InsuranceNewsNet Magazine | June 2021

INSIDE: Annuity Awareness Month 2021 Special Section

PAGE 24

June 2021

Three stories that show how insurers and producers recovered lost ground and added gains midway through 2021. PAGE 16 Skyrocket Your Practice: Sell Annuities And Attract AUM Online PAGE 8

How AG49 Is Like Frankenstein’s Monster PAGE 42

How 2021 Will Give RILAs Their Moment In The Sun PAGE 46

June 2021

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

JUNE 2021 » VOLUME 14, NUMBER 6

16

ANNUITY

FEATURE

46 2 021 Will Give RILAs Their Moment In The Sun

The 2021 State of Annuities

By John Hilton Three stories that will show how insurers and producers recovered lost ground and added gains midway through 2021.

24 The 2021 Annuity Thought Leadership Special Section

INFRONT

6 New York Court Stuns With Reg 187 Decision

By John Hilton Some insurers and producers found the New York regulations too onerous and are satisfied with the court’s decision to overturn Reg 187.

INTERVIEW

8 How To Sell Annuities And Attract AUM Online Al Caicedo did all the traditional things advisors do to get in front of annuity prospects. But he soon realized he had to move his marketing online in order to multiply his results. In this interview with Publisher Paul Feldman, Caicedo gives his pointers for using digital marketing to increase your reach.

online

www.insurancenewsnetmagazine.com

Six elite companies offer their unique perspective on product, process, and the future of an ever-changing annuity marketplace.

By David Hanzlik Registered index-linked annuities are particularly well placed for an unsteady economic environment.

HEALTH/BENEFITS

50 Employer-Sponsored HSAs Help With Recruitment And Retention

By Tom Torre When set up and implemented correctly, an employer-sponsored health savings account becomes a powerful tool to attract and keep workers.

ADVISORNEWS

54 Helping Clients Overcome FOMO In Selling Stock

IN THE FIELD 36 The Insurance Matchmaker

By Susan Rupe Jerald Tillman’s mission is to match a diverse talent pool with the needs of the insurance industry.

LIFE

42 Commentary: Why AG49 Is Like Frankenstein’s Monster

By John “Hutch” Hutchinson Actuarial Guideline 49 was aimed at alleviating confusion among IUL illustrations.

But it took on a life of its own.

By Daniel Zajac If your client has a significant portion of their retirement portfolio in company stock, they may fear missing out on a future run-up.

INBALANCE

58 How To Emerge From Pandemic Burnout

By Susan Rupe Maintaining structure and mindfulness in your life will help ease you into a reopening world.

BUSINESS

60 Eight Principles To Attract The Clients You Want

By Stephani Lucas Implement “heart-centered planning” into your practice and enjoy the results.

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InsuranceNewsNet Magazine » June 2021

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WELCOME LETTER FROM THE EDITOR

What’s Wrong With Diversity?

T

he morning’s mail brought us a manila envelope with no return address.

Inside was a copy of the April issue of InsuranceNewsNet Magazine, with the subscriber’s mailing label torn off.

Attached to the front cover was a sticky note on which the sender used an expletive and called us “losers.” The sender then told us what we can do with what they called “your critical race theory and other anti-American, leftist politics.”

The reader was clearly upset over April’s cover feature on the industry’s efforts to increase diversity while confronting its tarnished history on race.

It wasn’t the first time we drew reader ire for our coverage of diversity, equity and inclusion in the industry.

Our reporting on the National Association of Insurance and Financial Advisors’ Diversity, Equity and Inclusion Impact Week in early April generated a negative response from our audience.

There were complaints about the industry focusing on “social justice” instead of talent, ambition, education and performance. One of our online readers even said they were considering whether they wanted to continue their NAIFA membership over this.

Another reader canceled his subscription after complaining that a column in our May issue was — in his words — “racist and offensive.” The topic of the column? Black women advisors telling why they believe Black women make good advisors as well as good prospects.

We welcome reader feedback of all types, and I would like to see more of it.

But I am disappointed by the amount of negative feedback we have received over our coverage on diversity within our industry.

INN’s interest in diversity is nothing new. We are well aware of the industry’s image of being “pale, male and stale.”

“It has always been our mission to support growth in the industry, and where does that happen? With the next generation, which is younger and more diverse when you follow the population 4

InsuranceNewsNet Magazine » June 2021

If you truly believe in the products you sell and the services you provide, why shouldn’t everyone have access to these amazing products?

trends and wealth,” InsuranceNewsNet Publisher Paul Feldman says.

This discussion on diversity is a good thing for this industry. It’s not about being “woke.” We need more people in this business, and we need to reach and help more consumers protect and grow their wealth. And what is wrong with encouraging people of different racial and ethnic groups to enter the industry and find success in it? What is wrong with encouraging people of different racial and ethnic groups to buy the products you sell and use the services you offer?

If our industry is going to keep from dying off and fading away, we must find ways to recruit professionals who can bring a fresh perspective and who reflect our nation’s changing demographics.

And if you truly believe in the products you sell and the services you provide, why shouldn’t everyone have access to these amazing products?

Last year, I sat in on an online presentation sponsored by the organization Females and Finance in which two Black women who are financial advisors serving

a primarily Black clientele shared their views on a number of issues. Something one of the advisors said jumped out at me. She said that if the problem of generational poverty in the Black community could be solved, a number of other social problems would be solved along with it.

What helps families build wealth and pass that wealth on to the next generation? Homeownership is one thing.

Life insurance and related products are another.

To those who are working to help individuals and families of all colors have a secure financial future, thank you.

And to our readers, whether you agree with our coverage or not, we welcome and encourage your comments, feedback and ideas for future articles. You are always welcome to share your views at editor@insurancenewsnet.com.

Susan Rupe Managing Editor

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INFRONT

New York Court Stuns With Regulation 187 Decision Some insurers and producers found the New York regulation too onerous and are satisfied with the court’s decision to overturn it.

By John Hilton

I

n a surprising and stunning decision, the New York Supreme Court Appellate Division struck down Regulation 187, which established tough rules governing the sale of life insurance and annuities.

The late-April ruling left the industry both delighted and wondering, “What’s next?”

Regulation 187 stood as an outlier regulation ever since it took effect in 2019. First, it closely resembles the fiduciary rule put forth by the Obama administration. Producers recommending higher-priced, complex annuity and life insurance products face a high compliance barrier.

Second, the regulation was extended to life insurance sales on Feb. 1, 2020.

By contrast, the Suitability in Annuity Transactions regulation update completed in 2020 by a National Association of Insurance Commissioners’ working group is a lower barrier that applies only to annuity sales.

Insurers and producers agreed they could live with the new NAIC standard, which has been adopted by nine states as this issue went to press. Seven more states are considering the NAIC update.

Some insurers and producers decided the New York regulations were too onerous and avoided selling products in the state. For them, the court decision overturning Regulation 187 was especially satisfying.

But it raised an obvious legal question: If a New York court determined that the state’s best interest standard is “unconstitutionally vague” and uses “subjective terms,” what does that mean for the NAIC model?

6

InsuranceNewsNet Magazine » June 2021

Bold Regulation

New York regulators had no interest in the NAIC plans when it came to writing new rules for annuity sales. While NAIC regulators worked to update their suitability model, their New York counterparts quickly passed Regulation 187.

It mandates enhanced disclosure and documentation, required of the producer and insurance carrier, as well as training programs. Only the interests of the consumer are to be considered in any recommendation, and producers must act with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use.

The Independent Insurance Agents and Brokers of New York and the Professional Insurance Agents of New York State filed suit in 2018 to stop the regulation. The National Association of Insurance and Financial Advisors-NY filed a separate suit that was later joined with the Big I-NY/PIA-NY lawsuit.

The lawsuits made several arguments, including that Regulation 187 conflicts with governing statutory scheme and is beyond the respondent’s authority to impose; it is unreasonable, arbitrary and capricious and lacks a rational basis; and it is unconstitutionally vague.

The Supreme Court Appellate Division agreed, reversing a lower-court ruling.

The court noted that the regulation uses “subjective terms,” “fails to provide

sufficient concrete, practical guidance for producers,” and “provide[s] insufficient guidance with respect to how producers must conduct themselves in order to comply.”

Industry observers were thrilled by the decision.

“Our members have tried mightily to comply with the regulation, but, as the court found, it has been extremely difficult to meet the vague and subjective standards of the rule,” said Finseca CEO Marc Cadin.

The court’s decision acknowledged that Regulation 187 provides examples of what a producer’s “recommendation” triggering the “best interest” analysis did not include, (marketing materials, general advertisements and educational information).

However, the definition of “recommendation” was so broad that it provided to the producer no clear guidance as to what information or advice would not fall within the scope of the regulation, the law firm Bressler, Amery & Ross noted in a blog post.

About That NAIC Model

That brings us to the NAIC model that so many states are rushing to adopt. It, too, tends to rely on similar broad language. The model states that “to satisfy the best interest obligation,” a producer or an insurer must satisfy four obligations: care, disclosure, conflict of interest and documentation.

NEW YORK COURT STUNS WITH REGULATION 187 DECISION INFRONT

» Know the consumer’s financial

“Our members have tried mightily to comply with the regulation, but, as the court found, it has been extremely difficult to meet the vague and subjective standards of the rule.”

» Understand the available recom-

— Marc Cadin, CEO, Finseca

To satisfy the four obligations, when making a recommendation, producers must: situation, insurance needs and financial objectives; mendation options;

» Have a reasonable basis to be-

lieve the recommended option effectively addresses the consumer’s financial situation, insurance needs and financial objectives;

» Communicate the basis of the recommendation to the consumer;

» Disclose their role in the transac-

tion, their compensation, and any material conflicts of interest; and

» Document, in writing, any rec-

ommendation and the justification for such recommendation.

It’s fair to question whether other state best-interest rules could be successfully challenged in court. And would anyone want to? Many industry executives and their legal teams have come to accept best interest as an acceptable standard, one that at least avoids the dreaded fiduciary label.

Or it might be a moot point. The New York State Department of Financial Services seems likely to appeal the appellate court decision, although that had not been decided by press deadline.

“DFS continues to believe in the consumer protective notion that insurance agents and brokers must not put their own profits above the needs of the consumers who turn to them for advice; this is the heart of the regulation. We are reviewing

the decision and will consider our appellate rights,” a DFS spokeswoman said in a statement.

Otherwise, it is not unusual for rules to be vague, noted Fred Reish, fiduciary expert and a partner at Faegre Drinker in Los Angeles.

“Many rules, including the fiduciary prudent man rule, are principles-based and necessarily vague, at least as compared to rules that define specific acts,” he said. “In a principles-based environment, as opposed to a rules-based world, the issue is usually whether the advisor or agent has followed a thoughtful, professional process to reach a decision or recommendation. Those concepts are embedded in many of our laws and are not going away.”

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.

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www.american-equity.com Call us at 888-221-1234 June 2021 »●InsuranceNewsNet Magazine 7

INTERVIEW

Al Caicedo transitioned his marketing to digital and saw his practice skyrocket.

An interview with Publisher Paul Feldman

8

InsuranceNewsNet Magazine » June 2021

HOW TO SELL ANNUITIES AND ATTRACT AUM ONLINE INTERVIEW

For years, Al Caicedo marketed his business the way advisors have been marketing their business for — well, forever.

He spent thousands of dollars every year mailing flyers in an attempt to get prospects to attend in-person seminars. And that worked well for a while.

But a changing world demands changing marketing. Caicedo dipped a toe in the water of digital marketing and discovered he could save money while reaching more people. And his practice expanded and grew.

Caicedo is president and owner of CKS Summit Group in Clinton Township, Mich., where he focuses on helping ensure his clients are able to enjoy their lifestyle into their retirement years. He is a big believer in using annuities as part of a plan to guard against market volatility as well as developing income options and tax-savings strategies.

In this interview with Publisher Paul Feldman, Caicedo describes his journey to digital marketing success as well as his belief in annuities as part of a comprehensive retirement plan.

FELDMAN: Tell us about yourself, your current practice and your clients.

CAICEDO: This is my 23rd year owning CKS Summit group and my 27th year in the business, so we’ve been doing this for quite a while. We’ve been working in the pre-retiree/retiree arena since 2000.

Most of our clients are ages 55 and up, the bulk of them are ages 58 to 74.

We’re a very conservative firm, so over the years we specialized in very conservative investments. So it’s annuities, assets under management and, of course, life insurance.

We work with advisors and clients all over the country as well. At the last count, we had clients in 38 or 39 states.

FELDMAN: How did you get in the business?

CAICEDO: Here in Michigan, I used to

work for the Department of Defense. But I wanted to be my own boss. I wanted to be in my own world and my own business.

I met a gentleman who was very successful in this business, and I said I wanted to try that. So after being with the government for more than nine years, I said I wanted to jump into this crazy world. I signed up with Northwestern Mutual, and I spent a year and a half with them and then they fired me.

I remember my general agent brought me in and sat me down and said, “You’re just not cut out for this business; you gave it a good shot, but you need to go back to the corporate world.”

That became my belly fire for so many years.

marketing. Because I had a great foundation when it came to the business itself, as far as products and everything like that. But my missing component at that time was marketing, being able to get out there and get in front of people I wanted to get in front of, and to have a consistent supply of people to meet with.

That was a turning point. Once I left the captive world and entered the independent world in the first firm that I worked with, I learned that it’s all about marketing and how you market yourself and what you’re marketing and who you are marketing to.

And, for the first time in my life, I learned a niche, and that was really important because when I started this part of my career after I left Northwestern Mutual, we only dealt with small-business owners, with groups of 20 and under.

My first mentor said, “If you’re going to make money in this business, you have to be niche — you don’t want to be everything to everybody; you want to be very good to a very few people. And you can make a very good living in this business.”

That was my first glimpse at not just marketing but niche marketing, being

Once I left the captive world and entered the independent world in the first firm that I worked with, I learned that it’s all about marketing and how you market yourself ...”

But going to Northwestern Mutual was one of the best things I ever did because of the essence of the education I got from them. It was the old school, whole life foundation that I got from them, and everything that stemmed from that. However, their marketing system at that time was antiquated. It was the three-card system and all that kind of stuff.

When I moved out of there, I found a firm that was more progressive in their marketing, and they set me a different path. It was the first time I really learned

really focused on a particular group and learning everything I possibly could about those individuals.

FELDMAN: When it comes to marketing, you are crushing it selling annuities and AUM online. Can you share how you started and what you’ve learned?

CAICEDO: We started our online journey about four and a half years ago.

The reason why I started it is because I was doing pretty much what a lot of June 2021 » InsuranceNewsNet Magazine

9

INTERVIEW HOW TO SELL ANNUITIES AND ATTRACT AUM ONLINE independent advisors do. We all were doing workshops and seminars and all that kind of stuff. I was using a lot of mail to fill up all the different classes I was doing at that time.

I remember when, in order to fill a room, we would send out 1,000, 2,000 mailers. And then I got to the point where we were mailing out between 12,000 and 15,000 mailers a month. But what was happening was that we were seeing these incredible costs. And then our attendance was dropping, dropping,

all the metrics of our opens and closes and everything else like that. But we are the best check writers in the world. And what I mean by that is if you say you have a marketing thing, we’ll write a check and we hope we get a return.

So I interviewed so many digital firms out there, and at that time not many of them were in our space. It was really hard to find the right one. But along the way, I met someone and I said, “You get my world, and I love the way you guys are set up.”

Al’s Tips For A

GREAT ONLINE Presentation

F The best presentation is the shortest one.

F Be good at the things you can control.

F Keep the presentation moving.

Don’t keep a PowerPoint slide up for too long.

F Tell stories. The more relatable your stories are, the more people will remember them.

F Let your personality show in your presentation. dropping, and our response was going down and down.

I had a brief feel for digital media and digital marketing with an FMO. They were filling up their classes for a fraction of what I was spending on mail. So I said to myself, this is going to be my way of getting control of my marketing because one of the problems we have as advisors is that we’re meticulous in so many aspects of our business. We know 10

InsuranceNewsNet Magazine » June 2021

We started using digital media to fill up our workshops. And we were doing it for a fraction of the cost. I think our biggest ad spend at the time was $800 on Facebook advertising.

After building out our live events, we decided to put our toes in the water and market webinars to people 15 miles from my office. We started integrating webinars into our mix, but I made a lot of mistakes. We had webinars; we still had

our live events going on. But I couldn’t figure out all of the digital aspects of this.

I went on a journey to find out whether I even needed a digital guy. I spent money with four or five digital firms to see what was going on out there, learning and seeing all that needed to be done. Slowly but surely, we started to get it and we started to see results. We realized, OK, this does work. And so we expanded marketing our webinars to people within a 100-mile radius of our office, and from there we began to roll out across the state of Michigan.

Along the way, we were trying to build an online process, but I found myself failing. And the reason I was failing was that I was trying to do everything I did in the live world in the virtual world. I thought, I’m successful in front of people. I’m in control; I’ve got the show. I never even used PowerPoint when I did a live class.

It was just me being myself. But I slowly figured out that when we moved into this crazy virtual world, it’s a completely different paradigm shift from everything from how you handle clients to the event itself to the sales process. Once I realized that, we had the momentum and we really hit our stride.

One of the greatest things to come out of this was time management. My first appointments used to be about an hour and 15 minutes. Now they are about 35 minutes. And my clients love this.

FELDMAN: What lessons did you learn from the pandemic?

CAICEDO: The pandemic has forced this industry to move five or six years ahead of where we were. Other industries have been operating in the digital world for a while now, but our industry is pretty archaic. This past year, so many people were pushed into feeling comfortable in the digital world and using it to buy everything from cars to homes.

It’s important for advisors to create the virtual experience for customers. I always like to look at 10-year windows.

Between now and 2030, there will be more than $32 trillion in assets moving.

Most people talk about two generations: the baby boomers and the millennials.

But there is a silent, quiet, ghost generation smack-dab in the middle, which is Generation X. They’re going to be a powerful generation.

THE 2 BILLION DOLLAR MAN INTERVIEW

June 2021 » InsuranceNewsNet Magazine

11

INTERVIEW HOW TO SELL ANNUITIES AND ATTRACT AUM ONLINE Within the next 20 years, $62 trillion will move down to Gen X. And 95% of them are on Facebook, 41% of them follow their favorite businesses through Facebook, and 16% prefer learning on video on their own time. And if you think about it, the first Gen Xer is only three and a half years away from being able to take money from their 401(k)s and their IRAs. They’re only six years away from making their first decision on Social Security.

But you have to have the right processes in place to be able to make the switch to the digital world. You can’t just transfer the live world to the virtual world and be successful.

FELDMAN: So how do you gain trust online? What are your strategies?

CAICEDO: When you’re in the live

world, it’s kind of simple. You’re in front of them. They’re seeing everything.

