InsuranceNewsNet Magazine - April 2019 by InsuranceNewsNet

April 2019

The Answer Is Dividing The Insurance Industry Into Two Camps • PAGE 18 Health Brokers And The Fight Over Medicare for All PAGE 6

Peter Sheahan: The Secret Sauce To Success PAGE 10

Be Bulletproof With Your Diet — If You Dare PAGE 48

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IN THIS ISSUE

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APRIL 2019 » VOLUME 12, NUMBER 4

HEALTH/BENEFITS

FEATURE

38 Health Savings Accounts Are Part Of A Healthy Retirement

Is Suitability Being Pushed Aside? By John Hilton The answer is dividing the insurance industry into two camps.

INFRONT

6 Health Brokers Gearing Up For Fight Over Medicare For All By Susan Rupe The industry is fighting back over singlepayer, saying Medicare For All is choice for none.

INTERVIEW

10 ‘It’s The Secret Sauce To Success’ Peter Sheahan has made a career out of preparing industries and individuals to handle disruption. In Part 2 of this interview with Publisher Paul Feldman, Sheahan describes the way to make sure you are aligned with the right things in the face of disruption.

INSIGHTS

54 NAIFA: Why TV Commercials Are No Competition For Advisors 55 M DRT: Address The Three Eroding Factors Of Wealth 56 LIMRA: Who Are Your Warm Annuity Prospects?

online

www.insurancenewsnetmagazine.com

By Sam Odishoo A look at the various financial benefits provided by HSAs from both a preretirement and postretirement perspective.

ADVISORNEWS

42 More Than Math: Helping Clients Find Purpose In Planning

IN THE FIELD 24 Dr. Insurance

By Cassie Miller Clients who are the most successful in retirement are the ones who planned the longest.

By Susan Rupe Jamie Fleischner found her niche by providing disability insurance to medical professionals.

INBALANCE

46 It Was A Very Good Year: Buying Wine Without Breaking The Bank

LIFE

30 Who Gets The Life Insurance? Not The Ex-Spouse, States Say By Douglas I. Friedman and Jessica M. Friedman Advisors should pay attention to a Supreme Court decision revoking a beneficiary designation due to divorce.

ANNUITY

34 H ow A DIA Contributes To A Successful Retirement

By Bryce Sanders You can buy and serve wine that has “snob appeal” without spending an outrageous amount of money.

48 How To Be Bulletproof With Your Diet — If You Dare By Steven A. Morelli A plant-based diet holds the key to healthy longevity.

BUSINESS

52 Sit Up Straight And Listen Or Just Get Up And Walk Out

By Susan Rupe Researchers found the a deferred income annuity was more attractive to consumers if a death benefit is attached to it.

By Dave Thesing Every prospect needs to know how they will benefit by taking time to meet with you.

INSURANCENEWSNET.COM, INC.

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

SENIOR CONTENT STRATEGIST AD COPYWRITER AD COPYWRITER CREATIVE DIRECTOR SENIOR MULTIMEDIA DESIGNER GRAPHIC DESIGNER QUALITY MANAGER

Kristi Raynor John Muscarello James McAndrew Jacob Haas Bernard Uhden Shawn McMillion Sharon Brtalik

MEDIA OPERATIONS MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER BUSINESS DEVELOPMENT CORPORATE ACCOUNTANT

Ashley McHugh Tim Mader Samantha Winters David Shanks Steven Haines Elizabeth Nady

Copyright 2019 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. 115, 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. 115, 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 » April 2019

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WELCOME LETTER FROM THE EDITOR

Dropping Truth Bombs

“T

his is not family.” Mike said this in between puffs of a cigar as long as his hand. Although he had a few management jobs, he was still a relatively young guy in his 30s managing a news desk at a small city newspaper. The cigar seemed to be something he still needed to grow into. This was my first job out of college. I had wanted to be a reporter but the recession of 1981-82 still rippled into 1985. And, of course, I had gone into the newspaper business just as they were dimming the lights. I was finally able to get this job as a part-time copy editor. A bitter edge of disappointment sometimes surrounded Mike, disillusioned by office politics and friendships gone sour. The Times Mirror Co. owned our newspaper, but Mike had worked at a paper within Gannett, a company that wore its journalism badge proudly but disproportionately rewarded skillful corporate navigation. I guess Mike sensed my own frustration with upper management and was trying to be helpful. He had a different vision of working, one he described as akin to a bomber squadron. The bomber analogy actually seemed apt. We had a crew of five people sitting at desks grouped in a tight U with the news editor at the head. As most people were leaving the building, these editors would come in at night to take the payload of that day’s news to edit, shape into the next morning’s newspaper and drop it onto the press precisely on time, not a minute later. We did not have text, email or content management systems, so we had to talk to each other during the run to keep us all on track. That chatter, plus cigarettes and humor black and bitter as the coffee, filled the night.

Finding The Click

I did not expect to take the editing track but I found some things about it clicked with me. I felt aligned with many of its requirements. But to tell you the truth, I 4

InsuranceNewsNet Magazine » April 2019

was better at the creative part of editing such as writing headlines and reviewing story structure, than I was at detailed line-editing. I would feel a tad inadequate that I was not as good as some of the word nerds at spotting grammatical and style problems. So I stumbled along, trying to improve. When I realized that I had more to offer as a substantive editor, I focused on that and started asking older reporters substantive questions. I was uncomfortable with the interaction at first, but I plunged ahead, comforted by the sense I was in my element. Editing is a thankless job, so I did not expect much feedback beyond grumbling. Writers tend not to take criticism happily. But then after some time, the education reporter said, “You came out of nowhere and became a great editor.” I learned the meaning of the word “dumbfounded” at that moment. Here was an older reporter I highly respected telling me this. I assume George does not know I have been running on that one sentence for the rest of my career.

Staying Clicked

This is what alignment is all about. In Part 2 of the Peter Sheahan interview with Paul Feldman, Sheahan tells how important it is to discover your own strengths and play to them. The harder part is to arrange your practice and your staff so you can operate at your best. And the hardest part is keeping your business aligned. Sheahan talks about standing in your power. He does not mean superpower, which seems to be the thing now with Marvel and DC superheroes on every screen and brain. It is standing where you shine. We interviewed someone else several

years ago who built a whole franchise around this notion. Sally Hogshead developed the Fascination Advantage test and system. The system identifies the strengths that you present — the ones that other people perceive. It is quite a revealing test that might surprise you. But upon reflection, the results make sense. An essential part Sheahan’s alignment method is deselecting — not doing the things that fill your time but not your purpose. Other people do those things better and there is no shame in that. The idea is not to change the things to be what you think might lead to a more acceptable you, but to embody them fully. It might not be a superpower, but you will feel superpowerful. You will feel right.

There Is No Medal For That

I never told George how much that one sentence meant to me over the past 30 years. I probably should. Mike and I did reconnect recently. We caught up on the decades and then there was a bit of a pause. Mike said he realized he was not always a good manager and he felt bad about that. I winced at the thought of all the times I had been a pretty lousy manager myself. Really, he had nothing to apologize for. Some of Mike’s missteps were when he was trying to be himself, when he wanted to share something meaningful. And he did. I carry many of those moments to this day. He taught me work might not be family but something maybe as important, where we bring our best to serve the person next to you. He showed it’s not a job — but a mission. Of course, I did not say all that. Just, “Nah, you did good.” Steven A. Morelli Editor-in-Chief

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LIFE M&ANNUITY A S T E R S

INFRONT

Health Brokers Gearing Up For Fight Over Medicare For All As the single-payer movement gathers steam, the health insurance industry gets ready to push back. By Susan Rupe

hey took a hit during the Affordable Care Act and came back swinging. But the health insurance industry and the agents who sell its products are fighting back against another movement that threatens to put them out of business — single-payer health care, otherwise known as Medicare For All. Nine separate proposals have been announced with the goal of getting more Americans enrolled in health coverage. Some of those proposals are some form of a Medicare buy-in for small employers and for low-wage consumers who have difficulty obtaining affordable coverage. But the two proposals generating the most attention are separate Medicare For All bills sponsored by Sen. Bernie Plan

Sen. Bernie Sanders' (IVT) Medicarefor-all bill

Rep. Pramila Jayapal (DWA) Medicare-forall bill

Do All Americans Gain Coverage?

Yes

Do Americans still get insurance at work?

Sanders, I-Vt., and Rep. Pramila Jayapal, D-Wash. Both bills would eliminate employer-based health insurance and all private health insurance while transitioning all Americans to one government health plan. Cost-sharing — premiums, copays and deductibles — would disappear. Insurance would cover the current essential health benefits, as well as dental, vision, prescription drugs and women’s reproductive health services. The Sanders bill would take coverage even further by picking up the tab for long-term care. Both bills would require a tax increase to fund what is thought to be a $33 trillion cost for implementing coverage for all. The Sanders bill calls for higher taxes on the wealthiest Americans, increased income and estate taxes, establishing a new wealth tax on the top 0.1 percent of earners, and imposing new fees on large banks. Jayapal has not yet released the details of how her bill would be funded. A study by the Political Economy Research Institute at the University of Massachusetts estimates the industry

will lose 800,000 jobs if Medicare For All becomes reality. The health broker community is voicing its concerns about whether such a sweeping overhaul of health insurance is needed as Washington and the health insurers are still trying to stabilize the ACA marketplace. The Partnership For America’s Healthcare Future is made up of 28 members representing a cross-section of the health care community. Members range from the American Medical Association to the National Association of Health Underwriters to the Blue Cross Blue Shield Association. PAHCF’s mission is “to improve what’s working in health care and fix what’s not. We support building on the strength of employer-provided health coverage and preserving Medicare, Medicaid, and other programs that so many Americans depend on, so we can deliver affordability, expand options, improve access, and foster innovation.” Lauren Crawford Shaver, PAHCF executive director, spoke at the recent NAHU

Single-Payer Proposals

Do public plan enrollees pay premiums?

Does it require a tax increase?

Yes

Does the Government Regulate Health Care Prices?

Yes

How many people get covered?

All

How it works

All Americans will transition to one large government health plan

What program will expand?

Medicare

Costs to enrollees

How is it paid for?

Vision, Dental, prescription drugs, longterm care services, women's reproductive health services including abortion, plus ACA essential health benefits

Eliminate cost sharing-- No monthly premiums, no copayments, and no deductible-minus some charges for prescription drugs capped at $200 per year

Generally imposes higher taxes on the wealthiest Americans, increased income and estate taxes, establishing a new wealth tax on the top .1%, and imposing new fees on large banks

Is currently being revised to look more like the Sanders Medicare for all bill

Eliminate cost sharing-- No monthly premiums, no copayments, and no deductible

Do not currently have a financing plan

Benefits

Source: National Association of Health Underwriters 6

InsuranceNewsNet Magazine » April 2019

HEALTH BROKERS GEARING UP FOR FIGHT INFRONT Capitol Conference on the belief the “Medicare For All is choice for none.” “We want every American to have access to care but we don’t see Medicare For All as achieving that goal,” she said during the conference. “We also want to build on the strengths of our current system. Let’s fix the things that are not working, let’s not start over.” She told NAHU members that single-payer health care would be a one-sizefits-all system that would give consumers less choice and control over their doctors, treatments and coverage. It would mean higher taxes, longer wait times and lower quality of care. Janet Trautwein, NAHU CEO, has spent the past two years studying single-payer health care systems around the world through the London School of Economics. She told InsuranceNewsNet that although Medicare For All is gaining attention, the reality is that it won’t become law as long as President Donald Trump occupies the White House. “He would veto something like that,” she said. “But it’s really interesting — the reason the single-payer issue has been so much in the news lately is because of all the progressive Democrats who have declared for president, most of them are Medicare For All advocates. So it kind of gives you a disproportionate view of the likelihood of it passing because they are the ones getting all the news. But most of the newly elected members of Congress are more for doing something on fixing the ACA. Although some of the things they want to fix are not really some of things Republicans agree on.” However, if voters elect a Democratic president in 2020, “the more likely we are to see some type of public option — a Medicare buy-in for those ages 50 to 64,” she said. Trautwein said most Democrats in Congress are not in favor of Medicare For All. “But when you start expanding the public programs you have, or you start creating an unlevel playing field with the private sector, you have some public program creep, so to speak,” she said. “It’s much more likely to happen eventually if we have a public option or a Medicare buyin because your risk pool would be divided differently, with the number of people on public programs being much greater than those on private plans.”

Medicare For All might steam if the current health insurance marketplace stabilizes, Trautwein said. “If we could get things like reinsurance passed and some other things that would make the current individual market more affordable and offer more choices than what we have now, that would be a huge help toward there being any compelling reason to do anything else.”

What Would Happen To Brokers?

Medicare For All has no role for private health insurance or brokers. So what would happen to brokers if the proposal becomes law? “This would be absolutely detrimental to our industry,” said Ronnell Nolan, president/CEO of Health Agents for America. “The initial hit would affect not only the brokers but the businesses that serve our industry — it all trickles down and it would be a significant ripple effect. We see it as detrimental to our industry and the consumers we represent.” Trautwein said that in some countries that have single-payer coverage, brokers can sell supplemental insurance that covers things that the government plan does not or can help consumers move up to the front of the line in accessing care. But whether that option would be available in the U.S. under Medicare For All is unknown. The leaders of both agent associations said their members are conducting outreach to their elected representatives as well as educating consumers on what Medicare For All could mean. “We believe in the free market. We believe Medicare For All will take the freedom away from how people receive health care and how it’s delivered,” Nolan said. “The sales pitch — free access, no deductibles, no copays — is a lot of smoke and mirrors,” Nolan said. “Washington will decide what’s covered, how much to pay doctors and hospitals. So I don’t think people realize what they’re really going to lose and they will be paying more in taxes.” Susan Rupe is managing editor for Insurance N ewsN 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.

