InsuranceNewsNet Magazine | February 2021 by InsuranceNewsNet

February 2021

A NEW START TO AN

ELUSIVE RULE? What’s next for the DOL Conflict of Interest Rule?

PAGE 18

PLUS NAIFA President Tom Michel: Recruit And Train More In 2021 PAGE 8 Retirement Could Be At Risk For People Of Color PAGE 38

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IN THIS ISSUE A New Start To An 18 Elusive Rule?

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FEBRUARY 2021 » VOLUME 14, NUMBER 2

HEALTH/BENEFITS

FEATURE

34 COVID-19 Continues To Drive Voluntary Benefit Trends

By John Hilton

Will the Biden administration scrap the investment advice rule and resurrect the fiduciary approach?

INFRONT

6 Democratic Control Means More Taxes, Oversight

IN THE FIELD

By Susan Rupe Harley Tobon is on a mission to bring financial planning to as many households as possible while serving members of his Latino community.

LIFE

By Susan Rupe A great garden doesn’t just happen — you need to plan for it. Here are some things to consider when creating your backyard vegetable plot.

ANNUITY

BUSINESS

30 T he Medicaid SPIA: Helping Clients Alleviate LTC Costs

NAIFA President Tom Michel discusses the need to recruit and retain the right people as well as the creative ways his association had to pivot in the wake of COVID-19 restrictions.

By Susan Rupe Research indicates people of color may be misinterpreting their financial situation and putting their retirement in jeopardy.

42 Plan Now, Plant Later

By Justin Gladieux Tax-exempt organizations are increasingly using split-dollar life insurance arrangements as alternatives to traditional nonqualified deferred compensation plans.

8 Building Back Stronger

38 Retirement Could Be At Risk For People Of Color

INBALANCE

26 How Split-Dollar Life Insurance Rescues Nonprofits

INTERVIEW

By Mike Wilbert Voluntary benefits will become an even more personal choice for workers as they continue to navigate the effects the pandemic has had on their financial situation.

ADVISORNEWS

14 C ulture Is Currency

By John Hilton Taxes, health care and labor rules are sure to change, with many other issues expected to come into play.

online

www.insurancenewsnetmagazine.com

By Mark MacGillivray A Medicaid SPIA is a solution for a situation that could put a healthy spouse at risk of financial hardship when paying for a loved one’s medical care.

44 Cover These 4 Bases For The Perfect Client Meeting By Bill Cates The perfect meeting starts before the actual meeting begins.

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InsuranceNewsNet Magazine » February 2021

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IMG22661 | INN 02.2021

WELCOME LETTER FROM THE EDITOR

Winter Will Fade

inter is starting to recede, and with it one of the worst periods in American history. I don’t recall when I have wished for spring more, even after some deep winters in central New York. To be truthful, I have to say I did not have a horrendous 2020. It was not wonderful, but I was able to save some money and enjoy the quiet, an introvert’s preferred state. It was far too much solitude, but it had its pluses. None of my elderly close relatives got COVID-19, and I did not have to struggle with school-age children going to remote learning, back to school and then back to remote again. The year was actually good for quite a few people. I heard from many advisors and marketing organizations that were having a banner year. But those of us who did OK or even thrived last year cannot breathe a sigh of relief. We are not separate from all the people out there gasping for air, literally and figuratively. The life insurance and financial services industries have extraordinary power to help in some of the key crises this nation faces. In fact, those problems have a lot to do with our national crisis — retirement, for example. Some of the states that are hurting the most used to have strong manufacturing and union presence, such as Michigan. Blue-collar workers earned decent money, benefits and retirement funding that ensured people never had to worry about an income after they stopped working. Deep despair, with unemployment, opioid addiction and grinding poverty, haunts cities and crawls up the spine of the Appalachian Mountains.

More Than ‘Widows And Orphans’

The financial services and life insurance industries talk a good game of serving the public. I remember, early in my tenure at InsuranceNewsNet, hearing the phrase “widows and orphans,” as in “shield us from taxation — we protect the widows and orphans.” That is an old one, but we have a more updated version of how we cover 75 million 4

households in America. Commendable, yes, but life insurance ownership has been dropping in proportion to the population for a half century. Why do fewer people have life insurance? I have heard lots of guesses. For example, one is that fewer people have it as a group benefit and they are not buying it in the individual market. The reason that seems consistent is that there is a lot more money in the bigger cases, so why bother with all the smaller ones and do more work for less money? I have been inspired by agents who believe they are protecting their clients. Their passion was evident, and their practice reflected that outlook. I have also heard plenty of people who spoke about selling to prospects as if hunters considering their prey. Those more mercenary examples have prompted regulators and consumer advocates to install guardrails such as the Securities and Exchange Commission’s effort to regulate fixed indexed annuities with Rule 151A and, more recently, the Obama-era Department of Labor’s Conflict of Interest rule, aka the fiduciary rule.

Rule Wars

Both of those regulatory efforts failed, but some version may return with the Biden administration and a Democratic Congress. In this month’s feature, Senior Editor John Hilton discusses the likelihood of new regulations popping up in the next few years. This tug of war has been going on for decades, and consumers — who are more in debt and more unsure about their retirement years than ever before — are stuck in the middle. Half of Americans over age 55 don’t have any retirement savings. Even people with some means are routinely wiped out by long-term care expenses. As boomers enter their frail years, everybody will be paying for their care. I assume that we will not just let them suffer and die in the street or in dark corners. The life insurance and financial industries rally well when regulations are proposed. It was those efforts that brought

InsuranceNewsNet Magazine » February 2021

down SEC 151A and the DOL fiduciary rules. Both of the rules had their considerable flaws, despite good intentions. This is what happens when one “side” makes a rule while excluding the other. We could all do better by keeping the eye on the real issue, retirement and family security. In our industry, as in politics, we have our own us-against-them problems: fee vs. commission, planning vs. selling. It is yet another struggle in America with one side wanting to bash the other out of existence. Some marketing organizations get it. They offer a wide array of services and bring on a diverse agent and advisor force that attracts clients from across the spectrum of races and riches. They are using tech to scale up their businesses and give the sales force the benefit of efficiency. The more we have of these examples, the more likely this sector can serve as a model. What we can’t do is assume that the nation’s problems will stay in “that” part of town. The election of Donald Trump was possible because of people who have suffered in marginalized rural areas, ignored by politicians until they were rattled for a vote.

The Riot This Time

Rural poverty was a problem that came home to roost in horrifying ways, and no one is insulated from the effects; Democrats and Republicans alike huddled in the bowels of the Capitol while marauders stalked the halls looking for somebody to punish. Many of our worst impulses and ancient sins came together on Jan. 6 and erupted in front of our disbelieving eyes. Trump just happened to be the match that ignited that anguish. What does that have to do with us? After all, we are just selling insurance and providing investment advice. But this industry cannot hide behind the facade. We say we protect Americans. Well, right now America needs us more than ever. As this deep winter melts into spring, what will we grow out of this ground? Steven A. Morelli Editor-in-Chief

INFRONT Credit: REUTERS/Jonathan Ernst

The election of Senate candidates Jon Ossoff, left, and Raphael Warnock in Georgia opens the door for President Joe Biden, right, to push significant policy changes.

Democratic Control Means More Taxes, Oversight Taxes, health care and labor rules are sure to change, with many other issues expected to come into play. By John Hilton

airing President Joe Biden with a Democratic Congress surely means taxes will rise, regulatory oversight will increase and the government’s role in health insurance will be expanded. All those things became possible on Jan. 5, when Democrats swept a pair of Georgia Senate races. Sens. Rafael Warnock and Jon Ossoff defeated Republican incumbents Kelly Loeffler and David Perdue, respectively. The special election victories give Democrats slim control over both chambers of Congress. Analysts speculate that centrist senators such as Sen. Joe Manchin, D-W.V., and Sen. Lisa Murkowski, R-Alaska, will wield significant power in crafting deals. Nevertheless, it opens the door for the Biden administration to move on these three issues: 6

» Taxes. Biden’s plan would raise corporate and individual taxes, although not for anyone making less than $400,000, and would end preferential treatment of capital gains.

“The issue was always, could Democrats get something on the floor? And the answer to that is now clearly yes,” Wamhoff said.

» Regulatory oversight. A new and tougher investment advice rule is likely from the Department of Labor, and the Securities and Exchange Commission.

Having such a slim advantage in the Senate might not change the legislative agenda significantly, said Diane R. Boyle, senior vice president of government relations for the National A s s o c i at i o n o f Insurance and Boyle Financial Advisors. She noted the narrow margins and close proximity to the 2022 elections. But tax rates could certainly change, she added. “I think we’re more likely to see wealth tax and financial transaction tax proposals as well as activity to increase the corporate tax rate,” Boyle said. Biden’s plan would raise the corporate tax rate to 28% from 21%, restore the top individual tax rate to 39.6% from 37%, tax capital gains as ordinary income and at

» Health coverage. Biden could pursue a public option to compete with private health insurance. Another option would be lowering the Medicare age to 60, which the president also endorsed during his campaign. There are many other economic issues the Biden administration is expected to pursue. The president’s DOL is likely to take a strong pro-worker stance, which could have far-reaching implications for the economy. Whatever proposals the Biden team produces, the chances of success improved on Jan. 5, said Steve Wamhoff, of the progressive Institute on Taxation and Economic policy, to The Wall Street Journal.

InsuranceNewsNet Magazine » February 2021

Taxes

DEMOCRATIC CONTROL MEANS MORE TAXES, OVERSIGHT INFRONT death for very high earners, limit deductions for high earners, and subject wages above $400,000 to the Social Security payroll tax, according to the Committee for a Responsible Federal Budget. Biden would scrap preferential treatment of capital gains and dividends for higher earners, and raise taxes on inheritance. Capital gains and dividends would be taxed as ordinary income, at a rate of 39.6% for individuals and couples earning more than $1 million. Long-term capital gains are taxed currently at a top rate of 20%, and earned income is taxed at a top rate of 37%. Also, when one generation inherits from another, the cost basis of that asset steps up from the cost at the time of purchase to the cost at the time of transfer. That means heirs escape taxation on the gain. Biden would restore some taxes on inherited assets — although the campaign has said the plan would not apply for Americans earning less than $400,000.

Regulatory Oversight

Biden’s DOL leadership will play a key role in what happens with the investment advice rule the Trump administration published Dec. 15. That rule is expected to be withdrawn by the Biden administration upon taking office. The investment advice rule is a replacement for the fiduciary rule put forth by the Obama administration. In 2018, the Fifth Circuit Court of Appeals in New Orleans tossed out the fiduciary rule, handing a major win to industry opponents. The court ruled that the DOL rule “fails the reasonableness test” of the Administrative Procedures Act by extending the department’s ERISA authority to one-time IRA rollovers and similar transactions. A Democratic-led Senate gives the Biden team an opening to address the court’s concerns legislatively, said Barbara Roper, director of investor protection for the Consumer Federation of America. Expanding the DOL’s oversight role on rollovers would open the door for tougher rules for recommendations and sales of insurance products. Otherwise, Biden campaigned on a vow to promote union issues and to make it easier for employees to join unions and collectively bargaining. Here are some

worker issues a left-leaning DOL could tackle over the next four years:

not to expand it after the Affordable Care Act took effect.

Minimum Wage. Biden supports a $15 federal minimum wage. His official website called “wage theft” a serious issue he intends to address. He noted that “employers steal about $15 billion a year from working people just by paying workers less than the minimum wage.”

Affordable Care Act. Congress and the new president could build on the ACA, expanding subsidy eligibility and value.

Overtime. The DOL could revive an Obama-era overtime rule that had raised the minimum salary for exempt status to $913 per week ($47,476 per year), which was invalidated by a federal court. The Trump DOL overtime rule took effect Jan. 1, 2020, and the minimum salary for exempt status increased to $684 per week ($35,568 annually), up from $455 per week ($23,660 annually). Worker Classification. Biden also supports aggressive prosecution of employers who violate labor laws, including those who intentionally misclassify employees as independent contractors. Biden has said that he will support legislation that makes worker misclassification a substantive violation of law under all federal labor, employment and tax laws. Gig Workers. Employer misclassification of “gig economy” workers as independent contractors also has Biden’s attention. Doing so prevents them from receiving their legal benefits and protections. Biden supports using a strong three-prong “ABC test” to distinguish employees from independent contractors.

Health Coverage

Biden was a key player in President Barack Obama’s crafting of the Affordable Care Act, and he has a stated interest in preserving it. But a Democratic Congress could help Biden expand on government health care initiatives. Here are five ways a Democratic trifecta could affect health care, according to a recent Manatt Health webinar on the impact of the election: Public Option. Congress could implement a public option to compete with private health insurance. Congress also could use the public option as a chassis for expanding Medicaid in states that chose

Medicare At 60. President-elect Joe Biden has stated his support for lowering the Medicare eligibility age to 60. Look for a Democratic-controlled Congress to go along with it, while addressing Medicare insolvency issues. Drug Pricing. A Democratic-controlled Congress is likely to allow Medicare to negotiate prices with drug manufacturers. Congress also would place caps on drug price increases. Surprise Billing. This is one issue both Democrats and Republicans can agree on. Surprise billing legislation is likely no matter which party is in charge. The key issue is reaching agreement on the approach to provider payments in out-of-network settings. In addition, if the U.S. Supreme Court strikes down the ACA in a ruling expected to come down in June, Congress could act to codify some ACA provisions, such as protection for those with preexisting conditions. Congress also could pass legislation before the court reaches a decision, making the court case moot. These legislative options include: » Change the individual mandate penalty from $0 to an amount that would generate revenue for the government. » Repeal Section 5000A of the Affordable Care Act, the individual mandate. » Pass legislation severing the individual mandate from the rest of the ACA. » Pass health reform legislation that replaces the ACA. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeedback. com. Follow him on Twitter @INNJohnH.

February 2021 » InsuranceNewsNet Magazine

ER G N t and in ui re ROecr n mo 21 R i ST tra 20

IN D K IL C BU A B

InsuranceNewsNet Magazine » February 2021

ta NA lk IF s A t ab o P Pres ou ub id rig t h lish en ht ow er t To ke pe t P m ep op o h au M th le ire l Fe ich em an th ld el . d e ma n

INTERVIEW

om Michel got his baptism by pandemic in 2020 when, as president-elect of the National Association of Insurance and Financial Advisors, he was responsible for NAIFA’s annual conference. The association’s first virtual conference went well, but it was only a part of the year of the pivot that everybody experienced. In Michel’s case, besides working with NAIFA, he was helping his agency, Michel Financial Group, cope with the pandemic. He and his wife, Kim, lead the agency they have had in West Los Angeles for several years, following Michel’s long career as an agent and agency manager, starting with Connecticut Mutual and ending up with New York Life. As with many other agents, life insurance and finance were not where Michel’s career began. He worked in the auto aftermarket business, where he was feeling stifled. He remembered his father’s advice of being your own boss and eventually ended up in the advising business because he liked how the essence of insurance and finance was helping people. Michel credits NAIFA with giving him support throughout his 35-year career and helping him roll with all the changes he has seen in that career. As he faces his year of leading the association as president, Michel sees a whole new world of challenges, the pandemic being only one of them. One of the key challenges for NAIFA and Michel’s own agency is bringing in new people who will be successful. Recruiting is tough at any time, but in this interview with Publisher Paul Feldman, Michel tells how some basic values inform his recruiting and his success.

FELDMAN: How has your business been doing during the pandemic? MICHEL: There’s no doubt it’s hurt. People just aren’t as willing to meet with you in this business. That’s a pretty big deal. We’ve even had some cases where we had people who were agreeing to buy insurance, and then they weren’t comfortable going through an exam. But, that being said, I think it’s hurt

BUILDING BACK STRONGER INTERVIEW the newer advisor more than the senior advisor, strictly because the more senior advisor has had that book to fall back on. We have a couple of RIAs who do a fair amount of business, and they’re having one of their best years ever because they’re trying to take advantage of the market. And, all of a sudden, long-term care has become a priority. So, it took a pandemic to realize that long-term care was

MICHEL: I still think some are the same. I don’t want to play doctor, but I do think this is going to linger for longer than some think. And actually, I think it depends on the ZIP code. There are some places where they seem to think it’s over. Here in California, we’re still buckled up pretty good. [This interview was conducted in mid-December.] I do think with the vaccinations starting to roll out, that it will give people

Zoom and these other platforms are here to stay, there’s no doubt. It’s definitely a very efficient way to do business. But I still think people want to look you in the eye and Zoom is adequate, but it’s not. an issue. We even had some people buy life insurance because they felt now they were more susceptible to passing away because of the pandemic. So it’s triggered some of that thought process.

FELDMAN: Do you think you’re going to go back to in-person as much as you did before the pandemic? Or do you think that you’re going to stick to doing more meetings via Zoom? MICHEL: I’m an in-person guy. Zoom is nice, but I really like getting to know the people as much as I can. If it’s their office, it’s learning about their business. If it’s their home, which you don’t do that much, learning about their family. Even though there are some Zoom calls where the dog runs across the back and the child wants to sit on their lap. It’s still not quite the same. That being said, Zoom and these other platforms are here to stay, there’s no doubt. It’s definitely a very efficient way to do business. It may even be a way to do your introductory call, and then as you move along in the process be there. But I still think people want to look you in the eye and Zoom is adequate, but it’s not.

FELDMAN: What kind of challenges do you see coming up in 2021?

some sense of positivity that they can now start to go back to normal because there’s going to be an underlying push to get back to normal, not just going out to restaurants and not just mingling. But just doing business as we will. We still have to be very careful. I respect this thing greatly. But I think you’re going to see a real shift, I think from the first half of the year to the second half of the year. Because I think you know and I know, really you’re talking about cabin fever. This is nuts.

FELDMAN: One of the things that we struggle with in this industry is getting new blood into it. What are some strategies that you have found to be successful over the years? And how can the industry do better at attracting new people? MICHEL: I think for years we did not do a good enough job of being more diverse and more inclusive. We have made a conscientious effort now. But it’s just words — diversity and inclusion — and it’s got to be action. We partner with Ohio National and a number of other carriers that have great materials, not just in language but for target markets. Ohio National has done a great job there.

