InsuranceNewsNet Magazine - October 2018

ALSO INSIDE There ARE No Little Things with Stephen M.R. Covey PAGE 12

Commissions Vs. Fees and Your Client’s Best Interest PAGE 42

How To Calm Clients During Market Volatility PAGE 50

October 2018

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IN THIS ISSUE

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OCTOBER 2018 » VOLUME 11, NUMBER 10

FEATURE

Succession: Ready Or Not

By John Hilton

20 INFRONT

With so many agents and advisors aging out of the business, how are they planning for transitioning their practices? We look at some agency owners who are readying their successors for success.

ANNUITY

40 7 Ways Annuities Can Solve Your Clients’ Financial Problems

8A lternative Plans Part Of The Mix As Open Enrollment Approaches

By Susan Rupe The Trump administration opened the way for alternative health coverage plans earlier this year. The result could leave the individual market risk pool smaller and sicker, health insurance brokers told researchers.

By Lloyd Lofton Annuities can address the challenges of saving for retirement, prevent clients from outliving their income and keep clients from experiencing financial problems they would like to avoid.

42 C ommissions Vs. Fees: What’s Really The Client’s Best Interest?

By Jack D. Aiken The author contends most people would prefer to work with a successful, well-paid agent than one who was neither successful nor well-paid.

IN The Field

30 H itting The Reset Button While Pursuing That Big Hairy Audacious Goal

By Susan Rupe Jocelyn Wright is transitioning from academia to focus on forming what she calls the agency of the future.

INTERVIEW

12 There Are No Little Things

An interview with Stephen M.R. Covey Big things come from small gestures.

That’s part of the message Stephen M.R. Covey conveys to business leaders all over the world. In Part 2 of an interview with Publisher Paul Feldman, Covey explains how the details make the difference in winning clients’ trust.

2

LIFE

36 The Gift Of Life Insurance: How To Get Your Clients On Board

InsuranceNewsNet Magazine » October 2018

By Travis Scribner The idea of presenting a life insurance policy as a meaningful and financially sound gift that clients can provide to a loved one are multifold.

HEALTH/BENEFITS

46 T he Surprising Trends Behind Today’s Disability Claims

By Greg Breter The top causes of disability are not always what people imagine or worry about.

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IN THIS ISSUE

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OCTOBER 2018 » VOLUME 11, NUMBER 10

58 MDRT: 3 Lessons For Overcoming Obstacles To Success

50 Three Buckets = A Simple Retirement Planning Strategy

By Jason L. Smith A retirement planning strategy based on three distinct asset buckets, categorized to emphasize when those assets will be needed.

By David Appel Roadblocks to success can be difficult to navigate, but it is possible to overcome them with strategies in place to generate and manage growth.

BUSINESS

54 3 Numbers You Aren’t Tracking (But Should)

60 L IMRA: Are Employers And Workers On The Same Page With Benefits?

By John Pojeta The fuzzier our data measurement and tracking become, the more we stunt our growth potential.

52 Strategies To Calm Clients During Down Market Volatility

By Matthew T. Hoesly Take a proactive approach to educate clients about the ups and downs of the market.

By Deb Dupont Only about half of employees surveyed said they are satisfied with their workplace benefits.

INSIGHTS

56 NAIFA: Manage Rejection And Keep Moving Forward

EVERY ISSUE 6 Editor’s Letter 18 NewsWires

online

www.insurancenewsnetmagazine.com

By Barjes Angulo Focusing on the things you can control helps suppress the feeling of being rejected.

34 LifeWires 38 AnnuityWires

44 Health/Benefits Wires 48 AdvisorNews Wires

59 Advertiser Index 59 Marketplace

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InsuranceNewsNet Magazine » October 2018

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WELCOME LETTER FROM THE EDITOR

What Goes Around …

D

onna’s baleful eyes told me I was on the uncool side of the generation gap.

I could tell she was holding back a hive of retorts that would have been funny if I were not a supervisor. I know her zingers can sting because she would later become my second ex-wife.

As the weekend editor at the newspaper where we both worked, I had to circle the newsroom looking for reporters who had excess time to do the larger, thoughtful articles that filled the Sunday paper. No one had excess time. This newspaper, like most others, had been aggressively cutting staff ever since I had arrived in 1987.

When I became involved in journalism in the early ’80s, young reporters and editors were still in the Watergate thrall that newspapers can make a difference and that the fourth estate was real. The profession was more of a calling than a job for many of us then.

I was born in one of the last boomer years and shared many of those values involving cause above all else. When we went to work for newspapers, we learned pretty quickly that we would be putting up with cantankerous and sometimes downright nasty editors.

That treatment was regarded as our initiation. We assumed that someday we would take their positions to rot in place and snarl at the new people to strangle their zest for life.

But a couple of trends changed that expectation. One was the massive slashing that newspapers were committing, often in service of shareholders used to fat returns.

News distribution was changing from print to electronic, and the corporations could not or would not invest in it.

The other trend was Gen-Xers, who’d had enough of the nonsense from the boomer generation. They were cynical, tired of hearing how boomers were going to save the world only to become self-obsessed yuppies.

At least, that is how Gen-Xers seemed to have seen it.

Seeing Crowds From Both Sides Now

Donna was born a few years into Gen X, so she could straddle the generational line. She loved The Who and The Clash equally. She was a compatriot of a tough band of young 6

the restrictive childhoods that they rebelled against. They wanted to give perfection to their kids. They wanted their children to grow up valuing themselves.

Consequently, millennials are often accused of having been coddled to the point of feeling entitled. We say that like it is a bad thing. But this is the generation standing up and saying “Enough!” to institutionalized abuse.

Talkin’ About All Generations

journalists wise to the ways companies bend a sense of mission for their own purposes.

I had once actually said to a reporter, “Your newspaper needs you,” as I asked whether he could cover a Saturday night shift. He looked at me blankly and said, “Did you just say, ‘Your newspaper needs you’?”

“Well, yeah!” I said, but drifted away. I recalled that line had not seemed so ridiculous when it was used on me years earlier.

I realized how that sounded to younger people who came into the business and saw how our corporation, Gannett, was pulling big returns from our local paper — as high as 50 cents on the dollar — to build a lavish corporate office outside Washington, D.C., and to feed the growth of the then moneylosing USA Today.

We got layoffs in return. “Do more with less,” was the despised refrain.

Although I felt a tinge of betrayal about the whole souring-of-the-dream thing, younger people did not see it that way. They came to work, did a solid job, and left each day to their own lives after work. They were far more clear-eyed about the modern reality of work.

Then Gen-Xers became managers. I have worked for a few myself. I found them to be all business on the job — goal-oriented and pragmatic. Certainly the right stuff for advancing companies.

I admit that I do get a little too smug when Gen X bosses complain about millennials, the children of boomers. “Hah!” I think to myself, “there’s your karma for ya!”

Millennials are a generation bred in atonement. Boomers tried to make up for

InsuranceNewsNet Magazine » October 2018

We have to ask ourselves something as managers and business owners: Why should abuse be the norm in some professions?

Should young journalists be subjected to snarling insults and sexist behavior? Should we expect our people to leave their values at the door? Many industries have their own practices that do more harm than good to their workers.

Of course, we have seen instances where the “call-out” culture has gone off the rails, destroying careers on very little substance.

The underlying question is still important — are we expressing our values in how we treat the people who work for and with us?

I never quite shook off that sense of mission. Donna and I used to laugh about how I had believed that journalism was more religion than profession. I confess I have retained a little of that missionary zeal, but perhaps not so naively.

This month in the magazine, we are looking at how agencies are trying to transition to the next generation. That succession is not always successful. Maybe that struggle comes from one generation expecting the next to do everything the same — this way or no way. But that is not progress. That is not how we get better as an industry or as a nation.

That preceding paragraph is known in journalism as the lede. It is pronounced “lead,” and it means the paragraph tells readers the why of the story — why we are telling you all this.

And I fully expect that a Gen X or millennial colleague will rib me about burying the lede, much as I would chide them if they had.

But I’ll just smile and nod. Because I’m cool like that.

[Cue millennial eye roll.]

Steven A. Morelli Editor-in-Chief

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INFRONT

Alternative Plans Part Of The Mix As Open Enrollment Approaches Health insurance brokers told researchers they expect to see a smaller and sicker individual risk pool as healthy, higherincome consumers seek cheaper coverage.

By Susan Rupe

H

ealthy consumers are fleeing the health insurance marketplace for cheaper options as the Trump administration opened the way for alternative coverage plans earlier this year. The result could leave the individual market risk pool smaller and sicker.

That was what health insurance brokers told researchers from Georgetown University and the Urban Institute in the latest of a series of reports funded by the Robert Wood Johnson Foundation.

With the foundation’s support, the Urban Institute is undertaking a comprehensive monitoring and tracking project to examine the implementation and effects of health reform. The project began in May 2011 and will take place over several years.

The 2019 open enrollment season is set to begin Nov. 1. This will be the sixth year of enrollment under the Affordable Care Act. The Georgetown University researchers asked health insurance brokers in six states for their observations on the condition of the marketplace and how consumers are 8

responding to recent federal policy adjustments to the ACA. What brokers had to say can be broken down into four main perspectives.

1. Brokers told researchers that healthy, higher-income consumers are being pushed out of the individual market.

Consumers who are not eligible for a subsidy to help purchase insurance are finding the cost of coverage to be prohibitive.

Even though consumer demand for health insurance continues to be high, brokers said significant premium increases combined with fewer plan options and limited provider networks resulted in a decline in enrollment in ACA-compliant coverage among higher-income and healthier consumers.

2. Consumers are leaving the individual market in favor of purchasing cheaper alternative coverage options.

Brokers said they are looking for alternative coverage arrangements to sell clients who are weary of high premiums and reduced plan choices.

Earlier this year, the Trump administration cleared the way for insurers to sell to short-term health plans as a lower-cost way for consumers to obtain coverage. In addition, federal regulators gave the green light to “association health plans” for small businesses as lower-cost insurance options

InsuranceNewsNet Magazine » October 2018

that cover less. Such plans can be offered across state lines and are also designed for self-employed people.

3.

Non-ACA-compliant plans offer brokers higher commissions and marketing supports. These plans have lower premiums, but brokers reported the compensation they receive for selling these products is often higher than ACA-compliant plans. Meanwhile, broker compensation for selling ACAcompliant individual market plans has declined.

Marketing practices, such as direct-to-consumer advertising and broker trainings, for alternative coverage options are also aggressive, brokers told researchers.

4. Brokers predict higher premiums in the individual market and expanded enrollment in alternative coverage options like short-term health plans.

Brokers told researchers they expect to see expanded enrollment in short-term health plans and association health plans.

Brokers also expect to see continued marketing of products such as health care sharing ministries and direct primary care arrangements. As a result, enrollment in the individual health insurance market will become smaller and sicker.

ALTERNATIVE PLANS PART OF THE MIX AS OPEN ENROLLMENT APPROACHES INFRONT

Non-ACA-Compliant Alternative Coverage Options

One surprising finding that came out of the report, Lucia said, is that more brokers indicated they were interested in enrolling clients in health care sharing ministries, which are not considered to be insurance coverage. HCSM coverage does not have to meet any of the ACA consumer protections, although enrollment in an HCSM exempts a consumer from the individual mandate penalty for 2018.

“I think it’s partly because the broker community is looking for alternatives to the market where their customers have been priced out and they’re looking for something,” Lucia said.

Cheaper But Not Better

Commissions Down, Interest In Alternatives High

“This is what we heard from brokers: Commissions have gone down for comprehensive individual health insurance,” said Kevin Lucia, Georgetown University senior research professor. “And so, financially, it has been less attractive. And it’s still time-consuming for brokers to navigate the individual market. So it’s a combination of increased time and less financial gain that has kind of led to some brokers looking outside of marketing individual health insurance.”

However, Lucia said, brokers reported they are still seeing people walking in the door seeking health insurance, and they want to help people obtain coverage. “[Clients] want options. But in the individual market, their options were limited to comprehensive health insurance. And if you’re not subsidy-eligible, you’re likely to have seen a significant rise in premiums.

So customers are typically seeing fewer plan choices and higher premiums.”

Lucia said brokers indicated a growing interest in alternative coverage options partly because they are looking for solutions.

Health insurance brokers have seen their commissions on the individual

market evaporating in recent years. The Georgetown University report echoed that. For example, a Mississippi broker told researchers his individual market commissions dropped from $30 per member per month to $8; a New Hampshire broker told researchers she made 70 percent less on individual market commissions than she did 10 years ago.

“Brokers have been upset at carriers for the past few years. ‘Let’s keep cutting your commissions, put more work on you.’ It hasn’t been a great feeling for the broker community,” a Georgia broker was quoted in the report.

Can brokers make money by selling alternative coverage options? “It’s hard to tell,” Lucia said.

“What we clearly heard is that compensation for comprehensive ACA-compliant health insurance has gone down and that with short-term plans and even health care sharing ministries, brokers said they were seeing more generous compensation. We weren’t able to really sit down and look at the level of compensation among all these products. But the general message was that the financial rewards for selling these alternative coverage options seemed more attractive than for selling comprehensive health insurance.”

Consumers may be getting priced out of the ACA’s individual market, but there are risks involved with moving to a less expensive health insurance alternative, Lucia warned.

“A part of why these alternative coverage options such as short-term plans or health health care sharing ministries are cheaper is that they are not comprehensive coverage,” he said. “For example, on the shortterm side, yes, they’re significantly cheaper, but they don’t usually cover pharmaceutical or mental health, for example. They’re doing post-claims underwriting, so if you file a big claim, you can be denied for a pre-existing condition because that’s permitted under these plans.” health care sharing ministries “have significant benefit limitations” Lucia said.

“They often have annual and lifetime limits. They don’t cover some of the same preventive services or pharmacy or mental health. So you do get the lower premium but it does come at a cost to your client that they can’t be assured it will cover their needs if they are diagnosed with cancer or if they are diagnosed with diabetes.

“Or maybe if you sell a short-term family policy and then their kid has a mental health episode. It’s not going to cover that.

So it’s almost like you’re getting a shortterm gain in coverage, but there are some serious financial risks involved with selling these plans to clients.”

Some brokers told the study researchers they require clients to sign disclosure statements attesting that they are aware of these plans’ limitations before enrolling. A broker from Texas is “very cautious about [selling] those types of coverage” that are not insurance or that have limitations,

October 2018 » InsuranceNewsNet Magazine

9

INFRONT ALTERNATIVE PLANS PART OF THE MIX AS OPEN ENROLLMENT APPROACHES noting “people don’t understand insurance.” Other brokers told researchers that they want to maintain long-term relationships with their clients, particularly for future Medicare sales, and do not want to be blamed if a customer later finds their coverage insufficient.

A few brokers told researchers they only sell short-term plans in limited situations because “nothing replaces comprehensive coverage.” A Texas broker said, “I can barely stomach selling short-term plans, but sometimes it’s the only option.”

Brokers seem to have two views of these products when it comes to catastrophic health events. A different Texas broker sells short-term plans as “an opportunity

coverage to small employers.

“Both of these arrangements, because of how they are regulated, will allow small employers to buy coverage that does not have to come into compliance with the protections that are required in the fully insured group market, which is adjusted community rating, the rating protections, the single risk pool and the requirement that they cover essential health benefits,” Lucia said.

“So on one hand, you have these ACAcompliant policies, which are closely regulated with a lot of protections in place.

Small employers know if they buy these policies, they’re not going to be priced higher than other groups because of their

“I think we will see coverage options — such as the levelfunded market or association plans — that are cheaper, but at what risk?” to provide at least catastrophic coverage,” but an Iowa broker said, “all it takes is that a catastrophic thing happens” to show these plans’ shortcomings. In the end, one broker in Utah referred to her pitch to clients on short-term plans as “here’s something, it’s better than nothing.”

The Small-Group Market

What happens in the small-group health insurance market affects brokers on two fronts: Brokers have clients who are classified as small groups and many brokers themselves have businesses that are small groups.

