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October 2013

PLUS Joe Pulizzi and How to be the King of Content Marketing

How The Money Guys Struck Gold on the Air

ACA & Open Enrollment Season Special Report




How to write $250,000,000 of annuity premium and work 20 hours per week


hat if I told you that you can easily turn your practice into a “business” that runs like a machine…even when you’re on the golf course or taking your annual 3-month vacation (like I do). How would you like to be earning more, taking more time off, delegating more duties to your staff and reserving your valuable time for meeting with clients?

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View and share the articles from this month’s issue




42 42 M  edia Magic: How The Money Guys Struck Gold on the Air By Phillip A. Rousseaux Radio and television have helped an advisor successfully brand his firm and market his practice to prospective clients.

44 H  ow Longevity Insurance Got a Makeover with DIAs


8 Look for the Method behind the Madness of Conflicting Annuity Sales Reports By Linda Koco The annuity data pool is a tremendous resource for advisors, as long as those who are looking don’t fall in and drown.



22 How to Sell Your Agency

By Linda Koco Thinking about selling your agency? Experts give their guidance on how you can stand out from the crowd of advisors looking to liquidate.


Business Succession Guide A special section on how to help your clients prepare their businesses for a profitable transfer.

32 The Spectrum of Business Succession Planning By Sam G. Torolopoulos and Dennis M. Axman Every business has a unique path to succession. Your job is to blaze that trail.

12 H  ow to be the King of Content

An interview with Joe Pulizzi You have a story to tell and information to convey to your clients and prospects. How do you get that message across and position yourself as an expert? By putting content marketing to work for you! In an interview with InsuranceNewsNet Publisher Paul Feldman, the author of Epic Content Marketing, Joe Pulizzi, shares the concept of content marketing and provides a strategy on how to become your own publisher.


36 How Businesses Can Pass the Torch without Getting Burned By Irving Katz You know how few family businesses make it from generation to generation. Here’s how you can help clients to beat the odds.

38 Close Trap, Open Opportunity

InsuranceNewsNet Magazine » October 2013

By Bill Buslee and Steve Kroeger Key employees are important to the value of a business for a transitioning owner. But the usual tactics of retention can have their unintended consequences.

By Cathy Weatherford The recent popularity of deferred income annuities shows the continued consumer appetite for retirement income strategies focused on managing longevity risk through guaranteed lifetime income.


48 A  CA Adds Anxiety to Open Enrollment By Susan Rupe Despite some of the uncertainty in the Affordable Care Act environment, advisors still must be ready to serve their clients.

50 A  ccentuate the Positive and Eliminate the Negative on your Business By Ronald Fields With open enrollment season upon us, it’s time for advisors to step up by aiding employers and workers who are at a loss when it comes to insurance.


54 Do One-Country Funds and Retirement Money Mix? By Linda Koco Some clients may be curious about whether these funds will provide more of a yield than traditional retirement investments, so advisors will probably need to be ready to provide individualized guidance when asked.


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62 L IMRA: Knowledge Plus Action Equals Retirement Security

56 G  reat Sales Training Comes From Skilled Trainers

By Alison Salka Advisors can help clients achieve retirement security by giving them the knowledge they need and helping them to put that knowledge into action.

By Dan Seidman The right preparation will help transform your sales training from a snoozefest into a memorable experience for your attendees.


60 MDRT: Advising the Affluent Client: It’s All in the Questions By Thomas E. Fowler Discovering your client’s underlying motives and core values is easy. You just need to ask.

64 The Last Word: Clients Still Best Served by Advice over Search

61 NAIFA: Build Trust With Female Prospects

By Larry Barton The personalized advice and dedication to client service that is offered by an advisor is worth far more than any discount offered online.

By Jennifer Alford Women want the same thing that men do with regard to their finances. They want to be assured they will be financially independent.

EVERY ISSUE 6 Editor’s Letter 20 NewsWires

30 LifeWires 40 AnnuityWires

46 HealthWires 52 FinancialWires

INSURANCENEWSNET.COM, INC. 355 North 21st Street, Suite 211, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli ASSISTANT EDITOR Susan Rupe CREATIVE DIRECTOR Jake Haas PRODUCTION EDITOR Natasha Clague SENIOR GRAPHIC DESIGNER Carlos Centeno MARKETING STRATEGIST Katie Hyp DIRECTOR OF MARKETING Anne Groff AND SALES TECHNOLOGY DIRECTOR Joaquin Tuazon




Copyright 2013 All rights reserved. Reproduction or use, without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail, send your letter to 355 North 21st Street, Suite 211, Camp Hill, PA 17011, Fax at 866-3818630, or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, Ext. 115 or reprints@insurancenewsnet. com. Editorial Inquiries: You may e-mail or call 866-707-6786 ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to, or call 866-707-6786, Ext. 115 for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 355 N. 21st Street, Suite 211, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

Legal disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information “as is,” without warranties of any kind, either expressed or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration, for any errors, inaccuracies, omissions or other defects in, or untimeliness or unauthenticity of, the information published herein.

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6000 Westown Pkwy, West Des Moines, IA 50266 | | 888-647-1371 13 INN 10.13 FOR AGENT USE ONLY. NOT FOR USE IN SOLICITATION OR ADVERTISING TO THE PUBLIC. October 2013 Âť InsuranceNewsNet Magazine 5



Tales Told Out of School


n my senior year of high school, I was early on Monday mornings. I am not a morning person. In fact, it would be difficult to classify me as a person in the morning. I am more of a stumbling need for caffeine and solitude. But I would show up at least a halfhour early on Mondays to stand in a circle of other guys kicking dirt and smoking cigarettes. And telling stories about the weekend. Some of us had even spent time together over the weekend but we still wanted to hear the story about what we did. Especially if it was Jim Smith telling it. We called him Schmidt, because it didn’t seem possible that a real person could be named Jim Smith. Schmidt was a mechanic after school and destined to be a mechanic until he died. He was also the best storyteller I ever knew. We would try to make the mundane magnificent. Sometimes, we were funny. Some of us more than others. But we would stand there, kicking dirt and looking at grass until Jim uttered a sentence and flicked his Zippo. We’d watch him light up and start the story. He unspooled setting, character, exposition, climax and conclusion even if he didn’t know he was doing those things. He excelled at timing, always the key in story-telling. Even today, when I want to tell a story right, I’ll think about how Schmidt would do it. It doesn’t matter what else you do in your life, if you’re not telling stories and constantly trying to improve on your story-telling skill, you may as well be any other animal. Communication is what makes us human. We teach each other. We pass along traditions. We make life worth living. With stories. A great joke is a story with a surprise, because that’s what sparks humor – surprise. Some guys know that wooing a girl far above his ugly factor takes a story that suggests there is something more to him that is worth knowing. Your story is your essence. That is the moral in this month’s interview that Publisher Paul Feldman 6

conducted with Joe Pulizzi, an early practitioner of content marketing. Joe passes on excellent advice for finding the right vehicle for your story to build business. But Joe’s most important point was the simplest: you tell stories every day but you don’t recognize them. When you confess your worst sales misadventures, you are passing along your wisdom and helping someone else navigate a similar circumstance. When you relay how you shook an angry fist, or digit, at another motorist just to end up spending an excruciating few minutes standing next to him at the supermarket checkout line, you are demonstrating that we live in a community where our careless actions have consequences. When you tell a child how you met her mommy after a mean girl stood you up, you are assuring her that no matter how much her heart is broken now, someone out there will treasure, and deserve, her precious gift. Schmidt would have curled his lip at that last line, pronouncing it sappy. But he didn’t see what he was doing with his own jokes about a father who seemed to value only alcohol tolerance and an English teacher who appeared to enjoy inscribing an elaborate red “F” on Schmidt’s stories. Schmidt was easing his pain and, along the way, he taught us about dealing with our own disappointments. Schmidt’s most important lesson is the same one Joe Pulizzi conveys. Get the right story, get the story right and then get out of the way. Schmidt threw everything he had into a tale: his inflection, his arms, his eyebrows, his feet. But he kept himself out of it, as a mutual observer, as your narrator. He never cast himself as the hero, although, years later, you might conclude that he was. We sell services. We move products. We cash checks. That’s what we do, but that’s not who we are. Our stories move people to action. They succeed us generation to generation. Think of it this way. You can either shape the story or be someone else’s story. I learned that on the rise between the parking lot and school. I never fared that

InsuranceNewsNet Magazine » October 2013

well in Schmidt’s stories. In fact, there are probably lots of little Schmidts running around with stories about this idiot, Marino. Because Morelli is just too goofy a name for a person. The best story wins. You have heard that, no doubt. Long after might fails, words ring on. On this 50th anniversary of Martin Luther King’s “I Have a Dream” speech, we don’t recall a lot of details of what happened on that day, but those images and that sweeping story stand as tall as a monument today. On this 150th anniversary of the Battle of Gettysburg, it was 10 sentences uttered months after the fight that gave meaning to all those deaths. It is never what happens to you, it is what you make of it that counts. Schmidt made legends out of the stupid things that teenagers do. I don’t remember the deeds so much as his recounting of them. He made characters out of us and adventures out of our actions. Try this: Take the most interesting thing that happened to you today and make a story out of it. It might not have been a very exciting event, but build the story in your imagination. Then later today, tell it to someone. If you aren’t up for that, tell it to your smartphone. You’ll see where you might have been lacking and need to develop, but also you might surprise yourself. Do this as many days as you can, and pretty soon, you’ll be known as a great storyteller. You might even find yourself getting into trouble, just for the story. Like the time when the cops were chasing us and then we ended up chasing them. Schmidt was at the wheel. It was a hell of a ride. Maybe I’ll tell you about it sometime. But you have to tell one, too. See ya Monday. Steven A. Morelli Editor-in-Chief



October 2013 » InsuranceNewsNet Magazine




The Method behind the Madness of Conflicting Annuity Sales Reports T  he annuity industry is somewhat unique in the financial services field by the number of sales statistics that are released each quarter. But, it’s important for advisors to understand what’s behind the numbers. By Linda Koco


t’s a blessing and a curse at the same time. The “it” is the host of annuity sales statistics that come out each quarter. On the blessing side of things, annuity specialists are fortunate to be able to see the statistical highlights of annuity sales from an assortment of researchers. That gives a multi-dimensional look at the business, and that can prove invaluable when it comes to making decisions regarding the practice and client recommendations. It’s all the more valuable since the research organizations generally make annuity sales highlights available to business media, which disseminate the numbers widely. Annuity specialists do not typically have the budget to pay for the full reports on their own, so the public dissemination at least puts the key numbers within easy reaching distance. Talk about a good deal for advisors: this is it. And now for the curse. This is the difficulty that comes from trying to weigh the findings when they appear to disagree with one another in the very same quarter. If a reader does not know what’s behind the numerical differences, frustration and serious misunderstandings can result.


Consider the seeming disparity in some recent second quarter annuity sales data. In reporting second quarter annuity sales, SNL Financial noted that MetLife had moved into first place during the quarter, up from second place in the 8

ology, but we won’t belabor them here. If a reader does The point is, the researchers differnot know what’s entiate themselves by the markets they serve and the approaches they take. This behind the numerical helps them meet the information needs differences, frustration of their target audiences, but it also accounts for some of the seeming inconand serious gruities in the annuity data that advisors misunderstandings see in the general media. can result. Other reports, too same quarter last year. SNL also notes that Prudential Financial, which had been in first place in SNL’s second quarter rankings last year, dropped into second place for second quarter this year. But another annuity sales report, this one from Morningstar, shows more drastic changes. It shows that MetLife was in fifth place in second quarter this year, down from third place in second quarter last year. And it shows Prudential in sixth place this year, down from first place in the Morningstar report for the same period last year. The sober question to ask is: how can the researchers publish such vast differences in second quarter annuity sales for two of this country’s biggest carriers? The answer has to do with methodology. Researchers don’t all study the same annuity areas or use the same filters. For instance, SNL said its figures reflect business for individual and group annuities, both fixed and variable. The Morningstar figures also reflect individual and group sales, but only for variable annuities. Furthermore, SNL’s figures reflect statutory total annuity considerations in the United States, as per the National Association of Insurance Commissioners. The Morningstar figures reflect new sales, defined as all new money going into a contract. (Note: Morningstar reports net sales too but, in this particular example, the rankings are for new sales.) There are other differences in method-

InsuranceNewsNet Magazine » October 2013

A number of other firms and organizations make quarterly annuity results available in public venues (as well as to their own customers, members and study participants). Some of the wellknown providers, in addition to SNL and Morningstar, follow. Here, too, there are differences in scope and parameters. LIMRA. This researcher publishes new retail sales results for fixed and variable annuities, separately and in total, in the individual market. The data include fixed annuity detail (fixed rate deferred, book value, market value, indexed, etc.) and variable annuity account detail (separate and fixed). Insured Retirement Institute. This trade group puts out quarterly total new sales results for variable and fixed annuities, plus some additional detail. These results combine new variable annuity sales data from Morningstar and new fixed sales data from Beacon Research. Beacon Research. This researcher publishes data on fixed annuities, including indexed, income, fixed rate (market value and non-market value). The numbers are for new individual sales with 1035s/rollovers from other carriers included, but with contract-to-contract rollovers within the same carrier excluded. Wink Inc. This resource publishes new sales and other data on indexed

Do MEDICAL annuities. The publicly available annuity numbers are for individual and group sales, including 1035 exchanges and rollovers (but carriers that participate in the study receive sales net of 1035s and rollovers). CANNEX USA. This firm reports on single premium income annuities – not actual sales but advisor inquiries to its online exchange. Other researchers conduct annuity sales studies on a more boutique level, and some distributors and carriers also provide tallies but through the lens of their own firm and products. That means there’s plenty of annuity sales data to go around. The fly in the ointment is that data come with differences, some of them significant. The differences may include not just industry segment studied but also carriers and products included, definitions used for terms and products, categories of features examined, net or gross results, and many other factors. Sharp-eyed practitioners will catch the critical differences. At least that is the hope. But this doesn’t always happen. Those who are in a hurry or who are not yet up to speed on annuity data may assume it’s all somehow the same, may be overwhelmed at the volume, and/or may discount perceived discrepancies as “bad data” suitable only for the trash heap. Most researchers do indicate their methodology and/or source and scope of study. However, that information does not usually appear at the top of a data summary, or at the top of news reports about the sales reports. In-the-know advisors therefore need to read the data summaries straight through, top to bottom, and to ask questions about parameters if something doesn’t make sense. Some other sectors of the insurance business – such as disability and longterm care – do not have as deep a reservoir of publicly available sales data for field professionals to sample. In view of this, the annuity data pool is actually a tremendous resource for advisors, as long as those who are looking don’t fall in and drown. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@


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October 2013 » InsuranceNewsNet Magazine



ou have something important to say. Don’t you wish everybody knew that? That’s where content marketing comes in. Content marketing is a strategy to take what you are good at and get it in front of your ideal audience. It’s what Joe Pulizzi has been advocating since 2001. Joe has since founded the Content Marketing Institute (CMI) and he has helped thousands of individuals and companies find their voice – and their audience. He has written definitive guides on the subject, including his latest book, Epic Content Marketing. CMI has helped brands such as AT&T, Allstate, LinkedIn and SAP develop their content marketing. 12

InsuranceNewsNet Magazine » October 2013

Content marketing is one of the most powerful methods of advertising and marketing that you can do. Many top companies such as Genworth and Prudential have been using this technique for many years, and so should you. It is an effective tool to help you and your company establish trust through thought leadership. But you are not a huge corporation, you say? That’s great, because you still can find your unique voice and be nimble in delivering your information. Don’t worry about not having enough content to offer. By the time you use the methods Joe offers in this interview with InsuranceNewsNet Publisher Paul Feldman, you will be swimming in content – and clients.

Joe Pulizzi Founder of Content Marketing Institute

October 2013 Âť InsuranceNewsNet Magazine




FELDMAN: What is content marketing, and why should an insurance agent do this? PULIZZI: Content marketing is where, instead of buying advertising and trying to rent attention, you create your own interesting content and start to build your own audience, similar to the way a publisher would. An insurance agent can create valuable and compelling information in a white paper, a blog post, a magazine or a newsletter. An agent would need to figure out the needs of their customers, not just product needs. For example, why do people need estate planning? What are the ins and outs of it? What are the rules and regulations that clients need to know? Those are the subjects you need to cover and they should be covered on a consistent basis. From that audience, you end up growing more customers and keeping the customers you have. Content marketing is an art form that’s been done for hundreds of years. Companies have been producing their own content for a long, long time. But with social media and search engines, if you want to get found on the web, and you don’t want to pay directly for it, you need to create and tell amazing stories about solving your customers’ pain points. The short answer is that content marketing is thinking and acting like a publisher, and creating amazing content to attract an audience.