February 2021 » InsuranceNewsNet Magazine

INTERVIEW BUILDING BACK STRONGER First of all, we have to think more diverse and be more inclusive. People do business with people they know generally and who they like and who are similar to

It’s been so enlightening to watch these guys and sometimes do joint calls with them. We’re really enthused. We’ve got a couple who are doing really well. They

fashioned tune. And we’re not looking to grow by leaps and bounds. I think if it’s another firm that’s looking to add 20, 30, 40 people a year like some do, you’re going to have to have more legs on your stool, if you will, than we have. We’re really looking for people who we think we can help. We use the old line that if we don’t think we would want to have lunch or dinner with you, you’re probably not good for us. So we’re not into the numbers game anymore that I think some are.

We are an industry of people who care. We really are. We care about our clients. We care about our carriers, for the most part. And we care about each other. And if you can’t bring that care to the table and that care to your daily efforts, then you’re probably not meant to be in the industry. them. I don’t think any of those characteristics will ever change. My client looks a lot different than that of the 25-year-old new advisor in my office. The second thing we have to do is we have to let people understand how important this is and understand what a fulfilling life it is to help people every day. I think we talk too much about if you do this and you do that, then you will make this. And the problem we have seen over the years I’ve been recruiting is you get some pretty sharp people coming out of colleges, and there is a sense of immediate gratification. They want to be successful now, and the thought of building something is foreign. So you have to show them the importance of building something. And I think a lot of my peers sometimes don’t focus on that. I don’t want to throw them under the bus. I’ll give you a perfect example. In our agency, we just recruited four individuals with basketball backgrounds, African American gentlemen who all played college basketball, all played in Europe. And they were triggered by the fact that they saw a lot of their pals blow the money they made. So they were looking for a profession to say, “Hey, let me help you out. If you take this money and put it away now, you’re going to make your life a lot easier down the road.” 10

actually got their own DBA called LAB, Life After Basketball. What were they attracted to? Helping people. So, if we go in and say, “Here’s what we do. Here’s our insurance portfolio. Here’s our investment portfolio,” I don’t think that resonates with anybody. Are you talking about helping people? When you do that, you’re getting the right person in the door anyway. If you get someone who’s only focused on making money, they usually don’t make it because they don’t get it. We are an industry of people who care. We really are. We care about our clients. We care about our carriers, for the most part. And we care about each other. And if you can’t bring that care to the table and that care to your daily efforts, then you’re probably not meant to be in the industry. I tell people all the time, “We are an industry that at our core cares about other people and about each other.”

FELDMAN: How do you get new producers to join your agency? MICHEL: We have used all kinds of techniques over the years from some of the employer-based search engines that search people’s resumes, advertising. But the one that we’ve used the most has been the one that’s been the most successful — referrals. I know it’s an old-

InsuranceNewsNet Magazine » February 2021

FELDMAN: Is it tougher to get younger recruits used to the idea that it takes patience to get started in this business?

MICHEL: You tell someone, “You’ve got to have patience,” and they look at you like, “Are you nuts? Don’t you know who I am? I graduated with a 4.0, I should be making 150 grand tomorrow.” We’re always going to have that hurdle.

FELDMAN: What’s attractive about this industry is that there’s an upside. You come out of college, you take a job for $150,000. That’s a job. You might go up 3% a year, but you’re not going to be able to double, triple, quadruple, make seven figures a year with that particular career. The insurance industry can be one of the least profitable businesses and also one of the most profitable businesses. MICHEL: Absolutely. I really do believe this isn’t really a job. It’s a career. If you can wake up every day and enjoy what you’re doing, that’s going to make your life so much better. There’s just something about helping people that I think makes it more fulfilling.

FELDMAN: How can the industry evolve? How do we fix this recruiting problem in this business? Do carriers need to step up? Who steps up to do this? MICHEL: I think carriers are doing everything they can. Obviously, they all think they can do more, but they can’t go down to the battlefield for you. They can

BUILDING BACK STRONGER INTERVIEW provide all the tools and incentive programs. I think most of them do a pretty good job of it. It does fall on the leaders of the industry to recruit and spread the word, and therein lies part of the problem. I think we can do a better job of educating prospects on the beauty of this profession. It is noble what we do, and it is fulfilling. People need to hear that as opposed to when they walk in, they want to know how much they can make and all that. If someone walks out because you don’t give them that answer, they’re not your person. I don’t know if getting people in it is as much the issue as keeping people in it. I think a lot of carriers and agencies would tell you that the people-in-the-door number is maybe the same or up in some cases. But it’s all about retention, and teaching people that you must have a little patience. People who belong to an association and also educate themselves, they’re the ones who tend to stick around.

FELDMAN: How do you think agents and advisors could do a better job of recruiting and retaining? MICHEL: Recruit from the heart. Show your passion. Tell them stories. I tell people stories all the time and, unfortunately, they’re sad stories. Like the one about selling group life policy in a blue-collar work environment. Twenty years ago, I had a 401(k) client and I recommended a group life policy, which the commission couldn’t fill up a tank of gas. But two years later, two gentlemen died in a car crash and I show up with $50,000 for each family. You’d have thought someone said they would name their kids after me. It shouldn’t be that way, but I think we need to sell with a little bit more passion and more from the heart. And if we do, I think we’re going to recruit the people we want to recruit.

FELDMAN: What do you look for in your candidates? MICHEL: The first thing I already told you. Would I like to have dinner or lunch with them? I know that sounds really funny, but if I can’t wait to get them out of the office because every sentence starts

with “I,” I tend to think they’re not for us. That doesn’t mean they’re not right for the industry. I want people who care. Tell me about your life. How do they talk about their family? Are they respectful of their significant others? I look for more of the intangibles. At the end of the day, we do ask them, “Why do you think you would be successful?” And that’s an important question. We’ve had some people that we thought were brilliant. We asked them, “Well, whom do you know?” And they said, “Well, I don’t know anybody.” You better be upfront with them and say, “OK, this is going to be difficult. But if you’re willing to be told no, then we think you can make it.” I can easily tell within about five minutes if that person’s right for us, just based on their general demeanor. And in many cases, I don’t even look at their resume until after the meeting because I don’t want to have a preconceived idea. I actually love it when you talk to someone and they’ve told you how they’ve had some trials and tribulations in their life and how they bounced back from it. That tells me ... because another thing you’re looking for is character. And if someone says, “I was down and out and came back,” you go, “Whoa, give me some of that.”

FELDMAN: Well, as far as NAIFA goes, how do you see your role with NAIFA going into 2021 and some of the missions you’re hoping to accomplish? MICHEL: First of all, I hope I can get out as much as possible because part of what this role entails is to get in front of people and talk a good fight, if you will. As far as 2021, we’re really, really excited and have a lot going on. We’re embarking on a new five-year plan, 2025. We’re starting to see huge success in a lot of stuff we’re doing, from membership growth to amplifying our brand to producing better educational resources. The member experience is going way up. And in all honesty, what we’re trying to do is to keep that ball rolling forward. On advocacy, we’ve got some real critical issues here as a function of the increased deficit. Congress can raise money, and one of the ways they’re going to it is by raising taxes. But that’s not

going to cure the deficit. So, we have to be at the top of our game in educating. And then on top of that, you’ve got a brand-new legislature with a lot of new people. We’ve got to educate these people on all that we do and how we help society and how we keep people off the public dole.

FELDMAN: Is NAIFA planning on having an in-person conference? MICHEL: Yes and no is really the truth. We are planning on it. But we’re also planning on virtual because I think one thing that the pandemic has taught us is you got to be able to pivot. In NAIFA, the president-elect is in charge of the conference. So I was in charge of our conference last year. And it was pretty funny how it evolved. We had all our speakers lined up in January or February. And we were really excited. And then all of a sudden, the pandemic starts to catch momentum and then you know what happened. We were able to pivot and do a virtual conference, which turned out unbelievably. First of all, most of our sponsors, if not all of them, stuck with us. Attendance was virtually the same, and our reviews were off the charts [regarding] quality of content and all that. And as I always told people, “Hey, we got no complaints about the food, beverage or their rooms.” But that being said, there’s no substitute to being in-person. As you go through life, you have your grade school friends, high school friends, college and college fraternity friends — you always have these friends who are from different circles of life. Well, your NAIFA relationships extend for a lifetime, and you go to these conferences and you see people who were in study groups together, took cruises together, and they’re best friends and become godparents of each other’s children. There’s no substitute for getting together, even if sometimes those things are expensive to put on. And if we can, we will. But if we have to do it at the risk of someone’s health, we won’t.

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February 2021 » InsuranceNewsNet Magazine

NEWSWIRES

Fed Sees A Brighter Economy In 2021

You could almost hear them singing that Disney tune “There’s A Great Big Beautiful Tomorrow” as the Federal Reserve painted a bright picture for the coming year. The policymakers now foresee the economy contracting 2.4% in 2020, less than the 3.7% decline it envisioned in September. For 2021, in anticipation of a rebound, the officials have upgraded their growth forecast from 4% to 4.2%. By the end of 2021, the Fed expects the unemployment rate to fall to 5% from the current 6.7% — lower than the 5.5% rate it had forecast in September. Even as the U.S. is in what some health officials called a “dark winter” from COVID-19, the Fed painted its brightest picture of the economy in months, likely reflecting the expected impact of new vaccines. Fed Chair Jerome Powell said that although he predicts the economy and job market should rebound strongly in the second half of 2021, “the issue is the next four to five months” as the virus keeps weakening growth.

COVID-19 SPURS INTEREST IN EMERGENCY SAVINGS

Length of time household expenses can be covered by emergency savings 6 to 12 months, 13%

to less than 6 Over 12 months, The pandemic has 3months, 22% 17% forced Americans to take a fresh look No emergency 1 to less than 3 savings, 23% months, 22% at their finances, and many of them are worried about Less than 1 month, 3% their emergency savings. And with good reason — LIMRA found 14% of consumers said they have lost their job due to COVID-19 and 32% are earning less because their hours or pay were reduced. Almost half (45%) of workers indicate the pandemic’s economic downturn has negatively affected their retirement savings, and 56% are worried about the longterm impact the pandemic will have on their financial security. But the financial crisis resulting from COVID-19 has put a spotlight on a problem that already existed before the virus took hold. LIMRA said almost 1 in 4 Americans have no money set aside for emergencies and another 26% have less than three months of emergency savings. Over the past several years, 4 in 10 Americans expressed concern about paying their monthly bills and nearly 6 in 10 worried about being able to save for emergencies.

DID YOU

KNOW

Employers are taking notice. LIMRA said nearly two-thirds of employers are somewhat or very interested in offering employees access to an emergency savings account. Also, 3 in 10 defined contribution plan advisors would like to see recordkeepers offer workplace emergency savings alongside retirement plan recordkeeping.

OFFICE LIFE MAY NEVER BE THE SAME POST-PANDEMIC

Will the workplace desktop end up as a relic in a museum? Some chief information officers think it’s a possibility as employers and their workers weigh whether nearly a year’s worth of working from home will be permanent. “We do not see a return to the traditional five-day-a-week in the office likely happening again,” Brad Peterson, chief technology and information officer at Nasdaq, told CIO Journal. Peterson said a hybrid of home and office work will likely become the preferred option for most employees. In-person collaboration may be preferable, but employees are just as productive at home, said Max Li,

7.8 million Americans fell into poverty in the second half of 2020. Source: LIMRA

Source: National Source: University of Chicago and University of Association Notre Damefor Business Economics

InsuranceNewsNet Magazine » February 2021

QUOTABLE One of the things that the pandemic has underscored more than anything else is that the stock market is a forward-looking mechanism. — Michael Arone, chief investment strategist at State Street Global Advisors

global CIO at Automatic Data Processing. He said employees would often rather work from home because it gives them the freedom to structure their day in whatever way works best for them. “This has profound implications for the office model, as it is unlikely that we will ever go back to the way it was pre-COVID,” he said.

ECONOMISTS SEE JOBLESS RATES STAYING FLAT

The nation’s top economists predict unemployment rates to sink by less than 1 percentage point — to about 6% at the end of 2021, meaning unemployment will still hold well above pre-pandemic levels. Meanwhile, U.S. employers are seen as adding back an average of 321,205 positions a month in 2021, a tepid pace that sets the stage for another 2.5 more years before the financial system fully recovers the 22.2 million positions lost during the pandemic. That was the word from Bankrate’s Fourth Quarter Economic Indicator Survey. Part of the reasoning behind expecting elevated unemployment is a general prediction that employers won’t see enough demand to boost hiring. That is bad news for the nearly 10 million more Americans who were jobless at the end of 2020 compared with before the pandemic. But all is not gloom and doom. The economists surveyed said the U.S. financial system has more good going for it than bad. Distribution of the COVID-19 vaccines and passage of a second stimulus package helped soften the effects of rising cases and prolonged business shutdowns.

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the Fıeld

A Visit With Agents of Change

CULTURE IS CURRENCY

HARLEY TOBON AIMS TO BRING PROFESSIONAL FINANCIAL ADVICE TO AS MANY PEOPLE IN HIS LATINO COMMUNITY AS HE CAN

BY SUSAN RUPE

InsuranceNewsNet Magazine » February 2021

HOW THE STUDENT BECOMES THE ADVISOR IN THE FIELD

t. Charles is roughly 40 miles west of Chicago and is on the western fringe of the metroplex known as Chicagoland. When Harley Tobon’s Mexican-born parents decided to move out of the Windy City and find a place to raise their two sons, St. Charles was the perfect choice. “You’re on the cusp of the cornfields of the Midwest, while having an easy trip into metropolitan Chicago,” Tobon said of his hometown. “St. Charles is a great place to grow up. There’s a mix of affluent people along with a growing number of bluecollar workers. It’s a great place to see the world as it is.” Tobon, 23, still makes his home in St. Charles, where he serves as an advisor with Facet Wealth, which is based in Baltimore but serves clients around the nation. He is working toward his Certified Financial Planner designation and was chosen to receive a diversity scholarship from the Financial Planning Association. He also is a member of the Association of Latino Professionals for America, an organization aimed at fostering success within the Latinx community. He began his financial services career while he was a student studying personal finance at the University of Illinois at Urbana-Champaign. “I became licensed in property/casualty, life and health insurance at age 19. My first position in the industry was with a property/casualty insurance agency. I was brought in as a marketing coordinator, specializing in working with small-business clients.” But he was interested in financial matters long before he became a licensed agent. “Even when I was a child, I would encourage others to save money, to not spend it all,” he laughed. “Whenever I was given a cash gift, I would put it aside instead of rushing out to spend it.” He credits his father for being one of his earliest financial mentors. “Starting when I was a young age, my dad took it upon himself to instill in me the money management lessons that he had learned through trial and error. He wasn’t given the opportunity to have an in-depth understanding of finance aside from the philosophy of ‘you make what you use, you use what you make until you can’t use it anymore.’” While Tobon’s father taught him about managing money, his mother taught him people skills. “My mother has a lot of compassion,” he said. “And she taught me that being a good person takes you a long way. So between my father teaching me to be money-minded and my mother teaching me to be people-oriented, it was a great marriage of skills for me, and my interest in this business started from there.”

specifically in the Latino community, it was just being where people work. So I built a relationship with the owner of a Spanish grocery store, with the owners of some convenience stores in the area. It wasn’t necessarily an opportunity to do business development, it was to give the members of my community an individual they knew that they could communicate with, that they could ask questions pertinent to their concerns. I found many of them were relieved that there is someone out there who looks like them, who sounds like them.” Tobon’s involvement with FPA led to his current job, at a firm whose founder has an ambitious goal — to put a Certified Financial Planner in front of every household in the nation. Brent Weiss is the chief evangelist and founding member of Facet Wealth. Tobon said he heard Weiss speak at an FPA

“IT WASN’T NECESSARILY AN OPPORTUNITY TO DO BUSINESS DEVELOPMENT, IT WAS TO GIVE THE MEMBERS OF MY COMMUNITY AN INDIVIDUAL THEY KNEW THAT THEY COULD COMMUNICATE WITH ...”

“It Was Just Being Where People Work”

As he began in the business, he quickly learned to work with centers of influence and participate in community events as ways of prospecting with Latino clients in his hometown. “I did a lot of community-driven marketing — working with areas of influence, the local Chamber of Commerce, we did some community college events. When it came to prospecting

event, where he discussed his dream of making comprehensive, financial planning accessible to everyone. “I wanted to be a part of having that kind of comprehensive sound planning advice given to millions of households across the country,” Tobon said. “I knew how much of a benefit that could be, just reflecting on my own family and knowing that if my parents had been given the opportunity to speak with a professional financial advisor, how that could have springboarded our family into who knows where. When I thought of other households across the country and their needs, I knew this was an organization I wanted to learn more about and ultimately be a part of.” Facet Wealth’s business model is assigning each client one CFP who works with them consistently and virtually, getting a deep understanding of their needs and goals and creating an individually tailored financial plan. The firm doesn’t charge clients based on assets under management but charges fees based on the services clients use and has subscription-based service models available. Clients have the ability to work with their financial advisor from anywhere and have access to advisors even after business hours. “Our mission is that we aim to serve millions of households,” Tobon said. “Facet Wealth is very well positioned to be an opportunity for individuals to have a Certified Financial Planner available to them. In my position, I work with individuals who are interested in receiving comprehensive planning, begin the conversation and understand what their needs are February 2021 » InsuranceNewsNet Magazine

the Fıeld

A Visit With Agents of Change

in personal finance, what their concerns are. Something that I do personally is understand what they perceive planning to be and then have an open discussion about what that could look like. And what that looks like is different to different people.” Andy Barton is head of partnerships with Facet Wealth and hired Tobon to work for the firm. He described Tobon as “passionate about helping anyone get the financial planning they need.” Tobon especially wants to reach out to mass affluent consumers, Barton said. “He works hard to connect with people on a personal level, and that’s what he does well,” Barton said. “He also is able to serve people bilingually. He can provide advice and relate it back to what they are looking for.”

SERVING THE LATINO MARKET

‘People Prefer To Talk About Anything Else’

Tobon said he learned that finances can be a sensitive subject for clients to discuss. “People prefer to talk about anything else instead of their money,” he said. “So, starting from my insurance background, the conversations I have are less trajectory oriented and more about let’s protect what you have. Protection is easily understood by just about anyone.” Tobon said the protection conversation “gave me a lot of lessons in how individuals respect what they have. Especially in the Latino community, where you only have what you make and you never want to let that get out of your control.” In advising his clients, Tobon said, he found that most of their financial goals can be placed into three categories. “There are the short-term or medium-term goals, such as buying a vehicle, buying a home or maybe even buying a second home. Then there are more longterm goals, such as saving for retirement or saving up to begin the next chapter in their lives. Third, there are miscellaneous goals. These are when folks are pursuing their interests, maybe they want to create a business or they have family-oriented financial goals, maybe they want to perform some philanthropy.”

