2019

Source: LIMRA SRI

It is a great time to be offering annuities with growth based on an outside benchmark. — Sheryl J. Moore, Wink’s Sales & Market Report

Eighteen percent of Americans indicated that they are “extremely” anxious, whereas 26% and 36%, respectively, are “moderately” and “somewhat” anxious about their financial preparedness. The survey further shows a fundamental disconnect between the general awareness of retirement preparedness — 40% of non-retired Americans say that “how much income they’ll have in retirement” is the most important question they face about retirement — and the fact that 80% of non-retirees indicate they lack a specific financial plan that they follow.

PENSION BUY-OUT SALES CONTINUE TO RISE

U.S. single-premium pension buy-out product sales surpassed $4.7 billion in the second quarter, which is the 18th consecutive quarter of sales over the $1 billion mark. This also represents the second consecutive quarter of sales over $4.7 billion, according to LIMRA SRI. Total group annuity risk transfer sales in the second quarter 2019 reached at $5.8 billion, 32% lower than sales in the second quarter 2018. In the first half of the year, total group annuity risk transfer sales were $10.8 billion, which is 7% higher than prior year results. A group annuity risk transfer product, such as a pension buy-out product, allows an employer to transfer all or a portion of its pension liability to an insurer. In doing so, an employer can remove the liability from its balance sheet and reduce the volatility of the funded status.

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This fixed indexed annuity with Accelerated Death Benefit Rider1 fills a niche other products don’t. • 8% guaranteed death benefit growth that can be accelerated for chronic or terminal illness • No underwriting2

1. The accelerated Death Benefit Rider is automatically included for a cost. In certain states, the rider is named the Roll-Up Death Benefit with Enhanced Surrender Value Rider. 2. An individual may not purchase this annuity if they are currently in a nursing home, skilled nursing facility or unable to perform any one of the six Activities of Daily Living. Some products may not be available in all states and features may vary by state. Not all products and features are available from all firms. The SecureLink Chronic Illness Access fixed indexed annuity and Accelerated Death Benefit are not long-term care insurance. They are not a qualified benefit under the Internal Revenue Code. The Accelerated Death Benefit is automatically included in every contract and provides an option to accelerate death benefit proceeds in the event that the owner becomes chronically or terminally ill. An annuity is intended to be a long-term, tax deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth

IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. There are charges and expenses associated with annuities, such as surrender charges for early withdrawals. 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. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. 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 is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. For financial professional use only. Not for use with the public. This material may not be reproduced in any way where it would be accessible to the general public.

ANNUITY

Annuities In The Digital Age More carriers are incorporating annuities into digital platforms. What advisors should know about this changing technology.

By Katie Thompson

etirement anxiety has been persistent since the Great Recession. Fewer than 40% of nonretired adults said they think their retirement savings are on track, according to an annual Federal Reserve System poll. And 25% of workers have no retirement savings or pension. While the findings are alarming, the surveys represent a significant opportunity for advisors to help people navigate the road to financial security in retirement. Despite all the free online advice and self-directed platforms, financial professionals still have a big role to play in making financial health in retirement attainable for more Americans. The Fed surveys have consistently found that even among those who are saving, individuals said they lack confidence in their ability to manage their retirement investments. The transition to retirement used to be relatively simple, at least for individuals with traditional pensions offering predictable payments. But defined benefit plans have been shrinking. In 2017, only 16% of Fortune 500 companies offered a defined benefit plan (traditional or hybrid) to new hires, down from 59% among the same employers in 1998, according to Willis Towers Watson. That has left people on their own, with self-directed, employer-sponsored plans and individual retirement accounts to supplement Social Security. Yet people still desire a steady stream of payments for the rest of their lives when they retire, making annuities an attractive option. According to research by LIMRA, retirees who own an annuity feel more confident that they can afford their preferred lifestyle — even if they live to age 90 or older — than those who do not own an annuity. 32

Innovation In Annuities

There is a new chapter being written in the story of annuities. Recent headlines have teased that annuities may be coming to 401(k) plans in the future, driven by legislation that’s currently working its way through Congress. The bill at play would encourage companies to offer retirement savings plans with annuities with the thinking that annuities would enable companies to incorporate an element of old-fashioned pensions into 401(k)-type plans.

Platform For Takeoff

96.4% of advisors said they would likely increase their use of annuities if they had a multiproduct platform.

57% of advisors said a multi-

product annuity platform allows for customizable retirement planning based on client need and lifestyle

51% of advisors said they liked the simplicity of a single point of contact for multiple product offerings.

Source: 2018 Global Atlantic Financial Advisor Survey

BlackRock is in-part leading the charge, building products for workplace savings plans that would help employees generate steady, long-term income. Though BlackRock isn’t in the annuities business currently, they are in talks with insurers to provide such instruments within retirement offerings they plan to launch in the future. Beyond the push to bring annuities to 401(k)s, we’ve seen several innovations to simplify products over the past several months, making annuities more accessible and addressing consumer concerns for more comprehensive and personalized financial advice and offerings. The new solutions are being driven by the long-overdue digitization of the life insurance industry.

InsuranceNewsNet Magazine » October 2019

One such company providing a new, seamless digital experience is Pacific Life with their new brand Next by Pacific Life. The approach is to create transparent products and an engaging customer experience by starting with the customer and working backwards. The idea is that, as the customer’s life and retirement needs change over time, their annuity can, too. Additionally, a variety of different platforms have emerged to meet advisor and consumer expectations for digital, intuitive and efficient purchasing models.

Multi-User Platforms

Orion Advisor Services and Envestnet, two of the biggest technology platforms in wealth management, are racing to bring annuities into the fold. In March, Envestnet announced the launch of its insurance exchange with six carriers. The exchange will integrate wealth management, insurance and financial advice. More than 96,000 financial advisors use Envestnet’s technology and services. The portal is an achievement in collaboration because it isn’t easy working with multiple carriers. Standardization is one of the biggest challenges to a broad marketplace because annuities are complex products and insurers all speak a different language. Advisors must be able to understand the products they are selling so they can be confident in the comparisons they show their clients. Envestnet’s tool will make account opening, processing and management of annuities easier. It also will allow advisors to track the daily performance of annuities and integrate them into asset allocation models. By building annuities into the wealth management process, advisors will be able to provide the holistic financial advice that clients are demanding. Research suggests that advisors would use more annuities if they had more options from providers. Global Atlantic Financial Group, in a survey of 400 advisors, found that 90% find it difficult to address client needs using a “one-sizefits-all” approach with a single type of annuity. Of these advisors, nearly all said they would favor a multi-product platform.

