NAIFA's Advisor Today November/December 2017 Edition

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The Advisor Today Blog brings you the tools, ideas and techniques you need to build a successful practice. Fresh content is posted regularly, and we welcome your feedback and ideas in the comments section. We look forward to hearing from you!

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NAIFA OFFICERS

President Keith Gillies, CFP, CLU, ChFC Ameritas kmgillies@aol.com

President-Elect Jill Judd, LUTCF, FSS State Farm Insurance Companies Jill.judd.jy10@statefarm.com

Secretary Cammie Scott, LUTCF, REBC, RHU, CLTC CK Harp & Associates Cammie@ckharp.com

Treasurer Matthew Tassey, CLU, ChFC, LUTCF Burwell & Burwell mtassey@scribnerinsurance.com

Immediate Past President Paul Dougherty, LUTCF, FSS State Farm Insurance Companies paul@doughertyagency.com

CEO Kevin Mayeux, CAE kmayeux@naifa.org

Trustees

David A. Beaty, CLU, ChFC dave@heartlandfinancial.net

Todd G. Grantham, CFP, CLU, ChFC, MSFS

NAIFA’s Advisor Today

Editor-in-Chief

Ayo Mseka  amseka@naifa.org

703-770-8204

Circulation Manager

Tara Laptew  tlaptew@naifa.org

703-770-8207

NAIFA

Kevin Mayeux, CAE  CEO kmayeux@naifa.org

703-770-8101

Michael Gerber COO & General Counsel mgerber@naifa.org

703-770-8190

Diane Boyle SVP, Government Relations dboyle@naifa.org

703-770-8252

John Boyle

AVP, Professional Development & Education jboyle@naifa.org

703-770-8267

Judi Carsrud AVP, Government Relations

703-770-8155 jcarsrud@naifa.org

Jennifer Cassidy  VP, Finance jcassidy@naifa.org

703-770-8125

Sheila Owens VP, Communications and Marketing sowens@naifa.org

703-770-8112

Diane Powers VP, Professional Development and Education dpowers@naifa.org

703-770-8226

Brian Steiner VP, Business Development & Strategic Partnerships bsteiner@naifa.org

703-770-8220

Gary Sanders Counsel and VP, Government Relations gsanders@naifa.org

703-770-8192

Michele Grassley Clarke VP, Membership and Association Services

todd.grantham@nm.com

Connie Golleher, CLTC connie@gollehergroup.com

Bryon A. Holz, CLU, ChFC, LUTCF, LACP bryon@bryonholz.com

Lawrence Holzberg, LUTCF Lawrence_holzberg@wagllc.com

Brock T. Jolly, CFP, CLU, ChFC bjolly@financialguide.com

Delvin Joyce, CLU, ChFC delvin.joyce@prudential.com

Thomas O. Michel tmichel@michelfinancial.com

Charles M. Olson, CLU, ChFC Charles@ociservices.com

Ryan Pinney rpinney@pinneyinsurance.com

Greg Toscano, LUTCF gttoscano@yahoo.com

John Wheeler, Jr., CFP, CLU, ChFC, CRPC, LUTCF obfsinc@aol.com

NAIFA SERVICE CORPORATION OFFICERS AND DIRECTORS

President

Kevin Mayeux, CAE

Secretary Keith Gillies, CFP, CLU, ChFC

Treasurer

Matthew Tassey, CLU, ChFC, LUTCF

Directors

Brenda Doty, LUTCF, RHU, CLU, CPC

The Doty Group, Inc.

Susan Wier, CFP, ChFC, LUTCF First American Trust

EDITORIAL ADVISORY COUNCIL

Laurie A. Adams, CFP, CLU, LUTCF Country Insurance & Financial Services

Brian Ashe, CLU

Brian Ashe and Associates, Ltd.

Frank Bearden, Ph.D., CLU, ChFC

Frank C. Bearden, Ph.D., Consulting

Kevin Faherty, LUTCF

Faherty Insurance Services, Inc.

Greg Gagne, ChFC, LUTCF

Affinity Investment Group, LLC

Lisa Horowitz, CLU, ChFC

LifeCycles

Michael Lynch

Metlife

John Marshall Lee, CLU, CFP, RHU

People Insurance & Investments

John Nichols, MSM, CLU

Disability Resource Group Inc.

Ike Trotter, CLU, CASL, ChFC

Ike Trotter Agency, LLC

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Published November 2017/NAI-S0617/6865

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NAIFA’s Advisor Today (ISSN 1529-823X) is published bi-monthly by the National Association of Insurance and Financial Advisors Service Corporation, 2901 Telestar Court, Falls Church, VA 22042-1205.

Telephone: 703-770-8100. © 2017 National Association of Insurance and Financial Advisors Service Corporation. All rights reserved.

Subscriptions: The annual subscription rate for individual non-NAIFA members is $50; institutions, $60. The international subscription rate for non-NAIFA members is $100 per year.

FROM THE EDITOR Steps for Success in 2018

By Ayo Mseka

During my interviews with this year’s winners of Advisor Today’s Four Under Forty Awards, they shared a few “words of wisdom” that governed the steps they took on their way to the top. I have highlighted some of these observations below in the hopes they will inspire you to reach for similar levels of success.

You don’t have to be the smartest person in the room. You just have to be genuine, honest, caring, and sincere. People can sense if you lack these qualities when they meet you. If you have them, there is a great chance they might want to partner with you and begin to allow you to help them navigate their financial world, protect their family and loved ones, and provide them with th e comfort they need to sleep well at night. (Matthew Cuplin)

Success takes activity. I made it a point early in my career to do at least one thing every day to move forward. This might have been to enhance my education, call a prospective client, research a new business idea or run one more appointment. Over time, week by week, month by month, that kept me moving forward and before you knew it, I looked around and found myself in a very successful position. (Matthew Cuplin )

One of my mentors painstakingly helped me develop a client-engagement process. It wasn’t a script, or just asking the right questions. It was about professional conduct and control that guided people to the answers they sought. He pounded into me: process, process, process. So more than any other skill I have worked hard to develop, I have focused the most on my process, and I attribute nearly everything to that. (Brian Haney)

One of the mistakes many new or young agents make is not seeking joint-work partnerships with other more successful agents. Partnering is essential to success, and I continue it to this day. (Brian Haney)

The only way to be good in this business is to do what you have to do to succeed –and do it over and over again. This could be cold calling, business walk-ins, networking, or asking for referrals. You must do it consistently and you must do it repeatedly. (Chauvon McFadden)

You must commit to the business and never give up. In this business, we tend to waver a lot. In fact, I have quit this business mentally several times, but I have always made it a point to hang in there. Being resilient is a major contributor to my business success. (Chauvon McFadden)

Knowing specifically where you see your business headed both as a financial professional and as a leader is the first and most important step towards achieving your goals. (Stephanie Rivas)

Be passionate about getting in front of as many people as possible. They need you! Don’t let them or yourself down by not putting in as much effort as possible to build your business or to take your practice to levels you haven’t achieved before. (Stephanie Rivas)

These words of wisdom have played a pivotal role in advancing the careers of these outstanding advisors. Keep them top-of-mind as you finalize your plans for success in 2018, and watch great things happen to you and your practice.

Best of luck in your journey to success!

Progress!

By Keith Gillies, CFP, CLU, ChFC

Several months ago, as NAIFA began to celebrate an acceleration of its wins and victories, our leadership began signing off on email messages and telephone calls with this simple but powerful word: Progress. As you know, progress is defined as a forward or onward movement toward a destination. I am proud to let you know that NAIFA has moved forward and onward and will continue to do so.

During our Performance + Purpose Conference two years ago, the NAIFA National Council took the first step towards a new NAIFA by amending our by-laws to have our Governance Committee vet candidates for the Board of Trustees and Incoming Secretary and to present those candidates to the Delegate Council for consideration.

With that initiative, we made a commitment to you that the talent pool for your national leadership would expand and would consist of a more diverse board and executive committee. I am proud to report that we have achieved this objective. For the first time in NAIFA’s history, we have back-to-back female secretaries who will rise to lead our organization as your presidents.

In 2014, Jules Gaudreau, our then president-elect, also shared a vision to operate NAIFA as a business. That meant we needed a consistent message and a roadmap. His idea was to impanel a task force to “white board” a new NAIFA, and the seed for NAIFA 20/20 was planted. Gaudreau then appointed a task force, and the result was NAIFA 20/20, our comprehensive five-year strategic plan developed by members and executives to reinvent NAIFA as the vibrant, impactful and indispensable organization that advisors, the industry, and clients need.

Moving forward

As we work to implement NAIFA 20/20, we are experiencing growth in all areas. We’re expanding our services to enhance the professionalism of advisors throughout the country. We’re reaching new markets, having an unparalleled impact on public policy, and deepening our relationships with companies and other industry stakeholders. This July marked the completion of the first phase of NAIFA 20/20. Throughout the year, we held ourselves accountable by reporting our advancement to you and acting with transparency every step of the way.

Phase Two

It is now time to begin Phase Two of NAIFA 20/20. Upon taking office last September, Immediate Past President Paul Dougherty created another task force, The Quality Member Experience Task Force, to begin work on the most critical stage of NAIFA 20/20—the modernization of our By-Laws. Under the leadership of Chair Tom Michel, this QME Task Force, consisting of a cross-section of NAIFA members and executives, examined the challenges and opportunities of our association. Its recommendations represent input from hundreds of stakeholders across the federation, after numerous meetings and extensive feedback. The Task Force’s proposed recommendations will be presented to you during the 2018 NAIFA Congressional Conference in Washington.

These recommendations are critical because our stakeholders agree that NAIFA needs a structure that lessens the burden of bureaucracy and allows us to be more nimble and decisive so we can respond to the industry’s increasing challenges, while embracing new opportunities. Simply put, our current governance structure holds us back.

Also, our members have identified what they believe are the standards for success. Holding each other accountable to standards is not designed to punish anyone for falling short. Rather, where standards are not met, we will work to help each other overcome obstacles and move toward success. Teamwork is essential in ensuring that states, locals, and NAIFA-National meet these standards. Finally, reducing the number of dues structures from 600 to one will simplify operations, reduce administrative costs, and promote cohesion.

Our goal in implementing NAIFA 20/20 is to deliver a quality member experience for all NAIFA members. This will ensure that as the largest industry organization that protects the needs of 75 million American families, we will remain effective in Washington and in every state capitol.

It is my honor to serve as your new president. With your continued support, I am confident we will continue to make progress and take NAIFA to new heights of success.

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Keith M. Gillies, CFP, MBA, is the Managing Principal of Wealth Solutions, LLC and The Pension Center, LLC, and co-founder of United Wealth Advisors Group, LLC, where he serves as Chief Executive Officer. He began his career as a financial advisor in 1981 with a commitment to providing advice and strategies to individuals, professionals and business owners to help them achieve their personal, business and charitable goals.

products | life insurance

New Indexed IUL Product Makes its Debut

Credit: ©ISTOCK.COM/THITAREESARMKASAT

Ohio National Financial Services has introduced a new indexed universal life (IUL) insurance product that offers the flexibility and protection of a universal life policy, with indexed account options to help build cash value.

“The Virtus IUL policy provides the protection component our clients need and so much more,” said Chris Calabro, CLU, ChFC , Ohio National’s senior vice president, life insurance strategic business. “For customers who need to save for future needs such as their retirement or a child’s college education, it also offers a variety of crediting strategies and benefits – more than a normal fixed rate product. What also makes Virtus IUL stand out is its efficient, low-expense design that will help it perform better in a wider variety of market conditions.” Highlights of its accumulation, protection and flexibility features include:

• Three index accounts and a fixed account so customers can allocate premiums to fit their needs

• A minimum participation rate of 100 percent for all index accounts

• A step-up of at least 30 basis points to all index segments of a policy, as well as to the fixed account beginning in the 11th policy year1

• Two flexible loan options (index and standard) with the ability to switch between them as needs change 2

• Overloan protection rider

• A 2 percent cumulative account value true-up3

• An accelerated benefit rider (ABR), which is a living benefit that accelerates a portion of the death benefit if the insured is defined as chronically or terminally ill

• Up to a 20-year no lapse guarantee

These, in addition to other strong features, help make Virtus IUL a good balance for clients’ accumulation and protection needs, according to the company.

1 For account values in the Fixed account, the 30 basis point step-up will only be credited provided the current interest crediting rate is greater than 2 percent.