Fill a need. Your content should answer some unmet need of or question for your customer. It needs to be useful in some way to the customer. Be consistent. The great hallmark of a successful publisher is consistency. Whether you subscribe to a monthly magazine or daily e-mail newsletter, the content needs to be delivered always on time and as expected. Be human. The benefits of not being a journalistic entity is that you have nothing to hold you back from being, well, you. Find what your voice is, and share it. Have a point of view. This is not encyclopedia content. You are not giving a history report. Don’t be afraid to take sides on matters that can position you and your company as an expert. Avoid “sales speak.” When we at Content Marketing Institute create a piece of content that is solely about us rather than for an educational purpose, it only garners 25 percent of the regular amount of page views and social shares. The more you talk about yourself, the less people will value your content. Be best of breed. The goal for your content ultimately is to be best of breed. This means that, for your content niche, what you are distributing is the very best of what is found and is available. If you expect your customers to spend time with your content, you must deliver them amazing value. Joe Pulizzi, Epic Content Marketing: How to Tell a Different Story, Break through the Clutter, and Win More Customers by Marketing Less, McGraw-Hill, 2013.

FELDMAN: How important is advertising to content marketing? PULIZZI: It’s critical. This is not an either/ or situation. If you look at the biggest problem a lot of small businesses have, particularly in insurance, it’s that they will create a blog post or a white paper but then nobody downloads it, reads it, shares it or pays attention to it. This is why it is so hard to do. People think all they have to do is create good content and people will follow. Well, no. You have to know where your customers are hanging out on the web. You might actually have to get your content kick-started through paid strategies using some kind of tools, such as Outbrain or nRelate. Or you can use any kind of pay-per-click or banner placement ad 14

to promote your white paper or webinar. First, you have to figure out who you’re targeting. Then you need to figure out why you’re doing it, how it’s going to help your business, and how you are going to attract people to that message. FELDMAN: How would an insurance agent come up with content? PULIZZI: Story ideas are important. People think, “Oh, I’m going to talk about my products and services.” That’s a very small part of what we’re talking about, because most of the time, you already have a lot of that content. Most insurance agents probably have a ton of content about the

InsuranceNewsNet Magazine » October 2013

products they offer. But that has little to do with customers who don’t even know they need insurance. Even after somebody becomes a customer, how do you cross-sell, up-sell and get them thinking about new things? The No. 1 way to think about story ideas to accomplish any of those objectives would be to talk to your customers. That’s the old-line way, but it’s amazing how many large businesses don’t even do that. Just ask your customers what keeps them up at night. Or when they come into your office, ask them, “What led you to this decision?” You can also use things such as Google’s keyword search tool to see what people are looking for locally and what questions they are asking. You should be answering those questions in some way on the web. If you don’t answer those questions the way you would in a one-on-one meeting, odds are a competitor is answering those questions on the web. FELDMAN: How do you recommend finding a focus for your content? PULIZZI: You need a content marketing mission statement for your business. It’s similar to an editorial mission of any magazine, and it’s just as important. For example, Inc. magazine has one simple goal. They target entrepreneurs and small business owners with very useful information about one thing, and one thing only: how to grow their business. So that is the outcome for every piece of content they create on Inc. – growing the business. That’s why when you read Inc. it’s so good, because every article, every sidebar in there is meant to help you grow your profitability in some way. Form your mission around where you can really be the expert in your niche, and focus on that. You’re not going to talk about all things financial. There are lots of financial firms that are trying to become the financial services experts in the world. Your goal is to be the expert in your area. And when people are ready to buy, most likely they’ll buy from you, because you’re their solution provider. FELDMAN: Is there a rule of thumb for how long content should be? PULIZZI: There’s no silver bullet. I’ve seen


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it work where the goal or the core platform is a blog, and that blog is 300 to 500 words. I’ve also seen it where it’s an article series, and those articles are 1,000 to 2,000 words. Everybody thinks that content on the web has to be short and you always have to use bullet points. Long form content is actually coming back in vogue. The easiest way to get started is probably some kind of a blog that can feed into an e-newsletter. If somebody asks how long that content should be, it should be long enough to achieve the goal. What’s the goal? Is it to answer a question? To tell your story? Achieve that goal and then move onto the next piece of content. There’s no one right way to do it. It used to be a blog post had to be at least 200 words in order to get picked up by Google, but people wouldn’t read more than 500 words. I completely disagree with all that, because some of the most popular posts that we’ve done are well over 1,000 words on the web. Those are sometimes even our best posts. FELDMAN: How do you structure a compelling story? How do you avoid being overly “salesy”? PULIZZI: Everybody feels like, “If I’m not selling my product or service, then it’s not working.” You can pitch a little bit in your posts but you have to remember the more that you pitch in your post, the less that post will be shared. So you have a trade-off there. You could say, “Oh, we really want to get our new offering into this post.” Great – well, you’re probably not going to get as much traction on it. If you’re OK with that, that’s fine. If you want more traction and more sharing and more people to find it really valuable, leave out the sales pitch. It’s just like why insurance agents do talks. Let’s say you do a library talk or something, and you’re getting people from the area to attend. You don’t spend an hour talking about your products and services. Maybe you spend two minutes talking about what you do, and you spend 58 minutes answering questions from your audience. That’s your expertise. So, showing off your expertise is the sell, and I mean that’s just tough to get around. Having that expertise come from 16

Those are just business decisions about outsourcing that you need to make in order to get it done. FELDMAN: Do you think that leading with signing people up for a newsletter is the most effective method? Or is signing people up for a report on a similar topic more effective?

you is really how you’re going to sell your products and services. FELDMAN: A lot of our readers are doing seminars, educational meetings with clients and in-office training. Couldn’t they just record those and get started? PULIZZI: Such a great point. We would do a content audit and the first thing clients would realize is that content is happening right now in their organization. FELDMAN: How do you implement a content marketing strategy? PULIZZI: I think it depends on what you’re trying to do. I’m not one for saying, “Oh, you do what you can with the resources you have.” Once you understand who you are targeting and what you want them to do, you figure out what kind of stories you’re going to tell. Next, you figure out what channels you’re using. Then you make a decision that you’re going to do, let’s say, a blog two times a week and an e-mail newsletter every Friday. You’re going to measure this through sign-ups to the e-newsletter. Then every quarter, you look at those subscribers, and see how many of those are customers and what they’re doing in your customer relationship management (CRM) system. That’s the simplest of content strategies right there and any company can do that. But you need to figure out if you need help, and where you are going to find that help. There are lots of great sites, whether you’re looking at Skyword, Zerys or Textbroker, where you can get that kind of content. But I’m always partial to having a direct relationship with somebody who knows how to tell stories really well and who really understands your industry.

InsuranceNewsNet Magazine » October 2013

PULIZZI: We give people a free report, and we sign them up for a newsletter as part of that, because what’s really critical is to get opt-in approval to communicate with them on a regular basis. A report is fine, and you basically can get people to opt in to that. But if you’re not getting your readers’ opt-in approval to communicate with them on a regular basis, then that’s a problem. The opt-in is really what we want. FELDMAN: What should an agent do with an opt-in list once it has been grown? PULIZZI: Once they’re in your database, even a small company can use MailChimp or a marketing automation system that’s tied into your CRM system to send and track communication. People ask, “Now that I have all this content, how do I measure it?” There are only three questions I want to know if I’m running a content program. Is it going to drive revenue for me in some way? Is it going to save costs? Or is it going to make my customers happier? Hopefully one of them is our objective. FELDMAN: For a solopreneur or a salesperson who might think, “I’m too busy selling to write copy or write content or create these blog posts,” what would you say to them? Is there a way to get around that, to ask for help or outsource it? PULIZZI: I’m a salesperson and I blog very often. It’s the best sales that I’ll do, now that I’ve built an audience. I can pick up only so many phones during the day. I’m awake for only so many hours during the day. But my content is awake 24 hours a day, and I can affect and influence people with my content. So it’s so much more critical. So, you figure out how you can get it done. There are a lot of insurance agents



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out there who aren’t good storytellers. They understand their industry but they just need to figure out how to get it done. That could be done a number of ways. It depends on how you’re going to tell the story. I really believe you need to be great at one thing. So, are you great at blogging? Are you great at a podcast? Are you great at a video series? Are you great at webinars? Are you great at white papers? Focus on that one thing and then you can break that apart into other things. For example, let’s say you find out that you’re great at podcasting, so every week you do a podcast. From that podcast, you could probably generate three to 10 blog posts that somebody can transcribe. I am a big proponent of outsourcing as long as it’s authentic to the content mission. But I don’t like when people outsource everything to an agency and say, “just make sure I’m found in search engines,” and let somebody else run their social media. That’s like having a storefront and then just letting somebody else run it. You’d never do that as an insurance agent. You’d never do that as a solopreneur. But we let people do that for online content. FELDMAN: If you’re a little bit larger company, how do you create a content management team? PULIZZI: Let’s just simplify it. You need one person setting the strategy. That’s probably either the company owner or the person leading marketing. Then the most important thing you need after that is a managing editor. This is a person in the organization serving as half project manager, half storyteller. This is the person who does the editorial calendar and understands the different channels you’re using. If you have the resources, bring on a managing editor, or outsource the job to somebody who fulfills that role. Then you need somebody to create the design, because if your content doesn’t look good, people aren’t going to click on it. After that, you need little things, like who’s looking after your search engine strategy? Do you have a hit list of keywords that you’re focusing on? What social media channels are you going to focus on? What’s your distribution strategy? What’s your influencer strategy with that? So, it really does get kind of complicated down the road, but that’s 18

why you have to pick your channels. You have to pick what you’re really good at. FELDMAN: In insurance and financial businesses, compliance is often an issue. In a compliance-driven world, how do you have a good, solid content strategy? PULIZZI: Where I’ve seen it work best is you get legal compliance sign-off up front on the strategy. Have a strategy and say, “Here are the things we’re going to talk about.” You need compliance to sign off on those things and say, “OK, well, here’s what has to be at the bottom of every post, and here are the things you can’t talk about, and here are the things you can talk about.” And you trade back and forth into that conversation. It’s probably not a fair trade, but you figure out the rules of engagement. Once you have your rules, then you go. In order to be responsive and really focus on real-time communication, you can’t run every tweet through legal. FELDMAN: What’s the biggest reason why a content marketing system fails? PULIZZI: The No. 1 reason a content marketing system fails is it is not consistent. You should give it to your audience on the same day, at the same time, consistently, and never stop. That’s why we publish 365 days a year. We publish on holidays as well. We really believe that our promise to our audience is to give them a daily blog post, and we’re not going to break that promise.

month or every quarter, you will have an amazing content package that will blow the doors off of your customers’ expectations. That usually comes in the form of a white paper, an e-book, a video package or something that is incredibly helpful. In a lot of cases, that could be a curated piece of all your blog pieces. A good instance of this is when we did “100 Content Marketing Examples,” which is a pillar piece of content that we do on our site and we give away for people opting into our e-newsletter. Every one of those 100 examples came from the 200 previous days’ worth of blogs that we did. We just picked out the best examples, organized them, put them in a great design and offered them up. That thing’s been downloaded 100,000-plus times. You need to understand your customers’ pain point and how to solve it. Do you already have the content assets? The answer is probably yes. Then you figure out the resources you need to tell that story in the right way to create that pillar piece of content. FELDMAN: Is one of the keys to create “evergreen” content so that you can repurpose it later? PULIZZI: That’s the best kind of content. I have no problem with leveraging real-time content off the news, but that has a short lifespan. For the people reading this, they can be talking about solutions. We usually don’t blog about the news of the day. For example, when Oracle bought Eloqua, we did a post on it because a marketing automation company being bought by Oracle was a big deal in our industry. That post was very hot for three days. Well, nobody’s ever going to search for that anymore. It’s done. But they’ll always search for a content marketing strategy. That’s going to go on forever. So, find something everyone needs, build it and it will go on forever.

FELDMAN: You have talked about pillars of content. What does that mean?

Find out more about Joe Pulizzi and the Content Marketing Institute at

PULIZZI: You have that daily or ongoing content that will have readers say, “Wow, that’s great content and it helped me answer that one question.” But every

Plus, read our extended interview at

InsuranceNewsNet Magazine » October 2013



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Follow us on Twitter: @theNewLGA October May 2013 » InsuranceNewsNet Magazine



House passes NARAB II; Bill goes to Senate for approval

Joseph Gennaco of Winthrop, Mass., and Jupiter, Fla., had an idea for running a life settlement business that didn’t exactly go by the books. In fact, over a period of 10 years, he perpetrated an elaborate scheme that defrauded 40 of his customers out of a Disgruntled clients of Joe Gennaco picket in 2009 outside total of $7 million, according to authorities. Now he his Winthrop, Mass., office. is a poster child for what not to do in life settlements. Here’s the scoop. Gennaco had told his clients that their funds would be invested in one or more life insurance policies – the life settlements – and that the investments would be repaid with a “guaranteed” profit from the sale of those policies, according to a statement from the federal district court in Massachusetts. Instead, Gennaco took the investors’ funds for his own uses, allowed policies to lapse by failing to pay premiums, and failed to repay investors when he sold policies purchased as investments, the court said. This went on from 2001 through 2011, with Gennaco “continually reassuring investors that their money was safe,” and offering “phony excuses” for the delay in repayment, the court said. The 68-year-old eventually pleaded guilty to the charges. His sentence: 100 months of prison followed by three years of supervised release and an order to pay $7 million in restitution to his victims. Case closed.

SOME HARD FACTS ABOUT LTC FACT: Guess what? Baby boomers are

finding that caregiving for a parent or spouse is hard to do. of younger Who knew? boomers Fifty-seven percent of midbought LTCi dle-income boomers told Bankin 2012 ers Life and Casualty that caregiving requires more emotional strength than they had expected, 55 percent said it takes more patience, and 52 percent, more time. In addition, 34 percent said it costs more than expected, 33 percent said it has impacted their relationships and 32 percent said it takes more physical strength than they previously thought. Sixty-nine percent said their spouses don’t provide extensive caregiving support, and nearly 80 percent said their children don’t participate heavily either. Is it any wonder, then, that 54 percent of individual long-term care insurance buyers in 2012 were older boomers in






Credit: Richard Ireton,

Life Settlements 101 – What Not to Do

the 55 to 64 age range? That is according to The 2014 Sourcebook of American Association of Long-Term Care Insurance (AALTCI). Younger boomers are buying, too – nearly 25 percent in the 45 to 54 age group bought individual coverage in 2012, the association said.

Boomers also are buying combo policies (the life contracts with long-term care riders or benefits). In 2012, 54 percent of combo sales went to boomers aged 45 to 64, according to AALTCI figures. And the number of lives placed in the combos? It was up by 23.6 percent from 2011.


Much of today’s buzz in the life insurance industry surrounds how to increase penetration in the middle market. Most industry leaders agree that the same-ole, same-ole is not the

MID-SIZE AND LARGE PRIVATELY HELD INSURANCE AGENCIES and brokerage firms saw their median organic revenue grow by 6.9 percent in second quarter 2013, a record high since 2008. Source: Reagan Consulting

InsuranceNewsNet Magazine » October 2013

solution. But what is? Maybe it’s bifurcation. That is, stick with traditional high net worth (HNW) marketing on the one hand but do diversity-and-digital (Double-D) initiatives on the other. It could be that this is already under way. In a new study, Conning pointed out that insurers are continuing to focus on the traditional HNW segment while also investing in digital marketing and

sales support. In addition, Conning said that increased diversity in the U.S. population is driving demand for greater marketing segmentation, and that this is driving focus on digital marketing strategies. As for distribution strategies, Conning found that carriers are focusing on “increased diversity in the distribution force itself, while also developing direct-to-consumer models.” Hmm. If this is a widespread trend, agents and advisors who use mostly traditional approaches will have some thinking to do, about where they will fit in and how to get there.



Everyone keeps saying that defined contribution (DC) retirement plans such as 401(k) plans have become top dog in the employer plan world. But is that true? Based on Census Bureau data analyzed by the Employee Benefit Research Institute (EBRI), the answer is a resounding yes. In 2012, 78 percent of workers with a retirement plan considered the DC plan as primary, but just 21 percent said the defined benefit (pension) plan is primary.

That can be a handy piece of information for advisors to keep in mind when introducing the retirement planning concept to prospects at a seminar or to first-time customers at the office. For instance, the advisor could start out illustrating points by referring to the DC plan model but then shift over to referencing DB or something else if the initial points don’t hit home. Many people just don’t know what type of plan they have, so this approach might help open up discussion. There’s nothing like common ground as a basis for building understanding, after all.


Where client education is concerned, advisors still have their work cut out for them. Just 11 percent Investment Literacy Quiz of investors scored an A on an eight-question inGrades vestment literacy quiz in 22% earned a the second quarter John Hancock Investor Sen23% earned an timent Survey. Another 20 percent earned a B, so that was a little better. But nearly half got dunced


with a D (22 percent) or an F (23 percent).

Many in the survey group did get correct answers to certain questions. For instance, 94 percent properly identified the definition of asset allocation, 85 percent understood dollar cost-averaging, and 75 percent knew that a Roth IRA is purchased with after-tax dollars. Seventy-seven percent even knew that term life insurance is less likely to have cash value than permanent life insurance. But more than half stumbled on questions concerning things like optimal retirement savings strategy. The findings are sobering in view of the fact that the survey group participants weren’t babes in the woods. They were adults with household incomes of at least $75,000, and assets of $100,000 or more. We’re tempted to say, “Go figure.” But it’s probably better to say, “Go teach.”


