InsuranceNewsNet Magazine - March 2020 by InsuranceNewsNet

March 2020

Retirement Logistics Advisors know about the retirement crisis — now it’s time to do something about it PAGE 18

PLUS...

The Two-Front AALU Pivots Illustration War For The Future PAGE 8 PAGE 12

LTC EASY AS

March 2020

OneAmericaÂŽ arms financial professionals to navigate tough LTC conversations. Read more on page 4

We can help make the long-term care conversation easier.

1 2 3

Let’s talk about: Protection that could become an asset you can pass on to your loved ones. Making sure you and your spouse are protected – under one policy. The only lifetime benefit that you can’t outlive.

Let’s talk about protecting your client's income during retirement. Visit www.TalkLTC123.com to download our free financial professionals’ guide, “Let’s talk LTC”, and turn to page 4 to read more. Also, look for us at BISA in Hollywood, Florida, and at ILTCI in Denver.

www.TalkLTC123.com OneAmerica® is the marketing name for the companies of OneAmerica.

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IN THIS ISSUE

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MARCH 2020 » VOLUME 13, NUMBER 03

HEALTH/ BENEFITS

FEATURE

Retirement Logistics By Susan Rupe

Planning for retirement involves more than figuring out the financial parts of it. Read more about how advisors are guiding clients through the maze of decisions they must make for successful post-employment lives.

INFRONT

8 T wo-Front Illustration War

By John Hilton Change is in the air where illustrations are concerned. The only question is what those changes will look like.

IN THE FIELD

By Steven A. Morelli Kate Kilgore Cihon had not thought about going into business with her dad, Randy Kilgore, who has had a long, successful life insurance career. But then she realized that he was in the people business.

By Curt Abbott In this commentary, the author takes a look at indexed universal life performance versus projections.

AALU’s CEO, Marc Cadin, says his organization’s merger with GAMA is only a start in building an enormous organization to face the many challenges to the industry.

By James Poland Most consumers are not confident in their ability to support their household during a time of income loss.

42 The Retirement Ecosystem: A New Trend In The Industry

30 Why IUL Is Such A Divisive Product

12 After ‘Historic’ Advocacy Year, AALU Pivots For The Future

38 Be Your Client’s Financial Hero By Offering Disability Insurance

ADVISORNEWS

24 W hen The Dream Is Back Where You Left It

LIFE

INTERVIEW

online

www.insurancenewsnetmagazine.com

ANNUITY

34 H ow Annuities Can Help Women Overcome Retirement Anxiety By Jim Poolman Women have a unique set of challenges in preparing for retirement. Annuities can give them the financial confidence they need.

By Dean Zayed The booming partnership between insurance organizations and RIAs will create a lasting benefit for them, the advisors who choose to affiliate with them and the clients we all serve.

INBALANCE

46 It’s Never Too Late: Making Music As An Adult By Susan Rupe Many of us started music lessons as children but gave them up. How returning to playing music can bring you joy and benefit your brain health.

BUSINESS

48 Cracking The Code To CPA Referrals

By Bill Cates Everything you do to gain referrals from CPAs has to center on building trust.

INSURANCENEWSNET.COM, INC.

275 Grandview Ave., Suite 100, Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com PUBLISHER Paul Feldman AD COPYWRITER EDITOR-IN-CHIEF Steven A. Morelli AD COPYWRITER MANAGING EDITOR Susan Rupe CREATIVE DIRECTOR SENIOR EDITOR John Hilton SENIOR MULTIMEDIA DESIGNER VP SALES Susan Chieca GRAPHIC DESIGNER VP MARKETING Katie Frazier QUALITY MANAGER

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Copyright 2020 InsuranceNewsNet.com. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail editor@ insurancenewsnet.com, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 125, or reprints@insurancenewsnet.com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 717.441.9357, Ext. 125, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.

InsuranceNewsNet Magazine » March 2020

Life Insurance & Long-Term Care

Outsmart future long-term care costs. Introducing Brighthouse SmartCare, a hybrid life insurance and long-term care product. SM

Brighthouse SmartCare, a hybrid life insurance and long-term care product, gives your clients power over the unexpected. Its long-term care benefit and death benefit can grow over time, helping them to keep pace with rising costs. Better yet, if your clients never use the long-term care coverage, their money is put to good use through a death benefit for their loved ones. Brighthouse SmartCare offers: • Preparation for long-term care needs • Protection from unexpected events, such as premature death • The ability to grow benefits over time to meet rising future costs Brighthouse SmartCare is the smart way to gain power over the unexpected. Learn more at brighthousefinancial.com.

Brighthouse SmartCareSM is an Indexed Universal Life Insurance Policy with Long-Term Care Riders issued by, with product guarantees that are solely the responsibility of, Brighthouse Life Insurance Company, Charlotte, NC 28277 (“Brighthouse Financial”). All guarantees, including any optional benefits, are subject to the claimspaying ability and financial strength of the issuing insurance company. Each issuing insurance company is solely responsible for its own financial condition and contractual obligations. Brighthouse SmartCare has exclusions, limitations, reduction of benefits, and terms under which the policy may be continued in force or discontinued. For costs and complete details of the coverage, please consult the product illustration. Not available in all states. Brighthouse Financial® and its design are registered trademarks of Brighthouse Financial, Inc. and/or its affiliates. 1904 BDUL649894 ICC18-AP1 • NOT A DEPOSIT • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT 5-18-AP1 AGENCY • NOT GUARANTEED BY ANY BANK OR CREDIT UNION • MAY LOSE VALUE

SPONSORED CONTENT

“LTC joint protection is one of the differentiators of OneAmerica,” said Howard. “I think it’s easier for a couple to envision the likelihood of one of them needing care and sharing a pool of insurance as opposed to purchasing the correct amount for two individual policies. It just makes sense to the consumer.” 3. The only lifetime benefit that you can’t outlive Some might think they don’t need LTC protection beyond the average length of care between 2.2 years

and 3.7 years2 for men and women, respectively. But preparing for only the average length of a care need can leave a large gap. Among LTC claims during the most common ages (7584) people use LTC benefits, almost 30% of claims lasting longer than one year end up lasting longer than six years.3 “OneAmerica is the only one in the industry that offers lifetime benefits,” said Hall. “People are becoming aware of the implications of illnesses like dementia and Parkinson’s, and it makes people fearful that they’re going to need care for longer. Lifetime benefits offer the extra peace of mind that clients are looking for.”

Care Solutions® LTC Benefits — If Your Clients Don’t Use Them, They Won’t Lose Them Asset Care® — Clients receive a guaranteed amount of life insurance. All of it can be used for qualifying long-term care expenses, and the premium is credited with a guaranteed interest rate, increasing the cash value each month. Joint protection provides an opportunity for two individuals to receive benefits from a single policy. Annuity Care® — Sell an annuity with LTC benefits in which clients can access their cash value for qualifying care expenses on a tax-advantaged basis, and they can purchase extended benefits with guaranteed premiums.

Your clients aren’t average, so why is their long-term care? “OneAmerica recognized a great need to educate financial professionals about why LTC is important and how it can be part of every single person’s financial plan regardless of age or net worth, and in doing so, we’ve created several avenues for that,” said Edgar. “Our education materials are robust and comprehensive and include a range of topics, such as the basics of long-term care, long-term care planning, taxation and longterm care in businesses, as well as ready-made marketing campaigns that cover the basics of getting the conversation started.” •

Learn more about our forward-thinking, asset-based LTC solutions that include joint protection and lifetime benefit options. Visit TalkLTC123.com to download the OneAmerica guide “Let’s talk LTC.”

Annuity Care® II — Access an annuity with LTC benefits in which clients can access their cash value for qualifying expenses on a tax-advantaged basis, and it has built-in extended care benefits at guaranteed premiums.

1. AARP Long-Term Support and Services, published March 2017. 2. http://www.aaltci.org/long-term-care-insurance/learning-center//ltcfacts-2019.php#2019end Published 2019 3. Society of Actuaries, 2015 Intercompany Long-Term Care Experience Study About OneAmerica® A national provider of insurance and financial services for more than 140 years, the companies of OneAmerica help customers build and protect their financial futures. OneAmerica offers a variety of products and services to serve the financial needs of their policyholders and customers. These products include retirement plan products and recordkeeping services, individual life insurance, annuities, asset-based long-term care solutions and employee benefit plan products. Products are issued and underwritten by the companies of OneAmerica and distributed through a nationwide network of employees, agents, brokers and other sources who are committed to providing value to our customers. To learn more about our products, services and the companies of OneAmerica, visit OneAmerica.com/companies. OneAmerica® is the marketing name for the companies of OneAmerica. Products issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Asset Care form numbers: ICC18 L302; ICC18 L302 JT; ICC18 L302 SP; ICC18 L302 SP JT. Annuity Care and Annuity Care II form numbers: SA34, R508, SA35, ICC15 SA35, ICC15 R521 PPA ND, ICC15 R521 PPA, ICC15 R522 PPA. Not available in all states or may vary by state. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. On July 19, 2019, The State Life Insurance Company® was rated A+ (Superior) by A. M. Best. This is the second-highest rating of 16 possible ratings assigned by the agency.

WELCOME LETTER FROM THE EDITOR

Living The Dream!

hat if all your dreams came true? What would it look like? Would you be happier then? In this month’s “In The Field” feature, Kate Kilgore Cihon tells how she pursued her dream of going to New York, getting a public relations job in a glamorous field and living her best life. By any estimation, she did that. After taking a gamble by going to New York without a job, with hard work, she was living the life she wanted, even finding the guy of her dreams and marrying him. But when she envisioned raising her children, her thoughts tracked back home to Colorado, where her parents still lived. The place she worked so hard to escape was still home in her heart. Cihon is one of the rare people to have been able to climb up to her dream. Talk to anybody who has been able to do the same, and that person is likely to say that reality did not quite match the dream.

The Stuff Of Dreams

The dream life is also the point at the center of this month’s feature focusing on retirees, by Managing Editor Susan Rupe. After all, life insurance agents and financial advisors are protectors of dreams. Whether it is funding or preserving the good life, life insurance, annuities and financial products are involved. But clients and their advisors can confuse dollars with dreams. For example, if a client wanted a million dollars before retiring, the goal might be commendable, but what is its purpose? The answer might be, “Then I will be happy.” But that is not the real reason. High-net-worth advisors can tell many stories about clients who sit upon their mound of money afraid of spending any of it. That’s not quite living the dream. Why do they want a million dollars? That is the obvious next question. The answer might be “security,” but that is not the final answer either. How does that make them secure? Because they won’t run out of money, they might say. And that’s still not the final answer. What do they think will happen? 6

InsuranceNewsNet Magazine » March 2020

They think they will end up living out of a shopping cart on the street. (That was the actual answer in LIMRA research.) Now there is the root fear, the stuff dreams are made of. Quite often, dreams are the escape from what scares us. Maybe it’s the big city when you are from a small town. Maybe it is a small farm when you’re slaving away in an urban center. Call it Object A, a theory developed by the French psychologist Jacques Lacan. The desire does not come from the object, such as a car or a person, but the other way around. The desire will always be there, looking for another Object A. Simply put, it is not about the cookie — it’s all about anticipation. That is the exciting part triggering the dopamine, but that happens even before the cookie is eaten. Afterward, regret often settles in, soon to be cleared by a new Object A. Unless clients define their root desire, they are likely to be fixated on their Object A. It’s the same thing that drives people to line up at the supermarket courtesy counter to buy lottery tickets. We know a lottery ticket is a waste of money. They know they are not going to win money. They win a dopamine hit from the anticipation. It’s not the ticket; it’s the dream. And here’s the thing: They already won the lottery. They had a one in 400 trillion chance even to be born (as illustrated by Mel Robbins in a Tedx talk that can be dialed up on YouTube).

chance (two cells accidentally created complex cells); and then humans (a meteor killed off the dinosaurs and allowed the rise of mammals); and finally, for us to be living in an advanced society in which most of us are not scrambling to meet our basic needs. Living is not always easy, but life today is pretty wonderful.

The Dream After The Nightmare

Let’s go back to the original question: What if all your dreams came true? You would be living in the place of your choosing with the people you choose, nothing bad would ever happen, and you would not have to worry about anything. How long would it take before you got bored? How soon would you be looking for challenges? How satisfying are challenges unless there was a good chance you could lose? How would you value good health unless you got sick on occasion? What does everything mean to you if you could never lose anything? How soon would it be before you reconstructed your life back to the one you have right now? I knew an insurance agent whose answer to “How are you?” was always “Living the dream!” I don’t think he always felt it, but he said it every time. Later, he was slammed by an unfortunate chain of events that included a divorce, drug abuse and finally a stroke at an early age. He had to relearn how to speak. Along the way, he lost his agency and everything else. He visited our office after he began rebuilding his life. He looked spiffy in a suit, just like he always had. I cautiously asked him how he was doing. He flashed his trademark smile and bellowed: “Living the dream!” I knew he meant it that time. Steven A. Morelli Editor-in-Chief

The math might not be exact, but her reasoning is. Life itself was a freak

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INFRONT

Two-Front Illustration War Illustrations are in the crosshairs of both regulators and class-action litigators. The former group wants to rein in high IUL illustrations, while the latter is in court claiming insurers are using proprietary indices to manipulate illustrated returns. By John Hilton

llustrations are crucial to the sales process for life insurance and annuities, and they continue to attract attention from both regulators and trial attorneys. The issue is one of fairness and, perhaps, liability. Change is in the air, with the only questions being: What the change will look like and who will strike first — the courts or the regulators?

‘Toothless’ Guideline

On the life side, the source of consternation is Actuarial Guideline 49. Approved by the National Association of Insurance Commissioners (NAIC) in 2015, AG 49 was supposed to rein in indexed universal life illustrations. Almost immediately, insurers created IUL products with bonuses and multipliers that critics say rendered AG 49 toothless. The NAIC created a subgroup last year to tighten up AG 49 if possible. Talks were slow until October, when 8

InsuranceNewsNet Magazine » March 2020

the subgroup’s parent committee issued an edict that surprised many in the process. The Life Actuarial Task Force voted to add language tightening AG 49, leaving the details to the subgroup. The key wording is this: Multipliers or other enhancements should not illustrate better than non-multiplier designs. Since then, the subgroup has struggled to fulfill the mandate. On their most recent call, members seemed receptive to industry proposals that would limit maximum illustration rates to the 6% range. Illustrated rates had climbed to twice that number before regulators started

obviously it comes down to the experts who understand how these products work, and how the illustration of these Brian Bayerle products works,” said Brian Bayerle, senior actuary with the American Council of Life Insurers. The subgroup has also split on whether to apply any new IUL illustration rules to in-force policies. Birny Birnbaum, executive director of the Center for Economic Justice, has said the issue has already

“The problem with the illustrations and ‘fairness’ is in the rates an advisor can illustrate. As an example I will only show 3.5% growth on a IUL, because I would rather over deliver and under promise what the contract will do.” — Michael C. Whitman, CFP, Millennium Planning Group meeting. Industry representatives say they can keep multipliers, but use them in ways that keep illustrations reasonable. “There may be multiple other approaches that conceptually work and

been decided by NAIC precedent, which requires application to in-force policies. “The whole purpose of these changes is to stop what people feel are misleading illustrations,” Birnbaum said during

TWO-FRONT ILLUSTRATION WAR INFRONT a previous call. “So under what scenario would you say ‘Well, you’ve got a misleading illustration to begin with, but we don’t want to confuse you, so we’re going to let the company continue to provide a misleading illustration on an ongoing basis’?”