2 Once a loan option is selected, you cannot switch for 12 months.

3 The 2 percent cumulative account value true-up guarantees that upon full surrender or death in policy year six or later, the cash value will never be less that it would have been if all premiums had been allocated to the fixed account and credited with 2 percent interest since issue.

new products | employee benefits Tool Improves Management of DefinedBenefit Plans

Credit: ©ISTOCK.COM/NICOELNINO

Massachusetts Mutual Life Insurance Co., as part of a broader strategy to expand its share of the definedbenefit (DB) pension market, has introduced an analysis tool to help employers gauge the relative health of their pension plans and manage them accordingly.

MassMutual’s PensionSmart Analysis tool is available to pension plan sponsors through financial advisors and consultants who serve the pension recordkeeping, investments and actuarial marketplaces. The tool provides insights into the health of an employer’s pension, creating a “persona” that details the plan’s current status, funding level or health, service structure, and a comparison to pension plans sponsored by other employers in the same industry.

In addition, the new tool will help financial advisors and consultants identify local pension plans that may benefit from a plan health analysis and consultation. With the results of the tool’s analysis in hand, MassMutual’s pension experts can then assess the pension plan’s health and make recommendations to the sponsor about appropriate options.

“Our new PensionSmart Analysis tool provides employers and their advisors an easy-to-understand snapshot of their pension’s health and status in relation to their total retirement benefits package,” said Michael O’Connor, leader of MassMutual’s Defined Benefit Pension unit. “The introduction of this new analysis tool is part of a broader strategy by MassMutual to expand its share of the pension market as some providers reduce their service and support. There is a real opportunity to put our 70-plus years of experience and expertise in the pension plan market to good use.”

As of March 31, 2017, the Investment Company Institute reports there are $8.6 trillion total in private and public DB pension assets in the United States. The PensionSmart Analysis tool provides plan sponsors with a diagnosis or assessment of their plan’s health, including insights on funding levels, administrative efficiencies and expense savings, improved communications to participants and design recommendations. The analysis also examines funding, investment and de-risking strategies to help sponsors make the best long-term decisions about managing their pension plans. The insurer has a team of actuaries and investment professionals that focus on helping sponsors achieve their pension plan objectives.

As part of the analysis of pension investments, the tool can examine different investment “glide path” options

to help sponsors achieve specific goals related to funding and liability matching, according to O’Connor. MassMutual can also asses and recommend de-risking strategies as more sponsors look to reduce liabilities from pensions.

Advisors and consultants can use the PensionSmart Analysis tool to generate a listing of pension plans in their area and determine which plan sponsors might benefit the most from a health analysis. The new tool displays information on the sponsor, type of plan, size of the pension in assets and number of participants, funding level, status and service model.

New Product: Fixed Index Annuity with Liquidity Rider

Credit: ©ISTOCK.COM/WEERAPATKIATDUMRONG

North American Company for Life and Health Insurance has released the NAC VersaChoice 10, a fixed- index annuity with an optional rider that allows clients to have more access to more of their money sooner, the first of its kind on the market, according to the company.

“Retirement savers want three fundamental things when evaluating a vehicle for their retirement money,” said Rob TeKolste, president, Sammons Independent Annuity Group. “First, they want growth potential, second they want downside protection from market drops, and the third thing is having access to their hard-earned dollars in emergencies. The advantage of the NAC VersaChoice 10 fixed index annuity is that it offers all three of these benefits.”

The optional rider, called the enhanced liquidity benefit (ELB), has four features that provide access to the money in the annuity. An annual fee equivalent of 0.50 percent of the contract owner’s accumulated annuity value applies to the ELB rider. “With the ELB rider, we’ve enhanced two basic annuity features, which include the penalty-free withdrawals benefit as well as the return of premium benefit,” TeKolste said.

TeKolste also recognized the need to access retirement savings if a health event leaves a client unable to perform some of the basic activities of daily living. “We built in two additional liquidity benefits to access if you are permanently unable to complete two of the six activities of daily living,” he said. Initial eligibility for these liquidity benefits, and the trigger to turn those benefits on, are based on six activities of daily living – no underwriting or medical exam is required.

In a fixed index annuity, the performance of the account is tied to market performance but is not an actual investment in the stock market. Fixed-index annuities offer participation for some of the market’s growth in up times but protection in down times. The premium used to purchase the index will never be at risk of decreasing due to market losses.

For more information, visit www.northamericancompany.com.

new products | health insurance

New Dental and Vision Insurance

Credit: ©ISTOCK.COM/DROUK

Seeking to better meet customer needs, Mutual of Omaha has introduced two new options to provide individuals with a more holistic approach to health-care coverage: dental and vision insurance.

The dental policy options – Mutual Dental Preferred and Mutual Dental Protection – offer differing coverage levels, deductible and premium amounts so customers can select the best fit. Dental coverage is available to individuals ages 19-99, and the vision insurance is available as an optional rider to a dental policy.

When developing the new products, Mutual of Omaha surveyed current and potential customers to assess their needs and learn the types of dental and vision plans they would find valuable. The company used their input to fine-tune the plans. “The dental and vision coverage options we introduced this month are a direct result of what our customers told us would serve them well,” said Jeff Ganow, Mutual of Omaha vice president and actuary. “Customers have counted on us as a Medicare supplement provider for more than 50 years. We hope these products can help round out coverage for our customers’ additional health care needs.”

As of Oct. 7, Mutual of Omaha’s dental and vision products were available for customers to purchase through licensed agents and brokers in 23 states. For more information, visit mutualofomaha.com/dental-insurance.

Getting Ready for 2018

Increase your chances for success by taking these steps right now.

By Mike Morrow, CFP

Credit: ©ISTOCK.COM/MANOP1984

The final quarter of the year is a good time to reflect on the past year and make plans for the New Year. As busy professionals, we may be striving for a better work/life balance, our office may need a technology upgrade, or we may want to increase revenue. It’s important to take stock of where you are and think about where you want to be in a year’s time.

Take a moment to go back to the basics and map out your year. Contemplate the goals that you set last year, your achievements, and what didn’t work. Look at things such as business revenue, expenses, hours worked, staffing, and office efficiencies and don’t forget to consider your personal life, family and holiday time, health and wellness commitments and volunteer time.

A good template to mapping out your year and determining next year’s goals is to compile a list of actions under the following headlines: What should I stop doing, what should I start doing and what should I keep doing. Let’s take a quick look at what falls under those categories.

What should I stop doing?

Spend some time in considering activities or habits that are not providing value to your business and/or your personal life. Examples include making use of old technology that slows the office systems down, working with clients whose demands consistently exceed their value or maintaining work hours that don’t allow you to achieve your goals.

Under this category, you should look at removing distractions—those activities that prevent you from staying on track. Be honest with yourself when you think about how you spend the majority of your day. Most people underestimate the time they spend on their device, texting, email, and social media, for instance. There are apps that can help you manage your device distraction.  Offtime, Moment, Breakfree, and Stay on Task block distracting apps and track your device usage.

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Do more of the things you should be doing and less of the things you shouldn’t, and you will be on your way to a successful 2018.

What should I start doing?

If you desire a better work/life balance, maybe it’s time to delegate tasks that can free your time at work so you can spend more time with family, exercise, or pursue a hobby. Maybe you want to build your business within a specific market or you want to consider developing a marketing plan, initiating new sales approaches, learning something new, joining a networking group or scheduling some personal time.

Review business-building books, magazines, and conference material to help discover and generate ideas. Often the best ideas are those that are waiting to be implemented. Commit to implementing at least one better system or process in your business and personal life in each quarter of the year.

What I should keep doing?

You would not have achieved the level of success you have without doing some things correctly. Now is the time to give yourself a pat on the back for all of your strengths and attributes. If you are a positive leader, for example, write it down. Take this time to celebrate your accomplishments, what worked this year and what changes held fast and made a difference in your business. Think about your personal life, too, and what you think you want to keep doing. Your list may have things like volunteering at your child’s school, exercise commitments, or building savings plans. Don’t leave anything out. This list will give you the inspiration to make changes for even more growth.

Action steps for success

After you have decided what you want to keep doing and start doing, it is important to create action steps in order to achieve success. For example:

Goal: To be more productive

Action Steps:

1. Delegate newsletter creation to administrative staff.

2. Arrive at the office early, before the phone starts ringing.

3. Write monthly, weekly and daily to-do lists, and check them daily. Setting business goals that are within your reach and regularly tracking your activity will determine your longterm success. We don’t succeed all at once and we don’t fail suddenly. So do more of the things you should be doing and less of the things you shouldn’t, and you will be on your way to a very successful 2018.

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Mike Morrow, CFP is a financial advisor, speaker, author and commentator. He is the author of The Loyalty Edge and has been pioneering his clients to their financial goals for more than 25 years, focusing on client engagement and fostering client loyalty. Please visit: www.ideasforadvisors.com.

Improving Gender Diversity at the Workplace

Here are a few “hidden gems” and proven measures to really move the needle in promoting gender diversity.

By Ayo Mseka

Credit: ©ISTOCK.COM/ SHIRONOSOV

Boston Consulting Group’s (BCG) research has identified a set of initiatives that the firm says are underestimated by many organizations seeking gender diversity. These initiatives, the firm notes, tend to improve retention and advancement, and address the fundamental obstacles that women encounter and leaders fail to recognize. Here are a few of these hidden gems.

Implementing flexible work program. Flexible work—including part-time positions, paid family leave, working remotely, and additional or unpaid vacation—was the top-ranked initiative among the group BCG studied. More than half of all respondents, and 59% of women, cited it as the single most effective gender diversity intervention. Yet only 34% of senior male leaders agreed with them.

The demand for flexible work programs is likely to grow. Among both men and women younger than 30, flexible working was the top-ranked intervention. Among the executives BCG interviewed, 55% said that male as well as female Millennials clearly want flexibility and that their companies are under increasing pressure to accommodate these employees.

Eliminating biases in evaluations and promotions. Flexible work programs can help retain talent, but eradicating any inherent biases in the system is key to ensuring that women can advance to the C-suite, according to BCG. While many US company leaders may argue that they operate in a genuine meritocracy, research by Catalyst and other organizations suggests otherwise, BCG notes. Most managers and executives are subject to unconscious biases that affect how they hire, evaluate, and promote people. Identifying these biases and systematically eliminating them will go a long way to creating a more balanced workforce.

Closing the gender pay gap. It’s somewhat astonishing that in 2017, female employees in the US are still paid measurably less than men for the same work. Although this is a chronic issue, companies can use data and structured steps to address it. For example, they can conduct company-wide reviews to ensure that people in equivalent roles are on the same pay scales, and they can eliminate salary negotiations, which research by Catalyst suggests can disproportionately benefit men and perpetuate pay disparities. Ultimately, taking intentional, corrective action is the surest way to ensure that all employees will be paid fairly for their work.

Creating networking opportunities for women. Companies should also consider actively supporting

networking forums—for example, employee resource groups—for women. Such groups enable women to connect on a wide scale, particularly when they are significantly outnumbered at an organization or work in far-flung locations. Networking forums can facilitate women’s coming together, sharing experiences, and identifying role models who they might not otherwise encounter. When done well, networking forums create a strong sense of affiliation and improve retention of women in middle management.

Involving men as gender diversity champions. The data on this point is incontrovertible: the more that men are involved in a gender diversity program, the more progress the company makes. Men dominate the leadership teams at most companies, and if they don’t buy in, nothing will change.

Offering executive coaching. Women value executive coaching, particularly at key inflection points in their careers. Such relatively small investments can put women on a stronger career trajectory and set them up for future leadership, ultimately yielding a high return. Furthermore, these investments send a clear signal to highperforming women that the company values them, increasing their confidence in themselves and convincing them that they are able to take on more ambitious career goals.

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If middle managers do not support gender diversity, it simply will not happen, no matter what the CEO says.

Proven measures

Female employees and senior leaders deem the following proven measures effective:

Showing strong CEO leadership and having middle management at all levels invested in the change.  Among the executives BCG interviewed, a staggering 73% cited CEO leadership as one of the top priorities for improving gender diversity. It is crucial also for middle management to be invested in the change. Our research found that middle managers tend to be more resistant. On average, they are 5 percentage points less willing to change their behaviors to further gender diversity than are senior managers. Yet middle managers have a far more direct impact on the day-to-day experience of female employees. If middle managers do not support gender diversity, it simply will not happen, no matter what the CEO says.

