IARFC Register Volume 19 No 4 July-August 2018 by IARFC

Volume 19 No 4 July-August 2018

Cliff Walsh, RFCÂŽ Discipline and Emotional Control

Become an

MRFC

IN THIS ISSUE Most Effectively Meeting the Financial Goals of Retirement Digitization Leads to Commoditization Systematize, Systematize, Systematize

MRFC accredited by NCCA Join an elite group of financial consultants education • experience • integrity Contact mrfc@IARFC.org or 800.532.9060

How to become an

MRFC

• F our years of professional experience as a full-time practitioner in the field of financial planning or financial services. • An educational requirement which can be satisfied in various ways. • Evidence of having met local licensing requirements for your type of planning services. • D ocumentation of a sound record of business integrity with no suspension or revocation of any professional licenses or designations. • Completion of the application in its entirety with application fee. • Submission of examination fees. • Pass the MRFC examination with a score of 67% or better.

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

Founded in 1984, the IARFC’s mission is to serve, educate and train financial practitioners to help their clients wisely “spend, save, invest, insure and plan for the future to achieve financial independence and peace of mind.” www.IARFC.org

IARFC News MRFC Certification Board Welcomes New Members

Louise Fallica RFC®

The accredited Master Registered Financial Consultant Certification Program announces the election of two new members to their Board of Directors (MCB), and the reelection of a current Director. The results answered the recent call to action for volunteers and a subsequent voting survey by the members. The mission of the MCB is to provide an ongoing benefit to the general public by granting and recertifying the MRFC credential, upholding it as a standard of excellence for ethical, valued, competent, and client-focused financial consultants. The MCB operates independently from the International Association of Registered Financial Consultants (IARFC) to establish and uphold high standards of competence for the MRFC and its credential holders. The Register | July-August 2018

Craig Lemoine, Ph.D.

Elected Board Members are: • Louise Fallica, RFC® of Design Capital Planning Group, Inc. — Smithtown, NY (re-elected) • Craig Lemoine, Ph.D., of University of Illinois — Urbana, IL • Mickey Jordan, MRFC, of Money Concepts — Hotsprings, AR The MRFC credential was recently awarded accreditation status by the National Commission of Certifying Agencies (NCCA). “This accreditation has been a long time coming,” acknowledges MCB Chairman Barry Dayley, MRFC. “I am excited to have Louise back for another term and to welcome Craig and Mickey. Now that the accreditation journey is behind us, we can focus on getting our message out to financial professional.”

Mickey Jordan, MRFC

Leaving the MCB will be Walt Woerheide, Ph.D. and Justin Martin, RFC®. “We definitely thank those leaving us for their diligent input the past years that brought us to the point of accreditation,” stated Dayley. “The MCB has been served well by their participation.” The MRFC credential is available to any financial professional who meets the requirements and passes the exam – a competency-based assessment designed to assure that candidates have mastered the knowledge and skills necessary to practice in the financial services profession. Visit www.iarfc.org for more information and to download an application.  Contact: 800.532.9060 mrfc@iarfc.org www.iarfc.org/professionals/mrfc Page 1

BOARD OF DIRECTORS Chairman and CEO, H. Stephen Bailey, LUTCF, CEBA, MRFC Vice Chairman, Nicholas A. Royer, RFC® President, Peter J. D’Arruda, MRFC Secretary, Michelle Blair, RFC

Director, J. Christopher Dixon, RFC® Director, Michael Jay Markey, Jr., MRFC Director, James B. Moss, CEP®, RFC® Director, Rick B. Stanzione, RFC®

Director, Mayo M. Woodward, CRPC®, RFC®

Treasurer, Michael Jay Markey, Jr., MRFC

INTERNATIONAL LEADERS Asia Chair, Jeffrey Chiew, DBA, CLU, ChFC, CFP®, RFC®

Hong Kong and Macao, Chair, Teresa So, Ph.D., MFP, RFP, FChFP, RFC®

Greater China Chair (China, Hong Kong, Macau & Taiwan), Liang Tien Lung, RFC®

India Deputy Chair, Vijay S. Wadagbalkar, RFC®

China Development Center CEO Kai Yuan Tu Australia and New Zealand Chair, George Flack, CFP®, FIPA, AFAIM, RFC® Hong Kong and Macau Honorary Chair, Samuel W. K. Yung, MH, CFP®, MFP, FChFP, RFC®

Indonesia Chair, Aidil Akbar Madjid, MBA, RFC® Malaysia Chair, Ng Jyi Vei, ChFC, CFP®, RFC® Philippines Chair, Ralph Liew, RFC® Taiwan Chair, Kai Yuan Tu, RFC® Trinidad Chair, Inshan Meahjohn, RFC®

MRFC CERTIFICATION BOARD Chairman, Barry L. Dayley, CFP , MRFC

Director, Craig Lemoine, Ph.D.

Director, Louise Fallica, RFC®

Director, Mickey Jordan, MRFC

Director, Julie Friend

WEBSITES

IARFC OFFICE ASSOCIATE TEAM

United States — www.iarfc.org

COO, Charlotte Isbell

China — www.iarfc.cn

Editorial Coordinator, Wendy M. Kennedy

Hong Kong — www.iarfc-hk.org

Membership Services, Vicki Caplinger

India — www.iarfcindia.org Indonesia — www.iarfcindonesia.com Philippines — www.iarfcphilippines.org Taiwan — www.iarfc.org.tw

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www.IARFC.org/Register 1046 Summit Drive Middletown, OH 45042-0506 800.532.9060

Membership Services, Judi Nelson Public Relations, Susan M. Cappa Information Technology, Randy Kriner

Editor-in-Chief Wendy M. Kennedy editor@iarfc.org Editor Susan M. Cappa susan@iarfc.org Editorial Advisory Committee Peter J. D’Arruda, MRFC Michelle Blair, RFC® The Register is published by the International Association of Registered Financial Consultants ©2018, It includes articles and advice on technical subjects, economic events, regulatory actions and practice management. The facts and opinions in the IARFC’s Register articles represent their author’s views and are not endorsed by the publisher. The IARFC makes no claim as to accuracy and does not guarantee or endorse any product or service that may be advertised or featured. Articles, comments and letters are welcomed by email to: Wendy M. Kennedy editor@iarfc.org Periodicals Postage Paid at Mansfield, Ohio. POSTMASTER: Send address changes to: P.O. Box 42506, Middletown, Ohio 45042-0506 SSN 1556-4045

Advertise The Register reaches 4,000 financial professionals every issue. Register advertising is an easy and cost-effective way to promote your company’s products and services to this dedicated audience. To advertise contact: 513.594.0736 advertise@iarfc.org www.iarfc.org The Register | July-August 2018

In This ISSUE

Volume 19 No. 4

Cover Story

Columns

IARFC News

14 Discipline and

Emotional Control

Features Most Effectively Meeting the Financial Goals of Retirement 7 By Wade Pfau

In Order to “Buy Low”… You MUST “Sell High” First 12 By Christopher P. Hill

Digitization Leads to Commoditization 16 By Michael J. Markey, Jr.

Systematize, Systematize, Systematize

1 MRFC Certification Board Welcomes New Members

Chairman’s Desk 6 Accreditation – Leverage the Recognition By H. Stephen Bailey

Marketing Unplugged 10 When People Don’t Want to Talk About Wills and Estate Planning By Bryce Sanders

Consumer Focus 28 The Need For Income Planning Has Erupted Onto The Scene By Peter D’Arruda

IARFC – Viewpoint

18 By Max Bolka

30 What is Old is New By Michelle Blair

Comparing the Various Solutions for LTC

Departments

25 By Bryan Kuderna

2 IARFC Domestic and International Directors

4 New IARFC Members and Designees

Journal of Personal Finance

4 Events Calendar 5 From the Editor

Access the full online version by visiting journalofpersonalfinance.com or by joining the IARFC. Hard and Adobe PDF copies are available to Members and Non-Members: Order today. https://store.iarfc.org/

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

The Register | July-August 2018

Page 3

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

2019 March 20-22 Conference Nashville

Events Calendar 2018 July 2018 Brookstone Capital Management National Conference — Exhibit

N e w M R F C s, R F C s, R FA , and General Members MRFC

Members Who Recommended Members

Darrick McGill, MRFC, TX Daniel Musick, MRFC, MI

Christopher P. Hill, RFC® Michael Jay Markey, Jr., MRFC Stephen B. Scarpa, RFC® Hannah E. Swigert, RFC®

RFC®, RFA®, General Members Victoria Albanese, RFA®, RI John S. Amatulli, RFC®, IN Eduardo Caldera, RFC®, CA Charles Cardenas, III, RFC®, TX Douglas R. Claycomb, RFC®, OK Jeffrey A. Concepcion, RFC®, OH Bonnie Dang, RFA®, CA Mark D. Daviau, RFC®, NY Presley S. Fee, RFA®, IL Brian E. Frambes, RFC®, AZ Ralph J. Lagriola, RFC®, NJ Angelica S. Lassetter, RFC®, FL Jocelyn Li, RFA®, CA Alexander E. Metzner, RFC®, MD Ashley Nobel, RFA® , CA Mark W. Petro, RFC®, PA Thomas J. Ross, RFC®, IA Michael Shelton, RFC®, VA Joseph Winslow, RFC®, CA Yuhong Yao, RFC®, CA Dago Zuniga, RFC®, CA

Member Referrer Recognition

Hannah E. Swigert, RFC®

In Memoriam In reverence we would like to remember our passing member(s): Kenneth A. Marinace, RFC®, Burbank, CA

July 25-27, 2018 Chicago, IL Money Concepts — Exhibit July 15-19, 2018 Vail, CO

IARFC Ethics Approved Status

September Board of Directors Phone Conference September 18, 2018

Ethics Approved Status means adherence to the IARFC Code of Ethics with a clear record for the past five years. Members are biennially verified through FINRA, State licensing records and internet searches.

