InsuranceNewsNet Magazine | August 2018 by InsuranceNewsNet

Focusing on

‘WHY’

can inspire consumers to take action. PAGE 18

Reaching Retirement Alpha with Tom Hegna

PAGE 10

Brand New Profile Section!

Climbing Out of the Rabbit Hole on Sisters Find Their Annuity Suitability Way Home

PAGE 18

PAGE 40

PAGE 7 EXCLUSIVE: How listening to agents made Levinson & Associates the fastest growing life IMO!

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ince taking the reins as managing calling agents. Appointment calendars filled partner at Levinson & Associates, up. Sales went through the roof. And best of Bill Levinson’s been transforming all, it was effortless!” the industry with marketing tools Another slam-dunk breakthrough offered and software so monumental, the to Levinson & Associates agents can be found entire world is taking notice. right on an agent’s website; it allows prosA member of several boards, including pects searching for insurance to run their NAILBA’s ASNG group and a guest speaker for own quotes and even buy their own policies ACORD/LIMRA and iPipeline's annual con- — with no agent interaction. ference, his breakthroughs and thought leadAnd at the end of the day, the agent still gets ership can be found everywhere, from indus- full commission plus renewals for the sale! try publications and international news outlets to high-profile tech showcases. Most important, Levinson & Associates has revolutionized the way more than 14,000 agents — found in every city — market and write business, something he attributes to his own struggles. “Inspired by my father, Cary Levinson, more than 20 years ago, I entered the insurance industry looking for a job,” he explained. “I was given a list of names, a telephone, and was told to create and maintain relationships. I stumbled and hit roadblocks just like everyone does. Each time, Follow Levinson on Facebook or I used them as an opportunity to find ways Instagram @billylevinson for motivation to make agents’ lives easier,” he continued. to keep moving forward. “It didn’t happen overnight. But eventually, I got in front of web developers, product designers and software engineers. It’s called “Sell While You Sleep.” And it’s The rest, as they say, is history.” a part of the Levinson & Associates I-Genius Innovation after innovation soon followed, platform, a turnkey system that handles each one enhancing the way agents market virtually all of an agent’s marketing/sales and write business. needs automatically — including 1,000 One such idea, for example, gave agents prospects monthly. access to an exclusive platform letting them “We know that most IMOs offer the same

proven marketing tools and a CRM platform that automatically drives traffic to their website (Agency Automator).” If a prospect visits an agent’s website and doesn’t purchase a policy, it’s still a win for the agent. The prospect’s information — including what they were shopping for — is recorded and entered in an email campaign for the agent to follow up on later. And in the event you’d like someone else to call on those leads and set appointments for you, they’ve recently added a virtual assistant to help with that as well. In other words, agents at Levinson & Associates are handed every tool imaginable for success. There’s even a Levinson app to access all their needs on the fly. “We supply agents with not only the tools they need to be successful, but also the tools they want to be successful. Almost every innovation we’ve launched has come directly from wishes by agents in the field,” he continued. "Part of what makes them more successful than agents elsewhere, why we’ve seen such a huge increase in our workforce and why we’ve been featured as the top agent's IMO in 2017 is because we listen." Listen is right. You’ll find suggestion boxes throughout the Levinson & Associates headquarters in southern Florida, and with every weekly live training session, webinar, company email and other interaction — like their annual agent expo — this national IMO encourages agents to share their ideas.

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

AUGUST 2018 » VOLUME 11, NUMBER 8

online

www.insurancenewsnetmagazine.com

FEATURE

Mine Your Own Experience For Sales Gold By Susan Rupe

A good story can inspire a sale, but a great story tells the “why” behind the inspiration.

INFRONT

ANNUITY

40 C ommentary: Climbing Out Of The Rabbit Hole On Annuity Suitability

8D OL Rule Ghost Lingers As ACA Survives Trump Team’s Tactics By John Hilton and Susan Rupe There was no such thing as summer vacation when it came to federal regulations. We look at what’s happening with the fiduciary rule and health care reform.

IN The Field

26 S isters Find Their Way Home

Carina Hatfield and Trisha May look back on the legacy of their father and grandfather while adjusting their practice to serve the needs of clients in the 21st century.

LIFE

32 ‘Unscheduled’ Policy Loans Can Create Sales Opportunities By Anthony Giannone There is a huge opportunity to identify and remediate policy loan problems that can result in new compensation and satisfied clients.

INTERVIEW

10 Reaching Retirement Alpha

An interview with Tom Hegna Tom Hegna built a career on creating happy retirements for clients. In this interview with Publisher Paul Feldman, Hegna explains why an advisor who claims to uphold the highest standard of care but ignores annuities is doing a disservice to clients.

34 Carriers Reshape Indexed UL While Variable UL Sales Heat Up

InsuranceNewsNet Magazine » August 2018

By Cyril Tuohy Rising interest rates help insurers boost the generosity of the benefits available with life insurance contracts.

By Jack Aiken Fortunately, the basic values of fixed annuities mesh nicely with the reality of clients’ actual needs, so there is still time to scramble out of the rabbit hole.

42 B eneath The Lull, Carriers Are Reshaping Annuities For Advisors By Cyril Tuohy Annuity companies are experimenting with product tweaks as they push to distribute through new channels in search of growth.

HEALTH/BENEFITS

46 C ritical Illness Coverage Fills The Gap And Eases Client Concern By Pam Jenkins Surviving an illness and surviving its financial burden are different matters. How critical illness coverage can ease the pain.

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IN THIS ISSUE

View and share the articles from this month’s issue

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AUGUST 2018 » VOLUME 11, NUMBER 8

50 Keep Clients From Panicking: Placing Volatility Into Perspective

52 Blockchain 101: The Technology Behind Cryptocurrencies

58 MDRT: Finding Your Inspiration Throughout Your Career

By Harry Pokrandt With blockchain and bitcoin in the news, clients are likely to ask about them. Here is a crash course on cryptocurrencies and the technology behind them.

By Eric Gritter Give clients the information they need to consider current volatility in the context of historic returns and their long-term goals.

online

www.insurancenewsnetmagazine.com

By Kimberly A. Harding Everyone has different sources of inspiration that motivate them to do their best work every day.

BUSINESS

54 Managing Results Is Only Half Of A Successful Leader’s Job By S. Chris Edmonds A successful leader also must create a healthy work environment.

INSIGHTS

60 L IMRA: How Do We Fill The Life Insurance Purchase Funnel?

56 NAIFA: Turning Contacts Into Advocates

EVERY ISSUE 6 Editor’s Letter 16 NewsWires

By Elaine F. Tumicki Consumers recognize their need for life insurance, but they don’t make it through to a purchase.

By Brian Haney The right marketing plan must have a strategy for forming relationships with key players within a market.

30 LifeWires 38 AnnuityWires

44 Health/Benefits Wires 48 AdvisorNews Wires

59 Advertiser Index 59 Marketplace

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InsuranceNewsNet Magazine » August 2018

Be More T H A N J U S T A N AG E N T

DAVID GONZALEZ Allstate Agency Owner Norwalk, CT

BE AN OWNER WITH EQUITY. Unlike other small business ventures, being an Allstate Agency Owner lets you earn equity in your business with the opportunity to pass it down, or sell someday. So why settle for being just an agent? Be an Allstate Agency Owner. Get started today at allstateagent.com/OwnAnAgency Subject to all terms and conditions as outlined in the Allstate R3001 Exclusive Agency Agreement and Exclusive Agency program materials. Allstate agents are not franchisees; rather they are exclusive agent independent contractors and are not employed by Allstate. Allstate is an Equal Opportunity Company. Allstate Insurance Company, Northbrook, IL. In New Jersey, Allstate New Jersey Insurance Company, Bridgewater, NJ. ÂŠ 2018 Allstate Insurance Co.

WELCOME LETTER FROM THE EDITOR

Tell Us Your Truth

dreaded the thought of a three-hour class when I registered, but Bob Pollock’s journalism class seemed intriguing. I was a sophomore at Southern Connecticut State College (now university), thinking about a journalism career but not exactly sure. Pollock’s class would be my second class in journalism, but my curiosity about the profession was barely able to stretch as far as a three-hour class in the evening. I needn’t have worried. He came into that classroom, sat on the desk and told stories from his career as editor of the Ansonia Sentinel, a small newspaper that was later swallowed by a larger one. He enthralled us with a spectrum of stories: redemption, revenge, love. I was hooked and ready to tell my own. Well, I thought I was. That was why I was the student and he was the teacher. He assigned us to do a profile story. I thought that should be easy — find a person, ask some questions and write what that person said. I don’t even remember the person I wrote about. I just remember what Pollock wrote on my story. Next to a fairly awkward quote, he wrote, “Is that what he meant?” I confirmed the quote’s accuracy in my notes and spoke to him after class. But Pollock didn’t even look at the notes that I showed him. He said it was not about literal accuracy. “Is that what he meant?” he asked. “Because I didn’t understand it, and it wasn’t consistent with the other stuff he said.” I told him that I couldn’t read the guy’s mind to know his intent. He asked whether the quote struck me as weird when I wrote it, and I admitted it did, a tad uncomfortable with the slowly growing realization of my idiocy. “How do you expect your readers to make sense of it?” Pollock asked as I eyed the door. He told me that I had two responsibilities. One was the duty to the reader, who was expecting a story as close to truth and clarity as I could deliver. The other 6

was to the subject himself. “This person placed quite a bit of trust in you,” Polock said. “His life story is in your hands. How would you feel if you were that person and a college kid were writing about you?” I didn’t have to answer. He just told me to give him a new version by the next week. Lesson learned.

Our New Profiles

We have a feature starting this month called In The Field, which profiles a person of distinction each month. We don’t have firm rules on who can be a subject. In fact, our first profile is of two people, sisters, who represent the past and future of insurance — Carina Hatfield and Trisha May. InsuranceNewsNet Managing Editor Susan Rupe met the sisters at NAIFAPennsylvania’s annual meeting. I say “met,” but she already knew of the sisters and their father from her days as that association’s communications director. The sisters are the picture of hope for the insurance industry. Their grandfather started in the business in the middle of the 20th century when many insurance sales were door to door. Their father grew the practice into a business — a business the sisters didn’t want any part of. They pursued their own lives after getting out of school. As their dad helped his agency evolve into a full-service Nationwide operation, Hatfield eventually realized that insurance was perfect for her. She started working for her father and recruited her sister. They represent the future of insurance not only because they are young women in a traditionally male business but also because they realize that financial service is an important part of the mix. Anything less is not full service anymore. If the future is independent advisors, Nationwide is pushing the agency into it because the company is moving to an independent advisor model. That means by the middle of 2020, more than 2,000 agents will no longer be selling under the Nationwide umbrella.

InsuranceNewsNet Magazine » August 2018

The sisters and their agency will track closely to the rest of the industry. Will they even consider themselves an insurance agency or will they be an agency that happens to sell insurance?

How About You?

As I said, we haven’t set firm rules on the people we will feature. We know we want agents of change. We want people who are making a difference in the insurance industry and can help all of us understand the direction of change. If you know of someone who fits this description, let us know. Send us a note to editor@insurancenewsnet.com and write PROFILE in the subject line. Or perhaps it is you. What is your story? Susan Rupe also wrote about storytelling this month. We know stories are central to insurance sales. I have always known agents to be excellent storytellers. They wrap a tale around the truth that all families need some level of protection against the unknown. Tell us your truth, and we will tell it to everyone else. That was what I learned from Bob Pollock all those years ago. Eventually, I transferred to Syracuse University for its journalism program. But despite the excellent teachers at SU, they were not the ones who passed along the essence of what we do in journalism — and what you do in advising. We don’t tell stories for stories’ sake. We tell truths that need to be told. What is your truth? Steven A. Morelli Editor-in-Chief

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INFRONT

DOL Rule Ghost Lingers As ACA Survives Trump Team’s Tactics The fiduciary rule had a short life, but the industry cannot simply ignore it away. Meanwhile, the Trump administration continues chipping away at the Affordable Care Act as insurers gear up for the 2019 open enrollment season. By John Hilton and Susan Rupe

hile the Department of Labor fiduciary rule is officially a part of history, its impact lives on while regulators and insurers sort out what comes next. Tossed out by a federal appeals court March 15, the rule finally died for good in mid-June. Because the DOL rule was partly in place for one year, the industry cannot simply ignore it away. Its impact lives on in two ways: from the changing norms fueled by the three-year dabble with the DOL rule, and from lingering department guidance that lives on. The department guidance is Field Assistance Bulletin 2018-02, issued May 7 to clear up confusion among agents and advisors. The FAB states that prohibited transaction claims will not be brought against advisors who “are working diligently and in good faith” to satisfy the impartial conduct standards set forth in the DOL rule exemptions. 8

This guidance remains in effect until new guidance is issued countermanding it, said Drinker Biddle & Reath, a law firm specializing in regulatory and fiduciary issues. A DOL spokesman did not respond to our request for comments. Because the FAB is essentially still in place, the impartial conduct standards remain in place, said Kim O’Brien, CEO of AssessBEST, a compliance software company. [Disclosure: INN Publisher Paul Feldman is part owner of AssessBEST.] The impartial conduct standards require advisors to: » Act in the best interest of their clients. » Make no misleading statements. » Accept only reasonable compensation. Insurance carriers are not releasing agents from these compliance standards, O’Brien said. This might amount to erring on the side of caution, and on how the industry has come to operate in recent years. The next DOL bulletin could come any day, but until then, compliance teams are advising sales teams to act as though the impartial conduct standards are the law.

A New Understanding

The more complicated lingering impact from the late DOL rule is how it changed

InsuranceNewsNet Magazine » August 2018

perceptions and interpretations of existing rules. In particular, Drinker Biddle addressed broker-dealers who were not generally considered fiduciaries under the ERISA five-part test standard. “We do not believe this presumption can be sustained going forward,” the law firm said in a blog post. “The Fiduciary Rule and the developments that came along with it have caused investors and regulators to scrutinize these issues and re-examine previous understandings. Going forward, broker-dealers should expect to be held to the ‘letter’ of the Five-Part Test.” The now-reinstated 1975 five-part test (part of the Employee Retirement Income Security Act, ERISA) considers advice to meet the “fiduciary” standard if it is: 1. Regarding the value of securities or other property, or as to the advisability of investing in, purchasing or selling securities or other property. 2. Provided on a regular basis. 3. Provided pursuant to a mutual agreement or understanding, written or otherwise. 4. That the advice will be a primary basis for investment decisions. 5. Individualized, based on the particular needs of the investor.

DOL RULE GHOST LINGERS AS ACA SURVIVES TRUMP TEAM’S TACTICS INFRONT While not as strict as the fiduciary definition set out in the Investment Advisors Act of 1940, the five-part test is still a tough standard on ERISA fiduciaries. However, it has long been generally understood that brokers do not fall within this standard when selling investment or insurance products. Most of their transactions fail to meet one or more of the five parts.

‘Increasingly Difficult’

DOL rule debate likely changed that reading of the five-part language, according to a client alert written by Joshua Waldbeser and Brad Campbell, lawyers with Drinker Biddle. “Consider a broker who has a longstanding relationship with a 401(k) plan sponsor, offering regular recommendations on plan investment options,” they wrote. “If the advice has been followed by the plan fiduciaries (as is typically the case), it will be increasingly difficult to argue that there is no ‘mutual understanding’ that the advice is ‘a primary basis’ for investment decisions.” In short, the application of the 1975 rules will most certainly be broader than in the past, Drinker Biddle said. “While we await further rulemaking from the DOL, broker-dealers find themselves at somewhat of a crossroads; that is, ‘old’ rules viewed through the lens of a new day,” the firm noted. “We recommend that firms assess carefully when, and under what circumstances, their representatives’ recommendations may constitute fiduciary advice.”