Tracking progress with KPIs and metrics and linking real consequences to performance evaluations. Companies need to carefully select meaningful diversity metrics to gauge their progress. Even better, linking progress on these metrics to performance evaluations helps give real teeth to diversity efforts. However, metrics that become quotas regarding the number of women at the company or in a particular role can be polarizing, and the employees and leaders surveyed considered them to be among the most controversial interventions.

Highlighting senior leaders as visible role models. A second proven measure is making sure that the company has senior people who can serve as visible role models to women at lower levels. Role models can help women see a clear, feasible path to the C-suite. Notably, senior men—for example, male leaders who have climbed to the top while balancing significant non-work responsibilities or men who are part of a dual-career household and are seen to juggle family life and work effectively—can be just as inspiring as senior women.

Matching career sponsors with high-potential women. Sponsorship programs—in which the company identifies promising women and matches them with senior leaders who can advocate for their promotions, team assignments, and training and development—generate results. And the absence of such programs can hurt.

To achieve meaningful gains, sponsorship requires strong and systematic processes involving sponsors who are willing to go the extra mile—and stick their necks out—to ensure that talented women advance through the organization.

Creating robust antidiscrimination policies that make a clear value statement to staff.  Antidiscrimination policies may seem like baseline measures, but establishing them provides company leaders with the opportunity to take a public stand and clearly signal their commitment to gender diversity. Companies that go beyond the basics, drafting a strong and clear message, and then educating their employees on the policy and what it means, can revamp their culture.

In Step with a Winner

This Four Under Forty Award recipient has found success by doing what he says he will do and providing his clients with the highest level of service.

NAIFA member, Gregory K. Large, CLU, ChFC, CLTC, has done quite well for himself since winning Advisor Today’s Four Under Forty Award several years ago. He is now Managing Partner of Lenox Advisors, Inc., a wealth-management firm with custom solutions that integrate the financial needs of high-net-worth individuals, their families, and corporate clients.

We recently caught up with Large, who shared some of the challenges he encountered early in his career, how he managed to overcome those challenges, and some helpful hints for moving to the top.

Advisor Today: What motivated you to work in this industry?

Gregory Large: My motivation was twofold. The opportunity to work in an industry in which your reward reflects your efforts was important to me. But, more importantly, I wanted to have a better understanding of what my family didn’t have. I lost my father when I was 17-years-old, which left our family to deal with a difficult financial position, while also dealing with the loss. I wanted to understand what the industry was capable of so that I could help other families avoid what I went through myself.

AT: What were some of the biggest obstacles you faced initially?

Large: The biggest obstacle I faced initially was the plain, simple fact that there was inconsistent income in the early years. I had to work two jobs and use my credit card as financing in certain months when it was difficult for me to close business. Those early years were really a struggle. But that challenge created a foundation of appreciation in me and drove my fiscal responsibility, which would eventually lead me to make smart decisions in my career and planning for the future.

AT: Did these obstacles ever make you consider leaving the industry? If so, was there a turning point that inspired you to stay?

Large: Yes, absolutely. There were difficult times in the early years. I would wake up some nights thinking: “I should just get a job and a consistent paycheck.”

A memorable turning point was when one of my colleagues, a mentor to me, was diagnosed with Lymphoma. I saw him suffer for over 15 months before eventually succumbing. That experience changed my outlook. It made me really appreciate the positive impact our industry can have and how important our role can, and should be, in helping individuals be responsible and take care of themselves and the people they love.

AT: What additional knowledge have you gained since winning the Four Under Forty Award?

Large: I’ve gained significant experience in navigating the complexity and challenges of growing a business.

I’ve learned how important it is to surround yourself with people who are equally motivated and smarter than you are. Your experience and the people around you will ensure you can build and grow your practice the way you want, and be able to enjoy the fruits of your success together.

AT: Why is being a NAIFA member important to you?

Large: It’s important that we give back, and support each other and our industry. My NAIFA membership provided me with that support when I was just getting started, and it’s important that we each pay that forward.

Our industry is constantly scrutinized and criticized. NAIFA helps ensure that we have a platform together to communicate and demonstrate our positive role and impactful responsibility. Together, we are able to share our best practices and best ideas to better run our businesses and care for our clients.

NAIFA also provides representation at a national level to ensure that our industry and unique value propositions are not negatively impacted by legislative change.

AT: What do you value the most when working with a client?

Large: I value the relationship. I value each client’s trust. I truly appreciate listening to my client and being given the opportunity to care for them, their families and their future. The act of recommending financial solutions is important, but it’s secondary to being an advisor and simply listening to my clients.

AT: What do your clients say is your greatest strength?

Large: My clients point out my consistency—the consistent act of doing what I say, following through, and providing the best level of service and advice that I can.

AT: Any advice for young advisors just starting out?

Large: Know that your practice has to have an equal focus on service and sales, not just sales. They are equally important. Don’t miss that opportunity. It will serve you and your clients well and lead to deeper, more prosperous, relationships with clients over your working relationship.

practice specialties | financial planning

A charitable annuity-arbitrage strategy can provide many benefits to your clients and their charities.

By Aaron Hodari, CFP, CIMA

Credit: ©ISTOCK.COM/LEYLAYNR

Ordinarily, individuals who make charitable gifts at death, referred to as “testamentary gifts,” receive a federal estate-tax deduction for the amount that passes to charity, but they do not receive any income-tax benefit. Oftentimes, people who opt for this form of charitable giving do so because they are not yet prepared to part with all personal benefit from the assets they plan to donate.

However, by using an annuity arbitrage strategy, older clients (generally, ages 65 to 85) who intend to make specified testamentary gifts can effectively have their cake and eat it too – through the receipt of an income-tax benefit during their lifetimes while their favorite charities benefit at death.

Moreover, the annuity-arbitrage strategy can produce a very attractive net return on the funds committed to the plan – a return that can outperform fixed-income alternatives and exceed the results that one might obtain through a charitable gift annuity.

How it works

An annuity arbitrage involves the purchase of two separate insurance products on the life of the same insured. One of the products purchased is a single premium immediate annuity (SPIA),1 which is an annuity under which the insured makes a single large premium payment to the insurance carrier in exchange for the right to receive back level (usually annual) payments for the remainder of his or her lifetime.

Upon death, the annuity terminates and the insurance carrier is not required to make any further payments. The amount of the annuity payment is generally much higher than the payment one would ordinarily receive on a fixed-income investment in order to compensate the insured for the fact that the annuity terminates at his or her death – with no further benefit to the insured’s family.

Purchasing an SPIA on its own carries a considerable amount of risk because an early demise could result in the insured having received far less in annuity payments than was paid for the initial contract.

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A charitable annuity arbitrage offers donors an attractive annual-net return on the funds committed to the strategy and offers their favored charity the desired benefit at death.

To offset this risk of loss, the annuity-arbitrage strategy also involves the purchase of a guaranteed universal life insurance policy, designed to require level annual premiums until the death of the insured. Paired together, the SPIA and the insurance policy act as a perfect complement to each other – with the SPIA providing high annual

payments during the insured’s lifetime and the insurance policy covering the loss of principal at the insured’s death.

By taking advantage of differing underwriting assumptions between the carrier that offers the annuity and the carrier that offers the life insurance policy, it is often possible to find a spread between the annual-annuity payment and the annual life insurance premium that exceeds corporate and government bond rates.

In a standard annuity arbitrage, the insured might own both the SPIA and the life insurance policy (or the life insurance policy might be held in an irrevocable trust for the benefit of the insured’s children). In the charitable version of this strategy, the annuity is owned by the donor and the life insurance policy is owned by the charitable organization.

Beginning the transaction

To begin the transaction, the charitable organization applies for a life insurance policy with a death benefit that is equal to the amount that the insured desires to transfer to the charity at death. At the same time, the donor applies for an SPIA that requires a single premium equal to the difference between the death benefit on the life insurance policy and the life insurance policy’s annual premium.

When both policies are approved and issued, the donor funds the SPIA with the scheduled single premium and makes a tax-deductible contribution to the charity in the amount of the annual life insurance premium. Each year, the donor will use a portion of his or her annual annuity payment to make another donation to the charity in the amount of the life insurance premium, and will keep the difference. The annual SPIA payment is tax- favored because the IRS considers a large portion of the payment to be “return of principal.” Not until the principal has been deemed fully returned does the entire SPIA payment become taxable.

The return to the donor is the amount by which the annuity payment exceeds the life insurance premium after income taxes on the SPIA payment and the income tax deduction associated with the charitable contribution of the life insurance premium have been taken into account.

Overall, a charitable annuity arbitrage can provide donors with a very attractive annual net return on the funds committed to the strategy, while providing their favored charity with the desired benefit at death.

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Aaron Hodari, CFP, CIMA, is managing director with Schechter Wealth Strategies.

1 Single premium immediate annuities generally make fixed payments over the life of the insured. Payments, which consist of pri ncipal and interest, are typically not adjusted for inflation so the buying power of the payments issued may erode over time. Please note the decision to annuitiz e is irrevocable, and principal cannot be withdrawn at a rate greater than the contracted payout rate. All guarantees are subject to the claims paying ability of the issuing insurance company.

Working With Clients to Develop an Effective Gifting

A well-developed philanthropy plan should be a core part of your client’s overall financial plan.

By Andrew Crowell

Credit: ©ISTOCK.COM/ZHAOJIANKANG

As the calendar year begins to wind down, many investors start to think about charitable donations and yearend gifting. The horrific devastation wrought by hurricanes Harvey and Irma has even further highlighted attention on timely charitable giving.

All too often, however, the busyness of life gets in the way of thoughtful gift planning, and donations are rushed at the last minute simply to meet a tax deadline instead of being strategically planned to maximize both the deduction and philanthropic benefits of the gift. For clients with philanthropic priorities and interests, a welldeveloped philanthropy plan should be a core part of their overall financial plan.

Clarifying priorities

The gift-planning process itself can be a tremendously rewarding exercise. Whether done as a family or individual, clarifying the purpose, importance timing and type of philanthropic priorities can be extremely meaningful. What types of causes or organizations are important to the individual or family? Are there specific programs within those entities of particular interest, or do they just support the general work? Do they wish to be personally involved with the organization or the spending oversight? Do they have the desire or ability to begin donating now, or will their gifts be posthumous? Do they want recognition for their gift or do they wish to remain anonymous?

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A charitable lead trust can be an efficient way to help a charity and transfer assets for estate- and gift-tax purposes.

Identifying goals and purposes

These are just some of the many important questions that should be addressed as part of a philanthropy program. Identifying the goals and purposes behind the philanthropy first enables a more specific discussion of the types of assets and techniques that are the most appropriate.

Gifting highly appreciated assets like shares of stock rather than simply giving cash can accomplish multiple objectives, including avoiding capital-gains taxes, rebalancing an investment portfolio and supporting a worthwhile organization.

• Holders of an IRA account who have attained mandatory distribution age of 70½ but do not need or want to take the annual taxable income can consider a Qualified Charitable Distribution (QCD). Made permanent in late 2015, this provision allows an IRA holder to make a direct gift from an IRA to a charity. The distribution can be used to fulfill the required minimum distribution (RMD) and help the charity, but this contribution does not also count as an itemized deduction.

• Does your client want to help a charity and also still need income? In this instance, a strategy like a charitable gift annuity or a charitable remainder trust may be appropriate. Both of these techniques generate income for the donor and leave what’s left in the trust to a charity upon the donor’s passing.

• Alternatively, perhaps your client wishes to reduce taxable income and still desires to support their favorite cause while also efficiently transferring valuable assets to their heirs. A charitable lead trust (CLT) can help accomplish these multiple objectives. A CLT is a charitable giving vehicle that makes lead payments to a charity for a term of years or the donor’s lifetime and then pays the remainder of the trust to one or more persons, typically family members of family trusts.

The legal and tax nuances surrounding CLTs are quite complicated; so expert counsel should be sought from a CPA or a tax expert in order for you to be able to thoroughly explain the benefits and/or drawbacks to your client. Properly planned and executed, a CLT can be an efficient way to help a charity while also transferring assets for estate and gift-tax purposes.

• Perhaps your client’s goal is to donate a portion of what’s left of a personal estate after death. In this instance, a bequest or designating a charity as the beneficiary of your IRA may be worth considering.

Tax reform under debate in Washington has led to uncertainties surrounding the future of personal income-tax rates and possible limits on itemized deductions. There has been increased interest in donor-advised funds and private foundations as giving vehicles.

Assuming a new tax plan lowers the top federal tax rate beginning in 2018, this could make 2017 potentially more attractive for taking deductions rather than waiting. Further, tax-free distributions from an estate to a private foundation may be eliminated entirely under the new plan.

