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Volume 20 / Issue 1 www.figmarketing.com


                                                                          

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Introduction

Re-imagining Possibilities TEXT BY J. WESLEY KNOWLES

Touted by the mainstream media over the last several years, the future of the financial world produces an ominous overtone. With fewer employer-provided pensions—especially in the private sector—the burden of retirement planning is falling on individuals more than ever.1 There’s been much speculation about Social Security and its relevance as a reliable retirement supplement. There have been serious discussions of whether benefits would be cut by 2035 if corrections aren’t made to the current system of funding those accounts.2 There’s cause for concern. Still, if the policymakers heed the warning signs and make corrections, it could make an enormous difference in the outcome for markets down the line. The need for financial professionals and sound financial guidance has never been greater. At Financial Independence Group, we’re an advocate for both our agents and their clients. We understand the importance of creating road maps that meet you and your clients’ goals. With dozens of scenarios that can be impactful on wealth management, it’s crucial to have the right resources at your disposal. They’re critical for concise, well-informed decision making. Financial professionals have their work cut out for them in an age of media distrust and corruption. Relating to the client and their ideas, how they aspire to live during retirement, is essential. Ensuring that your clients keep the same quality of life in retirement can seem like a daunting task unless you have the right set of influencers educating and guiding you. At FIG, we focus on retirement planning. We believe that the future is a present state; that we must continuously adapt to thrive. We constantly look ahead to new, strategic partners and relationships so you can be a better, smarter, and more efficient financial professional. Our annuities, life insurance, and care planning divisions develop lasting relationships with insurance carriers, registered investment advisors (RIAs), broker-dealers (BDs), and other leaders in our industry for that reason. Our connections benefit our agents with programs and offerings not found at other organizations. This provides you with the tools, information, and assistance you need to support your clients’ strategies for retirement properly. There’s good news for your clients, too. According to the Urban Institute, retirement incomes will increase over the next four decades, thanks in part to more money circulating due to a workforce that’s working longer. Some political leaders are also looking to shore up Social Security funding. And employers and policymakers are beginning to recognize the importance of retraining and flexible work schedules. These ideas put into action accommodate needs and eliminate disincentives for older clients. By reframing your conversations, you can embrace the opportunities ahead.2 Maintaining a footing in the present with an eye on the future, FIG imagines and re-imagines the possibilities. We seek new methods to improve, streamline and secure relationships, and establish trust and confidence with you, our partner. As innovators, we meet each new challenge with excitement. We can only see the future of the financial world as bright. New challenges provide opportunities to improve. When combined with newer generations who engage with financial success in retirement, the horizon looks less ominous as it gets brighter each day. s 1. https://www.leadheroes.com/web-2-0-directory/financial-independence-group-fig/

2. https://www.forbes.com/sites/nextavenue/2019/07/25/what-the-future-of-retirement-looks-like/#345f8ddb3dec 3. https://www.investopedia.com/articles/retirement/11/5-steps-to-retirement-plan.asp

J. Wesley Knowles, Marketing Media Specialist, APM Division, Financial Independence Group, Inc. Contact Wesley - Phone: 800-527-1155, Email: Wes.Knowles@figmarketing.com

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Table of Contents

20

32

36

IN EVERY ISSUE 1 Introduction 2 Table of Contents 6 Credits 8 Executive Team 12 Contributors

20 THE FUTURE IS NOW 32 SIX QUESTIONS THAT CAN HELP Marketplace disruption is coming, but MAXIMIZE PROFITABILITY adaptation to changing environments Start running your practice more like is a sure way to stay ahead of the a business and start maximizing your game and remain successful. time and profitability. – by John Schwalenberg – by Brooks Riley

ARTICLES 1 RE-IMAGINING POSSIBILITES The future of new technologies is brighter than what doomsayers post. The personal touch alongside unique planning is still needed in the modern financial marketplace. – by J. Wesley Knowles

24 CARE PLANNING IS VITAL TO A FINANCIAL PROFESSIONAL’S BUSINESS Care planning is often overlooked as an offering because financial professionals just don’t know how and why they should talk about it. – by Alecia Barnette

18 BARNABAS CAPITAL An illustration of how Barnabas Capital can help your growing business acheive next level goals for your clients. – by Joe Powell

30 INTRODUCTION TO IPCG Insulate your business, attract the next generation and generate an additional revenue stream with Independent Property and Casualty Group (IPCG). – by Matt Woodford

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36 CARE PLANNING: A PERSONAL PERSPECTIVE A family discovered the challenges of Alzheimer’s/dementia without a proper plan. What can be learned from their experience? – by J. Wesley Knowles


An income solution for a broad range of client needs Tax-efficient payments Pre-59½ income without 10% penalty Joint income for nonspouses Wealth transfer strategies Solutions for clients over 85

Visit LincolnFinancial.com to see the annuity solutions Lincoln Financial Group can offer clients.

Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Please consult an independent advisor as to any tax, accounting, or legal statements made herein. The Lincoln National Life Insurance Company

Lincoln annuities are issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. The Lincoln National Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so. Contractual obligations are subject to the claims-paying ability of The Lincoln National Life Insurance Company.

©2019 Lincoln National Corporation LincolnFinancial.com

Product and features are subject to state availability. Limitations and exclusions may apply. Not available in New York.

LCN-2646849-071719 PDF 8/19 Z01 Order code: FA-i4LAD-FLI001

Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations.

Insurance products issued by:

For agent or broker use only. Not for use with the public.


F&G is rated Aor “excellent” by A.M. Best A.M. Best Rating: A- (“Excellent”), 4th highest out of 16 ratings for financial strength as of November 20, 2018. For the latest rating, access www.ambest.com. “F&G” refers to Fidelity & Guaranty Life, the marketing name for Fidelity & Guaranty Life Insurance Company issuing insurance in the United States outside of New York. Life insurance and annuities issued by Fidelity & Guaranty Life Insurance Company, Des Moines, IA.

salesdesk@fglife.com • 888.513.8797 • fglife.com

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30

42

ARTICLES 42 TEN STEPS FOR ACHIEVING FINANCIAL INDEPENDENCE Help your clients better prepare for the future by nudging them in the proper direction. – by Mark Stewart

52 THE FIG UNIVERSE An infographic illustration of the network and support systems that FIG provides to their financial professionals and partners. – by Financial Independence Group

46 CAR: LIFE INSURANCE CONCEPTS Our Comprehensive Analysis & Review (CAR) program can help you guide your clients in existing life insurance policies, and then adjust them for changing needs. – by Christopher Kite

54 COMPLIANCE CORNER – CYBERSECURITY Prevention can be difficult because cyber criminals are always trying to stay one step ahead, but there are good practices people can do to make it difficult for them. – by Paul Van Ginhoven

46 56 CALENDAR OF EVENTS Looking ahead to the year seeing what’s up and coming, helping you save important dates to schedule, to learn, and to improve your business. – by Financial Independence Group

CONNECTIONS MAGAZINE| | 5 CONNECTIONS MAGAZINE


EDITORIAL Publisher Financial Independence Group Editor Liz Ross Executives Dr. William H. Cain Ericka Cain Brian Williams Jim Cooper Mike Mullan Tracia Cericola Nicholas Ross Arron Price Art Direction J. Wesley Knowles Design/Production Alisa Agnew Danielle Harnish J. Wesley Knowles Jennifer Shephard Rashaad Bilal Copywriter Mark Stewart Editorial Assistants Carly Walker Jennifer Shephard Lindsey Forte Tara Salter Contributors Alecia Barnette Brooks Riley Christopher Kite J. Wesley Knowles Joe Powell Liz Ross Mark Stewart Matt Woodford Nicholas Ross Paul Van Ginhoven Project Consultants Alisa Agnew Jennifer Shephard Lindsey Forte Liz Ross Mark Stewart Nick Voelker Paul Van Ginhoven Project Manager J. Wesley Knowles PRODUCTION Design Team Financial Independence Group All Points Media 19520 West Catawba Ave Suite 200 Cornelius, NC 28031

Cover Design Rashaad Bilal CopyrightŠ 2020 by Financial Independence Group, LLC. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Financial Independence Group, LLC.