April 2019 » InsuranceNewsNet Magazine

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INTERVIEW

‘It’s The Secret Sauce To Success’ It is all about alignment — and Peter Sheahan reveals how to find it

InsuranceNewsNet Magazine » April 2019

ou have run toward disruption, as Peter Sheahan advised last month, but then what? Those who are advancing in their field recognize that disruption is constant. Whichever branch of financial services you are in, you face ever-changing client expectations, market realities and regulation. The first step is getting comfortable in that space, Sheahan said in the first half of the interview last month, and in his seventh book, Matter. But what do you do once you get there? Or maybe the better question is, what does it matter? That is the second step for having not just a successful business but ultimately a happy career. The first line in Sheahan’s book is “Does your company really matter?” He goes on to ask: If your company is dealing in commodities and is basically commoditized, then what is its real value? Finding this answer is essential to thriving when you are in the disruption zone. Locating that alignment gives you the platform to operate there. Sheahan helps large organization find and keep alignment. His company, Karrikins Group, and its staff of 120 are spread over seven countries. In this interview with INN Publisher Paul Feldman, Sheahan reveals how to find your own alignment. FELDMAN: We have talked about getting unique content to distinguish yourself. How do you get that? SHEAHAN: You start by asking yourself four questions. No. 1 is, what do I really think about this?” No. 2 is, how do you connect the dots that you aren’t necessarily connecting? Look to connect dots that people aren’t necessarily connecting. The third is projecting multiple scenarios into the future — and asking how they might play out. No. 4 is seeking a disruptive statement that captures your attention. It is that one line that finishes with an exclamation mark that really gets people going, “Well, hang on. Wow, that’s a bit counterintuitive.” FELDMAN: Yes, it is interesting that

IT’S THE SECRET SAUCE TO SUCCESS INTERVIEW people don’t look at these basic questions of themselves and they don’t have this level of insight. SHEAHAN: But it’s the stuff that matters most. So here’s an analogy: If you study humans and their level of personal happiness, there’s a lot of research to suggest we’re our least happy when our kids are home. The most joy came prior to having kids and after they leave. But if you asked anyone what the happiest times in their life were, they’re going to say when they had their kids. The reason they do that is they codify their

SHEAHAN: There are a few questions to ask yourself. One is, what’s the client journey of which discovery would be one part? Two, what are the critical things for me to understand about the client in that journey? Three, what are the critical points of pain or insight that we’ll have that positively predisposed to my solution? And four, how do I design an experience that consistently extracts those points of pain or those moments of insight that position my solution? You look at adding some great data on the role having a financial plan plays when

“People are more capable than they give themselves credit for. Usually, the distance between them and what they really want to achieve in their life is their own stories about why they can’t do it.” memory and they put disproportionate meaning to singular events and then paint the entire experience by that singular event. There are these moments of meaning, these amplified moments of opportunity, these moments of truth, these touch points. When you’re selling life insurance, something that’s invisible, sometimes those moments are harder to put your finger on. When you go to a coffee shop, it’s the smell when you walk in. Well, what’s your version of the smell when you walk in or the sound of a Harley-Davidson? Then how does that experience yell “value”? How does it yell “support”? How does it yell “expertise”? How does it yell, “I couldn’t get by without you”? And being intentional in curating that is really the point I’m getting at. FELDMAN: How would you do that with life insurance? How do you create a discovery phase that includes that sense when you’re meeting with a client?

rolling over a 401(k), for example. You want to see the map of the whole journey even though you might then break down individual parts of it because it’s interrelated, they’re inter-dependencies. FELDMAN: Once you have found these answers, you say the next important thing is to deselect some of the things you do. Can you tell us about that process? SHEAHAN: I actually think capacity is the core issue. I haven’t met too many brokers who aren’t working hard, but I have met plenty who aren’t doing the hard work because they’re bogged down in minutiae or in low-value activity. Sometimes they’re hiding behind the minutiae and the low-value activity. But if you look at the upper echelons of your readership, the guys who are doing seven figures and more, I bet you at different points along the way they got relentless about what they were prepared to do and not do. I bet you they were smart and putting in support around the highest value activity to take away a lower value work. April 2019 » InsuranceNewsNet Magazine

INTERVIEW IT’S THE SECRET SAUCE TO SUCCESS

Of your 50,000 readers, 49,995 of them aren’t even close to a level of clarity that puts tension on their own decision-making and behavior.

Even though the short-term gap in income due to expenses went down, they looked to grow greater revenue using a higher value time. I think capacity is the productivity discussion, it is the effectiveness discussion. You can’t expand capacity without arbitrage, which is like the role technology plays or without the selection and focus. So, I say it’s the principle of doing the deselection, and frankly put it on someone else’s plate. Do only the things that only you can do.

it’s about whether they are able to as well. You clarify what success looks like for them. You define the criteria for how you measure that. You make sure they understand the processes that are not negotiable. It’s about understanding the right things to be done and making sure people are doing the right things. That’s really what alignment is about. It’s the magic, by the way. It’s the secret sauce to success.

FELDMAN: Once you have alignment, how do you make sure it stays aligned?

SHEAHAN: It’s defining what success looks like for them personally. If you want to ask your average broker or agent what success looks like, they would give you a set of generic answers or give you some production numbers. That’s not a level of specificity that drives behavior. It’s specificity like: How many hours are you working? What kind of business are you doing? What’s your average policy value and what kind of client are you serving? What’s the breadth of products that you offer? What is your average dollar sale? I’d get to a level of specificity that really drives decision-making. And then out of that alignment, it becomes a little bit easier. So, I’ll give you an example. A lot of people in my space have extremely robust social media presence. I don’t. People

SHEAHAN: Bloody hell, how long we got? [laughter] That’s a big question. I have a company with 50 staff dedicated to solving that problem. Alignment. So, here’s the deal. There’s no shortage of good ideas. But they don’t all have the impact we most want. Alignment is a process of clarification. What does success really look like? And then relentlessly focus on only the things that get you to that outcome, and basically just be happy not doing anything else. But if you’re running a decent-sized book of business and you have two or three staff, then it’s not just about whether you’re able to do all the right things that are in alignment with your outcome, 12

InsuranceNewsNet Magazine » April 2019

FELDMAN: How do you ensure that people are aligned correctly?

constantly are frustrated with me for that. But I know that because I’m clear on success. I’m able to evaluate whether social media activity on a daily basis is an extremely valuable investment in my personal time and I often come up with the answer “no.” But the only reason I know how to evaluate that is because I’m clear on what success looks like for me. FELDMAN: So, people are not specific enough in defining success and working back from there? SHEAHAN: Correct. Of your 50,000 readers, 49,995 of them aren’t even close to a level of clarity that puts tension on their own decision-making and behavior. I think people are afraid of being specific because it means you begin to say no to things, and people don’t like saying no to stuff. They’re worried that they won’t get there, so they take every dollar of revenue that gets presented or every client. But those of us who are really successful in business know that not every dollar of revenue is created equal, and sometimes there are better clients. If you’re afraid of turning your back on anything, then you see yourself on this self-perpetuating spiral downward. FELDMAN: You talk a lot about people “stepping into their power.” What do you mean by that?

IT’S THE SECRET SAUCE TO SUCCESS INTERVIEW SHEAHAN: I tell myself that every day as well. People are more capable than they give themselves credit for. Usually, the distance between them and what they really want to achieve in their life is their own stories about why they can’t do it. We see it with CEOs. Company strategies are reflections of the CEO’s ambitions. FELDMAN: If I’m a 55-year-old insurance agent and really not accustomed to thinking in those terms, how would I start stepping into my power? SHEAHAN: The first step is acknowledging if you feel like you’re under-cooking it a little bit. If your level of production doesn’t seem worthy of your capability or of your ambition, that tells me there’s a gap. Whether it be a lack of discipline; whether it be not doing the hard work. We all know that businesses get built through prospecting, not through maintenance.

Then the second set of questions might be, what is really preventing me from having that? What am I spending too much time doing? What am I spending too little time doing? Why do I find myself gravitating toward the low-value work rather than the high-value work? What am I hiding from? They are a second set of questions to get clarity.

FELDMAN: What kinds of questions are involved in getting to this level of self-awareness? SHEAHAN: Am I achieving at the level I desire? Am I getting the level of joy from my work that I would like to? Am I in a position to make a greater contribution and impact than I am? Anything that has a generative opening could be a good start.

REVENUE

FELDMAN: Is there another level of questions then to identify what that person’s power is? SHEAHAN: When I talk about stepping into your power, I’m not talking about some unique skill or talent. I’m talking about stepping into what’s possible. It’s achieving at a level worthy of your potential and capability. It’s probably more closely linked to Marianne Williamson’s famous line: “Our greatest fear is not that we are inadequate; it’s that we’re great beyond measure.” Like we’re as scared about what we’re capable of as we are what we’re not

“Our greatest fear is not that we are inadequate; it’s that we’re great beyond measure.” I haven’t met someone feeling that tension who didn’t know where they were coming up short. And actually, I don’t think I’ve ever met an executive or an entrepreneur who didn’t have some sense as to why. So I think that level of self-awareness is where the process begins.

ADD RECURRING

capable of. I’m talking more about holding yourself back. FELDMAN: Why don’t more people challenge themselves that way? SHEAHAN: Because asking the question creates an immediate sense of dissonance. It’s disruptive to your own security and status quo. You cannot ask the questions without feeling tension. You cannot ask the questions without acknowledging that you’re not growing at the level you should be growing. You can’t ask those questions without acknowledging that you’ve been underplaying it a little bit. April 2019 » InsuranceNewsNet Magazine

BY SELLING

MED SUPP t Booming Market t Year Round Sales s Great Persistency y Lasting Renewal Comp p Easy Product to Learn Dedicated Support Team

NEWSWIRES

QUOTABLE

Prepare For ‘Shock And Awe’ Get ready to see “shock and awe” in

the stock market, a J.P. Morgan executive predicted. Under the right circumstances, the Trump administration and the Federal Reserve together could create a rally that would take the S&P 500 to 3,000, wrote Adam Crisafulli in a note to clients. What are those right circumstances? Crisafulli said the scenario to make this rally happen would depend on a trade deal with China that ends all tariffs, and it also would depend on what the Fed says about ending its balance sheet normalization. Crisafulli said the S&P is likely to consolidate its recent rally within the 2,750 to 2,800 range, until the Fed clarifies details of its plan for the balance sheet. and Maggie Hassan, D-N.H. The lawmakers have said they are gathering feedback from industry groups. A surprise bill usually occurs when a patient receives a sizable bill after going to a hospital, frequently because they received treatment from a doctor outside the patient’s insurance network.

$1B LOST TO FRAUDSTERS LAST YEAR WASHINGTON TAKES AIM AT SURPRISE MEDICAL BILLS

Protests are growing against so-called surprise medical bills, and legislation to protect patients from surprise medical bills is seen as one of the most likely areas for bipartisan action on health care this year. Joe Grogan, director of the White House Domestic Policy Council, warned hospitals that they must address the issue of surprise medical bills if they don’t want Congress to do it for them. His remarks came at the Federation Joe Grogan of American Hospitals’ annual conference in Washington. In the Senate, a bipartisan bill is being drafted by a group including Sens. Bill Cassidy, R-La., Michael Bennet, D-Colo., DID YOU

Americans’ wallets were $1.5 billion lighter in 2018, thanks to fraudsters, according to the Federal

InsuranceNewsNet Magazine » April 2019

— Jeb Hensarling, former Republican congressman from Texas.

— a nearly 40 percent increase over 2017. Although the stereotypical fraud victim is a vulnerable elderly person, the FTC report said that wasn’t the case in 2018. Younger individuals reported losing money to scammers at a higher rate than older consumers. Of the people who reported fraud and their age, 43 percent were in their 20s, while only 15 percent were in their 70s, according to the FTC. One reason for the higher rate of younger people, the FTC said, is the possibility that younger consumers were more likely than older ones to report fraud.

PERSONAL INCOME SEES FIRST DROP IN 3 YEARS

Trade Commission. The FTC said that it received 3 million consumer complaints last year, including more than 1.4 million fraud reports. Consumers claimed to have lost money in about one-quarter of those reports. Overall, Americans reported losing $1.48 billion to fraud

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Three percent economic growth is simply the average of the post-war era. All we’re trying to do is rid ourselves of the legacy of [former President Barack] Obama.

U.S. personal income fell for the first time in more than three years at the beginning of 2019 as dividends and interest payments dropped, the U.S. Department of Commerce reported. Personal income dipped 0.1 percent in January, marking the first decline since November 2015. In addition to a decline in personal income, the Commerce Department reported that consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 0.5 percent at the end of 2018. That was the biggest decline since September 2009.

THE

t s e g Lar

e m i Cr NCE A R U S N I F O Y R IN THE HISTO

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COVER STORY

THE ANSWER IS DIVIDING THE INSURANCE INDUSTRY INTO TWO CAMPS.

BY JOHN HILTON 18

InsuranceNewsNet Magazine Â» April 2019

IS SUITABILITY BEING PUSHED ASIDE? COVER STORY

wight Carter paused Carter remains a steadfast member of mid-sentence, acknowl- camp No. 1. edging that what he was “Nothing angers me more than someabout to say could sound body saying ‘We might as well accept it,’” boastful: “I’ve never had he said. a complaint in 49 years.” But he did not say it for bragging rights ‘Suitability Isn’t Quite Enough’ — he was demonstrating that the suit- Suitability was destined to be short-lived, ability standard is effective. said Bruce Ashton, who has The key is approaching every more than 35 years’ experiannuity sale with the right ence monitoring regulatory intentions, said Carter, 71, matters, currently as a partner who owns Financial Security for the law firm Drinker Biddle Associates, a regional inde& Reath. As simple annuities pendent marketing organizamorphed into indexed annution based in Raleigh, N.C. ities and life insurance took a Carter describes Financial similar route, regulators conDwight Carter Security as a regional IMO, or cluded that consumers are vul“a very small fish in a very large pond.” nerable, he said. For many years, business was good and Defenders of suitability point to very steady — 100 to 150 regular agents writ- low complaint numbers. The NAIC ining the bulk of $350 million in annual vestigated 6,040 life insurance and annuannuity sales. ity complaints in 2018, or 5.88 percent of Then the regulators got busy. By the the total complaints across all coverage time a three-year fight to knock down lines. the Department of Labor fiduciary rule But while perception might not be rewas finished, Carter had lost nearly 30 ality, the “groundswell” for tighter regupercent of his annual business. lations of insurance is probably not going Worse than that, the federal away, Ashton said. regulators unleashed Game of “Seems to me the concern Thrones-level warfare in the is that suitability isn’t quite IMO world. And the smaller enough,” he explained. “Yes, shops like his own were the you have to make sure the least prepared for combat, insurance broker, the insured Carter said. and the company have to deBigger IMOs “started telling termine that ‘Yes, this is a suitmy guys long before the initial able product’ for somebody. Bruce Ashton implementation of the DOL But that doesn’t mean you’re rule that this rule is coming and you need acting in their best interest.” to move to us because your guy is not goRegulators across the board are now ing to be able to support you,” Carter re- involved, which makes it harder for incalled. “So there was a run on our agents dustry opponents to mount a coordinatearly on and hard.” ed fight. The DOL rule was tossed out The DOL rule was tossed out by a feder- in March 2018 after trade associations al appeals court last summer. But it was a brief reprieve. State lawmakers from New York to Arizona are considering, or have passed, annuity sales rules. The National Association of Insurance Commissioners is debating a national model. The blizzard of best-interest activity leads to a natural question: Is suitability destined to die? The answer is dividing the insurance industry into two camps joined forces and planned to get its ap— those who want to preserve the cur- peal sent to the Fifth Circuit Court of rent suitability standard and those who Appeals. The Fifth Circuit is known to accept one that is closer to the fiduciary favor limited government. standard. The DOL rule took partial effect in

June 2017, requiring advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. When the rule was killed by the courts a year later, it left a vacuum. Several states launched independent rulemaking efforts, while an NAIC working group tackled an annuity sales model law. The Securities and Exchange Commission produced a tentative rule covering brokers. The onslaught of rulemaking seemed to fracture the industry alliance. On Jan. 14, frustrated IMO executives sent a fiery letter to leading industry trade associations expressing frustration at their lack of pushback. “We have been … scratching our heads why our trade associations seem to be going along with the NAIC proposal and not fighting against warrantless regulations,” the letter reads. “This has made us worry about the direction of our industry, the future of our businesses, and the protection of our clients.” They did not speak for the entire industry — or even the IMO set. A separate group of 10 IMOs representing “approximately 40 percent of fixed indexed annuity sales in the independent market” sent their own letter to NAIC. “We support a framework that can realize a best interest standard through a clearly and explicitly defined process that would include appropriate disclosure, thorough needs analysis and a well-supported recommendation,” their letter reads.

Making Lemonade

The NAIC letter was signed by Denny Southern, president of annuities and retirement planning for AmeriLife Group, based in Clearwater, Fla.

“Nothing angers me more than somebody saying ‘We might as well accept it.’” — Dwight Carter AmeriLife is a giant in the IMO industry — one that works with 140,000 independent agents and advisors across all channels. The company spent between $2 million and $2.5 million adapting its April 2019 » InsuranceNewsNet Magazine

COVER STORY IS SUITABILITY BEING PUSHED ASIDE?

State

Key Restrictions

Compensation Impact

Status

New York

• Only the consumer’s best interests can be factored into a recommendation.

The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.

Approved and going into effect in August 2019 for annuity sales, and six months later for life insurance sales.

The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.

Legislation creating the regulation was passed in the summer 2017. Nevada officials accepted public comment on the rule details through March 1 and are expected to finalize those rules this year.

