InsuranceNewsNet Magazine - August 2020 by InsuranceNewsNet

The industry examines how it can recruit a diverse advisor force to serve a diverse nation. â&#x20AC;¢ PAGE 16 Positively Shine In Troubling Times with Joe Jordan

PAGE 8

How Tech Touches Every Aspect of Insurance In Pandemic

PAGE 30

Putting the Social Back Into Social Distancing

PAGE 42

August 2020

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IN THIS ISSUE

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AUGUST 2020 » VOLUME 13, NUMBER 08

FEATURE

Someone Who Looks Like Me By Susan Rupe

How does the industry attract and retain a more diverse field force?

online

www.insurancenewsnetmagazine.com

HEALTH/BENEFITS

36 Debunking The Great HSA/FSA Benefits Debate By Rob Grubka These benefits can play a valuable role in putting people more in the driver’s seat of their overall financial wellness.

INFRONT

6 Back To The Future, Part ?

By John Hilton New advice rules would substantially return the industry to a pre-2016 regulatory environment — with a twist.

ADVISORNEWS

40 How SECURE Changes Retirement Planning

INTERVIEW 8 How To Shine In Troubling Times

Joe Jordan has spent many years speaking about bringing significance to the industry. In this interview with Publisher Paul Feldman, Jordan tells why heTRUCK! BACK UP THE believes positivity is the superpower we need right now. A Guide for the Successful Salesperson

IN THE FIELD

23 A Bountiful Harvest

LIFE

28 Technology Touching ‘Every Aspect’ Of Insurance In Pandemic By John Hilton COVID-19 pushed an industry that relies on face-to-face contact to accelerate its tech plans.

ANNUITY

INBALANCE

42 Putting Social In A Socially Distant World By Susan Rupe Our social lives will take time to get back to the way they used to be.

BUSINESS

32 I ncome Annuities Can Be Mighty Structures

By Susan Rupe Ray Jones traces his success to the lessons in hard work and perseverance he learned from his early days on a dairy farm.

By Debbie Baker One goal of the new law is to offer workers enhancements for their retirement savings.

44 Time Blocking: The Simple Daily Productivity Hack

By David Hanzlik Income annuities create true liquidity to help clients bridge their retirement income gap.

By Fred Hubler Scheduling your days in short increments can give you better control over your time.

Raymond Jones ChFC

INSURANCENEWSNET.COM, INC.

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

James McAndrew Matthew Fishgold Jacob Haas Bernard Uhden Shawn McMillion Megan Kofmehl

MEDIA OPERATIONS MANAGER NATIONAL ACCOUNT DIRECTOR NATIONAL ACCOUNT DIRECTOR NATIONAL ACCOUNT DIRECTOR DATABASE ADMINISTRATOR CORPORATE ACCOUNTANT

Ashley McHugh Sarah Allewelt Samantha Winters David Shanks Sapana Shah Trevor Alford

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

InsuranceNewsNet Magazine » August 2020

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WELCOME LETTER FROM THE EDITOR

Our Shot

ike millions of viewers, I was captivated by Hamilton recently. I should specify that I was captivated by the story of Alexander Hamilton when I saw the musical play in its limited run on a streaming service. The play reanimates the drama that has been shellacked with the gloss of history that seems to make the United States of America a preordained destiny. One of messages of the play is that Hamilton used his talent for storytelling to help craft the United States. Hamilton’s writing propelled him out of poverty, and into the American Revolution, after which his words built federalism and the financial system. Another takeaway is that Lin-Manuel Miranda is conserving the idea of America through his talent for storytelling. Through Miranda’s prodigious talent to perform, write music and extract the themes of meaning from a greater narrative that resonate with people, he showed the audience the actual person encased in the amber of history. I witnessed the power of Miranda’s talent last year when I saw an Alexander Hamilton exhibit at the Museum of the American Revolution in Philadelphia. In an interactive section at the end of the exhibit, a father was photographing his teenage daughter as she wore a tri-cornered hat and sang “Alexander Hamilton” in the way it is sung at the beginning of Miranda’s play. We were in the same tour group and she had been enthusiastic throughout the visit. She was far from the only young person enjoying the exhibit. How often do you think that an American teenager, boy or girl, yells “Yay!” when Dad suggests, “Hey, kids, let’s go to the Museum of the American Revolution!”? That is the power of Miranda’s alignment with his talent. Through it, we can see that we have our own talents that we can use to make a difference.

Listen To The Stories

Generations are learning about the essence and audacity of the American 4

experiment from a Puerto Rican from Manhattan telling the story of an immigrant from the West Indies. The perspectives and artistic dialects from many cultures have made America special from its beginning. The only way American ideals pass from generation to generation is through a fresh perspective to keep those values relevant. In Managing Editor Susan Rupe’s main feature, we learn the stories of people trying to change the narrative for life insurance and financial services. From people such as Barbara Turner, CEO of Ohio National, we learn the hardship of being the only Black person, and probably also the only woman, in the room. I recall that earlier in my career, when I worked with people of color I thought of them in the same way as I would other colleagues, and evaluated their contributions rather than their race or ethnicity. It was only later, when I heard stories expressing what Blacks and other minorities endured from their perspectives that I understood that their sense of being “other” is always present in the room. The stories allowed me to see life through their eyes.

We Feast On Diversity

After all, isn’t the story of America what all the fighting is about? The struggle over statues is an argument about our story and who is telling it. Monuments themselves are attempts to tell a version of the story. Alexander Hamilton was only a name in stone or a picture on our money to most people, until Miranda showed Americans who he was and what he meant to this nation. National identity is the story we tell ourselves or allow our ears to hear. The richness of America is as evident as the choice of restaurants in our major cities (well, preCOVID). Where else do you find that? In most countries, visitors encounter a

InsuranceNewsNet Magazine » August 2020

cuisine that identifies that culture. But what is the identifiable feature of American food? Variety — the spice of life. Little of the cuisine in this country can be called “all-American.” If you are thinking of fried chicken, that was apparently a product of Scottish frying techniques and African spices. It is all a buffet of cultures. There is also not much you can point to and say, “That is not American.” Even right- and left-wing extremism are strands in the national fabric. Only one thing is reliably American, and that is ingenuity. This is the country that takes the pieces of other cultures and makes magic that dazzles the world. In particular, our music and movies enthrall billions of people. Our stories tell who we are and where the future is. A recurring line in Hamilton is “Look around, look around at how lucky we are to be alive right now.” It is difficult to see how they would have thought that in revolutionary times. New York City was occupied for much of a war in which the rebels were far from certain to win. In fact, a good number of colonists were happy with the status quo, and historians estimate that only a third of Americans favored independence. But it was a historic time, with many currents of world history churning in our bays. New ideas from France and Britain mixed with Roman traditions to forge something that reflected the best of those influences and create the American story. Here we are again in a confusing time that we know is important. We just don’t know yet what the outcome will be and what significance will arise from it. That will be the job of the storytellers. Steven A. Morelli Editor-in-Chief

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IMG22526 | INN 8.2020

INFRONT

Back To The Future, Part ? The Department of Labor’s latest fiduciary rule is a prequel wrapped up in a sequel that will likely spawn another sequel. By John Hilton

he long, winding saga of the Department of Labor’s quest to update investment advice rules took another turn recently that can be fairly described as “Back to the Future.” As expected, the Trump administration pushed out new advice rules that substantially return the industry to a pre2016 regulatory environment — with a twist. The underlying standard will again be the Employee Retirement Income Security Act “five-part test” developed in 1975. But these rules add a new class exemption that would enable certain types of investment advice fiduciaries to receive a wide range of fees and other compensation without engaging in non-exempt prohibited transactions. The proposed exemption “would give Americans more choices for investment advice arrangements, while protecting the retirement savings of American 6

workers,” Secretary of Labor Eugene Scalia said. “The exemption would add to the tools individuals need to make the right decisions for their financial future.” Scalia is no stranger to these issues. He was last seen debating investment advice rules in court as a Gibson, Dunn & Crutcher attorney representing several clients suing the previous DOL rule, a true fiduciary standard put in place by President Barack Obama’s administration. Industry groups who called the fiduciary rule a gross overreach are understandably pleased with the new rule package. “The DOL’s new proposal would remedy many of the problems with the original fiduciary rule,” said Kevin Mayeux, CEO of the National Association of Insurance and Financial Advisors. “It is designed to allow existing business models, product offerings and compensation arrangements to continue.”

Controversy Brewing

But opposition to the Scalia proposal is widespread, including from the advisory world. Prominent analyst Jamie P. Hopkins, director of retirement research at Carson Group, is calling the rules a softball to financial services, especially

InsuranceNewsNet Magazine » August 2020

those in insurance. “In essence, it is keeping a lot of the status quo in place, but creating more ways to engage in conflicted advice than ever before by providing legal protections from the prohibited transaction rules for fiduciaries that engage in certain types of self-dealing or conflicted compensation models,” Hopkins said. While the rules do not need approval from Congress, Sen. Patty Murray, D-Wash., rushed out a statement blasting the effort. “This inadequate proposal will leave financial advisors free to put their interests ahead of their clients,” Murray said. “We need a strong fiduciary rule to protect people’s hard-earned savings.” And political realities likely make the rules an endangered entity long term. With President Donald J. Trump lagging badly in the polls, the DOL advice rules could be a prime candidate for reversal should Democratic challenger Joe Biden win the White House. But while Biden is certain to oppose the new rules, how high a priority it would be for him is hard to gauge. It took the Trump DOL more than three years to complete a new advice proposal. For now, the new advice rules are set to

BACK TO THE FUTURE, PART ? INFRONT recommended investment transactions and other relevant matters.

The Five-Part Test For Determining ‘Fiduciary’ Advice

Satisfying the best-interest definition requires the advisor to act with “prudence” and “loyalty,” terms that have been identified under ERISA. According to Carlton Fields, this is one area of disagreement between the DOL rule and RegBI, as the latter rule does not require “prudence.” The exemption also requires specific disclosures to retirement investors, conflict mitigation procedures and retrospective compliance review. The disclosure condition requires financial institutions to disclose to retirement investors their status as investment-advice fiduciaries and provide an accurate written description of their services and material conflicts of interest, Carlton Fields said. Much like the SEC rule, the DOL standard expects financial institutions to establish mitigation policies to keep their advisors from issuing conflicted advice.

1. Render advice as to the value of securities or other

property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property

2. on a regular basis 3. pursuant to a mutual agreement, arrangement, or un-

derstanding with a Plan, a Plan fiduciary or an IRA owner that

4. the advice will serve as a primary basis for investment decisions with respect to Plan or IRA assets, and that

5. the advice will be individualized based on the particular needs of the Plan or IRA.

‘A Free Pass’

Source: The U.S. Employee Benefits Security Administration

take effect 60 days after final publication in the Federal Register. Comments are being accepted on the proposed exemption until Aug. 6. One important goal for Trump administration regulators and the industry is harmonization of rules. The new DOL rules are very similar to the Securities and Exchange Commission’s Regulation Best Interest. That rule took effect June 30 and theoretically holds brokers to a best-interest standard. SEC examiners have indicated that they are merely looking for a “good-faith effort” to comply given the COVID-19 stress on the industry.

A Big Exemption

The key to the new rules is the prohibited transaction exemption for which the DOL is specifically soliciting comments. “This rule says if you are a fiduciary,

you can engage in a lot of self-dealing and conflicted compensation that is currently not allowed as a fiduciary in selling products and engaging in rollover advice,” explained Hopkins, also a finance professor of practice at Creighton University. “In essence, the DOL is acknowledging a standard only to build an exception from having to adhere to it.” In order for investment advice fiduciaries to rely on the proposed class exemption, the law firm Carlton Fields noted, they must satisfy the exemption’s “impartial conduct” standards, which include three components: » A best-interest standard. » A reasonable-compensation standard. »A requirement to make no materially misleading statements about

But critics maintain that the proposal does little more than gloss over conflicted advice problems that accompanied the growing complexity of products. “Insurance agents will get a free pass from DOL to encourage retirement savers to withdraw a lifetime of savings from their retirement plans and sink that money into a high-cost, opaque, illiquid annuity that saddles the retirement saver with subpar performance,” said Barbara Roper, director of investor protection for the Consumer Federation of America. Furthermore, there is no enforcement mechanism in the DOL rule, so investors harmed by conflicted advice will have “no recourse and no ability to recover their losses,” she added. “We don’t expect to see any meaningful changes in harmful practices that pervade the industry.” I n s u r a n c e N ews N e t Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

August 2020 » InsuranceNewsNet Magazine

INTERVIEW

How to Shine in Troubling Times Joe Jordanâ&#x20AC;&#x2122;s message of optimism resonates in an unsettling time of transition 8

InsuranceNewsNet Magazine Âť August 2020

HOW TO SHINE IN TROUBLING TIMES INTERVIEW

f you have been to even one industry conference, chances are good that you have seen the ever-dapper Joe Jordan speak. He has been in the sales end of the insurance and financial business for more than 40 years, but these days he is known by some as “the chaplain of insurance” for the uplifting messages he brings to the industry. In fact, he was on a worldwide tour delivering his message that wrapped up in mid-March, just in time to hunker down in his Manhattan home and ride out the pandemic. But even though he is 68, he had no intention to stop his mission. He got acquainted with the world of Zoom and remote meetings, turning himself into a webinar warrior. (Although viewers will not get to see the full complement of vintage duds, he does sport a bowtie for a dash of the Joe Jordan style.) Although Jordan was a vice president of sales and products for PaineWebber and MetLife, he has been speaking for the past several years about bringing significance to the life insurance and financial business beyond simply selling products. He wants to show that the business is more than a client’s dollars and cents. He encapsulated some of those thoughts in his book, Living a Life of Significance. So, rather than being sidelined by the pandemic, Jordan is instead finding his message has even more resonance to-

He said I changed his life and he attributed a lot of his success to me. I’ve had a few of these calls in the past but this was different. The guy does this thing he calls Gratitude Fridays. And he calls one person on Fridays, to tell them how they impacted his life. I picked up on this. I started doing it, and I just finished one of my calls today. I can’t begin to tell you how great you feel doing that. And it gets you out of yourself, and then you’ve impacted another life. Having a positive mental attitude is crucial. Expressing gratitude is another way to do that. That’s some of the stuff I’m talking about. You’ve got to really stay positive in an environment like this because if you’re an optimist, it’s rare, and you become very attractive. Optimists aren’t necessarily Pollyannas. They know there are problems, but they feel those can be corrected. It makes you extremely attractive. FELDMAN: How much importance do you think that plays today? What other things can people do in addition to the gratitude? JORDAN: We sent out thousands of notes and emails. We got an unbelievable response from people saying, “That really made my day.”

“You’ve got to really stay positive in an environment like this because if you’re an optimist, it’s rare, and you become very attractive.” day. In this discussion with Publisher Paul Feldman, Jordan shows how seeking significance can help not just individual agents and advisors, but the industry as a whole. FELDMAN: Your message has been of gratitude and optimism. How can we bring more of that to our clients these days? JORDAN: Here’s an example. I got a phone call from a guy out of the blue who said that he heard me speak six years ago.