Additionally, one can make a compelling case that while interest rates are low but expected to rise over time (and by extension the IRS “7520 rates,” which are used to value annuities and the deduction value of many types of charitable gifts), there are many compelling reasons for advisors to start speaking with clients to revisit or begin their philanthropy planning now.

<Bio box:>

Andrew Crowell is vice chairman of D.A. Davidson & Co.’s Individual Investor Group.

Information contained herein is from sources we consider reliable, but is not guaranteed, and we are not soliciting action based upon it. The opinions expressed are those of the author, based on interpretation of data available at the time of publication of this article, and do not constitute tax advice. Investors should consult their financial and/or tax advisor before implementing any investment plan

Young Consumers Show Interest in Actively Managed Investment Products

They appear to hold the key to the next generation of managed products.

By Ayo Mseka

Credit: ©ISTOCK.COM/EASY_COMPANY

As mutual funds continue to decline, falling from 63 percent of U.S. households owning them in 2010 to 39 percent in 2017, asset allocation and passive investment remain market darlings. However, two overlooked consumer groups, younger consumers and more experienced investors, and their views of products, promise to shake up this orthodoxy. This offers a silver lining to product managers, according to research by Hearts & Wallets, the source for retail investor data and insights.

Two reports, “Investment Products & Asset Managers,” and “Active vs. Passive and Impact Investing,” provide insights into developing and marketing investment products. The reports offer ideas on consumer attitudes and behaviors drawn from the over 40,000 U.S. households in the Investor Quantitative Database (IQDB), a sample size with unparalleled certainty, according to the survey. Younger consumers – and their growing awareness of the financial products they own and the firms that create them – are signaling a receptivity to packaged and actively managed products. Experience is another factor that can change attitudes about active and passive management for all life stages

Product vs. asset awareness

These trends come as product relevance has struggled. The emphasis of asset allocation over the branded mutual funds has caused consumer awareness of investment products to decline, while awareness of asset allocation has increased. In 2011, for example, 80 percent of households with assets were able to say what investment products they own, but by 2015, only 65 percent were. In contrast, 82 percent of consumers can answer questions about their asset allocation.

2017 marks an uptick in product awareness, but only among young consumers. In 2017, 83 percent of emerging (ages 21 to 27) and 80 percent of early career (ages 28 to 39) can name the investment products they own, up from 62 percent and 65 percent respectively. Yet awareness of investment products among the coveted late career (ages 53 to 64) baby boomers continues to decline, falling to 68 percent in 2017 from 84 percent in 2010, as asset allocation and goals-based wealth management approaches have replaced branded mutual funds. Among younger consumers 40 percent prefer packaged products to assembling component investments, the highest of any life

stage. Younger consumers hold the key to the next generation of managed products, according to the survey.

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Education is the impact area that motivates younger investors the most.

“Most mutual fund companies continue to want to target richer, older consumers,” Laura Varas, CEO and founder of Hearts & Wallets, said. “But older, richer consumers prefer to assemble components, either with an advisor or by themselves. They’re just not looking for packaged products, so targeting them is like selling ice skates to people who live in the tropics. The completely greenfield opportunity is to look at the unmet emotional and practical consumer needs to create products that solve real problems.

“This is where the so-called ‘robos’ have focused,” Varas continued. “Young people have a lot of wants and problems and few solutions. So, there’s a great opportunity to reinvent managed products for younger consumers who already have higher brand awareness for products. There is this awakening that the manager behind the funds and the market cycle may indeed matter.”

One in four younger investors are open to putting more money in active funds. One in three experienced investors believe active management can add value, especially in down markets. Experience has a bigger impact on investing attitudes than assets. About one third of experienced investors strongly believe that active management is more effective than indexing in limiting downside and can provide better returns, while less than 20 percent of investors with $2 million or more believe this.

High cash, impact investing

A larger percentage of younger investors are not only receptive to managed products, they also have large concentrations of cash, giving them the immediate ability to act on their preferences. The average early-career household now has 57 percent in cash, as cash concentrations are also increasing among mid- and late-career households. Younger investors are also the most receptive to impact investing with 70 percent of millennials including impact investing as one of their investment goals. Education is the impact area that motivates younger investors the most.

“Packaged products are a great way to scale advice, especially for younger consumers who are receptive to this structure,” said Amber Katris, Hearts & Wallets research subject matter expert. “Younger consumers are looking for ways to build wealth. They currently have fewer equity funds and more bond funds and need to understand the long-term implications of this asset allocation. Younger consumers are receptive to products that do good, as long as they also perform.”

Varas stressed that consumers want to participate in their investing decisions.

“As a former manager of products ranging from 110 equity mutual funds to consumer products, I’ve been puzzled to watch investment product manufacturers cede consumer awareness and becoming more commoditylike,” Varas said. “Consumers want to be engaged in selecting their investments whether on their own or with a trusted advisor and that’s increasing because of technology, concerns about pricing and potential conflicts of interest. The awareness-consideration-trial-purchase cycle begins with awareness, no matter who influences the ultimate purchase. This is a board-level issue for asset managers. Building a consumer-relevant brand is not for every company, but increasing consumer relevance and negotiating power can maximize profits longer-term.”

Call for Excellence

The John Newton Russell Legacy

Outstanding Character, Dedication to the Profession, Meritorious Service

Do you know anyone who possesses these outstanding qualities? If you do, now is the time to submit his or her name for the John Newton Russell Memorial Award. This is the industry’s highest honor.

In 1945, John Henry Russell provided the original endowment to establish this prestigious award to honor his father, John Newton Russell. A staunch proponent of informed, ethical marketing practices, Russell was agency manager for Pacific Mutual. He served as president of NALU (now NAIFA) during World War I and was one of the incorporators of The American College of Life Underwriters. His high standards are perpetuated in this award, which seeks to recognize someone with outstanding personal qualities, unstinting loyalty to the business and exemplary leadership.

Eligibility requirements

The award program is open to anyone you believe is highly qualified, and exhibits the character, leadership qualities, contributions to the profession and American families exemplified by John Newton Russell. Any member of a NAIFA local association is eligible to

nominate a worthy candidate. Nominees must be insurance and/or financial-services professionals. Standards for consideration are extraordinarily high. The characteristics of past recipients have included unwavering loyalty and a high level of professional accomplishment and community service.

How to apply

Whe n you send in your nomination, provide the award selection committee with sufficient information about your nominee and explain the basis for putting forward the person you chose. Nominations will be accepted through March 1, 2018. Your nomination contains the only information the selection committee will have as a basis for their decision, so please be thorough in your description.

The 2018 recipient will be announced in early May and will be honored at the NAIFA Performance + Purpose Conference in San Antonio, Texas, in September 2018.

Follow the instructions of the application form on the next page and submit it by the deadline indicated. Membership in your local association is required for participation in the award program.

The 2018 John Newton Russell Memorial Award Selection Committee

Juli Y. McNeely, LUTCF, CFP, CLU Chair

Joseph M. Belth, CLU

2017 John Newton Russell Honoree

D. Scott Brennan

2016 John Newton Russell Honoree

Peter C. Browne, LUTCF

2015 John Newton Russell Honoree

Paul R. Dougherty, LUTCF, FSS, HIA

Immediate Past President, NAIFA

Jules O. Gaudreau, Jr., ChFC, CIC Second Past President, NAIFA

David A. Culley, CLU, ChFC AALU Liaison

Gov. Dirk A. Kempthorne ACLI Liaison

Robert R. Johnson, Ph.D, CFA, CAIA

The American College Liaison

Mark A. Bonnett GAMA Liaison

Pat Wedeking LIFE Liaison

James Aussem, JD, AEP SFSP Liaison

James D. Pittman, CLU, CFP, CLTC MDRT Liaison

Robert A. Kerzner, CLU, ChFC LIMRA Liaison

Kevin M. Mayeux, CAE Secretary

Recommendation

for the 2018 JOHN NEWTON RUSSELL MEMORIAL AWARD

Recommendation

In my opinion, the following living person has rendered service to the institution of life insurance which, viewed in retrospect, is so outstanding and beyond the call of duty as to merit consideration for the John Newton Russell Memorial Award.

Name _____________________________________________________________________________________

Volunteer position __________________________________________________________________________

Address ___________________________________________________________________________________

Phone number and email ____________________________________________________________________

Supporting Data

On a separate sheet of paper, in 500 to 800 words, give a biographical sketch of your candidate, listing the individual’s industry and civic accomplishments and honors received. Please indicate the specific accomplishments that, in your opinion, demonstrate that your nominee deserves the award.

Nominator _________________________________________________________________________________

Volunteer position __________________________________________________________________________

Address ___________________________________________________________________________________

Phone number and email _____________________________________________________________________

Mail this form to:

John Newton Russell Award Committee

c/o Executive Office

National Association of Insurance and Financial Advisors

2901 Telestar Court

Falls Church, VA 22042-1205

Supporting data must accompany the nomination. Deadline: March 1, 2018.

product spotlight | critical illness insurance

Using CI Insurance as Part of a Well-Rounded Protection Strategy

It’s most powerful when used in conjunction with other products that provide solutions to complications that arise with the diagnosis of an illness.

By Ross Vanderwolf, CFP

Credit: ©ISTOCK.COM/SUDOK1

Financial advisors can leverage critical illness (CI) insurance products as powerful tools in the overall strategy they use to protect their clients from the financial complications that come with the diagnosis of a debilitating disease. This niche product continues to grow in popularity in Australia and is considered essential despite market shifts that complicate advisors’ sales strategies and clients’ ability to qualify for competitive premiums. Products have changed in response to mergers in the industry, increases in prevalent diseases and health-care costs. The result is a confusing and challenging landscape to navigate.

CI insurance is most effective when it is combined with other products, such as life insurance, income protection and total or permanent disability income insurance, to create a safety net that covers the client from multiple angles. Just as those products protect families in case of lost life, job or physical ability, trauma insurance helps protect against the financial burden of an illness. A variety of costs may arise, and the policy payout can be used to offset them.

Policies boast blanket coverage against life threatening illnesses and lump-sum payout upon diagnosis; so there is no discrimination or technicalities. With changes in the marketplace and a high number of policy payouts for exceedingly common types of cancer, policies now require stricter health screenings. Clients are screened for family or personal histories which, if present, can make underwriting tougher; some policies now enact strict exclusionary policies or have prohibitively high premiums. It’s important for clients to secure coverage as soon as possible, especially when age and health reduce their chances to qualify.

Sales tactics for CI insurance

The first step in selling CI insurance is to explain the potential financial burden that clients may face upon diagnosis. Identify what needs would arise and roughly how much it would take to fund those needs. Often, our clients are unable to perform their roles once they’re diagnosed and begin treatment. Some may wish to pay off their mortgage while others may want to hire help around the house, pay bills, etc. Some may anticipate higher

medical bills than they can afford. With cash on hand, families have more flexibility to secure needed services, pay bills, run a household and cover their families’ needs. Because the policy prevents a financial emergency from occurring, it safeguards clients’ financial livelihood and investments.

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Because CI insurance offers a powerful protection against financial loss, failure to advise clients about it is a potential liability.

Compliance and regulation often drive advisors through the sales process, as a way to protect their practice. Because CI insurance offers a powerful protection against financial loss, failure to advise clients is a potential liability. It’s best to educate clients on the benefits of the product, how it would help them and potential scenarios they may face after a diagnosis. Advisors make a sale if they are interested, and clients can sign a waiver if they wish to deny coverage. If clients are unfortunately diagnosed with a covered disease, they may sue you for malpractice. With proof they were educated about the risks but chose to deny coverage, you’re able to protect yourself.

Trends and challenges

The Australian insurance market is small and is home to few policy underwriters. While competition in the market is strong, international mergers and consolidations have, and will continue, to change the number and types of products offered overall and in the critical illness specialty.

Fluctuating policy costs bring an added level of uncertainty for advisors. CI insurance policies are offered on a term structure, rather than permanent. Premiums increase along with age and health issues. Although medical advancements help people live longer lives, they’re still at risk for serious illnesses and trauma. After age 50, premiums become increasingly expensive as health generally deteriorates. It’s never guaranteed that clients will continue to carry the same level of protection in the face of escalating coverage costs.

Like any insurance product, CI insurance is not a universal magic pill for clients’ financial-protection strategy. It’s most powerful when used in conjunction with other products and policies and designed to provide a solution to complications that will arise with illness diagnoses. Help your clients understand their needs, and together, you can help protect their family.