• Insurers required to develop training for producers. Rules cover insurance agents. • Cannot use “financial advisor” or “financial planner” titles without proper licensing.

Nevada

• Establishes a fiduciary duty status on brokers and registered reps for virtually all activities related to customer interaction. • Permits an “Episodic Fiduciary Duty Exemption” for a variety of situations. • Outlines lengthy list of fiduciary breaches, including excessive fees, failure to provide pertinent documents and putting own interest ahead of client’s. • Does not cover insurance agents.

Maryland

• Makes both brokers and insurance agents fiduciaries with “a duty to act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.”

The regulation does not ban commission sales, but the producer must be able to show that the product was the most appropriate fit for the consumer’s financial needs and objectives.

Legislation was introduced in February 2019 and faces a long road to adoption.

New Jersey

• Would implement a uniform fiduciary duty status on all broker-dealers, agents, investment advisors and investment advisor representatives registered to do business in the state.

No firm details on compensation limits.

A Notice of Pre-Proposal was filed by the New Jersey Bureau of Securities on Oct. 15, 2018. Public comment was accepted for two months. An actual rule had yet to be released by the time this issue went to press.

• Details are scant, but Gov. Phil Murphy said New Jersey will develop “the strongest investor protections in the nation.”

sales processes for the DOL rule, said especially for the insurance products and pulled the NAIC in its direction. CEO Scott Perry. Those expenses includ- the insurance industry, is at the NAIC,” ed developing a proprietary “Amerilyzer” he said. New York State Of Mind software tool to document Everyone in the industry New York previously adopted tougher client contacts and keep elecis keeping a close eye on the cybersecurity standards than the NAIC tronic records. New York Department of was considering at the time. The NAIC’s Once the DOL rule was Financial Services. For startfinal cybersecurity model ended up tossed, AmeriLife dropped ers, New York regulators are resembling the New York rules. everything and went back to far ahead of the game, with Although some insurers vow not to its old way of doing business, annuity sales rules set to take sell products in New York, Perry said Perry said. But uncertainty effect in August. Life insurAmeriLife will adapt. costs money, and it is someance sales must comply by “We’re going to take the lead from the Scott Perry thing the company wants to February 2020. carriers who do business in New York, avoid, he added, even if that means makSecondly, the New York rules are very and we’re going to follow what they being concessions on regulations. tough and would essentially lieve they want their distribu“We can’t just ignore the winds that do away with the suitability tion to follow,” he said. “Our are blowing in a certain direction,” Perry concept. The rules require proattitude is we would do what said. “To push back on every other regu- ducers always to place the cuswe need to do to continue to latory body dipping their toe in this wa- tomer’s interests ahead of their do business there.” ter seemed to us to be a little naïve.” own. Insurers are responsible New York regulators are So AmeriLife is supporting the NAIC for establishing a training regnot without industry support. working group. It would be a major prob- imen for their producers, who Valmark Financial Group is lem for the company, Perry stressed, if will be expected to keep suban umbrella company with Larry J. Rybka states splintered off into a variety of reg- stantial documentation. an independent broker-dealer, ulatory concepts. Former DFS Superintendent Maria as well as insurance and registered in“We certainly aren’t in favor of a patch- Vullo challenged NAIC officials to adopt vestment advisor divisions. CEO Larry work approach and to the degree that New York regs in their model annuity J. Rybka favors making New York stanwe feel we can get a uniform approach, sales rule. If that happens, it would not dards the law of the land. the best place we think we can get that, be the first time that New York regulators “Maybe this change is really a good 20

InsuranceNewsNet Magazine » April 2019

IS SUITABILITY BEING PUSHED ASIDE? COVER STORY thing for the life insurance industry,” Rybka said, adding that he opposed Dodd-Frank and the DOL fiduciary rule. “And for the pro-life-insurance people who want to sell real life insurance to real people, using real money to pay for it.” The New York regulations treat producers and distributors more fairly, Rybka said. “I think this falls on insurance companies much more than on distribution,” he

elimination of the fixed products that particularly help consumers with a low amount of assets. We’re going to lose a lot of product availability,” Carter said. “I have a great fear that the availability to those consumers will be virtually eliminated, as will many of the insurance-licensed-only agents who sell a lot of this stuff.” Many IMOs would be eliminated as well, analysts say, as a repeat of the DOL rule frenzy plays out. The premise is

“Maybe this change is really a good thing for the life insurance industry.” — Larry J. Rybka said. “And if you look at DOL, that was really all on distribution; it wasn’t on companies at all.” Still, significant opposition to the New York rules remains. A pair of lawsuits has been filed to stop the New York rule — one by The Big I and the Professional Insurance Agents of New York, and one by the National Association of Insurance and Financial Advisors-New York State. The Big I has several concerns, said Scott Hobson, director of government relations for The Big I New York, in a December interview. Specifically, they are concerned that state regulators will be able to “unilaterally” extend the best interest rule to all insurance transactions. Otherwise, “you’re opening up a tremendous amount of legal risk on agents and brokers,” Hobson explained. “We expect that many decisions would be second-guessed, resulting in litigation, claims and stuff of that nature.” The next battleground might be New Jersey, which published a “pre-proposal notice” in October and is seeking comments. The New Jersey plan is short on details but would impose a fiduciary duty on all investment professionals in the state.

Not Giving Up

Dwight Carter refuses to let the assaults on suitability go unanswered. He is a central player in the Fixed Annuity Consumer Choice campaign, a group of agents and IMOs lobbying to preserve fixed annuity sales. Tougher regulations will lead to “the

simple: big companies can better absorb costly regulation compliance and accompanying liability. Carter still doesn’t like it. “This rule is going to give rise to further aggregation of contracts, with the sole goal of eliminating the smaller ones who can’t keep up the pace,” he said. “The industry is already in the crosshairs of litigation from attorneys around the

“IMOs can no longer offer just a commission and a product,” said Scott Hawkins, director of insurance research at Conning. “They need to offer extra services for digital support around marketing, or around sales coaching or around electronic application and delivery around services, in order to attract producing agents. “So IMOs need to make those investments and cover those costs. The smaller IMOs might be the ones feeling the pressure the most, as opposed to the extremely large ones.”

September Deadlines

The regulation picture could potentially come further into focus in September. Reportedly, that is when the DOL and the SEC plan to release their respective rules that cover most all annuity sales. Staff from both offices are said to be working together on rules that harmonize standards. There is a potential to offer a blueprint of sorts for the industry, Ashton said. “What I would prefer to see is the SEC and the DOL get their act together and create a model for the rest of us to look at,” he added. “Almost no matter what the

“The smaller IMOs might be the ones feeling the pressure the most, as opposed to the extremely large ones.” — Scott Hawkins country anyway, so if we’re going to hand them a tort litigation on a silver platter, then we’re just dead.” Meanwhile, AmeriLife is “absolutely” looking to grow, Perry said. AmeriLife completed three acquisitions in the latter half of 2018, and added Dallas Financial Wholesalers in February. That addition pushed AmeriLife to $3 billion in annual annuity premium. “We see those pressures in the marketplace creating opportunities for us,” Perry said. “We are actively open to talking to folks who are looking for a potential partnership.” While regulation pressure is the main driver of merger and acquisition activity among IMOs, it is not the only one.

SEC comes out with, my guess is we’re going to see litigation.” The state insurance departments are another story. With many states having wildly divergent political philosophies, as well as differing levels of insurance industry presence, any harmonizing across state lines is unlikely, Ashton said. “I think it’s going to be a mixed bag.” 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.

April 2019 » InsuranceNewsNet Magazine

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the Fıeld

A Visit With Agents of Change

Dr. Insurance How one successful DI agent found her calling by serving medical professionals. • By Susan Rupe

InsuranceNewsNet Magazine » April 2019

DOCTOR INSURANCE IN THE FIELD

amie Fleischner’s mother was lucky enough to purchase disability insurance early in her career. Had her mother waited even a few years, she would have been uninsurable, as an autoimmune disorder began to take hold of her body. Seeing how that policy made a difference in her mother’s life — and how her mother bought the coverage at just the right time — has helped drive Fleischner’s success in DI sales. “This is something I emphasize to people — one of your biggest risks is not just becoming disabled, but becoming uninsurable,” Fleischner said. “Purchasing DI when you are young and healthy is key.” Fleischner has built a thriving practice providing physicians and other medical professionals with DI coverage. DI is her passion, although she also provides individual life and long-term care insurance. She founded Set For Life Insurance in 1999 in the Denver suburb of Greenwood

now in North Carolina. Although her father always spoke favorably about the insurance business, he never attempted to push her into it, Flesichner said. “She feels passionate about what she does, and she was wise enough to be able to tap into the millennial market and know what they think,” Kantor said. “She doesn’t work like most insurance agents. She marches to her own drum.” Kantor recognized that his daughter displayed an entrepreneurial spirit at an early age. “When the other little girls were playing mother and dragging their dolls around, Jamie had a pretend day care center in the basement of our house,” he said. “She had her dolls lined up in the day care center, she had her cousin working for her, she wrote paychecks and she wrote bills to the dolls’ ‘mothers.’” He also recalled that when Fleischner was in high school, she became involved in Distributive Education Clubs of

“One of your biggest risks is not just becoming disabled, but becoming uninsurable. Purchasing DI when you are young and healthy is key.” Village. Fleischner, 46, produces more than 800 DI applications per year and is the leading DI producer for Principal Financial and one of the top five DI producers for Guardian. She attributes much of her success to her ability to “speak the language” of her clients in the medical profession. “The majority of my clients are highly educated and are very busy,” she said. “They want to work with someone they can relate to who is credible and respects their time. Because they come to me by a strong referral source, they are ready to proceed but need to be guided well through the process. Most of them have already done some research and have some knowledge of what they want or need. I do my best to distill the complexity of the policies into simple, easy-tomake decisions.” Fleischner also grew up speaking the language of insurance. Her father, Bruce Kantor, has been an insurance broker for more than 30 years, first in Colorado and

America, where her business talent was nourished even more. Fleischner began her journey toward becoming a DI producer when she was a student at Washington University in St. Louis. She signed on as a student agent with Northwestern Mutual. “I actually got licensed and trained as an insurance agent while I was still in college,” she said. But Fleischner said that starting out in the business before the internet age was challenging. “They gave us no leads. I had to do it all on my own,” she recalled. “I was in a city where I knew no adults except for those on my college campus. I had to learn it the hard way.” But Fleischner took the attitude that “if this is what I am going to do, I need to completely embrace it.”

‘You Can’t Dabble’

So she rearranged her college schedule and took five classes on Tuesdays April 2019 » InsuranceNewsNet Magazine

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SUPP MED MED SUPP r Great Door Opener r High Demand Product t Seniors with Assets s Multiple Carrier Options s Turnkey Online Training g Live Agent Support

IN THE FIELD DOCTOR INSURANCE 2/8/2019

and Thursdays. She went into the office Mondays, Wednesdays and Fridays. And she studied all weekend. “I was working 30 hours a week and in school 30-40 hours a week,” she said. “If you’re going to be a success, you have to be all in. You can’t dabble.” Fleischner’s parents moved from Colorado to North Carolina while she was in college. So she faced the decision on where to move after graduation. She knew that she wanted to stay in the insurance business, but didn’t want to be a captive agent. She found a job with a Denver-area insurance agency that would provide her with training and would allow her to keep her clients if she decided to strike out on her own. But a family tragedy helped solidify Fleischner’s commitment to the DI market. Soon after Fleischner moved to Colorado, her parents traveled there from North Carolina to attend her sister’s wedding. Fleischner’s mother became ill and could not return home. Fleischner spent the next year and a half as her mother’s caregiver, accompanying her to and from the hospital and overseeing her needs. Her mother eventually died while waiting for a double lung transplant. DI soon became her passion, for two reasons. “One, because I saw the way it worked,” she said. “The other thing was, I was so young when I started in the industry and I realized early on that I can talk to anybody about disability insurance, whether they’re single or married, whereas with life insurance, you really had to wait until people had dependents. So I thought I had a larger prospect base by focusing on DI.” A week after her mother died, Fleischner’s boss committed suicide. “After that, my personal and professional lives were falling apart,” she said. “So I decided to go out on my own.” “I only want to work with the people who I can help, who I get excited to talk to every day,” she said. “If I could envision my favorite clients, they would be young doctors. So that’s where I really started niching myself. Then, as my clients started to move all over the country, they would refer me to others. Now, 25 years later, I’m licensed in all 50 states. I’m all over the place, all over the country.” 26

“I only want to work with the people who I can help, who I get excited to talk to every day.” Finding The Right Prospects

Jamie 7.10.bmp

“It’s hard to sell to blue collar, gray collar prospects because the premiums are disproportionate to what they‘re taking home,” she said. “So if you’re working with people who don’t have any discretionary income, they probably need DI because they can’t get by if they lose their income. But they can’t afford the premium. If you are going to be successful in the disability marketplace, you need to work with people who have the income level that they can afford the premiums.” Fleischner’s husband, Jeff, joined her in the practice after he was looking for a change from his career as an attorney dealing with workers’ compensation and personal injury cases. “He does a lot of the back-end detail work, behind-thescenes kinds of things,” she said. “And we have some staff people but we outsource a lot of stuff.” The Fleischners have two teenage sons and three border collies. A good bit of their time is spent walking the border collies. “We walk them 6½ miles every single day. Ten months of the year, we walk them 1½ hours a day,” she said. The family also enjoys world travel, having visited Europe and Japan, and is planning a trip to Africa this summer. All insurance advisors should offer DI as part of their product mix, Fleischner said. “If they’re not offering it as part of a plan, they’re doing their clients a disservice,” she said. “There’s a lot of business out there. Right now, sales are flat but there’s a tremendous opportunity in that field.”

When she was first starting in the business in St. Louis, Fleischner obtained some clients from Washington University Medical Center. From there, she asked for referrals. When she moved back to Colorado and began taking her mother to appointments at University of Colorado Hospital, she also made appointments with medical residents to discuss DI. “Once I had a foothold with a few, I would ask for the names Susan Rupe is maneditor for of their colleagues and I would meet mul- aging Insurance N ewsN et . tiple physicians,” she said. Her DI business She formerly served began to snowball. as communications Fleischner has come a long way from director for an insurthe days when she prospected through ance agents’ association and was an awardwinning newspaper reporter and editor. cold calling and direct mail. Her business Contact her at Susan.Rupe@innfeedback.com. is fueled almost exclusively by referrals. Follow her on Twitter @INNsusan. “My clients become my ambassadors and refer me to their colleagues,” she said. “A lot of my clients are now in positions of authority and recommend me to others. I am also asked to speak to resident groups, Do you know someone who would and I am featured in some of my clients’ make a compelling profile story? blogs and podcasts where they promote Shoot us a quick email telling us who https://mail.google.com/mail/u/0/#inbox/FMfcgxwBVWSgwZwHCkDRjdkhhtZgQZdJ?projector=1&messagePartId=0.0 me by social media.” it is and why you think so. Send it to Selling DI is a matter of marketing to editor@insurancenewsnet.com, and the right prospects, Fleischner said. put PROFILE in the subject line.

InsuranceNewsNet Magazine » April 2019

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LIFEWIRES

NAIC Group Split On IUL Models State insurance regulators debated how

much risk consumers should take on in pursuit reward when purchasing indexed universal life products. A National Association of Insurance Commissioners’ subgroup revealed the depths of its members’ disagreement during its first conference call on IUL illustrations. The IUL illustration subgroup has a 2019 charge to “provide recommendations for modifications to AG 49 to the Life Actuarial (A) Task Force.” The issue involves IUL multipliers, which did not exist when AG 49 was adopted in 2015. AG 49 states that: “If an insurer engages in a hedging program for index-based interest, the assumed earned interest rate underlying the disciplined current scale shall not exceed 145 percent of the annual net investment earnings rate.” Companies are using index performance multipliers on IUL products in order to skirt this requirement, said James Regalbuto, deputy superintendent for life insurance in New York. $352,000 in 2018, with enough life insurance protection in place ($100,000) to cover only 22 percent of their selfreported coverage needs ($452,000). This gap is 60 percent higher than the coverage gap for the general population, which is $210,000, enough to cover 49 percent of the average estimated need.