I think a lot of people now are suffering Zoom fatigue. Because there’s a lot of important stuff out there, but it tends to be product-oriented or process-oriented, things you have to do. Part of that gratitude thing is it gets you in the right mindset. The other thing I would mention also falls under the guise of gratefulness. I’m beginning to focus on what you need to be grateful for. It’s your family; be grateful you’re in this country; be grateful for all the benefits that you’ve created. We always talk about commissions

August 2020 » InsuranceNewsNet Magazine

INTERVIEW HOW TO SHINE IN TROUBLING TIMES and stuff. What about the death benefits you’ve created? Those numbers can be astronomical. We had a guy at MetLife who was going to quit, and then he realized, he said, “I read your book and I realized if all my clients died last night, it would be more revenue than the host of the Super

If you think about it, look at our profession. Look at what we do. The medical profession extends life, but we deal with the quality and dignity of life. It’s trying to get people into that type of framework to be thinking about how this thing is happening for me, because you’re being forced into it. I got forced into having to do webinars, and now that’s taking off. I’ve been in the business 46 years. I lived through every financial crisis under the sun: the high interest rates of the ‘70s, the 1987 crash, we had a couple of near crashes too, and then the most recent one. Well, ’07’09 was really a big one and then we had the Christmas Eve Massacre that happened in 2018. All of those crises were from a financial point of view. This is the first one where mortality and health are issues. We have something new now, and that’s called demand. I know Joe Jordan still cuts a dapper figure even 1 - 8 0 0 - B u y - Te r m after he transitioned into a webinar warrior in his Manhattan home. Insurance, their calls are going way up. Some people can’t get insurBowl would get.” He had $1.8 billion of life ance now. I think you noticed a couple of insurance in force. companies are really cutting back, so you Be grateful for the advancements in don’t know what you’ve got ’til it’s gone. technology. Imagine if this stuff happened This is really a time to take advantage of three years ago, and people are just plod- where you are. ding along trying to create virtual stuff. The other thing I think that’s important Now, boom, we’re right in the middle of it is this: I think there’s a fundamental evoso it’s forcing you to change. lution here. All of this compliance stuff is The whole thrust of my talk is “don’t not being driven by regulators. It’s being waste this crisis.” I want to make it clear, driven by consumers. What they really I’m not trying to take advantage of it. want is the idea and the ability to talk to What I am saying is that the question you one person who can take care of multiple have to ask yourself is, “Is this happening things. to me or is this happening for me?” It’s happening for you because it’s going FELDMAN: Do you see life insurance to force up, by at least five years, changing morphing into a planning profession? from the way we normally did business to the idea of having to go virtual and having JORDAN: I’ve always been a proponent to figure it out – how to interview people. of KYC, know your customer. That’s the You can do that, and three years ago, you whole idea of doing plans. Not selling couldn’t. That’s something that you really product but doing a plan. need to be grateful for. But most of the planning culture has 10

InsuranceNewsNet Magazine » August 2020

been focused on retirement. On top of that, you’ve got a decade worth of bull markets going on, so the whole idea of protection products doesn’t fit into that. Here’s the bottom line: now people are being very sensitive to the thing and so now it’s time to come on with holistic planning. That means not just taking care of the investments that people have, but also making certain that they are protected, because it’s a different reality right now. If you’re just in wealth management, then yeah, it’s tough. People feel losses twice as much as they feel gains. Even if you have great performance, there’s always someone who does better, and you don’t get the big pat on the back. Deliver a death claim or deliver a disability claim, or a long-term care, something like that. That’s a completely different environment. I’ll tell you this: there is absolutely no case on record where someone on their death bed said, “Call my broker. I appreciate he or she beat the S&P by four basis points.” It just doesn’t happen. The idea of doing a holistic plan is congruent with what the consumer wants. It’s also congruent with all of the consumer-oriented regulations that are out there. That was the whole impetus behind me writing the book, Living a Life of Significance. I saw a Gallup survey, and this was around 2012, looking at different professions, in terms of integrity, believability and trustworthiness. The only ones below insurance agents were Congress and car salesmen. I figured that was a big issue. You know what the No. 1 was? It was nurses. That’s probably pretty consistent today. All the others in the top were service organizations. I think that we have to evolve from a sales culture to a service culture. Holistic planning gets you to the point. When you think about it, all service organizations are built on two foundations. One is humility and the other is maturity. Humble people don’t think less of themselves. They just think of themselves less. Mature people aren’t necessarily older; they see things from another person’s perspective. I always ask people, “How many people want to live a significant life?” Everyone puts their hands up. It’s built on four pillars: belonging, purpose, storytelling, and transcendence.

HOW TO SHINE IN TROUBLING TIMES INTERVIEW FELDMAN: Would you tell what the pillars mean? JORDAN: Belonging. With the secularization of society and the rise of social media, and the decline of religion and family values, people have never felt more isolated or alone. Yale did a study and found out the more people use Facebook, the worse they feel. Why? No one posts they have a lousy day

but those are things you obtain. A way to figure out the difference is to read a eulogy. When you’re dead, you don’t want people getting up and saying, “Boy, he had a great pair of shoes and look at the car he’s got, look at the house he has.” No, you want to be remembered for something that’s of a higher order, and that’s really the idea of purpose that gets you to that kind of category.

The Four Pillars of a Significant Life Belonging Storytelling Transcendence Purpose

play a supporting role, not a leading one. Unfortunately, most of our financial planning culture tends to be more left brain, analytical. Using metaphors is effective. And the best metaphor guy in our business is Warren Buffett, the Oracle of Omaha. They asked him, “What should you be worried about investing in for a bull market?” He said, “Well, a rising tide raises all ships but when the tide goes out you see who’s swimming naked.” You don’t have to be a rocket scientist or take courses in economics to understand that one. Sometimes we piss people off because we hit them with facts and figures that don’t mean anything to them. Here’s the other important part; it’s funny. Humor and stress can’t exist at the same time. The last one is transcendence. That’s the out-of-body experience you get when you do something that’s worthwhile. FELDMAN: What kind of concerns are agents raising to you right now? JORDAN: They’re saying they’re fearful. They really don’t know how to use this technology. They feel very disoriented with this change.

or what have you. They never talk about the dog dying or the call blew up. It’s all this idyllic stuff, which has put on this new thing called FOMO, fear of missing out, especially affecting younger people. The UK now has the Ministry of Loneliness. Can you believe it? That’s for real. This isn’t John Cleese and the Ministry of Silly Walks. People have never felt more isolated and alone. It’s thinking about life’s meaning and purpose, right? I think people are searching out looking for having a relationship. FELDMAN: Speaking of purpose, that is the second pillar. JORDAN: Purpose requires a commitment that’s greater than what’s in it for you. Here’s an important distinction. There are goals and then there’s purpose. Goals are things you want to obtain: you want a big house; you want a car; you want to make more money; you want to get the trip. All of that stuff. Those are important

Viktor Frankl said, “Significance cannot be pursued, it must ensue. It can only do so as the unintended side effect of one’s devotion to a cause greater than one’s self, or is the byproduct of one’s surrender to someone other than one’s self.” FELDMAN: How about storytelling? JORDAN: Our business is very left-brain, analytically approaching people. We have to recover the lost art of storytelling. All wisdom comes from specific human experiences. The fact of the matter is stories create trust, a biological bond that no roboadvisor can do. It’s also a vicarious experience that can change people’s perspective. Stories reduce cynicism. Why? Because they happen to be true. I bump into people who heard me speak 10 years ago and they remember the stories like they heard them yesterday. This is the crucial point that I think needs to be discussed; people feel first and they rationalize later. Statistics and numbers

FELDMAN: Considering the high average age of agents, might this prompt more of them to retire? JORDAN: I think that’s right. That happens every time there’s a bear market or a big scare. It chases out the guys who don’t belong in the business. That was why I was doing this whole moniker of Living a Life of Significance. I wanted to attract younger people. They’re saying that they espouse the idea that they want to do something that’s worthwhile. I don’t think there’s anything more worthwhile than what we do. That’s why I’ve always been trying to change the mindset. Paul, I’m as good of a product hawker as there was. You know my background. I developed the annuities business at MetLife. Started with the annuities and then went to broker/dealer stuff. I’m as good a product hawker as there is. But I decided not to do that. My mission, I think, is to elevate the profession toward what it actually can do. I think a lot of things are conspiring to help make that happen.

August 2020 » InsuranceNewsNet Magazine

Millennials Saved $$$ During The Pandemic

NEWSWIRES

Pandemic Was Good For Millennials’ Finances There was a silver lining in the COVID-19 pandemic

52% Saved on Eating Out 47% Transportation 30% Nights Out Drinking 28% Vacations 21% Gym Membership

for many young adults. Two out of three (65% of) millennials said the pandemic had a positive effect on their finances, with 69% spending less money overall, even as boredom and depression contributed to a significant SOURCE: Money Under 30 uptick in online shopping for both groceries and nonessential items. The Money Under 30 survey showed millennials found the biggest savings on eating out (52%), transportation (47%) and nights out drinking (30%). Millennials also saved on vacations (28%) and gym membership (21%). What are millennials going to do with the money they saved? Invest it! The survey found 61% of millennials think now is a good time to invest. Seven in 10 of those younger than 30 are interested in learning how to invest, compared with 55% of those over 30. One in five (20%) plan to start investing because of the pandemic.

AMERICANS THINK US MOVING ON THE WRONG PATH

But that’s nothing new. The number of Americans who said this summer the country is headed in the wrong direction is near historic highs. However, it’s not the first time Americans have had crisis of confidence.

Patrick Murray, director of the Monmouth University Polling Institute, said it once was typical to see more people saying “right track” than “wrong track,” at least when the economy was good. But since 2008, “right track” respondents have never outnumbered “wrong track” respondents — even as the economy staged a comeback

MASKS COULD SAVE THE ECONOMY

An Economist/YouGov poll from late June shows 69% of Americans saying the country is on the wrong track, with 24% saying we’re moving in the right direction. A Monmouth University poll shows the “right track” number at 18%, while a USA Today poll from the same period shows 20% in the right track column. Historical polling data shows that Americans hit similar lows, or lower, in “right direction” numbers in late 2008 and mid-1992. The 2008 dip followed the stock market crash of the Great Recession, and the 1992 dip came after a less-intense economic slump and civil disturbances in Los Angeles over the Rodney King police brutality case. DID YOU

KNOW

To mask, or not to mask? While Americans debate the merits of wearing a face covering to stop the spread of COVID-19, Goldman Sachs is offering another reason to use a mask. Goldman said a federal mask mandate would not only cut the daily growth rate of new confirmed cases of the virus but also could save the U.S. economy from taking a 5% gross domestic product hit in lieu of additional lockdowns. Jan Hatzius, Goldman’s chief economist, said his team investigated the link between face masks and COVID-19 health and economic outcomes. They found that face masks are associated with significantly better COVID-19 outcomes. Hatzius said a face mask mandate would reduce the number of virus cases to the point where additional lockdowns would not be needed. Goldman contended is that a national

QUOTABLE Months of staying home with an uncertain future has encouraged young people to take stock of their finances and put their faith in the markets. — Rebecca Greig, managing editor of Money Under 30

mandate to wear face masks could raise the percentage of Americans who wear masks by 15 points and slash the daily growth rate of confirmed cases by 1 percentage point to 0.6%. By Goldman’s estimates, lockdown efforts earlier this year subtracted 17% from U.S. GDP between January and April.

CAN WELLNESS HELP INSURERS ENGAGE MORE CONSUMERS?

Most Americans say they want to improve one aspect of their overall wellness. Could that open the door to more engagement by life insurers? LIMRA and Boston Consulting Group took a look at consumers’ willingness to share their data and how life insurers can leverage Americans’ enthusiasm for wellness. The study found 97% of Americans say they want to improve one aspect of their overall wellness. Three-quarters of consumers claimed they want to improve their exercise habits, and six in 10 are interested in developing better sleep and eating habits. The report, “Extending The Life Insurance Value Proposition,” shows consumers see alignment between their goals and those of life insurers. Seven in 10 consumers believe life insurers want them to live healthier lives, will safeguard against data breaches and use their personal data appropriately, while six in 10 consumers believe life insurers will recommend good ideas to improve their health and advise them of treatments if they become ill.

17.6 million unemployed Americans probably won’t return to their pre-pandemic jobs. Source: Economic Policy Institute

InsuranceNewsNet Magazine » August 2020

The MOST POWERFUL Life And Annuity

INSURANCE SALES

STRATEGY

Ever Introduced To The Advisor World

ooking over Dana Point, California, Robert Binkele, CEO of the Estate Planning Team calmly and clearly reveals how his simple concept is redefining what’s possible for even entry-level and skilled insurance agents and financial advisors. Engineered Capital Gains Solutions Inc. (ECGS) approach to marketing this strategy is brilliant. The former pro football player’s firm, it turns out, has co-created a unique tax deferral strategy that’s so powerful it’s instantly saving businesses and real estate owners millions of dollars. It’s also creating a network lead-generation funnel so vast for agents joining that many are gaining direct access to high net worth clients without spending another dime in marketing seminars looking for new clients. In fact, they’re having a record year despite the Pandemic. Why? Simply put, times are changing. There’s a historic baby boomer generation retiring — and a massive transfer of wealth is flowing with it. With the low cost of money, many are facing overvalued market conditions and now have a huge need for capital gains tax deferral. By offering capital gains tax deferral as a new approach, the doors have opened to what every advisor or agent is looking for — high net worth prospects. The opportunity to liquidate real estate or a business is now, and agents and brokers need our help to list and sell these assets. ECGS has the turn-key

marketing system to reach them and their clients by utilizing capital gains tax deferral as a solution. The bigger picture is the ability to market to industry professionals, CPA’s, Business Brokers, Commercial Real Estate agents, and Estate Planning Attorneys who all go to work to help your business grow. It’s a team approach and there is nothing more powerful. Matched with the new partnership with premium finance expert and founder of Northstar Funding Partners Kim Coulter, ECGS might just have become the most powerful business-building strategy ever introduced. “With all I have ever seen out there, I can attest that this is far and away the most outstanding opportunity to ever hit the insurance industry,” Quinn Ellis, the company’s director of business development, exclaimed. “Outstanding” might be an understatement. In this rare Q&A with co-founder Robert Binkele, you’ll discover firsthand how this strategy is elevating production for producers and the IMOs, FMOs, BGAs, RIAs and broker-dealers involved — even opening the doors to major premium finance cases. Q: What exactly is Engineered Capital Gains Solutions Inc.’s tax deferral strategy? August 2020 » InsuranceNewsNet Continued onMagazine page 14 >> 13

A: In its simplest terms, if you were a business owner and you started your business like most people do, which is from scratch, and today it’s worth $10 million and you want to get out of it, either to retire or do something else, you would have to pay capital gains taxes on all of that $10 million. If we take a ballpark estimate, after federal and state taxes, you would be paying up to $4 million directly to the government. That means at the end of the day, the business that was worth $10 million when you sold it pays you less than $6 million after deducting commissions and closing costs. Four million dollars is a lot of money to just give away. And it is those taxes that keep a lot of business owners, real estate and stock investors, and collectors of fine art or antiques from selling when otherwise they would love to. Now, imagine talking to that business owner or a business broker who is trying to sell but does not want to because of the huge liability. Imagine how they would respond if you told them that you could help them quickly sell the business and keep all $10 million — paying zero dollars to the government in capital gains taxes (and even making money on it). Well, after analyzing the way IRC 453 installment sales were designed in the tax code over 90 years ago, we realized we could create a trust for large business and real estate sales, and we can help financial advisors or insurance agents grow their financial services practices. When our transactions close we secured our installment notes with diversified forms of various insurance products, annuities, mutual funds, managed accounts. Now, not only does the seller receive the full value of their sale, but also, depending on how the sale is designed, that money can grow and pay them interest and principal. Using this capital gains tax deferral strategy, people wanting to liquidate their assets are able to keep the full value of their business or real estate sale 14

InsuranceNewsNet Magazine » August 2020

and grow its value in a diversified and secure fashion, and the agent or advisor winds up writing annuities and life insurance policies because of it. Q: What are the biggest benefits for someone using this strategy? A: One, we help people live off more money. Ask anybody if they would rather live off $10 million or $6 million — I think you know the answer to that. Second, selling a business this way provides security and diversification instead of having all their money still tied up in the business or going through a standard installment sale. So the person who owns the business and wants to sell to the trust would become a creditor, and their money would be secured against the money that is inside the investments and the trust. In other words, they become creditors to the trust. They also get to approve or disapprove every investment that goes into that trust — which is where an insurance agent, financial advisor or Registered Investment Advisor (RIA) comes into play. Third, there are more than capital gains taxes at stake. In many regular circumstances, if you were to take the tax and have all of it hit you at once, you’re thrown into the highest income tax bracket. By securing that money in an annuity or other investment, you’re now letting the seller receive income in a lower tax bracket. The last benefit I like to bring up to people is the rule of 72. Let’s say that you sell a business and the capital gains taxes would have been $1.5 million. Using this strategy, it’s like telling the sellers that not only do they get to keep the $1.5 million inside the trust, but they only have to pay tax on the additional money that it earns. Looking at the rule of 72, let’s say you could double that money in 10 years or less. The $1.5 million you would have owed to the government is now worth $3 million. Even better is you could double that again in hypothetically another 10 years, whereas if you just wrote the government a check on a standard sale, that money is gone.