During second quarter’s volatile market environment, managed solutions assets grew by a Assets Grew modest 2 percent, or $59 billion, according to the Money BILLION Management Institute (MMI). But for the first six months, in 2012 these assets grew by $310


billion, or about two-thirds of the increase for all of 2012, the researcher

pointed out. What’s more, total managed solutions assets passed $3 trillion by the end of second quarter, an alltime high and up nearly 140 percent from $1.3 trillion at the end of 2008. What does that mean for insurance professionals? First, despite the second quarter slowdown (compared to first quarter’s 9 percent increase over

NFL Players Need Real Advisors Too many National Football League players are vulnerable to bad advice doled out by well-meaning friends and family and sometimes by self-interested others. That’s the view of estate planning attorney Eido Walny, whose clients include retired NFL players and other athletes. Complicating matters is that few agents advise athletes financially, especially after they retire from play, said the principal of Walny Legal Group of Milwaukee, Wis. Walny has a number of suggestions for players who want to avoid financial ruin. They are no-nonsense basics, such as “don’t spend money you don’t have,” “do hire a financial advisor,” and “get a good accountant.” But one suggestion should ring bells with insurance professionals. “Find a reputable insurance agent who may soften the financial blow when the unexpected happens,” the attorney said, adding that other people could benefit from the suggestions too. No doubt a lot of agents are rooting for Team Walny. year-end 2012), advisors in the professionally-managed investment solutions biz are still worthy competitors. But second, managed money clients do hold back when the markets get choppy. That opens up competitive opportunities for insurance specialists to offer insured solutions as an alternative to, or counterbalance for, managed solutions. Consider it Competitive Strategy 101.


Some annuity names have been getting the squinty eye from staff at the Securities and Exchange Commission (SEC). In a mid-year speech in Washington, Norm Champ cited as an example the names used in some registered index annuity filings. “Given the significant downside risk of some of these recently registered indexed annuities, the staff is careful to watch for names that might suggest that the product is without such risk,” said the director of the SEC’s DID YOU



Division of Investment Management in published remarks of that speech. In fact, he said, the staff has asked for name changes in certain cases. The goal, he said, “is not to discourage the use of descriptive names for new products, but rather to see that product names do not suggest a level of safety that they do not provide.” So that’s one more disclosure item to add to the list. By the way, the risk to which Champ was referring has to do with registered indexed annuities that have features similar to structured notes. If the in-

dex used for linking goes up, investors benefit in proportion to the increase, subject to a cap, he noted, but investors “bear the risk of loss in excess of a specified amount of loss protection offered under the annuity.” In addition, he said, “these annuities apply an adjustment to early withdrawals using often complex formulas [that can sometimes] result in a loss of principal, even if the reference index has appreciated at the time of the withdrawal.”

FINANCIAL ADVISORS RECEIVE an average of 126 contacts per month from product manufacturers, up from 110 touches per month a year ago and 103 touches per month five years ago. Source: Cogent Research

October 2013 » InsuranceNewsNet Magazine



InsuranceNewsNet Magazine Âť October 2013

The quality of preparation shows up in the selling price for an agency.


im Lehmann was on a golf course one day, chatting with a business colleague about why they didn’t do more business together. Age 65 was approaching, and Lehmann mentioned that he had been thinking about whether to sell his insurance marketing company, Innovative Marketing Strategies, and retire. But he wasn’t sure he wanted to stop working just yet. He also worried about what would happen to his employees. “There were many good people at Innovative,” he recalled. “It was like a family business and I didn’t want to lose that.” And he wondered what would happen with the insurance agencies with which his firm worked. “I knew I didn’t want to wait until I’m 93,” he said, but he also didn’t know when he would retire. Nor did he know what to do in order to start the process. He needed a plan and some help.

The Concerns

That’s the case for a lot of independent insurance agents these days. The situation is aggravated by the much publicized decline in number of advisors and paucity of young recruits. The average age of independent agents and registered investment advisors is now in the late 50s, pointed out Allen Duck, a partner at Eighty20 Advisors, a practice management consulting firm in Fort Collins, Colo. Furthermore, fewer young people are coming into the independent side of the life and health business. Those who do come in are culturally very different than their seniors – some may have an entitlement-orientation and poor work ethics, for instance – and that is making for difficulty in succession planning, he said. This is a big concern for the insurance distribution business. “The business is in a very fragile position,” Duck contended. “Within the next five to seven years, insurers in the independent channels, the broker-dealers (B/Ds), insurance marketing organizations (IMOs) and field marketing organizations (FMOs) will suffer from the decline in the number of advisors,” he predicted. It’s a problem for today as well. “If owners don’t sell their practices, the book of business goes back to the insurance company or the investment company,” he pointed out. Owners may wind up getting little or nothing for their business. The problem is compounded by inaction. Only 11 percent of financial advisors responding to a survey by Signator Investors said they had completed a succession plan, according to a July report from the firm’s parent, John Hancock Financial Network. Earlier this year, the SEI Advisor Network reported that 68 percent of financial advisors it had surveyed had no formal succession plan; and in 2011, Fidelity Institutional Wealth Services found that 75 percent of registered investment advisors either had no such plans or had plans that weren’t ready to implement.

Business Succession Guide

After you finish this article on planning for your agency’s succession, review a special section on how to help your clients prepare their businesses for a profitable transfer. The Spectrum of Succession Planning Corporate transition planning is quickly becoming one of the critical topics of our time as baby boomer business owners reach retirement age at an ever-increasing rate, in a still-challenging economy. PAGE 32 How Businesses Can Pass the Torch without Getting Burned You can help your clients to beat the odds for survival of their family-owned business. PAGE 36 Close Trap, Open Opportunity Keeping key employees is one of the keys to retaining value in a business. But clients can fall into one of many tax traps in doing the usual planning. PAGE 38

October 2013 » InsuranceNewsNet Magazine




The situation may look bleak, especially for selling the firm. But experts say sales can and do happen, with lucrative offers possible for practices grossing $1 million to $3 million a year. Smaller shops, in the $500,000 category, can attract buyers too, depending on agency particulars. Even smaller firms can find buyers, if the firms have recurring revenues. But one-person shops bringing in up to $100,000 often just close the door – unless they learn what to do to become saleable. Following are suggestions from experts on how to go about preparing to sell.

First Steps

First, always look inside the firm to see if someone there is interested in buying, said Scott Tietz, chief executive officer of Partners Advantage Insurance Services, a national marketing organization in Riverside, Calif. Assuming no one inside is interested, then look outside. “But before you do that, clean up the business,” Tietz said. Some businesses that at one time were making $400,000 a year are now making only $100,000, so the owners panic and want to sell now, he noted. “I tell them to turn it around first, and then sell.” Turning it around means doing things like cutting out inefficiencies, getting out of long-term leases, paying off outstanding debt, keeping the profit-andloss statements up to date and making sure that agency is using only one bank account. Only one bank account? That’s right, Tietz said. “If a prospective buyer’s due diligence process finds more than one bank account, that will raise questions about whether you are transferring money back and forth between accounts. That looks suspicious to buyers, and it will take time to sort it out.” Another step is to determine if you are selling the assets or the entire company, Tietz said, noting that “buyers typically want to buy the assets, but sellers typically want to sell the company because there is no tail to deal with later on.” The seller also needs to put together some background information, such as the history of the agency and its financials, organizational structure and special niches, said Rob Lieblein, executive vice president at MarshBerry, a consult24

ing service for independent agents and brokers. “Also include how you grew the business, where it is today, and provide information about the employees (salaries, bonuses, etc.), carrier relationships and client base,” Lieblein said. Be sure you are able to make a quality presentation of the agency, added Douglas C. Moat Sr., founder and chairman of Moat Associates, insurance agency consultant in Bluffton, S.C. “Did you lose some business? Tell why you lost the carrier or why the people left.”

Get Advice

Don’t try to do this alone, Lieblein cautioned. “Great insurance sales people sometimes think they can sell their agency on their own, but they do need advisors,” because of all the technicalities involved. However, it’s important to get professional advice from someone with expertise in insurance mergers and acquisitions, he said. These experts may include attorneys, certified public accountants and insurance merger and acquisition specialists. If the advisor has no insurance expertise, that could lead to problems because the person might not understand the terminology, commissions and other details of the agency business, Moat cautioned. He recalled one deal that fell apart because of the structure that was used to describe the transaction. “The outside expert had been unfamiliar with insurance agency transactions, used wrong terminology and didn’t understand the issues involved,” he said. His advice is not to trust friends or people who lack experience to do this. “You could end up leaving money on the table or doing it the wrong way. Instead, get referrals to people who have done this before and ask questions about their experience,” he said. Some people want to do this work for a percent of the value of the deal, Moat added. His recommendation is to find out the amount in dollars. Alternatively, he said, look for a fee-based business advisor, or consider building an incen-

InsuranceNewsNet Magazine » October 2013

tive into the contract for certain things. In a word, he said, “negotiate!”


The importance of outside expertise makes sense in view of the legalities involved. For instance, Lieblein said the selling advisor, working with the outside experts, will need to put together a “confidential memorandum.” This document details the information mentioned above and other business details. This is given to the prospective buyer for use in preparing an offer. Lieblein said other necessary documents related to the sale include: A legally binding confidentiality agreement. A non-binding letter of intent that outlines the basic transaction terms. A legally binding asset purchase agreement. If the seller is going to stay with the firm for, say, three to five years, there also will be an employment agreement





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to work out. The other employees typically are informed about two weeks before closing, Lieblein said. “That needs to be done because the new owner has to do the work necessary to hire the employees.” Other notifications will need to go out to carriers, clients, vendors and others who will be affected. Most provider and vendor contracts will carry over to the new owner, but sometimes amendments to those contracts need to be made.


A sensitive and confusing area for many agents and advisors is determining the value of the practice. “Some agents will say, “I want $1 million,” Moat pointed out. “I ask, ‘Based on what?’ Sometimes they say, ‘I just made it up.’ ” In setting the value, “you need to be realistic,” Moat said. “You can’t just make things up. You can’t hide the skeletons, because if the potential buyer finds out, they won’t trust you.” A good way to approach this is to dif-


ferentiate between three words, he said. Those words are: value, price and terms. Value is the worth the agency represents. Price is what the buyer actually pays. This might be different from the expected value, because the buyer might have different plans for the firm than what the seller has had, Moat said. Terms are the provisions that can reduce or increase the price, based on incentives and other factors, even tax issues. “Most owners don’t understand the true value,” Lieblein observed. “It could be that a practice is worth two times revenues or less, but until an expert looks at it and weighs all the factors, this is an unknown.” To illustrate, Lieblein cited the example of two very different sellers, whose agencies both have $3 million in revenue at time of sale. One seller is age 65, has three clients who represent 40 percent of the agency’s revenue, employs people in their late 50s and early 60s, has seen no growth in the last five years, has little or no growth strategy and wants to retire. By comparison, the other owner is age 45, has employees in their 30s and 40s, grew the business from $1 million three years ago to $3 million at time of sale, and plans to stay on after the sale. The first firm may sell for one times revenue paid over three years, Lieblein said. “But the second may receive two times revenue paid up front and may receive additional pay-

InsuranceNewsNet Magazine » October 2013

ments in the future based upon growth.” Actual offers depend upon many factors, Tietz said. For instance, if the owner is renting the office, when is the rent agreement up? Is the rent too big in comparison to the number of employees? Will the new owner be able to replicate the profits after the sale? “If the seller is in a one-person shop, the block of business depends on the owner. So, if the owner leaves the agency after the sale, the new owner will have to hire someone to take over, creating questions about cost and revenues.” Revenues are a very important piece of the equation. Buyers are looking for agencies that have recurring revenues, Duck explained. Many insurance firms don’t have recurring revenues, he said. Instead, the agencies take heaped commissions up front and no trailers, they don’t crosssell their accounts, and they don’t do much about offering investments. In those cases, he said, the value derives mainly from the effort the owner has put into the business. But when the owner leaves, the buyer wonders what value will remain. When he encounters such firms, Duck says he encourages the owners to spend the next 18 months cross-selling existing accounts and possibly adding invest-



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October 2013 » InsuranceNewsNet Magazine




ments to the practice. “Also create databases and powerful systems that add to the intellectual property and create legacy value for a third party to buy.” Do that before putting the practice up for sale, he said. Ideally, it’s best to get started at age 40, Duck added. “That way, you can retire at 65.” But even if the owner is older, making changes that increase recurring revenues will make a difference. That is one reason why many life agencies branch out into employee benefits, experts say. The benefits business contributes substantially to the all-important recurring revenue stream.

Graceful Exits

What happens to the seller? The exits are as variable as the people making them. Here are two examples of sellers who went through the process and are glad they did. When he decided to retire, John W. Cruickshank III had been an agent with Northwestern Mutual in Northbrook, Ill., for nearly 40 years. He was in a career agency, so he did not have to sell his practice. Instead, he assigned some of his clients to a new agent and turned over other clients to the general agent. But after two years, the agent assigned to the accounts had not sold even one policy to those clients, Cruickshank said. That was a concern from a customer service point of view and also from a monetary perspective since, as a retired agent, Cruickshank is to receive not only his renewal streams but also a portion of the commissions on new business written on the assigned cases. But there’s more to the story. The agent ended up leaving the firm, so Cruickshank said he reassigned the clients to another agent. The new agent was a go-getter, and has since made sales to every one of the assigned clients, sometimes more than once and even in recent times, Cruickshank said. “In the end, everything has worked out. I’m in a whole new world now, enjoying life tremendously.” Jim Lehmann, the California owner who was talking about whether to sell his firm at the beginning of this article, said the answer to his question turned out to be “right in front of me.” 28

The man with whom he was talking on the golf course that day was none other than Scott Tietz, the CEO of Partners Advantage. The two men had known each other for more than a decade as members of a marketing group. But on that particular day, their business talk morphed into discussing a merger. One thing led to another, and a few months later Lehmann sold the firm to Tietz. Lehmann didn’t go cold turkey, however. Like many veteran business owners, he enjoys working. So the agreement he signed with Tietz includes a phased retirement plan that allows Lehmann to

InsuranceNewsNet Magazine » October 2013

work full time at Partners Advantage as senior vice president-business development for three years. Then he will shift to part-time work as a consultant until he reaches age 70. He said the arrangement suits him just fine. “I treat the job with the same integrity and commitment as before. But at the end of the day, the ultimate liability is no longer mine.” Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@


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Plan F $103.50

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Zip Codes: 373-379, 382-385 AGE Plan F Plan N 65 $108.21 $77.11



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Modest improvement in earnings outlook for U.S. life insurers

2013 Q2

Individual Life Up 6% So Far in 2013

22 5

% %

Individual life premium continued to inch upward WHOLE in the first half of 2013, while policy count contin- INDEXED LIFE UNIVERSAL ued to slide, according to LIMRA. LIFE Individual life premium grew 4 percent in the second quarter, resulting in a 6 percent increase for the first half of 2013. Policy count, meanwhile, was down 2 percent for the quarter and 3 percent for the first half of 2013. This was after a slight increase over the past two years. Driving the growth numbers were indexed universal life (IUL) and whole life products. IUL premium increased 22 percent in the second quarter and 23 percent for the first half of the year. The growth of IUL was the biggest driver of overall sales growth in the second quarter and year-to-date. Whole life premium increased 5 percent in the quarter – the 16th consecutive quarter of positive growth.


Being a parent means having a lot of awkward conversations with your kids. Peer pressure, drugs and alcohol, “the birds and the bees” – all are topics guaranteed to make a parent squirm. Now, you can add life insurance to the list of topics that parents find cringe-worthy. A survey conducted by State Farm showed that parents would rather talk to their children about drugs/alcohol, religion and politics before life insurance, which they rated only slightly

more comfortable than discussing family finances or sex/puberty. The survey also shows parents are the primary source for initial conversations about life insurance. Becoming a parent is the number one life event that prompts individuals to obtain life insurance coverage (37 percent), according to the survey. However, just 51 percent of parents have individual life insurance policies outside of work. DID YOU




Sounds as if some parents need to get over their awkwardness and have a conversation with an advisor.


Speaking of uncomfortable conversations, it seems that clients feel just as awkward discussing insurance matters with an advisor as they do discussing insurance with their kids. A recent survey by Securian Financial Group showed that clients continue to withhold information from their advisors and give them the “it’s-none-ofyour-business” treatment. While 71.4 percent of respondents said they share all their financial details with their advisors, 28.6 percent said there were certain topics they choose not to share with their advisors, the survey also found.

Ironically, clients want advice and are prepared to hand over much of what they know regarding their assets. At the same time, what they often don’t want advisors to know also revolves around financial issues, advisors said, and that leads to a double standard.

FARM BUREAU FINANCIAL SERVICES is revamping its exclusive agency distribution network to focus on agent retention and training, the company said.