‘The Concept Of Money And The Idea Of Respect’

Tobon said that advisors who want to 16

Harley Tobon has some advice for advisors who want to serve Latinos: •D on’t let language be a barrier. •U nderstand that you may be the first financial professional the Latino family has ever encountered. • L atinos customarily provide financial support for those outside their immediate household. Be sensitive to that cultural tradition, and help them plan for it. serve Latino clients “must understand first and foremost that if the Latino individual has an opportunity to speak with a financial professional, it may well be the first time anyone in their family or their immediate circle has met with a professional advisor.” Advisors also need to understand some of the cultural distinctions in the Latino community, he added, especially the practice of families providing financial assistance to those outside their immediate household. In addition, he said,

InsuranceNewsNet Magazine » February 2021

Latino clients have a strong desire to help others within their community. Don’t let the language barrier keep you from serving Latino families and individuals, Tobon advised. “The concept of money and the idea of respect transcend language,” he said. Outside of work, Tobon enjoys life on his family’s five-acre property, where he keeps chickens and has a large vegetable garden. He also enjoys outdoor activities such as fishing. One of his passions is volunteering for the Make-A-Wish Foundation, which helps fulfill the wishes of children who are critically ill. How can the industry bring more Latinos into the financial services business? Tobon had some thoughts. “There’s the buzzword about creating the right cultural fit. But first, you have to recognize the lack of representation. When individuals look for a job in personal finance, they want to click on the company’s website and look at the team and see who they are. Employers who are interested in bringing in Latino advisors can look at what initiatives and incentives they can offer to bring those advisors into the workforce.” Tobon said he wants to serve households and individuals of all ethnic backgrounds, not just Latinos. “I hope to be a support for others who are traditionally underrepresented in personal finance, whether that be the Latino community, the Asian community, African American, women and any other minorities out there. I believe in more representation in the industry, because people are drawn to working with folks who look like you and sound like you. In America, by and large, folks are lacking professional financial planning. In my short career thus far, I’ve seen what professional planning can do for families and individuals, and I’m excited to be part of that.” Susan Rupe is managing editor for I n s u r a n ce N ews N et . She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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February 2021 » InsuranceNewsNet Magazine

A NEW

COVER STORY

START TO AN ELUSIVE 18

InsuranceNewsNet Magazine » February 2021

RULE?

A NEW START TO AN ELUSIVE RULE? COVER STORY

The fiduciary standard was the ideal at the center of the Obama-era Department of Labor’s Conflict of Interest Rule, so much so that it was known as the fiduciary rule. It was struck down in court, and the Trump administration put together another rule that is not altogether loved by anyone.

Will the Biden administration scrap that one as well and resurrect the fiduciary approach? Or is the Trump rule a new starting point? by John Hilton

resident Joe Biden will “almost certainly” pause the Department of Labor investment advice rule early in his administration. The Biden DOL will likely target a specific and controversial exemption allowing “investment advice fiduciaries” to engage in certain transactions that would otherwise be prohibited, explained Fred Reish, partner with the law firm Faegre Drinker Biddle & Reath. Otherwise, there are things in the Trump rule that the Biden team will surely warm to, Reish added. “In the preamble to the rule, the DOL expanded its interpretation of who is a fiduciary,” Reish said. “I suspect the new administration will agree with that and may even build on it. That part will, at the least, survive the change of administrations.” At stake is a long-awaited resolution for an industry toggling between standards and proposed standards for a decade since President Barack Obama directed his DOL to craft a fiduciary rule in 2010. There remain plenty of hurdles and a long way to go, but the two sides of the debate are closer than they have been to date. Barbara Roper, director of investor protection for the Consumer Federation of

exemption, the new rule also restores the original “investment advice” regulation and its five-part test for defining an investment-advice fiduciary. The rule was surprisingly tough, given it was issued under Secretary of Labor Eugene Scalia, who served as lead attorney for an industry coalition that successfully sued to overturn the fiduciary rule. Still, it falls short of where Democrats stand on these issues, Reish noted. “Historically, Democratic administrations have been more concerned about financial conflicts of interest than Republican ones,” he said. “After all, that is what this new rule is all about. I don’t see the exemption going through unscathed as written.” For the exemption, the Scalia DOL went back to the “impartial conduct standards” that underpinned the Obama rule. It includes three components: • A best interest standard.

America, has been in the fight since the beginning and called the investment advice rule “a modest step in the right direction.” She, too, sees the Biden administration working to strengthen existing efforts at both the DOL and the Securities and Exchange Commission’s Regulation Best Interest — as opposed to starting over or bringing back the fiduciary rule.

• A reasonable compensation standard. • A requirement to make no materially misleading statements about recommended investment transactions and other relevant matters.

Satisfying the best interest definition requires the advisor to act with “prudence” and “loyalty,” terms that have been identified unDOL will still need to figure der the Employee Retirement Income Security Act of 1974. out how to close loopholes Still, Roper wants to see in the regulatory definition of the rules go a little further to fiduciary investment advice” protect investors. “The guidance in the pre— Barbara Roper, director of investor protection amble to the DOL rule is a for the Consumer Federation of America modest step in the right di“It may be that DOL concludes, based rection, since it acknowledges that rollon actions by SEC to toughen up Reg over recommendations might constitute BI, that it can base its own standard fiduciary investment advice; however it on the Reg BI standard,” Roper said. falls far short of what is needed to ensure “Meanwhile, DOL will still need to figure that rollover recommendations are conout how to close loopholes in the regu- sistently treated as fiduciary investment latory definition of fiduciary investment advice,” she said. advice, which has already been reinstated Any rules published in the final 60 as a final rule.” days of an administration, known as “midnight regulations,” can be rescinded Long, Winding Road by the incoming administration. As this issue went to press, the DOL’s By withdrawing the rule and doing investment advice rule was slated to take a bit of rewriting, the Biden DOL can effect in mid-February. In addition to the seemingly restart the rulemaking process February 2021 » InsuranceNewsNet Magazine

COVER STORY A NEW START TO AN ELUSIVE RULE? early in its administration. As recent history shows, that is key to establishing a finality to this issue.

‘Great Compromise’

Industry executives and trade associations are hopeful that at least some aspects of the investment advice rule will withstand a Biden review. Before the election, Andrea McGrew, chief compliance officer with USA Financial, was certain that Biden and the Democrats would work quickly to reverse Trump’s investment advice rule, in part because the party declared that it would in its summer platform. But now McGrew is not so sure. “My hope would just be that they recognize this rule for what it is,” she explained. “Everybody in the industry sees it as a great compromise, a great middle ground in getting what everybody needs, yet doing it in a way where it helps the client. But it’s also manageable by firms and financial services companies.” Boston Mayor Marty Walsh will have a big voice in the future direction of the DOL — if he is confirmed by the Senate as Biden’s labor secretary. A union member and leader for more than 30 years, Walsh will likely be a pro-worker advocate. The assistant secretary and head for the Employee Benefits Security Administration will also be a key nominee to watch.

The state of the economy could be a complicating factor. The Biden administration is expected to have its hands full getting the COVID-19 pandemic under control and sparing the economy from any further erosion of employment and business closures.

Appeals in New Orleans tossed out the fiduciary rule, handing a major win to industry opponents. The chief legal voice for the industry plaintiffs, Eugene Scalia, would later be appointed by President Donald Trump to lead the DOL, and he helped write the successor rule. Judge Edith H. Jones wrote in the majority opinion that the DOL rule “fails the reasonableness test” of the Administrative Procedures Act by extending the depart— Andrea McGrew, chief compliance officer ment’s ERISA authority to with USA Financial one-time IRA rollovers and similar transactions. With reports of consumer debt soarThe decision went on to admonish ing, mass unemployment and millions the DOL for exceeding its authority and of Americans dipping into their savings reaffirmed the role of Congress and the and retirement funds, McGrew said the SEC in regulating agents and advisors. timing isn’t great for tougher rules on in“That was an incredibly aggressive vestment advice. piece of legislation, probably one of the “Let’s focus on some different areas most aggressive ones that I’ve seen in where we can get the economy going,” 16 years of being a compliance officer,” she said. McGrew said of the fiduciary rule. “It was so aggressive that I don’t think they sort No Going Back of understood all of the different trajectoOut of the gate, Biden seemed intent on ries of the rule. So it was a relief when the rounding up the old team, and Obama Fifth Circuit struck that down.” administration veterans dominated his What it all means is that any new rules early nominees. Dusting off the fiduciary put forth by the Biden administration rule seemed like a logical route — except will have to abide by the Fifth Circuit defor one major detail. cision — unless the administration can In 2018, the Fifth Circuit Court of find a court to overturn it.

My hope would just be that they recognize this rule for what it is.”

Investment Advice Rules Timeline

SEC officials in

the mid-1930s 1934-40: Investment advisors were subjected to a fiduciary standard under the Investment Advisers Act of 1940. Broker-dealers have only been held to a suitability standard under the Securities Exchange Act of 1934, even when providing investment advice services.

President Gerald Ford 20

1974: The Employee Retirement Income Security Act of 1974 (ERISA) is passed into law. ERISA defines a plan fiduciary to include anyone who gives investment advice for a fee or other compensation with respect to any moneys or other property of a plan.

InsuranceNewsNet Magazine » February 2021

1975: The Department of Labor issued a five-part regulatory test for “investment advice” that gave a very narrow meaning to this term. Before a person can be held to ERISA’s fiduciary standards, they must (1) make recommendations on investing in, purchasing or selling securities or other property, or give advice as to their value (2) on a regular basis (3) pursuant to a mutual understanding that the advice (4) will serve as a primary basis for investment decisions and (5) will be individualized to the particular needs of the plan. 1978: The DOL is given fiduciary oversight responsibility under Title I of ERISA. As part of Title I, the agency tackles oversight of most private sector employee benefit plans. President Jimmy Carter 1981: U.S. workers are introduced to 401(k)-style retirement plans. This starts the beginning of the shift away from defined benefit, or pension plans, to defined contribution vehicles. The 401(k) plans gave the employees control over investment decisions and ownership over their retirement nest eggs. According to the DOL, it also led to a need for greater regulation.

A NEW START TO AN ELUSIVE RULE? COVER STORY It all adds up to yet another complication that the Biden team might not want to tackle, analysts say. The Consumer Federation of America is hoping the team does. In particular, Roper said the Biden administration should establish a bold definition of “fiduciary investment advice.” The Fifth Circuit decision “was wrong on the facts and wrong on the law, but the new leadership at the department will have to decide whether they want to take on that fight,” Roper added. “Or, if the Democrats take the Senate, there’s at least a remote chance of a legislative solution to that problem.”

Very Different Rules

It is worth backtracking a bit to recall what made the fiduciary rule so unpopular in the first place. For starters, the fiduciary rule hewed closely to the common law of trusts by mandating an Impartial Conduct Standard for conflicted investment advice. That standard requires fiduciaries to offer investment recommendations under a duty of care and loyalty, “without regard to the financial or other interests of the [firm or agent].” The standard included three items that caused headaches for compliance executives:

1997: The Roth IRA was established by the Taxpayer Relief Act of 1997. It allows taxable compensation to be invested in a retirement account, with gains that are generally tax-free upon withdrawal.

• Best interest contract exemption. The BIC exemption would have allowed advisors and others to be paid for selling proprietary products and to earn commissions when they recommended select products. It would have dispensed with traditional commission structures and attached substantial documentation and liability to such sales. The rule required sales to be backed by a financial institution, of which the rule identified four: insurers, banks, broker-dealers and registered investment advisors. • Private right of action. The fiduciary rule opened the door for investors to use BIC exemption contracts to file state breach of contract claims and, potentially, class actions. • Impact on IMOs. Independent marketing organizations faced major disruption if the fiduciary rule had taken full effect. DOL regulators said they wanted to make sure the largest IMOs were tightly regulated as the “super-IMOs” to potentially act in a supervisory capacity for other smaller IMOs. Only seven IMOs — those with an average annual fixed annuity contract sales volume averaging at least $1.5 billion in premiums over each of the three previous fiscal years — were even eligible to qualify as financial institutions under the rule.

Sen. William Roth, R-Del.

2000s: Momentum grows among some lawmakers and administration officials for an expanded fiduciary standard. Growth of 401(k) and Roth IRA contributions is cited as the main reason. The total amount in 401(k) accounts grew from $384.9 billion in 1990 to $4 trillion in 2011, according to the Investment Company Institute. December 2006: The Pension Protection Act is signed into law by President George W. Bush. It amended ERISA’s prohibited transaction provisions by adding

a class exemption to allow greater flexibility for participants of 401(k)-type plans to obtain investment advice. The Bush DOL later studied further rulemaking to cover investment advice but did not make a proposal.

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July 2010: The Dodd-Frank Act is signed into law and gives the SEC the authority to establish a fiduciary standard for brokers and investment advisors if it determines there is a need. October 2010: The DOL announces plans to redefine when a person providing investment advice becomes a fiduciary under the ERISA. Continued >

President George W. Bush February 2021 » InsuranceNewsNet Magazine

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COVER STORY A NEW START TO AN ELUSIVE RULE? Industry trade organizations pushed The difference is the absence of the word • The NAIC Executive Committee back aggressively on the rule, coming “fiduciary,” any hint of a private right of finalized revisions to its suitability together for a joint legal push. Financial action or other liability attached to a fi- in annuity transactions (275) modprofessionals are already heavily regulat- nancial institution. el law in February 2020. Arizona ed, industry executives said, and a tough Work advanced at a faster pace at and Iowa quickly adopted versions of DOL rule will only limit Americans’ ac- the SEC and at the state level within the new rules, but adoption lagged afcess to advice. ter the COVID-19 pandemic It is worth noting that Tom hit. Finally, the association The NAIC model rule is Perez, 59, secretary of labor convened a panel to develexplicit and weak. That’s not under Obama and chairman op guidance for states in of the Democratic National the hopes of prodding more a rule that can be tweaked Committee, was mentioned into shape through strengthened state officials to advance for roles in a Biden adminthe best-interest update. istration. Phyllis Borzi, as- interpretations of its key components.” Several states, including sistant secretary for the — Barbara Roper, director of investor protection for the Rhode Island, Delaware and Employee Benefits Security Consumer Federation of America Alabama, moved to adopt Administration, has rethe rules at the end of 2020. mained a sharp critic of Trump’s DOL the National Association of Insurance efforts, but she appears unlikely to rejoin Commissioners. Both navigated conBut having rules on the books does not a Biden administration. troversy and have these rules on the mean they harmonize or that they are books: even good rules, Roper said. She hopes Best Interest World that Biden can prod the SEC to strengthWhile the Fifth Circuit court victory • The SEC made steady progress en Reg BI in concert with tweaks to the was certainly welcomed by the indus- under departed chairman Jay DOL investment advice rule. try, it was Trump’s surprise win in Clayton, and its Regulation Best But the state efforts are likely going November 2016 that doomed the fidu- Interest took effect in June 2020. to stand apart, Roper added. The NAIC ciary rule. The twin victories cemented Reg BI requires that four factors be model largely remains a suitability stanthe industry’s determination, with tacit considered in developing a recommen- dard, and it exempts cash and noncash agreement by many regulators, for har- dation for a retail customer: the cus- compensation from the definition of mamonized rules among state insurance, tomer’s investment profile, potential terial conflict of interest. securities and federal regulators. risks, potential rewards and costs. It “The NAIC model rule is explicit and The middle ground verbiage was not also includes a new “customer rela- weak,” Roper said. “That’s not a rule far from language that appears in the fi- tionship summary” disclosure between that can be tweaked into shape through duciary rule: the best-interest standard. broker and customer. strengthened interpretations of its key January 2011: The SEC releases a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisors. September 2011: The DOL withdraws its fiduciary-only rule, vowing to re-propose the rule in the future. June 14, 2013: Rep. Ann Wagner, R-Mo., introduces the Retail Investor Protection Act (RIPA) to govern retirement investing. Seen as an alternative to the fiduciary rule, the bill would bar the DOL Rep. Ann Wagner, R-Mo from establishing a fiduciary-only rule until the SEC acts. The Senate later declines to take up the legislation. February 2015: The White House releases the CEA report, “The Effects of Conflicted Advice on Retirement Savings”; President Obama signals push for fiduciary standard in address to AARP.

InsuranceNewsNet Magazine » February 2021

April 2015: DOL officially re-proposes a fiduciary-only rule, which is followed by a public comment period. The DOL proposal is actually three rules: extending the fiduciary standard to anyone who gives retirement plan advice, the Best Interest Contract Exemption (BICE), and changes to other exemptions. Aug. 10-13, 2015: DOL holds a four-day public hearing on the fiduciary-only rule. About 75 speakers address the agency over the four days. Written comments and petitions number more than 391,000, the DOL has said. April 2016: The fiduciary rule is published in the Federal Register. That made it “effective” June 7, 2016, but it had a delayed “applicability” date of April 10, 2017.

Perez speaks at a forum

Labor Secretary Tom Perez during a hearing

Summer-Fall 2016: The financial services industry prepares for full compliance with the new rule. Decisions must be made — the biggest being whether to take the Best Interest Contract Exemption or to continue the commission-based model.

A NEW START TO AN ELUSIVE RULE? COVER STORY components. I don’t know how DOL will plan to handle that.”

Rocky Road

The Trump administration’s best-interest rule did not come together as fast, and its experience serves as a cautionary tale for Biden. While Trump immediately paused the fiduciary rule after taking office, he ran into significant trouble getting a secretary of labor confirmed. His first candidate, Andrew Puzder, withdrew on the eve of his Senate confirmation hearing after it became clear that he did not have the votes. Trump quickly nominated Alexander Acosta for the post, but his confirmation was delayed until April 27, 2017. By 2019, Acosta found his own controversy from a plea bargain he had authorized for financier and convicted sex offender Jeffrey Epstein while serving as U.S. attorney in Florida. The resulting fallout eventually led to Acosta’s resignation in July 2019. By the time Scalia, the son of the late Supreme Court Justice Antonin Scalia, was confirmed on Sept. 30, 2019, much time had been wasted. With Scalia taking an active role, the DOL finally released its investment advice rule replacement on June 29, 2020. Many in the industry did not like it — their dissatisfaction boiling over during a September public hearing. June 1, 2016: Eight industry and trade groups, including the U.S. Chamber of Commerce, the Insured Retirement Institute, the Financial Services Institute, and the Securities Industry and Financial Markets Association, file the first lawsuit against the DOL in the northern district of Texas.