Chipping Away At The ACA

Congress may have given up on repealing the ACA, but the Trump administration and the courts continued their assault on the health care law. So far this summer, there have been a number of measures that weakened the ACA. Here’s a rundown of the hits the health care law has taken. The ACA requirement that insurers cover those with pre-existing conditions could be at risk after the Justice Department argued in federal court that it would not defend that part of the law. The reason behind this? The department argued that the parts of the ACA requiring insurers to cover people with pre-existing conditions are intertwined with the

portion of the law that mandates people have coverage or pay a tax penalty. But Congress repealed the tax penalty, so the Justice Department argued that the requirement to cover pre-existing conditions is no longer constitutional. A federal appeals court ruled that the federal government doesn’t have to pay health insurers money they say they are owed under the ACA’s risk corridor program. Health insurance carriers say they are owed about $12 billion from the risk corridor program. Insurers claim the government’s failure to make these payments resulted in skyrocketing premiums and dwindling competition in the ACA marketplaces. The court sided with the administration in ruling that the federal government didn’t have to make the payments because Congress had taken action — after the ACA’s passage — requiring the program to be budget neutral year after year. The Department of Labor released a rule making it easier for employers to join together to create what are known as association health plans. These plans are touted as a lower-cost way for smaller companies and the self-employed to band together to obtain coverage. But they bypass the ACA’s requirements, including the requirement to offer “essential health benefits,” which include coverage for maternity services, pediatric care, prescription drugs and mental health. The rule will also allow the plans to be sold across state lines, which would make it more difficult for state regulators to oversee them.

Actuaries Warn Of Rate Increases

The American Academy of Actuaries warned that the elimination of the individual mandate penalty as well as the expansion of association health plans will lead to ACA plan premium increases for the 2019 enrollment season. The next sign-up season for coverage under the ACA begins Nov. 1. Health care experts say the wider availability of cheaper health plans could draw healthy people away from the ACA marketplace and raise premiums for those who remain. Several insurers who are seeking rate increases for 2019 are blaming the repeal of the mandate penalty as a primary reason for hiking premiums. Insurers in New York requested an average increase of 24

percent while Washington state health insurers proposed an increase of 19 percent in premiums for 2019. The premium increases will have little effect on consumers who are eligible for subsidies, as the ACA’s subsidies are designed to increase as premiums go up. However, those who are not eligible for subsidies but rely on the marketplace for coverage will be hit by the premium hikes.

But Some Carriers See Good Times Ahead

Now that the ACA is approaching its sixth open enrollment season, some carriers are finding success under the health care law and are even planning to expand in many states. Oscar Health filed to sell ACA plans in Florida, Arizona and Michigan for the first time, and it will enter new markets in Ohio, Tennessee and Texas, The Hill reported. Bright Health will begin selling plans in Tennessee, and Presbyterian Healthcare will return to the New Mexico exchange after leaving it in 2016. Medica will sell coverage in the Kansas City area. The entrance of smaller carriers into the ACA marketplaces comes as major players — such as UnitedHealthcare, Humana and Cigna — pull out of the majority of the markets. Aetna left the ACA business entirely. Experts said insurers have finally figured out how to become profitable in the ACA environment. “We have finally reached the point where insurers are making money in the marketplaces,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. 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. 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.

August 2018 » InsuranceNewsNet Magazine

INTERVIEW

Tom Hegna tells how clients can retire happy with life insurance and annuities See Tom LIVE at the 2018 InsuranceNewsNet Super Conference, Sept. 26â&#x20AC;&#x201C;28 in Chicago! Visit www.innsuperconference.com for more information. 10

InsuranceNewsNet Magazine Âť August 2018

REACHING RETIREMENT ALPHA INTERVIEW

robably not a day goes by without the phrase “the client’s best interest” coming to your attention. But it is usually used as a bludgeon against commission-based agents and advisors. Tom Hegna turns that around to say that a financial advisor who claims to uphold the highest standard of care but ignores annuities is doing a disservice to clients. The rate of accumulation does not matter if the de-accumulation phase leaves clients out of money or afraid to spend what they have. How is that a safe, secure and happy retirement? Hegna built a career on crafting happy retirements. After decades with major life insurance companies such as New York Life and MetLife, Hegna turned full time to speaking and writing about how to ensure fulfilling retirements. He has written several books, including Paychecks and Playchecks and Don’t Worry, Retire Happy! Hegna is a popular speaker, having appeared on the main stage for major association conferences such as the Million Dollar Round Table’s annual meeting. He has also delivered more than 5,000 presentations of his Paychecks and Playchecks concepts. In this interview with Publisher Paul Feldman, Hegna tells how agents and advisors can confidently help their clients retire happy. FELDMAN: You have talked about the important concept of sequence of returns in your books. Could you tell us more about that and how it relates to advising clients on annuities? HEGNA: Clients and advisors don’t understand sequence of returns risk. Here’s an example: A guy retired in 1973. He averaged 10.1 percent a year for the next 22 years. His broker told him to take out 5 percent per year, and, of course, he went dead broke. People just can’t understand how you can average 10.1 percent a year for 22 years, only take out 5 percent and go broke. It doesn’t make sense to them. If you lose money early in retirement, it will devastate the whole rest of your retirement because none of that money that you took out gets to grow back. People just don’t understand these basic concepts.

And I would say there are a lot of advisors who do not understand sequence of returns risk. FELDMAN: Are some advisors missing the point about risk? HEGNA: Yes, many people think the riskiest time to invest is when you’re in your 80s. “Oh, you gotta be careful in your 80s.” No, the riskiest time is in your 50s and 60s, because if you lose money right before or right after retirement, it will devastate your whole retirement. If you lose money in your 80s and 90s, it will have much less of an impact on your retirement. That’s another thing that many of these financial planning types don’t understand. You’ve got to put guaranteed products in these portfolios to retire optimally. FELDMAN: You’ve written a booklet called Retirement Alpha: How Mortality Credits Improve Retirement Outcomes. What do you mean by retirement alpha, and how would advisors use mortality credits? HEGNA: Alpha is a measurement of outperformance that the fund manager brings. So if the fund manager does better than the S&P 500, they’re going to say he brings alpha to the portfolio. When the Financial Research Corporation looked at these annuities, they called these mortality credits a new form of alpha — retirement alpha. That really struck me. So I did some more research, and here’s what I found. Let me give you an example, and then I’ll dig more into the mortality credits. Think of a 75-year-old couple. It might be your parents. It might be a favorite client. Where is a 75-year-old couple supposed to find any alpha in today’s market? Are they going to get any alpha from their CDs? No. Are they going to get any alpha from their bonds? No. Are they going to get consistent, reliable alpha from the stock market? No. What is a 75-year-old couple supposed to do? They’re supposed to come to us to get the new alpha, the retirement alpha.

These are the mortality credits of life insurance and annuities. One of the first questions I would ask this 75-year-old couple is: How much money are you planning to leave to your kids? You know what 99 percent of them will reply? “Well, I don’t know. I guess whatever’s left over.” I say no, no, that’s not a good answer. I need a number. I could be $10,000, $100,000, $1 million. I don’t care what the number is, just give me a number of about how much you want to leave your kids. Once they say that number, I encourage the advisor to run a life insurance illustration, or a second-to-die illustration if it’s a couple, and show them. Let’s say they want to leave their kids $300,000. Show them they can buy that $300,000 policy for maybe $100,000. So for pennies on the dollar, they’re buying $300,000 to go to their kids. They’re using the leverage, the mortality credits of life insurance, to go to the kids. Now what does that free them up to do with their money? Spend it. Now they can buy a lifetime income annuity that has a much higher payout rate than bonds or CDs or any other guaranteed type income-producing vehicle, because every check you get from an insurance company and income annuity is composed of three parts.

August 2018 » InsuranceNewsNet Magazine

INTERVIEW REACHING RETIREMENT ALPHA portfolio. I’m going to remove some of the bonds. I’m going to replace them with a lifetime income annuity. You know what that will do to every single one of your portfolios? It will lower the risk and increase the returns. I always tell people, if you don’t believe me, prove me wrong. But here’s why they can’t. Inside a portfolio, a lifetime annuity functions like a triple A-rated bond with a triple C-rated yield, with zero standard deviation. What will that do in your portfolio? It will lower the risk and increase the returns. I always tell people I’m not making this stuff up. These are mathematical, scientific and economic facts. So here is a fact: If you have readers who are building portfolios for retirement and they’re not using income annuities, they are building suboptimal portfolios. That is not my opinion. That is a mathematical, scientific and economic fact. Many of these people claim to be a fiduciary. How can you be a fiduciary and not follow math and science and build suboptimal portfolios? It doesn’t make sense to me.

How can you be a fiduciary and not follow math and science and build suboptimal portfolios? It doesn’t make sense to me.

Part 1 is principal. Anybody can give you principal. Part 2 is interest. Anybody can give you interest. But Part 3 is the secret sauce that in Paychecks and Playchecks I called mortality credit. And in Don’t Worry, Retire Happy! I call it longevity credits. Only the life insurance company can guarantee you’ll never run out of money. A banker can’t guarantee you’ll never run out of money. A broker can’t guarantee you’ll never run out of money. But a life insurance company can because they pay these mortality and longevity credits. These credits are a new form of alpha that you can’t get from stocks, you can’t get from bonds. I know some of your readers are going to be doubters. At seminars, I say, “Look, I know there are some doubters in the audience, so I’m going to give you a chance to prove me wrong and you can be a hero among your peers. If you think what I’m telling you is incorrect, here’s a simple challenge. Build a portfolio that you think I cannot beat.” Then it’s, “Oh, he’ll never beat this one. This has all good stocks in it.” Yeah, you build that portfolio. You know what I’m going to do? I’m going to reach into that 12

FELDMAN: Indexed universal life has grown to one-fourth of all individual life sold today — what do you think about IUL? HEGNA: I try to stay away from individual products because I know everybody’s got their biases and their flavors. I will just say this. If you look at all of the permanent policies — universal life, variable life, whole life, indexed universal life — over time, I personally believe whole life has been a great product during up and down markets, through everything. High interest rates, low interest rates, through all market cycles — whole

InsuranceNewsNet Magazine » August 2018

life has proven itself to be a good policy. I was the variable life guy for MetLife for quite a few years. Back in the ’90s, variable life was the hottest product going because the markets were going up. The dot-com bubble and everything, it was a great product. Then the market crashed and people were a little less happy with variable life. When universal life started in the ’70s and ’80s, interest rates were 13, 14, 15 percent and universal life was the rage. Then when interest rates got down to 4 percent, universal life didn’t look as attractive. Now indexed universal life is kind of the hot product in the whole industry, and I’m not saying anything bad about indexed universal life — especially if it continues to perform as it always has. It may very well replace whole life as a longterm policy, but the jury is still out. And we haven’t seen it go through all types of market cycles — high interest rate, low interest rate, market up, market down. The other thing is, I spent 22 years in military intelligence, and in military intelligence we used something called indicators and warnings. It’s like we don’t know if North Korea’s going to attack, but if all of a sudden 500 tanks come up to the border and they move their missiles within a mile of the border, those are called indicators and warnings. One of the indicators and warnings I use in this business is asking who is not issuing indexed annuities? Or who is not issuing indexed universal life? You want to know who it is? The triple-A mutuals are not issuing those policies. Now that doesn’t mean they’re bad, it just gives me pause because the triple-A mutual wants to sell more life insurance than anybody else. So if they could make that product work over the long term, they’d have that product. MassMutual would have it. New York Life would have it. State Farm would have it. But they don’t. So I would just say that gives me a little pause. I know it’s the hot product right now. But you asked me for my personal opinion, and that’s the way I see it. I call them the way I see them. FELDMAN: Mutuals did not like universal life very much at one time, but many are offering it now.

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P64163

INTERVIEW REACHING RETIREMENT ALPHA

I recently did a seminar at the IMAX theater in San Antonio, Texas, for an audience of about 400 people. When I finished, an 83-year-old gentleman approached me. He said, “Well, Tom, that was a very interesting presentation. But what should I do with my money?” And so I asked him two fundamental questions: What do you want your money to do while you’re alive, and what do you want it to do when you die? And here’s what he said: “Well, I reckon nobody’s ever asked me that before. But here’s what I want: I want a guaranteed paycheck every month for the rest of my life. And when I die, I want my wife to get that same check for the rest of her life. Now, when she dies, we want our son to get that same check for the rest of his life. And then when he dies, I suppose his wife should get it for the rest of her life. And finally, when his wife dies, we want our granddaughter to get it for the rest of her life. That’s what I want.” Lucky for him, he can accomplish all of this with just one lifetime income annuity. Here is how: 1. Joint annuitants are Grandpa and the granddaughter. 2. Grandma is named as successor owner. 4. When Grandma dies, the son names his wife as the successor owner. 5. When both the husband and wife die, the checks will go to the granddaughter for the rest of her life. 6. When both Grandpa and the granddaughter die, the checks will cease. *This, of course, assumes that the granddaughter will live longer than her parents and grandparents.

COMPONENTS OF LIFETIME INCOME PAYOUT

... but only an insurance company can manufacture a mortality pool.

Female, age 65, $100,000 premium

Investment advisors can manufacture this payout ...

Mortality credits Return of premium Interest

HEGNA: Yes, a lot of the mutuals do have universal life. They have a fixed account, or they have a variable universal life. So those are pretty well prevalent in the mutual world. New York Life has variable life. It has universal life. State Farm has universal life. So, triple-A mutuals do have universal life, but none of them that I’m aware of have indexed universal life. And they don’t have indexed annuities either, most 14

of them. I’m not saying that’s good or bad. They’re ultraconservative companies. But I think over a 100-year period of time, they’ve been proven right more than they’ve been proven wrong. So it’s just things that make me — things that make you say, hmm, you know? FELDMAN: Absolutely. Part of longevity protection is long-term care

InsuranceNewsNet Magazine » August 2018

insurance. And we’ve seen this huge drop in that market, and there are only a few carriers even interested in writing it these days. Should people still buy individual long-term care policies? HEGNA: The problem is the media makes it sound like they have a sketchy track record. The fact that these companies had to raise their premiums, I’m not happy

Chart source: New York Life actuarial data and methodology.

3. When Grandpa dies, Grandma names the son as the successor owner.

Tom Hegna, Paychecks and Playchecks, 2011, Acanthus Publishing

Providing Income Across Generations

REACHING RETIREMENT ALPHA INTERVIEW about that at all. I mean, it makes the industry look terrible. But what is that telling you? It means it wasn’t a bad deal, it was too good of a deal because these companies were losing their shirts selling long-term care insurance. The people who bought it got a great deal. I’m not happy that they are raising premiums. I’m not happy about that. The industry should be embarrassed about that. But I don’t care what the premium is. The problem is long-term care costs are going through the ceiling. I tell people if you think long-term care insurance is expensive, you ought to try not having it. That will wipe you out.

seminars. People say “Boy, this makes a lot of sense to me.” If they would just talk about simple ways to secure guaranteed lifetime income and to manage key risks, that’s what I would do. I believe seminar selling still works if that’s a technique they want to use. If they want to do one on one, they could do that. Doing the educational type thing where you give classes at a university, that can work too. They have to get back to the basics. Retirement is risky business and we’ve got to manage risk. It’s not just about who can get the highest return or who’s got the lowest fees or who’s got the best asset allo-

I always tell people, if you know anybody who’s retired on assets, I got some pretty bad news. They will never, ever, ever be able to fully enjoy their retirement. People are going to have to do something. Now, if they’re not going to buy long-term care insurance, then they can buy a life insurance policy with a longterm care bucket. The thing about that is those are guaranteed never to go up. Because you’re not buying an unlimited number of dollars, you’re buying a bucket of money. You’re buying a million dollars or a half million or two million. That’s a fixed amount of money. You don’t have to raise the premium, because if long-term care costs you $5 million and you bought a $2 million policy, the company is only going to pay $2 million. They’re not on the hook for the other $3 million. I think more people are going to the life insurance and annuity side than the individual policy. I think that’s sad, but any plan is better than no plan. FELDMAN: You work with a lot of agents and advisors across the country. What are some effective strategies you see working today? HEGNA: Just try to simplify it and use simple steps, like the way I talk in my

cation model. That doesn’t have anything to do with retirement. I mean, not much. It’s really about taking key risks off the table and giving people these guaranteed paychecks and playchecks so that they can actually enjoy their retirement. I always tell people, if you know anybody who’s retired on assets, I got some pretty bad news. They will never, ever, ever be able to fully enjoy their retirement. Do you know why? Because one, they don’t know how long they’re going to live. Two, they don’t know the rate of return they’re going to get. Three, they don’t know how much money they can take out. So I promise you they will do one of two things. They will either take out too much money, in which case they can quickly run out of money, or more likely, they’ll never take out enough. They'll join the millions of Americans who are living the “just in case, just in case, just in case” retirement. What will get you out of a “just in case” retirement is a guaranteed lifetime income. I always say that it’s not just economics. I talk about math and science and

economics. It’s also about psychonomics. Think about it this way. Every two weeks for your whole life, you got something from your company. You know what that was called? That was called a paycheck. And you know what you did with most of your paycheck? You spent it. You paid for your car, your house and your insurance, and you went on trips. You did that for 40 years. When was the last time you raided your 401(k)? When was the last time you went into your brokerage account and took a bunch of money out of your savings? “Oh no, we can’t do that. We’ve got to save it. We’ve got to grow it. We’ve got to protect it. We can’t touch it. We’ve got to save it. We’ve got to grow it. We’ve got to protect it. We can’t touch it.” OK, you do that for 40 years. You honestly think on your 65th birthday you’re going to wake up and say, "By golly I’m going to blow my 401(k) today”? You can’t do it. People can’t spend assets. It’s not just economics, it’s psychonomics. And that’s why all the Ph.D.s who study retirement say you should take a portion of your assets and turn them into these guaranteed playchecks and paychecks because you’ll spend those. And then you’ll be able to enjoy your retirement. You can go out and do all the things that you want instead of sitting around saying, "Just in case, just in case." FELDMAN: I think that the stress about those assets affects life expectancy. HEGNA: It’s the peace of mind that I think increases your life expectancy. When people get older, their worlds get very small and little things matter to them. So they’re trying to live another month to get that check. And then guess what? They live that month, and, oh, I got another check coming in. I’d better be hanging around. I’d better live for that. They’re stress-free and they look forward to this money, and it tends to help them live longer. It’s been documented numerous places, such as the University of Chicago. If Fortune 100 companies want to check their books of business, they’re going to find out their annuity book lives longer than their life book. Jane Austen knew about it back in 1811 when she wrote the book Sense and Sensibility, so this is nothing new.

