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JUNE 2013 » VOLUME 6, NUMBER 6

» read it

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42

ANNUITY

40 A s Others Dive, Indexed Annuities Cruise Strong

By Linda Koco Fixed interest rates have been at historical all-time lows, which is one reason why consumers are enamored with indexed annuities.

INFRONT

8 Documentary Rekindles Fiduciary Standards Argument

By Cyril Tuohy A look at 2012 annuity sales figures shows an intriguing dance, combining a slump in sales numbers with some surprises among the carriers.

12

22 You’re in the Retirement Business Now

By Linda Koco Agents and advisors are being called upon like never before to put retirement income saving and planning on the front burner, right alongside protection and investment strategies.

34

42 S upplementing Retirement Income Key Reason People Buy Annuities

By Linda Koco Annuity buyers tell LIMRA their top reason for buying was to supplement Social Security or pension income.

HEALTH

48 M arketing Beyond the ACA Plans

By Mike Houlihan The health insurance industry will need to develop a stratified approach for understanding and engaging with consumers that goes beyond the selection of their plan type.

LIFE FEATURES

12 Stop Marketing and Start Engaging

An interview with Scott Stratten Do you want to sell without being a salesperson? Do you want to market your business without using marketing?

Are you sick of networking and using social media without getting the results you want? Scott Stratten has the answers for you! In this interview with InsuranceNewsNet publisher Paul Feldman, Stratten gives the secrets of “UnMarketing” and tells you how to position your business naturally and automatically.

2

InsuranceNewsNet Magazine » June 2013

34 Buy a Mercedes with No Out-of-Pocket Cost

By Karl Ohrman The “Mercedes Plan” is a strategy that can be used to create charitable gifts, funding a legacy or buying a luxury for yourself.

36 Final Expense Covers More than Just Burial Costs

By Mike Quaranta Final expense life insurance is an excellent way for your clients to create available cash for expenses incurred following the funeral, while protecting their estate from unnecessary and unexpected loss.

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ALSO IN THIS ISSUE JUNE 2013 » VOLUME 6, NUMBER 6

60 NAIFA: The Rebirth of LTCi Solutions

54

By Deb Newman Although the LTCi industry has changed, your clients’ need to address their risk has not.

62 L IMRA: Texting – It’s Not Just for Kids

By Todd A. Silverhart Texting – whether its use in the business world is good, bad or indifferent – is here to stay.

BUSINESS

54 F our Reasons Why Salespeople Fear the Phone

64 A Call for More PhDs in Financial Disciplines

By Kerry Johnson In the first installment of this two-part series, we look at call aversion, why salespeople are afflicted with it and how it may be hurting their careers.

By Larry Barton Professionals with advanced degrees can provide the industry with the knowledge they need to move into the research and theory behind consumers’ financial decisions.

INSIGHTS

58 MDRT: Make it Personal

By Kirk Wilkerson Serving clients is an act of stewardship.

The key to success is to make your business all about the clients.

EVERY ISSUE 6 Editor’s Letter 20 NewsWires

32 LifeWires 38 AnnuityWires

46 HealthWires 50 FinancialWires

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13 INN 06.13 June 2013 » InsuranceNewsNet Magazine 5

WELCOME

LETTER FROM THE EDITOR

Reap Riches or Regrets YOU REAP JUST WHAT YOU SOW. That old saying came to mind as we were planning the retirement feature this month.

Retirement used to sparkle with the image of people finally having the time and resources to spend doing whatever they wanted. It brought to mind a beach or an RV or just enjoying the home and life people have spent their lives building.

Now, retirement is more of a picture of anxiety for many, as diminishing resources await them. Few people daydream of getting that sweet Social Security or Medicare cash, but with shriveling pensions and sorry savings, those programs are looking better and better. Meanwhile, those government sources look shakier and shakier.

We are all becoming more responsible for our own “golden” years, with no rulebook to guide us. The three-legged stool – Social Security, pension and savings? The 10 percent annual withdrawal rule – or even 4 percent? People may as well go to Community Chest for cash. By the way, I have no idea what Community Chest is, outside a Monopoly board.

My own father has come to understand the consequences of not planning.

Since his stroke, that is one of the few things he comprehends. He had been an accountant who worked for Lockheed Martin, the University of Southern California and NBC. He even crunched numbers for the Internal Revenue Service after the 1987 stock market plummet yanked him out of early retirement.

He worked for several more years until he could retire again.

I knew little of this. Dad and I hadn’t chatted for more than 30 years. He called me out of the blue in 2009. We stumbled through a few awkward phone calls for a couple months until I got a message from his landlady that dad was in the hospital and was not likely to go back home.

Dad has no one else but me to help him. He moved from New York to California during the ’60s. He wasn’t exactly a hippie CPA, but he did jump into a VW Bug and didn’t look back, except for a few long-distance calls that trailed off as he drifted out of orbit.

He was proud of his independence, loved to argue and hated to lose. Now, 6 InsuranceNewsNet Magazine » June 2013

he can barely speak and is stuck in the brain of an 8-year-old, but with the knowledge of who he used to be. A man who had been in both the Marines and the Navy now needs help bathing and dressing. This news junkie and Sudoku addict can’t read See Spot Run. But he knows just how fast he is running out of money. I might have gotten a good dollop of the jerk gene but not so much of the accounting DNA. Dad can still whip off complex calculations while I’m still counting fingers. I’m like Rain Man without the talent.

He has no insurance, such as disability or long-term care. The revenue he has is Social Security, pensions from Lockheed Martin and the IRS and, inexplicably, an annuity that pays him $108 a month. He is probably better off than most people because of those resources and some savings. Each month, his assisted living facility lops his small savings a little lower like a scythe though wheat.

As I helped dad figure out his new future, he struggled to tell me he saved that money for me to inherit. I assume it was to make amends for just vanishing all those years ago. That’s not a trade that I would have chosen. But now he doesn’t even have that.

He had left a will in an envelope tacked to his wall, which was how his landlady found me. That was the extent of his planning. The man who just wanted to be left alone is now bewildered in the constant care of strangers.

All around you are people like my

father, heading toward a purgatory that they can’t even imagine. And I will say it again – dad is better off than most. It’s frightening to think of all those who have nothing but needs.

In this month’s magazine, we have an ambitious feature on retirement from Linda Koco. It includes a sidebar about how agents and advisors will be paid.

It’s an important question, particularly for commission-based producers. But I would suggest that you also have a higher purpose.

Most agents and advisors I know are active in their communities and constantly looking for ways to help others.

Sure, that’s good for business, but the really successful advisors love being of service. They radiate with that desire.

Heroes are people going about their daily lives when calamity calls them to action. They do it without a second thought.

Out there on the horizon, enormous waves of unprepared people are cresting toward a system already struggling to deal with retirees. It is an obvious disaster in the making.

We cannot count on the government.

We cannot count on employers. Can we count on you?

Steven A. Morelli Editor-in-Chief

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FOR THE EDUCATION OF PRODUCERS/BROKERS ONLY. NOT FOR USE WITH THE PUBLIC. 0219417-00007-00 June 2013 » InsuranceNewsNet Magazine

7

INFRONT

TIMELY ISSUES THAT MATTER TO YOU

Documentary Rekindles Fiduciary Standards Argument A PBS documentary on the effectiveness of retirement plan advice rekindled a discussion on the application of fiduciary standards for financial advisors.

By Cyril Tuohy

T

he question before financial advisors is this: Which threshold will the government require them to meet when it comes to advising retirement plan participants?

Will the U.S. Department of Labor and the Securities and Exchange Commission (SEC) require financial advisors to meet a fiduciary threshold in which clients’ needs – without exception – are placed before the needs of the advisor or the broker-dealer the advisor represents?

Or will the government remain satisfied with financial advisors meeting the lower “suitability” threshold, now in effect?

Discussion around the application of fiduciary standards for financial advisors was rekindled last month in the wake of the PBS “Frontline” documentary titled the “The Retirement Gamble.”

The documentary questioned the effectiveness of 401(k) plans and the retirement advice given by investment advisors who have a vested interest in steering plan participants to funds that commission-based advisors represent.

In the “Frontline” broadcast, producer Martin Smith, who also narrated the program, took issue with the fees charged by mutual funds for managing corporate 401(k) programs. He found that fees and explanations of expense ratios often were buried in the fine print of turgid, opaque language.

In one segment, a teacher is quoted as saying she eventually passed on moving her retirement assets out of an annuity because of the penalty.

The program also contended that retirement plans offer too few low-cost options, and that actively managed funds offered by many plans were over the 8

InsuranceNewsNet Magazine » June 2013

long term far more expensive than index funds. Other experts interviewed also said the industry made no effort to go beyond the “suitability” threshold of responsibility to investors, compared with meeting a higher “fiduciary” threshold.

“I would argue you should almost always be with somebody who has fiduciary duties,” said Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, who was interviewed on “Frontline.” “The only time you might not is if you wanted to buy bonds or individual stocks. It is going to be quite hard to find somebody, as of right now, working to the fiduciary standard.”

She said that 401(k)s have failed retirees, in part because those who sell and advise plan participants are required only to meet a “suitability” standard, which doesn’t guarantee that the interests of participants are put first, the documentary noted.

Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School for Social Research, told “Frontline” that the type of financial advisor usually encountered by plan participants at a mutual fund call center or in a local bank exhibit two standards of loyalty: one to their profession and another to their company.

This is in contrast to an advisor in a traditional retirement plan governed by the fiduciary standard of loyalty to a client.

“A professional standard that your guy is guided by is a much lower standard than a duty of loyalty or fiduciary standard,” Ghilarducci said. “Basically, your guy is out for himself to maximize his sales, and the way he does it is to be loyal to the mutual fund. They try to sell you the most profitable products.”

Not so, or at least it’s not that cut and dried, according to the National Association of Insurance and Financial Advisors (NAIFA). Imposing a stricter fiduciary-duty standard would limit plan participants’ access to products, services and

View “The Retirement Gamble” in its entirety online at

bitly.com/innm0613-pbs

advice – particularly participants in small plans, NAIFA said.

“If advisors are precluded from offering commission-based products, consumer choices will be limited, and many may not be able to afford advisor fees,” NAIFA said in a posting on its blog. “Additionally, if advisors’ liability and costs increase, advisors may not be able to afford to work with small accounts or Individual Retirement Account (IRA) holders.”

The U.S. Department of Labor is seeking to update the definition of fiduciary advice, which dates back to 1975 under the Employee Retirement Income Security Act (ERISA), when 401(k)s and IRAs had not yet developed into mainstream retirement vehicles.

The Labor Department is expected to release new rules governing advisors and their fees and commission structure in July and, for months, all manner of financial industry lobbyists have been pushing hard to sway government regulators to their view.

Employee Benefits Security Administration (EBSA) Assistant Secretary Phyllis C. Borzi said the department would insist on nothing less than the “strongest possible protections to business owners and retirement savings in plans and IRAs.” “Investment advisors shouldn’t be able to steer retirees, workers, small businesses and others into investments that benefit the advisors at the expense of their clients,” said Borzi. “The consumer’s retirement security must come first.”

Last year, Morgan Keegan and Co. agreed to pay more than $633,000 to 10 pension plans covered by ERISA following the Labor Department’s EBSA investigation that found the full-service

Do MEDICAL brokerage company steered employee benefit plan clients to hedge funds between 2001 and 2008.

Under the settlement terms, Morgan Keegan will disclose to ERISA clients whether it is acting as a fiduciary to those plans and, if so, reveal its compensation arrangements.

Meanwhile, two industry groups representing life insurers and corporate retirement plan sponsors also have hit back against “Frontline.”

“It is not news that fees matter or that a successful retirement requires disciplined saving over a working career,” said the Plan Sponsor Council of America (PSCA), in a statement posted on its website after the program aired. “The truth is, employees who work for large companies are overwhelmingly likely to pay 401(k) fees that are a small fraction of retail mutual fund rates.” The Plan Sponsor Council represents corporate-sponsored retirement plans.

The American Council of Life Insurers (ACLI), in a news release, said that “Fees can vary depending on the services provided…. It is important to look holistically at the plan and the services provided to determine whether fees are reasonable.”

“Employers serve as plan fiduciaries, choosing investment options for the plan, ensuring service provider fees are reasonable,” ACLI said.

PSCA went further and said in its statement that “it appears Mr. Smith is not aware of his responsibilities,” as a small-company plan sponsor himself.

Smith owns a production company, which produces documentaries for PBS. “In the show, Mr. Smith stated that he was too busy to look at investment alternatives. He wondered, ‘How did this get in here?’ The answer, of course, can be found by looking in a mirror. We hope that Mr. Smith understands his responsibilities as a plan sponsor and a fiduciary.”

As a goodwill gesture, PSCA offered Smith a free one-year membership in its organization. “PSCA members look forward to sharing their experiences and expertise with Mr. Smith,” the PSCA statement said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@ innfeedback.com.

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And, when it comes to prospecting, Wadsworth has done it all. “I’ve done seminars. I’ve done referrals. I’ve done cold calling. I’ve done pretty much everything any agent could ever do to find new qualified prospects. And my two biggest hurdles were creating a constant flow of new prospects and ensuring that I was talking to qualified people. The CRP system was the answer. I now have at least 10 highly-qualified, exclusive leads to talk to every month.”

His formula for converting Internet leads came after years of unsuccessful prospecting; this is when Wadsworth arrived at a revelation. “The last thing any of us signed up for when we became financial professionals is marketing. Once you are in the business long enough to realize it’s as much, or more, about marketing than about sales, you approach prospecting differently. You need to come at it from a marketing perspective.”

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“The CRP marketing system gives you confidence, because you know you have qualified prospects to see tomorrow and every day after that. And make no mistake. Confidence is what this whole thing is about,” he continued.

He admits to being cynical toward “lead systems.” But every single penny

Jeff Wadsworth, June 2012 MDRT Main Platform Speaker

agents make the mistake of viewing the leads as “the system.” “A lead is raw material, especially Internet leads. You can’t rely on the same sales process. You need a complete system, that works with your style and personality. That’s the only way to unlock the Million-a-Month producer inside of you.”

Internet Leads: A Different Animal

Wadsworth’s success, he says, is due in part to knowing what works and what doesn’t. “I know what to say and what not to say because these are not referral leads, nor are they seminar leads. If you approach Internet leads the same way, you will struggle to convert. They are a completely different animal,” he says.

When asked about the CRP system, Wadsworth’s face lights up. “What I’ve found is the most successful marketing I’ve ever seen in my career. I’ve never felt more confident about my marketing, and the results I’m seeing, than I do today. I’m really excited to share it with advisors who were in my shoes, to show them the confidence to be at a million a month... and more.”

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Positioning, Wadsworth says, is vital to unlocking the Million-a-Month Potential in even the most average agent. “You have to make the leap from ‘salesman’ to ‘consultant’ in your mind, or you’ll never get to the next level.

What agents don’t realize is that the most important person they need to position themselves with as the expert consultant is themselves.”

“When you see yourself in the consultant role and approach everything in your business with that in mind, that’s when you will start seeing things happen for you,” he says.

“This isn’t a client choosing you. This is you choosing a client. The day an agent figures that out is the day their life completely changes.

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12

InsuranceNewsNet Magazine Âť June 2013

Y

ou want to sell insurance but you do not want to be a salesperson. That is a common, yet seemingly contradictory thought.

But Scott Stratten hears you and knows exactly what you mean.

He coined the term “UnMarketing” for that reason and he wrote the book, UnMarketing: Stop Marketing. Start Engaging.

Scott was once a music industry marketer, national sales training manager and a professor at the Sheridan College School of Business. He ran his “UnAgency” for a nearly a decade before focusing on speaking at events for companies such as PepsiCo, Adobe, Red Cross, Deloitte and Fidelity Investments when they need help with social media and relationship marketing. He is scheduled

to be a Main Platform speaker at the Million Dollar Round Table annual meeting on June 11.

He is known as an expert on social media marketing (he has more than 147,000 Twitter followers and his YouTube channel has more than 1.6 million video views), but he believes that, regardless of the media, it all comes down to relationships and old-fashioned networking. People do not want to feel like they are being sold to, but most marketing does just that. Scott talks about becoming what many insurance agents and financial advisors want to be – an expert who comes immediately to mind when prospects need help.

In this conversation with InsuranceNewsNet Publisher Paul Feldman, Scott discusses how putting “Un” into “Marketing” is fun and profitable.

June 2013 » InsuranceNewsNet Magazine

13

FEATURE

STOP MARKETING AND START ENGAGING

FELDMAN: What is UnMarketing?

STRATTEN: UnMarketing goes against hypocritical marketing, which is when people market to others the way they themselves hate to be marketed to.

Nobody likes getting a cold call but then salespeople want to make them.

UnMarketing puts you in front of your marketplace so that when people have the need for your product or service, they choose you naturally, organically and automatically. Many successful people in the insurance business understand that when they get known at the local Chamber of Commerce when people need insurance, their names are the only names that come up. UnMarketing is about natural positioning and not in-your-face marketing.

It used to be called “Yellow Page-proofing,” meaning that nobody is going to go looking in the Yellow Pages for an insurance agent if they already know one.

Well, now UnMarketing is more about “Google-proofing.”

FELDMAN: What will you cover at the Million Dollar Round Table meeting?

STRATTEN: It’s going to be a short but sweet rant on engagement, on connection, on how we are messing it up and how we can do it right. It’s a very small window, so I’ve got to make the point loudly and proudly that the audience and your readers are supposed to be in the business of relationships. Relationships build trust and without trust, you don’t have any clients.

And this new thing called social media that has come out in the past few years should be the catalyst for creating trust.