InsuranceNewsNet Magazine » October 2013

QUOTABLE Never in my 39 years in the business has anybody ever complained about their whole life policies and the cash value buildup they have. — Eddie Levin of Levin Insurance and Retirement Planning, an independent broker in Homosassa Springs, Fla., on the customer value in whole life insurance

When clients are slow to reveal a key piece of information, it’s because they either overlooked it or they didn’t think it was important. Also likely, it’s because they are too embarrassed to admit their past mistakes.


The Hispanic population is complex, coming from many countries, but they share a tendency to be young, with large families including children and extended family members. Their strong emphasis on family makes them a natural market for life insurance. This is according to LIMRA’s study “Financial Protection for Hispanics.” According to U.S. Census Bureau estimates, in the next 20 years Hispanics are projected to grow three times more than any other ethnic group in the U.S. Much

like the general population, perceptions about affordability and lack of product knowledge prevent many Hispanics from obtaining life insurance. Also similar to the general population, Hispanics buy life insurance for two main reasons: provide an income stream if the insured dies and to cover burial and funeral costs. Opportunities exist for advisors who pay attention to both the opportunities and the cultural sensitivities that exist within the Hispanic market. For example, many Hispanic families are multi-generational with different levels of acculturation in the same household. A smart advisor will take into account the bilingual needs of the family and make sure to include all of the family members who are dependent on the wage earner.

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September October 2013 » InsuranceNewsNet Magazine



The Spectrum of Succession Planning A  successful business transition requires planning and collaboration in order to meet the client’s objectives. By Sam G. Torolopoulos and Dennis M. Axman

C Just as with insurance and financial service agencies, owners are aging out. The tail end of The Greatest Generation want a great retirement and boomers are looking to trade in their hard work as a springboard to the next phase of their lives. It’s up to you to help clients make the most out of what might be the most significant asset in their lives and secure their future. But it’s a growing field of sellers out there in an era of ever-tightening credit requirements. This guide will help lay out a plan. The Spectrum of Succession Planning Every business has a unique path to succession. Your job is to blaze that trail. PAGE 32 How Businesses Can Pass the Torch without Getting Burned You know how few family businesses make it from generation to generation. Here’s how you can help clients to beat the odds. PAGE 34

Close Trap, Open Opportunity Key employees and unlock the value of a business for a transitioning owner. But the usual tactics of retention can have their unintended consequences. PAGE 36 32

orporate transition planning is quickly becoming one of the critical topics of our time. Baby boomer business owners are reaching retirement age at an ever-increasing rate. Their children are not nearly as eager to take over the family business as the boomers were when they took over the business from their parents, the World War II generation. Complicating this dynamic are the emerging and changing credit, estate tax and global economic markets. Combining all these factors make transitioning the ownership of a privately-held business an uncertain proposition at best and a scary one at worst. A successful business transition must be done in a way that best accomplishes a number of goals. They include: meeting the owner’s personal motives, allowing the owner to have a clear understanding of their future management role, and providing a reasonable replacement income from reinvestment of the selling proceeds, even if those proceeds are received over time. At the beginning of any retirement or estate tax planning discussion with a business owner, the issue of value inevitably will come up. Rarely will clients be content to “take a salary for life” and leave the business equally to their children at death. Business owners often will do this because they believe there is no other option. Even if this is the case, we all have seen the unintended estate tax and ownership transfer consequences that this option brings. What many business owners intuitively know, but spend little time contemplating, is that their company has many

InsuranceNewsNet Magazine » October 2013

values on the same day. For example, the business may have: Orderly liquidation value: sell the assets, pay the liabilities and close the doors. Investment value: the value a non-working owner will pay to own a company that is part of a portfolio of companies. Fair market value: based on valuation rules put forth by the Internal Revenue Service for charitable, gift and estate tax transfers. Market value: the value a private equity firm or competitor might pay for the company. Synergistic value: the value a publicly traded company might pay in order to take advantage of market synergies or vertical integration. Business owners should understand that they choose the value world in which their business will trade, and that choice is based primarily on their motives. The business transfer spectrum depicted in the accompanying chart shows the many options that exist when transferring the equity interests from one generation to the next. At the top of the chart, we see the business owner’s motives. This represents the first and most important decision that the business owner has to make. Attempting to make a recommendation of a transfer method without determining the business owner’s motives often will result in a breakdown of the overall planning process. Ultimately, this will lead to a breakdown in trust toward the advisor who made that recommendation. It also is important for the business owner to know that the value conclusion reached will generate cash flow sufficient to meet his or her personal financial goals and objectives. Business owners might be willing to


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transfer 100 percent of the ownership interest to a family member at a minority price. But, without a proper valuation and illustration as to how the business owners will be paid, they likely will take no action. On the other hand, business owners’ motives might make selling to management or to an employee stock ownership plan (ESOP) a very attractive option. But owners likely will take no action unless they know how much the ESOP is legally able and willing to pay, what they will receive in cash at closing and over time, and how they will remain in control of the business at least until the company’s financial obligation to them has been satisfied. These are just some of the reasons that business planning and personal planning must take place concurrently. Other than business owners’ motives, what drives value? As previously mentioned, the transfer channel drives value within a reasonable range as it relates to the rules used in calculating the value of the stock. But ultimately, regardless of the transfer method chosen, cash flow is the largest value driver. Therefore, it is critical that the value conclusion reached, regardless of the transfer method chosen, is reasonable to both the buyer and the seller from a financial point of view. For example, if the value conclusion reached can be realized only with a 20year note, at 2 percent interest, assuming a 5 percent compound annual growth rate of the company’s net cash flow, something is not right and the value is likely too high. That value conclusion may make the seller happy but even the most devout family member will see the exercise as futile and unrealizable, causing him or her to be less than enthusiastic about the process. Conversely, a value conclusion that is less than two times last year’s earnings (earnings before interest, taxes, depreciation and amortization), when the company has a proven profit growth rate of 9 percent for the current year, may make the buyer happy, but the seller will normally not agree to such a price. At the end of the day, every business pays for itself through its cash flow. During the entire process, the seller’s value expectation must be managed through proper explanation and illustration. Likewise, the buyer needs to know that the company’s net cash flow will be 34

sufficient to service the purchase price debt over a reasonable period of time without bankrupting the company. Generally speaking, business owners will not transfer the ownership of their largest asset without understanding what they will receive and what their role in the company will be. Also, employees are unlikely to be willing to work for below-market wages for an extended period just to satisfy the note payments for the purchase price of the company’s stock. In the end, regardless of the transfer method ultimately chosen, the transition of a privately-held business is complex. It requires a collaborative effort. It is a process, not an event. It requires that the financial planner and the estate tax attorney understand the business owners’ motives. A successful transition requires a business valuation professional who can calculate the value of a privately-held business under one or more of the likely transfer methods. It requires the company’s certified public accountant or tax accountant to determine the estimated taxes under one or more of the likely transfer methods, using the value conclusions provided by the valuator in order to reach a net after-tax, after-transaction cost value. Lastly, those net value conclusions need to be used in order to develop a comprehensive personal retirement and estate tax plan that will alleviate the business owner’s concerns about post-retirement income. After the business transition planning strategy has been decided, the next step is to review the business owner’s personal estate plan. The American Taxpayer Relief Act of 2012 (ATRA) made most of the Bush tax cuts permanent. We now have an annual exclusion amount for 2013 of $14,000. In addition, we have a lifetime gift tax exemption of $5.25 million and a generation-skipping tax exemption also of $5.25 million. These numbers are all indexed and subject to change each year. How “permanent” these numbers are remains to be seen. ATRA also appears to have made portability here to stay. Portability provides a spousal carryover of the applicable exemption amount of a deceased spouse unused exemption amount (DSUEA). Working collaboratively, the client’s advisory team can create the plan that will best fit the

InsuranceNewsNet Magazine » October 2013

client’s legacy goals and objectives. This new tax law provides tremendous collaborative planning opportunities for us, along with the client’s entire advisory team, to assist business owner clients by transitioning to their estate planning. The two planning opportunities go hand in hand. Because the business often represents the largest single most illiquid asset in the client’s estate, it follows that the personal estate plan needs to be updated accordingly. Lastly, this will lead the business owner directly into retirement planning. The planning opportunities of gifting certainly are enhanced and, according to most industry sources, the “claw back” provision really is not a great risk for the client. If the client needs the value of the business to sustain retirement income, selling the business interest in an intra-family sale and having the cash distributions of the business pay the note payments to the owner will provide retirement income as needed. Of course, these types of strategies are collaborative in nature. If created and managed properly, a recapitalization of an S corporation or a limited liability company (LLC), or a family limited partnership for a C corporation, can provide even more leverage for the business owner while allowing the owner to remain in control, if that is the client’s objective. Life insurance, properly owned, is the product of choice in completing nearly all of these planning scenarios. By working closely with the multiple disciplines of the clients’ wealth planning teams, we can provide peace of mind for business owners. We can ensure that their years of creating and building their businesses will provide them and their loved ones with the income to enjoy their retirement years as well as plan a legacy for their families. Sam G. Torolopoulos, CPA/ABV, ASA, is president of ATI Capital Group. Sam can be reached at Sam.Torolopoulos@ Dennis M. Axman, CLU, ChFC, AEP, CFP, is vice president, advanced marketing, Pinnacle Insurance and Financial Services. Dennis can be reached at Dennis.Axman@



October 2013 » InsuranceNewsNet Magazine



How Businesses can Pass the Torch without Getting Burned Y  ou can help your clients to beat the odds for survival of their family-owned business.

Owners choose to transfer their companies to key employees for different reasons.

By Irving Katz


amily businesses, and the families that own them, are the strength of America. But, the statistics of family business survival are discouraging. In fact, out of every 100 family-owned businesses, only a third of the businesses get passed to the second generation. A mere three of those businesses will survive into the fourth generation. No one wants to think about after-death scenarios for their business. But, without a succession plan, key employees may leave, the business could be dismantled and lifetimes of hard work and sacrifice could go down the drain. Succession planning is disaster planning. Many small businesses have substantial funds invested in equipment but that equipment isn’t worth much on the open market. Such business owners may be far more interested in grooming an employee to buy them out and take over the business. A sale to key employees is a great option for companies that don’t sell to outsiders (third parties). We have found that owners choose to transfer their companies to key employees for different reasons, including these seven:


Some owners believe that they owe their employees something. They believe that their key employees have helped to create the company and they certainly have contributed to the company’s success. The owners believe these employees “deserve” the opportunity to purchase the business.


A variation on this “owe” idea is that some owners want to provide their key employees with the same opportunity to become financially successful that the owners had. 36


Other owners choose this transfer method because they already have promised their employees that they would sell to them. They feel committed to following through on this often vague promise.


Some owners believe that the only way to continue their legacies, to “do right” by their customers or to carry on the culture that they have worked so hard to create is to transfer ownership of their companies to their key employees.


Some owners are convinced their companies are valuable only to the key employees who work there. Historically, businesses worth less

InsuranceNewsNet Magazine » October 2013

than $2 million (businesses with free cash flow of $300,000 or less) hold little attraction to outside third parties.


Some owners are motivated by maximizing their own income. They may believe that key employees will pay more for their companies than will any other type of buyer. This assumption, in turn, may be based on another assumption that the business is not attractive to, or would be misunderstood by, outside buyers.


Some owners use the gradual sale of ownership interest to key employees as a way to motivate those employees to stay with the company.

PASS THE TORCH WITHOUT GETTING BURNED Even though an owner may see the reasons to sell their company to a key employee, how might they accomplish this?

Having Your Employees Cash You Out Of Your Business

Many, probably most, business owners would like to sell their businesses to their employees, except for one nagging problem: The employees have no money. Owners cannot risk selling a business to employees who have no cash. What can be done? Owners can create an incentive compensation plan for key employee group. Design the plan so that the bonuses increase as the profits of the business increase. Instead of paying key employees the full bonus, the company can defer a portion of it and promise to pay the balance at a future date, if each member remains with the company. This is an example of a plan called a nonqualified executive compensation plan and it can be made subject to vesting. Since this involves planning ahead, the business owner can evaluate each member of the key employee group to determine which employees would serve best as owners. The owners can offer to sell the key employee group a significant portion of the company (typically about 30-45 percent of the overall ownership of the company). If the plan is well designed and funded, there could be hundreds of thousands of dollars of deferred bonus money belonging to the employees at the company level. The key employee group can buy another 20 percent of the stock using an installment note. With the key employees now owning and having paid for 40 percent ownership or more of the company, they can secure bank financing to purchase the balance of the stock. This plan won’t apply to all business scenarios. Typically, the owner will want to spend five years funding the executive compensation plan. The owner should communicate the plan to a cooperative bank that will understand their intentions well in advance. Finally, this plan requires a strong management team interested in owning a company financially fit enough that it can use most of the available cash flow to pay down the purchased debt.


SUCCESSION PLANNING IS DISASTER PLANNING. But what happens in case of a sudden, significant event? Another corrective action is to establish a buy-sell or business continuity agreement that controls the transfer of the business ownership. The events that trigger this agreement could be the death or permanent disability of an owner, the sale or transfer of stock between owners or an outside party or the retirement of an owner. Family business owners that remain focused on the near future and work only in their businesses invariably neglect to put a buy-sell agreement in place. A written and funded buy-sell agreement allows for the orderly disposition of the business. The agreement can be made among shareholders of a corporation or partners of a partnership, or between a key employee and the owner. The agreement obligates the remaining business owners, key employees or the business itself to purchase the interest of the owner. A buy-sell agreement creates a market for the business interest, allows the business to operate without interference from the owner’s heirs, provides liquidity for the deceased owner’s estate, and establishes the value of the business for federal estate tax purposes. Helping family business owners to plan for the future successfully will help preserve an important part of the American business landscape. Irving Katz of San Juan Capistrano, Calif., specializes in succession, exit, retirement and estate planning for business owners. He is the author of Family Business Blunders: Seven Mistakes Family Businesses Make and How to Correct Them Before It Is Too Late. Contact him at

October 2013 » InsuranceNewsNet Magazine


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Close Trap, Open Opportunity Y  ou can provide a valuable service by educating business owners about these overlooked issues, their potential magnitude and the readily workable solutions. By Bill Buslee and Steve Kroeger


number of your clients could be walking into insurance traps without knowing it. Insurance professionals can provide a truly valuable service by educating business owners about these overlooked issues and their potential magnitude while providing readily workable solutions. Many of these considerations involve succession planning and keeping the business viable by helping retain its best resources – key employees.

Section 101(j) Considerations

First and foremost, we must confirm that any life insurance owned by the business, in the event of the insured’s death, will be paid income tax free. If proper procedures are not fully followed, death benefits on employer-owned contracts could be subject to income tax. Imagine the reaction from your client if the Internal Revenue Service comes in and takes approximately 40 percent of the policy proceeds at the very moment that cash flow is needed most. The Pension Protection Act of 2006 created an Internal Revenue Code section, IRC Section 101(j), stating that in order for proceeds from employer-owned life insurance policies to be received income tax free, contracts issued or materially modified must meet certain requirements. One of those requirements is “Notice and Consent.” Before the issue of the contract, the employer must notify the employee in writing that it is purchasing a life insurance contract on his or her life, and the notification must specify the amount of death benefit the employer is seeking to secure. In turn, the employee must consent to the purchase in writing. IRC Sec 101(J) further states that failure to comply could cause the death benefit to lose its tax-favored status and be subject to ordinary income taxes. 38

IRC Sec 101(j) affects many employer-owned life insurance contracts. It may apply to life insurance policies sold for any of the following purposes: Key-person policies. Stock redemption buy-sell agreements for employee-owners. Certain split-dollar arrangements. Family limited partnerships and limited liability corporations where the insured owner also acts as an employee. Deferred compensation plans. Supplemental executive retirement plans (SERPs). If there is any doubt as to whether a policy may be considered business-owned or a business may benefit from a life insurance policy’s death benefit, follow the adage, “When in doubt, fill it out.” Advise the business to complete and retain all notice and consent documents and meet all annual reporting requirements.

Buy-Sell Situations

Another regularly-neglected trap is leaving a buy-sell agreement unfunded. Time and expense are given to the proper drafting of the agreement; however, attorneys

InsuranceNewsNet Magazine » October 2013

typically do not provide access to funding vehicles. Consequently, if an owner becomes disabled or dies, there is a promise to pay – but with what? The heirs have lost their primary breadwinner and have a formal document stipulating payment, but the business lacks cash. The surviving owners are stuck. This ultimately could lead the business to fail or, potentially even worse, could lead to the unwanted involvement of the deceased owner’s family in the management and profits of the business. There are only four ways to fund a buysell agreement: Establishing a sinking fund. Installment payments. Borrowing the funds. Life and disability insurance proceeds. The first option offers limited leverage opportunities, can require lengthy amounts of time to fund and may subject the business to additional taxes. The next two choices can prove to be more costly than writing a check. Using life and disability insurance offers substantial financial leverage – a little premium can go a long way – and is the one method that guarantees liquidity exactly when it’s needed.