President Donald Trump

January 2017: In one of his first acts, President Donald Trump orders a DOL review of the fiduciary rule.

March 3, 2017: The DOL issues a proposed rule, calling for a 60-day delay to the fiduciary rule’s April 10 applicability date — to June 9.

Brad Campbell, onetime head of the DOL’s Employee Benefits Security Administration, called the guidance on the five-part test “fundamentally flawed,” adding that although it acknowledges that the sale of insurance products “is not fiduciary advice,” the guidance “goes on to create some significant ambiguity in the application of the five-part test, making it impossible to know with clarity where the department thinks the line has been drawn.” Specifically, the preamble to the rule caused angst over how the DOL would interpret “regular basis” as it relates to the sale of insurance products. While a one-time sale of, say, an annuity, would not meet the five-part test, the agent could conceivably have future interactions as part of doing a good job for the client. Would that constitute an ongoing relationship defined in the test? The DOL clarified this key aspect of the rule, Sidley Austin wrote in a December alert. “A single instance of advice to roll over assets from a Title I plan to an IRA would fail to meet the regular-basis prong and, likewise, that sporadic interactions between a financial services professional and a retirement investor do not meet the regular-basis prong,” the law firm wrote. “In any case, it is clear that the determination of whether a fiduciary relationship June 9, 2017: The fiduciary rule officially takes partial effect, with enforcement on hold until the Jan. 1 expected full implementation date. March 15, 2018: The Fifth Circuit Court of Appeals tosses out the fiduciary rule, in a major surprise victory for opponents. The court rules 2-1 for the industry plaintiffs. April 18, 2018: The Securities and Exchange Commission votes 4-1 to tentatively adopt Regulation Best Interest, a package of rules governing brokers giving investment advice. The rules call for a best-interest standard and require brokers to eliminate conflicts of interest. Labor Secretary Alexander Acosta

Continued >

February 2021 » InsuranceNewsNet Magazine

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COVER STORY A NEW START TO AN ELUSIVE RULE? exists in a given situation will be depen- and the states is less and little, respective“The Department of Labor [nomident on the specific facts and circum- ly. Biden will nominate a new SEC chair- nees] would probably take among the stances.” man, but the protocols are very different longest,” Cadin said, “because there is All the industry is hoping for after a with the independent agency. the greatest divide between the two pardecade of wrangling are fair rules and a An enormous difference in rules is ties in terms of the regulatory approach level playing field, said Marc Cadin, chief that the SEC Reg BI rule cannot be with- within the Labor Department and how executive officer of Finseca, a rebranded drawn, while the DOL rule can. But be- it impacts and protects consumers and trade association representing the entire yond that, historically, presidents do not impacts industry.” industry. Finseca had end-of-the“There are so many year conversations with The beauty of the DOL and the layers of regulations that the Biden team that were financial security profesSEC working in close coordination encouraging, Cadin added. sionals have to comply “In some of our converto create disclosures that fit both with,” he said. “The beauty sations with the incomof the DOL and the SEC sides of the compliance burden is that ing Biden administration, working in close coordi- ultimately provides consumers with more they’ve made it clear that nation to create disclo- protection, more efficiency, and continues what the country needs sures that fit both sides of now is stability,” he said. to give them access to the products.” the compliance burden is “We can’t have this whipthat ultimately provides — Marc Cadin, chief executive officer of Finseca sawing of laws and rules consumers with more and the lack of clarity, beprotection, more efficiency, and contin- exert such an overtly political policy role cause that inhibits the decision-makues to give them access to the products.” over the SEC. Analysts are united in ex- ing process and will ultimately hurt the pecting the SEC rule will be around for economy.” Your Move, Mr. President some time. At best, the new administraThe momentum, and simple common tion might influence a more active en- I n s u r a n c e N e w s N e t sense, favoring a harmonization of rules forcement and examination role for the Senior Editor John Hilton has covered might further sway a Biden DOL to let the agency. business and other best-interest movement play out for the Otherwise, the Biden White House beats in more than 20 immediate future. is likely to have its hands full just get- years of daily journalism. John may be After all, the president might have total ting a secretary of labor confirmed and reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH. control over what the Labor Department avoiding the political hassles that bogged does next, but his influence with the SEC down the Trump DOL. July 17, 2018: New York rejects a National Association of Insurance Commissioners’ effort to develop an annuity sales standard, instead issuing its own best-interest rule covering all sales of annuities and life insurance. Considered the toughest state rules in the country, the new rules take effect Aug. 1, 2019. Sept. 26, 2019: Eugene Scalia, Trump’s third nominee, is sworn in as secretary of labor. Scalia, who led the successful legal challenge to overturn the Obama fiduciary rule, announces that he will take an active role in crafting the department’s replacement rule.

Labor Secretary Eugene Scalia is sworn in

December 2019: An NAIC working group finalizes language and definitions of a best-interest standard for annuity sales. It does not mention fiduciary duty and does not include any private right of action. 24

InsuranceNewsNet Magazine » February 2021

February 2020: The NAIC executive committee formally adopts the best-interest standard model law for annuity sales and sends it to states for adoption. A handful of states adopt the rules during 2020.

NAIC officials at a conference

June 29, 2020: The DOL releases its long-awaited investment advice rule, a replacement for the Obama fiduciary rule. It includes a prohibited transaction exemption that allows “investment advice fiduciaries” to engage in certain transactions that would otherwise be prohibited. June 30, 2020: The SEC’s Reg BI takes effect, although the agency assures firms it is initially only looking for a “good-faith effort” to comply. Dec. 15, 2020: The DOL publishes a final version of its investment advice rule. It is published within the “midnight regulations” window, giving President Joe Biden’s administration the option to rescind the rule.

Joe Biden and Kamala Harris celebrate

UNSHAKABLE ACCUMULATION How the annuity industry’s newest player, SILAC Insurance Company, is redefining how retirement products are made, sold and understood, using its philosophy of innovation, transparency and simplicity.

If you’re a producer in the annuity space and aren’t familiar with SILAC Insurance Company yet, take a seat. This rebranded Utah-based carrier could rapidly become a household name and make your experience talking about and selling annuities a whole lot easier, from product design and client interactions to service and support. That might be a bold statement and not one that many established annuity carriers can make. For SILAC, this is where being “new” is an advantage. While the full company history spans more than 85 years as a life and health carrier, plans to shift focus to the annuity realm and to rebrand as SILAC only started in 2017. With the regulatory changes (some taking effect now) capturing the industry’s attention an outsider might wonder why anyone would want to enter the field at this time. Armed with a skilled leadership team and a mission to promote and simplify the industry’s product offerings, as well as the inherent freedom; lack of legacy systems or bureaucracy that plagues many in the space, for SILAC “this time” couldn’t have been better. In 2017, SILAC laid the foundation for what would become the innovative, transparent and focused carrier that agents, advisors and their clients have been waiting for.

299 South Main Street, #1100, Salt Lake City, UT 84111 SILAC is licensed as SILAC Life Insurance Company in the state of California, license #6244-8.

INTRODUCING THE SILAC ANNUITY SUITE INNOVATION. TRANSPARENCY. SIMPLICITY.™

Whether your clients’ goals are accumulation or income (or both!), SILAC’s product suite delivers top-performing products with competitive rates, bonuses and commissions, all in a transparent, simple, easy-to-explain and easy-to-understand manner.

ISN’T IT TIME TO SIMPLIFY RETIREMENT SOLUTIONS FOR YOUR CLIENTS?

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INNOVATION. TRANSPARENCY. SIMPLICITY.™

Visit SILACannuities.com to access your free starter kit and see for yourself how SILAC is changing the face of the annuity industry for the better.

The headline is more than the firm’s founding SILAC by simplifying the design of a product egg without many of the complications often principles; it’s a powerful philosophy of every so we, our agents and our policyholders can found in other products, such as annual fees aspect of what SILAC does, from its producer all understand it. This is a HUGE benefit be- policyholders are charged even in a year with cause with our focused selection, the client zero accumulation. service to innovative product design. “This is very, very important for us and In fact, the leadership team is so passion- knows what protections he or she has and something we are really proud of because ate about this philosophy that rather than dive how to access them. anyone selling our products can conin and splash the annuity industry "They're what I like to call 'clean fidently tell consumers, ‘You do not from Day One, this firm opted to products' that are easier to understand go backward with any of these annubide1 its time to ensure it could live and explain Withdrawals may impact future lifetime income withdrawal benefithan ts. just about any other ities.’ Sure, it’s possible there may be up to its emerging, game-changcompany in the industry." There are no annual fees. However, Withdrawal Charges, MVA, and Bonus Recovery may apply upon an excess some years where the index doesn’t ing2reputation. — Dwight Carter withdrawal as outlined in the policy. perform too well — just like any FIA Ask anyone there and you’ll “Retirement is hopefully a long time! Our — and there isn’t much of an interest credit, hear3https://foreignpolicy.com/2017/02/24/infographic-heres-how-the-global-gdp-is-divvied-up/ praise for most of the carriers already operating in the space, many of which offer focus on accumulation has led to very versa- but unlike many other annuities, in a year of tile products that may help policyholders be negative index returns if you have $100,000 very customizable products. Neither Barclays Bank PLC (BB PLC) nor any of its affi liates (collectively the issuer or producer Indexed Annuities, and or Denali™ FIA, at the to a Teton™ preparedBarclays) for theiris futures,” she says. of Fixedallocated BUT, the trade-off, as the leadership team better Barclays has no responsibilities, obligations or duties to policyholders in such Fixed Indexed Annuities. The Barclays Atlas 5 Index (the Index), While versatility is important in a retirement end of the day, the worst-case scenario is a willtogether attest,with of any that versatility often comes Barclays indices that are components of the Index, are trademarks owned by Barclays and, together with any component client will still have their $100,000,” Acker SILAC, so is keeping their annuin the form complicated benefi indices andof index data, are licensed forts, useannual by SILAC asproduct, the issuerfor or producer of Fixed Indexed Annuities (the Issuer). fees and exclusions — all of which can make ities streamlined to focus (primarily) on one explains. Barclays’ only relationship with the Issuer in respect of the Barclays Atlas 5 Index is the licensing of the Index, which is administered, coma strategy goal (the each. knowing the pros, cons, ins inand outsasoftheeach piled and published by BB PLC its role index sponsor Index Sponsor) without regard to the Issuer, the FixedIt’s Indexed Annuitiesthat or has producers across policyholders in such Fixed Indexed Additionally,“The SILAC,way as issuer Fixed Annuities, for itself transaction(s) theexecute country engaged and feeling confident we ofsee it, Indexed if someone is may nearproduct difficult to master from Annuities. an advisor’s with Barclays in or relating to the Index in connection with the Fixed Indexed Annuities. point of view and confusing to understand ing retirement, typically it is very important talking about the firm’s product perks. Fixed Indexed Annuities. Policyholders acquire Fixed Indexed Annuities from SILAC, policyholders neither acquire any interest in themany great things about “One of the for them to continue to and grow from a client’s. Barclays Atlas 5 Index nor enter into any relationship of any kind whatsoever with Barclays upon making a purchase in Fixed Indexed SILAC is that their team does exactly what InAnnuities. a timeTheofFixed mounting regulations pres- their nest egg but not suffer Indexed Annuities are not sponsored, endorsed, sold or promoted by Barclays, and Barclays makes no representation they promise. drastic losses Atlas as they areor any data included therein. suring the entire industryoftotheadjust its wayAnnuities of any regarding the advisability Fixed Indexed or use of the Barclays 5 Index Barclays shall And not they do it with competibe liable in any way to the Issuer, policyholders or to other third parties in respect of the use or accuracy of the Barclays Atlas 5 Index or features and benefits, tive cap rates, good doing business, and the growing need for pol- nearing their final years before any data included therein. AND no annual fees.² Plus, they’re what I icyholders to easily understand what they’re they retire,” states Dan Acker, like to call ‘clean products’ that are easier purchasing, SILAC found what could be the President and Chief Marketto understand andfor explain than just about any ing Offi cer at SILAC Insurance Company. ultimate opportunity. The “S&P 500®” is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed use by SILAC Insurance Company (“SILAC”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial SerAccording to Carrie Freeburg, VP of An- “The other side of that is, once consumers other company in the industry,” adds Dwight vices LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); decide to retire, they are on a fixed in- Carter, principal owner of Financial Security nuity Products, “Any product and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by SILAC. SILAC’s Teton Fixed Indexed andparties SILAC agent. annuity are a great feature thatarecould hurt perforAnnuities not sponsored, endorsed, sold or promoted bycome. SPDJI, Our Dow Jones, S&P,products or their respective affiliates, Associates and none of such makeisany representation regarding product(s) nor do they have any liability for any omissions, of downside protection Theerrors, combination way intosuch provide a lifetime income stream mance critically reviewed to the advisability of investing or interruptions of the S&P 500®. that someone can count on and know that plus no annual fees means SILAC products see whether it is necessary. the money is not going to go away or fluc- aren’t only easy to explain, but they’re also This allows us to build focused, helpful for agents tuate over clean and strong products be- and market value adjustment Withdrawal charges, bonus recovery maytime.¹” apply to withdrawals made during the withdrawal charge period. and advisors revisiting This is a product of the insurance industry and not guaranteed by an bank, nor insured by FDIC or NCUA/NCUSIF. Not a deposit. Not insured their clients on follow-up appointments and Acker continues, “In a nutshell, we because they are not weighed down by unnecby a federal government agency. Restrictions apply. May only be offered by a licensed agent. For agent use only. Not intended for general public. lieve there is a need in our country today for reviews. essary or expensive features.” After three years, the release of an innofixed annuities and what they can provide to She continues, “The reality is that simGuarantees are based on the financial strength and claims-paying ability of SILAC Insurance Company. plicity is our key innovation. I know it sounds consumers, whether it is people preparing vative multiyear guaranteed annuity line, the backward. Over the past 10+ years, prod- for retirement and saving or people who are release of two industry-leading FIA lines and ucts in the industry have gotten more and in retirement and need a consistent income a proprietary index (more on this later), SILAC officially announced its new name in Janumore complicated. If a product is hard for us stream.” It’s a powerful goal — one many fixed in- ary. The product suite, favored by scores of and our distribution partners to understand, how can we expect our policyholders to un- dexed annuities also accomplish. But SILAC’s agents and advisors around the country, was derstand it? We went down a new path at products may help to protect a client’s nest already making waves.

INNOVATION. TRANSPARENCY. SIMPLICITY.™ SERVICE. Powerful, easy-to-understand and easyto-explain products is one realm where SILAC remains true to its core philosophy. However, it certainly isn’t the only one. When it comes to supporting its sales force, be it placing new business, training or general support, few carriers strive to offer the level of service found within SILAC’s headquarters. The reason SILAC strives for a best-inclass level of support? According to Dan Acker, the carrier’s other top priority is taking care of their clients — the agents in the field and their policyholders. “I’m sure a lot of agents have experienced this feeling of a weird dynamic between them and home-office employees. When getting into the fixed indexed annuity space, we made the decision almost immediately to keep all of our administration in-house and not outsource to a single person,” Acker explains. “To help distinguish ourselves further, the culture we have instilled in SILAC is that agents and marketers are our clients first and foremost. We know that without an agent educating consumers on the value of our products and why they may need them, we really do not have any business coming in the door. So we should never believe that the agent has a simple job. We treat them as a partner, and they play a critical role. That’s why we spend a lot of time talking with and putting ourselves in the shoes of the agents as much as possible.”

Supporting their sales force is so important that their goal is to have every single person in the building, from the mailroom to the CEO, versed inside and out with product knowledge and be ready, capable and willing to answer the phone. It’s an extra level of support that does not go unnoticed. “The No. 1 thing for us as a mom-andpop independent organization is that we have a direct line to all the key elements for doing business. We can talk to underwriters. We can talk to policy issue processors. We can talk to new business transfer managers. We can even talk to the CEO,” Dwight Carter states. This is precisely how SILAC wants the agent experience to be, according to Kylie Gormly, VP of Annuity Customer service. “Our Annuity Customer Service Experience — ACE — Team is committed to the growth and innovation that both SILAC and the market have demanded. That commitment has allowed our team to care for every single agent and policyholder, from start to finish, by providing customized, creative and exclusive service to all SILAC partners,” she states. While striving to offer the highest level of support, SILAC also knows and prioritizes making sure its agents in the field are supported long before an appointment ever begins. That begins

As Chad Roesler, President of Gradient Annuity Brokerage, states, “It is one thing to have competitive products. It is another to have a sustainable, long-term relationship in the industry. Our agents enjoy telling SILAC’s story and the story its product line allows you to tell.”

with training and education. “Our Annuity New Business Team believes in a culture of service, of being open and flexible for the needs and changing environments to match our agents’ and policyholders’ needs. We support this by setting expectations appropriately as well as training and educating our agents on an ongoing basis,” Andelyn Warner, VP of Annuity New Business, explains. Much of that training is in the hands of – after many interviews – the infamous and wildly popular VP of Sales, Richard “Bubba” Morrow. At SILAC, that not only means continuous training for any new products or additions to existing products but also a complete onboarding experience, detailing how to do business with SILAC in addition to weekly and biweekly training that covers all challenges and questions an agent or marketing partner may encounter. “The first training occurs when an agent gets appointed with SILAC. During the contracting process, the agent is required to review our product training for each one he or she intends to sell. After contracted, we offer weekly training webinars every Monday and every other Wednesday. These range from product knowledge to case studies, sales ideas and service-related concepts,” Morrow mentions. All of this is to support the sales force in every way possible. All for straightforward, transparent and innovative products. All tied to one of the most powerful and proprietary indexes an agent and their client could ask for.