<Bio box:>

Ross Vanderwolf, CFP, of Fortitude Valley, Queensland, Australia, is the first vice president of MDRT. He is a 30-year MDRT member with nine Court of the Table and seven Top of the Table qualifications. A 36-year industry veteran, Vanderwolf is managing director of Rothgard Financial Partners, a full-service financial-planning practice. He has been recognized as one of Australia’s Most Trusted Financial Advisers since this designation’s inception in 2014.

product spotlight | long-term-care insurance

Optimum Long-Term-Care Planning

This type of planning makes long-term-care protection more affordable for many clients.

By James G. Blase, CPA, JD, LLM

Credit:

©ISTOCK.COM/ BOWDENIMAGES

The professional community consisting of financial and tax advisors must work together to develop strategies to make long-term-care (LTC) protection more affordable for clients who plan to live into their 80s, 90s and beyond. Taking this important step will help solve the upcoming and inevitable long-term-care crisis.

For a healthy 61-year old male, about $4,000 per year can purchase $250 worth of daily coverage (or $90,000 a year, in today’s dollars), with a 5-year benefit duration, and a 3% compound inflation feature. At age 90, the total five-year available tax-free long-term-care benefit would exceed $1,000,000. What is more, the policy would include all of the benefits of a “partnership program” policy. Now let’s analyze the significant benefits this plan affords.

First, the $4,000 premium is tax deductible, either fully, for a self-employed individual or a C corporation, or as an itemized deduction, otherwise.1 At just a 25% federal marginal income tax bracket, and ignoring potential state income tax benefits, the after-tax cost to the individual is just $3,000 a year for over $1 million of potential income tax-free long-term care coverage, spread out over five years (or over $200,000 a year, with the compound inflation feature), at age 90. Although of course premium rates could rise again in the future, these insurance benefits alone are nevertheless evident. $3,000 a year for over $1 million of income-tax-free long-term care protection at age 90 sounds pretty good.

Second, because this plan involves a partnership program policy, this means that if $1 million of insurance protection is afforded under the policy, a like $1 million of the insured’s assets will not be considered a resource for Medicaid-qualifying purposes, should the insured outlive the policy’s coverage. This principal aspect of the partnership program provides a singular benefit that planning with hybrid life insurance/LTC policies cannot achieve, because it allows an individual with, for example, a $1 million IRA, the ability to forego having to liquidate the IRA and pay significant income taxes, in order to transfer the net amount to his or her children in an effort to qualify for Medicaid if the insured should outlive the policy’s coverage.

Finally, remember that the benefits paid under any long-term-care insurance policy (partnership program or not, and whether in the traditional form or under a hybrid life insurance-LTC policy) are received by the insured income tax-free. This hugely beneficial feature of long-term care insurance will become even more significant if Congress eliminates the medical expense deduction, and thereby also eliminates the deduction for the current annual average $90,000 cost of long-term care not paid for with insurance.

Using Medicaid planning alone

Medicaid planning typically involves an individual making a decision to transfer the individual’s assets away to his or her children with the hope that long-term care will not be needed for at least five years, and therefore the individual will qualify for Medicaid to pay the cost of his or her long-term care, at that time. This so-called “5-year planning” carries with it three primary issues for the planner.

First, what is the best age to advise the individual to transfer all of his or her assets to the children? 70? 75? 80? 85? The dilemma is obvious. Transfer the assets away too soon, and the client must live for a long period in total reliance on his or her children. Transfer the assets away too late, and risk not satisfying the five-year waiting period.

Just as importantly, if we assume that a principal asset of most retired individuals is their IRA, the only way to transfer the same is by cashing it and transferring the after-tax proceeds to the children. Accelerating income taxes is obviously not something most individuals will want to do, especially when considering the significantly higher income tax bracket this is likely to place them in.

Finally, most individuals will prefer in-home care to institutional care, for as long as possible. Relying exclusively on 5-year planning, without an insurance element, obviously seriously limits the individual’s options in this regard. 2

The optimum plan

The optimum long-term-care plan solves all of the issues associated with 5-year planning alone by combining the benefits of a long-term-care partnership plan, 5-year planning, and sound tax planning. Here is how it works:

By purchasing a traditional partnership program LTC policy designed to provide five years’ worth of protection, the individual does not need to consider transferring assets to his or her children until he or she actually needs long-term care. At this point most individuals are more willing to make the transfers, since their need for the assets diminishes. They can even transfer their home to their children and still retain the right to live there, since this retained right does not constitute a resource or income available to the individuals for Medicaidqualifying purposes.

Most important is the fact that, based on the above set of facts, and utilizing a partnership program plan LTC insurance policy, the individual is able to retain an IRA valued at $1 million or more, without having to liquidate the same and pay substantial income taxes. What a huge tax benefit to the individual and his or her family, over traditional 5-year planning! The individual may then also be able to utilize the IRA or other assets to help supplement what Medicaid pays, e.g., to pay the additional cost for a private room versus a semi-private room.

Once the assets other than the IRA are transferred, the five-year clock begins ticking. After five years of longterm care provided for by the LTC insurance/partnership program policy (all or a portion of which can be in the home), the situation for most individuals will be more amenable to institutional care; so, they can then apply for Medicaid. There is no need to purchase a policy that includes a benefit payable beyond five years, which will result in a significant cost saving for the individual and his or her family.

The individual has now essentially achieved full long-term-care protection, for life, for the cost of the annual premium on a traditional, partnership program LTC insurance policy paying out a five-year benefit at the estimated full future cost of care, all while retaining his or her IRA and the right to live in his or her home.

Using hybrid long-term-care plans

Although not tax deductible, the newer forms of hybrid, LTC/life insurance policies assure the client and his or her family an aggregate life and/or LTC benefit at least equal to the premiums expended. The insured and/or his or her family is guaranteed the benefit designated in the policy, regardless of whether long-term care is ever needed. Hybrid policies are therefore said to provide more flexibility than traditional “stand alone” LTC insurance policies, because the insured’s premium dollars are not potentially wasted.

However, for the same (oftentimes tax deductible) premium dollar, a traditional partnership program LTC insurance policy will purchase substantially more long-term care insurance protection, and will include all of the above-described tax and Medicaid planning benefits associated with the partnership program. Put another way, a substantially lower premium (as compared to a hybrid policy) will purchase a like amount of long-term-care protection under a traditional partnership program LTC policy (and oftentimes on a tax-deductible basis), with the added tax and Medicaid planning benefits afforded under a partnership program policy.

When the coverage period of a hybrid policy runs its course, there is no Medicaid resource protection for the individual, as there is with a partnership program policy. In order for the individual to qualify for Medicaid benefits at that time, the individual would have had to transfer all of his or her assets away, five years earlier, and would have had to liquidate his or her entire IRA and pay substantial income taxes on the same. Especially when

viewed in this tax-disadvantaged light, the financial risk of opting for a hybrid type LTC insurance policy over a traditional, partnership program LTC insurance policy becomes significant.

It’s the client’s choice

Although on balance it can be argued that the benefits of optimum long-term-care planning outweigh the benefits of utilizing the newer forms of hybrid long-term- care/life insurance policies, it is ultimately the client’s decision to make. For example, in a particular client’s family history it may be rare that a family member has ever needed any significant long-term care, thus causing the client to understandably favor a hybrid policy over the traditional form of long-term-care protection.

The client may also understandably fear that future potential premium increases under a traditional LTC insurance policy outweigh all of the benefits of optimum long-term-care planning outlined in this article. Finally, it may be easier to qualify for a hybrid policy versus a traditional long-term-care policy. All of these factors are definitely relevant considerations.

The advisor’s role is merely to outline, in clear and plain terms, the pros and cons of optimum long-term-care planning utilizing a partnership program policy versus planning utilizing the newer forms of hybrid policies. The ultimate goal of each approach is the same: As outlined at the outset of this article, make long-term-care protection more affordable for the client, in order to help solve the upcoming and inevitable long-term-care crisis.

<Bio box:>

James G. Blase, CPA, JD, LLM, is Principal at Long-Term Care Advisors, LLC, in St. Louis. Contact him at 314-780-6562.

1 Remember that although an individual may not be able to make full use of a long-term care itemized deduction during his or her working years, during retirement the individual is much more likely to satisfy the 10% threshold for medical expense deductions, through a combination of lower income teamed with the increased costs associated with supplemental medical insurance premiums and out of pocket medical expenses. Note also that the premium deduction limitation is lower for individuals who are under age 61, and higher for individuals who are over age 70. Full or partial tax deductions utilizing a health savings account may also be available. Finally, remember that Congress may eventually choose to eliminate the medical expense deduction altogether and/or raise the standard deduction to a level where these deductions become moot for many itemizers.

2 Note that another potential concern is that the transfers will constitute taxable gifts for federal gift tax purposes, but with a lifetime gift tax exemption of $5.5 million today, this will not be an issue for most individuals.

product spotlight | employee benefits

Paid Family Leave

As workforces change, you might want to start counseling clients about PFL benefits.

By Terri Rhodes, MBA, CPDM, CCMP, and Breanna Scott

credit:

©ISTOCK.COM/RIDOFRANZ

With 2018 right around the corner, it’s time to start making your list of New Year’s resolutions. As you embark on a new year of sales and you set goals or resolutions, consider how you can be more consultative in your approach.

One way to do this is to become familiar with paid family leave (PFL) benefits, which have increased in popularity in 2017 and are building momentum for 2018. With New York State’s mandated program implementation date set for Jan. 1, 2018, it’s bound to be a top-of-mind offering for many clients at the start of the year.

To help prepare for your 2018 sales check-ins, here are a few key points you should understand about PFL and ways you can offer consultation to your clients.

What is PFL?

Most PFL programs offer job-protected time for employees to care for a sick or aging family member. Typically, these programs protect time for:

• Bonding time with a newborn or newly adopted child

• Caring for a family member (typically a parent, spouse, child) with a serious health condition

• Relieving family pressures when a family member is called to active military service

• An employee’s own serious illness

A common question you may receive from clients is: Are PFL and paid parental leave benefits the same? The answer is no. Paid parental leave is typically only for new mothers, fathers and adoptive parents to bond with a child. While this is the simple overview of PFL, the details and statutory regulations are more complex.

The PFL benefits conversation

The topic of PFL is trending at the national and state levels. The proposed Family and Medical Insurance Leave (FAMILY) Act would create a nationally mandated PFL program requiring employers to provide eligible workers up to 12 weeks of partial income replacement for qualifying events. However, it will take time for this policy to go through various stages of the legislative process and the final outcome is hard to predict. For now, it’s best to focus your attention on the individual states your clients operate in and their statutory mandates.

Currently, New Jersey, Rhode Island and California have implemented state-mandated programs, and New York, Washington State and the District of Columbia have passed legislation. It’s important to note some statutory PFL programs have varying definitions of who qualifies as a close relative; regulations for how the program can be funded; and stipulations for determining if disability benefits can work in conjunction with the program.

For the states that don’t mandate PFL programs, some employers are taking it upon themselves to proactively incorporate PFL policies into their employee- benefits programs. A recent survey conducted by Standard Insurance Company and the Disability Management Employer Coalition (DMEC) shows that 74 percent of employers hope to offer PFL coverage within the next five years.1 A potential reason for this uptick is that many clients are recognizing how PFL benefits can help better meet the changing needs of today’s diverse workforce.

The American family is evolving, and as there are fewer stay-at-home parents today than in previous generations, the need for paid time off to address family caregiving responsibilities is growing. 2 As clients look to recruit new talent or adapt to stay competitive within their respective industries, PFL programs can catch the attention of individuals in the sandwich and Baby Boomer generations who are caring for ill parents, spouses or children. It also can be an appealing benefit for Millennials who are starting families.

Offering consultative help

Now that you understand PFL and why clients are proactively working to offer this benefit, it’s time to learn how you can take a seat at the table. There are two key areas where you can help counsel clients.

Help clients think big-picture when considering providing PFL. If your clients are considering whether adding PFL benefits to their plan is right for their organization, walk them through these four questions:

Do their competitors offer PFL coverage or is it a novelty in their industry?

What are the demographics and needs of their workforce?

Would a program like this complement their company culture or offerings?

Do they have any employees based out of state where PFL is statutorily required?

Take charge of monitoring and providing statutory updates. If your clients already offer PFL in a state that is passing mandated legislation, help them review their program holistically to determine if their current plan meets statutory requirements. Proactively taking the lead on monitoring new regulations passed and offering recommendations on how to remain compliant could be a huge value-add for your clients.