Annuity Illustration Lawsuits

Illustrations are also drawing controversy on the annuity side, although the controversy rests equally on the use of proprietary indices. A class-action lawsuit

claims companies are using these indices to manipulate illustrated returns. An expanded class-action lawsuit alleges that Security Benefit Life defrauded consumers by implementing a “fraudulent scheme” involving a proprietary index used in two fixed indexed annuities. The lawsuit was filed in January in the U.S. District Court for the Southern District of Florida. Plaintiffs say Security Benefit manipulated clients to invest most of their FIA account values in the company’s

“Illustrations are a necessary part of the sales process. They let a client know how the policy could perform over time. … It is the advisor’s job to communicate the possibilities and educate the client.” — Charles C. Adi, financial advisor, Blueprint 360

“Almost every illustration is from la-la land. Assumptions are wildly optimistic and the sale is made easier by showing how ‘rosy’ the future will be if you buy this product. IUL seldom makes sense for the vast majority of retail clients.” — Kashif A. Ahmed, CFP, American Private Wealth

“IUL has a lot of moving parts. Some very bright people have told me it is too convoluted. The paper doesn’t care what is printed on it.” — D. Scott Brennan, The Brennan Group

synthetic index, which performed far worse than portrayed. “Security Benefit’s aggressive tactics and misleading sales scheme yielded immediate financial rewards for Security Benefit and its parent, Guggenheim Partners,” the lawsuit reads. The lawsuit targets two of Security Benefit’s FIAs, the Total Value and Secure Income annuities, both of which were offered with proprietary indices that the company advertised as “capable of producing double-digit returns,” the lawsuit alleged. Generally, annuities are marketed with a cap or participation rate that leaves owners with less than 100% of the market gains. In exchange, the client is protected against market losses.

‘Locked In’

The plaintiffs say Security Benefit marketed its TVA products as “uncapped” and with a “100% participation” rate. “Once consumers purchased the annuities, they were locked into them by onerous surrender penalties, by bonus claw-back provisions, and by the very structure of the Synthetic Indices themselves, which were designed to credit interest only at the end of fixed periods ranging from two to five years,” the lawsuit reads. Attorneys for the Florida plaintiffs allege that Security Benefit was able to perpetuate “a virtual shell game of misleading illustrations depicting unattainable future returns based on backcast modeling,” the lawsuit reads. Michael T. Castino, director of public relations for Security Benefit, sent InsuranceNewsNet a brief statement: “SBLIC believes that it has substantial defenses to the claims alleged and intends to vigorously defend itself in the action.” 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.

Like this article or any other?

Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com. March 2020 » InsuranceNewsNet Magazine

INFRONT TWO-FRONT ILLUSTRATION WAR

Taxes On The Ballot

Taxes are likely to be one of the top issues in the general election, but maybe not so much in the Democratic primaries because all the leading candidates support a tax increase to some extent. The candidates have similar proposals to raise the rate a couple of percentage points in the top income bracket, along with a more substantial increase in the top marginal rate. The exception in both cases is Sen. Bernie Sanders, who is proposing a larger increase. Another key departure is in the Social Security tax, or Old Age, Survivors and Disability Insurance (OASDI).

Raising Taxes On Work Federal top marginal tax rates on labor and investment income

The annual cost of OASDI is projected to exceed the total annual revenue this year, for the first time since 1982, according to the trustees of the Social Security and Medicare funds.

Labor Income

Current Law

Biden

Buttigieg

Sanders

Warren

Top Individual Tax Rate

37%

39.6%

52%

39.6%

“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees posted on their website. “The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare.”

OASDI Payroll Tax Rate

12.4

14.8

Medicare Tax

2.9

Additional Medicare Tax

0.9

M4A Income-Based Premium

11.5

The current 12.4% OASDI rate is split by employer and employee up to $137,000, and the rate is 0% for income above that limit. Some of the candidates are proposing an additional rate starting at a higher income level, according to The Wall Street Journal.

Top Marginal Rate

40.2

51.8

69.2

53.5

Top Capital Gains Rate

39.6

Net Investment Income Tax

3.8

Payroll Tax on Investment Income

14.8

Top Marginal Rate

23.8

43.4

55.8*

58.2

The leading candidates have proposed quite a few small changes to taxes. Generally speaking, they all have a proposal to add a new tax at a rate starting somewhere above the current ceiling:

Joe Biden: 12.4% on income above $400,000. Pete Buttigieg: “Additional” rate above $250,000. Bernie Sanders: 12.4% above $250,000. Sanders also proposes a new 6.2% tax on investment income for couples making more than $250,000 a year.

Investment Income

Note: Top marginal rate on labor income is calculated as (Income Rate + Employee Rate + Employer Rate) / (1 + Employer Rate). The * reflects the low end of the range for Sen. Sanders given a lack of clarity as to whether the payroll tax increase would apply to investment income as it does under Sen. Warren’s proposal.

Source: Cornerstone Macro

Elizabeth Warren: 14.8% above $250,000. It would apply to regular or investment income, according to Warren’s website — “14.8% of the lesser of net investment income or total income above these [individual or couple] thresholds.” President Donald Trump has not proposed any changes to the Social Security system over his presidency. He has not made any specific proposals in this campaign, except to say in response to the question of whether entitlement cuts would be considered that “at some point they will be.” This is just a brief look at some of the differences on tax policy. InsuranceNewsNet Magazine will feature more coverage of tax and other policies as the campaign season progresses. — Steven A. Morelli

InsuranceNewsNet Magazine » March 2020

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INTERVIEW

After ‘Historic’ Advocacy Year, AALU Pivots For The Future AALU CEO Marc Cadin says the merger with GAMA is only a start in building an enormous organization to face the many challenges to the industry.

InsuranceNewsNet Magazine » March 2020

AALU PIVOTS FOR THE FUTURE INTERVIEW

he Association for Advanced Life Underwriting racked up impressive victories last year in its role as industry advocate, but AALU’s new CEO says the wins have to be bigger in order to save the life insurance distribution and financial services industries. AALU has evolved into a strong advocate for the life insurance industry in Washington, D.C., along with serving its mission of representing advanced advisors. But the association’s new CEO, Marc Cadin, saw the need for a larger organization that can be even more effective in fighting the many challenges coming at the life insurance distribution and financial services industries. In Cadin’s estimation, it is more than winning on individual legislation or regulation; it is about raising the industries’ profile as a protector of Americans’ futures. As part of that quest, AALU is merging

with GAMA, an association focused on the professional development and leadership skills of front-line employees in the insurance, investment and financial services industries. The organizations were still working out the final details of the merger as of press time and had not yet released the name and other details about the new organization. Cadin spoke about making significant changes soon after he became CEO in September 2018, following nearly 20 years of coming up the advocacy side of AALU. He succeeded David Stertzer, who had been with the association for 32 years. In this interview with Publisher Paul Feldman, Cadin said he has been thinking for some time that the challenges facing insurance and financial advisors are bigger than the individual organizations representing them. He has ambitions for a far larger organization than what was created by this most recent merger.

ADVOCACY WINS The Association for Advanced Life Underwriting said they had “historic” advocacy victories over the past year. According to the association, they were: Pass-Through Deduction 199A: During the Tax Cuts and Jobs Act (TCJA) debate, AALU and its partners successfully fought for the inclusion of the “pass-through deduction” (Section 199A) to provide significant tax relief for businesses that would not benefit from the reduction in the corporate rate. After the TCJA was signed into law, AALU fought to ensure that life insurance and annuity commission income are treated as qualified business income for purposes of 199A.

Jason Dixson Photography

Transfer For Value: AALU advocated for corrections in the Transfer for Value rules, which reserved the current tax treatment of business uses of life insurance in merger and acquisition activity. AALU also worked to ensure that increased gifting in the estate planning context would not be subject to the threat of clawback — a necessary clarification from passage of the TCJA. SECURE Act: AALU sent more than 400 members to Capitol Hill to advocate for the SECURE Act.

March 2020 » InsuranceNewsNet Magazine

INTERVIEW AFTER ‘HISTORIC’ ADVOCACY YEAR, AALU PIVOTS FOR THE FUTURE FELDMAN: As you’re forming the new organization, what are some things that you can share about it and its direction in the next year? CADIN: I’d love to be able to tell you details, but we’re not quite ready for that. But I will tell you that I gave a speech on this at an AALU conference, all about how this is a great and noble profession, but because of the way we’re organized, there are too many groups and too many mixed messages, too little scale to really deal with the big rocks challenging the profession. And particularly in this day and age, with proposals like we see in Massachusetts and saw in New York and the DOL [Department of Labor], the profession is under attack — by well-intentioned regulators — but it’s under attack. It’s under attack by people like Suze Orman and Ken Fisher and Dave Ramsey, who don’t believe in the profession, the value of the products that we provide. The whole theory behind it was that we have to come together and unify the profession so that we can create an organization like other professions have. Whether it’s Realtors or the AICPA [American Institute of Certified Public Accountants] or the [American] Nurses’ Association, the American Dental Association, a bar association — every profession has an organization that promotes the profession, is involved in standards and licensing, and advocates on its behalf and for the ability for that profession to serve its clients. The organizations that advocate on behalf of the financial security profession are cut into a whole bunch of different pieces. AALU does really, really effective advocacy. GAMA provides this leadership and professional development that are second to none in the industry. And together, we are much stronger than we are apart. We’ve combined the teams. And the organization will really have three central pillars to our mission. We’re going to advocate, we’re going to provide world-class leadership and professional development for leaders, agency leaders, advisors, new advisors, experienced advisors. And ultimately what we want to do is elevate the profession. FELDMAN: So when you became the CEO, you said that you were looking 14

to make a fundamental change, and it sounds as though your wheels are in motion with the merger with GAMA. What else are you looking to do with this organization? CADIN: We restructured the membership and doubled membership last year, at the beginning of the year, before the merger. So that was on advocacy wins. We doubled membership in January of 2019. We’ve had 2,000 members for what felt like 2,000 years. And through restructuring, we doubled to 4,000.

together and we focus on the things that unite the profession, the values and the virtues of a commission-based advice model, the values of consumer choice, and things that a bunch of the organizations, including AALU, have tried to do to the best of their ability. But the structure was too confusing. Too few members of the profession participated. And so what we’re really trying to do is create something new that will be an attraction for other organizations hopefully and for a whole bunch of members of the profession who aren’t a member of any group today.

We simply have to do a better job of telling our story. We have to be more aggressive at telling our story about the virtues of a commission-based advice model, the virtues of consumer choice. Our goal is not just to bring AALU and GAMA together but also to create a new merged organization. Our goal is to unify the profession and create an organization with size and scale, with the ability to enact legislation that positively impacts the ability of this profession to provide financial security. We want to have 200,000 financial security professionals as members of our organization. We want to be involved in certification of best practices that help the profession do the noble job that is required of it. I’ve had a number of very positive conversations with other organizations within the profession that might want to join our cause. And this is where, again, it’s really important for me that while I spent the better part of my adult life at AALU, this really is not about AALU. It really is about the profession. It’s about how we bring people

InsuranceNewsNet Magazine » March 2020

FELDMAN: What are some of the challenges that you see overall for the profession? CADIN: The overarching challenge that we face is that the profession is not well understood. We have detractors that have been more effective, louder, more successful in painting this profession as something that it’s not. And unfortunately, when regulators believe that we are not acting in the best interest of consumers, we see things like New York 187, which applies not just to annuities but to life insurance as well. We see proposals that come out in Massachusetts. Yesterday, we sent a note to our members that talks about the challenges with this well-intentioned proposed fiduciary legislative regulation — that it’s coming from the secretary of state, who probably

AFTER ‘HISTORIC’ ADVOCACY YEAR, AALU PIVOTS FOR THE FUTURE INTERVIEW doesn’t even have authority to regulate insurance advisors or insurance products. It’s out of touch. It will end up reducing consumer access to advice. We know that for sure. So we have to get at the root cause of these proposals, which is why our well-intentioned regulators are going in a direction that is going to reduce consumer choice and, we believe, reduce financial security. We simply have to do a better job of telling our story. We have to be more aggressive at telling our story about the virtues of a commission-based advice model, the virtues of consumer choice. So that’s a big challenge. I think another challenge is how we’re organized. AALU and GAMA will come together. So where there were two, there will be one. We still have a whole bunch of different groups out there. And what my experience with the trade association community [shows] is that the current design lends more for competition rather than collaboration. For a lot of people, it’s more about the organization, the letters, rather than the cause of serving the profession. And so I think we have to continue to push ourselves to humbly ask, are there ways that we can more effectively come together to serve the profession? And then, obviously, as we look at the dynamics at the federal level, the elections are right around the corner. As we think about the scenario planning that we have engaged in, I would be remiss if I didn’t mention Chris Morton, who leads our government affairs team, who’s an extraordinary leader on behalf of helping us produce these wins and helping us prepare for what’s around the corner. But as Chris and I have talked, there really aren’t risk-free scenarios. No matter what happens in November, we’ve got to be prepared, and depending on what the outcome of the election is, that will adjust what the opportunity and the risk matrix are for us as we look forward to 2021. FELDMAN: How do you see the industry evolving over the next five to 10 years? CADIN: If you had asked me this 15 years ago, I would’ve said, what’s clear about the last five to 15 years is this is not a sales job anymore. This is an advice job. This

is a consulting job. Whereas the notion of sales contests and the idea of moving products and producing all of that, the world has shifted away from that. Consumers want holistic financial advice from somebody they can trust. The consumers want to know that whoever is offering them advice is offering them advice that’s in their best interest. I think we’re going to see that continuation. That’s certainly been a big trend over the last five to 10 years. And I think what we will see is, particularly if we are effective in unifying the profession, we will create a regulatory regime that respects consumer choice, that respects the commission-based advice model. But at the same time, it provides certainty to consumers that they’re receiving advice that’s in their best interest. So that’s clearly an area that’s a trend line that has already started and will accelerate into the future. I also think you’ll see the continued evolution of the culture within the profession that’s much, much more open and inclusive. There’s clearly more work that needs to be done in terms of changing the culture within the profession so that it is more inviting for women and people of color to join it. We can’t be an advocacy force for the financial and retirement security of the American people without looking like the American people. So I don’t think this is a “nice to have.” I think this is essential for the ongoing relevance of the profession. FELDMAN: How can we be more inclusive as an industry? What are some things that we should be doing to bring more diversity to this industry? CADIN: It all starts with culture, right? Gone are the days where people should be beating their chest about how much money people make or how big a case they closed. And I think that we should be beating our chest about serving all the clients that we serve. For me, I think all of the clients, from the very first term policy to the more sophisticated uses of the product, serve a great and noble purpose. And everyone should have access to the risk protection element, whether it’s annuities or life insurance and the advice that comes with them. It starts with valuing the service and

value that we’re providing consumers and really taking the nobility of what it is that we’re doing seriously enough to say, “OK, this is a group of servant leaders, and we’ve got to be very, very clear about what is and is not acceptable.” I’ll give you a very specific example that we put in two years ago, and I’m embarrassed that we didn’t put it in 20 years ago. We instituted a code of conduct at our meeting. And we’re very clear with our team that this is a professional meeting, that we are professionals. We expect our members to be professional, and there’s a code of conduct. And I will tell you that just simply having that internal conversation made a big difference to the professionals on our team, both male and female, and makes it clear to the members we have a zero-tolerance policy as it relates to the fact this is not a social gathering or a fraternity that people are coming to. So, walking the walk as it relates to culture in the choices that we make is essential. In terms of inclusion, we have to respect different business models. The way I look at it is there are three, maybe four, different models where products and buys get delivered. You’ve got the brokerage community and independent distribution. You’ve got producer groups or that top advisor consortium, and the brokerage obviously is IMOs. You’ve got the career agency system. There are multilevel marketing firms that are having a lot of success. We have one high standard for all the professions where you have to serve clients well. But we’re agnostic as it relates to whether you’re in a career system in an agency or a producer group or an IMO or you’re a B-D owner or you’re in a multilevel marketing firm. Ultimately, all of these ways of delivering products and advice are valuable to the consumer. And I don’t think we as an industry have as much muscle memory as we need to really value the differences. I think we focus on the differences and why one is better than the other. But the valuing of the differences and bringing people together and recognizing the different communities that exist within distribution and the diversity by which we serve consumers, that’s really something that is desperately needed within the profession.

