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First came Lightning Issue Term™, a product agents can literally sell in their sleep. They simply get a custom link, post it on their website, and do absolutely nothing while consumers apply online, get lightning-fast approval and receive their policy, which is mailed within 48 hours. Plus, it’s got some incredible features, including: • Issue age up to 65 (up to $100K) • A-rated carrier • Great commissions • 10, 20 and 30 years of guaranteed term coverage • Only three health questions

• Premiums payable by credit card or checking account • Comes with up to one year free scholarship for any family member • Double-digit lifetime renewals



While Lightning Issue Term was a big hit with agents and consumers alike, agents began asking for something even better: a level term product to sell the same effortless way. They asked and Levinson & Associates answered with Lightning Level Term. Again, it’s consumer driven, with lightning-fast approval and policies mailed within 48 hours. Features include: • Issue ages 18-65 (up to $150K) • A-rated carrier • 20 years of guaranteed level term coverage, with convertibility option • Premiums payable by credit card or checking account

• Only three health questions • Comes with up to one year free scholarship for any family member • Even more first-year commission + double digit renewal

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ABOUT THE COVER: Bill and Cary Levinson suggested the Boca Raton Resort as the site for their cover shoot because it’s where they’ll be hosting the annual Levinson Expo in the future. Read the full story of how they grew their company and how they help agents reach the Million Dollar Round Table on page 14.

WHAT MAKES CLIENTS PUT MORE INTO IUL Breakthrough video shows how to get IUL clients asking, “Can I put more money into this?”

A new 7-minute online video reveals how agents show their prospects a $1.7 million advantage of indexed universal life. You’ll be blown away by how easy the close is, but the close is only the beginning. • North Carolina agent Boyd sold to a CPA who then referred several physicians. »» Boyd said, “People are asking, ‘Can I put MORE money into this?’” • Florida agent Jim sold to a physician who emailed him the day after his IUL purchase, saying, “I must have been asleep at the wheel. We’ve got to double the amount that we’re putting in.” »» He went on to refer his wife and his physician business partner.


(At 3½ minutes in, you’ll see the proof for yourself!)

A discussion on the issues and where tradition meets 2016 This Year's ACA Season Finds Higher Premiums, Fewer Carriers


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View and share the articles from this month’s issue

» read it



FEATURES 24 When Party Lines Crisscross: A Discussion on the Issues and Where Tradition Meets 2016 By John Hilton

Observers can’t rely on the usual partyline thinking, as the 2016 presidential campaign and election are set to break all the usual rules.

32 How Principals Prepare for Takeoff By Cyril Tuohy

Principals preparing their agency for sale before they retire should be ramping up instead of dialing down.


10 This Year’s ACA Season Finds Higher Premiums, Fewer Carriers By Susan Rupe A look at what’s on the horizon as another open enrollment season begins Nov. 1.

42 To Age 100 — And Beyond! Life Insurance for a Lifetime By Palmer Williams The most important day for clients to have their life insurance in force is the day that they die. Proper care and diligence during policy reviews can make sure that happens no matter how long they live.


18 Marketing With Audacity

An interview with Stu Heinecke Getting past the gatekeeper is one of the biggest challenges faced by anyone in sales. Stu Heinecke, author of How to Get a Meeting With Anyone, tells InsuranceNewsNet Publisher Paul Feldman how the right use of humor can open the gate.


38 Match the Right Permanent Insurance With the Right Needs


46 F IA Supervision Under Fiduciary Rule: ‘Suitability on Steroids’

By Richard M. Weber A custom-designed portfolio begins with insuring the client’s core needs with convertible term and participating whole life. 2

InsuranceNewsNet Magazine » October 2016

By Cyril Tuohy Agents can expect those new frameworks to be more rigid and require stiffer due diligence.


54 H  ow We Lost Only 0.4% of Our Clients to Competitors Last Year By Elie Harriett Prospects don’t need us, and a lot of them know it. We figured this out and changed our strategy because of it.

60 How Advisors Can Capitalize on the Crowdfunding Boom By Dayne Roseman Alternative investments are set to be the most popular asset class in the coming years, but investors need professional advice to take advantage of the opportunities offered by this class.

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The principal underwriter is GWFS Equities, Inc., and securities, when offered, are offered through GWFS Equities, Inc. and/or other broker-dealers. GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Great-West Financial® refers to products and services provided by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York (GWL&A of NY), Home Office: NY, NY; and their subsidiaries and affiliates. The trademarks, logos, service marks and design elements used are owned by GWL&A. (8/16) PT269828 FOR BROKER/ADVISOR USE ONLY. Not for use with the public.