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FINANCIAL INDEPENDENCE GROUP EXECUTIVE TEAM

DR. WILLIAM H. CAIN

ERICKA CAIN

BRIAN WILLIAMS

JIM COOPER

Founder and Chairman of the Board

Founder

Co-Chief Executive Officer

Co-Chief Executive Officer


MIKE MULLAN

TRACIA CERICOLA

NICHOLAS ROSS

ARRON PRICE

Co-Chief Executive Officer

Chief Administrative Officer

Chief Distribution Officer

Chief Operating Officer


TM

A market risk management strategy designed to benefit the dynamic nature of the market today

When it comes to your investment goals, limiting exposure to market downturns may be as important as capturing market appreciation. Alphastar Capital Management offers Betashield™ – a risk mitigation strategy designed to guard investment portfolios from catastrophic losses. The Betashield™ strategy is a globally diversified asset allocation model portfolio that uses portfolio value signals that when triggered, relocates a predetermined percentage of portfolio holdings in both times of market advancement and market downturns. The strategy allows you to participate in potential market appreciation while managing market risk. Portfolio values are monitored and trade signals are adjusted higher during periods of portfolio appreciation. This “adjusted floor” is designed to allow you remain invested while protecting part of the prior appreciation of the portfolio. Contact Alphastar Capital Management to learn more about Betashield™ and how these strategies may assist your current investment portfolio or investing needs.

support@alphastarcm.com

855-340-2514

www.betashield.io All investments involve the risk of potential investment losses. Past performance is not a guarantee or predictor of future results. Betashield™ portfolio strategies are not a guarantee against loss or declines in the value of a portfolio. Draw down targets can not be guaranteed. Advertisement is not an offer or solicitation for the sale or purchase of any security or other financial instrument or to adopt a particular investment strategy. Refer to www.betashield.io for more information. Investment advisory services are offered through Alphastar Capital Management LLC (“Alphastar”), a SEC registered investment adviser.


Allianz Life Insurance Company of North America

10 years of delivering on

INCREASING INCOME POTENTIAL

97

RECEIVED AN

INCOME INCREASE.1

Annuities are designed to meet longterm needs for retirement income by providing tax deferral, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement. Our track record shows that income benefits for Allianz fixed index annuities (either built in or via an optional rider for an additional cost) have provided clients with income increases. That’s important – because even guaranteed lifetime income needs the potential to increase to help your clients address inflation. And every time there’s an income payment increase, that new higher payment is guaranteed for the rest of that client’s life (as long as the terms of the contract are followed).

SEE THE COMPLETE 10-YEAR HISTORY AT www.allianzlife.com/theproof.

There is no guarantee that a contract will receive an increase in any given year.

Percentage of clients taking income who have received at least one increase. The total number of contracts used for this analysis was 17,480, and represents any increase of any amount in a given year. Income payments were elected from 1/1/2008 through 12/31/2017. Income increases are reflective of multiple products and income benefits that were available at that time. Individual contracts may have seen varying amounts of income increases. Past income payment increases are not a guarantee of future results. With the purchase of any additional-cost riders, the contract’s values will be reduced by the cost of the rider. This may result in a loss of principal and interest (gains) in any year in which the contract does not earn interest or earns interest in an amount less than the rider charge. Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge and market value adjustment. All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax. For complete information about fixed annuities, ask your financial professional for a contract or Statement of Understanding that outlines the risks, fees, and expenses, as well as other information. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America (Allianz). Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.950.1962 www.allianzlife.com 1

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF This notice does not apply in New York. In New York, products are issued by Allianz Life Insurance Company of New York, New York City. Product and feature availability may vary by state and broker/dealer. ENT-1817-D (R-7/2019)


CONNECTIONS CONTRIBUTORS LIZ ROSS

PAUL VAN GINHOVEN

JOE POWELL

BROOKS RILEY

Director of Marketing Liz leads an incredibly talented group of professionals at APM, our marketing division, who are committed to providing advisors with the marketing tools and strategies they need to grow their business and make a difference in the lives of their clients.

President of Barnabas Capital Joe Powell has 16 years of experience in the financial services industry. Prior to Barnabas, Joe was Head of Product and Market Intelligence at Brighthouse Financial. Joe also spent part of his career at Wells Fargo Advisors in various roles including Vice President of Annuities as well as a Retirement Sales Consultant specializing in annuities and retirement income. Joe holds his Series 7, 66, and 24 licenses in addition to multiple insurance licenses.

MATT WOODFORD

President of IPCG A JMU graduate with a major in finance and a minor in marketing, Matt began his career in investment banking in 2002. In 2004, he transitioned into sales, where he became the top sales rep for a regional imaging company. He opened a State Farm agency in 2009 and was consistently in the top 10% nationally for financial services sales. As President and an equity owner of Independent Property & Casualty Group (IPCG), Matt looks forward to helping clients protect themselves from everyday risks while aligning with their financial goals.

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Director of Compliance Paul collaborates with FIG’s financial professionals and internal staff to find solutions to their compliance questions and potential regulatory issues. He’s a member of the International Association of Risk and Compliance Professionals and has a Certified Risk and Compliance Management Professional designation. He currently holds FINRA Series 6, 7, 9, 10, 24, 26, 53, 63 and 66 licenses. Additionally, Paul has a North Carolina Life Insurance License and is a North Carolina Notary Public.

Investment Advisor Consultant A member of Alphastar’s sales & marketing team with the primary responsibility of overseeing the Pathways new advisor training program. Brooks works to prospect, on-board, and coach newly licensed investment advisors to ensure that they are able to efficiently and properly build a productive advisory business. He brings 8+ years of sales experience in the investment management industry to the Alphastar team.

JOHN SCHWALENBERG

Surge Business Consulting Co-founder John enjoys being a resource for financial professionals with a desire to enhance skills and grow their business. During his 30-year career in financial services, he led a corporate services team, as well as having research sales and institutional trading roles at Sterne Agee, RBC Dain Rauscher, Swiss Bank, and the Chicago Board Options Exchange. As a holder of securities, insurance, and real estate licenses, John understands the demands placed on small business owners.


ALECIA BARNETTE

CHRISTOPHER KITE

MARK STEWART

J. WESLEY KNOWLES

Senior Vice President Care Planning Alecia has over 20 years of experience in providing assetbased LTC case designs to highly successful advisors. Her main purpose is to help advisors protect their clients and their families from the physical and emotional consequences of unexpected care needs. Alecia’s use of holistic approaches and strong ethics make her an invaluable asset to any financial advisor.

Copywriter Mark’s “jack-of-all-trades” mentality has made him both knowledgeable and passionate in advertising, digital and social media marketing, and of course— copywriting. Responsible for creating captivating content and convincing copy across the board for Financial Independence Group, he has a knack for making the most complex financial topics simple to understand.

Policy Design Analyst - Life Chris is a specialist in life insurance and annuity dynamics/disclosure who served as an advisor to the NAIC for life insurance illustrations. He brings an expertise of the sales, actuarial, regulatory, and system dynamics for life insurance and annuity sales – helping financial professionals and their clients better understand these products.

Marketing Media Specialist Wes has been involved as an artist & designer with the nationally recognized brands of Spectrum, The DNC, Amway, NBA Charlotte Hornets, AHL Charlotte Checkers, and the NFL Carolina Panthers. Wes joined All Points Media in 2014 and delivers his insight to an already strong group of designers and marketers with his many years of experience in publication production, copywriting, and art direction.

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ACM Mission Statement Alphastar’s mission is to lead the next generation of registered investment advisor (RIA) firms by providing unparalleled service & support to our investment advisor representatives in the field.

Independence

FIG Partnership

Alphastar’s unique business model provides flexibility to the advisor by combining a service model linked to investment management. In other words, Alphastar partners with advisors in ways other RIAs may not. We provide sales support and resources to ensure you’re able to focus on your core competency. Alphastar does all the heavy lifting so you may focus on client relationships and asset acquisition. Options of affiliation include becoming an IAR or via a sub-advisory agreement with your RIA to access our money management platform. Regardless, you have full access to all the services we provide.

Financial Independence Group strategically partners with Alphastar Capital Management, an SEC-registered investment advisor. While these entities remain separate, we provide a strategic alliance with an independent RIA for those wishing to expand their business practices in representing managed portfolios.

To learn more, visit www.alphastarcm.com or call (855) 340-2514.


We are made wise, not by the recollection of our past, but by the responsibility for our future. – George Bernard Shaw


WHO WE ARE At Barnabas Capital, we are a third-party distributor of investment and insurance products. We are a solutions-focused organization that provides unbiased and objective solutions to financial professionals. The products we market are designed to provide certain levels of protection while mitigating certain investment-related risks. Our foundation is built upon our people, our relationships, and our commitment to integrity in all that we do.

Barnabas Capital’s portfolio of products encompasses multiple product designs from leading insurers, enabling us to help advisors identify the right solutions where appropriate. WHAT WE DO We help financial professionals with investment solutions that help safeguard their client’s portfolios against certain key risks that are associated with investing and retirement. We offer access to products that provide a range of solutions which may help grow retirement assets while providing a level of protection during market downturns, in addition to features that may provide a lifetime income stream in retirement.

A LEVEL OF DOWNSIDE PROTECTION MAY HELP CLIENTS STAY INVESTED Equities are key to long-term growth, yet the performance of the average investor reflects the fact that many investors do not stay the course with their investments in the face of volatility.

20 Year Annualized Returns by Asset Class (1999-2018) 12.0%

9.9%

10.0%

7. 7%

7.0%

8.0%

5.6%

5.2%

5.0%

6.0%

4.5%

4.0% 3.4% 2.2%

4.0%

1.9%

2.0% 0.0% REITs

Gold

Oil

S&P 500

60/40

40/60

Bonds

EAFE

Homes

Inflation

Average Investor

Source: JP Morgan Guide to the Markets – 1Q 2019

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Talk to Barnabas about the different types of protection-oriented products we offer that may help balance growth with a level of protection.