ANNUITIES IN THE DIGITAL AGE ANNUITY

Carriers Update Advisor Experience

Brighthouse Financial is among the first carriers to offer annuities on Envestnet’s platform. Like other insurers, Brighthouse is pushing to provide a simple advisor experience at every touch point and across every channel. Part of its digital strategy is the creation of its own online platform to help their captive advisors navigate the fixed annuity purchase from start to finish. Its Digital Desk, announced last year, assists agents in educating their clients about various products. From there, the tool lets advisors submit the annuity suitability questionnaire and application electronically. With stagnant sales and increasing regulation, insurers are under pressure to better serve agents and consumers.

Fintech Consumer Solutions

That has opened the door to financial technology startups that see opportunities to sell direct to consumers. One such firm, New York-based Blueprint Income, started with the challenge of addressing how to help consumers minimize

the risk in self-directed retirement plans while also guaranteeing a steady retirement paycheck. The company calls its product a “personal pension.” What’s more, in contrast to annuities, which require an upfront investment of upwards of $100,000, Blueprint Income enables customers to pay for a guaranteed pension through smaller payments over time. Self-directed platforms are springing up aggressively like mint plants in the garden. They are trying to attract younger generations of digitally minded consumers who so far have been an elusive market for life insurers. But buying annuities is a lot like buying a mattress. It’s hard to comparison shop because companies selling annuities use a lot of jargon and proprietary names for things that are often only slightly different. Advisors can fill the education gap, but to effectively engage with today’s tech-enabled consumers, they need to adapt their practices and adopt new digital tools. Indeed, LIMRA research shows 63% of consumers expect to conduct more of their financial business online in the next five years.

Meeting this preference means more than having an informative website. Almost four in 10 millennials prefer meeting with an agent or advisor virtually rather than in person, a LIMRA-Ernst & Young survey revealed. Digital platforms that give consumers the freedom to shop and also provide access to professional advice are the future. With knowledge gaps and diminishing defined benefit plans, annuities are adapting to the changing industry and transforming into accessible solutions that provide comprehensive financial advice. By meeting today’s consumer expectations with innovative technologies, multi-user platforms, and an updated advisor experience, and with the government and large financial firms as an advocate, annuities are becoming a more front-and-center option to consider for creating income for life. Katie Thompson is a solution architect executive at SE2, a technology and third-party administration company focused on the North American life and annuity insurance industry. Katie may be contacted at katie. thompson@innfeedback.com.

October 2019 » InsuranceNewsNet Magazine

HEALTH/BENEFITSWIRES

QUOTABLE

Drug Price Increases Slowing Down Name-brand drug prices are still increas-

ing, but those price hikes appear to be less frequent and by smaller percentages, according to an analysis. Drugmakers raised list prices for brandname prescription medicines by a median of 5% in the first seven months of 2019, an Elsevier analysis reported. That’s a drop from about 9% or 10% over those months in the prior four years. From January through July 2019, there were 4,483 price hikes, down 36% from that time frame in 2015. For years, drugmakers raised list prices on brand-name medicines up to three times annually, sometimes 10% or more each time. Now, companies are taking more of their increases in January and forgoing early summer hikes. Still, there were 37 price hikes for every decrease in the first seven months of 2019. Both parties in Congress as well as the Trump administration are making an effort to try to curb prescription drug costs. In addition, many states are trying to limit drug price increases or to allow residents to buy drugs at lower prices from pharmacies in Canada.

CIGNA COULD EXIT GROUP BENEFITS BUSINESS

Cigna is exploring a sale of its group benefits insurance business, which could be valued at as much as $6 billion, Reuters reported.

The unit Cigna wants to shed offers disability insurance as well as life and accidental death and dismemberment coverage to clusters of company employees. Cigna’s move to get out of the group benefits business underscores its decision to focus on health care after it spent $54 billion to acquire pharmacy benefits manager Express Scripts Holding Co. last year. Cigna is working with an investment bank to run an auction for the group benefits business, Reuters reported. The unit could attract interest from other insurers that already have this product line and are seeking scale in that competitive market.

WORKER HEALTH BENEFIT COSTS TO TOP $15K

The total cost of worker health benefits is expected to rise by 5% next year, topping DID YOU

KNOW

$15,000 per employee. That’s according to the National Business Group on Health annual survey of nearly 150 of the nation’s largest employers. Employers said they are looking at ways to cut the costs of their workers’ prescription drugs. About 20% of large employers say they will switch next year from traditional pharmacy benefit contracts, which have relied on drugmaker rebates to hold down the costs of premiums. Instead, they’ll pass those pharmaceutical discounts directly to workers at the pharmacy counter. About 60% of large employers said they plan to make the switch by 2022. While some workers could see lower outof-pocket costs for high-priced drugs, others could see higher cost-sharing for premiums. In addition, nearly half of large employers surveyed say they are looking to contract directly with physician groups for so-called advanced primary care. They are paying physicians to take

Very few drug prices go down. — Adrienne E. Faerber, Dartmouth Institute for Health Policy and Clinical Practice

care of patients with chronic conditions for an overall fee, rather than paying for each individual visit.

SURPRISE BILLS BECOMING MORE COMMON

More Americans are getting a nasty surprise after receiving treatment in a hospital. Surprise bills for out-of-network care are becoming more common, and they are costing more money. About 42% of in-network hospital visits in 2016 resulted in an out-of-network bill, according to a study, published in JAMA Internal Medicine. Researchers estimated the potential cost to patients for hospital visits more than doubled between 2010 and 2016, reaching nearly $2,000 in 2016. Stanford University researchers looked at 5.5 million inpatient admissions and 13.6 million emergency department visits between 2010 and 2016. The portion of in-network hospital visits that resulted in an out-of-network bill increased from 26% in 2010 to 42% in 2016, researchers found. The situation was even worse in the emergency department, where about 43% of in-network visits led to an out-of-network bill in 2016, up from about a third of visits in 2010. Patients’ potential financial responsibility for out-of-network ED bills was $625 in 2016, up from $220 in 2010.

Four out of five large employers believe “Medicare for All” will result in higher taxes. Source: Associated Press

InsuranceNewsNet Magazine » October 2019

Source: National Business Group on Health

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HEALTH/BENEFITS

4 Things To Consider When Selling Hospital Indemnity Insurance Take a good look at the medical coverage offered by your employer client before you present a product to supplement that coverage. By Christin Kuretich

he growth of the voluntary benefits market has brought plenty of new players along with new products. More products mean more options for brokers to wade through, but it also means there’s a greater expectation to find the right fit for employers. Particularly when it comes to hospital indemnity insurance, there isn’t a onesize-fits-all solution. To find the plan that works for your employer clients, there are four key things you must consider when selling hospital indemnity insurance, which covers the gap between health coverage and out-of-pocket expenses.