One of the Georgetown University report’s primary findings, Lucia said, is “you have the fully insured group market, but you have more and more alternatives to buying the ACA-compliant small-group policies. And one of these arrangements has really gotten traction. That’s the interest in issuers marketing products that allow really small employers to self-fund.”

Another development in the smallgroup market has been the Trump administration’s push to make it easier to form an association that will be able to market 10

health status. They can be guaranteed that the coverage will include essential health benefits coverage, which includes pharmaceutical and maternity coverage.”

But these alternative coverage options are not the same, Lucia said. They don’t have the same rating protections, and they don’t have the same benefit protections. That leads to an unlevel playing field between these different arrangements, he said.

Health care services are expenses, and services feed into premiums, Lucia said.

“If you want premiums to come down in short order, the way to do that is to rate in a discriminatory way or cut back on benefits,” he said. “So I think we will see coverage options — such as the level-funded market or association plans — that are cheaper, but at what risk?”

Another potential problem exists when small-group employers buy skimpier products with alternative plans, Lucia said. If the group becomes older or sicker and premiums for the alternative coverage go up, employers may find that it’s too expensive to return to the fullyinsured market because that market has fewer healthy people in it as well.

InsuranceNewsNet Magazine » October 2018

“So when you don’t have a level playing field between coverage options — the fully insured market in this case — the smallgroup market is at risk. And it is at risk because of these other alternative coverage options,” he said.

What’s Ahead For Open Enrollment Season?

Lucia predicted that with the individual mandate penalty going away in January 2019, consumers will see more marketing of alternative coverage options. “I think consumers are going to be inundated with marketing of these types of arrangements. They’re going to be in a position where it’s going to be difficult to navigate between these options and really understand what each coverage option covers. So I think consumers will be in a challenging place,” he said.

Some good news for advisors this enrollment season is that consumers may need them more than ever. That’s because the Trump administration cut funding for the navigator program.

“It really comes down to producers being in a position to explain to consumers the balancing act between affordability and adequacy of coverage,” Lucia said. “I think this is what they’re trained to do, but consumers will be turning to them more, in part because there is less funding for navigators to do this.”

Lucia predicted brokers will see a growing market for alternative coverage options.

“It sounds like [brokers] are compensated better in those arrangements,” he said.

“But we did have some brokers who told us they are very concerned about marketing coverage that is not necessarily going to work when people become sick. So on one hand, there will be brokers who will have more options to market to consumers and with potentially greater financial rewards.

But it may not be a product they feel comfortable marketing.”

Susan Rupe is managing editor for Insurance N ewsN et .

She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at susan. rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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INTERVIEW

THERE ARE

NO

LITTLE

THINGS

Stephen M.R. Covey tells how the small details add up to BIG trust

12

InsuranceNewsNet Magazine » October 2018

S

THERE ARE NO LITTLE THINGS INTERVIEW

tephen M.R. Covey learned early on in his career that trust made all the difference in business, sales in particular.

Trust has inherent value.

It is not just a feeling. When clients trust an advisor, service provider or salesperson, they can accept advice to take action. Transactions are smoother and faster.

Without trust, you have doubt, which slows down or stops the process. The provider has to spend more time and money to salvage rather than serve.

But he really came to understand and rely on his lessons about trust when he guided the merger of the Covey Leadership Center and Franklin Quest to form FranklinCovey. He saw how he did not adequately build a foundation of trust for blending the two companies and quickly had to make up for it. He assumed he had trust on the side of the other company that he in fact did not have.

This experience reinforced for Covey that it is the little things that build trust, the details that show you care. Covey

I realized the importance of building trust in relationships and making sure that you always listen first.

Although Covey confirmed this in his first job, he learned it first from his father, Stephen R. Covey, the author of The 7 Habits of Highly Effective People, a seminal business and self-improvement book.

In fact, that book contains stories about when Stephen M.R. was much younger.

Covey promoted what became his father’s most well-known book and helped develop the Covey Leadership Center into what he says was the largest leadership development company worldwide.

A 1987-era Fuji Film ad

made his case in his own book, The Speed of Trust: The One Thing That Changes Everything.

In Part Two of his interview with Publisher Paul Feldman, Covey explains that big things come from small gestures.

FELDMAN: You learned about the importance of trust and how to develop it early in your career. Would you tell us that story?

COVEY: My first job was in sales. I was a leasing agent in real estate development.

We built spec buildings with no tenants yet, and we’d go out and find tenants to go in them.

We were building a 90,000-square-foot building, and we needed some tenants, and I found a great prospect — this was a cold-call deal — it was Fuji Photo Film and this was in the mid-’80s.

At the time, Fuji had very little presence in the U.S. — they were just getting established here. But I developed a great relationship with the person who ran the division and I said, “Look, we’ve got this new building. It would be great to move into it; it will give you more space to expand and grow.” They were really considering this, and it got to the point where they wanted me to come out to

October 2018 » InsuranceNewsNet Magazine

13

INTERVIEW THERE ARE NO LITTLE THINGS important thing. Just like somebody’s name is their most important thing and if you screw that up, you definitely have damaged their trust. And you saw that and as you said, there are no little things.

Stephen M.R. Covey and INN Magazine publisher Paul Feldman take a break from recording a promo for the INN Super Conference.

headquarters and meet with the president of the company to talk about this deal. Because this was a big regional office for them.

In preparation for that, I got to thinking, “You know what? I’m going to take pictures of it.” Then I said, “Why don’t we make sure we develop the pictures on Fuji film?”

with the president and the top team. I said, “We’ve got a great building to look at. Here’s some pictures of the building.

Why don’t you take a look at these?”

I passed the pictures out, and the first thing the president does is he takes a picture and he turns it over to the back and he sees Fuji Photo Film. He just beamed

With the people we trusted, everything was great. The people we didn’t trust, we always had quality issues and problems.

That sounds like a little thing, but it was actually big because back then Fuji had no market share. It was hard for me to find a place that used Fuji film. This was a different time.

FELDMAN: I can imagine it was hard to find a photo store that did that back then.

COVEY: I had to go all over town — this was in Dallas — until I finally found someone who used Fuji film to develop the pictures.

I flew out to the meeting and we met 14

with a smile. He looked at his colleagues and then he said, “We’ve got a deal.”

FELDMAN: That’s great.

COVEY: And it just brought home to me, there are no little things. That showed that I was trying to be respectful, trying to be influenced by them, and I was aware of the little things that mattered. And I think it just communicated volumes because back then finding that film was not an easy thing to do.

FELDMAN: To Fuji, that’s the most

InsuranceNewsNet Magazine » October 2018

COVEY: It was a big thing. And it actually closed the deal. On the spot. I was a young sales guy just starting out, and I said, “Wow, this is amazing.”

Also, I realized the importance of building trust in relationships and making sure that you always listen first.

My father taught this, as you know.

Seek first to understand then to be understood. That’s the key to human effectiveness. Because when you listen first and understand and the other person or party feels understood, they now become open to your influence.

That’s what I understood about Fuji Photo Film. They felt understood right out of the gate. Now they’re open to being influenced by me.

FELDMAN: Your father wrote The 7 Habits of Highly Effective People, which is a monumental book in the business world. It should be required reading for everybody. So was trust a foundational thing that you found made the big difference when you were at the Covey Leadership Center?

COVEY: Absolutely. In fact, I remember just early on when I first got in as CEO, we had a key product. We had two suppliers to make sure we had redundant sources — one we trusted, one we didn’t.

I said, “Well, if we don’t trust these people, why are we working with them?”

People would say, “Well, we’ve got to have a redundant backup source.”

But with the people we trusted, everything was great. The people we didn’t trust, we always had quality issues and problems. It would take longer, cost more and we had to put in place all these controls to compensate for that.

I’d say, “Who’s paying for all this?”

Well, we were because we had to have it. We had to have the quality control to make sure that we don’t send off bad product to the customer.

But it was costing us so much, and it dawned on me that there’s a high cost of low trust.

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INTERVIEW THERE ARE NO LITTLE THINGS Photo credit: Nan Palmero/Flickr

And once I put those glasses on, I started to see it everywhere: in relationships, on teams and in client organizations. When there was trust, you moved fast at low cost.

You got this multiplier, a dividend.

When there was low trust for whatever reason, you paid a tax at every gate. Everything would take you longer, cost you more. You’d have bureaucracy, redundancy creeps in, and in sales it changed everything.

People didn’t give you the benefit of the doubt. They wouldn’t refer business.

Whereas, when we built trust in relationships and had clients that really trusted us, it was amazing. We’d do more deals. We’d do better deals. They’d give us the benefit of the doubt, they’d refer business to us.

FELDMAN: It’s so pleasurable to do business with somebody you trust, isn’t it?

COVEY: It’s fun, yeah. It’s not just better 16

business. It’s fun; it’s enjoyable. You’re right. There’s energy and joy as well as greater speed, lower cost.

It’s just a better world on every front. In fact, it’s interesting, Paul, there’s a lot of studies that are coming out on this right now. Paul Zak is a neuroscientist, and he published an article about a year ago in the Harvard Business Review on the neuroscience of trust.

The long and short of it is that hightrust cultures and teams are just way more energized, way more engaged with greater excitement, commitment, less stress and less burnout than low-trust teams. The data bears it out in profound ways. It’s not a little.

It’s double, triple on all these different measures. And so it kind of verifies what we all know. And there’s economics of trust and also it is an extraordinary multiplier for everything else — all the qualitative dimensions of relationships, of teams, of cultures — and that’s with

InsuranceNewsNet Magazine » October 2018

your own people. It’s with clients. So in every single dimension, trust is the one thing that changes everything.

FELDMAN: What was it like growing up with Stephen R. Covey as your father?

COVEY: It was amazing, especially now as I look back at it. My dad passed away about five years ago. I realize what a gift I had.

We kids were kind of where he started his ideas. We were the guinea pigs, I like to say. And in fact, this story he tells in 7 Habits about green and clean — now that’s me. I’m that kid who he tried to teach how to take care of the yard. And so my dad really kind of honed his ideas in the home before he took them out.

FELDMAN: So, you grew up learning this from your father.

THERE ARE NO LITTLE THINGS INTERVIEW COVEY: It was like second nature to us because we were taught it all the time.

But here’s the one thing I’ll tell you, Paul, about my dad that maybe the average person would not know and that is this. That as good as my dad was in public, as a teacher and as an author, he was even better in private. As a husband to my mother, as a father to us kids. He was who you thought he was.

hadn’t figured out how to be a business yet. So even though we were creating a lot of value for people, and they loved the content, we didn’t know how to make money at it. We didn’t know how to turn it into a business.

So that was a big part of what I did, trying to figure out how to operationalize this, how to make it sustainable and how to scale it. And we did a number of those

Most people kind of think, “Hey, trust. You either have it or you don’t. It’s either there or it’s not.” And I’m saying, “No, that’s your starting point; we might start with a level of trust — it might be low, medium, high.”

He had real integrity and that was the source of his power. And so sometimes people can get onstage and just dazzle an audience and then they walk backstage and they’re like a different person. My dad was good onstage and he was better offstage in how he treated everyone.

things. I really focused on the business side of being able to take this all around the world. That was really my primary focus for the first 15 or so years, and it was only after doing that that I started then to say, “Hey, I also have something to say.”

FELDMAN: And that’s the key to success in life. And he ended up building a really successful company, the Covey Leadership Center.

FELDMAN: You certainly did and do.

So, are you now focused on bringing out your father’s message and the message of trust?

COVEY: Yes. At the time, we became the largest leadership development company in the world, and today we’re FranklinCovey, operating in 150 countries around the world.

So there’s really a legacy to the work that my father did with 7 Habits and principle-centered leadership and I’ve tried to build upon that and follow him with this work on Speed of Trust, which is really building on some of the foundational work he did with The 7 Habits of Highly Effective People.

COVEY: Yes, and I feel like I can say it better because I know the business side.

I come at this as a practitioner, as a doer.

It was really one of the highlights of anything I could imagine, to have a chance to be able to do this with my father’s work. To institutionalize this, so that it was more than just one person. I could instead say, “What if we could take these ideas of this one person and make this really something that could impact people everywhere in the world?” And that’s what we tried to do.

FELDMAN: You actually ran the Covey Leadership Center, and it was a little bit trying when you started, wasn’t it?

FELDMAN: With the company, you doubled the sales within just a matter of years from taking over.

COVEY: We had a great value proposition for our clients, and we added a lot of value. We had great content, but we didn’t have a good business model. We

COVEY: Yes. We increased the profits 12 times. And I increased the value of the company many, many times. That’s really a big part of how I became clear on my

message on trust is I saw how valuable it was to help us do exactly that — to grow our business, to increase our profits, to get more customers, and to see this kind of ripple and multiply.

FELDMAN: Many people probably believe that you can’t learn trust.

COVEY: And I say, “Look, you can learn trust. It is a learnable skill.” Most people kind of think, “Hey, trust. You either have it or you don’t. It’s either there or it’s not.”

And I’m saying, “No, that’s your starting point; we might start with a level of trust — it might be low, medium, high.”

There’s a starting point, but in the same way that you can diminish and lose trust through your behavior, you can also consciously, deliberately create it, grow it, expand it, extend it through your behavior.

In fact, you can get good at this. Trust is a learnable skill. And that’s exciting because if I can get good at trust, what an advantage for me, for my team, for my company to be the high-trust player in a world of declining trust.

And that’s the opportunity that’s in front of everyone in this profession.

FELDMAN: And trust isn’t just about selling to clients, but it’s about your whole life.

COVEY: It’s your whole life.

Here’s the thing, Paul. You can’t talk your way out of a problem that you behaved your way into.

FELDMAN: That was one of my favorite quotes in the whole book.

COVEY: If we’ve lost people’s trust because of our behavior, words alone won’t get it back. We have to “behavior” our way back into trust. The words can help, but we have to behavior back into trust.

And some of us maybe already start from a high place. But as an industry, finance and insurance are not as high as we want to be, like the data shows.

So we’ve already started a little bit at a deficit — that’s why we want to be intentional, be deliberate about building trust on purpose and turning this into our greatest strength.

October 2018 » InsuranceNewsNet Magazine

17

NEWSWIRES

Fed Worried About Trade War Federal Reserve officials are looking at ongoing global trade tensions, and they

do not like what they see. Minutes from the central bank’s most recent meeting showed a concern that the trade war poses the biggest threat to an otherwise strong economy.

In particular, Fed officials indicated that tariffs, imposed on a range of goods by President Donald Trump, pose dangers across a variety of areas.

“Wide-ranging tariff increases would also reduce the purchasing power of U.S. households,” the minutes said. “Further negative effects in such a scenario could include reductions in productivity and disruptions of supply chains. Other downside risks cited included the possibility of a significant weakening in the housing sector, a sharp increase in oil prices, or a severe slowdown in [emerging market economies].”

Fed officials also expressed fear that tariff increases would spark inflation.

TRUMP TO SEC: TWICE IS NICE

BULL MARKET HITS RECORD

The running of the bulls on Wall Street set a record. The current bull run on Wall Street became the longest in history at more than 3,400 days, beating the bull market of the 1990s that ended in the dot-com collapse in 2000.

That’s how long the benchmark S&P 500 index of major U.S. stocks went without a drop of 20 percent or more, the traditional definition of a bear market.

But despite its long duration, this bull market actually wasn’t as big in terms of overall gains as the 1990s’ one. The bull market for U.S. stocks began in March 2009.

DID YOU

KNOW

?

18

If the president has his way, the quarterly corporate earnings report would be a thing of the past.

Trump told the Securities and Exchange Commission that those fourtimes-a-year reports issued by public companies are an impediment to growth.

He called for a new system that instead reports earnings and forecasts at sixmonth intervals.

Some business leaders have argued the reports, mandated by law every 90 days, are inefficient and time consuming, and they rely on variables outside the company’s control.