With their money in a trust, clients don’t owe the government interest on the original transaction; they only owe their tax on the amount of money they are paid with their installment. Q: What is the opportunity size that a strategy like this represents for agents and advisors? A: It’s huge. Spread across the entire country, there is currently about $120 trillion worth of assets that are perfect for tax-deferral strategies like this one. And as I mentioned, it’s not simply businesses but includes art, farms, real estate, stock, mineral rights, yachts. This strategy benefits anything that involves highly appreciated assets. It also drastically differentiates those using it from everyone else working the typical Social Security seminars. We don’t need to bribe people to listen to what we have to say. That’s the key. Is your marketing plan dead? Not so with our capital gains solution, in these changing times, group and face to face meetings are out, we teach the agent to market differently. Q: Are you looking to recruit agents and advisors to work for you? How does a strategy like this impact IMOs, FMOs, BGAs, broker-dealers, etc.? A: We are creating a win-win-win situation with this program for everyone involved. This strategy doesn’t require anyone to leave and change insurance contracting. In fact, we’re all about protecting and elevating those firms like FMOs. After all, agents and advisors joined their IMOs and FMOs for a reason. We do not want to disrupt that. We just want to help them grow within their respective firms and help those firms grow. At the end of the day, we want to give them some unbelievable options that can carry them into a wealth-transfer setting in a more prepared fashion than they ever had before. This strategy helps those working within their IMOs and FMOs access those high net worth clients that they would otherwise never gain access to. Regardless, this program is set up so that whether you are an FMO or a bro-

ker-dealer or an RIA, you are going to manage the money. We simply supply you with the strategy to get you in front of the owners and key decision-makers — and do it without spending a dime on expensive seminars, dinners and other plans that might not pan out. Our job is to take whatever case an agent or advisor finds from start to finish so that the agents benefit from positioning and writing their products. With proper diversification, the advisor works with the trustee to invest in REITs, bonds, annuities, securities, life insurance or other prudent investments that are suitable to help assure the trustee’s performance in repaying the seller-taxpayer according to the held installment sales note. The reinvestment of the proceeds may result in more or less risk, depending on the nature of where the proceeds are

Q: How difficult is it for an insurance agent or advisor to learn your program and get started in the market?

learn the ropes. After that, they sit in on calls and shadow how the process works so they can see for themselves how simple it is, because business brokers want to make deals, but many of them, as stated earlier, simply can’t work around the capital gains tax burden many business owners face.

A: It’s very simple. We give everybody a link to get on the system. It takes about five minutes to get on. Next, they’ll be greeted by our estate planning team with a nice letter welcoming them and letting them know what we are going to do. From there, we train them — everybody needs to be trained so they know what they can and cannot do.

This solves the problem so well that it has those brokers chasing after agents and advisors who know about this strategy. And all the advisor must do, in many cases, is make the introduction, and we’ll handle the rest. With the partnership with Kim Coulter, that means even helping with premium finance case design.

We’ll even train them on how to walk into a business brokerage office — and we’ll even do it with them. It takes just three hours a week to start out and

No seminars, no dinners, no plate lickers. People following this strategy hold a unique power that lets them access the nation’s big-ticket clients. •

reinvested and the seller-taxpayer risk assessment. All the heavy lifting is completed by our tax team, our case managers and our trustees.

THE ESTATE PLANNING TEAM, NORTHSTAR FUNDING PARTNERS AND ENGINEERED CAPITAL GAINS SOLUTIONS INC. INTRODUCE AN UNBEATABLE COMBINATION OF LEAD GENERATION AND PREMIUM FINANCE The business opportunity that Engineered Capital Gains Solutions Inc. (ECGS) represents in the large case market is so enormous that legendary premium finance expert Kim Coulter and his Northstar Funding Partners have joined forces with ECGS to help agents and advisors following the ECGS strategy place the largest cases of their lives. “Financial services professionals are always searching for new client opportunities. With this strategy, those opportunities now mean five-, six- and even seven-figure premium sales,” Kim Coulter explains. “With regards to financial services products life insurance can be integral to the strategy and in some settings an ideal method to provide an estate planning solution or long-term

supplemental income. As the trust disperses funds, those monies can be allocated for life insurance and perhaps leveraged in a financing scenario. The possibilities here are varied and unique. The disbursements combined with life insurance financing could generate significant benefits for the seller as they defer taxes and use the financed policy for their longterm financial needs.”

And all anyone has to do is visit MostPowerfulStrategy.com to access a free information packet diving even further into how this program works.

August 2020 » InsuranceNewsNet Magazine

COVER STORY SOMEONE WHO LOOKS LIKE ME

The industry examines how it can recrui advisor force to serve a diverse nation. By Susan Rupe 16

InsuranceNewsNet Magazine Â» August 2020

SOMEONE WHO LOOKS LIKE ME

hen Barbara Turner was growing up in Cincinnati, she was familiar with only three white people. Two of them — President John F. Kennedy and his brother Robert — had their portraits in places of honor on the wall of her family’s home along with a portrait of Dr. Martin Luther King Jr. The third was her family’s life insurance agent, who came to the house every week. “My parents worked on Saturdays, and that was the day the insurance agent came to our house to collect the weekly premium,” Turner recalled. “My parents put the premium money on a tray by the front door before they left for work. My siblings and I were charged with making sure the premium was given to the insurance agent when he came to collect.”

COVER STORY

“pale, stale and male” business. In interviews with companies and people of color in the industry, it seems that success comes from the top — and the bottom. Companies have found success by targeting key executive positions for people of color, so the influence will trickle down, and also entry positions, such as interns. Turner’s company is one of many carriers trying to create a more diverse environment, one hire at a time. In her position, she is working to lead her company toward “cultivating an environment of diversity, equity and inclusion. “And we’re appealing to other women and people of color in a way that would cause them to want to join the life insurance industry or the financial services industry in general,” she added. During Turner’s career journey, she frequently found herself the only Black

“We have been very intentional in our efforts to attract, retain and help women and individuals of color succeed in this industry.” Barbara Turner, president and chief operating officer, Ohio National Financial Services

t a diverse

That insurance agent’s weekly visit to Turner’s house was her first real interaction with someone who was white. Today, Turner is the first Black woman to serve as president and chief operating officer of Ohio National Financial Services. She is one of the answers to the question of how the life insurance industry can diversify what is widely known as a

woman in the room. It was that way when she began her career in banking and continued as she moved into the world of life insurance. She started her career in the trust department of a bank, which she said was her first exposure to wealth. “That is where I learned the power of financial literacy and financial independence and financial security,” she

August 2020 » InsuranceNewsNet Magazine

COVER STORY SOMEONE WHO LOOKS LIKE ME said. “I really got to see firsthand how financial discipline and wealth building and legacy planning make positive and lasting impacts on the lives of others and in our community. I decided that I wanted to build a career in financial services because I felt it really allowed me to obtain financial independence and security, but also educate others on the importance of financial literacy and security and independence.” An investment advisory and broker-dealer firm recruited her away from the bank. She started as the trading manager, eventually was responsible for the trading system and operations, and also managed a savings portfolio.

and sponsor them and help them to feel that this can be a vocation that provides great fulfillment and allows them to really touch lives.” Although Turner remembers how lonely she felt early in her career, she also remembers that she survived the experience. “Now I thrive in this environment and I do everything I can to make sure we’re appealing to other women and people of color in a way that would make them want to join the life insurance industry or the financial services industry in general.” Several years ago, Ohio National hired a consultant to educate senior management and the board of directors how to

Companies have found success by targeting key executive positions for people of color, so the influence will trickle down, and also entry positions, such as interns. But Turner was usually the only woman and the only person of color as she progressed in the banking and investment advisory worlds. In addition, she served a predominantly white clientele with one exception — professional athletes who were Black. “Early on, it was very lonely for me in this business,” she said. “There were not many women or people of color. I was often excluded from social outings. Many of the individuals I worked with came from wealthy backgrounds, and I was barely making ends meet in the beginning of my career.” Turner said her desire to succeed and to belong led her to forge relationships with those who could help her move forward in her career. “It was an effective strategy. Many of those same individuals later served as mentors and sponsors to me. And so today, I’ve been very intentional about trying to bring other women and people of color along and expose them to our industry, to mentor 18

make the company more diverse. “We started with the business case for diversity,” Turner said. “But it’s not just making the business case. Ultimately, it’s the right thing to do to make sure you have an environment that’s diverse and inclusive.” The company implemented some of the consultant’s recommendations, which include forming a diversity advisory board. Turner said Ohio National also developed a Next Market Program at its home office, working with agents to help them understand cultural differences and “how to attract and retain people who are different from them whether by ethnicity, gender, sexual orientation or what have you. We have been very intentional in our efforts to attract, retain and help women and individuals of color succeed in this industry.” Turner said that seven or eight years ago, the average age of an Ohio National agent was 57. Today it is 45. Before the company’s diversity initiatives, the company’s field force was about 90% white

InsuranceNewsNet Magazine » August 2020

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. There are charges and expenses associated with annuities, such as surrender charges for early withdrawals. The SecureLink Chronic Illness Access fixed indexed annuity and Accelerated Death Benefit are not long-term care insurance. They are not a qualified benefit under the Internal Revenue Code. The Accelerated Death Benefit is automatically included in every contract and provides an option to accelerate death benefit proceeds in the event that the owner becomes chronically or terminally ill. Withdrawals or surrender of contract value during the acceleration period will be subject to taxation in the same manner as any other withdrawal. Some products and features may not be available in all states and features may vary by state. Not all products, features and optional benefits are available from all firms. Guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company. These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of its products. Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. For financial professional use only. Not for use with the general public. This material may not be reproduced in any form where it is accessible to the general public.

INSURANCE INVESTMENTS RETIREMENT

SecureLink Chronic Illness Accessâ&#x201E;˘ with Accelerated Death Benefit Rider1 8% death benefit roll-up compounded annually 2

Flexibility to access the death benefit for chronic or terminal illness

No underwriting, 3 making it easy for you to place new business

Annuity Sales Desk: 1-866-335-7355

1. In certain states this rider is named the Roll-up Death Benefit with Enhanced Surrender Value Rider. Please refer to the SecureLink Chronic Illness Access Quick Facts for product features, variations and terminology used in each state. The rider is automatically included for an additional cost. 2. In most states, the maximum Roll-up Value (200%) is based on contract value, which can grow based on interest earned, or decline due to rider charges. As a result, once the death benefit reaches the maximum, it may fluctuate up or down as the contract value changes. In New Jersey, the maximum is 200% of the purchase payment less withdrawals. 3. An individual may not purchase this annuity if they are currently in a nursing home, skilled nursing facility or unable to perform any one of the six Activities of Daily Living.

COVER STORY SOMEONE WHO LOOKS LIKE ME

“We want to mirror the communities in which we live and work.” Jane Conti, vice president of target marketing and recruiting, New York Life

males. Today, women make up about onethird of the company’s agents. Although Turner didn’t have the numbers for the company’s agents of color, she noted that “when you walk into the room today, instead of seeing 90% white men, you see a lot of Black and brown faces. We have become a real melting pot of individuals. It’s a beautiful sight, as it lets us know that we’re serving all of our community and we’re attracting agents who represent what our communities look like.” Ohio National has a diverse workforce in its home office, Turner said, but added the company “has some work to do as it relates to color” at the senior level. “But we are making progress. We are having courageous conversations about diversity, equity and inclusion. Through those conversations, we are learning to embrace the concept that we all want the same thing ultimately and that when someone dies or has a financial need, it doesn’t matter what color or gender they are. They want us to be there to deliver on our promise.”

Serving An Increasingly Diverse Nation

When you visit Chinatown in many major American cities, you are likely to see a New York Life office with the sign written in Chinese. New York Life’s presence 20

in many ethnic neighborhoods is part of the company’s initiative to recruit diverse agents to serve an increasingly diverse U.S. population. Jane Conti, New York Life’s vice president of target marketing and recruiting, said the company has spent the past two decades focusing on what they call “the cultural market.” “We are working strategically with our field force across the country, and our managers in particular, to ensure that we mirror the communities in which we live and work,” she said. Conti said New York Life looked at the nation’s changing demographics as the U.S. entered the 21st century and projected what the ethnic makeup of the country would be in the future. “We looked at how we could make sure we’re relevant and how we can serve those diverse communities. We looked at those communities that are growing and are underserved by the products and services we offer. Based on that, we determined we would build a plan around serving those communities and supporting our local offices.” New York Life has agencies that are targeted toward the Black, Chinese, Latino, Korean, South Asian, Vietnamese and Filipino communities. Nearly half of the company’s field force of more than 12,000

InsuranceNewsNet Magazine » August 2020

are members of these ethnic groups. The company’s diversity efforts start at the local level, Conti said. “We sit down with the managing partner who heads up our local sales offices and the entire management team. We look at the demographics of the area they are working in, what it looks like relative to the current state of their respective office, and then we look at the different opportunities that the community presents. And we build a business plan around that.” The business plan consists of looking at different organizations, centers of influence and various ways that the local office can get involved in the community by having the agents and local managers actually go out in the communities and meet people. Conti said the community involvement leads to recruiting agents of color to serve those communities. In most instances, the agents are recruited through the centers of influence that the local office works with in reaching the community. “We want to increase the percentage of hires that we have from these markets,” she said. “We want to mirror the communities in which we live and work.”