One of the core offerings distributed by Barnabas Capital™ are indexed variable annuities. These products are designed for investors that are willing to give up a portion of the equity market upside in exchange for a level of protection on the downside. We believe that by providing top-notch training and education, we can help financial professionals understand and evaluate various solutions that may help their clients achieve their financial objectives. Whether the financial objective is lifetime income or to grow retirement assets while maintaining a level of protection from loss, Barnabas Capital™ offers solutions from top insurance companies that may help address key retirement-related risks.

–Joe Powell, President

For more information, please contact us at info@barnabascapital.com

Securities offered through Barnabas Capital, LLC, Member FINRA. For more information, please visit brokercheck.com. CONNECTIONS MAGAZINE | 19 For Financial Professional Use Only – Not for Customer Use


The Imp ac t

THE

W: NO

y, Aging, & g o l o Eco chn e no T of

ty pari Dis ic m

F

R E IS U T U

TEXT BY JOHN SCHWALENBERG

S

am awoke from a sound sleep around 7:15 AM. Sunshine filled the smartment™ even though it was rainy outside. The recently installed Lytelife™ technology was providing natural light and vitamin D through LED structures on-demand. He got dressed and went downstairs for a breakfast of avocado toast, fresh orange juice, and java served by Parker, a service robot and PC outfitted as one. Before he left for the day, Sam’s virtual butler, a hologram, informed him of the weather, updated him on last night’s Wimbledon match, and displayed areas to avoid for traffic concerns. Waymo’s driverless car was just moments away since the butler had already scheduled Sam’s trips for the day. Once inside, the iDriver confirmed the destination, adjusted the temperature

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to Sam’s profile preferences, and asked if he preferred to listen to the news or his favorite Spotify station during the ride. Sam was on the way to get the perfect haircut. Upon arrival, he looked for the designated booth number on the large screen above that resembled a flight monitor at an airport. Sam proceeded to his designated booth where AI Hairy, the artificial intelligence that powers the booth, instructed Sam to sit, relax, and get comfortable as a device gently wrapped around Sam to keep the desired posture. AI Hairy then displayed 12 hairstyle options through the large glass pane in front of Sam. He was able to alter the look from front to back, to see the

styles more defined. Sam selected the favorite hairstyle and length option, and the AI placed Sam’s image inside the hairstyle model for final signoff. Hairy then completed the styling in roughly 45-minutes with the “minimal conversation” option selected by Sam. Asset and Legacy Planning with AI Sam was living a beautiful life. Being an architect was financially rewarding, and he knew it was prime time to adjust his financial plans to include asset and legacy protection. Parker, the service robot and PC, downloaded the most updated PrecisionWealth™ technology and proceeded to ask Sam a series of 50 questions—all related to behavior, finances, risk, and death. The AI-driven in-depth learning program tailored each question as the algorithms processed the


previous answers. In less than two hours, Sam had a mid-level financial plan that would be reviewed and adjusted every 90 days. Sam looked into Parker’s retina-scanning eyes. Once Sam’s identity was confirmed, $275,000 immediately transfers to the custodian for investment. Sam is also charitably inclined to help the Boys and Girls Clubs of America. PrecisionWealth™ suggested a life insurance policy for the funding of an endowment in Sam’s name. His eyes were then scanned using biometrics for underwriting. Over 60 tests were conducted via the retina scan. After AI searches through Sam’s history and financial data, the underwriting gets approval in seconds. Sam goes the entire day without one human interaction. Abrupt Changes That Transform Sam’s story will move from fiction to non-fiction faster than any reader imagines. It’ll happen almost overnight. Time allowed our forefathers decades to transform from agriculture to industry. They had time to adjust, learn, and adapt; time to rebalance themselves, careers, and lifestyles. Abrupt change is coming. What took 100 years to advance in the past will occur in the next five years. From Transportation as a Service (TaaS) to precision medical diagnostics from a simple blood test; incredible technology enhancements will overtake consumers at lightning speed. It’s estimated that by 2030 almost 40% of all US jobs will be automated.

No economic sector will be unscathed by the forthcoming societal changes. One of the most significant economic areas to be impacted will be financial services, as AI and non-humans will complete 60% of output. And it isn’t isolated to Wall Street.

Independent financial services professionals will see their methods, staff, and processes altered significantly. Manual processes will cease by the algorithmic opportunity, and transactions will be accurately executed with fewer input or output errors. These algorithms will improve efficiency, reduce labor costs, limit compliance risk, remove emotional behavior and risk, and streamline logistics chains for most financial transactions. The result will be a cleaner experience for the retail investor. Clients’ needs and responsibilities are quickly changing. Therefore, the financial planning process must change. Cross-sector technology advancement will have a significant impact on the way financial professionals plan with their clientele. We forecast three transformational changes that’ll significantly impact the world of finance.

The Reality of Changing Client Needs

First, tomorrow’s client will need financial advice related to cash flow behaviors. Everything from new debt to the loss of jobs to technology will impact today’s average investor. Debt will grow incrementally as the world changes around us. Added expenses, limited job growth, and belowaverage wage increases will leave the consumer needing smarter advice about how to manage and spend their cash flow. Consider the debt we face today. US household debt is over $13 trillion. US credit card debt is currently above the 2008 financial crisis levels. And, student loan debt is up 9% per year since the financial crisis. Now, add in the future disappearance of certain trades brought on by technologic advancements. For the average consumer, it’ll become increasingly difficult to advance in work and sustain the wage growth needed. Some will advance via ongoing education, and others will seek additional jobs—sometimes working two or three jobs for every one job in the past. With pressure from mounting debt and job market shifts, cash flow management once reserved for retirement planning will become a matter of necessity for every client at any age. Second, we can’t escape the effects of demographics on the economy. We don’t focus on this enough since we’re naturally near-sighted. Most countries are in the same battle with what to do and how to handle the aging population. (This post won’t discuss government benefits and

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intervention, but will focus on infusing financial advice with biogerontology technology when planning for an aging population.) Technology is going to allow us to live longer. However, longevity isn’t always a benefit unless one’s wellness is optimal. In a country that’s traditionally lazy with health and wellness, life-extending technology may end up costing us in a population that downplays biogerontology and healthy aging.

Third, structural changes within society and technology will accelerate the need for financial advice to include heir and legacy planning. We believe that every financial professional and advisory firm should establish and offer a true next-generation planning model. This may very well be the most significant opportunistic shift for financial services in the immediate future. Most firms don’t have a basic heir model, and even less have a real formal offering. However, technology

Employment will be the other path subject to disruption. Financial advice will be altered to account for the change in workforce opportunities, the lack of jobs, and motivation to seek employment by today’s youth. The good news is that technology will create new jobs that don’t exist today. These jobs will be in areas like video-gaming and deep coding, or managing boutique shops and restaurants assisted by AIenhanced robots.

Regardless of wellness or not, today’s client will require adjustment to financial planning due to increases in longevity. One requirement will be retirement and postretirement fluid income plans. Planning for average life expectancy and making investments accordingly will no longer suffice. Multiple methods may be required, monitored, and executed as the client ages and more factors about their internal age are recognized and endorsed wooden blocks spelling out wealth and health with coins on top In summation of the aging portion of our research, financial services firms must create comprehensive care and aging plan models. An example of a full-scale care planning offering is Financial Independence Group’s creation of Whealth™. Our Whealth™ model is a complete wellness and wealth management tool for financial professionals to customize and implement over a three-year timeframe within their current businesses.

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technology and finance will become available in phase two and beyond. Much like PrecisionWealth™, the fictional company in our story, sincere advice will be extremely customized and “live” alongside the user. Guidance will be pure and objective and could plan for users the same way that most sophisticated firms do today via humans. Financial planning and advice once reserved for the ultra-affluent and family offices will become mainstream and holistic in offerings and benefits.

will alter this almost immediately. We predict the disruption of two nextgeneration paths.

For those next-generation clients that achieve the jobs of tomorrow, more burst planning will be required. Burst planning™ emphasizes multiple complexities and accounts for shifts in the plan and overall investments.