A lot of people in the business aren’t doing it. I see infinite potential for your industry to use a tool like social media.

FELDMAN: Is social media a fad or should everyone in business today be using it?

STRATTEN: I am not one of those social media fan boys who say everybody has to use it. I actually think that it’s a mistake to use it just because somebody tells you that you have to. I don’t think mandatory engagement is a good call.

I tell everyone that if they don’t have the time to do it, don’t do it. If you have 14

InsuranceNewsNet Magazine » June 2013

one minute a week to tweet, it’s like walking into a networking event and saying, “How’s it going, everybody? I’ve got to go,” and walking out the door. You have to be committed and engaged in order to be successful.

A lot of people who sell insurance understand face-to-face networking but they somehow miss something when it comes to virtual networking. In reality, it’s close to being the same thing. You get to know people and get in front of them. You connect with them and they begin to trust you. They want to know what you do and you become front-ofmind for them. That’s why you go to networking events. That’s why you get to know people in your community.

And that’s the same thing that’s happening virtually.

FELDMAN: In your book, you said networking events are evil. Why did you say that?

STRATTEN: They are evil because I don’t like forced networking where you put everything into one pot, put on the lid and hope it’s a good soup. When you call something a networking event, it puts a lot of pressure on people to whip out the cards and connect with as many people as possible. So you get this kind of baseball card syndrome.

I think cards should be about connecting, not collecting.

It’s the few strong connections that we can make at networking events that truly pay off, versus the “here’s my card, here’s my card.” This is especially true for the people who give out their cards at the start of a conversation. I don’t know if I want your card. I don’t know if you care about me.

I don’t know if I care about you, frankly. The cards given out at the end of a

conversation allow you to continue the discussion after the event, whether that means through social media, e-mail or the phone.

You can’t create good connections at networking events when you are trying to get rid of 200 cards in your hand.

FELDMAN: I speak with a lot of people who brag about their number of followers and how many likes they have.

They spend hours and a lot of money getting as many people as possible in their network. How do you feel about that philosophy?

STRATTEN: I know people buy followers, likes and also views on YouTube. People do it because they want to have this perception of social success.

The funny thing is that you can go to an event and say that you have 100 life insurance clients and nobody can prove otherwise. You can fake it. But you can’t go somewhere and say you have 100,000 followers on Twitter when you actually have seven and get away with it. It’s public.

So this creates the sting of public statistics.

Public popularity is the goal but there’s the middle, which is the work that you have to do to get a good follower count.

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FEATURE

STOP MARKETING AND START ENGAGING

People don’t like the middle part.

They don’t like the effort part. So they think if we can just buy a bunch of fake followers and likes or just follow a lot of people with the hope that they will follow us back, we can get around the system.

There is no shortcut to relationships, though. We shouldn’t focus on the number of followers. We need to focus on the resonation, which is how far what you say travels when you say it.

A key point that I stress is: Don’t ever do anything on Twitter or Facebook that you wouldn’t do at a networking event. They’re the same rules. Don’t talk about yourself the entire time.

Don’t try to sell immediately. And don’t ever do it while drunk. If you follow those three rules, you will do social media just fine.

FELDMAN: You have a pretty significant following on social media. In your book, you talked about how you grew from 2,000 to 10,000 Twitter followers in 30 days. How did you do that?

STRATTEN: You want the secret to Twitter? Work. The number of followers I have is wonderful – 140-something thousand. People love that number, but they forget about the 97,000 tweets it took to get there. People just say, hey, you just tweeted and you grew this huge platform. Yeah, it took five years of tweeting to get to this point. So there’s no overnight social success.

Like anything in business, this isn’t just something that happens in one day. The only secret to success is work.

FELDMAN: I just checked your Twitter page and you have 96,428 tweets.

Where do you get your inspiration for that many posts?

STRATTEN: Well, luckily for me, my brain is such a freak that it always comes up with something. Twitter worked for me because of my personality and that does not necessarily mean it works for everybody. I’m not suggesting that anybody should tweet almost 100,000 times.

I have a very short attention span like most people, but I am borderline attention deficit disorder. So I speak in one-liners and that really works well for Twitter.

FELDMAN: I’ve spoken with a lot of agents who said they tried social media, only to be discouraged. They make a solid effort for a period of time and abandon it when it fails to produce business. How long should someone try?

STRATTEN: There is no number because if I say a month and you tweet five times in a month, to me, that’s two minutes. So it’s not even a number of tweets or a number of days. It all depends on what you are doing with that time. I don’t know the answer except that I do know that I’d rather have consistency then quantity in time. If you have three hours a week to spare on social, I would rather you spent about a half-hour a day every day than three hours once a week because it’s a continual conversation.

And I think that the consistency builds up better than anything else.

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InsuranceNewsNet Magazine » June 2013

STOP MARKETING AND START ENGAGING

FEATURE

FELDMAN: How would you, as an insurance agent, build interest in insurance within social media?

Scott Stratten says the hierarchy of buying pyramid is based on Maslow’s hierarchy of needs and explains how connecting with clients’ needs increases engagement. The pyramid is a result of his surveys of thousands of business owners who bought a service. As you go down the pyramid, so grows price hesitancy and competition.

I was on Twitter for eight months and I got nothing out of it from April 2008 to January 2009. I could have blamed the network and said I tried. Hey, I got 1,200 followers for crying out loud. I tried.

But then on Jan. 1, 2009, I decided to live on Twitter for 30 days. I tweeted almost 7,000 times in those 30 days. I was a networking Twitter machine. And I went from 1,200 followers to 10,000 followers in that month.

I could have written it off before I tried that. It had been eight months but I wasn’t giving it my effort. I was just there.

And that was the difference. I think a lot of times people say social media doesn’t work but it’s really reflective on what they’ve given and put into that network.

So if you are on there for a month and you tweet 3,000 times, you’ve given it your all. If you are on there for eight months like I was and you tweeted 150 times, maybe the problem was you and not the network.

FELDMAN: Was there a point during your 30-day challenge that you realized that it was working for you?

STRATTEN: Well, I started talking to people who were answering me back – that

was huge. My goal for that month was to be tweeting so much that if I was gone for one day, people would ask where I was.

I really started seeing it on day one because I was there waiting for people to reply. Before, I was tweeting something, leaving and then coming back three days later and checking it. But then I stuck around for the conversation. I started talking to people and they started talking back and the next thing I knew, five hours were gone and I was talking with seven different people.

FELDMAN: So did you start out by simply responding to other people’s tweets?

STRATTEN: Yes. And that’s a great question because that made a huge difference.

Replies get you noticed and retweets get you follow-ups. That’s really the formula – 75 percent of my tweets are replies. And it’s been like that since day one. The types of replies are different whereas in the old days when I was trying to get traction and I had to go find a conversation by jumping in and saying, “Hey, I like that idea.” Now the majority of my replies are replying to people who are talking to me.

STRATTEN: It’s not about social media.

It’s not about somebody like me who doesn’t have a real job who says you should do this.

So I would tell you what I would do with my own business. If I want to grow my business, I want to make my current clients even happier so they will refer more people to me. Ecstatic clients refer new clients. Static clients don’t. Clients who just renew because they have no inclination to change don’t refer people.

So you have to decide: Do you want to go into new waters and increase your reach or do you want to increase the connection with your current clients?

If I want to increase my service to current clients, I follow those people on Twitter. I like their businesses on Facebook. I interact and share things and become the catalyst for my clients. I become the person who shares stuff. I don’t go out and say, “This is my client.” That’s not what you want to do. You want to go there and share stuff because you have a genuine interest in what they do.

The insurance business is very community-based, so I would become a catalyst for the community. If my current town or neighborhood didn’t have a Facebook page, I would set one up and run that page. I would create the community conversation.

On Twitter, if I have zero followers and I’m starting from scratch, I want to find everybody in my area who is connected, who are good at what they do and who are interesting.

I can do that simply by finding one person in the community on Twitter who is connected and going into that person’s profile to see who he or she follows. If I click on that list, it will show me local people I can connect with.

FELDMAN: What are the elements of a great tweet?

STRATTEN: It’s like anything getting spread. You have to evoke emotion and do it in 140 characters or less. It should be funny, “wow,” inspirational, controversial and it should make people say, “I’ve got to share this.” Ask yourself, June May 2013 » InsuranceNewsNet Magazine

17

FEATURE

STOP MARKETING AND START ENGAGING

“What can I say right now that would help my audience, or that would be funny and that they would like?”

I love the tweets that are humanity-based and cause-based, such as from someone in Haiti after the earthquake about how people were helping others.

Twitter, at the very base of it, is a community that wants to share.

FELDMAN: In your book, you talk about old school websites. What do you consider old or new school sites?

STRATTEN: Old school websites are static brochure sites, especially in your industry. They are like an ad for people to call or e-mail. It’s about services, testimonials and maybe some articles. But they just sit there.

New school sites are alive. They have blogs and they have content. They are on a Content Management System, a CMS, which constantly refreshes content. You give people a reason to come back to your site.

If you go to www.unmarketing.com, the front page of my site is my blog. But I don’t call it my blog. It’s my site and the front page of it is my newest content.

That’s the best way for me to position my expertise for my audience.

I still have about us, services and testimonial pages, but the lead page is my knowledge. That’s the biggest change in websites. When I get to the front page of your site, the front door, what are you saying? Is it about you? Or is it about the reader and the potential client and the marketplace?

You will find in your industry, most of the time it’s about the person selling the policy, when in reality, I want to learn about your expertise. The best way for me to learn about your expertise is not by seeing your degrees. It’s your saying that you are so confident in your knowledge that you are going to give it out for free because you want to help people.

FELDMAN: What are the biggest mistakes you see people making with social media?

STRATTEN: Not posting enough or letting it be dormant. I think that this is worse than not having any social media presence at all. It’s actually a very dangerous thing because people can see it and they think it’s a live place. It’s like having a storefront with no one working or visiting there.

I also see what I refer to as “greed” – where it’s all about you, it’s all about insurance rates or about products. Nobody outside of the industry cares about insurance rates. For 99 percent of their lives, they never think about insurance. Since it doesn’t affect their lives on a regular basis, no one is going to share it. The key is getting content shared in social media. This is what gets you known in your market and with your clients. Nobody is sharing and tweeting about the new policies or new rates. Nobody is on Pinterest pinning their life insurance policy and saying, “How great does this look?”

FELDMAN: You have had a bit of experience talking to people in the life insurance business. But do you have a relationship with an insurance agent?

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STOP MARKETING AND START ENGAGING STRATTEN: I am actually looking right now for somebody to sell me insurance. I am looking to change companies. I want more life insurance. I want something for my son and for my employees. I don’t trust anybody enough to give my business. And that’s kind of sad, really.

FELDMAN: What does somebody have to do to win your business?

STRATTEN: I think what they have to do is not try to win my business. Point me to some articles on your site that show me what I need to look for as an entrepreneur, as a small business owner. Not, “I will only give you this information if we have coffee.”

That happens a lot in your industry and in real estate. People say, “Hey, I want to talk to you about real estate or insurance or investing. I’ll buy you a coffee.”

I’m thinking I can buy my own coffee. I have the three bucks for Starbucks. It’s

not an incentive for me to listen to you.

But some people make that their hook. “I’m the one that buys coffee for people.” Is that your biggest selling point that I’m going to get some caffeine if I have to sit there and listen to your pitch for a half-hour?

I would love for somebody to send me a link and say here are the things in Ontario, Canada, that you need to look at for insurance. I don’t want to do Google for that. I want somebody to say this is what I do and I love it. I want to see their passion for it.

FELDMAN: This might sound funny, but have you tried social media to find someone to sell you life insurance?

STRATTEN: I tweeted it once. I put it on Facebook once. I said I’m looking for somebody to change insurance companies.

And I’ll be damned if I heard from any-

FEATURE

body after the initial 48 hours. Initially, everybody was like, “Hey, I can do that for you. I can do that. Hey, that’s what I do.” And then after that – nothing.

The industry is supposed to be the king of the follow-up and I got nothing.

I didn’t go through the channels that they wanted me to. They told me to go to their website and fill out the contact form. But I didn’t want to do that. I want the information now so I can freely read it and go to the person who is providing me with the great information.

FELDMAN: Although you’re still on Twitter and Facebook quite a bit, you said you are spending less time there. What is the next thing? What do you think people will be gravitating toward?

STRATTEN: I’m kind of blessed that my job is to keep up with the industry. I do love geek stuff and I love augmented reality. The fact that I can hold up a phone with the Yelp! app and it will view every restaurant on the street and pull up the reviews of each restaurant. That is very, very cool. I love that type of stuff.

But I don’t think networking will ever change. Social media will change but it will always be the same connection.

We’ve been doing social media before it was even called social media. We called it chatting. We called it talking. There have been forums online ever since online existed and that’s exactly what social media is. It’s a forum for conversation.

Because forums in the old days and now are still forums based on like minds.

So I think the more into the future we get, the more in the past we will stay. I don’t want us to fall into the “shiny object syndrome,” just jumping into the next thing and the next thing and the next thing.

The best thing somebody in your industry can do is focus. Focus on something, do it and do it well. And put the sunglasses on and avoid the shiny object jumping at you. If it works for you, don’t let somebody like me tell you any differently.

Find out more about Scott at www.unmarketing.com.

June 2013 » InsuranceNewsNet Magazine

19

[NEWSWIRES]

41% of Americans expect the economy to stay the same in the next year and three in ten (29%) expect it to get worse. bitly.com/QRnochange

New Estate Tax Surprise

49 % 74 %

The estate tax law continues to surprise. Last year, a lot of insurance and financial profesKNOW OF NEW sionals were thinking, and hoping, that once ESTATE TAX LAW Congress enacted a law that cleared up the estate tax exemption issues and other matters, a number of clients would start their estate tax planning in earnest. That would include making certain changes to their financial plans.

At the 11th hour, Congress did pass legislation that, among other things, made the $5 NOT MAKING CHANGES million estate tax exemption, indexed for inflation, permanent. But now comes word from Boston-based John Hancock that a majority of investors (74 percent) have said they are not likely to make changes to their personal financial plans as a result of changes to the estate tax law.

It’s not that investors are uninformed. Nearly half (49 percent) said they are familiar with changes made to the estate tax law in late 2012, the researchers found. But apparently most of the surveyed investors just aren’t interested in adjusting their plans.

Incidentally, the survey sampled views of investors with a household income of at least $75,000 and assets of $100,000 or more. Perhaps people with greater incomes or assets might respond differently?

THE DEATH MASTER FILE ISN’T PERFECT

Remember how state insurance departments have been tightening the screws on life carriers that fail to check the Death Master File to see if policyholders have died? The Death Master File (DMF) is a government database of people whose deaths have been reported to the Social Security Administration.

Well, guess what? The U.S. Government Accountability Office says it has found that the Social Security Administration does not verify certain death reports or record others. Rather, it

“only verifies death reports received for individuals who are current (Social Security) program beneficiaries, and even DID YOU

KNOW

?

20

then, only for those reports received from sources it considers to be less accurate.” As a result, “the agency risks including incorrect death information in the DMF, such as including living individuals in the file or not including deceased individuals.”

It’s generally known that the DMF isn’t perfect, but now that the government’s own researchers are spotlighting its problems, you have to wonder: How might this affect all those mandatory DMF search requirements from state insurance departments?

A LESSON IN ADVERTISING

A Tampico, Ill., life and health insurance agent ran afoul of the Illinois advertising code and is now paying the price. Terry L. Gaskill, 67, told the Daily Gazette that he had been fined $1,000 for violating the code when he ran an ad for

SIXTY PERCENT OF EXECUTIVES claim that excessive complexity in their industry is skyrocketing costs and hindering growth.

Source: Bain & Company

InsuranceNewsNet Magazine » June 2013

health insurance, 401(k) rollovers and annuities.

The department had three issues with the ad, Gaskill told the Gazette reporter: 1) He didn’t include the name of the insurer; 2) he had not obtained the carrier’s approval of the ad before it ran; and 3) he had used an agency name in the ad that was not licensed with the department.

He had intended to run a “generic ad,” he continued, but then he found out that such ads are not allowed in Illinois. “I learned the lesson the hard way,” he told the reporter. So what did he do? Gaskill voluntarily gave up his insurance license and retired rather than pay the $1,000 fine to the Illinois Department of Insurance, the news story says.

FOR SOME, PRICE TRUMPS LOYALTY

PRICE

Price control continues to be a huge issue for consumers. In fact, 34 percent of consumers say they are more interested in reducing their health plan costs than keeping their doctor, reports HealthPocket, Sunnyvale, Calif.

Price is such a big issue with the willing-to-switch crowd that more than 50

percent of them said they would switch doctors if their health premium decreases by just $500 to $1,000 a year.

Eight percent were a bit more choosey.

They said they would switch docs for an annual savings of $1,000 to $2,000. Another 7.5 percent said they would hold off on switching unless the savings on premium were $3,000 or more.

Of course, the issuers of health coverage have pricing issues, too. As HealthPocket points out, cost pressures are causing insurers to limit the size of their provider networks in order to negotiate lower rates to healthcare providers in exchange for a larger volume of patients.

All this leads to speculation that when the Affordable Care Act takes effect in 2014, the price-versus-loyalty issue will be on center stage.

Well, maybe loyalty is a waning trend anyhow. According to a 2013 Bain and Company survey, 66 percent of executives from more than 70 countries

[NEWSWIRES] said they feel customers are less loyal to brands than they used to be.

RETIRED AND IN DEBT

Nearly half of retirees (49 percent) carried debt into retirement, with 55 percent ow-

ing more than $25,000, and 21 percent owing more than $100,000,

according to a 2013 study on debt in retirement by Securian Financial Group. Advisors might take that as a negative signal for insurance and retirement income planning purposes, but at least the 2013 figure is an improvement over the previous few years.