December Board of Directors Phone Conference December 11, 2018

2019 March Board of Directors Meeting March 19, 2019 Nashville, TN IARFC Annual Meeting

Brand Your Ethics Approved Status Set yourself apart from other consultants

March 20-22, 2019 Gaylord Opryland Resort & Convention Center, Nashville, TN Page 4

Visit the IARFC store for these valuable branding tools www.IARFC.org/Store or contact 800.532.9060, info@iarfc.org

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

The Register | July-August 2018

From the EDITOR

Advertise in the

Save the Date, March 20-22, 2019. The 2019 IARFC Annual Conference is taking shape. We have secured a contract with the Gaylord Opryland Resort and Convention Center. Registration will open soon, please take advantage of early registration discounts. We had an outstanding time at the Biltmore in April and we wish to grow our community with you in attendance. IARFC CE will be available. The Register magazine is open for advertising. Reach the IARFC members and designees by taking advantage of our low rates. The MRFC credential is accredited by the NCCA and is one of only 8 accredited designations listed on FINRA. This is a new level of acceptance for the IARFC. Be with us while we move forward with our MRFC program.

Wendy M. Kennedy, Editor-in-Chief

Advertise in the Register, published by the IARFC since 1999 and circulated in print and electronically around the world.

Advertising Representative Wendy M. Kennedy, Editorial Coordinator IARFC P.O. Box 506 Middletown, OH 45042 P: 513.261.6047 F: 309.483.2371 editor@iarfc.org

Services and Products Readers Provide… Annuities, all types

Disability Income

Loan Cancellation

Asset Management

End-of-Life Planning

Long-Term Care Insurance

Bonds

Estate Planning

Mutual Funds, all types

Business Planning

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Business Succession

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Precious Metals

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REITs

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Investment Real Estate

Retirement Plan/401(k)

Critical Illness Insurance

Life Insurance, all types

Tangible Assets

Special Advertising Opportunities The September/October, theme is the Generations of Clients – Identifying Their Needs. Features are scheduled to include Generation Gap – Between Client and Consultant, Be High-Tech and High-Touch, Be Available 24/7, Be Transparent — Trust is Key, Help First, Sell Second, Support Social Causes. The back, inside front, and inside back covers are available on a first-come, first-served basis. Other positions are also available. Practitioners, academicians and policy makers in financial services rely on the Register as a key source of information to grow and serve their client base. The back cover is $750 and insertion prices decrease from there based on position, size and schedule frequency. Please contact us with questions, for a media kit, or for assistance in developing your customized advertising, exhibit and sponsorship packages. We look forward to hearing from you. The Register | July-August 2018

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From the

Chairman’s Desk… Accreditation – Leverage the Recognition In the last Chairman’s Desk, I acknowledged the MRFC Accreditation from the NCCA. This was a culmination of hard work and dollars spent. I feel positive about the outcome and wish to explore the significance of this achievement with you and where we go from here. Association Recognition Realize that of the 180 designations that are listed on FINRA’s website, only 8 are accredited. We are number 8. That has moved us to the top 8 designations in the U.S. I won’t lie, it gives me the chills whenever I see the MRFC on this list. We obtained the credibility that we have needed for years. Now… how are we going to train people to be true consultants? The four year college experience is sadly becoming too expensive. People are not willing to spend $50,000 a year to get a degree. Colleges themselves are addressing this issue by transitioning education into an online process to ease the expenditure. For the education component of the MRFC, we need to tap into this way of thinking and provide potential consultants the education they need. I can see candidates starting out as a Registered Financial Associate (RFA®), proceeding on to a Registered Financial Consultant (RFC®) after the required amount of experience and then finally taking the MRFC exam. These are dreams-to-reality scenarios that occupy my think time at 3am in the morning. Broker Dealer Recognition Now that the MRFC accreditation listing is on FINRA’s website, we are working on ways to highlight our new status to all the Broker Dealers in the country. However, we need your help. Take the Chairman’s Action Item Challenge and help us get acceptance. Consultant Recognition Consultants need to first sit for the exam if you have not already. Those who are MRFCs should publicize your new status. You need to say… “I am an MRFC”. Page 6

You have to adhere to their rules. Visit for the MRFC on www.finra.org./investors/ accredited-designations.

Chairman Action Item Challenge to Members… If your Broker Dealer does not recognize the MRFC, CONTACT the IARFC home office and ask for the appropriate paperwork to send to your compliance department. Now that we are backed by the NCCA, it should be a matter of catching up with and cutting through the red tape.

Consumer Recognition Awareness is a key factor. We have to educate the public regarding a Master Registered Financial Consultant and what that means. A name search on the IARFC website identifies you as an MRFC. The consumer will feel much more comfortable by dealing with an accredited consultant and an added layer of legitimacy. Final Recognition This last acknowledgement goes to all those involved in making this accreditation possible. The MRFC Certification Board has performed their leadership role admirably and the Middletown Team has been working day after day, task by task to make this a reality. I salute you all. 

We have documentation to forward to any compliance department – just ask.

WWBD? Or as I have come to ask myself at times – What Would Bailey Do? I would send out press releases to every one of my clients. Put out a Public Service Announcement to radio stations, TV stations, newspapers and anywhere else that could give me publicity. Speeches to nonprofit groups are helpful. And…I would have it all over Social Media. What Would You Do? FINRA Recognition FINRA has a history of not approving designations that are not accredited. In the past 5 years, they have become even more selective. This is a sure check to establish ethical legitimacy. Additionally you don’t get security licensed in any way shape or form unless you have a FINRA license. That is the reasoning that more people don’t have the accreditation.

H. Stephen Bailey, CEBA, CEP®, MRFC H. Stephen “Steve” Bailey, CEBA, CEP®, MRFC started HB Financial almost 30 years ago after already having a life insurance career. Steve is the Chair and CEO of the IARFC Board. He is also the 2010 recipient of the prestigious Loren Dunton Memorial Award. When not working with his clients, Steve is on a golf course, spending time with his grandson or traveling with his wife, Bobbi. Contact: 704.563.6844 chairman@iarfc.org www.iarfc.org The Register | July-August 2018

Most Effectively Meeting the Financial Goals of Retirement

Without the relative stability provided by earnings from employment, retirees must find a way to convert their financial resources into a stream of income that will last the remainder of their lives. Two trends complicate this task. First, people are living longer, so those retiring in their sixties must plan to support a longer period of spending. Second, traditional defined-benefit pensions are becoming less common. Pensions once guaranteed lifetime income by pooling risks across a large number of workers, but few employees have access to them today. Instead, employees and employers now tend to contribute to various definedcontribution pensions like 401(k)s, where the employee accepts longevity and investment risk and must make investment decisions. 401(k) plans are not pensions in the traditional sense, as they shift the risks and responsibility to employees to bear on their own rather than pooling these risks through the pension fund. The Register | July-August 2018