Key Person Coverage

The purpose of a key person policy is to provide financial help to a business as it goes through a transition period following the loss of a key employee. Proceeds can be used to help locate and retain a replacement, help meet payroll requirements, and help the business maintain its credit with the banks. Banks regularly require key person insurance indemnifying them before executing business loans.

il ustration software and more. Because the business is the owner, premium payer and sole beneficiary of the policy, the 101(j) requirements previously discussed clearly apply. An additional trap can be created with key person policies if the business seeks to deduct the premiums as a business expense. Although this protection may appear to be a reasonable business expense, premiums on key person policies are not deductible, according to IRC Section 264(a)(1). An extra trap develops with key person contracts if splitting the benefits between the business and a beneficiary of the insured is desired. However, these complications can be managed if the arrangement is properly treated as an endorsement split dollar agreement.

CLOSE TRAP, OPEN OPPORTUNITY agreements issued under the economic benefit regime are referred to as endorsement split dollar agreements (ESDAs) and non-equity collateral assignment split dollar agreements (NECAs). The only significant impact of the new regulations on ESDAs was with regard to the annual renewable term rate commonly used to measure the reportable economic benefit (REB). Table 2001 rates replaced the PS 58 rates and more stringent requirements were placed on what carriers could offer as alternative term rates. The trap associated with ESDAs is that the agreement may be kept in place too long. The REB will increase each year. The economic benefit can seem trivial in the early years of the agreement ($1.10 per thousand at age 40), but it can become sizeable in later years ($11.90 per thousand at age 65) and onerous in even later years ($33.30 per thousand at age 75). While there are a number of ways that an employer can offer insurance to help key employees provide for their families with death benefit, a properly designed split dollar agreement also offers em-

Position yourself as a knowledgeable source on Social Security to show clients and prospects how dif erent strategies could create a better retirement outcome. Endorsement Split Dollar Agreements

The Treasury Department’s final regulations (Rev. Rul. 2003-105; Treas. Reg. Section 1.61-22(b)(1); TD 9092) established that split dollar agreements fall under two tax regimes: the economic benefit regime and the loan regime. Split dollar



ployers the ability to recover the costs of providing the insurance. Effective split dollar planning always starts with the exit strategy – avoid the trap. When it comes to business planning and business-owned life insurance policies, a number of potential planning traps can play havoc with a business’ very survival. While procrastination may prove to be costly, we often can resolve these problems simply by reviewing all business-owned policies, as well as the associated agreements, on a regular basis. Bill Buslee, MS, CLU, ChFC, is director of advanced sales for Crump Life Insurance Services. Contact him at Bill.Buslee@ Steve Kroeger, CLU, HIA, MBA, is senior director of advanced sales for Crump Life Insurance Service. Contact him at Steve.Kroeger@


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©2013 Creative Marketing International Corp. October 2013 » InsuranceNewsNet Magazine 39

[ANNUITYWIRES] Quarterly Sales Figures Continue to Seesaw

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Are they up or are they down? It depends on 2012 Q2 how you look at the most recent quarterly an- 2013 Q1 VS VS nuity sales figures. Industry-wide annuity sales for second quar- 2013 Q2 2013 Q2 ter 2013 rose 9.9 percent to nearly $54.5 billion from $49.6 billion in the previous quarter, but were down 1.4 percent from $55.3 billion in the second quarter of 2012. Leading the pack were sales of fixed annuities, which rose to their highest quarterly level since fourth quarter 2011. Sales totaled $17.14 billion, up 14.6 percent from just under $15 billion in the first quarter and up 0.2 percent from $17.10 billion in the second quarter of 2012, according to Beacon Research. Meanwhile, variable annuity total sales topped $37.3 billion in the second quarter of 2013, according to Morningstar. This is a 7.8 percent increase from $34.6 billion in the first quarter, but a 2.2 percent drop from nearly $38.2 billion in the second quarter of 2012. Deferred income annuity sales were up nearly 40 percent from the previous quarter. Variable annuity sales were up slightly, but saw their seventh straight quarter of growth. WHY ARE THE REPOR “Rising interest rates, along with the steepest yield curve in TS nearly two years, helped drive second quarter’s fixed annuity sales DIFFERENT? FIND OUT IN INFR ONT! growth,” Beacon Research President Jeremy Alexander said. page 8


Allianz Life has launched two improved indexed allocations offering additional

choices for retirement accumulation. Allianz says the indexed allocations are available through the Allianz Preferred platform. They include the Barclays US Dynamic Balance Index, which appeals to customers responding to lowcap environment by offering uncapped strategy with an annual spread, and the Russell 2000 Index, which measures performance of small-cap companies to meet needs of customers seeking to diversify accumulation strategies, offered as a stand-alone option. The improved version is launching in 44 states. The improvements are being added to the three exclusive Preferred Fixed Indexed Annuities: Allianz 222, Allianz 360 and Allianz 365i. Lincoln Financial has launched its first-ever deferred income annuity, Lin-

coln Deferred Income Solutions. Lincoln said the new DIA enhances a 40

client’s ability to plan for future income needs by allowing them to select when they begin receiving income payments following a specified deferral period. The exact amount of those payments is determined at the outset, and does not change over the life of the contract. Depending on the payout option chosen, Lincoln Deferred Income Solutions also offers death benefit protection during the deferral and income phases, providing a legacy for heirs.


The financial stars are aligning to create a boom time for annuities, said Dennis R. Glass, Lincoln Financial Group president and chief executive officer. Glass told analysts recently that this is, or is about to be, the best of times for the industry. In the wake of the financial crisis,

investors have made a “dramatic move” to have a portion of their portfolio invested “in something that has more certainty.” Even with pressure from banks and asset managers, guaranteed income products

InsuranceNewsNet Magazine » October 2013

provide a fundamental need for many Americans that other companies don’t offer: protection from adverse events, for example. For those reasons, annuities are going to continue to be “very popular over the next decade,” Glass said.


There’s an old joke that defines retirement as “twice as much husband on half as much income.” Now a University of Missouri study shows that spouses tend to have similar levels of planning for retirement. This planning can lead to more success and less stress when they leave the workforce. “The transition into retirement, in some ways, is like the transition into parenthood,” said Angela Curl, an assistant professor in the university’s School of Social Work. “When couples prepare to become parents, they do a lot of planning for the future. They spend time thinking, ‘How might our relationship change? How will our lives be different, and what do we need to do to accommodate this life change?’ It’s the same way with retirement.” Curl analyzed data from the study, which included information from married couples who were 45 years of age and older and worked full or part time. Curl found that, when one spouse planned, the other spouse also planned. Even though husbands planned more often than wives, the spouses influenced each other. Seems as if this is one more opportunity to sit both spouses down and begin a discussion on funding retirement with annuities.

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More American Workers Remain Unretired The percentage of workers ages 65 and older who are still in the nation’s labor force has been rising, particularly over the last decade.

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October 2013 » InsuranceNewsNet Magazine


Media Magic: How The Money Guys Struck Gold on the Air A  fter an initial stumble, a Baltimore-area producer went from being a struggling annuity seller to a TV star and trusted advisor. By Phillip Rousseaux


f you are offering retirement income planning to your clients and you are using indexed annuities, chances are you still are using seminars to attract prospects. There is nothing wrong with using seminars to educate the public and attract new clients, but there is a stigma that comes along with them. Remember the AARP and Financial Industry Regulatory Authority (FINRA) alerts that were issued to warn seniors about “free lunch” seminars in 2010? How about the “Dateline: To Catch a Predator” TV special in 2008? These are extreme examples and they certainly do not reflect the way in which most respectable financial professionals run their practices. However, there is no denying the adverse effect that these examples have had on the public’s view of seminars. The most difficult task we have is to get in front of qualified prospects on a day-to-day basis. We spend thousands of dollars and countless hours, as well as perform constant experiments, on perfecting the systems that we use to get prospects through the door. In early 2008, before the financial crisis, my firm began to experience diminishing returns from our core marketing system, which consisted of educational seminar dinners and lunches. We knew that a change was needed, so we started to explore other marketing solutions. The result was extraordinary. Because of what we were able to do, we have not held a seminar since 2009. Prospects now come to us, where we previously had to go to their homes or to restaurants in order to meet them. In addition, we have limited our services to 100 new clients a year. Instead of the pro42

The Money Guys, from left, Mike DiPaula, Chris Kirk and Philip Rousseaux, educate consumers about annuities on their radio show. spective client choosing us, we choose them. So how did we do it? In 2008, we decided to launch a radio show called “The Money Guys” on a local FM station in the Baltimore area. “The Money Guys” consisted of three financial professionals discussing retirement planning issues. We took calls from listeners during this live, fast-paced show. But, at first, the show did not generate the prospects that we had anticipated. What we found was that the show was full of great information – we discussed everything from Roth conversions to tax-saving strategies to retirement planning – but it was not getting our office phone to ring. Three months into the show, we revamped the content and noticed an immediate change. We went from setting one or two appointments per show to setting an astounding 10 appointments in the hour in which the show aired. This was by far the most critical moment in the development of our current marketing strategy. It continues to drive what we are doing now, five years later. So what was the change? We fine-tuned our content to discuss living benefit riders, indexed annuity features such as “annual resets,” and investing for protection from the downside risk. We didn’t veer off this topic. Instead of discussing all areas of retirement planning, we focused on educating the public about how annuities work. The funny thing is that, once the public understood the features and benefits provided by

InsuranceNewsNet Magazine » October 2013

fixed annuities, they were no longer afraid to put part of their life savings into this type of investment. We also ran radio commercials during morning and afternoon drive times. During these commercials, we offered no-obligation retirement checkups our flagship station’s listeners. Within one year of starting the show, we were able to retire seminar marketing completely. What’s more, our prospective clients were more than happy to come into our office and meet “The Money Guys” in person, instead of us having to take our consultations on the road. The next step in branding your firm and yourself in the community is to break into television. In 2010, we decided to leap from the airwaves to the small screen. We worked with a local production company that had some big-name clients, and we began to plan, shoot and edit television commercials. This took about a year from conception to completion. We hired actors, built sets and developed a script. We ultimately decided to shoot three different commercials that would brand our firm locally as “the retirement planning firm you call when you finish your working years.” The production and final outcome of these commercials was nothing short of breathtaking. We had commercials worthy of any Fortune 500 company’s national ad campaign, with voiceovers, graphics, high-quality storytelling and a call to action. Unfortunately, the results were less

MEDIA MAGIC: HOW THE MONEY GUYS STRUCK GOLD ON THE AIR than spectacular. We would receive about one call each time a commercial aired. Although this is certainly better than nothing, the production cost of these commercials made this type of marketing a money-losing venture. The one thing the commercials accomplished was branding our firm. Our dry cleaners, clients, family and friends knew the name of our company and what we stood for. However, the commercials were not doing what we needed them to do; they were not attracting prospective clients. After three months of airing the advertisements at different times and on different networks, we pulled the plug and went back to the drawing board to revamp our TV strategy. We knew what worked was the content on our radio show, “The Money Guys.” Instead of doing a scripted show, we simply would bring some notes about current economic issues to the studio and discuss those issues as they related to fixed indexed annuities. This led to a much more natural flow. The public enjoyed the educational format as well as the passion and

assurance that we provided when it came to discussing retirement planning. Rather than pull the plug on television altogether, we decided to hire the same firm that created the TV commercials to produce “The Money Guys” in a new format suited for television. It took about eight weeks to build the set and edit the show. This time, instead of hiring actors to promote our services, we decided to use ourselves and to do exactly what we had been doing on radio: discuss retirement income planning as well as annuity living benefits and riders. What happened after that first show aired was what we had hoped would happen from the beginning. We have had to expand our offices twice in less than 12 months. We also have doubled our employee base just to keep up with the leads generated by our shows. As a result, we no longer have to take every prospective client who walks in the door; we can focus on working with those who will be impacted most meaningfully by working with us. We did not start this branding and


marketing campaign with the idea of ending seminars, but that was the end result. We no longer can go out to dinner without someone recognizing us as “The Money Guys.” We have successfully branded our firm and marketed to prospective clients, which is everything that we set out to accomplish with this campaign. We not only wanted to brand our firm, but we wanted to inspire those who could use our services to pick up the phone and call. If you want to take your firm to the next level, you have to do things differently. “The Money Guys” now airs on multiple television and radio stations weekly in our market, and continues to be a lucrative venture for our firm. If you are not using radio and TV to promote your practice, perhaps it is time that you gave them a second look. Philip A. Rousseaux, RICP, is the founder and president of Everest Wealth Management, Towson, Md. Philip can be reached at Philip.Rousseaux@

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October 2013 » InsuranceNewsNet Magazine



Longevity Insurance Gets a Makeover with Deferred Income Annuities N  ew deferred income annuities add to the robust lineup of lifetime income strategies.


By Cathy Weatherford


s Americans continue to live longer, the demand for income that will last a lifetime has grown substantially. Insurers have responded by developing new products tailored to their customers’ individual needs. This innovation is accelerating, and the result is a broader offering of retirement income products. One such product, deferred income annuities (DIAs), is emblematic of the product expansion taking place across the insured retirement market. Since their emergence several years ago, DIAs have become the focus of insurers’ efforts at innovation, providing financial advisors and their clients with another lifetime income option.

The Before

Anyone who studies mortality tables for a living could have seen this coming. Americans were living longer and, as a result, were spending more years in retirement. At the same time, traditional defined benefit pension plans were disappearing and more workers were saving for retirement with 401(k) and other defined contribution plans. These plans have been largely successful at helping Americans accumulate financial assets for their later years. The Investment Company Institute estimates that $5.1 trillion in assets were held in these plans at the close of 2012. That said, the defined contribution system resulted in more workers being self-responsible for saving for retirement, investing retirement assets and managing withdrawals during their retirement years – transferring new risks to plan participants in the process. One of these risks is longevity risk – the risk of outliving retirement savings. 44

34% 35


Source: Insured Retirement Institute and Cogent Research. “The Evolution of the Annuity Industry.” (September 2012)


27% 26%


19% 9% 7%

Guaranteed Income


Advisor Recommended

Tax Deferral

Principal Protection



Inflation Protection

Consumers continue to cite guaranteed income as the number one reason to purchase an annuity, followed by advisor recommendation and tax deferral.

To manage this risk, many consumers have turned to annuity products as a source of guaranteed lifetime income. Guaranteed income is the top reason consumers purchase an annuity, according to an Insured Retirement Institute (IRI) and Cogent Research study. To meet this demand, the insured retirement industry continues to develop a menu of strategies to provide retirement income, with each approach tailored to meet the needs of each customer. These strategies include, among others: variable annuities (VAs) with guaranteed living benefits, indexed annuities (IAs) with guaranteed living benefits and single-premium immediate annuities (SPIAs). Each of these product classes has its own unique features, which are developed to cater to specific markets. VAs with living benefits, for example, provide consumers with the ability to invest in equity markets in a tax-deferred savings vehicle, while offering guarantees and providing for income flexibility. To cater to those interested only in insuring against longevity in its purest sense, insurers had developed advanced life deferred annuities (ALDAs), sometimes

InsuranceNewsNet Magazine » October 2013

simply referred to as “longevity insurance.” With the ALDAs, after a one-time premium payment, the income stream would be deferred for a long period of time – 15 to 20 years for example – until the beneficiary reached an advanced age, often age 80 or 85. Then the income stream would begin, providing fixed payments for the duration of the owner’s life. Because of the long deferral period, risk pooling and the lack of bells and whistles, ALDAs provided a lowcost and extremely efficient strategy to insure against longevity while providing the most income per premium dollar. While a simpler product was able to provide higher payouts, the lack of features would impede ALDAs from gaining popularity. ALDAs generally did not provide death benefits, so the entire premium would be lost if the owner died before the income stream commenced. ALDAs also had no cash value, so they couldn’t be tapped in the event the owner needed the liquidity. As a result, few companies marketed ALDAs, consumers shied away from them and significant sales never materialized.


The Makeover

The concept of providing an income annuity later in life, when other assets may be exhausted, still had merit. With roughly 10,000 baby boomers reaching retirement age each day and the need to protect against outliving retirement assets persisting, insurers began rethinking their approach to longevity insurance. The outcome would become a new product: deferred income annuities or DIAs. To address consumers’ concerns with ALDAs, insurers reduced the minimum deferral period, previously in the 20- to

30-year range, to two years. Most DIAs on the market today offer the ability to defer income for as long as 40 years, but the majority of the contracts sold have a deferral period of five to 15 years. To further address the rigidity of the ALDA, insurers added more flexibility to DIA contracts. Now, most DIAs offer the option to modify the benefit commencement date – typically just once – to provide some limited flexibility. Most DIAs also allow the client to contribute additional premiums before the income start date. In addition, most DIAs now have





25 20 15 10 5 0


1960 1980 2000 2012 2020 2040 YEAR

The average 65-year-old female in 1940 would be expected to live about 13.4 more years to age 78.4. In 2012, the average 65-year-old female would be expected to live about 20.4 more years to age 84.4. Source: Social Security Trustees Report 2013


Source: Insured Retirement Institute’s Report: “Deferred Income Annuities: Insuring Against Longevity Risk” (August 2013). Available at





DIA purchased before retirement, generally two to 15 years prior

DIA purchased at retirement

DIA purchased with varying income start dates


Shelters assets from market shocks near retirement; provides guaranteed lifetime income once income streams commences

Allows continued control of assets in time leading up to retirement; provides guaranteed lifetime income once income streams commences

Provides guaranteed lifetime income once income streams commences; varying income start dates can provide incremental “raises” in retirement income


a death benefit, which typically was not available with ALDAs. Many insurers also have added liquidity features and cost of living adjustments pegged to a preset percentage or to the Consumer Price Index.