In Securian’s 2007 survey, for instance, 71 percent carried debt into retirement and in 2009, 67 percent did the same, the St. Paul, Minn., company says.

FINANCIAL PROFESSIONALS STILL SNUB WOMEN

Women aren’t getting enough attention from financial professionals. That’s what Allianz found in a 2013 poll of women ages 25 to 75 with a minimum household income of $30,000.

Of the 38 percent of women who said they have a financial professional, more than a third (38 percent) described the professional as “not very responsive” or “doesn’t seem all that interested in my personal situation” (40 percent).

That may help explain another finding, namely that the majority (60 percent)

QUOTABLE At a time when our economy is in transition and many people have a general uncertainty about the economic future, a life insurance policy that is affordable can offer clients a measure of comfort and security in knowing that at least one area of their life is within their control and there is a plan in place that provides protection for their loved ones in the event of death.

— Debbie Knowles, vice president-marketing for Standard Life and Accident

56 % 56

IT’S IMPO

%

RTANT ...

FINANCIAL INDEPENDENCE IN RETIREMENT

PROTECTING FAMILY FROM UNCERTAINTY

Move Over Big Screen TV, Insurance Is Here To live life as a good person, what do you need? It’s probably not a big screen TV. According to a survey from New York Life, 56 percent of Americans across all generations gave a much different answer. It is extremely important, they said, to have enough money to be financially self-sufficient in retirement. In addition, 56 percent

said it’s extremely important to protect the family against life’s uncertainties, and 54 percent said it’s extremely important not to have to worry about bills and other day-today expenses.

The ability to accumulate more things is just not how most people find financial satisfaction or real life satisfaction, surmise the researchers, adding that Americans “want their finances to offer protection for the future, not just the ability to snap up the latest gadgets today.”

Our take: If it’s protection that people want, insurance agents and companies have the solution. do not see their financial professional as a “go-to” source for information about how to save, spend and invest.

Here’s another tidbit: The top financial topic that women said they most want to learn about is … drumroll, please … attaining a retirement lifestyle. But that’s not likely the top focus for many financial professionals, Allianz says.

“It’s definitely concerning that the financial services industry doesn’t seem to have learned much in the last seven years about customizing solutions to female clients,” commented Katie Libbe, vice president-consumer insights for Allianz Life.

Hmm, couldn’t some bright-eyed insurance professionals do something about this? Do you think?

THE WELL-OFF WANT RETIREMENT INCOME STREAMS

Some retirement professionals have been thinking that the middle- and mass-affluent households will be the primary markets inter-

ested in having a regular income stream in retirement. But the Investment Program Association has also found interest among high-net-worth investors who have annual household incomes of at least $150,000 and net investable assets of $250,000 or more.

According to the Ellicott, Md., trade group, 41 percent of such investors who are within five years of retirement believe it’s essential or very important to own investment vehicles that provide regular current income.

Among the high net worth who are already retired, 33 percent said the same.

Not surprisingly, the large majority of this savvy group of investors has already taken steps to counteract inflation, a key retirement planning strategy. For instance, 93 percent of those within five years of retirement say they have diversified their portfolios against possible inflation, and 86 percent of the retirees have done the same.

Would they be interested in insured retirement income strategies too? That might be something the advisor can find out.

June 2013 » InsuranceNewsNet Magazine

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The Great Recession and the aging of the population are factors driving advisors to be relied upon more than ever to provide retirement guidance and solutions.

BY LINDA KOCO 22

InsuranceNewsNet Magazine Âť June 2013

C

harles R. Lodriguss thought he was the Albert Einstein of financial planning, before the crash of 2008.

After the financial collapse, the Harvey, La., advisor realized he had to make a radical change in what he was recommending to clients, he said during a breakout session at this year’s annual Retirement Industry Conference in New Orleans. The meeting was sponsored by LIMRA, LOMA and the Society of Actuaries.

The initial impulse was to move clients into very conservative portfolios.

That almost assured his clients wouldn’t run out of money, said Lodriguss, who is a financial consultant with Thrivent Financial for Lutherans. However, it curtailed his clients’ spending habits tremendously. So then he began looking into annuities, and along with it, the use of those products for retirement planning purposes.

Lodriguss’ journey toward annuities shines a light on how advisor attitudes can change, and have changed, toward retirement solutions such as annuities.

Indeed, insurance agents and advisors are being called upon like never before to put retirement income saving and planning on the front burner, right alongside protection and investment strategies.

The economic crisis has had much to do with this trend. And it also is driven by the rising number of baby boomer retirements, the increased longevity of Americans, the greater potential need for long-term-care services, the decline of traditional pension plans and many other retirement-related trends.

Some in the retirement industry have been saying that agents and advisors still

YOU’RE IN THE RETIREMENT BUSINESS NOW are focused mostly on helping clients accumulate funds instead of planning for taking retirement income from those funds. But data and anecdotes presented at the conference suggest something different – namely, that agents and advisors have been inching ever closer to providing retirement income products, strategies and solutions and services.

They are doing this in tandem with insurance and financial companies, retirement plan providers and sponsors,

FEATURE

The response was “shockingly surprising,” Lodriguss told the break-out session, explaining that the products met with welcome and receptivity from “the masses.” People liked the tracking in the products and that at age 65, the withdrawal rate would go up a little bit, he said. It was a matter of “OK, where do I sign?” Lodriguss added.

“I had thought the rigidity of the product would be a big turn-off, but it turned out to be a big turn-on.”

Agents and advisors are being called upon like never before to put retirement income saving and planning on the front burner, right alongside protection and investment strategies. researchers, government policy wonks, consultants, product designers and others who are also stepping up their retirement income and planning initiatives.

How the Epiphany Happens

This is not a revolution. It’s more like evolution, with agents and advisors slowly feeling their way. Lodriguss’ story is instructive.

When he saw his clients’ post-recession struggles, Lodriguss said he began looking at annuities as something that might help, because annuity products have features that are similar to other forms of insurance. He thought he could use the products to transfer some of the financial risk to the insurer.

He said he knew that annuities presented certain obstacles – fees in the products, for example, and the possibility that clients might be turned off by the rigidity of the products – but he decided to present the products and see.

of advisors already offer retirement income planning services to their clients.

He is not alone. Ronald C. Camet Jr., a personal financial representative with Allstate in Metairie, La., told the same break-out session how he moved from selling mutual funds, stocks and bonds in the 1990s into selling a lot of annuities starting in the 2000s.

In the old days, he recalled, “the only time the annuity made sense to me was for the death benefit.” But in 2000 and 2001, the lifetime income riders started appearing on variable annuities. Camet said he looked at the products and began to think they made sense. By 2004 and 2005, he was showing those products to customers, who also said the products made sense. Not only that, the customers told him they wanted to put some money into those products.

Then came Camet’s personal “aha moment.” In 2009, he said, one of his customers called to thank him for offering the product. “She said, ‘I understand now. Thank you for showing us this, and we want to put more money into it.’”

“She called me!” Camet stressed, adding that an annuity with a lifetime income rider “is the only investment I’ve given to a customer where the customer has called and thanked me for it.”

A little time later, a comment from his mother got his attention, too. She asked, “Why don’t we put all our money in a product like that?”

Camet said he answered that he is trained not to put all a client’s eggs in one basket. But what impressed him was his mother’s favorable view of the prodJune 2013 » InsuranceNewsNet Magazine

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YOU’RE IN THE RETIREMENT BUSINESS NOW

uct. Ever since, he said, “annuities have become a huge part of my business.”

New Data

Two stories do not a trend make. But when viewed against some new data from LIMRA, the pieces begin to fall into place.

The data show that advisors do appear to be making mental and advisory room for retirement planning. Specifically, nearly all (89 percent) of more than 1,000 advisors whom LIMRA surveyed in late 2011 said they offer retirement income planning services to clients.

In addition, three-fourths (76 percent) of those advisors said they made changes in the last 12 months in order to do more retirement income planning than previously.

What kind of changes did they make?

Nearly half (44 percent) said they introduced new products or services, and 37 percent added more components to their financial planning or advice-giving capabilities.

Others said they obtained special training, extended their network of relationships with lawyers or other professionals, and even added professional staff. Still others said they changed their platform or practice model and/or launched a new website or major addition to their pages.

Those findings are raising eyebrows among company executives who say their own advisors are actively resisting retirement income planning. The executives are wondering, how can the LIMRA results be so different from what the executives have experienced?

Some of the disparity may be explained by looking at the definition of “advisor.”

In the LIMRA study, “financial advisors” included registered investment advisers (RIAs), registered representatives of broker-dealers (B-Ds), dually registered reps and bank professionals. It did not include either institutional investors or life insurance agents who receive at least 85 percent of product sales through one company.

However, even if one-company life insurance agents also were included in the survey, the outcome might have been close to what LIMRA found. That’s because many of those agents work for carriers that do offer retirement products and services and also have created their own retirement strategy and research centers.

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InsuranceNewsNet Magazine » June 2013

WHAT’S THE FUTURE LOOK LIKE? In looking at the retirement future for agents, Ronald Kuehn, second vice president and associate actuary at Ameritas Life Insurance, had this to say: For agents to move more strongly into the retirement planning and retirement income market, “it will take a simplified product design plus enough education so that the agents understand how to build a solutions-based approach to meet the market and to specific client needs.”

In addition, he said, “Agents will need to adopt a long-term perspective for meeting client needs—not a commodity approach. In view of that, the companies will need to create a way to compensate agents for that long-term horizon.”

As noted earlier, agents just about everywhere are being pressed to take up income planning in some fashion.

It is worth noting that the LIMRA researchers found that consumers who have advisors tend to be older (many in their 60s and 70s), and have higher investable assets (approaching $1 million or more) than people who don’t work with advisors. This helps explain the high percentage of retirement activity among advisors in the LIMRA study.

Their older, wealthier customers are likely demanding retirement services.

Some retirement experts have wondered whether advisors will also provide retirement planning and support to people of more modest means, should they, too, create demand for retirement services.

Certain clues point to yes. For one, there is that anecdote from Lodriguss to consider. He said that the “masses” are the people whom he has found are attracted to annuities with retirement income features. So apparently, Lodriguss is providing the middle-market (the masses) with retirement services. Can his peers be far behind?

Then there is the industry statistic about annuity purchase premiums to consider. These premiums tend to average between $50,000 and $100,000, according to the lore of the business.

That is a relatively modest amount, which suggests that the middle-market demographic is among the buyers. (Not all annuity sales reflect retirement income-oriented business, but some of it likely is, especially as the elderly population continues to rise.)

Naturally, advisors who specialize in serving the high-net-worth market tend not to be big players in the middle market. However, with the middle-market push that many insurance and financial services firms are making today, other advisors can be expected to become middle-market specialists for retirement income, among other needs.

A Reason to Step In

LIMRA has some other statistics that may provide advisors with reason to wave the retirement flag, if they have not done so already.

One is that guaranteed living benefits (GLBs), the annuity riders that guarantee

“Tell people what they need to do. If we don’t get bold about it, it’s not going to change things.”

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May 2013 » InsuranceNewsNet Magazine 25

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YOU’RE IN THE RETIREMENT BUSINESS NOW

to provide lifetime benefits, continue to be strong sellers. Those riders were elected on a large majority (more than 80 percent) of variable annuities sold in 2012, according to LIMRA data presented at the conference by LIMRA Assistant Vice President Joseph E. Montminy.

In addition, in the indexed annuity market, more than 70 percent of buyers elected GLBs throughout most of the same year, with the percentage rising each quarter.

presents a perplexing problem that he says the retirement industry needs to address. This is that despite the dramatic economic and longevity trends in the United States, many Americans are not saving enough for retirement.

LIMRA analysis of 2010 Federal Reserve Board data found that pre-retirees (ages 55-70) had less than $100,000 in financial assets, he said in his address.

And four out of five American workers are saving less than 10 percent of their

Despite the dramatic economic and longevity trends in the United States, many Americans are not saving enough for retirement.

It’s a safe bet that these are retirement-oriented purchases. After all, in 2011, LIMRA found that 68 percent of variable annuity buyers who elected a popular form of GLB – the guaranteed living withdrawal benefit (GLWB) – were baby boomers. At the time, those buyers ranged in age from the mid- to late-40s to age 65, the very age group that presumably had (and still has) retirement in their sights.

Opportunity is still another reason for advisors to move into the retirement market. In particular, financial opportunity.

Consider: Pre-retirees, ages 55 to 64, will hold $10.2 trillion of Americans’ investable assets in 2020, up from $6.1 trillion in 2010, said Robert A. Kerzner, president and chief executive officer of LIMRA, LOMA and LL Global, in an address at the conference. In addition, retirees ages 65 and above will likely have $11.4 trillion in investable assets by 2020, up from $5.9 trillion in 2010, he said, citing a LIMRA analysis of government projections.

Since those are investable assets, they could also become money in motion – for agents and advisors in the retirement market.

Perplexing Problem

The LIMRA projections are sizeable enough to get the attention of just about any industry that serves the pre- and post-retirement market. Yet Kerzner 26

income for retirement. Half of Americans are not contributing to a retirement plan or an individual retirement account at all, he added.

A number of studies have found that people plan to cope with their income shortfall by selling their homes, cutting spending and working longer. But people can’t always do those things, Kerzner said. In addition, people have basic expenses to cover (energy, food, clothing, etc.) that influence how much can be saved for retirement.

Even when people do have money, however, behavioral economics researchers have found that people often put instant gratification first, before longer-term goals, Kerzner said. As a result, many Americans spend now rather than save now for a retirement many years off.

Programs are needed that “allow employees to commit future income to retirement plans,” he concluded. In addition, he said Americans need advisors who can motivate them to take steps to plan for retirement today.

As he put it, “the data says ‘advice matters.’ ” Advisors are in the position of being able to prompt people to take steps to save, he explained, alluding to the LIMRA research, mentioned earlier, which shows that consumers who have an advisor are more likely to plan for retirement, to save more, and to save at a higher percentage. They have a higher confidence in their ability to save as well.

Advisors bring a visceral element to the retirement savings process, he said.

They can help consumers envision and sense what retirement might be like. It is experiences like that which will help consumers find the motivation they need to start on retirement planning now, Kerzner said.

No Walk in the Park

Bringing retirement income saving and distribution into the discussion with clients is not always easy, however. For accumulation-focused agents and advisors, it may require intentional strategy to make it a top-of-mind priority.

As Bernie Gacona, senior vice president and director of annuities at Wells Fargo, pointed out at the Retirement Industry Conference, it will take certain education to get there. “Many financial advisors have been in the accumulation mode for so long that trying to do decumulation means they need to adopt a whole different mindset,” he explained.

Following are 12 suggestions offered by various panelists at the conference.

Plan for flexibility. Focus on flexibility rather than putting the client into a box (such as locking onto “the” withdrawal rate), said Alex Null, senior vice president-mutual funds, annuities and retirement services at SunTrust Investment Services. “Choose products by first looking at risk and client attitude,” he suggested. William J. Miller, senior

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InsuranceNewsNet Magazine » June 2013

OUT OF

American workers are saving less than 10 percent of their income for retirement.

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June 2013 » InsuranceNewsNet Magazine

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FEATURE

YOU’RE IN THE RETIREMENT BUSINESS NOW

vice president-risk management at Waddell & Reed, agreed. “Clients don’t want to give up control,” he said.

Beef up financial literacy. That is important for clients to have, said Tina Valenzuela, vice president-insurance services at Charles Schwab & Co. To help with this, her firm has developed educational content and workshops as well as basic actionable fundamentals for clients to use.

Adopt holistic planning. Many experts said retirement planning should be part of a holistic planning strategy, not about discrete products, such as annuities or mutual funds. Agents and advisors should concentrate on integrating multiple products and services into a plan that supports retirement lifestyle and other needs as well as income, they said. To that end, Schwab is encouraging its financial consultants to make income planning a part of holistic financial planning with clients, Valenzuela said, noting the goal is to get clients to put together a plan.

Take a comprehensive approach.

Include consideration of Social Security, long-term care, longevity, inflation, guaranteed benefits to annuitant and surviving spouse, and other aspects of retirement, suggested Miller, noting that those elements could converge during the distribution phase in ways that destroy the years of accumulation planning. Advisors need a comprehensive understanding of those factors, he said, and manufacturers and distributors need to put a strategy in place that will help advisors solve for this.

Consolidate and plan. During the pre-retirement years (ages 55 to 70), many people start consolidating assets, noted Joseph Toledano, executive director at Morgan Stanley. That’s when the advisor may want to have a conversation with the client about income planning, he said.

Do income illustrations. Gacona’s firm will be launching an income planning tool for its financial advisors this fall that will enables the advisors to look at client assets in five “product allocation” categories (equities, guaranteed insurance products, etc.). The tool also illustrates projected income from those categories. That will help the advisor create the income plan.

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InsuranceNewsNet Magazine » June 2013

TAKE THE TRAILER? Retirement product providers are well aware of compensation-related challenges. Often, they say the solutions will need to match the needs of the distribution channel, business model and market.

Why don’t the commissioned sales agents and representatives just elect to take trailer commissions or levelized commissions, some market watchers ask. Those options pay a smaller compensation up front but then spread the remaining compensation over subsequent years. That way, the agents would be compensated in not just one fell swoop.

That may sound like a simple way for the provider to ensure the agent has an income stream through most or all of the client’s retirement years, but the approach is not as simple as it seems.