August 2018 » InsuranceNewsNet Magazine

NEWSWIRES When am I gettin that g raise?

Weak Pay Growth A Puzzlement The economy is buzzing, the unemployment rate

has hit a multi-decade low and employers are complaining they can’t find enough people to fill their job openings. Which leads us to a question that stumped even the chair of the Federal Reserve: When will people finally start getting meaningful pay raises? Jerome Powell was asked this question during a recent news conference and he had no answer, calling the situation “a puzzle.” Powell offered up one likely factor: the economy’s relatively low productivity growth. This means that American workers aren’t generating enough additional value for each hour on the job. Economists theorize that Americans have found themselves increasingly in competition with foreigner workers who earn less and that this factor has suppressed wages in some industries. And then there’s the “monopsony factor” — industries or communities with only a few very large employers. Research has found that employers in such cases can limit pay growth because workers have few options to quit for similar jobs at rival employers.

FEDERAL $: LESS ON KIDS, MORE ON ELDERS

Children continue to get a smaller piece of the federal spending pie, according to the Committee for a Responsible Federal Budget. Government spending on children has been falling since 2010 and now accounts for less than 10 percent of the federal budget, a committee analysis said. It’s a major turnaround from a half-century-old trend. Spending on children grew from $19 billion (when adjusted for inflation), or 3 percent of the federal budget in 1960, to $405 billion, or nearly 11 percent of the budget in 2010, the study said. The increase was largely driven by the establishment of Medicaid, the food-stamp program and the Children’s DID YOU

KNOW

Health Insurance Program, as well as the introduction of Supplemental Security Income, Section 8 low-income housing and the Earned Income Tax Credit. All are major sources of support for children. But a major reason for the decline in spending on children is the retirement of the baby boomers and the rise of health care costs. This led to a larger share of federal dollars going to the elderly. Older Americans are getting more of the pie ($1.4 trillion, or 37 percent), while children are getting less ($377 billion, or 9.8 percent). The report projects that in 10 years, federal spending on children will fall to just 7 percent.

COULD A RECESSION BE ON THE HORIZON?

Some folks see a cloud around every silver lining, and the economy is a prime example of that. Despite the U.S. experiencing the second-longest economic expansion in its history, many economists are seeing

QUOTABLE

The U.S. economy is in great shape. — Federal Reserve Chair Jerome Powell, after the Fed raised interest rates for the second time this year

storm clouds on the horizon. Half the economists surveyed by the National Association of Business Economics foresee a recession starting in late 2019 or in early 2020, and two-thirds are predicting a slump by the end of 2020. It’s because things are going so well that economists see the bubble bursting soon. The late stage of an economic expansion is when things are most vulnerable to a downturn. It’s typically when unemployment falls, inflation heats up, the Federal Reserve raises interest rates to cool the economy down, and investors and consumers pull back.

LENDERS MAKE A PUSH FOR BORROWERS

If it seems as though your mailbox contains more solicitations from lenders than ever before, you’re correct. Nonbank lenders are making a push to supply personal loans to borrowers, with a record number of mailings sent to consumers. Credit Suisse tracked 10 nonbank lenders and found they sent 368 million pieces of mail during the month of May. That’s a jump of 41 percent over the same period last year. Personal loan debt was at $120 billion through the first quarter of 2018, an 18 percent hike from last year. American consumers have $1.03 trillion in revolving credit, a 20 percent increase over the past five years, according to Federal Reserve data.

Federal debt compared to the size of the economy will reach 78 percent this fiscal year, the highest level in nearly seven decades, the Congressional Budget Office predicts. Source: Associated Press

InsuranceNewsNet Magazine » August 2018

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COVER STORY

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MINE YOUR OWN EXPERIENCE FOR SALES GOLD COVER STORY

D Focusing on

‘WHY’ can inspire

consumers to take action. By Susan Rupe

avid Sheridan lived said. It creates a personal connection, it the kind of suburban helps people understand what you believe Pittsburgh childhood fa- and why you can be trusted. miliar to baby boomers. “What you want to get into right away He and his pack of is the why of what you’re doing, not the neighborhood friends what or the how. That comes later. spent their days playing “But what you’re trying to get to is, sports, participating in Scouting and ex- what are the problems that the person ploring the nearby woods. Their daily ad- you’re talking to really has? And have ventures didn’t end until the streetlights they expressed those problems to you? came on at night. Have they said, ‘This is a problem I want It was straight out of Leave It To to solve?’ Once you can get that person Beaver. Until something happened to talking about what the real issues are and one of the gang and changed the group what the problems are, now you’re in a dynamic forever. position to offer a solution. And they can One of the neighborhood kids, Larry, see it as a solution instead of just another saw his life upended after his father died. sales pitch.” Larry’s mother had to sell their home Sheridan said that the financial serand move the family to an apartment on vices industry helps people solve probthe other side of town. Their standard lems. “But you have to understand what of living fell sharply. those problems are Larry ended up going before you start to a different school, throwing solutions a different church, a at people,” he said. different Scout troop Nobody buys a soluand playing on diftion to a problem they ferent sports teams don’t know or believe than the other kids he they have. had known all his life. Telling the story Larry fell out of conof why you do what tact with the group. you do helps adviSheridan now lives sors build personal far from his childconnections when David Sheridan, Protective Life hood home, but he talking to clients, never forgot Larry. Sheridan said. “You He is vice president, managing di- don’t want to spend a lot of time talking rector of brokerage distribution for about things you do as a company that Protective Life. He believes the industry aren’t really relevant to the person you’re is not telling the story of all the Larrys talking to. out there and why life insurance would “What sales people typically want to have made a difference for their families. do is get in front of somebody, show the Sheridan speaks to industry groups on new whiz bang product or the new whiz the power of storytelling to inspire con- bang sales idea. There’s nothing wrong sumers to take action and protect their with that. But if the person you’re showfamilies. He challenges industry profes- ing it to isn’t receptive or doesn’t see how sionals to share the story of why they do you’re offering a solution to a problem what they do. they agree needs solving, then you’re His company backs his beliefs. beating your head against the wall. And Protective Life has embraced the concept that’s why I think folks don’t do it very of “story-selling.” It has sponsored train- often.” ing for its people on the science of using Sheridan said that one of the life instories to connect with consumers by surance industry’s problems is “we don’t focusing on the “why” of life insurance. have as many classically trained life insurance sales professional out there who Getting To The Why make people understand why life insurWhy is the “why” so important in story- ance is so important like we did 30 or 40 telling? Discussing the “why” reveals you years ago. They actually did story selling to be more than a salesperson, Sheridan back then but they didn’t call it that.” August 2018 » InsuranceNewsNet Magazine

COVER STORY MINE YOUR OWN EXPERIENCE FOR SALES GOLD He recalled an old story-selling process called “You’ll Earn A Fortune.” “This was where they would help people realize that life insurance is not just about somebody dies and you get a bunch of money. And that’s the way a lot of people look at it — why should I pay this money to the insurance company today so somebody else will get all this money?” Sheridan turned back to his friend Larry. “Life insurance is not just paying off the mortgage. And that’s how people tend to narrowly think about it,” he said. “What they don’t think about is how life drastically will change for the people who are left behind. It’s not just about being able to pay off the car or the mortgage. It’s about losing all those life connections because now something has to drastically change in the life of the spouse who is left or the children who are left.”

The Outside Story And The Inside Story

Every good story actually consists of two stories. There’s the outside story, and then there’s the inside story. And the “why” is a big part of the inside story. That’s a major portion of the message Michel Neray conveys wherever he goes. Neray travels around the world, teaching people how to use what he calls

A photo of David Sheridan’s family home in Pennsylvania is an opener for his story on why life insurance could have helped a childhood friend.

purposeful storytelling to connect with others. He is a master practitioner of neuro-linguistic programming. Every story begins with a triggering event, Neray said. “Something happens, which then creates a storyline that continues until the trigger event is resolved,” he explained. “Something happens, someone gets into trouble, they are personally transformed by that, and then they come out at the other end as someone transformed by that. They learn something from that.” What Neray called the outside story is what happens. “I did this, he did that, and then this happened — that’s the

outside story,” he said. But the inside or internal story is what happens to the main character throughout the process. “We all know that in any story, the character ends up being transformed,” he said. “How is that person changed as a result of what happened? That is the internal storyline.” The reason why the two parts of the story are important, Neray said, is that the external story outlines the action and keeps people engaged on a momentto-moment basis. They want to know what happens next. Meanwhile, the internal storyline is what Neray calls the universal storyline.

Basic Story Structure: Act 1: Something happens that causes a problem. Act 2: Main character hits a low point but discovers the way out. Act 3: The journey back (usually two steps forward and one step back). Michel Neray speaks about the power of purposeful storytelling.

InsuranceNewsNet Magazine » August 2018

From Michel Neray

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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. 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. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. For financial professional use only. Not for use with the public. This material may not be reproduced in any way where it would be accessible to the general public.

17-70350 ICC17-70350

COVER STORY MINE YOUR OWN EXPERIENCE FOR SALES GOLD “It speaks to universal themes. How would I behave in this circumstance? How do I grow? How do I make my life better, and what do I need to change to make that happen?” What does this have to do with selling in the financial services world? “We are always selling to people who have skepticisms, limiting beliefs, desires to make their lives better but fears at the same time,” Neray said. “It’s off-putting to just lay that out for them and suggest to them that they have these beliefs. “But if we could embed those skepticisms, beliefs, fears or whatever into a story, especially in a personal story, then our listeners will say, ‘Hmmm, I’ve been there, I understand that.’ They won’t say that consciously, but that’s what they will think at a very, very deep level.” With so many advisors and financial services companies competing for consumers’ attention, bringing the “why” into the sales story is what takes it to the next level, Neray said. “Most insurance agents will understand the why is important,” he said. “They will typically tell stories that explain ‘I saw this happen to a neighbor, and they didn’t have any insurance, and their life was thrown into a mess.’” But the next level, he explained, is telling the prospect “why I do how I do what I do.” “When we go to that level, we not only explain why I so firmly believe in what I do, but we explain my differentiation, my brand differentiation. “Especially with life insurance and financial services, it’s so hard to discern one person from another. Where we differentiate ourselves is not what we do but how we do it. We have to explain how we do things differently than everybody else.” Although Neray said he believes storytelling is an important part of connecting with prospects, he warned against taking what he called “a heavy-handed approach.” “When you think about it, ‘stories’ is just another word for ‘examples.’ Stop thinking about stories, and start thinking about examples.”

Myra Palmer turned her story of loss into a call to action for advisors and their clients.

message Myra Palmer has for advisors. Palmer is president of The Palmer Agency in Atlanta. Her brokerage general agency was left reeling when her business partner, as well as her parents and brother — who worked in the business with her — died within an eight-year period. Her husband’s death during that period compounded her loss. Palmer has spoken to a number of agent association groups, telling her story and pressing them to get their clients to take action in planning for their own needs. “Every time I am talking to an advisor and they tell me about a client who asks about key man and buy-and-sell

A Call To Action

You can tell the most compelling story in the world, but if it doesn’t include a call to action, it is worthless. That’s the 22

InsuranceNewsNet Magazine » August 2018

insurance, but they push pause on their planning, that’s when I go into my portion of the story about the need not to wait,” she said. “The time is now. I talk to them about what happened to our agency and ask them to take action.” In her presentation, Palmer reminds the audience how valuable they are to their clients, and she urges them to keep pushing forward despite the amount of rejection they face. “No client wakes up in the morning and says, ‘I can’t wait to call my financial advisor today and talk about death and disability,’” she said. Palmer begins her presentation with asking her audience questions.

“No client wakes up in the morning and says, ‘I can’t wait to call my financial advisor today and talk about death and disability.’”

commoditized solutions and within the same class — and getting theGOLD same results. MINE YOUR OWNasset EXPERIENCE FOR SALES COVER STORY

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COVER STORY MINE YOUR OWN EXPERIENCE FOR SALES GOLD

If it’s something that involved you personally, there’s an underlying passion that gets passed along to the person you’re talking with. It’s more than just the numbers you’re throwing at somebody. “I’d like for you to take a minute and think about the people who mean the most to you in your life. Now imagine losing them one by one. Unimaginable isn’t it? “I have a passion for the work we do, helping people plan to protect and provide for their families and businesses in the event of a loss. Even when presented with a plan, however, only a small percentage of people put those strategies in place. What makes it so hard to accept such a proposal, which in turn makes your job so

challenging? What can we do to connect with our clients on a deeper level to help move them to action? How can we weave stories into the sales process to help communicate the value of the plans we recommend and the products we offer?” Palmer ends her presentation with a PowerPoint slide showing a photo of her family; then, as she tells the story, each family member who has died appears as a silhouette. That’s when she makes her final call to action.

“I tell them I never would have imagined the story of loss would become my story. As you have heard, I have benefited from excellent financial planning but also felt the disappointment and impact of improper planning,” she said. “Then I ask the audience, ‘Are you prepared for the unimaginable? Are your clients? When was the last time you contacted your clients for a policy review or just to tell them you are thinking about them?’” The first time Palmer made this presentation, she wasn’t prepared for the audience reaction she received. It was dead silence.

Inspired By Life Experiences

Edward Auble has accumulated a library’s worth of stories from his long financial services career that included stints in such far-flung places as the Caribbean and the Middle East. He often uses them to lead off the e-newsletter he sends to hundreds of clients and prospects. “Storytelling in general brings a realworld situation into your conversations,”

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InsuranceNewsNet Magazine » August 2018

MINE YOUR OWN EXPERIENCE FOR SALES GOLD COVER STORY

Edward Auble takes stories from his family, clients and community involvement and includes them in his e-newsletters.

said Auble, the owner of Auble Financial in Paoli, Pa. “If it’s something that involved you personally, there’s an underlying passion that gets passed along to the person you’re talking with. It’s more than just the numbers you’re throwing at somebody.” Many of Auble’s clients are dealing with long-term care issues and end-oflife issues. The clients who have done the right kind of planning provide inspirational examples, while those who have put off planning until it reaches the crisis stage provide cautionary tales. Auble’s family, friends and industry colleagues also are fertile territory for stories. He often tells of how his family was affected when his father died unexpectedly at 49 without life insurance; Auble was only 11. Another family story centers on Auble’s infant brother, George, who lived only 19 days. After George’s death, Auble’s father bought life insurance on his two surviving children. Auble’s sister’s recent move to assisted living — and the issues associated with that move — is is a source of stories on end-of-life planning. And some old stories used to inspire sales are still relevant today, he said, and

I’ve ever heard in the business,” he said. Another old sales story Auble tells is an analogy of the difference between term and permanent insurance. “Imagine you take your car into a parking lot, and it costs you $1 and that’s it,” he said. “But imagine going to another parking lot where it costs you $2 to park your car, and then when you get your car you also get the $2 back. That’s a simple way to explain the difference.” Auble said that his e-newsletter audience has responded positively to the stories he includes in his messages. “They are stories everyone can relate to because sooner or later,” he said, “everyone either knows someone who was in a similar situation, or they have been in a similar situation themselves.”

he still tells them to prospects when appropriate. One colleague told him years ago: “Life insurance is the explosive expansion of capital at exactly the right time, paid out to exactly the right people in the exact amount that you want them to have — and it’s all tax-free.” “That’s the most powerful sentence

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.