INNOVATION. TRANSPARENCY. SIMPLICITY.™ INDEXES. If you were to look at a majority of FIAs or any annuities that follow an index, you'll notice one thing they have in common, including SILAC - most follow stocks or segments within the U.S. On the one hand, this is great, considering the U.S. is the largest economy in the world. On the other, it’s not always the strongest. A major part of SILAC’s success with creating such powerful accumulation products — and one of the best stories to accompany their products — is the global diversification provided by the unique index they're tied to. Introducing Barclays Atlas 5 Index. We all know the markets in the U.S. can be volatile. While the U.S. may be the largest economy, it still only represents approximately 24% of the global GDP.3 Now ask yourself, what if you had retirement vehicles that based their performance on an index that aims to achieve optimal allocation between global bonds and equities, based on the principles of modern portfolio theory and the ability to reposition weights daily rather than be tied to one domestic index? Instantly, your products gain an

appeal and understanding as to why they have performed so well and consistently helping to paint a more stable and appealing picture for a client or prospect truly interested in protecting their nest egg - especially in shaky times. That’s precisely what SILAC has accomplished with their proprietary index that both Teton™ and Denali’s™ accumulation performance are tied to. Thanks to a partnership with Barclays, the Atlas 5 Index aims to provide stable and consistent returns through a diversified portfolio of global equities and bonds and a 5% annualized volatility target. In total, it comprises six equity and five bond components. The weight of each is based on historical volatilities and correlations as well as current trends that are analyzed and reweighed, daily if necessary, between the U.S., the eurozone, and German, Japanese and emerging markets. Another feature is Atlas’ ability to increase its exposure. When volatility is low, it can increase exposure to the equity and bond markets. When volatility is high, it can decrease exposure to equities and bonds. Said differently, if markets are quiet and volatility is low, then exposure increases to provide

more participation in the underlying components of each market. “When we first started out in this space in June 2019, we started off with the S&P 500® because everyone knows it. A client can type it into a web browser and see how it’s performing. In January 2020, we decided to partner with Barclays Bank and introduce a custom index. We didn’t do it for the sake of saying we have one. We partnered with Barclays on Atlas because we wanted to add a volatility controlled index that aligns with our company’s philosophy and provides additional diversification. With Atlas, our agents and policyholders now have the ability to diversify out of the U.S. when it isn’t performing as well,” Acker clarifies. The Barclays Atlas 5 Index is well suited to support SILAC’s mission of providing some of the most competitive and easy-to-understand annuities in the industry. The SILAC annuity series offers advantages for agents as well as their clients when it comes to accumulation, income and flexibility. With the Barclays Atlas 5 Index, they now also have the advantage of global market diversification.

MEET THE BARCLAYS ATLAS 5 INDEX POWERED BY THE WORLD’S STRONGEST MARKETS The Barclays Atlas 5 Index is comprised of 6 equity and 5 bond components. The weighting of each component is based on historical volatilities and correlations. It then considers current economic trends for each component to determine the optimal portfolio. The index targets a 5% annualized volatility and has been live since December 6, 2019. The components include: EQUITIES**

S&P 500

TREASURY FUTURES

NASDAQ 100 US 10Y

EUROZONE* US 5Y

GERMANY*

GERMAN 10Y*

JAPAN*

GERMAN 5Y*

EMERGING MKTS JAPAN 10Y*

*Non U.S. Dollars denominated assets have their profits and losses converted to U.S. Dollars on a daily basis. **Equities index components, other than the Emerging Markets ETF, consist of equity futures indices.

Visit SILACannuities.com to access your free starter kit and see for yourself how SILAC is changing the face of the annuity industry for the better.

Withdrawals may impact future lifetime income withdrawal benefits.

There are no annual fees. However, Withdrawal Charges, MVA, and Bonus Recovery may apply upon an excess withdrawal as outlined in the policy.

https://foreignpolicy.com/2017/02/24/infographic-heres-how-the-global-gdp-is-divvied-up/

Neither Barclays Bank PLC (BB PLC) nor any of its affiliates (collectively Barclays) is the issuer or producer of Fixed Indexed Annuities, and Barclays has no responsibilities, obligations or duties to policyholders in such Fixed Indexed Annuities. The Barclays Atlas 5 Index (the Index), together with any Barclays indices that are components of the Index, are trademarks owned by Barclays and, together with any component indices and index data, are licensed for use by SILAC as the issuer or producer of Fixed Indexed Annuities (the Issuer). Barclays’ only relationship with the Issuer in respect of the Barclays Atlas 5 Index is the licensing of the Index, which is administered, compiled and published by BB PLC in its role as the index sponsor (the Index Sponsor) without regard to the Issuer, the Fixed Indexed Annuities or policyholders in such Fixed Indexed Annuities. Additionally, SILAC, as issuer of Fixed Indexed Annuities, may for itself execute transaction(s) with Barclays in or relating to the Index in connection with the Fixed Indexed Annuities. Fixed Indexed Annuities. Policyholders acquire Fixed Indexed Annuities from SILAC, and policyholders neither acquire any interest in the Barclays Atlas 5 Index nor enter into any relationship of any kind whatsoever with Barclays upon making a purchase in Fixed Indexed Annuities. The Fixed Indexed Annuities are not sponsored, endorsed, sold or promoted by Barclays, and Barclays makes no representation regarding the advisability of the Fixed Indexed Annuities or use of the Barclays Atlas 5 Index or any data included therein. Barclays shall not be liable in any way to the Issuer, policyholders or to other third parties in respect of the use or accuracy of the Barclays Atlas 5 Index or any data included therein.

The “S&P 500®” is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by SILAC Insurance Company (“SILAC”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by SILAC. SILAC’s Teton Fixed Indexed Annuities are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500®.

Withdrawal charges, bonus recovery and market value adjustment may apply to withdrawals made during the withdrawal charge period. This is a product of the insurance industry and not guaranteed by an bank, nor insured by FDIC or NCUA/NCUSIF. Not a deposit. Not insured by a federal government agency. Restrictions apply. May only be offered by a licensed agent. For agent use only. Not intended for general public. Guarantees are based on the financial strength and claims-paying ability of SILAC Insurance Company.

Why The Pandemic Motivates Some To Purchase Life Insurance

LIFEWIRES

COVID-19 Puts Focus On Life Insurance The pandemic’s increasing death toll has caused more

Fear of being diagnosed

30%

Know someone who is diagnosed Current insurance through work felt inadequate Insurance companies were waiving the medical exam Cost of life insurance is rising Loss of job and the coverage that came with it Was diagnosed with COVID-19 Have a preexisting condition

29%

QUOTABLE

27% 25% 22% 22%

20% Americans to consider their life insurance coverage, and many have taken action. 19% A NerdWallet survey showed 1 in 4 Americans who Source: Another reason 5% NerdWallet have life insurance said they either bought coverage or increased it because of COVID-19. Of those who purchased or increased their coverage, 30% said they were motivated by fear of being diagnosed with COVID-19, and 29% said they did it because they know someone who died of the virus. More than 2 in 5 insured parents of minor children (44%) said they purchased or increased their coverage due to the pandemic, compared with just 13% of those without minor children. Insured millennials are more likely than their older counterparts to say they purchased or increased coverage due to the pandemic — 42%, compared with 30% of Gen Xers and 5% of baby boomers. Around 1 in 7 Americans who didn’t purchase life insurance through a company or advisor (14%) said they considered purchasing coverage due to the pandemic, but ultimately decided not to. Another 16% are still considering purchasing. For Americans who considered but ultimately opted not to get life insurance, the No. 1 reason they made that choice was that COVID-19 cases in their area started going down (35%).

Where the life insurance market is going in 2030 Life insurance market

$4.2 trillion

DIVERSE, LEAN, OMNI — THE FUTURE OF LIFE INSURANCE

Protecting people against risk and Retirement $240 trillion preserving their savings gap overall well-beMortality $160 trillion protection gap ing will remain at Source: EY the core of the life insurance industry. But the way life insurers fulfill that purpose will look vastly different in the future. That was the word from the EY NextWave Insurance Report, which described the major forces reshaping the life insurance and retirement market and how they will play out during the next 10 years. EY identified six megatrends reshaping the life insurance market. They are financial health and wellness, long-term value, collaboration with governments and regulators, omnichannel engagement, capital optimization and convergence, and commoditization and customization. Insurers must adapt to changing consumer desires, the EY report said. The product-driven and distribution-centric Life insurance penetration

2.7%

DID YOU

KNOW

models of the past will not be sustainable in the future, primarily because they no longer reflect what customers want. But life insurers that can master transformation will see a potential upside, EY said. The U.S. faces a projected $240 trillion retirement gap and a projected $160 trillion protection gap in 2030, pointing to the industry’s growth potential and its ability to make a huge contribution to the overall well-being of individuals, families and society as a whole. And the industry will need to engage governments and regulators, as well as other financial services firms, to develop strategies to close these gaps.

LIFE INSURERS CAN WITHSTAND SECOND WAVE

With interest rates at historically low level s a nd economic uncertainty remaining high, Moody’s Investors Service found its portfolio of U.S. life insurers well positioned to withstand a

Million Dollar Round Table introduced MDRT Global Services, a membership association created exclusively for field and Source: The Wall Streethome Journal office leaders. Source: MDRT

We believe consumers should have meaningful guarantee of interest rates. — My Chi To, New York Department of Financial Services

severe second wave of COVID-19 coinciding with stressed equity and credit markets. COVID-19 has caused tragic loss of life across the U.S. and will result in elevated life insurance death claims. However, Moody’s found life reinsurers are most exposed to increased death benefits. Moody’s also found investment risk remains a key credit risk for U.S. life insurers. Given heightened market volatility and downside risks, Moody’s assumes especially severe scenarios for equity and real estate investments.

MASSMUTUAL BUYS $100M IN BITCOIN

In the latest sign of mainstream acceptance for digital currency, MassMutual bought $100 million of bitcoin for its general investment account, The Wall Street Journal reported. The purchase represents a small piece of MassMutual’s $235 billion general investment account, but it shows further momentum for bitcoin, which surged in the fall. The price of a single bitcoin peaked in late November at $19,835, topping its 2017 high, and traded around $18,000 at the end of 2020. MassMutual officials said the bitcoin investment was based on a broad strategy to take advantage of new opportunities while remaining diversified, “giving us measured yet meaningful exposure to a growing economic aspect of our increasingly digital world.”

February 2021 » InsuranceNewsNet Magazine

LIFE

How Split-Dollar Life Insurance Rescues Nonprofits Addressing the excise tax on compensation paid to nonprofits’ key employees. By Justin Gladieux

eople might be surprised to learn that the tax reform of 2017 imposed an excise tax on nonprofit employees paid more than $1 million in parachute payments. The surprise for many people is that a nonprofit firm may have several employees impacted by this 21% excise tax, especially if the nonprofits that come to mind are those like the local YMCA or Girl Scout council. But what about the leader of a large health care organization, the head of a major foundation or the CEO of a major credit union? These positions at tax-exempt organizations are widely understood to have compensation and benefit packages that could trigger the tax. It should not come as a surprise that the excise tax is causing financial concern. It also calls attention to compensation arrangements and is creating problems of perception and appearance for stakeholders, legislators and the public. Nonprofits and other tax-exempts were already at a disadvantage in competing for talent with for-profit corporations. This excise tax has worsened the ability for tax-exempts to recruit, retain, reward and provide for the retirement of key executives. As a result, tax-exempt organizations are increasingly using split-dollar life insurance arrangements as alternatives to traditional nonqualified deferred compensation plans. Before the 2017 Tax Cuts and Jobs Act, this approach was already a popular strategy for tax-exempt organizations. Perhaps the two most prominent examples are Jim Harbaugh at the University of Michigan and Dabo 32

Swinney at Clemson University, two high-profile college football coaches receiving split-dollar life insurance arrangements as part of their compensation packages.

Split-Dollar Life Insurance

Under a split-dollar loan arrangement, the employer agrees to make loans to the executive to pay the premium on a cash value life insurance policy that is owned by the employee. The policy is collaterally assigned to the employer to secure the repayment of the loan from the policy’s cash value, death benefit or both. Policies funding split-dollar plans are generally designed to maximize cash value accumulation and minimize the

InsuranceNewsNet Magazine » February 2021

amount of death benefit purchased unless there is a greater need for it. With the enactment of the 21% excise tax, split-dollar loan arrangements have become more attractive because premium loans are not considered wages. If they are treated as loans for federal tax purposes, then they are not remuneration subject to the 21% tax. “Split-dollar is a strategy that allows the disproportionate sharing of the cost and benefits of a permanent life insurance policy between two persons,” said Michael Fontanini, vice president, advanced sales and design, with Lion Street. “The premium loans made to the employee accumulate cash value policy which can later be accessed in retire-

Who Is Affected By The Excise Tax? The definition of a “covered employee” comprises more than officers. It includes a current or former employee who is or was among the five highest paid in a tax year beginning after Dec. 31, 2016. Once an employee is deemed a “covered employee,” they will always be considered a “covered employee” and therefore the number of affected employees is not limited after the first year to just five. Even after retirement, the excise tax could be triggered by a deferred compensation payment to a former employee. Don Curristan is a principal of the national executive benefit planning firm Executive Benefit Solutions and works with dozens of tax-exempt organizations on their executive compensation strategies. “You can see how a lump-sum payment under a traditional §457(f) plan can inadvertently trigger the excise tax for someone who is a senior employee but not an officer,” he said. “The excise tax is owed by the employer and not the employee, which puts the pressure on the employer to take steps to not trigger the tax.” There are a few exemptions to who is a “covered employee” for purposes of the excise tax. Remuneration paid to licensed medical professionals, including physicians, nurses and veterinarians, for their professional medical services is excluded. However, if one of these medical professionals is serving in an administrative function such as executive or medical director at a nonprofit hospital, then the remuneration linked to that position is included.

HOW SPLIT-DOLLAR LIFE INSURANCE RESCUES NONPROFITS LIFE ment tax-free as withdrawals or loans from the policy. The tax-exempt employer recovers its loans, plus any accrued interest, from the death benefit, and any remaining death benefit proceeds are paid to the employee’s beneficiaries.” Note that the nature of the split-dollar loan is important and that any imputed income attributable to below-market loans would be treated as compensation and could be subject to the excise tax. If the loans bear a market rate of interest, equal to or more than the Applicable Federal Rate, that is appropriately paid or accrued, the Internal Revenue Code generally does not apply and there is typically no imputed income. Further, if the loan is designed to be below market, it should be either a demand or hybrid term loan. These types of loans recognize the income annually at the time it would otherwise be due. Care should be taken to ensure any split-dollar loans are structured properly to obtain the optimal tax treatment.

Evolution Of Split-Dollar

The history of tax law applicable to split-dollar arrangements stretches back to the 1960s; however, it has been significantly modified and refined in the past 17 years. In 2003, the IRS issued comprehensive split-dollar regulations that clarified the tax treatment of arrangements commonly used at that time and those entered into thereafter. Under current tax law, the split-dollar form that is the most commonly used in the context of compensation and benefits planning for nonprofit organizations is the loan regime/collateral assignment arrangement. The loans made to the employee for policy premiums allow the employer to retain a security interest in the policy values via the collateral assignment. This assignment is released at the time of repayment, which is typically at termination of employment or at death. Although the interest on the loan may be paid annually by the employee, usually the interest is either imputed to them as compensation annually, in which case the employee is taxed on the interest annually, or the interest is accrued and repaid at termination or death. Unless structured as demand or hybrid term loans, below-market loans charging inadequate interest should be avoided, as

the imputed income from traditional term loans with a period certain at the month the loan is made is equal to the present value of all the forgone interest over the term of the loan, discounted at the appropriate AFR. Scott Richardson is the CEO and founder of IZALE Financial Group and regularly structures split-dollar plans for credit unions and other nonprofit associations. “How the loan is structured is important in modeling plan costs,” he said. “Loans can be made as demand or term loans or a hybrid of the two.” Demand notes are repayable on demand by the lender and will utilize the Blended Annual Rate equal to the average of the Short-Term Applicable Federal Rate for January and July each calendar year as published by the IRS in June. A term loan uses the appropriate AFR in effect the month the loan is made and based on and locked in for the stated or deemed term of the loan. The ShortTerm AFR is for loans up to three years, Mid-Term AFR for loans between three and nine years, and Long-Term AFR for those over nine years. A hybrid loan is a term loan that is payable on death, separation from service or the earlier of death and a period certain. With any term loan, each advance is a new loan subject to a new AFR based on its term. A technique Richardson often employs with credit unions is for the employer to make a single, up-front term loan to the employee repayable on death, the excess proceeds of which over the first-year premium are held in the life insurance company’s premium deposit account. This allows the AFR on the entire loan funding all premiums to be locked in for the loan’s term, which is often until death of the insured. “The life insurance company then moves funds from the premium deposit account annually in years 2+ to make premium payments on the policy,” he said.

Reporting

An “Organization Exempt from Income Tax” as defined by the IRS must annually file a Form 990. The organization is required to report compensation for current officers and key employees in Part IX, Statement of Functional Expenses, Line 5, using the total compensation paid to such individuals for the organization’s

February 2021 » InsuranceNewsNet Magazine

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LIFE HOW SPLIT-DOLLAR LIFE INSURANCE RESCUES NONPROFITS

What Organizations Are Subject To The Excise Tax? The excise tax applies to an “applicable tax-exempt organization.” This definition encompasses all types of tax-exempt organizations whose income is excluded from taxation under §501(a), including hospitals, colleges, and universities exempt under §501(c)(3), health maintenance organizations and other social welfare organizations exempt under §501(c)(4), labor and agricultural organizations exempt under §501(c)(5), and labor organizations, chambers of commerce, real estate boards and professional sports leagues exempt under §501(c)(6). The excise tax also applies to organizations that have their income excluded from taxation under §115(1), farmers’ cooperatives described in §521(b)(1) and political organizations described in §527(e)(1). Despite their tax-exempt status, many state colleges and universities whose income is exempt from taxation under the doctrine of implied statutory immunity are not subject to the excise tax. In 2019, the U.S. Treasury clarified this distinction with IRS notice 2019-09, which provides that a governmental unit that is not recognized as tax exempt under Section 501(a) of the Code and does not exclude income under Section 115(1) of the Code is not an applicable organization. fiscal year, which may be different from the calendar year. “Under a loan-regime split-dollar arrangement, any outstanding loans made to and owed by a key employee of a tax-exempt organization are reported elsewhere in Schedule L,” said Janice Forgays, estate and wealth counsel at PRW Wealth Management. “Only the small, annual interest costs imputed to the executive as compensation, if any, are reported on Schedule J.” Forgays offered a word of caution to organizations implementing a split-dollar plan. “In order to avoid the appearance of a private inurement, all the formalities of adopting a compensation plan must be followed. These include a written plan and a formal adoption by the board.”