They’re in your office, but it’s all sensory from the moment they meet you to the moment they walk through your office.

In the live world, we would require a certain number of touches. For example, from the time they register for one of our events to the time we have the actual event, they’ve already been touched 11 times by us. Maybe they would receive a postcard or an invitation, or someone would call them and ask them to find

Where Am I Currently

Marketing?

You gotta know where your people are!

F Facebook is where we do 95% of our marketing.

F LinkedIn is good for businessto-business marketing.

F Google Ads helps you attract what’s near you.

12

InsuranceNewsNet Magazine » June 2021

others to come to this dinner or show up at this class.

We tried that in the virtual world. We started focusing on the number of touches it takes to get someone to register for a webinar, to make a first appointment and so on. We use videos, emails, text messaging, a combination of all kinds of stuff to make sure I get familiar with somebody in a short period of time.

I look at it this way. I have a favorite sportscaster or a favorite newscaster, and they’ve never sat down with me. They’ve never had a meal with me.

They’ve never invited me to their home.

However, I trust their word. And the reason why I trust their word is because there’s an unspoken familiarity. And that creates a relationship with that individual in the virtual world.

We had to do that same thing but in a compressed time period, so it’s a lot of face time and a lot of verbal, nonverbal, facial communication we’re having with people, because you are trying to get the same concept as you do in the live world.

But you also have to be entertaining.

Otherwise, it’s easy for people to push a button and you’re gone. You can be the most boring person in a classroom, and nobody’s going to leave. But online, if you can’t hit someone in the first minute and a half, they’re going to click on something else.

That was our biggest obstacle in the beginning because when I was presenting live, I never used a prop. I was a star in my live world. But now you’re in a box and the box is the star. You can’t stay on a slide for more than 20 seconds, and you have to compress and deliver your presentation within 30 minutes.

When you are telling stories online, it has to be continuous, like a motion picture. That’s why we were failing in the beginning, because we weren’t doing it that way. People will always remember stories more than anything else.

You always have to get good at the things you can control. You can’t make someone want to schedule an appointment with you, but you can make your presentation so entertaining that they stick with you for the whole thing.

When you are in this virtual world, one of the things you can control is your entertainment value. How are you

HOW TO SELL ANNUITIES AND ATTRACT AUM ONLINE INTERVIEW When you talk to your clients, do you ask them whether they expect a five-year, 10-year, 30-year retirement? Because the next question is, can you look me in the face and say for the next 10, 15, 20, 25 years, this country is not going to experience something that’s going to severely impact your financial goals?

FELDMAN: What is your biggest takeaway in working with advisors over the past crazy year?

CAICEDO: I can’t believe how many

Al Caicedo is often called upon to provide his expertise on business news outlets such as Fox Business News. delivering your message, how quickly are those slides moving, all that kind of stuff. It’s exciting.

FELDMAN: What can advisors do to overcome the reluctance and hesitancy surrounding annuities?

CAICEDO: To me, it’s conviction, it’s be-

lief, because if you don’t believe it, how in the world can you expect somebody else to believe it? Annuities have gotten such a bad black eye. However, I can sit here

The reason why you’re seeing what we’re seeing with the annuity world today is because so many guys ran away from it. We as advisors are sucking at educating our clients and having conviction that annuities along with life insurance are the greatest products ever invented. They were put in place to give you peace of mind and to make sure that when you need it, it’s going to be there.

I have clients who are receiving payouts right now and their world has changed; I know that when all hell breaks

My favorite stories are the ones about clients who met with me and didn’t think they were able to retire. And to have them sitting with tears in their eyes and saying, ‘Everything you promised happened.’” and tell you that we in this firm have changed so many lives. When we use annuities as part of our strategy, we have so many people who are living a stressfree retirement, knowing that they have guarantees coming into their lives every single month.

You have a product that brings stability. That brings guarantees.

loose, I can make a phone call to them and say, “Aren’t you glad you made this decision while everybody else is trying to figure out whether taxes are going to go through the roof, or because they’re so leveraged out in this market that is going to go through a massive correction? How do you feel today that you don’t have to worry about that?”

people have limiting beliefs. We’ve talked a lot about how we’re an old profession and how are we going to get young people to come into it. It’s how out of touch we are and how unwilling we are to embrace technology and how afraid we are of it. How we feel that snail mail is the way to go. How a live event is the only way you can reach an individual.

You think because you have an office and all the marble up front and all this stuff is the only way somebody is going to do business.

With all those limiting beliefs, how many people sat on the sidelines last year? All they did was serve as caretakers.

My favorite stories are the ones about clients who met with me and didn’t think they were able to retire. And to have them sitting with tears in their eyes and saying, “Everything you promised happened.” And that’s because we were able to put certainty inside of their world. That, to me, is changing lives. My favorite stories are the ones in which we know that we made an impact. We went against the current of what the world out there preaches. Because everybody believes that it’s OK to go out there and lose 50%, but God forbid you ever put money into something that charges you a surrender charge. An 80-year-old woman can lose 70% of her portfolio, but God forbid we protect 100% of it.

We confuse returns and results. We don’t know what returns can be, but we certainly know results. Returns can make you broke; results help you live.

Like this article or any other?

Take advantage of our award-winning journalism, licensure and reprint options.

Find out more at innreprints.com.

June 2021 » InsuranceNewsNet Magazine

13

NEWSWIRES

QUOTABLE

Yellen: Massive Spending Won’t Fuel Inflation

Treasury Secretary Janet Yellen attempted to quell fears that President Joe Biden’s massive proposed spending on infrastructure, families and education will fuel inflation. Yellen said that because the Janet Yellen plans would be phased in gradually over 10 years, inflation would be less likely of a consequence.

Some economists, including former Treasury Secretary Larry Summers, have warned that the Federal Reserve’s current ultralow interest rates, along with the Biden administration’s proposed $4 trillion in new spending, atop about $5 trillion already approved by Congress, risk accelerating inflation.

Yellen, a former Fed chair, said the central bank “has the tools to redress inflation should it arise.”

Fed Chairman Jay Powell has clearly indicated that he does not believe a steep increase in prices is likely. Powell said he believes that the Fed can keep interest rates low even as the economic recovery intensifies, and it will not have to quickly raise rates to stop runaway inflation.

SMALL, MEDIUM BUSINESSES TAKE A ROSY VIEW

Optimism among small and medium-sized businesses is the highest it’s been since the COVID-19 pandemic began, with 57% of businesses optimistic about the overall economic outlook for the next 12 months, a higher percentage than before the pandemic began. That’s according to the Principal Financial Well-Being Index.

Only 39% of employers said they were positive about their business prospects in November 2020. However, widespread vaccine distribution in the U.S. and signs of economic resurgence are changing sentiments. According to the survey, 45% of respondents expect to fully recover from the impacts of COVID-19 over the next six months and 65% estimate within a year.

Va c c i n e s aren’t the only reason for the sunny outlook. The rise in optimism may be due to the easing of some state DID YOU

KNOW

?

14

and local restrictions allowing employers to return to more normal operations, along with continued small business support and relief programs, said Amy Friedrich, president of U.S. Insurance Solutions at Principal.

PERSONAL INCOME HITS A RECORD HIGH

Personal income jumped to a record high in March, a 21.1% increase over the previous month, the Bureau of Economic Analysis reported. The spike was attributed to economic stimulus payments hitting people’s bank accounts while more displaced workers were brought back on the job.

The government also reported that gross domestic product grew by an annualized 6.4% rate in the first quarter of 2021. Consumer spending, which makes up about two-thirds of the nation’s economic activity, increased by an

I don’t see growth as being particularly durable.

— Former White House economist Joseph LaVorgna.

annualized 10.7%.

Even more good news: The University of Michigan’s Surveys of Consumers reported that consumer sentiment rose 4% in April from the month before — a 23% improvement from April 2020.

People’s outlook about both current economic conditions and their expectations for the future also improved.

THE RECOVERY BROUGHT TO YOU

BY THE LETTER K

Employment among the bottom third of earners — those making less than $27,000 a year — is still down 30% from pre-pandemic levels, according to Opportunity Insights, a joint project between Harvard Universit y and Brown Universit y.

Meanwhile, the highest-paid workers (who earn more than $60,000 annually) have fully regained the jobs they lost.

Stock and home prices soared to record highs. The financial benefits have largely accrued to the white, wealthy and college-educated, who disproportionately own such assets, economists said.

Percentage change in employment rates for all income levels Employment for low-income earners is still down 30% —Low Wage (<$27K)

—Middle Wage (<$27K - $60)

0%

—High Wage (>$60) 0% -6.5%

-5 -10 -15 -20 -25

-29.9%

-30 -35 FEB 20

APR 20

JUN 20

AUG 20

OCT 20

DEC 20

FEB 21

The U.S. economy is recovering from the pandemic, but its unequal nature resembles the letter K. The labor market is showing signs of improvement but some groups — especially low-wage workers — continue to struggle.

The U.S. trade deficit widened to a record $74.4 billion in March.

Source: LIMRA

Source: National Association for Business Economics

InsuranceNewsNet Magazine » June 2021

APR 21

Source: U.S. Department of Commerce

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COVER STORY

The pandemic brought a double-barrel shot of pain to the annuity industry in 2020. In addition to the sudden economic wreckage, face-to-face sales were virtually eliminated overnight.

As 2021 reaches the midpoint, insurers and producers have recovered lost ground and added gains.

Let’s Make A Deal!

Private equity firms are eagerly snapping up insurers in deals that have some concerned.

Others say the capital infusion means more power to push out products. • PAGE 17

16

InsuranceNewsNet Magazine » June 2021

A Policy Change

Regulators and legislators are fascinated with annuities. The former seems to finally agree on proper sales oversight, while lawmakers are discovering annuities might be able to solve a crisis. • PAGE 22

A Stronger Leg To Stand On

The traditional “three-legged stool” is wobbly. Read why one veteran retirement planning expert says the pensions leg should be sawed off and replaced with annuities. • PAGE 23

THE 2021 STATE OF ANNUITIES COVER STORY

Let’s Make A Deal!

Private equity firms are eagerly snapping up insurers in deals that have some concerned. Others say the capital infusion means more power to push out products. • By John Hilton

P

rivate equity firms are feverishly buying up insurers and their books of business — with both good and bad implications.

The good news first. Annuity innovation and product availability are strengthened by the financial heft a private equity backer brings.

Athene was able to ride out 2020 and even boost some sales figures because it has the financial muscles to do so, said Mike Downing, executive vice president and chief actuary for the retirement services company.

Once the pandemic hit in March 2020, face-to-face selling halted abruptly. By May, many insurers were pulling products, or curtailing sales to specific age ranges. Not Athene.

“Because we have such strong capital and a lot of excess capital, we took a perspective of: We’re going to power through this because we have a huge cushion,” Downing explained. “And we’re going to take advantage of that capital cushion we have in that surplus and really continue to deliver products that customers need.”

In 2020, there were 191 privateequity-backed insurance deals in the U.S., Refinitiv reported, beating the prior record of 154 set in 2019. The dealmaking has continued strong in 2021.

In a February deal, KKR bought 60% of insurer Global Atlantic for more than $4 billion. Blackstone had agreed to buy Allstate Life for $2.8 billion one month earlier.

Structured Annuity Sales By Quarter

Structured annuity sales quickly shrugged off the pandemic and resumed explosive quarterly growth. (Dollars in millions.) $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 1Q18

2Q18

3Q18

4Q18

1Q19

Athene made its own deal in a March merger with Apollo Global Management, which held a 35% stake in Athene. The $11 billion all-stock deal folds Athene’s hefty annuity business into Apollo’s investment umbrella.

It also adds more financial capital to the annuity business, Downing said. Founded in 2009, Athene is a unique company, he explained, in that it focuses solely on spread-type opportunities in the retire-

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

ment space, as opposed to traditional life insurance.

“The biggest risk that insurance companies face when offering that kind of product is really on the asset side,” Downing added, “being able to effectively underwrite assets, manage the inherent credit risk that exists, what to get incremental alpha on those assets without taking excessive risk. And that’s where a company like Apollo really excels.”

June 2021 » InsuranceNewsNet Magazine

17

COVER STORY THE 2021 STATE OF ANNUITIES

2020-2021 Annuity Sales

Overall annuity sales grew 9% in Q1 2021 over Q1 2020, the Secure Retirement Institute reports. (Dollars in billions.)

Q1 2020

Q2 2020

Q3 2020

Q4 2020

YTD 2020

Q1 2021 (EST)

Traditional variable

$21.1

$16.6

$17.7

$19.2

$74.5

$20.7

-2%

8%

Registered index-linked

$4.9

$4.5

$6.3

$8.4

$24.1

$9.2

89%

9%

$26.0

$21.1

$23.9

$27.6

$98.6

$29.9

15%

8%

$9.8

$12.8

$15.8

$13.7

$52.1

$14.3

46%

4%

Total Variable Fixed-rate deferred

Q1 2021 / Q1 2020

Q1 2021 / Q4 2020

Indexed

$16.2

$12.0

$13.2

$14.1

$55.5

$13.7

-15%

-3%

Deferred income

$0.47

$0.35

$0.42

$0.45

$1.7

$0.41

-13%

-9%

Fixed immediate

$1.9

$1.4

$1.4

$1.6

$6.3

$1.4

-26%

-13%

Structured settlements

$1.5

$1.2

$1.0

$1.1

$4.8

$1.2

-20%

9%

Total Fixed

$29.9

$27.8

$31.8

$31.0

$120.4

$31.0

4%

0%

Total U.S. Annuities

$55.9

$48.9

$55.7

$58.6

$219.0

$60.9

9%

4%

Source: Secure Retirement Institute, Preliminary Estimates

In other words, the financial might Apollo brings means Athene will continue to be aggressive in the annuity space.

The Bad News

Some critics are concerned about all the attention from private equity. Those concerns relate to the various fees associated with life insurance and annuity contracts.

Fees can be raised to a certain capped

person told CNBC. It is the persistently low interest rates that are motivating insurers to sell off their insurance businesses. The extended lowrate period is making it hard for insurers to get a decent return from the bonds that underpin their portfolios, which in turn squeezes the cash on hand needed to pay benefits on insurance contracts.

“Life insurers are continuing to pivot

The extended low-rate period is making it hard for insurers to get a decent return from the bonds that underpin their portfolios, which in turn, squeezes the cash on hand needed to pay benefits on insurance contracts. limit, and some are worried that private equity backers will raid contracts to collect as much fee revenue as they can.

Jacked-up fees could erode the investment earnings of a variable annuity, for example. Consumers and longtime clients would wind up the losers.

So far, the private equity deals appear to be only good news for the business of selling annuities. KKR reportedly has not raised any fees on the enormous book of business Global Atlantic holds, a spokes18

InsuranceNewsNet Magazine » June 2021

toward simpler, more fee-based, capitallight insurance products; and private equity sees investment and asset management opportunities, as well as expense takeouts, as a lure,” said Moody’s Vice President Laura Bazer in a recent report.

Despite this bottom-line financial reality, insurers continue to tweak and create new annuity products. Sales dipped as the COVID-19 pandemic raged, but rebounded strongly in the fourth quarter 2020. That growth continued into the first

half of 2021 as the industry adapted to new sales environments and digital delivery systems.

Sales Trends

Total annuity sales of $219 billion represented a 9% decline in 2020, according to the Secure Retirement Institute’s U.S. Individual Annuity Sales Survey. The rebound began in the fourth quarter, with a 2% year-over-year increase, SRI said.

As this issue went to press, preliminary first-quarter SRI sales data showed a continued strong bounce back in most product areas, said Todd Giesing, senior annuity research director, SRI. A concerning and extended trend is the decline in guaranteed income product sales. At a time when more and more baby boomers are retiring in need of guaranteed income they won’t outlive, the sales of such products nose-dived, Giesing said.

Over a five-year period ending in 2020, sales of these income-focused products declined from $116 billion to about $60 billion in 2020.

“We don’t think this is a lack of demand or need for guaranteed income,” Giesing said, “because all the demographics point to a demand that needs to be increasing, as fewer people have the backstop of a corporate pension.”

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June 2021 » InsuranceNewsNet Magazine

19

COVER STORY THE 2021 STATE OF ANNUITIES

Annuity Sales Forecasts By Product Type, 2021-2025

The Secure Retirement Institute predicts healthy 2021-25 growth for annuity sales across most product lines. (Dollars in billions.)

2020(A)

2021(F)

2022(F)

2023(F)

2024(F)

2025(F)

Variable annuities

$98.6 ↓ 3%

$99 - $107

$99 - $107

$112 - $120

$118 - $126

$126 - $134

Traditional variable annuities

$74.5 ↓ 12%

$66 - $71

$66 - $71

$68 - $73

$70 - $75

$74 - $79

Registered index-linked annuities (RILA)

$24.1 ↑ 38%

$33 - $36

$41 - $44

$45 - $48

$47 - $50

$52 - $55

Fixed annuities

$120.4 ↓ 14%

$116 - $127

$125 - $137

$135 - $147

$140 - $151

$145 - $157

Indexed annuities

$55.5 ↓ 24%

$60 - $65

$66 - $71

$71 - $76

$74 - $79

$78 - $83

Fixed-rate deferred annuities

$52.1 ↑ 10%

$42 - $47

$44 - $49

$49 - $54

$49 - $54

$49 - $54

Income annuities

$8.0 ↓ 35%

$8.9 - $9.9

$9.8 - $10.8

$10.2 - $11.2

$10.7 - $11.7

$11.7 - $12.7

Structured settlements

$4.8 ↓ 26%

$5.4 - $5.9

$5.7 - $6.2

$6.0 - $6.5

$6.3 - $6.8

$6.6 - $7.1

$219.0 ↓ 9%

$215 - $235

$232 - $251

$248 - $267

$258 - $277

$271 - $290

Total

(A) = Actual, (F) = Forecast; Green cells = Up from prior year, Yellow cells = Flat from prior year, Red cells = Down from prior year

Instead, Giesing pointed to two reasons why consumers are avoiding guaranteed income annuities. For starters, low interest rates are limiting the guarantees offered by income annuities. Second, the pandemic forced many Americans to hunker down and focus on “short-term needs,” Giesing noted.

“We’re hoping that as the pandemic subsides and vaccines roll out here in the U.S., people will get focused back on longer-term planning,” he said. “People may have a different view on mortality, too. Once they get out of this thing, it’s going to be an interesting dynamic.

We do expect income-focused sales to grow, but they will still be growing slow and steady.”

‘Kind Of Unique’

The sales star continues to be structured, or registered indexed-linked, annuities.

The unique combination of low interest rates, a roller-coaster 21st-century economy and an advancing baby boomer generation is making the upside-downside package offered by structured annuities very popular.