As workforces continue to become more multigenerational and the battle for top talent continues, counseling clients on PFL benefits is something you’ll want to take advantage of in your 2018 sales. Although it’s hard to predict what 2018 has in store for you and your clients, the more you start preparing for sales conversations now, the better off you can be when the New Year arrives.

<Bio box:>

Terri Rhodes, MBA, CPDM, CCMP, is the CEO of the Disability Management Employer Coalition, with extensive knowledge in all aspects of absence and disability program management. She has more than 25 years working for some of the most progressive companies designing and managing absence programs.

Breanna Scott, product and service management director with Standard Insurance Company, guides the strategic development of its product portfolio, including market analysis and product positioning. She leads the group insurance product team responsible for creating and refining its employee benefits and voluntary product and service offerings.

1 Watch the Webinar: Get Ready: Paid Family Leaves Are Coming, Standard Insurance Company, 2017, video citation at 17 minutes a nd 16 seconds, https:// www.standard.com/employer/insurance/paid-family-leave/get-ready-paid-family-leaves-are-coming

2 The American family today, Pew Research Center, December 17, 2015, http://www.pewsocialtrends.org/2015/12/17/1-the-american-family-today/

Taking the lead on monitoring new regulations and recommending how to remain compliant could be a value-added benefit for your clients.

product spotlight | employee benefits

Growing Your Employee-Benefits Sales

As workforces change, consider counseling clients about PFL benefits.

By Terri Rhodes, MBA, CPDM, CCMP and Breanna Scott

Credit: ©ISTOCK.COM/SSSTEP

With 2018 right around the corner, it’s time to start making your list of New Year’s resolutions. As you embark on a new year of sales and you set goals or resolutions, consider how you can be more consultative in your approach.

One way to do this is to become familiar with paid family leave (PFL) benefits, which have increased in popularity in 2017 and are building momentum for 2018. With New York State’s mandated program implementation date set for Jan. 1, 2018, it’s bound to be a top-of-mind offering for many clients at the start of the year.

To help prepare for your 2018 sales check-ins, here are a few key points you should understand about PFL and ways you can offer consultation to your clients.

What is PFL?

Most PFL programs offer job-protected time for employees to care for a sick or aging family member. Typically, these programs protect time for:

Bonding time with a newborn or newly adopted child

Caring for a family member (typically a parent, spouse, child) with a serious health condition

Relieving family pressures when a family member is called to active military service

An employee’s own serious illness

A common question you may receive from clients is: Are PFL and paid parental leave benefits the same? The answer is no. Paid parental leave is typically only for new mothers, fathers and adoptive parents to bond with a child. While this is the simple overview of PFL, the details and statutory regulations are more complex.

The PFL benefits conversation

The topic of PFL is trending at the national and state levels. The proposed Family and Medical Insurance Leave (FAMILY) Act would create a nationally mandated PFL program requiring employers to provide eligible workers up to 12 weeks of partial income replacement for qualifying events. However, it will take time for this policy to go through various stages of the legislative process, and the final outcome is hard to predict. For now, it’s best to focus your attention on the individual states your clients operate in and their statutory mandates.

Currently, New Jersey, Rhode Island and California have implemented state-mandated programs, and New York, Washington state and the District of Columbia have passed legislation. It’s important to note some statutory PFL programs have varying definitions of who qualifies as a close relative; regulations for how the program can be funded; and stipulations for determining if disability benefits can work in conjunction with the program.

<insert pull quote:>

Taking the lead on monitoring new regulations and recommending how to remain compliant could be a value-added benefit for your clients.

For the states that don’t mandate PFL programs, some employers are taking it upon themselves to proactively incorporate PFL policies into their employee- benefits programs. A recent survey conducted by Standard Insurance Company and the Disability Management Employer Coalition (DMEC) shows that 74 percent of employers hope to offer PFL coverage within the next five years.1 A potential reason for this uptick is that many clients are recognizing how PFL benefits can help better meet the changing needs of today’s diverse workforce.

The American family is evolving, and as there are fewer stay-at-home parents today than in previous generations, the need for paid time off to address family caregiving responsibilities is growing.2 As clients look to recruit new talent or adapt to stay competitive within their respective industries, PFL programs can catch the attention of individuals in the sandwich and baby boomer generations who are caring for ill parents, spouses or children. It also can be an appealing benefit for millennials who are starting families.

Offering consultative help

Now that you understand PFL and why clients are proactively working to offer this benefit, it’s time to learn how you can take a seat at the table. There are two key areas where you can help counsel clients.

Help clients think big-picture when considering providing PFL. If your clients are considering whether adding PFL benefits to their plan is right for their organization, walk them through these four questions:

Do their competitors offer PFL coverage or is it a novelty in their industry?

What are the demographics and needs of their workforce?

Would a program like this complement their company culture or offerings?

Do they have any employees based out of state where PFL is statutorily required?

Take charge of monitoring and providing statutory updates. If your clients already offer PFL in a state that is passing mandated legislation, help them review their program holistically to determine if their current plan meets statutory requirements. Proactively taking the lead on monitoring new regulations passed and offering recommendations on how to remain compliant could be a huge value-add for your clients.

As workforces continue to become more multigenerational and the battle for top talent continues, counseling clients on PFL benefits is something you’ll want to take advantage of in your 2018 sales. Although it’s hard to predict what 2018 has in store for you and your clients, the more you start preparing for sales conversations now, the better off you can be when the New Year arrives.

<Bio box:>

Terri Rhodes, MBA, CPDM, CCMP, is the CEO of the Disability Management Employer Coalition, with extensive knowledge in all aspects of absence and disability program management. She has more than 25 years working for some of the most progressive companies designing and managing absence programs.

Breanna Scott, product and service management director with Standard Insurance Company, guides the strategic development of its product portfolio, including market analysis and product positioning. She leads the group insurance product team responsible for creating and refining its employee benefits and voluntary product and service offerings.

Meet NAIFA’s New President

Keith Gillies, MBA, CFP, CLU, ChFC, has the leadership skills it takes to move NAIFA forward, thanks to the life lessons he has learned on his journey toward success.

By Ayo Mseka

As a child growing up in Louisiana, Keith Gillies, MBA, CFP, CLU, ChFC, did not have a lot of material things. But he had a grandmother who gave him something that was priceless—the belief that he could become anyone he wanted to be. This motivated the young Gillies to reach for the stars, and today he is President of NAIFA and the CEO of a thriving financial-services firm.

“My grandmother, Amy, was, and is, the most important influence in my life,” Gillies told us when we visited him at his home in New Orleans earlier this year. “She was an amazing woman who motivated me to do good things. Even though she died over 45 years ago, I still think of her often because of the belief she had in me.”

With such a powerful influence in his life, it did not take long for Gillies to excel. He attended Tulane University, where he earned an MBA with honors, as well as the University of New Orleans, where he earned a BA degree. Reflecting his commitment to lifelong learning, he has also earned many industry designations.

After college graduation, Gillies wanted to attend law school but missed the application deadline. So, he decided to “try” the financial-services industry. Thirty-six years later, he is still in the industry and loving every minute of it. He is the managing principal of Wealth Solutions, LLC, and The Pension Center, LLC, as well as co-founder of United Wealth Advisors Group, LLC, where he serves as CEO. He is also a registered representative and investment advisor representative with Ameritas Investment Corp, and a leading representative of the Ameritas Group of Companies. In addition, he is a life and qualifying member of MDRT, with status as a Top of the Table member.

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Gillies’ accomplishments over the years have placed him in elite company. In 1997, he was named the NAIFAGreater New Orleans Member of the Year, and in 2013, was the recipient of the Lester A. Rosen Humanitarian Award for service to his community, profession and the greater Ameritas family. He also won the NAIFALouisiana’s Arthur Abramson Member of the Year Award in 2007, and in 2016, was inducted into the Ameritas Hall of Fame.

The winning edge

When asked for the reasons for his success, Gillies’ response is quick and to the point: “You must have a vision and a carefully articulated plan to carry out that vision,” he said. “This is extremely important.”

Also, in today’s highly regulated world, it is critical for advisors to work together in teams made up of people with complementary skillsets, which will enable them to provide comprehensive services to a wide range of clients. In addition, Gilllies’ firm makes efficient use of systems, processes and technology to more effectively leverage the time and resources of its employees.

“Always do what is in the best interest of the client.”—Keith Gillies, MBA, CFP,CLU, ChFC

To ensure that his practice continues to survive and thrive, Gillies does not forget to do one important thing each day—check to see that his revenue-producing efforts outnumber his volunteer activities. “When I first got involved with NAIFA at the state level,” he explained, “a friend of mine advised me to make sure I do revenueproducing work each day, and I am glad I listened to him. Volunteerism is great, but it can consume you if you are not careful.”

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For newcomers who might be facing career hurdles on their path to success, Gillies’ main piece of advice is for them to join a study group. “When I lost the election for NAIFA Secretary in 2012,” he said, “Ameritas’ CEO Joanne Martin asked me to help put together a program for the company’s young advisors. We created the Ameritas Growth Leaders, a super study group of advisors who have been in the business 10 years or less. Members of this group set goals and hold one another accountable. It has been very successful; in fact, the retention rate for members is about 70 percent.

“People respect what is inspected,” Gillies pointed out. “When your peers hold you accountable, you strive for excellence and try to do what you say you will do.”

Industry newcomers looking to advance their careers must also take the time to create a plan that allows them to have some level of activity. “You can’t be in the office all the time and expect success,” he stressed. “If things are slow, go out and see your clients because good things happen when you do.”

And for those who have spent some time in the business but don’t think they have achieved an appropriate level of success, Gillies suggests they segment their existing client base to provide a higher level of service to their clients, and try to invest some money into their business by acquiring systems, processes and  staff that will help them leverage their time and make the most of their resources.

No matter what stage of their career advisors happen to find themselves in, all of them will increase their chances of doing well if they adhere to these maxims that Gillies has lived by all his life:

• Always do what is in the best interest of the client.

• Remember that success is a journey, not a destination; so enjoy the ride.

Gillies spent 16 years instilling this principle in the team of young basketball players he coached when he served as head coach at Saint Joan of Arc – and the strategy paid off. “Although as a coach your goal is to win the game, that should not define your success,” he explained. “For me, the success is in the journey. You may win some games, but you can’t win the last game all the time.”

The NAIFA advantage

NAIFA membership can also accelerate an advisor’s journey toward success, and the sooner advisors join NAIFA, the better it will be for them, Gillies said. For his part, Gillies joined NAIFA his first month in the business in 1981, and the association has been there for him ever since.  “NAIFA is critical to my success,” he stressed, “because of the people I have met and the things I have learned over the years.  Also, NAIFA protects our clients and our practices.”

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“NAIFA is critical to my success because of the people I have met and the things I have learned over the years. Also, NAIFA protects our clients and our practices.”--Keith Gillies, MBA, CFP, CLU, ChFC

NAIFA provides countless tools and resources that members can use to move ahead, he added. “If you just take advantage of the wide array of NAIFA benefits, you will be successful and the money you earn from the extra business you gain will be more than enough to offset your membership dues.”

But to get the most from what NAIFA offers, members must get involved in the association and stay engaged, he said. The most successful in the business are those who are involved in their professional association and are engaged in the political/legislative process.

“For example,” he pointed out, “if you attend a function hosted for an elected official, you will have an opportunity to meet other NAIFA members who are successful and who will notice that you are engaged and involved. You can call on those folks to help you with your career, if and when the need arises,” he said.

Balancing work and life

Although Gillies has come a long way from his humble beginnings by working hard, he knows the importance

“Remember that success is a journey, not a destination; so, enjoy the ride.”—Keith Gillies, MBA, CFP,CLU, ChFC

of slowing down and maintaining a healthy work/life balance. So despite his demanding work schedule, he makes sure he spends quality time with his family—his wife, Cindy, and children, Blake, Misty, Lindsay, Amy—named after his beloved grandmother—and Keagan. “I try not to miss any of their activities and schedule my work around those activities,” he said.

During our visit to New Orleans, this dedication to family was in full force at a baseball game we attended, in which his son, Keagan, was playing. Gillies followed the game closely, cheered Keegan’s team on several times, and beamed with pride when they won.

He also enjoys reading, playing golf, taking early-morning walks, and traveling with friends and family.

For several years, his family and his firm have also supported Miracle League, an organization whose vision is to provide any disabled child, regardless of the level of his or her disability, the opportunity to play league sports and enjoy being part of a team sport.