2020 IRS Proposed Regulations

On Ju ne 11, 2020, t he Trea su r y Department and the IRS released detailed proposed rules interpreting §4960 of the IRC. The proposed regulations provide additional detail about the tax penalties on tax-exempt employers and entities treated as related to those organizations paying certain employees remuneration in excess of $1 million or excess payments 34

contingent upon an employee’s separation from employment. The most helpful parts of the proposed regulations are in defining who is or is not a covered employee, which includes a number of exemptions, what is or is not an Applicable Tax-Exempt Organization, and what is or is not considered remuneration subject to the excise tax. The proposed regulations touched upon the use of split-dollar arrangements as they pertain to the §4960 excise tax. The regulations provide that imputed interest on a below-market split-dollar loan (in which the insurance arrangement is structured using the loan approach) is treated as remuneration under these rules, even though there is no federal tax withholding on the interest. Until final regulations are issued, an organization may rely on these proposed regulations, or the organization may adopt its own reasonable, good faith interpretation of the statutory rules.

Administration

As with any benefit plan, success can hinge upon the quality of the plan’s administration. A company’s benefit employees will change over time, and a record of not only

InsuranceNewsNet Magazine » February 2021

why a split-dollar plan was implemented but the intent of the plan for both the employer and the employee is crucial. Jordan Walker, manager of business insurance solutions for Lincoln Financial Distributors, said that administration should cover two things: accounting of the plan and management of the policy. “An experienced administration partner is key when it comes to split-dollar arrangements. There are so many instances where the plan is well-documented and monitored but the life insurance policy funding vehicle does not receive ongoing evaluation,” he said. “As with any life insurance policy, performance can vary, so premiums may have to be increased or decreased to preserve both the employee’s expectation of future payments and the employer’s ability to recover.” Walker focuses on making sure the future intent of the executive is considered when designing split-dollar arrangements. The executive may wish to use the policy for estate planning as opposed to taking policy loans for supplemental retirement income, and this may impact how the policy is owned. This means considering trust ownership or other positioning of the policy. “It is easy for an employer to focus on their side of the equation and to zero in on a split-dollar plan’s ability to recover the loans advanced at any time during the plan. Equally as important is the need to balance that protection of the organization with the plan’s benefits for the executive.”

Considerations

Although split-dollar plans have increased in application with tax-exempts, a variety of plans should be evaluated to find if one or a combination of them is the best fit. All tax-exempt organizations with executive benefit plans should immediately revisit and reconsider the financial effectiveness of their plans. A split-dollar loan arrangement may be the solution. Justin Gladieux, MBA, CEPA, is the senior vice president, Corporate Markets, for Lion Street. Justin may be contacted at justin.gladieux@ innfeedback.com.

ANNUITYWIRES

Report: RILA Sales To Keep Expanding

RILA Sales Climb 1Q 2019 3Q 2019 1Q 2020 3Q 2020

$3.5 billion $4.8 billion $4.9 billion $6.3 billion

QUOTABLE

SOURCE: Secure Retirement Institute, U.S. Individual Annuity Sales Survey

More insurers are expected to warm up to registered index-linked annuity products, according to a Cerulli Associates report. That growth potential is good news for the industry, as RILAs are the only annuity product showing significant growth in recent sales numbers. “RILAs offer the client participation in the returns of mainstream market indices, while protecting the client on the downside, reminiscent of a guaranteed living benefit, though not as risky for the issuer,” said Donnie Ethier, director of Cerulli’s Wealth Management practice. As broker/dealer home offices and their advisors continue to evaluate and embrace today’s supply of RILAs, Cerulli expects more insurers to enter the space. “Several insurers are currently developing RILAs and plan to deemphasize their traditional variable annuities that are more difficult to hedge,” Ethier said. Cerulli anticipates that RILAs will attract sales and market share away from competing annuity designs.

TRANSAMERICA LATEST TO EXIT VAS, FIAS

Transamerica will no longer sell variable annuities with benefit riders or fixed index annuities. The company is also exiting the standalone long-term care market, Aegon executives said in a late-2020 planning session. Executives at Aegon, which owns Transamerica, made it clear the company must retool to free up capital and increase margins. Products that rely on ultra-low interest rates are out. “In the U.S., we will grow and invest in term life, index universal life, whole life, and final expense policies,” Blake Bostwick, CEO of Transamerica’s Individual Solutions division, said in a DID YOU

KNOW

statement. “We will focus on asset accumulation annuities that are less interest rate-sensitive. We believe these product lines offer an attractive return on capital, where we are already well positioned for growth.” Transamerica is just the latest company to pull back on annuity lines. Last month, Prudential Financial discontinued all sales of variable annuities with guaranteed living benefits.

DOL ISSUES INVESTMENT ADVICE RULE

The Department of Labor issued the latest version of a rule covering advice and sales with retirement dollars — but will it last? The answer is probably not. The Trump administration replacement rule has two main parts: a new prohibited transaction exemption allowing advisors to provide conflicted advice for commissions; and a reinstatement of the “five-part test” from 1975 to determine what constitutes

What would work for the customer doesn’t work for the shareholder. — Charlie Lowrey, CEO of Prudential on the decision to stop selling variable annuities with living benefits

investment advice. It is a successor rule to the unpopular fiduciary rule published by the Obama administration, which was later tossed out by a federal appeals court. However, the Trump rule can be withdrawn by the incoming Biden administration. Any rules published in the final 60 days of an administration, known as “midnight regulations,” can be rescinded by the incoming administration. While President Joe Biden and his team are likely to have much higher priorities, the Democratic platform released over the summer vowed to reverse Trump administration rules on investment advice.

AIG LIFE & RETIREMENT SHAKES UP LEADERSHIP

Todd Solash, chief executive officer of AIG’s Individual Retirement business, w i l l ta ke on an expanded role with the company’s Life Insurance business. In his new role, Solash will be responsible for “driving the division’s strategic agenda and continuing to Solash innovate and adapt the business to best serve the evolving needs of its customers and partners,” AIG said. Solash joined AIG in 2017 from AXA US, where he was head of the firm’s individual annuities business.

Total annuity sales are forecast to drop about 13% in 2020. Source: Cerulli Associates

February 2021 » InsuranceNewsNet Magazine

ANNUITY

The Medicaid SPIA: Helping Clients Alleviate LTC Costs The costs of care in a nursing home can be financially devastating to a client in a matter of months. Here is one tool that can be an option to cover those costs. By Mark MacGillivray

etirees continue to have significant concerns about outliving their income. This is especially true if expensive long-term care issues come into the picture. Most Americans who reach age 65 will need long-term care at some point in their lives, according to the U.S. Department of Health and Human Services. Most advisors are aware that the costs of care in a nursing home can be financially devastating to a client in a matter of months. However, clients may not know they have additional options besides using their savings to cover this long-term care in a time of need. Advisors can help educate clients about a Medicaid SPIA, or a single premium immediate annuity, which can help alleviate the unpredictable and often high costs associated with long-term 36

medical care. Most clients don’t know state to state, assets placed within a that a Medicaid SPIA exists — let alone Medicaid-compliant immediate annuthe steps they should take when consid- ity are considered income. Medicaidering one. compliant annuities can be used in Advisors have an opportunity to help Medicaid planning for single individclients find solutions for financial stabil- uals, though they are more commonly ity through sharing information about used with couples. specialized options, like a Medicaid For married couples, immediate anSPIA. Whether for a client or their nuities such as a Medicaid SPIA can spouse, there are a few considerations help an ill spouse qualify for Medicaid clients should know when considering a Medicaid SPIA in a A Medicaid SPIA is a helpful time of need. solution for a situation that A Medicaid SPIA should be on the table as an option could have put the healthy spouse for most clients. The clients at risk of financial hardship, even who would benefit most from a Medicaid SPIA include a broad devastation, to pay for the medical range of people. I have seen care of their loved one.” this immediate annuity help those in the low-to-moderate-income to pay for long-term care. This immerange. Those who could benefit from a diate annuity pays the principal back to Medicaid SPIA make up about 80% of the healthy spouse in incremental paythe general population. Knowing this ments over a set period of time, allowing can make it easier for advisors to iden- the ill spouse to have quality medical tify the clients who should be educat- care coverage without impoverishing ed about and who should consider a the healthy spouse. Medicaid SPIA to meet their needs. A Medicaid SPIA is a helpful soluKnow the basics of a Medicaid tion for a situation that could have put SPIA. Although regulations vary from the healthy spouse at risk of financial

InsuranceNewsNet Magazine » February 2021

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made Withdrawal during charges, bonusthe recovery and withdrawal market value adjustment may apply charge to withdrawals madeperiod. during the withdrawal charge period. or NCUA/NCUSIF. This is a product of the insurance industry and Not not guaranteed a deposit. by an bank, nor insured by Not FDIC or NCUA/NCUSIF. insured Not a deposit. Not insured or agent by a federal government use agency. only. Restrictions apply. Not May only intended be offered by a licensed agent. for For agent general use only. Not intended for general lifornia, license public. SILAC is licensed #6244-8. as SILAC Life Insurance Company in the state of California, license #6244-8.

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ANNUITY THE MEDICAID SPIA: HELPING CLIENTS ALLEVIATE LTC COSTS

The Medicaid SPIA — How It Works Here is an example of how a Medicaid SPIA can work for a married couple. Jennifer (age 78) and Greg (age 80) Jennifer and Greg have $426,500 in countable assets. Jennifer is in a nursing home. Option 1: Spend down to $2,000 by privately paying for Jennifer’s care at a cost of $6,000 a month. Their assets will be depleted at a minimum of $72,000 a year for Jennifer’s care. All their hard-earned assets will be gone in just over 71 months.

Option 2: Convert assets to an Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) Medicaid-compliant annuity. This will result in Jennifer’s immediate eligibility for Medicaid in order to pay for long-term care, while providing Greg with sufficient income and resources to maintain his lifestyle.

Total Countable Assets: Less Amount Greg Is Allowed To Keep: Balance Used To Purchase Annuity:

$426,500 $115,920 $310,580

Federal law allows for a division of the assets at the time the other spouse enters a nursing home.

Using $310,580 to purchase an OBRA ’93 Medicaid-compliant immediate annuity in Greg’s name produces a total of $4,320 of monthly income for six years. Jennifer is allowed to immediately qualify for Medicaid to pay for nursing home care. The goal is to qualify the institutionalized spouse immediately for Medicaid eligibility in order to pay for long-term care, while providing the other spouse with sufficient income and resources to maintain his or her lifestyle. SOURCE: The Standard

hardship, even devastation, to pay for the medical care of their loved one. The ill spouse receives the care they need, and the healthy spouse continues to have enough income to maintain their lifestyle. Clients should consult an elder law attorney. Regulations for a Medicaid SPIA vary from state to state. It’s essential that clients understand the laws and regulations for a Medicaid SPIA in their individual state before they move forward with this type of solution. Advisors should encourage clients to seek out a local elder law attorney. The elder law attorney can provide state-specific expertise and a thorough understanding of the individual regulations for the state in which the client resides. An elder law attorney can also ease clients’ minds and answer any questions 38

about moving their countable assets into a properly designed immediate annuity. Suggesting clients consult an elder law attorney to understand the product better and protect themselves in this situation also provides an opportunity for advisors to build deeper trust with their clients. Planning and preparation are crucial for a Medicaid SPIA. There may be financial decisions that clients need to make before purchasing the Medicaid SPIA. For example, clients may want to take care of any lingering financial obligations for any needs before moving the bulk of their countable assets into the immediate annuity. This can be very beneficial if the healthy spouse is in need of a vehicle or home repairs or if there is something costly they anticipate could happen while their assets are

InsuranceNewsNet Magazine » February 2021

in the immediate annuity. Elder law attorneys also can help with this planning process along with the advisor. Advisors can grow their business by supporting the needs of adult children. Advisors can open the door to a productive conversation about a Medicaid SPIA by discussing it with clients who may have older parents. This provides these adult children with valuable information they could bring to their parents, as many adult children assist their parents with financial matters. On the other side of the coin, clients who are looking for options to keep their own financial stability while covering the cost of long-term care often have adult children. These adult children should be aware of a Medicaid SPIA and the benefits, should they be in a similar situation someday. This is another opportunity for advisors to build trust and better support their clients, and perhaps assist multiple generations from the same family. Working with a quality carrier is encouraged. It’s important for clients to know that only a limited number of carriers offer a Medicaid SPIA. Ensuring that the carrier is reputable and established in the annuities space should be a set standard for clients in these circumstances. The decisions surrounding the longterm medical care of a loved one are some of the most difficult that clients will ever have to make. People shouldn’t be deterred by the often-high cost of long-term medical care. They also shouldn’t be financially devastated by having to pay for that care for their spouse. Advisors can better support both their clients and their clients’ adult children by opening the door to conversations around long-term care. Keeping clients informed and educated about specialized solutions, like a Medicaid SPIA, allows them to make the best possible decisions about their futures. Mark MacGillivray is director of financial institutions, annuities, at The Standard. Mark may be contacted at mark.macgillivray@ innfeedback.com.

HEALTH/BENEFITSWIRES

QUOTABLE

Who Should Pay For Health Care? Americans are starkly divided on how to pay for the

Agree Americans should nation’s health care needs, a HealthCareInsider.com surbe required to have vey revealed. When asked whether Americans should be health insurance 62% required to carry health insurance, 43% of respondents said yes, 37% said no and 20% were undecided. But that same question had sharply different respons41% es when broken down by political affiliation. Nearly twothirds (62%) of self-identified Democrats said Americans 25% should be required to have coverage, while only 25% of Republicans agreed. Meanwhile, 41% of independents said D IND R health insurance should be mandated. The same percentages of Democrats and independents Source: HealthCareInsider also said they somewhat or strongly opposed striking down the Affordable Care Act. But only 15% of Republicans felt the same way. One area where those of all political stripes seemed close in agreement: the requirement that insurance companies cover preexisting conditions even if the ACA is eliminated. Among the Democratic respondents, 65% want to keep the preexisting condition requirement, as do 46% of Republicans and 56% of independents.

WHAT DID WE LEARN ABOUT CONSUMERS IN 2020?

What did we learn in 2020 about U.S. health insurance consumers and the Medicare and Affordable Care Act markets? eHealth attempted to answer that question, and here is what they found out. Seniors want everyone to wear masks, with 85% of Medicare beneficiaries saying everyone should be required to wear a mask in public. Many Medicare beneficiaries also said their l i fe s t y le s a re likely to change permanently after COVID-19 is over, with 68% saying they will be less likely to go on a cruise after COVID-19, 53% less likely to visit an amusement park and 49% less likely to travel by airplane. Most ACA enrollees are unhappy with the law, with 60% of enrollees who receive premium subsidies saying the law isn’t working for them, and 64% of enrollees saying they believe the law must be reworked. DID YOU

KNOW

HEALTH INSURANCE INDUSTRY STABLE IN 2021

The 2021 outlook for the U.S. health insurance industry is stable because the challenges associated with the COVID-19 pandemic are anticipated to remain manageable, Moody’s Investors Service said in its annual outlook. The policy and legal environments are key challenges, but the well-diversified business models of the sector will help stabilize performance. Moody’s forecast single-digit earnings growth for insurers in 2021, as COVID-19 diagnosis and treatment costs are likely to continue in the first half of the year and the impact of vaccine costs will be manageable. Public policy uncertainty and the outcome of the ACA Supreme Court lawsuit are manageable risks, Moody’s said. In addition, Moody’s predicts large mergers and acquisitions in the health insurance sector are unlikely in 2021,

High medical costs continue disrupting American families. — Stephanie Shields, senior vice president of broker sales at Aflac

as insurers’ business profiles have evolved and improved.

THERE’S NO PLACE LIKE HOME?

COVID-19 has forced many Americans to think about their future long-term care needs, and they don’t like what they see. Six out of 10 Americans say they would rather die than live in a nursing home, according to the Nationwide Retirement Institute Long-Term Care Survey. Further, 48% of those surveyed said they are more worried about the safety of nursing homes now than they were before the pandemic. The vast majority of Americans (87%) said they believe it’s more important than ever for people to stay at home for long-term care as well as have a plan for long-term care (85%) and have long-term care insurance (81%), as COVID-19 has raised concerns about the safety of nursing homes. But although 81% of those surveyed said the pandemic has made it more important than ever to have long-term care insurance, only 41% have talked about long-term care with family members, and a mere 8% have long-term care insurance in place.

Most adults HAVEN’T discussed long-term care costs. Only 45% have discussed long-term care costs with anyone Fewer than 1 in 10 have talked to a financial professional about it 30% say they haven’t talked to anyone because they aren’t planning for these costs yet Source: Nationwide

63% of Medicare beneficiaries said they worry about getting an unexpected medical bill after receiving medical care. Source: eHealth February 2021 » InsuranceNewsNet Magazine

HEALTH/BENEFITS

COVID-19 Continues To Drive Voluntary Benefit Trends Workers seek more customization and financial well-being tools as we move into 2021. By Mike Wilbert

ou don’t have to look into a crystal ball to realize that predicting voluntary benefit trends for 2021 will be heavily affected by COVID-19. The pandemic has changed our lives and our work, and likewise the employee benefits landscape. Virtual care, mental health services, critical illness coverage, child care and financial well-being are among the needs and priorities for employees these days as they deal with pandemic reality. Last fall, Purchasing Power conducted an informal survey of 93 human resource professionals to assess the impact that both COVID-19 and financial stress is having on their workforces. The survey asked about the financial challenges their employees were facing. Employers reported the following circumstances:

» 81% said employees had a spouse or partner laid off or furloughed during the pandemic, so money is tighter than ever.

» 49% said employees had family or

household members who contracted COVID-19 and there are unexpected medical expenses involved.

» 48% said employees had college-age children return from school and are back living at home.

» 34% said employees had extended family members out of work who needed financial support.