1. Don’t look at the hospital indemnity plan; start with the employer’s medical coverage.

The first thing you should consider when evaluating a hospital indemnity plan isn’t related to that plan at all. The employer’s medical plan should be the first thing considered. 36

More than many other voluntary products, hospital indemnity insurance is a companion to an employee’s major medical coverage. The costs of spending just one night in the hospital can quickly chew through an employee’s entire deductible. We’ve all seen the statistics on what that can mean for an employee; Bankrate reports more than 60% of Americans don’t have enough in savings to cover a $1,000 expense. Taking note of the deductible on

the medical plan will help provide a road map for the value employees need from a hospital indemnity plan. It’s not all about the deductible, either. Look at some of the other medical plan features and see where there may be missing pieces. What does the medical plan offer to pay toward an ambulance ride? What about X-ray and imaging services? Where are the holes in the medical plan that you can plug should an employee have to spend time in the hospital?

What Is Hospital Indemnity Insurance?

What’s it for? Hospital indemnity insurance covers the gap between what medical insurance pays and what the policyholder must pay out of pocket. How does it work? Hospital indemnity insurance pays a set amount when the policyholder incurs covered medical expenses resulting from hospitalization, surgery, chemotherapy and radiation services. That set amount may be per day, per week, per month, per visit or per event, depending on the plan and the benefit that applies. Is any special coverage available? Some hospital indemnity plans cover additional services such as ambulance trips or second surgical opinions. Does this come under the Affordable Care Act? No. Hospital indemnity plans are not major medical insurance and are not subject to the Affordable Care Act. Applicants can be denied coverage based on their health history.

InsuranceNewsNet Magazine » October 2019

SELLING HOSPITAL INDEMNITY INSURANCE HEALTH/BENEFITS

2. Can the hospital indemnity plan meet the needs you’ve identified?

Now that you’ve identified the employer’s need, it’s time to start asking questions about the hospital indemnity plan. This is where things get a little trickier than you might think. Sure, you can simply find a plan that has a generous benefit to cover a policyholder’s deductible. You can also help pick up the slack where the medical plan may be lacking. But you and the policyholder will benefit from digging deeper. A policy without sufficient benefits to cover the initial out-of-pocket cost of a hospital stay obviously won’t do much good, but you can swing too far in the other direction as well. In doing so, you run the risk of driving away potential buyers with an overly expensive product. When it comes to hospital indemnity insurance, you have to think of Goldilocks — not too much, not too little, but just right. To achieve that balance, you need a hospital indemnity product that offers

you’re likely to face problems in getting employees to see its value. To tackle this challenge, it’s important to look for a hospital indemnity plan that offers features that increase the probability that a policyholder will receive a payment. Whether that is through wellness benefits, flexibility in the use of riders and benefits, or return of premium for policyholders who don’t submit a claim, you must deliver value that employees can see and understand.

4. How does it handle changing needs?

This point overlaps with the previous point we made about flexibility. But it’s important because hospital indemnity plans must be flexible not just at time of purchase, but throughout the life of the policy. A policyholder’s needs can change. What if the employer changes medical plans? What if the policyholder starts a family and has a larger deductible? To

Hospital indemnity/supplemental medical sales declined by 1% in 2018 with total sales of $644 million. Source: Eastbridge Consulting Group you the flexibility to find the right level of protection. The solution is to find a policy that covers the needs of the medical plan; but to be successful, you have to look at how closely you can fine-tune the hospital indemnity insurance policy to the group’s specific needs.

3. What can the plan do to add value for the policyholder?

You know what is the least effective kind of hospital indemnity insurance? The kind that no one owns. Hospital indemnity insurance faces an uphill battle in that consumers don’t understand what it does or how it works. In fact, Trustmark research found that 76% of consumers say they don’t know what “hospital indemnity insurance” is. So if the product is difficult for consumers to understand and, if they don’t happen to experience a hospital stay where they can make use of their policy,

meet these needs, a plan must offer flexibility to make changes and match needs as policyholder needs change. Fortunately, given the expanding options for hospital indemnity insurance, you’re more likely than ever to find a product that closely aligns to your client’s needs. You just have to start by asking the right questions. The players and the products in the market may change; your ability to provide value to clients doesn’t have to. Christin Kuretich is senior director of product and innovation with Trustmark Voluntary Benefits. Christin may be contacted at christin. kuretich @innfeedback.com.

October 2019 » InsuranceNewsNet Magazine

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NEWSWIRES

All-Male No More

The boards of S&P 500 firms are becoming much more gender-balanced, according to a report from EY. Fifty-six percent of firms on the index have at least three female directors, the report found. That number is up 19% from just three years ago. In recent years, more attention has been paid to the makeup of corporate boards. Initiatives such as #MeToo have been calling on companies to have equal representation in the workplace. Some states have taken initiatives to make the workplace more gender-balanced. In California, having at least one woman on a company’s board of directors is mandatory.

MILLENNIALS ARE LOSING MONEY TO BAD INVESTMENTS

ELDERLY AND EMPLOYED

Inadequate or no retirement savings are leading America’s elderly population back to work. For the first time in 57 years, the participation rate in the labor force of retirement-age workers has cracked 20%, according to a United Income report. The ranks of people 65 or older who are working or seeking paid work doubled from just 10% back in 1985. Fiftythree percent of employees age 65 or older have at least an undergraduate degree, up from 25% in 1985. The Bureau of Labor Statistics expects the job market to be flooded with baby boomers for the next few years. “By 2024, baby boomers will have reached ages 60 to 78,” the BLS report said. “And some of them are expected to continue working even after they qualify for Social Security benefits.”

When it comes to investing, millennials have it all wrong, according to a Bankrate report. According to their Financial Security Report, 30% of millennials say they think cash is the best place to invest funds they won’t need for 10 or more years. Unfortunately, they are dead wrong. Investing isn’t the only financial faux pas millennials are making. A 2016 Federal Reserve study found that the median savings for millennials was just $2,600. Many experts believe millennials are choosing to make bad investment and savings choices because of the Great Recession, which happened right as older millennials were coming of age. Millennials avoid potentially lucrative investments because of their fear of investment loses.

DID YOU

Ehhmmm I think I'll just keep this cash under my matress, thanks ...

QUOTABLE The threat of cyber security may very well be the biggest threat to the U.S. financial system. — J.P. Morgan Chase CEO Jamie Dimon

WOMEN ARE MORE CONCERNED, BUT LESS PREPARED FOR RETIREMENT THAN MEN

Female investors are cautious about the market and economy, The Nationwide Advisory Solutions’ fifth annual Advisor Authority Study found. Women investors who use an advisor are far less likely than men to say their outlook for the U.S. economy is optimistic (34% vs 52%) and are somewhat less likely to say their outlook for the U.S. stock market is optimistic (41% vs 55%). The study also found that female investors are somewhat more likely than men to say that outliving retirement savings is a top financial concern (15% vs 9%), but are far less likely than men to have a strategy in place to help protect against outliving their savings (62% vs 76%). Even women with advisors are somewhat less likely than men with advisors to have a strategy in place to help protect against outliving their savings (68% vs 79%). Because women generally have a longer lifespan than men, women are far more dependent than men on Social Security in retirement; 78% of women rely on Social Security to protect themselves from outliving their savings compared to just 66% of men. Women are also less likely to use other guaranteed income solutions to protect themselves from outliving their savings.