Data in the “quarterly guidance system” become expectations of Wall Street analysts, and markets are set in motion by whether or not companies hit their stated targets. Reports at three-month intervals say little about

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whether a company is positioned for long-term growth, critics of the system contend.

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Social Security recipients could see their biggest raise in years come 2019. Early indications suggest that Social Security benefits could go up by a greater amount than retirees and other participants have seen since 2012.

Social Security calculates each year’s COLA by looking at the Consumer Price Index from July through September and comparing it to the previous year’s levels.

If that reading were to stay flat in August and September, it would give retirees a 2.7 percent increase come January. If price levels rise, then it’s conceivable that the COLA could reach 3 percent, according to a Motley Fool report.

Annual COLAs are given out to Social Security recipients every January.

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InsuranceNewsNet Magazine » October 2018

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20

InsuranceNewsNet Magazine Âť October 2018

Agency owners know that day is coming one way or another, but they are often not making plans.

COVER STORY SUCCESSION – READY OR NOT

M

any agents and advisors are aging out of the business, but are often failing to plan a transition for their agencies until they approach retirement.

But Scott Bishop has a plan about two decades in gestation — his son, Nathan, a 20-year-old college student majoring in finance and accounting, who wants to follow in his footsteps into the business. Nathan is already interning at Northwestern Mutual.

Bishop is 50 and closer to retirement than is partner, Cy G. Cattan, at STA

And if they have not taken care of matters to make their agency salable, they need to look at growing their succession plan either by biological or agency family.

Learning The Hard Way To Plan

Bishop had a falling out with his previous business partner in 2012 and paid a heavy price. Bishop and Cattan left the company and took team members and clients with them.

“It became an ugly deal so Cy and I decided that we wanted to make sure that all the contingencies were covered when

Many agency owners are not doing planning for the biggest transition they all know will come ...

Wealth Management in Houston. Cy is 40 years old and has children much younger than college age.

The partners are actively thinking about transition, perhaps because they learned the hard way that change comes whether or not you plan for it. They had an ugly parting with an earlier agency and learned to have a contingency plan.

But many agency owners are not doing planning for the biggest transition they all know will come — when they leave, either by choice or by some other kind of fate.

An InsurMark survey showed that 83 percent of advisors consider their business a part of their retirement plans. Yet, even though their business is a part of their retirement plans, 65 percent have no succession plans and 89 percent have no appraised value for their business.

“Many people get into the business in their 20s or early 30s, and they’re bulletproof. They’re going to live forever,” Bishop said. “One of the things that makes it especially urgent for me is our industry is graying. If we’re financial planners and we’re telling our clients to take care of these things, how can we not take care of them ourselves?”

22

we got back together in 2013,” Bishop recalled. “So we rewrote the buy-sell agreement to take into account all those things.”

They have a buy-sell agreement, a very detailed document that is continually changing. The pair — who manages

following decade. He has a general plan to retire around age 70. With the planning work the partners have done, they are prepared for any situation.

For example, if one of the partners should die, insurance will help with the required payout to the survivor’s family members. Absent that insurance, the surviving partner must find the cash while also worrying about nervous clients bailing on a suddenly unstable agency.

“We have insurance to fund that portion of our buy-sell agreement and I’ve already paid the premiums,” Bishop explained.

One important aspect of the BishopCattan agreement: They brought others into it. They shared it with family, and even their employees. That openness spreads confidence, security and happiness throughout their orbit.

“By sharing the agreement with our team members, that makes sure that if something happens to either Cy or me, the company is in good shape and the team members are taken care of,” Bishop said. “They know that their job is secure and that is hopefully something that will keep them from going to another firm for another $1,000 a year.”

They expand that transparency to clients.

“Whenever I bring in a new client, they know we work as a team,” Bishop Scott Bishop meeting with his multigenerational staff at STA Wealth Management.

about $400 million in assets under management — plan to add a disability buyout component by year’s end.

At its core, the Bishop-Cattan buy-sell agreement is a combination of triggers and what-ifs, with insurance built in to protect the partners.

Bishop’s plan is to work until 60 and then gear down and do less for the

InsuranceNewsNet Magazine » October 2018

explained. “That is my succession plan that I am building long-term internally for an easy transition upon my death, disability or retirement.”

Buying From Within

FP Transitions, in Lake Oswego, Ore., continues to do more nuanced business succession plans, said Brad Bueermann,

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October 2018 » InsuranceNewsNet Magazine

23

COVER STORY SUCCESSION – READY OR NOT

cession Plan Five Components Of A GOOD Suc for the plan, experts say. plan a

Succession planning is easier to get off the ground if one starts with lished in systematic order. It also helps In other words, break the succession plan into bits that can be accomp five components of good succession the are here produce a stronger plan, experts add. With that in mind, .

Houston in based planner l financia a Bishop, planning, courtesy of Scott is simply getting started. It reCreate a clear vision. The most difficult thing for many business owners ction. introspe deep with goals ional profess and l quires a willingness to look at persona transition look like for ful success a does “What Setting the company aside, a good way to start is by asking, ration.” conside careful and n reflectio l persona requires answer me?” Bishop said. “Getting to that

1.

y generally starts with operating Determine the business valuation. Establishing the value of the compan indicator of company profitbest the is flow cash , income net or cash flow. “Unlike book value, revenue want to see dependable, growing and ability and overall operating efficiency,” Bishop said. “Prospective buyers predictable flows.” of the business, or even a quicker exit, a If the succession plan includes staying on to work, or retaining a part plan. the with assist to ent investm good a valuation specialist might be

2.

or retention of staff as well as clients.

Maximizing value. Buyers place a high value on business continuity, risk to a successful transition,” “Clients who can easily follow disengaged staff out the door are an obvious who are a good long-term ionals profess and Bishop said. “This risk can be mitigated by hiring key employees employees share in the firm’s success.” fit, and by creating a compensation strategy with incentives that help al advisor, he added.

Likewise, it is best to connect the client with the firm, and not the individu

3.

and productive. To a point, that is. It Maximize scale. In other words, make sure the business is efficient office morale is low, Bishop said. and rked doesn’t make sense to be so “efficient” that staffers are overwo buyers. to interest great of be will that one is But a profitable and streamlined agency

4.

are ones with sound growth strateDemonstrate consistent growth. Firms that attract premium offers gies and strong business development plans. compensation and incentive plans in “Successful firms tend to have well-documented business development firm’s growth,” Bishop said. the in interest vested a has e everyon place for the entire staff, to ensure that

5.

— John Hilton

FP CEO and principal. The company does valuations and succession planning, and operates “the largest market for buying and selling financial practices.”

In the past, succession was largely about passing the business on to family members, he said, especially on the insurance side.

Absent any capable and interested family members, agency owners looked to an outside buyer. And usually too late to execute the most beneficial sale, Bueermann said.

“One of the things that we’ve really worked hard to introduce was a 24

succession planning that was an internal sale,” he explained. “Particularly for larger practices, a practice that has more than, say, a million dollars in revenue, they needed to be developing a plan around how their junior advisors could become owners.”

This type of business succession is becoming a strong trend in the succession planning world, Bueermann said. The key is you are not taking anything off the table, he added, meaning that the external sale is still in play.

“We are just seeing more and more people, maybe it’s awareness, maybe it’s

InsuranceNewsNet Magazine » October 2018

other things, coming in and starting to do that type of planning,” he said.

The net economic gain from succession planning is easy to see after the fact.

Tax impacts can be managed. Clients are satisfied and retained. Fair market value can be realized.

But agency owners who opt to consider an internal succession are seeing additional gains, Bueermann said, from more engaged advisors.

“You’ve taken employees or junior partners and made them owners,” he said. “You’ve given them a goal as to where they’re going to go as far as buying

TEAR DOWN THIS WALL COVER STORY

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October 2018 » InsuranceNewsNet Magazine

COVER STORY SUCCESSION – READY OR NOT

Avoid Succession Planning Mistakes To them, from Anthony J. Martins, Here are four common succession planning mistakes and how to avoid regional vice president for Securian.

agents and advisors do not Not Having a Plan. According to surveys, roughly 60-65 percent of time to create a succession have a plan for succession. Even if you’re confident that you’ll have Martins wrote in a guide favor, your in plan or think everything will just “fall into place,” the odds aren’t rs.

Adviso al Financi for the National Association of Insurance and a plan. Or at least get started SOLUTION: This one is obvious, but in case you didn’t catch it — create on paper. ideas putting with preparation and identifying potential successors, and

1.

there is only one road to Thinking There Is Only One Path. Many advisors mistakenly think retirement. In fact, there are many, Martins wrote. g, the more alternatives you SOLUTION: Start early and be flexible. “The earlier you begin plannin allow you to adapt to changes will have to structure your eventual transition. Remaining flexible will ent goals,” Martins said. retirem and ion and will increase your chances of achieving your success

2.

junior advisor as the one Limiting Your Potential Buyers. Homing in on a child or a preferred n. decisio ghted to take over the business could wind up a shortsi le as your practice may be today, SOLUTION: Identify your value and expand the search. “As desirab or candidates and encourages you must consider how you can position it in a way that attracts success them to work with you,” Martins explained.

3.

a formal document? Does Being Informal and Not Communicating. Is your succession plan clients, employees and your Do board? on s the person you think is taking over the busines they have about emerideas vague the g realizin is s advisor many family know the plan? The issue for gencies and succession are not real plans until they are formalized. important thing to keep in SOLUTION: “Frequent and clear communication is perhaps the most sit down with your chosen and y, attorne an Hire wrote.

Martins ion,” mind as you plan for your success successor and nail down those details.

— John Hilton

4.

into the company. You no longer have to worry about them walking across the street, or taking the next best offer.

Instead they’re invested in building this business.”

Those agency owners who have no family succession and no strong internal options are the ones who need succession plans the most. Many of them never intended to be business owners at all.

The InsurMark survey found that 74 percent of respondents identified themselves as “advisors who own a business,” versus 26 percent who said they are 26

“business owners who happen to be advisors.”

“Advisors do a great job of measuring their clients’ assets and progress to goals,” said Jay Vinson, executive vice president for sales and marketing for InsurMark. “But they have not taken the basic steps to prepare their business for a transition.

“We don’t think this means they are all planning to ‘die at the desk,’ but rather could use the help from strategic partners to maximize their business planning.”

InsuranceNewsNet Magazine » October 2018

‘Sell And Stay’

FP Transitions is handling planning for a “practice on the East Coast in the $3 to $4 million range.” The owner and the practice’s junior advisor are both looking to stay on. The owner’s time frame is three to five years, while the junior advisor has 20 years to go.

“These are people that know the clients, so it’s a perfect acquisition,” Bueermann said.

After doing 20 to 30 of these kinds of sales, FP Transitions created a moniker for the unique deals. It’s now known at the office as a “sell and stay” and it makes

SUCCESSION – READY OR NOT COVER STORY sense for a lot of advisors.

“This is a great time for people,” Bueermann said. “If you’re an owner in your 60s, or certainly in your 70s, even owners in their 50s, thinking ‘I’m going to want to sell in the next five or six years’ … you could do it now.”

market. The firms involved in FP transactions this year are showing 12 to 13 percent growth on average, Bueermann said, adding that those figures might be skewed by the fact that successful firms are more likely to be sold.

In the RIA world, 2017 was a record

who are doing that are doing extraordinarily well. And we do approximately a thousand valuations a year.”

Firms with recurring revenue are selling at multiples in the 2.4-2.5 range, he said, while nonrecurring revenue multiples stayed in the 1.2-1.3 range.

74 percent of respondents identified themselves as “advisors who own a business,” versus 26 percent who said they are “business owners who happen to be advisors.”

Doing so means de-risking and capitalizing on the equity in the business, while still pulling income from the business. And selling an agency with quality advisors and experience attached “is a plus,” Bueermann said.

FP Transitions is doing a lot of agency transactions because it’s a seller’s

year with 152 mergers and acquisitions recorded by the DeVoe RIA Deal Book.

At the midway point this year, David DeVoe called it “even money” whether a new record will be set in 2018.

“No business can stay static and you’ve got to develop a plan that makes you unique,” Bueermann said. “The people

“One of the most interesting ones is insurance-based revenue, or first-year commissions’ income,” he added. “That income, provided that they have consistency, growth and an integrated growth management, those practices are showing .96-.97.”

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COVER STORY SUCCESSION – READY OR NOT

Start With Continuity Planning Before you can create a succession plan, you should have a continuity plan in place. It is a broader plan that accounts for everything that could interrupt the business.

A continuity plan can be put in place immediately, rather than phased in over months or years, said Kirk Hulett, executive vice president of strategy and practice management at Securiti es America.

In a recent report for the National Association of Insurance and Financia l Advisors, Hulett offered 10 reasons why advisors should stop procrastinating and get a continuity plan togethe r.

1.

Your Clients. This one is obvious: Part of your obligation to clients includes making sure they will be cared for in case of emergencies. “If you have clients who own businesses, this is also a chance to show them what planning for the future of their business looks like,” Hulett wrote.

Your Staff. When the need for succession draws near, your staff will be “on the front lines — explaining the situation to clients, prospects, vendors and business partners,” Hulett wrote. “At the same time, they will be dealing with their own emotions — sadness, grief, fear, anxiety, possibly anger.”

Your Family. In addition to being fair to family about future plans, there is a financial aspect as well. Clients who do not know the future of your business are candidates to take their business elsewhere.

That could hurt your family’s financial security.

Your Business Partners. If you are sick for any length of time, how will agency revenues be divided up? If someone dies unexpectedly, will their heirs be taken care of? These are questions that need to be answered.

Your Estate Plan. How will your stake in the business be handled should you suddenly die?

Life insurance can help with this aspect, but the plan needs to be put to paper.

2.

3.

4.

5.

Strong Business Climate

The time is good for succession planning and agency sales due to the underlying business climate. The economy continues to expand, taxes are low and regulations are in abeyance.

In particular, the Department of Labor fiduciary rule was knocked out by a federal appeals court in March. It is dead. The Securities and Exchange Commission and the National Association of Insurance Commissioners are working on “best-interest” rules, but neither is expected to be a major hindrance on the industry.

The number of households making 28

6.

Your Prospects. Having a continuity plan can be “a great selling point when meeting with prospective clients,” Hulett wrote. “It shows that you practice what you preach, and that their needs will be met even in your absence.”

Your Peace of Mind. Having plans in place for sudden death and eventual succession can be difficult to get started and completed, but bring a tremendous sigh of relief when finished.

Your Speedy Recovery. In the event of a difficult or prolonged illness, the future of your company can be a major stressor if not properly planned.

Your Practice Valuation. From the time you become incapacitated, or die, your business starts losing value because of uncertainty. “Having a continuity plan in place can increase or at least maintain the value of your practice in the interim, as it helps ensure that clients and assets stay with your practice until the sale becomes effective,” Hulett wrote.

Your Income. You need income more than ever should an illness hit. Proper planning takes care of this need.

7.

8.

9.

10.

at least $100,000 in the U.S. stands at roughly 40 percent. The number earning $200,000 increased to nearly 15 percent.

“You’ve added several million people who are now making enough money that they are saving and need to plan,” Bueermann said. “We’ve added a lot more demand into the total economy for the services that are provided by investment advisors and insurers.”

Bishop, who hosts a radio show on financial planning and often delivers talks on succession planning, said the market to sell an agency has never been better.

“There are boatloads of private equity money and people looking to acquire

InsuranceNewsNet Magazine » October 2018

— John Hilton

financial planning and insurance firms,” he said. “If there ends up being a slowdown in the economy, the financing may dry up. So if you’re a baby boomer or a late baby boomer and have been contemplating it, now is the time to start taking a look at it.”

I n s u r a n c e N ew s N e t Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. Follow him on Twitter @INNJohnH. John may be reached at john.hilton@innfeedback.com.