Not all companies offer the trailer or levelized commission option, for example. Even when they do offer it, many agents don’t elect it. Sheryl Moore, president and chief executive officer of Moore Market Intelligence pointed that out at this year’s Retirement Industry Conference. In the indexed annuity market, many carriers do offer trailer options, she said, but 95 percent of indexed annuity sales have the heaped (up front) option elected, not the trailer. (Presumably, all or most of the policies are deferred annuity contracts.)

Some indexed carriers have started experimenting with levelized compensation, Moore added, explaining that these models will pay less in year one but then pay the remaining comp out over a short period of two to five years.

Some agents have told InsuranceNewsNet that they like the idea of the trailer or levelized option but that they don’t elect it because they worry about how they may collect it if the issuing company is later sold, the book of business is closed or in receivership, or if they themselves decide to leave the business. The agents acknowledge that they’d likely get their trailer or levelized comp, all things being equal, but they elect the bird-inthe-hand as the safer alternative. Others say they elect the heaped option simply because they need or want all the compensation now.

Include the family. Get data on the family, the kids who are in college, and so on. Also develop different approaches for multiple age groups and generations.

Tell people what to do. The industry provides people with retirement information, but it hasn’t told people what to do to get on a retirement savings path, said Stig O. Nybo, president of pension sales and distribution for Transamerica Retirement Solutions. Auto enrollment and auto escalation programs in 401(k)

and 403(b) programs help, but he said people tend to cap out at 5 percent deferral and “that’s not enough.” Tell people what they need to do, he urged, and set the context for them in a way that will lead to success. “If we don’t get bold about it, it’s not going to change things.”

Focus on retirement readiness. “We have to focus on how to get people ready for retirement,” said Charles P. Nelson, president of Great-West Retirement Services, noting that people don’t just say, “I want to be in a retire-

ESTATE PLANNING FAILURES OF RETHINKING THE RICH AND BIG FAMOUS CASES

FEATURE

June 2013 » InsuranceNewsNet Magazine

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YOU’RE IN THE RETIREMENT BUSINESS NOW

ment income plan.” Retirement readiness initiatives, along with things like auto enrollment and auto escalation (in employer retirement plans), should help get them started, he said.

Get in front of the consumer over and over. Repeated interactions between company and consumer and agent and can help the consumer to overcome emotional attachment to the company, according to behaviorists.

That attachment will help the consumer overcome the immediate bias that causes people to put off making changes (such as starting to save), said Eric S. Henderson, senior vice president of individual products and solutions at Nationwide.

Make it clear and concise. The basic tenet at SunTrust is that, “if something is not explained in a clear and concise manner, generally the behavior is perceived as ‘not a good thing’ or ‘not a good thing for me,’” said Null. This has led his firm to focus on two areas: 1) helping clients understand the longevity issues in retirement and 2) helping them to prioritize and plan for what could be 20 years of retirement.

Approach retirement income planning with care. The whole process of decumulating assets is much more difficult than accumulating assets, cautioned Gacona. For example, he noted that advisors need to analyze which assets to draw down first, such as qualified or non-qualified. If there’s a mistake in the decumulation phase, and if that means the client won’t be able to have the planned 30 years income, “that’s a problem,” he said.

Some agents and advisors may already do some or all of the things on the above list. But judging by the amount of attention the industry is giving to the how-to-get-started topic, many others are probably still in the early stages and need a booster shot or two or 12. What happens next could be a very big deal, for consumers as well as the retirement industry.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

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InsuranceNewsNet Magazine » June 2013

HEY, HOW AM I GOING TO GET PAID?!

A big sticking point for insurance agents and advisors is how they will be compensated for the retirement planning and income work they do. Sorting this out can get complicated.

IF THEY ARE COMMISSION-ONLY INSURANCE AGENTS, they know they will probably receive an upfront commission on the sale of the products used to implement the client’s plan, whether the products are annuities, long-term-care policies, cash-value building life policies or other contracts.

But retirement income work often includes regular review of the underlying plan (assuming there is a plan) and/or help with starting and finessing policy benefits that the client now needs.

Agents say this post-sale work could take a substantial amount of time and energy, especially if the advisor also provides input on lifestyle issues, risk protection and other retirement matters over the course of the next 20 or 30 years. So, they ask, how to get paid for the post-sale work?

IF THEY ARE FEE-ONLY ADVISORS, they know they will receive a fee for services rendered during both the planning stage and the income management stage (assuming the advisors also manage the assets). But if a fee-only advisor recommends that some of the money be moved into guaranteed instruments, such as annuities, or perhaps into certain investments handled elsewhere, what happens to that advisor’s future revenue stream related to that client?

Some fee-only advisors just provide advice and plans. They may charge a flat fee for that counsel. Such advisors know and can control their retirement-related income, so they may not have compensation issues.

But other fee-only advisors base their fees on assets under management, so providing advice that will send portions of the assets elsewhere could reduce the compensation the advisor receives from the client in the future retirement years. If the advisor operates under the fiduciary standard of care, which calls for doing what is best for the client, the advisor will have no alternative if what’s best for the client is to recommend the “elsewhere” products or services.

IF THEY WORK ON BOTH COMMISSIONS AND FEES, the commissions could help compensate the advisor for the right-now work performed and the advisor may also charge, say, a flat fee for advice and account monitoring, and a percent of assets fee for money management. In some cases, the combined approach solves the compensation issue, because the advisor will have multiple streams of income from the client throughout the retirement years.

Consider: Some registered investment advisers (RIAs) provide not only asset management but also insurance, securities, accounting, legal and/ or real estate services, according to RIA in a Box, a New York registration and compliance firm.

However, such a business model may introduce complexity to the billing and record-keeping process and possibly compliance challenges as well, depending on the work being performed.

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June 2013 Âť InsuranceNewsNet Magazine

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[LIFEWIRES]

Carriers are using five ways to reach the mid-market for life insurance bitly.com/QRfiveways

QUOTABLE

Athene Selling Aviva USA’s Life Business Athene’s quest to become the leader in the fixed annuity segment of the retirement savings market moved one step closer to reality.

Athene announced that it will sell Aviva USA’s life insurance business to Commonwealth Annuity and Life in order to concentrate on its fixed annuity products.

In December, Athene announced that it would acquire Aviva USA’s annuity and life operations for $1.5 billion. The purchase would position Athene to be the leader in fixed annuities. At the time of the announcement, Athene said it was “evaluating strategic options with respect to Aviva USA’s life insurance operations.”

Aviva USA’s life insurance business had about $10 billion in assets as of the end of 2012.

Commonwealth is a wholly owned subsidiary of Global Atlantic Financial Group. Global Atlantic announced that it plans to build a local team in Iowa as part of this acquisition, hiring members of Aviva USA’s Iowa-based team to manage the life insurance business.

LIFE INDUSTRY RESTRUCTURING IS ON THE INCREASE

Restructuring in the life industry is speeding up, according to Fitch Ratings.

Among recent developments in that area: MONY LIFE announced its planned sale to Protective Life.

HARTFORD FINANCIAL SERVICES’ sale of its individual life business to Prudential Financial and its retirement plans business to Massachusetts Mutual Life Insurance.

GENWORTH FINANCIAL’s sale of its wealth management business to a partnership of Aquiline Capital Partners and Genstar Capital.

SUN LIFE FINANCIAL’s sale of Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance & Annuity Co. of New York to Delaware Life Holdings, a company owned by shareholders of Guggenheim Partners.

Insurers most affected include those that were active in the annuity and longterm care businesses, where unfavorable DID YOU

KNOW

?

32

results have led a number of major players to exit the market.

Fitch said it expects this restructuring will continue to create opportunities for both traditional players looking to strengthen existing core business, reinsurers with an expertise in block acquisitions, and nontraditional players (e.g. private equity). Looking into its crystal ball, Fitch predicts merger and acquisition activity to accelerate in 2013.

HELP WANTED: ADVISORS

Three more companies are hanging out the “Help Wanted” sign and hiring staff by the thousands.

Western & Southern Life has launched an aggressive recruiting initiative aimed at hiring more than 1,100 financial representatives in 2013. The company is specifically targeting individuals transitioning out of the military, women and individuals with a multicultural background, as well as college graduates.

In Lansing, Mich., Jackson National Life announced plans for a $100 million expansion of its headquarters to provide

NEARLY ONE IN FIVE AMERICANS (17%) said they would be willing to purchase life insurance from a retail outlet.

Source: LIMRA and the LIFE Foundation 2013 Insurance Barometer Survey

InsuranceNewsNet Magazine » June 2013

Life insurance has never been as inexpensive or easy to buy – especially with the anticipated growth of online and nontraditional purchasing channels – yet, millions of consumers continue to put off the decision.

— Marvin H. Feldman, LIFE Foundation president

capacity for more than 1,000 jobs.

Meanwhile, Combined Insurance announced its intention to hire 3,000 new agents and sales managers this year.

According to the U.S. Department of Labor’s Bureau of Labor statistics, employment of insurance agents and managers is projected to grow 22 percent over the next seven years, faster than the average for all occupations.

GEN X: A $3.6 TRILLION OPPORTUNITY

The members of Generation X, those between the ages of 32 and 47, are now at the point in their lives where they are doing “grown-up things” such as getting married, having children and climbing the career ladder. They also are at the point in their lives where they represent the largest potential for life insurance sales – at $3.6 trillion in the next 12 months. This is according to a Deloitte white paper, “Life insurers cast the net wider for growth: Enter Gen X.” “Carriers should now reconsider the scant attention paid to this formerly discounted, underinsured and underpenetrated generation,” Deloitte said. “While at first glance it may seem that the pursuit of this segment necessitates more resources than other generations, Xers’ high brand loyalty is very likely to help defray the initial acquisition cost through additional product sales over time.”

The sales potential of Gen X has surpassed that of the highly-sought-out baby boom generation, whose sales potential Deloitte estimated at $2.2 trillion over the next year. Generation Y trails with potential of $0.3 trillion.

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33

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Buy a Mercedes with No Out-of-Pocket Cost L ife insurance cash value can help your client buy a luxury for himself or fund a legacy for someone else.

By Karl Ohrman

D

id you find this article’s headline intriguing? Good! It was meant to be! But it also is true. Because my practice deals primarily with nonprofit organizations across the country, I usually use this concept for immediate major charitable gifts. Or, the concept can be used to obtain a Mercedes.

So, how can someone buy a Mercedes with no out-ofpocket cost?

The “Mercedes Plan” is one of the most favored fundraising strategies for our nonprofit clients. It creates major immediate charitable gifts without asking donors for any funds out of pocket that might disturb their annual giving or golf tournament sponsorship.

But instead of making a charitable gift, the strategy can also be used to buy 34

InsuranceNewsNet Magazine » June 2013

a Mercedes or anything else that a person may choose.

Identify the prospect.

Identify the need.

First, as you know, in any sales situation the main objective is to find out what the prospect wants or needs. What is the goal?

What is the prospect trying to accomplish?

What is the hot button? A good sales person will not move on until this need or desire is firmly and clearly established.

Then a good sales person will find a way to satisfy that need or desire.

Therefore, let’s find out the prospect’s goal. Is it to make a charitable gift? Is it to design a plan that will create gifts to children or grandchildren? Or is the goal to buy a new Mercedes or any other physical asset? This is the first and most essential step.

How does the “Mercedes Plan” work?

For those of you who are securities licensed, the next step is to identify a low-yielding asset in a person’s portfolio such as a bank

certificate of deposit or a money market account crediting a low rate.

We request permission to transfer this asset, say $200,000, to a special insurance policy with historic earnings around 6 percent. The policy cash value in Year One is $200,000. No money is lost in this financial transfer. This is accomplished with a special policy rider. The cost for this benefit is allocated to the agent through a leveling of the sales commission.

At the beginning of the second year, the policy owner has the right to obtain a loan from the insurance company. The loan is secured by the policy death benefit. This loan is not deducted from the life policy cash value. The policy still has $200,000 cash value earning interest even after the loan.

The loan can be any amount up to 40 percent of the prior year’s premium. In my example, $200,000 was transferred, thus the loan could be any amount up to $80,000 (40 percent of the initial transfer amount). Or it could be $20,000 to pay for a European river cruise. Or whatever.

To follow through on this article’s basic premise, the policy owner makes the

BUY A MERCEDES WITH NO OUT-OF-POCKET COST loan and takes the $80,000 down to the local Mercedes store and buys a shiny new Mercedes.

So now where are we?

The insured still has $200,000 cash value earning a higher interest rate.

The $80,000 loan is secured by the policy’s death benefit.

At the end of 10 years, the policy cash value is close to what the yield would have been if the $200,000 had stayed in the CD at the local bank.

In addition, the life insurance coverage has been an additional benefit. If the insured had died during this 10-year period, the loan would be repaid and the balance of the death benefit would have gone to the insured’s family or perhaps to the charity where the initial gift was made.

And don’t forget about the Mercedes looking better than ever. A Mercedes does seem to last and age gracefully.

Please let me tell you of a situation where this concept is being used successfully. A local community has decided to turn its empty, unused railroad station

into a county history museum. Asking for outright major gifts has been difficult and not too successful.

Then they discovered the “Mercedes” concept. The county’s leading citizens were approached about shifting around certain personal assets and creating sizeable gifts in the process. The museum will open later this year.

How else can this concept be used?

In our everyday practice of dealing with fundraising efforts for our nonprofit clients, the $80,000 would have been used as a tax-deductible gift to a charity.

But the focal point of this strategy is the ability to borrow funds directly from the insurance company without depleting the policy values. This is the key to the strategy.

The loan never needs to be repaid. It can be recovered by the insurance company out of the policy’s death benefit.

What other strategies are there?

How would you like to leave each of your children or grandchildren $1 million at

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no out-of-pocket cost? There is a second strategy that can accomplish this.

Planned gifts can be structured to anyone: your children or grandchildren, your alma mater, your local hospital or church. If you qualify for this plan, significant deferred gifts can be created with no out-of-pocket cost.

An example is the father who wanted to leave $1 million to each of his five adult children at his passing. Unfortunately, he didn’t qualify for a $5 million policy, only a $3.5 million policy. That policy will net seven planned gifts of $100,000 to each of his five children.

Now he doesn’t have to worry about spending the “children’s money.” His goal is to spend his last dollar on his last day on earth. But he will still leave a substantial legacy to his children.

Karl Ohrman, CLU, ChFC, is the president of Coordinated Financial Services, a Pittsburgh, Pa., firm specializing in fundraising for nonprofit organizations across the country. Contact him at karl. ohrman@innfeedback.com.

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June 2013 » InsuranceNewsNet Magazine

35

LIFE

Final Expense Covers More than Just Burial Costs F inal expense life insurance can help your client’s family face the expenses that are incurred after the funeral.

By Mike Quaranta

A

ll too often, we casually use the term “final expense” and are surprised to find our clients and prospects believe this term is used to mean the same thing as burial expense.

Final expenses include much more than merely the cost of a funeral. If our clients fail to plan for these costs, they can leave their heirs unexpectedly owing thousands of dollars. At the time of death, don’t our clients want their loved ones to remember them for the love and happiness shared with them in life, instead of leaving behind a legacy of indebtedness and poor planning?

What does the term “final expense” really mean?

There is an easy way to understand the variety of final expenses that can be incurred on your client’s behalf. Let’s assign them to three distinct categories: death care funding, estate settlement funding and legacy funding.

Death Care Funding: This provides for the expenses of the final memorial and burial. The loss of a loved one can be an emotional time for a family. Funeral arrangements are an opportunity for a family to make one last expression of devotion and respect for their departed loved one. The family desires to provide a memorial that appropriately reflects the life of the deceased. In the same context, the deceased would want a funeral that portrays at death an accurate accounting of his or her life. In order to achieve this, there are many expenses that need to be paid. Expenses such as transportation of the remains, embalming or cremation services, the selection and cost of an appropriate casket, purchase of the cemetery lots, providing a marker or headstone, memorial service expenses (such 36

InsuranceNewsNet Magazine » June 2013

as a minister, music and flowers), cost to publish an obituary, and travel and hotel costs for out-of-area family to attend the funeral. You may even be aware of some costs not mentioned here. Like us, our clients want to have the comfort of knowing their family will have the resources available to cover these costs adequately.

Estate Settlement Funding: Every person has an estate, whether they are millionaires, middle class or simply living paycheck to paycheck. It is a certainty that there will be expenses involved to preserve and liquidate your client’s estate.

advertising costs for estate sales, banking fees, shipping costs, storage and disposal, attorney and accountant fees including preparation of their final income tax return and probate expenses.

Almost every property owner incurs probate expense, whether or not they have a will. One often-overlooked expense is the cost of caring for a beloved family pet while a new home is found for this faithful friend. For many American families, their home is the largest single asset in their estate. However, when a homeowner dies, there are many expenses that continue as long as the

Many times, the client has not planned for these expenses in advance.

These expenses are the ones most overlooked by your clients in their personal planning. It is important they understand that final expenses are not necessarily expenses that are incurred at or after death.

There are many expenses, such as credit cards, medical bills, utilities and insurance, that are incurred before death, but must be paid afterward. You have probably heard the old saying, “Nothing is certain but death and taxes.” Even after death, your client’s estate may incur taxes, such as property tax, income tax and taxes and fees to transfer title or deed of certain properties. Once your client passes away, their income sources such as pensions and Social Security will end or be greatly reduced for the surviving spouse. Where will your client’s loved ones find the money to pay these bills? In the weeks and months after they pass, there will be many other expenses necessary to preserve and maintain their estate while it is being sold, distributed or transferred.