KNOW 92% of Americans say nothing makes them happier or more confident than when theirSource: finances are in order. Source: Northwest Mutual LIMRA

InsuranceNewsNet Magazine » October 2019

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I-30239 02/15/19

Women need and deserve something different — something that is in harmony with their needs.

Women Need Financial Planning That Fits Their Unique Needs Financial advisors need to recognize women’s unique financial needs and the risk that women’s life and career circumstances create. • Marguerita Cheng

wo decades after the U.S. Food and Drug Administration started receiving complaints that Ambien and other sleep aids made women taking them particularly groggy the next morning, and even might have been responsible for driving accidents, the agency accepted and responded to the scientific evidence behind the anecdotes. It turns out that women’s bodies simply metabolized the active ingredient zolpidem in all these sleep aids much more slowly than men did. In 2013, the FDA finally acted, slashing the recommended dosage of these medications in half for women. Medicine isn’t the only field where “what’s good for the goose is good for the gander” still prevails. Equality is a wonderful goal, when we consider the kind of outcomes that we want, whether it’s a good night’s sleep or retirement security. How women reach those equal outcomes, however, may require taking a 40

different pathway, whether it’s a question of medical or financial advice. Even the definition of what “financial success” and a good relationship with an investment advisor looks like can be very different for women than for men.

viewed as a joint financial plan. “I miss my husband, but I need someone who understands where I am, and who I can talk with,” she told me. Let’s face reality. Even though women are increasingly financially independent, controlling or inheriting a growing share of the country’s wealth, the typical broker or financial advisor today gears his practice toward the way men think and

Most women, I’ve found, are aware of their unique needs and of the risk that those circumstances create. After all, many have been grappling with them throughout their lives... I’ve seen many of my clients come to understand what this means. For example, a widowed woman in her 60s, began working with me after her husband’s death. The financial advisor they had consulted with saw her husband as the client, and rarely even looked her in the eyes when discussing what the couple

InsuranceNewsNet Magazine » October 2019

behave. (And yes, the choice of pronoun is deliberate — only about 17% of financial advisors today are women, giving the industry one of the biggest gender gaps in corporate America.) His approach toward working with clients is likely to be shaped by how men define their needs and even their communication styles.

WOMEN NEED THEIR OWN TYPE OF FINANCIAL PLANNING

Women Vs. Men At Work

• Women make up 44% of the corporate workforce in S&P 500 companies. • Women comprise fewer than 5% of the CEOs of S&P 500 companies. • A lifetime earnings gap of as much as $1 million exists between men and women. That’s partly because women live longer after retirement and partly because they spend more time (uncompensated) caring for elderly parents or children. • Surveys show about half of women feel confident when it comes to managing their finances, compared to nearly 70% of men. Even in marketing campaigns, female clients are given roles that amplify or echo the concerns raised by their partners. The truth is that women’s perceptions, needs and objectives can vary as radically from those of men as those recommended Ambien dosages. Women have distinctive life experiences, circumstances and goals. That doesn’t mean that as advisors, we should scramble to deliver something radically different, either. For instance, dismissing women as being invariably “risk averse” and devising an overly conservative asset allocation model creates an entirely different kind of risk that is unique to women, who, because they still may end up with lower earnings and likely will live longer, lead their portfolios to work hard for them. I still see some financial advisors leap to the conclusion that being aware of risk is the same thing as being unwilling to incur risk. Most women, I’ve found, are aware of their unique needs and of the risk that those circumstances create. After all, many have been grappling with them throughout their lives, fighting for fair pay or an equitable share of household assets and child support in a divorce. Since the United Nations began celebrating International Women’s Day in 1975, women have made tremendous strides toward equality and financial independence, and continue to shatter glass ceilings. Women still have distinctive career paths and earnings patterns that affect their financial planning strategies in ways aren’t seen in men’s lives. They are likely to have taken far more professional risks, leaving the job market to raise children and then retrain or upgrade their skills to leap back into new positions. I see my own grandmother’s experience as emblematic of this flexibility. A widow for 40 years, she became an Airbnb pioneer long before room rental apps — or the internet itself — were a “thing.” She rented out rooms in her home to those who needed a place to stay or live in exchange for the extra income she required. There are institutional barriers that can be tough to demolish. Women, as a group, are less likely to have access to traditional sources of capital if they want to start a business.

Catalyst, an advocate for women in the workplace, reports that while women make up 44% of the corporate workforce in S&P 500 companies, they are only 11% of the top earners, while fewer than 5% of those companies are led by female CEOs. It isn’t just about earnings: women are less likely than men to have access to traditional retirement plans, or even to be able to fund those 401(k) or individual retirement accounts smoothly and consistently, year after year. Perhaps that’s why traditional investment advisors — who still see retirement planning and financial planning in general through men’s eyes — too often don’t serve women well. They are well-prepared to give guidance on portfolio construction and provide insight into investment returns with many analytic tools. What is often lacking, my own clients have helped me understand, is guidance on how to compensate for breaks in work history and smaller retirement nest eggs. Women need, and deserve, something different. Not something better, but something that is in harmony with their needs, from asset allocation to the kind of communication about their objectives. A prescription for working with women clients starts with recognizing that there’s an average lifetime earnings gap of as much as $1 million between men and women. That’s partly because women live longer after retirement and partly because they spend more time (uncompensated) caring for elderly parents or children. Surveys also reveal that only about half of women feel confident when it comes to managing their finances, compared to nearly 70% of men. Then, too, women often link financial well-being to other life goals: securing their family’s health and education, or establishing a legacy or pursuing philanthropic goals. For them, money is less likely to be a way to keep score, as it can be with men. “If the difference in men’s and women’s pay is a gap, then the wealth difference can only be described as a chasm,” wrote Kimberly Blanton of the Boston College Center for Retirement Research. If women aren’t transforming their earnings into wealth, the financial services industry has to shoulder part of the blame — and devise a solution. Let’s make the quest by women to find the right kind of financial guidance not just an objective, but a mission. Women now understand that their physical health depends on having relationships with physicians who understand that, for example, heart attacks in women may have different symptoms than those seen in men. Now it’s time to empower them by acknowledging that their financial health may require an equally distinctive approach, and ensure it’s easier to find someone who works with them, in a way that works best for them. Marguerita Cheng is the CEO at Blue Ocean Global Wealth. Prior to co-founding Blue Ocean Global Wealth, she was a financial advisor at Ameriprise Financial and an analyst and editor for Towa Securities in Tokyo, Japan. She may be contacted at marguerita.cheng@ innfeedback.com.