Someone Who Looks Like You

Delvin Joyce has met in person with Black and white prospects who were surprised to discover they were meeting with a Black advisor. Joyce is a financial planner with Prudential in Charlotte, N.C. “Back then, I was doing a lot of cold-calling, and some people I talked to assumed I was white,” he said. “Sometimes when I met with them in person, they would be surprised that I am Black, and they would say something like, ‘You didn’t sound Black over the phone.’ And I don’t even know what Black is supposed to sound like.” Unlike Ohio National’s Turner, whose early experience with life insurance was with a white agent, Joyce grew up in the insurance business. His father had a second job with A.L. Williams & Associates, now Primerica Financial Services. “Back then, Williams was focused more on term insurance, so my dad made these T-shirts for us kids that said ‘The Terminators,’” he said. Joyce played football at James Madison University, and a friend of his suggested he interview for a job at John Hancock

SOMEONE WHO LOOKS LIKE ME COVER STORY after graduation. But his insurance career was put on hold when the New York Giants drafted him. After four years in the NFL, Joyce returned to insurance, this time at Prudential. Why Prudential? Because when Joyce went to a job fair to find a path for his post-NFL career, there were several other insurance companies recruiting agents, but all their booths were staffed by middle-aged white men. Prudential’s booth was the only one that was not. Joyce said his early days in the busi-

C-suite and director-level professionals. Many of his clients are what he calls “new money, first-generation wealthy.” “They didn’t come from money, but now they are acquiring wealth, and they need help navigating that landscape,” he said. Joyce said that although Black families have high ownership rates of life insurance, their policy face values traditionally are much lower than the amounts owned by white families. He said that in order for Black Americans to learn about the

white guy, and he was sitting down with white clients. But now the industry has done a great job of showcasing the fact that there are diverse people in it.” For the industry to become more diverse, there must be more support and resources available to help Black advisors succeed once they enter the business, Joyce said. “The reality is that Black-owned businesses fail at a higher rate than white-owned businesses. And if you’re starting in this industry, you’re starting as a business owner. And most people can’t afford to stick around and build the business. So giving people some sort of structure where it’s not eat what you kill would give people resources to sustain themselves and their families while building their practice.”

“I go to industry events and I’m one of only four or five Black people out of a room of 1,000.” Delvin Joyce, financial planner with Prudential in Charlotte, N.C.

ness were challenging because of the emphasis on what is known as Project 200, where new agents list the 200 people — family, friends and contacts — to whom they will try to sell insurance. “We’re all well aware that there’s a racial wealth gap. So if you’re bringing Black advisors into this industry and saying you’re going to be successful based on your 200 closest connections, obviously if there’s a racial wealth gap, there’s a chance that their 200 connections may not have the same kind of wealth as those of the white advisors. So it already kind of puts a Black advisor at a disadvantage unless they have the wherewithal to build a bigger network right off the bat.” Joyce serves a clientele that is about 70% Black, with many of his clients

ways life insurance can create wealth and leave a legacy, they need to meet with someone who looks like them and understands their concerns. It’s not only Black consumers who need to see someone who looks like them. Prospective Black advisors also need to see someone who looks like them, Joyce said. “I go to industry events and I’m one of only four or five Black people out of a room of 1,000. So the role-modeling isn’t there. One of my goals is to bring two or three new people to each event I attend so that they can see the role-modeling.” Joyce also noted that until about 10 years ago, the industry showed few people of color in their advertising and marketing. “You would see a TV commercial, and the advisor was always a middle-aged

It’s All About The Pipeline

The way to attract more advisors of color into the industry is to reexamine the pipeline that feeds prospective hires into a company. That’s the word from Wes Thompson, whose career began at Aetna and included serving as president of Sun Life Financial U.S. before he became president and CEO of M Financial Group in Portland, Ore. Thompson recalled how he was accepted into Aetna’s executive intern program while he was studying for his MBA at New York University in the 1980s. He said the mentorship he received in the program led to his being one of only two Black interns chosen to run a regional office for Aetna. While running Aetna’s offices in Southern California, Thompson said, he “learned some lessons very early about the importance of recruiting diverse talent.” He sought out a few people of color to recruit for the marketing department, even though they had no experience in the insurance business. But Aetna was a mostly white organization at the executive level at the time, he said. There was only one other Black executive in the life business and a handful of Black executives in the company’s property/casualty division. When Thompson moved to Sun Life

August 2020 » InsuranceNewsNet Magazine

COVER STORY SOMEONE WHO LOOKS LIKE ME 2008, he found that there were no Black people on the company’s executive team and no Black people working in the next level below the executive team. “Here we were, sitting in Boston, the home of more universities than almost anywhere in the nation, and we weren’t recruiting any people of color,” he said. Thompson hired a Black man as the company’s human resources director and a Black woman as the company’s chief marketing officer. From there, he started a leadership development program to increase diversity at the company. “We started an internship program that focused on recruiting graduates from local universities,” he said. “Before I got there, there was an ad hoc internship program, but we found that the people who got hired were friends and family. And that’s not a bad thing, except that there were no Black people coming in as friends and family.” Thompson set out to change that, and Sun Life began recruiting from a diverse pool of applicants to fill 10 positions. The first group of interns included two Black women, one Black man and one Asian man. “So by doing that, we started the pipeline,” he said. “We began to build a pool from which you could pull applicants. But unless you have that pipeline, it’s really hard to change the makeup of your organization.”

“Unless you have that pipeline, it’s really hard to change the makeup of your organization.” Wes Thompson, president and CEO of M Financial Group

Encouraged By Social Unrest

Over the past few months, the nation has been rocked by social unrest stemming from racial inequality. Mike James, president of NFP Life Solutions in Boston, said he is encouraged by the situation. “We’re uncovering systemic bias and racism that exist inside institutions,” he said. “We’d be naive to think it doesn’t exist in the insurance industry. I think as we shine a light on things systemically biased and unjust and start to root those things out, it will leave room for more inclusion and more acceptance of a broader group of people.”

“I’d like to see more people who look like me make contributions like I’ve had the chance to make.” Mike James, president, NFP Life Solutions in Boston

InsuranceNewsNet Magazine » August 2020

The result, James said, will be “more leaders of color starting to move into places that traditionally they have not had the chance to. “So I’m hopeful this environment we’re experiencing now will start to permeate corporate America and the business world, and help them reshape policies, procedures and programs that give people of color real paths to growth and success.” James said that when he began his career at John Hancock 29 years ago, “some people who are not Black extended a hand and saw my unique abilities and talents.” Now that he has a visible role at NFP, James said, “I’d like to see more people who look like me make contributions like I’ve had the chance to make. “I think we’re going to come out of this environment, and it’s not going to be next month. This work takes vigilance, and it will take time. But I think if we stay focused on it and we stay on the right side of effecting change positively, we’ll all benefit from it.” 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.

the Fıeld

A Visit With Agents of Change

A BOUNTIFUL

HARVEST Ray Jones reaped a successful career using lessons he learned growing up on a dairy farm. BY SUSAN RUPE

IN THE FIELD

ay Jones and his brothers were regulars on the livestock show and fair circuit when they were growing up on their family’s dairy farm in southern Ohio. But although they worked hard to get their cattle in shape for the exhibit ring, they didn’t take home any ribbons at first. As they were the only Black family in their state who showed dairy animals competitively, the Jones brothers found their cattle frequently were ignored by judges in favor of those exhibited by white farmers. One year, the boys decided they had had enough of coming home from the state fair empty-handed. They told their father they weren’t going to the fair anymore. His response? “Back up the truck.” “That was his way of telling us not to give up. Load those cows onto the truck because we’re going to the fair,” said Jones, who is a wealth advisor in Columbus, Ohio. Eventually, the Jones family’s luck on the fair circuit turned around. Their herd of cattle began winning enough ribbons and medals to fill several boxes. Jones’ father ultimately was inducted into the Ohio Agriculture Hall of Fame. Jones said that the lessons learned from his early years of working the family farm prepared him well for success in the insurance and financial services field. “You take a gamble every year,” he said. “You put your crops in the ground, and you hope you get enough rain or you don’t get too much rain. And then when harvest time comes, you hope you can get into the field and it’s not too wet. My point is there’s nothing guaranteed. So if you grew up and got through that uncertainty, then when you start out in the life insurance business, you’re not afraid of uncertainty.” Jones said that a farmer plants seeds each year and knows that if they get a good crop six or eight out of every 10 years, they will make money. By the same token, if advisors set a goal of seeing 10 prospects each and every week, they will make enough sales to be successful. After graduating from Ohio State University in 1969, Jones had a full scholarship to the University of Cincinnati Law School. But illness forced him to withdraw in his second semester. He needed a job, so he began selling office supplies. Soon afterward, he bought a life insurance policy from a Northwestern Mutual agent who told him he would make a good insurance agent. Jones took the suggestion and signed on with Prudential in 1973, the same year he married his wife, Diane.

August 2020 » InsuranceNewsNet Magazine

the Fıeld

A Visit With Agents of Change

The Eight Step Sales Process

BACK UP TH A Guide for

E TRUCK!

the Successful

Salesperson

In his book, Back Up The Truck!, Ray Jones outlined the sales process he developed to be an excellent listener and stay on track during an interview. STEP 1: Get to know your prospects, and make them feel comfortable. One of the most common mistakes we make is not breaking the ice or initial tension that often exists when we meet someone for the first time.

Raymond Jon

STEP 2: Sell yourself and your company. I found the two most common objections that prospects have for not buying are (1) they are not sold on my personal qualifications and (2) they are not sold on my company. Successfully handling this step will help eliminate objections to buying before they ever come up. STEP 3: Ask the “magic question.” Here is an example: “Mr. Prospect, do you have any questions (about your insurance or investments in general)?” Then I shut up. If you ask the question sincerely, your prospect will tell you what’s on their mind. They might say, “Well, I want to start a college fund for my children.” STEP 4: Get the pertinent facts. Based on what the prospect tells you in Step 3, proceed to get the facts that pertain to their particular interests and needs. At this point, you can decide whether you will go ahead and proceed with the remainder of your interview or turn the interview into a two-interview situation. STEP 5: Point out the problem through rational analysis. After you have obtained the facts, take your prospect step by step through the solutions you have to show them and how their individual needs can be met using those solutions. STEP 6: Present the solution. After you have illustrated the need to your prospect through rational analysis, then present your solution. STEP 7: Close or keep silent. Here is an example: “Mr. Prospect, this product will provide the service and solution you need, and the cost is $100 per month.” Then I don’t say another thing. On most occasions, the prospect will either say, “Yes, I feel that this is an adequate solution to my problem,” or “I can’t afford $100 per month.” So at this point, it is just a matter of whether they purchase what I have proposed or want some modification of the solution. STEP 8: Don’t forget to get referrals. If you have done a good job on the previous seven steps of your interview — sold yourself and your company, made friends, presented a professional solution that relates to the facts, and have shown this solution through rational analysis — then your prospect will look at you as a professional and be more willing to refer you to others. Ray Jones, Back Up The Truck, backupthetruck.biz

InsuranceNewsNet Magazine » August 2020

es ChFC

Jones credited his earliest supervisor, John Poston, with much of his success as he started out in the life insurance business. Jones was the only Black associate in his office, and he said that Poston trained him in the same manner as he did all the other agents under his supervision. “It was important to him that I be just as successful as any of his other associates,” Jones said. “He consistently went out of his way to give me the attention and confidence I needed.” Jones said that his supervisor also pushed him to sell to white prospects as well as Black prospects. “Don’t limit yourself just to your own ethnic group,” he said. “There’s a perception out there that Black people will buy only from other Black people. But the truth is that Black people will also buy from white people, and white people will buy from Black people. So there’s a big market out there, and I want a piece of all of it.” In his early days in the insurance business, Jones and his wife would spend Saturdays going through the list of births and marriages from the Columbus Dispatch. From that list, he would call on people during the week and set up appointments. Eventually, Jones realized he needed to develop a niche market, so he put his law school background to work and began to cultivate local attorneys as clients. From there, he became involved with the local bar association, attending their meetings and writing articles for their newsletter. In addition to serving attorneys, Jones built up a group insurance practice among small-business owners in Columbus. After about 20 years, Jones sold his Prudential practice and became a trainer. He was on the road three days every week, traveling among five states, doing agent training sessions. How to sell and how to talk to prospects were the biggest training needs Jones saw for the agents he trained. “First, you have to create a need, and you have to communicate how this product fits their need. And then second, you have to know how to illustrate it. You have to know how to get on a computer and run the proposal,” he said. “From there, I would

A BOUNTIFUL HARVEST IN THE FIELD

show them different situations and tell them this is how this product fits in this situation. It’s all about here’s the situation, here’s the product that works, and here’s how to illustrate and explain it.” Jones trained agents for 10 years before going back into practice as a financial advisor. Although he was starting over, he found it easier the second time around. “I had lived in Columbus for a lot of years at that point, and I knew a lot of people,” he said. “I was able to call on some of my old clients. Even though I had to start from scratch, I was starting from scratch with

shared involvement with the National Association of Insurance and Financial Advisors-Columbus. “Ray has a great sense of humor, and he is very personable,” Roach said. “I think the fact that he is so personable is a big factor in his career success.” Jones and his wife have two daughters, one a kindergarten teacher and the other a nurse practitioner. He enjoys playing golf and outdoor cooking. He recently wrote a book, Back Up The Truck! A Guide For The Successful Salesperson, in which he shares his secrets

My point is there’s nothing guaranteed. So if you grew up and got through that uncertainty, then when you start out in the life insurance business, you’re not afraid of uncertainty. a more elevated clientele than I worked with when I first started out.” Today, Jones serves a clientele made up mainly of those age 50 and older — what he calls “a pre-retirement, post-retirement practice.” He does a lot of 401(k) rollovers and retirement planning, and manages clients’ assets. After close to five decades in financial services, Jones said the biggest changes he has seen in the business are the increased use of technology, and the greater variety and complexity of products in the marketplace. Clients also have changed over the years. Consumers are still buying life insurance, but they want their advisors to offer them “the total picture,” he said. “They want retirement planning, they want investments. They want their advisor to help them with all these things — not just life insurance.” Bob Roach is a Northwestern Mutual advisor in Columbus who has known Jones for many years through their

to sales success. But the book also contains many of Jones’ philosophies of business and life, and it includes his story of growing up on the dairy farm in southern Ohio. He said he wrote the book as a memoir for his three grandchildren “to show them, ‘Hey, you can do this.’ “Whether you go into insurance and financial services or whatever you go into — you’re going to have obstacles out there,” Jones said. “But there are more people out there who are going to help you than are going to hold you back.” 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 2020 » InsuranceNewsNet Magazine

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LIFEWIRES

Lower- And Middle-Class Families Dropping Coverage Even before the COVID-19 pandemic hit, ownership of life insurance fell among

households earning less than $100,000 a year, declining by 25% over the past 10 years. That was one finding from this year’s Insurance Barometer Study by LIMRA and Life Happens, which reviewed 10 years of consumer data on life insurance and related financial issues. In January, 46% of adult consumers did not own life insurance. Although 36% of respondents said they intended to purchase life insurance in the next 12 months, many were without it during the height of COVID-19.

Top Reasons For Not Owning Life Insurance Have other financial priorities Too expensive Don't feel I need any Unsure of how much/what type to buy Haven't gotten around to it Don't like thinking about death

67% 65% 56% 52% 43% 42%

SOURCE: LIMRA

Perception of cost may be the most significant barrier for young adults to purchase life insurance. Half of millennials believe the estimated yearly cost vs. a $250,000 level-term life insurance policy for a healthy 30-year-old is $1,000 or more, when in actuality, it’s closer to $160 per year, LIMRA reported.