MINE YOUR OWN EXPERIENCE FOR SALES GOLD COVER STORY

October 2018 » InsuranceNewsNet Magazine

29

the FÄąeld

A Visit With Agents of Change

Jocelyn Wright is pivoting from academia in the hopes of creating the advisory of the future.

By Susan Rupe

InsuranceNewsNet Magazine Âť October 2018

Photo credit: Susan Rupe

30

HITTING THE RESET BUTTON

A

fter she finishes unpacking all the boxes covered with plastic sheets in the basement of her Philadelphia home, Jocelyn Wright, 49, will begin building what she calls the financial practice of the future.

Wright describes herself as hitting a reset point in her career as she transitions from academic life to return her focus to her advisory practice. From 2014 until a few months ago, she served as the chair of The State Farm Center for Women and Financial Services at The American College while maintaining an advisory practice. She remains on the adjunct faculty at the college as she devotes more time to serving clients.

Now, Wright is renovating her stone duplex to serve as the nerve center for her soon-to-be virtual practice, Ascension Investment Advisors, as well as to provide living spaces for her and her sister.

Wright’s new headquarters is in Philadelphia’s Chestnut Hill neighborhood — a 45-minute commuter-train ride from congested Center City. With its tree-lined streets, flower-filled planters and stone houses, this parklike community resembles an old-money suburb within the city limits.

The house isn’t far from the neighborhood where Wright grew up, and where she had what she called the turning point that led to her passion in helping others find financial security.

In the spring of Wright’s sophomore year of college, her grandmother died, leaving behind a life insurance policy with only a $5,000 death benefit — not enough to have the type of funeral deserving of the family matriarch.

“I saw how my father and aunts were

IN THE FIELD

trying to come up with the money to “The firm had an African-American have a service in Philadelphia and then woman owner, and 50 percent of the emhave a burial for her in the South, which ployees were women,” Wright recalled. is where she was from originally,” Wright But she soon discovered that this firm said. “I kept asking myself, ‘Why didn’t was the exception to the rule. Women we know better?’” and people of color were almost invisible The irony was that Wright’s grand- in the financial services industry — both mother had been scheduled to meet with as advisors and as clients. an agent to discuss life insurance on the day she died.

Wright always had an When #MeToo Meets interest in finance, beginning in childhood when she Industry Conferences would volunteer to be the banker during Monopoly Diversity in games. But as a college stuF T he Time Is Ninancial Services: dent studying business and ow finance, that interest kicked into high gear.

“I worked in the collection industry in college, working with people who had fallen It is safe to say that if it behind on their credit card happens at conferences, it is also happening in the office. bills,” she said. “I learned to be There is little very protective about creddoubt that, if giv access and oppoen rtunity, it and to be conscientious qualified mi no and female ca rity about paying bills on time. I dates will th ndirive. also would help friends with basic budgeting.”

After finishing graduate school, Wright landed a job with J.P. Morgan but was laid off shortly after 9/11. Despite Jocelyn Wright’s columns appeared monthly in InsuranceNewsNet Magazine that setback, she still enjoyed over the span of more than a year. working in the financial world.

“I wanted to educate people,” she said.

Wright made it her mission to change “It’s important to me to educate people that. about personal finance and especially to “I focused on serving single, profesget more women involved in the field.” sional women,” she said. “At the time Wright moved to Houston, where she [2002], it was thought that single women joined a boutique financial planning firm didn’t have a need for financial products and found what she described as “a won- or solutions. I knew differently. There are derful mentor” in the firm’s owner. so many women who are caregivers and have people who depend on them. There are women who are earning money but need help on investing and preparing for retirement. Who is going to help them?”

THE AMERICAN COLLEGE INSIGHTS

about helping With over 90 years of experience, The American College is passionate students expand their knowledge and opportunities as financial professionals.

conference app to allow attendees to reof this stateTHE misconduct. portAM ERICANThe impact COLLE and from GEKitces ment coming directly With over 90 INSIGHTS years of exper ience, The Amer Moore cannot be overstated. When messtudents expan ican College is d their knowledge passionate about sages come from the top, there is no misand opportunitie helping s as financial professionals. taking the seriousness of the matter. Talk uring a recent conversation I about zero tolerance! had with a young woman, she shared an unpleasant experi- Not Only At Conferences only not is this as such conduct of code ence she had had while attend- A for conference attendance but ing an industry conference. After hearing appropriate in general practice. If we her story, I felt angry and sad. Angry also important up and jeoppolicies in place for how we took place for fear of speaking because someone she respected and who have rules and However, not everyThe finadeal with clients, we are well past the ardizing one’s career. ncia was old enough to be her father would will the l serv ices on how we will deal one who experiences harassment has try timetake indu to include rules do such a thing and sad that there wasn’t can a lesson from sability to simply change jobs. There is a org another. one with aniz two ations tha another woman (a conference buddy) t have can be fertile certain level of privilege that goes along con ted conferences present who possibly could have protected cerIndustry efforts aro made inappropriate with leaving. sity and undand misconduct ground dive arefor rher from such a situation. enup wor end kingato Instead, many women will male-dominated lead behavior. more there crea te a ip pipIselin After the incident, she did not leave the ersh e for womThere oppor- during in their jobs while hoping that the and venue our profession? en is oritin profession completely. However, she left min ies. end. When someone leaves tunity; people are more relaxed in a seem- behavior will in-Joce the firm where she would have had to By lyn Wright especially when without reporting the incident, the guilty environment, social ingly teract with the creep. to conHowever, it would be party goes unchecked and is likely have atteadd ndedinaalcohol.

How many other stories are there of you num ber that such behavior tinue the behavior. Moreover, in cases ence over of us to think women in our industry who, already few snaïve the past year of confer- away from where the harasser is a high performer, are focu happens only when people that wer on crea e in number, have been subjected to inap- sed ting a mor if it happens those in charge may turn a blind eye and that to esay and the office. is safe dive rse usiv e Itenv propriate behavior or, God forbid, even incl in order to protect the situation the ignore iron the in happening also women is it men at conferences, t for worse? profession. within the financiaoffice.

Therefore, we bottom line. l services But as I refle ferences, I However, thanks in large part to the make it a point must e con have to ask ct on thes mys ant question this #MeToo movement, women are now emimpimplement : At the rate elf an to ortResearch ing, will the we powered to tell their story without the at show code ressof- conduct industry ever are prog s that 30 perc so many from coming nific for women ant benchm fear that prevented ent is a sigachi reinforce eveevents parityandthe in my ark groupthi As OprahofWinfrey theitpast. inflection poin forwardininthat The audienc lifetime? represen home. at it ts viroaccep- nk and create a mor es at thes where criti reac hercalGolden 99 percent hed.“If said t during stated, mass is Globe nment for the exchange e open enMoore female, I noti e events wer e es the When a min ority grou watchof ideas. all the girlsI wou “I want contended, ced. I have ld like to chal tance speech, 30 percent p reac harassment h- lead if our indu long thehappens leve l, on the is ersh is belie new day that stry is tothe individual isn’t any ip to put thei lenge our industry … toitknow ngth ofing veda that ificant atchan realize collestrelikea conference, issues, their such sign r money whe mou In an attempt to address tatio finally ge day ths new that in when are if they ctivethevoichorizon. And theanother n ofcoone. This keeps represen women, come to ly tothat are truly serio re their e is Moore, Michael Kitces and Alan driv heard, and change mus the-connection us it will be because of a lot of magen from with theydawns, an-the industry unbalanced; t be no diversity and about are founders of XY Planning Network, charge of enac top dow … and some pretty phelong n. The lead women nificent ” er broken. then is perc advisors financial ers in as other eived sion, and not inclucode of con- ting policy, who nounced an anti-harassmentbe representing nomenal men fighting hard to make sure male, mus conference. hap beyond pen to the min also applies att actThis giving it lip simply the remarks as our duct during their openingsubs ority service. that they become the leaders who take us . of womin crea ive change. Whenallie about wes talk Ima tingthe lack August. intant gine the XYPN annual conferenceOur say to Another the progto the time when nobody ever has attritypically industry can organiza financial services, we tion en in ress our the network’s The policy was created bytwo take prof driv again!” organiza lesso female ing chan#MeToo of nawareness, to alack from islimited would mak ession tionsbute up ge thatithave Diversity Committee, which the Nationa certisedmade e if the inl Foo made con interested efforts arourole models women executives t- ball nd diversityor few entirely of volunteer members.

Wright is the working to Jocelyn and leadLeague, conserious a had and we Have fields. whi crea STEM ers are ch of The State Farm “Conference te a leadersh of the major chair The policy states in part, for wom blished comip pipe impactesta of harassment? panies cam beminversation the mayand Center for Women and rules en orities. about theline Rooney Rule participants violating these The e 30% issue of retainthis help explain the Club orig er around a togethCould confer3 to createServices at nities for min in 200Financial sanctioned or expelled from inally in thethe com College. opportu wasincrea American Uni oritiesThe ted Kin ing women the industry?

- good at goal. It wou mon ted ball. discretion in professio ence without a refund at notjocelyn. contacted utivthe in 2010 by the reaction maynalbe The rule Jocelyn ld be e leadersh gdom vic-requires foot too often,exec- viewis for the - importa only for the industry ip (chairAll also teams to inte .com. of the conference organizers. wright@innfeedback bers)” XYPN but, more and CEO nt, at for leas of the harassment t the one where FTS firm- each rto leave themem E 100tim minority cand a feature in the There is little clients we serve. went so far as to include com goal ope panies. The was to incr doubt that, ir er and n head coach, gene idate for and opp if give male director ease the number of fe- year front office position ral manag- female ortunity, qualified min n access s on their boa imum of 30 cand , the rule was ority and . Earl rds to a min Magazine » March perc 2018 expanded furt ier this panies and idates will thrive. The 50 InsuranceNewsNetClu - clude ir comwomen as b in the Uni ent by 2020. The 30% potential cand her to in- better for our industry will executive was launched ted States subsequ be all the it. idat ope es for nings in the entl The time goal for incr in mid-2014 with a sim y er’s office. commissionis now . We easing gen ilar sit by idly Although S&P 100 boa der diversity and wait for can no longer these efforts rds. At last on occu real change perfect, they r. are in no centage of to way do demonst women dire count, the per- on rate an effo the part of had increase ctors in the thes rt Jocelyn U.S. ate d Wright percent. At from 20.2 percent to change. Rese e organizations to creis director of The this pace, arch has show 23.3 twee American the 30% Clu the United n a compan n a link be- lege Stat States will b y’s perform e Farm Cen Colachieving be very clos in creased female ance and inWomen ter for and its goal by repr e Fina to a dive esentation. ncial Services. Joce 2020. rse grou By havi lyn at the table, p of employees and lead ng tacted at jocemay be conlyn.wrigh you eliminat ers innfeedba t@ 56 Insu e the possibili ck.com. ranceNew sNet ty

Industry conferences can be fertile ground for misconduct and inappropriate behavior.

By Jocelyn Wright

D

“It’s important to me to educate people about personal finance and especially to get more women involved in the field.”

I

Magazine

» February 2017

Back Home In Philadelphia

After nine years in Houston, Wright moved back to Philadelphia. She began working for a large insurance and financial services agency in the suburb of Newtown Square. The agency was starting a unit focusing on African-American clients. After a year there, Wright had the October 2018 » InsuranceNewsNet Magazine

31

IN THE FIELD HITTING THE RESET BUTTON

opportunity to purchase her own registered investment advisory firm.

She continued to focus on serving professional women.

“I see how the industry overlooks them,” she said. “A lot of people in the industry look at single women and think there’s no opportunity there — they don’t have a need for financial solutions.”

Photo credit: Susan Rupe

Wright begs to differ.

“Many single women are wearing multiple hats,” she said. “They are caregivers, they have responsibilities, they have people who depend on them, they have unique financial needs.”

“Women have a lot of anxiety about their finances and their retirement readiness. I think it’s my responsibility to ease their anxiety.”

In serving women, Wright noted a number of common factors that keep her clients awake at night.

“They’re worried about the long term.

Will they be able to retire? Will they have enough? They’re concerned about their families as well. They want to make sure their parents are taken care of.”

The majority of Wright’s clients are African-American, and she noted that whether those clients are couples or individuals, many of them are what she called the financial go-to for their family.

“They are the people that others in the 32

family go to when they need financial help,” she said. “How do they manage that and still make sure their own needs are covered?”

and services.

As director of the center, Wright promoted the advancement of women in the financial services profession.

She also was outspoken on a number Speaking Out of issues facing women and minorities Wright’s studies to obtain her Certified in the financial services world, writing Financial Planner designation led her to about subjects ranging from the #MeToo The American College. “The college was movement to ideas for diversifying the agent and advisor force. Her columns appeared monthly in Jocelyn Wright enters her InsuranceNewsNet Magazine new office in Philadelphia, over the span of more than a where she hopes to create the agency of the future. year.

Wright’s work at The American College won praise from Deborah Eskridge Glenn, the college’s vice president of administration and chief human resources officer, who described Wright as “a rising star in our industry.”

“Jocelyn is the consummate professional and a strong advocate for women in financial services,” Glenn told InsuranceNewsNet. “She is an avid supporter of diversity and inclusion initiatives.”

Now that she has moved into an adjunct role at the college, Wright wants to continue working with clients reaching out to me to take some addition- and remain a voice for women and unal classes, and I was working with peo- derrepresented groups in the industry. ple offering CFP classes,” she recalled. “At She believes those in the industry need one point, I went to The American College to pay attention to segments of the popuwebsite and saw the women’s center on the lation that she believes have been ignored site. I saw there was an open position there in the past. and I reached out.”

“There is wealth in these underrepreThe State Farm Center for Women sented markets,” Wright said. “We can’t and Financial Services at The American ignore certain groups simply because College was founded in 2011 as the na- we’re not comfortable working with tion’s first academic center focusing on members of these communities.” the economic issues and opportunities Wright recently joined a new study of American women, both as consum- group whose members were asked to deers and providers of financial products scribe their “big hairy audacious goal.”

“I think it’s especially important for women and people of color to make themselves visible so that young people can see someone like them doing this and realize it’s an option for them.”

InsuranceNewsNet Magazine » October 2018

HITTING THE RESET BUTTON

IN THE FIELD

First Protective Puts You First

Jocelyn Wright sets up her office, where she plans to focus on women and underrepresented groups.

Photo credit: Susan Rupe

“Mine is that in the next five years, I want to form a group with at least five advisors and build a financial planning firm for the future — a firm that will help people who are overlooked,” she said.

Because of her relationship with The American College, Wright also wants “to help young advisors cut their teeth” and get a strong start in an industry that needs new blood.

“I think it’s especially important for women and people of color to make themselves visible,” she said, “so that young people can see someone like them doing this and realize it’s an option for them.”

Going Virtual

Wright has her eye on forming the firm of the future. But right now, there are boxes to unpack, remodeling contractors to supervise and a virtual practice to get off the ground.

She also has a personal goal to attain.

A long-distance runner, Wright is four states away from achieving the 50-State Challenge — running a half-marathon in each of the 50 states. She plans to complete the final half-marathon in Hawaii this month when she turns 50.

Wright believes a virtual office isn’t for everyone, but it makes sense for her and her clients right now.

“I don’t have to have a brick-and-mortar office — I can see clients virtually,”

she said. “Using technology, doing virtual meetings with WebEx.” Moving to a virtual practice “definitely helps to cut expenses,” Wright said. “I’m able to take the money spent on rent and put more money into marketing.”

For those who want to meet with her in person, Wright can use coworking spaces or meet with clients in their homes or offices. She still has a number of clients in Houston and travels to that city to meet with them.

“As long as I have an internet connection and a phone,” she said, “I can set up shop anywhere.”

Susan Rupe is managing editor for Insurance N ewsN et .

She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor.

Contact her at susan.rupe@innfeedback. com. Follow her on Twitter @INNsusan.

Tell Us!

Do you know someone who would make a compelling profile story?

Shoot us a quick email telling us who it is and why you think so. Send it to editor@insurancenewsnet.com, and put PROFILE in the subject line.