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October 2019 » InsuranceNewsNet Magazine

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INBALANCEWIRES

No More ‘Spring Ahead, Fall Back’? It’s a twice-yearly ritual — adjusting the clocks forward or back-

ward one hour and adjusting sleep patterns accordingly. But do we have to continue doing it? A growing number of Americans are saying no. Studies show that in the days after we lose an hour of sleep by “springing ahead,” Americans face a slightly greater risk of heart attack and stroke. Car crashes and workplace accidents are on the uptick during that time periodas well. So far this year, at least 36 states have introduced legislation to end or study the practice, more than any year before. Some bills call for year-round standard time, but most would establish permanent daylight saving time — which would result in an extra hour of evening sunlight for most of the year in exchange for a later sunrise in the winter. Proponents of permanent daylight savings time say that extra hour of daylight in the evening would encourage more people to be outdoors. But those who oppose it point to the dangers of people having to travel to work or school in the dark.

HIGH BLOOD PRESSURE CAN SHRINK YOUR BRAIN

High blood pressure can damage the body in numerous ways, and now researchers believe that an increase in blood pressure can make someone’s brain smaller. A study published in The Lancet Neurology found that adults without dementia who had high blood pressure in their 40s had smaller brains, by overall volume, when they reached their 70s. Researchers found that more rapid increases in blood pressure in middle age led to greater changes in brain health, including a smaller brain, later in life. Study participants who had high blood pressure in their 40s, or a significant increase in blood pressure through their 30s, were also found to be more likely to have blood vessel damage in the brain, increasing the risk of stroke, the researchers found. High blood pressure, particularly among middle-age people, has long been

DID YOU

KNOW

linked to risk of dementia and other types of cognitive decline.

AMERICANS CLUELESS ABOUT FAST FOOD CALORIES

Almost 40% of Americans eat fast food every day, the Centers for Disease Control and Prevention reports. Yet most of us don’t realize how many fast food calories we consume. A study by Treadmill Reviews revealed that 41% of those surveyed underestimated the calories in a cheeseburger and 60% estimated the calories in an order of french fries to be an average of 100 calories less than they actually are. On the other hand, the survey respondents thought fried chicken had more calories than it actually does. But they thought

QUOTABLE The problem with lowering your calorie intake further is that that’s when the hormonal mechanisms to make you hungrier kick in. — Dr. Holly Lofton, NYU Langone Health

cheesecake had slightly more than half the calories than the 720 calories packed into a single serving.

LUNG DISEASE COULD BE LINKED TO VAPING

Vaping may be taking a toll on its users’ health, as the CDC is investigating more than 150 cases of severe lung infection possibly linked to people using e-cigarettes. No deaths have been reported, but patients reported a gradual start of symptoms including breathing difficulty, shortness of breath and chest pain before hospitalization. The main connection among the cases is that many patients have acknowledged recent use of vaping products containing THC, which is the psychoactive ingredient in marijuana. However, the CDC emphasized that no specific product has been identified in all cases, nor has any product been conclusively linked to illnesses.

Americans lost more than $143 million in online romance scams in 2018. Source: Federal Trade Commission

InsuranceNewsNet Magazine » October 2019

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INBALANCE

To Fly Or Not To Fly, That Is The Question Gerry Wevodau has been a private pilot for 20 years.

Getting your pilot’s license takes commitment, but the rewards and sense of accomplishment you will achieve are worth the time and expense. By Gerry R. Wevodau

on’t be confused; this is not the aviator’s version of Hamlet and no, I’m not William Shakespeare, but this question may be truly “flying” around your mind. People have different tolerances for adventure, learning, financial investment, time commitment and overall risk. I believe you should have some tolerance for all the above to seriously consider becoming a private pilot. I have been challenged to share some basics on how or why you should consider the commitment of learning to fly, so here is a basic outline of the five editorial questions: the who, what, where, when, why and maybe how of pursuing the art of flying. But before I do that, ask yourself this question: Are you willing to do what it takes to see this through to accomplishment? If not, that’s OK; maybe another hobby or passion awaits you. Flying must be taken seriously and it is not for the faint of heart, but flying has great rewards and will give you a sense of personal accomplishment. So, let’s take off and start with who: People who are up for adventure! Do you have the spirit of the Wright Brothers, Amelia Earhart or Chuck Yeager? It isn’t necessary, but it would help. I’ve flown with all types of people over the past 20 years. Being adventurous doesn’t mean someone is dangerous. The exact opposite must be true, or you will have big problems. The best flyers are people who aren’t afraid of the challenge or risk but are also very risk-averse and are smart enough to avoid bad decisions. Flying skills don’t necessarily come 46

naturally to most people, but you will grow in knowledge and flying helps with hand/eye coordination. The Federal Aviation Administration reported that 168,000 student pilot certificates were issued last year, compared with only 70,000 in 2009. So, we are seeing resurgence in new pilot training. There are many advantages to flying in a private plane over flying commercially, but flying in a private plane has its own limitations. If you are flying shorter distances — such as a few hours’ drive to maybe a few states away — you can usually get to the destination in about onethird the time it would take you if you drove the speed limit on the highway. You also get to avoid those annoying airport security lines! What: the most fun you’ll ever have — legally! Flying has truly been the most exhilarating, fun, challenging thing I’ve done in life. There is a joy found in the sense of freedom that only flying can

InsuranceNewsNet Magazine » October 2019

bring, and flying can give you a true sense of accomplishment. I love it when I have a passenger who may have flown in a 737, but never in a fly-by-wire or stick-and-rudder type of aircraft. What they quickly learn is that private pilots do just as much work as the professionals do on some levels. We communicate just like your commuter or large airline pilots do. You have to learn the language to speak in a very specific type of code and know what someone is saying to you and you have to be quick about it. There are other people out there trying to communicate, too. It’s even better if we are flying in the clouds or rain and the passenger cannot see the ground. You break out of the zero visibility and there is the runway straight ahead. Their mind is blown, and they say, “That is so cool!” Where: Check out your local smaller airfield, talk to some pilots or instructors. Flight instruction usually happens just

TO FLY OR NOT TO FLY, THAT IS THE QUESTION INBALANCE

Glossary Of Flight Terms Fly-by-wire: This system replaces conventional mechanical flight controls with an electronic interface. The pilot’s movements of the flight controls are converted to electrical signals, which are interpreted by the flight control computers. They, in turn, make the airplane do what the pilot commands. Stick-and-rudder: Flying using convention mechanical flight controls Fixed-base operator: A service center for aircraft, often a private enterprise or subsidiary of the airport or airport authority. Many provide charter service such as aircraft maintenance, fuel service and hangar services.