Voluntary Benefits Step To The Forefront

Because they can address many of the 40

specific needs that employees have as they continue to struggle with and overcome pandemic challenges, voluntary benefits have now taken on a significantly more important role. In recent years, voluntary benefits have seen more popularity as the products themselves have become more diversified and appealing to the multiple generations in the workplace. But then voluntary benefits have always been a win-win for employers and employees. For employers they are an excellent recruiting and retention tool, while employees see voluntary benefits as an opportunity to choose benefits that they need or want. The impact of COVID-19 on employees’ lives and their finances really shone a spotlight on the value of voluntary benefits, which have given employers a way to meet the shifting needs and priorities of their workforce during this critical time. In 2021, employers will continue to seek ways to expand voluntary benefit offerings in order to provide more customized options to meet workforce needs, whether that’s targeting traditional voluntary benefits or nontraditional ones for lifestyle, personal wellness and financial health. What trends can we expect this year for voluntary benefits?

InsuranceNewsNet Magazine » February 2021

Growth Spurt

Over the past decade, voluntary benefit sales have grown at a compounded annual growth rate of 5% a year while employerpaid benefits declined, according to Moody’s Investors Service. In the voluntary benefits space, traditional insurance-related products such as supplementary life insurance, disability income and dental accounted for more than 60% of total 2019 sales. However, Moody’s reports nontraditional voluntary benefits such as pet insurance, elder care and student loan services programs have gained traction — particularly with younger buyers, who prefer the increased choice and customizable options. Look for a jump in the growth rate in 2021 as employers expand their offerings and as employees choose voluntary benefit options as a go-to to help them face financial challenges as a result of COVID-19.

Benefits For Financial Well-being

One critical piece of pandemic disruption that employers can’t overlook is their employees’ financial situation. For many employees, COVID-19 certainly drew attention to their fragile financial condition. In September, 84% of Americans told a Harris poll that the COVID-19 outbreak was causing stress on their personal

COVID-19 CONTINUES TO DRIVE VOLUNTARY BENEFIT TRENDS HEALTH/BENEFITS

HR leaders and benefit brokers are focused on the realities of the pandemic in the workplace. The Top 5 key takeaways from a recent survey are:

the ability to purchase home office and workout equipment or needed appliances through the convenient payroll deduction system of an employee purchase program can be an invaluable benefit. As a result of the pandemic, we can also expect more interest in critical illness insurance and mental health benefits. A recent Mercer survey revealed that 22% of employers are enhancing voluntary benefits such as critical illness insurance, and 20% are adding or improving behavioral health care benefits.

1. Employees are dealing with out-of-work spouses/partners.

More Employee Interest

What HR Professionals Are Saying

2. 55.9% of HR professionals said they are seeing an increase in 401(k) withdrawals, while 36% had employee requests for financial assistance from the company. 3. Higher levels of employee stress (86%), reduced productivity (65%) and decreased morale (60.6%) are the three biggest ways financial stress affects a company. 4. 85% of benefit brokers surveyed said they are very likely to recommend additional voluntary benefits to their clients for their employee benefit packages in 2021. 5. Critical illness insurance (81.1%), accident insurance (75.5%), employee purchase programs (59.4%) and identity theft protection (57.1%) are at the top of the list for benefit brokers planning to recommend more voluntary benefits. SOURCE: Purchasing Power survey

finances. And 39% told that same poll they will feel “very/somewhat worried” about their financial situation 12 months from now. As a result of the impact the pandemic is having on their finances, 50% of people told a SoFi survey they feel it is more important now that employers offer financial wellness benefits. And when asked what their employer could do to have the most significant impact on their personal financial situation, they said, “Make a contribution to my rainy-day fund/ emergency savings account.” While employees continue to look for ways to stretch their paycheck and recover from the financial hardship of the pandemic, voluntary benefits such as employee purchase programs, bill payment programs, medical deductible financing, financial counseling and student loan repayment benefit programs will get more

attention. It’s also likely we will see more financial wellness and well-being products introduced this year.

More Benefit Customization

Being able to pick and choose benefits that are important to them has always been the attraction of voluntary benefits for employees. Because of the pandemic, many voluntary benefits will stand out as options for these times. We’ll see employees paying more attention to benefits that they might not otherwise have found as important or needed pre-pandemic, such as pet insurance, identity theft protection, legal insurance and employee purchase programs. With more people working from home, an increase in pet adoptions is making pet insurance a highly requested voluntary benefit. Because cash and credit are not always readily available,

The pandemic has forced many employees to look for resources and assistance they may never have thought about previously. Pre-pandemic, when open enrollment time rolled around and the entire employee benefits package needed review, it was often easy for employees to overlook some benefits. For the enrollment season that just ended, nearly 7 in 10 employees (71%) planned to spend more time reviewing their voluntary benefits as a result of COVID-19 than they did for 2020, and more than half (53%) planned to make changes to their benefits coverages, Kiplinger’s reported. Now that employees have begun to pay more attention to voluntary benefits, we’ll see that trend continue in 2021. Additionally, we’ll see employers scheduling more off-cycle benefit enrollments, especially for new voluntary benefits, in order to provide employees additional options that help with parts of their lives affected by the pandemic. This year, voluntary benefits will become an even more personal choice for employees as they continue to navigate the effect the pandemic has had on their financial situation. Being able to pick and choose products to meet their individual needs will be a lifeline for many who are still recovering. Mike Wilbert is chief revenue officer at Purchasing Power, a voluntary benefit provider. He has 30 years of experience in the insurance and voluntary benefits industry. Mike may be contacted at mike. wilbert@innfeedback.com.

February 2021 » InsuranceNewsNet Magazine

Financial facts and figures powered by AdvisorNews.com

It’s An Everything Rally!

The Everything Rally is one of the few welcome holdovers from 2020; at least it was at press time when everything from stocks to commodities to digital currency and, well, everything, seemed to be appreciating in value. The S&P 500 ended the year with 33 record highs, a happy surprise in light of the equities plunge in March. Brokerages and wealth managers reported struggling with demand in November and December, with little sign of letting up. Consumers are reportedly borrowing This index shows the gap at low rates and throwing the cash into investing — not between economists’ exactly a comforting thought. expectations and reality, The winter equities boost is coming on a bit broader rising when the economy exceeds expectations, than it did earlier in 2020, when energy and airline stocks dropping when it underdragged. But they and other lagging sectors are booming. performs. Add junk bonds, commodities, real estate and digital currency, and you have a historic Everything Rally. Left out were the usual safe bets of Treasuries and gold — which is counterintuitive considering 2021 featured a 4.4% drop in global GDP, the largest since the Depression.

Global Surprise

RIA M&A Hits Record In 4Q

Early 2020 saw sluggish merger and acquisition activity, but it came roaring back at the end of the year, 2019 2020 2021 with a record 69 in the fourth quarter, according to SOURCE: Citi Economic Surprise Index Echelon Partners. That strong quarter pushed 2020 to the eighth consecutive record-setting year, with 205 deals, up from 203 in 2019. Echelon’s RIA M&A Deal Report for the fourth quarter also found that average assets under management per deal increased 23.7% in 2020 from 2019. The size of firms that were acquired in 2020 also hit a record high of $1.8 billion.

Retirement Risks Millennials

48% Dipped into retirement savings 50% Stopped or reduced retirement savings

Gen Xers

32% Dipped into retirement savings 41% Stopped or reduced retirement savings

SOURCE: Allianz Q4 Quarterly Market Perceptions Study

InsuranceNewsNet Magazine » February 2021

Boomers

22% Dipped into retirement savings 36% Stopped or reduced retirement savings

Americans Expect A Bumpy 2021

As Americans continue to endure the health and economic impacts of the COVID-19 pandemic, the majority are concerned about continued market volatility in the year ahead.

Nearly three-quarters (72%) believe the markets will continue to be very volatile in 2021, according to the Q4

Quarterly Market Perceptions Study from Allianz Life.

Fewer people say they are ready to invest now (25% compared with 29% in

the last quarter). Even more indicative of the current financial predicament faced by many is that over one-third (34%) say they have had to dip into their retirement savings because of the impact COVID-19

has had on the economy. “We’ve watched as the pandemic continues to wreak havoc on peoples’ financial and retirement strategies, whether that is from unexpected job loss or early withdrawal of retirement assets,” said Aimee Johnson, vice president of advanced markets and solutions, Allianz Life. “It’s clear that people remain nervous about market risks and how their finances will continue to be impacted not only in 2021 but for many years ahead.”

53% 33% 67% 56% 66% 67%

COVID-19 has had a negative effect on retirement plans. Not financially prepared to ride out the economic impact of COVID-19. Rethinking how to protect retirement savings. Will adjust retirement strategy if market volatility persists. Think the economy will improve in 2021. Think their financial situation will ultimately improve.

SOURCE: Allianz Q4 Quarterly Market Perceptions Study

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Retirement Could Be At Risk For People Of Color Research shows an opportunity for advisors to help people of color catch up with their retirement preparedness. • By Susan Rupe

lthough many of them say they are reasonably prepared for retirement, Americans who identify as people of color report their retirement-focused investments are limited and they show a lack of progress toward achieving important retirement goals. That’s the word from Allianz Life, whose research on retirement readiness indicated people of color may be misinterpreting their financial situation and putting their retirement at risk. More than half of people of color (55%) who responded to Allianz’s latest Retirement Risk Survey said they believe they are currently saving enough in a retirement account , and a

nearly equal amount (52%) believe they have plenty of time to save for retirement. These feelings of preparedness are underscored by the fact that more than one-third (35%) of people of color said retirement is too far away to start worrying about it. Nearly seven in 10 people of color say they plan to work into retirement. Cecilia Stanton Adams, Allianz’s chief diversity and inclusion officer, said 44

different cultural values that shape their decision-making could influence the level of confidence people of color have in their retirement readiness. “Oftentimes in communities of color, breadwinners are expected to balance support for multiple generations with their personal retirement goals,” Stanton Adams said. “This complexity, among others, could be responsible for the disconnect we see between perception and reality, putting people of color at higher risk for retirement insecurity.” Adams said that the phrase “people of color” refers to those of many ethnic groups, including African American, Asian, Pacific Islander, Hispanic and Native American. Although each of those individual groups has its own customs and traditions, she said, they have several characteristics in common. “We do know that when it comes to the typical American dream of retirement — reaching the age of 65, having a nest egg put away that you can then rely upon to travel and do all the things that you want to do — that may not be the way that many people of color are thinking about their retirement.” She noted that in many communities of color there is a culture of collectivism, as opposed to the culture of individualism that is prevalent elsewhere. And that affects retirement planning.

InsuranceNewsNet Magazine » February 2021

“We see in many cultures that there are multiple generations within one household,” she said. “As you grow up, you know that your responsibility is going to be taking care of your parents when they are older. So now you have someone of color who is looking at their retirement and thinking, ‘OK, when I reach a certain age, I will move in with my son or daughter and become part of that larger household.’ And the person at the head of that household is thinking about not only taking care of themselves individually or taking care of their immediate family, but also taking care of their extended family. So that also makes them think about retirement differently. At the same time they are thinking about taking care of parents, they also may be thinking about educating the younger family members. So that’s going to limit the amount of money they have available to save for their own retirement.” Fewer than half of respondents of color report ownership of investments and accounts that can help with retirement security. This includes participa-

tion in employer-sponsored plans (48%) and individual retirement account ownership (21%). With less than half of people of color reporting they are enrolled in a workplace retirement plan, it’s a real concern about

RETIREMENT COULD BE AT RISK FOR PEOPLE OF COLOR

There is a disconnect between perception and reality in retirement preparedness

SOURCE: Allianz Life

their retirement readiness, Adams said. “For some people, they may not have access to a plan at work, but for those who have access to one and are not participating, those are dollars they are leaving on the table. But for many families, they are more concerned about trying to get the most they can out of every paycheck. It’s a balance between how do we meet our immediate needs and how can we take care of more long-term needs.” Another is that nearly seven in 10 people of color say they plan to work into retirement. When asked how they are moving toward their retirement goals, fewer than half of people of color reported making progress. Some of the steps they said they are taking include “setting longterm financial goals” (46%) and “diversifying my retirement savings to protect more of my nest egg” (40%). At the same time, people of color indicate a significant level of concern about a variety of retirement issues in which a financial professional could provide assistance. Some of these concerns include “having unexpected, large expenses to pay” (63%), “becoming a financial burden to your loved ones” (52%), “not

having enough money to do all the things you want to do in retirement” (53%) and “not being able to stay in your home” (48%). One factor impacting the retirement readiness of people of color may be a lack of professional help. Less than one-third (32%) of people indicated that they are currently working with a financial professional. Adams said the lack of advisors of color may have an influence on the low percentage of people of color who are working with a financial professional. “The chances are that if you do use a financial professional, you’re going to look for one within your network,” she said. “You may ask a neighbor or a friend if they are working with someone; but if they’re not connected with anyone, you may not have access to help either.” She said the number of young people entering the financial services profession and reaching out to underserved communities is an encouraging sign. “A lot of these different groups haven’t had that connection to a financial services provider in the past.” The retirement readiness gap among communities of color provides an

opportunity for advisors and financial services companies, Adams said. “Those who have an understanding of cultural values, how they are important to each individual household and how to infuse those cultural values into someone’s long-term plan will help define the retirement legacy in the way that means the most to people of color,” she said. “Cookie-cutter approaches are no longer appropriate.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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February 2021 » InsuranceNewsNet Magazine

INBALANCEWIRES

Have A Laugh — It’s Good For You Don’t be afraid to crack up laughing over your

LONG-TERM BENEFITS OF LAUGHTER: » Improves your immune system. » Connects you with others. » Relieves pain.

favorite comedy show or your kid’s silly joke. It’s » Improves your mood. true that laughter is the best medicine. A study SOURCE: Mayo Clinic published in the American Journal of Lifestyle Medicine shows that laughter has many positive benefits for those who do it regularly. Laughter can help combat symptoms of anxiety and reduce the effects of stress on your body, but that’s not all a good chuckle can do for you. Research suggests that there are physical health benefits from enjoying a hearty laugh. Among other things, laughter has been shown to increase pain tolerance, reduce agitation in dementia patients and boost the immune system. It also has been shown to increase blood flow, reduce inflammation and prevent the formation of cholesterol plaque. Hospitals are recognizing the benefits of regular laughter and are incorporating humor therapy into programs to help people cope with chronic diseases such as cancer.

WATCH OUT FOR BURNOUT?

In 2019, the World Health Organization recognized burnout as a syndrome in its International Classification of Diseases, although the term has been in use since the 1970s. The WHO defines burnout as an occupational phenomenon resulting from chronic workplace stress that hasn’t been successfully managed. It’s a state of physical, emotional and mental exhaustion that results from excessive and prolonged stress. So how do you know whether you have burnout? Here are some signs: 1] You are under stress, and that stress is on the increase. 2] You’re losing interest in your job. 3] You feel exhausted and irritable, and you can’t sleep. 4] You have trouble concentrating. 5] You want to quit your job. After you recognize you have burnout, what do you do about it? Experts offer two words: reframe and recharge. Reframing is a technique

DID YOU

KNOW

to refocus your mindset and emotions. Shifting from negative thinking and emotions to consider more options can change your brain chemistry. You can recharge by engaging in mindful breathing and practicing self-care through eating healthy foods, exercising and getting enough sleep.

STOP A COLD BEFORE IT STARTS

QUOTABLE A sleep-deprived brain is a hungry brain. — Richard K. Bogan, sleep researcher and professor at the University of South Carolina School of Medicine

Maintain a hands-off policy with your eyes, nose and mouth. Wash your hands frequently and keep them away from your face. Use a disinfecting wipe on the most germ-laden object you come in contact with every day — your phone. And if you do feel those cold symptoms coming on, reach for a zinc supplement to reduce the duration and severity of those symptoms.

SLASH YOUR DIABETES RISK

What if there was a way to cut your risk of developUh-oh, you know the ing type 2 diabetes by nearly 60%? The signs. That scratchy National Institutes of Health found that throat and sniffly people with prediabetes who lost 7% of nose means a their body weight by eating fewer calocold is brew6 Key Nutrients ries and exercising 150 minutes a week ing. But you can To Fight Colds reduced their risk of developing type 2 keep a cold from » Probiotics » Vitamin A diabetes by 58%. starting in the » Vitamin C » Zinc How do you do it? The NIH said f irst place by » Vitamin E » Protein that the exercise goal can be reached following this with 20-30 minutes of brisk walkadvice from the ing every day, while the 7% weight reCleveland Clinic. duction works out to about 11 pounds Low humidity dries out your nasal for someone who weighs 160 pounds, passages and leaves you susceptible to or 20 pounds for someone weighing rhinoviruses, so use a humidifier and 280 pounds. That weight loss goal can make sure you keep it clean to prevent be accomplished in as little as two or mold from growing in it. Your cells dethree weeks, the NIH said. pend on vitamin D to activate their imOther things that can help reduce your mune responses, so make sure you get at diabetes risk include stopping smoking, least 600 IUs of the “sunshine vitamin” dealing with stress and watching your every day. alcohol intake.

43% of Americans reported that the pandemic has changed their perspective on what it means to have a healthy mind. Source: Optavia survey

InsuranceNewsNet Magazine » February 2021

INBALANCE

Plan Now, Plant Later It’s a good time of year to plan your vegetable garden. By Susan Rupe

ust when it seemed winter would never end, the mail carrier would deliver some hope to our door. Usually around the end of February, seed catalogs would arrive, signaling it was time for my dad to begin planning what vegetables he would plant in our family’s huge backyard garden. Gardening is showing a pandemic-related resurgence as more Americans began growing their own food during shelter-in-place restrictions last year and amid concerns about food shortages. Many garden suppliers reported they sold out of seeds and plants as people rushed to convert their backyards into their own produce patches. A great garden doesn’t just happen — you need to plan for it. This is a good time of the year to consider what you want to plant, where you want to plant it, and how much space and time you want to devote to it.

and you start thinking you’d like to have homegrown lettuce, it’s almost too late to plant it. Tomatoes, peppers and the traditional “summer vegetables” can wait to be planted until after the last frost of the season. If you decide you want to start those plants from seed instead of buying plants at a greenhouse, allow about six to eight weeks before the last frost so that you can start your seeds indoors before setting them into the garden. In choosing how much to plant, consider how you will use your produce. Will you eat it as soon as it’s picked? During the growing season, will you plan your meals around what’s in the garden? Will you can or freeze the excess, or will you share it with others?