Wealth management has traditionally focused on accumulating assets without applying further thought to the differences that happen after retirement. But the situation changes as one transitions from saving to spending assets. To put it succinctly, retirees experience reduced capacity to bear financial market risk once they have retired. The standard of living for a retiree becomes more vulnerable to enduring permanent harm as a result of financial market downturns. Retirement risks include longevity and an unknown planning horizon, market volatility and macroeconomic risks, inflation, and spending shocks that can derail a budget. Retirement income is about matching household assets to liabilities. Liabilities are the financial goals associated with retirement: supporting lifestyle for as long as one lives, while also preserving assets to meet legacy goals and to provide liquidity that helps to manage unanticipated

spending shocks. Retirement risks must be managed by combining different income tools with different relative strengths and weaknesses for addressing each of the risks. There is no single solution that can cover every risk. The traditional investment management approach that dominates the wealth accumulation phase is ill-equipped on its own to manage this changing nature of risk in retirement. The expectation remains that an investment portfolio can manage all these risks. This causes simple rules of thumb like the 4% rule for spending from investments to be both too conservative and too aggressive at the same time. Longevity risk and market risk are managed by needing to set aside a large pot of assets to meet retirement spending goals by making sure there is enough money set aside to last even in an overly lengthy retirement coupled with poor market Page 7

returns. This leads spending to be unnecessarily conservative to make sure the nest egg can be stretched out for longer. At the same time, spending may still be aggressive because there is no guarantee that this approach will work. Guidelines about spending based on historical outcomes do not guarantee future success. Many retirees sense this and spend even less with investment strategies because they are worried about outliving their wealth. Risk pooling is another way to help manage retirement expenses that is not available with an unprotected investment portfolio. Exhibit 1 shows the sources of spending power provided through two general retirement income approaches. The investing approach relies on three sources of spending: the spenddown of principal, interest and dividends generated by that principal, and the hope for capital gains created when the stock market and other risky investments are able to outperform fixed income assets like bonds. For a simple lifetime income guarantee approach, there are also three sources of spending: principal, interest and risk pooling. The problem with traditional investment strategies is that they do not include a role for risk pooling, and risk pooling is a

very competitive source of returns unavailable to investments. Simply, risk pooling allows individuals to spend as though they will live to life expectancy and get average market returns. This can provide a higher standard of living, or otherwise meet a spending goal more cheaply, than an investment portfolio where one feels obligated to spend at a lower rate to help ensure the money lasts longer. With risk pooling, those who live longer receive subsidized payments (mortality credits) from those in the risk pool who did not live as long. This allows everyone to enjoy a higher standard of living than they may have otherwise felt comfortable with. They have a license to spend because they have the comfort of knowing these payments will continue for life. Risk pooling allows a lifetime spending goal to be met more cheaply with less of the asset basis, which also then frees up more assets to provide discretion and investment growth potential for the liquidity and legacy goals in the financial plan. The safety-first approach to retirement combines both risk pooling (through insurance) and the risk premium (through investments) to provide better retirement outcomes for spending and legacy than an investment portfolio can reliably provide on its own. Reduced exposure

of lifestyle to market risk can also support and happier and less stressful retirement. As a greater appreciation develops about the different risks that retirees face, the conversation must change to include an important role of lifetime guarantees in building reliable and efficient retirement plans. ď&#x201A;Ş

Wade D. Pfau, Ph.D., CFA, RFCÂŽ Wade D. Pfau, Ph.D., CFA, RFCÂŽ is a professor of retirement income at The American College in Bryn Mawr, PA, and a principal at McLean Asset Management. He is also a past co-editor of the Journal of Personal Finance. Contact: wadepfau@gmail.com www.retirementresearcher.com

Exhibit 1 Sources of Spending Power in Retirement Diversified Investment Portfolio

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Lifetime Income Guarantee

The Register | July-August 2018

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IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

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• Life, AD&D and LTD Insurance • Highly affordable premiums with core coverage • Guaranteed issue/no medical or financial underwriting • Competitive premiums designed for consultants • Travel benefits and employee assistance programs For new members, these plans are available up to 30 days after joining the Association with no medical form required – guaranteed issue up to $250,000. For current members, applicants must provide medical history. There is no physical required, an in depth questionnaire is sent to underwriting to make a determination. Medical questionnaires vary from state to state. Questions? Call plan administrator: Michael Insurance Planning 800.932.4075 download program brochure www.IARFC.org/Insurance partner program with The Standard Insurance Company and Michael Insurance Planning Company

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Marketing Unplugged When People Don’t Want to Talk About Wills and Estate Planning Not enough Americans embrace estate planning. When life insurance trusts and foundations spring to mind, most people assume: “I’m not rich enough for that.” However, not being rich isn’t a valid excuse for doing absolutely nothing. The AARP quotes a study by caring.com indicating 60% of Americans don’t have wills. You don’t need another article about setting up trusts or protecting assets from irresponsible children. However, let’s include one quote: “65% of wealth is gone by the second generation, 95% by the third.” Who’s the sage? Raymond “Red’ Reddington, lead character on NBC’s “The Blacklist.” If the 2017 estate tax threshold is $ 5.49 million for individuals (1), if they have less, they might assume estate planning is an unnecessary expense. Seven Reasons Why Having a Will Makes Practical Sense We think of inheritance in terms of money. There’s more to it. Don’t forget about hard assets like jewelry, antiques and collectables. If your client is a farmer, the land they own may have quietly crept up in value. One of the purposes of a will is to make your intentions known. Consider the following scenarios: • The deceased owns expensive jewelry. Once the coffin lid is closed, one of the four surviving children explains she was given a deathbed promise that she would get the most valuable pieces. Arguments among the children follow. • The deceased owns vacation property. The children fight over who gets it. FYI: One of my former managers had many children. They were a close family. He and his wife had a provision written into their wills indicating if any two family members argued over who gets a specific item, that item would automatically be taken out of the distribution and sold. Very practical. You can’t do that without a will. Page 10

• The deceased has loaned a substantial amount of money to a relative. It was a handshake deal with no paperwork. Since the grantor of the loan is deceased, somehow the recipient forgets the loan was ever made. • The deceased was loved by their family. Money is tight. The funeral director is steering the bereaved towards the most expensive caskets. The beloved family member would have preferred to be cremated with little fuss. • The deceased didn’t trust banks. They converted their cash and security into gold coins. They hid their bullion in a really safe place. Unfortunately, their memory failed and they never revealed the hiding place. • The deceased enjoyed trading online. The accounts are pretty easy to find because they generate tax reporting

statements. However, the deceased neglected to keep a file of the passwords for each account. • Lots of valuable stuff is missing. The family has found the key to a safe deposit box. Now if they could only figure out what bank they should visit! The Rationale Behind the Living Will Some family members used to joke: “Don’t expect me to care for you in your old age. I’m just going to pull the plug!” Fortunately, things don’t work that way in practice. Yet suppose a family member goes into a coma and is hospitalized yet unresponsive. Another scenario is a person who has a serious accident, is unconscious for the long term and cannot breathe on their own. They are connected to a respirator. The collective opinion might be there’s no “quality of life”, yet no one wants to be the person to actually issue instructions to pull the plug. The Register | July-August 2018

This is where a living will (2) provides direction for end of life patient care provided by the patient themselves. The Problems Caused by Illiquid Assets You’ve heard the expression “Bought the farm.” One definition is the idea that when the farmer died, the life insurance payout was sufficient to cover the outstanding mortgage. However, another problem presents itself: The scenario where the deceased owns a substantial asset (like a farm) that’s illiquid unless sold. The Federal threshold might be high, but state estate tax thresholds are often lower. (3) Here’s a 2015 example: Washington State has a threshold of just over $ 2 MM. The estate tax rate starts at 10% and goes up to 20%. The family is now in the position of determining how the tax bill will be paid. If it’s a farm, a portion of the land might be sold, yet that might create another problem: The amount of land remaining isn’t large enough to continue operation as a profitable, viable farm.

growth, what might their assets look like down the road? Albert Einstein felt compound interest was the 8th wonder of the world. (4) 5. State Tax Threshold – What would their estate tax picture look like at the state level? How much might they owe? Is that a manageable amount? 6. Is Estate Planning Needed? – Can a life insurance policy they already own be moved out of the estate into a life insurance trust? (5) Should they be giving away assets during their lifetime to help fund their grandchildren’s college educations? (6) There are many other aspects of estate planning where you may be able to help. Your client will need an attorney with experience in this area. Your client should be open to discussing this delicate subject if you ease into it. 

Action Plan For Having This Conversation Who wants to talk about their own death? No one I know. This is a difficult conversation for clients. If you jump in at the restructuring assets point, you might either scare them into inactivity or persuade them to setup trusts they never get around to funding. A smart advisor might move through several stages: 1. Reassurance – You hope they live a long life. Their spouse too. 2. Wills – Does someone know where the money is? What about hard assets? When the time comes, who inherits what? Although your client can easily buy a kit to write a will, getting an attorney’s help is probably money well spent. The lawyer can also hold a copy of the will. Living Wills – These make sense. Your 3. client is likely familiar with them or has seen a family situation where knowing the person’s wishes would have been helpful. 4. Estate Tax Threshold – Your client might not think they have enough assets to hit the Federal estate tax threshold. Tax laws might change before then too. However, they are in good health now. Suppose they were around for another 20 or 30 years? At conservative rates of The Register | July-August 2018

Bryce M. Sanders Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book “Captivating the Wealthy Investor” is available on Amazon. Contact: 215.862.3607 brycesanders@msn.com www.perceptivebusiness.com (1) https://www.forbes.com/sites/ashleaebeling/2016/10/25/ irs-announces-2017-estate-and-gift-tax-limits-the-11-milliontax-break/#43d651643b70

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

Member-Refer-A-Member Enhance the Designation "The only way that an Association grows is by attracting new members,” confirms IARFC Chairman H. Stephen Bailey. Encouraging your peers to join is the best recruiting effort an Association can utilize. We salute your pride in being a Registered Financial Consultant and are proud to have an award recognition program dedicated to members who have contributed to the growth of the Association. The Member’s Award is presented annually in appreciation to top IARFC members who have sponsored the most qualified professional consultants that subsequently joined the ranks of the Association.