How Do You Become A Private Pilot? 1. Obtain a student pilot certificate from the Federal Aviation Administration. 2. Pass a third-class aviation medical exam. 3. Find an instructor 4. Take the FAA written exam. 5. Start flying! Get your required hours of flight. 6. Take the FAA Practical Exam 7. Get your license.

about anywhere there are small airplanes. Initially, you must take a written exam, usually all done online. Check out AOPA. org or faa.gov for information specifically for pilots. The practical study happens in the left seat with an instructor. The minimum time required by the FAA is 40 hours (20 with a licensed instructor), although the national average is more like 70 hours. You also need to connect with an instructor at a local flight school. Instructors may be people with years of experience and are professional or corporate pilots. But an instructor often is someone who is building up hours to get a higher designation to be able to fly for the airlines commercially. Make sure you have a good working rapport with the instructor because you will spend a fair amount of time together. If you want to fast-track the learning, three sessions a week may be required. But many can reach the goal in one or two sessions per week, although it will take longer to get your required hours in. Delays like weather, schedules and life can get in the way of that learning. Trust me when I say this is no time to be cheap with your time or your wallet. Your life and the lives of others will depend on your skills someday. I can truly say that after 20 years of flying, I am still learning every time I fly. Never be too proud to say you don’t understand something. It’s a lifetime of learning and skill building — that’s what is exciting about flying! When: You really must make the time commitment to complete the training. This isn’t something to take lightly; this is

serious business. It takes as long as it takes; don’t be in a rush with something like this. In a day of flight simulators and computers, people may think learning to be a pilot is easy. I remember taking my niece and nephew bowling one time when they were young. I asked them if they ever bowled before. They said, “We bowl all the time.” I thought, “Great! I don’t have to teach them anything.” But after the fifth gutter ball, I asked what kind of bowling they did “all the time.” They said, “Wii bowling.” I can tell you, it’s not the same, just like flying a plane isn’t the same as flying a drone, model airplane or simulator — even though there is plenty of crossover among all of those. So how quickly do you learn and retain information? Do you learn more by reading or by practical learning? It will take both, as well as a heightened sense of awareness to fly and stick with it and see it through, so persistence is required. Why: Is that really a question? It should be why not? This has been the greatest ride of my life, next to having a family! I understand flying isn’t for everyone. As a matter of fact, 99.5% of the population doesn’t have a pilot’s license, so the pilot community is a very small one. But if learning to fly is on your bucket list, at least go and take an “introduction to flying” ride with a certified flight instructor at your local airport fixed-base operator. If your flight leaves you throwing up and white-knuckled, learning to fly may not be for you. But if you feel like a kid in a candy store and want more, then maybe it’s worth a try. How: As mentioned previously, the journey starts with a knowledge exam, but you could dip your toe in the water before you even take this. Then follow the FAA’s “Becoming A Student Pilot” list of requirements on the faa.gov website. You must undergo a medical exam to see if you can pass the physical requirements. There are even newer self-reporting medicals that don’t require you to go to an official FAA-certified flight doctor for the exam. You are required to obtain a student certificate before you can fly solo, but your local flight school can help you along the way. I would also look online to King Schools and Sporty’s Pilot Shop for more education tools to help you along the way. If you are going to take flying seriously, APOA.org is a must for obtaining the knowledge and information you will need as a pilot. Many training centers also have flight simulators that will give you some of your training without your having to leave the ground as part of your training. This can be very helpful and more affordable for a portion of the training. On average, you will pay about $200-$220 an hour for a training plane and flight instructor, based on my local flight school. At an average of 70 hours of training, you’re looking at an investment of around $14,000-$15,400 to get your ticket to ride. There are lower-cost options available by getting a sport pilot’s license and, if you’re serious about the process, that could be an option. I hope this information is enough to inspire you to get your wings! There is a tremendous joy in flying. I challenge you to explore the horizon! Gerry R. Wevodau is president of Wevodau Insurance and Benefit Strategies, Wormleysburg, Pa. Gerry may be contacted at gerry.wevodau@innfeedback.com.

October 2019 » InsuranceNewsNet Magazine

BUSINESS

A Guide To Getting Referrals That Are Just Right Not all referrals are right for your practice. Here is how to increase the chances of getting introduced to referrals who are the perfect fit. By Bill Cates

ot all referrals are created equal. Sometimes a client or center of influence knows exactly who to send your way and you love them for it. But others will refer folks to you with no regard for fit. Sometimes you end up taking on clients who aren’t a good match out of some sense of obligation to the referral source. And with that can come a bit of resentment. I want to discuss quality over quantity — about how to increase the likelihood of getting introduced only to prospects who are a perfect fit for your business.

Referrals Vs. Introductions

I sometimes use the words “referrals” and “introductions” interchangeably, but there is a difference. Referrals don’t work very well any more. Your client says, “Call George and use my name. That should do it.” But George doesn’t pick up his phone if he doesn’t know who you are. In fact, he’s probably wondering, “Why did Laura give my name out to this guy?” Instead, we need to get connected — introduced. From this moment on, 48

whenever you are talking to prospects, clients and centers of influence about others who might value your work, use the word introduction. “How do you feel about introducing me to your sister and brother-in-law?” “Let’s discuss the best way for you to introduce me to him; he’ll probably prefer to hear from you before he hears from me.”

Strategy No. 1 — Teach Your Sources Who You Serve The Best

a sense of who we best serve. While I don’t expect you to know the specifics about anyone’s financial situation, you probably have a sense, and that’s very helpful.” Now you go on to describe some of the demographics of an ideal client, covering such topics as income, assets, age range or anything else that’s important to you.

Strategy No. 2 — Qualify The

If a potential client doesn’t really fit your Prospect Before You Speak To Them business — isn’t suited for the work you You’re in a meeting with a client and they like to do and the direction in which you say something like, “Hey, I think I might are taking your business — are you the have a referral for you.” Be flattered that right person for them? I would submit that they trust you enough to introduce you to you are not. They should be served by someone who is jumping-up-and-down excited to work with them. The first line of defense against receiving ill-fitting clients is to teach your clients who you serve the best • 20% of your clients will give you referrals — the people for whom you without asking. do your best work. “We have built our busi• 20% of your clients will never give you ness in a way that allows referrals. us to work with certain • 60% of your clients will give you referrals types of folks who meet a and make introductions, but only if you specific criterion. [As you are appropriately proactive. do.] We’re not the right firm for everybody, and I want to make sure we have a chance at being a good fit for the someone, but don’t feel obligated to take right person. So I thought maybe you that client. Assuming you haven’t made the can identify someone who you think decision to take on anyone and everyone, should know about us, since you have just because a client wants to give you a

InsuranceNewsNet Magazine » October 2019

From my work as a referral coach, I have determined that:

A GUIDE TO GETTING REFERRALS THAT ARE JUST RIGHT BUSINESS referral doesn’t mean you have to accept it. Earlier in this article, I made the point that if a client isn’t the right fit for you, then you’re probably not the right person for them. If you agree with that, then why would you even be tempted to create a lose-lose-lose situation? The language for this situation is much the same as previously. “I appreciate the trust you have in the work that I do, enough so you want to let others know about us. Let’s talk about your friend Keith. I’ve probably mentioned to you that we’re not the right firm for everyone, that it’s important for everyone that the fit is just right.

you work with a firm perfectly suited for your situation. Let’s chat a bit to see if it makes sense for us to get together.” Jayson then shares some of his criteria for a perfect fit. He told me that if the prospect is not a great fit, they will recognize it and pretty much self-select out of the next step. Important note No. 1 — As soon as you get off the phone with a prospect who isn’t a good match, pick up the phone and leave a message for the referral source. “Diana — I just got off the phone with Bobby. Nice guy! I appreciate the trust you have in us to recommend us

The first line of defense against receiving ill-fitting clients is to teach your clients who you serve the best — the people for whom you do your best work. “If you don’t mind, I’d like to ask you a few questions about Keith’s situation and why you thought of him to see if it makes sense to follow through with an introduction. While I don’t expect you to know the specifics about his financial situation, you probably have a sense, and that would be helpful.” The words you choose might be very different from this suggested verbiage. It’s important that whatever you say is authentic for you.