“At the start of the pandemic, the 10year Treasury plummeted to 56 basis points, and the equities market contract20

InsuranceNewsNet Magazine » June 2021

ed 32%,” Giesing said. “Worried investors turned to registered index-linked annuities and fixed-rate deferred annuities for the balance of downside protection and investment growth.”

According to sales data collected by Wink, Inc., fourth quarter 2020 structured annuity sales were up 71% over the prior year quarter.

“I project that structured annuity sales will soon gain enough momentum to surpass where their indexed brethren were just over a decade after development,” said Sheryl J. Moore, CEO of both Moore Market Intelligence and Wink. “The consistent double-digit gains in structured annuity sales over the previous quarter, year, and year-to-date support this.”

Clients considering an annuity today have likely lived through deep financial anxiety, said Scott Stolz, head of insurance solutions for Simon Markets, during a recent webinar. First came the tech stock crash of 2000-02, followed up by the great recession of 2008-09.

Those memories are surely driving people to the structured annuities, which offer the potential for market returns, but limit any losses.

“Structured annuities are kind of unique in that they give you the ability to

balance the risk versus reward and individualize it for each specific client based on what their needs are,” said Stolz, who headed up the Raymond James Insurance Group for many years.

Structured annuities are no shooting star. Most insurers either have introduced, or are planning to introduce, new products with new features in the structured annuity space. Most product executives see great potential for these products to dominate the market for years to come.

“Probably our single biggest area of product innovation and development going forward is in that [structured annuity] space,” Downing said. “We recognize that that’s a really big growth area.

Over the next three years, I would expect in terms of product innovation for Athene to be developing new products in that space to really continue to stay on top of that market.”

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.

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COVER STORY THE 2021 STATE OF ANNUITIES

A Policy Change

Regulators and legislators are fascinated with annuities. The former seems to finally agree on proper sales oversight, while lawmakers are discovering annuities might be able to solve a crisis. • By John Hilton

F

or a good long time, it seemed as though regulators and legislators hated annuities as much as Ken Fisher does.

Things got so bad that the Obama administration went out of its way to talk up annuities on occasion. Even former President Barack Obama himself endorsed the products. Of course, his Department of Labor was also attempting to adopt tough annuity sales rules at the same time.

Things have changed. Annuities and those who sell them are riding a wave of positive public policy that extends from regulators’ offices to the halls of Congress.

Two positive trends are well on their way to established policy: → Congress is committed to SECURE Act legislation. The SECURE Act was signed by former President Donald Trump in late 2019. Industry lobbyists are hopeful that SECURE 2.0 will be introduced this summer. → Best-interest annuity sales regulations. The Biden DOL joined a growing list of states in endorsing best-interest regulations on annuity sales.

The SECURE Act legislation removes barriers to selling annuities — in particular, into retirement plans — while the regulation clarity is perhaps the most important development in years. The costly and chilling effect on annuity marketing, distribution and sales is slowly being eliminated as a harmonious best-interest standard wins consensus.

“There could be a path of regulation that might cause challenges in different jurisdictions, but it’s not something we’ve seen yet,” said Bryan Pinsky, senior vice president of individual retirement pricing and product development for AIG.

A SECURE Future

The door cracked open wider for annuities to be sold into retirement plans with the surprise passage of the SECURE Act in 22

InsuranceNewsNet Magazine » June 2021

December 2019. After passing the House early in the year, the bill collected dust for months. When senators started looking for a bipartisan issue to get a legislative win, the pickings were slim, which elevated the SECURE Act. The legislation made several significant changes, many of which are still being put in place. Officially known as the Setting Every Community Up for Retirement Enhancement Act, it allows:

• Further support the use of annuities that provide guaranteed lifetime income in retirement.

• Create a new incentive for small businesses to offer a retirement plan.

A Best-Interest World

If we had peeked ahead five years in 2016 and saw state insurance commissioners, federal Department of Labor civil servants and Securities and Exchange Commission regulators all agreeing on → More time in individual retirement general annuity sales standards — few accounts and 401(k)s. The bill raises the would have believed it. age for taking required minimum distriBut that is where we are in 2021. butions from age 70 1/2 to age 72.

To recap, the Biden administration closed the loop on harmonization of a → Granting older workers benefits. best-interest standard when it allowed the As long as you’re working, you can still Trump DOL-authored investment advice contribute to your IRA after age 70 1/2. rule to take effect.

Previously, you couldn’t.

The DOL rule has two main parts: a new prohibited transaction exemption al→ Boosting small-business 401(k)s. lowing advisors to provide conflicted adSmall businesses can now band together vice for commissions, and a reinstatement in group plans. of the “five-part test” from 1975 to determine what constitutes investment advice. → 529 plans. They can be used to repay Most importantly, it is similar in spirit up to $10,000 in student loans, as well to rules put forth by the SEC and its as for siblings.

Regulation Best Interest and the model annuity sales rule finalIndustry lobbyists are callized by the National Association ing SECURE a great first step, of Insurance Commissioners. As but one that needs companion of press deadline, about a dozen legislation known as Securing states have adopted or are in the Neal a Strong Retirement Act of 2020. process of adopting the latter rule.

It was introduced by Reps. Richard Standards are becoming clear: Neal, D-Mass., and Kevin Brady, Agents and their financial instiR-Texas, in late October, but did tutions need to carefully docunot go far. Hopes are high for a ment all annuity transactions.

“SECURE 2.0” bill this summer.

Commissions are fine, and highThe latest bill included the foler-priced products can be sold, lowing: but only with a careful paper trail Brady • Allow people who have saved too explaining why that recommendalittle to set more aside for their retirement. tion was made. It is all music to the ears of • Offer low- and moderate-income annuity executives who feel the burden of workers a tax credit for contributions to uncertain regulations being lifted. a 401(k) or similar plan.

“It’s been an interesting road, but we’re • Help people with student loans save happy with where we’re at, and I think it’s by letting employers make retirement been a situation that has generally proplan contributions equal to what an em- vided more opportunities to meet clients’ ployee pays on their loans. needs,” Pinsky said.

THE 2021 STATE OF ANNUITIES COVER STORY

A Stronger Leg To Stand On

The traditional ‘three-legged stool’ is wobbly. Read why one veteran retirement planning expert says the pensions leg should be sawed off and replaced with annuities. • By John Hilton

J

ason Fichtner recalls a typical conversation with a 62-year-old newly minted retiree applying for benefits when he worked at the Social Security Administration.

“I’d ask them, ‘How long do you think you’re going to live?’” he said. “And they’d say, ‘Twenty years.’ I’d say, ‘So you have money saved up until you’re 82.’ And they would look at me like, ‘What?’”

The entire exchange reveals the poor planning and incomplete assumptions that have plagued the retirement industry for decades.

With pensions nearly nonexistent today and a final surge of baby boomer retirements Fichtner lurking, it is time for change, Fichtner said.

Former acting deputy commissioner of the Social Security Administration and a senior economist with the Joint Economic Committee of the U.S. Congress, Fichtner is bringing his impressive background to the Alliance for Lifetime Income.

A nonprofit consumer education organization, the alliance was formed by a coalition of financial services companies.

The data is shocking, its leaders note: The entire baby boomer generation, more than 70 million strong, will be 65 or older in 2030.

“So many people now are entering retirement with Social Security as their only protected source of income,” explained Fichtner, most recently senior lecturer in International Economics at Johns Hopkins University Nitze School of Advanced International Studies.

With all these factors in play, the time is right for annuities to take on a bigger role in across-the-board retirement planning, Fichtner concluded in the alliance white paper, “The Peak 65 Generation: Creating A New Retirement Security Framework.”

It suggests that annuities should replace pensions as the third leg in the traditional “three-legged stool” of retirement income, which includes Social Security and accumulated savings.

“We’re doing a refresh on annuity products because we see a role for annuities in filling that gap that Social Security can’t provide for and helping to mitigate risk and have that safe security that [retirees] want,” Fichtner said.

Hitting The Peak

The alliance is touting “Peak 65” to publicize the value of annuities. Peak 65 is a term used to describe the point in time when more Americans will turn age 65 than at any point in history, which will occur in 2024.

While the focus is on replacing pension income, the other legs are not exactly on the firmest footing. Social Security will require a legislative fix to keep from running short of funds by the mid-2030s.

Even with that fix, the demographics suggest that future retirees will need to become even more active in securing lifetime income.

In 2018, 16% of the population was age 65 and over. By 2060, it is estimated that percentage will rise to 23%. At the same time, the working-age population will be getting smaller, from about 62% today to 57% in 2060.

In addition, surveys indicate that most Americans are undersaved for retirement. A quarter of Americans have no retirement savings, a Forbes study found.

A new framework is needed to address the current realities that put “as many as 50% of households at risk” of not having enough money to maintain their standard of living in retirement, Fichtner’s white paper concluded. And the fix must include a focus on how protected income can help to provide the security

necessary to maintain a given standard of living in retirement.

“Social Security is one source of protected income, and for many people, it’s their sole source of protected income in retirement,” Fichtner said. “The problem is that it’s not enough.”

Employers Have A Role

Meeting the challenges presented by Peak 65 will require collective action on the part of employers, advisors and policymakers, Fichtner said.

Policy is changing, as evidenced by the SECURE Act, passed in 2019, and the potential for Congress to consider SECURE 2.0 later this year. Both pieces of legislation are aimed, at least partly, at providing greater access to annuities.

Likewise, advisors are warming up to annuities as time goes on. A recent survey by DPL Financial Partners found that 68% of advisors said they would consider recommending annuities to clients.

That leaves employers as the final piece.

The alliance recommends employers take three steps to promote access and education for annuities. → Ensure that American workers have better access through their workplace retirement plans to solutions that generate protected income easily and efficiently. → Consider the use of “trial annuities” as part of workplace retirement plans to mitigate behavioral hurdles to annuitization and encourage adoption of proven protected income strategies. → Make professional financial advice, education and retirement income planning a key workplace benefit.

“Employers really do want to help their employees,” Fichtner said. “One of the things that the SECURE Act now allows us to do is have that discussion about how you can re-create that guaranteed income someone got from a pension, but actually now more secure.”

June 2021 » InsuranceNewsNet Magazine

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Special Sponsored Section

In this year’s Annuity Awareness Month Thought Leadership Series, great minds from six elite companies offer their perspective on product, process, and the future of an ever-changing annuity marketplace.

INSIDE Why Annuity Education Is Critical To An Ongoing Recovery with Charles J. DiVencenzo, Jr., president & CEO, NAFA PAGE 25

The OneAmerica® Hybrid Annuity Care Suite Tackles the LTCi Catch-22 with Tim Vannoy, a OneAmerica regional sales director PAGE 29

7 Annuity Myths And Their Antidotes

by Brokers International PAGE 26

Creating the Change Advisors Need with National Western Life’s head of national sales, James J. Ryan and chief marketing officer Chad Tope PAGE 30

Why Don’t Advisors Do Annual Reviews on Annuities?

by Signal Advisors PAGE 28

Matching Money Mindset with Fixed Index Annuity Benefits

by American Equity PAGE 31

2021 Annuity Thought Leadership Series proudly sponsored by

June 2021 » InsuranceNewsNet Magazine

25

The Annuity Issue • Special Sponsored Section

7

ANNUITY MYTHS AND THEIR ANTIDOTES

As a financial professional, you know the benefits annuities offer to clients: guaranteed lifetime income and peace of mind knowing they’ll have enough money to retire. Unfortunately, your clients might be carrying several common misconceptions about annuities, such as concerns that the guarantee can’t be trusted or that there are more effective methods to generate lifetime income.

added. However, most annuities do have surrender charges if you withdraw money from your annuity during the surrender period. The surrender period is typically between 5-10 years.

can help protect their retirement

This myth has probably caused

other products.

Check out these 7 annuity myths and Brokers International’s tips to overcome them, so you can help your clients effectively utilize annuities to plan for their retirement.

some of your clients to view annuities as an ineffective piece of the retirement planning puzzle. To combat this, familiarize yourself with the various annuity structures and how each one fits within different financial situations.

Then discuss the annuity that fits your client’s financial situation and how it can help them reach their retirement goals.

annuity myth #1

annui ties are expensive and have high fees The biggest myth surrounding annuities is they’re expensive and have hefty fees. Compared to other products, annuities are competitively priced and they’re the only product that offers guaranteed income. Fixed annuities typically don’t have any direct fees unless additional features like optional riders or an enhanced death benefit are

26

InsuranceNewsNet Magazine » June 2021

funds from market volatility and inflation, while providing growth opportunities. Annuities can also be a more stable asset allocation strategy compared to

Many people are misinformed about the benefits and drawbacks of annuities. Don’t let your clients fall victim to these annuity myths.

You know this isn’t true, but your clients may not. If you have clients planning to retire in the next 5 to 15 years, annuities

The average consumer doesn’t know much about annuities, so they don’t consider them when building their retirement planning strategy. Annuities are complex products, but with your help as an experienced agent, you will be able to help simplify the complexities of annuity products and educate your client on how they work and how they can be a reliable method of producing income during retirement.

Brokers International offers tools to help agents provide easy summaries for clients, so they

The Annuity Issue • Special Sponsored Section

can see how an annuity can bolster their retirement plan and help them achieve their goals.

Most people think all annuities are the same because they don’t understand the differences between variable, fixed, immediate, and fixed indexed annuities. When discussing annuity structures with your clients, avoid using technical industry jargon. Lay out all their options in plain English to avoid confusion when choosing an annuity to suit their financial circumstances.

Another common reason people may not purchase an annuity is because they don’t know what will happen to the remaining money if they die. Clearly communicate with your clients

that in almost every annuity, the remaining money would be received by their beneficiaries. A “life only” immediate annuity is the only situation where an insurance company will hold onto the remaining money.

situation. If your client wants to purchase an annuity, but it isn’t the best move financially or strategically, guide them in another direction. Provide alternative options that will help them more effectively prepare for their retirement. annuity myths

BUST ED!

Don’t let this myth go unbusted.

Social Security and pensions may provide some income, but it is rarely enough. Annuities are one of the most effective ways to generate guaranteed lifetime income and they could play a critical role in your clients’ retirement plans. Educate your clients on the roles of the big three—annuities, Social Security, and pensions—then make sure they have a plan to generate income during retirement.

Keep these myths in mind the next time you discuss annuities with your clients, so you can help them make informed decisions about their retirement strategies. Many people are misinformed about the benefits and drawbacks of annuities, don’t let your clients be among them.

Annuities aren’t for everyone and they don’t fit every financial

To learn more about how Brokers International can help your annuity business reach mythic proportions, visit biltd.com/myth or call 866-250-9159.

For Financial Professional use only, not for use with the general public. ©2021 Brokers International, Ltd. All rights reserved. #21-0256-040822 June 2021 » InsuranceNewsNet Magazine

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The Annuity Issue • Special Sponsored Section

Why Don’t Advisors Do Annual Reviews on Annuities?

I

t’s no surprise that the No. 1 reason advisors lose clients is lack of communication. So why aren’t more advisors meeting annually with their clients? That’s a problem Signal Advisors, a new tech-focused IMO, set out to uncover and solve.

Based on Signal data, the average advisor plans to meet with more than 50% of their clients on an annual basis. But estimates show they actually meet with less than 16% of their clients to conduct annual reviews.

Patrick Kelly, co-founder and CEO of Signal Advisors, believes having a process for ongoing reviews and client communication is what separates average advisors from mega-producers.

“It’s difficult to keep track of every annuity an advisor has ever sold. Most advisors have policies hidden away in filing cabinets. It’s an antiquated process,” Kelly mentions.

But the benefits don’t end with time savings. Annual reviews present a greater opportunity to strengthen client relationships and increase sales.

“A client might buy from you six or seven times during his/her lifetime, not including referrals. So keeping in touch and maintaining strong rapport with them is key.

Not just when things are looking good or to get ahead of any portfolio complaints, but all of the time,” Patrick states.

Better Client Service, Better Business

Saving one hour of your time per client is one thing. But it’s only the beginning when it comes to the support Signal Advisors offers producers.

Sheila Maloney from Retirement Resources simply gushed about the level of service their firm receives. “I love so many things about working with Signal! Their review emails and notices for anniversary dates have helped our office stay on top of the client experience. Their staff does a great job of helping complete new business as quickly as possible. The client experience is overall smoother and more enjoyable. These efficiencies make sure the client is taken care of from the moment they contact our office and throughout the relationship,” says Maloney.

Automating the annual review process is an advent the industry’s needed for a long time. And it’s one that is helping advisors retain and service clients better.

“It’s difficult to keep track of every annuity an advisor has ever sold. Most advisors have policies hidden away in filing cabinets.

It’s an antiquated process.”

“Policy reviews tend to be reactive. Especially for advisors who don’t have the resources and staff to set annual review reminders for each client and compile policy data.”

Annuity Reporting Tools Are Lacking

The other hurdle is that information from carriers can be difficult to find or nonexistent. Advisors are left having to do manual calculations to figure out policy statistics such as average annual returns, withdrawals since inception and income rider fee analysis.

“It’s not that advisors don’t want to stay in touch. The problem is scalability. As a client base grows, the time it takes to stay in contact with everyone becomes seemingly impossible,” says Kelly.

Unfortunately, this problem is unique to annuities. Unlike in the securities sector, which is rich with reporting, there is a lack of tools specific for annuity annual reviews.

That is, until now.

The 1-Click Annual Review

Thanks to the ingenuity of the Signal Advisors techfocused team, they created 1-click annual reviews for advisors within their annuity-focused platform.

In just minutes, advisors can access a client-ready annual review that is perfectly branded to their firm. With a single click, advisors can save nearly an hour’s worth of admin time and frustration.

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InsuranceNewsNet Magazine » June 2021

To get a demo, visit

BetterThanAnIMO.com

The Annuity Issue • Special Sponsored Section

The OneAmerica® Hybrid Annuity Care Suite Tackles the LTCi Catch-22 For clients over 70, it can be a winning combination!

I

f you have older clients sitting on nonqualified assets — especially clients who may have difficulty qualifying for traditional long-term care insurance — there’s a smart strategy to help them get the protection they need, without incurring tax penalties or risking legacy planning.

It’s a strategy that Tim Vannoy, a OneAmerica regional sales director, is sharing with as many financial professionals as he can.

The LTC Catch-22 and How To Solve It

Vannoy

According to the Census Bureau, the fastest-growing population is adults age 85-100. Because of improved health care and medical technology, many are expected to live even longer. Unfortunately, while this population swells, few are holistically prepared for a longterm care event and the costs associated with it.

Many of them want long-term care coverage, but they can’t afford it or they don’t qualify for it. Others are in denial that they would ever need it or are misinformed as to what coverage entails. Finally, some are hesitant to pay premiums for a policy they may never file a claim on.