An Ongoing Opportunity The IARFC is looking to enrich the careers of your professional peers with the same membership benefits you enjoy. By referring potential IARFC members, you offer them an opportunity to tap into the premier network of members who share best practices, strategies to help grow businesses and techniques for better practice management.

(2) http://www.alllaw.com/articles/wills_and_trusts/article7.asp

Referring a member is easy!

(3) https://taxfoundation.org/does-your-state-have-estate-orinheritance-tax/

Take a few minutes to grow our network of the Registered Financial Consultants. Fill out the Referral form by going to:

(4) http://quotesonfinance.com/quote/79/Albert-EinsteinCompound-interest

www.IARFC.org/ReferMember Call: 800.532.9060 Email: info@iarfc.org

(5) https://www.estateplanning.com/should-i-put-my-lifeinsurance-policies-in-my-living-trust/ (6) https://www.thebalance.com/gift-tax-exclusion-annualexclusion-vs-lifetime-exemption-3505656

For details go to: https://www.iarfc.org/docs/ content/Referralprogram.pdf Page 11

In Order to “Buy Low”… You MUST “Sell High” First they certainly don’t need my help. There are many ways my clients can accomplish this on their own, such as buying governmentbacked securities, CD’s, money market, etc. Although avoiding large losses is one of my key roles, my primary objective is to help my clients significantly grow their wealth over time. But here’s the deal. You can’t have one without the other. A Stock Market Fortune. Really? I believe the reason clients hire me is to avoid large losses - with the ultimate objective of meaningfully growing their precious, hard-earned wealth over time. In fact, this may sound like an extreme statement, but I believe my objective is to help my clients multiply their wealth over time and, in doing so, create stock market fortunes. If you go back to our early years of education, some of the most elementary principles we learned along the way were;

bond market, the gold or silver market, the real estate market, the international market, and more.

1. What goes up must come down 2. Every action has an equal and opposite 3. Trees don’t grow to the sky

With regards to the stock market, here are some similar elementary principles we have learned along the way:

These principles can be easily transferred to stock market investing, particularly as it relates to today (and every other major Bull Market throughout history).

1. Historically, the stock market spends about 50% of its time rising and 50% declining 2. Every long-term bull market is followed by a great bear market, and vice versa 3. The key to successful long-term investing is to “buy low and sell high”

What is a Market? As I searched for the definition of the word “market”, here is the best definition I found from www.businessdictionary.com; “An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services, or contracts or instruments, for money or barter. Markets include mechanisms or means for (1) determining price of the traded item, (2) communicating the price information, (3) facilitating deals and transactions, and (4) effecting distribution. The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.” There are many kinds of markets. For example, there is the stock market, the Page 12

Avoiding Large Losses is the Key Throughout my entire career as an investment professional, I have consistently made the following statement: “90% of successful investing comes from avoiding large losses” The significance of such an all-important statement is rarely understood or spoken about. When I say make this statement to my clients, their first thought and/or reaction is usually; “That’s great because I don’t like losing money.” Sure, I fully understand my clients disdain for suffering large losses in their investment portfolios. However, if the sole investment objective of my client’s is not losing money,

Can you really multiply wealth through stock market investing and create fortunes? Yes, you absolutely can. The stock market is an incredible investment medium that affords powerful mathematical advantages that can literally create lifestyle-changing fortunes for our clients, as well as many generations to come. If you don’t believe that making millions and billions from stock market investing is truly attainable, just ask the legendary investor Warren Buffet. How did Mr. Buffet become a multi-billionaire and one of the richest people in the world? Answer: Solely through successful stock market investing. However, here is the real message and lesson from Warren Buffet. Since Mr. Buffet is one of the people in the world whose billions are solely attributed to stock market investing, what does that tells us? It illustrates three very important facts: 1. Only a tiny minority of investors experience stock market fortunes 2. The stock market is one of the most competitive marketplaces 3. Extraordinary investment results don’t happen in ordinary ways Investing and Mathematical Advantages The stock market is an incredible investment medium that offers tremendous The Register | July-August 2018

mathematical advantages. How so? Because investment losses are arithmetic, whereas growth potentials are geometric/ exponential. If you want to achieve significant long-term investment success, this is an extremely important concept to understand and, more importantly, implement and capitalize on. Losses are Arithmetic — This simply means losses are “dollar for dollar”. In other words, if you own an investment that declines 50%, you will lose an equally proportionate 50% of your money. When it comes to investing, you typically cannot lose more than 100% of your original investment capital. Most stock prices don’t drop to zero, nor do the major market indices. However, it is not uncommon for equities and the major market indices to experience periods where they decline 40-80%. (Note: There are advanced investment strategies where you can lose more than 100%, but those are not the focus of this discussion.) Growth Potentials are Geometric/ Exponential — This simply means growth potentials are limitless. In other words, equity prices really don’t have a limit on how high they can climb. This means stock market investing offers every investor and investment professional the potential to compound and multiply their wealth - in a geometric and exponential way. To help illustrate, here are four examples: 1. If $1 Million drops to $500,000 – this is a 50% loss (arithmetic) If $500,000 grows back to $1 Million – this is a 100% gain (geometric/exponential) 2. If a $100 stock drops to $20 – this is an 80% loss (arithmetic) If a $20 stock grows back to $100 – this is a 400% gain (geometric/exponential) 3. If you achieve a compounded return of 15% for 15 years (net of fees) – $100,000 grows to $813,700 (geometric/exponential) 4. If you achieve a compounded return of 20% for 15 years (net of fees) – $100,000 grows to $1,540,700 (geometric/exponential) The Key is Avoiding Large Losses The reason I have always stated that “90% of long-term investment success comes from avoiding large losses” is because; 1. Bear Markets should be welcomed rather than feared. Bear Markets are The Register | July-August 2018

amazing “buy low” investment blessings. They provide us with the opportunity to invest when prices, values, and risks are low – and the growth potentials are high. 2. If you experience large losses, you can’t “buy low”. If you experience large losses, that means your money is invested in the stock market, right? Therefore, if you are invested in the stock market, you only have two options – get out or stay in. However, you can’t come in (or “buy low”) because you are already invested. 3. Part of the process of managing money is protecting it. The large majority of investors and investment professionals believe you must always be invested in the stock market. However, if we all know the key to long-term investment success is to “buy low and sell high”, how can we buy low if we don’t sell high – first? To “buy low”, you need investment capital readily available, right? This means there are times when it is perfectly OK and reasonable to: 1. Stay out of the stock market 2. “Sell high” and sit on the sidelines for an extended period 3. Focus on protecting and preserving wealth, and patiently wait for a better “buy low” investment opportunity

• Prices climb exponentially higher and accordingly, risks climb higher • The Federal Reserve Board changes their policies and becomes restrictive • Something creates a change in the long-term forces of supply and demand I am fully confident today’s Bull Market is in the process of a long-term trend change. I have absolutely no idea when the next Bear Market will begin or end, and quite frankly nobody does. However, I do firmly believe we will look back upon today’s stock market environment and view it as a “sell high” time frame. If I am correct about the stock market’s “big picture”, the only way to capitalize on the next rarely-afforded “buy low” opportunity is to: 1. “Sell high” and avoid large losses 2. Have your investment capital ready (out of the market) to “buy low” Extraordinary results rarely happen in ordinary ways. So here is the million-dollar question for every investment professional and wealth manager; “What is your current plan to help your clients avoid the potential for large losses?” 