“It is important for people who have earned some level of success to give back to the community because our business is all about helping people with their goals and dreams,” Gillies said. “You can’t give away money. When you do it out of your heart, it all comes back to you.”

Turning setbacks into comebacks

As it is with almost anyone who is traveling toward success, Gillies has had his share of roadblocks. For instance, he was hit with one of the biggest business challenges of his career when Hurricane Katrina hit the east coast of Louisiana in 2005, and three weeks later, Hurricane Rita made landfall on the west coast of Louisiana.

“Imagine all of your clients live and work from the Louisiana/Mississippi coast through Houston,” he said. “New Orleans is flooded, roads are closed, there is no phone service, the internet does not work, and the bridges are all out. There is nothing.”

But Gillies did not allow this catastrophe to derail his plans for success. Instead, he managed to make “something out of nothing” by using his down time to create a planning program for annual reviews with his clients. “In business school, they often teach you to think outside the box,” he said, “but sometimes, the answer is actually inside the box. This is what we determined as we went through this exercise at the end of 2005.”

The review program he and his staff implemented was very successful, and during the next two months, they held 123 client meetings—almost all of them in the office. “Katrina forced me to change my practice and focus much more on providing value,” he said. “From that disaster in 2005, my practice has really thrived.”

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Keith Gillies at a Glance

• Recipient of numerous awards, including the NAIFA-Greater New Orleans Member of the Year in 1997 and the Lester Rosen Humanitarian Award for service to his community, profession and the greater Ameritas family

• Past president of NAIFA-Greater New Orleans and NAIFA-Louisiana

• Life and qualifying MDRT member, with Top of the Table status

• Winner of the NAIFA-Louisiana’s Arthur Abramson Member of the Year Award

• Inducted into the Ameritas Hall of Fame

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Leading NAIFA

Katrina is now long gone, but the importance of providing more value to those he serves has stayed with Gillies and has been a top item on his NAIFA agenda since assuming the association’s highest office.

“The Office of the Presidency will continue to improve the NAIFA member experience,” he told us. “We must continue to drive the organization with a focus on providing quality experience for our members. Whatever we need to do to create a valuable and consistent experience for our members, we must do. If we do, membership will increase, because we will be providing value for our members’ investment in their association.”

Over the next several months, the Office of the Presidency also plans to:

• Continue to diversify NAIFA’s revenue stream so that the association remains financially viable, vibrant and relevant for many years to come.

• Continue to seek ways to improve the way the association tells its story. “The value is there, but we need to improve the way we tell our story because it is an outstanding story,” he said.

Finally, continue the wonderful job the association has been doing in protecting the industry. “We must be forever vigilant in fighting for a business climate that protects our members, their businesses and the clients they serve,” he said.

Living his best life

Gillies takes over the reins of NAIFA at a good point in his life. After 36 years in the business, he considers himself truly blessed. Because he loves what he does for a living, he does not see it as work; in fact, he says he has not worked in a couple of decades.

“Every morning when I wake up, I am happy to go to work with some amazing people,” he said. “I have not only found some level of financial success, I have also been blessed with the opportunity to work with people I admire and respect, and with people who need the products and services we provide. What an amazing career!”

In addition, he has a family he adores, and is proud to belong to a profession that empowers him to do two things that are near and dear to his heart: give back to his community, and serve an association that has given him so much.

“I want to thank members for giving me the privilege of leading NAIFA,” he said. “It is a responsibility I take very seriously and for which I will be forever grateful. With your help and support, we will continue to build on our successes and make NAIFA more than we ever imagined.”

Help PrepareClients for the “Knowns and Unknowns” of Retirement Planning

Discuss the known factors they will need to be prepared for, and the uncertainties that lie ahead.

By Dale Meinders and Wayne Hechanova

credit:

©ISTOCK.COM/SERGUNT

As financial professionals, we don’t have a crystal ball that allows us to look clearly into our clients’ financial future, but we can offer retirement solutions that can help address financial uncertainty, no matter what comes their way. We should talk through the potential issues that our clients may face both leading to retirement and when they start receiving retirement income.

New realities are reshaping the American retirement that call for different strategies and discussions. So to help your clients, discuss the known factors that they will need to be prepared for and the unclear uncertainties that lie ahead.

Longevity. The Stanford Center on Longevity found that Americans have an average increase in life expectancy of 30 years, compared with 100 years ago. When Allianz asked about this increase in “The Gift of Time”* study we found that 93 percent of Americans have a favorable view of living those 30 extra years but 70 percent feel financially unprepared to live to 100 and beyond. People are worried about having enough money to last their whole lives – retirements could now last more than 25 or 30 years. Financial professionals have an opportunity to put the appropriate resources in place to ensure that their clients do not outlive their hard-earned money.

In many cases, too, clients hope to leave a financial legacy behind to support their loved ones for years to come. A potential solution like an annuity can help protect clients as they live longer with guaranteed lifetime income. Fixed-index annuities (FIAs), for example, can help clients meet long-term retirement goals by offering taxdeferred growth potential, a death benefit during the accumulation phase and a guaranteed stream of income at retirement.*

Increased costs of living. People fear that the rising cost of living will affect their retirement plans. Clients worry about not being able to afford the lifestyle they want in retirement or they believe they will need to work longer to support their goals. When considering a solution that can help combat their concerns, think about how clients may need to adjust to a rising cost of living. When we asked people in the “Allianz Life 2017 Inflation Study” about solutions that could help them manage the effects of inflation, we found that 86 percent were interested in a product that offered guaranteed income for life, plus the opportunity for income to increase over time.

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Another uncertain element that will affect everyone’s retirement is Social Security because no one is sure about its long-term solvency.

Similarly, when presented with two options for guaranteed income one that starts with a higher income rate but has no opportunity to increase over time and one that starts with a lower income rate but offers the possibility of increases – 73 percent preferred the increasing income option. Solutions that supplement a client’s income will also help with rising health-care premiums – which are an integral part of a long-term retirement strategy. Look

into increasing income options that may be offered through either built-in or optional riders for an additional cost. Pensions. Many employers have shifted away from providing pension plans that pay retirees a steady stream of income (a defined benefit) and have moved toward defined contribution plans (such as 401(k) plans). This shift not only puts the onus on employees to take the reins of their retirement saving; it also gives your clients the responsibility of creating their own lifetime income. In the absence of pensions or defined-benefit plans, discuss how clients will cover their expenses in the future. Will they have enough by just contributing to their employer’s plans? Financial professionals can help by exploring solutions that provide consistent income that is guaranteed for life.

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Financial professionals have an opportunity to put the appropriate resources in place to ensure their clients do not outlive their hard-earned money.

Social Security. Another uncertain element that will affect everyone’s retirement is Social Security because no one is sure about its long-term solvency. The ratio of covered workers to Social Security beneficiaries has changed significantly since 1950, which means fewer employees are covering each Social Security beneficiary. Thus, more of their income will need to come from their own retirement savings.

Market volatility. Over the last 10 years, markets have been a rollercoaster – from historical lows to recordbreaking highs, no one knows what to expect. This may have a major effect on retirement assets as clients’ IRAs, 401(k) plans and 403(b) retirement-savings plans are taking the brunt of the change. Just ask Gen Xers and baby boomers who went through the 2008 market crash. We found that some of them have become “postcrash skeptics” in our “Generations Apart”SM study. Because of this, many Americans are switching to more conservative investments. Clients who are worried about their retirement future may be good candidates for products that help protect a portion of their portfolio. To counter the volatility that clients may experience, financial professionals should look for annuities and other solutions that offer income with the potential to increase based upon positive market performance, while offering a level of protection against market losses.

When discussing a client’s retirement strategy, it’s up to you to discuss solutions that provide protection by managing both the knowns and the unknowns that could affect them. A well-planned portfolio can offer a level of protection, no matter what happens.

*The Allianz Life “The Gift of Time” study was conducted online by Larson Research + Strategy last year with 3,000 U.S. adults, including 1,000 Baby Boomers, 1,000 Gen Xers , and 1,000 Millennials.

*Your clients should carefully consider the features, benefits, limitations, risks and fees that may be associated with an annuity to determine if an annuity is appropriate for your clients based on their financial situation and objectives.

*Guarantees are backed by the financial strength and claims-paying ability of the issuing insurer.

Distributions are subject to ordinary income tax and, if taken prior to age 59 ½, a 10 percent additional federal tax.

<Bio box:>

Dale Meinders and Wayne Hechanova are Senior Directors of Distribution Insights for Allianz Life Insurance Company of North America.

NAIFA’s 2018 Performance + Purpose Conference

NAIFA is gearing up for the NAIFA 2018 Performance + Purpose Conference (P +P 2018), which takes place Sept. 13 to Sept. 16 in San Antonio.

As most of you know, the 2017 P+P Conference was cancelled because of Hurricane Irma. NAIFA volunteers and leaders had planned an exciting program of speakers, sessions and networking events for the 2017 meeting.

“It’s unfortunate we had to cancel the 2017 P+P conference,” said NAIFA president-elect and 2018 Performance + Purpose Chair Jill Judd, xxxx, “But we’re keeping the best of our 2017 program and planning an even more dynamic event for 2018.”

More than the annual business meeting, NAIFA P+P has now become a high-caliber, professional-development conference with programming for everyone – from those who are new to the industry to the most experienced and successful advisors.

NAIFA is also increasing the number of peer-to-peer learning opportunities attendees can take advantage of at P+P 2018, with new offerings like Braindates. A NAIFA Braindate is an online matchmaking service for professional development. It is your chance to find and meet one-on-one colleagues with whom you share a professional interest. You will have an opportunity to post Offers, which are the experience and knowledge you have to share, and Requests, which are things you want to learn about. Then, you and other conference attendees can search all the Offerings and Requests, make connections, and schedule in-person meetings in the conference’s Braindates Lounge.

Fortunately, many of the key main stage and workshop presenters who were scheduled for the 2017 P+P Conference have re-committed to speak at P+P 2018. Leigh Anne Tuohy, made famous in The Blind Side movie, and Forbes Publisher, Rich Karlgaard, will be the keynote speakers.

Tuohy and her family’s inspirational journey are proof that when we give a bit of ourselves to other people, we can make the world a better place and perhaps, even save a life. She will share her personal “Blind Side” observations – from seeing Michael Oher for the first time to how the experience changed her as a person, as well as the Tuohy family.

Karlgaard is one of the most influential figures in the technology, economic and business worlds, and will help you see the global marketplace with new eyes. He is the thought leader that Fortune 500 companies, small businesses and national associations turn to for a reliable roadmap of what’s to come.

With more than 20 educational workshops scheduled for P+P 2018, every hour will be an engaging experience for you. MDRT presenters and qualifiers, Barbara Pietrangelo and Marc Silverman, are slated as the Big Ideas Presenters. Pietrangelo will focus on ways agents can use to prospect and market their way to the top of the industry. Her presentation will emphasize the importance of having a succession plan in place for your business. In addition to the Big Ideas presenters, more than 30 industry leaders will present workshops.

Everyone who attends NAIFA’s 2018 P +P will not only get something out of the experience, they will also have an opportunity to give back. NAIFA will partner with Together We Rise, a nonprofit organization that helps change the way kids experience foster care in the United States. During the 2018 P+P conference, participants will be able to build a bicycle or decorate a duffel bag for a child in foster care.

By all indications, NAIFA Performance + Purpose 2018 promises to be a well-rounded and enriching experience for all attendees. Stay tuned for more information in the coming months about NAIFA Performance + Purpose 2018 by visiting www.naifa.org/conference

My Best Ideas for Selling Annuities

These five suggestions from an industry veteran will go a long way in boosting your annuity sales.

By Frank Medina

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If you don’t know how to take active control of your sales strategy and have no intention of learning, then the business of selling annuities is probably not for you. It’s a competitive industry and you need to be at your best if you want to succeed. Although the sales of fixed annuity increased by 14 percent in 2016 to reach $117.45 billion, there are indications the coming years might be tougher on the sector.

Upping your game

So how can you up your sales game and ensure your sales continue to grow in this very dynamic industry? Here are a few tips to help you do things a lot better.

Have an in-depth understanding of your products. You need to become a specialist in the types of annuities you are dealing with. This is best done by availing yourself of any opportunity in continuing education, so you can learn about new features, industry shifts and any future forecasts. This in-depth knowledge is not only necessary for you, it is important for your clients too. For example, if understanding your products helps you find a fixed index annuity (FIA) with a roll-up rate of 10% as opposed to an 8% FIA, your client would be incredibly pleased with the extra 2%. A happy client translates into lead generation for you, since a happy client might recommend you to others.