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64 MDRT: 8 Strategies to Maximize Your Clients’ Charitable Giving By Brett Sause How to work with your clients to develop a plan for their charitable giving that aligns with their financial goals and overall wealth management

66 THE AMERICAN COLLEGE: Helping Clients Make Good Choices By Julie A. Ragatz A lack of advisor and client education prevents advisors from making good recommendations.

68 L IMRA: Advisors Don’t Always Practice What They Preach By Laura A. Murach Many advisors admit they lack the knowledge and understanding of how to build their own business succession plan.

65 NAIFA: 5 Things to Do Today to Guarantee Success in 2017 By J. Leland “Lee” Davis A person who is 100 percent committed to a result is an awesome force of nature.

EVERY ISSUE 6 Editor’s Letter 22 NewsWires

36 LifeWires 44 AnnuityWires

50 Health/Benefits Wires 58 AdvisorNews Wires


3500 Market Street, Suite 202, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton SENIOR WRITER Cyril Tuohy VP FINANCES AND OPERATIONS David Kefford VP MARKETING Katie Frazier CREATIVE STRATEGIST Christina I. Keith AD COPYWRITER John Muscarello CREATIVE DIRECTOR Jacob Haas GRAPHIC DESIGNER Bernard Uhden


Copyright 2016 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 3500 Market Street, Suite 202, Camp Hill, PA 17011, fax 866-381-8630 or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, Ext. 115, or 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, 3500 Market Street, Suite 202, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

Shawn McMillion Sharon Brtalik Joaquin Tuazon Kevin Crider Tim Mader Brian Henderson Emily Cramer Ashley McHugh Darla Eager Yuelin Lai

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 express 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 inauthenticity of, the information published herein.

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Unparalleled Lines


ne is a secretive hawk with a somewhat dour, awkward demeanor. The other is a shootfrom-the-hip opportunist who vacillates on issues in order to have the greatest effect on a crowd or a deal. In the realm of presidents, that might describe Richard Nixon and Bill Clinton. But in our current election, those descriptions also would fit Hillary Clinton and Donald Trump. That crazy crisscross was one of the fascinating aspects of the election identified by pundits Michael Lewan and Frank Donatelli during a discussion with Senior Editor John Hilton and me. An edited version of the conversation is one of the features in this month’s magazine. The pair alluded to the unusual circumstance that voters cannot reliably expect the stereotypical party lines from the candidates. But I filled in a couple of details in the description above. I added the Nixon reference because I am writing this on the Monday after it was disclosed that Hillary Clinton left a Sept. 11 commemoration after falling ill. The campaign was slow to acknowledge that she had pneumonia. That reluctance to reveal is a common criticism of her and of the Clintons in general. They hide information until they feel sufficient pressure to disclose. Then the disclosure itself is not as damaging as the lack of transparency. That sounds a lot like Nixon. The cover-up is what got him into the most trouble. Other aspects of Clinton’s history sound like what you would expect from a Republican. She leans toward hawkish positions. Clinton was principally responsible for bombing Libya and pushing Moammar Gadhafi out of power. Then Donald Trump sounds more like a Democrat, criticizing not only the Libyan intervention but also Clinton’s vote authorizing former President George W. Bush to use military force as a last resort in Iraq. Trump also admires Russian president Vladimir Putin’s bombing of Syria and invasion of Crimea. So it is difficult to know exactly what Trump would do on the international stage. Really on any stage, for that matter. Unpredictability is one of his intriguing 6

characteristics, but it is not what you expect of Republicans, who are usually proud of their unwavering devotion to plainly-articulated principles.

Money Matters

Turning to finance and insurance, you find other surprises. Here we have a Democrat who has become really cozy with Wall Streeters. And then we have a Republican calling for restoring the Glass-Steagall Act, a Depression-era regulation that hemmed in banks and securities firms until replaced by the Gramm-Leach-Bliley Act in 1999. Gramm-Leach-Bliley, proposed by three Republican legislators and signed by Democratic president Bill Clinton, loosened many of the restrictions and has been blamed for some of the conditions that led to the 2008 economic collapse. Trump also supports scrapping the estate tax, which is not great for high-net-worth life insurance strategies but aligns with the anti-tax tendencies of Republicans. Clinton wants to lower the exemption and raise the rate, which would broaden opportunity for life insurance sales. The candidates fall within the party lines on other tax issues as well. Trump wants to reduce the number of brackets and lower the rates. Clinton wants to raise rates on the top 1 percent. On the fiduciary rule, Clinton favors the Department of Labor’s conflict of interest regulation. The Sen. Elizabeth Warren wing of the Democratic party and Bernie Sanders supporters would likely rebel if she did not support the rule. Trump has not stated his position on the rule, but it is surmised that he would not support it. He certainly is not a fan of regulation or regulators. But even so, it would be unlikely that he could do much to remove the rule once it has gone into effect and the financial and insurance industries have realigned to comply with it.