Where is the Stock Market Today? Nobody can accurately predict the stock market’s short-term movements, and nobody can accurately predict stock market tops or bottoms either. In fact, if someone claims they can accurately predict these things, they are either clairvoyant or misleading. However, I have always stated that major long-term stock market trend changes can be recognized. How so? As previously noted, the key ingredient that drives the stock market’s long-term price structure is buyers (demand) and sellers (supply). Therefore, the only way a major trend change can occur is when a substantial change occurs in the long-term forces of supply and demand. At some point, every Bull Market reaches a point where; • Prices have risen geometrically/ exponentially for a prolonged period • The large majority of investors are in the stock market, or entering • The media and news background are predominantly positive • There is an over-abundance of buyers, and a scarcity of sellers

Christopher P. Hill, RFC® Christopher P. Hill, RFC®, is the President of Wealth and Income Group LLC, with multiple branch offices in Virginia. Chris began his 28-year career in the financial services industry by spending his summers as a college intern for a major stockbrokerage firm. After graduating college with a B.S. in Finance, he spent over a decade working with the Senior Portfolio Manager of a leading money management firm. In 2001 Chris formed his own company with a primary focus on wealth management. Contact: 540.685.4321 chris@funeralreaources.com www.funeralreaources.com Page 13

Cliff Walsh

RFC®

The Register is showcasing one of its “own”, writer/contributor Cliff Walsh, RFC®, vice president of asset management at American Portfolios Financial Services, Inc. (AP) in Holbrook, N.Y. Before joining AP in October 2017, Walsh served as the chief investment officer of Progressive Advisory Solutions, LLC, where he oversaw the company’s investment process, portfolio management and risk controls. He has also served as the director of investments at PPS Advisors, Inc., and acted as the portfolio manager of PPS Advisors’ investment strategies. In addition, Walsh held positions at CCM, Julius Baer Investment Management and Sidoti & Company. Cliff holds the Registered Financial Consultant (RFC®) and Chartered Financial Analyst (CFA®) designations. He graduated with honors and earned a dual major in finance and management systems from Fordham University’s Graduate School of Business MBA program, and his B.S. in finance from Villanova University (1998). Along with finding out more about Cliff and his investment management progression, we ask him to expand on concepts he discusses in his articles. They define a clarity of purpose and are easy for even the novice investor to understand. Page 14

Discipline and Emotional Control Register: How did you get interested in financial services? Cliff: My grandfather was an amateur stock speculator; he was by no means an investor. On my 12th birthday (1988), he gave me $100 and opened the newspaper to the investment section. In those days, you got your quotes daily from the paper. We ended up buying a penny stock called Wang Labs. I have no idea what criteria we used to buy it, but in hindsight, my purchase was undoubtedly similar to a lottery ticket. I ended up doubling my money in a short period of time. I was in awe that you could actually make money like that. I later took an investment class in high school where we competed in a 10-week investment contest. My team ended up

winning at our school and came in second place in the county. My Advanced Placement economics teacher also sold mutual funds after school, so he stoked my interest in the markets and the business as well. I’ve been hooked ever since. Register: Professionally, what has been the hardest challenge for you to face and how have you met it? Cliff: My job, ultimately, is to predict the future, which obviously is a very difficult thing to do. Forecasting the economy, changes to government policies and regulations, and demographic shifts all come into play on a daily basis. Sometimes, even when you get those calls right, the financial markets do something different from what you expect because you The Register | July-August 2018

misjudged what expectations were already in market prices. Over the long term, I am confident that I have met the challenge during my career. Over short periods of time, I am often wrong. My investment philosophy is based on the foundation best described by Benjamin Graham, when he said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” Eventually, a wellthought-out and executed investment philosophy will win out.

Diversification is also key. Taking a long-term view is significant as well. Very few people can effectively trade short-term swings in the market. The final piece is having the discipline and emotional control to implement the plan. Without that, the most well-designed plan is worthless.

Cliff: Every way possible. I have been an institutional investor for the bulk of my career. Emotions certainly impact professional investors on Wall Street. Only during the last three and a half years have I gotten involved with the retail investor and I have been blown away by how much those emotional decisions are massively amplified on “Main Street.”

Cliff: I think there are a host of disruptions taking place in the industry. The demographic shift is perhaps the most significant. The emergence of the Millennial generation and all of the wealth they stand to inherit will cause major shifts in the industry. Millennials, on average, turn the client experience upside down in addition to all of the technology and fee transparency that they demand. Passive investing, ETFs, robo advisors, video chatting, an advisor’s online presence—all are growing in importance. Regulatory issues are a challenge as well. I don’t know how to control the government, but from a technology and Millennial standpoint, one can choose to be the disrupter rather than the disrupted. So many consultants are stuck in their ways and refuse to adapt. In the long term, these consultants will be forced to change or leave the industry. Register: From your writings, it is clear that you can break down complicated topics for the average investor. What are the secrets to explaining investment strategy to non-professional clientele? Cliff: My wife and I have been together for more than 25 years, since we were 16 years old. She is a teacher and has basically zero understanding of finance. Her eyes glaze over when my explanations get too complicated. So I’ve learned from trial and error how to explain things to people who don’t have a finance or economics degree. I’m going to get in trouble for this… Register: What do you believe are the key components of a sound investment strategy? Cliff: Rational, common sense goes a long way. Knowing why you bought something and under what circumstances you will sell are important. I spend more time trying to figure out how much I will lose if I’m wrong than on what I will make if I’m right. The Register | July-August 2018

Register: How do the emotions of hope, fear, greed and pride derail the investor and their decisions? How do you handle “investor attachment gone awry”?

Having studied behavioral finance and trading to a great extent. I am aware of the majority of mistakes the average investor makes and the ones I’m prone to. I have developed an investment philosophy and process with a variety of checks and balances to eliminate or reduce those errors. Keeping trade journals, which contain the reasons why I bought or sold a particular investment, so that I can go back at a later date and assess what my thesis was, how it played out, and what mistakes were made or issues that were overlooked From a client perspective, it’s difficult. You need to communicate and lay out a plan of attack in advance of the 85-year-old grandmas wanting to put half their money in Netflix. I’ve seen a lot of plans go to waste because the advisor couldn’t subdue the clients’ emotions enough. Fear is a powerful force, both of losing money and missing out on making money, which leads to exactly what you don’t want—buy high, sell low. Register: Define the emergence of Millennials in the economy and financial markets. Cliff: My definition is disruption. On average, there are so many things that are different about them: they do everything online; they connect less with people in person; they have a lot of student debt; they want more work-life balance; they don’t trust financial institutions or advisors; and they will inherit trillions of dollars. All of these together, among other things, will cause sweeping change in the economy and financial markets. Household formation is beginning at a later age and the size of

the home being purchased is smaller. They are having fewer children than older generations. They want more technology, different services, pricing structures and means of communicating with consultant. Register: Explain the term ESG and how it affects your clients’ investment choices. Cliff: ESG stands for environmental, social and governance. It refers to a style of investment that we at American Portfolios call Impact Investing. I actually wrote about it in a Register article earlier this year. We believe that using ESG criteria improves risk-adjusted investment returns. More and more, clients are becoming aware of the companies their investment managers invest in and want to make sure those companies are aligned with their values. My team runs a group of Impact Investing portfolios. The strategy is particularly attractive to Millennials and women. There still remains a major disconnect between financial advisors and retail clients, however. According to a 2016 study by Morningstar, roughly 75 percent of women and 90 percent of Millennials said they were highly interested in Impact Investing, while less than 10 percent of advisors polled had a similar level of interest. We think offering Impact Investing strategies is a key valueadd to many clients. Register: Speaking to your RFC® designation, how do you promote your RFC® and Ethics Approved status? Cliff: My business within American Portfolios revolves around providing investment strategies to investment advisors. Trust is an important piece in why advisors choose to work with our team over other institutional investment managers. The RFC’s Ethics Approved status, is an important differentiator. Register: Putting aside your financial world and career, what do you do for family life and pastime activities? Where do your passions lie? Cliff: My kids keep my wife and me busy. We have two children, a 12-year-old daughter and a 6-year-old son. I grew up playing baseball from t-ball into college, so I manage my son’s baseball team and also coach soccer. We like to travel as a family, particularly to beach and lake locations. Personally, I like to write creatively.  Contact: 631.439.4600 ctwalsh@americanportfolios.com www.americanportfolios.com Page 15

Digitization Leads to Commoditization accelerated the eventual fate (death) of many Mom and Pop shops. Convenience, one-stop shopping, and far lower prices shifted the fulcrum between price and service. Agreed? Does this apply to Amazon’s success? Amazon (digital) bests the big box retailers (brick and mortar) in both service and price. If pricing is key, then we go digital, but if service is key, now we go local. This dynamic has saved the Mom and Pop shop. Likewise, the expansion of Robo will save, through differentiation, the true financial consultant. Okay so here’s the fun part. The “valueadded” services many consultants provide are systematic contributions/distributions, automatic rebalancing, annual meetings, and an every-once-in-a-while encouraging voice to stay the course. Is this anything Robo can’t do? In fact, I’d argue Robo can do those things better and definitely at a lower cost. Price isn’t king when the value-added is understood.