March 2020 » InsuranceNewsNet Magazine

NEWSWIRES

Climate Crisis Will Reshape Finance The intensifying climate crisis will bring about a fundamental reshaping of finance, with a significant reallocation of capital set to take place “sooner than most anticipate.” Those were the words from the head of the world's largest money manager. Larry Fink, BlackRock chief executive, wrote his annual letter to fellow chief execs in which he said: “Climate change has become a defining factor in companies’ long-term prospects. ... But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. “Climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios,” Fink continued. BlackRock's assets under management totaled almost $7 trillion in the third quarter of 2019.

DID YOU

KNOW

There's an expectation for volatility to pick up in the stock market ahead of the election, which causes anxiety for investors, especially the closer you are to retirement. — Paula Nelson, president of the retirement unit at Global Atlantic Financial Group.

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‘POLITICAL DEADLOCK’ THREATENS ECONOMY

FORMER WELLS FARGO CEO BARRED FROM INDUSTRY

Former Wells Fargo CEO John Stumpf has been barred from ever working at a bank and will pay $17.5 million in connection with scandals at Wells. The bank faced controversy when it was revealed that employees set up millions of fake accounts to meet sales quotas. In addition to the $17.5 million fine, Stumpf’s settlement declares he shall not participate “in any manner” at any bank regulated by the Office of the Comptroller of the Currency. The nation’s fourth-largest bank, Wells Fargo has been in the midst of restructuring and regulatory reforms since 2016, stemming from the fake-account scandals. The fallout from the fake accounts has had consequences for the bank. In recent years, Wells has stalled between stagnant revenue and an urgent need to cost cuts. The current Wells Fargo CEO, Charlie Scharf, told the bank’s employees that “the OCC’s actions are consistent with my belief that we should hold ourselves and individuals accountable.”

QUOTABLE

NEW YORK ALLEGES NRA RAN INSURANCE SCAM

The National Rif le A ssociation ha s come under fire from the New York Department of Financial Services, which accuses the gun lobbying group of acting as an unlicensed insurance producer and engaging in misleading marketing practices. The state previously fined insurance broker Lockton Cos. $7 million for underwriting an NRA-branded insurance program called Carry Guard, which prompted the group to file a lawsuit in 2018 against Gov. Andrew Cuomo and other state officials. The new charges accuse the NRA of working with Lockton to sell insurance to gun owners and their families that would cover losses and costs associated with the aftermath of the purposeful use

It seems as though everyone has an opinion on the biggest threat to the U.S. economy. Now Kiplinger’s Personal Finance has weighed in. Kiplinger’s revealed that typical Americans now consider “political deadlock” to be the greatest threat to the U.S economy. Kiplinger — What’s the greatest threat to the U.S. economy? which has been forecasting inPolitical deadlock – 28% formation about Global trade and tariffs – 28% personal and Geopolitical tension – 13% business finance Inflation – 10% since 1920 — Slowing unemployment ranks political growth – 8% deadlock at the top of the list of economy-busting factors, feared by 28% of the respondents in a wide-ranging new survey. Global trade and tariffs was ranked second on the list, also feared by 28%. Geopolitical tension concerned 13%, followed by inflation (10%) and slowing employment growth (8%). Another 13% had a mix of other fears, the poll said.

The Aflac Duck turns 20 years old in 2020. Source: Aflac

InsuranceNewsNet Magazine » March 2020

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Retireme Logistics COVER STORY

Advisors know about the retirement crisis — now it’s time to do something about it By Susan Rupe

hen Rob Klein meets with a client to discuss retirement planning, he kicks off the conversation by asking the client three questions.

1. How are you going to change a light bulb? 2. How will you get an ice cream cone? 3. W ho will you eat lunch with? There are no correct answers. But as the client figures out their answers, they also will envision what their later years will be Klein like, and what kind of planning they need to do in order to navigate successfully through the twists and turns of their senior years. “When we start asking these questions, and we listen to the responses, it’s not easy. Because a lot of people are in denial about what their lives will be like when they get older,” he said. “Some 18

clients just have a deer-in-the-headlights look when we ask these questions. But the clients who are a little more open to thinking ahead are the ones who went through similar experiences with their own parents.” Klein said he wants his clients to think through what he calls retirement logistics. Just as UPS and FedEx are in the logistics business — bringing together people and objects and machines to create a successful delivery — a successful retirement requires logistics as well. Retirement is complicated. We all have heard the statistic about 10,000 baby boomers turning 65 every day. We also keep hearing that people are going into retirement with little in the way of savings, and that the private-sector pensions that kept our parents’ retirements afloat are going the way of the rotary-dial phone. If all that isn’t scary enough, life expectancies are creeping upward, and a greater number of older Americans are living longer with chronic conditions such as diabetes and coronary disease that would have been fatal at a younger age a generation ago. So, more of us will be in need of

InsuranceNewsNet Magazine » March 2020

some kind of long-term care. How can the financial services industry guide the “silver tsunami” away from disaster? Klein, of White Plains, N.Y., is a founding member of Jester Financial Technologies and is also a retirement health care advisor. He specializes in helping clients age in place, planning so they can be independent for as long as possible. But there are a lot of pieces to put together in order to help clients achieve that goal, he said. Having a plan to address issues such as paying for health care in retirement is important, Klein said, but the logistics he referred to earlier also come into play. He often refers to his retired schoolteacher parents and their friends who live in a rural community in New York’s Catskill Mountains. “So you may have good health coverage but do you have a good medical portfolio? By that, I mean are you living in an area where you have good access to care?” Klein asked. “Because my parents’ friend is in her 80s and she has to drive seven miles just to get to a pharmacy. Is she going to do that in the ice and snow? No. So

you might say, OK, I can get mail-order drugs. But where she lives, the post office doesn’t deliver to her house. She has to drive into town to pick up her mail. She has to drive 10 miles to see her doctor. Ten miles is not that big a deal right now, but what will she do when her vision isn’t so good and she can’t drive? So, it’s something that seems pretty simple, but it can get complicated.” Planning for retirement also includes thinking about making your house more senior-friendly. “I tell clients, if you really like your home, if you want to age in place, why not put everything on one floor?” Klein said. “Even though you have a two-story home with a basement, you don’t have to move. But then I ask clients, ‘When are you going to do this? Now? While you’re working, have the funds and have the ability to live through the construction?’ And they say, ‘Well, I guess I’ll do it later.’ And I say, ‘Later? Like when the ambulance brings you home from the rehab center and you’re in a wheelchair or in a walker and you have to get up five steps to get to your front door or get up to the bathroom on the second floor?’”

RETIREMENT LOGISTICS COVER STORY Consumers who are in the middle market have “a lot of critically important financial decisions” to make if they are to have a successful retirement, said Matthew Drinkwater, corporate vice president and director, retirement research, at SRI. “Things like claiming Social Security, how to invest their savings, how much they elect to withdraw from those savings. Many of them don’t really have a good idea how to optimize some of those decisions. Some of those decisions are tough for the experts to optimize.” Drinkwater Drinkwater said that SRI research shows that workers who are 10 years away from retirement expect to rely more on their savings to pay the bills in their post-employment years than those who are already in retirement, who are more likely to have a pension or other workplace-based re t i rement plan.

A Need For Critical Decisions

The Secure Retirement Institute’s mission is to provide information on retirement issues to the financial services industry.

March 2020 » InsuranceNewsNet Magazine

COVER STORY RETIREMENT LOGISTICS “Part of the solution is being able to generate sustainable income,” Drinkwater said. “For many people, that will mean having some degree of downside protection, risk-pooling — in other words, products with income guarantees such as annuities.” SRI research shows that the major motivation for buying annuities is their ability to produce guaranteed lifetime income. But Drinkwater said he believes “there is a lot of potential not yet realized” for annuity sales to future retirees. The concept and institution of retirement itself will evolve as the baby boomers remake the post-working years in the same way they have remade every other phase of life they’ve experienced, Drinkwater said. “I don’t mean that people are going to give up on the idea of retirement,” he said. “I don’t think this notion of retirement is specifically going to disappear or it’s going to be totally radically different. I think that’s really overstated and oversold. For example, we may see more people choose to gradually shift into retirement from full-time work to seasonal or part-time or consulting work in order to boost their income and perhaps even continue to save money during that transition before stopping paid work.” The big challenge in this scenario, he said, is that not all workers will have the option to phase into retirement. “A lot of people experience health issues and a lot of people end up becoming caregivers to family members,” he said. “What this implies to me is you have a lot of people who need to save as much as possible; they need to have some type of contingency plans in place. If they can work until age 70 and then retire, that’s great, but many people won’t, and they need a different approach.” Because not everyone will end up on the retirement journey they originally envisioned, advisors should be discussing alternative retirement outcomes with clients, Drinkwater said. “It means finding the right way to save that makes sense for each person. So for example, people might be looking at their workplace plan, such as a 401(k). Some might be looking at other ways to boost their savings. Annuities are a good tool for those who are maybe one wealth 20

segment up from mass affluent into affluent or high net worth.” Drinkwater said the financial services industry has been responding to the growing silver tsunami “by gradually ramping up its activities for years.” He cited innovations in annuity products and greater marketing of annuities to retirees and pre-retirees as one example. Registered index-linked annuities are one example he named of a recent product to hit the market. But the concept of retirement will change as younger generations age and get ready for their post-employment years, Drinkwater said. “Baby boomers and Generation X will bring different ideas and expectations to retirement,” he said. “There won’t be a complete abandonment of retirement. But there will be changes — perhaps more ambitious lifestyle goals and activities that people want to do in retirement.”

A Global Issue

The world’s aging population is “the biggest issue that humanity faces in this century,” according to Joe Jordan, industry speaker and behavioral finance expert. Jordan said that by 2015, 2 billion people worldwide will be over the age of 60. By 2015, China will have more people over 65 Jordan than the combined populations of Germany, France and Britain. In Japan, sales of adult diapers are greater than sales of baby diapers. The greatest economic impact of this aging population has to do with caregiving, Jordan said. What it boils down to, he said, is who will take care of Mom? “It’s estimated that in the U.S., we have 65 million Americans providing free care for family members, which adds up to about $375 billion of free services,” he said. “So our industry must address ways to give independence and dignity to a population that has never lived this long.” The industry has developed products to ensure people don’t run out of money, Jordan said. But caregiving and the emotional and financial impacts surrounding it run the risk of destroying families. He said he believes advisors must share

InsuranceNewsNet Magazine » March 2020

stories about caregiving and its impact on families in order to help clients address these issues as they plan for their own long-term care needs.

The Journey

People need professional advice in order to achieve a financially healthy retirement. What are advisors doing to launch them on the retirement journey? Kathleen Owings believes it all starts with making a list. Owings is principal and financial advisor at Westbilt Financial Group, Colorado Springs. The list includes Owings things such as:

1. Paying off the mortgage prior to retirement. 2. Compiling all monthly expenses to get an idea of how much income will be needed. 3. Planning for long-term care expenses. “People don’t have clarity on their needs in retirement,” Owings said. “I walk through this with them so that we can dive down and figure out what their expenses will be. That drives the conversation about how much money they will need, and then we can talk about where that money will come from.” Owings said she often finds clients will give her some arbitrary number about how much money they believe they will need annually in retirement. Making the list helps them realize what they actually need, and they usually find that the amount of money they will need to cover their living costs is far higher than what they originally guessed. After working on this exercise, Owings said, clients who are within a three- to five-year window of retiring can start planning for how much more to save or whether they need to stay on the job a little longer. Once expenses are figured, the next step is to work with clients on a plan to replace 75%-90% of their income in retirement. “We look at Social Security, a pension if they have it, workplace savings,

RETIREMENT LOGISTICS COVER STORY “The things that used to kill us don’t kill us anymore, and it’s going to continue that way unless someone finds a cure for Alzheimer’s disease and dementia,” she said. “So people need to have some kind of plan for how to address their long-term care needs.” Annuities are an important tool to fill the gap between what clients will receive in Social Security and what they will need to cover basic living expenses, Garrison said. Clients initially may be reluctant to put some of their money into an annuity, Garrison said, but she presents an annuity as “a tool that can help their other money work better.” “They’re concerned about the market; they can see the markets are at an alltime high at this point. But they’re afraid of volatility because they know they could lose money in a downturn. So we look at taking a slice of their retirement savings and putting it into an annuity, to try to help their other money work better — so all their retirement money is not at risk.” Once a client has a plan to cover their basic retirement expenses, Garrison said, “they feel more in control of their funds and more secure.”

10 FACTS the Secure Retirement Institute gathered about retirement. 1. 1 in 7 U.S. retirees (age 65+) lives in poverty. 2. 44% of workers who aren’t saving for retirement say they cannot afford to. 3. More than half (53%) of Americans don’t believe their savings and investments will last if they live to be 90 years old. 4. Thirty percent of retirees have mortgage debt — almost double from 1989. 5. About 80% of older adults have at least one chronic disease, and 68% have at least two. 6. Social Security is the primary source of income for retirees, but the Social Security Trust Fund is expected to be depleted in 15 years. 7. Less than half of workers (44%) believe that income from Social Security, pensions and annuities will be enough to pay for their basic living expenses in retirement.

Write It Down

8. 45% of working baby boomers have less than $100,000 saved for retirement — 28% have less than $25,000. 9. Only 13% of Americans say they are very knowledgeable about financial products and investments. 10. 7 in 10 pre-retirees say they aren’t well prepared for their retirement. other accounts,” she said. “And we build a model showing whether this will meet their needs or if they will have a gap. “Sadly, many people just want to throw their hands up and run away screaming,” she continued. “But in my modeling, we go conservative on inflation and we figure on people living a long life. In the case of a married couple, we assume at least one of them will live much longer than the other.”

Two Concerns

When asked what clients are most concerned about when planning for retirement, Gwen Garrison Garrison sa id it comes down to two things: long-term care and running out of money. Garrison is president of LifePlan Financial Advisors in Newnan, Ga.

No client leaves Denise Grace’s office without a written plan for retirement. Grace is founder and president of Grace Financial Group in Novi, Mich. “We look at here’s where you’re going, here’s how it’s going to look like,” she said. “Because if you’re going to run out of money Grace according to all of our assumptions, you need to know now and make plans. Are you going to work longer? Are you going to try to save more or cut back on some of your expenses? Whatever their answers, they will have a map that tells them here’s what their retirement will look like and I run it up to age 90.” Grace said her clients also are concerned about running out of money and about paying for long-term care. She has found annuities and life insurance products that offer long-term care riders help ease clients’ concerns on both those fronts.