Strategy No. 3 – Qualify The Prospect Over The Phone

What do you do if a prospect reaches out to you — referred by a client or center of influence — and you’re not sure if they are a good fit for you? Qualify them over the phone! You don’t want to waste this person’s time or your time if the fit isn’t right. One of my coaching clients, Jayson, isn’t shy about this at all. Here’s what he says to these folks. “Bobby — It’s great that Diana suggested you reach out to me. She’s been a wonderful client for many years. I know that we are not the right firm for everyone. It’s important to you that

to him. Through our conversation, we determined that the timing wasn’t right for us to get together. Again, thank you so much for this recommendation. I look forward to the next opportunity.” Important note No. 2 — In this message to your referral source, you don’t want to reveal any proprietary information. Perhaps the next time you visit with this referral source in person, you can teach them who you serve the best — in a conversation totally separated from this situation. Remember the two main things to avoid taking on clients who don’t fit your business: 1. Teach your referral sources who you serve the best. 2. Qualify, qualify, qualify. Don’t create lose-lose relationships. Bill Cates, CSP, CPAE, is the author of Get More Referrals Now, Beyond Referrals and Radical Relevance, and the founder of The Cates Academy for Relationship Marketing. Bill may be contacted at bill.cates@innfeedback.com.

October 2019 » InsuranceNewsNet Magazine

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From Generalist To Specialist: Strategically Creating Your Niche When you stop trying to be everything to everybody, you find the best place to focus your practice. By Brad Elman

hen I was a new agent, I was perplexed every time I heard speakers at industry meetings talk about how much they love their careers. I was jealous because loving my career seemed entirely out of the question. Then one day I realized I can choose with whom I work, what products I sell and what types of planning I execute. If I made different choices, I could find love for my career. Although I didn’t realize it at the time, I discovered narrowing my focus and thinking mindfully about the work I consistently enjoy are the first steps toward developing a niche. The more you hone in on a topic, the more likely you will master it, positioning yourself as an indispensable source of credible advice.

How To Begin

You likely began your career as a generalist, working with every product you are licensed to sell to give yourself the best chance of survival in a competitive industry. This is a necessary stage in any new financial representative’s development. But the more areas you claim to be an expert in, the less credible you become and the harder it is to brand your niche. To create a brand, we must establish what differentiates us over the competition and articulate our value proposition. So, if you want to be a generalist, build your brand around being the most unique generalist out there and leverage how that provides convenience to your clients: “We can provide a more coordinated approach because we have expertise in multiple disciplines relevant to 50

you. Let us be your advocate, and we will work with other advisors as needed.”

From Generalist To Specialist

The top end of the market prefers to work with and be referred to specialists, which makes honing your expertise even more important. Our clients appreciate convenience, but not at the expense of expertise. Claiming too many specialties dilutes our brand and our client’s perception of our expertise. The key is picking the right practice area for you specifically and building from there.

Narrow Your Focus

Four criteria exist in your niche and they ideally align: credibility from claims experiences, demonstrated expertise from credentials or background, preferred professions and products. Firsthand claims are the most effective way to explain the benefits of your advice to a prospect. Early in my career, I broke my leg playing soccer and made a disability claim. Although I didn’t need my leg as part of the job, I discovered the pain and exhaustion were enough to affect my performance. I connected personally with and became an expert on the product. My claim story served as a point of reference for clients to realize it really doesn’t take much to disable you. While a personal connection is impactful, your claim story can focus on someone else, such as a client or friend. However you choose to frame it, ensure your claim story would move you if you were a client. After you identify your meaningful claim stories, make a list of your three favorite products to work with and preferred professions for each. Perhaps you like to work with life insurance for business owners or disability insurance for physicians. If you have a claim story about the product and group you pinpointed, put a star by it. If you don’t, consider whether you enjoy the work you do with your product and market niche, and

InsuranceNewsNet Magazine » October 2019

any adjustments you can make to create more personal connections and sales opportunities.

Brand Your Niche

If you have a niche, you know it. If you have a branded niche, your clients also recognize it and can reference it as a reason to conduct business with you. We need to brand ourselves as the expert or advisor of choice in our niches. Consider writing for insurance journals and referral source trades. Communicate your skills through these media to brand yourself as a credible specialist and receive public validation of your expertise. To leverage your exposure, tell clients you were quoted or wrote an article; consider adding an “in the news” section on your website or promote the content on LinkedIn.

Continue To Evaluate

Your niche can change as you progress through your career. Even now, I know it is time for a change in my niche to realign with my passions and expertise. For example, you may start volunteering and find you can build a business around working with the other volunteers in the organization or the constituents the organization serves. Continue to evaluate who you work with, what products you sell and what types of planning you conduct. When I strategically narrowed my focus and stopped trying to be everything to everybody, I found my niche, and I have been finding it ever since. Brad Elman, CLU, ChSNC, CLTC, is a 27year MDRT member from Los Altos, Calif. His life insurance practice focuses on business and estate planning. In 2013, he founded Special Needs Life Insurance Solutions, dedicated to helping families with developmentally disabled children plan for their financial security. Brad may be contacted at brad.elman@ innfeedback.com.