ACA Repeal? Reform?

Both candidates advocate substantial changes to the Affordable Care Act, which

InsuranceNewsNet Magazine » October 2016

many would agree needs extensive repair at least. Trump called for repealing the ACA and deferring to Congress for a replacement. If Trump is elected, this is probably one of the surest outcomes. That’s because if he is elected, voters would also likely vote to retain Republican control of the Senate and House. In that case, the likely ACA replacement would be a version of House Speaker Paul Ryan’s proposal. That entails decreasing regulation and offering assistance through policies such as tax credits. Clinton has said she would keep the ACA but called for substantial changes, such as extending Medicare to people 55 and older. If she faces a Republican Senate and House, Clinton’s proposal is unlikely to get very far. Most peg Clinton as essentially a moderate Democrat on regulations and financial matters. It is not so clear where Trump falls on the spectrum. It is even difficult to say that he would be a hard-liner on immigration, given his moderating statements. Stability is usually the province of Republicans, but their candidate cannot be described as steady. And reform is often associated with Democrats, but many liberals suspect their candidate leans conservative on many of their prominent issues. As we look toward the expanse between now and Election Day, the only prediction that we can assuredly make is that we will be in for more surprises, comebacks and plummets. And that the outcome will be one for the history books. Steven A. Morelli Editor-In-Chief

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This Year’s ACA Season Finds Higher Premiums, Fewer Carriers  he Obama administration T makes one last push for enrollment as a new sign-up season begins one week before the presidential election.

“One of our most important tasks is to continue to build a strong health insurance marketplace.”

By Susan Rupe


t should be old news by now — another open enrollment season for health insurance is on its way. But each year seems to bring a whole new set of problems, and this one is no exception. Nov. 1 marks the fourth time in which the exchanges will open for business to mark the start of another enrollment season under the Affordable Care Act (ACA). In some ways, this next enrollment period should be a little easier than those of previous years. For one thing, many of the technological problems that plagued the first enrollment seasons have been ironed out over the years. Those who sell health insurance have the benefit of three years of experience negotiating the ins and outs of the system. And 11 million Americans already have purchased coverage on the exchanges since the ACA took effect, according to the U.S. Department of Health and Human Services (HHS). But an estimated 24 million working-age adults still are uninsured, according to a Commonwealth Fund report. Of this group, 88 percent is made up of racial or ethnic minorities, young adults under age 35, those who are low-income but live in states where Medicaid was not expanded, and those who work for small businesses that do not provide health coverage. The Obama administration is spending its waning days making one last push to get people covered. An ad campaign will target young adults who were hit with tax penalties for the first time this year for failing to have coverage. But while the push is on to make the uninsured aware of the upcoming enrollment season, insurers are bailing out of the exchange business. Among the 10

Kevin Counihan, CEO, Centers for Medicare & Medicaid Services

top names to exit the ACA marketplace, Humana said it would scale back its exchange business, selling products on 11 state exchanges instead of the 15 states in which it did business last year; UnitedHealthcare announced it is retreating from all but three of the states in which it did business on the exchanges; and Aetna said it would do business in exchanges in 242 counties, down from the 778 counties last year. In addition, 16 of the 23 health insurance co-ops that were established under the ACA have shut their doors. The reasons? Higher-than-expected claims from policyholders who were older and

sicker than anticipated. Those who sell health insurance are dealing with their own challenges in trying to serve clients while seeing their commission income dwindle to almost nothing. But enough looking back at the ACA for now. What’s on the horizon as we enter a new enrollment year? Reduced competition in the marketplace. Between the exit of some big names from the marketplace and the demise of most of the co-ops, many consumers will have little to choose from when they attempt to shop for individual coverage.

While the push is on to make the uninsured aware of the upcoming enrollment season, insurers are bailing out of the exchange business.