August 2018 » InsuranceNewsNet Magazine

the FÄąeld

A Visit With Agents of Change Photo credit: Susan Rupe

Two sisters in small-town Pennsylvania come back to the family agency to lead it into the post-captive agency era.

By Susan Rupe 26

InsuranceNewsNet Magazine Âť August 2018

SISTERS FIND THEIR WAY HOME IN THE FIELD

Nationwide was known as Farm Bureau Insurance. He ran his practice from a room in his home that later became the family room. R. Leon’s son, Robert L. Weigner, became principal agent in 1982, having worked previously for the IRS and then for another insurance agent in Pottstown. R. Leon died in 2007. Hatfield and May have fun memories of staying at their grandfather’s farm for

Taking Baby Steps

The sisters may not have been too concerned about the insurance business when their grandfather was in the thick of it, but when they were a little older, they took

Carina Hatfield (left) and her sister Trisha May are carrying on the legacy left by their grandfather R. Leon Weigner (shown in the photo at the top) and father, Robert L. Weigner (shown in the photo at the right).

a week or two each summer when they were growing up. But at the time, they weren’t too aware of exactly what kept Pop Pop in the house while they played in the swimming pool. “What I remember is he had a bubble gum machine in his office and we would play in the pool and then go into his office to get bubble gum, and we would get

“When I tell my son I’m an insurance agent, he hears the word ‘agent’ and he thinks I’m a secret agent.” — Trisha May mous with insurance ever since R. Leon Weigner started his practice in 1948 out of his home on the family farm outside the neighboring town of Oaks. R. Leon (Hatfield and May called him “Pop Pop”) started in the business when

Financial Services moved into a converted house on the same street as its current Pottstown location. The business moved to its present home in 2006.

Photo credit: Susan Rupe

arina Hatfield was having dinner with her father one night when, halfway through the meal, she told him something that made him drop his knife and fork. “I told him that I thought I wanted to go into the insurance business and I wanted to work with him,” she said. “I didn’t know it at the time, but he had been hoping my sister or I would want to go into the business with him. But he never told us that. And when I told him that I wanted to give it a try, he was so surprised, he dropped his silverware.” That was 13 years ago. Today, Hatfield and her sister Trisha May are the third generation of the Weigner family to serve the insurance and financial needs of those in the Pottstown, Pa., area. Although their father was happy that his daughters were entering the business with him, some family members were skeptical about how the dynamic would work out. “Our husbands gave it six months,” May said. The sisters’ family is the story of insurance sales in the 20th century — and they are poised to take on the challenges of the 21st century. Weigner Insurance & Financial Services–Nationwide Insurance is in a converted midcentury house on a heavily traveled corner of a community where the shopping centers and apartment complexes of suburbia brush up against the cornfields and horse pastures of the countryside. It’s a place where the Weigner name has become synony-

yelled at for barging in,” May laughed. Hatfield recalled that R. Leon’s office had a hollow wooden door and the girls would have to knock on the door to be allowed inside. Eventually, Weigner Insurance &

some baby steps into business under their father’s watch — even if they didn’t realize it at the time. “We would come into the office and put mailing labels on envelopes,” May said. “I ironed Dad’s shirts for $1 a shirt.” Still, they didn’t think the insurance business was an attractive career path. “When I was in middle school, we had Career Day, and you could go to work with your parent for a day,” May recalled. “I didn’t want to go to work with Dad because I thought what he did was boring.” May might not have been too excited by the insurance business when she was a girl, but her 7-year-old son feels differently about it. “When I tell my son I’m an insurance agent, he hears the word ‘agent’ and he thinks I’m a secret agent,” she laughed. Robert was active in the National Association of Insurance and Financial Advisors for most of his career, having served as president of its Pennsylvania association and later as a national trustee. During his years in NAIFA, he attended

August 2018 » InsuranceNewsNet Magazine

IN THE FIELD SISTERS FIND THEIR WAY HOME

May was pregnant with her first child at the time, but her sister wanted her to leave her job and work in the family business. May was not enthusiastic. “At first I said no because I wanted to keep our relationship,” she said. “But she said, ‘Can’t you just come in and organize stuff?’ And I started coming in for eight hours a week.” Six months later, May obtained her property/casualty license and then received her life license. Hatfield and her husband also were starting a family around that time. The sisters’ oldest children are six months apart in age. “You should have seen our office when our oldest kids were babies,” Hatfield said. “We would bring them to work with us. We had a pack-and-play in the doorway and baby stuff all over. And our dad was there playing with them and helping with them while we all worked.”

A 2-month-old Carina sits on her father’s lap as he takes calls in his office.

A Death Changes Everything many state and national conventions, usually bringing his family with him. “People at the conventions would ask us if we were going into the business like our dad, and we always said no,” Hatfield said. Hatfield eventually went to college to study music therapy and then became a

want?’ I said I wanted to have a flexible schedule, be able to travel and to earn what I earn. He said, ‘You just explained what your dad does.’” After that realization, it was time for Hatfield to talk to her father. She invited him to dinner and had the conversation

“Carina is ‘Let’s get it done,’ and Trish is ‘OK, let’s figure out how to get there.’” massage therapist, running a practice for five years. May studied philosophy in college (“I had no idea what I wanted to do!”) and later worked for a copier company.

‘You Just Explained What Your Dad Does’

A lifetime of playing piano and violin, combined with five years of full-time massage therapy, led to Hatfield having some issues with her fingers and hands. It was time to rethink careers. Her husband helped lead her down the path to her father’s insurance practice. “My husband asked me, ‘What do you 28

that led to the silverware-dropping. They agreed Hatfield would try working part time in her father’s office “and we’ll see how it goes.” She taught music at a preschool in the mornings and then would go into the office in the afternoons. But a tragedy soon changed that arrangement. Robert’s assistant, Margaret Nagy, died unexpectedly, and he needed his daughter’s full-time help. “I started answering phones and filing until I got my license,” Hatfield said. “I started out by doing customer service and not selling for a while until I learned the business.”

InsuranceNewsNet Magazine » August 2018

But the family togetherness was short-lived. Robert died in 2013 after an eight-month battle with cancer. During his illness, he and his daughters started contingency planning through Nationwide. “Nationwide offered a plan where he could name a successor to be considered after his death,” Hatfield said. “We had to develop a plan and a budget.” During that time, May took on more duties at the office, becoming responsible for payroll and accounting. Hatfield was doing what was necessary to be approved as a contingency agent by Nationwide. She also earned her securities license. Despite his illness, Robert qualified for Million Dollar Round Table his final year. Eventually, the plan was approved and Hatfield was approved as agency owner. May’s title is associate agent/office manager. The two women say their sister/workplace relationship has its good and bad points. “We clearly push each other’s buttons,” Hatfield said. “But we know each other’s strengths,” May said. “And there’s no tiptoeing around things — we can say something to each other and then move on.” Hatfield and May are active in a number of community and industry organizations, including NAIFA, the association their

SISTERS FIND THEIR WAY HOME IN THE FIELD ARTICLE HEADLINE HERE INFRONT

Photo credit: Susan Rupe Photo credit: Susan Rupe

The two women have faced some significant changes in the relatively short time they have been in the insurance business, and they are preparing to deal with one more. Nationwide announced in April that it will shift to an independent agency model by July 1, 2020. About 2,000 existing agents who have been operating under the Nationwide brand will have the opportunity to transition to an independent agency model before that date. “We’ll become an independent agency at some point, but we’ll still be here,” Hatfield said. “We’re a hybrid – we’ve had the ability to write business with other brokers for years, so it’s not going to be much of a change. But we’ll be Weigner Insurance & Financial Services — not Nationwide. And we’re known more for the Weigner name anyway, so that part will be the same.” In addition to changing their branding and advertising in preparation for the switch, the sisters also are planning to expand their practice to branch into group health insurance and Medicare products. “It will all be a lot of work,” Hatfield said, “but it’s an opportunity.”

Hatfield and May serve a community where the shopping centers and apartment complexes of suburbia brush up against the cornfields and horse pastures of the countryside.

father served for many years. Hatfield is following her father by progressing through the leadership ranks of NAIFAPennsylvania, where she is vice president. The two women also are avid runners,

sisters is that Hatfield is “the quick start,” while May is “the follow-through.” “Carina is ‘Let’s get it done,’ and Trish is ‘OK, let’s figure out how to get there,’” she said.

“People would ask us if we were going into the business like our dad, and we always said no.” — Carina Hatfield having participated in marathons. When Hatfield was starting out in the business, she participated in NAIFA’s Leadership in Life Institute, where she became friends with fellow NAIFA member Christine Pikutis-Musuneggi. “Carina is very determined,” PikutisMusuneggi said. “She is intense about what she does, and she can go full-bore ahead. She has her focus on a bunch of different things.” Pikutis-Musuneggi also came to know May as she entered the business and became involved with NAIFA. She noted the main difference between the two

A Fork In The Road

The sisters’ community and family have seen many changes since R. Leon sold insurance out of his family room. But, Hatfield said, their market has stayed mostly the same over the years. “We serve the average American worker — two-paycheck families,” she said. “The majority of our clients are in their 60s, mainly because they originally were clients of my father and grandfather.” Much of their client base is made up of small, family-owned businesses in their community, businesses such as building contractors and electricians.

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.

Tell Us!

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

August 2018 » InsuranceNewsNet Magazine

LIFEWIRES Market Share By Product

Individual Life Combo Premium Jumps In 2017 Think of all the famous combinations in this world — chocolate and vanilla, movies Policies

60%

33%

75%

Premiums

Face Amount

60%

10%

VUL

20%

and popcorn, Romeo and Juliet — and now add one more to the list. We’re talking about life insurance and long-term care or chronic illness coverage. This combo is seeing its popularity grow, with total new premium increasing by 18 percent to $4.1 billion in 2017, according to LIMRA. This is the third consecutive year of growth. Life combination product market share of individual life insurance premium increased 10 percentage points over the past two years and represents 25 percent of total new U.S. life insurance premium in 2017. LIMRA reported there were 260,000 policies sold in 2017, 5 percent more than in 2016.

WE’RE ON THE EVE OF DISRUPTION

The global demand for life insurance has the potential to skyrocket, said a report from PWC. But there are some caveats with this. The world’s middle-class population (those with income over $10 daily) will increase to 1.2 billion by 2030, PWC said, creating an increased demand for life insurance. But, they cautioned, life insurers will have to deal with disruptions on the horizon if they expect to reach this growing worldwide middle class. Here are some technology trends PWC said life insurers will face in the coming decade or so. Gamification will take hold as a large number of life insurers from across the globe are leveraging gamification techniques to spread awareness and information about fairly complex life insurance policy wordings. Wearable technology will become more widespread, and life insurers will find greater uses for the data it generates. In addition, PWC predicted increased use of chatbot technology by life insurers, as well as blockchain technology becoming the new normal in the life insurance world. DID YOU

KNOW

CELEBS FUND BACKING LIFE STARTUP

Celebrities lend their star power to products ranging from handbags to vodka. Life insurance is the next product to see a sprinkling of that celebrity stardust. The life insurance startup Ethos saw an $11.5 million investment — led by one of the world’s top venture firms, Sequoia Capital — and additional participation from the family offices of Hollywood’s biggest stars and an NBA All-Star. Jay Z’s Roc Nation and the family funds of Kevin Durant, Robert Downey Jr. and Will Smith all participated in the new funding round for Ethos. Life insurance startups have been attracting interest from venture investors for a little over a year now. What has made the life insurance market interesting for investors is the fact that consumers’ interest in it continues to decline. So investors assume there’s room for new companies to come in and provide better service.

Futurity First Insurance Group has joined Securities America, an independent advisory and brokerage firm.

InsuranceNewsNet Magazine » August 2018

Source: Securities America

QUOTABLE We’ve heard many stories about how life insurance has helped those in need. But now we need to tell new stories. — Robert Kerzner, LIMRA CEO

WHY NOT ASK ABOUT GUNS?

When someone applies for life insurance, the insurer typically will ask a number of health questions, along with questions such as whether the applicant is a pilot or a scuba diver. But insurers don’t ask whether the applicant keeps a firearm in the home, and if so, how it is stored. A University of Michigan researcher asked why gun ownership isn’t a concern to life insurers when the risk of death by firearm is higher than the risk of death while scuba diving. Kristen Moore, an actuary who studies firearm ownership, suggests that insurance companies might benefit from studying the risk of gun ownership. In Moore’s study, she estimated that there are 164 scuba deaths per million scuba divers annually versus 240 to 450 gun deaths per million firearm owners each year. “What we found is the death rate attributable to firearms is higher than the death rate attributable to scuba diving, so I think it’s perfectly reasonable to ask why they are not treated the same way in the underwriting process,” she said. If life insurers find significantly higher suicide or homicide or accidental death rates among gun owners, Moore said, then life insurance premiums might go up for gun owners. However, if the gun owner takes a safety training class, or has a gun safe, then there might not be as much of a premium increase.

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LIFE

‘Unscheduled’ Policy Loans Can Create Sales Opportunities A huge number of “unscheduled” policy loans go mostly unnoticed until they become a threat to the policy or an unwelcome tax problem for the insured. By Anthony Giannone

ne of the most basic concepts behind the purchase of permanent insurance is the right to borrow from the cash value of the policy. Some sales strategies involve the use of policy loans in effect to create a personal bank from which policy owners may borrow and, in theory, repay. The sales pitch has always been that the loan rate charged by the carrier is low or reasonable in relation to prevailing rates and that loan repayment is optional, at least with respect to the tax consequences. The ability to borrow from oneself and to effectively dictate the terms of the repayment is an attractive and valuable feature. From an illustrative point of view, loans are the cornerstone of retirement income, deferred compensation and premium financing strategies. And the type, duration, cost and magnitude of the loans have a direct impact on the success or failure of these plans. Although these “scheduled” loans are important in the sales process and definitely need to be managed properly, they do not necessarily create new sales opportunities. But there are a huge number of “unscheduled” loans that go mostly unnoticed until they become a threat to the policy or an unwelcome tax problem for the insured. I believe these present a clear opportunity not only to help clients, but also to create new commissionable sales. These loans are usually taken by the policyowner in times of economic stress and continue to accrue because the client 32

lacks a clear understanding of how the loans affect the coverage and possibly their tax obligations. In the case of whole life policies, loans are often the result of the automatic premium loan feature that creates a loan equal to the required premium when clients miss a premium payment, either intentionally or not. Typically, when clients realize they can continue this process, they repeat it. The result often is a huge loan that accumulates until the client receives notices

loan and the aggregate cash value. With a loan to value of 80 percent or more, there is virtually no way to make a clean 1035 exchange with the limited number of carriers that will take loans over. To further compound the problem, some of the large mutual carriers routinely refuse to transfer a loan to another carrier via the 1035 exchange process. Another issue that deserves attention is the cost of the loan. From the late 1980s and well into the late 1990s, most

Male 65, $2M Whole Life Policy, $1,112,058 Loan Balance DEATH BENEFIT $1,023,389

ANNUAL OUTLAY $82,323

$877,942

$40,000

EXISTING

LOAN RESCUE

indicating a sharp reduction in benefits or impending lapse. And the reaction to this news is most often met with either misdirected indifference or panic. We know that recognition of gain occurs when an over-loaned policy lapses. But clients typically don’t realize that until the situation is acute. The problem is the relationship between the size of the

InsuranceNewsNet Magazine » August 2018

EXISTING

LOAN RESCUE

policies had a standard 8 percent loan rate. This is a rate that is easily 200 basis points higher than prevailing market loan rates today. Even worse, many policies have variable loan rates, that even now are costing policy owners in excess of 10 percent. We have even seen policy loan rates as high as 13 percent!