The initial disruption has already begun with information technology. This will continue to impact how advice is constructed, delivered, and executed. Recall the earlier story about Sam. The way Sam received financial planning and advice is available today. It has been for a few years. It simply hasn’t been advanced much past phase one. Quantum offerings of

For instance: A deep coder may work with Company X for a salary and benefits, then abruptly move to Company Y with a commission, a potential bonus, and stock options after a 12-month incubation process. This burst, or rapid and consistent shift, in gross input (salary, benefits, options, timing, and valuation) won’t work inside of today’s linear software


models or the traditional minds of most financial planners. The bad news is these jobs won’t require the vast amounts of human capital the way factories did during the Industrial Revolution. Now, the reality is job creation comes with a decreased need for employees. This naturally increases competition for those that want the jobs. However, it can also create a lack of self-worth and desire to achieve for those that feel unequipped. Client Concerns From Disruption Investors may be forced to examine cash flow and investment options knowing they may have children living with them much longer than expected. Complete retirement plans become disrupted in this model as location, living standards, and the possible care required for grandchildren becomes top-of-mind for parents. Guaranteed income and guaranteed employment will also become factors. Parents may invest to hedge or buy-up the factor used in guaranteed income for their children. Moreover, life insurance will have an entirely new meaning as the income protection and estate creation it offers will become invaluable. There is no longer one economy. Because of the many generations, types of work experience and education levels, the US economy is a conglomerate of hundreds of economic subsets. Advancing technologies will transform every economic subset. These complexities will require an adjustment in financial

services offerings for each subset. Financial services haven’t seen a change like this before, nor will it correctly anticipate the hyper rate of future transformation. The closest comparison is the move to automated algorithmic trading platforms. Although every financial professional must adapt to market evolution, for those that anticipate and respond to changes quickly, opportunities will be boundless. All economic subgroups will need exhaustive planning once reserved for the wealthy. Firms of all sizes will be able to capitalize on this new need by creating a variety of models for a multitude of economic groups.

©Surge Business Consulting 2019. All Rights Reserved. The thoughts and opinions expressed herein are those of its authors only. This is not tax or legal advice. This article is for educational purposes only. Written exclusively for Financial Independence Group. This article shall not be circulated without expressed written permission from Surge Business Consulting or Financial Independence Group.

John Schwalenberg, Surge Business Consulting Co-founder, Contact John - Phone: 214-945-2610, Email: Info@Surgebc.com

BOTTOM LINE The financial services sector has traditionally been slow to innovate. Most of the global disruption due to technology will lead directly back to finance. Every household will be impacted by the changes brought on by technology advancements. This will require alterations in household financial, investment, aging, and insurance planning. Unlike driverless cars, some of it will still require a human at the wheel. However, much will be conducted by technology itself. The key recommendation today is for financial professionals to examine how to work in a brandnew landscape. One without human interaction. One with Sam. s

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TEXT BY ALECIA BARNETTE

Care planning solutions are often overlooked by financial professionals for several reasons, the most common being the intimidation felt by a space they’ve never dealt with before and the emotional response this subject produces. Ironically, financial professionals have the most to gain by incorporating this line of business over other advisory figures clients use. So why should you as a financial professional talk care planning? You should talk about it because it’s making a massive resurgence in the insurance and retirement planning industry. Care planning is no longer a “maybe discussion,” these are mandates for the Wealth Counselor™ of tomorrow. Many of your clients believe they have enough money to self-fund an extended care event, but if they begin using more than planned, it’ll have a severe impact on their financial plan, thereby impacting you as well.

The Need for Care Planning Did you know according to the National Clearinghouse for Long-Term Care Information that around 70% of individuals over age 65 will require some type of long-term care (LTC) service during their lifetime? Of Americans age 65 and older today, one in five will require LTC services for five or more years. The number of Americans living with Alzheimer’s disease is growing. An estimated 5.4 million Americans of all ages have Alzheimer’s disease and these numbers are increasing at an alarming rate. By 2050, the number of people over the age of 65 with Alzheimer’s or dementia may nearly triple. Let that sink in…

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Given these facts, the question now becomes not whether an extended care event will affect your client’s retirement income plan, but when? When a person’s income needs drastically increase, where will the income to pay for the care come from? They may need to liquidate investments in managed accounts, annuities, and cash equivalents. If your business model is based on creating plans to generate income during retirement, paying for care will disrupt every aspect of your model. What will happen to it when at least 20% of your clients over age 65 are pulling between $50,000 and $120,000 out of their portfolios annually for more than five years? We know the costs of care are increasing, but they’re expected to dramatically jump as baby boomers are aging into this phase of life.

The Importance of the Care Planning Conversation Can you ensure your clients attain a rate of return high enough to get an additional $70,000 a year or more to fund care events which could last 5, 10, or even 15 years or more? Paying for care requires reallocation of income streams and can have a direct impact on your client’s ability to keep financial commitments they may have. It’s a discussion you need to have with every single one of your clients.

Historically, financial professionals have felt that having the care planning conversation meant initiating emotionally charged and tense discussions since it’s not a topic anyone enjoys thinking about—the inevitable aging process and potential loss of independence. Care planning was overlooked as a product line to offer because financial professionals just don’t know how and why they should talk about it.

I think what scares agents most is, they don’t know what they don’t know. Over the years, the landscape has changed in the LTC industry. When I started in this industry more than 20 years ago, most care planning solutions involved using traditional LTC insurance (LTCI). It’s always been the cheapest way to secure the largest pool of LTC benefits to start. The problem is it has a bad reputation with all the negative press regarding rate increases. We’ve seen many carriers raise rates anywhere from 5% to the 150% range. Additionally, many of the major insurers have left the marketplace because lower lapse rates have paired with higher claim experiences and it’s been devastating. The important detail to note here is this: LTC events are an inevitable milestone for most of our aging population and need to be planned for.

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Do I think traditional LTCI is a still a good fit? Absolutely! However, I do think there are many different solutions available that are becoming more popular. Check out our infographic (far left page) outlining the different solutions available to you in the marketplace.

Your Care Planning Resource What do numerous solutions mean for you as a financial professional? It means you have options. Many of the objections that you’re facing in the industry can now be overcome. Let’s take, for example, rate increases. Here at Financial Independence Group, we focus primarily on asset-based LTC as a solution. With this class of products, you have guarantees. Your client won’t experience rate increases and they’ll have a benefit whether they live, die, or walk away from the policy. We believe care planning isn’t a one-size-fits-all approach because every client is different. Remember, if your client doesn’t have a plan, then by default their money is their plan. You don’t have to be an expert in this space because that’s what we’re here for. You only need to be brave enough to start the care planning conversation with your clients to uphold your fiduciary responsibility.

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We can teach you how to approach this in an easy, repeatable, and product-agnostic way because of the many solutions available. s 1.  https://longtermcare.acl.gov/the-basics/how-much-carewill-you-need.html 2.  https://www.sciencedirect.com/science/article/abs/pii/ S1552526016000856 Alecia Barnette, Senior Vice President - Care Planning Division, Financial Independence Group, Inc. Contact Alecia - Phone: 800-527-1155, Email: Alecia@figmarketing.com


What’s the Best Fit? Long-term care (LTC) and life insurance tools all provide solutions…but which is best? It depends on the client.

TRADITIONAL LTC PRO

Typically, the most affordable way to cover LTC expenses

LIFE INSURANCE WITH QLTCI RIDERS

ASSET-BASED LTC PRO

PRO

More flexible option, leverages assets to realize cash value accumulation

HIGH

Allows the policyholder to have a portion of their death benefit prior to their death for qualified LTC needs

CON

More expensive with opportunity cost if a single premium is selected

CON

CON

Premiums may not be tax-deductible, and aren’t the “best” at any one function

BEST FOR

Clients who wants the lowest cost and most efficient way to cover LTC expenses

PRO

Reduces fear of wasting premiums while gaining a guaranteed death benefit, cash value, and LTC coverage

CON

“If you don’t use it, you lose it” no cash value or return of premium

LIFE INSURANCE WITH AB RIDERS

The benefit is calculated at time of claim based on the conditions of the rider specifications.

BEST FOR

Clients who looks to solve an LTC problem, but want life insurance with return or premium and guaranteed premium

BEST FOR

BEST FOR

Clients who primarily want life insurance, but find LTC appealing and nice to have in case they need it

Clients that want a death benefit, but like the security of having benefits for chronic illness, permanent disability, or cognitive impairments

Care Planning Department

Traditional LTC Life Department

Care Planning Priority

Asset- Based LTC

Life Insurance with a LTC Rider

Life Insurance with a chronic illness rider

LOW

Life Insurance with a terminal or critical illness rider

Life Insurance

LOW

Life Insurance Priority

HIGH

With so many products available, it can seem overwhelming to find what’s right for your client. We can help.

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RetireUp Pro integrates with Riskalyze software. We’re proud to announce the integration of RetireUp Pro with Riskalyze, a software aimed at financial professionals to get risk assessments for client portfolios. With a few clicks, RetireUp Pro users can integrate Riskalyze software in their RetireUp Pro account via our Agent Portal.