Fortunately, many of the same individuals, those age 7085, could be ideal candidates for the Annuity Care suite from OneAmerica.

The way the products are designed, the client will either use the long-term care benefit without incurring any tax penalties or, if they never have a long-term care event, can pass the death benefit on to a beneficiary.

Nonqualified Annuities and the Key to Protecting More Retirees

It’s well known that nonqualified deferred annuities are a popular solution for Americans planning their retirement because they offer tax-deferred growth and the opportunity to provide a source of income.

According to a 2013 Gallup Poll interviewing nonqualified annuity participants, 86% of people buy one for its taxdeferred accumulation. While some decide to annuitize their contract, most clients never do.

“One of the things we train people to ask their clients with nonqualified annuities who don’t plan to annuitize their policies is ‘What would cause you to spend this money?’ —and 73% of them said it is an emergency fund and they do not need the income. It is in case they need assistance,” Vannoy says.

The downside for many clients using their current, nonqualified funds for a long-term care event is that it can come at a hefty price with fees and taxes. Vannoy wants financial professionals to know that their clients don’t

have to pay this price.

“I wish more financial professionals knew about the benefits of the Pension Protection Act of 2006,” says Vannoy.

Tucked inside this law is a special exemption for those holding nonqualified annuities. The provision allows policyholders to make withdrawals for long-term care events (such as at-home nurse visits and live-in facilities) tax free.

These withdrawals, which the OneAmerica Annuity Care suite pays monthly, are also not counted as income but rather as a reduction of cost basis. The catch is that, because nonqualified annuities are a form of tax-deferred growth, only select products qualify. The exemption allows policyholders the ability to access the bases of the annuity rather than the growth, preventing a taxable event from occurring.

An Annuity Care Suite Offering Hybrid LTC Options Like No Other

While many annuities may carry long-term care provisions, few can touch the benefits that the OneAmerica Annuity Care suite is designed to handle.

That starts with an annuity’s easier underwriting requirements.

“I tell people looking for long-term care that our underwriting is so much easier than traditional policies. If you can’t get LTC here, you just can’t get it,” Vannoy said.

Housing many of the few Pension Protection Act options, the Annuity Care suite is designed to help your clients get the care they need — guaranteed for life.

“When financial professionals explain the impact a longterm care event can have on a family and how these products can turn on tax-free income — without endangering any legacy planning — the results are amazing,” Vannoy states.

It all comes packaged with an industry-leading claims concierge service, where the same specialist guides a family during their time of need from start to finish. Vannoy encourages you to have meaningful conversations with your clients to increase their access to income when they need it most.

You can help unlock more business that’s right in front of you. To dive deeper into this topic and learn more about the OneAmerica product suite, visit TheLTCAnnuity.com for a white paper. You’ll learn more about how to help the aging population navigate the challenges they face by having meaningful conversations about a product suite designed with them in mind. You’ll also hear from a successful financial professional who speaks to how producers can successfully position these products to increase their books of business.

OneAmerica® is the marketing name for the companies of OneAmerica. Products are issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Annuity Care II Form numbers: SA34, R508; SA35; ICC15 SA35, ICC15 R521 PPA ND, ICC15 R521 PPA, ICC15 R522 PPA. Not available in all states or may vary by state. Guarantees are subject to the claims paying ability of the issuing insurance company. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice.

June 2021 » InsuranceNewsNet Magazine

29

The Annuity Issue • Special Sponsored Section

Creating the Change Advisors Need How National Western Life is helping lead the industry’s post-pandemic revolution

F

or almost two years, this pandemic has tested the resiliency of nearly every human being on earth. And while its devastating mark will never be forgotten, this tragedy is proving to be the wakeup call many industries needed in order to adopt 21st-century processes and technologies.

Thanks to bold decisions by brave leaders like those at National Western Life (NWL), few industries have advanced further than those in the insurance and financial spaces.

Today, we sit down with NWL’s James J. Ryan, head of national sales, and Chad Tope, chief marketing officer, to look at how the insurance marketing organization’s adjustment to the pandemic has helped its agents thrive in these times.

INN: First, how has the pandemic impacted client attitudes?

Ryan

Ryan: There’s definitely been a disruption to the traditional American dream, and that’s bringing the need for protection front and center. Clients are starting to ask, “How can I position my family to pay for education and Tope living expenses if I’m no longer in the picture?” It’s given people the opportunity to slow down and assess their priorities better. In that respect, it’s making the job of an agent who is adapted to this new landscape easier.

INN: How has the pandemic impacted the industry as a whole?

Tope: When something like this happens, there really is no choice but to adapt. The pandemic — as terrible as it is — has forced this industry to look forward rather than stay comfortable in the present. Millions are now working from home; they’re becoming comfortable with virtual meetings and online shopping. Luckily, the structure of our company has allowed us to adapt and readily bring about the technology and support our producers need when they need it.

Ryan: The industry in general is racing toward a fully electronic environment for writing business. So one of the areas we’ve prioritized is giving our producers access to many products that accept electronic documents and signatures. More than that, however, we’re also spearheading technology that makes these new online tools easy for everyone to use. And what they’re finding is that our platform is actually saving them time and frustration.

INN: How has NWL been able to shift to this online landscape so quickly?

Tope: That comes down to three points. First, we knew that to build the firm of the future, we had to embrace technology, data gathering and data analytics from Day One. Second, we want to make sure we’re top of mind with independent agents. That means we can’t just have the tech — it has to work and be user friendly. So we make sure the platform agents use is always up to date, state of the art and easy to use.

Third, to help distinguish ourselves when it comes to various types of coverage, rather than try to satisfy every insurable opportunity, NWL focuses on providing solutions that meet a client’s specific needs.

INN: What is NWL ChoiceOptimizer?

Ryan: The NWL ChoiceOptimizer is a new family of annuities we introduced to the independent brokerage market this past March. It is our first 100% electronic product, from illustrations and product overviews to applications and policy issues. And there are plans to launch two more products this year, both 100% electronic. Advancing in this direction helps us stay current and top of mind with agents and provides us the capability to quickly respond to the ever-changing environment.

For an even greater look at how NWL is supporting their clients as well as details of their groundbreaking new products, visit AdvanceWithNWL.com.

For Agent Use Only — This document has not been approved under the advertising laws of your state for dissemination to individual purchasers. The NWL® ChoiceOptimizer (Form ICC20 01-1190-20 and state variations) is issued by National Western Life Insurance Company®, Austin, Texas. Subject to certain conditions. Products and product features not approved in all states. Certain limitations and exclusions may apply. See policy for complete details.

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InsuranceNewsNet Magazine » June 2021

The Annuity Issue • Special Sponsored Section

SPONSORED CONTENT

Matching money mindset with fixed index annuity (FIA) benefits TO P T H R E E I N C O M E F E AT U R E S CLIENTS VALUE MOST It may seem self-evident, but there is a direct correlation between annuity awareness and annuity preference.

According to the Secure Retirement Institute, 83% of annuity owners view annuities favorably; that number is cut in half (41%) for non-annuity owners.1 By in large,

consumers are unaware of key benefits that annuities provide. By emphasizing the benefits unique to annuities like protecting assets from volatility while generating lifelong income can help bridge knowledge gaps and build long-term solutions.

Money mindset

Preferred product features

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Relevant discussion topics

Income Seekers

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Income-focused products and lifetime income rider options

FIA payout options FIA and lifetime income rider flexibility Why fees matter with lifetime benefits

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As a retirement income product, fixed index annuities bring a lot to the table. Benefits like principal protection, taxdeferral and growing assets for lifelong income reserves are all important. But, what’s of primary importance to one client may be less significant to another. By aligning your messaging to products and features relevant to your client needs, you can further your relationships and build business.

American Equity’s line of fixed index annuity products and lifetime income rider options offer a combination of benefits to meet your client’s needs, wherever they are in their journey to and through retirement.

Whether it’s building up assets for retirement or preserving income for life and securing a legacy, we’ve got you covered with our AssetShield and IncomeShield fixed index annuities. For more specific information on products and resources on features, visit our product pages.

www.american-equity.com

*LIMRA. “Behavior Finance and Retirement Income Preferences” 2020.

1 Secure Retirement Institute. “Knowledge Matters. The Impact of Financial Knowledge on Annuity Perceptions of Consumers.” 2020 Annuity contract issued under form series ICC17 BASE-IDX, ICC17 BASE-IDX-B, ICC17 IDX-11-10, ICC17 IDX-10-10, ICC17 IDX-10-7, ICC17 IDX-10-5 and state variations thereof. Availability may vary by state.

This material is for informational purposes only, and is not a recommendation to buy, sell, hold or rollover any asset. It does not take into account the specific financial circumstances, investment objectives, risk tolerance, or need of any specific person. In providing this information American Equity Investment Life Insurance Company is not acting as your fiduciary as defined by the Department of Labor. American Equity does not offer legal, investment or tax advice or make recommendations regarding insurance or investment products. Please consult a qualified professional.

01AD-INN-AA 05.07.21 ©2021 American Equity. All Rights Reserved.

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Ameritas leaders are industry leaders

Robelynn H. Abadie, RFC, LUTCF

Abadie Financial Services Baton Rouge, LA

David J. Fazzini, LUTCF Premier Planning Group Phoenixville, PA

Frank C. Kinter, CLU, CHFC WPA Pittsburgh Financial Center Indiana, PA

Stuart J. Raffel, CLU, CPC, RFC Price/Raffel LA Los Angeles, CA

Kim G. Allen, LUTCF United Wealth Advisors Group Watertown, NY

Kathyrn A. Frank

Innovative Premier Financial Services Houston, TX

Merle D. Miller, RFC

Stephen D. Andersen, RHU

inSOURCE Financial Advisors Lincoln, NE

Mark E. Friese, CMFC

Friese Financial Advocates -Canvas Financial Libertyville, IL

Brett Moldenhauer

Zachary H. Blume

Peter C. Browne, LUTCF

Price/Raffel LA Los Angeles, CA

DFG - PRB New York, NY

Keith M. Gillies, CLU, CFP, ChFC David R. Guttery, RFC, CAM, RFS United Wealth Advisors Group La Place, LA

Keystone Financial Group Trussville, AL

William C. Moore, CFP

Kevin P. Nicholson

Midwest Financial Solutions Iowa City, IA

Moldenhauer & Associates Orchard Park, NY

Minh Vo

Brian P. Walsh, CLU, ChFC, RFC

David B. Wentz, J.D., LUTCF

R. David Wentz, J.D, CLU, ChFC

Walsh & Nicholson Financial Group Wayne, PA

Tax Favored Benefits Overland Park, KS

Tax Favored Benefits Overland Park, KS

Verus Financial Group Houston, TX

W.C. Moore Financial Services Walsh & Nicholson Financial Group Wayne, PA Centreville, VA

2021 MDRT Top of the Table Ameritas salutes our valued field associates who have attained the highest levels of MDRT membership.

Stephen L. Bruneau, CLU, CFP

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Unique Advantage San Antonio, TX

CF Advisors Group Pittsburgh, PA

Boston 128 Companies Weston, MA

United Wealth Advisors Group Bethesda, MD

Frank G. Heitker, CLU, FLMI

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John C. Kenan

Patrick J. Kenney, CPA

Premier Planning Group Cincinnati, OH

Premier Planning Group Phoenixville, PA

Jalinski Advisory Group Toms River, NJ

Southeast Financial Services Greensboro, NC

Premier Planning Group Toledo, OH

Mitchell W. Ostrove, CLU, ChFC

Joseph S. Pantozzi, CLU, CHFC

Christopher Pirtle, LUTCF

Ronald G. Pray, CLU, ChFC

Arnold J. Price

Peake Financial Silver Spring, MD

Ronald G. Pray Company Gilroy, CA

Price/Raffel LA Los Angeles, CA

The Ostrove Group White Plains, NY

Alpha Omega Wealth Las Vegas, NV

inSOURCE Financial Advisors LaVista, NE

Josh A. Jalinski

Any agency referenced is not an affiliate of Ameritas or of any of its affiliates.

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DST 1364 5-21

2021 MDRT Court of the Table

C. Robert Brown, CLU, LUTCF

Samson Chan

Dominick F. Impastato, Jr., LUTCF,

David A. McBride

UCL Financial Group LLC Memphis, TN

National Wealth Group San Ramon, CA

Acacia Financial Group Metairie, LA

Sovereign Financial Group Midvale, UT

David E. McClure

Franklin R. Mooney, LUTCF,

Michael C. Polin

Daniel J. Scholz, CLU, ChFC

Premier Planning Group Phoenixville, PA

Ameritas Financial Center Omaha, NE

Koehler Financial Group Las Vegas, NV

MRFC, LACP

Insurance Services Inc. Peoria, IL

Mark D. Scholz

Brian P. Walsh, Jr.

Ameritas Financial Center Omaha, NE

Walsh & Nicholson Financial Group Wayne, PA

This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to: Ameritas Life Insurance Corp., 5900 O Street, Lincoln, Nebraska 68510 and Ameritas Life Insurance Corp. of New York, (licensed in New York) 1350 Broadway, Suite 2201, New York, New York 10018. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit ameritas.com.

Any agency referenced is not an affiliate of Ameritas or of any of its affiliates. DST 1423 5-21

2021 MDRT Qualifiers Howard L. Barto, David White & Associates Richard T. Brunsman, CLU, ChFC, RT Brunsman Insurance & Investments Anthony G. Butz, LUTCF, Premier Planning Group – Cincinnati John Elias Calles, J.D., CLU, ChFC, National Wealth Group Jenning Chen, Capstone Financial Group Justin R. Craft, RFC, Nowlin and Associates Calvin L. Currinder, CLU, Carillon Group Lindsay N. Haas, Hoffmann Financial Services Scott C. Hanna, Westpoint Wealth Management Edward H. Harrell, Jr., CLU, Harrell-Virginia Beach Carrol U. Hoffmann, Hoffmann Financial Services Tobin C. Hoffmann, LUTCF, Hoffmann Financial Services Bryan L. Holen, inSOURCE Financial Advisors Dominick Luongo, Luongo & Associates Timothy J. Moran, LUTCF, UCL Financial/United Wealth Advisors Group Charles E. Nowlin, CLU, ChFC, Nowlin and Associates Stanley B. Plocharczyk, CLU, ChFC, Plocharczyk & Associates Ann Baker Ronn, LUTCF, The AFP Group Richard A. Strevey, inSOURCE Financial Advisors Douglas A. Thompson, CLU, Executive Benefits John B. Tickle, Houston Agency Anthony B. Tringale, CLU, DC Metro Agency Randall H. Trost, inSOURCE Financial Advisors John E. Worrel, LUTCF, Acacia Financial Group

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2021 Ameritas Mutual Holding Company

the Fıeld

A Visit With Agents of Change

Jerald Tillman’s mission to get more African Americans into the industry led to his founding a national organization. by Susan Rupe

S

hortly before he was due to graduate from Miami University of Ohio back in 1974, Jerald Tillman was invited to meet with a recruiter for an insurance carrier. His response? “I did not go to college for four years to go into the insurance business.”

But Tillman’s football coach persuaded him to meet with the recruiter, who asked him his career goals.

“I immediately told him, ‘I want to run my own business,’” Tillman recalled. “I said, ‘I like my freedom, I like to have my time, I want to come and go as I please, and I want to earn an unlimited income.

I definitely want to be my own boss, have my own office but not be stuck in the office all day. That is my dream.’”

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InsuranceNewsNet Magazine » June 2021

The recruiter replied that Tillman just described the insurance business.

“He told me, ‘Jerald, you know all the employees here at Miami University; they all have health insurance. And if you could be the one to underwrite the health insurance on all of these 5,000 employees, you could make a lot of money.’ And he also told me that if I wanted to provide the health insurance on all these employees, I would be meeting with the top executives, even the president of the university. I said, ‘So that’s what insurance is about?’ And he said, ‘That’s insurance.’ He got me interested in insurance because I never dreamed that insurance was the way I could have my own business.”

Tillman eventually signed on with Aetna Life and Casualty. But when he told

his mother about his plans for post-college life, her reaction was similar to the reaction he had when he was first approached about entering the business.

“She said to me, ‘You went to college for four years to do what?’ and she told me she was disappointed in me. Because she had had very little exposure to the insurance business except for the man who came around every week to collect the premium on a $3,000 or a $5,000 life insurance policy.”

Tillman reassured his mother that “it’s a different industry out here than what you think, and I’m going to prove it to you and make you proud.”

Today, Tillman is CEO of JL Tillman Insurance Agency in Cincinnati. In addition, he founded the National African-

THE INSURANCE MATCHMAKER — WITH JERALD TILLMAN

American Insurance Association in 1997.

When Tillman started out in the industry, his first general agent gave him a piece of advice. “He said, ‘If you’re going to get into something, get into it.’”

Tillman took the advice and became active in the local association of what was then known as the National Association of Life Underwriters, now the National Association of Insurance and Financial Advisors. He was named to a local leadership position and progressed to a leadership position on the state level.

He began attending conferences and noticed how few people of color were present. “In the beginning, it didn’t bother me because I was concentrating on learning from others who were in this business. But after four or five years in the business, I decided I would make a commitment and make it my life’s work to contribute to the industry and bring more African Americans into the insurance industry.”

It was an ambitious commitment, especially because Tillman was in his mid-20s at the time. He started where he was, in Dayton, Ohio. He created an organization he called the Association of Black Insurance Professionals and invited Black life insurance agents from his city to join.

Meanwhile, Tillman’s practice was taking off. He realized he needed to expand from life and health into the property/casualty world in order to satisfy all the insurance needs of his clients. He established a Nationwide Insurance agency and eventually moved to Cincinnati as a district sales manager for the company.

After Tillman settled in Cincinnati, he asked whether there was an organization for Black insurance professionals in his new city. “There were a few people who were getting together, but there was no association,” he said. “I told the people about the organization I started in Dayton and said why don’t we collaborate with them? And then we had two organizations, one in Dayton and one in Cincinnati.”

The Power Of Public Relations

Tillman realized the power of public relations and media coverage in giving credibility to the organizations and their members.

“I told the two chapters that every time

they vote in a new president, they have to put it in the newspaper,” he said. “We have to be proud of what we do, we have to be proud of this industry and we have to let people know we’re professionals too.”

Black advisors “have to be confident, we have to know where we’re going and we have to share our success with the world because the world is not used to seeing a lot of successful Black people,” Tillman said.

After an industry trade publication included a photo of Tillman with an article about the Cincinnati organization, a Black advisor called him on the phone.

“He said, ‘Mr. Tillman, I was looking in this magazine, and I saw a Black face.

And I was shocked. I immediately asked myself, what did he do wrong? Did he steal something? Did he lose his job? But

IN THE FIELD

more African Americans for the industry,” Tillman said.