Some of the costs are travel for an outof-area executor or family member to tend to the estate settlement. There are

estate continues to own it. Your client may have a spouse or other family member that will continue living in the home and your client would want to provide funds for repairs and improvements. If the home is to be sold, there are a variety of “make ready” expenses such as repairs and cleaning, mortgage payments, utilities, taxes and insurance. Maintenance expenses such as lawn care, pest control, advertising and real estate agent fees. If your clients doubt such problems arise, have them look no further than the classified ads of their local newspaper to find the unfortunate results of an individual who failed to provide sufficient cash to fund these expenses. You will find words such as, “forced sale,” “price reduced for quick sale,” “need cash fast” or, worst of all, “facing foreclosure.” A properly designed financial plan that adequately provides for these estate settlement expenses will make your client’s estate more valuable and make the management and disposition of it easier on their family.

Legacy Funding: This final category can be used for your client to make

FINAL EXPENSE COVERS MORE THAN JUST BURIAL COSTS a statement in death, about their values and priorities in life. Perhaps they would like to leave one or more cash gifts to their children, grandchildren or other family members, but don’t have the accumulated cash to do all that they desire.

Maybe they have a special institution such as their church, social club, charitable organization or foundation that they have supported through the years.

Where will these people and organizations be forced to turn to replace the consistent donations your clients have made? Legacy gifts give your clients an opportunity to make a final lasting expression of love and commitment after they die.

We’ve described three types of final expenses. Will your client incur all of them?

Probably not, but they will incur some.

This raises the question you must ask them: “Mr. Client, how will your estate provide the funds for these expenses?”

Many times, the client has not planned for these expenses in advance because any one of them may be easily absorbed from cash flow or accumulated assets.

However, several of these expenses combined can create a significant financial burden for your client’s estate.

Just as there are three categories of final expense, there are three basic methods for providing funds to pay for them.

First, your clients can provide the funds from accumulated cash in their estate. That’s a great idea; however many people do not have $30,000, $15,000 or even $5,000 of readily available cash on hand. Even people with significant estates may have their money invested in stocks, bonds, annuities, deposit accounts or

Final expenses include much more than merely the cost of a funeral, which can range between $8,000– $10,000.

Source: funeral-tips.com

LIFE

Traditional Final Expenses • Purchase of casket or urn • Purchase of cemetery plot or vault • Purchase of headstone or tombstone • Purchase of flowers

• Travel costs for loved ones • Travel cost of casket • Burial or cremation expenses • Funeral home or church services

• Rental of hearse • Viewing or wake • Pictures • Printing funeral programs

Possible Additional Expenses • Mortgage, care or other load payoffs • Unpaid taxes • Nursing home bills

• Physicians’ fees • Ambulance costs • Paramedic expenses

property that can’t be quickly converted to cash without significant penalties.

While we can encourage our clients to start putting away funds today for the certain eventuality of their death, sadly, many will die prematurely before they have time to save enough money for their final expense needs.

Second, your clients can leave their loved ones with the burden of paying these costs out of their own pocket.

Without question, this method of funding is the least desirable as it will put incredible strain on family finances and relationships as they try to decide how to divide the bills among themselves.

Third, clients can fund final expenses through a high-quality final expense life insurance program that is designed to cover those unexpected little expenses that add up to significant costs.

Your clients understand the importance of life insurance as a way to replace the income of a breadwinner who passes away unexpectedly, or to pay off a mort-

• Emergency room expenses • Medicare deductibles

gage or other debt, but they may not recognize its value in funding final expenses.

Final expense life insurance should be a permanent whole life insurance plan that offers benefits at death and does not expire after a period of time like term insurance. Final expense life insurance is an excellent way for your clients to create available cash for the expenses we have discussed, while protecting their estate from unnecessary and unexpected loss, regardless of whether they die prematurely or after a long and meaningful life.

Encourage your client to plan wisely today so that their family, loved ones and the people who rely on them will be taken care of tomorrow.

Mike Quaranta is vice president and chief marketing officer at Oxford Life Insurance Co. He has more than 30 years of experience in the financial services industry. Contact Mike at Mike.Quaranta@ innfeedback.com.

June 2013 » InsuranceNewsNet Magazine

37

[ANNUITYWIRES] New Products Popping Up …

New annuity products have been popping up like dandelions on the lawn. Here’s a rundown of what’s new and what’s improved: METLIFE announced the launch of MetLife Shield Level Selector, a new single premium deferred annuity. Shield Level Selector offers the ability to transfer some or all downside risk to MetLife, while still maintaining the opportunity for growth potential. Investors can select the level of protection they want, based on their risk tolerance. Levels of protection start with Shield 10, which protects against the first 10 index percent loss.

LINCOLN FINANCIAL GROUP and PRIMERICA announced that they will be incorporating additional Lincoln annuity products into Primerica’s retirement lineup. Beginning July 1, Primerica representatives will be able to recommend a new proprietary fixed indexed annuity, Prime Income Optimizer, as part of their offerings.

GUARDIAN’S SecureFuture Income Annuity and the Principal Deferred Income Annuity are the two newest deferred income annuities in The Fidelity Insurance Network portfolio, joining MassMutual’s RetireEase Choice and New York Life’s Guaranteed Future Income Annuity II. PHOENIX launched the Phoenix Income Elite Annuity, a single premium fixed indexed annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider. Phoenix Income Elite is available through independent distributors working with Saybrus Partners, Phoenix’s distribution subsidiary.

PRINCIPAL announced the Principal Deferred Income Annuity for retirees who want to lock in a guaranteed income stream but don’t need to start receiving it until later.

AMERICAN GENERAL announced its new AG Choice Index 10 annuity. This new indexed annuity offers upside growth potential with the guaranteed protection of a traditional fixed annuity. Contract owners receive a 4 percent premium enhancement on every premium paid in the first 30 days of the contract, a rate that may be difficult to match in today’s low interest rate environment. Plus, they have the opportunity to earn additional interest based in part on the movement of the S&P 500 index without dividends.

In addition, a number of carriers have added or expanded upon their variable annuity offerings. They include: JACKSON NATIONAL, with new options to its Elite Access variable annuity investment platform. These options include 20 subaccounts and seven fund managers added to its variable annuities lineup, providing investors and financial advisors more choices for investment strategies through retail asset management subsidiary Curian Capital.

PRUDENTIAL added six new asset allocation portfolios to its Highest Daily variable annuity investment platform. The additions bring the total number of asset allocation portfolios to 21, and span four investment strategies: traditional, tactical, quantitative and alternative. All of the asset allocation portfolios can be selected as stand-alone options or combined.

LINCOLN FINANCIAL GROUP announced that beginning July 1, Primerica representatives will be able to recommend the Lincoln ChoicePlus Assurance variable annuity and a new proprietary fixed indexed annuity, Prime Income Optimizer, as part of their offerings.

INDEXED AND INCOME ANNUITIES SET SALES RECORDS

Sales of indexed and inINCOME ANNUITY come annuities rose to INDEXED % record highs in 2012, ANNUITY according to Beacon Re% search. Indexed annuity

3.7 38

8.5

InsuranceNewsNet Magazine » June 2013

sales increased 3.7 percent to $34.2 billion.

Income annuities saw their third straight year of growth, with sales increasing 8.5 percent to $9.2 billion.

Deferred income annuities topped the $1 billion mark for the first time in 2012. Sales climbed nearly 150 percent from the first

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to the fourth quarter. Total fixed annuity sales were $16.2 billion in the fourth quarter, down 6.5 percent from the prior year.

Annual sales of fixed annuities dropped 11.6 percent to $66.8 billion. Large losses in fixed rate annuity sales were responsible for the annual decrease. Most issuers of these products chose to maximize margins at the expense of sales.

Allianz was the top fixed annuity company in 2012, followed by New York Life, Aviva, American Equity and Security Benefit Life.

WHAT DO TRANSITION BOOMERS CRAVE? GUARANTEES

Transition boomers, those ages 55 to 65 closing in on retirement, resoundingly said they would protect their retirement savings with a guaranteed return rather than chancing a loss in the market. This is according to Allianz’s “2013 Transition Boomers and Retirement Income survey.”

Specifically, 87 percent of transition boomers surveyed reported being more attracted

to a financial product with 4-percent return that is guaranteed not to lose value over one

with 8-percent return but with the possibility of losing value due to market downturns.

But, despite this attraction to guarantees, only 25 percent of respondents said they own an annuity, a product that can help answer the demand for guarantees.

“Regardless of how hot the markets are, transition boomers still crave protection for their retirement savings,” said Allianz Life president and chief executive officer Walter White. “There are financial products that can deliver these benefits, but the industry needs to do more to educate these Transition Boomers about them.”

Go to AnnuityNews.com for exclusive sales ideas and more!

Americans Prepared To Work Longer, But Not Live Longer Just over half (56%) of Americans say they’re financially prepared to live to the age of 75, yet 10% expect to work into their 80s, according to new research. bitly.com/QRlonger

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ANNUITY

As Others Dive, Indexed Annuities Cruise Strong I ndustry leaders say the public will continue to be enamored with indexed annuities as the desire for security trumps the attraction of chasing after interest rates.

By Linda Koco

I

s the consumer romance with indexed annuities likely to continue next year or might it start to fizzle as consumers seek other eligible prospects?

Three leading annuity experts gave the thumbs up to “continue.”

They had reasons.

First, here’s a refresher on the record sales the product line has seen in recent times. In every quarter since second quarter 2011, fixed indexed annuities sold over $8 billion per quarter, according to statistics from LIMRA. In fourth quarter 2012 alone, sales reached $8.5 billion, up from $8.1 billion back in second quarter 2011.

Meanwhile, all other types of fixed annuities – book value, market value adjusted, single-premium immediate and structured – sold only $9.2 billion in fourth quarter 2012, down from their seven-month high of $13.2 billion in second quarter 2011, according to LIMRA figures.

And variable annuities sold just $35 billion in fourth quarter 2012, down from their seven-month high of $40.6 billion in second quarter 2011, the LIMRA data shows.

Quarterly variable annuity sales are still much higher than indexed, but the indexed annuity trajectory over the past seven quarters has meant that indexed sales have helped the fixed side of the business close the fixed/variable gap. Comparatively speaking, then, indexed product sales have been on a tear.

Why is That?

Why have the indexed products sold so well while other fixed annuities and variable annuities have not, and where it is all going?

One reason is that fixed interest rates have been at historical all-time lows, said 40

InsuranceNewsNet Magazine » June 2013

Sheryl Moore, president and chief executive officer of Moore Market Intelligence.

When rates are low, indexed annuities tend to do better than traditional fixed annuities, she noted.

Another reason is consumer demand for safe money products. Many consumers are uncomfortable with the fluctuations in the market, she explained, noting that this point comes up repeatedly in the phone calls her firm receives from consumers.

“People often ask whether it is true that indexed products will not have any losses due to the market,” Moore noted. When she says it’s true, they respond that this is all they wanted to know. She said she does inquire whether they are looking for growth, and mentions that 1 percent growth might be possible in today’s market, but most callers say they are not interested in that.

“What concerns them most is that zero percent guarantee (in the indexed annuity).

It’s a strong value proposition for someone who is looking to save for retirement.”

Another driver for indexed sales is the volatility and uncertainty in the markets, Moore said. Any time markets decline, variable annuity sales drop, and any time fixed interest rates go up, fixed annuity sales go up, she pointed out.

But in 2012, the market conditions were different – markets were volatile and interest rates very low. Consumers responded by downshifting interest in either variable or traditional fixed annuity sales.

In fact, “for every one dollar in (traditional) fixed annuity sales that came in last year, there was almost one dollar in indexed annuity sales coming in,” Moore said. The trend has become so pronounced that her firm is now projecting that by year-end 2013, indexed annuity sales will surpass (traditional) fixed annuity sales.

Indexed annuity sales won’t surpass variable annuity sales, however. But Moore

ANNUITY

AS OTHERS DIVE, INDEXED ANNUITIES CRUISE STRONG noted that trends in the variable annuity market – with carriers limiting guarantees such as lifetime benefits and offering buyouts to customers – have the potential to affect sales in an adverse way going forward. The unspoken implication is that variable market dynamics are in place that will favor indexed annuity sales.

Other developments in the variable annuity market, including carriers pulling out from that market altogether, have also contributed toward shining a spotlight on the indexed annuity industry, said Kim O’Brien, president and chief executive officer of NAFA, the National Association for Fixed Annuities.

Can this Continue?

Moore said she believes that indexed annuities will continue to see sales increases, for reasons having to do with the changing nature of the indexed annuity market.

For instance, non-traditional distributors are expanding into the business, she said.

“Banks and wirehouses, which have traditionally not been big fans of the product, are latching onto it and running with it.

That’s not just because the security status (of indexed annuities) is not in question at this time, but also because their other sources of revenue are waning, so they are looking for an alternative.”

In addition, many companies are feeling “bullied” into entering the fixed indexed annuity business, Moore said. These are firms that formerly were not interested in the products but now are saying they have a “very strong interest in indexed annuities.”

Many companies offer only (traditional) fixed and variable annuities, she explained.

They feel the see-saw effect of variable annuity sales going up when the market is up and fixed annuity sales going up when interest rates were up, she explained, noting that the assets “just shift from one side of the house to the other” depending on which side is up.

But in the recent economy, with its market volatility and very low interest rates, variable sales declined but the assets went “flying out the door to competitors,” she said.

Those competitors were firms that offered indexed annuities, Moore said.

As a result, companies that formerly did not want to offer indexed annuities are now deciding to develop those products.

NAFA’s O’Brien likened the indexed annuity’s future prospects to those that lay

$36.7

INDEXED ANNUITIES HOLD STEADY

1.6 1.9 7.0

19.0

( Dollars in Billions )

Struct. Settlements

$29.2

SPIA

MVA

Book Value

Indexed

1.4 2.0 3.5 $23.6 $21.8 $21.4 1.3 $21.1 $21.3 1.8 1.3 $19.3 1.5 1.5 $19.4 $20.0 1.3 $20.3 $18.9 $18.6 $17.9 $17.7 2.4 1.8 1.4 2.1 2.0 1.4 1.2 2.2 1.3 1.3 $18.1 1.8 2.2 1.4 1.2 1.3 1.1 1.5 1.7 1.6 1.8 1.8 1.4 1.4 1.2 1.9 1.8 1.9 2.0 2.0 1.3 1.4 14.1 1.2 1.3 1.2 1.0 1.0 10.6 7.4 8.4 8.3 6.9 9.5 6.6 8.5 6.2 5.8 5.5 5.0 4.9 7.9

7.5

8.2

7.5

7.0

7.0

8.2

8.7

8.2

7.1

8.1

8.7

8.3

8.1

8.6

8.7

8.5

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

2009

2010

2011

2012

Source: U.S. Individual Annuities survey, LIMRA. | Fixed-rate deferred annuities = book value + market value adjusted annuities

before universal life policies in the 1980s and beyond.

When universal life first came out, she recalled, it triggered the same kind of reaction that indexed annuities first encountered in the marketplace. “Universal life was the bad poster child of the life insurance industry,” she explained. “But the product slowly gained traction and acceptance.”

Today, there are now indexed versions of universal life in the market, O’Brien pointed out. The presence of those products in the industry will play favorably toward the indexed annuity, she predicted.

Expect a Blip or Two

The industry will not be without challenges and sales dips, however. Jack Marrion, president of Advantage Compendium, predicted that “first quarter sales will cycle down, and probably through the rest of the year.”

The reason: “It’s hard to get people excited about a 2 percent to 3 percent cap (the maximum rate used in an indexed annuity’s interest crediting calculation). That’s just the reality right now.”

To put things in perspective, Marrion pointed out that the industry did roughly $34 billion in indexed annuity sales last year.

By comparison, “$60 billion a month went into bank money markets – because people wanted to see where things were going before committing to longer term products.”

Marrion said he doesn’t foresee any big move until changes occur in interest rates.

When changes do occur, however, Marrion predicted that sales will turn back up for indexed annuities. “Because of the (spread) relationship between 10-year Treasury bonds and corporate bonds, when Treasury rates improve, that will help yield, and that will bring (indexed annuity) caps up. And that will bring sales back up.”

O’Brien detailed several legislative and regulatory issues that may affect the industry going forward, including tax reform, lack of understanding of indexed annuities among federal regulators, the potential impact of a proposed fiduciary standard, etc. – but she also noted there are favorable trends, such as certain state-level developments.

The overall picture from the panelists is that the industry will have its challenges but that safe-money-oriented consumers will still want indexed annuities, and that more carriers and distributors will be offering the products this year. So the romance with indexed annuities appears likely to continue.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

June 2013 » InsuranceNewsNet Magazine

41

ANNUITY

Supplementing Retirement Income Key Reason Why People Buy Annuities C ompanies and producers might be focusing on features, but LIMRA research shows that easing retirement anxiety should be a main target.

By Linda Koco

H

ere is a good one for annuity buffs. What is the top reason that adults over 40 buy deferred annuities? Growth potential, perhaps?

Maybe tax deferral? How about tax deferral plus liquidity? What about the product guarantees?

Was the information from the online calculator the tipping point? Or, was it perhaps the influence of that “nice young man (or woman)” who provided the guidance and recommendation?

The possibilities are endless. And, of course, the reasons vary according to the unique needs and wants of individual clients. Any agent or advisor who has been in the business for very long will point that out.

Still, when LIMRA put that question to 1,200 deferred annuity buyers in the 40plus age group, one reason stood out at the very top and it wasn’t any of the above.

The top reason was: “to supplement Social Security or pension income.”

That may not sound very sexy, but that’s what the buyers told LIMRA. Joseph Montminy, a LIMRA vice president, included that finding in a presentation he gave at the Retirement Industry Conference in New Orleans sponsored

by LIMRA, LOMA and the Society of Actuaries in April.