More than a sales tool, RetireUpPro is the industry’s first advisor-guided retirement decision platform. Designed to increase capacity, productivity, and profitability—you can guide your clients through a personalized retirement planning experience. With RetireUpPro, you’ll be able to: • Change the client conversation • Visualize retirement realities and solutions • Get approvals faster with clean and compliant apps

If you have questions or concerns about syncing the two programs, please call (800) 527-1155 to speak with our Marketing Program Specialist, Hamilton Morales; or email him at hamilton.morales@figmarketing.com


An Introduction to IPCG TEXT BY MATT WOODFORD

Independent Property and Casualty Group (IPCG) works with companies and individuals to offer the best products to protect assets and minimize risk. We take a holistic approach when working with our clients to make sure their coverage aligns with their financial goals. IPCG has access with the top carriers in all 50 states, ensuring the client gets the best value in the marketplace. We stay in constant contact with the carriers during renewals to confirm the client is still in the optimal position with their rates and coverage. Service is a key component in the foundation of IPCG’s business model. Our concierge department will act as a liaison between the carrier and client; making sure the client understands the coverage they have in place, as well as being a resource to assist when a potentially crucial claim arises. IPCG has also created a unique partnership with financial professionals. We see three key areas where the financial professional will benefit:

1. Help you insulate your business. The more lines someone has, the closer the relationship becomes.

2. Attract the next generation. Help younger generations with their property and casualty needs to open the door for future financial services.

3. Generate an additional revenue stream. You’ll be paid commission on new business and renewals.

Through our partnership, we’ll help you concentrate on growing your business without the worry of unnecessary financial loss from potential insurable risks your clients may face. At IPCG, our goal is to ensure your clients are protected and their coverage continues to meet their business or personal needs. s Matt Woodford, President, Independent Property and Casualty Group Contact Matt - Phone: 704-990-0930, Email: matt.woodford@ipcginsurance.com

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TEXT BY BROOKS RILEY

Six Questions That Can Help You Maximize Profitability Operating an independent advisory practice requires expertise in a multitude of various fields. Many advisors will typically focus on client relationship management and financial planning as their primary disciplines (and rightfully so), as these are the core functions of the profession. However, it’s also important to remember that your advisory practice is a business and should run as such to What’s your net production? achieve the levels of growth and profitability Most financial professionals know that you desire. Many independent financial professionals don’t track important business efficiency metrics, like average hourly rate or the annual costs to maintain a client. However, once you know the answers to a few crucial questions, you’ll have the tools to start running your practice more like a business and start maximizing your time and profitability.

their gross production each year, but what was your take home after all expenses were paid to run your business? That’s what counts when evaluating how successful your practice is. The average expenses of an independent financial professional typically range from 40% to 60% of his or her gross production.

What’s your average hourly value? Suppose you work 40 hours a week and take two one-week vacations during the year. That means you work about 2,000 hours a year. How much is one hour of your time worth? Are you compensated fairly? If your gross production is $500,000 and you work 2,000 hours a year, your average value is $250 an hour. If every hour of your time is worth $250, should you be paying bills, filing paperwork, or tracking down transfers? Or should you be paying an assistant $20 an hour to handle these tasks? If you want to leverage your resources properly, you should be outsourcing anything you’re doing during the day that’s not in line with your pay. Meaning you can spend more time focused on clients and prospects.

How much time do you spend meeting with clients or prospects? It’s widely understood that the more time you spend directly with clients and prospects, the more profitable you’ll be. Financial professionals that focus more of their activity on interacting with clients and prospects build more trust, get more of their clients’ assets, close more prospects, get more referrals, and lose fewer clients over time. When you dedicate most of your valuable time to working with clients and prospects, you’ll get more clients and keep them longer.

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How much time do you spend with your top clients? You need to make sure you’re spending time with the right clients. Who are the right clients? You should segment your book of business based on where most of your revenue comes from. If you have 250 clients and 25 are producing 70% of your total revenue, those 25 clients should be getting 70% of your time.

How much does it cost to maintain a client for a year? Add up all your expenses in the last year and divide that figure by the number of clients you served. Make sure to include your business expenses, cost of time spent, cost of mailings and client events, etc. Then, you can compare that with the average fee that you charge clients and determine what the breakeven assets under management (AUM) are per client. This allows you to gauge your current clients, as well as focus your prospecting parameters to ensure that the revenue generated from adding a new client will improve your business’s profitability.

What percentage of your overall business is generated from a recurring revenue source? Recurring revenue sources can help increase the profitability and enterprise value of your firm. Most advisors participate in some mix of both commissions- and fee-based production. As a firm matures, typically, the production mix will shift profoundly toward fee-based activities because the fee-based model allows you to focus more on higher revenue-producing clients without the need to prospect as heavily for new business. Furthermore, as one looks to exit the industry or sell their practice, recurring fee-based revenue will command a higher business valuation than a firm that’s focused on one-time, commission-based revenue sources.

These are just a few high-level questions that financial professionals should be able to answer to assess the efficiency and profitability of their business. With the full range of responsibilities associated with operating an independent financial planning firm, it’s easy to neglect tracking specific business efficiency metrics. However, it’s a significant undertaking to achieve your business growth and profitability goals. If you’d like assistance with a business assessment or more details, please contact an Alphastar business consultant. s Brooks Riley, Investment Advisor Consultant, Alphastar Capital Management, Contact Brooks - Phone: 855-340-2514, Email: Brooks.Riley@alphastarcm.com CONNECTIONS MAGAZINE| | 33 33 CONNECTIONS MAGAZINE


        

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Care Planning: A Personal Perspective TEXT BY J. WESLEY KNOWLES

As we mature and experience life, with its hurdles and rewards, we rarely contemplate long-term care (LTC) and the possibility that there may be a time when we’ll need it. The truth is, most of us feel invincible until our bodies give us a reason not to. Aging is cyclical. We may eventually care for our parents as they did for us when we were children. It’s when a parent or spouse matures to the point of needing around-the-clock care that love and commitment become real. The burden of caregiving then falls to the spouse or children when existing finances can’t cover the escalating costs of supervised care.

A Personal Perspective My father recently lost a battle to Alzheimer’s disease, one that had been slowly escalating over the last nine years. The hints were there from time to time in the early stages. Our family overlooked these indicators with excuses. Over time, our family realized that something bigger was at play changing my father’s perceptions and personality. Diagnosed with dementia early on, and later re-diagnosed as Alzheimer’s disease and dementia, this disease would ultimately ruin my father’s quality of life while complicating ours as his caregivers. In the US alone, an estimated 5.8 million people currently have Alzheimer’s disease, according to the Alzheimer’s Association. This figure may rise to 14 million people by 2050 as life expectancy continues to increase.1 Alzheimer’s disease is now the sixth leading cause of death and the only one in the top ten causes of death in the US that are on the rise. It’s also the only leading cause of death that medical experts can’t cure, prevent, or slow down.2 Finding care can be precarious and our family learned about the limited options available to us during the process. When you assume the role of caregiver there’s 36 | CONNECTIONS MAGAZINE

an added emotional and physical toll that takes you by surprise. You lose your identity as a son, daughter, or spouse and become a nurse, boss, and therapist. With cognitive disorders it becomes even more complicated when the patient associates you with things they don’t want you to do for them (bathe, bathroom assistance, changing, and administering medicines). Their behavior becomes hostile and sometimes violent, changing how you relate to them and how they see you.

Limited Options Without Care Planning Without a care plan in place, in-home care was our only option, since just a few care days per week can quickly add up. For instance, 44 hours of outside caregiving work can easily add up to more than $45,000 a year.6 We were only able to do four days a week to stay on budget for other medical and living expenses. The shortfall left gaps in service that our family members filled by becoming my father’s caregivers. The hours were mostly nights and weekends, usually after long days of full-time work, to assist with incontinence and mobility issues. I can’t emphasize the amount of extra stress this adds to a family dynamic. These circumstances challenged us every day throughout the


last several years of my father’s life. Our lives became increasingly stressed as his condition worsened. Fortunately, moving my parents across the street two years ago eliminated the burden of distance. Geography can become an extra stressor for the family caregiver and long-distance caregivers reported the highest average annual expenses.4 In 2016, the National Alliance for Caregiving showed that roughly one in six Americans are taking care of a disabled family member.5 Relatives who step up to the responsibility often experience relocation, house reconfiguration, additional expenses, and of course, work interruption.4 There are many options for care and having an LTC policy in place for my parents would have radically redefined our approach to my father. It would’ve allowed us to remain his family by having professional caregivers most of the time. In exhaustion, we grew increasingly impatient with his behavior. It was concerning that the hostility my father expressed regularly would tarnish our positive memories of him. We worked to remember that our frustrations should be directed at the affliction and not the afflicted. Once hospice stepped in for the last six weeks of his life, we were able to re-group and go back to our family roles again. We have no regrets for doing our part to assist my father during his decline. He never intended to be the one to become helpless and entirely dependent on the family he had served his whole life. Our difficulties stemmed from balancing multiple jobs and regular commitments. It became physically exhausting over time and eventually burnout set in. My mother bore the brunt of it. Confined to the same household with him each day, getting little rest, and dealing with health issues herself, she managed remarkably. The point for sharing this personal perspective is to emphasize setting aside an allocation for LTC now to protect assets in retirement. Proper planning is an important component to financial considerations and LTC plans can help alleviate future illness and disability burdens. It also reduces the amount of physical, emotional, and financial responsibility for spouses and children alike. CONNECTIONS MAGAZINE | 37


Bottom Line

There are several options for aging family members with specific care needs, which include continuing care retirement communities, assisted living facilities, group homes, and nursing homes.3 They all come at a cost and there’s no one-size-fits-all rule in this area of life. Putting off investigating care planning options today will only compromise assets down the line. The reality is that healthcare is becoming increasingly more expensive. Even a simple care plan or a versatile indexed universal life (IUL) policy may cover some of the costs of in-home caregiving services that could ease serious financial or emotional burdens for family later in life. Having a care plan in place would’ve made a difference in how we were relating to my father during his decline. I played the roles of son and caregiver and both were very difficult at times. My family is glad that my father is no longer suffering, but we miss him tremendously. We’re recalling all of the wisdom, gifts, and experiences he imparted to us before Alzheimer’s disease stole him away.