March 2020 » InsuranceNewsNet Magazine

COVER STORY RETIREMENT LOGISTICS

Some more retirement facts from Secure Retirement Institute

There are 50.5 million retirees in the United States, and that number will grow 40% by 2035. 6 in 10 retirees are worried about reduced Social Security benefits. Nearly half are concerned about paying for health care costs beyond what Medicare covers. 53 percent of all retirees retired sooner than they planned — often not by choice. “They like the idea that you have an asset and if you don’t use it for care, you can either cash it out or your beneficiaries will get the money,” she said. “The biggest issue with traditional long-term care insurance is that you pay all those premiums and you may not need the care. Or I have clients who bought traditional LTCi many years ago and the premiums have gone up so high that they’re having to cut back on their benefits. So now they don’t have the coverage they originally thought they would have. So now we’re looking at how we supplement that.” Each client’s retirement path is different and each client has different dreams for retirement. It is the advisor’s job to get them on their path and equip them with the tools they need to realize those dreams. 22

“I just think it’s important that people are able to sleep at night knowing that no matter what happens, they’re going to be OK,” Grace said. “That we’ve got all their bases covered. And they’ve got a written plan that we can modify as they move through their retirement and make sure they’re on track.” 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@ i n n f e e d b a c k . co m . Follow her on Twitter @INNsusan.

InsuranceNewsNet Magazine » March 2020

Please keep in mind that the primary reason to purchase a life insurance product is the death benefit. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products. Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. For financial professional use only. Not for use with the public. This material may not be reproduced in any way where it would be accessible to the general public.

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the Fıeld

A Visit With Agents of Change

When The Dream Is Back Where You Left It How Kate Kilgore Cihon reached for what she thought was her dream life but found the real thing back home By Steven A. Morelli

Kate Kilgore Cihon had not thought about going into business with her dad, Randy Kilgore, who has had a long, successful life insurance career. But then she realized that he was in the people business.

InsuranceNewsNet Magazine » March 2020

ate Kilgore Cihon was living her dream life, newly married, living in Manhattan and working at a glamorous company in public relations, her chosen field. That dream had lived in her head since her college days. But something was missing. She was in her late 20s, thinking about having children and couldn’t picture that happening in New York City, where she had lived since 2001. That’s when she realized her heart was still back home, along the Rocky Mountains of Colorado. Casting her eyes back home, she found a company in Denver where she could use her experience. And Denver was right up the road from Colorado Springs, where she grew up and her parents still lived. But her husband, Matt, was a New York boy. His sales career was growing, and his roots were in upstate New York. “I don’t think my husband was all that thrilled,” Cihon said. “So I dragged him back, kicking and screaming. He was kind of up-and-coming in his career, but we’d just gotten married and I didn’t see myself raising a family in New York City.” Once they were settled in Denver in 2007, it was soon clear that Cihon’s new job with a cosmetics company also wasn’t her dream. Even though the job was public relations, she found herself dealing with products more than with people. “It was kind of fun,” Cihon recalled, “but I was like, ‘Gosh, I just really want to talk to people. I don’t want to look at these numbers all day.’” She liked interaction with people as much as her father did at the insurance agency that he had run all her life. Cihon hadn’t paid a whole lot of attention to what her father did when she was growing up. But she remembered the fun places they used to go for conventions and company trips. After nearly 30 years of not asking much about what her father, Randy Kilgore, did for a living, Cihon was suddenly interested in exploring the subject. “I was home for Christmas and I said to my dad, ‘Well, what you did was pretty relationship-based,’” she said, and he agreed. “It took me a long time to get up the courage to even talk to him about it. And I said, ‘I think I could be good at that.’ And he was like, ‘Huh, really?’”

WHEN THE DREAM IS BACK WHERE YOU LEFT IT IN THE FIELD

A Quick Start

Although children have been known to work for their parents’ insurance agency, Cihon did not get involved in the agency as a kid the way many did as they grew into the business. Her father, who had inherited the profession from his stepfather, remembered that Cihon was fixed on her trajectory and it was in the opposite direction of his world. “I’ve been in the business since 1971 and she was born in ’78, but she never came down to the office and answered the phones. She never did any filing,” Kilgore said. “I bought some insurance policies on her when she graduated from college

third edition, published in 1973. “It’s like 500 pages and he said, ‘Why don’t you read this and see if you find it to be interesting,’” Cihon said, laughing at the memory. “And I’m like, ‘This is awful. Why would you do this to me?’” Ah, but the book turned out to be more than mere paper and binding. It was a key. “Lo and behold, he had underlined passages and made notes in the margins,” she said. “I saw all the plans that my dad put in place for close personal friends of ours, family and people I’ve known my whole life.” Far from daunting her, the big book intrigued her. A month after she broached

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Randy Kilgore started with this book and handed it off to his daughter.

“Lo and behold, he had underlined passages and made notes in the margin. I saw all of the plans that my dad put in place for close personal friends of ours, family and just people that I’ve known my whole life.”

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— KATE KILGORE CIHON and high school. I tried to show her the policies and those kinds of things and she was just kind of like, ‘Well, OK, thanks.’” It wasn’t that Cihon could not be successful in the insurance business — she usually got what she aimed for. It just did not seem like her kind of thing. But her interest came at an opportune time, just as Dad was puzzling through his succession plan. Kilgore was considering other agents or selling off parts of the business, among other options. Now here was a path to a more satisfying transition. So Dad gave her his holy book, the Life and Health Insurance Handbook, the

the topic with her father, Cihon quit her job and started studying for the licenses her dad said she would need. There was the obvious insurance license, but Kilgore said that was not enough these days. “And I said, ‘Now you’re going to have to do this other stuff because the world of insurance has changed from when I started,’” said Kilgore, who is now 72. When he began, he sold term and whole life and that was it. He did eventually get a Series 6 for mutual funds and variable annuities, but that was all he had needed for a full career that included

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the Fıeld

A Visit With Agents of Change “In fact, we spent all day today with some of our 401(k) clients,” Kilgore said. “And, you know, I can talk about the 401(k) and how I set it up and those things, but when it comes down to the investment of their 401(k) money, I let her handle all that.” Cihon quickly saw her father’s point when she started out. “Back when my dad was starting out, you had insurance brokers, you had insurance salesmen and you had stockbrokers,” Cihon said. “There wasn’t this hybrid of the financial advisor that’s only come about in the past 10 or 15 years.”

A Holistic Perspective Kate and Matt with Reed, 8, and Darcy, 7.

40 years in the Million Dollar Round Table and a term as the president of the National Association of Insurance and Financial Advisors. “These policies kind of morphed from just being a universal life policy,” Kilgore said. “And now it was becoming a much more sophisticated product, and you needed to have better training and understanding of the finance world than you did back when I started.” That meant getting the Series 7 and 66 licenses, both involving challenging exams. “I gave her some benchmarks, and she met and exceeded all those,” Kilgore said. “She really didn’t have a business background, but she sure studied hard and passed all those tests the first time through.” Cihon went on sales calls and client visits with her father, absorbing everything. “I started in January and got officially licensed in March,” she said. “I’m sure I qualified for the sales conference at our home company within nine months. So, that was pretty exciting.” It helped that she was starting at age 30, because her peers had growing families and responsibilities that needed protection. If she’d been any younger, her peers might not have been ready for these conversations, and older clients might not have taken her as seriously, regardless of who her father was. Soon, she was bringing a new set of skills and a modern perspective to the practice, Kilgore said. 26

Cihon obviously also brought a female perspective to the practice. Male insurance agents and financial advisors have long been criticized for their lack of communication skills with women, often talking to the man and ignoring the woman when dealing with a couple.

“In the past, the insurance and funding and investment sides had been a lot more transactional, and you can’t be that way today,” Cihon said. “You have to develop a relationship with your clients. A lot of that comes from asking questions and listening. Just by nature as mothers, as females, we’re a little bit more empathetic. That’s not to say that men can’t be, they certainly can — but we listen a little bit more closely and ask questions of both people. I really want to engage the clients in the process and make them feel heard and valued.” And it isn’t just a feeling about the added value; she confirms it with data. “In the past seven years, I’ve had an agenda that recaps what the client talked about before, tells them what we’re going to talk about now and some steps for us for future planning,” she said. “So they really feel understood. And the last bullet point I always have is ‘Has this been valuable?’ Why are they going to talk to me

Kate and her father, Randy, join a panel discussion on succession planning at the NAIFA 2019 national conference.

But Cihon said the problem went beyond simple communication skills — the guys were directing their message to the wrong person. “If you’re talking to a couple, even me working full time,” she said, “I pay the bills, I manage the budget, I know what’s coming in and out all the time. As you look at the household dynamics, more often than not the woman, whether she works or not, is kind of the CEO of the household.” She also said women’s relational skills are a perfect fit for the more holistic world of insurance and finance today.

InsuranceNewsNet Magazine » March 2020

unless I bring some sort of value?” As Cihon handled more of the business, the practice shifted. Now it is half employee benefits, about 30% life insurance and 20% securities. Their benefits business now serves about 125 companies. The renewal process has grown large enough that she brought in her husband to handle that side of the business. Cihon has qualified for MDRT six years, the past two as Court of the Table. She has been active in NAIFA, where she was named one of the 4 Under 40 award recipients in 2019. She is now 41.

WHEN THE DREAM IS BACK WHERE YOU LEFT IT IN THE FIELD

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Kate Cihon points out that she was named one of NAIFA’s 4 under 40 at the 2019 national conference.

Join a committed TEAM: • Life Products designed exclusively for Catholics • Help clients achieve financial success with Catholic Values • Customized marketing support and training • Advanced sales support • Highly rated by AM Best and KBRA The office has physically shifted. It had been in Colorado Springs for her dad’s career, but Cihon has been in Denver since she returned to her home state. She had been commuting, which took a toll with two children at home: Reed, 8, and Darcy, 7. They opened a Denver office, where the business has gradually grown. Kilgore has downsized to a smaller Colorado Springs office. Now Cihon works four blocks from home. The practice’s name changed, too, from Randy Kilgore & Co. to Kilgore Cihon Advisor Group, where Kilgore is founder and managing partner, and Cihon is vice president and managing partner. “I’m kind of semiretired because I’m not out there beating the bushes, looking for new clients,” Kilgore said. “People come to me and say, ‘Hey, I need to do this or that.’ We sold a million-dollar policy yesterday because of the people I know.” He said he knew his daughter would be a success not just because of the work she put in, but because of her people skills and sheer fearlessness. “Right out of the chute, she was a good

prospector,” Kilgore said. “Even her first year, she did very well in the business because she was not afraid to talk to people. She is going to have a good career.” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@ insurancenewsnet.com.

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March 2020 » InsuranceNewsNet Magazine

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LIFEWIRES

Florida Moves To Ban Use Of Genetic Info Florida legislators moved closer to banning life insurance, long-

term care insurance and disability insurance companies from using customers’ genetic information in changing, denying or canceling policies. The House passed the bill on to the Senate, where its prospects are much tougher. Florida would become the first state to have such a law if it is ultimately passed by the Legislature and signed by Gov. Ron DeSantis. State and federal laws already prevent health insurance companies from considering a person’s genetic information when deciding whether and at what price to cover that consumer. The Florida bill would extend that ban to life, disability and long-term care insurers.

MILLIONS IN BENEFITS UNCLAIMED EACH YEAR

Every year, millions of dollars in life insurance benefits go unclaimed because beneficiaries are unaware of the coverage or don’t have basic information about the policies. That’s the word from the National Association of Insurance Commissioners, which said most beneficiaries are unprepared to receive life insurance death benefits, with millennials and Generation Z the least prepared to be beneficiaries. Overall, just 39% of baby boomers surveyed say they feel they are prepared for their roles as life insurance beneficiaries. This drops off among younger beneficiaries. Just 30% of millennials and only 22% of Gen Zers surveyed say they are equipped.

How prepared are beneficiaries? Not everyone who is a life insurance beneficiary understands what that means.

39% 30% 22% DID YOU

KNOW

f baby boomers o say they’re prepared f millennials say o they’re prepared f Gen Zers say o they’re prepared SOURCE: NAIC

Half of all those surveyed said they are listed as a beneficiary on a friend’s or relative’s life insurance policy. But some people don’t know about the policies at all. Overall, 21% of Gen Zers and 20% of millennials say they don’t know whether they’re named as a beneficiary.

ACCELERATED UNDERWRITING COULD CLOSE GAP

Accelerated underwriting holds the promise of being able to cut the agent’s time spent selling a $500,000 policy from 20 hours to roughly five, a

They don’t want to wait 20% to 25% of people drop out of the life insurance buying process during the 30- to-40-day traditional underwriting process. SOURCE: Deloitte

Deloitte analyst said. The associated benefits are numerous. In particular, it could lead to more life insurance sold to Americans who need smaller amounts for basic protection. Chris Stehno, managing director, human capital practice at Deloitte, shared data and analysis on new underwriting technology for NAIC’s Accelerated Underwriting Working Group. The benefits offered by accelerated underwriting have the potential to revolutionize the life insurance industry.

QUOTABLE There is a life insurance preparation gap, and it’s not the buyer who’s unprepared — it’s the beneficiary. — Ray Farmer, NAIC President

“Right now, agents aren’t selling below a million dollars,” Stehno said. “It’s not they don’t want to, but for the most part, they’re not too interested in it. What accelerated underwriting does is say, ‘Hey, for a portion of those people, the young and healthy, I’m interested in selling to them again.’”

INDUSTRY FACES LOW GROWTH, NEW CHALLENGES

The U.S. life insurance industry is still feeling the effects of a low-growth decade, according to EY’s 2020 US and Americas Insurance Outlook. Between 2013 and 2018, compound annual growth rate in life insurance premium growth has been 1.7%, the EY report said. Gross written premium grew from $661 billion in 2013 to $718 billion in 2018. The report said in terms of assets under management, life insurers have not attracted the level of inflows that retirement accounts and mutual funds have. Still, there is broad industry consensus that large market segments are currently neglected or underserved. Multiple studies have found that there is a considerable life insurance coverage gap for Americans. While a significant portion of middle-class customers have not saved enough for retirement, the industry has fallen short in communicating the importance and value of its products. A return to profitable growth has to be at the top of the strategic agenda for life insurance executives for both the near and longer terms.

24.6% of indexed universal life sales were made with accelerated underwriting for the fiscal Source: Milliman year ending Sept. 30, 2018 — an increase from 16.8% during fiscal year 2017.

InsuranceNewsNet Magazine » March 2020

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LIFE

Why IUL Is Such A Divisive Product A commentary on why we should be selling performance — not projections — in indexed universal life. By Curt Abbott

s a brokerage general agency, we have suffered significantly because of our conservative attitude toward all insurance products, especially (but not exclusively) indexed universal life. It isn’t that we categorically reject the legitimacy of the IUL design — far from it. We think well-designed IUL products without heavy loads and increased exposure to risk make perfect sense for the right buyers. But realistically, the way IUL is illustrated is just wrong and not likely to get much better, since some of the most basic assumptions permitted by the National Association of Insurance Commissioners are misguided and perpetuated throughout the illustrations for the lifetime of the buyer. At the same time, spreadsheeting (a form of sales oversimplification) has become the de facto basis for product comparisons, while insurance companies have been hard at work complicating their products to the point of absurdity. The fact that a compliant sales illustration now requires 25-plus pages and multiple signatures signals that there is a whole lot more going on with these products than any spreadsheet can possibly capture. And yet it’s pretty clear from our interactions with agents that they just want to be the low-cost provider in any sales situation. Unfortunately, decades of experience tell us that this race to the bottom causes tremendous angst for purchasers many years later. The pain inflicted on thousands of older policyholders by the huge cost of insurance increases in the later years of their contracts is proof positive that the industry holds the cards and is willing 30

to play them whenever profitability is at risk. And one of the key dangers for any insurance carrier is that policyholders pay premiums that are unrealistically low and rarely adjusted for actual policy performance. Therefore, comparing products by lining up their illustrations side by side without a book full of disclosures is a fool’s errand. As a product analyst, I have the job of assisting agents in evaluating the suitability of insurance products to meet their clients’ specific needs. From my perspective, the key to this is making sure that clients both understand the product they are buying and are capable of managing it through many decades of ownership. Whether or not the NAIC will admit this, the truth is that IUL is even more of a “security” than variable life is. At least with variable products, we get full disclosure of the underlying assets, expenses, etc., in the form of a prospectus.