The organization’s members were invited to The American College to attend the annual Lang Dixon Education Day, a day of professional development established in honor of a Black advisor’s contributions to the industry. One major topic of discussion was the practice of redlining from an agent’s perspective and from the corporate perspective. The insurance industry press covered the event, and Tillman said the big story that emerged was that “Black insurance agents said insurance companies avoid inner cities.”

The result was increased interest among Black insurance professionals, who asked Tillman for help establishing their own professional organizations in

Tillman says Black advisors “have to be confident, we have to know where we’re going and we have to share our success with the world because the world is not used to seeing a lot of successful Black people.” then I read the article, and I was immediately fired up. I want you to help us start a chapter in Cleveland.’”

Chapters eventually sprang up throughout Ohio over a period of 20 years under the umbrella of the Ohio Association of Black Insurance Professionals.

“The purpose was to establish a support group for African Americans in the insurance business to encourage outstanding, successful careers that will break the glass ceiling, to encourage African Americans to obtain their professional designations and to recruit

their cities. Tillman was ready to make the Ohio Association of Black Insurance Professionals a national organization, but he said his board members weren’t ready to expand nationally.

Taking It National

He decided to create a new name for this national organization, the National African-American Insurance Association, and to proceed with establishing bylaws, a dues structure and all the other parts that go along with a professional association.

Tillman began going to industry conferences to find the top Black talent in June 2021 » InsuranceNewsNet Magazine

37

the Fıeld

A Visit With Agents of Change

“My objective was to do what I can to integrate the industry and match the talent to the industry.” attendance. After identifying 10 Black advisors from these conferences, Tillman invited them to meet him in New Orleans, and NAAIA was born. The year was 1997, and the organization’s motto was “Now is the time.” Today, the organization comprises 17 chapters, and its membership increased to more than 1,000 in 2020.

“So many people have found us because they want to be part of positive change,” Tillman said. “They want to tear down the barriers because we’re all in this together. And there is so much talent out there.

My objective was to do what I can to integrate the industry and match the talent to the industry. Because I knew that African Americans were talented enough; they just didn’t have the exposure to the insurance industry. I knew there was an opportunity to play matchmaker in this industry.”

As NAAIA’s executive director, Margaret Redd has worked with Tillman in the association for more than 20 years.

“Twenty-four years ago, Jerald defined a vision and strategically engaged others to make NAAIA a reality,” she said.

“The outgrowth of Jerald’s vision is that through NAAIA, thousands of African Americans and other insurance professionals have been inspired, developed, supported and empowered as they navigate their career and business journeys.”

38

InsuranceNewsNet Magazine » June 2021

Redd described Tillman as a “game changer and a visionary whose legacy and commitment to diversity, equity and inclusion will have significant and positive industry impact for generations to come.”

Lack of exposure to the insurance industry and its opportunities, Tillman said, is a challenge in getting more African Americans into the industry.

“For the most part, the people who already were in the industry, they recruited people who went to their schools, people they went to church with, people who were in their neighborhoods, people like them,” he said. “African Americans weren’t exposed to the industry and didn’t get those opportunities.”

One of NAAIA’s goals is to expose more Black students to the industry and get them to consider careers in the insurance world. The organization is working with historically Black colleges and universities as well as with Junior Achievement to promote insurance as a career.

Tillman’s practice is a multiline agency where he provides individual life insurance as well as property/casualty coverage. He specializes in working with business owners. Outside the business, he enjoys travel and the outdoors, and he runs 15 miles a week. He is in the process of writing a book with the working title Soaring Above The Clouds, in which he shares his insights on how to handle life’s trials and tribulations.

At age 69, he is beginning to think about transitioning his practice someday.

He has three daughters, and he said that at least one of them is interested in entering the business and eventually taking it over.

“In the meantime, I’m still enjoying my agency work, I still get excited over writing business. I still go into the office every day. I’m in a sweet spot in life. I have my own agency, and I have everything within my span of control. I’m making decent money, and I come and go as I please. I’m happy.”

Susan Rupe is managing editor for Insurance NewsNet. 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.

1. VUL Defender ranks #1 70% of the time for lifetime and guarantees to A100. Average premium ranking for VUL Defender vs. top competitors based on combined averages for the following scenarios: lifetime no-lapse guarantee and NLG-A100; assumed 6% gross IR, company weighted average of funds; ages 20-70; male/female; Preferred Best, Preferred and Standard underwriting classes; full, ten and single pay; death benefit amounts of $250,000, $500,000 and $1M. Companies/products included: Securian Financial: VUL Defender® John Hancock: Protection VUL 21 Lincoln Financial: VULOne Nationwide: VUL Protector Pacific Life: Pacific Admiral VUL Prudential: VUL Protector (2018) This comparison does not take all material factors into account and must not be used with the public.

These factors include but are not limited to: applicable separate account and indexed account options, rider availability, surrender periods, or fees and expenses.

For information regarding these and other factors please consult each company’s respective prospectus.

Product features and availability may vary by state.

Variable products are sold by prospectus. Your clients should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. A prospectus can be obtained at securian.com Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

Insurance policy guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.

Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. Variable life insurance products contain fees, such as management fees, fund expenses, distribution fees and mortality and expense charges (which may increase over time). The variable investment options are subject to market risk, including loss of principal.

Uncapped indexed account participation rates are subject to change and may be less than 100%. This could have the impact of the indexed account credit being less than the change in the reference index.

Agreements may be subject to additional costs and restrictions. Agreements may not be available in all states or may exist under a different name in various states and may not be available in combination with other agreements.

These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products.

Insurance products are issued by Minnesota Life Insurance Company in all states except New York.

In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer.

Minnesota Life is not an authorized New York insurer and does not do insurance business in New York.

Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state.

Each insurer is solely responsible for the financial obligations under the policies or contracts it issues.

Securities offered through Securian Financial Services, Inc., member FINRA/SIPC, 400 Robert Street North, St. Paul, MN 55101-2098, 1-800-820-4205.

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 general public. The information presented above is solely intended for use by financial professionals. Such information is not intended for public consumption or dissemination.

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June 2021 » InsuranceNewsNet Magazine

39

LIFEWIRES Who’s Talking About Life Insurance?

55% Of Consumers Talked About Life Insurance During Pandemic The COVID-19 pandemic brought life insurance to the fore-

72% of Gen Zers talked to friends or family about life insurance in the past year, compared with: • 64% of millennials • 50% of Gen Xers • 44% of baby boomers

SOURCE: ValuePenguin front of more consumers’ minds, according to a ValuePenguin survey. More than half (55%) of consumers said they talked to their loved ones about coverage during the past year while 13% researched life insurance options for the first time. Meanwhile, 1 in 10 consumers made their first life insurance purchase.

Nearly one-quarter (24%) of Generation Z purchased their first life insurance policy during the pandemic, as did 17% of millennials.

However, the survey showed reluctance to buy life insurance still remains. For example, 48% of those who have employer-sponsored life insurance have no plans to supplement that policy. Nearly 3 in 10 (28%) avoid thinking about life insurance because it’s too depressing, and only 46% said the benefits of life insurance are very clear.

Fifty-five percent of respondents don’t understand the difference between term life and whole life insurance, and many admitted they don’t know enough about it to purchase a policy.

NEW YORK LIFE PLEDGES $1B TOWARD RACIAL WEALTH GAP

New York Life announced a $1 billion impact investment initiative to address the racial wealth gap by investing in underserved and undercapitalized communities over the next three years. The company will focus on supporting small businesses, affordable housing and community development and partnering with diverse asset managers, federally chartered community development financial institutions and other mission-driven organizations.

The insurer has collaborated with Fairview Capital to commit $150 million to invest in diverse and emerging fund managers. Through this collaboration, the company expects to make 15 venture capital and growth equity limited partnership commitments over the next three years. Each commitment would support dozens of businesses, resulting in several hundred businesses impacted overall.

“The societal events of the past year have stirred an urgency to address America’s racial disparities, which the Covid-19 pandemic has only made more glaring. Now, more than ever, is the right time to make DID YOU

KNOW

?

40

impact investments that drive change,” said Tony Malloy, New York Life’s chief investment officer.

COVID-19 FUELED RECORD DEATH BENEFITS SURGE

The U.S. life insurance industry recorded its largest year-over-year increase in direct and net death benefits in nearly a quarter-century as excess mortality due to COVID-19 triggered an unusual volume of claims during 2020.

Aggregate net death benefits across all lines of business rose by 15.1% to $87.51 billion, according to an S&P Global Market Intelligence analysis of disclosures in annual statutory statements. The rate of increase for death benefits on individual life policies of 16.7% exceeded the 10.9% rise for group life contracts.

Double-digit increases in net individual life death benefits were the rule for most of the largest U.S. life groups as they rose by 12.8% for the U.S. life units of Prudential, 15% at the group led by Northwestern Mutual, 21.8% for the group led by New York Life, 17% for the life units of Lincoln National, 39.9% for

QUOTABLE Women have adapted to the industry.

Now it’s time for the industry to adapt to women.

— Carrie Sayre, president of Women in Insurance and Financial Services

Transamerica and affiliates, and 13% for the group led by MassMutual.

WHY DON’T THEY BUY? EXPLODING THE MYTHS

Consumer interest in buying life insurance may be on the rise, but 40% of the adult U.S. population — we’re talking 102 million people — is uninsured or underinsured and believe they need to buy or increase their coverage. So why aren’t they doing it? The 2021 Reasons For Insurance Barometer Not Buying Life Survey attempted to Insurance find out.

81% think it’s too The study reveals the expensive most common reasons 75% have other people give for not pur- financial priorities chasing life insurance 65% don’t know are cost and having what kind to buy SOURCE: 2021 Insurance Barometer Survey other financial priorities. But more than half (53%) admit that they are unsure what product they would need or how much coverage to purchase. Nearly half (47%) stated that they have put off purchasing, and more than a third (36%) believe they simply would not qualify for coverage.

In addition, survey respondents overestimated the cost of life insurance and admitted to a lack of knowledge about the product. According to the study, less than a third of consumers said they were “very” or “extremely” knowledgeable about life insurance. Finally, 35% of men and 22% of women surveyed said they believe the life insurance they receive through the workplace is sufficient.

Nearly 4 in 10 consumers who have life insurance wish they had purchased their policies at a younger age. Source: 2021 Insurance Barometer Survey Source: The Wall Street Journal

InsuranceNewsNet Magazine » June 2021

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41

LIFE

Commentary: Why AG49 Is Like Frankenstein’s Monster Actuarial Guideline 49 was aimed at alleviating confusion among indexed universal life insurance illustrations. But it didn’t end up that way.

By John “Hutch” Hutchinson

A

ctuarial Guideline 49 has been bolted onto and restitched to the point where it degenerated into a grotesque monster with a life of its own.

Like the road to hell, AG49’s original path was paved with good intentions.

Its stated aim was to alleviate confusion by creating uniformity among indexed universal life illustrations plus requiring additional disclosures to aid in consumer understanding.

As a client-facing insurance agent myself, I can tell you firsthand these marks were completely missed.

“Uniformity” and “consumer understanding” are so far removed from today’s AG49-A illustrations that even seasoned industry vets are befuddled. Let’s walk down memory lane to see where AG49 went astray and discuss how to rectify its bastardization.

Before the monster of AG49 was given life, a group of insurance companies cried foul on indexed universal life insurance carriers playing fast and loose with illustrations using unsustainable caps and growth trajectories. The most egregious instances cherry-picked slices of history while overlaying IUL caps their options budget couldn’t possibly sustain.

A task force of actuaries from both sides of the insurance aisle (companies who did and didn’t sell IUL) worked to compromise on formulas ensuring these three tenets for IUL illustrations: 1. Determining the maximum allowable illustration rates.

2. Limiting the amount of illustrated policy loan leverage.

3. Requiring additional disclosures to aid in consumer understanding.

42

InsuranceNewsNet Magazine » June 2021

AG49 first took effect in September 2015, and everyone adapted to the new illustrations.

‘It’s Alive, It’s ALIVE!’

The task force confidently checked the first two tenets above. However, their solution for Tenet 3 about aiding in “consumer understanding” fell short. They simply mandated a midpoint illustration be shown with steady crediting between 0% and the AG49 maximum. It’s important to examine how poorly this third tenet was addressed because our solution lives here.

First, most carriers were already illustrating some version of a midpoint, so there was nothing “additional” about it.

Second, prior to AG49, several IUL carriers offered historically back-tested supplemental reports, where the consumer could clearly see the effect of their policy’s cap, floor, charges and loan interest during up and down years. Since that baby got thrown out with the bathwater, AG49 actually removed

tools that previously aided in consumer understanding of the variability inherent in IUL. After the doctor walked away from his creation, the monster claimed its first victim.

Consumers would now see IUL only as a smooth ride. Let’s compare this flaw of averages with the past 65 years of the S&P 500 using a 0% floor and a 9.99% cap: Notice that 62 out of 65 years produced crediting below 3% or above 7%, and only three of 65 years experienced crediting in between. Yet most consumers will see only illustrations with steady crediting between 3%-7% every single year, setting false expectations.

Back to our history lesson …

Like the arms race, insurance companies began retooling their illustrations to position themselves competitively with the new regulations.

However, AG49 also mandated that carriers must substantiate the affordability of their hedging strategy. To account for options pricing, a company’s maximum crediting rate could be no more than 145% of their general account’s earnings.

COMMENTARY: WHY AG49 IS LIKE FRANKENSTEIN’S MONSTER LIFE The forlorn monster pleaded with its maker for a mate, and the creator conceded.

One company (that isn’t even a major IUL player) posed a question: What if the policy owner participated in cost sharing for the hedging? If a specific fee was charged, shouldn’t this also be budgeted into the carrier’s allowable options budget?

Surprisingly, regulators agreed.

If an illustration uses a rate lower than the maximum, then perhaps some amount of the multiplier can make its way into the illustration, but it’s all formulaic and difficult to discern if and how much.

This Is Uniformity?

Consumers now have access to features that deduct from their cash value, yet no proper cost/benefit analysis can be performed.

What About Consumer Understanding?

The monster’s mate began being assembled.

Another IUL carrier took this idea and literally turned the tables. Instead of competing vertically, going for the highest cap, they created a new IUL category by competing horizontally.

Rather than charge a nominal fee to elevate their cap, they essentially tripled their charges to buy multiple options silos within a single IUL policy.

Their illustrations only displayed an AG49 rate of 5% or 6%, but the actual growth rate was illustrated in the high teens. This concept was a smashing success, other carriers followed suit, and these products captured massive market share.

The industry again cried foul! They claimed unsuspecting consumers would have no idea what was going on under the hood, especially the copious fees that may cannibalize their policy after a string of bad years.

Another task force decided the fate of multipliers, and on Dec. 14, 2020, AG49-A became the new standard.

Horrified by the consequences of his latest work, the creator abruptly destroys the monster’s new mate.

The new mandate is simple.

Illustrations are prohibited from showing any positive effect from buyup caps or multipliers beyond the maximum AG49 rate, even though multiplier fees would still be illustrated.

Agents must resort to stor y telling instead of financial modeling. Rogue spreadsheets are now regularly being cobbled together (some more accurate than others).

Shouldn’t these be compliantly displayed on carrier paper like they were in the past?

Aren’t historical lookbacks the only way to facilitate “consumer understanding” of IUL’s inevitable volatility (whether multiplied or not)?

Couldn’t the uniformity we’ve been promised simply be a predetermined collection of historical slices (including the lowest period and another matching the AG49 rate)?

Wouldn’t historicals run at the midpoint between an IUL’s current parameters, and its guaranteed minimum parameters better represent what happens if caps and participation rates continue waning?

Of course! However, because of how AG49 semantically overlays with universal life’s original Model Regulation 586 from 1995, these incredibly useful tools are forbidden. Isn’t it time the creator brought the monster back to the lab and started anew?

Where's the monster wandering now?

The latest trend in IUL is all about volatility-controlled strategies by

third-party managers. Since their algorithms shift from equity exposure to bond exposure when volatility is high, the cost to hedge these strategies is significantly cheaper. Therefore, IUL companies offering these strategies use the cost savings to bake some sort of bonus into the illustration or offer participation rates exceeding 100%.

Although it’s not a forbidden multiplier for a fee, isn’t this simply a photo negative? You’re offering a cheaper hedge so you can multiply or enhance actual performance.

Given that bond yields are at historical lows, will the affordability of this hedge endure? Since these volatility-controlled models don’t have extensive histories, AG49-A actually allows the use of a “hypothetical benchmark index” for their illustration rate even if that hypothetical benchmark isn’t actually even offered within their IUL.

Wait, What?!?

The creator must continue chasing the monster as he roams through uncharted territory.

Listen, I’m all about free markets.

Quite frankly, the consumer should have access to all of these diverse crediting strategies, whether it be volatility control, tracking traditional indexes, or even multiplying any of the above so long as the additional costs and implications can be properly modeled to facilitate an informed decision by the consumer.

Disclosure rather than prohibition is the key. Let the client decide what kind of crediting methods are most appropriate for him or her by demonstrating the variability involved in each. By creating uniform standards for compliant historical back tests, we can appropriately model any type of strategy and better frame more realistic expectations for consumers.

Only then will we stop reactively stitching up this monster.

John “Hutch” Hutchinson is an independent insurance agent and registered investment advisor in San Clemente, Calif. He is founder of BankingTruths.com, an educational site for both consumers and advisors. He may be contacted at john.hutchinson@innfeedback.com.

June 2021 » InsuranceNewsNet Magazine

43

ANNUITYWIRES

Structured Annuities Break Out In 2020

If annuity sellers were looking for the perfect product to ride out a pandemic, an uncertain economy and plunging interest rates, structured annuities answered the call.

Also known as registered index-linked annuities or buffered annuities, the products continue to sell at higher and higher numbers each quarter.

Source: Wink Inc., numbers in millions

Structured Annuities Sales Power Through Pandemic

$9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

Structured annuity sales in the fourth quarter were $8.4 billion, up 34.5% as compared with the previous quarter, and up 70.8% as compared with the previous year, Wink Inc. reported. Total 2020 structured sales were $24 billion.

The big sales numbers should continue for the foreseeable future, said Sheryl J. Moore, CEO of Wink. “In the past, I’ve made the observation that structured annuities are experiencing sales similar to that of indexed annuities, during the same period of the products’ maturity. That will change this year,” she said. “I project that structured annuity sales will soon gain enough momentum to surpass where their indexed brethren were just over a decade after development.”

INSURERS RESHUFFLE ANNUITY OFFERINGS

Insurers still like annuities — just the right kind of annuity — and it showed in first-quarter earnings reports, with several insurers pledging to reduce or eliminate their annuity holdings.