October 2018 » InsuranceNewsNet Magazine

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LIFEWIRES

QUOTABLE

Policy Owners Are Optimists Maybe carriers should give away a pair

of rose-colored glasses with each life insurance policy purchased.

An AIG survey found that 56 percent of those who own life insurance are optimists, compared with 48 percent of those who don’t have coverage.

The AIG research also revealed that participants in group retirement plans, such as 401(k) and pension plans, are the most likely group to own life insurance.

AIG found that 69 percent of participants in group retirement plans also own life insurance, compared with only 44 percent of nonparticipants.

Life insurance owners also tend to be older and more affluent than nonowners.

AIG found the median age of life insurance owners is 43, versus 39 for nonowners, and the median annual income of life insurance owners is $88,000, versus $70,000 for nonowners.

When respondents were given a choice between having their employer provide student loan repayments or provide free life insurance, nearly two-thirds opted for help in repaying student loan debt.

NAIC LOOKS AT LIFE INSURANCE SUMMARIES

LIFE INSURANCE: WORTH IT BUT MISUNDERSTOOD

Those who own life insurance said it’s worth the cost even though many of them don’t understand how it works. That’s the word from a LendEDU survey.

More than half of those surveyed (54 percent) said they own life insurance, and 83 percent of those policyholders said they believe it is worth the cost. But one-third of those surveyed said they do not fully understand their life insurance policy. In addition, 20 percent of policyholders said they aren’t sure what type of coverage they have.

Among the 44 percent of survey respondents who do not own life insurance, 53 percent said they plan on buying coverage in the future, and 44 percent said they cannot afford it.

DID YOU

KNOW

?

34

A National Association of Insurance Commissioners working group is considering a proposed two-page “policy overview” summary to accompany life insurance illustrations.

Designed to “enhance consumer understanding,” the two-page summary proposal has been in the works for nearly three years. The Life Insurance Illustration Issues Working Group is making slow progress on the proposal, with a few issues remaining to work out.

Specifically, the American Academy of Actuaries is concerned that the summary could do more harm than good if it

George Nichols III was named president and CEO of The American College, Source: The American College effective Nov. 1.

InsuranceNewsNet Magazine » October 2018

Remember that life insurance is sold, not bought.

So don’t be afraid to quote a big number, prospect up, try to replicate your ‘A’ clients, focus on being a problem solver, and expect people to buy from you.

— Eszylfie Taylor, president of Taylor Insurance and Financial Services, Pasadena, Calif.

motivates consumers to ignore the full disclosure.

WORKERS WOULD LIKE GROUP LIFE

Only slightly more than a quarter of American workers (27 percent) have voluntary group life insurance. But about twothirds of those whose employers don’t offer it wish they did.

A Harris Poll said that 68 percent of employees who don’t have access to life insurance at work said they would be likely to buy it if it were offered.

When asked the reasons why they have voluntary group life insurance through their employer, 60 percent of employees said it’s to protect their families from future financial hardship; 44 percent said for peace of mind; 40 percent want to pay off debts and final expenses in the event of their passing; 27 percent want to replace a spouse/partner’s income in the event of their passing; and 26 percent want to leave an inheritance for children or grandchildren.

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LIFE

The Gift of Life Insurance: How To Get Your Clients On Board The gift of a life insurance policy can be a tool to teach financial responsibility to your clients’ children.

By Travis Scribner

W

hether it’s used for year-end financial planning or for building a legacy strategy, you already know that life insurance cash value can be a great savings vehicle for your clients.

But what you may not realize is that you have a unique opportunity to help clients take advantage of another use for life insurance: paying into a policy for a child to give your clients’ children or grandchildren the freedom and flexibility to use the cash value to fund major life milestones.

The idea of presenting a life insurance policy as a meaningful and financially 36

sound gift that clients can provide to a loved one is multifold. Remind clients that the main purpose of life insurance is the death benefit. When you encourage clients to view the policy payments as a gift, the emphasis should be on the fact that clients are creating a future cash resource to help assist with a child’s major expenses or life milestones.

Remind your clients that in addition to the death benefit protection, life insurance creates a tax-advantaged savings pool. It’s designed to grow and accumulate in value over the long term and its value will never decrease if premiums are paid and there are no loans or withdrawals. Essentially, a life insurance policy grants your client the ability to gift a long-term asset to a child that will lay a solid foundation for their financial future.

An Education Savings Tool

Although there are several ways to position the idea of gifting a life insurance

InsuranceNewsNet Magazine » October 2018

policy, one of the most versatile and promising ways to do so is to inform clients how life insurance can be an alternative savings vehicle for college funding and planning.

For example, if a client is paying into a 20-pay life insurance policy in a child’s name from their birth up until they are ready for college, the cash value of that policy will grow over time to help offset future tuition for higher education. The cash value may offset only a portion of tuition.

Clients might question why they would pursue this route instead of using a traditional 529 account to save for education. You should emphasize that although a 529 has benefits, a life insurance policy offers additional flexibility.

In the event a child receives a scholarship, or if the child does not end up going to college, the money in a 529 account would be heavily taxed when withdrawn for noneducation-based needs. A life insurance policy provides more freedom

THE GIFT OF LIFE INSURANCE: HOW TO GET YOUR CLIENTS ON BOARD LIFE when plans for education change.

One scenario to start getting clients onboard with the merits of gifting a life insurance policy is to position it as an incentive for school attendance or performance. Although each client’s financial situation will vary and require a customized scenario, many parents are looking for ways to teach their children financial responsibility. A client can use a life insurance policy as an opportunity to do exactly this.

Here is an example: When a child enrolls in college, their parents may request they take out student loans to pay their tuition. This starts to build credit in the child’s name, but also offers the parent an opportunity to incentivize the child: When you complete college, or perform well in class, then the cash value of the life insurance policy will be used to pay off your student loans.

child or grandchild, it is time to reevaluate their financial planning goals and how that affects their gifting and legacy goals.

Tapping Cash Value

You also can leverage the value of gifting a life insurance policy by emphasizing its ability to act as a cash reserve for a child’s future expenses — beyond education needs — to enhance a young person’s overall financial portfolio.

When your client owns a policy on behalf of a loved one, they have the opportunity of continued saving to expand wealth, or to liquidate the policy and use its cash value. A child might choose to keep growing the policy and use it toward retirement needs, or leave it untouched for death benefits.

The policy can be a great way for clients to teach their loved ones about developing and diversifying their overall

Getting Clients On Board

A common misconception among clients is that you must be a high-net-worth individual to gift a life insurance policy.

You might hear some clients express concerns that premiums upfront are too expensive and they have more important priorities right now.

Yet clients can customize the dollar amount based on their individual needs.

I’ve seen clients pay into policies for a loved one with cash flows as little as $100 per month. It may seem like a nominal amount, but it should be discussed as a long-term instrument that will continue to grow in the two decades before the money may be needed.

Getting your clients on board with giving the gift of life insurance will enhance long-term planning efforts, create effective savings vehicles for expenses like education, or provide tangible im-

Although each client’s financial situation will vary and require a customized scenario, many parents are looking for ways to teach their children financial responsibility.

There are other ways to incentivize education. Perhaps a client wants to offer a child freedom to choose, but also teach financial responsibility while doing so. If a college-bound child is deciding between an in-state university or a more expensive private school, the policy can be leveraged to pay for the more expensive school, or as a post-graduation gift for selecting the more affordable option.

The merits of gifting life insurance to fund education are clearly best suited for clients who are about to have a child or recently had a child, so cash value can grow over time to fund major expenses. For some clients, you can instill the mindset that each time they are expecting a new

financial portfolio, or about the importance of saving for retirement as early as possible. Depending on the financial situations of the policy owner and the beneficiary, the policy can be one of the strongest ways to gift someone financial stability and long-term protection.

Advisors need to get personal and illustrate how a life insurance policy can serve as a truly thoughtful gift with longterm equity and a tangible impact on a person’s life. The most important component that we’ve seen resonate with clients is that life insurance is an asset that offers flexibility and control. It’s gifting someone the freedom to continue to grow assets or to liquidate growing funds to help support a loved one’s life milestones.

pact for future needs. Although clients might not see it right away, you have the ability to show them life insurance is truly a unique gift that gives in so many ways.

Travis Scribner is a managing partner with WestPac Wealth Partners and a financial representative with Guardian. He is based in Las Vegas. Travis may be contacted at travis.scribner@innfeedback.com.

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October 2018 » InsuranceNewsNet Magazine

37

ANNUITYWIRES

2Q Total Annuity Sales Skyrocket

QUOTABLE

Fixed indexed annuity sales generated some heat in the second quarter.

FIA sales were $17.6 billion, 17 percent higher than second quarter 2016 and 21 percent higher than first quarter sales results, according to LIMRA Secure Retirement Institute.

Fee-based FIA sales were $67 million in the second quarter. Fee-based FIAs represent less than one-half of one percent of the total FIA market.

LIMRA SRI is forecasting FIA sales to grow 5-10 percent in 2018 — exceeding the prior annual record of $59.1 billion — and we expect FIA sales to continue to show growth in 2019 and 2020.

Total annuity sales were $59.5 billion, a 10 percent increase over the second quarter 2017 results and 15 percent higher than the first quarter.

The last time sales were at this level was the first quarter of 2015.

Rising interest rates will benefit income annuity sales.

— Todd Giesing, annuity research director, LIMRA Secure Retirement Institute

1. Under regulation #245, there is no way to illustrate indexes on fixed indexed annuities that have not been in existence for the previous 10 years.

2. The definition of “non-guaranteed elements” could be construed to include participating income annuities because of the formula used to calculate the dividend scale.

NAIC EYES ANNUITY ILLUSTRATION CHANGES

State insurance commissioners are getting closer to final rule revisions that would allow insurers to illustrate indexed annuities using indices that have been around less than 10 years.

The Annuity Suitability Working Group wrapped up a comment period July 1 on revisions to Annuity Disclosure Model Regulation 245. The group is a National Association of Insurance Commissioners committee.

The working group is tackling two issues:

Insurers say the 10-year requirement isn’t necessary if index components have been around that long.

LINCOLN FINANCIAL MOVES TO IMO CHANNEL

Lincoln Financial and a Georgia-based independent marketing organization reached a distribution deal to exclusively market a new index annuity. This is the latest sign of the insurer’s push into the channel.

DID YOU

Life will make its entire fee- and commissionKNOW Allianz based annuity product portfolio available through the

?

38

Envestnet Insurance Exchange.

InsuranceNewsNet Magazine » October 2018

Source: Allianz Life

Lincoln Impact Advantage is designed to be sold to high-net-worth individuals and will be offered exclusively by 500 agents and advisors affiliated with The Impact Partnership, based in Kennesaw, Ga. Lincoln Impact Advantage is designed for accounts with initial investments of $100,000 or more. The commission-based annuity comes with seven- and 10-year surrender charge periods, and credits account values using the Balanced Capital Strength 6 Index developed by First Trust and JP Morgan. The indexing strategy credits interest to the policy based on a two-year period using a point-to-point calculation method. An income rider is available for an additional annual charge.

VA OWNERS UNSURE WHY THEY BOUGHT THEM

Here’s a surprising fact about variable annuities: More than one-third of households with a VA aren’t sure why they bought them in the first place.

More than likely this is less a sign of product confusion or amnesia than it is an indication of the variety of uses for which advisors recommend VAs, said Scott Smith, director of advice relationship with Cerulli Associates.

Cerulli’s survey found that of households that had a VA, 34 percent weren’t sure why they bought it, 26 percent said it was to guarantee monthly payments in retirement and 20 percent bought it for portfolio diversification.

Whereas VAs were previously bought primarily for their income guarantees, particularly in the wake of the 2008 financial collapse, advisors now find that VAs can fit snugly into a broader retirement portfolio, Smith said.

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ANNUITY

7 Ways Annuities Can Solve Your Clients’ Financial Problems How to identify annuity sales opportunities lurking in the midst of your clients’ financial challenges.

activities you are already engaged in while helping your clients in the process.

After all, that’s what it’s about, isn’t it?

By Lloyd Lofton

Many retirees may need to draw enough income to live comfortably, but they must exercise caution not to deplete their nest egg. In many cases, the split annuity may hold the answer to their concern.

The split annuity is intended to provide immediate income while simultaneously regrowing the principal to — or close to — its original amount.

This works by using both an immediate and a deferred annuity.

Enough premium is placed in the deferred annuity to grow back to the original total investment (or close to it).

Meanwhile, the remaining premium is placed into an immediate annuity in an amount that will provide the needed income for a specified period.

After the specified number of years, the deferred annuity grows close to the original amount invested and is completely out of the surrender charge period.

The client now has several options, none of which will result in surrender penalties.

The deferred annuity may be annuitized and provide income payments, all or part of the annuity may be surrendered and placed into another instrument, or the entire split annuity process may be started over again.

H

ope is the magic ingredient in motivating yourself and others, or so said W.C. Stone, the founder of Combined Insurance Co. and one of the original positive attitude leaders.

Regardless of your feelings about positive attitude thinking, sometimes I’m positive something is crappy and sometimes I think everything is great. Funny how that works!

One subject I feel positive about is annuity sales, and Wink Inc.’s most recent sales results back me up.

Wink reported that traditional fixed annuity sales in the second quarter were $875 million — up 19.9 percent from the first quarter, although down 12.5 percent from the same period last year. (Hang on, that may not actually be bad.)

The report also shows that multiyear guaranteed annuities were up 23.4 percent ($10 billion) from the first quarter and up 27.2 percent from the same time last year.

Overall, the Wink report showed indexed annuity sales were $17.3 billion in the second quarter this year (up 22 percent from the first quarter), while showing an increase of 18.4 percent over last year.

So are you in the annuity market?

No? I know — the annuity market can seem scary. You think you must be an expert, you may not be sure where these products fit, and you don’t want to lose traction from what you are already successful at. Right?

Well, let’s see if we can identify how you can use some different concepts to identify sales opportunities within the 40

1.

Split Annuities

2.

Bonus Annuities

Bonus annuities pay an interest bonus during the first year, and a set base rate for subsequent years. Many bonus annuities will pay a bonus for additional money added to the annuity for the entire term of the annuity.

For example, the Allianz 222 Annuity offers the opportunity to earn a bonus during a client’s accumulation period,

InsuranceNewsNet Magazine » October 2018

and after they begin receiving their income. The insured’s principle is protected as expected from market downturns, and the insured has the potential interest based on: allocation options they choose, tax-deferral and death benefits. (I’m not promoting their specific product, or any carrier’s, just illustrating how this concept is available.)

Bonus annuities have a higher average yield due to the high first-year credit.

These annuities are especially useful when it is necessary to cover surrender charges from other plans.

3.

Multiyear Guarantee Annuities

This is another type of fixed annuity that has some of the same features of certificates of deposit and bonds in that they guarantee a rate of interest for the entire annuity period, or for a set number of years as stated in the contract.

The surrender charge period is usually the same as the interest guarantee period.

Some multiyear guarantee annuities will allow up to a 15 percent withdrawal after the first year without penalty, and most will allow interest-only withdrawals after the first year.

Wink showed sales of these annuities were up 23.4 percent in the second quarter of 2018 from the previous quarter.

4.

Tax-sheltered Annuities

Tax-sheltered annuities are special annuities that are qualified.

These annuities are only for persons who are employed by tax-exempt organizations, such as educational institutions, tax-exempt hospitals and other charitable organizations.

TSAs are qualified in that they are funded with pretax dollars and fall under Section 403(b) of the IRS code.

Employers do not match funds, and the premiums for the annuities are withheld

7 WAYS ANNUITIES CAN SOLVE YOUR CLIENTS’ FINANCIAL PROBLEMS ANNUITY from the worker’s paycheck. Payroll deduction is the extent of the employer’s involvement. There is a maximum contribution set by the IRS and it varies from year to year.