Specifically, 55 percent of the 440 variable annuity buyers who were polled gave that supplemental retirement income answer; 46 percent of 229 indexed annuity buyers gave that answer, and 42 percent of 531 traditional fixed an42

InsuranceNewsNet Magazine » June 2013

nuity buyers did the same. The buyers were individuals who had purchased a deferred annuity within the last three years.

At Odds?

This top reason may seem at odds with annuity marketing strategies that focus on annuity features, subaccounts (if a variable annuity), crediting rate bumpups (if fixed), bonuses, rider options, tax deferral and more.

Using deferred annuities to supplement Social Security or pension income typically doesn’t get top billing in annuity sales literature either, unless the literature is designed for use in income planning scenarios. Sometimes it gets no billing at all.

The finding also may seem at odds with reasons often cited by annuity agents and advisors, who tend to zero in on more annuity-specific motivators as the top reason for clients deciding to buy a deferred annuity.

In the post-recession years, for instance, many agents and advisors have said that guaranteed lifetime benefit options are what draw consumers into the land of annuity ownership. Others have named the upside potential/downside floor in indexed annuities as the big “it,” while still others point to features and benefits of a particular new annuity.

Some agents say the ratings of the insurance company issuing the annuity are what really win over the customer.

But there it is in the LIMRA survey;

supplementing Social Security or pension income is the top reason that annuity buyers said they had for buying their annuity in recent times.

What might agents and advisors make of this head-scratcher? The key word here is, this is the top reason that annuity buyers gave for their purchase, not annuity advisors, specialists or marketers.

This is one of those rare situations where everyone is right. The buyers’ top reason – at least, the buyers LIMRA surveyed – for buying deferred annuities reflects their own understanding of the deferred annuity they purchased, their own goals and needs, and also their wishes.

The buyers in the survey were looking back, and the reasons they cited were the ones they remember, which may or may not be the same as the ones they had at time of purchase.

Meanwhile, agent perspectives on why consumers buy annuities will naturally reflect a more technical level of understanding of the products and markets as well as a business-level assessment of customer motivations. Annuity specialists tend to see consumer reasons through the funnel of their professional role and the trends they have noticed in their own practices, which may or may not be the same as trends identified by their peers.

In addition, buyers and advisors often use different words for the same thing, again due to their different perspectives and levels of understandings.

Potential discrepancies aside, the LIMRA finding could prove useful to agents and advisors when discussing the annuity option. For instance, it might be a discussion point to broach with a client early in the conversation and also at the close, just to see if the supplemental income issue lives in the client’s interiors.

Or, the finding could nudge the advisor to remember to look for subtle signals from the client that supplemental income in retirement is a topic the client is keen on exploring. A raised eyebrow, or eyes suddenly opened wider upon hearing the words, could be enough of a “tell” to spur the advisor to discuss that top reason for buying.

If the buyer is interested in electing a guaranteed lifetime benefit option, discussing how that feature will help supple-

Advisors typically understand that life insurance can be a useful tool to maximize wealth transfer to heirs. What’s not well understood is how charitable planning programs can facilitate an even more tax-advantaged scenario in order to fund life insurance premiums. This report will show you how to: • Help charitable clients view charitable giving as part of their overall estate plan, as much as a personal value.

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June 2013 » InsuranceNewsNet Magazine

43

ANNUITY

SUPPLEMENTING RETIREMENT INCOME KEY REASON WHY PEOPLE BUY ANNUITIES

$650 Billion of Assets Ripe for Annuities with Guaranteed Lifetime Income

ment Social Security or pension income is a no-brainer. No doubt, many agents and advisors already are having this discussion. It’s a natural fit and often recommended by retirement income experts.

Sales Opportunity in Income

Speaking of guaranteed lifetime income features in annuities, LIMRA’s Montminy has some statistics that underscore the sales opportunities in this market. The way he put the opportunity in his recent presentation at the Retirement Industry Conference is this: “$650 billion of assets

are interested in converting a portion of assets into annuities with lifetime income guarantees.”

That finding is based on a LIMRA analysis of three major consumer studies – one published by LIMRA in 2010, one by the Federal Reserve Board in 2012 and one by LIMRA in 2012. The work covered nearly 5,300 consumers, so it has some heft. LIMRA focused on consumers aged 45 to 80, the age group that most industry studies say comprises the largest demographic of annuity buyers.

Significantly for annuity profession-

Supplementing Social Security or pension income is the top reason that annuity buyers said they had for buying their annuity in recent times.

44

InsuranceNewsNet Magazine » June 2013

als who are looking for market opportunity, the LIMRA analysis found that the assets held by pre-retirees represent $474 billion of the projected $650 billion total. Flipping that around to square with Montminy’s phraseology, this means that $474 billion of pre-retiree assets are interested in converting a portion of assets into annuities with lifetime income guarantees.

What percentage of those assets will actually go into annuities having lifetime income guarantees remains to be seen.

But it seems pretty evident that annuity specialists will have a clear shot at garnering some of those assets – helped along perhaps by positioning the annuity for supplemental retirement income purposes.

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning.

Linda can be reached at Linda.Koco@ innfeedback.com.

1948

Sentinel Mutual Insurance Company Founded (by a group of Utah Funeral Directors)

1954

Sentinel Insurance Company Advances as a Capital Stock Insurer

2007

Growth Milestone: $131.9 Million

2009

Medicare Supplement Added to Product Offerings

2011

Personal Choice Annuity Expands Sentinel Product Line

2011

Sentinel Grows to $154 Million Assets

(Insurance in Force)

1957

Brand Name Evolves: Sentinel Security Life Insurance Company

2012

1960

Sentinel Surpasses Goal: $2 Million Assets

Sentinel Broadens Portfolio with Hospital Advantage Product and exceeds $300 Million in Assets

2013

Innovative Summit Bonus Index Annuity Product Launched

1962

Acquisition of Uinta National Insurance Company of Utah & United Reserve Life Company of Montana

1965

Acquisition of National Mutual Insurance Company of Utah

New Vantage Life Insurance | Personal Choice Annuity | Hospital Advantage Medicare Supplement Insurance | Summit Bonus Index Annuity Sentinel Security Life Insurance Company 866-235-1892 www.sslco.com 1405 West 2200 South, Salt Lake City,June UT 84119 2013 Âť InsuranceNewsNet Magazine 45

SSLAD-INN 06/13

[HEALTHWIRES]

Recent Slowdown In Health Spending Tied To The Economy bitly.com/QRslowdown

Is the ACA a train wreck or not?

Is implementation of the Affordable Care Act (ACA) turning into a train wreck? Or is everything on track? It depends on who is talking.

The political firestorm began when Sen. Max Baucus, D-Mont., stunned Obama administration officials by saying openly that implementation of ACA is “a huge train wreck coming down.” That was a surprise because Baucus had helped to write the healthcare law. Baucus said many of his constituents were confused about the new law and that education and outreach efforts by the administration were inadequate.

Two weeks later, President Barack Obama, in a news conference, countered Baucus’ allegation by describing the ACA implementation as “working just fine.”

“Even if we do everything perfectly, there’ll still be, you know, glitches and bumps, and there’ll be stories that can be written that says, oh, look, this thing’s, you know, not working the way it’s supposed to, and this happened and that happened,” Obama said.

“And that’s pretty much true of every government program that’s ever been set up.”

Administration officials have said repeatedly that they will be ready in October to begin enrolling people in private health plans, with federal subsidies offered through insurance marketplaces in every state.

ACA APPLICATION SLIMS DOWN

One major criticism of health-care reform – the length of the application for health insurance – was addressed by the Obama administration, but the application form still runs multiple pages.

An earlier version of the forms had provoked widespread complaints that they were as bad as tax forms and might overwhelm uninsured people, causing them to give up in frustration.

In response to these complaints, the application slimmed down, but applicants still must detail their finances. The biggest change: a five-page short form that single people can fill out. That form includes

a cover page with instructions and another page if you want to designate someone to help you through the process.

But the abridged application form for families still runs to 12 pages, even if most households will not have to fill out every DID YOU

KNOW

?

page. Most people are expected to take another option, applying online.

GOOD NEWS/BAD NEWS FOR EMPLOYERS

The good news for employers is that their strategies for controlling health care costs seem to be working.

The Kaiser Family Foundation’s latest study of employer-sponsored health insurance among companies of all sizes reported annual premiums were up only 4 percent from the previous year. Another Towers

Watson survey of larger companies found, since 2007, annual health care cost increases for larger companies have stabilized at historically low levels between 5 and 7 percent.

Both studies attribute the lower costs in part to two factors: Changes in plan design and increases in employee contributions.

The bad news is that new taxes and fees levied on health insurance policies as a result of the Affordable Care Act will put the pressure on premiums beginning in 2014.

Employers are recognizing that keeping

84 MILLION PEOPLE – nearly half of all working-age U.S. adults – went without health insurance for a time last year or had out-of-pocket costs that were so high relative to their income they were considered underinsured.

Source: Commonwealth Fund

46 InsuranceNewsNet Magazine » June 2013

QUOTABLE We are on track to fully implement marketplaces in January 2014, and to be open for open enrollment.

— Kathleen Sebelius , Secretary of Health and Human Services

their workforce healthy can have a significant impact on their company’s bottom line.

According to the Towers Watson survey: 40 percent of employers are cultivating employee health and well-being as a central part of their strategy.

61 percent are using financial rewards for individuals who participate in health management programs/activities.

33 percent of companies are taking steps to educate and support more informed health care.

ADVISORS GIVE CONSUMERS AN EDGE

Consumers still need BY USING AN ADVISOR, MEMBERS SAVED AN an advisor to help them choose the best health AVERAGE OF plan for their needs and their wallets.

According to data analyzed by Health PER CLAIM Care Service Corp.

(HCSC), those who worked with health care advisors made more informed decisions that helped them spend less money.

HCSC, which operates Blue Cross and Blue Shield plans in Illinois, New Mexico, Oklahoma and Texas, developed the Benefits Value Advisor program to help its customers achieve cost savings in the health-care system and improve overall quality of care. These benefits advisors walk consumers through their health care options and provide the information that helps them to maximize their benefits. According to HCSC, more than

$2,000

90 percent of those who used a benefits advisor discovered they were eligible for savings through other health care options by pursuing care with an alterna-

tive provider.

How much in savings? Members who chose an alternative provider saw an average savings of about $2,000 per claim.

A Tiered Approach to Adequate Disability Insurance Protection

1. Tier 1 - Group LTD Coverage

60% to a total of $15,000

2. Tier 2 - Individual Non-Cancelable Guaranteed to Age 65

3. Tier 3 - Supplemental Guaranteed Issue to get the Insured up to 70% of Income

Most disability carriers

70%

Income Replacement

Proper disability insurance protection often requires the use of more than a single disability insurance policy. The supplemental Disability Insurance Plan fills in the deficiencies of not only group LTD coverage, but individual, standalone policies as well. Coverage will often take the following format:

52%

35%

17%

Individual DI Plan $5,000/month

Group LTD Plan $15,000/month

0%

Disability • Life • Medical • Contingency

don’t offer limits that adequately insure wellcompensated workers.

High-Limit DI is needed.

Guaranteed issue with a group size starting at only 5 lives. We will when others won’t.

Petersen International Underwriters www.piu.org • piu@piu.org (800) 345-8816

HEALTH

Marketing Beyond the ACA Plans T he four different types of health-care plans under the Affordable Care Act will be only the beginning of your strategy for marketing health insurance to the consumer.

By Mike Houlihan

A

s 2014 fast approaches and the Affordable Care Act (ACA) takes shape, the health insurance industry will need to develop a stratified approach for understanding and engaging with consumers 48 InsuranceNewsNet Magazine Âť June 2013

that goes well beyond the selection of their plan type (Bronze, Silver, Gold or Platinum). In a word, you must “connect� with your policy holder.

In the days of yesteryear, brands controlled the interaction with consumers, but today, consumers choose when, where, how and if they will engage with the brand. Consumers who select your brand will want you to connect with them, on their terms, via their personal channel preference. If you cannot connect with your prospects, you will not be influential to them.

The challenge for health insurance carriers is to affect loss ratio favorably through better direct communication to their clients. Because carriers have typically been operating in an industry that works through businesses (about 55 percent of Americans receive health insurance coverage through their employers) to reach their audience segments, working directly with consumers (estimates for 2014 are as high as 30 percent will be in the direct to consumer marketplace) will take a different approach. In regard to the Health Insurance Portability and

MARKETING BEYOND THE ACA PLANS Accountability Act (HIPAA), check with your company’s internal legal and privacy departments for compliance and alignment. The compliance rules likely differ with prospects versus members, as your member customer audience has a direct relationship with the insurance carrier already, based on their policy contract.

Think about Americans post-Obamacare and what happens after they select their metal plan on an exchange and become customers. The carriers will need to quickly engage with the new customers, ensure that the best plan for their needs was selected and that their individual and family health needs are being properly supported. Having tailored messaging is critically important. To stay current and relevant, it will be imperative for health insurers to understand that all insight and interaction between their brand and customers includes a proactive process of matching customers’ expectations in terms of needs, wants, aspirations and channel preference, which only delivers value if and when you connect.

As you build a 360-degree view of your customers, the full data set will include demographic and behavioral portraits, along with risk and product analysis.

Messages to these constituents will be based on this data. Dependent on this messaging success, whether it be acquisition or upsell related, or wellness and health related, is connecting with your target audience. Channel propensity is a must to include in your overall new member customer portrait.

Let’s use Julie as a potential real world example. Julie is a 34-year-old single mother with an eight-year-old asthmatic daughter. She works as a waitress and makes $35,000 a year, which prevents her in her state from receiving any government subsidy for her health insurance coverage needs in 2014. Her employer is providing a $1,500 stipend toward her purchase.

Julie’s parents, on the other hand, are empty nesters, aged 60 and 59, still working and fairly healthy for their age group. They’re also headed into the same insurance exchange market, albeit facing extremely different healthcare needs than their daughter and granddaughter.

Because Julie’s situation and her parents’ situation are so different, their

health insurance carrier will need to have a process to communicate tailored, health managing messages to each household. For instance, Julie likely selects the Bronze plan, but because of her daughter’s frequent hospital visits, the Silver plan may be the more optimal plan, as her exchange could not offer advice regarding her family situation.

To ensure engagement, not only will successful health insurers use better data collection practices to feed their marketing decision systems with regard to best product and affordability now, they will use the data to define a long-term or lifetime strategy based on effective communication. Of course, the effectiveness is achieved when the interpersonal communication is connected.

Every customer interaction with your brand has the potential to unleash a treasure trove of insight.

Health management, health improvement messages will be based on the core principles of marketing, and will directly target loss ratio management or improvement (another mandate within the law). The content will be customized according to life-stage segments, and so too must the connection channel.

Channel preference must not be overlooked. Julie is likely to want her health-related news delivered to her smartphone, while her mom likes receiving information via email and her dad by traditional mail or phone. “Po-TAY-to, Po-TAH-to.” Different generations interact with media differently. Generation X uses the Internet to handle business such as banking and shopping and baby boomers are likely to watch videos online. It’s up to the health insurance provider to find out how to best reach each of their customers according to their unique preferences. And in three

HEALTH

years it will be different (think TV and wristbands).

The intention is to improve health and manage the loss ratio, therefore, at the end of the day, the linchpin is making the relevant connection with the policy holders. There is no single silver-bullet, no one piece of data that accurately describes or predicts customer behavior.

Successful health insurers will use data to drive all important customer-oriented decisions. This includes being smarter about media buying and also about timing and messaging across all media (website, TV, mobile, Internet, etc.). You have to have an omni-channel approach. A comprehensive analytic and marketing program is built on the interpersonal connection.

This connection then begins to establish a foundation for a long-term relationship. These relationships, or better said, healthy relationships, will provide the loss ratio management within the ACA in 2014, while also establishing the seed for lifetime customer value measures.

What’s next? Engagement. Access to information about companies, products, pricing, availability and satisfaction has had an impact on how consumers shop and purchase. It’s great for empowering consumers, but it means companies have a challenge ahead. Every customer interaction – at every touch point – with your brand has the potential to unleash a treasure trove of insight and intelligence on how to build relevant, more intimate relationships between you and your customers moving forward. Learning about your customers across these interactions and using insight to inform more relevant, personal and meaningful customer experiences is the key to building and maintaining strong, long-term customer relationships. Ensure that your new policy holder messaging is reaching its target, and your ability to have a healthy engagement with your new members and customers will improve.

Mike Houlihan is director of health insurance industry with Acxiom Corp. Mike may be reached at mike.houlihan@innfeedback.com.

June 2013 » InsuranceNewsNet Magazine

49

[FINANCIALWIRES]

Growth in 403(b)s makes them more attractive bitly.com/QR403bgrowth

WHAT TYPES OF ADVICE DO PEOPLE WANT?

Balancing the Bull/Bear Ratio Hey you! Yeah, we see you looking all guilty over there in the corner making a nice dollar for you and your clients in the roaring equities market as you arch the eyebrow of puritanical disapproval at the raucous party.

Although this bull market has been bucking for 50 months now, it’s been called the most hated rally ever. It’s like it won a Nobel Prize but mom just wants it to find a nice plateau, settle down and live the clean life without calling attention to itself. Well, to be fair to mom, the market does have a nasty tendency of lifting you up, just to let you down.

And up it is! Dow Jones at 15,000 is like New Year’s all over again! The S&P is whooping it up too – hitting a record just about every day in early May. But it’s like that moment in the movie where everybody is drunk with joy and leaping through golden fields, but we’re all just waiting for the Chord of Despair.