The Unveil

DIA products were launched into the market several years ago. Last year, they achieved their first year of significant sales, estimated to be about $1 billion, with six companies offering DIA contracts. Now, a dozen insurers either are offering or have filed to offer a DIA product. Meanwhile, sales continue to increase. Beacon Research reported that DIA sales increased for five consecutive quarters, reaching a record high during the first quarter of 2013. And while relatively new to the market, trends are beginning to emerge on DIA clients. In general, those who are purchasing DIA contracts are similar to those who purchase VAs or FIAs with living benefits. DIA buyers are, on average, in their late 50s. The average deferral period is about eight years. Although DIA sales are growing, they make up only a small percentage of total annuity sales. That said, IRI expects DIAs to be the fastest growing product class on the market in 2013 on a percentage basis. This trend should continue into 2014. What remains to be seen is whether DIAs will be a long-term success or a passing fad. Their market presence, however, demonstrates the industry’s commitment to innovate and to develop new products to meet the needs of consumers. Their recent success also shows the continued consumer appetite for retirement income strategies focused on managing longevity risk through guaranteed lifetime income. As Americans continue to live longer, and as baby boomers exit the workforce en masse, there will be a continued need for guaranteed lifetime income strategies. DIAs, for the time being, will provide consumers with another option for attaining income for life. Cathy Weatherford is president and chief executive officer of the Insured Retirement Institute. She served for 12 years as chief executive officer of the National Association of Insurance Commissioners and was Insurance Commissioner of Oklahoma from 1991 to 1995. Contact Cathy at Cathy.

October 2013 » InsuranceNewsNet Magazine



A simple answer to improve employee health care

Hot Off the Wires: It’s HealthWeek!


Health insurance is one of the biggest issues of our time, and InsuranceNewsNet is bringing you the latest news about it each and every week! INN has launched HealthWeek, a newsletter that dishes up a hefty helping of health insurance news and delivers it right to your inbox.

We don’t see it having an impact in the next year or two.

scape, and how it all affects your business. To subscribe, go to

includes TV ads featuring the folklore character suffering humorous mishaps while waterskiing, ice skating and chopping trees. The injuries are meant to illustrate the campaign’s tagline, which calls Minnesota the “Land of 10,000 reasons to get health insurance.” Leaders in Paul’s “hometown” of Bemidji have 10,000 reasons to hate the ads. “I think they’re offensive, some of them, and I think they’re inappropriate,” Bemidji Mayor Rita Albrecht said. “And I would prefer some of them not be used.”

Keep up with the latest news about the health insurance industry, the evolving health care land-


It’s been a long time since we’ve heard Mom tell us, “If you eat all your vegetables, then you may have dessert.” Now, a health insurer is taking a page from the Mom playbook and rewarding its clients, not with a slab of chocolate cake at the end of the meal but with a voucher to buy more broccoli and Brussels sprouts. Independent Health of New York state is teaming up with a grocery chain to reinforce healthy eating habits by pro-

viding incentives to patronize the produce aisle. For every $2 that eligible members spend on produce, they’ll earn $1 to spend later. The insurer hopes that this will give its members a reason to bypass the potato chips and pretzels in favor of buying more spinach and squash. We think this would meet Mom’s approval – and it might even make those Brussels sprouts taste better.


Nearly half of American babies are born to mothers receiving Medicaid benefits, according to a study issued by George DID YOU



Washington University in partnership with the March of Dimes. Those figures are higher than previous estimates, and demonstrates not only that the Medicaid program is the single largest payer of obstetric care in the U.S., but also confirms that most American newborns are born into some degree of poverty. The states with the highest Medicaid birth rates are Arkansas, Mississippi, Louisiana and Maine, as well as Washington, D.C.

While the 2010 Affordable Care Act will drive the expansion of Medicaid eligibility in some states next year, the expansion shouldn’t result in more births being paid for by the program. That’s because all states, prior to the enactment of the Affordable Care Act, had already expanded eligibility for pregnant women.


That legendary lumberman from up north, Paul Bunyan, has been tapped to promote MNsure, the Minnesota health care exchange, and some folks aren’t too happy about it. Minnesotans consider Paul to be one of their own. And they are not amused by MNsure’s awareness campaign that

TEXAS LEADS THE NATION in the rate of uninsured. More than 25 percent of the state’s population under age 65 – 5,771,479 people – has no health insurance coverage. Source: U.S. Census Bureau

46 InsuranceNewsNet Magazine » October 2013

— Highmark chief executive officer Dr. William Winkenwerder Jr. on the effect of the Affordable Care Act on the health insurer.

H&R BLOCK HELPS CUSTOMERS ENROLL IN COVERAGE H&R Block will soon do more than help people file a 1040 form. The tax preparer is teaming up with GoHealth in a pilot program in Arizona that will

help its customers enroll in health care exchanges.

As part of the pilot program, GoHealth will have its insurance agents in Block’s tax offices. Bill Cobb, Block’s chief executive, said the partnership with GoHealth won’t generate meaningful revenue for Block right away, but the company expects health care and taxes to become closely tied in the future. GoHealth would provide the online platform behind Block’s help with enrolling at health care exchanges and choosing health coverage. Block tax preparers had raised the Affordable Care Act’s provisions with customers in the tax season that ended in April. The company again plans to include health care as part of the tax review in the coming tax season.

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Each year, open enrollment season brings its own set of challenges and opportunities for those in the health insurance market. This year, open enrollment presents even deeper challenges as employers and workers alike attempt to sort out the changes brought about by the Affordable Care Act (ACA) and what it will mean to them. Open enrollment season also coincides with the opening of the health care exchanges on Oct. 1. Where does the health insurance advisor fit into the scheme of things? And, what can advisors do to better serve their clients and keep their own practice going in the face of change? This section will address some of these concerns. ACA Adds Anxiety to Open Enrollment Employers need more help than ever from advisors as they attempt to find the best and most cost-effective health care solutions for their workers. PAGE 48 Accentuate the Positive, Eliminate the Negative on your Business Health care reform presents challenges to advisors, but parlaying the changing environment into new opportunities will reconfirm their value to clients. PAGE 50

ACA Adds Anxiety to Open Enrollment A  dvisors are working harder at diversifying their practice and offering greater value to their clients as the health insurance landscape continues to shift. By Susan Rupe


his October finds a whole new take on open season as employers peer at the new health insurance exchanges and pepper their health insurance advisors with questions about whether they should steer their workers there. “A big question is: will the marketplace be a viable option?” said Joseph “Joey” Giangola of Giangola Insurance in Ashtabula, Ohio. With the establishment of the health care marketplaces, or exchanges, under ACA, many fear that companies will shift their employees to

48 InsuranceNewsNet Magazine » October 2013

the exchange for coverage. “For companies in the 5-10-15 employee range, in a lot of cases they are figuring out whether to keep their plan or whether to put their employees into the marketplace,” he added. This fall’s open enrollment season brings with it a whole new set of anxieties and challenges because the start of open enrollment coincides with the Oct. 1 launch of the health insurance exchanges as part of the Affordable Care Act (ACA). But along with these anxieties and challenges are opportunities for advisors who are able to position themselves as a valued partner with their group business clients. Advisors said that working with their clients to find the best coverage at the best rates, and positioning themselves as a resource for their clients are the best

ACA ADDS ANXIETY TO OPEN ENROLLMENT ways to guide their clients through the open enrollment season and retain their business. “Brokers need to approach it from a positive mode. Look for ways to add value to your client. Partner with TPAs (third party administrators) and self-insured carriers that can be nimble and think outside the box,” said Susan Rider with Gregory & Appel, a regional broker based in Indianapolis. “Diversify what you’re able to offer to your clients. In our business, we are seeing that the mid-size market is needing additional human resources assistance because the HR departments are getting slimmer and ACA has put more requirements on HR departments. We are rolling out an HR unit to help provide support to our clients. You need to tell your employer clients that they need to work with someone who can partner with them and work strategically with them over the next five years.” Shar Sparano, president of Benefits Advisory Service of Forest Hills, N.Y., echoed the need for advisors to provide HR assistance to clients who may need it. “Employers need to get their records up to spec and we can give them assistance with that,” she said. “All clients are different but they all have to comply with the new law.” David Capo, who is a senior account executive in Sparano’s firm, said that ACA has forced advisors to “be more strategic in working with clients.” “We are planning not just for their renewal in three months but for the renewals coming up in the next year, three years, five years,” he said. Health insurance advisors report that this year’s open enrollment season is bringing more questions than ever from clients, more information to convey to clients and more changes to brush up on in order to serve those clients. “Everybody wants to know what to expect. Everybody has questions. They need help!” Sparano said. “We are doing a lot of work on our existing groups. Our existing clients need more of our attention than ever before. Rates are high, increases are substantial. Clients are looking at alternatives.” Training and outreach are among the major activities advisors are conducting in preparing for open enrollment season.

“There are three people in my office and we are spending a lot of time going to meetings and doing outreach,” Rider said. With more than half of the 32 people in broker’s benefits department having completed ACA training, the company has been able to get information about the changes that are coming and share that information with their clients in a timely fashion, Rider added. In addition, her company serves as an exchange educator in each of the states in which it conducts business. “Now, more than ever, our clients are really engaged. The CEOs and CFOs are more engaged because of the extreme financial impact that health care has on their company’s bottom line,” she added. “Health care is a major business decision for them now.” “Right now, it’s a wait-and-see kind of game until the big show starts,” Giangola said. “We are approaching our clients on an individual, case-by-case basis to discuss their needs and their options. Each of our clients is different and we need to concentrate on what each one needs.” Giangola noted that many of the insurance carriers that his company represents are offering early renewal options to their group customers. This enables the customer to lock in a rate prior to Dec. 1, 2013, instead of the normal date of Jan. 1, 2014. Even though employers were given an extra year to comply with ACA-mandated requirements, advisors have been busy answering their questions and preparing them for what lies ahead. One question that Rider said many of her small to mid-sized group clients is asking is whether a self-funded health plan is a more economical option than a fully-insured plan because of tax considerations. “There are a lot of compliance issues involved. It’s a matter of letting our clients know what’s out there and what they need to do in regard to compliance (with the law),” Capo said. Sparano added that “The No. 1 thing is to sit down and discuss what’s compliant and what they can expect down the road. There is a timetable for all the regulations that are coming down. Review the timetable with them. Just because they get an extra year to comply, they will need to be working on it now.”


Since ACA was passed in 2010, policy experts have debated whether 2014 will mark the beginning of the end for employer-sponsored health insurance as we know it. Researchers at the University of Michigan released a study in September predicting a relatively small decline in employer-sponsored coverage as a result of health care reform. Their paper, published in the September issue of Health Affairs, predicted a change in the percentage of employers offering coverage from a 1.8 decline to a 2.9 percent increase. “The response of employers to health reform is important for several reasons,” said Helen Levy, a co-author of the study. “First, a reduction in employer coverage could increase federal outlays if more workers receive premium tax credits in the exchanges or enroll in Medicaid.” Second, if the employers who drop coverage have relatively less healthy workers, this worsens the exchange risk pool, driving up average premiums. And lastly, the ACA was presented to the American public as a reform that would not seriously disrupt existing employer-sponsored coverage, she said. “To the approximately 160 million Americans who have such coverage and are for the most part quite satisfied with it, large-scale employer dropping of coverage would be an unwelcome surprise,” Levy said. Another co-author, Colleen Carey, notes that since the employer penalty for not offering coverage will not take effect until 2015, it may be several years before the true effects of these policies become evident. Giangola said that despite some of the uncertainty in the ACA world, advisors still must be ready to serve their clients. “Don’t be afraid to jump in head-first. Don’t treat (ACA) like it’s Armageddon. Learn as much about this as you can because you gotta be ready to answer your clients’ questions,” he said. Susan Rupe is assistant editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Susan may be reached at srupe@

October 2013 » InsuranceNewsNet Magazine



Accentuate the Positive, Eliminate the Negative on your Business H  ealth care reform presents challenges to advisors, but parlaying the changing environment into new opportunities will reconfirm their value to clients. By Ronald Fields


entioning health care reform to a broker is a lot like poking a sleeping bear – you’re likely to get some irritated growls. It’s no wonder, really. Slogging through thousands of pages of rules and regulations is tedious, and worrying about income losses as some accounts switch from traditional major medical plans to health care exchanges adds insult to injury. Brokers can’t avoid studying up on health care reform, because clients are counting on them for guidance as major changes to the health care system go into effect. But when it comes to sales and finances, brokers should look on the bright side. As the great American lyricist Johnny Mercer advised during the dark days of World War II, it’s time to “accentuate the positive” and “eliminate the negative.” While pessimistic brokers are worrying about what will or what will not happen as health care reform is implemented, their more optimistic cohorts are parlaying the changing environment into new opportunities and reconfirming their value to potential and current clients. It’s important to remember that while benefits experts find new regulations tedious and confusing, employers seem even more befuddled – as are workers who seek to understand what steps they should take to protect their families’ financial security in the post-health care reform environment. The 2013 Aflac Open Enrollment Survey revealed that 69 percent of employers haven’t communicated about reform-driven changes to their benefits packages with employees. Unfortunately, some don’t understand reform well enough to develop coherent messages – just 9 percent of companies describe themselves as very prepared to implement the required changes to their businesses. 50

Other businesses may be dragging their feet to avoid being the bearers of bad news: 37 percent of companies say they’re likely to offer fewer benefits options or discontinue them altogether as a result of reform, and 40 percent are likely to let workers buy coverage through marketplaces or exchanges. Employers who suspect their workforces won’t be pleased are correct. According to the Open Enrollment Survey:


60 percent of workers agree or strongly agree with the statement, “I expect my employer to continue to offer comprehensive benefit options.” 55 percent said they are at least somewhat likely to look for other jobs if their companies stop offering comprehensive benefits options, which would include sending the employees to the marketplaces or exchanges to buy health insurance. 71 percent of companies believe employees’ health care costs will rise as the result of reform, but half of workers (51 percent) say $25 is the maximum monthly increase their budgets will tolerate.

It’s time for brokers to step into the ring. The “take your corners” disconnect between employee expectation and employer action, combined with the start of open enrollment season, presents brokers with opportunities to referee. They can start by clueing in clients on the importance of strong benefits packages and how dangerous depleted health insurance rosters can be. A 2012 Right Management survey revealed that 86 percent of employees plan to look for new jobs this year. And it won’t take much persuading to lure them from their current workplaces: 59 percent of employees surveyed as part of the 2013 Aflac WorkForces Report said they would take a job with slightly lower pay if it came with more robust benefits options. Companies also should note that not only rank and file employees are

InsuranceNewsNet Magazine » October 2013

23% Too little or

21% Choose benefits

15% Do not elect

14% Do not check whether

too much in flexible spending account available or voluntary options

options they don’t need or wrong coverage amounts doctors are in network or for correct deductions

Source: 2013 Aflac Open Enrollment Survey

developing exit strategies. Their best and brightest workers are polishing their resumes, too. According to a 2013 Career Builder survey, 32 percent of employers lost their top performers to other organizations, and 39 percent of companies fear the trend will continue. Given that superior benefits are so enticing to job-seekers, companies that want to retain their workers and bring in top new talent must use open enrollment to position their benefits packages in the most attractive ways. That makes it an opportune time for brokers to strengthen relationships with existing accounts and sign new ones by proving themselves as indispensable resources for enrollment tips and information, including guidance about reform.

Communication is Key

According to the 2013 Aflac study, employees are relying on their companies to educate them about their benefits needs in the wake of health care reform. However, just

ACCENTUATE THE POSITIVE, ELIMINATE THE NEGATIVE ON YOUR BUSINESS 13 percent of employers believe educating workers about reform is important to their organizations. Brokers should remind clients about the importance of developing strong, yearround communications plans that ensure workers receive clear, consistent and concise information about health insurance coverage and options. Smart brokers will go a step further by recommending appropriate content and proposing timetables that go beyond the traditional recruiting, onboarding and open enrollment periods to coincide with promotions or salary increases, marriage, the birth of a child, work anniversaries and age milestones. Aflac’s Open Enrollment Survey showed the importance of ongoing communications, with 74 percent of workers saying they understand what is covered by their health insurance policies either sometimes, rarely or never. What’s more, nine out of 10 (90 percent) admit to choosing the same benefits options every year, although 54 percent believe they waste up to $750 annually due to open enrollment mistakes. The most common mistakes cited were putting too little

or too much into flexible spending accounts, choosing benefits options they don’t need or the wrong coverage amounts, and passing on voluntary options. Employees are looking for robust benefits options that can help ensure their families are protected from the financial setbacks caused by illness or injury, while employers continue to trim their health insurance portfolios for budgetary reasons. Brokers, meanwhile, are looking for ways to replace lost income as accounts move to simpler plan administration, out of the benefits arena, or consider health care exchanges. Voluntary insurance represents the opportunity to put in place a win-winwin scenario. Employers can add voluntary insurance policies such as disability, accident and hospital insurance to their portfolios with no direct effect on their companies’ bottom lines. Employees can select the voluntary options that meet their individual needs and circumstances. And brokers can offset income losses stemming from health care reform with earnings from the sale of voluntary products.