As with all qualified accounts, the funds accumulate tax-deferred. Taxes are paid on the full income when it is withdrawn, whether in a lump sum or as installment payments.

I cut my teeth on these products back in 1977, just after TSAs came into existence. I have a plaque in my office recognizing me as the top TSA producer in the Southern District, 1977, for John Hancock (a little nostalgia for you).

5.

Income Protection

Clients who don’t want to worry about juggling assets to generate income and who need a low-risk source of income can invest in a single-payment immediate annuity to cover fixed monthly expenses.

Because funds for living expenses are guaranteed, clients can invest other assets more aggressively.

6.

Fund A Divorce Decree With A SPIA

Clients can purchase a SPIA to fund the benefit payments spelled out in their divorce decree.

With a SPIA, a divorced client can pay child support or make benefit payments to an ex-spouse. The balance is then paid to the client to pay taxes.

In this way, court-ordered payments are always made on time, fulfilling the requirements of the divorce decree. The ex-spouse is assured of receiving those payments.

7.

Fund The Purchase Of A Business

To fund a business purchase, a client can purchase a SPIA with a benefit payment that meets the seller’s requirement. The annuity is owned by the client, with payments made to the business’s seller.

The seller secures the full price for the business. The buyer puts out less money for the purchase, and the seller defers capital gains tax.

After the business is paid for, the owner can use the benefit payments for other obligations or to fund retirement.

As you can see, annuities provide numerous ways for clients to solve everyday financial problems they face, and to address lifestyle issues.

Here’s my tip for you: Start asking questions that encourage your clients to tell a story — about the challenges of saving for retirement, how outliving their income has affected a family member, or about financial problems they would like to avoid.

Remember, great stories are about people, not things. And what people are using annuities for is a great story!

Lloyd Lofton is managing partner of 7 Figure Sales Tools, Marietta, Ga. Lloyd can be contacted at lloyd. lofton@innfeedback.com.

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41

ANNUITY

Morrie, Come on, lking you're ta it! top crazy, s

Commissions Vs. Fees: What’s Really The Client’s Best Interest?

Annuity commissions may have been given a bad rap in today’s best-interest-driven world. But are they really hurting clients?

By Jack D. Aiken

I

n the movie Goodfellas, Morrie enthusiastically tells Henry, “I never agreed to three points on top of the vig!” Regrettably, Morrie’s expression of disappointment did not work so well for him in the long run, and it may well be the same for clients of fee-based retirement planners. They too will pay the vig and will be exposed to losses even greater than those bothering Morrie.

“Vig” or “vigorish” is defined as a charge taken as a fee by a bookie or a gambling house on bets. What could more perfectly describe the relationship between broker-dealer reps and advisors with their clientele? Equity purchases and managed portfolios are at best 42

calculated, and often very well-informed, bets on what might happen in the future.

For the overwhelming majority of these bet-takers, the results are much more likely to be riding a wave as opposed to charting a carefully considered course.

Never Take A Loss

With shocking regularity, news stories appear about some random game by stark amateurs who are able to make market picks that outperform financial professionals of the highest stature.

Since Barton Malkiel’s Random Walk Down Wall Street was first published in 1973, we have seen a lot of fun around the notion of a blindfolded monkey beating the professionals.

A few weeks ago, The Wall Street Journal reported a group of their staffers threw darts at a list of stocks and outperformed a group of elite financial professionals. The dart throwers posted a nice profit while the group of very high-flying professionals posted a loss.

InsuranceNewsNet Magazine » October 2018

Famously, Warren Buffet’s Rule No. 1 is “Never lose money.” His Rule No. 2 is “Don’t forget Rule No. 1.” Yet we know that betting on the market results in losses with such frequency that a blindfolded monkey can do better than premier Wall Street professionals.

To be fair, the issues and considerations are complex, but the bottom line is the vigorish paid to purchase speculative instruments or to have an advisor manage a portfolio is a lot like placing a pretty risky bet. Like Morrie in Goodfellas, you could pay the vig and points on top through losses. It’s easy to see why Morrie was upset.

This risk is amplified when it affects a family’s retirement income. The amusing scenario of dart-throwing monkeys doesn’t consider the reality of a decumulation strategy knocked about by sequence risk and the uncertainties of simply living life. To provide consumers with the confidence that they will not outlive their money, annuities must play

COMMISSIONS VS. FEES: WHAT’S REALLY IN THE CLIENT’S BEST INTEREST? ANNUITY a prominent, even majority, role in a retirement strategy. As part of the annuity transaction, an insurance agent is paid a sales commission.

Commissions On Fixed Products Are Wonderful Things

When a consumer buys an insurance contract, they are buying a specific guaranteed feature set. They are not making a speculative investment. Every insurance contract has underlying minimum guarantees that are known for the balance of the contract, and typically for the balance of the customer’s life. No equity, bond or alternative investment can say as much.

Unlike asset under management fees, annuity sales commissions are not paid

electricity gets from a distant generating station to my microwave, I assume there are many people involved in the process and some of them are very well paid. I think most people would prefer to work with a successful, well-paid agent than with an agent who was not successful or well-paid. So the real question is, “What does it cost the client?”

Fee-Based Planning Has Incentive Conflicts

Setting aside monkeys with darts, this contrast of a sales commission to AUM fees is critical. AUM fees put all of the incentives in the wrong place for responsible retirement planning. We often hear fee-based advisors touting that their

To provide consumers with the confidence that they will not outlive their money, annuities must play a prominent, even majority, role in a retirement strategy. by the customer. If the consumer gives an insurer $100,000, that entire amount goes to work under the terms of the contract immediately. And at that time, the consumer can look down the road one year, 10 years or 40 years into the future and know to the penny the minimum value of the thing they purchased. Now that’s the basis of a plan. Something you can build on. A foundation upon which you can expand and grow, knowing that a base is there. And it has not cost the consumer one cent.

Cynics, typically politicians and feebased advisors, contend that if commissions on product sales were not so high, products could be better for consumers because the insurers could plow those exorbitant commissions back into customer benefits. That’s like saying that if linemen weren’t so well paid, your electric bill would be lower.

Personally, I don’t care what linemen make. I hope they do well and prosper.

What I do care about is having the lights come on when I flip the switch. Without knowing almost anything about how

income increases only if the value of the client’s account increases. It is typical for fee-based advisors to earn a fee based on the value of the client’s AUM. What gets less attention is that the client also pays if the value of their account declines. The impact of these unending fees can be tremendously detrimental to the client — particularly during retirement.

Funding retirement from portfolios based on bonds and equities is very risky. We know that there is only about a 95 percent chance of a portfolio distributing an inflation-adjusted 4 percent lasting 30 years. If that distribution is increased to just 4.17 percent, the probability of failure by 30 years doubles. A change as small as just 17 basis points means that one in 10 portfolios will fail.

In their efforts to ensure that their clients are not among the 10 percent who would fail, fee-based advisors are under pressure to perform better and better. They take more risks. Which is exactly what most retirees do not want.

Studies show that about 75 percent of retirees prefer safety over return. Yet the

pressures and incentives for fee-based advisors are to increase risk to maintain and grow the portfolio so their fees can be higher. And all the while, win or lose for the client, fee-based advisors are being paid fees.

This is in sharp contrast to insurance agents who are paid a commission to provide guaranteed minimum benefits.

The cost to the client for the services of broker-dealers and fee-based advisors can be 1 percent, or even higher, and fees would continue for the rest of the client’s life. Commissioned insurance agents typically make one commission. Very often that commission is in the range of 2 percent to 5 percent. They can be higher — even 8 percent, 10 percent or more. But they are not forever and they are never paid by the client. A 7 percent one-time commission not paid by the client looks pretty good compared to 1 percent paid by the client every year for perhaps 30 years.

In large part, this one-time sales commission is the distinction that will put guaranteed value, fixed annuities at the forefront of retirement planning from a “best-interest” standpoint. The payment of a sales commission for the purchase of a specific product creates a stark distinction between what fixed annuities provide and what investments are trying to do.

The agent has sold a specific feature set that will provide specific benefits for worried retirees. The client has purchased “certainty” and has not invested in “perhaps”. The agent has earned a commission for that defined service to their client.

In contrast, the broker-dealer rep or fee-based advisor places a bet about how things might be in the future. And for that they get the vig. And sometimes the client pays the “vig plus 3 percent” — or more.

Providers of guaranteed insurance products will shine and dominate when it comes to meeting the “best interest” of customers who are most keenly concerned with safety and not outliving their income.

Jack D. Aiken is president of LTA Marketing Group, Fargo, N.D. Jack can be contacted at jack.aiken@ innfeedback.com.

October 2018 » InsuranceNewsNet Magazine

43

HEALTH/BENEFITSWIRES

QUOTABLE

More Americans Support ‘Medicare For All’ Seventy percent of Americans

told a Reuters-Ipsos poll that they would like to see a single-payer health care system, also known as “Medicare For All.” The survey also showed that 85 percent of Democrats favor the policy, along with 52 percent of Republicans.

A study by the Mercatus Center at George Mason University found that a single-payer health care system would lead to a $32.6 trillion increase in federal spending over a 10-year period. The study’s author, Charles Blahous, wrote in The Wall Street Journal that even doubling taxes would not cover the bill for a single-payer healthcare system.

The policy’s proponents, however, point to a note in the study showing that health care costs would also decrease by $2 trillion by 2031 if it became law.

WALMART, ANTHEM FORM PARTNERSHIP

Senior citizens who are enrolled in Anthem’s Medicare Advantage program can use their insurance to cover some over-the-counter medications and first aid supplies at Walmart stores.

The Anthem/Walmart deal will take effect in January.

Currently, Anthem’s Medicare Advantage members who pay extra for plans with an OTC benefit can buy those items through a catalog over the phone or online, or they can shop in stores, though not both. In partnering with Walmart, seniors can buy their items online or in stores.

Walmart currently offers a Medicare Advantage plan co-branded with Humana.

DID YOU

KNOW

?

44

It’s not surprising that consumers were confused about the status of the ACA at the end of last year.

— Rep. Frank Pallone Jr., D-N.J., and Sens. Patty Murray, D-Wash., Ron Wyden, D-Ore., and Bob Casey, D-Pa., in a statement

Aid and Albertsons called off their agreement to become a single company before a shareholder vote was scheduled to take place on the matter.

CMS GIVES STATES $8.6M TO STABILIZE MARKETS

With the next open enrollment season for health insurance inching closer, the federal government gave 30 states and the District of Columbia $8.6 million to help stabilize their insurance marketplaces.

The funding will pay for measures that support market reforms and consumer protections under the Affordable Care Act. States can use the funds for activities such as improving and expanding the number of affordable health care coverage options available, or examining plan policies relating to mental health and opioid treatment services.

Albertsons — parent company of grocery chains Safeway and Acme — announced in February it planned to buy more than 2,500 stores from Rite Aid. But a major Rite Aid shareholder and two proxy advisory firms came out against the deal. Rite Aid’s leadership said the drugstore chain would move forward as a stand-alone company.

The nation’s largest drugstore chain, Walgreens, tried unsuccessfully to buy all of Rite Aid last year, but scuttled that deal after encountering regulatory resistance. Last September, Walgreens Boots Alliance Inc. announced a slimmer agreement to buy nearly 2,000 Rite Aid locations and some distribution centers for about $4.38 billion.

RITE AID-ALBERTSONS DEAL IS OFF

One of the biggest in a series of health care mega mergers is off the table. Rite

The Senate passed a measure to provide funding to require drug advertisements to disclose the price of the drug.

Source: American Association for Medicare Supplement Insurance

InsuranceNewsNet Magazine » October 2018

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

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HEALTH/BENEFITS

The leading cause of short-term disability claims by far is something most people wouldn’t even think of as a disability: pregnancy.

The Surprising Trends Behind Today’s Disability Claims The top 10 causes of disability are not always the things people worry about.

By Greg Breter

M

ost people realize that disability is something they could experience one day. It’s hard to ignore an issue that affects one out of every four workers at some point during their working lives. But the top causes of disability are not always what people imagine or worry about.

We analyzed the top 10 causes of disability claims in 2017 for any trends or other statistics that might reshape what readers think about modern disability.

We learned some surprising things.

Short-Term No. 1 Pregnancy

The leading cause of short-term disability claims by far is something most people wouldn’t even think of as a disability: pregnancy. Twenty-eight percent of short-term disability claims in 2017 were for pregnancy. This was nearly triple the percentage of the No. 2 short-term disability cause.

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This makes sense because when a woman gives birth, she’ll be out on maternity leave. And if there are any complications or issues, it could mean she will require a longer time before returning to work.

The good news is that Unum has seen a decrease over the past 10 years in health issues from complicated pregnancies, thanks to a combination of advances in medical treatment, lower cesarean section rates and more resources for new moms. This has led to a 47 percent reduction in long-term disability claims stemming from complicated pregnancy issues.

Cancer is the No. 2 cause of death in the United States, behind heart disease, and is on track to become the leading cause in the near future. The good news is that from 1990 to 2014, the overall cancer death rate per individual case has fallen by 25 percent because of better treatment, according to the National Cancer Institute.

From 2006 to 2017, Unum saw a double-digit percentage decrease in longterm disability claims for female breast and respiratory cancers. This could be a sign that greater awareness, early detection and advancements in medical care for these issues are paying off.

Long-Term No. 1 Cancer

Short-Term No. 2 Injury (Excluding Back Injuries)

The top cause of long-term disability is also not what most people would think.

When people worry about disability, their nightmare scenario is usually a serious accident that puts them in a wheelchair or body cast.

It’s a dangerous world out there. A fall down the stairs, a car accident, dropping something heavy on the foot — all it takes is one second for a serious injury. It makes sense that injury is the No. 2 reason for short-term disability claims.

From 2006 to 2017, Unum saw a double-digit percentage decrease in long-term disability claims for female breast and respiratory cancers.

InsuranceNewsNet Magazine » October 2018

THE SURPRISING TRENDS BEHIND TODAY’S DISABILITY CLAIMS HEALTH/BENEFITS In many ways, society has become safer. From 2005 to 2011, injury-related hospital visits per 10,000 people either decreased or held steady for cuts, car accidents and being struck by others.

However, injuries from falls have increased for all age groups, especially younger Americans.

Smartphones could be contributing to this problem. The number of pedestrian injuries from cellphone use doubled from 2005 to 2010, and Americans between the ages of 16 to 25 are most at risk for these types of injuries.

Long-Term No. 2 Back Injuries

Back injuries are about as universal a health problem as it gets. Roughly 80 percent of adults will experience back pain at some point in their lives. Twenty percent of adults experience chronic back pain that lasts 12 weeks or longer.

For such a common problem, it’s no wonder that back injuries are the leading non-illness cause of long-term disability claims. People can reduce their chances of back injuries by staying at a healthy weight, exercising regularly and maintaining good posture while sitting, as well as by controlling stress, as stress increases muscle tension.

Short-Term No. 3 Joint Disorders

Unum’s short-term disability claims for joint disorders have steadily increased from 2008 to 2017. This comes from a combination of an aging workforce as well as rising obesity rates. The more someone weighs, the more wear and tear on their joints.

Although Americans realize weight gain is a problem that can lead to heart disease and diabetes, they might not appreciate just how problematic it is for joints. One out of five Americans develops arthritis, but this jumps up to one out of three among obese Americans.

Long-Term No. 3 Injuries (Excluding Back Injuries)

Injuries are also a top cause of long-term disabilities. To estimate what results in the most serious injuries, we looked at the Centers for Disease Control’s leading causes of injury deaths in 2016. The logic is that if someone survives a life-threatening

The TOP 10 Causes of Disability Claims

Here are the leading causes of long-term and short-term disability insurance claims in 2017, according to internal data provided by Unum.