COVID-19 THREATENS INSURANCE PORTFOLIOS

While the COVID-19 pandemic likely will impact the claims side of the insurance industry, it is also affecting another component: insurance company investment portfolios, according to Conning. Many insurers invest most of their customers’ premium dollars in investment-grade securities (those rated AAA through BBB, which carry NAIC 1 or 2 designations). Insurers have a long history of investing in safer investments such as AAA-rated U.S. Treasuries, but the past decade’s historically low interest rates led insurers further into generally higher-yielding assets, including IG corporate bonds. However, Conning believes that the economic damage DID YOU

KNOW

caused by social distancing measures and business closures to slow the spread of COVID-19 has in turn damaged U.S. corporate credit profiles. Conning expects corporate earnings to be dramatically impacted by higher unemployment, reduced consumer spending and weak business investment. Companies are also aggressively drawing on credit facilities and raising cash via record bond issuance, ensuring they have adequate financial flexibility to survive a potentially deep recession.

METLIFE TO PAY $84M IN DEATH MASTER FILE CASE

MetLife has agreed to pay $84 million to settle an eight-year-old class-action lawsuit filed by shareholders who claim the insurer underreported its liabilities for claims to deceased policyholders. Plaintiffs claim that MetLife failed to include data from the Social Security

KKR will acquire all the outstanding shares of Global Atlantic, a retirement and life insurance Source: Business Wire company. Source: The Wall Street Journal

InsuranceNewsNet Magazine » August 2020

QUOTABLE We just have to become better listeners. — Marv Feldman, former Life Happens president and CEO

Administration’s “Death Master File” in tabulating its incurred but not reported reserves. The SSA database includes all known deaths and is used by insurers to distribute benefits. By failing to include SSA death data and associated pending payouts, plaintiffs claim MetLife presented an inaccurate financial picture during quarterly reports to shareholders. MetLife also failed to disclose regulatory investigations into its misuse of the SSA death database, plaintiffs allege in court documents.

TRUST IN AGENTS AT 12-YEAR HIGH

Despite the unsettled economy over the past half year, public confidence in insurance agents is at an all-time high, up dramatically from a low recorded in the wake of the 2008 crash, according to LIMRA data. In October 2008, only 9% of consumers had “extreme/ quite a bit of” confidence in insurance agents and brokers in LIMRA’s Consumer Sentiment Survey. In May of this year, that percentage had risen to 32%, a 255% increase. Consumer confidence also increased in insurance companies, with 40% of consumers saying they had extreme or quite a bit of confidence in life carriers. Financial advisors saw a similar increase in their esteem among consumers. In October 2008, 11% of consumers had extreme or quite a bit of confidence in financial advisors. That grew to 36% by this May.

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LIFE

Technology Touching ‘Every Aspect’ Of Insurance In Pandemic When the COVID-19 pandemic chased everyone indoors, an insurance industry that relies on face-to-face contact suddenly had to change course. What happened was insurers, middlemen and agents all learned they can rely on technology to forge a new way of selling insurance products. By John Hilton

nsurers and everyone along the distribution chain have long anticipated the impending technology infusion that would transform the delivery of life insurance and related products to consumers. That technology transformation crept closer at a glacial pace until the COVID-19 pandemic pushed an industry that relies on face-to-face contact to accelerate its plans. And something happened along the way to the new cyber-reality: Insurers, middlemen and agents all learned they can rely on technology to forge a new way of selling insurance products. “It really is touching every aspect of 28

the business,” said Kara Hoogensen, senior vice president of specialty benefits at Principal Financial. Principal is just one of many carriers that accelerated long-debated technology plans. For example, an online applica-

‘Some Pressure’

Likewise, Principal accelerated use of its Human API platform for consumers to provide access to their electronic health records. The efforts are helping Principal limit its pandemic impact, Hoogensen said.

“Five mail drops has now gone to one email. So it’s gone from 21 days and five stamps to one email and an authentication DocuSign.” tion option in use for life insurance was quickly adapted for use with Principal’s disability insurance products. “We definitely worked to get that out into the marketplaces as soon as we possibly could,” Hoogensen said. “It’s just easier to do business virtually and digitally at this point in time, as opposed to having a broker sit across the table and help an individual fill out a policy for income replacement.”

InsuranceNewsNet Magazine » August 2020

“We are going to see some pressure on our premium in the near term, but we are confident that it’s going to be a shortterm impact,” she added. It’s a similar story at Foresters Financial, where executives fast-tracked several technology initiatives to help the company ride out the pandemic, said Matt Berman, chief distribution officer. The company is well positioned, Berman said, because most of its life insurance business

TECHNOLOGY TOUCHING ‘EVERY ASPECT’ OF INSURANCE IN PANDEMIC LIFE is already nonmedically underwritten, meaning no blood or fluids are required. The actuarial calculation is an important bottom-line formula that can get thrown off if major changes are not deftly handled. Foresters, like most insurers, capped its final expense whole life insurance product at age 75. Previously, sales of that product were capped at 85. “When you eliminate blood and fluid on fully underwritten pricing, but with the math that we do to make this profitable, you may have X percentage of mortality slippage,” Berman said. “But if you have fewer hands touching the application from entry to issue, what you’re hoping is that operational efficiency should neutralize the mortality slippage.

to where we were,” said Mike Kalen, CEO of Covr Financial Technologies. “Everyone seems to like it. Carriers are comfortable, intermediaries like Covr are loving it, and the advisors, agents and clients are all benefiting from simplification and getting policies faster.” Covr works with most of the major life insurance carriers in the marketplace, and many of them are increasing the face amounts eligible for underwriting without a medical exam, he explained. Amounts are still on the lower end — generally up to $3 million at most — but the rapid adoption of technological platforms is helping close more life insurance sales quicker. An industry long resistant to a full embrace of technology is now

Accelerated Underwriting, Electronic Delivery Jump During Pandemic

More Honest Than You Think

The percentage of applicants under age 60 going through accelerated underwriting on life insurance policies up to $1 million jumped from 33% to 50% in two months. Before the pandemic restrictions, Covr delivered just 10% of policies electronically. In eight weeks, that percentage grew to 62%. SOURCE: Covr

So net-net, you’re still either positive or neutral.” Nearly four months into the pandemic, it is the sales that are keeping losses low for insurers like Foresters. All products on the company’s e-app and non-face-toface platforms maintained steady sales, Berman said. “Only in the areas that have been solely supported by either a para-med or a paper app, we saw a dip in sales,” he added.

Helping Middlemen, Too

Further down the distribution chain, technology is also helping independent marketing organizations keep insurance products moving. “I don’t think there’s going to be a return

icies delivered electronically, Kalen said. “That saves 21 days on the process as opposed to having it mailed,” he explained. “Five mail drops has now gone to one email. So it’s gone from 21 days and five stamps to one email and an authentication DocuSign.” Insurers are growing more comfortable and trusting of the processes, Kalen said. Big data availability is making medical assessments more precise, and that means good offers for potential clients. “We think that over time, the offers have gotten better,” Kalen said. “Meaning that two years ago, you always felt that your healthiest client got the second-best rate, like the insurance companies had built in some conservatism into their rates. Now we feel the healthiest clients are getting the best rates.”

forced to use it as much as possible. The early returns are encouraging, Kalen said. Covr is among many companies providing platforms to accelerate underwriting without medical exams, allow for electronic signatures and deliver policies electronically. In two months, the percentage of applicants under age 60 going through accelerated underwriting jumped from 33% to 50%, Kalen said, citing Covr statistics. That is on life insurance policies up to $1 million. Before the pandemic restrictions, Covr delivered just 10% of policies electronically, which meant agents still had to meet several times with clients. In eight weeks, that number grew to 62% of pol-

The life insurance application process starts with the prospective buyer self-disclosing medical conditions. And surveys are showing that consumers are actually more honest than expected, Kalen said. “The insurance carriers believe that clients are more honest with a computer or a trained call center person than they are with their agent,” he said. “So right away we’re getting better data in the self-disclose part of the journey.” Otherwise, the continued public availability of more and more data, such as criminal and financial, makes it easier for carriers to complete the underwriting process. But the emergence of technology in underwriting does not lessen the role or need for the insurance agent, Kalen said. “I think agents are realizing that their value applies regardless of the process that they choose to put their customers through,” he said. “So if an insurance agent can offer their customers wellpriced, simple insurance through a highly rated carrier, they are still adding a lot of value.” I n s u r a n c e N ews N e t Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

August 2020 » InsuranceNewsNet Magazine

ANNUITYWIRES

Annuity Sales Could Decline Up To 15% In 2020

A perfect storm of bad news is hitting annu2020 2021 2022 ity sales hard this year. Variable Annuities -10.2% ($91.5) -3.3% ($98.5) 5.3% ($107.5) In fact, the Secure —Non-RILA VAs -14.2% ($72.5) -10.6% ($75.5) -8.2% ($77.5) Retirement Institute is —RILAs 14.9% ($20) 37.9% ($24) 72.4% ($30) forecasting that overall Fixed Annuities -12.7% ($122) -15.6% ($118) -10.9% ($124.5) annuity sales will decline —Indexed Annuities -21.7% ($57.5) -8.1% ($67.5) 2.7% ($75.5) 8% to 15% in 2020. The —Fixed-Rate Deferred Annuities 2.1% ($48.5) -25.3% ($35.5) -18.9% ($38.5) COVID-19 pandemic —Income Annuities -39.5% ($7.5) -23.3% ($9.5) -7.2% ($11.5) triggered ultralow interTotal Annuity Sales -11.6% ($213.5) -10.4 ($216.5) -1.7 ($237.5) est rates, extreme market This data from the Secure Retirement Institute projects annual annuity sales (in billions) as the industry volatility and record-high deals with the impact of COVID-19. All data is percentage loss or gain based on 2019 annual sales. Actual sales figures are in parentheses and represent the median sales estimated by SRI. unemployment — condiSOURCE: Secure Retirement Institute tions that generally are unfavorable for annuity sales. The good news is the outlook for 2021 and 2022 is brighter. As equity markets and interest rates slowly rise over the next two years and the number of people age 65 and over expands to comprise 18% of the U.S. population, SRI is forecasting the annuity market will rebound. “Most annuity products will face headwinds under the current economic conditions,” noted Todd Giesing, senior research director, SRI Annuity Research. “However, registered index-linked annuities, which offer investment growth opportunity with limited downside risk, are uniquely positioned to thrive in this environment and successfully compete for clients.”

DPL, MIDLAND OFFER COMMISSION-FREE FIA

Regulation surrounding commissions may be favorable at the moment, but that does not mean that insurers are giving up on fee-based annuities. DPL Financial Partners and Midland National Life are the latest firms to team up on a new, commission-free fixed indexed annuity: the Midland National Capital Income. Executives tout its unique health-activated income multiplier feature, which can double income payments for up to five years to help prepare for increased personal care costs. It offers this feature through its income rider, which can create guaranteed lifetime income to help safeguard retirement lifestyles. “Health problems can dramatically impact a retiree’s expenses,” said DID YOU

KNOW

David Lau, founder and CEO of DPL. “We wanted to create a first-of-its-kind product that provides additional income should a client experience an unexpected health event.” The new FIA was expected to be exclusively available to DPL’s RIA member firms by the end of July.

COVID-19 SPARKS RETIREMENT CONCERNS, INTEREST IN ANNUITIES

Although most attention is focused on the immediate economic threats from the COVID-19 pandemic, the long-term impact is bad as well. A recent survey from Jackson National Life and the Insured Retirement Institute finds that more than half (55%) of financial

QUOTABLE Americans are in real danger of outliving their retirement savings. — Eric Henderson, Nationwide Financial

professionals believe 25% or more of their client base is at risk of running out of money during retirement. Conversely, a mere 4% report none of their clients is at risk, illustrating the vast majority of financial professionals believe at least one or more of their clients are in danger of exhausting their retirement savings. When asked the same question before the pandemic, 38% of financial professionals stated a quarter or more of their clients may deplete their retirement savings.

ATHENE TO REINSURE $27.6B OF JACKSON ANNUITIES

Athene Holding inked a deal to reinsure $27.6 billion of Jackson National’s in-force book of fixed and fixed indexed annuity liabilities in exchange for approximately $1.25 billion in ceding commission. Athene will also invest $500 million of capital in Jackson in return for a 9.9% voting interest corresponding to an 11.1% economic interest in Jackson. The combined effects of the investment and reinsurance transactions are estimated to increase Jackson’s risk-based capital ratio by approximately 80 percentage points.

Three in five clients say advisors have a responsibility to present guaranteed lifetime income products as part of a retirement income strategy. Source: Greenwald & Associates and CANNEX

InsuranceNewsNet Magazine » August 2020

ANNUITY

Income Annuities Can Be Mighty Structures Income annuities can be a bridge over the retirement income gap — but only if advisors can build that bridge correctly. By David Hanzlik

onstructing a solid income plan is essential to ensuring that clients’ retirement needs are met. But with a rapid decline in pension plans, escalating health care and cost-of-living expenses, and decreasing confidence in the solvency of Social Security, the imbalance between income and costs in retirement is growing starker for many Americans. This trend accelerated in the shadow of the Great Recession, and the COVID-19 pandemic only threatens to push savers further behind. Advisors can help clients tackle this growing shortfall through introducing income annuities. By offering a reliable, protected stream of funding, these products can be mighty structures. But with the current low interest rate environment and the misconceptions about annuities that have taken hold over the years, it can be hard for clients to see how these can be effective solutions for their planning needs. Here’s a road map for advisors looking to introduce their clients to annuities as a bridge to close the retirement income gap.

How Income Annuities Create True Liquidity Let’s consider a client: • She’s 65. • She has $1 million of retirement assets. • She wants to be able to spend $50,000 a year for 25 years (age 90). Here are some things we will assume about her portfolio:

Simplify, Clarify And Demystify

An alternative portfolio is to purchase a life-only income annuity:

Set The Scene

To show how beneficial income annuities can be, advisors first must educate their clients on how the retirement landscape has shifted over the years. In the 1980s, 60% of U.S. companies offered pension plans, which gave employees a guaranteed monthly source of income to provide for their retirement needs. However, in less than 40 years, that percentage has fallen radically to only 4%. And even though many companies still offer 401(k) accounts, only 41% of eligible em32

ployer-sponsored 401(k)s, those plans do not offer the same assurances as pensions do and can be very vulnerable to an economic downturn. While the upside of a 401(k) may be greater than that of an annuity or pension, there is no downside protection built in. The goal isn’t to scare clients into an annuity — but instead to show that the path to retirement is not always smooth, and a multipronged approach that offers both guarantees and upside potential is key to developing a sturdy nest egg.