‘UNSCHEDULED’ POLICY LOANS CAN CREATE SALES OPPORTUNITIES LIFE

An Opportunity To Satisfy Clients

Put this all together and you can see that there is a huge opportunity to identify and remediate policy loan problems that can result in new compensation and satisfied clients. Recently we’ve had the opportunity to audit a number of policies on the lives of insureds of various ages, with various policy types and loan sizes, and the outcomes were significantly better than we anticipated. There are two important reasons for our positive results: 1) We found the few carriers that are actively looking for loan transfer opportunities and know how to make them work, and 2) we found a premium finance company that has exactly the right loan methodology to rescue the policies that have too extreme a loan to value percentage for a traditional loan transfer 1035 exchange. Of our most recent audits, several of the policies had been kicked around by the agents for years in an attempt to find a solution that would not require the policyowner to repay the loan out of pocket. Here is one example (see chart).

By becoming experts in the process of evaluating loan rescues, you can save clients large amounts of money by reducing their overall costs ... Another client had a 90 percent loan to value on a whole life policy issued in the late ’90s. This one was complicated by the fact the client has medical issues that limited his options to one carrier, who did not accept loan transfers (even if the loan to value made sense). So, making this one work involved a premium finance lender and some creative use of the new policy’s withdrawal and loan features. As we thought about the outcomes, we realized that this is an often overlooked corner of the market where there are huge numbers of clients to be helped and equally large commissions to be garnered. By becoming experts in the process of evaluating loan rescues, you can save clients large amounts of money by

reducing their overall costs, reducing the loan interest rates and repaying loans out of the values of a newly issued indexed universal life or universal life contract, and at the same time restore the client’s originally desired benefits. The process is a bit complicated and requires some luck in underwriting, but the outcome makes it worthwhile for all parties. Anthony Giannone is a partner at CPI Companies. He has more than 15 years of experience in sales and providing support to financial advisors. He may be contacted at anthony.giannone@innfeedback.com.

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August 2018 » InsuranceNewsNet Magazine

LIFE

Carriers Reshape Indexed UL While Variable UL Sales Heat Up The fast-selling indexed universal life segment saw some product tweaks, while variable universal life gets back into the sales game. By Cyril Tuohy

ife insurers are wasting no time tweaking their indexed universal life line-ups to take advantage of a fast-selling segment. First-quarter sales of indexed universal life rose 12 percent to $486 million compared to the year-ago period. Rising interest rates help insurers boost the generosity of the benefits available with life insurance contracts. Meanwhile, industry analysts expect more companies to join the IUL market. IUL policies are structured either for accumulation or for protection. Recent developments in accumulation-focused IULs have come from insurers Ameritas, Lincoln and John Hancock. Other changes to protection-focused products have come courtesy of Pacific Life and AXA. Living benefit riders usually come as 34

contract options and at extra cost. Here’s a rundown of some recent IUL product developments. Growth IUL from Ameritas. Growth IUL is new this year and will eventually succeed Excel Plus IUL, which will be phased out by December 2019 to conform with new mortality tables, said Kelly Halverson, Ameritas vice president and actuary — individual product development. Growth IUL’s significant features include: » A 10-year lookback guarantee of 4 percent. Credited interest will equal at least 4 percent compounded annually over the first 10 years for account values allocated to the index strategies. » A lifetime income rider. » An accelerated death benefit rider for chronic, critical or terminal illness with 18 qualifying triggers. » An index credit boost of 10 percent of the index credit starting in year six.

InsuranceNewsNet Magazine » August 2018

Growth IUL joins the company’s Excel IUL and Excel Plus IUL product lineup. WealthAccumulate IUL from Lincoln Financial. WealthAccumulate IUL joins the company’s protection-focused WealthPreserve IUL and offers protections not often found in IUL contracts. WealthAccumulate IUL comes with: » An executive rider and a “Surrender Value Enhancement Endorsement” feature designed to help business owners protect employees and reposition assets to buy life insurance. » An accelerated death benefit to help pay for chronic or terminal illness. » Premium allocations across three index accounts. Accumulation IUL from John Hancock. The company said it updated the design of its Accumulation IUL contract to deliver stronger protection against market downturns and more value. Tweaks to Accumulation IUL include:

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LIFE CARRIERS RESHAPE INDEXED UL WHILE VARIABLE UL SALES HEAT UP » A critical illness rider for financial protection in case of a heart attack, cancer or stroke.

» The contract also provides for a nolapse guarantee until age 90, or for 40 years if the policy is bought before age 50.

» A rider that accelerates the death benefit to help pay for long-term care expenses.

Discovery Protector IUL from Pacific Life. Pacific Life has issued its protection-focused IUL, Pacific Discovery Protector IUL, after finding success last year with the accumulation-based IUL contract Pacific Discovery Xelerator IUL. Among the features of Pacific Discovery Protector IUL are:

» Through Hancock’s Vitality program, policyholders who select Accumulation IUL with Vitality can earn rewards for healthy living like walking, eating well and getting regular checkups. » Premium allocations across four index accounts. XL-CV Max IUL from Midland National. Midland National’s new XLCV Max IUL boosts the growth of cash values with the help of interest multipliers. The contract offers: » An account interest multiplier that boosts the interest credited by 10 percent beginning in policy year six. » A guaranteed 1 percent interest bonus on the index account kicks in at policy year 11. » A return of premium death benefit option. » Accelerated underwriting, which allows qualified applicants to avoid paramedical exams. » A maximum accelerated death benefit amount that has been raised to $2 million. IUL Protect from AXA. Earlier this year, AXA announced that its popular IUL Protect contract would benefit from an extra interest credit feature. Since then, the Federal Reserve has raised benchmark lending rates twice. » AXA’s IUL Protect extra-interest credit feature was raised from 25 to 50 basis points on all IUL Protect accounts, the company said. The extra interest is credited on top of the index credited to the policyholder’s cash values. » IUL Protect comes with an optional long-term care rider.

» An indexed interest performance factor that may raise crediting rates of the indexed account beginning in year 11. » Flexible premium payments. » Several living benefit riders.

VUL Back In The Game

Take a guess at which was the fastestgrowing life insurance line in the first quarter? Variable universal life. That product line, long ago eclipsed by faster-growing insurance product lines, appears to have stirred back to the life and

of all individual life premium. Strong equity markets have spurred interest in VUL, and sales are expected to increase for the full-year 2018 over 2017, LIMRA analysts said. VUL sales rose 2 percent last year over 2016. But come 2019, VUL sales are forecasted to fall due to an economic slowdown as predicted by LIMRA’s economic forecaster, Oxford Economics, Durham said.

VUL Once A High Flier

VUL sales peaked around the year 2000. But after the dot-com market collapse, lifetime guarantee universal life (LTGUL) started eating into VUL’s market share. LTGUL sales rose steadily until 2008, after which market share eroded with the collapse of interest rates. Changes in reserving requirements also made LTGUL more expensive. Whole life also captured some market share from VUL in the wake of the 2000 market downturn as agents and consumers moved toward products with less volatility, Durham said.

VUL sales rose 10 percent in the first quarter over the year-ago period, and policy count rose 8 percent, LIMRA reported. outpaced even hot-selling IUL products over the past two quarters, data show. With VUL, cash values are invested in the market, with the policyholder taking on the investment risks, so VUL sales tend to rise and fall with the stock market, said Ashley Durham, assistant research director of LIMRA Insurance Research. VUL sales rose 10 percent in the first quarter over the year-ago period, and policy count rose 8 percent, LIMRA also reported. In the fourth quarter VUL sales rose 17 percent over the year-ago period. IUL sales rose 8 percent in the first quarter, the sixth consecutive quarter of growth, LIMRA reported. The line now represents 63 percent of all universal life premium and 23 percent

InsuranceNewsNet Magazine » August 2018

Whole life, with its straightforward design, was easier for agents to sell and for consumers to buy. The potential for policyholders to benefit from dividends also helped whole life nibble away at VUL share, she said. Then came IUL without the risk of market-related losses to which VUL contract holders were exposed. VUL declined further and accounted for 6 percent of all insurance premium at the end of last year, LIMRA said. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril. tuohy@innfeedback.com.

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ANNUITYWIRES

Don’t Let Grandma Run Out Of Money!

A coalition of 24 insurers and asset managers banded together with one goal: protecting income for life. The goals of the nonprofit Alliance for Lifetime Income are to: » Educate advisors and consumers about the value of annuities. » Move the discussion away from asset accumulation and toward protecting income for a lifetime. » Simplify the language around annuities and kill the jargon. Alliance leaders said that for too long the retirement discussion has focused on accumulating assets instead of protecting income for life. And the jargon surrounding annuities and other retirement products has confused consumers. Financial advisors need a new approach with which to engage clients about annuities. Many people know that saving for retirement is important, “but you may not have created a plan to turn your savings into a paycheck once you stop working,” said Lincoln Financial president and CEO Dennis R. Glass in announcing the alliance’s launch. around the Securities and Exchange Commission’s best interest rule and expected market volatility, LIMRA SRI expects total annuity sales to be flat in 2020.

SEC RULE ANXIETY LEADS TO VA SALES FEARS SUNNY FORECAST FOR ANNUITY SALES THROUGH 2019

LIMRA Secure Retirement Institute released its three-year annuity sales forecast, and it calls for fair weather through 2019. After six consecutive quarters of declines, total annuity sales leveled off in the fourth quarter 2017 and first quarter 2018, LIMRA SRI reported. Improved economic and regulatory conditions led LIMRA SRI to predict total annuity sales will increase between 5 and 10 percent in 2018 and improve up to 5 percent in 2019. However, there are some clouds on the annuity horizon. Based on uncertainty

Just when you thought it was safe to sell variable annuities, here comes the Securities and Exchange Commission with a proposed rule. The SEC’s best interest regulation could throw a wet blanket on VA sales, which had been predicted to see strong sales in the second and third quarters of this year. VAs have been there before. Last year, as key benchmark lending rates rose and the stock market roared ahead — both good news for VAs — VA sales fell 10

DID YOU

KNOW In 2018, indexed annuity sales are expected to rise

close to $60 billion.

InsuranceNewsNet Magazine » August 2018

Source: LIMRA SRI

QUOTABLE

There are 11 companies As a nation, we haveoffering vastly QLAC (qualifying longevity expanded 401(k)s and annuity other contract) products. While this is retirement accumulation avehicles, small andbut newhave part ofnot thetackled DIA market, we expect to see the looming issue of an uptick in sales in 2016. securing retirement

income.

— Jana Greer, AIG

percent to $96 billion over 2016 after partial implementation of the Department of Labor’s fiduciary rule, which was killed by the courts in June. The SEC’s comment period for the regulation closes in August, after which time regulators could make changes.

NEW PRODUCT ROUNDUP

It’s summer, and the sun is shining on new annuity products. Here is news about some of them.

» Athene’s new Agility indexed annuity’s lifetime income and enhanced death benefit features come without a separate product fee. Lifetime income features and more generous death benefits are typically offered as optional riders that usually come at an extra cost. Agility will be sold through independent marketing organizations, brokerdealers and banks.

» Pacific Life offers a new VA rider targeting buyers who want “income soon.” The company’s Core Protect Plus rider offers a five-year minimum deferral period for people 60 and older. The rider is available with Pacific Choice, Pacific Odyssey, Pacific Value Select, Pacific Journey Select and Pacific Navigator families of VAs.

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ANNUITY

Commentary: Climbing Out Of The Rabbit Hole On Annuity Suitability Clearing through the confusion of whether annuities are suitable for clients. By Jack D. Aiken

ike Alice, that white rabbit caught our eye and we have tumbled down the rabbit hole. Straight to the bottom. We entered Wonderland, where things are upside down and backwards regarding the prevailing “suitability standards” embraced by regulators. Fortunately, the basic values of fixed annuities mesh nicely with the reality of our clients’ actual needs, so there is still time to scramble out of the rabbit hole. It is helpful to reflect on how we got so deep in the hole so that we can backstep our way out. But the process is confusing. What could possibly be wrong with doing things that are “suitable?” Well, it started in not so obvious ways and led us off to a really bad result. A while back I found myself alone in an elevator with an insurance commissioner, and I offered a mild opposing view of her position that annuities were not suitable for older people. She responded by saying, “No one over 85 should buy an annuity.” I hurried to warn a friend that in just a few days he would become too stupid to buy another annuity. I fretted abount being unable to interrupt him in the middle of the polo match he was riding on the several-hundred-acre horse farm he owns and manages. I worry now whether anyone has told Warren Buffet he is too old and stupid to buy a 40

guaranteed annuity. Probably not. This commissioner’s wrongheaded notion, shared by many regulators of every stripe, was a convenient justification for dictating age as a key suitability consideration. The prevailing result was acceptance that at some age you should have very few or even no assets in annuities. It was a short step for these

misguided regulators to pressure and intimidate carriers into limiting product design, prescribing internal guidelines, and restricting innovation precisely when it is needed most for the group that needs it most. In reality, once we step out of Wonderland, the exact opposite is true. The No. 1 concern for aging Americans is that they will outlive their income.

InsuranceNewsNet Magazine » August 2018

There is no other financial product that can provide a guaranteed lifetime income. In what universe does it make sense to restrict and even deny access to the one product that guarantees to address the number one concern of retiring Americans?

Down The Slippery Slope

But we followed the beguiling and benign white rabbit of “suitability” onto the slippery slope of accepting that it was OK to have someone else determine how people can use their personal assets to address their personal concerns. And we accepted a suitability standard that gives someone other than the customer control over how the customer may conduct their affairs. As there is no limit to the number of agencies, bureaus, departments, commissioners and deputies standing ready to improve the lives of each person in ways they think they should be improved, soon there was simply not enough room in suitability to accommodate all the guidelines waiting to be imposed. In what seemed like no time at all, suitability had metastasized into an immediate need for “fiduciary accountability” and “best interest” standards. There is a growing list of regulatory bodies providing “guidance,” and even outright mandates, as to suitability, best interest standards, and what constitutes a standard of conduct for fiduciaries. Everybody is in the arena. The Securities and Exchange Commission, Financial Industry Regulatory Authority, each state insurance commissioner, the National Association of Insurance

CLIMBING OUT OF THE RABBIT HOLE ANNUITY

Commissioners, the Department of Labor, and, of course, opportunistic politicians eager to be characterized as protectors of the elderly, the uninformed, and my polo-playing octogenarian friend who one day was arbitrarily deemed too feeble-minded to make his own decisions. These groups and others are posturing and thumping their lecterns about how exactly financial service providers, agents and customers will interact. Each group touts their own agenda, authority and justifications to shape and control the affairs of others via a weird game of regulatory musical chairs. The market uncertainty, created by this horde, blunts innovation and the development of product-driven solutions. The cost of compliance has skyrocketed and burdened already historic low yields to the customer. The risk of being declared noncompliant has disenfranchised thousands of very competent, responsible agents and distributors from properly servicing their clientele. This is particularly true for the middle-income and family markets that need personalized professional access to the best possible solutions to their concerns. Fixed annuities should be the majority-share bedrock of most Americans’ retirement plans. Instead of allocating 20 percent, 30 percent or 40 percent of a retirement portfolio to fixed annuities, the ratios should be flipped and the scrutiny shifted. For the vast majority of people, if fixed annuities make up less than 60 percent, 70 percent or 80 percent of their retirement portfolio, the suitability of the advice they received should be evaluated. Given clear explanations and full disclosure of the basic arithmetic and the

relative plan success rates over time, most people would choose guaranteed fixed annuities as being appropriate to their risk tolerance and financial aspirations in retirement. Recent court decisions have declared much of what fueled the dysfunction in responsible planning for clients to be way out of bounds. Even within the various regulatory communities, the more thoughtful have agreed that perhaps the concepts need reconsideration. This is a great time to not only stop the encroachment, but also to regain for clients the ability to make their own decisions in ways they find appropriate. It is a relief to hear more discussion around better disclosure about the issues. Guaranteed fixed annuities offer unique benefits that are exactly in step with the needs of those who want assurance as they age. Development of objective, plain-English, side-by-side explanations as to what fixed annuities do and do not provide compared in the same manner to the ballyhooed alternatives will secure annuities’ role as the biggest portion of almost every client’s retirement strategy. Jack D. Aiken is president of LTA Marketing Group, Fargo, N.D. Jack may be contacted at jack.aiken@ innfeedback.com.