QUOTABLE Do you want protection for your family for as long as you live, or for as long as they live? — Yolie Aleman-Rodriguez, State Farm agent

as exercising, or risky behaviors such as smoking or skydiving.

NEWSPAPER’S LIFE INSURANCE PURCHASE COST IT BIG-TIME

Five years ago, the then-owners of a California newspaper, The Orange County Register, faced a financial crunch and hoped life insurance would help dig them out of the hole. But the scheme backfired and resulted in a lawsuit from the Pension Benefit Guaranty Corp.

COULD INSURERS BECOME SOCIAL MEDIA STALKERS? MILLENNIALS ‘AT RISK’ WITHOUT LIFE INSURANCE

The millennial generation is now the most at-risk age group when it comes to having adequate life insurance coverage. That’s according to New York Life’s Life Insurance Gap survey. The survey asks Americans to compare how much life insurance they need, based on living expenses and plans for their loved ones, with the amount of life insurance protection they have. That finding reflected a shift since New York Life conducted a similar survey in 2013 showing Generation X as the most at-risk age group. Millennials with life insurance have a self-reported life insurance gap of DID YOU

KNOW

Are life insurers checking out their clients’ Facebook and Instagram posts? New York says it’s OK. In February, the New York Department of Financial Services said life insurance companies can use information obtained from customers’ social media posts and other “lifestyle indicators” when setting premiums. However, life insurers’ use of this information must meet non-discrimination standards. The Wall Street Journal reported insurers have already begun using algorithms to examine “nontraditional” information sources to evaluate customers’ risk. These electronic “snoops” are looking for posts showing healthy behaviors such

Aaron Kushner

Aaron Kushner and Eric Spitz owned the newspaper between 2013 and 2014 when they bought life insurance on their employees. Their plan was to record the putative value of those policies upon the workers’ deaths as a contribution to the newspaper’s pension fund, which was hundreds of millions of dollars in the red. The PBGC said the scheme was incompetently arranged, and a violation of the company’s fiduciary duties to its own workers. The company lost $9.4 million and the PBGC wants the money back from Kushner and Spitz, as well as the company’s pension expert and his actuary.

60% of black Americans own life insurance. Source: LIMRA

InsuranceNewsNet Magazine » April 2019

Eric Spitz

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An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals. Guarantees are subject to the financial strength and claimspaying ability of the issuing insurance company. 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 its 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.

LIFE

Who Gets The Life Insurance? Not The Ex-Spouse, States Say A Supreme Court decision revoking a beneficiary designation due to divorce may have ramifications that advisors need to address. By Douglas I. Friedman and Jessica M. Friedman

t’s rare that the U.S. Supreme Court decides a case with immediate impact on an advisor’s daily activities, but that is exactly what happened on June 11, 2018. That was the day the court validated a Minnesota statute that retroactively revoked a life insurance beneficiary designation because the beneficiary was the former spouse of the insured. Yes, you read that correctly — the statute retroactively revoked a beneficiary designation due to a divorce. Here is why statutes like the one in Minnesota have much more far-reaching ramifications than advisors may anticipate, and how advisors may address the resulting errors and omissions concerns. The facts of the case are routine. A couple marries. The husband names his wife as beneficiary on his life insurance. They divorce. The divorce decree does not mention the life insurance policy and, years later, the husband dies without ever changing the beneficiary. Under a so-called divorce revocation statute, the former spouse is treated as pre-deceasing the insured. As a result, the contingent beneficiary takes the death proceeds. There are few exceptions to this, even if the statute is passed after the divorce. About half the states have statutes such as this, and these statutes affect revocable non-probate beneficiary designations, not just life insurance. Each statute is different. Although they have similarities, the specifics of each statute are important, as they can change the outcome. For example, all the statutes of which we are aware contain an exception if the 30

InsuranceNewsNet Magazine » April 2019

divorce decree requires the insured to maintain the coverage for the benefit of the spouse. Two other common exceptions are if the divorced spouse owns the policy, or if the divorced spouse pays the premium on the policy. But states often have provisions that are particular to that state. The state statutes are often relatively new, so advisors may not be familiar with them. And, in a state where the statute is new, the courts may not have interpreted the statute yet, so there has not been the publicity that results from news of recent cases. Since cases take years to wind themselves through the appellate system, there may be little if any case law in a particular state. Although we all can read what a statute says, the case law is important because we don’t know what the statute’s particular language means until a court tells us. The courts also interpret what the statute was intended to accomplish. So, case law provides the framework within

which we can knowledgeably advise clients. But there are more complexities than the statutes themselves, as there is often a question of which state law applies to a particular case. Let’s illustrate this by adding the following facts to the commonplace scenario described at the beginning of this article. Assume that the policy is purchased while the insured/policy owner lives in Kansas, that the insured later moves to Alabama and gets divorced. And let’s assume he later marries again, lives with his second wife in Alabama, and dies in Georgia. Assume further that the primary beneficiary (former spouse) lives in Georgia. Alabama has a divorce revocation statute for non-probate assets, such as life insurance. Neither Kansas nor Georgia has a divorce revocation statute. Advisors often think that the law of the place of sale is the controlling law. In some states, like Alabama and Georgia, that is a good assumption. But state courts still may apply the laws of their own state for any number of reasons. In the scenario described previously, the Alabama Supreme Court recently applied the laws of Alabama, on the grounds that to apply another state’s differing law would violate Alabama public policy. The important point, then, is that we often do not know what state law will apply.

What To Tell A Divorced Client

What is an advisor to do in such an unpredictable climate? We have several suggestions. One is to advise a divorced client to revisit all revocable beneficiary designations, as these statutes usually apply to all such designations, not just on life insurance. For example, beneficiary designations of a non-qualified plan may be affected. The client can be contacted in writing, by telephone or — even better — a telephone call followed up by a letter (with proof of delivery) or email (with delivery and read delivery receipts). Since

WHO GETS THE LIFE INSURANCE? NOT THE EX-SPOUSE, STATES SAY LIFE

... the court validated a Minnesota statute that retroactively revoked a life insurance beneficiary designation because the beneficiary was the former spouse of the insured. neither an advisor nor an insurer may give legal advice, the advisor should recommend that the client seek legal counsel to determine the best course. If the client is in the process of securing a divorce, this issue should be raised with the client’s divorce lawyer. These simple actions should help alleviate errors and omissions concerns in these cases. Interestingly, the advisor’s relationship with the client may heighten the advisor’s responsibilities. For example, the more the advisor is involved with a client, such as with annual planning meetings, the more liability the advisor may have. Sometimes even what is written on a business card may trigger a greater duty toward the client.

In addition to revisiting beneficiary designations, the client’s attorney may recommend refiling a beneficiary designation, even if that beneficiary is required under a divorce decree. The reasoning is that the post-divorce renaming of the former spouse alleviates the questions raised by a non-probate divorce revocation statute. This step should make things easier later on, for both the deceased’s family, as well as the named beneficiary. So here are two questions for an advisor: 1) Do you have a client who has been divorced, or is contemplating divorce? 2) Do you know whether a non-probate divorce revocation statute may affect the eventual payment of death proceeds? The advisor should know the answer to

the first question. But the answer to the second question is often not readily discernible, even to an attorney. As a result, we recommend obtaining legal advice. The failure to address these issues may wreak havoc with well-thought-out estate plans, not to mention open a possible errors and omissions issue. Doug Friedman and Jessica Friedman are practicing lawyers based in Birmingham, Ala. They represent insurers nationwide on issues such as advanced sales, marketing-related legal work, compliance, and claims. Doug may be contacted at doug.friedman@innfeedback.com. Jessica may be contacted at jessica.friedman@ innfeedback.com.

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April 2019 » InsuranceNewsNet Magazine

14%

ANNUITYWIRES

QUOTABLE

Annuity Sales Spike 14% In 2018

Annuity sales continued reaching new heights in 2018, according to LIMRA Secure Retirement Institute. In 2018, total annuity sales increased 14 percent over 2017, reaching $232.1 billion. Total annuity sales for the fourth quarter were $62.1 billion, a 22 percent increase over the fourth quarter of 2017. Fourth quarter 2018 represents the highest quarterly total annuity sales since first quarter 2009, and the first time annuity sales have exceeded $60 billion since the fourth quarter of 2015. Fourth-quarter indexed annuity sales set an all-time quarterly record at $19.5 billion, a 40 percent increase, compared with fourth quarter 2018 results. For the year, fixed indexed annuity sales rose 27 percent to $69.6 billion, compared with prior year. This is also a record and exceeds the previous annual fixed indexed annuity sales record by $10 billion.

NAIC GETS PLENTY OF ADVICE ON ANNUITY SALES RULE

Based on the first batch of comment letters, state insurance commissioners have a long way to go to finalize an annuity sales model law that gains approval from industry players. A National Association of Insurance Commissioners’ working group debated its annuity sales model throughout 2018 — mostly without success due to a few thorny issues. Finally, they produced a draft rule that skipped over many of those issues and accepted comments. A group of 10 independent marketing organizations sent a letter of borderline approval of the NAIC effort, and suggested any disagreements could be worked out. The signatories said the group represents about 40 percent of the fixed indexed annuity sales in the independent market. The IMOs emphasized the need for “uniformity” and acknowledged the nightmare of possibilities that come with every state operating under different sales rules. DID YOU

KNOW

JACKSON WILL DISTRIBUTE ANNUITIES TO RIAS

DPL Financial Partners and Jackson National are teaming up to bring the carrier’s advisory annuity products to fee-only advisors in what represents Jackson’s first distribution partnership targeting the independent RIA channel. Three of the carrier’s commission-free products are now available to RIAs nationwide through DPL’s platform: two variable annuities and one fixed indexed.

NAIC LOOKS AT INDEXES

A National Association of Insurance Commissioners’ working group wants to double the time indexes must be in existence from 10 to 20 years before they can be used in indexed annuity illustrations.

The rising interest rates are definitely a key factor here. — Todd Giesing, director of annuity research, LIMRA SRI

The regulators are concerned that consumers are being misled by unrealistic indexed annuity illustrations. The proposed changes are out for public comment until late April.

START ME UP: ANNUITIES AND THE ROLLING STONES

You know a classic rock band is starting to attract a more — ahem — mature audience when the annuity industry sponsors its tour. The annuity-focused Alliance for Lifetime Income has signed on as the sole sponsor of The Rolling Stones’ 2019 “No Filter” U.S. stadium tour. The tour kicks off April 20 at the Hard Rock Stadium in Miami. According to the Alliance for Lifetime Income website, the group saw the sponsorship opportunity as too good to pass up. “As a band that personifies longevity and living life to the fullest, The Rolling Stones continue to prove to millions of fans from every generation that age is just a number,” the ALI statement reads.

Envestnet Insurance Exchange now offers access to six carriers.

InsuranceNewsNet Magazine » April 2019

Source: Envestnet

Long-term care protection may be their best asset We can help you provide peace of mind for your clients by protecting them from the impact of a longterm care event. Our Care Solutions asset-based long-term care products offer lifetime benefits, so your clients may be protected as long as they need*. Call 1-866-986-9439 or visit www.oneamerica.com/inn to learn more.

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Life Insurance | Retirement | Employee Benefits

I-30239 02/15/19

ANNUITY

How A DIA Contributes To A Successful Retirement A study examined how much of a retiree’s nest egg should be invested into a longevity annuity to reduce the odds of running out of money in the later years of retirement. By Susan Rupe

eferred income annuities can be a powerful defense against the risk of outliving retirement savings. But how much of a retirement nest egg should be invested in a DIA? And why don’t more consumers purchase a DIA? The Employee Benefit Research Institute looked into DIAs and their adoption by those facing retirement. The researchers found that only a small percentage of defined contribution and individual retirement account balances are annuitized. In addition, a significant percentage of defined benefit funds are taken as lump-sum distributions when the option is available. It’s an issue of cost versus control, said Jack VanDerhei, EBRI director of research and author of the report “Deferred Income Annuity Purchases: Optimal Levels For Retirement Income Adequacy.” Because DIA payments are delayed — usually for 20 years — and generally begin paying out when the annuity owner is in their 80s, a DIA could be offered for a small fraction of the cost for a similar monthly benefit provided by a single-premium immediate annuity that begins paying out immediately at retirement, he said. This reduced cost could help alleviate consumers’ reluctance to give up control over a large portion of their retirement account funds at retirement age. In addition, EBRI researchers found that a DIA was more attractive to consumers if it had a death benefit attached to it. EBRI’s study examined how the probability of a “successful” retirement varies 34

InsuranceNewsNet Magazine » April 2019

with the percentage of a 401(k) balance that is used to purchase a DIA. A “successful” retirement was measured by the EBRI Retirement Readiness Rating. The rating analyzes the risk of not having enough retirement funds to cover basic expenses and uninsured health care costs. The results were broken down for all households with a 401(k) balance and analyzed by a simulated age of death. EBRI also looked at the results by different age groups. So when is the best time to buy a DIA, and how much of a nest egg should go into it? Buying a DIA without a death benefit at age 65, putting up to 20 percent of a 401(k) account balance into it and deferring payment for 20 years provides the best hedge against outliving income in retirement, VanDerhei said. However, more is not exactly better when it comes to how much of a retirement nest egg should be invested in a DIA, VanDerhei cautioned. “There is an overall decrease in retirement readiness for DIA purchases starting at 25 percent — due in part to the interaction with long-term care costs,” he said. The EBRI study found that retirement readiness improves when DIA purchases equal five, 10 or 15 percent of a 401(k) balance and a death benefit is added to the DIA in case the annuity holder dies before the DIA begins paying out. When EBRI ran through scenarios in which the annuity holders were estimated to die at certain ages, retirement readiness decreased for those projected to die before the DIA benefits kicked in, as well as those projected to die soon after the benefits begin. Investors projected to live beyond age 89 showed a significant increase in retirement readiness if they put a larger percentage — but not larger than 25 percent — of their 401(k) balance into a DIA.

The Interest Is There

EBRI’s 2015 Retirement Confidence Survey attempted to gauge workers’

interest in DIAs. Workers were asked how interested they would be at retirement in purchasing an insurance product with a portion of their savings that would begin providing guaranteed monthly income for the rest of the worker’s (or their spouse’s) life at some point in the future, such as age 80 or 85. Eight percent of workers indicated they were very interested and 30 percent reported they were somewhat interested, while 21 percent said they were not too interested and 38 percent said they were not at all interested. EBRI’s research showed that that the level of interest in purchasing a longevity annuity is strongly associated with how strongly the worker believes they will live to age 85. Nearly one-half (47 percent) of those who believed it was “very likely” that they would live until at least age 85 were either somewhat interested or very interested in purchasing such a product; however, this percentage dropped to 41 for those who believed it was “somewhat likely” that they would live until at least age 85. One-quarter (25 percent) of those who believed that they were either “not too likely” or “not at all likely” to live until at least age 85 reported that they were interested in buying such an annuity. A similar relationship was found between the level of interest in purchasing a longevity annuity and a worker’s perceived likelihood of living to age 95. In this case, more than one-half (53 percent) of those who believed it was “very likely” or “somewhat likely” that they would live until at least age 95 were either somewhat interested or very interested in purchasing such a product. This percentage dropped to 35 percent for those who believed it was “not too likely” that they would live until at least age 95 and 30 percent for those who believed that they were “not at all likely” to live until at least age 95. Workers ages 45 or younger — regardless of household income — were much more likely to be interested in purchasing a longevity annuity than their older

HOW A DIA CONTRIBUTES TO A SUCCESSFUL RETIREMENT ANNUITY

The Retirement Readiness Rating is an analysis of those estimated to be at risk of not having sufficient retirement resources to pay for basic expenses and uninsured health care costs.