The catalyst remains the same — ultralow interest rates, which show no sign of rising anytime soon.

American Financial Group plans to complete the sale of Great American Life to MassMutual in the second quarter. The deal allows American Financial to focus on its profitable property/casualty business. The sale will give MassMutual more access to banks and independent agents.

Meanwhile, Prudential previously announced plans to reduce annuities to 10% or less of company earnings.

In the third quarter, the company said it would discontinue all sales of variable annuities with guaranteed living benefits. By repricing strategies and introducing FlexGuard, a registered index-linked DID YOU

KNOW 44

Figuring out how to provide a lifetime income is really, really challenging, and that’s what annuities do best.

— David Blanchett, head of retirement research for Morningstar Investment Management

1Q18

?

QUOTABLE

annuity, in May 2020, Prudential completely retooled its annuity business.

The Commission on Retirement Security Act would establish a federal retirement commission that could review private retirement benefit programs and then report recommendations on retirement security to Congress.

“The key to long-lasting retirement security policy is through bipartisanship,” Young said. “Otherwise, there’s a real concern that any changes brought on in a purely partisan manner will only be temporary changes.”

RETIREMENT SECURITY BILLS REQUIRE COOPERATION

Republicans and Democrats don’t do much together these days, but they will have to if any retirement security legislation gets passed, said Sen. Todd Young, R-Ind. In the previous session of Congress, Young and three other senators put forward two bills to imYoung prove access to workplace retirement plans and improve private sector retirement plans.

The Retirement Security Flexibility Act would expand access to workplace retirement plans by giving small employers more flexibility when they set up 401(k)s for their employees. In addition, the bill would make it easier for savers to auto enroll into long-term savings plans and more quickly escalate those savings.

NO RIGHT TO SUE IN DOL RULE

The Department of Labor’s newest guidance on its investment advice rule’s exemption emphasizes that the rule does not extend a private right to sue and other conditions set in the previous rulemaking that inspired industry objections.

“The exemption also does not expand retirement investors’ ability to enforce their rights in court or create any new legal claims beyond those in Title I of ERISA and the Code,” the guidance says.

Beyond the exemption, the rule reinterprets the “five-part test” from 1975 to determine what constitutes investment advice. The Trump rule replaced the unpopular fiduciary rule put forth by the Obama administration.

36% of Americans are more concerned now than at the start of the pandemic regarding their ability to maintain a nest egg in retirement. Source: Fidelity Investments

InsuranceNewsNet Magazine » June 2021

ANNUITY

2021 Will Give RILAs Their Moment In The Sun Registered index-linked annuities are uniquely positioned for times like these.

By David Hanzlik

2

020 was an incredibly challenging year to say the very least, and nearly everyone has been affected by the COVID-19 pandemic. Not only has the pandemic been incredibly lethal, but also it has exacted a devastating toll on our economy unlike any we have observed since World War II. We continue to focus from a medical standpoint on protecting the most vulnerable Americans — many of whom are of retirement age and thus not dramatically affected by the prospect of job loss.

But from a financial security perspective, the conundrum faced by those still working but approaching retirement calls for greater discussion.

Millions of jobs have been lost and countless businesses have failed due to the public health measures enacted to slow the spread of the pandemic. Many of these losses have fallen on low-wage workers who were already the most financially vulnerable, but when pre-retirees lose their jobs, their chances of regaining employment are much lower, 46

InsuranceNewsNet Magazine » June 2021

and the financial and emotional effects of these job losses can be irreversible throughout their retirement.

Now it is important to note that all this upheaval in the labor market and wider economy is taking place as the stock market continues to hit new highs. It is truly “A Tale Of Two Cities” as near-zero interest rates designed to incentivize buying and borrowing to stimulate the economy today lead many to flock to the

for this unsteady economic environment. These products allow for increased savings growth with better, customized risk control and access to future guaranteed income — all key components to planning for and achieving a comfortable retirement.

Annuities in general give savers the ability to stay invested (i.e., putting their money to work) and reduce the risk of potential losses, which make them a compelling alternative to other hallmark safe-haRILAs are structured ven products, such as differently in that they are certificates of deposit or bonds. While many fixed tied to the market rather than a annuity products tend to fixed rate, generally resulting in see lower sales during pegreater upside potential. riods of low interest rates — warranted or not — stock market in search of yield instead of variable annuities aren’t tethered to inputting money into protected savings. terest rates and can offer unique benefits So how can pre-retirees get in on the to savers. action of upward market trends as a RILAs are structured differently in means of bolstering their chances of re- that they are tied to the market rather tiring safely, without opening themselves than a fixed rate, generally resulting in up to risk by getting too wrapped up in greater upside potential. For the past irrational exuberance? century, the average stock market return A great way to balance priorities for has been around 10% per year. This highthis segment of the population is through er rate of return, especially at the current the use of registered index-linked annu- moment in time, is more lucrative than ities, which are particularly well placed are fixed products, allowing customers

2021 WILL GIVE RILAS THEIR MOMENT IN THE SUN ANNUITY

Floor Style or Buffer Style: What’s The Difference?

Floor Style

•Y ou can set a floor to limit the maximum amount of loss your client is willing to accept.

• I f you set the floor at 10%, this protects from losses exceeding 10%. So if the linked index falls 15%, the loss is only 10%, while gains are symmetrically capped at 10%.

Buffer Style

• Protects from a percentage of loss.

• If you set the buffer at 10% and the index declines 15%, the loss is 15% minus 10% — or 5%.

• Gains are reduced by the same buffer amount. If you set the buffer at 10% and the index rises 30%, the gain is 30% minus 10% — or 20%.

•A good choice if a client is unwilling to accept any losses • A buffer exposes the clients beyond a certain point, although to potentially higher risk but it prevents gains beyond the cap. provides a larger return.

Source: Annuity.org

to use RILAs to push the limits of a lowrate environment.

What also makes RILAs so versatile is the level of flexibility they provide through their customizable risk exposure. Savers are able to identify a comfort zone based on how much they’re willing to lose and what their income accumulation goals are. This customized approach gives people the freedom from trying to “time” investment strategies and offers them the option to seek more stable longterm returns.

The adjustable comfort zones for RILAs can be structured in two different ways, buffer style or floor style, each of which uniquely provides upside potential with protection against downside risk. For floor-style RILAs, customers are able to set the maximum percentage of loss they are willing to take on as the “floor.” If the determined floor is set at -10%, the customer will not lose anything beyond that percentage linked to the market. At the same time, the owner can earn only up to a “cap” on market gains, which is set to provide a notably higher amount of upside potential than most fixed products offer.

On the other hand, buffer-style RILAs give savers a buffer against loss rather than a floor. This means they are protected against a certain percentage “buffer” of loss by the issuer, while the remaining percentage loss is incurred by the customer. This type of RILA works best with a saver who is willing to accept a little more risk in search of further gains. With a 10% buffer, a portfolio that declines 45% would result in an experienced loss of 35%. Like the floor style, the owner can earn only up to a cap on market gains.

In both cases, cap levels are unique to the RILA, are guaranteed for some period of time (e.g., one year, three years) and vary based on market conditions.

Both the floor and buffer model for mitigating risk with RILAs are particularly beneficial right now as hedges against market volatility exemplified by extreme highs and lows. While it is clear that missing out on the worst days in the market raises portfolio value over time, evidence also shows that the benefits of remaining part of the best days still don’t outweigh the benefit of being on the sidelines for the worst days.

A controlled study done on a portfolio

of $100,000 invested from 1994 to 2014 that missed out on 40 of both the best and worst days in the market resulted in a 23.4% increase in comparison with the same portfolio with those days included.

Having both the upside and downside potential from investing in the market is important, but with the bumpers built into RILAs, a nest egg has the potential to grow in a more stable fashion than it would in other investment vehicles.

Beyond the opportunity for regulated growth, an emerging benefit being offered with some RILAs lies in providing access to a flexible source of guaranteed income in retirement. Gone are the days of the security of reliable, regularly scheduled pension plan checks provided to most employees. With increasing lifespans and rising health care costs, the uncertainty of having a large enough nest egg for retirement is greater than ever. In order to guarantee savers do not outlive their savings, some RILAs have begun offering a guaranteed lifetime withdrawal benefit.

GLWBs guarantee income for life while also providing upside potential and liquidity through access to remaining account balances. A RILA paired with a GLWB provides a powerful vehicle for accumulating savings in a protected manner that allows for real upside opportunity, limited downside risk and the safety of income for life. This tool can help mitigate uncertainty caused by the pandemic and recession, which have wreaked havoc on the lives of many pre-retirees. Financial security feels less certain now, particularly for the segment of the population approaching retirement.

RILAs should get a closer look as they are uniquely positioned to help during times like these. Given that we’re still some time away from normalcy, those approaching retirement have the perfect opportunity to think about the best ways to stay secure now while trying to gain some upside to enjoy retirement with.

David Hanzlik is vice president of annuity and retirement solutions, CUNA Mutual Group.

David may be contacted at david.hanzlik@ innfeedback.com.

June 2021 » InsuranceNewsNet Magazine

47

Consumers Still On

The Hook For Health HEALTH/BENEFITSWIRES Care Costs People insured with ACA plans paid $1,148 in out-ofpocket costs in 2018, a 12% increase over the $1,028 spent in 2000.

ACA Slowed Growth In OutOf-Pocket Spending The Affordable Care Act didn’t decrease out-of-pocket spending for health care, SOURCE: JAMA Network Open

but it did slow increases in out-of-pocket costs for those who received coverage under the health care law, JAMA Network Open found.

Since the ACA was enacted in 2010, average out-of-pocket expenses for doctor visits, prescription drugs and other services have risen by an average of 0.2% per year, the data showed. During the nine years before the law’s passage, from 2000 to 2009, these fees increased by an average of 1% per year.

One big reason for the slowdown in out-of-pocket spending was a 24% drop in out-of-pocket costs for prescription drugs under the ACA, researchers said.

Despite these findings, consumers still had to dig into their cash to pay for health care expenses. People insured with ACA plans paid $1,148 in out-of-pocket costs in 2018, a 12% increase over the $1,028 spent in 2000, according to the researchers.

QUOTABLE We’re overdue for modernization of the Medicaid program for older adults.

— Eric T. Roberts, assistant professor in the University of Pittsburgh’s Public Health’s Department of Health Policy and Management

doctor forever. The survey found that 35% expect to use more health services this year and 39% of those in the age 65-and-older cohort plan to catch up on their care.

how many people sign up. The result, they say, would be higher health care costs for everyone.

To be eligible, parents would have to meet the IRS’ definition of a dependent, meaning they rely on their children for at least 50% of their support.

CALIFORNIA CONSIDERS ADDING PARENTS TO PLANS

The ACA allowed children to remain on their parents’ health insurance until they reached age 26. Now California could become the first state to allow adults to add their parents as dependents on their health plans. The policy proposal is aimed at increasing insurance coverage for low-income people who are living in the country illegally and are ineligible for government-funded coverage.

Supporters say it will save families money by, among other things, limiting their expenses to one shared out-of-pocket maximum limit. But business groups say adding a large group of older people to their insurance plans will drive up premium costs. Employer premiums would increase between $200 million and $800 million per year, depending on DID YOU

KNOW

?

48

AMERICANS PUT OFF CARE DURING COVID-19

Nearly 40% of those surveyed said they delayed seeking health care during the COVID-19 pandemic, according to an Insure.com survey.

Of those who postponed receiving services, 21% of respondents delayed dental visits, 18% delayed primary care, 14% delayed seeing an eye doctor, 12% delayed visiting a specialist, 10% delayed physical therapy and 8% delayed receiving mental health services.

But people won’t put off seeing the

How Many Will Seek More Health Care In 2021?

• 65-plus — 39% • 45-54 — 32% • 18-24 — 33% • 55-64 — 32% • 35-44 — 32% • 25-34 — 30% Source: Insure.com

PANEL URGES US TO BOOST PRIMARY CARE

A primary care physician for every American. That’s what the National Academies of Sciences, Engineering and Medicine wants to see in the U.S. In a new report, the academies urged the federal government to aggressively bolster primary care and connect more Americans with a dedicated source of care.

The authors recommend that all Americans select a primary care provider or be assigned one, a landmark step that could reorient how care is delivered in the nation’s fragmented medical system.

And the report calls on major government health plans such as Medicare and Medicaid to shift money to primary care and away from the medical specialties that have long commanded the biggest fees in the U.S. system.

About 5% of U.S. health care spending goes to primary care.

InsuranceNewsNet Magazine » June 2021

Source: the Organization for Economic Co-operation and Development

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12/21

HEALTH/BENEFITS

Employer-Sponsored HSAs Help With Recruitment And Retention Not offering an employer-sponsored health savings account program could be costing clients more than just missed FICA tax savings.

By Tom Torre

W

hen it comes to conversations with employer clients about building an employer-sponsored health savings account program, agents and brokers tend to hear a recurring response — some clients just don’t see the value in offering an HSA program to their employees.

From there, the conversation often shifts to the financial benefits for the client earned through FICA tax savings.

Savvy agents and brokers educate clients on how, by setting up an employer-sponsored HSA program and providing employees with an easy way to make pretax HSA contributions, they’re lowering their company’s FICA tax liability — and ultimately saving more money for their businesses the more their employees contribute to their own HSAs. The FICA savings value proposition often is enough to convince clients to give an employer-sponsored HSA program more thought. But for those who need additional convincing, HSA programs provide much more than just tax savings.

Another increasingly important but often overlooked benefit of offering an employer-sponsored HSA program is the ability to leverage the program itself as a critical recruitment and retention tool.

Agents and brokers can create win-win scenarios by helping their clients understand that an HSA program offers more than just tax savings alone.

Employee Benefits Make A Difference

Many employer clients don’t recognize that the direct influence their employee benefits have on their ability to recruit and retain top talent is greater than ever.

50

InsuranceNewsNet Magazine » June 2021

Clients also don’t recognize that the landscape of what employees have come to expect when it comes to their benefits has rapidly evolved, particularly this past year when dealing with the continued challenges COVID-19 has presented.

Recent industry trend research conducted by Wellable frames up a telling story when it comes to just how much employee benefits impact decision-making, with 70% of employees defining benefits as either the most important or a very important factor in accepting or continuing a job.

And while the research shows that clients are listening, with 66% “significantly influenced” by their desire to create competitive benefit packages, many still seem to be missing the mark when it comes to adding an HSA program.

Going Halfway Isn’t Good Enough

Clients often believe that simply offering an HSA-eligible high-deductible health plan is enough to attract and retain employees. In reality, it’s only going halfway and can become a sticking point for recruitment and retention efforts.

Research shows that clients who take this approach see low employee buy-in and even lower HSA enrollment numbers compared with those who offer an HSA program, especially those who make a contribution to employee HSAs. When employees are left to their own devices to find and open an HSA, usually they simply don’t do it. And for prospective employees, that may make the difference

between accepting or declining an offer.

Clients and their employees both end up

missing out on sizable tax savings and many other benefits, and clients’ recruitment and retention efforts stand to suffer real setbacks.

HSA Programs: An Expectation And Not An Option

The continued shift to a more consumer-driven health care model has only been amplified by COVID-19 and employees facing steadily increasing cost-sharing.

This shift plays directly into the growing demand for HDHP options paired with employer-sponsored HSAs. More and more, employees of all kinds are coming to expect an HDHP/HSA option to help them better

EMPLOYER-SPONSORED HSAS HEALTH/BENEFITS control their costs and take a more active role in their health care. On top of this, an increasing number of employees also expect their employer to make some type of contribution to their HSA. Employer HSA contributions alone can be a make-it-orbreak-it factor for recruiting and retention.

The latest Devenir research projects HSA-eligible health plan enrollment will continue to grow by nearly 25% annually and that HSAs are on pace to exceed 36 million by 2023.

Clearly, clients can’t ignore the importance of offering an HSA program. And, agents and brokers can’t ignore the importance of helping clients build the best HSA programs possible with the best HSA partner.

Positive Trends To Help Influence Clients

While some clients still struggle to see the value of an employer-sponsored HSA program, there are many other clients who do see that value. These clients either have made or are planning to make the necessary adjustments.

More than half of clients agree that employee productivity and morale suffer due to stress about personal financial issues.

According to Wellable, 41% of employers plan to invest more resources into improving employee financial health in the coming year. And for employers who already have implemented changes such as adding an employer-sponsored HSA program, 54% have experienced “significantly influenced” ROI.

5 Ways HSA Programs Boost Recruiting And Retention

When set up and implemented correctly, an employer-sponsored HSA program becomes a powerful tool not only for client FICA savings but also for recruitment and retention. Clients will be able to promote their leading-edge benefits to attract and retain the top talent they need to stay ahead of their competition.

Agents and brokers need to help clients understand five key recruitment and retention highlights: 1. Completing the HDHP/HSA puzzle.

Offering an HDHP plus an employer-sponsored HSA saves employees money up front on insurance premiums while also providing an easy way for them to open an HSA.

2. Streamlining additional savings, and potentially sweetening the deal.

Employees can save even more money by making pretax contributions through payroll deductions — easily accomplished through an employer-sponsored HSA program. If a client chooses to make a contribution to employee HSAs, that further strengthens the appeal to both current and prospective employees. And with current Devenir data showing only 34% of HSAs receiving an employer contribution, the opportunity to differentiate is apparent.

3. Promoting an HSA’s unique “triple tax advantage.” With an HSA, contributions aren’t taxed, funds grow tax free and all withdrawals for qualified expenses are tax free.

4. Showcasing the flexibility and portability employees want. HSA funds roll over year after year and never face a use-it-or-lose-it scenario. Employees own their HSAs and all the funds in their accounts, even with a job change, insurance plan change or even retirement. And HSA funds can be used for a wide variety of health care costs — everything from prescription and nonprescription medications to medical, dental and vision expenses.

5. Providing a unique way to invest for the long term. HSAs can be used to invest for long-term retirement goals, similar to a 401(k), but even more tax advantaged. HSA contributions and earnings can set employees up for a brighter financial future and can even be used for other purposes beyond health care expenses after age 65 without penalty.

Help Clients Build Their Best HSA Program

By understanding all the ways an employer-sponsored HSA program can add value to their clients’ businesses — including boosting recruitment and retention — agents and brokers can effectively educate clients on why they can’t overlook the importance of offering an HSA program to their employees.

Tom Torre is CEO of Bend Financial. He may be contacted at tom .torre @innfeedback.com.

June 2021 » InsuranceNewsNet Magazine

51

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The State of Savings Just how much money do people have

Yay?

socked away for retirement? A lot depends on the state in which they live.

The website Personal Capital found that $177, 50 the state with the lowest median amount saved 0 in retirement accounts — half fall above, half below — is Mississippi, at about $83,500. Washington state has the highest median at $177,500.