Commentators and analysts are trying to apply science to justify their apprehension or their exuberance. They hold up price/earnings ratios as prisms to see the market’s true colors but argue over which one to look at. After all, you have your various trailing and forward P/E ratios and you have your different indexes to work with.

We like to be the “market’s-half-full” kind of people, but the pessimists might have a point when it comes to comparing P/E ratios. According to the Wall Street Journal on May 14, the trailing P/E (the past 12 months of earnings) for the Dow Industrial was 16.5 and a year ago, it was 13.9. So, that would seem to be healthy, restrained growth, just entering the sweet spot between 15 and 25. But then the future P/E (the next 12 months of estimated earnings) is 13.5 and that does not look good. Then again, that could mean earnings are going gangbusters. See what we mean? This can drive somebody a little looney and this is just one snapshot of many.

It makes a person just want to take this bull market, call it a guilty pleasure and have fun, fun, fun ’til the bears take the T-Bird away.

SMALL FIRM RETIREMENT PLANS UPWARD BOUND

Businesses with 10 or fewer employees may % be small, but they are mighty, at least in their retirement plans.

Average balances in the retirement plans that small businesses use – the SEP-IRAs, Self-Employed 401(k)s and SIMPLE IRA savings plan – increased by 20 percent from 2007 to 2012, according to Fidelity Investments. By plan type, the average balance in Self-Employed 401(k) plans was up 16 percent from $103,400 in 2007 to $119,500 in 2012; in SEP-IRAs, up 17

20

DID YOU

KNOW

?

50

percent to $71,300; and in SIMPLE IRAs, up 26 percent to $31,100.

The market rebound was a factor in that bounce, Fidelity pointed out. But so was a noticeable increase in average contributions. For example, in the Self-Employed 401(k) market, the average contribution rose 21 percent to $20,950 during the same six-year period. Meanwhile, in SEP-IRAs, the average rose 14 percent to $13,250, and in SIMPLE IRAs, the average employer/employee contributions moved up 4 percent to $6,000.

Considering some of these businesses may now be feeling flush, this might be a good time for producers to pay them a “how are ya?” visit.

U.S. INVESTORS HAVE, on average, only 11 percent of their income-producing assets invested internationally, the smallest percentage among investors from 12 other countries. Source: Legg Mason

InsuranceNewsNet Magazine » June 2013

Your name might not be E.F. Hutton but when you speak, people listen. (That was one for you, boomers.)

People ages 25 to 75 with $100,000 or more in investable assets really want financial advice, particularly on retirement. In fact, retirement topped the list of concerns, with 87 percent of the surveyed investors saying they want “clear communication on how assets can contribute to a retirement income stream.”

That ranked a smidgen higher than the 86 percent who said they want an analysis of the economy and guidance on asset allocation.

Right behind that, 85 percent said they want guidance on federal tax changes and 82 percent on both downside portfolio protection and new investment ideas. And 75 percent want help with sticking to a financial plan.

529 PLANS GROW AND DIRECT SELLERS BENEFIT

First, the good news. Assets in the 529 plans that people use to save % up for college expenses rose by 25 percent in 2012, according to Morningstar. That’s even though traditional open-end mutual funds have outperformed 529 plans investment options over the past five years, and age-based 529 options also have trailed their benchmarks.

In addition, although 529 plan investment options have a total expense ratio that can run 20 to 30 basis points higher than fees for similar mutual fund offerings, the 529 options are steadily lowering their fees, Morningstar said.

Now the not-so-good news, at least for commission-based advisors, but more good news for fee-based advisors. Morningstar found that direct-sold 529 plans have continued to gain market share at the expense of advisor-sold plans, which are typically done on a commission basis. Morningstar said this trend may reflect the rise of independent, fee-only advisors, who may be more likely than affiliated advisors to direct client assets toward a cheaper direct-sold plan.

Also, “some direct-sold 529 plans have begun to specifically target RIAs (registered investment advisors) in their marketing campaigns and investment offerings.”

So, will commission-based advisors come back with the market segment or will it continue to funnel toward fee-only advisors?

25

June 2013 Âť InsuranceNewsNet Magazine

51

FINANCIAL

Demand for Financial Advisors Expected to Grow by 32 Percent tatistics show that the need S for new blood in the financial advising business will continue to grow through the end of the decade, as more advisors retire and more people depend on professional advice.

By Cyril Tuohy

I

t’s a great time to be a personal financial advisor, according to the latest occupational outlook statistics published by the Bureau of Labor Statistics (BLS).

All you need is a bachelor’s degree, you don’t even need job experience, or any onthe-job training, and the economy’s going to need 66,400 more of them by 2020. Oh, yes, and the median pay in 2010 for a financial advisor? $64,750.

That might sound like an easy gig, but, not so fast, according to Ellen Turf, chief executive officer of the National Association of Personal Financial Advisors (NAPFA). Government statistics just published in the 20122013 edition of the Occupational Outlook Handbook make it sound as though becoming a personal financial advisor is easy. That would be a mistake, Turf said.

Even if they have aced the battery of requisite Certified Financial Planner courses, advisors need to be professional communicators above all. “It’s a hard road to go,” Turf said. The typical age of students at NAPFA is 44 years old.

“We see a lot of career changers, former engineers, dentists, teachers and Realtors,” Turf said. She explained that even candidates with multiple degrees will not survive if they can’t communicate clearly and concisely.

About 45 percent of NAPFA’s members are solo practitioners.

NAPFA, with about 2,500 members, is the largest membership organization representing fee-only financial planners. Financial planners are compensated either through a flat fee or retainer, an hourly fee, or a percentage of assets under management.

The compensation is something else the government report seems to be underestimating. “As far as pay goes, this doesn’t jibe 52

InsuranceNewsNet Magazine » June 2013

with what we have. That seems incredibly low,” Turf said.

Roughly speaking, financial planners take a 1 percent fee, or $10,000, for every $1 million in assets they manage. Hourly fees range from $120 to $350, depending on where the planners work. Big city financial planners are likely to charge more than planners in a smaller market to make up for the differences in the cost of living, Turf said.

By comparison, BLS data estimates that $64,750 in annual salary comes out to $31.13 an hour.

Whatever quibbles the industry has with the BLS number crunchers, government and industry agree on the reasons for future job growth, however those numbers pan out. “As large numbers of baby boomers approach retirement age, they will seek planning advice from personal financial advisors,” the BLS said.

Those predictions already are coming true.

Susan Waters, chief executive officer of the National Association of Insurance and Financial Advisors (NAIFA), said that with the decline of defined benefit pension plans provided by corporations, the role of advisors has grown. She said that role will continue to grow as companies ditch the paternalism that used to be de rigueur, even for many lucky hourly employees.

“Workplace pensions have gone the way of the dinosaur, and Americans know that Social Security will not entirely support them in retirement. Many people find themselves facing tough financial and insurance decisions,” she

said, in an email to InsuranceNewsNet. “Advisors help them reach long-term goals, such as ensuring their comfortable retirements or the future well-being of their families.”

After the market crash of 2008, people hesitate to adopt do-it-yourself investing strategies. “It’s more than about money, it’s about how you want to live your life,” Turf said, pointing to the very low attrition rate among advisors.

Officially, there were 206,800 jobs classified as personal financial planners in 2010, and that number is expected to grow to 273,200, or about 32 percent by 2020, according to the BLS. This is despite the fact that advisors may not be replacing themselves at the same rate as they once did.

Financial advisors fare better than their insurance sales agent cousins working the insurance distribution chain, according to the annual BLS occupational outlook data.

The median pay for insurance agents in 2010 was $46,770 per year, or $22.48 an hour.

In addition, the number of insurance agent jobs in 2010, estimated at 411,500, is expected to grow by 22 percent by 2020.

This assumes, of course, that those numbers can be taken at face value.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril can be reached at cyril.tuohy@innfeedback.com.

FINANCIAL INDEPENDENCE GROUP, INC.

Your Prem i er I nsur ance ar keti ng O r gani zatFINANCIAL io n TAX LAW OFFERS FASTER CONNECTION FOR CLIENTS’ ROTHMCONVERSION

lower or higher in the future. Whether subject to the RMD rules and can cona Roth conversion makes sense will de- tinue to grow tax-free until the death pend on some of these factors, as well of the account owner. Of course, the as the individual’s specific financial plan participant can easily get around planning goals and objectives. this by rolling the Roth 401(k) monies With recent years of tax uncertain- to their individual Roth IRA at or beBy Gretchen Miller ty, there has been a greater focus on fore age 70½. onverting 401(k) assets to a Roth the benefits of tax diversification. The As more plan sponsors amend their account became easier with the idea being that having investments in retirement plans to take advantage passage of The American Tax- different buckets – those that are tax- of new provisions under the recent payer Relief Act of 2012 (ATRA). able, tax-deferred and tax-free – allow passed tax act, the more people will be The ability to contribute to a Roth ac- for better tax efficiency and control having the Roth conversion conversacount in a 401(k) and 403(b) plan has of a person’s tax liability when taking tion. Be prepared to discuss whether a been allowed ever since 2006. However, distributions. Allocating a portion of a Roth conversion makes sense and, if it plan participants were not able to con- client’s money into a tax-free Roth ac- does, what retirement assets should be vert their traditional pre-tax portion of count can be an ideal way to provide converted and whether that conversion their retirement plan to the Roth por- for this tax diversification. should be inside a retirement plan or to tion of the plan until the passage of the If a Roth conversion does make a Roth IRA. Small Business Jobs Act (SBJA) in 2010. sense, the next question is what assets The problem was that SBJA only ap- should be converted. First, make sure Gretchen Miller is advanced planning director Prudential Annuities. Gretchen may be plied to intra-plan conversions by partic- the employer-sponsored plan permits of reached at gretchen.miller@innfeedback.com. ipants who were eligible to take a distri- an intra-plan conversion. Then deterbution from the plan. Such distributable mine if the participant otherwise has events include reaching the age of 59½, the right to either roll money out of separation from service or retirement. the plan directly to a Roth IRA (rollTherefore, relatively few participants over conversion directly to a Roth IRA were able to take advantage of an in-plan has been allowed since 2008 under the Roth conversion. ATRA now allows in- Pension Protection Act of 2006) or tra-plan Roth conversion without the have traditional IRA assets that can be requirement for a distributable event. In converted. multi-million dollar fixed business and Larry continues, “I’d go so far as to say it’s order to take advantage of this opportuOne of the benefits of converting nity, the employer-sponsored plan would funds to a Roth IRA, assecurities opposed toproducer, an this program will teach you completely changed the way we do business. specifically have to permit Roth contri- intra-plan conversion, is the ability to how to incorporate and execute true financial Whileand the technical was there the conversion. butions may need to beability amended to already recharacterize If the include allowing intra-planthanks investments after the into tax- your business. In this program planning from language my years in theforbusiness, to Thedrop in value conversions. Additional guidance on this payer converts the funds, the taxpayer you will like aRevenue well-oiled is Practice expected we fromnow the run Internal hasmachine.” the ability to recharacterize or learn undo how to layer managed money Service later in the year. the conversion. It is as if the conversion with your fixed insurance practice. The This new provision is being touted never happened. The taxpayer can elect byThe the Practice Congressional Budget Office to recharacterize a RothPractice conversionnot for only shows you effective sales is an integrated model, layering (CBO) as a $12.2 billion revenue raiser any reason up until the tax filing due systems but also an internal process to running fixed business with money willincome tax return over the next 10 years.

It ismanaged believed that datethat of their including taxpayers willhow be attracted the idea your extensions (Oct. 15). Anan intra-plan Roth efficient business. show you you cantodiversify business of paying taxes now on assets that have 401(k) conversion cannot be recharacthemodel potential subsequently a terized.

Thisacan be a major drawback to forto larger sales.grow By on learning from tax-free basis. Before taking advantage an intra-plan conversion. of this opportunity, plan participants Another key difference between a should first discuss with their advisor Roth 401(k) and a Roth IRA is the rewhether and how much of their retire- quirement to take a Required MiniFor should more about The Practice, ment assets be information converted to a mum Distribution (RMD).

Roth 401(k)call 1-800-527-1155 Roth account. plans are subject to RMDs, meaning The factors to consider when con- that once the participant attains the age verting retirement assets to a Roth of 70½ (or retires if later) the particiincludes the participants’ investment pant must begin to take distributions. timeline, whether they have The distributions from the Roth acDownload yourassets FREEtoMarketing Financial Independence Group, Inc. pay the resulting income taxes, their will be tax-free but will lose the Incentive on The Practicecount here: www.figmarketing.com current income tax bracket and whethbenefit of continued tax-free investing. http://goo.gl/MTImn er they believe income tax rates will be Roth IRAs, on the other hand, are not

he latest spur for Roth conT versions came from ATRA, which allows for a conversion without a requirement for a distributable event.

C

I have no doubt that our involvement with The Practice program with Jeff Bucher has been beneficial to us.

- Larry

June 2013 » InsuranceNewsNet Magazine

53

BUSINESS

Four Reasons Why Salespeople PART 1 Fear the Phone of a 2-Part Series

The first step in overcoming call reluctance is to recognize whether you have it and how it may be keeping you from the success you could achieve. In this first of two articles, we look at four types of call aversion and how you can recognize whether you fit into one of them.

By Kerry Johnson

S

ee if any of these examples sounds familiar: Don prides himself on being a professional. But he’d like his sales production level to be a little higher. Don sees himself as consistently prepared for his fact-finding interviews and he knows exactly what to say. The problem is, he doesn’t say it often enough. He’d rather spend time analyzing than acting.

Bob considers himself to be successful.

But he doesn’t prospect much because he feels it is beneath him. To avoid the risk of humiliation for low sales and to preserve his self-perceived status, he would rather let others refer prospects to him through word of mouth. Unfortunately, this technique has not paid off. But at least it is better than pursuing prospects who might think less of him for making an unsolicited phone call.

Jennifer enjoys selling. She realizes that selling, while extremely profitable, also can be uncomfortable. She doesn’t like to prospect through referral contacts or make cold calls. She is afraid of being thought of as pushy and intrusive.

When she calls prospects, she frequently apologizes for interrupting them. She procrastinates making cold calls, waiting for the “right time.” Jennifer realizes she doesn’t make a lot of calls, but she is unwilling to take the risk of appearing too forward.

Identifying Call Aversion

The people in these examples possess a self-sabotaging psychological 54

InsuranceNewsNet Magazine » June 2013

malady described as “call aversion.” If your sales activity is too low, you may have this self-promotion disease. If you have call aversion, you may find it emotionally difficult to force yourself to prospect, and thereby achieve your goals.

According to researchers, more than 40 percent of salespeople questioned have reported that they experienced severe bouts of call reluctance that nearly ended their careers. Most managers agree it is the main reason many new hires fail, but few comprehend that it also can affect more experienced producers.

The first step in dealing with call aversion is recognizing specifically whether you have it and how it may be harming your career. While there seem to be many types of call aversion, four stand out as the most common: The Analytic, ING OF SPEAK CK OUT C , S HE PHONE – IT’S NOT G IN T X S TE OR KID JUST F

2 page 6

The Image-Conscious, Position-Acceptance and Fear of Intrusion.

1 The Analytic Type

The Analytic type of call aversion occurs in sales producers who are overly sensitive about being swept away by their emotions. Afraid to show their true feelings, they preoccupy themselves in highly technical matters. Analytics keep their feelings in the deep freeze, fearing rejection if they reveal themselves.

They over-analyze and under-act. When

FOUR REASONS WHY SALESPEOPLE FEAR THE PHONE giving sales presentations, they tend to emphasize technical details while neglecting relationships.

When I was a stockbroker, I knew an Analytic named Ken. He was very knowledgeable about the bond market.

I would often see him looking over a bond value history or working on one of his performance illustrations. I was shocked to learn that out of the 15 or so producers in the office, he was No. 15.

Ken possessed the Analytic call aversion style. He tried to avoid making phone calls by preoccupying himself with computers and technical illustrations.

2 The Image-Conscious Type

The Image-Conscious type of call aversion is prevalent in producers who try to overcome self-confidence and self-esteem insecurities by making a show of the trappings of their success. They invest heavily in the appearances of wealth and achievement. In an effort to impress others, they often concentrate their energies on showy, if not difficult, sales. Although they lack qualifications or experience at times, they nevertheless work on endeavors that carry a low probability of success, believing these infrequent deals are compatible with their perceived professional image. Prospecting is beneath them and is seen as just plain undignified.

These salespeople have the “Superman Salesperson Complex.” They attempt to shortcut the sales process by skipping the all-important building blocks to success. They want to reach up, grab the golden ring and make that big sale. But they don’t want to struggle in the trenches with the other salespeople who gut it out. This can happen to those producers who have transferred to a new location or a new company. They may have spent several years paying their dues. Then, suddenly, they are forced to start all over again.

3 Position Acceptance Type

Call aversion with regard to Position Acceptance occurs when an individua l is embarrassed or apologetic in the role of salesperson.

BUSINESS

=

If you have call aversion, you may find it emotionally difficult to force yourself to prospect, and thereby achieve your goals.

There is often a suppressed sense of dedication and zeal because this job or position is not considered to be professionally impressive. These producers may suffer periods of job-related depression while pretending to be committed to their positions. They never fully believe the job will ever become a career.

They may not even believe that sales is a worthwhile career.

This Position Acceptance type of call aversion is one that I had to deal with in my own personal career. I realized the only way I would be able to develop business was to get out and make phone calls. Since I wanted to consult to major companies in helping their salespeople achieve greater production, my only hope was to speak at various conferences and seminars, in addition to making prospecting telephone calls. It was up to me to develop those speaking engagements, as a way to create more business. However, I had a great deal of difficulty envisioning myself making prospecting calls. I immediately started making telephone calls at the rate of 10 per day. It worked enormously well.