Percentage of 401(k) Balance at Age 65 Used to Purchase a DIA Deferring 20 Years

Among other things, the analysis estimates how age, relative level of pre-retirement income, and eligibility for participation in a defined contribution plan (principally a 401(k) plan) affect the prospects of running out of money in retirement. It also shows how long early baby boomers' resources are likely to last in retirement. counterparts. EBRI researchers attributed some of this to public perceptions of the future solvency of Social Security. The percentage of workers ages 45 or younger interested in a longevity annuity was 40 percent for those who believed Social Security would be a major source of income in retirement; however, it increased to 47 percent for those who believed it would be only a minor source of retirement income. The portion of those who expressed interest in a longevity annuity increased to 59 percent for younger workers who believed Social Security will not be a source of income in retirement at all.

Why The Reluctance To Buy?

If purchasing a DIA leads to a higher retirement readiness, then why aren’t more people buying them? DIAs and qualified longevity annuity contracts are a good alternative for those who do not want to put their entire 401(k) balance into a SPIA on retirement, VanDerhei said. “I always thought QLACs or DIAs would be the perfect antidote to people not wanting to give up flexibility by sticking their entire 401(k) account balance into a SPIA,” he said. “With a SPIA, even though people have longevity protection, if something happens and they need money for long-term care expenses

For households currently ages 35–64 who have a 401(k) balance at retirement age (65). * Second death for couples Source: EBRI Retirement Security Projection Model® Version 3427

or something happens to the house, they didn’t have that flexibility. So I think there’s always been that reluctance on the part of many retirees or near-retirees to, in essence, give up all or part of their account balance to buy a SPIA.” VanDerhei began studying DIAs and QLACs in 2015, looking at the ways software programs have been modified to show the relative advantages of these types of annuities over other annuities. But all the number-crunching in the world can’t account for life’s uncertainties, he said. “What happens if you have a long-term care situation, and you need money for assisted living or a nursing home? If you put too much of your account balance in a [a DIA or QLAC], if you have a situation such as dealing with nursing home costs that otherwise you might have been able to handle, suddenly you no longer have those assets readily available and you might have to end up on Medicaid. There’s a really difficult trade-off going on here.”

What About A Death Benefit?

VanDerhei said what most surprised him in conducting the research was that people were interested in seeing the advantages of having a death benefit included in the DIA, so that if the account holder

died between the ages of 65 and 84, there would be a return of premium. He said he had a “hunch” that advisors are finding it difficult to sell DIAs and QLACs without a benefit that kicks in if the account holder dies between the ages of 65 and 84. “If you put money into a product that isn’t going to pay out for 20 years and you die within those 20 years, what happens?” he asked. “My surprise was the incredible desire to see results with death benefits presented,” he said. “If you’re going to get the death benefit between 65 and 84, obviously for any dollar of premium you’re going to get less in benefits if you make it to age 85. So there’s this trade-off going on.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback. com. Follow her on Twitter @INNsusan.

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April 2019 » InsuranceNewsNet Magazine

HEALTH/BENEFITSWIRES

QUOTABLE

What’s Up With Amazon And Health Care? Last year, three heavyweights in

the business world — Amazon, Berkshire Hathaway and J.P. Morgan — announced they were forming a joint venture known as ABC that some observers thought would upend the health care business. So what are they really doing? Some of ABC’s secrets were made public recently when sealed testimony in a court case was made public by a judge. It turns out that ABC is primarily focused on “things around insurance complexity,” said ABC Chief Operating Officer Jack Stoddard. For example, ABC is exploring whether it can “reinvent what insurance looks like in terms of benefit design,” he said. Stoddard emphasized ABC is not looking to uproot insurers, health care providers and pharmacy benefit managers, but work with them. ABC is particularly interested in the pharmacy aspect of health care, he said. Although he said ABC has no plans to compete in the pharmacy space, the venture “will explore whether it can contract with existing pharmacy benefit managers to get more transparency and to actually understand what the costs are.”

NATIONAL HEALTH EXPENDITURES TO HIT $6T BY 2027

The U.S. health care tab keeps going up. National health expenditure growth is expected to average 5.5 percent annually from 2018-2027, reaching nearly $6 trillion by 2027, according to the independent Office of the Actuary at the Centers for Medicare & Medicaid Services. Growth in national health spending is projected to be faster than projected growth in Gross Domestic Product by 0.8 percentage points over the same period. As a result, the report projects the health share of GDP to rise from 17.9 percent in 2017 to 19.4 percent by 2027. The outlook for national health spending and enrollment over the next decade is expected to be driven primarily by demographic factors such as the baby boomers continuing to age from private insurance DID YOU

KNOW

into Medicare, and increases in prices for medical goods and services.

RURAL HOSPITALS AT RISK OF CLOSING

The nation’s rural hospitals are becoming an endangered species in the health care world. One in five rural hospitals is at a high risk of closing unless their financial situation improves, according to a Navigant analysis. We’re talking 430 hospitals across 43 states, and employing 150,000 people.

These hospitals would be missed by the communities they serve as the study shows that 64 percent of these facilities are considered essential to their communities’

The sick people are helping to subsidize the healthy people. That’s not how insurance is supposed to work. — Scott Gottlieb, U.S. Food and Drug Administration commissioner

health and economic well-being. Multiple factors have contributed to this crisis, the study suggests. They include low rural population growth, low rates of reimbursement, a decline in inpatient care, and an inability for hospitals to leverage technology due to a lack of capital.

OLDER CONSUMERS LIKE SHORTTERM PLANS

Older consumers are more likely than younger ones to consider short-term health insurance as an alternative to Affordable Care Act plans. That’s according to an eHealth survey. What makes short-term insurance so attractive to this age group? Affordability is the main reason, according to eHealth. Seven out of 10 respondents ages 55 to 64 said affordability is their primary reason for choosing short-term coverage. Nearly nine out of 10 said low premiums were more important than comprehensive benefits to them. And these older enrollees want to keep their short-term coverage, the survey showed. About two-thirds of those ages 55 to 64 said they want to retain shortterm coverage for seven months or longer. This compares with 56 percent of those between the ages of 18 and 24 reporting they intend to keep their short-term coverage for no more than six months.

ACA marketplace silver plans impose higher cost-sharing for prescription drugs than do employer-based plans.

InsuranceNewsNet Magazine » April 2019

Source: Modern Healthcare

SIGNATURE GUARANTEED UNIVERSAL LIFE INSURANCE HIGHLY COMPETITIVE PRICING Signature GUL premiums are competitive in recurring and short-pay scenarios. Run a quote for your client today! Recurring Premium

10-Year Short-Pay Premium

Company

Annual Premium

Company

Annual Premium

American National

$32,022

American National

$53,209

Protective

$33,389

American General with ROP

$58,892

Lincoln Financial

$34,245

North American

$59,320

Symetra with ROP

$35,267

Nationwide with ROP

$60,938

American General with ROP

$35,606

Protective

$61,658

Nationwide with ROP

$36,834

Symetra with ROP

$62,357

North American

$38,528

Lincoln Financial

$64,143

Assumptions for both scenarios: Age 70, Standard, Male, Nonsmoker, $1,000,000 to Age 100

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For more information call 1-888-501-4043 today! The competitor comparison from carrier illustration software is current as of 01.17.2019. Premiums are rounded to the nearest dollar. American National cannot guarantee the accuracy and completeness of the premium comparison. Data is subject to change at any time. The companies listed are believed to offer comparable products to Signature GUL. 1) Cash-Out Rider may not be available on all substandard rated policies and some may only qualify for the Cash-Out option in the 15th Policy anniversary. 2) The riders are offered at no additional premium. However, the accelerated payment will be less than the requested death benefit because it will be reduced by an actuarial discount and an administrative fee of up to $500. The amount of the reduction is primarily dependent on American Nationalâ&#x20AC;&#x2122;s determination of the insuredâ&#x20AC;&#x2122;s life expectancy at the time of election. Outstanding policy loans will reduce the amount of the benefit payment. Policy Form Series: SGUL18; GCOR15; ABR14-TM; ABR14-CH; ABR14-CT (Forms may vary by state). American National Insurance Company, Galveston, Texas.

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01.19

HEALTH/BENEFITS

Health Savings Accounts Are Part Of A Healthy Retirement From their tax advantages to their investment potential, health savings accounts have a range of benefits to both workers and retirees.

By Sam Odishoo

inancial wellness is becoming a well-known phrase in today’s workplace. Employees consistently rank finances as one of the primary stressors in their lives. As a result, employers are offering tools to ease their workers’ financial stress. The health savings account is often overlooked when considering financial wellness. Most consumers are aware that an HSA provides a tax-advantaged savings component for qualified medical expenses. But less is known about the HSA’s role as a retirement planning and investment vehicle. Let’s look at the various financial benefits provided by HSAs from both a preretirement and postretirement perspective.

Preretirement

Employers have been quick to board the financial wellness train, because financially-savvy employees are more productive workers. Properly implemented and reinforced HSA programs contribute to a robust benefits package for several reasons. Tax advantages. HSAs allow employees to accumulate tax-advantaged funds every year as long as they are enrolled in an HSA-qualified medical plan. Unlike flexible spending accounts or health reimbursement accounts, HSA funds are portable, which means that available funds can be rolled over from year to year and from employer to employer. HSAs are owned solely by the employee, making them ideal vehicles for continuous asset accumulation. As of 2019, the maximum annual 38

InsuranceNewsNet Magazine » April 2019

contribution amount for individuals is $3,500 and $7,000 for families. Individuals above the age of 55 are also entitled to make catch-up contributions equaling an additional $1,000 per year. Contribution maximums increase every year and will continue to do so into the future. As a result, HSAs have emerged as an additional retirement planning instrument similar to a traditional 401(k) or individual retirement account. When employees contribute to their HSAs via payroll deductions, the funds are accumulated on a pretax basis. This pretax advantage reduces the employee’s state and federal income tax liability while also avoiding any FICA taxes. If employers contribute to a participating employee’s HSA, those contribution amounts also are not included in the

employee’s take-home pay while simultaneously decreasing the dollar amount contributed by employers. HSAs allow employees to use the tax-exempt dollars they’ve amassed over time to pay for medical services. Employees who consistently contribute to their HSAs are putting tax-free money aside in the event of future medical expenditures. Now, even if they’re living paycheck to paycheck, as many American workers do, they have prepared themselves and their families for the economic impact of unforeseen health care costs. Retirement planning. Although 401(k)s have traditionally been the most popular retirement accounts, employers are quickly realizing that the tax-advantaged saving potential of an HSA is equal, if not superior, to that of the 401(k).

Now, even if they’re living paycheck to paycheck, as many American workers do, they have prepared themselves and their families for the economic impact of unforeseen health care costs. employee’s taxable income. HSA dollars are tax-exempt even at the point of withdrawal (for qualified medical expenses), creating a triple tax advantage unrivaled in any other similarly structured savings account. Health care savings. While health care costs continue to increase, insurance premiums are growing steadily alongside them. As a means of reducing financial obligation on both sides of the coin, employers and their employees are turning to HSA-qualified medical plans. Pairing a high-deductible health plan with an HSA provides dual savings for employees. Compared to a low-deductible preferred provider organization option, HDHP premiums are significantly less expensive. This increases the

A recent study published by the Employee Benefit Research Institute estimates that the average American couple approaching age 65 will require nearly $300,000 to cover their health care costs during retirement. With medical costs increasing consistently alongside the average human lifespan, that number will continue to climb. These alarming statistics have contributed directly to widespread HSA adoption. Consider the following scenario: » A 30-year-old employee opens an HSA through her employer and contributes $1,500 annually. The employer also provides an annual contribution amount of $1,000. The employee continues to add a joint $2,500 into her HSA each year for

HSAS ARE PART OF A HEALTHY RETIREMENT HEALTH/BENEFITS the next 15 years until she switches employers. Up until now, she has spent only 10 percent of her funds each year on qualified medical expenses, leaving $33,750 in her account. » Her new employer also offers an HSA but does not contribute to the employee’s accounts. By the age of 45, her income has increased, so she can afford to contribute the maximum amount of $3,450 each year (the individual maximum would

the financial stressors from their retirement years. Tax advantages. HSAs function a bit differently in retirement years than they do during employment. As soon as an employee enrolls in Medicare (whether retired or not), they can no longer make HSA contributions or receive contributions from their employer. This is where the sustained accumulation of HSA dollars becomes important, because the account holder can still withdraw funds to pay for

HSA Participation Among Eligible Employees Source: Benefitfocus®

85%

84%

76% 53%

53%

2019 51%

40%

Millennials

2018

81%

50%

36%

Generation X

Baby Boomers

have risen considerably over the years, but for comparative purposes we will use the 2018 maximum). The employee contributes $3,450 annually over the next 10 years until she reaches age 55 and is eligible for catch-up contributions totaling $4,450 annually. She adds $4,450 each year after that until she retires at age 65. » Over the last 20 years, she used only 15 percent of her contribution amount each year for medical expenses. As a new retiree, she will have $100,900 tax-free sitting in her HSA. Now that she is eligible for Medicare and Social Security, she will have significantly bolstered her retirement readiness through her diligent HSA contributions.

Post-Retirement

Retirement is all too often characterized by a fear of the unknown. How much savings will I need to maintain my lifestyle in retirement? HSAs, through their triple tax advantages and long-term savings capabilities, are helping people remove

Traditionalists

All Employees

qualified medical expenses in retirement as a financial supplement to Medicare. HSA withdrawals for medical expenses continue to be tax-free — even while a retired employee is collecting Social Security and enrolled in Medicare. However, 401(k)s and individual retirement accounts are subject to income tax. This has contributed heavily to HSA adoption as a retirement vehicle over the last decade. If an employee withdraws HSA funds for a nonqualified expense before reaching age 65, they are subject to a 20 percent penalty. After age 65, employees and retirees are free to use their HSA dollars for any necessity without being penalized. These nonqualified expenses will be subject to income tax. But if the account holder is retired, these withdrawals will likely be taxed at a lower rate due to the retiree’s decreased income. It is still recommended that HSA dollars are used exclusively for qualified medical expenses in retirement years. However, it’s reassuring to know that an

HSA can be used as an added layer of financial security if nonmedical emergencies arise after the age of 65. Retirement health care. HSAs provide tax-free financial protection from the nearly unavoidable increase in health care expenses among the aging population. Individuals can use their HSA dollars to pay for services such as long-term care, hospice and nursing homes, as well as for home modifications such as ramps and handrails. Individuals are not required to begin withdrawing funds from HSAs when they reach age 70½. As a result, accountholders frequently opt to pay for minor medical expenses out of pocket during their working and early retirement years, leaving their HSA dollars untouched until later in life when the need for the funds is greater. Investment ability. The HSA’s bestkept secret is that accumulated funds are investable. HSA owners can grow their account balance tax-free, plus any dividends or capital gains earned are also non-taxable. Although employees typically view an HSA as a short-term solution for medical expenses, the investment component helps reinforce the HSA as a long-term savings vehicle. To maximize investment potential for employees, it is recommended that employers select an HSA administrator who understands an HSA’s diversified investment options. Many administrators have implemented an array of offerings, from self-directed brokerage accounts that allow HSA owners to invest in stocks, bonds and exchange-traded funds to a wide range of mutual funds available at the owner’s discretion. For HSA account holders who make it through retirement without using all their HSA dollars, the remaining funds can be passed on to their beneficiaries. Surviving spouses are eligible to inherit the unused balance tax-free, but any other beneficiary would be subject to taxation on the basis of the plan’s fair market value. Sam Odishoo is an employee benefits consultant with USI Insurance Services in Chicago. Sam may be contacted at sam. odishoo@innfeedback.com.