However, the average for each state is generally far higher than the median. Connecticut’s average retirement savings of about $523,600 — ranking it first among the states — compares to its median of $160,300. New Hampshire’s average retirement savings comes in second at $494,600, while 500 $83,ved its median is $159,300. Meanwhile, Utah had the lowest average at $300,400, and its median of $90,800 was second-lowsa est (behind Mississippi).

When it comes to retirement savings among generations, Personal Capital found baby boomers’ account balances are much fatter than those of younger cohorts. Boomers Source: Personal Capital had an average retirement account balance of $1.02 million, compared with $568,700 for Generation X, $166,00 for millennials and $35,000 for Generation Z.

The Pandemic’s Impact on Spending & Investing Behaviors

The pandemic has caused many affluent Americans to re-evaluate the way they save, spend and invest.

Pandemic Was Healthy For Wealthy

Affluent Americans are not only doing better than their less-wealthy contemporaries but are also further ahead than their parents were at % run count% their age. Both46 findings from a recent Bank of America survey 35 say they arethose optimizing of survey respondents er to the experience of many average Americans, particularly on or actively managing their are using this time to get the lower endtheir of finances the income people have finances more often in order scale. Meanwhile, wealthier been able to sock away more cash into savings during the pandemic as they focused on improving their financial position.

Four out of five respondents (81%) have taken money they normally spend on entertainment, travel and dining and set it aside — namely toward:

52%

25%

Emergency funds

Savings accounts

Most (84%) said they plan to achieve or have already achieved one or more

earlier than parents. approach More thanthrough half (53%) said Many financial investorsmilestones have maintained theirtheir investment they have seeking already achieved planatovariety achieveoffive or more financial milethe pandemic, guidanceorfrom resources. stones earlier than their parents.

Americans Feeling More Secure, Except For Retirement

Americans are more secure about covering their expenses and are more optimistic about the future than they were a year ago, but they are neglecting to build the foundation for that security, according to recently released surveys.

A year ago, just as COVID-19 was winding up to become a pandemic, Americans were already uneasy with their finances, according to a New York Life Wealth Watch survey.

Last year, only 53% of respondents were confident in their ability to pay their monthly bills. This year’s survey showed

73% were confident. Last year, only 42% of Americans were confident they could pay for a personal emergency; this year 55% said they could handle it.

Meanwhile, more than half of working age adults surveyed said they were concerned about their ability to achieve retirement security in a study done by the

National Institute on Retirement Security.

Respondents cited several factors in their struggle to prepare for retirement, according to the NIRS survey.

The escalating costs of health care (59%) and long-term care top the list (56%). Other factors include longer life spans (53%), stagnant salaries (51%), fewer pensions (51%), debt (47%) and do-it-yourself retirement plans (45%).

Nearly half (48%) of affluent Americans say they have made no changes to their investment risk tolerance, as a result of the pandemic. During this period, respondents turned to the following to learn about the market and manage their investments:

Millennials Already Planning For Retirement

45

Millennials have had more than their fair share of chal-

37

32

30

ready for retirement?

% % % % Among the81% 44%have of investors have made a planwho to protect lenges Online wheninvestment it comes to their finances. This is the generchanges tothemselves their risk tolerance, they are split Financial Informational Friends against outliving in their response to market volatility — with advisors management family ation that survived 9/11, thewebsites market crashorof 2008 and the their savings 23% indicating they have been more platforms and/or blogs Great Recession. But a Nationwide Retirement Institute aggressive 21% more cautious.

71% and have a strategy to

study showed these financial catastrophes have steeled millennials’ resolve for a financially secure retirement.

protect their assets against market risk

When life returns to “normal” after the pandemic, affluent Americans plan to spend more on: 52

InsuranceNewsNet Magazine » June 2021

%

%

%

%

%

In 2016, only 50% of millennials said they had an advisor. A mere four years later, that number had grown to 75% in 2020 — possibly a sign of increasing trepidation, as 84% said they could do all the right things to manage their finances and still be blindsided by outside events.

SecurityBenefit.com/Financial-Professionals

Ah ah ahhh, you didn't go with the S&P!

Annuities are issued by Security Benefit Life Insurance Company (SBL) in all states except NY.

Buffett Warns About Stocks

Berkshire Hathaway held its annual meeting recently and billionaire Warren Buffett had some words to share about buying stocks — or more specifically, gambling on stocks He said that most people will fare better by owning an S&P 500 index fund instead of betting on individual stocks. He said many of the novice investors who jumped into the market recently and drove up the value of video game retailer GameStop are essentially gambling.

Stock trading platforms that allow people to buy and sell stocks for free, such as Robinhood, are only encouraging that gambling, he warned.

Buffett said the policies of the Federal Reserve and the stimulus packages passed by Congress have done a tremendous job of propping up the economy because interest rates remain low. He said the government clearly learned lessons from the Great Recession in 2008 and acted quickly, but it's hard to predict what the long-term consequences of those policies will be.

DID YOU KNOW?

Services offered through Security Distributors, a subsidiary of SBL, which is What do you look for in whol owned by Security Benefit Corporacompany? tion ("Security Benefit"). a lyretirement We know there are multiple factors to consider when making recommendations to help consumers achieve a comfortable retirement. Security Benefit has dedicated expertise in multiple retirement markets and wealth segments to accommodate a variety of life stages and help you grow your practice.

We offer retirement plan services, a flexible advisor mutual fund program, access to specialty markets like teachers and fire fighters, and a full range of annuity products to help consumers

One Security Benefit Place | Topeka, KS 66636 | SecurityBenefit.com

accumulate assets, some of which provide protection from market loss.

Visit us online at SecurityBenefit.com/Financial-Professionals

SB-10009-30 2021/04/29

Annuities are issued by Security Benefit Life Insurance Company (SBL) in all states except NY. Services offered through Security Distributors, a subsidiary of SBL, which is wholly owned by Security Benefit Corporation ("Security Benefit").

More than eight in 10 Americans indicate the events of the past year have hurt their retirement plans.

Source: Fidelity Investments

One Security Benefit Place | Topeka, KS 66636 | SecurityBenefit.com SB-10009-30

2021/04/29

Helping Clients Overcome FOMO In Selling Stock Clients who have a significant portion of their retirement portfolio in stock need help in diversifying their assets.

• By Daniel Zajac

E

ven though stock ownership in general has gone down significantly in recent years, a recent Gallup poll revealed more than half of American workers own stock of one sort or another, while the National Center for Employee Ownership reports 36% of those who work at an entity that issues stock own shares in it.

All that “own company” stock, often acquired over a long professional career and at a below-market price through options or incentive grants, can add up to a very large proportion of a client’s assets.

According to Schwab Stock Plan Services, of the 60% of those employees planning to use equity compensation for retirement, more than 65% of their retirement assets are in that equity compensation. Diversification could help protect a portfolio from the volatility of a single stock. The problem is that a 54

InsuranceNewsNet Magazine » June 2021

significant percentage of the employee stock owners have an emotional attachment to their own company stock.

Although it may be difficult to guide them toward diversification, you can help steer them toward better financial planning.

Understand Your Clients

To lead your clients to a less risky portfolio profile, you will need to first identify how your clients feel about their own company stock to recognize their emotional attachment to it. You will then need to address that emotional attachment to their (potentially) overly concentrated portfolio and encourage a less risky, more diversified investment portfolio.

FOMO Rules Them All

One of the biggest problems in guiding your clients toward selling employer stock is that they are afraid there will be a big run-up in price that they will miss.

This fear, commonly known as the fear of missing out, has become a powerful disincentive for selling stock. While FOMO is often associated with missing the upside potential of company stock, FOMO also

may be an issue in a down market, missing out on selling prior to the stock price going down.

Fear of missing out and fear of bad timing are the biggest fears in selling employee stock or exercising employee options. It is your job to guide your clients with concentrated employer stock positions around their FOMO.

They Might Not Like It, But They May Be Open To It

Clients tend to cling to their employee stock. They may have created a large portion of their wealth with that company, they enjoyed medical insurance and other benefits with that company, so why wouldn’t they want to keep the company stock as long as they can? If you advise them to sell it all right away, they might not like that advice right off the bat. Even so, as a responsible advisor — and a fiduciary to your clients — it is imperative that you continue to advise them when it’s time to reduce their risk, usually by selling some or all of their concentrated position. This might happen in a single event, or it might be planned over a scheduled period of time.

HELPING CLIENTS OVERCOME FOMO IN SELLING STOCK

Having a plan in place can help persuade your clients to think logically, rather than emotionally, about their investments. Acknowledge their hard work, the value of their company, and the time and energy they’ve invested in it. But get them to focus on their investment and lifestyle goals — on why they invested — instead of focusing on that particular stock. Remind them that any stock — including that of their employer — is an investment and must be treated as such.

In the end, you simply must make clear why it may be risky to hold a large percentage of any one stock in their investment account. To do so, you can remind them of companies such as Enron, whose employees had invested most of their retirement savings in the company’s stock and lost everything to the tune of over $1 billion in retirement assets when the company went belly-up.

Similarly, remind them of the Lehman Brothers employees who lost hundreds of millions in employee stock grants when Lehman collapsed.

Even when the employer company stays in business, retired employees holding stock of companies such as Ford Motor Co. or General Electric can share their experience of huge losses in the value of their stock. There is simply no logic in continuing to be exposed to such

Remind them of companies such as Enron, whose employees had invested most of their retirement savings in the company’s stock and lost everything to the tune of over $1 billion in retirement assets when the company went belly-up. concentration risks at any time, but particularly not as retirement comes near.

Not Necessary To Do It All At Once

Your client may not react well if you sell a large position all at one time; the IRS will, however, be delighted at the taxes it will likely receive. Thus, your job is to find a way to reduce the client’s exposure to the one stock in a way that will 1) be the most tax efficient, 2) provide the largest possible gain or smallest possible loss, 3) reduce the client’s risk on an ongoing basis and 4) meet the financial plan’s stated goal.

Sales to reduce the overall position are the ultimate goal. Slowing the pace of reducing the concentration while still limiting the client’s exposure can make for a healthier and longer-lasting client relationship in the long run.

Taking Stock Of Employee Stock Ownership » 60% of workers who have an equity compensation plan intend to use the money for retirement. » Their average vested balance is $97,711. » The average total value of their equity compensation is $149,835. » Among those who have an equity compensation plan, it makes up 27% of their net worth on average.

The Ultimate Goal — Reduce The Position And Risk

According to the Financial Industry Regulatory Authority, whatever strategies you recommend to the client holding a concentrated position in his or her employer’s stock, the ultimate goal should be to aid the client in reducing a concentrated position risk that will only grow increasingly inappropriate as the client nears retirement.

Although each client portfolio should be viewed as a whole, with the entire risk profile considered, a general rule of thumb is that the client should hold no more than 10%-15% of their retirement assets in their former employer’s stock.

Holding too much company stock for too long could be a bad idea. Your clients value your advice, and you should advise them to reduce their exposure to an emotional attachment with one single stock.

In sum, it will be your job to guide your clients around their fears, particularly their fear of missing a big run-up in their stock after they sell. Help your client decide what is important to them.

Keep suggesting multiple and varied strategies that can be used to reduce a given client’s exposure to a concentrated position. Get them to trust the investment skills and wisdom that they hired you for — and you can talk your clients out of FOMO and into a stronger financial plan.

Daniel Zajac, CFP, is a partner at Simone Zajac Wealth Management, Exton, Pa. He specializes in equity compensation strategy and financial planning for families and individuals. He may be contacted at daniel.zajac@ innfeedback.com.

June 2021 » InsuranceNewsNet Magazine

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INBALANCEWIRES

The 10-Second Trick To Help You Lose Weight

If you lift weights to lose pounds and want to challenge yourself to do just a little bit to work toward your weight loss, here’s a 10-second trick. Perform a plyometric exercise for 10 seconds before you work your way up to a heavier load.

What are plyometric exercises? They are powerful, explosive movements that help ramp up your central nervous system. They also allow your body to “wake up” so it has more power to move more weights.

Here are some examples: 10 seconds of squat jumps, 10 seconds of jump lunges, 10 seconds of bench pushups, 10 seconds of medicine ball slams.

The goal is to get your body to be explosive but not to fatigue yourself. Try performing two or three sets of plyometrics before transitioning to heavier weights.

HOW SITTING CAN EXTEND YOUR LIFE

You may have heard health experts claim that too much sitting can take years off your life. But what if sitting can extend your life? Here’s what experts have to say.

The European Journal of Preventive Cardiology published a study of the world’s longest-living people and found that many of those in the 100-year-old age group regularly sit on the floor.

When you consider that people get up and down from a sitting position 30 or 40 times a day, floor sitting leads to the equivalent of 30 or 40 squats daily.

Sitting on the floor more often and exerting more effort to rise to a standing position several times per day works your core and helps your balance. But even if you’re sitting on the floor, the same rules for proper posture abide. Avoid slouching, and sit tall with your neck extended out of your spine.

DID YOU

KNOW

?

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QUOTABLE We all deserve to have the flexibility to work in the manner that is most productive for our preferences and beliefs.

— Eric S. Yuan, founder and CEO of Zoom

creates lines that can become permanent. Wear sunglasses! Drinking alcohol dehydrates the skin and makes us look older. Lack of exercise slows down the circulation system and leads to an older-looking face. Finally, proper cleansing and use of a moisturizer can work wonders in improving your facial appearance.

YOU’RE NAPPING ALL WRONG 7 THINGS THAT AGE YOUR FACE

You can’t turn back the hands of time but you can avoid the things that make your face show time’s ravages. Here are some of the top things that dermatologists say cause your face to look older than you really are.

Top of the list is the sun. Too much of it causes wrinkles, sunspots and skin cancer. Combat sun damage with a sunscreen with an SPF of at least 30.

Smoking releases harmful chemicals into the body that make skin saggy and keep toxins from being removed from the skin.

Stay hydrated — inadequate water consumption leaves skin dry and makes wrinkles and fine lines appear more prominent.

Squinting in the sun over a period of time

Taking a nap can be a great way to recharge, but sleep experts say too much of a good thing can backfire. The key to the best nap is not to stay asleep too long.

The ideal length of a power nap is an hour or less. NASA researchers recommend 10 to 20 minutes of shuteye to get the maximum results.

Napping for too long can lead to sleep difficulties at night, researchers said. In addition, taking a snooze after 3 p.m. can interfere with nighttime sleep.

The optimum nap takes place in a location that’s cool, dark and quiet. To help you fall asleep, practice relaxation exercises that take your mind away from your life’s stresses.

Dehydration can occur in as little as 30 minutes in the heat.

Source: Vanderbilt Medical Center

InsuranceNewsNet Magazine » June 2021

Working to make retirement clearer for everyone.

Starting with you.

Let’s face it. Retirement can be confusing for just about everyone. At Jackson ®, we’re here to help clear things up. Our range of annuity products help remove the uncertainty that complicates your clients’ plans.

And, our award-winning customer call center, * fee transparency, and user-friendly website make navigating everything easier for you. Together, we can help make retirement clearer for everyone.

Annuities are long-term, tax-deferred vehicles designed for retirement. Variable annuities involve risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. * SQM (Service Quality Measurement Group) Contact Center Awards Program for 2020.

Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please contact your Jackson representative or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These products have limitations and restrictions.

Contact Jackson for more information.

Jackson® is the marketing name for Jackson National Life Insurance Company® and Jackson National Life Insurance Company of New York®.

CMC25777CCCAD 04/21

Not FDIC/NCUA insured • May lose value • Not bank/CU guaranteed Not a deposit • Not insured by any federal agency

INBALANCE

How To Emerge From Pandemic Burnout Restrictions are easing and the world is opening up, but it’s still crucial to maintain good physical and mental health practices.

By Susan Rupe

T

he pandemic-weary world is moving back to normal as more people are getting vaccinated and more areas of the nation are rolling back restrictions.

But many of us felt as though we hit a wall in the past month or so, and may have suffered from something called “pandemic burnout” — a weariness of taking precautionary measures combined with isolation from being unable to gather with family and friends. The ups and downs of the past year, combined with lingering uncertainty, have impacted everyone’s mental health and might not go away completely even as restrictions lift.

So how do you recover from pandemic burnout and get ready to emerge into a reopening world? By maintaining structure in your daily life and being mindful, according to a psychotherapist and mental health expert.

Dave Marlon is a former insurance agent who founded Vegas Stronger, a nonprofit organization that deals with substance abuse issues. He has seen the different ways in which people are dealing with the pandemic and its aftermath.

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There are two different types of pandemic burnout, he said. The first type is the physical effect on COVID-19 patients whose symptoms lingered for weeks or months and who are struggling to regain their physical health.

But the second type of burnout is emotional or mental. It stems from a dramatic change in people’s lives that came on suddenly and went on longer than most people expected.

“At first, we weren’t able to go to work, so we weren’t commuting. We weren’t able to go to our favorite restaurants, to the gym, to our spiritual institutions. There may have been some degree of novelty with that in the beginning of the pandemic, but the routine of this new life eventually sank in.”

Marlon said he noticed a physical change in many of his clients. “Most people had a degradation in their diets; they were eating more than usual or they weren’t eating healthy foods. Along with that, many of them weren’t able to keep up with their fitness regimes or their workout schedules, and they also reduced the amount of socialization they did with family and friends.”

But other people used the pandemic as a wake-up call to improve their overall health, he said.

“Some took up yoga; others decided to overhaul their diets and ended up losing weight. Some decided to put a new priority on their relationships and others

Get Over Pandemic BURNOUT Have a routine – Get up and go to bed at the same time every day; get dressed; eat meals at the same time every day.

Set boundaries – Have a clear beginning and end to your workday, especially if you continue to work from home.

Connect – Stay in touch, whether virtually or in person, with people you care about.

Keep moving – Exercise regularly.

Limit your alcohol intake.

Be mindful of your emotions – Control the things you can and let go of anxiety over the things you can’t.

HOW TO EMERGE FROM PANDEMIC BURNOUT INBALANCE became more mindful of what’s important to them.”

The keys to successfully emerging from pandemic burnout, Marlon said, are mindfulness and connection.

“Be mindful of what you’re eating, what substances you’re consuming,” he said. “And even if you are continuing to work from home, it’s important to have people you check in with every day, see if they’re OK and talk about what’s going on in your lives.”

For some people, long stretches of time at home led to throwing structure and routine out the window. Marlon recommended finding a routine the works for you and sticking with it, even as life begins to move toward normalcy.

As more Americans get vaccinated and government-mandated restrictions are rolled back, will pandemic burnout go away? Marlon said he believes it will be with us for a while.

“We still will see the social effects and the effects on our mental health,” he said.