Here’s a bold prediction, the advancement of the digital advisor, affectionately known as robo-advisors, lends a once in a lifetime opportunity for substantial growth for financial consultants but not glorified sales-reps. Unfittingly, many articles focus on growth opportunities through the advancement of better marketing messages and/or the acquisition of other practices. While these methods can and often will lead to growth, they aren’t nearly as exponential as the opportunity created by the expansion of robo-advisors (Robo for short). A few years ago, I was giving a short speech at a conference. My wife, who normally doesn’t attend these talks, decided she should come and support me (it could’ve had something to do with Tim Tebow speaking later…but we’ll ignore this fact and move on.) Given the rarity of her attendance, she needed a new outfit (of Page 16

course!). With no other options, we found a small Mom and Pop shop. To our surprise, this small shop was thriving. A decade or so earlier, they almost went out of business when big box retailers, with much lower prices, opened nearby. This was the aha moment. There’s a fluid dichotomy between price and service. We want the lowest price with the best service, but generally one is sacrificed for the other. When the large retailers opened, the positivity of lower price offset the negativity of lower service. The consumer preference shift towards price, misled the Mom and Pop shops to try and compete on price. Too often this tactic led to lower service. No longer having service as their value-added differentiator, this move exasperated the downhill decline of sales, and therefore

The realization of ordinary, simple services provided by Robo will fade the dichotomy between price and service. It will be normal to expect greater price with greater service. How do we advance this movement? Simple, stop doing what you’re currently doing. Currently, many of us, we try to tell a prospective client all the things we could do better or in addition to what their current advisor is doing (or not doing). However, this brings out the “no” hormone in the client and makes them feel like a buyer, which by-the-way, they don’t like. Instead, what if you educated them about a Robo advisor. You showed them, how ordinary, and simplistic the services they’ve been receiving are. Then you show them how much cheaper, and in some cases, better they’d be if they went Robo. This does two things. First, you’re acting as an advisor. You’re advising them, how they can do something they’re currently doing, but do it better and for less cost. This is the truest form of unbiased advice, The Register | July-August 2018

since if they go Robo you make nothing. It’s great. It’s pure. Not everyone will go Robo and Robo isn’t bad. Look at TurboTax, a Robo tax preparer. When I started in this business there were a lot of retirees not filing taxes because they “didn’t owe” anything, however this ignored the fact they might get some back. However, the filing costs would eat up any return and they felt it wasn’t worth it. Today, for better or worse, Mr. Turbo seems to be one of the top preparers we come across. TurboTax isn’t a good fit for everyone. I’ve met some clients who answer questions differently, as the owed/refund tally shifts from green to red. They’re not a good fit for Robo. When they realize this behavioral deficiency, they’re okay paying more, because they understand they’re getting more. One of our biggest referral sources has come from a man who we recommended stop using an advisor. He learned he was much better going DIY and digital. Yet, he knows many people who aren’t comfortable with a DIY retirement plan — he sends them to us.

want or need transactional services. Watch this, this is fun: THEN TURN THIS CLIENT AWAY!!! (it takes three exclamation marks to fully convey the intended emphasis). If they just need a single one-time life insurance sale, is this anything a computer can’t do? Nope. The advent of the Robo revolution is the resurrection of the personal financial consultant. As big box retailers have moved into our space, we tried to compete on price. This was as foolish as it was when Mom and Pop retailers tried to do the same. Amazon will kill the big box retailers, no differently than how Robo will kill off the standardized, ordinary services provided by too many in our industry. Digitization leads to commoditization. Commoditization leads to standardization, which leads to lower prices and value-added differentiation. Be different. Be specialized. Be holistic. Be a consultant not a sales-rep!

If this offends someone, oh well, it’s who I am. They’ll find out sometime anyway, it might as well be early on. Lastly, digital will lead us to focus on being more specialized. Recently I was reading an article about the expanded fiduciary standard for the See-Ehf-Pee designation (spelled phonetically because I’m not sure I’m allowed to reference the name of this designation within these pages, ha!). The author felt, although acting as a fiduciary is best, it was impossible to always do so, since some clients’ only The Register | July-August 2018

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Digital has also created the desire for personality. For so long, companies had no opinion on political trends, or sports teams, because they might alienate a potential client. Now if a client wants an advisor with no personality, then they will go digital. I think what is most interesting, is that people will seek a relationship with others who have stated beliefs even if those beliefs do not fully align with their own. During our entire process, I share my faith with clients. I share what we believe the purpose of money is, how we’ve been focusing on it the wrong way, and why I believe this is what I was created to do. This isn’t okay for some, and some don’t agree, but even some who didn’t agree have become clients. They’ve shared how it’s nice to know what someone feels or thinks.

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Systematize, Systematize, Systematize

Have you ever had one of those days where you spend so much time playing tag on the phone, having entire conversations via email, and getting lost on social media and the internet that the entire day got away from you? Could you feel your stress level climb with each non-productive activity you undertook? Did your head start to spin with brain fog as you got further and further away from your to do list? With so much distraction, dysfunction and noise going on, it’s more important than ever to streamline your practice by systematizing all your processes. Defining Systematization A system is a process you don’t have to think about it; It’s a no brainer. This saves you time, energy and helps avoid both hurry and procrastination. It’s documented, so it’s trackable, repeatable and delegate-able. Anyone can follow the steps A-Z to get the job done. When you’re a solo practitioner it may be easy to keep it all in your head, although it’s usually still mentally draining. Page 18

When you add an assistant, you may still use what’s referred to as the “Manual Intercom System,” where you shout instructions to each other from room to room all day long. The minute you add a third person, however, someone will usually be left out of most conversations. Hence the need to create and maintain well-documented systems. In addition, documenting conversations and processes starting today will also be your best defense when it comes to defending an audit or lawsuit. What To Systematize So what should you systematize? In short, all aspects of your business, including: 1. Marketing — Automate it. Many Advisors either can’t or won’t do marketing, no less develop a cohesive marketing plan. The good news is that dozens of low cost/ no cost traditional marketing methods are still effective, and technology has evolved to the point of enabling consultants to hire outside digital marketing agencies with end-to-end programs.

2. Sales — Know how to qualify, introduce, explain what you do for a living, and close new business in just one meeting. (Yes, it’s possible, really!) The icing on the cake? When you systematize your sales process, you can get pre-qualified referrals who are expecting your call…Guaranteed. 3. Client Intake — From the moment your prospect says, “This sounds good, how do we get started?” you need a system for efficiently handling all the paperwork without killing you or your new client. Again, proper use of technology can help here. Whether you use DocuSign & LaserApp, or your client signs the paperwork at your office and then take them to lunch/dinner to celebrate your new relationship, have a system in place for what happens next, including follow up from all sides to make sure all the paperwork and client funds land where they’re supposed to. 4. Client Service — An extension of #3 above, what happens after your client signs on? Have a plan for the first day, week, The Register | July-August 2018

month, quarter, six months and one year from now. Think of these as your deliverables, both tangible and intangible, and have an automated, documented system for tracking and implementing.

• Focusing more on the type of activities you enjoy doing.

5. Operations/Admin — Operations usually connects everything else on this list and throws in “everything including the kitchen sink.” Document the daily running of your office, from opening to closing. If you don’t write it down and assign responsibility, don’t be surprised when it doesn’t get done.

• At first thinking “that idea is outlandish,” but then remembering that, in order to get different results, you’ve got to think and act differently.

6. HR/Staffing — Have a documented system for hiring, firing, training, supervising, motivating, compensating and incentivizing employees. Independent recruiters and websites from Craigslist (free) to Zip Recruiter can do a lot of the heavy lifting and sorting through candidates to help you find the right ones.

• Y our staff comes up to you and says, “Hey, you shouldn’t be doing that… Give that to me!”

7. Time Management — Having clearly defined goals, a meaningful mission and a business plan will help manage your time. Also, learn personal habits such as how to structure your day for maximum productivity and the least amount of stress. In addition, learn how to graciously say, “No thank you” to clients who don’t fit your profile. And finally, have a system in place to handle the 1,000 interruptions from email, phone and your staff that we all face daily. 8. Project Management — Once you have a sound list of goals and a business and strategic plan, you can begin to chart out your goals weeks and even months in advance (at least 90 days out). Successful consultants use “90-Day Sprints” to get projects accomplished.

• More patience for those necessary activities you don’t enjoy doing.

your peers or seek professional guidance, systematizing all aspects of your business will save you time, money and energy. It’s an essential component to growing, and eventually transitioning, your practice as well as enjoying a rewarding career. 

• Noticing gains in productivity, ranging anywhere from incremental to as large as 20%.