April 2019 » InsuranceNewsNet Magazine

NEWSWIRES

QUOTABLE

Only 34% Confident About Their IRA Knowledge

Only about one-third of Americans believe they are knowledgeable about individual retirement accounts, despite the fact that Americans have used traditional IRAs for retirement saving over the past 45 years. LIMRA Secure Retirement Institute found lack of knowledge is the biggest obstacle to investing in an IRA. A LIMRA SRI study revealed only 34 percent of Americans believe they are knowledgeable about IRAs. Men are far more likely than women to say they are knowledgeable about IRAs. Forty-two percent of men consider themselves knowledgeable about IRAs, compared with 27 percent of women. Of those who don’t own an IRA, nearly half (46 percent) said they did not understand enough about IRAs to contribute to them. Older Americans are more likely than younger Americans to own traditional IRAs, LIMRA SRI reported. Almost half (48 percent) of silent generation Americans own an IRA, compared with 30 percent of baby boomers, Generation X and millennials. Ownership of Roth IRAs is much more level across age groups. About one in five boomers (19 percent), Gen X (19 percent) and millennials (18 percent) own a Roth IRA, along with one in six silent generation (16 percent) consumers.

SANDWICH GENERATION LACKS SAVINGS

The sandwich generation risks becoming toast. Members of the sandwich generation — those taking care of elderly parents and raising children at the same time — are finding themselves in a savings squeeze, according to PNC Financial Services Group. “Sandwiches” report they have been unable to build robust emergency savings and retirement account balances primarily due to the strain of financially supporting other family members. Nearly four in 10 of sandwich generation households indicate they do not have an emergency savings fund, and a third have less than $25,000 saved for retirement. The financial issues this population group DID YOU

faces are only going to get worse in the future, as 32 percent said they expect to care for an elderly family member within the next five to 10 years.

FRENCH AND SPANISH ARE THE WORLD’S BIGGEST RETIREMENT WORRIERS

It seems as though the whole world is worried about retirement. Workers in the United States may fear their ability to afford their golden years, but even workers in countries known for their generous safety nets are afraid of retiring broke. ING surveyed almost 15,000 people in Europe, the U.S. and Australia, finding that most people worry whether they’ll have enough money in retirement. France and Spain lead the list of countries whose citizens are worried about having enough retirement funds. Nearly 70 percent of Spanish and 67 percent of French citizens said they fear going broke

KNOW 46% of Americans do not believe they are prepared for retirement. Source: Source:LIMRA Gallup poll

InsuranceNewsNet Magazine » April 2019

Americans have not outgrown human advisors. — Regina Bedoya, Million Dollar Round Table first vice president

in their post-employment years. In the U.S., 62 percent said they are worried about their retirement finances. The Dutch are the least concerned about retirement, with 40 percent worrying about having enough money to retire.

FURLOUGHED WORKERS RAIDED RETIREMENT FUNDS

How did the 800,000 federal employees who were affected by the government shutdown survive without a paycheck? More than one quarter of them withdrew money from their retirement funds to help make it through the 35 days in which they went unpaid, according to a Prudential study. In addition, four in 10 of these federal workers borrowed money from family or friends, while 20 percent took out a bank loan to help pay expenses until they went back to work. The silver lining in this scenario, the study found, is that workers are more aware of the importance of having an emergency fund. Fifty-two percent of the federal workers and spouses who were surveyed said they plan to add more money to their existing emergency funds. Ten percent who don’t have emergency savings funds plan to start them.

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More Than Math: Helping Clients Find Purpose In Planning Those who are successful in their post-employment years are the ones who retire to something, instead of from something. • Cassie Miller

or downsizing; they had the least amount of time to prepare for retirement.

hen Laurie Adams convinced her husband to retire early in 1997, she thought it would be a great idea. She and her son would see him more often, and he would be free to pursue other endeavors that the high demands of his hospitality industry job wouldn’t allow him to do. Adams, a financial planner at Country Financial in Peoria Heights, Ill., soon realized that she was wrong.

» The Today’s Traditionalists — Living the traditional idea of retirement as a time of “slowing down.”

helping her husband transition into retiree life prompted Adams to start focusing on the non-math aspects of retirement with her clients to ensure they really are retirement-ready.

The Research

While teaching retirement planning at St. Ambrose University, Adams spent hours poring over research on retirement and teaching her class how those findings would impact their clients’ experiences.

» The Ageless Explorers — Same attributes as Live For Todays, but planned financially and emotionally; can reinvent themselves throughout retirement. After reviewing these personality types, Adams concluded that clients who are the most successful in retirement are the ones who planned the longest. “Meaning they retired to something rather than from something,” Adams said.

It All Starts With A Notebook

So how can advisors help ensure their clients are successful in retirement? Adams recommends a notebook and three lists. The notebook idea comes from author and retirement expert Mitch Anthony, who suggested in the early 2000s that holistic planning would become an integral part of the non-math portion of retirement planning. Using the names Dick and Jane for example, the three lists should detail what each one wants their life to look like in retirement.

Laurie Adams employed a more holistic approach to retirement planning after her husband Mark struggled in his transition to retired life.

“I quickly realized that retiring from something was not a good enough plan,” Adams said. Her husband formerly managed 250 people, but he now placed his managerial demands on just two people — his wife and son. In addition to losing the high demands of his former role, Adams’s husband lost his social circle. “Everyone he knew was still working, and he worked too many hours to have a social network outside of work,” Adams said. The eye-opening experiences of 42

InsuranceNewsNet Magazine » April 2019

“Most people had the idea that retirement was a period of slowing down,” Adams said. She pointed to the four different retiree personality types found in the Re-visioning Retirement study by aging expert Ken Dychtwald. Those types are: » The Live For Todays — All about new experiences; haven’t done a good job of saving for retirement. » The Sick And Tireds — Those who were forced into retirement due to health

List 1: Things Dick will do alone in retirement. List 2: Things Jane will do alone in retirement. List 3: Things Dick and Jane will do together in retirement. “That is a huge conversation starter with clients,” Adams said. “Usually, when you start discussing retirement with a couple, one of them looks uncomfortable. A lot of the time, the one who looks

MORE THAN MATH: HELPING CLIENTS FIND PURPOSE IN PLANNING

Maslow Meets Retirement “The hierarchy [Abraham] Maslow offered was: physical survival, safety, love, esteem and self-actualization. “For the purposes of a financial/life discussion, I have taken the liberty of renaming and juxtaposing two categories: love and esteem. In the Hierarchy Dream of Financial Needs, love becomes “gifting.” Money Maslow defined love as having to do Gift Money with belonging — to a spouse, a family a community or a group — and Freedom Money gifting is most often the material Safety Money expression of love. “What Maslow called esteem Survival Money I have called freedom. Maslow was referring to the self-esteem that results from doing things well and being recognized for it. In the Income for Life model, this is categorized under “freedom money” because unless people have the freedom to do what they want with their occupational lives, they will be missing the esteem and satisfaction that come from doing what they’re best at.” — Mitch Anthony From ‘Determine Your Hierarchy of Needs for Retirement,’ Nextavenue.org

uncomfortable is the spouse who has been staying at home. They’ve seen how their friends’ lives changed when their spouses retired.” Adams saw first-hand how her husband changed once he retired. “For the first six months, all he did was sleep and worry,” Adams said. “I was just trying to save him from that job, but I saw how retiring from something is a really bad idea.” Because of her personal experience, Adams understood the uncomfortable spouse at the other end of the table. Without a social network and plan of things to do and see in retirement, no amount of money or financial planning could alleviate the worry. Eventually, as her husband began to pursue new interests and career paths, the worry started to dissipate, Adams said. But, she recognizes that it could have been avoided altogether if her husband had planned for retirement in the first place. “Really working on the non-math part of it is an important part of retirement planning,” Adams said. Money should be treated as a utility, not as an end-all, when it comes to retirement planning, said Dennis Nolte of Oviedo, Fla., a former therapist turned financial planner. “I tend to address the relational aspects of clients’ lives,” Nolte said. “Purpose is front and center.” Helping people find their purpose is key to developing a well-rounded life in retirement, and the reason why Adams employs Mitch Anthony’s notebook idea. As more of the industry begins to move in that direction, Adams said it is important for advisors to talk about their clients’ vision for retirement early and often, make sure they share the same vision and discuss how to mesh their individual personalities into a plan that alleviates the stress for both individuals.

Nolte couldn’t agree more, adding that personal development is crucial for success in retirement. “Many folks don’t have a personal mission statement or consider retirement a new career,” Nolte said. “Those clients who have been networking outside of work (family, community, church, boards, even part-time employment/consulting) are much more prepared and happy in retirement.” The “financial therapist,” as his clients affectionately call him, shares with them a Wall Street Journal article quoting the Roman orator Cicero to guide pre-retirees in their quest for purpose in retirement. “How wonderful it is for the soul when — after so many struggles with lust, ambition, strife, quarreling and other passions — these battles are at last ended and it can return, as they say, to live within itself,” Cicero offered. Adams may not be a former therapist, but she jokes that her approach is reminiscent of counseling — especially with retirement-age couples. Adams said failure to share the same vision for retirement has led to a spike in divorce rates in retirement-age couples. In fact, according to a 2017 Pew Research Center report, divorce rates among adults 50 and older have tripled since the 1990s, which is why Adams puts so much emphasis on each individual knowing what they want from retirement before they get there. “It’s very important to get that conversation out there now, so they can work it out while they are still working,” she said. Adams encourages advisors to have their clients create a list and ask, “How’s the list going?” AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.

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INBALANCEWIRES

Catch-Up Sleep Leads To Weight Gain So you burned the candle at both ends all week but you say it’s OK because

you’ll catch up on sleep over the weekend. Not so fast. The belief that extra hours of z’s on the weekend can make up for a week’s worth of sleep deprivation is not a good idea for your weight or your overall health, experts say. “Weekend catch-up sleep is not protective,” Dr. Vsevolod Polotsky, director of sleep research at the Johns Hopkins University School of Medicine, told CNN. “The bottom line of this study is that even if you sleep longer on weekends, if you continue to sleep poorly, you will still eat too much, and you will still gain weight.” Hunger hormones are affected by chronic sleep loss, Polotsky said. People who get less sleep tend to have higher levels of the hormone that increases appetite, and that leads to overeating. Sleeping in on the weekends doesn’t correct the body’s inability to regulate blood sugar if that weekend is followed by a workweek or school week full of insufficient sleep, said Kenneth Wright Jr., who directs the sleep lab at the University of Colorado in Boulder.

FALLING CAN BE DEADLY BUT PREVENTABLE

Every 19 minutes, an adult in the United States dies from a fall. Falls are the leading cause of injury among older adults. But falling is not an inevitable consequence of aging. Most age-related falls are preventable, experts say, and there are ways you can minimize the risk for yourself or an older family member. One way is through exercise to maintain leg strength, balance, endurance and coordination that can help you “catch yourself” and avoid a fall if you should trip. Tai Chi is a low-impact way to improve balance. Also, practice standing on one foot when you brush your teeth or wash dishes. Other fall-prevention tactics include wearing appropriate footwear both inside and outside the house, getting rid of clutter and loose throw rugs, improving lighting inside the home, and reviewing medications for their ability to cause dizziness.

Americans are turning their backs on beer, Bloomberg reports. Alcohol consumption in the United States hit its third straight year of declines in 2018, with a 2.8 percent drop in beer sales fueling that trend. Beer sales dropped even though craft beer consumption rose 15 percent over the same time period, according to the IWSR Drinks Market Analysis. Why are beer sales over a barrel? Bloomberg said consumers are shunning beverages with calories and carbohydrates, plus consumers have a dizzying array of beverage choices available to them. Lower-calorie drinks such as spiked seltzers and sparkling wines, as well as a trend toward distilled spirits, are guiding consumers’ choice of what to put in their glasses. Consumers have another option for getting

KNOW Heart attack rates among women ages 35-54 44

increased by 10 percent between 1995 and 2014. Source: Circulation

InsuranceNewsNet Magazine » April 2019

People treat themselves like machines. They consistently overschedule, overwork and overdo. — Dr. Matthew Edlund, author of The Power of Rest: Why Sleep Alone Is Not Enough

buzzed — legal marijuana. As the legalization of weed spreads nationally, pot is viewed by many modern consumers as healthier than alcohol, particularly among younger adults, Bloomberg reported.

AMERICANS FALLING OUT OF LOVE WITH BEER

DID YOU

QUOTABLE

THE POWER OF CHECKING IN AT WORK

Asking the simple question “How are you doing?” can have a powerful effect on workplace relationships. The EY Belonging Barometer study surveyed 1,000 employed American adults and found that more than 40 percent feel physically and emotionally isolated in the workplace. The solution? Giving employees more opportunities to check in with each other. The study found that 39 percent of respondents felt the greatest sense of belonging when their colleagues check in with them, both personally and professionally. These check-ins were more important to employees than face time with senior leadership, invitations to events or being copied in on emails. But study also found checking in doesn’t have to occur in-person. Respondents indicated some may want to sit and talk, while others may prefer a digital chat.

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INBALANCE

It Was A Very Good Year: Buying Wine Without Breaking The Bank Fine wine can be an expensive passion but there are ways to buy a quality vintage at a reasonable price. By Bryce Sanders

ine and food can be a magical combination. Maybe wine is the only subject friends in your social circle talk about. As you climb the corporate ladder, maybe you discovered most members of senior management are wine fans. Wine has become your passion. But what an expensive passion! True, you can buy a bottle of Woodbridge cabernet sauvignon from California for about $6. It contains about 25 ounces. A bottle of Bryant Family Vineyard cabernet also contains 25 ounces, but it sells for $794 a bottle. Silver, the precious metal, sold for $15.60 an ounce as of the beginning of this year. Ounce for ounce, the Bryant Family Vineyard wine is roughly twice the price of silver! Wine is meant to be enjoyed over dinner with friends. How can you buy and serve fine wine that has “snob appeal” without breaking the bank? Here are 10 ways to go about it. 46

InsuranceNewsNet Magazine » April 2019

» Buy great names from average years. Wines with the ultimate in snob appeal come from France. The big names in Burgundy and Bordeaux are the stars of the international auction market. In both places “Grand Cru” are the magic words. In Bordeaux, there are 62 wines tracing back to the 1855 classification. (St. Emilion, a region within Bordeaux, uses the same words, but they have a different meaning.) Technological advances have largely eliminated poor years, yet the industry differentiates between “great years” and everything else. Chateau Lynch Bages, an excellent red from the Paulliac region, averages $161 a bottle in the 2016 vintage. The critics score is 94 out of 100 points. Lynch Bages from the 2013 vintage averages about $101 per bottle. It gets 90 out of 100 from the critics. » Second labels. Wine prices are high because of supply and demand. The Bordeaux chateau owners are smart. They also release “second” wines from younger vines. Same land. Same talented winemakers. Using

Lynch Bages as an example again, Echo de Lynch Bages (clever name, yes?) sells for about $47 a bottle in the 2016 vintage. It scores 90 out of 100. It’s a cost-effective way to buy wines from really great properties in really great vintages. » Follow the winemaker. Heidi Barrett is an example of a famous California winemaker. She was synonymous with Screaming Eagle, the ultimate cult California cabernet in the 1990s. It sells for about $3,000 a bottle. Among the properties where she consults is Paradigm, whose 2014 cabernet averages about $84 a bottle. Same winemaking know-how. Cabernet grapes. Napa Valley. The prestige follows the winemaker. » Follow the owner. Domaine de la Romanee Conti is the most famous Burgundy estate in the world. Romanee Conti is the top DRC wine. The vineyard is only four acres, producing about 3,500 bottles. Amazingly, the wine sells for about $23,904 per bottle

BUYING WINE WITHOUT BREAKING THE BANK INBALANCE in the 2015 vintage! Who runs the place? Aubert de Villaine, the co-director. Does he own other vineyards elsewhere? Yes. He also owns Domaine A&P Villaine in the Bouzeron, a Burgundy sub-region. This excellent white wine, made from the aligoté grape, runs about $35 per bottle. A good wine shop should be able to order it for you.