Long-Term Disability:

Short-Term Disability:

Cancer

17%

Pregnancy

28%

Back disorders

13%

Injury (excluding back)

11%

Injury (excluding back)

12%

Joint disorders

8%

Cardiovascular disorders

9%

Digestive system disorders

7%

Joint disorders

9%

Cancer

7%

injury, they will take a long time to recover from that injury. Accidental poisonings are the top cause of injuries for most age groups and are spiking because of the opioid crisis.

Car accidents are the No. 2 cause of long-term disabilities. Although vehicles themselves have become safer, cellphones have created a growing problem. One out of four car accidents today involve cellphones, and experts believe texting while driving could be as dangerous as driving while intoxicated. Unintentional falls are a close third for injuries.

year fell from about 750,000 in the 1980s to roughly 600,000 in 2014.

Short-Term No. 4 Digestive System Disorders

Long-Term No. 5 Joint Disorders

Long-Term No. 4 Cardiovascular Disorders

Gregory Breter is senior vice president, Unum US Benefits. Gregory may be contacted at gregory. breter@innfeedback.com.

Digestive system disorders include problems with the liver, kidney, esophagus and digestive tract. These issues are common enough to be No. 4 on the list for shortterm disability.

Although digestive system disorders make up 7 percent of short-term disability claims, they make up just over 2 percent of long-term disability claims.

Our health care system prevents many of these short-term issues from developing into long-term problems.

Heart disease remains the leading cause of death in the United States, so it makes sense that it would be a major contributor to long-term disability. The good news is that Americans have become better at preventing cardiovascular issues, as people quit smoking and use prescription drugs to control cholesterol. The total number of deaths from heart disease per

Short-Term No. 5 Cancer

Cancer rounds out the top five for shortterm disability claims, as people need time off work for treatment. The sooner cancer is detected, the better the survival rate.

Colonoscopies, mammograms and pap tests are screening tests that have been proven to reduce cancer deaths. It’s a good reminder that everyone should keep up with regular checkups and screenings.

Joint disorders are last on the top five list of long-term disability claims. Almost 19 percent of Americans over the age of 65 are working at least part time, and as the workforce continues to get older, claims for joint disorders will likely increase.

By building awareness about modern disability trends, we hope that we’ve given benefits brokers a new outlook on how they can help their clients’ employees stay healthy and reduce their chances of experiencing these common issues.

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October 2018 » InsuranceNewsNet Magazine

47

NEWSWIRES

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QUOTABLE

Women Are Advisors’ Dream When advisors close their eyes and imagine their dream client, that client is likely to be a woman.

MassMutual research shows that women and their approach to investing seem to be the better prospects for advisors, and women are also in greater need of advice. Other reasons why women make ideal clients?

Consider this. The research found that compared to men:

If you live in fear, you miss out on market growth.

— Arian Vojdani, investment strategist at MV Financial

month. For example, August is the month when people request the largest number of loans for moving and wedding costs. In February, people are likely to take out loans to pay taxes.

Personal loans are increasing in popularity, and, as a result, Americans are continuing to pile on the debt. The value of outstanding personal loans ballooned to about $120 billion as of March, according to TransUnion.

»W omen are more likely to save. »W omen are more likely to work with an advisor. »W omen are more open to simple investing strategies.

Yoink!

YOUNG INVESTORS WITHDRAW RETIREMENT FUNDS EARLY

Early withdrawals from retirement funds are increasingly becoming the norm among young investors, according to an E*TRADE Financial study. Almost 60 percent of young investors stated they had made an early withdrawal from their retirement account. In fact, early withdrawals among young investors (ages 18-34) rose significantly over the past three years — from roughly one out of three to now more than half.

This trend seems to run contrary to another survey finding — that almost all the young investors surveyed (89 percent) feel confident they will save enough

to enjoy their retirement. But at the same time, young investors don’t think they will need to save that much for retirement. Investors in this age group are most likely to think they’ll need only between $250,000 and $999,999 for a successful retirement.

And finally, 44 percent of young investors would recommend that a friend or family member put aside 6-10 percent of their income for retirement, but only 38 percent are actually saving that much for themselves.

They need more than a security blanket to clutch — more than half of Americans surveyed said they don’t believe they ever will be truly financially secure.

hat ial t e m Gim financ stupidurity! sec

AMERICANS BORROW MONEY FOR SURPRISING REASONS

It’s bad enough that Americans are getting deeper into credit card debt. A new study shows more Americans are taking out loans to pay for their regular expenses.

A LendingPoint report shows that these loans also follow a cyclical trend based on people’s spending priorities in a particular

DID YOU

KNOW

?

48

MAJORITY FINDS FINANCIAL SECURITY ELUSIVE

InsuranceNewsNet Magazine » October 2018

The average mortgage debt is $188,795.

Source: LIMRA

Source: MassMutual

A MassMutual report found that although most people are confident in their ability to pay bills and budget their funds, 54 percent said true financial security won’t happen to them.

Eight percent of the survey respondents reported having no cash stashed away in case of an emergency. Nearly 20 percent have less than one month of expenses saved, while only 21 percent have between three to six months’ worth of emergency savings. Only 33 percent of people were confident they were doing a good job preparing for retirement.

SERVING FINANCIAL GROWTH

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Three Buckets = A Simple Retirement Planning Strategy A retirement plan that bridges the gap between accumulating funds and distributing them. • Jason L. Smith

I

t seems as though financial advisors are all too often left to make important investment decisions for clients based on clients citing something like, “You’re the expert” or “I don’t really understand all of this, so you decide.”

As clients draw closer to retirement, they become overwhelmed by the myriad choices regarding their investments. This can result in disjointed retirement plans that are based on an individual retirement account here, Social Security there, and a mishmash of pensions and 401(k) plans in between.

Realizing that an empowered and informed investor is a happier client is one of the reasons that I developed The Bucket Plan, a financial planning process that clients will actually understand. The Bucket Plan simplifies the planning process and provides the advisor with information to structure a plan that can enable the client to not only retire but also to achieve the 50

type of retirement that they truly desire.

One of the biggest concerns facing retirees today is running out of money.

Because people are living longer, this is a valid concern. So before they make the decision to retire, they come to their advisors for advice. The clients’ journey from a vague understanding of their retirement goals to a comfortable knowledge of their solid, strategic three-bucket plan is one that we can all relate to on some level.

So, what is The Bucket Plan exactly?

The Bucket Plan is a retirement planning strategy based on three distinct buckets of assets, divided to emphasize when those assets will be needed. The three buckets are: » Now. The Now bucket is what we call safe and liquid money. It doesn’t grow much, but it’s also not exposed to risk that it could otherwise be exposed to if it were invested. This bucket includes

InsuranceNewsNet Magazine » October 2018

all the money the client could need now, including an emergency fund, money for upcoming planned expenses and the first year of income if they are retiring in the near future. Clients can sleep better at night knowing money is there when needed. » Soon. The Soon bucket is often considered the “preservation” bucket. This bucket includes money that the client may need soon, so the funds are intentionally invested for conservative growth.

A client may access this money for additional funds beyond the Now bucket or to provide income during the first 10 years of retirement. Things such as bonds and CD ladders, as well as and annuities built on a fixed chassis, fit in this bucket. A big correction or downturn won’t impact the client’s spending plans during their early retirement years. » Later. The Later bucket is where we house the assets earmarked for longterm growth as well as legacy planning, as they are funds that will not be needed

THREE BUCKETS = A SIMPLE RETIREMENT PLANNING STRATEGY

until later. Using The Bucket Plan, the client should be secure with the money in the Now and Soon buckets for at least 10 years, allowing the funds in the Later bucket to be put into longer-term, growth-oriented investments. As the Soon bucket is spent down over time, assets from the Later bucket will be used to replenish it. We call this reloading the Soon bucket.

To help us and the client understand their risk tolerance, priorities, concerns and income needs, we’ve developed a series of tools that support our Bucket Plan process. These tools allow us to be strategic in our recommendations to the client, while staying within the parameters they provide and letting them be active participants in the process. Let’s look at these tools and how they work.

We developed a concerns and priorities ranking worksheet to give us some insight into what really keeps clients up at

The biggest mistake people make is going directly from accumulation to distribution without preserving a portion of the assets that they will draw from during the first phase of retirement.

We present a financial plan in terms that a client can readily understand, making it easier for them to accept our proposed strategies. The Bucket Plan philosophy is a simple concept and is basically an asset-positioning philosophy based on the time available to invest and the eventual purpose of the funds.

Bridging The Income Gap

What’s unique about The Bucket Plan is the Soon bucket, the bridge between a client’s safe assets (Now) and the money that’s set aside for long-term growth (Later). Instead of making the common mistake of jumping from Now to Later, the Soon bucket gives investors extra time to invest the Later bucket funds for optimum growth in the early phase of

The Soon bucket gives investors extra time to invest the Later bucket funds for optimum growth in the early phase of retirement. night when they think about retirement.

The client is asked to use the worksheet to rank various financial concerns and priorities from one to three.

We educate the client on the three phases of the money cycle (accumulation, preservation and distribution) as well as the biggest mistakes we see people make.

The accumulation phase (earning, saving and investing) begins the moment someone starts earning a living, and it continues into the preservation phase, which typically takes place about five to 10 years before retirement.

The final phase is the distribution phase, when investors take distributions from their accounts for use as income in retirement and when distributions go to the family upon their passing.

retirement. This is why the Soon bucket is often referred to as the “preservation” bucket or a bridge.

An income gap assessment tool helps the client to see the difference between their retirement income sources and their retirement income needs. This assessment is broken into three sections, making it easy for the investor to see and understand the results.

First, we look for the net after-tax income that currently covers living expenses. Next, we add up any fixed income in retirement, such as pensions or Social Security. Then we look at adjustments, which include any major expenses that are changing in retirement, such as mortgage payments or health care.

Subtracting the expenses (after

adjustments) from the anticipated retirement income gives us a fairly accurate picture of the investor’s post-retirement financial life and the income gap that we need to fill.

A volatility tolerance analysis is a key tool, as it establishes how much investment risk the client is willing to accept within each bucket, thereby guiding the financial advisor’s recommendations.

A two-prong risk assessment, one each for the Soon bucket and the Later bucket, is necessary to fully grasp the client’s tolerance for volatility in each bucket. Keep in mind that there is a different purpose for the funds in each bucket, so what is tolerable in one bucket may not be acceptable in the other. Going through this process will help the advisor understand how conservative or aggressive the client wants to be with the investments that are earmarked for different purposes and phases of retirement.

Throughout this process, we keep the process and the discussions simple to help the client understand their entire situation and make sound decisions. We don’t overwhelm the client with everything going on behind the scenes, but we use powerful, targeted questions to draw out the information needed to develop a simple written plan of asset allocation that is easy to follow and understand.

Using all this information as a foundation allows an advisor to sit down with their clients and design a Bucket Plan that can meet or exceed their financial goals, all while staying within the client’s comfort zone for risk. The Bucket Plan can make it a win for everyone.

Jason L Smith is the founder and CEO of The JL Smith Group and the founder, president and CEO of Clarity 2 Prosperity. He is the author of The Bucket Plan: Protecting and Growing Your Assets for a Worry-Free Retirement. Jason may be contacted at jason.smith@innfeedback.com.

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October 2018 » InsuranceNewsNet Magazine

51

Communication and education are the keys in reassuring clients when the market resembles a roller-coaster ride.

Strategies To Calm Clients During Down-Market Volatility Communication and education are the keys in reassuring clients when the market resembles a roller-coaster ride. • Matthew T. Hoesly

C

lient communication and education are important components of practice management advisors must undertake to ensure clients understand how their portfolios are serving their overall financial goals. In particular, it is vital for advisors to proactively communicate with clients about market volatility or increasingly down markets.

On any given day, clients are exposed to news about potential market volatility.

They often hear about specific companies or commodities dropping in value and think it impacts them, although it may not have any effect on their investments.

Preempt confusion, questions and panic with a smart strategy designed to set clients at ease.

Hedge Against Volatility With Diverse Investments

Investment diversification is an important first step to prepare clients for potential market volatility. The total value of a client’s portfolio is less likely to be impacted when the investment is spread out across multiple assets. If clients are diversified in a variety of appropriate funds from the start, there should be no reason for them to panic when the market experiences volatility.

52

Mutual funds and exchange-traded funds offer a variety of opportunities and methods to protect portfolios against common types of volatility that may threaten portfolios. Some funds hedge against the U.S. dollar, which is one way to diversify and alleviate volatility. Other funds shift their focus more toward cash investments when the market turns.

Advisors also can diversify tax strategies by using various products and investments – such as a Roth IRA, insurance products, or investment and savings accounts. Work with clients to build an investment portfolio that suits their needs and spreads across a few key investments in order to protect them in the event of downward movement in the market.

Build Flexible Proactive And Reactive Communication Strategies

Clients need to know how movement in the market does or does not affect their portfolio, and they need to understand their advisor is a partner and resource. It’s reassuring for clients when their advisor proactively reaches out during periods of volatility to educate and help them adjust if needed, instead of avoiding it and hoping the market will correct itself automatically.

A recent study conducted by the Million

InsuranceNewsNet Magazine » October 2018

Dollar Round Table found that 74 percent of consumers with advisors indicated their advisor shared best practices for responding to market volatility. As a result, more than half of survey respondents with financial advisors expressed the relationship increased their understanding of appropriate actions to take when the market is volatile.

Right now is the ideal time to update and educate clients. It’s best to prepare them while the market is performing well and the outlook is positive. This way, if and when volatility occurs, clients are prepared with a solid foundation and understanding of what is happening when the market slips. Help clients understand where they are in the market and how much risk they can expect as part of this education.

Leverage visual aids and other tools to deepen clients’ comprehension. A scatterplot graph that shows risk and return on a chart is particularly helpful for clients to see how much risk they have in their holdings.

Client Communication Frequency

Advisors can use education to put clients at ease and explain the portfolio’s performance as it relates to movement in the market.

Your communication plan should include both proactive and reactive strategies to establish a strong baseline understanding at the outset that clients can draw on when volatility occurs.

You can start small with your

STRATEGIES TO CALM CLIENTS DURING DOWN-MARKET VOLATILITY

communication plan and operate alongside existing client communication initiatives.

Take advantage of already scheduled annual meetings or ongoing review periods to educate and prepare clients for what they may see in the coming year and how their portfolios should perform. Then reach out to clients with a simple phone call when big events take place in the market to let them know how they might impact them.

If you know your clients well on an individual basis, tailor the message to suit their risk tolerance. Clients who are more skittish and risk-averse may react negatively to the news, so be prepared with strategies and additional information about how they are directly impacted.

This approach worked well for my practice during the financial crisis in 2008 and has evolved over time to become a larger segment of my ongoing client service strategy.

I called each employee of one of our larger corporate retirement planning clients when the market got bad to answer questions about the crisis and their company-sponsored 401(k) accounts. Clients

appreciated my ability and willingness to answer questions and provide recommendations to help carry their portfolios through the storm. As a result, 30 percent of those employees now have individual business with my practice outside the company’s retirement plan.

Set The Stage: Context Is Key

Give clients context for where we are in the market cycle when you start educational conversations about volatility. Right now, we are nine years into an upmarket. Given the average bull market lasts about six years, clients should expect a little bit of volatility in the near future. After clients understand what to look for, use analogies and storytelling to contextualize what happens in the market during volatility.

One effective analogy to give clients added context is a comparison of market movement to sale prices. When clients are shopping and see an item marked down 20 percent, they are inclined to make a purchase and do not believe the item is any less valuable despite the lower price.

However, if an investment goes down 20

percent in the market, their instinct is to distance themselves from it. This analogy helps people understand that maybe there’s a better way to look at variations in investment prices. “Buying low” is hard to do!

A proactive approach to client education about the market’s impact on their investments and financial well-being lays the groundwork for productive, rational conversations when volatility inevitably occurs. It may also strengthen client relationships with deeper trust and appreciation in the long run. Advisors will do well to take advantage of the current market to implement their strategies to prepare clients — and their practices — for any upcoming changes.