SOURCE: CUNA Mutual

ployees ultimately contribute, and of those who do enroll, many aren’t maximizing the potential of their investments, according to a Financial Freedom Studio report. It’s also important to remind clients that even if they’re participating in em-

InsuranceNewsNet Magazine » August 2020

After advisors establish the “why” of income annuities, they can then explore the “how.” Annuities have gotten a bad rap as being overly complex products that cater only to the wealthy, so it is essential to educate your clients about how these products work to support their retirement goals. Start by highlighting guaranteed income — the very nuts and bolts that make these products stand — and how annuities operate similarly to a pension. Like pension plans, income annuities provide structured, direct monthly payments for a set life span. And unlike 401(k)s, income annuities have a floor to guard against fluctuations from interest rate changes or market volatility. So when downturns hit, the income stream can weather the storm. The loss of pension plans resonates with many Americans. Perhaps they were forced to take a pension buyout into a 401(k), or they have pension-backed parents who seem far more secure in retirement compared with their own prospects. By putting income annuities into this context, advisors can shatter the myths that surround these products and underscore them as applicable solutions.

Debunk The Myths

Despite the benefits, some clients will be skeptical. One of the most common concerns is that income annuities will lock up

INCOME ANNUITIES CAN BE MIGHTY STRUCTURES ANNUITY liquidity. Between the lump sum sticker price, the structured payout system and the often-confusing concept of risk-pooling, it’s understandable why some clients believe they’ll have less freedom with their money. But advisors know this is a misconception. The best way to address this perception is to reinforce the concept of true liquidity in retirement — the assets remaining only after appropriately setting aside assets to meet basic income needs. Advisors can really make income annuities shine with this framework. The value of true liquidity with these products is often higher when compared with a traditional retirement portfolio, giving clients more money and more freedom at the end of the day. Still, clients may hesitate at the contrast that would appear between different options — so it’s important to break it down. A great way to illustrate true liquidity is to walk clients through a case study. Let’s look at a healthy 65-year-old woman with $1 million in assets and a desire to reliably secure $50,000 per year — with

a 90% confidence level that she will not outlive her money. Using basic mortality projections, we need to create an income stream that will last until at least age 101 in order to achieve a 90% confidence level — in other words, there is only a 10% expectation that she will live past 101. With this starting point, we can compare two portfolios using Monte Carlo simulations: a 50% stock/50% bond portfolio, and a stock portfolio with a life-only income annuity. For the 50/50 construction, this client would need to set aside $958,410 in assets to meet her goals, and the initial true liquidity would be $41,590 — so only $41,590 is truly available for other needs outside funding the $50,000 per year income goal. However, with the annuity portfolio, the client can reach her goals with $776,328 in assets and a resulting initial true liquidity of $223,672. What’s more, with the 50/50 portfolio there is a risk that under some market conditions the entire asset portfolio will run out, while there’s no risk of running out of income with the annuity portfolio.

By using a case study like this, a client will be better equipped to understand how an income annuity can allow them more flexibility in retirement.

A Pathway That Brings Prospects

Advisors know better than anyone that the retirement income journey takes some careful navigation. With uncertain market conditions and a protracted economic downturn looming from the COVID-19 pandemic, clients are at a higher risk of encountering gaps in their income plans. However, with the right tools (annuities), as well as the right mechanism (dialogue to alleviate concerns), advisors can help their clients build a strong bridge to a secure retirement. David Hanzlik is vice president of annuity and retirement solutions, CUNA Mutual Group. David may be contacted at david.hanzlik@innfeedback.com.

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Learn more about how this growth-focused fixed index annuity can offer your clients a new strategic option. Visit: www.american-equity.com/destinations-annuity Annuity contract and riders issued under form series ICC17 BASE-IDX, ICC17 IDX-10-10, ICC20 E-PTP-PR, ICC18 E-MPTP-A (patent pending) and state variations thereof. Availability may vary by state. Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC. Possible interest credits for money allocated to an index-linked crediting strategy are based upon performance of the specific index; however, fixed index annuities are not an investment, but an insurance product, and do not directly invest in the stock market or the index itself. TM

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HEALTH/BENEFITSWIRES

Few Employers Plan To Drop Coverage Employers are in crisis management mode and facing uncertainty as the COVID-

19 pandemic has led to record high numbers of unemployment as well as concerns over business reopening. At a time like this, it’s easy to wonder whether employers will quit offering health benefits Employers Increasingly Confident They’ll Offer Health Benefits Employers’ confidence on whether they will offer health benefits a decade from now has ebbed and flowed since 2008. to their workers. 74% 73% But the Employee 69% 65% Benefit Research 62% 59% 57% Institute found 54% that few employers 44% 43% 38% offering health coverage are thinking 26% 25% 23% about dropping it. EBRI’s study 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 showed employers SOURCE: Employee Benefit Research Institute believe “health care is too emotionally charged to be on the table.” Instead, employers are looking to save costs through furloughs, salary decreases and cuts to 401(k) matches. Supreme Court that the ACA is invalid, including its protections for people with preexisting conditions. In a court brief, the administration contended “the entire ACA thus must fall” because of a tax law change made by the Republicancontrolled Congress in 2017.

HOUSE DEMS ACT ON ACA, BUT NO REPLACEMENT BEFORE ELECTION

The House of Representatives passed legislation that would expand the Affordable Care Act. But the Patient Protection and Affordable Care Enhancement Act is likely to falter in the Republican-controlled Senate. The bill would provide federal funding to states to lower the cost of premiums while expanding health care to more Americans and creating a drug price negotiation mechanism. Meanwhile, the Trump administration doesn’t expect to release a detailed health care plan until the Supreme Court rules on the ACA’s legality, said U.S. Health and Human Services Secretary Alex Azar. “We’ll work with Congress on a plan if the ACA is struck down,” Azar said. “We’ll see what the Supreme Court rules.” The administration told the DID YOU

KNOW

US EXPECTS INSURERS TO PICK UP THE VACCINE TAB

Health insurers will be on the hook for the costs of a COVID-19 vaccine, once it is developed and becomes available. The Trump administration has been talking with insurers about offering vaccines at no cost to patients. The industry earlier made a similar commitment to cover testing for the coronavirus without charging copays. The White House launched an initiative dubbed Operation Warp Speed to quickly manufacture millions of doses of

QUOTABLE This pandemic shows us that the lack of good health care options makes us more vulnerable and less resilient. — Steve Beshear, former Kentucky governor

COVID-19 vaccines, once the Food and Drug Administration approves one or more formulations. Candidate vaccines are in early trials, and the goal is to have 300 million doses by early next year. Insurers are also required by the ACA to provide preventive coverage — including a wide range of screening tests and immunizations — at no charge to patients.

RETAILERS CONTINUE MOVE INTO HEALTH CARE

The lines between the retail sector and the health care sector continue to blur with the latest moves by two major chain stores. Walmart will start selling health insurance plans. The company is advertising for agents to sell Medicare supplemental insurance in the Dallas area for an entity it calls Walmart Insurance Services. The retail giant has opened four Walmart Health clinics in the U.S. and plans to open more. The clinics offer a wide range of low-cost services, such as an annual checkup for $30 or a strep test for $20. Walgreens struck a deal to open hundreds of doctors’ offices in their stores. VillageMD will staff and run primary-care clinics in 500 to 700 Walgreens stores in more than 30 U.S. markets over the next five years.

About 49% of the U.S. population is covered by employer-based health insurance.

InsuranceNewsNet Magazine » August 2020

Source: Employee Benefit Research Institute

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HEALTH/BENEFITS

Debunking The Great HSA/FSA Benefits Debate Help employees see how their benefits choices can work together to help them with financial wellness now and in the future.

By Rob Grubka

f health savings accounts were people, they would be old enough to drive a car. HSAs have grown in popularity and usage since they were created in 2003, and they became even more popular following the passage of the Affordable Care Act in 2010. At the same time, health care costs have been on the rise and continue to shift to consumers, especially as an increasing number of employers are offering high-deductible health plans. In fact, more than 137 million Americans reported medical financial hardship in the past year, according to a Journal of General Internal Medicine study. Meanwhile, Milliman reported an average family had more than $4,500 in annual out-of-pocket medical costs, underscoring the need for solutions that support holistic financial wellness. As part of workplace benefits programs, HSAs (and their cousins, flexible spending accounts) can play a valuable role in putting people more in 36

the driver’s seat of their overall financial wellness. HSAs can complement retirement savings plans and help employees plan, invest and protect for today and the future. They can also provide insurance and benefits brokers more reasons to touch base with clients, which can

jargon when having a conversation about benefits solutions, it’s common for people in the room to unknowingly have different interpretations of what the terms and products mean. When discussing HSAs and FSAs with clients, it helps to get back to basics.

An easy way to help your clients remember how HSAs and FSAs work is to think of them this way: flexible spending for today; health savings for tomorrow. in turn increase growth opportunities across the benefits spectrum. The challenge now is to ensure those who have HSAs, FSAs and related accounts — and even more so for those who don’t — understand how they work, how they differ and how they can help with eligible expenses today and in retirement.

Start Client Conversations With The Basics

Although it’s easy to slip into industry

InsuranceNewsNet Magazine » August 2020

From the outset, it’s important to ensure everyone has the same understanding of the products, how they work with various health insurance plans and what they cover, and what the advantages and disadvantages of each are for employers and the various needs of their employee population. Clearly defining the industry terms can also help align thinking and enable more productive conversations and, ultimately, stronger benefits programs. An easy way to help your clients

DEBUNKING THE GREAT HSA/FSA BENEFITS DEBATE HEALTH/BENEFITS remember how HSAs and FSAs work at the very high level is to think of them this way: flexible spending for today; health savings for tomorrow. When speaking about HSAs, make sure everyone at the table knows that HSAs can be offered only in conjunction with HSA-eligible high-deductible health plans. Define the “triple-tax advantages” — they can cover qualified health care costs tax-free with money that is contributed and withdrawn taxfree. And remind them of the fourth and often overlooked tax advantage: HSA contributions via payroll are not subject to FICA tax — a benefit to both the employee and employer. In addition, HSAs can have investment options — much like the investment options employers and employees are accustomed to managing in their retirement savings plans. Finally, HSAs are portable, meaning they’re owned by the employee, so their balance can be rolled over year over year and even used as another tax-advantaged means to cover qualified medical expenses in retirement. Depending on the demographics of a client’s employee population, your employer client might also want to consider other spending accounts, such as health FSAs or dependent-care FSAs. But unlike HSAs, the primary difference with FSAs is that these spending accounts are not portable, and they’re “use-it-or-lose-it” in any given benefits year. In addition, these accounts do not include an investment option available with many HSAs. Finally, health FSAs can be used with any health care plan, but they can’t be used if the employee has an HSA. To solve for that, the employer can offer a limited-purpose FSA that can be used in conjunction with an HSA to help cover immediate qualified vision and dental costs.

Create A Benefits Offering Strategy

It’s easy to add products to a benefits platform, but employers might not always see the greatest return on their time and resource investment in the benefits. The Employee Benefits Research Institute reported only 18% of employees say their employer or benefits provider offers education on how HSAs work, 11% say they’re

The Triple Tax Advantages Of Health Savings Accounts

SOURCE: Voya

provided guidance on how much to contribute to an HSA and 10% note they receive information on how to invest money in their HSAs. Encourage employers to make the benefits enrollment process more active and less passive. You can choose to have employees opt out of certain benefits rather than opt in so they’ll be more likely to pause and read more about each benefit. Direct links from HDHPs to HSAs, followed by FSAs and voluntary benefits, can provide a more holistic view so workers can see how their benefits choices can work together to help them with financial wellness now and in the future. Work with employers to set clear expectations and metrics to measure workers’ interests, engagement and enrollment. After all, the success of any benefit is measured by whether employees actually make the most of using them. If employers see increasing engagement in any benefit, they’re more likely to continue offering that benefit and even expanding offerings in the future.

Unique, Year-Round Opportunities To Engage Employers

As the landscape across all benefits becomes more competitive, HSAs and FSAs can offer brokers reasons to connect with employers throughout the year. These touchpoints can be an easy differentiator for you as you help employers take advantage of these accounts. This, in turn, gives you more flexibility in plan design and other offerings. In addition to helping employers select their HSA provider and

features, brokers can work with providers to track interest and participation. Then they can offer their knowledge in planning and communicating about HSAs, beginning with enrollment and then during the year. Brokers can use reports to encourage employers to send communications throughout the year using various methods — email, apps, online and, yes, even good old-fashioned print mail. Reminders can include information about beneficiary designations, contribution limits, employer incentives, and ways to use, invest and save HSA balances. The more employees feel informed throughout the year, the stronger their understanding and confidence in their HSA, FSA and other benefits choices will be during open enrollment. Help employers give their workers more confidence and control of the wheel. HSAs and FSAs are part of a broader financial wellness strategy for employers, employees and brokers. They can provide important tax-advantaged savings and spending opportunities to and through retirement, demonstrate to employers the value of brokers’ benefits experience in an ever-evolving health and financial environment, and create touchpoints to broaden and deepen relationships. Rob Grubka is president, Voya Employee Benefits. Rob may be contacted at rob. grubka@innfeedback.com.

August 2020 » InsuranceNewsNet Magazine

Financial facts and figures powered by AdvisorNews.com

Household Income Drops, But Spending Is Up

Personal income decreased 4.2% while consumer spending increased 8.2% AMID THEBureau STORM in May, according to the of Economic Analysis.

The decrease in personal income in May primarily reflected a decrease in government “Other” social benefits decreased Amidsocial the benefits. storm, firms find value in next-gen

Percent

as payments to individuals from federal economic recovery programs continued, but at a lower level than in April.

SOURCE: U.S. Bureau of Economic Analysis

The pressures facing financial firms are impacting businesses in powerful ways.

12 10 8 6 4 2 0 -2 -4 -6

46% Dec.

Jan.

Feb.

have placed a focus on short-term business continuity

Mar.

Apr.

Tech is coming fast at financial services

companies that continue to bulk up their technologies

tech as the COVID-19 closedown continues, according to a Broadridge Financial Solutions study.

Only 1% of C-suite executives from 500 firms surveyed by Broadridge in June said they would not be investing in tech. All

41%

face an increased need to mutualize non-differentiating functions

Financial Firms Take On More Tech To Compete

Nearly all firms expect to their operating the others said the changes pandemic is pushing models and next-gen technology strategies. them to build up their tech capabilities. EXPECTED DEGREE OF CHANGE

May

no change

Partially offsetting the decrease in other government social benefits was an increase in unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration.

40%

Consumer Spending

Goods

HIGH require large-scale changes

SOURCE: U.S. Bureau of Economic Analysis

will scale back digital transformation plans

Percent

34%

10%

plan to increase the scope of their digital strategy

LOW require only a few minor changes

Services

44%

45%

MODERATE require a moderate number of changes

0 -5 Even as firms turn to cost saving and continuity in the near term, 53% plan to accelerate their next-gen technology strategies.

-10 -15 Feb.

Mar.

Apr.

May

Consumer spending increased in May, reflecting increases in both goods and services.TOC> F Within goods, the leading contributor to the increase was spending on new motor vehicles. Spending on recreational goods and vehicles also increased. F Within services, the leading contributor to the increase was spending on health care. Other contributors to the increase were spending on food services and accommodations.

Fed Chief Sees Dark View On Inequality

When Federal Reserve Chairman Jerome Powell issued the central bank’s dour vision of the economy’s near-term future, he turned some of that darker focus on economic inequality. “Inequality is something that’s been with us increasingly for more than four decades, and it’s not really related to monetary policy,” Powell said after the Fed announced rates will remain near zero. 38

InsuranceNewsNet Magazine » August 2020

In the next six months, financial firms plan to focus on increasing cybersecurity and risk management more than any other tech changes (63%), which were followed by enhancing multichannel client communiBROADRIDGE | 5 cations (60%), improving customer engagement and experience (53%) and making significant cost reductions (45%). The execs were as optimistic as they were forward-thinking, with 56% predicting their businesses would recover in a year, and 94% saying they will in two years.