Patiently nurture a great relationship with your clients. Speaking of recommendations, you should prioritize relationships with your clients as this can lead to referrals. Building great rapport with your clients is not an immediate process, however; you need to make a conscious effort to make the client comfortable with your skills and approach and get to really know him. When you and your client and are comfortable with each other, the client can easily hand you more business through intra-family referrals.

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One way to understand your clients’ needs is to capture their imagination by asking them about their financial goals.

Leverage current events in your sales pitch. Make sure you understand what is going on in today’s economy and its effects on the security of alternative investments such as annuities in light of future uncertainties. This might be the trigger you need to push potential clients to make a purchase decision so as to ensure that their

future is secure. If you stay up-to-date on the potential effects of any new government policy, stock market plunges, etc., you would come across as thoughtful, current and relevant to your client, and not just as another annuity salesperson pitching the same old same old.

Sell solutions, not products. Whenever you prioritize selling products over selling solutions to problems, you come across as pushy. When you’re pitching to the client, speak of the product in the context of it being a solution to a specific need. One way to understand the client’s needs is to attempt to capture their imagination by asking them about their goals for retirement, investment, charitable donations, etc. Once you know this, you can show them an annuity with a guaranteed income to meet their needs.

Go with the times. Your sales strategy should be dictated by what works and not “how it’s done.” This means that you may need to ditch traditional methods of sales if they are not working for you. In fact, even if they are working, you should try something new to give yourself multiple sales opportunities. For instance, take active lead generation. Word of mouth is great (and you should never ignore it), but also try non-traditional methods like technology services that deliver qualified leads in short periods of time. Lead-generation companies, SEO, and social media all fall under this category.

Annuities do not sell themselves as you know too well. Selling them requires effort. And even though the tips I have shared in this article are sure to increase your sales rate, never forget that the three key ingredients are diligence, hard work and prioritizing relationships.

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Frank Medina uses his expertise in retirement planning to suggest products that actually perform well for his clients. Interested in learning more about him? Contact him at @thefrankmedina. (http://frankmedinainsurance.com)

& marketing

Using LinkedIn as a Marketing Tool

By Bryce Sanders

If you are serious about using this virtually free tool, here are a few steps you should take.

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Everyone hears stories about how LinkedIn is now the new cold call.1 This is great because no one really liked cold calling anyway. But many agents and advisors attend a class about using LinkedIn and a couple of things usually happen:

• They take the class but go back to business as usual.

• They hear about a really great strategy in the class but find out that their firm has restrictive rules about using LinkedIn; so they forget about it

But you are different. You want a strategy that can get people to talk to you and you are willing to invest some time and effort in working within your company’s guidelines. I have about 1,100 1st level contacts and my New Year’s resolution at the beginning of this year was to reach out to them to find out how they use LinkedIn. The entire project took about five months, during which I learned a lot. If you are serious about using this virtually free tool, here are a few things you should be doing.

Build a robust network of first-level contacts. This network of contacts logically includes your clients. You can maintain client confidentiality by choosing to opt out of sharing your list. But keep in mind that this might be considered rude. The advantage of having a robust network is that participants can see your posts and vice versa.

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Everyone who meets your ideal client profile is a prospect and should be part of your network.

Keep building your network. What about friends and prospects? Logically, everyone you know who fits into your ideal client profile is a prospect and should be part of your network. You want an effective way to “drip market” to them.

Post regularly. You should have a continuous feed of posts rolling through your homepage every day. Although your firm probably prohibits you from writing articles and posting them, it most likely has an archive of articles you can post. These are usually educational. Your posts will be seen by your first-level contacts who can like, comment or share them. That’s powerful. Obviously, sharing is the LinkedIn version of going “viral.”

Engage with others. The object is to get a dialogue going. If someone likes or comments on your article, the least you can do is to thank them. If your firm allows it, comment on their posts.

Pay attention to notifications. That’s the tab on top that presents a list of people having birthdays, work anniversaries or job changes. These are all reasons for you to send congratulatory messages — and there are even messages prewritten just for these occasions.

Benefits of using LinkedIn

Allocating time to LinkedIn every day pays dividends in several ways, including:

• Name recognition among clients and prospects. You are “drip marketing” with intelligent information they can use.

• Engagement with others. Even if you only follow the prompts to send greetings, you often get a response. You’ve reached out and they have responded and the ball is now in your court. When I asked one of my contacts about how he uses LinkedIn, he said: “If you get about eight back-and-forth exchanges with someone, they are getting interested.”

• Putting you in front of others. You want to get in front of someone — LinkedIn shows “who knows who.” Call up those contacts and ask if they will set up a meeting by inviting them for drinks or asking them to accept your call. At the end of the day, everything comes down to face-to-face relationships. Even if you don’t’ receive immediate dividends by using LinkedIn, you must keep using it. At times, you might feel as if you are pushing on a string. You post, you engage but you don’t get any meaningful results. Keep on doing what you are doing, though. After all, you are reaching lots of people who may contact you when they need you.

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Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book “Captivating the Wealthy Investor,” can be found on Amazon. 1 https://www.bizjournals.com/philadelphia/how-to/marketing/2017/06/is-linkedin-the-new-cold-call.html

Ensuring Success for Your Fixed-Annuity Sales in 2018

The concepts described in this article will not only help boost your fixed-annuity sales next year, they can also help strengthen your client relationships.

By Rich Lane

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With the DOL fiduciary definition now effective, you may be re-considering how to incorporate fixed annuities into your sales for 2018. Considered a mainstay in the industry, many clients have low awareness of how an annuity can help them meet their financial goals. Or, they may think there are other, better vehicles to consider for their hard-earned money.

With the sprint to the end of the year behind you, January is a great time to focus on how to refresh your sales approach. Here are a few tried-and-true sales insights and considerations you can use to help meet your clients’ financial objectives in the New Year, regardless of your tenure in the industry.

Insight No. 1: Sell peace of mind. Many clients have limited awareness of what an annuity is and the safety it can provide in preserving and growing assets. One of the first things to bring up to a client as part of a sale is that an annuity can offer him lifetime income and provide peace of mind in knowing that the value will never decrease. There are very few financial instruments available today that can lay claim to these benefits and, for many clients, the thought of having a secure, stable income guaranteed for the rest of their life is a huge draw.

Insight No. 2: Draw comparisons to other products. You may typically recommend clients place a portion of their money in assets geared to ensure protection of principal. As your clients age, they often place a higher portion of their assets into nonstock vehicles that offer increased safety to help ensure they stay on track for a secure retirement. One of those nonstock vehicles that is often recommended is the bond mutual fund.

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An important part of the annuity sale is to make sure the purchase is a good fit for your client.

As a way to help clients weigh their options, consider how you can position a fixed annuity like a bond mutual fund, but without the downside risk. Many will gravitate to the idea that they are transferring that downside risk to an insurance company, rather than taking on that responsibility themselves.

Insight No. 3: Ditch the bells and whistles. An important part of the annuity sale is to make sure the purchase is a good fit for your client. This means it’s tailored to his or her financial objectives. While some clients will want an immediate stream of income from their annuity, others may not want to ever withdraw funds.

The key here is to keep it simple and avoid adding any riders to a client’s annuity that provide him or her with access to their money. The more straightforward the sale, the better the fit is for your client. That’s because, depending on a client’s financial objectives, selling an income rider could ultimately drag down his or her overall yield and accumulation potential.

Insight No. 4: Discuss how all returns are relative. For a fixed, deferred annuity, make sure your clients know that returns — especially in the short term — are relative. It’s important not to focus on the return potential compared with the short-term returns of the next hottest security but to consider the guarantees and downside protection of an annuity in the long run. Even in a prolonged low interest rate environment, many billions of dollars of fixed annuities are purchased by Baby Boomers seeking safety first, with the plan of guaranteed income later.

Insight No. 5: Embrace change. The last two years have consisted of numerous ups and downs for the industry, with many of your peers ultimately choosing to exit the field altogether. While it may seem counterintuitive, it’s more important than ever to embrace the added scrutiny and compliance paperwork required to serve your clients today compared to what it was five or 10 years ago.

Your competition may have chosen to leave the industry because of the perceived “hassle” of paperwork or the inability to clearly justify their actions. This brings more opportunity for professionals who are willing to meet expectations and have the communications skills to succeed.

As you consider your sales next year, think of how to weave in these concepts to help your clients understand the value that a fixed annuity can provide to them. Not only can it help strengthen your sales, it also can help strengthen your client relationships.

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Rich Lane is the second vice president of individual annuity sales and marketing for Standard Insurance Company. He has been in the fixed-annuities industry for more than 20 years, with an emphasis on product and distribution development for brokerages , banks and broker/dealers.

Secrets of Top of the Table Producers

Prospecting as We Know It Is Dead. And that’s OK.

Social media is here to stay and can be a powerful tool in your prospecting arsenal.

By Marvin Feldman, CLU, ChFC, RFC

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One of the hardest parts of this business is prospecting. Even after more than 50 years in this business, I still find it difficult and not particularly enjoyable. What prospecting looks like now is very different from what it looked like when I started out, or even from what it looked like 10 or even five years ago, and that’s OK.

As of 2017, 81 percent of Americans had a social-media profile. People are online and on social media as never before. It’s how they connect. It’s how they get their news. It’s how they see pictures of their friends, kids and, frankly, where they watch the latest viral cat videos. Gone are the days of running into people at a Rotary meeting; instead, they are glued to their phones, which they wouldn’t think of using for an actual phone call. Instead they are texting or using social media.

Getting started in the new era

Whether you love it or hate it, social media is here to stay and can be a powerful tool in your prospecting arsenal. So how do you get started? If you haven’t already done so, create your social profile on at least one of the major social-media outlets, such as Facebook, Twitter, LinkedIn or even Instagram. If you don’t know what you’re doing, get help from someone in your office who does, or even a niece, nephew or grandkid. Then start posting.

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We are not on social media to sell. We are there to establish ourselves as trusted advisors.

The easiest way to find good, relevant content is to follow Life Happens on its social-media properties (get all the links at www.lifehappens.org/socialmedia), and then simply share what you like and what you know your friends or followers would like to see or hear about. Besides being easy, this method is free, and there are not many places where you can get something that is best in class and free.

Don’t sell!

Life Happens has been curating content on its social-media properties for more than 10 years. We know what

works—and what doesn’t. Our content meets all the requirements to educate and motivate people to make a decision to buy life insurance. You can also get some great advice on all things social by listening to our new “Marketing Happens” podcast that is run by Life Happens’ Social Media Manager, Nate McGrath. Find it easily and for free on iTunes.

But remember that we are not on social media to sell. We are there to establish ourselves as trusted advisors. People like to work with people they know, like and trust, and social media is a great way to get that message out in a low-key way on a medium that is very much an integral part of most people’s day.

Make your posts about you, your family, your community involvement and, of course, include subtle messages about how it’s important to protect those you love with life insurance. When the time is right, when your friends and followers have that life change and incur new financial obligations, you will be top-of-mind as the person they want to help them with these financial needs, including life insurance.

If you’d like to take your social media to the next level or just don’t have the time or interest in creating your own social-media campaigns, Life Happens Pro has its new social-media scheduling tool called SocialEdge, which allows you to use Life Happens content, as well as your own. Also, something that puts it heads and shoulders above any product on the market is the AutoStream function, which automates posting to your social-media feeds, based on your input—with content that’s tailored to you and your followers. I encourage you to check it out at www.lifehappenspro.org.

Lastly, remember that in February, we have the “Insure Your Love” campaign. This is a great time to ramp up your social-media outreach, and of course, Life Happens has plenty of “Love Insurance” content for you to use. If your prospects and clients owe someone or love someone, they need life insurance. Good luck!

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Marvin H. Feldman, CLU, ChFC, RFC, is principal of the Feldman Financial Group in Clearwater, Florida. He is president and CEO of Life Happens and a member of NAIFA-Pinellas. You may contact him at 727-723-9020.

< these endnotes go with the Paid Family Leave story>

(Endnotes)

1 1 Watch the Webinar: “Get Ready: Paid Family Leaves Are Coming,” Standard Insurance Company, 2017, video citation at 17 minutes and 16 seconds, https:// www.standard.com/employer/insurance/paid-family-leave/get-ready-paid-family-leaves-are-coming

2 2 “The American family today,” Pew Research Center, Dec. 17, 2015, http://www.pewsocialtrends.org/2015/12/17/1-the-american-family-today/