Carrier

Total Premium $

Policy Charges $

Interest $

Effective Rate

Account Value $

Net Policy Return

300,000

57,697

218,203

7.65%

460,506

5.19%

300,000

234,777

437,577

15.47%

502,800

6.22%

Consider the nonguaranteed elements in life insurance policies: » Whole life has a dividend that will be higher or lower than illustrated. » Universal life has a credited interest rate and a COI (mortality) rate that may be guaranteed. » Variable life has the performance of the underlying investment and, again, a COI that may be guaranteed. » IUL can have a cap rate, a participation rate, an index multiplier, an account multiplier, a performance bonus, a separate fee

InsuranceNewsNet Magazine » March 2020

that may be guaranteed, and nonguaranteed COI rates. Worse, it is impossible to illustrate the impact of changes in these variables. Actuarial Guideline 49 further clouds the situation by calculating a “current” rate by simply applying all the above variables over an arbitrary lookback period. To fully understand IUL, you need to know not only the risk associated with the market segment represented by the index but also the cost of options, the profitability of the options trade and how it affects the illustration, the cost of multipliers, the impact of multipliers in a negative market, and the historical results based on the specific options strategy selected. And even with that information, you’d be hard-pressed to find an illustration that even approximates reality. The vast majority of agents request IUL illustrated with a simple S&P 500 Index using a one-year point-to-point calculation, even though that might not be the strategy that yields the highest probability of success. In fact, when one of our IUL carriers did the math on their product, they demonstrated that the one-year point-topoint strategy had a much lower probability of success than the uncapped/spread strategy based on the same cash flows. And probability analysis yields a different

answer for every individual client based on the product, age, rating, cash flow, etc. The industry perpetuates the theory that picking an interest rate lower than what AG 49 allows provides a “conservative” estimate of future performance. But that could not be further from the truth. In reality, policy performance has more to do with options structure and future market performance than anyone wants to admit. Add to that the variability of options pricing, which is somewhat counterintuitive in that a volatile market causes the cost of options to rise, reducing the caps on the most popular strategies (S&P 500 point-topoint, for example) even while the market continues to ratchet upward.

WHY IUL IS SUCH A DIVISIVE PRODUCT LIFE What does this mean for consumers? I think it means we are focused on the wrong metrics. We should be selling performance, not projections. To do that, we need to: 1. Evaluate the impact of reductions in nonguaranteed bonuses, multipliers and any other elements of the contract that impact the real return. 2. Understand the impact of policy expenses related to leveraging the options trade. 3. Put clients in a position that may exceed their expectations. To illustrate the difficulty in evaluating and comparing IUL policies side by side, consider the following example. Male, 50, paying $20,000 annual premium for 15 years, minimum Option B (increasing) death benefit, solving for income from ages 71 to 90. Policy A is a fairly straightforward contract, with a 13% cap, a guaranteed account credit of 25 basis points starting in Year 6 and a maximum illustrated rate of 7.39%. Policy B is more complex, with a 12.25% cap, 56% index credit, nonguaranteed performance credit, a 6% charge and a maximum illustrated rate of 7.10%. From this chart, a couple of things should jump out at you. First, the total charges for Policy B are more than four times those of Policy A. Second, and probably more important, is that the return on the underlying investment in Policy B is projected at 15.47%! And of that 15.47%, the result for the client is only 6.22%. While that makes for a wonderful illustration ($81,803 of income versus $60,656 with Policy A), what is the probability that the actual results will meet or exceed the illustrated values? Is there any way to realistically model that when the only tool the insurance companies make available is the ability to change the interest rate? Second, the difference in policy costs of $177,080 is the equivalent of roughly 8.85 annual premiums. Consider that the client risked more than half of the total premiums contributed to the policy to possibly achieve a 1.03% difference in return. While most people tend to rely on “rule

Policy Comparison

One thing that is very clear is that the arbitrary rule-of-thumb interest assumptions can’t possibly begin to Carrier Policy A Policy B provide a basis for comparing prodCurrent ucts. Applying equal reductions to rates on both products will tend to Cap 13.00% 12.25% paint a much rosier picture for prod Index Multiplier 56% ucts with higher fees and leverage. As a result, in the end, this “conser Account Credit 25 bp (yr. 6+) vative” approach would steer clients Performance to products that are more likely to Bonus 1.36% underperform. Charges 6.00% Is 25% too conservative? Is 10%? Unfortunately, sufficient data doesn’t Projected Rate 7.39% 7.10% really exist to answer those ques Income $60,656 $81,803 tions. Nobody can tell you what options would have cost 25 to 30 years 10% Reduction ago or how these products would Cap 11.70% 11.03% have actually performed during those historical look-back periods. I Performance Bonus 1.22% do know that I’d much rather have a client buy a policy expecting $50,000 Return (30-Yr. income and end up with $60,000 Median) 7.18% 7.71% than have a client buy $81,000 and Illustrated end up with $13,000 (or nothing!). Rate* 7.16% 4.94% Is it possible that the policy will Income $57,881 $13,664 outperform the maximum rate illustration? Sure. Is it likely? I wouldn’t 25% Reduction 5.57% 3.50% bet on it. As some companies have Cap 9.75% 9.19% taught us, insurance carriers are more than willing to find ways to Performance Bonus 1.02% meet their profit goals by taking money from clients however they R eturn (30-Yr. can. Loading up IUL products with Median) 6.31% 5.46% a plethora of nonguaranteed rates Illustrated creates a treasure chest of ways for Rate* 6.29% 3.50% them to manipulate policies down Income $48,340 $0 the road. Clients have enough trouble try*The illustrated rate needs to be adjusted to reflect the fact that the ing to understand why a simple index multiplier and the account credit (but not the performance bonus) are factored into the illustrated values. IUL policy that underperformed is falling apart. I can’t imagine trying of thumb” methods in cases like this (70% to explain the reason they don’t have the of max., 1% below max., 1.50% above fixed retirement income in 20 years that they rate), I’ve spent a good deal of time work- planned on. I believe there will be a lot of ing on models that analyze the S&P Index those conversations in the years to come. going back to 1950 and applying various But I suspect that the architects of these reductions to nonguaranteed elements. products will be long gone by then. Although they are not product specific, these models calculate the interest that Curt Abbott is would have been credited based on ac- a partner with CPI Companies, tual product specifications and allowed Voorhees, N.J. He me to analyze the impact of changes to has helped financial advisors implenonguaranteed elements. In the column above, I address two ment complex life insurance planning reduced-rate scenarios for these policies, solutions for their high net worth clients. assuming the nonguaranteed elements Curt may be contacted at curt.abbott@ are reduced by 10% and 25%, respectively innfeedback.com. March 2020 » InsuranceNewsNet Magazine

ANNUITYWIRES

QUOTABLE

SECURE Act To Ignite Annuity Boost

The SECURE Act will inspire a new batch of annuities and opportunities, but they might not show up until next year, according to insurance professionals. “The reason you won’t likely see a huge boost in 2020 is because plans still have to add annuities and do a review in order to get them into the plan as an investment option,” said Jamie Hopkins, director of retirement research for Carson Wealth. Large-scale annuity inclusion in plans won’t come immediately after the enactment of the expanded safe harbor for a related reason — there are three constituencies that need to be educated, according to Sri Reddy, Principal Financial Group’s senior vice president in retirement and income solutions. First, advisors need to learn about SECURE’s nuances and how to be experts in this arena, Reddy said. Second, record-keepers need to learn about how annuities are different from mutual funds with age restrictions and contribution differences, and they also need to build technology to support annuity offerings and their proliferation. The third group that needs to be educated, he said, is the plan sponsors.

ALLIANCE SPONSORS ROLLING STONES TOUR

The Rolling Stones have been rocking audiences since 1962, and the band’s members continue to perform and record long past the age when most people retire. So it seems appropriate that an organization that promotes annuities will sponsor the band’s upcoming tour.

planning to retire — they’re also planning to live their best life. Millions of Stones fans want the freedom to continue doing what they love, the alliance said in a news release.

CONSUMERS LESS CONCERNED Outsmart future ABOUT MARKET VOLATILITY After a volatile year in the markets, long-term care costs. American investors ended 2019 feeling

For those that work with or start working with 401(k) plans, there could be a huge boom in annuity sales starting, likely in 2021. Life Insurance & Long-Term Care

— Jamie Hopkins, director of retirement research for Carson Wealth.

crash or recession were at their lowest levels since 2018. Kelly LaVigne, vice president of consumer insights, Allianz Life, said the large percentages of consumers who are concerned about volatility put a renewed spotlight on guaranteed retirement income. Nearly a third of respondents (31%) say putting some money into a financial product that provides a guaranteed stream of income in retirement is the most important step to take to ensure that they have a secure retirement. This is up from 26% last quarter.

confident about their finances than Introducingmore Brighthouse SmartCare, a hybrid theyand havelong-term in a long time. NEW PRODUCT NEWS life insurance care product. According to the latest A llianz Carriers continue to develop new annuity Brighthouse SmartCare, a hybrid life insurance and long-term care product, gives Market Perceptions Study from your clients power Quarterly over the unexpected. Its long-term care benefit and death benefit products. Here is a rundown on some of can grow over time,Allianz helping them to keep pace fourth with risingquarter costs. Life, in the of 2019, them. Better yet, if your clients never use the long-term care coverage, their money is put to worries about an impending market » Brighthouse Financial entered the good use through a death benefit for their loved ones. Brighthouse SmartCare offers: independent marketing organization dis• Preparation for long-term care needs • Protection from unexpected events, such as premature death tribution channel • The ability to grow benefits over time to meet rising future costs with Brighthouse Brighthouse SmartCare is the smart way to gain power over the The Alliance for Lifetime Income willLearn more at brighthousefinancial.com. SecureAdvantage unexpected. be the sole sponsor of the 2020 Rolling 6-Year fixed inStones “No Filter” tour. This is the secdex annuity. SecureAdvantage 6-Year will Brighthouse SmartCare is an Indexed Universal Life Insurance Policy with Long-Term Care Riders issued by, ond consecutive year that the Alliance hasguarantees that are solely the responsibility of, Brighthouse Life Insurance beCompany, distributed with product Charlotte,through Market Synergy NC 28277 (“Brighthouse Financial”). All guarantees, including any optional benefits, are subject to the claimssponsored the Rolling Stones’ U.S. tour. Group’scompany exclusive network of IMOs. paying ability and financial strength of the issuing insurance company. Each issuing insurance is solely for its ownIn financial condition and contractual obligations. Brighthouse SmartCare has exclusions, 4Q 2019, 31% of Americans Last year, the alliance spokeresponsible direct-reduction » Athene has added the Nasdaq FC limitations, of benefits, and terms under which the policy may be continued in force or discontinued. money intothe product illustration.Index, For costs and complete detailsputting of the coverage, please consult Not available in all states. ly with thousands of Americans on itsFinancial said sponsored by Brighthouse and its design are registered trademarks of Brighthouse Financial, Inc. and/or its affiliates. guaranteed income is a good 1904 BDUL649894 nationwide trip across America with Bank of America, ICC18-AP1 • NOT A DEPOSIT • NOT INSURED • NOT FEDERAL GOVERNMENT investment, upFDIC from 26% in INSURED 3Q. BY ANYand the Stones. The message they 5-18-AP1 received theLOSE AI VALUE Powered AGENCY • NOT GUARANTEED BY ANY BANK OR CREDIT UNION • MAY was that Americans today aren’t just US Equity Index, sponsored by HSBC, to SOURCE: Allianz Life its suite of FIAs. SM

More Americans Open to Investing in Guaranteed Income SM

DID YOU

KNOW

DPL Financial Partners will begin offering two of Pacific Life’s annuity products to more than 400 registered Source: DPL Financial Partners investment advisory firms.

InsuranceNewsNet Magazine » March 2020

UNIFY THE PROFESSION one voice. one community. Why Are We Forming a New Organization? By joining forces, we can make a greater impact for our members and the people they serve. We have the opportunity to represent and bring our entire profession together, advancing and growing the work we do. We will significantly strengthen the advocacy efforts on behalf of the profession, offer more impactful leadership and professional development programs, all to elevate the profession and give the entire field a more impactful voice. This is about securing the future of the profession.

Ways to Take Action Become a Founding Member today and help enhance the member experience and make a meaningful difference in the future of the profession. To learn more or donate visit unifytheprofession.org.

“

AALU and GAMA’s leadership to come together to form a new organization is welcome news for the profession and a gamechanger for our efforts.” - Warren May Chairman, Industry Alignment Group National VP, Principal Financial Group

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MARCH 22-25, 2020 // ORLANDO, FL

ANNUITY

How Annuities Can Help Women Overcome Retirement Anxiety How Annuities Improve Retirement Portfolios

By Jim Poolman

Research shows that in most situations, income annuities can better meet client goals in retirement than an investments-only approach can. Retirees who had guaranteed income through an annuity were more likely to feel confident and accept more market volatility with their other assets.

reparing for retirement is a lifelong process, no matter your background, income level or geographic location. However, widespread evidence demonstrates that women face challenges different from those men face when preparing for retirement. For example, according to the 2019 “Women, Money, and Power Study” commissioned by Allianz Life, women have experienced a steady downward trajectory on a number of key financial points in recent years. First, fewer women report having increased their earning power in 2019 (42%, compared with 57% in 2013). Second, only a quarter of women in the study say they currently work with a financial professional, which is down from 30% in 2016. These concerning trends are compounded by the fact that women tend to live longer, which leads to not only increased living expenses throughout retirement but also higher health care expenditure. This puts women at an even higher risk of outliving their savings. Finally, even though ultimately eight out of 10 women will be solely responsible for their financial well-being at some point — as a result of divorce, widowhood or never marrying — most women prefer to let their spouse handle long-term financial planning, according to a 2018 UBS survey. But this can lead to financial surprises once women are on their own. Underscoring this point, the survey also found that 59% of divorced or widowed women say they wish they had been more involved in long-term financial decisions during their marriage. Together, these points emphasize the 34

Researchers looked at combination strategies using both annuities and investments compared with traditional investment-only portfolios and found the following:

» Adding an income

annuity to a retirement portfolio allows a retiree to get the same or higher income with a lower risk of outliving savings than an investments-only approach.

» Retirees with income annuities can spend at a level that investments alone would be unable to match without significant risk of running out of money before age 95.

importance of a strong financial plan to help women avoid the unique financial challenges they’ll face during retirement. Everyone’s ideal retirement looks different, and thus the path to getting there will be unique to each person. Regardless, the following best practices may be helpful when working with female clients in preparing them for life in retirement.

Encourage clients to get and stay engaged.

As mentioned earlier, a majority of divorced or widowed women say they wish they’d been more involved in household financial decisions during their marriage. In recent years, the divorce rate for couples age 50 and older has been increasing, and a late-in-life divorce has much greater financial implications compared with a divorce that occurs before age 35. In the late-in-life divorce, retirement accounts are cut in half. This can set both spouses back financially, but women usually have a harder time recovering, especially if they left the workforce during their marriage to raise children or pursue other priorities.

InsuranceNewsNet Magazine » March 2020

» Using both annuities and investments can enhance the value of assets for heirs over

the long term.