» Find a good wine merchant. Buying wine isn’t like buying something online. It’s like having a financial advisor who knows you well. Develop a relationship, let them know what you like, buy what they suggest and give feedback. These closeouts are often just a couple of cases here and there. You get a discreet email or phone call asking if you are interested. This gets you into the running for wines on allocation. Those wines never make it to the shelves.

» Follow the chateau. The Bordeaux chateau owners have a problem. They own all the good land. To get more, they need to buy out a neighbor. People aren’t selling, except at astronomical prices. One solution is for the famous families to look elsewhere in France or around the world, buy land, plant grapes, send their staff and oversee the whole operation. Domaines Baron de Rothschild (Lafite) do this quite well. Chateau d’Aussieres in Corbieres and, further afield, Bodegas Caro in Argentina are good examples. Prices on a recent vintage average $27 and $65 per bottle, respectively. The most famous name in Bordeaux isn’t going to attach its name to a low-quality operation.

» Learn about rosé wine. It’s hot. It’s also comparatively inexpensive. Provence, France, is considered the traditional home of rosé wines. If a top Bordeaux might run several hundred dollars a bottle and a top Burgundy over a thousand, a French rosé with pedigree might cost you $50 a bottle. Here’s an example. Domaine de Triennes in Provence was formed by Aubert de Villaine and Jacques Seysses, two of Burgundy’s most famous names. Obviously, they are going to put care into the wines they produce. This rosé runs about $17 a bottle.

» Closeouts. Now to more practical stuff. Wine is heavy, bulky and fragile. In the United States, it’s mostly sold through distributors who maintain warehouses. The wines at the top of the collectability pyramid sell on allocation, they disappear quickly. Less popular Grand Cru wines further down the list may be sitting in the warehouse collecting dust. Maybe there wasn’t that much demand for that vintage. The distributors need to free up storage space for the incoming vintage. It’s like car dealers announcing “We’ve got to clear out the 2018 models to make way for the 2019s!” They often do significant price cuts quietly to move inventory. Find a wine merchant that gets these kinds of deals.

» Discover Chablis. It’s a white wine from Burgundy made from the chardonnay grape. It’s farther north. The soil is chalk-based. Unlike other famous Burgundies, they don’t usually age wine in oak barrels. Stainless steel is more common. It has a characteristically flinty, mineral taste. You can pick it out in a lineup. It’s also comparatively inexpensive. Grand Cru and Premier Cru are two top levels. A Grand Cru example from a good producer will set you back about $70-$80 a bottle. Premier Cru, the next level down, might run about $40 a bottle. Premier Cru white Burgundy from Puligny Montrachet, farther south, might set you back $388 a bottle.

» Champagne. It has great brand awareness. Many people are Champagne snobs. The top-of-the-line bottles are household names. Dom Pérignon is the flagship of the Moët Champagne brand. A current vintage should run about $164 a bottle. It’s available almost everywhere. The major Champagne houses each have their own Tête du cuvée or “top of the line” names. Vintage Champagne is a notch down, but still considered serious by fellow wine fans. If Dom is about $164 a bottle and Moët & Chandon non-vintage is about $45 a bottle, the Moët 2009 averages about $73 a bottle.

Other Ways To Buy Wine

You want to run with the big dogs. Hold your own with wine fans, yet not break the bank. There are plenty of other ways to buy tasty wine cheaply, but they lack snob appeal. Costco sells excellent wine, even French Champagne, under its Kirkland label. Trader Joe’s sells good wine at reasonable prices. Bottom line: There are lots of good deals out there.

Where Do These Prices Come From?

Technology makes researching wine prices easy. Wine-searcher.com is a site that allows you to enter a wine name and find who sells it and at what price in your state, across the country or around the world. Your primary point of contact is your local wine merchant, but this site provides a general range. Bryce Sanders is president of Perceptive Business Solutions. He provides high-networth client acquisition training for the financial services industry. He is the author of the book, Captivating The Wealthy Investor. Bryce may be contacted at bryce.sanders@innfeedback.com.

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April 2019 » InsuranceNewsNet Magazine

INBALANCE Chaz Niell/Icon Sportswire

Venus Williams turned to a raw vegan diet to fight Sjögren’s syndrome, a debilitating autoimmune disorder that led her to drop out of the 2011 U.S. Open. The diet improved her condition, convincing her sister, Serena, to also go vegan.

How To Be Bulletproof With Your Diet — If You Dare You have the power to live longer and enjoy those extra years in top health. By Steven A. Morelli

f there were a drug that could not only stop heart disease and type 2 diabetes but reverse it, would you take it? Oh, and it may also cure some cancers, stop Alzheimer’s disease and treat depression — how about now? It is safe — the drug has no harmful side effects. It only seems to have benefits, including an improvement in your sex life. You might demand a prescription right this minute from your doctor and bust down the pharmacy doors to get a lifetime supply. Except it doesn’t require a prescription and it’s not available at the drug store. That’s because it’s not a drug at all. It is a plant-based diet. 48

InsuranceNewsNet Magazine » April 2019

Well, that’s just crazy, you might think. That’s way too extreme. In this era of growing awareness that holistic wellness is firmly rooted in physical health, it might be time to think the unthinkable.

Slow-Motion Suicide

The current American diet clearly is not leading to peak health. Seven in 10 Americans are either overweight or obese, according to federal statistics. And it is only getting worse with younger generations. Extreme obesity was rare 50 years ago. Now, nearly 10 percent of people ages 12 to 19 tip that end of the scale, according to the National Institutes of Health. Americans are living larger, but also shorter. Starting in 2015, the United States began its first sustained increase in mortality rates since the flu pandemic of 1918. All the top causes of death in the United States have a lifestyle connection.

Excluding accidents, the top causes of death are:

1. Heart disease 2. Cancer 3. Respiratory disease 4. Stroke 5. Alzheimer’s disease 6. Diabetes

This is actually more of a top five list because heart disease and strokes are both considered a cardiovascular disease, which Dr. Caldwell Esselstyn calls a “foodborne” illness. Esselstyn became a proponent of a plant-based diet in the late 1970s when he was treating women for breast cancer in Cleveland. He was frustrated with perpetually operating to remove cancer rather than preventing it. When he looked for answers globally, he noticed that Kenya had a fraction of the U.S. breast cancer rate. Then he found the same dynamic in Japan, which has the world’s highest

HOW TO BE BULLETPROOF WITH YOUR DIET — IF YOU DARE INBALANCE life expectancy. He also saw that when Japanese women moved to the United States, within a generation or two, they had the same breast cancer rate as the average American. Prostate cancer was another rare condition — killing only 18 men in all of Japan in 1958. These cultures also lacked heart disease. It was simply non-existent. Back at the Cleveland Clinic, Esselstyn asked for a small group of patients with advanced heart disease to treat. A colleague called them “the walking dead.” Within a month and a half, their conditions reversed with a plant-based diet. He is far from the first physician or researcher to see these results. Researchers such as Dr. Dean Ornish have shown that a vegan diet can reverse heart disease, type 2 diabetes and maybe even cancer. The Blue Zones book was the result of another comparison of cultures by Dan Buettner. He identified five areas where people lived longer, healthier lives, meaning they would age into their 90s and 100s still tending their gardens and the other chores and joys of their lives. These were disparate cultures with little in common except a diet that was almost all plant-based. One of them was Okinawa, for example. Before significant Western contact, the residents had among the highest number of people in their 100s who were also still in good health. Even though Okinawa was the

Plant-Based Vs. Vegan A vegan diet is plant-based but a plant-based diet is not necessarily vegan. Both eliminate any animal products — meat, fish and dairy — but the motivation is different. That is a general understanding, however. Even some people in those categories use the terms interchangeably. VEGAN: This is more of a lifestyle built around not exploiting animals in any way. Not only would it exclude animal products in diet but also in clothing and in other products. For example, they might avoid products that were tested on animals. PLANT-BASED: This phrase has become popular as people go without animal products for health rather than ethics. Some do not like the association with the word “vegan.” And on the other hand, some vegans want to distinguish themselves as doing it for animals. poorest of Japan’s 47 prefectures, it was also the healthiest. Dr. T. Colin Campbell, a Cornell University researcher, found that the traditional Okinawan diet was 70 percent sweet potato. Yes, loaded with carbs. And although they lived on an island, their diet was only 1 percent fish. Until 1949, that is. Even though World War II smashed into the island, the

impact was not as devastating as the Western diet that followed. Since then, longevity has been plummeting and obesity increasing — growing along with Western diseases, such as heart disease and cancer.

How Does It Work?

So, why does a plant-based diet improve health? Key reasons have to do with

REUTERS/Stoyan Nenov

Kendrick Farris, vegan since 2014, was the only male weightlifter of Team USA to qualify for the Rio Olympics in 2016 and has been called America’s strongest weightlifter.

April 2019 » InsuranceNewsNet Magazine

INBALANCE HOW TO BE BULLETPROOF WITH YOUR DIET — IF YOU DARE

But Where Do You Get Your Protein? Tom Nowak knows what you would probably ask about his vegan diet. “Where do you get your protein?” he said, but could not help chuckling as he recalled the typical reaction. “That’s not the real question. It’s where do vegans get their patience?”

Tom Nowak

That is because protein deficiency in any diet with sufficient calories is rare. In fact, many of the planet’s largest animals, such as elephants, are herbivores. Powerful apes and gorillas are almost exclusively herbivores. Before Nowak was a financial advisor, he was a chemist in the pharmaceutical industry. So he knows something about biochemistry — enough to know that protein comes from plants. When humans eat animals, they are consuming the protein that the animal’s body made from plants. “That’s how everybody else gets their protein and we are just buffaloed, so to speak, into believing the messaging out there that vegans can’t get enough protein,” Nowak said. “Even though the best tennis player in the world is vegan; the No. 1 weightlifter is vegan. I met an 85-year-old triathlete and she’s a vegan. So they get plenty of protein.” If anything, Americans suffer from too much protein. It might seem that if some protein grows muscle, then more protein would be better, but excess protein does not build muscle it grows fat. Excess protein, particularly the kind from animals, overloads kidneys and is considered a factor in the increase in renal failure. The U.S. Department of Agriculture’s daily recommendation is 56 grams of protein for men and 46 for women. Although some researchers are doubting if that is too high, Americans are already doubling that by taking in about 100 grams a day. In fact, even with all the growing attention to healthier eating, Americans ate more red meat and poultry than ever, 222.2 pounds per person in 2018, according to the USDA. — Steven A. Morelli inflammation, oxidation and cholesterol. Scientists argue over which one causes cardiovascular disease, diabetes and cancer. For example, LDL cholesterol has been implicated in heart disease but lately some scientists have argued it is more related to inflammation. Here is a simple answer: all three are related to animal products. They are also related to each other, one giving rise to the other. Inflammation: When your body protects itself, it produces the conditions leading to inflammation, such as a lump 50

InsuranceNewsNet Magazine » April 2019

on the head after a bump. You do the same when you consume animal products. It is your body saying that this stuff does not belong there. Inflammation leads to many conditions — arthritis, of course, but also nearly every other major illness, such as heart disease, cancer, auto-immune disorders and even depression. With any of these conditions, it is no surprise that one of the first things a doctor will usually talk about is diet. Oxidation: When you see rust, you are looking at oxidation. Technically, it is the loss of an electron from a molecule or

atom. In your body, that creates an unstable element (aka, a free radical) that floats around, looking to bind with something else. Those free radicals are actually beneficial in getting rid of toxins, but are really damaging when they overwhelm antioxidants. Free radicals can break down tissue, organs, DNA and proteins. Oxidative stress has been linked to heart disease, diabetes and cancer, along with many other maladies. A leading culprit is heme iron, the kind you get from animal products. That iron is more readily absorbed in the body, but it is too much of the wrong kind of iron because it produces excess free radicals. Antioxidants from berries, nuts and dark chocolate (woohoo!) help achieve a healthy balance. Cholesterol: Your body generates its own cholesterol and you do not need it from other sources, which would be animal protein and fat — meat, dairy and fish. Fruits, vegetables and grains do not have cholesterol. Even high-fat plant foods, such as nuts, do not contain cholesterol. Your body cannot burn off cholesterol as it can other fats. There is no “good” cholesterol that you could consume, only what your body makes.

Yeah, But …

Someone hearing all this might say, “Yeah, but you aren’t getting the essential nutrients …” So, here are a few common ones. Vitamin B12: People suddenly get really worried about B12 when the subject of a vegan diet comes up. And B12 is in fact vital for nerve and blood cell health. But B12 is produced by bacteria in the ground — not by animals or plants. It gets into animals through contamination or supplementation. Basically, before humans discovered hygiene, we were lapping up all sorts of B12. According to a Tufts University study, 40 percent of Americans don’t have enough B12 — a percentage far surpassing the vegan population (about 3 percent of the total U.S. population). Supplementing is the only way to get B12 and there is some argument that the most effective absorption is from drops under the tongue (sublingually). Omega-3: This fat protects cell walls. A lack of omega-3 contributes to many maladies, including heart disease and stroke. Omega-3 must be ingested because animals cannot create it. Fish has

HOW TO BE BULLETPROOF WITH YOUR DIET — IF YOU DARE INBALANCE been identified as a good source, but the Journal of the American Medical Association published an analysis in 2018 of 10 studies that showed “supplementation with marine-derived omega-3 fatty acids for a mean of 4.4 years had no

with cow’s milk. But where do cows get it? They used to get it through pasture grass, but now alfalfa or other grass is added to their feed. Leafy greens such as kale provide a high level of calcium that is actually better absorbed than calcium

Let food be thy medicine and medicine be thy food. — Hippocrates significant association with reductions in fatal or nonfatal coronary heart disease or any major vascular events.” In fact, because that omega-3 is derived from fatty fish at the top of the food chain, such as salmon, it is accompanied by many toxic substances, particularly mercury. Plantbased sources are walnuts and seeds such as flax and chia (all good to put into your almond milk yogurt!). Calcium: This mineral is essential to bone health and has long been associated

from dairy. Also, studies have shown that countries with high dairy consumption have a higher osteoporosis rate than other countries. Those are just a few of the objections that naysayers make. But those arguments ignore the larger picture: More and more research shows that meat and dairy consumption is linked to most serious diseases; just as more studies bear out the healthy benefits of a plant-based diet. Three researchers from the University

of Limerick concluded a meta-analysis of inflammation’s role in chronic disease with a dash of ancient wisdom: “Nature has provided us with a wide range of dietary weapons, which, if appropriately combined in dietary patterns such as the Med-diet, can beneficially contribute to improving our quality of life, health, and life expectancy by equilibrating the inflammatory milieu to normal levels and thus preventively reducing the risk of inflammation-related chronic disorders. Let us not forget the words of Hippocrates of Kos (460-377 BC), who is universally recognized as the father of modern medicine: ‘Let food be thy medicine and medicine be thy food.’” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@insurancenewsnet.com.

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Visit www.INNDataServices.com or call 717.441.9357 ext. 125 to set up a personalized demo. April 2019 » InsuranceNewsNet Magazine

BUSINESS

Sit Up Straight And Listen Or Just Get Up And Walk Out How focusing attention delivers value to clients.