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It’s important for clients to consult with a financial professional that understands care planning options with access to a variety of programs, methods, and choices. This way, a customized plan that fits personal needs can be built and allocated over time. s 1. 2. 3. 4. 5. 6.

https://www.nia.nih.gov/health/alzheimers- disease-fact-sheet https://www.medicalnewstoday.com/ articles/282929.php https://www.nia.nih.gov/health/finding-long- term-care-person-alzheimers https://www.nap.edu/read/23606/chapter/6 https://www.thinkadvisor.com/2019/09/23/ the-early-retirement-your-clients-didnt-plan- for/?slreturn=20190825105941 https://www.seniorliving.org/insurance/long-term- care/

J. Wesley Knowles, Marketing Media Specialist, APM Division, Financial Independence Group, Inc. Contact Wesley - Phone: 800-527-1155, Email: Wes.Knowles@figmarketing.com


The great retirement income gap. It happens when your clients’ income needs unexpectedly change… and their expenses suddenly exceed their budget. When your clients aren’t prepared for the retirement income gap, the future they’ve worked and planned for could be jeopardized. At the same time, their income gap can impact your business as well.

Contact: Alecia Barnette, CLTC 1- 800-527-1155 ext 124 alecia@figmarketing.com www.figmarketing.com

Connect with your clients to create a financial strategy with OneAmerica® Care Solutions. Our tools and resources efficiently communicate with clients about their retirement income plans, risks and possibilities.

Help your clients close the retirement income gap (and close your own income gap, too!)

Note: Products issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Not available in all states or may vary by state. • NOT A DEPOSIT • NOT FDIC OR NCUA INSURED • NOT BANK OR CREDIT UNION GUARANTEED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • MAY LOSE VALUE The contact listed is not an affiliate of the companies of OneAmerica.

is the marketing name for the companies of OneAmerica | OneAmerica.com © 2018 OneAmerica Financial Partners, Inc. All rights reserved.

For use with financial professionals only. Not for public distribution. I-30149 07/27/18


Check out the APM portfolio site!


TEXT BY MARK STEWART

TEN STEPS

for Achieving Financial Independence Financial independence: it’s a term used often in the financial industry. It’s used daily here at…Financial Independence Group. But when we’re talking about your clients’ financial independence, we’re talking about a sound, safe, and comfortable retirement. One that means they no longer depend on outside sources of income to live. Everything is peachy. Everything is fine. It’s what most people dream of in retirement. But many Americans won’t ever achieve it. They’ll be left to worry how they’ll fare in retirement—especially those close to it. Hopefully, none are your clients. Help them better prepare for the future by nudging them in the proper direction. Feel free to share these ten tips for achieving financial independence the next time you sit down with your clients.

Financial Independence Tips

good idea to suggest the ICE egg cover between three and six months of living expenses.

1. Create action plans that’ll get your clients where they want to be. 4. The tax-advantageous route is a great way to go. Achieving financial independence isn’t about one big plan coming to life. It’s about completing a whole series of small plans on time. Finding your clients’ financial freedom will require time and research on your part to establish and achieve the goals you’ve set out. Give your clients a list of these various goals so they’re officially established. You’ll be able to track your progress easier, too.

2. Save money, even if it’s just a little. It’s always a good idea to save money, no matter what’s happening. Even if it’s not much, saving money creates healthy habits and ensures they’re always making progress towards the overall goal: financial independence.

Heavy taxes can reduce a client’s income, meaning it’s harder to save and pay off debts. When you’re planning, try to think about the taxsaving strategies that could result in less money for Uncle Sam—and more money for their retirement.

5. Being insured means being smart. I’m sure you’ve heard it before. The “It won’t happen to me.” It’s a line that financial professionals know a little too well. It’s important to talk about the what-ifs of life, and how you can help your clients be protected. As clients age and their wealth grows, their insurance coverage should increase as well. That way, all their assets are protected in case of the unthinkable.

3. Early on, help them develop an ICE egg. 6. Encourage them to spend responsibly. It’s not a nest egg. It’s an in-case-of-emergency (ICE) egg. Nearly 80% of Americans workers live paycheck to paycheck. That’s a little alarming. One of the first financial goals anyone should have is to set up an emergency fund in case an unplanned event happens. It’s a 42 | CONNECTIONS MAGAZINE

Ask about spending habits. If there seems to be concern about how much money is being spent, let them know. Clients who tend to have more fun with their expenditures instead of putting money away can always get hurt in the long run.


7. Refocus goals annually. Helping your clients create—and stick to—their financial goals are vitally important to their financial independence. The action plans noted in the first tip can help you and your clients stick to a method for financial success. But with everything in life, things change. Take the time to review financial goals with your clients each year to make sure everything is going smoothly. It can be easy to get pulled in different directions financially, so sit down each year with your clients to renew their commitments.

8. Keep learning about personal finance. You’re the financial expert for your clients. They rely on you to guide them through life’s financial obstacles. But that doesn’t mean they shouldn’t understand (and even appreciate) personal finance. However, you can encourage your clients to continuously learn about personal finance. That can mean sharing relevant articles or videos with them, recommending books, or maybe even creating content yourself. Every bit of personal finance knowledge will help them think more strategically about their money. And strategically thinking can equate to financial independence.

to motivate preschoolers to stay under control—and it’s an oddly compelling way to explain what it may take to achieve financial independence. The test placed a marshmallow in front of children, and if they waited 15 minutes to eat it, they would be rewarded with two additional marshmallows to snack on. However, many children couldn’t wait. The results found that decades later, the children who did wait were more successful individuals overall. It’s a great lesson in self-control, and at the very least, it could show your clients that if some 4-year-olds can practice delayed gratification…they can in their finances, too.

Bottom Line As a financial professional, you play a prominent and vital role in your clients’ journey to financial independence. And while no single piece of advice or strategy can achieve financial independence alone, these quick tips can serve as valuable conversation starters the next time you sit down with your clients to plan for their future. s

9. Avoid consumer debt. Consumer debt can be a financial independence killer—especially credit cards with the ridiculous annual percentage rates. That alone can make your clients feel like they’re playing credit card catch-up for decades.

Mark Stewart, Copywriter Financial Independence Group, Inc. Contact: Mark - Phone: 704-439-2334, Email: Mark.Stewart@figmarketing.com

Did you know that the collective debt for Americans is over $4 trillion? And yes, you did read that correctly. Try to focus your clients’ thoughts on healthy spending habits rather than the latest and greatest trends. If they can focus in on their livelihood and financial well-being, they may begin ignoring those more lavish impulses.

10. Explain the marshmallow test. The marshmallow test was an iconic series of psychological studies from the 1960s that examined the power of delayed gratification

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BUSINESS CONSULTING Surge™ Business Consulting isn’t a sales coaching or traditional track consulting program. It’s an exclusive bespoke process to bring out the very best from financial professionals who understand they are beer than present. They desire to surge in every aspect of their business.

Foundation (Strategic)

Risks + Growth Oppounities (Tactical)

Execution (Accountability)

Whether examining our personal relationships or the home we live in, it all begins with the foundation. If the foundation isn’t rock solid, everything built upon it will remain weak in perpetuity. Now more than ever, financial services professionals face unparalleled risk and a plethora of oppounity. From new regulations to technologies and talent, identifying and forecasting risks and growth oppounities is paramount to future success.

Surge™ Business Consulting engages with financial professionals to create tailored business solutions to maximize growth in their respective businesses. Through our 20/20 process, Surge™ holds itself and the financial professional accountable to reaching new heights together.


The Surge™ TOP 10 MOST ADDRESSED Surge™ has helped hundreds of companies across the financial services industry identify strengths and deficiencies to ultimately grow, improve and transform their firms. Through years of analysis and implementation, the expeise Surge™ offers is incomparable.