An unprecedented 2.5 MILLION VETERANS do not realize they are eligible for a little-known benefit. This breakthrough opportunity is generating countless pre-qualified appoint-



Accentuate the Positive

The bottom line is that brokers have little reason to focus on the negatives brought about by reform, because they can be neutralized by positives. With open enrollment just around the corner, now is the time for benefits advisors to step up by aiding employers and workers who are at a loss when it comes to insurance and enrollment. Instead of growling about reform, brokers and benefits advisors should take the lead during open enrollment by helping accounts shore up their benefits offerings, providing guidance on employee communications timelines and content, leading town-hall meetings to discuss benefits changes and answer related questions, and conducting educational webinars for workers. After all, positive activity generates positive results. Ronald Fields is vice president of core broker sales for Aflac. Contact him at

ments and we are seeking hard-working independent agents to serve our nation’s wartime heroes and their families. This is an incredibly lucrative opportunity and a rewarding endeavor.


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Love and work don’t always work for the working class.


Stimulation Stuck at 11 (AP Photo/Richard Drew)

Chairman Ben Bernanke apparently did not want to go out as the bad guy who cut off any of the quantitative easing sauce to stimulate the economy. After a few months of provoking delirium tremens by threatening to stop buying bonds at an unimaginable rate, the Fed announced on Sept. 18 that it would not ease up a bit. The news that the Fed will go on buying $45

billion worth of treasuries and $40 billion of mortgage bonds each month surprised analysts, who were predicting $5 billion to $20 billion in cuts. They estimated

that the easing would have had little effect on the markets because either the action was already accounted for in pricing or they were grown-up enough to just deal with it. Isn’t the non-news good news? Well, the Dow Jones set a new record moments after the announcement and the guess at press time was that investors would be happy but then sad as the realization sank in that this means the Fed does not think the economy is ready to go cold turkey off stimulus. However it went, it might be time for the United States to admit that it might have a stimulation problem.


It’s no secret that the rich are getting richer but it might be a surprise that advisors looking to get rich them-

selves should be looking for younger wealthy clients.

They want more money, now – that’s why. Wealthy boomers have their pile and just want it preserved. That’s good for estate planners. But what about the people who are on the move and who want their money to go out there and make some more money? For that, you need investors from the Gen X or Y crowd, according to the 2013 Fidelity Investments Millionaire Outlook Survey. Those folks, between the ages of 23 and 48 and with $1 million or more in investable assets, tend to be more active in investing and planning, the survey showed. They have the most optimistic financial outlook in the study’s history and are more apt than boomers to live the millionaire lifestyle. They are also more generous than boomers. DID YOU




That all translates to more opportunity for advisors, but it’s also a little bit of a mind-blower. The generation that was supposedly lost in self-reflective ennui turned out to be more fun-loving and giving than their hippie brothers and sisters. Let’s give that a gold-plated “wow, man.”


IPO! There was a time those three letters sent thrills through the investment community looking for the next great thing. A hot venture would stuff cash in a rocket and whoosh! Millionaires and billionaires would burst into spectacular being! But fireworks being what they are, sometimes you get a dud. Facebook, for example. That should have been the fiery start to the latest money rave but we all stood around and said, “Is that all there is?” Maybe the loopy days of jumping around fountains of funds are behind us, we thought as the noisemaker drooped from our pouty lips. But, wait, did you hear that chirping in the woods? It’s Twitter! Ready to fly high and restore our faith! And, look, behind it are Chrysler and Hilton waiting to run out

THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING was 20 percent this year. The average increase in the first day (or “pop”) is 13 percent. Source: Renaissance Capital

InsuranceNewsNet Magazine » October 2013

No taper – the market loves it. We will see if that lasts, but, boy, we are off to the races! — Brad McMillan, of Commonwealth Financial in Waltham, Mass. to Reuters

onto the field. Actually, even though the Twitter filing inspired serious squawking, the number of IPO filings is up this year, 174 so far, compared to 141 all of last year, according to Renaissance Capital. Performance is up also, with many stock values climbing hundreds of percent following the offering. Twitter’s announcement even featured a whisper of speakeasy intrigue with a tweet that said the company “confidentially” filed a notice for the IPO.

That secrecy is a product of the JOBS Act of 2012, which allows companies to keep financial details quiet until three weeks before the IPO. The Jumpstart Our

Business Startups Act loosened rules on access to capital and regulations meant to safeguard investors. Although analysts say the act didn’t create a whole lot of JOBS, it is certainly jumpstarting quite a bit of wealth. (But that’s off the record, on the QT and very hush-hush.)


Let’s say you made a questionable investment in the ’90s. Maybe it was in a certain plush toy. Perhaps you have a storage unit filled with a mid-sized city of them. Most likely, you can’t even hear the word “bean” without shriveling up a little inside. It might please you in some small way that the inventor of Beanie Babies, Ty Warner, pleaded guilty to tax evasion and now owes $53 million. On your

way home, perhaps you can finally treat yourself by stopping at that storage unit and lying back in that squishy pile of regret and luxuriating in the memory of the good old days of irrational exuberance. Just don’t bend any of the heartshaped tags. Hey, you never know!

Single-Country Fund: A mutual fund that restricts its investment to the assets of one country and is able to allocate its funds only within the range of investment instruments available in the specified country.


Do One-Country Funds and Retirement Money Mix? Investors look at some impressive gains but retirees should tread lightly, advisors say. By Linda Koco


ield-starved American retirees are always looking for a way to maximize returns. Sometimes they read about investing in Brazil, Japan, Korea, Malaysia and other faraway places. They go to seminars and hear pitches for investments in countries where the Gross Domestic Product is improving and where growth prospects are tantalizing. And they start to wonder, should I try to get a piece of the action? Should I put some retirement savings in one of those one-country funds instead of keeping it all in the bank? Countries come in and out of favor regularly, so Mike Rocco, an equity analyst at Morningstar, gets a stream of calls from financial reporters and others to find out if the countries currently in favor would be good for investors.

Not for the Vast Majority

“I’m not a planner and I don’t give advice,” Rocco said. But he does have some thoughts about older people sinking retirement money into one-country mutual funds, even in countries that are doing well. In brief, he said, “the vast majority of Americans have no business investing in one-country funds.” One-country funds are, in Rocco’s view, too concentrated. The danger for the investor is that the investment will be prone to any problems that may occur in the country where the money is invested. Then the retiree risks seeing the value of the investment decrease. Obviously, the investor benefits when the country does well for a protracted period, say for 10 years. But, still, older people generally want less risk, not more, Rocco said. In addition, they have less time to recover from a financial setback, so for them, “geographic concentration is risky.” 54

Another factor is that older people are not in the accumulation phase of life anymore. Even if they see a market or region has gone up 40 percent, they still should ask, “What is the worst this can do?” Then they should ask themselves if they could stomach that. Americans also should examine whether they can get their money out of the investment if they want to, and whether the government of the foreign country has regulations to protect investors, he said. If the client wants some international exposure, and if the advisor agrees that would help the overall plan, “why not look at something like a diversified emerging markets fund?” Rocco asked. “Why not let the fund manager pick the best opportunities throughout the developing world in Korea, Asia, Malaysia or elsewhere?” Think of owning a single-country fund as being comparable to owning a stock, he suggested. “It’s OK if the client has money to invest in a risky stock (if holding diversified assets elsewhere), but otherwise be cautious.”

Bond Fund Example

Aaron Dillon sees it differently. He has been going around the country talking with registered investment advisors and broker-dealers about how he thinks a one-country fund – in particular, a fund that invests 100 percent in Chinese bonds – could be good for older Americans. Dillon is managing director and a U.S. product developer at Harvest Funds. The firm is a big mutual fund company headquartered in Beijing. It has set up a New York office, staffed it with U.S. wealth and asset management executives, and has developed plans to market Chinese- and Asian-focused funds to U.S. investors. Harvest’s first U.S. offering is the Harvest Funds Intermediate Bond Fund – hence Dillon’s interest in advocating for Chinese bond investments. Here is his argument: Older people do need safe stable income, said Dillon, him-

InsuranceNewsNet Magazine » October 2013

self an American with experience at U.S. investment firms. “The income should not be wild, or change every month. They need simple products,” he said. But many older Americans also need greater yield than is available from bank certificates of deposit, U.S. Treasuries and corporate bonds, Dillon contended. “Tenyear U.S. Treasuries are paying from 2 percent to 2.5 percent, and corporate bonds are paying from 3 percent to 3.5 percent. How can you live on that?” Some Americans respond by investing in risker asset classes with B or BB credit ratings or investing in alternative asset classes, he said. So Harvest decided to develop a “different kind of retirement income strategy” for older Americans to consider, one that invests primarily in investment grade and high-yield, high-quality China bonds (which in August were yielding at or above 7 percent, he said). The fund is structured to pay out monthly checks without dipping into principal, plus a bonus in December. It’s a total return strategy, designed for income. The checks are based on the coupon payments, so they can change. Dillon acknowledged that some Americans resist investing in anything in China or anything international. “If they’re spooked by it, I say ‘don’t buy this fund’ and I move on.” But he has found others are interested and want to learn more, so he thinks some will like the approach. About the investment being too concentrated, because the fund invests only in China bonds, Dillon said he does not recommend that people put 100 percent of their portfolios into the fund. “Investors need to be diversified, and invest in line with their risk profile. We are telling people, maybe put 5 percent of the intermediate exposure into this fund, and if you like it, try more.”

Not for Retirement Money

Eric Jacobson, an analyst at Morningstar who specializes in bonds, said that for

DO ONE-COUNTRY FUNDS AND RETIREMENT MONEY MIX? American investors in particular, a bond fund that focuses on a single country would be too much of a concentrated bet, particularly for retirement money. “If you buy a fund focused on a single country, you’re making an implied bet on many things about that country, including but not limited to the policies and financial decisions of its government,” he wrote in an e-mail. “I think most investors would prefer to allow a fund manager to do fundamental research on a variety of countries and choose those whose bonds they believe offer the best risk/reward tradeoff.” Joe Tomlinson, a financial planner and advisor from Greenville, Maine, has a few recommendations for clients who are considering such investments:  Read the offering carefully before investing. Does it lock in the interest rate? Does the country’s government have a right to make changes to the offering after issue?  Find out if and how the U.S. investor can get money back out of the fund or investment.

 Ask whether the fund company uses a facility such as the Securities Investor Protection Corporation (SIPC). SIPC is a Washington, D.C., organization that works to help recover funds when cash and securities are missing from customer accounts of a brokerage that has failed.  Consider whether using a basket of overseas bonds from a number of other countries instead of a one-country fund might be better than a one-country bond fund. Or consider using an international equity fund for global exposure. In general, Tomlinson said he likes to see clients, even retired clients, do at least some international diversification rather than invest only in U.S. securities. “U.S. and other countries do better at different times,” he explained, “so this helps keep the portfolio from being exposed to the risk of only one country.” However, he prefers that clients do the international investing on the stock side of their portfolios. For instance, a 75-year-old might have 30 percent of assets in stocks,


and maybe 30 percent of those assets could be in international stock funds. “It’s easier to find international funds and diversify them on the equity side,” he explained. As for bond investments, he prefers no international exposure there. “I like to keep these investments simple. It’s the safe money place for the client’s money.” Reuters said China’s Ministry Of Commerce reported in late August that foreign direct investments from the U.S. rose 11.4 percent in the first seven months compared to a year earlier. That is the kind of information that raises Americans’ curiosity about one-country investing. The figures don’t address client needs, the total economic picture, or any aspect of personal investing or retirement income. But it is information that may excite or interest some clients, so advisors will probably need to keep on top of one-country trends and be ready to provide individualized guidance when asked. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. She can be reached at

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October 2013 » InsuranceNewsNet Magazine



Great Sales Training Comes PART 3 From Skilled Trainers of a 3-Part Series

The best sales trainers themselves can improve their personal performance by moving beyond their comfort zone. By Dan Seidman


ere is a question for trainers and entrepreneurs and those who lead them: How great (or not) are your skills in front of an audience of learners? Sales training is not just about the tools, the job aids, participant’s guides, the PowerPoint and the props. Great sales training also is about your ability as a facilitator and communicator (and at times, entertainer). Great sales trainers have persuasive personalities. In this month’s article about the CAT Scan for your sales training, we will look at the T, which stands for training skills. The right skills can turn a sales training session into a sales training experience. When we use the word “experience,” it puts responsibility on the trainer to 56

exhibit entertaining and persuasive platform skills, to perform and engage attendees, to enhance and embed the learning. So just as good training puts attendees out of their comfort zone, trainers themselves can improve their personal performance by moving beyond their comfort zone and gaining the same platform skills displayed by outstanding actors, speakers, musicians and comedians. The final piece of our CAT Scan diagnostic process is all about two things great trainers do to offer learners a memorable and high-impact experience. They prepare as professionals. They perform as professionals.

1 Prepare As A Professional

Preparation involves making an ongoing investment in your career. When a trainer adopts the practices that help make the training experience dynamic, the event is made memorable for the students. Learning is more deeply em-

InsuranceNewsNet Magazine » October 2013

bedded by replacing boredom with entertaining and engaging moments. This is not about getting silly during a session, but it is about keeping the training time upbeat, fast-moving and fun. Top-notch training performers do not read the material. They know the content cold. They rehearse in front of a mirror (to eliminate bad gestures or nervous physical habits), in front of a camera or in front of a group of peers. They break down the material into manageable pieces for their practice sessions. This is also the time to add personal stories, appropriate news items and humor to support the content. Know the audience by reviewing their profiles, and adjust the presentation to who is out there. Gather personal stories to provide concrete examples to the learning session. Dress professionally. The first impression on learners is critical to credibility. Pay close attention to details. The biggest


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problem here? Guys with unpolished shoes. Practice smiling. Practice vocal exercises. Develop the strength and stamina needed to conduct half-day and longer sessions, focus on clear enunciation of words, emphasizing specific words and phrases, pausing after important statements, and variety in volume and emphasis (to eliminate a boring monotone). Do some warm-ups before practice and before the training session begins. Your training voice is an instrument that makes you money. Take good care of it. Review speakers and entertainers whom you admire. Late night talk show hosts are incredibly skillful with audiences. Study their gestures, facial expressions, vocal variety and movement. Could you create your own David Letterman-style “Top Ten List”? How about a funny man-on-the-street video to support your ideas? Adopt ideas that improve the training experience. Know your room and your equipment. Speaking of equipment, videotape your training sessions. Then watch the video with the sound turned off in order to study your gestures and movement. Listen to the sound without the video in order to critique your vocal skills. One option: obtain acting and vocal training privately, at a local university or through coaches. The National Speakers Association is a good resource. Check out their website at Attend a “Train the Trainer” workshop. The American Society for Training & Development (ASTD), a global training organization with 74,000 members, has an outstanding program. (I’m a little biased because I designed their sales training experience.) You would be wise to invest the time and brainpower into this resource from world-class training professionals. Check out their website at Programs/Training-Certificate.

My favorite training resource is the book, The Presentation Secrets of Steve Jobs by Carmine Gallo (you’ll use up two highlighters on this masterful book). Your preparation is now complete. It’s performance time!

2 Perform as a Pro

Performance is all about your time on the platform. During that time, you are 58

a trainer, an educator and an entertainer. Your “performance” breathes life into the training content. Here are some tips for giving a memorable performance: Smile! When you are enjoying yourself, you set the framework for the whole class to do it as well. Connect! Meet and greet attendees as they enter the room. Your first two minutes on the platform are critical. Open with an insightful observation, a promise or a humorous anecdote that supports the training. (An example: “You made a great decision to be in this room today. Just the fact that you’re open to new learning means you can adopt what you’ll experience and go back to your jobs and use this investment to make more money as sales professionals.”)