INSIGHTS

Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

Tenacity And Ambition Fueled Advisor’s Drive To Success This advisor’s uncommon path to leadership offers critical insights for successfully leading others. By Ayo Mseka

f you or someone you know has moved to the U.S. and feels overwhelmed about finding success in the financial services industry, you might want to spend some time combing through the new book, Leadership Beyond Borders. Written by NAIFA member Aamir Chalisa, the book tells the inspiring story of his life in two countries — the U.S. and Pakistan — and the lessons he learned on his way to becoming managing director at Futurity First Insurance Group in Chicago. When Chalisa’s dream of becoming a doctor was thwarted by political unrest in his native Pakistan, he emigrated to the U.S. to further his education in an environment free of violence. After years of working as a janitor to fund his education, Chalisa earned a bachelor’s degree as well a master’s degree in business and joined the insurance industry. He quickly set himself apart in his career and community. In Leadership Beyond Borders, Chalisa describes a few steps financial professionals can take to set themselves apart in their careers and communities. » Be active in industry organizations. When he worked for MetLife, Chalisa said the company did a phenomenal job of training its agents and providing resources to help them learn about sales. MetLife also encouraged the agents to attend NAIFA meetings regularly. » Mentor someone or work with a mentor. Chalisa encourages new advisors to seek at least one mentor who will help shepherd them through their most difficult first years in the industry. Learning

from someone who has blazed the trail is priceless and is easier than learning on your own. Once you become a seasoned advisor, he writes, you should pay it forward by guiding new agents through their first few years in the business. » Combat your fears and learn from early experiences. Sometimes in life, Chalisa writes, you need to experience a situation that terrifies you and requires you to step up and meet a challenge. After you get through that situation successfully, your self-confidence will increase and subsequent challenges will become easier to handle. So, embrace difficult situations and learn how to find the valuable lessons they teach. » Understand the significance of the products you sell. The significance of life insurance does not really hit you until you deliver your first death claim, Chalisa writes. During his first year as an agent, he wrote a policy for the father of one of his clients who originally thought he would buy a $50,000 policy just for burial purposes. About a year later, the client died unexpectedly. Chalisa understood what life insurance is all about when he delivered a check to the client’s family. “Life-changing experiences of clients make us realize that we are not just working with people’s money,” he writes. “We are also contributing to their peace of mind, financial stability and their families’ futures. I began to see that the work we are doing is significant and self-fulfilling. It is not just about making money — it is also about helping people become financially secure.” The two years Chalisa spent on the sales and service side of the business before he got into management truly helped him understand what the industry is all about, he explains. » To grow and succeed, you have to get out of your comfort zone. Sometimes the best things happen when

you are taken out of your comfort zone and you become uncomfortable because this makes you stronger, builds perseverance and helps you face future challenges with more confidence, Chalisa writes. » Seek out and celebrate diversity. Make time to learn about new cultures and seek opportunities to gain an understanding of other communities. Also, share your background and way of life with people from diverse backgrounds. » Donate time to others. Appreciate how blessed you are to have what you have rather than taking the comforts of your life for granted. Support charitable organizations not only by giving money, but by giving your time. In doing so, you will help others while developing a valuable perspective on other parts of the world and about people whose life experiences are vastly different from your own. Through volunteering, Chalisa has made many friends, and through those friends, he can now better figure out where his help is needed the most. Throughout his 28 years in the financial services business, Chalisa never gave up despite facing many setbacks. His tenacity is the quality he values the most. “Life is a roller coaster, a journey with hardships at times and adversity all around,” he writes, “but family, friends, faith, perseverance, leadership, drive and ambition will allow you to fulfill every dream you have for yourself and your family.” Ayo Mseka is editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@naifa.org.

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October 2019 » 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.

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Reaching Unadvised Gen X Investors In order to break through to Generation X consumers, advisors must overcome two primary obstacles.

By Matthew Drinkwater

dvisors are always looking for an opportunity to find new clients. Some advisors may look to younger generations as they continue to hit milestones that would make them better suited for financial advice. But there may be a generation that advisors are missing. Generation X, comprising 36 million households, could represent one of the next best opportunities for financial advisors to provide in-depth retirement planning. The oldest members of this generation will reach age 55 by 2020. As LIMRA Secure Retirement Institute research has demonstrated, reaching milestone ages — such as 55 or 60 — can trigger retirement planning activities. Even before that point, many Gen Xers are entering their peak earning years and are growing their financial assets substantially. These investors will be seeking guidance as they navigate through the critical pre-retirement years. LIMRA SRI analysis finds Gen X households collectively control $6.6 trillion in financial assets. Both in absolute terms and as a share of all financial assets, this amount will grow as Gen Xers continue to contribute to retirement savings, pay down debt and begin to receive inheritances. As with other generations, wealth is extremely concentrated — only about 7% have household financial assets of at least $500,000, a common threshold assets level. Although this is low, this proportion is much higher than among millennials; fewer than 1% of millennial households have assets at this level. 52

The Difference Between The Advised And Unadvised

Fewer than half of Gen X investors currently work with a financial professional (usually a financial advisor/planner) to make financial or investment decisions. Gen X investors who work with advisors are twice as likely as those who don’t work with advisors to have a formal written plan for managing income, expenses and assets in retirement (38% vs. 19% respectively). The importance of these plans shouldn’t be downplayed; LIMRA SRI research has repeatedly shown that formal retirement plans result in consumers having higher confidence in being able to achieve their desired lifestyle in retirement. Our studies also indicate that 81% of all formal retirement plans are created with the help of advisors.

The Value Of Trust

The biggest differences between the two groups are found in their trust of advisors. For example, only 20% of unadvised Gen X consumers say they have an “extreme amount” or “quite a bit” of trust in financial advisors to act in their best interest. In contrast, 68% of advised Gen X consumers feel this way. Our research finds unadvised Gen X consumers are more skeptical about the value of having an advisor. Sixty percent of Gen Xers believe that advisors “act in their own interest” and “sell people things they don’t need.” These were by far the most commonly-cited reasons for not working with an advisor. If they aren’t working with professional financial advisors, then who — if anyone — are they working with to help make financial decisions related to retirement? Although more than half of unadvised Gen Xers consult a spouse or partner, and 19% consult family members (e.g., parents, siblings), nearly 4 in 10 (38%) say that they don’t consult anyone. Unadvised Gen Xers also describe themselves as “investors” more often than advised Gen

InsuranceNewsNet Magazine » October 2019

Xers do; 33% strongly agree that they are “currently very involved in monitoring and managing their retirement savings” while only 13% of advised Gen Xers strongly agree with this statement. Can more unadvised Gen Xers be convinced to work with financial professionals? According to LIMRA research, the answer is yes. But in order to break through, advisors must overcome the two primary obstacles we identified in our research. First, advisors need to build trust with their Gen X clients. Product sales, if any, should be the natural consequence of a thorough assessment and planning process. A strong track record can lead existing clients to build your case for you in the form of referrals to Gen Xers approaching retirement. Second, they have to provide services above and beyond investment management. Many unadvised Gen Xers consider themselves to be capable of handling those decisions on their own. However, they may not know enough about the complexities involved in transitioning from full-time work to retirement. This includes when to claim Social Security benefits, whether to buy Medicare supplements and how to generate income that will last throughout retirement. A financial advisor who can provide guidance on these decisions — looming on the horizon for Gen Xers — has a competitive advantage over advisors limited to asset management. In the long run, Gen Xers themselves will benefit by having a clear plan in place and by making more informed decisions about their futures. Matthew Drinkwater, Ph.D., is corporate vice president and director of retirement research within the LIMRA Secure Retirement Institute. Matt may be contacted at matthew.drinkwater@innfeedback.com.

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