EVOLVED MARKETING PATH

REDUNDANT PROCESSES

TECHNOLOGY DEFICIENCIES

FEE COMPRESSION

NEXT GENERATION MODELS

CENTERS OF INFLUENCE

EMPLOYEE COMPENSATION

EXPANSION

DIGITAL MEDIA & MARKETING

CONTINUITY & SUCCESSION

Financial Independence Group | 19520 W. Catawba Ave., Suite 200 Cornelius, Noh Carolina 28031 (800) 527-1155

www.SurgeBC.com


LIFE INSURANCE CONCEPTS TEXT BY CHRIS KITE

Our Comprehensive Analysis & Review (CAR) program can help you guide your clients in the review of proposed or existing life insurance policies, and then adjust them for changing needs while considering alternatives.

In particular, you can help your clients manage their policies in or near retirement when needs typically change from income protection (in case of early death) to protecting and maximizing policy values and benefits for longevity. For clients who plan to take policy distributions to supplement retirement income, this guidance includes how to manage the policy for optimal use.

Client Life Insurance Reviews A policy review should have four key aspects: – Insurance

tailoring: Should coverage be increased or decreased?

– Cash

value peak: Does the cash value keep growing or start to decrease?

– Premium

opportunity: How much premium can be added to leverage growth?

– Review

credits, loan, and withdrawals: How are credits added and what are plans for distributions?

46 | CONNECTIONS MAGAZINE

Use this key question to maximize long-term value and benefits: Would your client prefer to add more premiums or reduce the current insurance amount if needed? Insurance Tailoring Insurance tailoring refers to adjusting the policy benefit based on a life cycle of needs and resources. Life insurance should be balanced by the ability to pay premiums to optimize long-term values and benefits. A key concept is that a life insurance benefit is a combination of insurance and value as shown in


the graph below. The insurance amount may start as level with value added on to increase the benefit. Eventually, the insurance amount should decrease due to changing needs and increasing costs of insurance as you age. We’ll display product types that provide cash value versus internal values for the death benefit and not available in cash while living.

$20,000

CASH VALUE AGE Prior to retirement, financial professionals typically recommend clients have life insurance coverage that equals five to ten (or more) times their income. A combination of term and permanent insurance is often a good combination to provide this coverage. As one nears retirement, the need for income replacement in case of an early death typically makes a critical change toward preserving or maximizing values for a long life. This principle applies whether the policy is kept only for the death benefit or also provides retirement income. Typically, term insurance coverage is dropped or reduced in retirement years when premiums would increase dramatically. In the graph above, the insurance portion can be covered entirely by term insurance and the value portion can represent an accumulation of retirement assets or income separate from a life insurance policy. For cash value life insurance, the ability to provide a permanent benefit depends on building value, and eventually, decreasing the insurance amount. Cash Value Peak The cash value in a UL policy declines from a peak when the policy costs exceed the current average credits and premiums paid. This is a key decision point for policy changes. By this point, you should either put in more premium to keep the policy going or reduce the benefit unless you’re comfortable with having extended term insurance (ETI). When cash value reaches a peak, the policy typically would last only about ten more years. An exception to a policy lapsing with zero cash value is with guaranteed universal life (GUL), or other products

NET SURRENDER VALUE

$

NET INSURANCE

with secondary guarantees to maintain the death benefit even if the cash value is below zero. However, these policies do have internal account values that need to continue increasing to support the secondary guarantees. A GUL policy should be checked regularly to see if the premiums paid keep up with the expected guaranteed benefit.

$15,000

$10,000

$5,000

$0 10

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30

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POLICY YEAR

If a policy has enough cash value, you can take distributions to supplement income. These distributions will typically reduce the death benefit and the cash value. If credits are greater than the income taken, then the cash value can continue to grow. Although, values and benefits would be less than what they would have been without taking the income. If your client plans to regularly take income from the policy via loans or withdrawals, you should consider minimizing the death benefit within tax limits in order to minimize costs and maximize income. Premium Opportunity When reviewing a life insurance policy, you should consider the opportunity to add more premiums, particularly for UL insurance that has flexible premiums and adjustable benefits. This opportunity may seem counterintuitive, but paying higher premiums reduces insurance costs and maximizes long-term cash values and benefits. Review policy statements and in force illustrations to see the premium opportunity for how much can be added to the policy now or over the coming years. For example, a UL policy may have a level benefit of $200,000 with $40,000 in cash value. The $160,000 difference between the death benefit and cash value is the insurance amount and is used to determine costs. The policy was issued years ago when interest rates were much higher and now the cash value is CONNECTIONS MAGAZINE | 47


less than originally projected. The policy is projected to last a limited number of years with a big risk of the insured outliving the policy without any benefit to the beneficiaries. It’s essentially ETI. The red in the graph below represents a policy lapse at a future age when the value in black is depleted. UL AS EXTENDED TERM INSURANCE

Lapse

$

Cash Value

additions. A whole life policy is designed with a fixed premium that makes it permanent insurance with cash value growing and the internal insurance amount decreasing. If policy loans have been used to pay the base premium or to provide distributions, then the opportunity to repay loans should be considered to build long-term value and benefits particularly if the loan is charged at a rate higher than what’s applied to the cash value that supports it.

Net Insurance

AGE

To avoid a policy lapse and to build cash value, premiums can be added over time or as a lump sum. In this example, the policy has maximum premiums that would allow $40,000 to be added to the policy. Adding the premium then doubles the cash value and reduces the insurance amount to about $120,000 so that costs are reduced by about 25%. The cash value then continues to grow, making it permanent insurance that would last until death (or be available to use as cash value if needed). Many older UL policies have guaranteed interest rates of 4% or higher so this premium opportunity may provide a solid return that’s particularly attractive in a low interest rate economy. Check on what the premium load would be for adding premiums. Premium Opportunity with Term or Whole Life Insurance Term Life Insurance When reviewing a life insurance policy, you should consider the opportunity to add more premiums, particularly for UL insurance that has flexible premiums and adjustable benefits. Whole Life Insurance When reviewing a life insurance policy, you should consider the opportunity to add more premiums, particularly for UL insurance that has flexible premiums and adjustable benefits. Whole life insurance may have options to add extra premiums or apply dividends to purchase paid-up 48 | CONNECTIONS MAGAZINE

$

NET INSURANCE CASH VALUE AGE

Policyholders should be strongly encouraged to fund UL policies (other than GUL) near the tax limits in or near retirement. The policy may start with a minimum or target premium and then later be funded near the maximum premium to maximize cash value and longterm benefits. Exceptions occur when the client only wants or needs the policy to be ETI. In cases where the insured’s life expectancy has declined, the term coverage may be long enough to reasonably expect a benefit. GUL is an exception to this principle of building cash value but does require a premium that builds internal values that follow the principle shown in the graph above. GUL is focused on guaranteeing a leveled death benefit and no cash value. Be sure your client has set up automated premium payments that are checked to be sure this coverage stays in force. Failure to pay the premium, particularly at older ages, results in a tremendous loss in economic value. Verify if the policy allows prepayment of premiums for the guarantees or whether there is actually a prepayment penalty. Insurance Tailoring: Adjusting Benefits Problems with Low Cash Value in Retirement Problems with cost and difficult decisions occur for life insurance policies with low cash values during retirement. As previously noted, GUL is an exception as long as the premium is paid.


For UL as ETI, the following graph shows how the low cash value in black is depleted. When it reaches a peak, the policy may last about ten more years. Costs are based on the insurance amount (in gray) and the cost per thousand rises with age. The policy lapse is shown in white for ages where there’s no benefit. UL AS EXTENDED TERM INSURANCE

Lapse

$

Cash Value

Net Insurance

AGE

Consider the prior example where a UL insurance policy with a level $200,000 benefit has $40,000 in cash value in retirement. If the policyholder isn’t willing or able to add enough premiums, then reducing the benefit is typically prudent. The exception is when life expectancy has declined and the insured is unlikely to outlive the benefit. In this example, the death benefit may need to be reduced from $200,000 to $80,000 to allow the $40,000 in cash value to continue to grow. Eventually, the cash value may grow enough so that the death benefit is increased above $80,000. The policy preserves the option to use cash value in case it’s needed or to keep all values to support a permanent death benefit. Choosing to reduce the face amount to $80,000 can be a difficult decision as a death earlier than expected may occur and the beneficiaries would have $120,000 less in benefits. Insurance companies require the policyholder request each face decrease so you typically can’t request smaller decreases occur over the years to provide a smoother transition. The prudent and practical choice may be to make a large enough decrease to allow the policy to grow and provide a permanent benefit. Increasing to Level Death Benefit The increasing death benefit option for UL policies has a level insurance amount where the account value is added on to provide the total death benefit that increases due to account value increases. It allows about two to three times as much premium to be paid into the policy compared to a level death benefit option. However, if not enough premiums are paid or credits added, then the account value will decrease and