W By Dave Thesing

hat is the one question you must answer before a prospect agrees to schedule an appointment with you? Every prospect needs to know how they will benefit by taking time to meet with you. Here’s a news flash: “Getting to know you better” is seldom seen as a benefit to prospects and neither is “Showing you the kind of work I do.” Before dialing the phone, you should always have an answer to this basic question: How could this prospect benefit by meeting with me? Consider this simple exercise to help hone your phone skills and set more appointments. 1. Make a three-column list of the next five people you plan to call with names in the first column. 2. In the second column, list your reason for calling the prospect now. 52

InsuranceNewsNet Magazine » April 2019

3. In the third column, write at least one benefit you believe the prospect will realize from meeting with you. 4. When you call the prospect, be sure to communicate this benefit before asking them to commit to meeting with you.

Listen Better. Sell More.

After you secure that all-important first meeting, make the most of it and increase your chances of closing the sale by listening more effectively to what your prospects are saying. It has been said that “Listening is not the same as hearing and in order to listen effectively you need to use more than just your ears.” Many agree that effective listening is an important skill, although most people don’t feel a strong need to improve their own skill levels. More than 8,000 people employed in businesses, hospitals, universities, the military and government agencies were asked if they found themselves communicating as effectively, or more effectively, than their coworkers. Nearly all responded positively. However, research shows that the average person listens at only about 25 percent efficiency.

Experts in the field have marketed and capitalized on this knowledge to create the “10 Fastest Tips that Allow You to be an Effective Listener” and the “10 Principles of Listening.” But for those who have actively tried to make effective listening and the communication awareness and persuasion skills a core part of your business, you know that it is much deeper and more difficult than 10 simple steps. So what can you do to become a more effective listener and grow your business? Start by listening with more than just your ears. For a good foundation, evaluate all aspects of listening and the concepts of how people communicate. According to Albert Mehrabian, a communications researcher, there are three basic elements of face-to-face communication: » 55 percent of communication is nonverbal such as body language. » 38 percent is verbal through tone — including pace and volume. » 7 percent of communication is done through words. Listening with more than your ears

SIT UP STRAIGHT AND LISTEN BUSINESS

Take time to hone your LISTENING SKILLS Here’s how you can become a better reader of body language and verbal cues. Set aside 10 to 15 minutes each day to study the body language and verbal cues of others. You can do this in a variety of environments: » Business meetings. » Sales calls (especially when you are conducting joint appointments). » Social functions. » Restaurants or airports. » Try watching TV with the sound off or in a foreign language. requires that you learn how to read nonverbal cues and focus not only on what you want to say to a prospect, but how they are responding to your message. With this in mind, be aware of body language, including: » Facial expressions. Frowning or raising of the brow line, blank stares, squinting eyes or frustration, as opposed to a simple smile and consistent eye contact. » Posture. Changes in posture, such as leaning away, crossed arms or constant shifting in seat can convey a level of discomfort or indifference. Slouching can signify indifference and stiff or rigid posture can say “I don’t feel fully comfortable in your presence.” Meanwhile, an alert or erect posture with the head slightly forward and nodding, along with hands and arms that are relaxed and held at shoulder width or wider with the palms facing up can indicate interest and eagerness to engage in conversation. » Eye contact. If a client or prospect is avoiding eye contact or constantly

BUSINESS

BY SELLING

MED SUPP

darting and shifting eyes off to blank space, this can signal a lack of interest, mistrust or insecurity. Angry and negative moods can cause a person’s pupils to contract. However, when a person is receptive to the conversation, their eyes will often dilate to three or four times their normal size. They frequently will raise their eyebrows slightly. If they like you and are interested in what you have to say, they will meet your gaze from 60 to 70 percent of the time. When you can put all these tips and best practices together consistently, you will begin to convert more calls and build better relationships with clients. Remember, listen, be interested, be interesting and close by scheduling a follow-up meeting now. Seize the moment and you can capture more sales. Dave Thesing is a partner at IFC National Marketing, an insurance marketing organization dedicated to supporting independent agents and financial advisors. Dave is also president of Bridgeway Learning Systems. Dave can be contacted at dave. thesing@innfeedback.com.

April 2019 » InsuranceNewsNet Magazine

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Why TV Commercials Are No Competition For Advisors Even though clients can get product information from multiple sources, they still need advisors. By Elie Harriett

was at a prospect’s home, and he showed me a box of ads for the product I was there to sell. I am not kidding — he showed me a cardboard box filled with ads he had received in the mail. I began going through my presentation. He kept stopping me and saying, “I know that. I got that.” Before I go any further into the story, here’s some background on me. I’m a broker in one of the most crowded markets in the insurance industry: Medicare-related health insurance. Carriers realize they can sell their products directly to consumers. As a result, as brokers and agents, we are not just competing with one another; we are also competing directly with the carriers we represent. This has changed how we see our business and how we operate. But there are times when we faced competition from TV ads but won the sale. Back to the story about my prospect and the box of ads. After my prospect showed me the box, I asked why I was there. He said he needed someone to sort through the items in the box and answer questions he wrote on each mailing. “Sure,” I said. It turned out that he had multiple ads from nine carriers and I represented eight of them, so I answered every question during the meeting. In the end, I came to the same conclusion he did about the best plan for him. But he said he still called the numbers on the ads and couldn’t understand the answers he was given. So he asked if I could sell the product to him with the caveat that he would call me if he had further questions. “Of course,” I told him, “that’s what I’m there for.” Here is another story about a client visit that happened only three months ago. 54

InsuranceNewsNet Magazine » April 2019

The TV ads did their job in selling the products and narrowing down the options. I just had to reduce the number of options on the list from 10 to two and let them make a selection. I was at a client’s house, reviewing a plan for the next year, when a friend joined us. The phone kept ringing during the meeting. The friend kept answering the phone, saying “No” and hanging up. This happened frequently. After we finished, I asked him what was going on. My client said they receive more than 30 calls a day from robocallers and telemarketers who are trying to get them to change their Medicare plans. This is illegal — in Ohio, you cannot make unsolicited calls about Medicare products. My client had a friend at her home to take the calls because she could not get them to stop calling. I asked if I could take a couple of those calls and she said yes. I took two of them and demonstrated what to say and do. Then the friend sitting there asked me if I could arrange an appointment with him because it sounded as though I knew what I was doing. He and his wife are now happy clients as well.

Using The Media To Your Advantage

You can use the media to your advantage, as well. For example, I have my own YouTube

channel to which I direct tech-savvy clients and agents who are not in this business to help them understand Medicare and get their questions answered. If I’m talking with tech-savvy clients, I make sure they know how to access my channels before they see me. This helps them know which questions they need to ask or think about before our visit. I recently walked into a client’s home, turned to my left and saw myself projected on a 50-inch TV screen. When I asked what was happening, I was told that they were watching my videos, writing down questions, and preparing for our appointment. That was a new experience for me! What got me was they were also writing down questions from commercials. When we got to their two pages of written questions, all I had to do was find out what they wanted and answer their questions directly in relation to their needs. Their radar was up for “salesman-speak;” so, I answered direct questions with direct answers. The TV ads did their job in selling the products and narrowing down the options. I just had to reduce the number of options on the list from 10 to two and let them make a selection. These clients were quite quick to sign on. They told me that my videos helped bring up questions they had from the commercials, which is my goal in creating the videos. My message is simple: Don’t pack it in because you’re not on TV. Clients know they can get products by mail, web or phone, but they still appreciate and respect someone who takes the time and trouble to help them personally. Serving clients is just as rewarding today as it ever was! Elie Harriett is a NAIFA member and co-owns Classic Insurance & Financial Services Co., specializing in Medicare-related insurance. Elie may be reached at elie. harriett@innfeedback.com.

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

Address The Three Eroding Factors Of Wealth Retirement planning is more than simply accumulating a target amount in an account balance. By Brandon Green

f you are climbing a mountain and have the choice of two guides — one who is experienced at helping climbers to the top, and the other who has never lost someone on the way down — which one would you choose? There are no do-overs on your way down the mountain just as there are no do-overs in retirement. Many advisors focus only on wealth accumulation, helping their clients get to the top of the mountain, but don’t discuss how their clients should decumulate their portfolios during retirement. Refocus your clients’ frame of mind from simply accumulating a certain retirement account balance to actually living through retirement by addressing the three eroding factors of wealth: taxes, fees and market volatility.

Shift The Client Mindset

A client’s journey down the mountain often requires a different set of products, level of discipline, asset allocation and outlook on retirement. You must also encourage clients to avoid making decisions based upon common traps, such as “that’s just the way things are” or “that’s what my parents did.” Tell clients stories such as the mountain metaphor and give them facts backed by mathematics or history to effectively communicate the need to address wealth erosion. Ask clients this question: Imagine that, on the day before you retire, taxes double and/or the market corrects by 20 percent or more. What would you do? If everything your clients saved was in a qualified account such as a 401(k) that had never been taxed, then suddenly a much larger portion of their retirement funds would go to the government. It is easy to see how taxes can

be the No. 1 factor of wealth erosion.

clients ever thought about that?

Importance Of Tax Diversification

Prepare For Volatility

The average person planning for retirement typically does not consider the impact of taxes on their portfolio. They may see they have a comfortable amount of assets ahead of retirement, but it’s easy to put into perspective how an amount between $2 million and $2.5 million can run down to zero in eight to 10 years. Tax diversification is critical so that clients have the ability to pull from multiple sources of income based on the tax environment at that time. If taxes are high, they can pull out of nontaxable assets such as a Roth IRA. If taxes are low, they can pull out of their qualified accounts such as an IRA or a 401(k). Help clients understand the tax treatment of their money by showing them how to classify their accounts into one of three buckets: taxable (anything with a qualification that will be treated as ordinary income regardless of their bracket or income threshold such as a 401(k) or IRA), never taxed again (Roth IRAs or properly structured and correctly funded life insurance contacts with tax-advantaged access) or accounts that are taxed over a lifetime (anything that has a capital gains treatment such as a brokerage account). Proper segmentation within these three buckets helps combat the effect of taxes on wealth erosion.

Plan For Fees

Fees are inevitable and sometimes not as visible as other expenses in life. Most clients never project or add up what these costs amount to over time. The aggregate effect of these costs can really impact account balances during both the accumulation and distribution phase. In a fee-based model, the advisor makes money whether the market is up or down, both while the client is saving and working and also during retirement when the client drawing an income. Have your

Clients love the variability associated with investments when the market is on the upswing but rash decisions often occur when the market declines. Keep in mind that markets fluctuate and it is important for clients to know their actual rate of return, not just their average rate of return. A diverse portfolio with a solid component, such as investment-grade whole life insurance or other financial products that have guarantees, can provide the balance necessary in a volatile market. These products are beneficial as a client approaches the top of the mountain and once again, if designed properly, can become a safe and steady income stream for the journey down the mountain. As advisors, we also must shift our mindsets. For those who traditionally focus on wealth accumulation, put yourself in your clients’ shoes. If taxes doubled or tripled or you also faced a major market correction the day before you retired, how would you react? Take what you would do to protect your own income and mitigate taxes in retirement, and transfer it to your clients’ plans. As my friend Matt Love with Matt Love Financial says, “You don’t need a qualified retirement plan to retire. You need money.” Just remember, where that money sits is as important, if not more important, than what it earns. Brandon Green, ChFC, CLU, CLTC, LUTCF, is a 9-year MDRT member with The Fitzpatrick Group in Houston, Texas. Brandon may be contacted at brandon. green@innfeedback.com.

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April 2019 » InsuranceNewsNet Magazine

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Who Are Your Warm Annuity Prospects? A poor engagement with an annuity prospect means a lost sales opportunity. By Jafor Iqbal

n today’s busy world, it is important that advisors and their firms make the right initial connection and engagement with potential annuity buyers. A poor engagement with an annuity prospect means lost opportunity in sales for the advisor as well as the manufacturer. A recent LIMRA Secure Retirement Institute study found four in 10 current non-buyers may buy an annuity in future. This indicates a vast demand and market for annuities. The study is based on a LIMRA SRI survey of 821 clients who had a conversation with their advisors in the last three years about a deferred annuity conversation, but decided not to buy one. The LIMRA SRI study narrows down the deferred annuity non-buyers into three distinct categories or mindsets:

WARM: TEPID: COLD: MAY BUY ANNUITY WOULD ANNUITY IS GOOD, NOT BUY SOMEDAY BUT NOT ANNUITY FOR ME 42% of 18% of non-buyers

40% of non-buyers

non-buyers

The non-buyers in the first group, Warm, are open about buying deferred annuities in the future. They are the biggest group of non-buyers and are likely to say, “It’s not the right time” as the top reason for not buying an annuity. The non-buyers in our second group, Tepid, show little enthusiasm about a deferred annuity and are ambivalent about its value. Their most common reason for not buying an annuity is often “other investments were a better fit.” Members of the smallest group of non-buyers, Cold, express hostility 56

InsuranceNewsNet Magazine » April 2019

against annuities. “I do not like annuities” is their overwhelming reason for not buying, and it’s likely that members of this group will never buy an annuity. Advisors who can identify these warm prospects from others stand the best

goals and preferences. 2. Educate them first. Only around half of those who discussed annuities with their advisors are well aware of the annuity’s features. Many cold and warm prospects think advisors were not explaining annuities in terms they could understand. For many financial products, particularly annuities, there is an educational component and a steep learning curve involved. The annuity manufacturers bear the heavy burden in helping advisors tell a simple story about annuities. Many non-buying prospects said they wished

Preferences for Income in Retirement

WARM 33 pts

TEPID 30 pts

COLD

Initial investment amount is preserved

15 pts

16 pts

19 pts

Income amount has the potential for investment growth

14 pts

16 pts

18 pts

Return on investments are guaranteed

16 pts

14 pts

11 pts

Control over how investments are managed

13 pts

16 pts

23 pts

Heirs or charities will receive money when I die

9 pts

8 pts

10 pts

Income is guaranteed for life

chance of turning these prospects into annuity buyers. Here are three ways advisors can separate these kinds of prospects from each other. 1. Ask about goals and preferences in retirement. In a recent study, LIMRA SRI asked the non-buyers to distribute 100 points across six different preferences about income in retirement based on how they valued that method (see table below). These segments differ in crucial ways when it comes to creating income in their retirement. What the results determined was that the warm prospects value the guaranteed income the most. To cold prospects, keeping control over their investments is more important than creating guaranteed income. They also want income in retirement to have the potential to grow and are more concerned about outliving their savings in retirement years than other segments. The tepid prospects have similar retirement income preferences to those of the cold prospects. Advisors can use simple and quick retirement profile questionnaires, similar to what LIMRA SRI designed, to identify and recognize prospects’ retirement

19 pts

advisors could do a better job in explaining how an annuity fits their needs. 3. Build trust. Lack of trust and satisfaction with their advisors stands out among the annuity non-buyers. Annuity non-buyers show much lower levels of trust and satisfaction regarding their advisors than the actual buyers do. Warm prospects came closer to actual buyers in terms of their satisfaction with advisors. These non-buyers are more likely to believe their advisors are knowledgeable and would recommend products in their clients’ best interest. Most annuity discussions happen as part of broader discussions with advisors. It takes time to explain how annuities fit into a portfolio. Advisors can be more successful if they present annuities as part of retirement planning or income discussions. Jafor Iqbal is assistant vice president, LIMRA Secure Retirement Institute. He leads LIMRA SRI’s retirement income initiatives. Jafor may be contacted at jafor. iqbal@innfeedback.com.

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Articles inside

How to Be Bulletproof With Your Diet \u2013 If You Dare

Dr. Insurance

Is Suitability Being Pushed Aside?

It's the Secret Sauce to Success