MORE FROM THE “SALES TRAINING” SERIES Read Part 1 from our August 2013 issue: Why Your Sales Training Needs a CAT Scan Read Part 2 from our September 2013 issue: Great Sales Training Comes From Skilled Trainers

Engage in your own positive self-talk throughout the session. (An example: “This is going to be a great experience, for me as well as my learners.”) Move! Don’t stand in one place. Walk into and connect with your learners. Sit down at times. Make eye contact constantly. When someone else is speaking, give them your complete attention. Affirm comments and questions. Encourage participant interaction by thanking them for every contribution to the group. Failing to do this might be the biggest mistake trainers make. Always give some feedback to a comment made, before moving on. It’s respectful and it tells others that their ideas are welcome as well. Put into play those movements, gestures and facial expressions you’ve adopted during your preparation time. Modulate your voice. Speak as if you are talking with a close friend, sometimes

InsuranceNewsNet Magazine » October 2013

quietly with emphasis, sometimes louder with energy. Exhibit posture that shows authority, success and strength. Move forward on points that are important to the learners. Pause frequently. Be yourself! Banter. Read humorous material in order to stimulate your own sense of humor. Find places to insert some funny lines during your program. It has to be natural, not forced. Trainers – like all professionals in business, academia and sports – need to hone their skills in order to give their audiences the best possible experience while accomplishing their mission to change behavior.

CAT Scan Wrap-up

In this series, you have learned the three foundational concepts that form great sales training. CONTENT – Do you have the latest best practices in motivation and decision-making? For example, you can know exactly when to use Pain on a buyer and when to use Gain (or benefits). That’s worth adding into your selling system. ARCHITECTURE – Do you design your training experiences to help participants change their behavior? I hope so, because most trainers out there are still preaching. And that means your sales professionals aren’t practicing the actual skills they need in order to make you both more money. TRAINER – Do you give a great training presentation, including interactive elements, humor, video, music, exercises and more? Outstanding trainers know that memorable makes money. Now it’s time to re-design! Develop that CAT scan of your own and begin to improve your sales team’s performance by truly training your selling professionals. Dan Seidman is the 2013 International Sales Training Leader of the Year (Stevie® Awards) and designer of the global sales training program for the American Society for Training & Development (ASTD). He is the author of The Ultimate Guide to Sales Training. Contact Dan, write to dan.seidman@




Your professional association has never been more important to your career than it is now, and NAIFA has never offered more free benefits to members:


Monthly Webinar Series NAIFA’s free members-only webinars feature timely information and training on topics such as sales, prospecting, marketing, practice management, and legislative updates. NAIFA’s Advisor Today Magazine Advisor Today is the premier source for practice management content and industry news. Online Seminar Series NAIFA’s Online Seminars grant 24/7 access to training and information on topics like succession planning and thriving during your first three years in the business.

NAIFA’s Virtual Library The Virtual Library is a one-of-a-kind repository of online sales tools and resources, including client presentations. NAIFA SmartBrief All the insurance and financial news you need, every day, in a two-minute read. NAIFA ClientCast® by RealWealth® These professionally produced podcasts are yours to forward to your clients and prospects each month, and feature a variety of topics including life, health, long term care, disability and critical illness insurance.

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Advising the Affluent Client: It’s All in the Questions High-net-worth clients can be put at ease if you ask simple, non-intrusive questions to get insight into their core values. By Thomas E. Fowler


fellow Million Dollar Round Table member recently told me about a challenge he faced. He had a great relationship with a particular client, but was intimidated by their wealth level. He doubted his ability to help this client and he assumed the client was collaborating with other advisors. This is a common occurrence for advisors working with the affluent market. We imagine that affluent clients have the best legal and tax counsel, and that they constantly are being courted by major financial institutions. This may be true, but we often fail to consider the client’s true desire, which is to work with an advisor who understands what they want for themselves and their family, now and in the future. The trusted advisor is the one who takes the time to ask the right questions to determine specifically what the client desires.

Ask Intuitive Questions

The most critical step is to have confidence in the questions you ask your clients and prospects. One important question to ask is: “When was the first time all of your advisors got together to understand what your role is for yourself, and what you want now and in the future?” The second important question is: “When was the first time your advisors worked in a collaborative team to create a structure and a plan to get ‘it’ done?” In too many cases, the answer to both questions is “Never.” An example of a simple non-intrusive question is: “Describe the house in which you grew up.” The client’s answer will give you tremendous insight into what’s important to them. Not only does the rest of your conversation flow 60

from their answer, they remember you because of your interest in them. You have the opportunity to ask numerous follow-up questions, depending on the answer to your first question. For instance, in answering the question above, the client may share how their family struggled financially. Your next question might be: “How specifically did the financial needs impact the family?” Or: “What life lessons did you learn from that experience?” The answers they provide will give you insight into how they view money, how they handle adversity and how they make decisions. By asking intuitive questions that require a thoughtful answer, you can discover your client’s underlying motives and core values. You just need to ask. You do not need to be in a formal business setting to uncover a person’s values. You can have a productive conversation over coffee. Once you have a conversation that uncovers these hidden guiding principles, where do you go from there?

Listen Carefully to Their Answers

Most people don’t articulate their core values directly but, if you know what to listen for, those values will be easier to identify. If they describe a family gathering, extended family or siblings, then family togetherness may be a core value. The client may articulate a strong work ethic in the way they discuss their parents or the chores they had as a child. Some will describe a person of influence who encouraged them to pursue their passions or dreams. Charity can be depicted by how their parents helped others. Honesty and ethics may come from a family story.

Put the Plan to Action

At dinner with four men at the MDRT Annual Meeting, I asked one of the four, “I grew up in a small town in Texas. I wonder how our childhoods differed. Can you describe the house you grew up in?” The conversation at the table

InsuranceNewsNet Magazine » October 2013

stopped and everyone listened to his answer. I followed by asking him to name and describe someone who had a major impact on him growing up. Then I asked what qualities that person possessed that impacted him. When he was done speaking, I asked those at the table to tell me what the man’s core values were. They named all eight of his core values. I asked the man if at any time during our conversation he felt uncomfortable. His answer was, “No.” He said he felt energized by sharing his childhood experiences. When you ask questions, listen for the qualities the client identifies in the people they describe. The values you recognize in others are the values you possess. By asking a simple question and listening intentionally, you can learn much about your client and prospect. Having these types of conversations, especially with your high-net-worth clients, will help put all parties at ease. Rather than fearing the big cases, focus on the potential that comes with them and the opportunity to expand your expertise. Thomas E. Fowler, CLU, LUTCF, is the president of The Fowler Group, Bellevue, Wash. He has more than 40 years of experience assisting owners of closely held and family-owned companies with their estate and business planning. He is a 24-year member of the Million Dollar Round Table (MDRT) with three Top of the Table and nine Court of the Table qualifications. Contact him at Thomas.


Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every Congressional district in the United States.

Build Trust With Female Prospects S  tart by finding a common point of interest, focusing on benefits and staying in touch. By Jennifer Alford


ou’ve heard it before: Women make 85 percent of a household’s decisions. Yet presenting financial services to a woman in the same fashion as you would present to a man is a grave mistake financial planners make every day. Why? Women think differently from men. Women listen differently. And they make decisions based, in part, on how they feel. Selling to women is all about trust. Without trust, they won’t buy from you or give you referrals. It’s that simple. Here are five quick tips for building trust with the women you meet.

1 Find the CPI (Common Point of Interest).

There is an old saying that you have two ears and one mouth, so use them accordingly. This is especially true when meeting with women. A woman will tell you her story but you must be willing to listen actively. Be sure to nod your head, draw her out and confirm what you’ve learned. Pay special attention to what she leads with – her business or her family. This will provide you with a clue to what’s most important to her and help you understand the type of woman she is – entrepreneurial or family-oriented. The entrepreneurial woman is similar to you. She wants the information distilled and presented clearly. She wants to understand the gains and any risks, and she’s not afraid of pulling the trigger. When dealing with the family-oriented woman, you’ll want to make sure you listen carefully to what she says. What are her fears? What does security mean to her? What can you do to help? CAUTION: Understanding her body language is the key. Women can give off false positives when listening to a salesman. She may be nodding and even half smiling at you, but 90 per-

cent of the time, she’s not engaged in the conversation. Instead, she’s likely to be thinking “Geez, this guy has gone on for over 10 minutes and he hasn’t asked me what I think or what I feel. What a total jerk!” Women don’t like ego, they don’t like sales pitches and they don’t like it when men don’t take them seriously. SOLUTION: Engage her in the conversation. Find out her interests and hobbies. This will provide you with a solid relationship down the road.

2 Focus on the benefit, not the products.

At the end of the day, women want the same thing that men do with regard to their finances. They want to be assured they will be financially independent.

Men present solutions very well. But that’s not what women are interested in. Becoming “rich” is nice, but the meaning of being “rich” is what women truly want. Tell her that her kids can afford to go to college, or the family can take a vacation each year, or that she can leave a legacy for her grandkids, or that she and her husband can afford to retire without having to sacrifice their lifestyle. The goal in asking questions is to understand the family’s financial goals and dreams, as well as to validate her feelings and concerns. Continue asking questions until you have a clear understanding of what she wants. Then show her you fully understand those needs by repeating what she’s shared with you.

3 Never, ever scare them.

Women don’t buy on fear. When you present a solution to a woman, focus on what that solution will do for her and how much better she will feel when that issue is taken care of. CAUTION: It’s going to be very easy for you to present solutions. This is what men do marvelously. But that’s not what she’s interested in. She’s looking for a teammate to help her find the solution, not the go-to answer. SOLUTION: Draw her fears out and present different alternatives for her to consider. Ask more questions to clarify her thoughts and feelings.

4 Keep the communication flowing.

Keep in touch with women throughout the year by systemizing your communication. It’s no mystery that everyone wants to feel important. Send a review letter, a holiday card or a newsletter. It doesn’t matter what you send as long as your client feels valued. Remember the CPI that was first established? You learned her interests and hobbies. If you know she loves flowers, then make sure her birthday card has flowers on it. Don’t send the same sailboat card that you send to everyone else. Your thoughtfulness will prove to her that she matters “as a person” first and as a customer second. This will cement the trust she’s placing in you.

5 Unlock the referral power.

“Marketing Goddess” Rebecca Booth, an expert in marketing to women, said, “Female clients will refer up to 28 people if they are happy with their experience with you. Men, on the other hand, will average 13 referrals.” Jennifer Alford is financial advisor and vice president of Creative Financial Partners in Perrysburg, Ohio. She is vice president of NAIFA-Ohio and was one of the recipients of NAIFA’s Advisor Today Four Under 40 Awards in 2006. Contact her at

October 2013 » InsuranceNewsNet Magazine


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


Knowledge Plus Action Equals Retirement Security U  nderstanding and managing the risks to a secure retirement can be overwhelming for many workers. By Alison Salka


etirement security – the Holy Grail to millions of workers – usually is defined as living comfortably and having no financial worries. To get there, though, workers need to “worry” about a variety of issues. They need to decide how much to save, how and where to invest, and how to generate income from savings at retirement. They also need to manage a variety of risks such as longevity risk, market risk, inflation risk and health risk. Moreover, many workers aren’t even aware of all the risks they face. Understanding these risks, much less managing them, can be overwhelming. Earlier this year, LIMRA quizzed more than 1,800 household decision makers about their financial literacy. They were asked a series of 10 questions on finances and retirement. Half of the questions were true/false, so respondents had a fifty-fifty chance of picking the right answer. One in five people who took the quiz got fewer than five answers correct. We also asked people to rate their financial literacy. Some were asked before they took the quiz and others were asked afterward. Not surprisingly, people’s assessment of their financial literacy tended to be lower if they rated themselves after they took the quiz. This suggests that people may generally overestimate their literacy, which is a bit scary if they described themselves as “not very knowledgeable” or “not at all knowledgeable” about investments and financial products when not quizzed. So where are people acquiring their knowledge? The most common response is that people teach themselves. The next most common response is that they obtain information from par62

ents and family. Anyone who has ever received “hot tips” from Uncle Larry knows that family may not be the best source of information. A little more than one in 10 said they had some formal training, such as a class or seminar. Men, those under age 35, those with higher incomes and people with a college education were more likely to have had some formal training. Those age 55 and over and those with higher incomes are more likely to have received education from a financial professional. At least most professionals have standards and designations, unlike Uncle Larry. Many recognize the need to be better informed. When asked where they think more education is needed, generating retirement income was the most common topic identified. Those with lower incomes tend to be more interested in education on how and where to save, budgeting, and managing debt. Those under age 34 expressed a greater need for financial education overall. Given that they are the generation coming of age in a tough job environment and likely to be without a defined benefit pension plan, education for this group is critically important. Acquiring knowledge is necessary, but putting it into an action plan is also essential. The study found that almost three quarters have taken at least one step to plan for a secure retirement. The most common step for those working full time was to contribute to an employer-sponsored retirement plan. Not surprisingly, those over age 55 have taken

InsuranceNewsNet Magazine » October 2013

more planning steps. They are more apt to have calculated their likely income, discussed planning with a professional, reviewed their asset allocation and determined what their expenses will be in retirement. While these are all positive actions, it is still discouraging that fully a quarter of those over age 55 have taken no steps at all. Even when you know what actions to take, intentions easily can be derailed by things like inertia and cognitive biases that lead to investing mistakes. Tools like automatic enrollment in a defined contribution plan are excellent, effective ways to get people saving and investing appropriately. LIMRA also polled current retirees for their best advice to achieve a secure retirement. Their answers focused on four central themes: saving, planning, paying off debt and managing money wisely. These are not stunning revelations, but affirmations of what we know to be good practices. The best advice is often simple, like that of the retiree who summed up her advice in three words: “Save! Save! Save!” Alison Salka is responsible for directing LIMRA’s retirement research program. She supervises and conducts consumer research, benchmark studies and white papers focused on helping member companies better understand issues and trends in the retirement market. Contact Alison at Alison.Salka@


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Clients Still Best Served by Advice over Search Your professionalism and your concern for the client are worth far more than any discounts offered online. By Larry Barton


ne of my favorite quotes from W.C. Fields is: “I was miserable when I lost my corkscrew. I had to survive for a week on only food and water.” Right now, surviving has never been more important – for you and your clients. The property and casualty world has seen such a dramatic and important series of changes in recent years – the most notable being the rise of the online quote and service center. Although this constitutes a real “disrupter” to the traditional carriers, the reality is that these companies often provide sound products at lower prices. The consumer is stronger when diversity exists. Now, even the traditional brick-and-mortar agencies have learned to adapt to 24/7 online quotes and service. Who can argue that the world of P/C is not better served with more competitors who forced a conventional industry to change to a new world? Although we may never know their names or situations, just imagine back to the mid-1990s and the executives who sat around ornate conference tables and scoffed at the possibility that Geico or Progressive could become formidable players in the industry. So will life agents be similarly disrupted by the savvy marketing skills of those who eroded the market share of the large P/C carriers? Let’s look at the life insurance industry today. You can find online quotes for a wide array of life products, and it is worth taking 30 minutes to look at some of the sites where products and carriers are compared in depth. Having this competitive intelligence is what smart agents must do if they want to understand the mindset of potential clients. 64

Thus far, a decade of aggressive online quote and service providers suggests a modest to low impact from these companies. Research conducted by The American College, LIMRA and other organizations shows the abiding and strong appeal of term products as opposed to whole life and hybrid products, mostly because of affordability. However, when you have the opportunity to speak with a client who has already “scouted” the web for “cheaper” products, here are a few questions to ask in order to help elevate your professionalism and sales: [1] Do you know the credentials of the agent you spoke with on the phone? Do they have any designations from an accredited institution? [2] Did you ask the agent if they will provide a photo so that you have a reference point? (Most online/service center agents refuse to do this.) [3] Did you ask the agent if they have any pending complaints or issues with their state insurance commissioner or Better Business Bureau? [4] Did you ask the agent what the cash value of the policy will be at the end of the term period? (Many clients will be genuinely surprised by this answer, validating that some have absolutely no idea what they are buying, other than perceived peace of mind.) [5] Did you ask the agent for references in your hometown with names and numbers? (Listen carefully to their answer, which is typically: “We cannot do that because of privacy policies.” A great come-back response for you may be: “With a local agent such as me, you will see me at church or find me at Starbucks or the Rotary Club. I live here, my kids were raised here. That access, when you need it, makes a real difference.”)

InsuranceNewsNet Magazine » October 2013

[6] Did you ask the agent about their client retention rate? (Again, listen carefully. The agent may not fully understand the question because retention was mentioned only during their orientation. You may have to explain to the client why client retention speaks volumes as to policy satisfaction and personal attention.) [7] Did you ask the agent who will present the check to the survivors in the event of death and how long would it take for this to be processed? The power of an ethical, client-centric practice begins and ends with the fact that you are known, visible, engaged in your community, and ready to help every client at every stage in their need for financial and insurance products. No one has the capacity to present this case more effectively than you. Here’s your homework: call some of these companies and try asking a few of these seven questions. I suspect you will be able to identify at least seven more great questions. Then consider sharing your findings with those who work in your agency. Like you, I order products online and love a bargain. Like you, I’ll shop competitively to try to maximize savings. But there are a few products – and you sell one of them – that buying on the web can never, ever take the place of buying from a professional who cares. Be proud of it. Do your research – and prosper! Larry Barton, Ph.D., CAP, is president, CEO of The American College and holder of the O. Alfred Granum Chair in Management at The American College, based in Bryn Mawr, PA. Contact Larry Barton at Larry.

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