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[LIFEWIRES] How big could BGA’s get? LIMRA Survey: What Drives Advisor Success The economics of financial advisory distribution face numerous challenges, but pockets of opportunity remain, according to a major survey of 2,000 experienced financial advisors, conducted by LIMRA and McKinsey & Co. The LIMRA/McKinsey study provides critical insights across a number of dimensions that impact the success of advisory sales forces. According to the survey: Sales capacity is one of the most significant issues impacting distribution. Across most channels, the majority of experienced advisors is over 50 and has more than 25 years of experience. Growth opportunities are the most important factor in advisors’ selection of a firm and are twice as important as compensation. The most productive advisors utilize four best practices, including teaming, client specialization, retirement planning and knowledge of life events. The percentage of advisors teaming with others has grown since 2008, primarily as a result of their desire for growth and increased productivity. Advisors are selling a larger share of investments and advisory solutions, relative to insurance. Investment products account for a growing share of revenues for career and independent insurance agents (30 percent in 2012 versus 23 percent in 2004.) Financial services organizations have increased the services they offer to affiliated advisors by 40 percent over the past 10 years, but many of these services are not valued or are poorly delivered. Advisors are reducing the number of insurance carriers with whom they do business and place approximately 50 percent of their insurance with their top carrier. They frequently switch insurance carriers. Advisors are keen to introduce new technologies to their practices. The use of video technology will quadruple over the next four years, while the use of social media will more than double. MASSMUTUAL FINED $1.6M BY SEC Massachusetts Mutual Life Insurance was charged with securities law violations for failing to properly disclose the potential negative impact of a “cap” placed on a complex investment product for investors to use for retirement. According to the SEC’s order, MassMutual advertised its GMIB riders as providing “Income Now” if investors elected to DID YOU KNOW ? 24 make withdrawals during the accumulation phase or “Income Later” if they elected to receive annuity payments. According the SEC’s release, the investigation found that MassMutual included a cap feature in certain optional riders offered to investors, and the cap potentially affected $2.5 billion worth of MassMutual variable annuities. Neither the prospectuses nor the sales literature explained that if the cap was reached, the guaranteed minimum income benefit (GMIB) value would OF THOSE ADVISORS WHO ARE WITHIN 10 YEARS OF RETIRING or selling their practices, more than half have no succession plan. Advisor satisfaction is significantly higher for all independent channels, with affiliated advisors more likely to leave their firms within the next three years. Source: LIMRA/McKinsey & Co. Study: Key Factors That Drive Financial Advisor Productivity Across Multiple Distribution Channels InsuranceNewsNet Magazine » December 2012 QUOTABLE The year-to-date operating profit is strong, but challenges posed by low interest rates are significant and demand innovative and sustainable product offerings to achieve future success. — Walter White, Allianz Life President & CEO no longer earn interest. MassMutual’s disclosures instead implied that interest would continue to accrue after the GMIB value reached the cap, and dollar-for-dollar withdrawals would remain available to investors. A number of MassMutual’s own sales agents were confused by the language in the disclosures, and investors were not sufficiently informed of the potential negative effect of taking withdrawals if they reached the cap approximately a decade from now. MassMutual, which removed the cap after the SEC’s investigation to ensure that no investors will be harmed, has agreed to settle the charges and pay a $1.6 million penalty. LOW INTEREST RATES AFFECT ALLIANZ LIFE Q3 SALES Allianz Life Insurance posted operating profit of $559 million through the third quarter of 2012 compared to an operating profit of $379 million through the same period in 2011, according to Allianz. Persistent low interest rates continue to challenge sales volumes. Allianz Life reported premiums of $7.4 billion through the third quarter of 2012, compared to $8.3 billion through the third quarter 2011. Fixed annuity premium of $4.2 billion was down 16 percent yearto-date compared to $5.1 billion in 2011 and variable annuity premium of $2.7 billion was down 6 percent from $2.9 billion in 2011. Life insurance sales hit $48 million through the third quarter, up 109 percent from $23 million for the same period in 2011.

December 2012

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