No one starts a marriage anticipating a divorce, but these statistics underscore the importance of women staying engaged in financial decisions throughout their marriage. Whether or not they have a long-term partner, it is important that women take ownership of their own financial future with eyes wide open. BOTTOM LINE: Financial professionals working with female clients who are in significant, long-term relationships encourage regular meetings between partners. That way, the couple can talk through their financial goals. This not only ensures the partners are aligned, but also wards off any unnecessary surprises should life take an unexpected turn.

Explore lifetime income options.

Today, with increasing life expectancies, retirement can realistically last for decades. Longer life expectancies, combined with more years spent in retirement, increase the risk of outliving savings. Given that women are more likely to outlive their male partners, products that offer guaranteed lifetime income

SOURCE: Principal Financial Group

Lifetime income products can give women the financial confidence to face their unique retirement challenges.

HOW ANNUITIES CAN HELP WOMEN OVERCOME RETIREMENT ANXIETY ANNUITY should be explored as part of any balanced portfolio. Social Security is often the first thing most pre-retirees think of when considering lifetime income options. However, the Indexed Annuities Leadership Council has found that many baby boomers overestimate their expected monthly Social Security payment by $500 — a miscalculation that will leave them almost a quarter-million dollars short over a 30-year retirement. Naturally, this raises the question of additional options that can provide a similar peace of mind through steady income. By offering principal protection from market volatility, tax-deferred growth and the option to provide guaranteed lifetime income, annuities could be an ideal product for women in retirement, given the increased financial risk outlined previously. Beginning with lifetime income, research published in 2019 by Principal Financial Group demonstrates how annuities can improve retirement outcomes versus investments alone.

Specifically, researchers found that adding an income annuity increased the chances of a retiree’s portfolio lasting until age 95 by around 20 percentage points compared with a portfolio comprising only investments. As people, especially women, continue to live longer, helping your clients make the transition from a “pool of assets” that can fund retirement to “retirement income” can be an essential step in rounding out a healthy financial plan. Additionally, annuities join many retirement products to offer tax-deferred growth. According to the IALC’s retirement calculators, assuming a $10,000 initial balance, a $5,000 annual contribution and a 4% hypothetical interest rate, a fixed indexed annuity could accumulate an additional $20,000 over 20 years compared with taxable savings. But unlike investments, annuities offer principal protection, meaning your client will never lose her initial principal due to market swings, as long as it remains in the annuity. Again, these aspects underscore the increased confidence annuities can provide women as

they look for tools to prepare for a long and comfortable life after work. BOTTOM LINE: While an annuity should never be recommended as the only retirement planning vehicle, it should be included as part of a balanced portfolio. If your clients are among the 80% of American workers who feel their No. 1 need in retirement is a stable income that can’t be outlived, it’s worth talking about whether an annuity is right for their situation. Retirement can be a scary prospect, especially for women due to the unique challenges they face. But anxiety is often driven by the unknown. As a financial professional, you can help your clients avoid ignoring their financial future until it’s too late. Jim Poolman serves as the executive director of the Indexed Annuity Leadership Council, a coalition of life insurance companies that have come together to increase the dialogue surrounding fixed indexed annuities. Jim may be contacted at jim.poolman@innfeedback.com.

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HEALTH/BENEFITSWIRES

ACA Premiums Drop In 31 States Health insurance premiums for plans purchased through Affordable

Care Act marketplaces for 2020 decreased in 31 states, a new analysis shows. Costs fell by an average of 3.5% for the lowest-priced silver plans, according to a new report prepared by the Urban Institute, with funding from the Robert Wood Johnson Foundation. Researchers examined premium changes in the lowest-cost silver plan for a 40-year-old nonsmoker from 2017 to 2020, finding premiums stabilized in the past two years. The number of insurers participating also increased in 2019 and 2020, suggesting that many insurers feel the markets are stable, functional and potentially profitable. This is a contrast to 2018 and 2019, when the ACA marketplaces experienced considerable turmoil that resulted in huge swings in premiums, leading to concerns about stability and long-term viability. Additionally, there was fear that not enforcing the individual mandate would threaten the risk pool and force insurers to increase premiums to cover the additional risk. Researchers say the 2020 premium decreases are a result of the marketplaces stabilizing after a period of uncertainty in 2017-2018, driven by the Trump administration eliminating funding for the ACA’s cost-sharing reductions, Congress eliminating the individual mandate penalty and other regulatory changes.

HEALTH CARE PAPERWORK COST $812B IN 2017

The health care bureaucracy cost Americans $812 billion in 2017, according to a study published in the Annals of Internal Medicine. That number represented more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. The study estimated that cutting U.S. administrative costs to Canadian levels would have saved more than $600 billion in 2017. Health administration costs were more than four times higher per capita in the U.S. than in Canada ($2,479 vs. $551 per person), which implemented a single-payer system in 1962. Americans spent $844 per person on insurers' overhead, while Canadians spent $146. Additionally, doctors, hospitals and other health providers in the U.S. spent far more on administration due to the complexity entailed in billing multiple payers and dealing with insurers’ requirements.

DID YOU

KNOW

OUT-OF-POCKET CHILDBIRTH COSTS JUMP 50%

It ’s costing more money to have a baby. A loophole in the ACA may be causing expectant and new mothers to incur significant out-ofpocket costs before, during and after giving birth, a new analysis suggests. In findings published in the journal Health Affairs, resea rchers noted that, for some American families, average out-of-pocket health care spending for maternity care — including during pregnancy, delivery and three months after birth — jumped from $3,069 in 2008 to $4,569 in 2015, a nearly 50% increase. And ACA imposes few restrictions on how plans impose co-pays, deductibles and cost-sharing for maternity care. Approximately half of all women in the

QUOTABLE We remain opposed to Medicare for All. — James L. Madara, AMA CEO and executive vice president

U.S. are covered by ACA plans, the authors of the Health Affairs article said.

INSURERS START DRUG COMPANY

A group of 18 Blue Cross Blue Shield health insurers is helping create a nonprofit drug company to make certain generic drugs itself. The insurers are targeting medicines where there is a lack of competition and a need to bring down prices. The insurers announced they will spend $55 million to partner with Civica Rx to create a new subsidiary dedicated to lowering the cost of select generic drugs. Civica is a nonprofit organization formed in 2018 by three philanthropies and numerous health care organizations in an effort to combat drug shortages and price spikes in hospitals. While Civica had been focused on providing drugs to hospitals, this partnership will focus on drugs that are purchased at pharmacies outside of hospitals. In this partnership, the Blue Cross Blue Shield companies want to bring select high-cost generic drugs to market for consumers. The subsidiary will acquire and develop abbreviated new drug applications for select generic drugs and partner with Civica and manufacturing partners to bring more affordable generic drugs to uncompetitive markets in exchange for higher volume and multiyear purchasing commitments.

60% of those surveyed said they would rather have free universal health care than total student loan forgiveness. Source: LendEDUPress Source: Associated

InsuranceNewsNet Magazine » March 2020

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HEALTH/BENEFITS

Be Your Client’s Financial Hero By Offering Disability Insurance Why recommending income protection to your clients can save them from financial ruin.

Confidence in Supporting Household During Income Loss

By James Poland

inancial advisors have as much of an impact on a person’s financial health as doctors have on their physical health. A doctor’s primary job is to assess the patient’s physical and mental health, affirm that all is normal, and recommend changes that can help the patient stay as healthy as possible. Doctors know full well that their patients will not always comply with their recommendations, but they also know that it’s their professional duty to properly assess each patient’s health and provide appropriate recommendations regardless. Compliance is up to the patient. Like a doctor, you are responsible for pointing out the good and the bad of your clients’ fiscal health and for recommending everything from various products to a financial plan to help them. In many ways, a financial advisor’s responsibility to a client’s financial health is exactly the same as a doctor’s duty to a patient’s physical health. As a result, advisors should consider 38

20%

Not at all confident

45%

Somewhat confident

34%

Extremely confident

Men

37% 43% 20% Women

Most consumers are either somewhat or not at all confident in their ability to support their household during a time of income loss. SOURCE: Council for Disability Awareness

recommending income protection insurance to their clients to help protect against unknown risks or life-altering events such as illnesses or injuries. Disability can happen to anyone at any time, and it can financially devastate individuals and families if a breadwinner is unable to work and earn an income. As a financial advisor, you have a unique

InsuranceNewsNet Magazine » March 2020

opportunity to encourage your clients to protect against that devastation with individual disability insurance.

Disability Can Happen To Anyone At Any Time

No one plans to become disabled, but the U.S. Social Security Administration reports an individual entering the

BE YOUR CLIENT’S FINANCIAL HERO BY OFFERING DISABILITY HEALTH/BENEFITS choices, may seem daunting at first glance. Instead of approaching DI with hesitation, focus on the need for income protection rather than a complex solution. First and foremost, educate clients about the importance of preventing financial loss or ruin in the event they are too sick or hurt to work for extended periods of time.

Disability Puts American Households At Risk More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age.

» Practice what you preach. Set a good example for clients by maintaining your own personal DI coverage and offering personal anecdotes of the peace of mind it provides. Believe it or not, your experiences can go a long way in influencing your clients.

At least 51 million working adults in the U.S. are without disability insurance other than the basic coverage available through Social Security. Only 40% of U.S. households have at least $6,275 in liquid savings. That is what it would take a family of four to replace income for three months — at the poverty level. Four out of 10 American adults indicate they can’t pay an unexpected $400 bill without having to carry a balance on their credit card or borrow money from friends, family or the bank. SOURCE: Council for Disability Awareness

workforce today has a 25% chance of becoming disabled before retirement. Common medical conditions that routinely contribute to both short-term and long-term disability claims include musculoskeletal disorders, cancer, mental health issues and injuries (such as fractures and sprains). Yet there are also medical conditions that can lead to a disability, such as digestive disorders, cardiac disease and diabetes. Group long-term DI offers a base of income protection for employees, but it often doesn’t provide enough coverage for highly compensated individuals in professional occupations. Workers’ compensation and Social Security can’t be relied upon to cover most of these challenges either. Workers’ compensation covers time away from work only if the disabling illness or injury was directly work-related, and Social Security typically doesn’t replace enough pre-disability income to maintain a person’s current lifestyle.

An Advisor Can Help Prevent Income Devastation

There are easy steps you, as your clients’ financial advisor, can take to ensure their

income is protected and their financial well-being is secure. Here are a few ways to start the conversation about disability insurance. » Put it in context. Many clients think they have adequate income protection from other sources, such as personal savings. But they might not have thought about how a serious illness or injury could impact their ability to earn an income to make ends meet. Discuss the income sources they would tap when facing a serious health condition, and point out the gap in income they will have even with those sources. » Remember the entire family. Explain how some DI policies provide a family caregiving benefit that can allow the policyholder to receive monthly payments for experiencing a loss of income when taking time away from work to care for a loved one — whether it be a spouse, domestic partner, parent or child — who is facing a serious long-term health condition. » Keep it simple. DI contracts, with their unique array of provisions and

Highly compensated workers who generate most or all of their earnings through full-time work and who depend on those earnings to maintain their standard of living should certainly consider added income protection. Because disability can happen at any time, and because so few people are prepared to lose their income, you have an important opportunity to be the financial hero your clients need. You may be exposing clients to risk by not offering a product that can help protect their paychecks and maintain their standard of living. Once you have your clients’ interest, rely on one of the many DI brokerage agencies around the country to be your expert for DI support. The top industry experts who are well versed in income protection solutions can help you tailor a plan to fit each client’s specific needs. In many cases, it’s as easy as starting the conversation to pique your client’s interest and letting DI specialists help you do the rest. James Poland, J D, FLMI , is a regional director of individual disability insurance sales for The Standard. He may be contacted at james.poland@ innfeedback.com.

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March 2020 » InsuranceNewsNet Magazine

Financial facts and figures powered by AdvisorNews.com

Comp Is Just The Start For RIAs

Competition is heating up as registered investment advisors escalate their recruiting game, with 76% planning to hire from other firms in the next 12 months, according to a Schwab compensation report. And it isn’t just compensation that will tempt advisors to move. The lures include a partnership track, equity-sharing and tried-and-true benefits such as health insurance. Successful firms will also be team-based instead of competing individuals, according to the report “Owning the Future of Independent Advice.”

Total staff by AUM

52.0

Source: Schwab

12.0

7.5

$100M – $250M

$250M – $500M

$500M – $1B

$1B – $2.5B

Percentage of firms offering benefits Medical insurance Dental insurance Vision insurance 77%

$2.5B+

Source: Schwab

99%

96%

90%

87% 74%

71% 57%

55% 44%

33%

$100M – $250M

39%

$250M – $500M

$500M – $1B

$1B+

“For RIA firms that have moved to team-based service models, talent acquisition has also become less about finding the ‘do-it-all’ advisor and more about individuals who complement existing teams and have the entrepreneurial drive to innovate,” according to the report. “For many, the solution is to hire more junior candidates who have the right values and technical aptitude, and then create a professional development path that keeps people committed to the firm and nurtures the firm’s culture.” Source: Dow Jones

Are you aware of how your practice handles “critical moments” with prospects and clients? The short answer from most survey respondents was no. In fact, only 20% of those answering a

poll by the Sandler Research Center had identified the critical moments that clients had with their firm.

25.0 5.0

How Do You Handle ‘Critical Moments’?

Another 38% said they had started identifying those moments but still had work to do. Sandler Research defined critical moments as follow: “Every contact an existing or potential client has with your company can be described as a critical moment.”

King Of Ponzi Scams Asks Court For Mercy

The man responsible for the largest Ponzi scheme in history is asking for compassion. Although Bernie Madoff has served only 11 years of his 150-year prison sentence, he is asking to be released because of terminal kidney failure, among other ailments. The 81-year-old told the Washington Post, “There’s no cure for my type of disease.” He also said he felt bad about the $65 billion Ponzi scheme that he orchestrated.

Stock Prices Push Into The Red Zone

Deutsche Bank is clanging the warning bell on stock prices, saying that they are at “extreme levels” as market indexes notch high after high. “Equity positioning, like the market itself, has run far ahead of current growth, as investors price in a global rebound,” Deutsche strategists warned in a report. 40

InsuranceNewsNet Magazine » March 2020

But prices keep defying logic, with episodes such as trade wars and coronavirus unable to knock the market far off its trajectory.

The strategists also said Deutsche’s metrics have not been stretched this far since January 2018, before a significant correction and sell-off. But then again, here we are, back in record-breaking territory.

things people s ay to their financial advisor s

“we plan on having a nice, long retirement. that shouldn’t be a bummer, right?”

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The Retirement Ecosystem: A New Trend In The Industry When insurance organizations partner with registered investment advisors, consumers will emerge the winners. • Dean Zayed

n recent years, there has been a steady increase in the number of financial professionals who are seeking a more holistic approach for their practice. Today’s advisor fully understands the need to move away from a one-dimensional approach, not only to gain new clients but also to retain those who might have developed more sophisticated needs. This evolution has led to an obvious and synergistic partnership between insurance organizations and their registered investment advisory counterparts, creating a retirement planning ecosystem. Although this isn’t new to everyone, some have hesitated to embrace this concept out of a fear of losing business to what has been viewed as a competitor. Early adopters of this model have proven that insurance organizations’ fears are misguided, and that their product sales will actually increase with an RIA partnership. With the ability to gather 100% of a client’s assets, there will be even more opportunities for advisors to recommend insurance products. The financial advisory space has become extremely competitive, and consumers are subjected to more advertising and solicitation than ever before. With an insurance-only approach, advisors are creating vulnerability; clients will seek out a relationship with competitors to handle the remainder of their investable assets. Those competitors are looking to capture 100% of a client’s assets and will scrutinize any prior recommendations — as well as position themselves as a better solution due to their comprehensive licensure. An insurance-only advisor is at a disadvantage, which means lost clients

and no repeatable business. Consumers have become more educated about our industry and tend to do their homework on advisors. Although a fiduciary standard has been in place since the Investment Advisers Act of 1940, the news surrounding the Department of Labor fiduciary rule created a new awareness of the differences among various types of financial professionals. Insurance organizations were forced to reevaluate their business

own insurance arm. This was a natural progression in the constantly changing landscape of our industry.