But first, I had to get over the image of a huckster and instead adopt an attitude of a competent salesperson providing a service useful to others. Nothing happens until something is sold.

4 Fear of Intrusion Type Fear of Intrusion types are those who don’t want to be considered pushy or aggressive. These people are unwilling to be assertive in prospecting for new business. A Fear of Intrusion type may

postpone making a prospecting call because she is waiting for the right time.

These salespeople frequently accept a prospect’s objections too quickly and they have trouble closing. They don’t want to be pushy and they associate any sales as pushy, hard closing and unprofessional. But the opposite is true. The best producers aren’t pushy at all.

Often, Fear of Intrusion types have self-esteem problems. They are so focused on what other people think of them that they lose sight of what they are trying to accomplish. Not only are these individuals concerned with the needs and desires of other people, they take their prospect’s resistance too seriously. The Fear of Intrusion type possibly has what is known as a primary fear of selling. Many of us suffer from this.

We don’t like to get rejected. We don’t enjoy getting a hard time, or experiencing resistance from prospects. But salespeople with this primary fear may take even the slightest criticism personally.

They may cave in to the objection too rapidly. These people sometimes appear apologetic for taking the prospect’s time during a telephone call, as well as for seeing someone face-to-face.

In Part 2 of this article, we will explore a four-step technique for overcoming call aversion and seeing more business come your way.

Kerry Johnson, MBA, Ph.D., is a best-selling author and frequent speaker at financial planning and insurance conferences around the world. Contact him at Kerry.

Johnson@innfeedback.com.

June 2013 » InsuranceNewsNet Magazine

55

Honestly, Abe?

No will?

56

InsuranceNewsNet Magazine Âť June 2013

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braham Lincoln was the first president to do many things, including winning re-election in the time of civil war. But did you know he was the first president to have died without a will?

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June 2013 » InsuranceNewsNet Magazine

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MDRT INSIGHTS

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

Make It Personal The line between a business relationship and a personal relationship is nearly invisible.

By Kirk Wilkerson

T

he most successful professionals, from a personal standpoint, tend to be the ones who see altruistically the benefits and value of our industry. Indeed, practicing stewardship as a financial professional is to achieve success. It is not only our duty but our privilege to provide the best possible service to our clients, and keep their best interests at the forefront at all times. We literally can change the future of people’s lives, and the lives of their families for multiple generations.

Our business is not just about estate planning strategies, retirement planning and seeking to reduce tax liabilities.

To me, what I do is nothing short of financial ministry, because faith is a very big part of my personal life. As such, that attitude comes out in the way I take care of my clients. I live in a very small town in North Carolina so many of my client relationships happen to be quite personal. The byproduct of that is I really need to be on my game and know what I’m talking about. None of us has control over market performance and the like, but when you really know people, it’s incredibly important to be as educated as possible on the financial advice you are doling out. You may have a client who attends your church or has a child on your son’s baseball team. If you live in a small town, the chances are pretty high you’re going to run into that client at the grocery store or post office.

Therefore the line between a business relationship and a personal relationship becomes nearly invisible.

As financial professionals, we possess the unique ability to influence the future. Doing so requires a keen understanding of our ever-changing industry 58

InsuranceNewsNet Magazine » June 2013

as well as the ever-changing needs of the clients we serve. In turn, I believe our primary obligation is to make sure our clients are educated about everything remotely possible regarding their retirement planning situation. They deserve to understand as much as I do, or as much as I know, about their circumstances, what strategy we’re going to implement, and what the outcome should be on the backside. I want my clients to know everything I know.

Doing so probably sounds like I’d be

working myself out of a job to the point that my clients wouldn’t really need me.

It’s actually quite the contrary. Instead, they’ve become tremendously loyal because I’ve treated them as equals and kept them out of the dark.

It’s no secret that people today are living longer and leading more productive lives than previous generations. I have married clients who are now 80 and 82 years old and don’t look a day over 65.

There’s an enormous tidal wave of our population hitting retirement age all at once. The baby boomer situation we are faced with creates tremendous hurdles that we, as financial professionals, need to be aware of. But, it also creates a great opportunity for stewardship. Good or

bad, we are going to have an impact. We have the ability to change people’s lives while they are living, and to change the lives of their families after they have passed on. Looking out for our clients and guiding them to make the best retirement planning decisions builds and solidifies personal relationships – something for which today’s retirees are so desperate.

What we have to do as an industry is intentionally slow down long enough to establish those personal relationships with our clients. As a result, we have great relationships with retirees and, ideally, profitable ones as well. And, one day the children of your current boomer clients will enter the retirement cycle, allowing for the possibility of multi-generational relationships. This is the joy of being in this business. I love that the work I do with my clients goes far beyond the actual transaction. It’s all about the impact I may have had on my clients and their children.

As a member of the Million Dollar Round Table (MDRT), I’ve been blessed to be a part of committees and to have leadership roles.

This has enabled me to share my philosophy and to benefit from the thoughts of my peers – and as an act of stewardship, my clients benefit as well. I believe with every ounce of my being in the integrity and value of our industry and that it can be centered on stewardship. As individuals and practitioners we have the ability to put into motion our clients’ wishes and ensure that they are not facing dire consequences down the road. The key to my success? I make it personal day in and day out.

Kirk Wilkerson is an 11year MDRT member with seven Court of the Table and one Top of the Table honors. He is a registered representative who offers securities through AXA Advisors. Contact Kirk at Kirk.Wilkerson@ innfeedback.com.

• Only NAIFA advocates on behalf of all of your clients and their financial future.

NAIFA

.org/ItPays Go t o www.

N AIFA. o rg/It P ays PROTECTS 7-866-2432!

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Insurance products have been identified as “tax expenditures” and have a price associated with them. Congress is looking for more money in 2013, and your products and your business are at risk.

Join NAIFA, and you’ll be joining other advisors in speaking to State and Federal legislators with one, clear voice.

• Only NAIFA represents insurance and financial advisors regardless of the products they sell or the focus of their practice.

“We intend to move

a comprehensive tax reform bill in 2013 – no matter what.”

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• Only NAIFA advocates on behalf of all of your clients and their financial future.

Go to www.NAIFA.org/ItPays or call 1-877-866-2432!

June 2013 » InsuranceNewsNet Magazine

59

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.

NAIFA INSIGHTS

The Rebirth of LTCi Solutions T he long-term care insurance industry is changing, with policies to fill the gap in your client’s plans.

By Deb Newman

R

arely do we see a story with a positive spin on the nightly news – or in news about the financial services industry. The latest buzz is about the supposed demise of the long-term care insurance industry. Let’s look at all sides – the bad, the good and, more importantly, what changes need to be made in order for this industry to thrive.

Let’s Look at the Bad News

Traditional benefits, as well as some companies, are beginning to vanish: Limited pay options: Most carriers are unable to find reinsurers willing to take on the risk. Others have eliminated the uncertainty of that pricing due to the low interest rate environment.

Issue ages over 80: Many companies are decreasing maximum-issue ages to 75 or 79.

Carriers continue to raise premiums on some older blocks of business that were not priced correctly due to low lapse, low interest rates and increased mortality.

Discounts are declining: Fewer companies are offering significant preferred health discounts and deep discounts for spousal/partner relationships. Some insurers have left the market.

Simplified underwriting for small employer groups is scarce: Guaranteed issue on less than 150+ lives is no longer available.

And Now for the Good News

Companies are entering the LTCi market: Large carriers such as Thrivent Financial and Transamerica have re-entered the market with their own products. Others, like Mutual of Omaha, have expanded their distribution, while still others are staying the course and growing.

Product innovation: New products whose entry points have lower prices are being developed and marketed. How does $80 a month sound? These policies 60

Although the LTCi industry has gone through some changes, your clients’ need to address this risk has not. are sold like starter life policies – with future purchase options that give the advisor the opportunity to review with his clients more often and increase the benefit over time.

Selling innovations: Forward thinkers are making it easier to sell LTCi anywhere, anytime. John Hancock has spent millions creating its LTC Captivate sales system, designed to help you meet with your clients on line. Catherine Dove from LTC Connection is developing LTC Roadmap, an integrated online sales system that will work across the various carriers and products.

And there is More News

Gender-specific pricing: Genworth and John Hancock have introduced gender-based pricing. In general, it may cost women 20-40 percent more for coverage, while men will pay less. Other carriers have indicated they will likely follow suit later this year. Interestingly, John Hancock’s pricing on couples actually has become more affordable in many cases.

LTCi riders on life products and linked benefit policies: We are seeing a new generation of life insurance prod-

InsuranceNewsNet Magazine » June 2013

ucts with innovative LTCi riders – both traditional life insurance and hybrid single premium products. But not all LTCi solutions will yield the same result at claim time. Accelerated death benefit and critical illness riders may give the illusion of LTC protection, but have different definitions.

Underwriting is changing: Carriers are screening for cognitive impairment at younger ages, and some are using traditional blood and urine testing for additional new underwriting requirements.

Short-term care and other innovative solutions are on the drawing boards of many carriers: Work is being done within a working group of the LTCI Society of Actuaries to recommend needed changes to the National Association of Insurance Commissioners model, so more innovation can emerge.

What has not changed are your client’s motivations for considering and purchasing LTCi: Avoiding placing the caregiving burden on their children, protecting their assets, being able to obtain high-quality private pay care and gaining peace of mind because they have taken care of the problem. These are in videos sponsored by the LIFE Foundation at http://bit.ly/innm0613-ltci.

Although the LTCi industry has gone through some changes, your client’s need to address this risk has not. With 10,000 people a day turning 65 for the next 17 years, the topic of LTC planning is not going away. You can change your client’s life – and that of his family. Whether you partner with a specialist or provide the solutions yourself, the industry awaits with policies to fill this gap in your client’s plans.

Deb Newman, CLU, ChFC, LTCP, is the founder and chief executive officer of Newman Long Term Care, an agency focused on LTC insurance for over 20 years. She is the immediate past chair of the LIFE Foundation, president of NAIFA-Minnesota and was a contributing faculty member on the new Retirement Income Certified Professional designation from The American College. Contact her at Deb.Newman@ innfeedback.com.

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LIMRA INSIGHTS

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

Texting – It’s Not Just for Kids T exting is becoming a more acceptable way of sharing information in the business world.

By Todd A. Silverhart

With growing numbers of workers seeing their cell phone as an extension of their persona, it is inevitable that their reliance on texting will be incorporated into their business lives.

W

ith the introduction of text messaging recently passing the 20-year milestone, I have to wonder whether any of those involved sensed the widespread impact their development would have. With cell phone use having become so popular, texting is, in fact, changing the communication landscape in extreme ways – particularly for younger generations.

The statistics supporting the growing prevalence of texting really are quite remarkable. With the figures ever changing, Pew reports that 80 percent of cell phone owners text (up from 57 percent in 2007), with one in three teenagers sending more than 3,000 texts per month. And according to Forrester, more than 6 million text messages are sent each day in the United States.

As a baby boomer parent of teenage children, I have to believe that my personal experience with texting is not atypical. Clearly, my texting behavior has been shaped by my kids, who have been coming of age during a period when cell phone ownership has become ubiquitous. At the same time, among their peers, texting has evolved to become the undisputed communication channel of choice. In fact, it’s such a default communication for young people that my suggestion of sending an e-mail elicited a response of “E-mail? Why don’t you just text?” (The reaction was as if I’d suggested writing a letter in long hand and walking it to the post office for mailing.)

With their growing dependence on texts (clearly reflected in the need to change our phone plan to accommodate unlimited texting), it quickly became evident that communicating with our children would be greatly facilitated if my wife and I jumped on the texting bandwagon. The immediate response that a text message tends to elicit – combined with the disfavor (perceived taboo) of answering a phone call from 62

InsuranceNewsNet Magazine » June 2013

their parents while with their friends – prompted us to embrace texting. And having done so, it is readily apparent that there really is something to be said for the ability to communicate in a brief, focused and quick manner at certain times with other friends and family.

While I have grown to be a regular user of texting in my personal life, I seldom have occasion to communicate via text at work. I have to believe, however, that just as texting has affected personal communication, over time it also will increasingly affect business communication. With growing numbers of workers seeing their cell phone as an extension of their persona, it is inevitable that their reliance on texting will be incorporated into their business lives.

What does all this mean to advisors?

Earlier research from LIMRA revealed that 83 percent of Gen Yers and 68 percent of Gen Xers sleep next to their cell phones. In addition, we found that younger consumers take full advantage of the multiple information options available to them. Gen Xers and Gen Yers who seek information online often also get information from agents or brokers; 40 percent of those who talk with agents or brokers also look online. Word-ofmouth is extremely important for these generations so all the messages from a company, contact center representative and field force must be consistent.

At a LIMRA conference last year, I witnessed an impressive demonstration of the “text whenever possible” mindset by an agency manager whose practice focuses on meeting the needs of Gen X and Y clients. Having set the context by explain-

ing his goal of “digitizing” as much as possible and driving traffic to his website, he demonstrated his alternative to using paper business cards (clearly a staple for traditional sales professionals).

In the session, attendees were invited to take out their cell phones and send a text to the number he provided. Immediately, all who sent the text received a text in return containing complete contact information, all of his social media handles, and links to his website and a video describing the capabilities of his firm. Brilliant! And at the same time, he was able to capture the cell phone numbers of everyone who sent the text and incorporate them into his contacts database.

I find it interesting how many times I have heard baby boomer peers expressing their concerns about the overuse of texting by younger generations. They seem to focus on all of its potential ill-effects – most notably, losing interpersonal skills as well as proficiency in grammar and writing. However, while too much of anything can be problematic, I fear that many of my cohorts are holding on to a nostalgic, ethnocentric mentality, resisting change by believing that “all things were better the way we did them back in the day.” The reality is that texting – whether its use is good, bad, or indifferent – is here to stay.

Todd A. Silverhart, Ph.D., corporate vice president and director of LIMRA’s Insurance Research has responsibility for markets, products and group distribution.

Contact him at Todd.Silverhart@ innfeedback.com.

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June 2013 » InsuranceNewsNet Magazine

63

THE LAST WORD

WITH LARRY BARTON

A Call for More PhDs in Financial Disciplines Where are the meaningful breakthroughs in the way we deliver our products and services to consumers?

By Larry Barton

New York Life recently made a gift of $5 million to The American College to establish a new PhD program in Financial and Retirement Planning.

R

ecently, I’ve seen articles that question the value of a college education. During these tough economic times, people are asking themselves whether the amount of debt incurred by university students provides a reasonable return on investment. In fact, Peter Theil, the co-founder of PayPal, recently created a foundation that offers students under the age of 20 a total of $100,000 over two years to drop out of college and pursue other work, which could involve creating a startup business or working on societal issues.

I agree that educators should be responsible for ensuring that a college education remains affordable. But the return on investment for the individual is not the only thing we should be discussing as our nation reexamines the value of education. Focusing on the individual student misses the bigger point.

We also should be looking at the return our society gets when we equip scholars to expand the boundaries of knowledge.

The easiest example to which one can point is the development of new technology. Remember a year or so ago when IBM’s Watson won big on “Jeopardy,” beating some of the top champions of the game? Now Watson is “learning” oncology to assist doctors with diagnoses and better health outcomes for patients. Education at the very highest level is what moves professions forward. In financial services, college degrees and advanced designations are important, but we also need more doctoral students, more scholars devoted to research. Where are our “Watson” moments? Where are the meaningful breakthroughs in the way we deliver valuable products and services to consumers?

64

InsuranceNewsNet Magazine » June 2013

PhDs can devote their full attention to research and to questioning the approaches that are “generally accepted.” The results of their work lead to new thinking, new jobs, new industries and more effective uses of available resources.

Dr. Wade Pfau of our faculty here at The American College of Financial Services recently ran a series of historical simulations for retirees from 1926 to 2000 to see how long retirement savings would last. He’s at the forefront of new thinking that the traditionally accepted 4 percent portfolio withdrawal rate is too aggressive over the long term, considering the variety of economic conditions a retirement portfolio might have to weather. Retirees needed to be more conservative if they want to avoid running out of money during the course of their retirement.

It’s just one example of challenging accepted wisdom and best practices.

That’s what PhDs and doctoral candidates do, and we need more of them in financial disciplines. Where could new knowledge take us in the areas of financial and retirement planning? Are there more effective ways to build wealth over time? Better ways to serve moderate-income households? Better hedging and risk mitigation strategies? New approaches to behavioral economics that could help investors protect themselves from their worst financial instincts?

The opportunity is compelling. That’s why New York Life, the largest mutual life insurance company in the U.S., recently made a gift of $5 million to The

American College to establish a new PhD program in Financial and Retirement Planning.

With an unrivaled curriculum, this advanced degree will provide financial practitioners with the knowledge they need to move beyond the practice of retirement planning and financial decision making into the research and theory behind consumers’ financial decisions. Individuals who complete this comprehensive curriculum will have the opportunity to become world-class scholars whose research and teaching will provide financial professionals with the advanced information they need to serve the people who are counting on them.

If you have ideas for specific research that is needed in the financial and retirement planning fields, let us hear from you. I also encourage those practitioners who might one day want to teach in these areas at the college level to consider this new advanced degree program. Our sessions are full for 2013, but there is still limited opportunity to enroll in 2014.

As always, I’m interested in your ideas. Write me at InsuranceNewsNet and share your perspectives.

Larry Barton, Ph.D., CAP, is president, CEO of The American College and holder of the O. Alfred Granum Chair in Management at The American College, based in Bryn Mawr, PA. Contact Larry Barton at Larry.Barton@innfeedback.com.

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