Where To Plant

After you’ve planned what you want to grow in your garden, the next step is figuring out where to plant it. The obvious choice for a garden is in your backyard, but if you have no yard, container gardening

What To Plant

Three main things to consider when deciding what to plant: 1) What is easiest to grow. 2) What will give you the greatest yield for the least amount of effort. 3) What you actually like to eat. No. 3 is really important because there’s no sense in planting something that you and your family will tire of eating after you’ve picked only a few of them. Some vegetables that are easy to grow are zucchini and most members of the squash family, tomatoes, beans and peppers. They also can yield a large harvest, so make sure you don’t plant too much if you don’t plan to eat or preserve all your crops. It’s so easy to be tempted into buying more plants than you need, only to find that you end up knee-deep in vegetables. When considering what to plant, also consider the timing. Vegetables such as onions, sweet peas and lettuce need to be planted early in the spring. If it’s June 48

InsuranceNewsNet Magazine » February 2021

also can yield some good results. I live in a townhome with no backyard, yet I grow tomatoes, strawberries, peppers, beans, lettuce and blueberries out of containers placed on our deck. One advantage of container gardening is that you can move the containers around so your plants can get the optimal sun exposure. And container gardening is easier on the back and legs than is traditional gardening. Raised beds are a good choice for the beginning gardener. The beds can be made of wood, stone, metal or bricks and filled with soil. Raised beds are easy to work and allow you to plant more intensively so that you get more out of a small space. You can make the beds whatever size you want to accommodate your yard and the number of plants you want to grow. Or you may decide you want to designate a plot of ground in your yard and

What Should I Grow? Here are some of the easiest vegetables to grow. 1. Tomatoes 2. Zucchini 3. Peppers 4. Cabbage 5. Green beans

6. Lettuce 7. Beets 8. Carrots 9. Chard, spinach or kale 10. Radishes

Bonus: Marigolds – they discourage pests, attract pollinators and add color to the garden SOURCE: The Old Farmer’s Almanac

PLAN NOW, PLANT LATER INBALANCE create your garden from there. You’ll need to start by removing the grass, leveling the garden site, and applying soil and other organic material (compost). A soil test can determine the pH level of your garden soil and guide you to the correct use of fertilizer for the plants you want to grow. A number of websites, such as smallblueprinter.com, offer online tools enabling you to design your garden and add plants and other objects to your design. Your garden will need sunshine and the right amount of moisture. The site you select should receive at least six hours of sun per day, according to the experts at The Old Farmer’s Almanac. Make sure the soil is well drained so that you don’t end up with a bunch of rotted roots. And avoid places that get too much wind so that your plants don’t get damaged.

Other Tips

1. Water. You’ll need to supplement the water your garden receives if Mother Nature doesn’t provide enough rainfall. If you don’t want to lug buckets of water

to your garden, invest in a hose with a sprayer attachment, or consider investing in a drip irrigation system. 2. Compost. Even the best soil needs help. Applying composted plant material or well-aged manure will help your soil drain well and help it hold moisture as well as add nutrients. 3. Know your zone. The U.S. Department of Agriculture established Plant Hardiness Zone Maps to indicate what regions of the country have the best climate conditions for growing certain plants. Download the map and find your zone at plants.usda.gov/hardiness.html.

Benefits

Aside from the health benefits of eating homegrown fresh food, vegetable gardening boosts our health in other ways.

Gardening combines physical activity with social interaction and exposure to nature and sunlight. Sunlight lowers blood pressure as well as increases vitamin D levels in the summer, the National Institutes of Health reports. Working in the garden restores dexterity and strength, and the aerobic exercise that is involved can easily burn up the same number of calories that you might burn up in the gym, the NIH said. Make this the year you plan to boost your health by planting a garden. Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@ innfeedback.com. Follow her on Twitter @INNsusan.

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February 2021 » InsuranceNewsNet Magazine

BUSINESS

Cover These 4 Bases For The Perfect Client Meeting Just like a baseball player has a pregame routine before each game, so can you use a pre-appointment routine to increase your chances of success. Here are the four bases you want to cover. By Bill Cates

hat does the perfect client meeting look like to you? How about this — you provide great value to your clients, they love your work and they have two ideal prospects to whom they will introduce you right away. How do you make this happen? By running meetings that are purpose driven and passion fueled. Here are the steps you want to take to make this perfect-meeting scenario possible. 50

Engaged Clients Give Referrals

Client satisfaction may be enough for you to keep that client, but it’s not always enough for you to become referable. The key to becoming super-referable — so that you get referrals without asking and you have receptive clients when you do ask for referrals — is to create engaged clients. There are two qualities of an engaged client. First, they are engaged with your value. They like the questions you ask, the things you teach, the perspectives you share and your responsive service. Second, they like who you are — as a person. You’ve made a human connection with them. One of the fastest ways to make this human connection is to share your client-focused why — why you believe in your value. There is often a short story (keep it short) associated with your client-focused why. People

InsuranceNewsNet Magazine » February 2021

listen to stories differently. If you’re asking your clients to give you influence over their current and future financial lives, they want to know who you are as a person. Share your why in the very first appointment with your prospect.

The Perfect Meeting Starts Before The Actual Meeting

Creating the perfect client meeting — a meeting that creates a strong value connection and strong human connection with your client and that allows you to leverage those connections for introductions to others — starts before you’re even in front of the client. It starts in your meeting preparation. Just like a baseball player has a pregame routine before each game, so can you use a pre-appointment routine to increase your chances of success. Here are the four bases you want to cover.

COVER THESE 4 BASES FOR THE PERFECT CLIENT MEETING BUSINESS

Create an agenda You will run more efficient and more effective meetings if you operate from an agenda. Your clients will appreciate your preparation and organization. And you’ll have more time to cover the important topics. On your agenda (usually the nextto-last item) put Value Discussion. The Value Discussion — checking in with your clients to make sure they feel good about your value — is the first step in asking for introductions. (See Sidebar.)

Who do you know; who do they know? The easiest and most comfortable way to ask for introductions is to ask for an introduction to a specific person you know that your client knows — someone your client has mentioned in a previous meeting, such as friends, family members and/or colleagues. “George — I know your sister and brother-in-law are in the area. How do you feel about introducing me to them? Can we explore an approach that would feel comfortable to everyone and that might pique their interest in knowing about me?” If you don’t know of anyone specific in your client’s life, then you can move to categories of life events and money in motion. The goal is to keep the focus narrow, so your client can begin to picture people in their mind’s eye.

Practice your approach Until you feel super confident and fluid with your conversation about introductions, I highly recommend that you write out your basic script (or at least some bullet points) and practice. Practice with a colleague, or practice in your car as you’re driving to the appointment.

Activate your awareness I’ve found that many financial professionals become so immersed in running their meetings, they lose awareness of some important things that can happen in a meeting. Right before every client meeting, go through this checklist to activate your awareness, so you’ll notice:

» What has changed in your client’s life?

VIPS Method For Asking For Referrals V = Value discussion – Develop the habit of checking in with your prospects and clients to make sure you are meeting their expectations, to catch any unexpressed complaints, and to get them feeling good about the working relationship. I = Treat the request with importance – Come from a place of confidence. Have a passion for the work you do and for wanting to bring your important work to others. P = Gain permission to explore possibilities – Not everyone likes to discuss referrals and introductions. Don’t assume. Soften your request just a bit by making sure they are OK with brainstorming a little. S = Suggest names and categories – Come prepared with specific people or categories and let your client know you’ve come prepared. Don’t throw open the entire universe for them to consider.

» What can you discuss about their family, friends and/or other interests to keep the human connection strong?

» What value-recognizing statements

do they make? These are statements of thanks and appreciation to you for the good work you are doing with them.

» Who do they know? Be genuinely cu-

rious about other people they mention (such as a couple with whom they spend time or family members that they mention). Genuine curiosity about your clients’ lives makes for good conversation and will help you build an “inventory” of possible introductions. I’m not suggesting you “pounce” on those mentions right at that moment. Perhaps later in the meeting or during a future meeting, you can suggest that person for a possible introduction.

Keeping your awareness relaxed and open during your meetings will help you see the ever-present opportunities to add value and leverage that value for introductions. Having the confidence to act on what you see will produce the results you want. Bill Cates, CSP, CPAE, is the author of Get More Referrals Now, Beyond Referrals and Radical Relevance and is the founder of The Cates Academy for Relationship Marketing. Bill may be contacted at bill. cates@innfeedback.com.

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February 2021 » InsuranceNewsNet Magazine

INSIGHTS

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

Making The Move From Financial Planning To Dignity Planning The four questions you must guide clients through in order to plan for their future quality of life.

My client said something to me that changed my life forever: “Thank you for allowing me to keep my dignity.”

By Shane E. Westhoelter

few months into my career in selling life insurance policies door to door, I had to deliver my first death claim check. My client said something to me that changed my life forever: “Thank you for allowing me to keep my dignity.” It was from that point on that I understood the importance of what we do in the insurance profession. We don’t just sell life insurance, longterm care insurance, disability insurance, health insurance, auto insurance, home insurance or even financial services. What we do is provide people with dignity when it matters most. As I help my clients understand the difference between financial planning and quality of life planning, I focus on dignity, not insurance.

Quality Of Life Planning

To focus on providing dignity, have your clients ask themselves: What if I live? What if I linger? What if I leave? What is my legacy? Guide your clients through these four key components of quality of life planning that take the “if” out of life so that they can live. “What if I live?” refers to longevity planning and having the money you need to live with dignity until the day you die. “What if I linger?” is about having proper coverage if you become sick, hurt or disabled. Can you get the quality of care you desire to keep your dignity? Asking “What if I leave?” compels you to reflect on death and divorce. Will your assets transfer as you desire to those you care about? Will you be able to retain your dignity, even after you die? Finally, we all leave a legacy by default or design. “What is my legacy?” is 52

necessary to ask in order to understand how you would like to leave yours. Will you leave money to your children, grandchildren or charities, or will you create a foundation to be remembered?

Set Yourself Apart

Quality of life planning is more than just financial planning; it brings in a comprehensive and holistic approach, needsbased conversations, storytelling and resources. We bring value-added services to clients by focusing on quality of life planning. For example, we give our clients an emergency kit that allows them to keep all their medical information in one place in the event of an emergency. We give them medical information cards to keep in the car so first responders will have access to their medical background in an emergency. We provide them online storage files for archiving photos, legal documents and meaningful memories. We help them write “family love letters” with meaning and purpose to leave for those they love. We also help our clients create a lifelong legacy to be remembered by both family and the community through planned giving and lifelong checks. When you begin to provide dignity and

InsuranceNewsNet Magazine » February 2021

stop selling products, people will refer family and friends to you, which is inherent to your success.

Words Matter

Words matter, and rephrasing “financial planning” to “dignity planning” has a stronger impact on clients. It’s important to incorporate dignity into each of your conversations. For example, instead of asking, “What do you want to do when you retire?” I now ask, “What do you want to do when you no longer want or need to work every day?” Leading clients to envision their ideal scenario is much more impactful than simply asking about retirement. Additionally, consider asking, “What does dignity mean to you?” instead of “Why do you want to invest for retirement?” We say “protection against the unexpected” instead of “insurance.” These questions and attention to detail in the words we use will give insight into how clients feel about money and saving for themselves. People don’t always remember what you say, but they remember how your words made them feel.

Root Your ‘Why’ In Dignity

Ask yourself why you believe in this profession. Why should someone do business with you? What drives you every day? My “why” is to provide dignity, not just insurance or investments. My passion for providing dignity brings people to me as they relate to my “why.” By focusing on quality of life planning and dignity as opposed to selling products, you can understand your clients’ needs and set your services apart from those of others. Shane Westhoelter, AEP, CLU, is the founder and CEO of Gateway Financial Advisors and Gateway Insurance Group. Shane has been an MDRT member since 1999. He may be contacted at shane.westhoelter @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.

Time-Saving Techniques For A More Productive Practice If you take an organized approach to running your business, you will start making the time to do what needs to be done. By Barjes Angulo

here is more demand on our time now than ever before. Things that need to be done creep into our well-planned schedule. I have been a financial advisor since 2001, and during that time I have tried, failed, tried and succeeded, only to then have a new responsibility and fail again. This is OK because if you are not “failing forward,” you are probably not growing. Here are four steps I have focused on over the years to gain more time to do the things I want to do. 1. Set your calendar with intention. I’ve tried various ways to set appointments with my clients. Those ways continue to evolve and change, based on my life and my commitments. Where I have found great success is setting up appointments with clients one weekend a month in the fall and winter months. So, if a client asks for an appointment in July, I remind them that when they wake up on Saturday morning and it’s beach weather, they are probably going to cancel the appointment. I can’t compete with the beach! After my wife and I had our first child, I didn’t schedule appointments on weekends, and I currently schedule no appointments after 6:30 p.m. Where am I today? I see clients only three days a week (Tuesdays, Wednesdays and Thursdays), and the last appointment begins at 5 pm. Controlling your calendar will bring you greater peace of mind and will allow you to perform better in all areas of your life. Introducing these “guardrails” is easier when you give

clients access to your calendar through the use of an online calendar system. 2. Leverage technology. In our office, we have links for all types of meetings and for the days they take place. Every step of the process has its own link — a meeting with a wholesaler has one, and even an introductory call has its own. This helps keep the focus on each particular day. You also can use a customer relationship management system, which allows you to stay in tune with your practice and keeps you and the team on the same page. Most important are the notes that a CRM provides. I can’t tell you how many times we’ve been saved by these detailed notes. We use a Kanban project-management tool. However, keep in mind, there are a variety of project-management tools that are available on the market today. So, you can find the one that best suits your practice needs. With ours, we can move the client “prep,” projects and practice calendar forward, which allows all members of my team to stay on the same page. 3. Leverage your team. Our team communicates primarily through internal messaging. This allows us to keep a log of questions and responses, and it ultimately reduces the number of email messages we exchange. If there is a quick question that requires a quick answer, this is the best approach for our team to use. We still use email to send sensitive documents, which are protected by the server. We have three standing meetings per week. Monday afternoon meetings are for reviewing what happened during the prior week and for planning for the upcoming week. We work off a document called “Actionable and Measurable Activities.” This allows the team to have clarity on our focus for the week. Additionally, we have a Tuesday or Wednesday morning 20-minute

“huddle” to address anything the team needs my help with. Finally, on Friday, we close out the week with a virtual happy hour at about 5 p.m. During this time, we talk about anything social, as well as about the upcoming weekend. This has been especially helpful during the pandemic. Having a team to support you gives you time to do what you are best at doing — helping people solve their financial problems! 4. Outsource tasks and functions. Having a team on salary is not easy on the pocket, so outsourcing has been my best friend. We’ve outsourced practice management, bookkeeping and graphics. This gives me the effect of having a large operation with minimal commitment. If the team or an individual is not needed, we simply end the contract. If I need to get something done, I just Google it and there will be someone out there who would love to do what I don’t want to do. Remember that your only job is to help people solve their financial problems. Additionally, leverage your internal partners — the insurance company, your broker/dealer and/or registered investment advisor. They have a wide range of resources you can use to improve your practice. If you take an organized approach to running your business, you will start making the time to do what needs to be done. Bringing together resources requires meticulous planning on a day-today, week-to-week, month-to-month and year-to-year basis. Having a system that you can follow regardless of the season will help keep you organized and on track. Barjes Angulo, LUTCF, RICP, is the founder of New York-based Angulo Strategies. He has been helping clients achieve their financial objectives for more than 20 years. He may be contacted at barjes.angulo@innfeedback.com.

February 2021 » 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.

INSIGHTS

COVID-19 May Prompt More People to Buy Life Insurance Research shows a high percentage of Americans are likely to buy life insurance in the next 12 months. By Elizabeth Caswell

he COVID-19 pandemic has raised the awareness of the need for life insurance. A recent LIMRA study reveals 75 million Americans are more likely to buy life insurance than they were before the COVID-19 outbreak. Among Americans who purchased life insurance in the past two years, 61% say they are likely to buy more in the year ahead. Depending on household structure, between 73% and 86% of younger Americans (age 18-44) report the highest rates of likelihood to buy life insurance in the next 12 months. LIMRA surveyed 3,162 consumers in May 2020, identifying various life stages that encompass all U.S. households. Age, marital status and the presence of minor

couples over the age of 45, there is a 10-point difference in ownership of individual life insurance by both adults. Both partners in 34% of older couples without children own individual life coverage, compared with 44% for parents.

How People Buy Life Insurance

Our research included asking consumers about their recent life insurance shopping behaviors. LIMRA assessed how consumers make decisions about life insurance — from recognizing the need for life insurance to shopping, obtaining quotes and 75 million Americans are more making a purchase. likely to buy life insurance than Over the past two years, they were before the COVID-19 outbreak.” 29% of Americans reported shopping for life insurance. — LIMRA Study A total of 24% evaluated at children living in the home are the un- least one quote, and 17% purchased coverderpinnings of the eight market profiles age. The 2020 research reflects higher accreated, and are instrumental in assessing tivity rates as compared with similar 2019 the need for life insurance. and 2017 research — shopping, quoting Among those who have a child at home, and purchasing rates reported by con65% to 88% own life insurance. Partnered sumers in 2020 are up significantly. parents over age 45 report the highest Income replacement is the most comownership rate, at 88%. Younger parents mon reason people give for purchasing life are not far behind, with a 77% ownership insurance. As consumers move through rate. One in five older couples with chil- the stages of life, “income replacement” dren owns group life insurance only. can take on a different meaning and reNearly three in 10 (29%) of younger quire additional or different coverage. couples without children report that Younger consumers, particularly couboth adults own individual life, com- ples, cited wealth transfer and ensuring pared with 50% of younger couples with a mortgage payoff as their top specific children. In households led by older income replacement priorities. Older 54

InsuranceNewsNet Magazine » February 2021

consumers cited burial and final expenses as their reasons for buying life insurance. Among adults under the age of 45, the top reason not to buy is due to a concern over making the wrong choice and being uncertain about the value of insurance for the price. Consumers over 45 years of age cited the same reasons for not buying, leading with expense as the top concern. Challenges in choosing a policy were the second-most-cited reason. COVID-19 has unearthed the financial implications of a loved one’s untimely death. It may also be a wake-up call for all the healthy people looking to lock in insurance premiums while they are healthy, and to protect their ability to get insurance before they need it. In every stage of life, there are opportunities to meet American consumers where they are and offer solutions to their planning and insurance needs. This is an opportunity for insurers to continue to progress within their local markets and in collaboration with employers to provide insurance products and services that support employees’ financial wellness today and in the future. Elizabeth Caswell is associate research director, insurance research, LIMRA. She may be contacted at elizabeth.caswell@innfeedback.com.

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