• An immediate reduction in stress levels from knowing you have a plan in place. • You enjoy your clients more, perhaps sharing a meal, celebrating your relationship, etc. • A feeling of control as you start running your business, instead of your business running you. Don’t Reinvent The Wheel In most cases, someone has already done exactly what you’d like to accomplish. Templates and help are available. You just need to ask. Whether you do it yourself, ask

Max Bolka Max Bolka, was a featured speaker at this year’s IARFC’s Biltmore Conference April 17-19th in Asheville, NC. He is a 30+ year veteran of the financial services industry who developed and served nationwide financial planning and investment clientele. For the past 20 years, he has also been “Building First-Class Financial Advisors” of all kinds through his industry professional speaking, writing and one-on-one mentoring program. For more visit his website. Contact: 828.713.4116 max@maxbolka.com www.maxbolka.com

9. Financial Management — Finally, you might be surprised how many consultants do not keep adequate books. You should have an easy system for tracking all your finances. Use spreadsheets to show everything from where the money comes from (Pipeline/ Client Tracker), to a monthly Business and Personal Profit & Lost Statements, as well as a Quarterly Personal Net Worth Statement that tracks the progress towards your own financial independence Guideposts Along The Way Some examples of signs you may see along the way as you start to systematize which indicate you’re on the right path can include: • Streamlining your life as well as your business. The Register | July-August 2018

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Why Advertise in the Register The Register, a practitioner-oriented, financial magazine by the International Association of Registered Financial Consultants (IARFC), includes profiles, articles, interviews, book reviews, practice management techniques, product information and marketing recommendations. The Register updates members on current matters, along with a listing of newest members and latest conferences with CE approved curriculum.

Our members use the Register to help them face ongoing challenges in their daily financial planning practice. Take this opportunity to perfectly position your company in front of the rapidly growing financial planning market and an ever-faithful Register audience of financial professionals.

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The Register | July-August 2018

IARFC

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The International Association of Registered Financial Consultants (IARFC) is a non-profit professional association formed to foster public confidence in the financial services profession, to help financial consultants exchange planning techniques, and to recognize practitioners who are truly committed to ethical standards and continuous professional education. It is composed of over 4,000 individual members domestic and internationally. The association was organized in 1984. The IARFC administers the Registered Financial Consultant (RFC) designation, the Registered Financial Associate (RFA) designation and the Master Registered Financial Consultant credential (MRFC).

About Our Members Connecting Products and Services with IARFC Members 70% of readers visit a company’s website for more information after seeing their ad in the Register. 85% of IARFC members are actively involved in making the final purchase decision. 80% of IARFC members decide to order products and services within three months. Products and Services Purchased

IARFC INTERNATIONAL ASSOCIATION OF REGISTERED FINANCIAL CONSULTANTS

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Reprints Our custom reprints produce highly attractive color or black & white copies of articles previously published in the Register and Journal magazines or on the IARFC website. Reprint cost is determined by the number of pages, quantity ordered, color usage, and photography used in the article. All reprints will include a Register or Journal masthead (unless a cover is included in the order) and disclaimer. Reprints can also be customized to include your company logo and/or disclosure. A watermarked PDF proof will be emailed to the specified contact person for final approval. Once approved, the watermark will be removed, and the order will be sent to the IARFC printer. The printing process takes approximately 7-10 business days to complete. Our standard shipping is UPS Ground. Rush orders are available for an additional charge. Invoices are sent immediately after the quantity and size of the order reprint order is decided. For more information or a price quote contact: Wendy M. Kennedy, Editorial Coordinator at 513.261.6047 or editor@iarfc.org

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Comparing the Various Solutions for Healthcare Costs in Retirement A thorough comparison of today’s products addressing Long-Term Care

The best thing about retirement is people are living longer than ever. The worst thing about retirement is people are living longer than ever. I’ve attended umpteen retirement conferences with this infamous tagline. The US elder care market is expected to exceed $512 billion in 20201. Similar to national debt, Social Security obligations, pension deficits, and other entitlement conundrums, here is yet another figure which has become so gargantuan that it’s best to ignore and casually overlook a 3% versus 7% cost increase. This attitude invalidates the first thing any grammar school teacher will espouse about goals, they must be The Register | July-August 2018

SMART (Specific, Measurable, Achievable, Relevant, and Timed). While ignorance is bliss, it’s also irresponsible. Therefore, a financial planning client must zone in on their individual obligations, for instance the cost of private nursing home room – $8,121 or assisting living facility – $3,7502. Let’s explore the original answer to this expense, Long-Term Care Insurance (LTCI), and then proceed to the recent response of hybrid products. LTCI was first offered in the late 1970s and really caught on in the 1980s. This was in

response to many elderly Americans following the trend of having to sell their house in order to get care. Sales began to peak in the late 1990s and early 2000s; in 2002 over 754,000 policies were purchased by 125 different insurance carriers. Then there was the collapse… in 2014 only 129,000 policies were purchased by a mere 15 carriers3. Customers of LTCI would pay a “nonguaranteed” premium for a set number of years, or more commonly lifetime, with the potential to receive a specific daily benefit for a set number of years, or lifetime benefit, after satisfying triggers such as the inability to Page 25

perform two of six activities of daily living, chronically ill, terminally ill, or severe cognitive impairment. Carriers swooped into this growing market, competing for market share on cost. With little to no prior actuarial evidence and making guestimates on potential claims 20-30 years down the road, carriers made some mistakes. They then leveraged those “non-guaranteed” rate clauses to make up the shortfall, asking clients to pay sometimes 40-50% more premium for the same plan, only to then increase rates year after year. Insurers argue these rate hikes are justified due to faulty assumptions about cost of care, interest rates, policyholder lifespans, retention rates, and other factors. Naturally, many of our nation’s grandparents balked at these elevated expenses on their fixed retiree income, still harboring the fear of paying so much money only to die suddenly of a heart attack, and chose to lapse their policies. The quickly growing market of seniors combined with a fading product left a void for new solutions… enter Life Insurance. Some permanent life insurance, typically Whole Life or Universal Life, now contain an “Accelerated Benefit Rider”. Typically, these riders will allow the insured to advance a portion of their death benefit prematurely in the event of chronic or terminal illness. The advancement is based on a percentage of the corridor between Cash Value and Death Benefit, determined by their age at that point. This advancement is also a lien against the death benefit. Page 26

To piggyback on this method, some life insurance policies offer a “Long-Term Care Rider”. This is similar in that it allows an advancement of death benefit, but without restrictions based on age and/or cash values. It typically also does not create a lien against the policy. Such riders do come at an additional cost, which like traditional LTC is not a guaranteed premium. Clients can at least erase the “use it or lose it” debacle, knowing heirs will get a death benefit, caregivers will receive payments, and/or they personally will enjoy cash value. Beyond traditional life insurance, the annuity market has also created their own benefits to address LTC. Some products offer a rider that will double the annuity payout or add some other bonus feature in the event chronic or terminal illness triggers are satisfied. These often come at an increased cost on top of that of a withdrawal rider. It may have taken several decades to get it right, but the insurance industry is finally making strides to help consumers tackle one of the biggest threats to retirement. In fairness when discussing life insurance and long-term care, people having been dying since the beginning of time. People have only been going into assisted living facilities for a few decades. Hopefully continued actuarial evidence will lead to even more innovation. 

Bryan M. Kuderna, CFP®, LUTCF Bryan M. Kuderna is a CFP®, LUTCF with Kuderna Financial Team. He is a perennial qualifier for the industry’s prestigious MDRT, Leaders Club, and Inner Circle. He is the author of the best-selling book, Millennial Millionaire – A Guide to Become a Millionaire by 30. Bryan has a Bachelor of Science in Finance and Economics from The College of New Jersey. He has also studied at The University of Tampa and The University of Economics in Prague, Czech Republic. Contact: 848.456.3057 bryan_kuderna@planningalliance.com www.planningalliance.com (1) Market Insight Reports- 03/19/2018 (2) Genworth 2017 Cost of Care Survey (3) NAIC Report- 2016 The Register | July-August 2018

The Register | July-August 2018

Page 27

Consumer Focus The Need for Income Planning Has Erupted Onto the Scene With the recent news of the intensity and lava flow of the Kilauea Volcano on Hawaii’s Big Island, it’s important to understand, while old by human standards, Kilauea is actually the youngest of Hawaii’s active volcanos at between 300,000 & 600,000 years old. It’s latest eruption cycle has been underway since January 1983 and is showing no signs of dissipating. Matter of fact in April of 2018, the over 2,000 degree lava started flowing a lot more aggressively, overtaking houses and previously undisturbed land. One can’t turn on the news without hearing something about this natural phenomenon. I know, you’re asking yourselves “what does a volcano have to do with enjoying retirement?” Actually, lots to the people who were unfortunately in the path of the lava. Planning for the unexpected and having contingency plans in place are topics preached daily by many retirement planners. Illustrating the similarities of a misbehaving volcano and a properly laid out retirement plan lies ahead and should lead to some very interesting reading. So, relax and let’s go with the flow. Retirement planning has changed lots in the last 30 years. Planning today for retirement is vastly different than when our parents and grandparents were planning theirs. It isn’t uncommon to hear someone refer to their upcoming retirement as transition or “second act” meaning the stage in later life where full-time work is left in the dust as people move onto other life pursuits. Others, like me, say that they never plan to retire, maybe just change direction. Our friend Kilauea appears to be the same way. Active for at least 300,000 years, its lava intensity merely changes direction every century or so. Not really knowing how much one will need yearly in retirement is a common mistake. Do you want to stay in your current home, move to an adult living community, or move closer to family members? How will you spend your time: traveling, starting a business, volunteering? Studies have found Page 28

that being active with a network of friends is a major ingredient for happiness in retirement. In addition, for those who don’t prepare for the non-financial aspects of retirement, boredom and a lack of purpose are commonly reported.

hot as lava emotions that the noncommunicating spouses will experience towards each other in the future, it gets awful scary to think about. Having a plan that both spouses agree upon and understand is vital.