August 2018 » InsuranceNewsNet Magazine

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ANNUITY

Beneath The Lull, Carriers Are Reshaping Annuities For Advisors The annuity industry is trying to find out where the market is, an industry analyst said, while the marketplace makes some shifts in the face of flat sales. By Cyril Tuohy

verall sales of individual annuities were flat in the first quarter, but don’t let the lull fool you. Behind the staid numbers, annuity companies are experimenting with product tweaks as they push to distribute through new channels in search of growth, which is likely to come from reaching down to the mass affluent and middle markets. The annuity industry is trying to find out where the market is, said Chris Eberly, Novarica vice president and co-author of a report on the trends in the life and annuity sector. First-quarter overall annuity sales were $52 billion, flat with the year-ago period, according to LIMRA Secure Retirement Institute. Sales fell last year compared to 2016, but forecasts call for rising sales this year as regulatory burdens lift and interest rates move upward.

Product Changes Stress Flexibility

On the product side, the operative word is “flexibility” as companies respond to consumer demand to make products younger buyers want to buy, Eberly said. So how are insurers pressing forward? In the deferred income annuity world, insurers have: » Introduced shorter minimum income deferral periods. » Lowered initial premium payments and offered flexible contribution levels to make such annuities more attractive to younger consumers. 42

» Injected more death benefit options and added more flexibility in the timing of payouts. In the variable annuity world, insurers have: » Offered access to more alternative asset classes in which advisors can invest. » Developed a host of new fee-based products to attract registered investment advisors. » Issued indexed-linked annuities with some protection against loss in exchange for the potential for higher credited gains.

Here’s what agents can expect: » Upgrades to their online portals that agents use to manage customers, boost productivity, hunt for sales and marketing support, conduct needs analysis, and explore suitability. Big improvements have been implemented at Ohio National, CUNA Mutual, Lincoln, Great American, Mass Mutual and Bankers Life. » More communication through texting and social media in a bid to appeal to younger advisors and buyers.

» Linked riders to annuities to help the chronically ill accelerate or raise immediate payouts.

» Better educational materials to support the understanding of fee-only products as fee-only advisors, who have traditionally stayed away from annuities, enter the market and think about suitability issues down the road.

“The common theme of these is expanding the potential annuity owner and distribution channel bases,” wrote Eberly and report co-author Steven Kaye,

» New annuities available through the direct-to-consumer channel. Nassau Re’s multiyear guaranteed annuity is available online, and Prudential this year

LIMRA SRI is forecasting VA sales to be 0 to 5 percent higher in 2018, compared with 2017 results. Novarica associate vice president of research.

launched its digital-only GIFT annuity, a voluntary deferred income annuity.

Distribution Moves To Version 2.0

» Linking the idea of an annuity with income and a personal pension, which Blueprint Income through its insurance company partners says can be funded with small monthly contributions.

On the distribution front, annuity companies are moving further into online, bank and broker-dealer channels, Eberly and Kaye wrote. Progressive insurers want to improve the agent browsing, workflow and buying experiences over online channels to boost agent self-service functions that might have required email or a call center help desk in the past.

InsuranceNewsNet Magazine » August 2018

Fee-based VA Sales Jump 70% In 1Q

Meanwhile, fee-based VA sales were a bright spot in the annuity sales world. Sales of fee-based VAs, one of the

BENEATH THE LULL, CARRIERS ARE RESHAPING ANNUITIES FOR ADVISORS ANNUITY

ANNUITY INDUSTRY ESTIMATES

But advisors who have in the past been reticent to sell annuities because they cost too much and were difficult to explain have recently shown more interest now that more annuity compensation models come with fees as well as with commissions.

(Dollars in billions)

Q1 2017

Q1 2018

Pct Chg Q1/Q1

Separate accounts

19.1

19.7

Fixed accounts

5.8

19.7

-16%

Total Variable

$24.9

$24.6

-1%

10.1

8.7

-14%

Variable

Long-term Hope For Fee-based Annuities

Fixed Fixed-rate deferred Book value

5.9

-8%

Market value adjusted

4.2

3.3

-21%

Indexed

13.1

14.5

11%

Fixed deferred

23.2

Deferred income

0.55

0.52

-6%

Fixed immediate

2.0

2.1

Structured settlements

1.4

Total Fixed

$27.1

$27.2

Total

$52.0

$51.8

Industry estimates reported for the first quarter 2017 based on data from 63 companies, representing 96 percent of total sales. Source: LIMRA Secure Retirement Institute, U.S. Individual Annuity Sales Survey (2018, 1st quarter)

industry’s best hopes for cracking the registered investment advisor channel, rose 70 percent to $780 million over the year-ago period, LIMRA SRI reported. Fee-based VAs have delivered steady growth over the past three quarters, although fee-based VA sales still make up only 3 percent of overall VA sales. Last year, fee-based VA sales were $660 million in the fourth quarter and $550 million in the third quarter, data show. In 2017, fee-based VA sales reached $2.2 billion, or 2.7 percent of all VA sales, LIMRA SRI said. Fee-based annuities do not pay a commission to agents and come with different surrender charges or none at all. Overall VA sales are expected to improve this year over last year as companies raise crediting rates for guaranteed living benefits and loosen restrictions on investments, said Todd Giesing, annuity research director for LIMRA SRI. “Combined with the vacated Department of Labor fiduciary rule, we expect VA sales will improve throughout the year,” Giesing said. “As a result, LIMRA SRI is forecasting VA sales to be

0 to 5 percent higher in 2018, compared with 2017 results.” Overall, U.S. annuity sales were $51.8 billion, level with first-quarter 2017 results, LIMRA reported.

Fee-based Indexed Annuity Sales Also Rose In 1Q

Fee-based sales of indexed annuities were $60 million in the first quarter, or about 0.42 percent of all indexed annuity sales, Wink’s Market & Sales Report reported. The 0.42 percent share was unchanged from the fourth quarter, when Wink first began keeping track. Last year, fee-based indexed sales were $57 million in the fourth quarter, $48 million in the third quarter, $23 million in the second quarter and $10.3 million in the first quarter, according to Wink. First-quarter 2018 indexed annuity sales rose 11 percent to $14.5 billion, compared with first quarter 2017, Wink said. Fee-based annuities have a long way to go before racking up significant sales compared to their commissionable cousins, analysts say.

In the long term, fee-based product growth holds promise, said industry consultant David Lau. Dually registered RIAs will be able to migrate away from broker-dealers for a fee-based annuity sale, he said. “We see that as a big movement,” said Lau, founder and CEO of DPL Financial Partners, which develops fee-based products for large insurers. Dually registered advisors and feebased financial advisors manage as much as $4 trillion in assets, according to Tiburon Strategic Advisors. The other reason to be optimistic about fee-based annuities has to do with pricing changes and lower costs, long a pet peeve of advisors. Many fee-based annuities come with contract fees as low as 0.35 percent of the account value. The economic environment may be spurring RIAs to look more closely at annuities because bond yields are so low that there’s little point in moving retirement savings into bonds, Lau said. Indexed annuities, by contrast, offer more attractive returns. There were 10 indexed annuity companies offering fee-based indexed annuities at the end of the first quarter, Wink reported. The top fee-based indexed annuity sold in the first quarter was Allianz Life Retirement Foundation ADV Annuity. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@ innfeedback.com.

Like this article or any other? Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.

August 2018 » InsuranceNewsNet Magazine

HEALTH/BENEFITSWIRES

Even The Wealthy Fear Health Care Costs Affluent older adults are “terrified” of what health care costs will do to their retirement plans, a survey revealed. Sixtyfour percent of wealthy seniors said they fear health care costs will derail their dreams of a secure retirement, while 73 percent said out-of-control health care costs are among their top fears about their post-working lives. The Nationwide Retirement Institute survey showed that about 70 percent of older adults don’t fully know what they are signing up for when they enroll in Medicare. Forty-two percent admitted they would give away all their money to their children so they could be eligible for Medicaid-funded long-term care. What’s also keeping these wealthy seniors up at night is the $22,849 in annual health care costs that they estimate they will face. But only about half of older adults (52 percent) have discussed their health care cost fears with a financial advisor.

chronic care for long-term and recurring illnesses, and pharmacy needs. There’s a $0 deductible and restrictions on pre-existing conditions. The on-demand aspect of Bind means consumers can pay for additional coverage when they need it. “Add-Ins” are optional coverages for treatment consumers can plan ahead for — such as knee replacement or hernia repair.

HERE COMES ON-DEMAND HEALTH INSURANCE

The drugstore business is the latest target of Amazon disruption. The online retail giant made news with its deal to buy the online pharmacy PillPack. PillPack packages, organizes and delivers drugs. It sends consumers packages with the specific number of medications they’re supposed to take at specific times. Terms of the deal weren’t disclosed. The companies expect the deal to close during the second half of the year. The move is the strongest indication yet of Amazon’s intent to push further into the health care industry. It threatens to remove the sale of prescription drugs away from retail pharmacy chains, which was

Bind, the first-ever on-demand health insurance model, is now available to self-insured employers across the U.S. The national expansion is backed by funding from Ascension Ventures, Lemhi Ventures and UnitedHealthcare. Bind provides coverage from the first dollar spent and allows members to add coverage at any time throughout the year. Bind’s “Core” coverage includes preventive care; primary and specialty care; urgent, emergency and hospital care,

DID YOU

KNOW The cost of the average emergency room

visit rose to $247 in 2016 from $125 in 2009. Source: American Association for Medicare Supplement Insurance

InsuranceNewsNet Magazine » August 2018

If you look back to where we were [a year ago], the marketplaces are showing remarkable resilience. - Sabrina Corlette, Georgetown University Center on Health Insurance Reforms

one of the few distinguishing factors drugstores relied on to fend off Amazon.

AMAZON SHAKES UP THE PHARMACY WORLD

QUOTABLE

Source: Health Care Cost Institute

AVERAGE FAMILY’S HEALTH CARE COSTS CONTINUE RISING

Some good news/bad news when it comes to the health care costs faced by the average family of four. The bad news: The typical costs for this family’s health care have been increasing $100 a month for more than a decade. The good news: Those health care costs are increasing at a slower rate than in the past 20 years. That’s the word from the annual Milliman Medical Index, which found the total costs for a typical family of four insured by the most common health plan offered by employers will average $28,166 this year. The estimate includes the average cost of health insurance paid by employers and employees, as well as deductibles and out-of-pocket expenses.

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HEALTH/BENEFITS

Critical Illness Coverage Fills The Gap And Eases Client Concern With traditional health insurance carrying more out-ofpocket costs, clients need the relief that a critical illness plan can provide. By Pam Jenkins

merica’s workers are concerned about health care — really concerned. In fact, a recent survey from the Employee Benefits Research Institute showed 31 percent think health care is the most critical issue in the country, far outpacing terrorism at 21 percent and nearly double the number who thought so five years ago. Clearly, health care reform hasn’t done much to reassure us about the availability and cost of health care. In the same study, only 1 in 3 respondents said they were very confident or extremely confident they could afford care without financial hardship. Increased spending on health care is contributing to Americans' financial fragility. More than a third of those with higher health expenses report having difficulty paying other bills, and nearly that many have high credit card debt. And more than 1 in 4 struggles to pay for even basic necessities.

Critical Illness Magnifies The Problem

This financial difficulty is magnified when it comes to critical illnesses. The survey shows nearly a quarter of working Americans say they’re not very prepared or not at all prepared to fund out-of-pocket medical expenses for critical illnesses, and another third are only somewhat prepared. What’s going on here? If the Affordable Care Act means everyone has health coverage, why are so many workers concerned about medical costs, especially for serious illnesses such as heart attack, stroke or cancer? There are two main reasons. First, it’s 46

important to realize that no health insurance plan — “Cadillac” or otherwise — covers all the medical and nonmedical costs related to a serious illness. And second, the costs of a serious illness such as heart attack, stroke or cancer can be significant.

Serious Illness = Serious Bills

Let’s start with costs. The American Heart Association reports heart attacks and coronary heart disease are two of the 10 most expensive hospital discharge diagnoses, accounting for nearly $22 billion in costs

Out-Of-Pocket Costs Pile Up

Your clients may assume the health coverage they offer their employees will cover most medical expenses. But when you do the math, it’s easy to see how quickly the dollars add up. First, your clients are probably offering higher-deductible health plans than they did just a few years ago. That means employees are shouldering a heavier burden upfront, even before a critical illness strikes. Then employees are likely responsible for copayments or coinsurance. Although 20 percent of the tab may not be a concern

Most Critical Issue In The United States, 2017 31%

21% 15%

13% 9%

Health care

Terrorism

Role of federal government

Unemployment/ jobs

Education

Immigration

Taxes

Source: Employee Benefit Research Institute and Greenwald & Associates, 2017 Health Workplace Benefits Survey

a year. Heart attack hospitalizations cost patients a median of $53,000 and strokes cost $31,000. If bypass surgery is needed, costs can skyrocket to the $86,000-to$178,000 range. Add onto those bills the additional expenses following hospitalization, including rehabilitation, therapy, ongoing medical care and drugs. Many patients and their families also face significant nonmedical costs related to a serious illness, such as home adaptations or equipment, travel for treatment, and lost income from missing work.

InsuranceNewsNet Magazine » August 2018

for a $100 office visit, the 20 percent share of a $100,000 hospital bill is another matter entirely. Even plans that cap out-of-pocket costs can still leave families owing thousands of dollars. When you consider close to half of working Americans would struggle to scrape together as little as $400 in an emergency, this kind of financial burden can be devastating.

How Critical Illness Insurance Helps

Critical illness insurance can help bridge the financial gap between what health insurance covers and out-of-pocket expenses. Industry research tells us that America’s

CRITICAL ILLNESS COVERAGE FILLS THE GAP AND EASES CLIENT CONCERN HEALTH/BENEFITS workers are very concerned about our health care system. This concern springs from rising costs as well as access to quality care. The good news is that many of us feel positive about the health plan provided by our employer, and many employers still see this as a way to attract and retain valuable talent. However, rising costs for both employees and employers have become the new reality. Meanwhile, employers are looking for more creative ways to help employees deal with the financial impacts of an illness or accident by providing access to voluntary plans, like critical illness, that provide cash payments to the insured to use for whatever expenses are most pressing at that time. Critical illness insurance complements major medical insurance by paying a lump sum — typically $5,000 to $100,000 depending on the plan — when the illness is first diagnosed. Covered illnesses usually include heart attack, stroke, end-stage renal failure, coronary artery disease requiring bypass surgery, major organ failure and sometimes cancer. Benefits are paid directly to the insured to use however they are needed: for

hospital or doctor’s bills, copayments and deductibles, or even daily living expenses such as mortgage payments, utility bills, food and child care. The coverage doesn’t coordinate with other insurance, so the benefit amount isn’t reduced by what major medical or other coverage pays. Insureds don’t even have to get sick to take advantage of their critical illness insurance. Many plans include a wellness benefit that pays a set amount — $50 to $150 is typical — for covered health screenings such as mammograms, colonoscopies or X-rays. These tests can help in early detection to prevent more serious illnesses from developing.

Who Needs Critical Illness Insurance?

Unfortunately, serious illnesses are far from rare. Every 42 seconds, someone in the U.S. has a heart attack. For about 660,000 of those heart attack sufferers each year, it’s a first occurrence. Cancer cases also are on the rise, with about 1.7 million new cases diagnosed every year. The good news is more people are now

surviving diagnoses that were once considered death sentences. More than 80 percent of those who have a stroke survive it. And death rates are declining for all four of the most common cancer types: lung, colorectal, breast and prostate. However, surviving the illness and surviving the financial burden are different matters. Critical illness insurance is an affordable option to help your clients’ employees better protect their families, their finances and their futures. If critical illness insurance isn’t in the portfolio of solutions you’re offering your clients, it’s time to consider adding it. Pam Jenkins is assistant vice president for product development at Colonial Life & Accident Insurance. Pam may be contacted at pam.jenkins@innfeedback.com.

Like this article or any other? Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.