Powell attributed the divide between the top wage earners and the lowest wage earners to globalization and technological trends that have created a greater skills gap. Powell said higher education would be

required in order to get higher-paying jobs, leaving the bottom wage earners without a way to increase compensation if education and new skills are unattainable. “If you’re on the right side of those trends, then those things are good for you,” Powell said. “If you’re not, then your wages are going to stagnate.”

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How SECURE Changes Retirement Planning Retirement saving vehicles for most American workers must be improved, as many folks rely too heavily on Social Security as their primary source of income. • Debbie Baker

he Setting Every Community Up for Retirement Enhancement Act of 2019, more commonly known as the SECURE Act, brings significant changes to retirement plans and individual retirement accounts. One goal of SECURE is to offer workers enhancements for retirement savings, and the other is to enable employers or providers to be able to offer additional or improved retirement choices and services. As the name implies, retirement saving vehicles for most American workers must be improved, as many folks rely too heavily on Social Security as their primary, if not only, source of income in retirement. Changes resulting from SECURE might provide some beneficial features to some, both on an individual level as well as on a company-sponsored plan. Here are the most notable changes for individuals. 1. Ability to contribute longer. SECURE has eliminated the contribution cutoff age of 70 ½ to traditional IRAs for those individuals who are still working and earning a salary. Now, contributions to a traditional IRA can be made up to the annual contribution limit ($7,000 in 2020 for workers 50 and older) or 100% of income — whichever is greater — regardless of age. Many people now are working past the age of 70 ½, so the ability to contribute to IRAs for a longer period of time can significantly impact savings, as this contribution can be made in addition to 401(k) deferrals. In some cases, a tax deduction might also be available. However, if an account owner has taken distributions in the form of a qualified charitable distribution, which is not subject to income tax 40

(up to $100,000), a portion of that distribution might now be subject to taxation if contributions are being deducted. 2. Increased age for required minimum distributions. Beginning in 2020, the age at which you must take distributions from a traditional IRA has been changed to 72 from 70½. As life expectancy has increased, this extension makes good sense, giving individuals an extra year and a half for savings or tax planning, because IRA distributions — except those qualifying for exceptions — are subject to ordinary income tax. This delay also allows a bit of extra time for Roth conversion considerations, as Roth conversions after the beginning of the required minimum distribution date are more complex. 3. Elimination of stretch IRAs. Those IRAs inherited from someone other than a spouse can no longer be distributed over the recipient’s own life expectancy. Now the account must be totally withdrawn within 10 years of the original owner’s death, unless an exception applies. Such exceptions include minor children recipients, disabled beneficiaries and those who are less than 10 years younger than the original account owner. This acceleration in the withdrawal period for affected accounts might be prompted for additional tax revenue to counteract the delay in age for required minimum distributions. In any case, you and your client may want to implement a withdrawal strategy for inherited accounts to accelerate payments in years when income or tax rates are lower, since there is now complete flexibility in the withdrawal schedule

InsuranceNewsNet Magazine » August 2020

within the 10-year time period. Although growth compounding might influence individuals to wait until the final year or so to withdraw funds, the tax consequences of that strategy need to be considered. Advisors can add value when considering various scenarios for withdrawals. 4. Penalty-free withdrawal addition. SECURE has added the ability to make a penalty-free withdrawal of $5,000 from a 401(k) or IRA for the birth or adoption of a child, provided the withdrawal occurs within one year of the birth or adoption. And this withdrawal option applies to both parents. It’s worth mentioning that this opportunity can be used if the new parents have insufficient funds or savings that are not readily available. Repayment is possible as a rollover contribution if funds are redeposited to the account within 60 days of withdrawal. But keep in mind that although the 10% penalty does not apply to the withdrawal, the distribution amount is subject to ordinary income taxation. Providers or employers also have some additional benefits and options under the SECURE Act. Most notably affected are small businesses that might have been burdened previously by administrative or plan startup costs. Changes for those employers are designed to reduce those burdens and costs. The changes include the following. 1. Annuity choices in 401(k) plans. This option allows an employer to offer annuities, with employer liability mitigated if the underlying insurer fails to meet financial obligations. This choice benefits those workers who would like to convert savings into an income stream for life. Given the necessary administration of this option, as well as the potential complex nature of an annuity conversion,

HOW SECURE CHANGES RETIREMENT PLANNING

employers now must allow enrollment to those workers who are 21 years of age or older with 1,000 annual hours or three consecutive years of 500 hours of service. Ease of plan administration is also promised. This rule is not effective until 2021. 4. Safe harbor plans for qualified automatic contribution arrangements. Employers typically establish a default contribution rate — the qualified automatic contribution arrangement for employee auto-enrollment. This contribution cap for businesses for such auto-enrollment is increasing from 10% to 15% for safe harbor retirement plans, except for the employee’s first year of employment. The idea behind this is to boost employee savings. Of course, employees can always change the automatic rate or opt out entirely.

Americans Face A Rocky Road To Retirement 55%

5. Multiple employer plans. This feature allows multiple, unrelated small businesses to combine plans, thereby allowing participating employers to share the administrative plan costs. The plan sponsor provides the administration and fiduciary responsibilities.

$5K

Of the adult population participates in a workplace retirement plan.

22% of Americans have less than $5,000 in retirement savings.

$58K

And finally, although unrelated to retirement plans and IRAs, another change worthy of mention is that the SECURE Act enables 529 plan funds to be used to repay student loans up to $10,000 annually. An example where this might be useful involves a change of 529 plan beneficiary. If a student has excess 529 plan funds after graduation, the beneficiary can be changed to another qualified student to be used for loan repayment purposes.

$24B

The median 401(k) balance for those ages 65 and older.

In 401(k) matches goes unclaimed every year.

Source: U.S. Bureau of Labor Statistics, Vanguard, Northwestern Mutual’s 2019 Planning & Progress Report, Financial Engines

this capability is expected to be offered gradually over the next several years. Financial advisors should be proactive in explaining these new choices — including the costs — to clients who are interested. 2. Employer tax credits. There are two tax credit opportunities for employers under the SECURE Act. First, a tax credit of up to $5,000 is available to defray a plan’s startup cost, whereas previously

the amount was capped at $500. And second, employers will now realize a $500 tax credit when starting a 401(k) or SIMPLE Plan that provides automatic enrollment. This credit is in addition to the startup credit and also will be realized if the employer converts an existing plan to auto-enrollment. 3. Part-time employee inclusion. Good news for the part-timers, as

Debbie Baker, CFP, is business operations manager for a wealth advisory firm in Indianapolis. She has 30 years of experience as a financial services professional. Debbie may be contacted at debbie. baker@innfeedback.com.

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August 2020 » InsuranceNewsNet Magazine

INBALANCE

Emerging From COVID-19 Putting Social In A Socially Distant World As parts of the country lift some COVID-19 restrictions, don’t expect our social lives to get back to the way they used to be right away, experts say.

By Susan Rupe

tate and local officials may be loosening the restrictions on our daily lives imposed by COVID-19, but the pandemic will continue to change the way we conduct our social lives for many months to come. That’s the word from Michael Urban, senior lecturer and founding director of the University of New Haven’s doctorate of occupational therapy program. Urban has been instructing his students on the ways COVID-19 will continue to influence everything from the way we wash our hands to the way we spend a day at the beach. Forget social distancing, Urban told InsuranceNewsNet. The term implies that we aren’t socializing, he said, and humans are social creatures by nature. He suggested instead that we think of the COVID-19 restrictions as physical distancing, because we are remaining physically separated from each other while still being able to socialize. Physical distancing and COVID-19 precautions will affect nearly every aspect of our social lives, Urban said. Those precautions start with the basics we have become accustomed to since COVID-19 ground most activities to a halt: staying home if you have a fever or a cough, frequent hand-washing with soap, wearing a mask in public.

Spending Time Outdoors

Outdoor activities are a great way to begin resuming our social lives during the pandemic, he said. “You’re out in the fresh air, it’s healthier for you than being trapped indoors,” Urban said. “You can go hiking, you can go to the beach, you can go to public 42

swimming pools, you can keep that physical distance at least six feet apart.” In many areas, officials will keep crowds under control even in outdoor gathering places, Urban said. “They may limit the number of cars they let into the parking lot or limit the number of people admitted into a location or take some other action to maintain that physical distancing.” Physical distancing is even changing etiquette to some degree, he said. “For example, when we meet up with people or you’re outside and you see someone you know and you want to talk, you will stay six feet apart, and you will wear masks. That’s going to be part of our way of doing things for a long time to come.” As another example, instead of crowding around a picnic table, family and friends can enjoy an outdoor picnic or backyard cookout by sitting in chairs placed in a circle, with everyone maintaining the proper distancing.

Shopping

Retailers that were permitted to remain open during the COVID-19 lockdown put social distancing protocols into place for their shoppers, and those protocols will remain in effect as more stores open for business, Urban said. “We saw retailers looking at ways consumers can change their behavior to remain physically distant and to feel safe shopping in an enclosed space. For example, retailers established pathways inside the store so that shoppers could maneuver around but still remain physically distant, and I think we will see some form of this continue. I’ve noticed shoppers have become more accustomed to standing six feet apart while waiting in line at the cash register. Some retailers moved racks of merchandise so that they could be more spread out in the confines of the store. That also helps people with physical disabilities get around in the

InsuranceNewsNet Magazine » August 2020

store much better because there’s less clutter, and so it becomes a way to be more inclusive for people who have disabilities.” Retailers also will continue to be vigilant in sanitizing door handles and other surfaces that people frequently touch, as well as using plexiglass shields at the checkout. Employees will be on hand to guide shoppers in physical distancing protocols. In addition, shoppers will continue to see restrictions on trying on clothes or returning merchandise. Expect to see new protocols in place for doctor’s offices, hair salons, the gym and even church services, Urban said. “No more sitting in the waiting area for the doctor’s office or the barber shop or hair salon. You’ll check in for your appointment — often online — and then they notify you when it’s OK to come in.” Locations will limit the number of people allowed inside as well. “Those protocols will change as we learn more about COVID-19 and the people who run these various businesses get an idea of how many people are coming in,” Urban said. “As we move about our daily lives, we will need to get accustomed to checking ahead of time — either going onto a business’s website or calling ahead — to find out what to expect before we get there.” COVID-19 will force some new habits as people leave their homes either to socialize or to take care of life’s necessities,

EMERGING FROM COVID-19 INBALANCE he noted. “We’ll have to make sure we have masks and hand sanitizer with us. In my family, we keep some bags with disinfectant wipes in the car so that we can wipe down shopping cart handles or door handles. I think this will become a habit with many of us into the future.”

Social Gatherings

The COVID-19 shutdown forced many social activities to move online. Everything from library story hours to dance classes to Scout meetings were held remotely. Urban said that while online activities have been good for giving people a social outlet, ultimately people are social creatures and crave doing things in person. He predicted activities will continue to be held virtually to give people an option in case they don’t feel comfortable venturing out among others. But for those who want to participate in activities in person, physical distancing will remain the norm. “We will see activities being limited in the number of people participating, keeping some kind of physical distancing,” he said. Rituals such as graduations and weddings in the time of COVID-19 have forced people to get creative in the way they approach these traditions, Urban said. For example, more weddings have taken place with only the couple, their officiant and witnesses, with family and friends watching the event online. Graduations have moved from crowded stadiums and auditoriums to “drivethrough” events, parades or livestreamed events. Urban predicted that COVID-19 will force people to take stock of social traditions and ask themselves how they can be done differently in the future. “Don’t be surprised to see the bride and groom posting for pictures wearing face masks or seeing the wedding guests wearing masks on the dance floor,” he said. Perhaps friends and family are leery of traveling to a social event because they are at high risk for COVID-19 but they still want to participate in the occasion. Giving guests an online option could become the norm. Look for protocols such as temperature checks at the entrance to an event, spacing of tables and chairs to maintain physical distancing, and limits on the number of people invited to events to

become more common as people socialize in the COVID-19 era, Urban said.

Travel

COVID-19 brought travel to a halt. Although people slowly have begun to venture out on the open road and into the airways, the travel experience will never be the same again, according to a report commissioned by Allianz Partners. Futurologist Ray Hammond said in the report that travelers will see “a new era of precaution with less spontaneity and more protections against virus.” Hammon predicted that short-haul and domestic air travel will recover first, but travelers will change their behaviors, including wearing face masks throughout their journey and saying goodbye to loved ones outside the airport. In some cases, jet bridges to planes will be used as a final “disinfectant tunnel.” Airlines will cut down on cabin bags to speed up boarding and reduce contamination risk, and will reduce food and drink services. The cruise industry will be most affected by COVID-19, Hammond said, as no one has a clear vision of how cruises can be organized while respecting distancing and, above all, quarantining sick travelers to avoid contamination. Hospitality will be affected by enhanced sanitation measures. Allinclusive hotel packages are likely to be redesigned to remove buffet-style food and drink delivery to ensure guests receive service at their individual, physically distanced tables. The free continental breakfast buffet offered at many hotels will be a thing of the past. Finally, business travel will be greatly reduced, since the pandemic has shown that global project management can be done by video conferencing. Hammond predicted only trade meetings, exhibitions and international sporting events are likely to resume to normal levels in the foreseeable future. Susan Rupe is managing editor for Insurance NewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

How Will COVID-19 Change Our Lives? IN THE HOME Homes will continue to be fitness centers, classrooms and medical consulting rooms as exercise, education and health care continue to be conducted virtually. More young adults will remain at home as universities conduct online learning and more paid work can be done virtually. Electronic sensors to detect virus particles are in development, making the home a “sterile sanctuary.”

PERSONAL MOBILITY Greater use of masks and gloves when taking public transportation. More walking and bicycling. Less traffic congestion as more employees work remotely.

TRAVEL Less business travel. Airlines will restrict carryon luggage and onboard food and beverage. Increased sanitation measures in hotels and the elimination of self-serve buffets.

HEALTH CARE The mental health aftermath of the pandemic will last longer than the pandemic itself. Greater use of telemedicine. Medical supply chains will become increasingly localized to ensure quick and easy access. Source: Allianz Partners and futurologist Ray Hammond

BUSINESS

Time Blocking: The Simple Daily Productivity Hack Scheduling your days might sound confining, but it actually is liberating. By Fred Hubler

nlike many other productivity hacks, time blocking is a technique that can increase efficiency without the need to spend extra money. It is a successful and proactive tactic that any professional can use to yield greater results. Over the years, time blocking has received greater attention, with some of the world’s most powerful CEOs and entrepreneurs, such as Elon Musk, crediting the technique for their success. This time management tactic has proven beneficial for financial advisors as well. Between having a family and working a full-time job, it can feel difficult to be fulfilled in both your social and work life. For example, prioritizing family time when an important project stands in the way, as well as other distractions, can be daunting. Life is unpredictable and work is constant. Learning how to manage your 44

time properly can help you work as efficiently as possible. Not only will you be more diligent about your work, but results will begin to occur naturally, leaving you with ample time for your family or social activities. If you are a financial advisor looking to balance your work/life schedule, time blocking is a way to completely change and improve your time management strategy.