Matthew T. Hoesly, CFP, ChFC, MSFS, is an investment advisor representative with Resource 1, a registered investment advisory firm in Norfolk, Va. He is a 10year member of the Million Dollar Round Table with Court of the Table and Top of the Table honors. He may be contacted at matthew.hoesly@innfeedback.com.

October 2018 » InsuranceNewsNet Magazine

53

BUSINESS

( But should )

3 Numbers You Aren’t Tracking What you need to know to discover the true return on investment of your marketing and your true bottom line.

By John Pojeta

W

hen I first began my career as an advisor, a mentor gave me two lessons that I still use today: If you can’t measure it, don’t do it; and the bottom line counts — provided you know how to count.

You have heard this advice or some version of it before. In practice, though, tracking your numbers and understanding the nuances of your bottom line can fall by the wayside. The fuzzier our data measurement and tracking become, the more we stunt our growth potential.

When you don’t know what’s working and aren’t measuring its true impact, you can’t make smarter, more profitable decisions in the future.

If you are aggressively pursuing growth, you should track the true return on investment of your marketing and your true bottom line.

You may think you are tracking those numbers now, but you are likely overlooking key insights.

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Measuring Your Prospecting Efforts

The game all businesses play is finding a way to put in X amount of money to then get more back out. This is the most basic form of the idea of return on investment, yet we often encounter advisors who aren’t assessing the ROI of their prospecting correctly or thoroughly. The apparent simplicity of calculating ROI obscures opportunities to better understand what you can do to make your business grow. “Money in” and “money out” are the ultimate end game, but there are more questions to answer along the way, especially if you are looking at marketing.

Ask yourself the following: 1. When will you reasonably break even on a new marketing tactic (and can you tolerate writing checks until then)?

2. At what return will you feel good about a marketing investment? When will you feel great?

3. Given your break-even point and your goals, how do you plan to address your potential discomfort between now and the return?

To use a common prospecting tool as an example, suppose you spend four hours this month attending network events.

How many prospects will you engage,

InsuranceNewsNet Magazine » October 2018

how many of those prospects will become clients, and what is the total lifetime value of those clients? Let’s take this big question apart into its variables: » Your investment (time and/or money).

You need this to determine your ROI, but we often find that advisors don’t know what they are worth per hour or how to measure the value of spending an hour doing one task versus doing another. » The specific activity you are measuring. Being clear now makes reviewing your prospecting much easier later. » The number of leads you generated. This helps you calculate your conversion rate, but for this calculation to be meaningful, you need a stricter process for defining a lead. If you wanted, you could gather a nearly infinite number of names and phone numbers, but that doesn’t mean they are actually opportunities. Develop a process to qualify leads and track them. » The conversion rate and total number of those leads. How many clients you obtained for your investment, or what percentage of leads became clients. » The true value of the clients you converted. You may find that some sources

3 NUMBERS YOU AREN’T TRACKING (BUT SHOULD) BUSINESS of clients are actually less profitable than others or that certain types of clients are more likely to provide referrals or increase wallet share. Many advisors don’t measure these metrics, yet they have massive potential for driving revenue.

You should be able to do this math for all of your prospecting efforts. You may find a piece of your prospecting that perhaps feels good to do — such as an annual direct mail newsletter about your staff to the ZIP codes you target — but is not actually impacting the business. That enables you to reallocate those resources to an aspect of your prospecting that is performing far better, such as your appointment-setting program or your client appreciation events.

The Bottom Line You Don’t Know About

How you measure your bottom line is more than your total net revenue. Net revenue absolutely counts and is important, but by itself does not tell the entire story about the growth or trajectory of

your business. The hidden challenge of an upmarket is that you can generate more revenue without ever expanding your customer base in a meaningful way.

For example, the health and benefits advisor could see a 15 percent increase in revenue for the business, but that increase might actually be a result of his clients growing — such as a business that expands from 21 employees to 45 employees. In this case, the advisor added new lives to the plan but did not add a new client. If the market hits a downturn and that same client lays off employees, that perceived growth will evaporate.

When you look at your bottom line, you need to see the whole story, and that means counting profit alongside the quantity of clients.

By tracking these numbers consistently — especially if it’s done in conjunction with the first piece of advice — you should be able to see how many new high-value clients you are adding. Your goal is not to get 100 mediocre clients to pad your client count, but rather to add ideal clients as well as bread-and-butter

clients alongside the profit growth of your current client base.

Under those circumstances, your business will not only grow exponentially, but you also will better insulate yourself from the painful consequences of a recession.

Get Started

If you don’t have this tracking in place currently, the upfront work of going back through your activity and calculating your numbers might seem daunting, but don’t let that deter you from the growth opportunities on the other side of that effort.

You will gain new understanding of your business and therefore be better equipped to reach new goals.

John Pojeta is the vice president of business development at The PT Services Group. He previously owned and operated an Ameriprise Financial Services franchise for 16 years.

John may be contacted at john.pojeta@ innfeedback.com.

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October 2018 » InsuranceNewsNet Magazine

55

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

INSIGHTS

Manage Rejection And Keep Moving Forward This advisor’s advice for handling rejection will come in handy as you deal with the many “no’s” you will likely receive from prospects.

By Barjes Angulo

I

n our business, facing rejection is part of life. All of us experience rejection frequently, sometimes on a daily basis. To be successful in this business, we must find ways to manage rejection and keep moving forward.

Helping clients with their finances can sometimes be a lonely business. Some financial professionals can’t handle this high level of rejection and end up leaving the business. Advisors are so different from each other that what keeps one in the game might not keep another.

Here are a few things you can do to successfully manage rejection.

Have Many Irons In The Fire

Keep Your Office Neat

When I get home from a long day at the office, I want my apartment to be fresh

and organized. This should extend to your office environment as well. Coming to a neat office in the morning gives us a fresh start for the day. Also, try to begin the day with new accomplishments.

Yesterday’s service issues, canceled appointments and lapsed polices are just that — yesterday’s issues.

And when you leave the office, leave nothing on your desk. This makes you feel as if you just made your bed. Staying organized will allow you to stay structured throughout the day so that you can stay focused on the things you can control.

Mind What You Look At Each Day

On the back of my office door, I have photos of the people I respect, care about and love. These are mentors, clients, friends and family. When I’m feeling bad about a “no” I received from a prospect or client, I look at these photos, which remind me

InsuranceNewsNet Magazine » October 2018

Just kee swimming p

p Just keineg m im w s swimming swimming

w e do ?

What do . swim swim We swim

of the good that I do and of the life I have made for myself by helping those people.

You must also be careful about what you read and pay attention to social media. Follow successful people, pages with motivational stories, and people you admire. This will keep you focused on positive things so that when rejection creeps in, you will not be fazed. Reading positive quotes will also remind you why you do what you do each day.

Focusing on the things you can control helps suppress the feeling of being rejected.

I hear a lot about the need to have many irons in the fire. This means making sure you are working on several cases or you have a few client appointments scheduled at the same time. In this way, if one of these initiatives does not pan out, you will not be fazed. If someone you have an appointment with cancels at the last minute, that is OK because you have four more people to see today — you can actually use the break.

If you have a few appointments lined up, that means you are working on several cases and are seeing the people. This leaves you with little or no time to think about rejection. But if you have only one appointment a week, rejection will consume you if that one client or prospect cancels. So, avoid the need to deal with rejection by scheduling more appointments. And the way to do this is to make more calls — that’s the one thing you have some control over.

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Focusing on the things you can control helps suppress the feeling of being rejected. These include going to the gym, reading motivational books and spending time with the correct people. For example, living in New York City, I ride the subway daily to my office. I use my commuting time to listen to podcasts, or when I need some “fun,” I listen to music.

I try to read for 20 to 30 minutes daily.

This can be a book or an article that provides me with valuable insights.

eep Just kming im w s

Think About Your Favorite Clients

All of us have clients we consider our favorites — those we think about in the following way: “If everyone I met were like Mr. and Mrs. Fernandez, business would be amazing!”

So, to stay positive, think about your favorite clients.

Think of the good you’ve done for them and the time it took to start working with them. Remind yourself that if anything were to happen to them, you would know that their family will be protected. Sometimes, I pick up the phone and call one of them. They immediately take my call and are always happy to hear from me.

There will always be rejection in our line of work — there is no way it can be avoided. It’s what we say to ourselves and how we act when it pops up that make a difference.

Barjes Angulo has owned Angulo Strategies for more than 10 years and has been in the financial industry for 20 years. He is a recipient of Advisor Today’s Four Under Forty Award. Barjes may be contacted at barjes.angulo@innfeedback.com.

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

3 Lessons For Overcoming Obstacles To Success Everyone experiences roadblocks in their careers, but there are ways to work around them and build a path to success.

By David Appel

G

rowth stagnation can be a frustrating hurdle that threatens the success of new and developing practices. I experienced a particularly challenging period in my practice that coincided with difficult personal circumstances. During that rough patch, I applied three key lessons I refined over the course of my career. Those lessons helped me adapt my operations and make it through that seemingly impossible chapter.

Years later, my practice is thriving.

These lessons can be implemented in any combination to help advisors overcome the most common obstacles to their success.

Lesson 1: Empower Your Staff To Help You Achieve More

A successful practice cannot prosper and flourish with the support of only one person. Advisors need to delegate tasks to their team in order to open their schedules and drive growth for their practices.

Ideally, advisors should not be involved in or responsible for tasks that do not relate to revenue generation.

Recognize your staff’s strengths and weaknesses, and work with them individually and collectively to delegate ownership for areas that elevate their skills and minimize gaps. This will ensure that employees are not frustrated or discouraged with their tasks and will keep them satisfied and efficient. Some tasks, such as illustrations and visualizations, may need to be outsourced to a third party to streamline workflow.

The only way to get through growing pains is to accept that mistakes will happen; when they do, try to fix and minimize 58

them. Consistency and structure are key to a well-functioning team dynamic.

Lesson 2: Never Stop Prospecting

No matter how successful you are, you cannot afford to get too comfortable or stop prospecting. You must keep your radar on at all times and follow up with new prospects at an appropriate time.

Gaps in prospecting can create a drought in your business down the line and can cause serious damage to your practice.

My practice relies on a few ongoing prospecting strategies to feed the lead pipeline and ensure sustainable long-term success. I give road show presentations as a way to educate professionals who offer related, complementary services on the benefits of various insurance products and strategies. Presentations are tailored to suit the needs and interests of their professional services — from lawyers to CPAs to trust and investment brokers. In these hourlong meetings, I dedicate time for questions and open conversation, which leads to networking and opportunities to collaborate on ways to better serve our clients.

My other prospecting efforts focus on networking within my community and centers of influence. This contributed to 80 percent of my gross annual revenue. In fact, my network carried me through a few lean years of operation. I relied on fellow advisors’ referrals and prospect leads to protect my practice and employees.

It’s important to pay that forward and keep in touch with influential advisors in my local community and the greater industry. I attend meetings and conferences, sponsor local events and schedule one-on-one outings to professional sports events in addition to outreach through targeted email campaigns. I also hold an annual holiday party to treat 30 of my closest sources and my staff to a private five-course dinner. At this dinner, some of

InsuranceNewsNet Magazine » October 2018

Boston’s top advisors are able to network and refer business to each other. This promotes a positive relationship and community that ensures our mutual success.

Lesson 3: Know Your Value And Strengths

Identify and hold on to tasks in your dayto-day operations that keep you excited about your business and help you perform better than anyone else. Find a way to keep at least two of your valuable strengths within your purview.

For me, it’s prospecting and client service. My skills help clients and other advisors feel comfortable that they will be well taken care of. This brings real value to those relationships that might not otherwise exist if those tasks were outsourced.

Roadblocks to success can be difficult to navigate, but it is possible to overcome them with strategies in place to generate and manage growth. Advisors who are hesitant to relinquish control over their practices’ day-to-day operations should identify a few key changes they can make to build momentum as they grow and develop their practices over time.

David Appel, CLU, ChFC, is a 22-year MDRT member with nine Court of the Table qualifications and seven Top of the Table qualifications. He has spoken at life insurance industry meetings in the United States and around the world. Appel is the managing partner of Appel Insurance Advisors. David can be contacted at david.appel@innfeedback.com.

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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

Are Employers And Workers On The Same Page With Benefits?

Are Employees Satisfied With Their Benefits?

Research finds that there’s room for advisors to add real value to benefits programs and efforts.

78% YES!

By Deb Dupont

T

o use a bad pun, many of the “benefits” of employment, beyond the obvious receipt of a paycheck, are the “employee benefits” offered by employers. Benefits are a key part of the relationship between employers and employees, and those benefits often contribute significantly to a household’s overall financial security and health.

Helping employers — and employees — navigate and make best use of employee benefits is a key function of both advisors and the companies that offer those benefits. Understanding the role those benefits play for each “customer” (employers and workers) is critical to adding value and helping craft a successful offering.

The LIMRA Secure Retirement Institute recently looked at both employee and employer perceptions of benefits offerings in its new report titled “A Matter of Opinion: Employer and Employee Perceptions of Benefits Priorities and Strategies.” (To be clear, and in light of my own role in institutional retirement research, the employers we spoke to were those who already offered a defined contribution plan.) When talking to employers, we asked them about how important they felt that these benefits were to their employees, instead of to their own organizations.

The Top 5 List

Retirement and health benefits remain a top priority. Health trumps retirement as the No. 1 benefit, but they are equally included in employer and employee top five benefits lists (for nine in 10 employers and workers).

In the top five list, retirement and health benefits are followed by paid vacation time (about eight in 10) and life insurance (about six in 10), where employers and 60

of Employers

52%

of Employees

Employers overestimate employee satisfaction with benefits, creating an opportunity for investigation, communication and plan design changes. employees are in similar agreement about the importance of these benefits.

Rounding out the top five for both groups is disability insurance, where we see a little less synchronicity between employers and employees. Fifty-eight percent of employers said it’s a top benefit for employees, but only 47 percent of employees agree.

Employees, especially younger ones, may not have had the opportunity to see disability insurance in action (and this is a good thing) or truly understand how it works. Disability insurance is much more important to older workers. Sixty percent of people older than 50 said it is a top benefit, compared to nearly half of people ages 40-49. Only 34 percent of those ages 20-39 said that disability insurance is on top of their list.

Paid parental leave is another area where, in total, employers and workers don’t connect about how important a benefit is — but again, age very much comes into play. Although 40 percent of employers said it’s a top five benefit, only 28 percent of employees overall felt the same. Here, though, employers are right in line with their youngest employees; 40 percent of each felt it’s a top five benefit. It’s no surprise that very few workers ages 50 and older felt the same (only 11 percent).

of workers vs. 31 percent of employers, and physical wellness for 27 percent of workers vs. 20 percent of employers. About a third of each (34 percent of employees, 37 percent of employers) said that education funding support of some kind makes the top five list.

A relatively new benefit on the market, an emergency savings (rainy day fund) benefit, is of great interest to employers; 89 percent are interested in offering one. A somewhat smaller percentage of employees — but still, 61 percent — are interested in using one. Three-quarters of millennials said they would use this benefit, compared with only 42 percent of baby boomers.

Are employees satisfied with their benefits? About half — 52 percent — said they are, which certainly leaves room for improvement. Employers overestimate their employees’ satisfaction, with 78 percent reporting that their employees are satisfied.

This suggests that there’s room for advisors and benefits providers to add real value to benefits programs and efforts.

Understanding employee perceptions and needs — and addressing gaps with products, education, communication, enrollment support and other engagement tools — can be a real differentiator with employer clients who struggle to balance benefits, resources, dollars and employee needs.

Employees Warm To Wellness Programs

Deb Dupont is responsible for the LIMRA Secure Retirement Institute’s institutional (retirement plans) retirement research program. Deb may be contacted at deb.dupont@innfeedback.com.

Wellness programs — both financial and physical — are a little more important to employees than employers appreciate; financial wellness is top five ranked for 35 percent

InsuranceNewsNet Magazine » October 2018

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