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NEWSWIRES

QUOTABLE

Advisors’ Clients Trending Younger

If you think you’re seeing more young clients than ever, you’re not alone. By 2023, 41 percent of all clients will be Gen Xers or millennials, up from 30 percent today, according to the TD Ameritrade Institutional 2018 RIA Sentiment Survey. Meanwhile, baby boomers will make up 43 percent of advisory clients, down from 46 percent today. Seniors will decline from 23 percent to 14 percent over the same time period, the survey said. Advisors are waking up to this trend. Nearly 40 percent are advising 401(k) plan participants, TD Ameritrade said. Additionally, 47 percent are reevaluating how they charge for services to better accommodate younger clients. Thirty percent of RIAs are hiring younger advisors, who have more in common with a youthful clientele.

DIVORCE COMPOUNDS RETIREMENT RISK

Divorce is a stressful life event — financially as well a s emot iona l ly. Prudential looked into the impact of that divorce on retirement readiness and found divorced Americans are at greater risk of not being able to maintain their standards of living in retirement. Prudential’s research revealed that divorced households have a 7 percent higher risk of not having adequate retirement income than are households that have not experienced divorce. Half of all households are at risk of not having enough retirement income. The study’s findings show that on top of the normal retirement worries, divorced couples are dealing with legal fees, splitting assets and increased living expenses, and they are looking for ways to make up for that loss. DID YOU

KNOW

WHY CLIENTS PUT OFF FINANCIAL DECISIONS

“Let me think about it.” “I’m not ready to make a decision.” How many times have you heard these stalling tactics when moving clients to make a financial decision? Why do people procrastinate? Seven out of 10 Americans admit to postponing financial decisions, according to a Principal Financial Group study. Another 56 percent have not made any financial decisions in the past three years. The study showed that 30 percent of Americans feel comfor t a ble w it h t he i r knowledge of financial management, and the fear that people feel when treading into unfamiliar territory can lead to paralysis. But there is some good news: After people spend time learning about financial planning, they’re 75 percent

Advisors need to prepare themselves for the fact that younger clients are less interested in products and are more fee conscious. — Ross Riskin, founder of the American Institute of Certified College Financial Consultants

more likely to be confident in their financial future.

MILLENNIALS, WOMEN GET HIGH MARKS FOR PLANNING

Millennials are beating the stereotypes of being underemployed and saddled with debt and instead emerging as savvy financial planners. That’s the word from Schwab’s 2018 Modern Wealth Index, which found that Generation Y actually has the best financial planners of any generational group. Thirty-one percent of millennials have a written financial plan, compared with just 20 percent of Generation X and 22 percent of baby boomers. They also are tops when it comes to goal-setting and saving. Meanwhile, women emerged as being better long-term investors than men, and women are more likely to research major purchases. Millennials and women earned kudos in the Schwab study for asking questions, joining groups and not being overconfident in their financial knowledge. They also were more likely to eschew credit cards and au t o m at e their savings.

Individuals age 60 and older hold nearly $6.5 trillion in individual retirement account assets.Source: CNBC Source: LIMRA

InsuranceNewsNet Magazine » August 2018

Source: Cerulli Associates

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Warning

Keep Clients From PANICKING: Placing Volatility Into Perspective Knowing that market fluctuations are common, and establishing a long-term plan, can help you ease your clients’ fears of volatility. • Eric Gritter

any investors were rattled by the stock market correction earlier this year. And predictions that more significant adjustments could be on the way have further stoked clients’ fears. When clients open their investment statement only to learn that their portfolio has lost value, it can trigger a feeling of uncertainty that may lead to impulsive, emotional decision-making. To keep investors on course, financial advisors need to ensure that their clients have the information they need to consider current volatility in the context of historic returns and their long-term goals.

and had little impact on the average investor’s portfolio. Despite all the concern, the S&P lost less than 1 percent of its total value in the first quarter of 2018. Those who have been investing for a decade or more clearly remember the 2008 recession, but how many remember Black Monday — Aug. 8, 2011 — when investors lost approximately $1 trillion in a single day? On that day, the Dow Jones Industrial Average lost 634.76 points (-5.55 percent) to close at 10,809.85, making it the sixth-largest drop of the index

in history. Beginning in 2015 and extending into early 2016, markets experienced two more significant corrections that shook investors’ confidence. On Aug. 24, 2015, the Dow dropped nearly 1,100 points shortly after the opening bell, and then January 2016 saw 93 percent of investors lose money as the Dow lost 5.5 percent of its value. Most have already forgotten those downturns because their portfolios have since recovered. Clients need to know that market fluctuations are common and, with proper planning and asset allocation, no reason to panic.

Place Market Fluctuations In Perspective

In the first quarter of 2018, U.S. investors experienced 11 days with losses of greater than 1 percent on the S&P 500. Contrast that with last year, when the S&P had a total of only four days that closed with such significant losses. Fortunately, most of these shifts were relatively short-lived 50

In the first quarter of 2018, U.S. investors saw 11 days with losses greater than 1 percent on the S&P 500. (Graph from CNNMoney)

InsuranceNewsNet Magazine » August 2018

KEEP CLIENTS FROM PANICKING: PLACING VOLATILITY INTO PERSPECTIVE

The S&P gained 19.4% in 2017, its best year since 2013. Source: MarketWatch

Establish A Long-Term Plan

Strategic, long-term financial planning should begin on day one, not after a correction has occurred. Since market shifts are normal and inevitable, preparing for them must be incorporated into every client’s investment strategy. Consider a client’s age, risk tolerance and temperament when developing their investment plan. A realistic plan that a client can stick to is infinitely better than a perfect plan that the client abandons. When clients have a predefined, disciplined process, they are much more likely to stay the course and avoid making shortsighted moves that they may later regret. Clients rely on their advisors to be a voice of reason and offer guidance that reflects their stage and goals. Market volatility can actually be a positive for investors who are still in their wealth-building stage. Buying equities when prices are low can help younger clients acquire bargains that will grow in value over the long term. Investors who are a few decades away from retirement need to know that short-term losses won’t have much impact on the value of their portfolio over time. Although diversification is important for all investors, age-appropriate asset allocation becomes more critical for

clients who are approaching — or already in — retirement. Older clients with shorter time horizons should take steps in their portfolios to mitigate severe drawdowns. This can mean investing in a more conservative asset allocation as well as using a more tactical strategy with a disciplined process. Baby boomers and seniors who are relying on their portfolios for income can be better prepared for downturns by holding a portion of their portfolios in low-risk assets like cash, certificates of deposit or bonds to avoid needing to sell stocks when values are low — in essence, reducing sequence-of-return risk that is inherent in the distribution phase.

Educate Clients About Cognitive Biases

As humans, our choices are never made in a vacuum. A variety of cognitive biases can influence an investor’s decision-making, particularly during stressful times. Educating clients about these biases can help them take a more objective, strategic approach to their investments. Loss aversion and the sunk costs fallacy are often observed in investing behavior. Psychologists Daniel Kahneman and Amos Tversky have found that humans are more fearful of potential losses than they are enthusiastic about potential

gains. In their attempt to avoid losing more value, some investors may look to cash out equities when markets are shaky. Meanwhile, other clients may opt to stay the course with stocks or funds that are underperforming because they feel that they have already invested too much to walk away. Financial advisors and their clients also need to be aware of recency bias, the tendency for the recent past to have an outsized influence on investors’ behaviors. Instead of considering historic performance or emerging trends, investors may extrapolate current conditions as indicative of future returns, which can lead to faulty assumptions. Encourage clients to consider an investment’s longer-term performance and fit within their overall strategy before making a decision.

Clear Communication Is Key

Whether the news is good or bad, clients appreciate ongoing communication and guidance from their financial advisors. Reaching out to clients with details on their portfolio’s performance helps bolster their confidence and demonstrates that their investments are in good hands. When financial advisors work proactively to manage their clients’ expectations and establish a realistic investment plan, clients are able to better weather inevitable market volatility. Eric Gritter, CFA, is vice president of investment strategy at USA Financial. Eric may be contacted at eric.gritter@innfeedback.com.

August 2018 » InsuranceNewsNet Magazine

Blockchain 101: The Technology Behind Cryptocurrencies Bitcoin and blockchain are often thought to be the same thing, but it’s important to understand the difference between the two. • Harry Pokrandt

itcoin and blockchain are in the news more and more these days, and clients are likely to ask about them. Here’s a crash course on cryptocurrencies and the technology behind them. Bitcoin and blockchain are often thought to be the same thing, but it’s important to understand the difference between the two. Bitcoin is a digital currency, and although it is the most popular cryptocurrency in use today, there are many other digital currencies out there, such as Ethereum, Litecoin and Dash. What makes all these digital currencies special is the fact that they are built on blockchain technology. It’s easy to confuse digital currencies with the technology that makes them possible, as digital currencies are the most visible and practical implementation of blockchain technology. However,

It is sprouting a new wave of innovative and remarkable startups. Looking at the projects that are using blockchain technology, the potential seems truly limitless. Even the way some projects fund themselves is the result of blockchain-based innovation.

What Exactly Is Blockchain?

A blockchain is essentially a public ledger or a list of records. It resides online and is distributed across a network of decentralized computers, recording events and transactions in a secure, incorruptible manner. Once something exists on the blockchain, it is impossible to alter or change it in any way. For example, let’s say you send one Bitcoin to your friend. This transaction creates an entry in the block, which updates itself to record the transaction. The details of the transaction then spread

a transaction, it records it in a ledger via its core banking platform. This allows the bank to keep track of how much money is in each account. A blockchain does the same thing for cryptocurrencies. Every time a transaction occurs, it is recorded into a block, which you can think of as a page in a ledger. Once the block is full, it is added to the blockchain, a chain of linked blocks that is similar to a ledger containing multiple pages. Although this analogy serves as a good starting point, there obviously are certain subtle differences between how a bank maintains a transaction and how it is maintained with digital currencies. For one, there is no central party for crypto transactions, such as a bank, so the blockchain itself has to ensure that no fraudulent transactions are allowed. This is where miners come in. Miners verify transactions and add them to the blockchain.

One way to understand it is to think of blockchain as a groundbreaking technology, like the internet, and cryptocurrencies as a very popular How Does Mining Work? Although your bank can verify that you application that uses that technology ... indeed have $100 in your account to send blockchain as a technology has far greater uses outside the world of finance, and many believe it will be the key driver that pushes many industries to become decentralized. One way to understand it is to think of blockchain as a groundbreaking technology, like the internet, and cryptocurrencies as a very popular application that uses that technology, in the way that email needs the internet to function. Bitcoin was the first major practical application of blockchain technology, and blockchain has become a backbone technology to other cryptocurrencies. 52

across the network, and every other computer in the decentralized network updates the ledger as well. The key differentiator with blockchain, in contrast with traditional record-keeping systems, is that instead of residing at a single location (usually a trusted third party, such as a bank), the ledger is maintained collectively by a global network of computers.

Why Do We Need Blockchain?

Blockchain is needed for the same reason a bank needs a ledger: to keep track of transactions. Every time a bank processes

InsuranceNewsNet Magazine » August 2018

to someone else, digital currencies have no bank or centralized party that can make that verification. Miners are users with high-powered computers spread across the world who serve as auditors for the network. Their role is to keep the ecosystem honest and to prevent users from sending digital currency that they don’t have. In other words, mining is the critical backbone that powers decentralized networks. Without mining, it would be impossible for blockchain to exist. Miners aren’t just powering networks out of the goodness of their hearts; they are being compensated by the network

BLOCKCHAIN 101: THE TECHNOLOGY BEHIND CRYPTOCURRENCIES

for their work in the form of whatever digital currency they are mining. Operating digital currency miners is expensive, complicated and extremely labor intensive. Mining started out as a hobbyist activity, and today it has evolved into a highly competitive, highly lucrative, multibillion-dollar industry. The amount miners are compensated and when they are compensated depends entirely on preset algorithms of the digital currency they are mining.

These features provide an unprecedented level of security to users of the blockchain.

What Makes Blockchain Secure?

1. Education: Digitizing and verifying academic credentials.

The primary advantage of blockchain technology is that it is controlled by a network instead of by a single entity. This means that it has no single point of failure and no single point of corruption. Furthermore, the information stored in the blockchain is public and the system is designed to verify the integrity of the blockchain on its own. Thus, the only way to create a fraudulent transaction on such a network would be to take control of the majority of the global network itself.

How Can Blockchain Be Used Outside Of Finance?

Blockchain can be applied to nearly every industry, but it will especially benefit those industries that lack transparency, are at a high risk of fraud and are digital. Here are 10 of the hundreds, if not thousands, of uses for blockchain technology:

6. Legal: Smart contracts with preset rules. 7. Media: Control of ownership rights and anti-piracy. 8. Health care: Drug supply chain integrity. 9. Real estate: Digitized transaction process and ownership. 10. Automotive: Vehicle ownership and history. Although itâ&#x20AC;&#x2122;s difficult to know which digital currency will become the largest in the years ahead, many do believe that blockchain technology is here to stay and that its level of disruption has only just begun.

2. Nonprofits: Auditable trail of all donations and spending. 3. Voting: Preventing voter fraud and tampering. 4. Human resources: Background checks and credential verification. 5. Law enforcement: Evidence integrity and documentation.

Harry Pokrandt is CEO of HIVE Technologies. Harry may be contacted at harry.pokrandt@innfeedback.com.

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August 2018 Âť InsuranceNewsNet Magazine

BUSINESS

Managing Results Is Only Half Of A Successful Leader’s Job Three steps toward creating a purposeful, positive, productive work culture. By S. Chris Edmonds

hat’s on your to-do list today? I’ll wager that “building workplace relationships” doesn’t appear on that list — but it’s something that all agency owners and business leaders should be focused on daily. The reason is because our workplaces aren’t great places for employees to hang out. Don’t believe it? Here are some studies to back this up. Christine Porath, in a Harvard Business Review article, wrote that 98 percent of the employees she interviewed over the past 20 years have experienced incivility or rudeness in the workplace. Only 35 percent of employees around the globe are actively engaged at work, according to Gallup’s most recent “State Of The Workplace” report. That number hasn’t shifted significantly in more than two decades. Respectful treatment of all employees at all organizational levels occurs in only 38 percent of global workplaces, the Society 54

for Human Resource Management found in its 2017 report “Employee Job Satisfaction and Engagement.” Your agency may be much better than these studies indicate — but I’ll bet there are opportunities for your organization to improve the health and quality of its work culture.

How Healthy Is Your Work Culture?

Why don’t leaders invest as much time and energy in creating a healthy work environment as they do in managing results? Because they’ve never been asked to manage culture. Most don’t know how to do it. They’ve never experienced a successful culture change, much less led one. The good news is that executives agree culture matters. Deloitte’s 2017 Global Human Capital Trends report found 80 percent of executives rated the employee experience — organizational culture, engagement and the employee brand proposition — as very important or important. But only 22 percent believe their companies are excellent at building a positive employee experience. Even better news? Leaders can fix their damaged or broken work cultures. When leaders embrace their responsibility to create a purposeful, positive and

InsuranceNewsNet Magazine » August 2018

productive work culture, the following three-step process will guide the way.

1. Define

The first step, define, requires business owners to formalize their desired culture through an organizational constitution. An organizational constitution is a written document that specifies your company’s servant purpose, values and behaviors, strategies and goals. Your servant purpose clearly describes your agency’s present-day “reason for being” besides making money. Making money is certainly important for the longterm success of your business, but making money is not the be-all and end-all for many humans. Your team members know that making a profit is important to the success of the business, but a more natural motivation can make a huge difference. A servant purpose describes what you do (your product or service), who you do it for (your clients), and “to what end” — how what you do improves customers’ quality of life every day. Most company mission or purpose statements don’t meet these criteria — and they don’t have a positive effect on employees. Here’s an actual purpose statement for a real company:

MANAGING RESULTS IS ONLY HALF OF A SUCCESSFUL LEADER’S JOB BUSINESS “Creating superior value for our customers, employees, partners and shareholders.” Is it clear what they do? No (they are a tire company). Is it clear who the company’s primary “customers” are? No. Is it clear how what the company does improves others’ quality of life? No. Compare that to this purpose statement from a pharmaceutical company (Bristol-Myers Squibb): “To discover, develop, and deliver innovative medicines that help patients prevail over serious diseases.” Is it clear what they do? Absolutely. Is it clear who they do it for? Absolutely. Is it clear to what end employees are toiling — how they improve customers’ quality of life? Absolutely. This purpose statement creates clarity of how their customers benefit, which creates meaning and significance for employees every day. Continuing the “define” step, agency leaders must define values in observable, tangible and measurable terms — just as performance standards are defined in observable, tangible and measurable terms. If your company has values defined, they

» I ensure that each customer is assisted in finding requested items. » I deliver a clean, fast, friendly experience to each customer. These behaviors (three of eight of their service behaviors) are measurable. Someone could observe me working over a week’s time and be able to rate the degree to which I model these specific behaviors. Another business, a three-state region of a waste management provider, defined their respect value with these behaviors: » I seek and genuinely listen to others’ opinions. » I do not act or speak rudely or discount others. » I work to resolve problems and differences by directly communicating with the people involved. Again, these behaviors specify a very specific path to demonstrate respect in this division.