Two Industries Can Coexist

We are in a time when there is a clear realization of how these two industries can coexist and complement each other in the long term. Successful financial advisors understand that constructing a proper retirement plan means the entire universe of investment vehicles must be available to clients. Each client has different goals and needs, and advisors are doing the client an injustice if they have

If legislation around the DOL rule does arise in the future, insurance organizations that have realized the importance of an RIA relationship will be ahead of the curve.

models and the practices of their agents in the field. Insurance agents were finding it much more difficult to gain a client’s trust and sell products while the DOL rule was looming. Even after the DOL rule was dropped, several insurance organizations knew that a primary solution was to embrace relationships with RIAs and convince their agents to become licensed fiduciaries. If legislation around the DOL rule does arise in the future, insurance organizations that have realized the importance of an RIA relationship will be ahead of the curve. Fast-forward to today, and the partnership between RIAs and independent marketing organizations/field marketing organizations is at an all-time high. Not only have strategic alliances been formed, but also many insurance organizations have created their own internal RIA — and some RIAs have created their

InsuranceNewsNet Magazine » March 2020

limited solutions available. The marriage of insurance products with managed money portfolios is a very basic concept. It must be emphasized that there is a place for fixed indexed annuities in retirement portfolios — whether for income or even bond replacement. Along those lines, there is a place for securities in retirement portfolios as a growth component. These complementary products, when used appropriately, will create comprehensive portfolios that address specific client goals and needs. The creation of a complete solution will clearly illustrate the difference between successful and struggling advisors. On a larger scale, the mutual support of both these products will identify the successful insurance marketing organizations/ field marketing organizations and RIAs versus those that are struggling to survive in this new ecosystem. This new retirement ecosystem is a

THE RETIREMENT ECOSYSTEM: A NEW TREND IN THE INDUSTRY

RIA Ranks Continue To Climb 15,000

Number of RIAs

12,500 10,000

10,511

10,533

2012

2013

10,895

11,473

11,847

11,172

2016

2017

11,578

11,993

7,500 5,000 2,500 0

2014

2015

In 2019, there were 12,993 registered investment advisors (RIAs) working in the United States, up from 10,511 in 2012.

game-changer for financial professionals, because the result is business growth. When insurance organizations and RIAs work together, it presents more resources and tools that ultimately benefit advisors. Each organization has its own strengths and expertise, which advisors can now leverage to create a better client experience. The idea of being licensed for both insurance and securities has evolved, and RIA firms that have historically embraced this concept have been instrumental to advisor growth. The insurance-friendly RIA has not only helped advisors gather assets under management but also helped advisors sell more annuity and insurance products. By leveraging an RIA’s comprehensive financial plan or portfolio that includes an insurance component, advisors are clearly demonstrating a holistic approach. Advisors are also leveraging the marketing resources of their insurance

2018

2019

SOURCE: Statistica.com

organization to reach prospective clients — not just for a possible annuity sale, but also for reviewing additional assets that could be in a managed portfolio. Advisors are becoming aware that they need their insurance organization and their RIA to work together, or they will ultimately find another alternative that will. Consumers are savvier than ever before. They can easily identify when they are being sold a product and not a longterm solution. Even though the insurance industry is product-driven, companies are actively encouraging their agents to become securities licensed. By reinventing themselves as an advisor that provides comprehensive planning solutions, such companies will get their clients past the perception that they are dealing with an “insurance salesperson.” In today’s world, clients clearly know that an insurance agent is not a true financial advisor and will lose confidence in

those trying to portray themselves as such. There are thousands of financial professionals in the industry, and there is only one way to clearly differentiate yourself from the masses. Advisors must embrace and be an active participant in this new retirement planning ecosystem. This booming partnership between insurance organizations and RIAs will ultimately create a lasting benefit for themselves, the advisors who choose to affiliate and, most important, the clients we all serve. Dean Zayed, JD, LLM, CFP, is founder and CEO of Brookstone Capital Management and president of AmeriLife Investment Advisory Services. Dean may be contacted at dean.zayed@ innfeedback.com.

March 2020 » InsuranceNewsNet Magazine

INBALANCEWIRES

Americans Drinking More Alcohol

Americans consume more alcohol per person in modern times than Americans did in the 1910s before the advent of Prohibition, an Associated Press analysis found. Americans drink, on average, 2.3 gallons of alcohol per year in the form of beer, wine and mixed beverages, the AP found as it analyzed federal health statistics. The AP noted that the number of deaths per year (88,000) associated with excessive drinking actually ranks higher than the opioid crisis in terms of total deaths. Meanwhile, beverage industry trackers reported that U.S. wine consumption dropped in 2019 for the first time since 1994. More consumers are turning to beer, spirits and low-alcohol products such as spiked seltzer.

THE DAILY DOZEN CAN HELP SHED POUNDS

You wa nt to lose weight, but you get conflicting advice on what to eat. Fewer carbs? More protein? Icky green juice from the blender? Now a doctor and author has come up with his checklist of the “daily dozen” that will lead to weight loss if eaten every day. Dr. Michael Greger, a physician who specializes in clinical nutrition, said eating all of the items on the list is filling, but it adds up to 1,250 to 1,500 calories — about 500 fewer than people normally eat — leading to weight loss. So here’s the list: » Beans, 3 servings » Berries, 1 serving » Other fruits, 3 servings » Cruciferous vegetables, 1 serving » Greens, 2 servings » Other vegetables, 2 servings » Flaxseed, 1 serving » Nuts and seeds, 1 serving » Herbs and spices » Whole grains, 3 servings » Beverages, 5 servings » Exercise, 40-90 minutes a day

2016-2017 SAW LARGEST DROP IN CANCER DEATHS

QUOTABLE Consumption has been going up. Harms (from alcohol) have been going up. And there’s not been a policy response to match it. — Dr. Tim Naimi, an alcohol researcher at Boston University

1,806,590 new cancer cases and 606,520 deaths are expected in the U.S. in 2020, which is about 4,950 new cases and more than 1,600 deaths each day.

The death rate from cancer in the U.S. declined by 29% from 1991 to 2017. This TAKE A MENTAL included a 2.2% drop from 2016 to 2017, HEALTH DAY the largest single-year drop ever So you’re not sick, recorded, according to annual statis- but you aren’t up tics reporting by the American Cancer to going to the Society. Driving that record drop was a office. It’s OK — decline in lung cancer deaths. But despite go ahead and take lung cancer deaths falling from 3% annu- that mental health ally from 2008 to 2013 and 5% annually day, mental health from 2013 to 2017, lung cancer is still the professionals say. leading cause of cancer death. When should you take a mental The decline in the death rate over the health day? When you need one, said Jill past 26 years has been steady. Overall, Sylvester, author of Trust Your Intuition. cancer death rates More specifically, she said you dropped by an avershould consider taking a day off The Top 4 Types of Cancer age of 1.5% per year when you’re feeling increased Are on the Decline between 2008 and difficulty getting through the » Lung cancer death rates 2017. This transworkday. declined by 51% from 1990 to 2017 among men and 26% from lates to more than What should you do on a 2002 to 2017 among women. 2.9 million deaths mental health day? Psychologist » Breast cancer death rates avoided since 1991, Marianna Strongin said the day declined 40% from 1989 to 2017 when cancer death should be spent on you. In adamong women. rates were at all-time dition to things such as getting » Prostate cancer death rates highs. a haircut or a facial, a mental declined 52% from 1993 to 2017 among men. But cancer conhealth day is a good time to take tinues to take its care of personal chores that are » Colorectal cancer death rates declined 53% from 1980 to 2017 toll on the U.S. popcausing you stress, such as orgaamong men and by 57% from ulation. A total of nizing your home. 1969 to 2017 among women.

DID YOU

KNOW A 20-minute walk can improve your focus as much as a cup of coffee.

Source: Nature Scientific Reports

InsuranceNewsNet Magazine » March 2020

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INBALANCE

It’s Never Too Late: Making Music As An Adult Even if it has been many years since you played an instrument, getting back to the music can be easier than you think — and good for your brain. By Susan Rupe

ne great aspect of being an adult is that you can do certain things because you want to — not because someone else is forcing you to do them. Playing a musical instrument is one example. Many of us started music lessons as children, but we soon became frustrated and locked into a series of arguments with our parents over our lack of interest in practicing. Some of us were enthusiastic band members in school but abandoned the clarinet or the drums after graduation. Then one day, we look at the dusty old piano in the corner, or we find our old flute while cleaning out the attic, and we begin to think, “Maybe I should take up playing again. Nah — I’m too old to start over!” But it’s not too late, and you’re not too old to enjoy making music. One day, my parents announced they would no longer house the piano that I had played every day up to the time I 46

graduated from school and moved out. In fact, they were so eager to find this piano a new home that they paid to have it shipped halfway across the state to my house. They shipped a huge box of my old sheet music along with it. So, more than 20 years after my last music lesson, I sat down at my old piano and wondered whether I still remembered how to play. And I wondered whether I

figuring out where to begin. But you probably will realize you need to catch up on a few things. Maybe you forgot how to play some of the chords or you are baffled by all those sharps and flats. Be persistent and have patience with yourself, and you will be playing songs again before you know it. I find playing familiar music to be relaxing and even comforting. Trying to

Researchers say that playing an instrument is good for your brain health. It’s a way to keep your brain sharper and more alert. even wanted to play. But I soon discovered that I had never forgotten the basics, even though my skills were quite rusty. I also learned that playing music because I want to, and not because someone is pressuring me to do it, is actually a lot of fun. When you return to music as an adult, you have a head start because you already know how to read music and you know the basic mechanics of playing an instrument. So you don’t have to waste time

InsuranceNewsNet Magazine » March 2020

master a new piece of music is like solving a challenging puzzle — it forces me to use a different part of my brain and employ different skills from those I use during the course of my workday. Researchers say that playing an instrument is good for your brain health. It’s a way to keep your brain sharper and more alert. This brain activity can help fight dementia and increase your cognitive function, said researchers at

IT’S NEVER TOO LATE: MAKING MUSIC AS AN ADULT INBALANCE the Brain and Mind Institute and the Psychology Department at Western University in Canada. Musical training can improve longterm memory, improve reaction time and help people strengthen their fine motor skills, according to University of Montreal researchers. The researchers also found that playing music improves the brain’s problem-solving skills. So how do you get your musical groove back if you’ve been away from it for a while? Here are a few things I’ve learned.

A Few Notes: Things I Learned From Studying Music H ard work reaps rewards. It’s the steady practice day after day that makes the difference. D on’t take shortcuts with the basics. Make sure you understand things such as sharps and flats. Know what the various symbols on the sheet music mean. Play every note; don’t skip over notes or be sloppy. P lan your attack! What does this piece of music require you to do? Will you have to start out loud and strong? Do you have to jump right in and play at a fast tempo? Does the song start out slowly and build to a big finish?

Make sure your instrument is in good condition. Get that piano or guitar tuned. There are “horn hospitals” out there that will get your old band instrument performance-ready again.

Y ou will make mistakes! When you make a mistake, keep going. eep an eye out! As you are playing, keep one eye focused a few bars K ahead of what you’re actually playing so you can be prepared for what the song requires you to do next. Is there a key change or a change in tempo coming up? Are there some complicated chords you will have to work through?

YouTube has many instructional videos that can walk you through various levels of playing. But a few lessons with a teacher will help you clean up bad habits such as faulty posture, incorrect breathing techniques or sloppy phrasing.

reparation is key to a great performance. Practice until you can’t P get it wrong. If you do perform in public, take calming breaths and change your mindset. All the practice in the world won’t help if you can’t get your nerves under control. Things really turned around for me when I stopped fearing that I might embarrass myself onstage and instead pivoted my thinking to: “I’m going to show everyone what I can do!”

Sheet music can be expensive, but there are ways to save money on it. Check out websites or apps that allow you to download sheet music onto a tablet. I have found plenty of cheap sheet music at secondhand bookstores, library book sales and yard sales.

You have to play as well as practice. Playing is for music that you already know. Practicing is for music you are trying to learn. Set aside time to do both.

— Susan Rupe

At some point while you’re relearning, you’ll feel as if a switch in your brain is flipped on and you’ll discover much of what you forgot comes flooding back to you. But you have to slog through a lot of frustration to reach that breakthrough.

Warm up — do those scales even if you find them boring. You may find, as an adult, that your fingers aren’t as nimble as they were when you were a kid. That’s why it’s so important to do those warm-up exercises.

What type of music do you want to play? As an adult, you can play the type of music you like instead of being forced to play stuff like minuets and waltzes. Maybe you have a “goal song” in mind, such as Beethoven’s “Moonlight Sonata,” and you want to work your way to the point where you’re able to play it.

One more thing — when people know you play an instrument, they may ask you to play something for them. Have two or three go-to songs in your repertoire that you can play convincingly from memory

If you like performing in public or with others, find an outlet. The town band and community chorus traditions are still alive in many areas of the country. You might find a willing audience at a local festival, an open mic night or a senior citizens’ center.

whenever this situation arises. My go-to songs are “Moon River” and “Let It Be Me.” Almost everyone recognizes them, and they are easy to play. Have fun rediscovering music! 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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March 2020 » InsuranceNewsNet Magazine

BUSINESS

Cracking The Code To CPA Referrals Sometimes all that CPAs want is a resource they can trust, not necessarily a source of clients. By Bill Cates

hy is it that so many advisors and agents can’t seem to create productive referral relationships with CPAs? Do the folks who get great referrals from CPAs have access to a CPA Enigma machine that cracked the code for them? Here’s the truth about getting referrals from CPAs. Are you ready? Can you handle the truth? The agents and advisors who form productive referral relationships with CPAs make sure they are referable.

Here are three case studies of financial professionals who have figured out how to generate a flow of high-quality clients referred from CPAs.

Case Study No. 1: CPAs Feeding Referrals

Joel is a top-producing financial professional in Maine. He is successful for two main reasons: He serves the heck out of his clients, and he has formed

Becoming Referable With CPAs

When I speak to groups of agents and advisors, I ask this question: “How many of you have had this experience? You met a CPA over a meal to learn about each other’s businesses. You sent a couple of referrals over to them hoping that the law of reciprocity would kick in and they’d send a few of their clients over to you. And you’re still waiting.” About half of the group raises their hands. First of all, you must realize that most CPAs seem to have been born without the reciprocity gene. Second, sending clients to them doesn’t make you referable. They appreciate the business, but if they aren’t totally clear about how you serve your clients and whether they can trust you implicitly to do the right thing for the folks they send to you, they won’t introduce you to anyone. CPAs tend to be cautious by nature, and their biggest fear is that you’ll do something to hurt their relationship with their client. Everything you do to gain referrals from CPAs has to center on building trust. 48

InsuranceNewsNet Magazine » March 2020

strong relationships with about 30 CPAs who feed him a continuous flow of high-quality clients. Joel told me, “I get so many referrals from CPAs because I become a resource for them. I create opportunities for them to build stronger bonds with their clients.” He added, “I’ve become a resource of knowledge for many CPAs and attorneys. Whenever they have a financial question, they call me first. I even hold breakfast seminars to help them with strategies and provide case studies.” Joel didn’t make the common mistake of starting these relationships based on reciprocal referrals. He set himself up as a resource for information and someone who can help their clients. If he gives these CPAs referrals (which he does from time to time), that’s icing on the cake. As

A 3-PHASE APPROACH The more effective and efficient way to meet CPAs is through introductions from your clients. Try this three-phase approach:

Phase 1 – Service To Your Common Client A message to a CPA that you have a client in common will get a response. When you meet, begin with how the two of you knowing each other will serve the common client. Demonstrate your processes to the CPA.