cause the death benefit to decrease from the prior total. If the account value is depleted, then the policy will lapse. Typically, you should switch from the increasing death benefit option to the level death benefit option in retirement unless you’re still funding the policy near the tax limits. You may also need to decrease the face amount with this level option if the account value wouldn’t be enough to keep the policy going over the following years. When a level benefit policy is properly funded, the death benefit can eventually increase due to cash value growth. Whole life can provide an increasing death benefit when dividends purchase paid-up additions. Then these additions have a guaranteed increasing cash value that decreases the internal insurance amount. Review Credits, Loans, and Withdrawals Variable and Indexed Universal Life: Actual Patterns of Credits and Income Indexed universal life (IUL) provides an upside for index credits while guaranteeing no investment loss. In contrast, variable life products have subaccounts that may provide a higher credit in a particular year but may have losses in other years. See the policy illustrations and product guides for how the indexes or subaccounts work. When you review a policy statement for an indexed product, keep in mind that if there is an index credit for an account, the credit typically won’t show up until the end of the index year. So you need to look at when the premium was paid into the account. Illustrations of IUL cash value growth or income are typically based on an assumption of a level credit rate. The results will vary each year. Some years will have no credits. In other years, the credit will be higher or lower than the illustrated average. If you start taking income from the policy, then you’d likely need to adjust the amount from year-to-year based on the actual and average past credits. Income Monitoring to Preserve Tax Advantages If you plan to use policy loans to provide income, keep in mind that the policy needs to stay in force until death in order to avoid a tax on gains that support the loan balance. If the policy lapses, the cash value is surrendered to pay off the loan balance. Be sure your company has a process to limit loans, use fixed loans, and manage insurance cost to keep the policy from lapsing. CONNECTIONS MAGAZINE | 49


Case Studies The prior graph shown for UL as ETI was run as an age 45 case with the minimum premium to carry the policy to age 80 based on current costs and a 7.10% IUL credit rate. However, the credit rate doesn’t make a big difference because the cash value is so low. The following graph is the same case except it’s run with a fixed account of 3.75%, current costs, and a target premium that’s twice as much as the minimum premium. The policy is projected to carry to age UL TARGET PREMIUM AT 3.75% 93 and the cash value in black peaks at age 80. Lapse

$

Cash Value

Net Insurance

AGE

The next example is the same case with a maximum premium and with an indexed credit rate of 7.10%. With this higher credit rate and higher premium, the policy is projected to provide income equal to about three times the premiums paid.

While there are many combinations of how these values and benefits can be designed, the key concept is how the insurance amount in gray decreases to minimize costs and maximize values. The black again represents cash value and the green represents total income distributed. IUL MAX PREMIUM AND INCOME AT 7.10%

The next example is with the same maximum premium and the 7.10% index credit rate. The variation is to start with about 41% of the death benefit compared to the prior case, but have the death benefit increase to allow the same premium and then change to a level death benefit option when distributions begin. The death benefit actually decreases with the distributions so you don’t see a level death benefit. The key concept again is how the insurance amount in gray decreases to minimize costs and maximize values. The black again represents cash value and the green represents total income distributed. This design provides about 21% higher income.

Income

Cash Value

$ Net Insurance

AGE IUL GLP2 INCOME AT 7.10%

Income

$

Cash Value

Net Insurance

AGE

50 | CONNECTIONS MAGAZINE


Level Term Insurance Followed by Decreasing Benefit The following graph shows insurance tailoring of term life insurance coverage using a UL structure. The policy has a level death benefit (shown in gray) for a selected number of years such as 10, 15, or 20 years. The premium and benefit is guaranteed not to change during this time. After the time period, the premium stays the same and the benefit is reduced. This pattern fits well with a transition into retirement using separate assets for retirement values and income.

$ Net Insurance

Single-Premium Life Insurance and Reduced Paid-Up Insurance AGE A single-premium policy typically provides a level of guaranteed benefit with increasing cash value and the potential for additions based on non-guaranteed elements. It can be used to transfer values from an existing policy to a new single premium policy. It’s similar to reduced paid-up (RPU) insurance options within a cash value policy that reduce the benefit and use the cash value to pay-up the policy so that no more premiums are needed or allowed. For example, a whole life policy can be converted to RPU and then experience increases due to non-guaranteed dividends. s Chris Kite, Policy Design Analyst – Life Department, Financial Independence Group, Inc. Contact Chris - Phone: 800-527-1155, Email: Chris.Kite@figmarketing.com

Interested in what the CAR program can do for you and your clients? Learn more about this game-changing program by logging into your Agent Portal or by contacting your private client group.

CONNECTIONS MAGAZINE | 51


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©2020 FINANCIAL INDEPENDENCE GROUP, LLC. ALL RIGHTS RESERVED.


TEXT BY PAUL VAN GINHOVEN

This article will provide you with some information and for their financial gain. In other words, it’s their day job. tips concerning topic we hear more about each day – Most people and organizations may not spend much time cybersecurity. We’ve all seen the news over the past thinking about cybersecurity – certainly not as much time couple of years regarding major breaches at high- as a fraudster does. Prevention may be difficult as fraudsters profile organizations such as Target, Anthem, Yahoo, are always trying to stay one step ahead, but there are good Equifax and even the SEC. These organizations are just practices people can do to make it difficult for a fraudster. a few examples and demonstrates the fact if major organizations are What can we do? How do Fraudsters utilize many methods to gain access to information in your computer impacted by cybersecurity breaches, we protect ourselves systems. One of the most common then small organizations and individuals when a fraudster can go methods used is “phishing” because it’s most certainly have vulnerabilities as so easy. Phishing schemes are typically well. Yahoo’s breach compromised to great lengths? in the form of emails that appear to be approximately three billion accounts worldwide, while Equifax’s breach impacted approximately legitimate requests from companies you may do business 143 million Americans, so this issue is far-reaching. As we with. However, when accessed fully, a fraudster may gain become more reliant on technology to get our business unlimited access to your emails, possibly your computer and done, we need to be more cognizant of the little things perhaps an entire network you’re connected to. Phishing we should be doing to protect our systems and ultimately, emails can look official and may utilize company logos or even reference specific names of people who work at the the sensitive information that is housed within it. company. So, what can we do? How do we protect ourselves It’s a fact that fraudsters seek easy targets and if anything, when a fraudster can go to great lengths? are persistent. Keep in mind, a fraudster’s time is completely dedicated to searching for and exploiting vulnerabilities Phishing emails often have clues you should be aware of. in a system and finding ways to access data they can use First, you should read the email carefully. An email that 54 | CONNECTIONS MAGAZINE


has an urgent tone, has obvious misspellings, contains grammatical errors, and/or is requesting highly sensitive information (i.e. Social Security information, bank account information, login IDs, passwords, etc.) are typically red flags that identify a fraudulent email. Secondly, hyperlinks within phishing emails often provide major clues. If you hover your mouse pointer over a hyperlink, it’s possible to see where the link is being directed without actually clicking on it. If the hyperlink is directed to some other source, this is a major red flag and you shouldn’t click on it. When in doubt, you should err on the side of caution and call the company where the email originated to verify if it’s a legitimate request. A two-minute phone call to verify a request for sensitive information may save you many headaches. Lastly, it is important to keep your antivirus and technology security current. Never hit the snooze button when it’s time to update your software or security patches. FINRA and the SEC have made cybersecurity an examination priority for the last few years running. This won’t change as regulators are very concerned about ensuring customer data is protected. Additionally, the NAIC has introduced Cybersecurity Model Regulation in the past year. Several states have already adopted this regulation, which sets cybersecurity standards, provides requirements for informing regulators of a breach, and requires insurance agents to have cybersecurity programs, amongst other things. State insurance departments are all looking at this topic and you can expect more states to either adopt the Cyber Model Regulation or develop their own versions of the rule. Lastly, and in light of all I’ve discussed, you should consider protecting your business with E&O insurance that includes cybersecurity coverage. Financial professionals are generally required to have their own E&O policy, but their policy may not include cybersecurity issues. If that’s the case with your E&O policy, you may have a great risk to bear in the event of any breaches. A cybersecurity breach and the legal ramifications that follow could very easily destroy the business you worked hard to create. Having insurance in place could help protect you from those risks, so review your professional coverages on a regular basis. Your livelihood depends on it! As always, should you have any compliance questions, we are always here to help. Please feel free to send an email to compliance@figmarketing.com. s Paul Van Ginhoven, Director Of Compliance, Financial Independence Group, Inc. Contact Paul - Phone: 800-527-1155, Email: Paul.VanGinhoven@figmarketing.com CONNECTIONS MAGAZINE | 55


2020 FINANCIAL INDEPENDENCE GROUP

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2021 Important Dates to Remember: 56 | CONNECTIONS MAGAZINE

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Apr. 12: Easter Apr. 15: Care Planning Meeting, Austin, TX (Lincoln)

• May 17-22: 2021 Agent Convention, Athens, Greece • Feb. 11-12: 2021 FIG Symposium, Las Vegas, NV


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FIG Connections Winter 2020  

Financial Independence Group's Connections magazine pays tribute to our financial professionals, partners and our carriers—along with our ow...

FIG Connections Winter 2020  

Financial Independence Group's Connections magazine pays tribute to our financial professionals, partners and our carriers—along with our ow...