Only when values are behaviorally defined do they become actionable. probably are not measurable. They are aspirational (“We act with integrity”) but likely not behavioral (“I do what I say I will do”). Only when values are behaviorally defined do they become actionable. Behavioral definitions shift values from vague ideas to clear requirements for trustful and respectful treatment of others in the course of one’s work. One business, a seven-state region of the world’s largest retailer, defined its customer service value with behaviors like these: » I initiate friendly hospitality by promptly and enthusiastically smiling and acknowledging everyone who comes within 10 feet.

3. Refine

Strategies and goals in your agency are probably defined already (most do define performance expectations and strategies). Including them in your organizational constitution ensures that team leaders and team members understand that values demonstration and performance accomplishment are equally important.

2. Align

coaching them, praising them and redirecting misaligned behaviors. When agency owners and leaders model your valued behaviors and hold everyone accountable for demonstrating your valued behaviors in every interaction, you make values as important as results. You make treating others with trust and respect in every interaction as natural as breathing! One critically important piece of alignment is that you will no longer tolerate bad behavior from anyone. You won’t allow or ignore aggressive behavior, rude behavior, demeaning behavior, harassment or teasing ever again. Just as you monitor performance traction with daily dashboards of key metrics, you must create a clear, reliable means to monitor values alignment. A custom values survey does that. It allows employees to rate their bosses on how well those bosses demonstrate your valued behaviors. A values survey must be done regularly — at least twice a year. Some businesses are using weekly pulse surveys (one question a week; it takes three minutes for employees to complete it online with their smartphones or computers) to keep a more frequent tally of values alignment.

The second step, align, is the hardest part. This is where senior leaders demonstrate their agency’s valued behaviors in every interaction — and coach others to do the same. By defining your organizational constitution and announcing the new servant purpose, values and behaviors, don’t assume that anyone will embrace or model those behaviors. They won’t model them until they see senior leaders living them,

The third step, refine, happens every two years or so with a review of your valued behaviors. You’ll update the behaviors list by removing well-embraced behaviors (they won’t disappear in your environment), revising some behaviors or adding new behaviors to address “opportunities” for better citizenship in your evolving work culture. Your servant purpose and values rarely change. But your strategies and goals might change annually. Through these steps — define, align and refine — you can craft a purposeful, positive, productive work culture. Don’t leave your culture to chance. Be intentional with an organizational constitution. S. Chris Edmonds helps senior leaders create purposeful, positive, productive work cultures. He is a speaker and executive consultant who is the founder of The Purposeful Culture Group and the author of The Culture Engine. Chris may be contacted at chris.edmonds@ innfeedback.com.

August 2018 » InsuranceNewsNet Magazine

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.

INSIGHTS

Turning Contacts Into Advocates Four steps to help you build effective relationships with your centers of influence.

The right marketing plan must have a strategy for forming relationships with key players within a market. Every advisor needs advocates.

By Brian Haney

he financial industry values the power of referrals because they are among the best ways to grow a business. However, when I consider many of the effective ways I have generated referrals, I believe we would benefit from looking at referral generation in the broader context of marketing. The right marketing plan must have a strategy for forming relationships with key players within a market. Every advisor needs advocates. How can you develop advocates quickly and effectively? Here are four tips to get you started.

1. Get Invited In

The best way to build relationships with centers of influence is to get invited in. But how do you get invited? Ask your clients and they will gladly do it for you. Here’s a story to illustrate the point: I was at a networking event at my local Chamber of Commerce and I knew one of my clients would also be there. I asked him what groups he is involved in that have been really good for his business. He replied, “Oh, I’m a member of the LGBT Chamber in Washington. It would be perfect for you. Let me invite you to our next event.” I took him up on his offer and met him at the next event. I had him introduce me, I made several solid connections, and I began to develop some key relationships quickly — all because my client invited me in! Taking this approach with all clients can work well; just be genuinely interested in their success and ask them what they’re doing to connect and grow, and they will naturally invite you to the events they believe are working well for them.

2. Know The Celebrities

After you’ve been connected, get to know the “celebrities” in the group — people 56

speak or get some face time with other members of the group. Being a sponsor allows you to engage at a deeper level while demonstrating to the community that you’re committed enough to spend money to support it. Events that are philanthropic in nature can be the most powerful because the focus is less on business for yourself and more on the shared values of that community.

4. Serve The Community

who show up in most of the photos posted online, and people you want to know: key leaders and influencers. Once I became connected to the Capital Area Gay & Lesbian Chamber of Commerce, I got to know the board members and leaders. I made sure my client introduced me to them at our first meeting, and from there I spent time getting to know them. The approach that works the best is to become an advocate for the group itself and ask the key leaders how you can support the group. What areas of need do they have? I wanted to learn from them, build friendships with them and hear their perspectives on what they believed their community needed. When leaders see that you care about their group, they will warm up to you quickly. These professional relationships have become personal friendships and have been keys to developing relational equity within the community in a short amount of time.

3. Sponsor Events

Most groups hold events of some kind. Whether it’s a charity golf outing or a membership event, take advantage of the community and sponsor events. Yes, it comes at a cost, but there’s no better way to grow relationships than to be a sponsor. Find the sponsorship opportunities that are right for you, and don’t just spend money to have your name on a banner. Most groups will work to ensure you

InsuranceNewsNet Magazine » August 2018

Finally, if you want your influence to grow, find ways to serve the community, such as by volunteering for a committee or for a board. I was on the LGBT Chamber’s board for four years, serving as vice president and as treasurer. I’ve served on other boards as well. Being a member of a volunteer board is a fantastic way to get an inside perspective of the community of members you are there to serve. It’s also a great way to grow business, because now you’re the person people will want to know. The common theme of the four strategies described earlier centers on the law of reciprocity. You may know it as giver’s gain. By giving to others — whether to your client by taking a genuine interest in their business, or to the community through volunteering, sponsorship or board service, the law of reciprocity is a powerful force that ingratiates others to you. When you’ve given without the expectation of return, those who recognize this tend to want to give back to you. Developing strong relationships with centers of influence makes you a strong member of the community that these partners will advocate for. Ultimately, the best way to get referrals is to be referable. Using the strategies described earlier will make you referable and will form strong community relationships to benefit your practice. Brian Haney, CFS, CFBS, CLTC, LACP, has been in the financial services business since 2003. He founded The Haney Co. with his father six years ago. Brian may be contacted at brian.haney@ innfeedback.com.

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A Fresh Look at Retirem ent Planning

If you’re talking about the Spousal Continuation feature with your financial professional, that means you have also discussed the Retirement Cornerstone® variable annuity. Retirement Cornerstone® with guaranteed benefit riders—like the Spousal Continuation feature—is appealing as a retirement planning because it can help you: strategy • Manage income for yourself • Customize income and take advantage of potential interest rate rises • Provide protection for your spouse and family down the road You can take action now that can help your goals become a reality.

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Longer, Healthier Lives Await You and Your Spouse

We’re living longer, healthier lives. Are you sure you and your spouse will enough income? have

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Picturing yourself as a retiree may be hard. But if you could envision those years, you’d probably future see a life full of activity and decades of health, and prosperity. Rocking happiness chairs and lap shawls may not be on the agenda. reality, however, is probably The somewhere in between.

People are living longer and longer. You may need to plan for a 25-to-30 -year retirement.

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Population aging has emerged as a major demographic worldwide trend. The United States is following suit, with Americans living longer as death rates fall.

Growth in Life Expectancy Male

Female

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81.1 75.3

76.4

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2008

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1 National Institute on Aging and U.S. Census Bureau, An Aging World: 2008 International Population Reports, June 2009 2 National Vital Statistics Reports,

Deaths: Final Data for 2014,

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2 Retirement Cornerstone® Variable Annuity with the Spousal Continuation Feature: Built-in Confidence for Your Spouse’s Future

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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.

Finding Your Inspiration Throughout Your Career How one advisor found the inspiration to help as many people as possible achieve their financial dreams and manage their nightmares. By Kimberly A. Harding

hen I began my career as a financial services professional, I was told I had many factors working against my success. I was young, female and did not have extensive experience. I chose to perceive these traits as fuel for my career success instead of liabilities that would limit my potential within the industry. I was inspired to prove people and existing prejudices wrong and show that a young woman could succeed in a male-dominated industry. My differences did not have to work against me — they are my biggest assets and make me unique.

Discovering Your Inspiration

Everyone has different sources of inspiration that motivate them to do their best work every day. Advisors should look within themselves and the people around them to renew their inspiration. For example, some may be influenced by wealth, fear of failure, or personal relationships with friends and family. Find your confidence through continuing education and acquiring designations to become an excellent resource to serve your clients as holistically as possible. Consider a particular aspect of the industry that you strongly believe in, such as a certain product or planning specialty, and channel it as your passion. After you define your passions and commit yourself to a mission, I believe clients will trust in your abilities to help make their financial goals a reality.

Find Motivation

It is vital to find inspiration at every stage of your career to keep yourself motivated and accomplish your goals. Inspiration evolves as your career progresses, and it is important to re-evaluate this aspect of your professional career on a regular, ongoing basis. When you begin as a new professional, you may fall into survival mode and use survival as the measure of professional success. Seek out additional motivating factors that you can carry with you throughout your career instead of relying on this temporary mentality. My suggested approach is to turn challenges you face at the beginning into opportunities to differentiate yourself from other professionals.

Personal Stories That Influence My Actions

Advisors’ personal lives can also serve as a motivator. I experienced firsthand the financial and emotional toll that an unexpected illness can have on an entire family. That experience drives me to help clients create long-term plans and help protect their family’s livelihood. If you form personal connections with clients and share these personal experiences, you can enhance the mutual trust in your relationships and make a difference in their lives. The people that I surround myself with — such as friends, family, clients and my team at the office — also motivate me to set a good example. I want my daughter to know that if you work hard, believe in yourself and contribute to the greater good, you can achieve personal and professional success.

Leverage Client Relationships

Although my determination to prove people wrong faded as I gained more

InsuranceNewsNet Magazine » August 2018

experience, I am still motivated today to uphold my success due to my natural competitive drive and love of our business. Now I strive to maintain and grow my practice, driven by my passion to help others obtain financial independence. My clients inspire me to work hard every day so I can help them achieve their goals. I recognize the impact I can have on my clients’ short-term and long-term dreams. I want to continue to empower my clients to support their families and lead financially stable lives. I believe that our country is in crisis, people need financial help more than ever before, and it is our duty to serve and help them get on the right path to achieving their goals. It is our firm’s mission to help as many people as possible achieve their financial dreams and manage their nightmares. It can be difficult to discover your personal source of inspiration on your own. Seek input from a mentor, a coach, colleagues, family or friends. Sometimes the person who will support you the most is someone who once walked in your shoes, such as a peer or mentor. They can help you determine your strengths, passions and, ultimately, your inspiration. Inspired advisors can experience fulfilling careers based on genuine interest in their clients’ well-being and successes. Kimberly A. Harding, CLU, CLTC, has been in the financial services and insurance industry since 2003. She is a lifetime member of MDRT. Kimberly is a partner with Harding Financial and Insurance in Woburn, Mass. Kimberly may be contacted at kimberly.harding@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.

How Do We Fill The Life Insurance Purchase Funnel? New direct-to-consumer approaches, as well as a focus on workplace sales, could reach consumers who need life insurance but are not buying it. By Elaine F. Tumicki

IMRA recently published a report titled “The Purchase Funnel,” which surveyed respondents who have primary or shared decision-making responsibility about finances, including insurance. One quarter of those households recognized in the previous 24 months that they had a need for life insurance. That translates to 31 million households — 31 million (or more) potential buyers for life insurance. Talk about potential!

These are some of the factors that may result in lower market penetration. In fact, only 44 percent of households own an individual life insurance policy. So have people turned their known need into a purchase recently? Individual life insurance sales growth has been modest at best in the past five years, averaging 1.6 percent for premium. LIMRA forecasts more of the same, with annual growth rates averaging just over 2 percent over the next four years. Overall sales have been lackluster, although there have been some pockets of success. Although 2018 sales started slow, with a decline of 2 percent in annualized premium for the first quarter, indexed universal life premium grew by 8 percent. IUL has been on a run, with increases in most quarters over the past several

Both term insurance and variable UL sales have been flat, alternating between small increases and small decreases. The end result of these increases and decreases in products is very modest growth overall. There are still the 22 million households who recognized a need for life insurance but didn’t buy (and millions more who haven’t recognized the need). How can the life insurance industry reach these uninsured or underinsured households? That is the $64,000 question, and one that doesn’t have an easy answer. Perhaps new direct-to-consumer approaches will help chip away at the uninsured need. These approaches will likely use data-driven, customer-centric, automated methods to simplify the purchase process and make it more efficient. Maybe the workplace is part of the answer. Employees appreciate the vetting process employers conduct to offer voluntary life insurance and other products as part of their benefits package. One thing is clear: There is not one clear method that will solve the problem. LIMRA has robust research programs on all these topics to help our members reach households in need of the life insurance industry’s products.

Consumers recognize the need for insurance — most often prompted by life events such as marriage, births and deaths — but they don’t make it through to a purchase. However, more than two thirds of these needs are still unmet. Only 7 percent of households (9 million) actually went on to purchase a life insurance policy. This purchase statistic is consistent with sales research — LIMRA estimates that just under 9.8 million individual life insurance policies were sold in 2017. This is a familiar scenario that we have seen in the past. Consumers recognize the need for life insurance — most often prompted by life events such as marriage, births and deaths — but they don’t make it through to a purchase. They have their reasons: 1. Competing financial priorities. 2. Misperceptions about cost. 3. The inability to make a decision. 60

years (with a brief downturn following the implementation of new illustration requirements). IUL offers a combination of cash value increases based on stock market growth, and protections against stock market declines. This combination has been popular over the past several years, and many more carriers have entered the market. Whole life (until recently) has also done well since the Great Recession, likely because of the guarantees inherent in the product. However, sales of whole life have faltered somewhat in the past few quarters. On the other hand, lifetime guarantee UL has been mostly down for the past few years, a result of regulatory changes that led to higher prices and market exits.

InsuranceNewsNet Magazine » August 2018

Elaine F. Tumicki, CLU, ChFC, LLIF, is corporate vice president, insurance research — product at LIMRA. Elaine may be contacted at elaine.tumicki@ innfeedback.com.

At Foresters Financial, we are ™

Foresters does more than offer a range of competitively priced financial services products. As a member based organization, we are moved to action and give back to families and communities where our clients live.

In 2017 alone, Foresters contributions¹ included:

$4.4 million in Community Grants

36,594

volunteer hours donated by members through Community Grants

$2.2 million in Competitive Scholarships² to 250 students

$3.1 million to our members in Emergency Assistance relief

700+

local community organizations supported by members donating time and effort through granting activities

And Foresters remains financially strong³ with:

3 million+ members and clients in Canada, the United States and the United Kingdom

$45.1 billion funds under management/ administration

3.1 million

certificates and contracts in force

Learn how we can do more for your clients. Visit report.foresters.com 1 Consolidated financial results as at December 31, 2017. All figures in Canadian dollars. 2 This program is administered by International Scholarship and Tuition Services. Available to eligible members with an in force certificate having a minimum face value of $10,000 or if an annuity, either a minimum cash value of $10,000 or a minimum contribution of $1,000 paid in the previous twelve months. 3 Financial strength refers to the overall financial health of The Independent Order of Foresters. It does not refer to nor represent the performance of any particular investment or insurance product. All investing involves risk, including the risk that you can lose money. Foresters Financial and Foresters are trade names and trademarks of The Independent Order of Foresters (a fraternal benefit society, 789 Don Mills Road, Toronto, Canada M3C 1T9) and its subsidiaries. N262

416314 US (08/18)