“The economic and emotional anxiety many of us have experienced don’t just go

We can feel like we’re victims to this and we can worry about the things that are outside us. Or we can take personal responsibility for the things in our lives that we can control. away. So it’s important that we acknowledge what we feel.”

Some aspects of daily life will remain changed by the pandemic for a long time to come, Marlon said. One example is medicine, where telemedicine has become more widely accepted and probably will continue to be the way in which many Americans receive some of their health care.

Long periods of uncertainty also have affected Americans’ mental health, and Marlon said the effects of that uncertainty might remain after the pandemic is on its way out.

“We can feel like we’re victims to this and we can worry about the things that are outside us,” he said. “Or we can take

personal responsibility for the things in our lives that we can control. We can make some new fitness goals. We can improve our diet. We can reach out to family members. We can develop an improved spiritual life. These are all things that will move us past the pandemic and that we can continue to do after the pandemic is over.”

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.

Throw your spray and pray marketing tactics OUT THE WINDOW! And start using data that digs down to the very last detail.

Data Decisions Group (DDG) wants to save everyone, from agents to carriers a fortune and countless hours prospecting.

Thanks to a breakthrough in data analytics, this market research giant could hand you the ultimate customizable prospect list, so you can target and speak to precisely the client or recruit you’re looking for.

For a detailed breakdown of how DDG’s market research destroys the competition, visit ThePerfectData.com for a zero-obligation report.

June 2021 » InsuranceNewsNet Magazine

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BUSINESS

Eight Principles To Attract The Clients You Want If more agents and advisors would lead from their hearts, their businesses could change dramatically.

By Stephani Lucas

W

e’ve all seen the headlines and ads claiming there is a secret to success, top tips promising they will grow your business and ensure financial gain.

But nine times out of 10, these promises are empty gimmicks, or they involve more effort than they’re worth. In order to see any real results, you must buy a product or service, add more funds to your already tight budget, grow your team or learn a new skill.

But what if you could grow your business without buying anything at all? In fact, what if you already had all the tools you needed to succeed? Every agent and advisor already possesses the skills they need to be successful. It’s just a matter of looking within.

In business, we tend to operate from the analytical part of our minds, not our hearts. If more agents and advisors would lead from their hearts, their businesses could change dramatically. If you’re doing the right things for the right reasons, the money will follow. Our motivation should stem from how we can positively impact others, be the best versions of ourselves 60

InsuranceNewsNet Magazine » June 2021

and focus on serving our clients.

So where do you start? These eight principles have transformed my personal life and my business, and I recommend them to all agents and advisors seeking more fulfillment in business.

1. Stay grounded.

First and foremost, it’s important to stay centered and grounded. In business, challenging issues arise that can trigger an emotional response. A difficult client, a stressful meeting, an impending deadline — all of these are examples of stressful situations agents and advisors face regularly.

When an emotional reaction starts to arise, it can be difficult to get past it and see the situation for what it really is.

Staying grounded and having a practice that helps you maintain a level of calmness allows you to not only diffuse the feelings of the moment, but it also allows you to remain levelheaded to make sound decisions and offer solid advice for your clients.

A few simple ways to stay grounded?

Slow down. Take deep breaths. Get some fresh air. Meditate. Exercise. These practices take only a few minutes but make a world of difference.

2. Practice a growth mindset.

Sometimes it’s all about perspective. Do you focus on the negatives more than the positives? If you could achieve anything,

what would it be? Start focusing on what could be possible for your business rather than dwelling on the obstacles and setbacks.

Practicing a growth mindset shifts the focus from scarcity to abundance. When you focus on immediate gain all the time, other possibilities may go past you unnoticed. Instead, look forward to what you want to achieve, and envision the clients you’d like to attract — even if it doesn’t seem possible right now. Leaders who have an abundance mindset focus on future possibilities and see everything as an opportunity. Refuse to settle for mediocrity.

It is important to stay present and be able to visualize and feel as though you already have achieved your desired outcome.

3. Nourish your personal power.

We’re not talking superheroes here, or maybe we are? We all have something unique to offer to this industry, no matter what area we specialize in. What is your superpower? What skill or ability do you have that sets you apart from others?

Take some time to reflect on what makes you uniquely you. Once you identify that, you’ll be better able to attract the types of clients you want to work with.

Nourishing your personal power also means taking care of yourself. When you have a full tank, you can give so much more to the other people in your life. It

EIGHT PRINCIPLES TO ATTRACT THE CLIENTS YOU WANT BUSINESS can be easy to forget how much our own physical and mental well-being affects our lives and the way we conduct our business. Keep yourself mentally, physically, emotionally and spiritually healthy, and you’ll be able to better serve your clients.

4. Lead with your heart.

These eight principles all are tied to this core part of all of us: the heart. It may seem counterintuitive, but your heart has everything to do with your business. When you practice self-love, are confident in yourself and put your heart into your work, your clients, staff and associates notice a difference. That self-love — or the lack of it — spills over into your business and the way you interact with clients.

If you haven’t healed from a past trauma to your heart, you might be subconsciously spreading that broken-hearted feeling or pain to others without even being aware it’s happening. On the other hand, when your clients and prospects feel that you care for their needs, feel empathy for them and respect them, that goes a long way.

5. Speak your truth.

This is a tough one. Speaking your truth isn’t easy. In fact, sometimes, it can be downright scary — especially when what you’re about to say might go against the popular opinion or might cost you a potential client.

Speaking your truth means authentically expressing what you know is true for you, not only in business but also in life. It can feel uncomfortable to be vulnerable, but being the kind of agent or advisor who has the courage to say what needs to be said and offer honest advice to clients will pay off in the long run.

So if a client asks your opinion about something you know may ruffle some feathers, you must have the courage to express what you truly feel. Your clients may not always agree right away, but over time they will know they can trust you and, as a result, they will value your opinions. Remember: Your job is not to please everyone. You want to attract the types of client relationships built on mutual trust and respect.

6. Identify your vision.

When was the last time you stopped and thought about your vision for your business? If you don’t have a clear vision, maybe it’s time to check in. For example, if you want to write $1 million in annuity premiums a month, how many clients do you need in order to accomplish that goal? What’s your closing ratio? What’s your average case size? Take time to map

Heart-Centered Planning Do the right things for the right reasons.

8. Build a community.

Be the best version of yourself.

You already possess everything you need to be successful.

Focus on serving clients.

Refuse to be mediocre.

Take care of yourself.

out these data points to put your plan together so you can move forward in a clear direction.

Also, before that, decide what kind of client you want to serve, what your company brand represents and how you want to portray yourself. Once you identify your vision, you’ll be able to discern what does and does not align with that vision, so you can stay focused to achieve your financial goals. Your vision may shift and change over time, but it’s key to your long-term success.

7. Live your purpose.

Once you’ve identified your true vision for this industry, you’ll be able to live out your true purpose. Everyone in this industry is called to a purpose. Just because this industry has operated in a

certain way in the past doesn’t mean it can’t evolve or change.

Strive to be different. Don’t feel as though you must go along with a certain way of being if it doesn’t match up with who you are. When you do something that’s not aligned with your vision and purpose, you won’t be fulfilled in the long run. The media tells us every day we aren’t good enough if we don’t have this or that, if we don’t look a certain way, or we aren’t this wealthy. Shift this paradigm and dare to conduct business in a way that’s truly authentic to you — and not based on what anyone else thinks.

Surround yourself with people who are cheering you on and supporting you. A community not only holds you accountable, but it is also an incredible asset for finding new business and networking. True, it’s a bit more challenging to build a community now due to the pandemic and social distancing, but there are still myriad ways to connect with others.

Start with your interests. What are some activities you enjoy? You don’t have to be all business. Join an online gaming meetup, a book club, an outdoor exercise group, a sports team or work in a community garden. Take advantage of social networking platforms such as LinkedIn or Nextdoor to get to know other like-minded professionals and your neighbors. You never know what could come out of the connections you make.

I describe these eight principles as part of “heart-centered planning.” Implement them into your financial practice and enjoy the results.

Stephani Lucas is the founder and CEO of the Annuity Consultants, a field marketing organization built in 2010 with a mission to transform the financial/insurance services industry from the inside out. She is the creator of the Heart-Centered Planning Series. She may be contacted at stephani.lucas @innfeedback.com.

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INSIGHTS

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

Overcoming 3 Objections To Disability Insurance And LTCi The long-term impacts of COVID-19 are putting a new focus on disability insurance and long-term care insurance.

Here are some ways you can help young clients understand the risk of forgoing coverage.

By Eszylfie Taylor

W

e’ve all heard about the COVID-19 “long haulers,” people who exhibit prolonged symptoms, from breathing difficulties to the infamous “brain fog,” long after they stop testing positive for the virus. We have not, as a society, talked about the practical impacts of this phenomenon: Thousands, perhaps millions, of previously healthy people will need long-term care or face at least temporary disability because of the pandemic.

While there now seems to be an end in sight for COVID-19, one thing is clear: We can never know what personal or societal crisis is around the corner. This means agents and advisors must discuss disability insurance and long-term care insurance with young, healthy clients.

These individuals often have three objections to signing on to such policies, and we must be able to directly refute each one of those objections.

Objection #1: Mortality Anxiety

Facing our frailty as human beings is hard to do. Much like with mortality and life insurance, many people avoid conversations that touch on disability and longterm care, and that can hinder attempts to sign clients up for beneficial insurance policies. After more than a year of a global pandemic, with reminders of a that very frailty all around us, these conversations may get even harder.

Statistics are not on our side either.

When discussing life insurance, agents can bring up the unavoidable fact that everyone dies. Conversely, “only” 1 in 3 62

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American seniors today with LTCi will draw benefits, and “only” 1 in 4 Americans in their 20s today will become disabled before retirement. It’s easier for many people to believe they will be lucky.

Throwing these statistics at clients won’t work. Instead, use stories about individuals to demonstrate risk on a personal level.

Make sure not to focus solely on the health risks — the most heartbreaking aspect of disability or LTC is often what it does to the relationships of a person with a disability or LTC needs. It is sad, but COVID-19 will leave us with plenty of examples to offer. Be empathetic and sensitive about it, but clearly explain the risks associated with rolling the dice.

Throwing statistics at clients won’t work.

Instead, use stories about individuals to demonstrate risk on a personal level.

Objection #2: Seeing Is Believing

We all have met people who don’t believe bad things can happen to them until they’re staring those bad things in the face.

Accordingly, some clients, left to their own devices, won’t be interested in DI or LTCi until a health issue appears that forces them to see the need for it.

The problem with this approach is that DI and LTCi are most comprehensive and most affordable for young people with no health problems. It’s possible for a 45-yearold with a thyroid problem to acquire LTCi, but they will pay more for less coverage than they would have been able to obtain 10 years earlier.

Everyone has a unique set of financial needs. But nobody is getting younger, and few people get healthier over time. Make sure young clients understand that their

choices with DI and LTCi include figuring out how to fit better, cheaper policies into their budgets now or how to pick up less affordable, less beneficial policies later.

Objection #3: Pricey Premiums

Even when young clients understand the risks of forgoing DI and LTCi or putting off acquiring coverage, they may still balk at the premiums they’re offered. A frequent concern for clients is that, if a DI or LTCi policy isn’t eventually needed, they’ll simply have wasted their money.

Some people will never need their policies. But a policyholder in their 20s can pay DI or LTCi premiums for 40 years and still recoup all of their total payments in just one year of insurance benefits. Explaining this can go a long way toward alleviating worries about flushing cash down the drain.

More fundamental, though, is the very concept of risk management. Both insurance companies that issue policies to 25-year-olds and 25-year-olds who forgo insurance are making the same bet: the 25-year-olds in question will not need insurance benefits. Remind young clients that the insurance companies can afford to be wrong. Clients, on the other hand, cannot.

DI and LTCi are underutilized tools for financial security, and the COVID-19 pandemic has put a spotlight on the potential consequences for even young, healthy clients. As our clients emotionally and financially recover from the past year, let’s work with them so they’re prepared for any challenge in the years to come.

MDRT Lifetime and Top of the Table Member Eszylfie Taylor is the president and founder of Taylor Insurance and Financial Services in Pasadena, Calif. Taylor has worked in insurance and financial advising for more 20 years and has received multiple awards from NAIFA, including a 4 Under 40 Award in 2015. He may be contacted at eszylfie.taylor@innfeedback.com.

INSIGHTS

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

Help Your Client Get Their Best Divorce Settlement Encourage clients to do what they can, as quickly as they can. Starting off with baby steps is OK.

By Glenn Crawford

D

ivorce is generally one of the most challenging things someone can experience.

Whether a client is on the initiating end or the receiving end of the divorce process, there are many things they will have to complete as they go through the process. These things include generating a budget, figuring out how to divide assets equitably, determining whether spousal support or child support is warranted, and most important, planning their financial life after divorce. It may sound cold, but for many people, negotiating a divorce will likely be the biggest business deal they’ve ever done in their lives.

This is a very emotional time, and sometimes it’s difficult for people to muster the energy to address the tasks at hand. My advice is to encourage clients to do what they can, as quickly as they can. They may start off with baby steps. Encourage them to simply take a pen and a piece of paper, and journal everything they can from memory about the financial aspects of the divorce, as follows:

» Assets each partner brought into the marriage (houses, investment accounts, retirement accounts, inheritance, etc.). » Date of the marriage.

» Property and assets acquired during the marriage (everything they can think of: cars, real estate, investment accounts, retirement accounts, pensions, jewelry, etc). » How many years each partner served on the job, and any benefits earned such as pensions, employee stock programs, accrued vacation, medical benefits, etc. » Debts incurred and outstanding during the marriage. » Monthly household expenses during the marriage. » Where legal documents, such as trusts and wills, are located. » Date of separation. » Projected budget and expenses after the date of separation.

After making these lists, your client should gather or make a copy of every statement with a number on it, even little things as small as a magazine subscription. If the statement is not available, ask them to jot down their best estimate of the amount and item.

Now this may sound like a lot, but there’s good news. You can reassure your clients that although there are many things they have to do, now they also get to write the script for their new life. There are certainly desires and goals they suppressed for the sake of the marriage, and now they get to

undertake these desires and goals. Your client has a new script, and they are the author.

Also, they don’t have to go it alone. I can’t think of any great achiever who didn’t have a coach. I highly recommend that people going through a divorce work with a financial advisor to help them gather, analyze and make decisions on their financial settlement. Once they’ve signed the judgment, it is pretty much final, so they want to be in a position to make the most informed decisions.

Financial considerations for someone going through a divorce are different than for most people and an advisor with a Certified Divorce Financial Analyst designation is trained, certified and experienced to give advice for this circumstance.

This person will serve as the quarterback of the team and will work along with the divorce attorney, CPA, real estate agent and mortgage lender, as they all will need substantial amounts of information during the divorce proceedings.

Finally, encourage clients to keep their eye on the end goal, and to be good and forgiving to themselves along the way. I often tell them, “If you need to rest, rest. Take a hot bath, have a cup of tea, listen to soothing music, get a workout. I speak from experience; you will get through this, and you won’t believe how great your life can be on the other side.”

Glenn Crawford, CDFA, is a financial services representative with Signature Resources. He may be contacted at glenn.crawford@ innfeedback.com.

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INSIGHTS

More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.

Don’t Let Plan Leakage Sink The Retirement Ship Withdrawing money from retirement accounts to address nonretirement financial challenges can undo years of saving in a moment.

By Jonah Morales

A

fter Social Security, retirement plan assets are Americans’ most important source of income in retirement. However, Secure Retirement Institute research shows too many Americans withdraw money from their employer-sponsored retirement accounts (also known as plan leakage) to address nonretirement financial challenges. According to the 2019 Census Bureau Current Population Survey, 15% of assets withdrawn from retirement accounts were by nonretirees ages 18 to 58. These withdrawals have the potential to undermine their future retirement security.

Understanding how Americans really think about plan leakage and the factors that encourage or deter them from turning to their retirement savings should be a critical part of the industry’s efforts.

Encouraging consumers to save for retirement is important, but retirement plan leakage can undo years of saving in a moment. Consumers need help dealing with the financial demands of life without hurting their retirement security.

SRI conducted a two-day online bulletin board discussion with millennial and Generation X consumers in December 2020 to better understand why retirement plan leakage occurs, and what can be done to prevent it. Here are some of the most important takeaways.

The Dangers Of One Pot Of Money

We found there are two schools of thought when it comes to how consumers view assets in their retirement savings accounts. Some see these assets as part of their general wealth, available to be 64

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More than a quarter of U.S. workers (26%) say they have only enough emergency savings to cover less than one month’s expenses, and nearly half (48%) report having only enough emergency savings to cover three months’ expenses or less. tapped if needed; others see their retirement savings as separate from their liquid savings and are more averse to withdrawing those assets to pay for things outside of retirement.

For many Americans, their retirement savings represent the largest portion of their financial wealth. Without alternative savings accounts, the propensity to use these retirement savings assets is greater. One promising solution to this issue is the emergency savings account.

Today, SRI research reveals more than a quarter of U.S. workers (26%) say they have only enough emergency savings to cover less than one month’s expenses, and nearly half (48%) report having only enough emergency savings to cover three months’ expenses or less.

Helping Americans create an emergency savings account could help consumers avoid thinking of their retirement savings as an option to tap into when faced with a financial emergency. Advisors (as well as retirement plan sponsors and recordkeepers) should strongly encourage consumers to have emergency savings accounts in conjunction with their retirement savings.

However, suggestions are often not enough to encourage saving when other barriers exist. In recent years, there has been a push for emergency savings accounts offered by employers. When offered, these are especially valuable for early-stage workers who may be struggling with student loan debt and have not established solid savings behaviors.

Making it as easy as possible for workers to save is key. The retirement industry as a whole should expand access to and usage of these accounts. Although younger workers generally have fewer assets than

older ones, helping them to save and leave their money in retirement accounts will pay dividends in the future.

Proactive Advice Is Needed

Another critical reason to proactively encourage consumers to plan for the unexpected and set up emergency savings accounts is that by the time an emergency occurs and consumers need money, most have already made up their minds to take money out.

SRI research finds consumers tend to exhaust other options for funds first; once they have decided to turn to their retirement savings, it is too late. Instead of trying to talk consumers out of using their retirement savings in the moment, our research suggests that it would be more effective to proactively encourage a resilient savings mindset through planning and setting up separate emergency savings and retirement accounts before any leakage occurs.

Our industry should play a vital role in helping Americans plan for and deal with the unexpected. Financial strains can happen to anyone, but being prepared can make all the difference when it comes to leakage. Financial professionals should proactively work with their clients at every stage in life to build a financial plan that helps them deal with the financial challenges they may face, so they don’t consider using their retirement savings assets in their working years and endanger their retirement security.

Jonah Morales is a research analyst with Secure Retirement Institute. He may be contacted at Jonah. morales@innfeedback.com.

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