Phase 2 – Service To The CPA How can you be of service to CPAs and their firms? Can you contribute content to the CPA’s newsletter or educate the partners, staff or clients?

Phase 3 – Discuss Introductions Once trust is established, you can discuss possible introductions. Four important bases to cover: Be referable in their eyes, teach them who’s a good fit for you, agree on a method of introduction and agree on how to stay in touch over time.

CRACKING THE CODE TO CPA REFERRALS BUSINESS long as Joel continues to be a productive resource, and as long as he takes great care of the people sent his way — making the CPA look good — the flow of quality clients continues. Joel has become the advisor of choice for these CPAs. Don’t make the mistake of thinking CPAs expect you to bring them clients. Sometimes they just want a resource they can trust.

Case Study No. 2: CPAs And Your Niche

Rob had already established a bit of a niche working with physicians and dentists. By focusing on this niche, Rob discovered a large CPA firm that had a number of partners who also focused on physicians and dentists. After courting a few of the partners for several months, he finally said to one of them, “I’d like you to experience the process we bring to our clients. Would you be open to going through that process with me?” The partner agreed. That cracked the code, and referrals started flowing — and not just referrals, but solid email introductions. If that weren’t enough, this CPA firm is now hosting special dinners to introduce Rob to its clients. Rob has 30 minutes to speak to these folks — to provide value and gently entice them to learn more. What Rob has discovered is the power of targeting a niche market. When you target a narrow market, you not only bring more perceived and real value to these clients, but also discover potential centers of influence that offer the potential for collaboration.

Case Study No. 3: Show Them Your Process

Erin had identified a CPA (we’ll call him George) whose client base was a perfect match for her business. Erin met with George at his office to learn as much as she could about his business. She met the staff and learned about George’s philosophy toward insurance, investments and all things financial. Erin showed a genuine interest in how she might serve George — separate from the referrals he might be able to provide. Erin offered to write some articles for George’s newsletter and host a workshop for the partners and staff so she could bring them up to date on some of the

newer insurance products on the market. Then George paid a visit to Erin’s office. Erin laid out her entire process. She explained what happened in each meeting with his clients, how she stayed in touch with her clients and some of the typical client problems she solved. Erin told me that at the end of this second meeting, the CPA said, “This is the first time, in all the years of advisors trying to get referrals from me, that someone finally took the time to fully explain how they served their clients.” The net result is that Erin is averaging about one very high-level client per month introduced by this CPA. Erin became super referable!

It’s A Delicate Balance

What’s the No. 1 killer of houseplants? Underwatering! What’s the No. 2 killer of houseplants? Overwatering! It’s a delicate balance. As with caring for houseplants, building relationships with CPAs requires a delicate balance. Some agents and advisors come on too strong. They are excited about how they can be of service to the CPA’s clients. They go for referrals much too quickly. This looks “salesy” to CPAs, and CPAs hate salesy! On average, it takes nine to 12 months of courtship with a CPA to begin creating a productive referral relationship. Most agents and advisors don’t appear willing to stick it out long enough to build that trust. Getting referrals from CPAs is a long-distance run, not a sprint. Let the CPAs you approach know that you’re in it for the long haul, that you won’t do anything with a client who isn’t perfect for them and that you’re willing to walk away from a “deal” that isn’t right for the client. Bill Cates, CSP, CPAE, is the author of Get More Referrals Now, Beyond Referrals and Radical Relevance, and the founder of The Cates Academy for Relationship Marketing. Bill may be contacted at bill. cates@innfeedback.com.

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March 2020 » InsuranceNewsNet Magazine

THIS

IS WHERE DEALS GET

DONE!

The statistics speak for themselves. Missing out on the annual ICMG conference is a deal breaker. • 400+ senior level executives • Pitch your story: 30-second intros everyone sees • Speed networking: 90-minutes of face-to-face introductions • Latest industry info: 9 different sessions • Free conference and year-round networking app • Warm weather and comfort at the PGA National in Palm Beach Gardens, FL • Golf with attendees “fore” charity • And more… Save the date and be a deal maker February 2-3, 2021. Attend the ICMG Conference. Space for exhibitors is extremely limited. Get in early to secure your spot. Your next business partner is waiting for you.

Visit ICMG2021.org to download your free conference brochure.

INSIGHTS

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

What Do The Clients Of The Future Need From You? Understanding baby boomers’ unique needs, values and communication styles will contribute to building a thriving business. By Sandro Forte

ur future clients will have very different needs and objectives than those we currently work with and those we have served in the past. As we address the changing needs of emerging generations with new processes or offerings, the fact remains that most established practices must continue to prioritize the traditional needs of their existing senior clients in order to support positive business growth. While some advisors target output-driven millennials who have a desire for brevity and a need for speed, other advisors concentrate their business on more senior generations who are responsible for ushering in dramatic social change, rapidly increasing income inequality, high educational standards and cultural identity. Given that the U.S. Bureau of Labor Statistics reports 25% of workers in the U.S. are at least 55 years of age as of this year, it’s vital to build and maintain positive relationships with senior clients, primarily baby boomers — those born between 1946 and 1965. Understanding their needs, values and communication styles will help you grow in your advising skills and contribute to a thriving business.

Wealth Transfer Trends

Although baby boomers have long since created and held most of the overall wealth in the U.S., U.K. and other established economies, fewer choose to pass on their wealth to their children. It is an interesting and somewhat alarming trend — what’s behind it? Primarily it is because of a belief that their children should earn their own money, just as they did for themselves. 50

When working with this generation, we must take care not to widen the divide between the generations in terms of their attitudes toward work ethic and wealth. This challenges an advisor to effectively communicate the importance of legacy creation to senior clients while also navigating their predispositions.

Working With Seniors

Customizing your advising techniques with this very significant client group will make them feel valued and understood. Prioritizing etiquette in all interactions is a great foundation to lay when building these relationships. Show up on time to make a good first impression because punctuality is a key measure of character for seniors. The use of the words “please” and “thank you” will also help you build better connections with this generation.

Communication Styles

Seniors usually base their financial decisions on the extent to which they like and trust their advisor. This means that effective communication is key to their reliance on financial advice from an expert. It is important to understand boomers do not always like to make decisions quickly, so giving them time and space to make decisions will build confidence — although polite reminders after a reasonable period of reflection are also appreciated. To a boomer, the written word resonates more than anything they will ever hear; so put everything in writing — from meeting summaries to formal recommendations and handwritten notes of acknowledgment. These methods will be far more effective than sending an email or text message.

Cultivating Legacies

Many senior clients ask themselves, “Do I give my money to my children or to charity?” It is imperative we help them understand that their beliefs about earned wealth and passing on wealth to future

InsuranceNewsNet Magazine » March 2020

generations need not be mutually exclusive. Because boomers value structure, security and control, advisors should focus on recommendations such as trusts and other methods of passing on a legacy that provide discretion. Remember that senior clients hold the key to the longevity of our businesses. The plans we help put into place for future generations create the clients of the future. To find a natural connection to the next generation that will build on the trust you have maintained with senior clients, suggest meeting executors, guardians and beneficiaries when you are discussing their estate planning. They will likely respond well to this recommendation and coordinate the introduction since they see the benefits of structure, order and long-term planning.

Driving Future Growth

Advisors who avoid a one-size-fitsall approach to their sales process and service proposition will find more success than those who do not adjust their strategies. Remember that seniors are relationship-driven, make decisions based on how someone makes them feel and are input-oriented. By taking the time to really listen to their needs and communicate in a way that resonates with them, you’ll effectively demonstrate the high standards of planning you maintain and grow your business for the future. Sandro Forte is CEO of The Forte Financial Group, London. He is the author of Dare To Be Different and has coached financial advisors from more than 80 countries on growing their businesses. He may be contacted at sandro.forte@ 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.

The Ingredients For Sales Success These ideas helped this award-winning advisor thrive in the financial services business — and could do the same for you. By Raymond Jones and Ayo Mseka

you are looking for a few ways to boost your production numbers in 2020, you might want to spend some time with the book, Back Up The Truck! Written by top financial advisor Raymond Jones, the book is an easy read, with lots of ideas you can use to accelerate your way to the top. Salespeople are frequently in the public eye, Jones writes. He has been in the financial services industry since 1973, and his areas of focus include business retirement plans, insurance, investments and employee stock options. Throughout his long and successful career, Jones has learned that there are 10 ingredients for sales success, which he shares in Back Up The Truck! Here are his success strategies. » Present a neat appearance. A positive first impression is the most important step in the sales process, Jones writes. How someone first perceives us has a great deal to do with their decision to do business with us. We do not have time for second chances, so it is imperative that we dress professionally. » Be confident, enthusiastic and punctual. Confidence and enthusiasm are contagious, Jones writes. If you want your prospect to be enthusiastic about what you are presenting, you must be enthusiastic yourself. When you meet someone for the first time, shake their hand firmly, look at them squarely in the eye and repeat their name. “And do not be late,” he adds. “Show up for the appointment at least 10 minutes early.” » Be sold on your product. If you do not believe your product will do what it says it will do, then find something else to sell that you can believe in. Jones says he has never recommended anything to anyone

that he would not buy himself if he were in their situation. If it is not good enough for him to buy, then it is not good enough for anyone else. » Follow the advice of your manager and other experienced salespeople. Much of Jones’ knowledge and understanding of the financial services industry has come from the advice of his managers and other close representatives. If you want success, you must be willing to listen and talk to those who have been there before. » Establish realistic goals. Your goals should be based on activity first, and the minimum activity should be 10 or more sales calls per week. If you are willing to conduct two interviews a day, then you are willing to make the kind of sacrifice that a successful salesperson should make, Jones writes. Also, do productive things. Get out of the office and see the people, even if one of them is a client you acquired three weeks ago. Exposure will put you in situations that will allow you to meet new prospects, as well as provide you with fresh ideas. One of the ways Jones cracked the small-business market was to simply leave his office and make face-to-face calls. He just walked into an office, asked for the owner and, surprisingly enough, obtained a great number of appointments. » Do not think that the world owes you a living. If you feel you have a disadvantage, then you have already taken the first step toward failure, Jones writes. The business of sales is results-oriented. Only you can make things happen for yourself. You need to respect your prospects, appreciate the opportunity to be of service and not be intimidated. “Nobody owes us a living,” he writes. “We are in possession of our success.” » Have an organized sales presentation. This is the heart of the entire sales process, according to Jones. When he took the advice of a successful salesman about the need to be organized in an interview, Jones suddenly noticed an increase in his

sales. He uses an eight-step sales presentation, explained in the book. » Avoid negative people. There is a tendency to talk about the negative aspects of this business instead of the positive. When we are not making sales, Jones writes, we tend to blame it on someone else, say that people are not interested in the product or feel that our manager does not give us proper guidance. Jones learned to avoid negative people and situations. “If we have a proper game plan and know what we want to accomplish, there will not be time to listen to the negative comments of others,” he writes. » Have a consistent exercise program. Physical exercise should be a part of everyone’s daily routine, Jones writes. We have to be in good physical shape to sell so that our bodies do not give way during the normal workday. For his part, Jones works out at his local YMCA, and he said his exercise program keeps him from getting physically tired of selling. “Whether you jog, do sit-ups or take part in recreational sports, it is vitally important that you keep your body in tune. It not only improves your attitude, it also gives you a place to relieve the stress and frustrations of the day,” he writes. » Say “thank you.” When you make a sale, do not just walk away. Send a thankyou card with a personal note to your new client for allowing you to be of service to them. Raymond Jones, ChFC, is a financial advisor in Columbus, Ohio, and a member of NAIFA. He has more than 40 years of experience in sales and sales management. He may be contacted at raymond.jones@innfeedback.com. Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Contact her at ayo.mseka@innfeedback.com.

March 2020 » 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

How The SECURE Act Opens The Door To MEPs What plan sponsors need to consider about multiple employer plans.

Access to Defined Contribution Retirement Savings at Work D on’t have a DC plan at work

By Deb Dupont

ne of the provisions of the Setting Every Community Up For Retirement Enhancement (SECURE) Act is to allow wider adoption of multiple employer plans. What is an MEP and what do plan sponsors need to know about it? In theory, MEPs allow unrelated businesses to participate jointly in a retirement plan that is intended to have lower costs and fewer administrative responsibilities for employers than 401(k) plans sponsored by individual companies. Previously, businesses could offer an MEP only if they had a prior connection such as membership in the same association. The SECURE Act opens the door for unaffiliated employers to join forces in an MEP. There are many reasons that MEPs have intrigued the press and the retirement industry in general — such as potentially lower cost, economies of scale,

H ave a DC plan at work

36% 64% All workers

55% 45% 1 to 46 workers

13%

11%

75%

87%

64%

50 to 99 workers

100 to 499 workers

500 or more workers

SOURCE: Institutional Retirement Reference Guide, First Edition 2019 (page 55), and The Secure Retirement Institute analysis of the U.S. Bureau of Labor Statistics National Compensation Survey: Employee Benefits in the United States, Table 1: Private Industry Workers, 2018

workplace retirement saving takes place via payroll deductions into a defined contribution plan. More than half of workers in the smallest private-sector companies (with 1 to 49 employees) — and one-third of workers overall — lack access to a DC plan (see chart). While the objective of expanding MEP availability is to extend retirement savings access to more workers, the impact may not be limited to only those employers not already offering plans — or even just to smaller employers.

More than half (56%) of DC plan sponsors said they would be willing to explore participation in an MEP. easier administration and reduced fiduciary responsibility. Add to that how an MEP can help improve Americans’ access to workplace-enabled retirement plans (since it makes it easier for smaller companies to offer them). A lack of access to retirement savings through the workplace, especially for employees of smaller companies, can impede workers’ ability to actively save and prepare for retirement. Most often,

25%

Familiarity with the concept of MEPs is actually much stronger among DC sponsors in larger companies and with larger plans. Just three in 10 sponsors in companies with fewer than 20 employees are familiar with MEPs, compared with seven in 10 at companies with 1,000 or more employees. The effect continues, and even expands, when reviewing how interested a sponsor — of an existing DC plan — is

InsuranceNewsNet Magazine » March 2020

in considering participation in an MEP. More than half (56%) of DC plan sponsors said they would be willing to explore participation in an MEP. Topping the list of features sponsors find attractive is the belief that participating in an MEP would mean lower plan costs. Three-quarters of all plan sponsors are drawn to reduced plan costs, and eight in 10 of those respondents are “very” interested in pursuing an MEP. What’s more, that interest is not limited to sponsors of smaller plans and at smaller companies. Expanded access to MEP participation (and sponsorship) may open the doors to a shift in DC coverage and access more far-reaching than simply enabling more plans to form. Existing plans may also shift. Both scenarios represent the potential for opportunities and challenges for those already supporting DC clients. New markets may open for record keepers and advisors who want to leverage the “access gap” and help more employers offer DC plans using an MEP arrangement. Record keepers and advisors should also be aware that existing clients may be attracted to MEPs and take steps to protect their current books of business. Deb Dupont is responsible for The Secure Retirement Institute’s institutional (retirement plans) retirement research program. Deb may be contacted at deb.dupont@innfeedback.com.

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