Understanding future taxes is also a necessity. Tax Planning has helped many by looking ahead to protect their behinds from unexpected taxation in the future. Making sure to invest tax-efficiently is a huge step in controlling the flow of unnecessary tax lava. Getting debt under control can also make retirement more enjoyable.

As one approaches retirement it is vitally important to plan as if a long retirement awaits. This is referred to a longevity planning. Retirements can last 30 or 40 years or even longer. Just like many people underestimated the true force and damaging power of Kilauea, many planning for retirement underestimate how long they will live and fail to save enough money to last their lifetime. One of the biggest blunders I see in the financial planning community is calling a financial plan a “retirement plan” even though the plan has no yearly lifetime income component, otherwise known as a “financial fill-up” built in. A good tool to utilize for the Financial Fill-up is a Bucket Plan.

It’s amazing, but many couples never talk about retirement decisions. 60% of married couples did not agree on their respective retirement ages, 44% did not agree about whether they will work in retirement, and 42% had different ideas about their expected retirement lifestyle. When you think about the lack of communication and the

The Register | July-August 2018

The most important goal in setting up a retirement income plan is to make sure your income lasts for the rest of your life. This can be achieved many times by using an income planning strategy known as “4 Bucket Plan”. Just as volcanos use multiple streams of lava to cover an area, a proper bucketing strategy can give a retiree multiple streams of income to cover wants and needs all the way through retirement. There are many theories of proper bucketing strategies, and the magic is they can be customized for everyone. Bucket one is for ultra-low risk investments as this bucket is your immediate income plan. It is usually advisable to have this bucket pay out the first 5 years and then exhaust itself. Many utilize a fixed-interest immediate annuity or CD’s for this bucket. It isn’t glamorous and its purpose is to just simply isolate the need to take money from your other investments over the first five years at least.

untouched the better the growth for income will be. This additional bucket helps one be prepared for most any unforeseen curve balls that life throws our way. Don’t wait until you’re ready for retirement to figure out what you want to do. Start thinking about life after full-time work at least a decade before. Ask yourself questions such as “What do I want to do?” and “What makes me happy?” There is no right “one size fits all” answer because personal values and retirement resources vary widely. In addition, some people prefer a modest retirement while others expect to be very active and incur higher costs. The happiest are those who have planned ahead and there is no time like the present to make sure your retirement plan is safe from catastrophes. I’m sure many in the path of the current lava waves in Hawaii never thought of the “what if’s”. In many cases of homes and lives being destroyed by the volcano all that’s left is to pray. Retirement doesn’t have to be that way. 

Bucket two is for years 5-13 and is fine with some medium to low risk stocks, bonds, or even an annuity in some cases. 40% in equities is acceptable as long as the stocks are reputable and reliable. A good rule of thumb is to aim for a 5-7% return in this part of the plan. The whole time one has been living off this portion of the portfolio, buckets three and four have had at least a good 13 years to grow. Bucket three is for your longer-term investments. In an ideal scenario this won’t need to be touched for at least 13 years into the future. More risk can be taken here as the time horizon is much longer. Aiming for an 7-9% return here isn’t stretching too far as long as the market cooperates, and one can put up to 80% of this bucket into aggressive equities. Bucket four is usually an annuity with a lifetime income rider. This annuity will have an income value that grows yearly. Its main purpose will be to some day combat inflation or other unexpected surprises and emergencies by supplying an additional yearly income for life. Liquidity features also allow a small portion to come out each year for emergencies. It can be activated any time after the first year, but the longer it is The Register | July-August 2018

RFC® Note Cards Use the RFC ® Note Cards for quick personal Thank You Order your RFC® Note Cards, packages of 25, $15 plus s&h, quantity pricing available

Peter J. “Coach Pete” D’Arruda, CTC, MRFC Peter J. “Coach Pete” D’Arruda, CTC, MRFC is a Financial and Tax Coach. He is host of the nationally syndicated weekly radio show, The Financial Safari, as well as the author of four books, including “Fine Print Fiasco”, “Financial Safari, 7 Financial Baby Steps” and “Have you been talking to Financial Aliens?” Themes of these easy readers include helping others avoid being taken advantage of and translating financial jargon for any layperson.

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Visit the IARFC store for these valuable branding tools. store.iarfc.org or contact 800.532.9060, info@iarfc.org

Contact: 919.657.4201 pete@capitalfinancialusa.com www.capitalfinancialusa.com Page 29

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What is Old is New In the past, a secretary/assistant/gal Friday or whatever term you had chosen to use, would be considered a go-fer or person that would be given any task that you didn’t want to do yourself. That is the PAST. Staffers today are multitaskers who run rings around what used to be the old image of office personnel. They are now the CURRENT heart of your business. Today’s more than able workforce, comes to you better trained, more diligent, and highly educated. Their face is the first to be seen and it must be a smiling and attentive face. Expecting the staff to be aware and observant of a client’s time, personality, and reason for being in your office, is crucial to the FUTURE of your practice. That is where continued training comes in.

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Page 30

A few years ago I wrote a series of articles for the Register and delivered a CE presentation on “How to be a Purple Cow in a Blue Ocean”. It discussed being different and standing out as a practice by doing things so thoughtful and unexpected that it demonstrated how special your clients or prospects are to you. YOU and your STAFF will stand out like a “Purple Cow in a Blue Ocean”. These special things go a long way in the eyes of others. The point of those articles was to impress on business or practice owners how very important it is to have a well trained staff. An improperly trained staff member can make or break a business. The future of YOUR practice is in THEIR hands before it ever gets to YOURS. The old traditions, like handwritten notes to a client or personal phone calls, seem to have been replaced by email messages and other digital means of communication. While those types of messages are here to stay, like it or not, a client still appreciates the OLD way, even though they understand the NEW way. Trying to adapt to current modes of communication with a client, is inevitable. Depending on the age of your client base,

you may find that more and more of them are getting into the digital age and embracing it. Ask your clients how they want to receive communication from you. You may be surprised by their answer. I am sure that most of your clients do texting today, but some may want to hear their phone ring and actually speak to someone! Even if your major way of communication is email, if you drop a handwritten note or card to them, the reaction will be overwhelmingly positive. Positive reactions lead to more referrals. Speaking about referrals…how about sending a restaurant gift card to your top several clients on their wedding anniversary? The cost will come back to you in many ways–client retention, referrals, continued positive relationships, and a great big Thank You! By incorporating the OLD and NEW and you will reach a happy medium for the staff, the clients, and the consultants in the firm. 

Michelle Blair, RFC® Michelle K. Blair, RFC® is an office administrator specializing in management and relationship building. She is a Board member of the IARFC as well as the Secretary of the Financial Planning Association, Long Island Chapter. Michelle devotes quite a bit of time to promoting professional and personal growth in the industry. Contact: 516.639.5078 michelleblairrfc@gmail.com The Register | July-August 2018

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IARFC Ethics Approved Status

Brand Your Ethics Approved Status Set yourself apart from other consultants • Affix your Ethics Approved Seal to your framed RFA®, RFC® or MRFC Certificate • Send an IARFC Ethics Approved media release to your contacts • Order business cards with the Ethics Approved Seal • Place digitized Seal on your website in a prominent position • Mention this program in client newsletters • Order additional Ethics Approved Seals as a visual reminder • Display the IARFC Code of Ethics plaque in office • Put a link to the IARFC Code of Ethics on your website

Visit the store store for these valuable branding tools tools VisitIARFC the IARFC for these valuable branding www.IARFC.org or contact info@iarfc.org www.IARFC.org/Store or 800.532.9060, contact 800.532.9060, info@iarfc.org The Register | November-December 2017

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2019

IARFC Annual Conference March 20-22 Gaylord Opryland Resort & Convention Center Nashville, TN