What Is Time Blocking And Why Does It Work?

Time blocking is an effective time management technique that involves scheduling your day in short increments. Although it may seem constraining to have your entire day planned out, this technique has proven effective for many when it comes to increasing efficiency and producing greater results. Time blocking is also a valuable way to ward off any work-related stress that follows you home. While you are using time blocking, you can continue through the workday knowing you succeeded through each block and accomplished your daily goals. The reason why time blocking has

InsuranceNewsNet Magazine » August 2020

proven to be effective is because it forces you to focus on the task at hand. Scheduling every minute of your day protects you from distraction while simultaneously increasing your focus. Focusing on one task at a time instead of multitasking can make you 80% more productive, said Cal Newport, author of Deep Work. Along with this, when you know you have time designated for checking your phone and social media, you will be less tempted to check it in the given moment.

Elon Musk’s Time-Blocking Method

As a father of six children, it is evident that Elon Musk is quite the family man. He also exercises regularly and has his own interests aside from work. Despite his endless to-do list, Musk is able to avoid distraction and manage his hectic schedule effectively through his use of time blocking. Time blocking works slightly differently for every person. For example, Musk plans his day in five-minute time blocks. His days are preplanned and fully booked to eliminate distractions. During each time block, he has an assignment

TIME BLOCKING: THE SIMPLE DAILY PRODUCTIVITY HACK BUSINESS

Take Control Of Your Day With Time Blocking Time blocking works when your entire day is scheduled. How you decide to create that time-blocked schedule is up to you. 1. Block off your actual work day. Exclude the time you spend commuting and eating lunch. 2. Designate times for meetings and for creative work. If possible, designate one or two days a week as “meeting days” and assign the rest of the week as creative time or actual work time. 3. Block off personal time. Schedule things such as picking up the kids from school, exercising or socializing. 4. Schedule in goals. Find places in your week for you to spend 30 to 60 minutes working toward a specific goal. 5. Schedule times for checking email and social media to avoid spending too much time going down the online “rabbit hole.” SOURCE: Projectmanager.com

scheduled for himself, such as having breakfast or responding to emails. Musk is undoubtedly one of the busiest men alive, he remains outrageously successful. While five-minute increments may be extreme for the average person, Musk demonstrates the incredible impact time blocking can have on efficiency.

Time Blocking For Your Practice

Time blocking is an effective time management technique that can be customized to each person. Although most days do not go as planned, time blocking can keep people on track and their priorities in check. The first step to incorporating the time-blocking strategy is to plan in increments that work for you. In my practice, we focus on how to create the ideal workweek. Instead of using five-minute blocks like Musk does, we find that half-

hour blocks are the most effective. For you, those time blocks could be 20 minutes or possibly an hour. Find an increment that increases your efficiency. Begin by making lists of what you enjoy doing, what you want to do and what you simply have to do. Decide what can be delegated to your team or if it might be necessary to hire some extra help. Take notes of when you are meeting with vendors and clients or when you have other mandatory obligations. Once this is all marked down, set aside times for the smaller tasks, such as checking emails. When engaging in time blocking, designate a block for checking social channels. Only when you’ve reached that time block should you check your notifications. Otherwise, keep devices on do not disturb. Another helpful tip is to group similar tasks. For example, consider scheduling similar meetings

during the same day of each week. After the time is blocked out and your schedule is made, create a folder for each type of task that must be completed. This way, when you arrive at a time block, such as preparing for a meeting, you have all the information accessible in that folder. Time blocking isn’t only about organizing your schedule. As an advisor, it’s also important to organize the work that needs to be done. When I hit a time block designated for client calls, I make sure to use the time for this task only, even if I don’t have a particular call scheduled. Instead, I’ll go through my client list and reach out to a client I haven’t talked to in a bit. This is something I never would have found time to do previously. As my practice evolves, so does the practice of my team. My team has set up their own time-blocking schedule based on their day-to-day tasks. Each member’s time blocks are entered into our system to provide a basis of scheduling for the remainder of the day. This system saves my office staff countless hours of emailing or calling back and forth to find the perfect time to host meetings. Additionally, time blocking has given me the freedom to relax and enjoy the conversations I have with my clients rather than worrying about all the other assignments on my to-do list. I meet with clients three days a week and leave Mondays and Fridays for accomplishing the rest of my work-related tasks. Although it is not always possible to align meetings at exact times, an office runs most smoothly when all members of a team are able to hit their ideal, time-blocked week with 90% accuracy. Organizing the week into time blocks promotes a productive environment in less time while better serving clients. In addition, time blocking makes it possible to be there for your family. Fred Hubler is a financial advisor with more than 18 years of experience in the financial services and technology industry. He is the founder of Retainer Based Academy, located in Phoenixville, Pa. Fred may be contacted at fred.hubler@innfeedback.com.

August 2020 » InsuranceNewsNet Magazine

INSIGHTS

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

The Importance Of Setting Client Income Goals Establishing smart income goals can set up advisors for decades of continual and cumulative career success. By Doug Bennett

oal setting is the foundation of any successful career, providing a focal point for prioritizing tasks and giving structure to both our professional and personal lives. This fact underpins all the work advisors do with clients and should also guide the work we do on and for ourselves. To keep us geared toward growth and unlock new professional opportunities, income goals are specifically critical for financial advisors. Establishing smart income goals can set up advisors for decades of continual and cumulative career success.

Achievable Over Astronomical

My first income goal was to make £100,000 in one year, and I set that goal when I was making between £55,000 and £60,000. This was not an especially bold target, and for good reason. For goals to be effective, those who set them must be able to envision achieving them. If an advisor cannot see how they will get from their current situation to their goal, they will have a harder time making progress. More achievable also means simpler. Simpler goals focus the subconscious, making it easier to prioritize. If goals become too complicated, decision making becomes more difficult and self-defeating. Numerical goals can work in an income-profit tandem. Once an advisor reaches an income goal, their next goal can be to make the same amount in profit after expenses and taxes. I followed this pattern for all my goals, from £100,000 to £200,000 and beyond. Although goals should always be within reach, they should also present calls for personal growth that require gen46

uine thought and effort. Advisors who choose income targets that are too easy to achieve on paper might, counterintuitively, find progress elusive. If the work can always be left for later, it often is. Even when these goals are met, advisors may not grow as much as they could have if they had set their ambitions higher. As they meet successive goals, advisors should choose their next income targets based on the unique growth moment they would provide, not a simple numerical change.

Helping Yourself Succeed

The simplest and best tactic to make goals easier to achieve is to write them down. Everyone has had the experience of being asked by their spouse to run to the grocery store for a staple item, such as bread or milk. You leave the house, get to the store and forget what you need, wandering the aisles hoping to trigger your memory. A written list would have helped you remember — a practice that is even more true for recalling and acting on your goals. It helps you remember them in the first place, and it provides a fail-safe for when you forget. Remembering goals on a subconscious level matters — that sounds obvious, but advisors have dozens of tasks on their to-do lists all the time. The more top of mind the goal, the more effectively an advisor can prioritize tasks in an order that allows them to make progress. Even better is to write down a goal and stick it somewhere you will regularly see it. Jack Canfield, the co-author of the famous

InsuranceNewsNet Magazine » August 2020

Chicken Soup For The Soul books, wrote a check for $1 million and stuck it to the ceiling above his bed. It was the first thing he saw every morning, and the last thing he saw every night. Most of us do not achieve our professional goals on our own but, instead, work toward them with our team members. To build the most effective team, it’s important for advisors to hire those who have strengths that they personally lack. Teams that are balanced in this way can take on more work and aim higher. I can come up with ideas and start projects, but I struggle with following through and completing the tasks within those projects. My two staff members, conversely, are detail-oriented and great at seeing projects to completion. Their contributions allow me to raise the bar on which goals are achievable. When working in financial services, there’s no limit to where one’s goals can take them other than what level of work an advisor can do. Income goals allow advisors to continuously raise their ambitions, and the time and work put into achieving those goals helps advisors undergo professional and personal growth. Doug Bennett, DipPFS, offers services including wealth management and lifestyle financial planning and wills and trust. He is a 13-year member of MDRT, with six Court of the Table qualifications. He is the author of the upcoming book Goals Do Come True. Doug may be contacted at doug. bennett@innfeedback.com.

INSIGHTS

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

Servant Leadership At Work Hartford’s fire chief used the principles of servant leadership to improve his department’s performance. By Ayo Mseka

To lead effectively, Freeman said, he embraced the elements of “servant leadership” as established by Robert K. Greenleaf in 1970. The elements are: » Empathy. Servant leaders must understand the needs of their team and how their leadership impacts others. » Listening. Strong communication, and especially active listening are crucial to the development of the required empathy. » Healing. Individuals’ relationships in any organizational situation can become strained. A servant leader will use the healing of relationships as a tool to transform their organization.

hen Reginald Freeman took command of the Hartford (Conn.) Fire Department, it faced a number of systemic problems, including safety issues and alleged criminal activity by several members of the team. These problems were exacerbated by a lack of communication, guidance, leadership and accountability. During NAIFA’s Virtual Impact Week event in May, Freeman described how the ideals of servant leadership helped him address and overturn the problems within the fire department. Thousands of financial professionals learned some powerful leadership lessons from Freeman, Hartford’s fire chief and emergency management director. NAIFA hosted the online event to offer educational and motivational programs and to provide a platform for finanReginald Freeman, Hartford (Conn.) fire chief cial professionals to come together as a community. » Awareness. “Awareness helps one Solving The Problem understand issues involving ethics, power As a leader, Freeman pointed out, the first and values. It lends itself to being able to step in addressing systemic problems like view most situations from a more intethese is to understand the climate of the grated, holistic position,” Freeman said. organization and any problems that may » Persuasion. Servant leaders achieve be rooted in it, because unaddressed cli- success by persuading their teams to buy mate difficulties can affect the overall in to their decisions, rather than by using culture of an organization. “If you don’t power and authority to coerce compliaddress problems before they get out ance. of control, that becomes your cultural » Conceptualization. Servant leaders norm,” Freeman said. “dream big dreams,” Freeman said. They Being in a position of authority does address problems by thinking “beyond not necessarily mean that the person in day-to-day realities.” that position is a leader, Freeman said. » Foresight. Servant leaders anticYou have to “know when to manage and ipate outcomes. “Foresight is a characknow when to lead,” he added. A leader teristic that enables the servant leader lays out expectations for the team and to understand the lessons from the past, asks what the team expects from him. the realities of the present and the likely

consequence of a decision for the future,” Freeman said. » Stewardship. Serving the needs of others is a priority for a servant leader. “It means I care about you as individuals and I want you to be successful,” he said. » Commitment to the team’s growth. A servant leader will inspire his team to perform at its best by nurturing “the personal and professional growth of employees and colleagues,” Freeman said. » Building community. A servant leader recognizes the benefit of strong communities “as the primary shaper of human lives.”

The Benefits Of Servant Leadership

Ser vant leadership of fers many benefits if it is used effectively. Freeman said servant leadership allowed him to significantly improve the Hartford Fire Department’s performance. Response times are down, accountability is up and morale, along with pride in the department, has increased. In addition, many members of his team have obtained professional development certifications. “Servant leadership is critical to the success of 21st-century persons in positions of authority,” Freeman said. “With four different generations in the workplace, being able to lead and manage individuals from diverse backgrounds and perspectives is challenging.” However, with an understanding of servant leadership, a leader can effectively communicate and accomplish their goals. “Lead with confidence,” Freeman concluded. “Lead with integrity. Lead with passion.” Ayo Mseka is editor of NAIFA’s Advisor Today magazine. She may be contacted at ayo.mseka@innfeedback.com.

August 2020 » InsuranceNewsNet Magazine

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

INSIGHTS

What Does The Future Of Deferred Annuities Look Like? If fixed interest rates remain at low levels for an extended period, where will the money flow? By Steven E. Simonds

ith more than $1 trillion expected to exit deferred annuity contracts over the next five years, manufacturers, asset managers and distributors will face both opportunities and challenges. Each year, hundreds of billions of dollars are invested in deferred annuity solutions. With these inflows, deferred annuity in-force assets were worth more than $3 trillion at the end of 2019. Having a surrender charge has long been the primary predictor of future movement of annuity assets. Two recent trends have tempered that logic: a prolonged period of low interest rates and the rise of guaranteed living benefit riders on variable and indexed annuities.

potential and downside protection. SRI is forecasting sales to exceed $80 billion annually by 2024. Indexed annuities are the only deferred annuity product type for which assets are expected to grow over the next five years.

Over the next five years, the Secure Retirement Institute sees the following trends: » Overall individual deferred annuity assets will not grow substantially. » Assets will continue to shift to the fixed annuity market. » More money will leave the deferred individual annuity market than will enter it.

Different Types Of Annuities And Distribution Channels

More than 40% of variable annuity assets are protected by a GLB rider, making those funds less likely to move, even when surrender charges expire. Partly because of this, annual full surrenders of VAs are likely to decrease from $98.5 billion in 2019 to approximately $87 billion by 2023. Taking a closer look at assets by distribution channel, GLB elections are higher in the broker-dealer and career agent channels. With a total of $460 billion in VA surrenders forecast through 2023, and only an estimated 20%-25% of that leaving VA contracts with GLB riders, the difference will likely come disproportionately from the already smaller holdings in the bank, direct and independent agent channels. Indexed annuities are still relatively young — but they seem to have hit the annuity “sweet spot” by offering upside 48

Independent agents dominate this market, holding approximately twothirds of the $500 billion of in-force indexed annuities at the end of first quarter 2020. That proportion will decrease as sales in other channels — particularly banks and broker-dealers — continue to accelerate. The increased potential upside available through registered index-linked annuities might offer an alternative option, but these products are not generally available through independent agents. Fixed-rate deferred annuity product design lends itself to a potentially significant amount of money in motion. As most of these product designs involve a set rate for a set term, once that term comes due, owners are likely to shop for the next best rate.

InsuranceNewsNet Magazine » August 2020

The SRI study “U.S. Individual Annuity Persistency” shows that surrender activity is volatile in the full-service national broker-dealer and bank channels, and these seem to be the most sensitive to interest rate swings. Assets no longer subject to a surrender charge in the full-service national broker-dealer channel have declined steadily, with annualized surrender rates often two or three times higher than those of other channels. With high rate sensitivity, ready access to competitive fixed-interest products, and close to $90 billion held without surrender charges, the bank channel in particular is primed to shed annuity assets. As fixed-rate deferred sales in 2019 hit their highest levels since the 2008 financial crisis, it will be important to watch the surrender activity of these assets in the next three to five years.

Where Will The Money Flow?

If fixed interest rates remain at low levels for an extended period, we will see continued surrender of fixed-rate annuities in favor of competing investments that are more liquid. This trend will be most acute in banks and full-service broker-dealers, as they have ready access to alternative investments, although this may be tempered in the near term as today’s ultralow rate environment leaves those alternatives with similarly unattractive rates. The key question remains: Where will this money go? A portion will flow back into individual annuities, but not at the pace seen in the past. The retirement industry should maintain focus on annuities’ unique value proposition — helping Americans transition from accumulating and protecting retirement assets to distributing lifetime income to maximize their retirement security. Steven E. Simonds, ACS, FLMI, is senior analyst, Secure Retirement Institute. Steven may be contacted at steven.simonds@innfeedback.com.

Failure

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