InsuranceNewsNet Magazine » October 2016

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“The exchanges are a mess as they exist today.” Mark Bertolini, Aetna CEO One in four counties in the U.S. could have only one insurer in the marketplace when open enrollment begins, according to Kaiser Family Foundation research. Arizona and the Southeastern states will be especially hard-hit by the lack of competition, Kaiser reported. Premiums going up. Higher premiums dominated the health insurance news all summer. A Kaiser Family Foundation analysis indicated that costs for the most common plans are increasing faster in 2017 than in previous years in 16 cities. The cost of the second-lowest silver plan

increases of at least 10 percent. Saying good-bye to grandmother. So-called grandmothered health plans will be terminated on Dec. 31, 2017, under the ACA requirements. These “transitional” plans are not fully ACA-compliant and were purchased between 2010 and 2013 — between the time the ACA was signed into law and the time the exchanges opened for business. HHS is allowing grandmothered plans to continue to renew up until Oct. 1, 2017, but with a termination date no later than Dec. 31, 2017. The termination date of

Costs for most common plans are rising faster in 2017 than in previous years in 16 cities. will increase by about 9 percent, compared with 2 percent in 2016. And it’s not only the individual marketplace seeing these increases. An Arthur J. Gallagher & Co. survey of U.S. employers reports that 54 percent are paying at least 5 percent more for employee medical insurance this year, with nearly one in four suffering from 12

grandmothered plans will align with the open enrollment period for 2018 coverage. So instead of having grandmothered plans terminate at their first renewal date after Oct. 1, 2016, grandmothered plans will be eligible for renewal again until Oct. 1, 2017. But they must terminate by the end of 2017, regardless of their renewal date.

InsuranceNewsNet Magazine » October 2016

A few adjustments. The Obama administration proposed a series of fixes and adjustments to the ACA in late August. The draft regulation is 300 pages long, but here are some highlights. The administration proposes updating the health insurance marketplace's premium stabilization system — which includes the risk adjustment, reinsurance and risk corridor systems. The rule would make the risk adjustment formula more accurate by using prescription drug data as a source of information about enrollees’ health. The proposal also would add protection for insurers that have high-cost enrollees, with costs above $2 million for a single enrollee shared among insurers. The proposal would change the current five-year ban on companies returning to the health law's markets after they have left. The rule includes an attempt to make it easier for consumers to compare competing insurance plans, as well as a new method for calculating premiums for children, geared to avoiding large increases after a child turns 21. Limits would be put on "special enrollment periods" during which people can get coverage outside of the usual sign-up season. The future of these proposed changes could depend on the outcome of the presidential election. A win for Republican candidate Donald Trump could mean the proposal is dead before it can take effect. Trump has vowed to repeal and replace the health care law. Meanwhile, a victory for Democratic candidate Hillary Clinton could mean moving forward with the changes, as Clinton has committed to building on the current health care law and addressing its challenges. Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@

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An Innovation + Motivation Formula

That Drives Unprecedented Agent Success

Cary Levinson and Bill Levinson at the Boca Raton Resort & Club, site of future Levinson Expo.

Both Cary Levinson and his son, Bill Levinson, entered the insurance industry reluctantly, but now they lead one of the top IMOs in the country. In this Q&A, hear what warmed both men to the industry, how each contributed to the lightning-fast growth of Levinson & Associates and their very specific advice on how any agent can race to the top (of the “Table,” that is).

Q: Cary, why did you choose insurance as a career?

Cary: I began my insurance career in 1971. I had just moved to Florida as a newlywed and was desperate for a job. I had a degree – in psychology – but like so many others was unemployed. So I answered a newspaper ad for a management training position at Metropolitan Life and gladly accepted it because there was a $100-a-week salary for the first 13 weeks; I would then transition to commission only. I figured my life insurance career would last no longer than 13 weeks. The first policy I helped sell was a $10,000 endowment policy on a 38-year-old married man with two little girls. Three weeks after we delivered the policy, that client, Bob, was killed on I-95 on his way home from work. At that time, I was on my way out. I no more wanted to be an insurance man than the man on the moon. I wanted to work with my psychology and eventually become a psychiatrist. But the day that I delivered that $10,000 check to Bob’s widow changed my life forever. She said, “Because of you, Cary, I’m able to now stay in our home with our daughters.” Driving 14

InsuranceNewsNet Magazine » October 2016

home that night, I committed to staying in this business forever.

Cary: In those days, building an organization was contingent on personal relationships and seeing agents as often as possible. So I would go around the state of Florida and just spend time with my agents and bring them up to date on company and policy changes.

Bill: We went from two companies to over 30 practically overnight, with almost every product available. We subsequently noticed the start of a vast shift in technology. Cary: I’m somebody who, when I turn my computer on, if I see a light, I’m very happy. But Bill is constantly thinking about new ways to use technology to improve the level of success that our agents are experiencing, whether it’s a new CRM tool or an IUL sales program.

Q: Bill, how did you achieve success?

Q: What’s hot right now in new tech?

Q: How were you able to become successful?

Bill: I also didn’t set out to be in this business. But one day something just clicked, and I left a sales management position at a motorcycle dealership and came to work with my dad. This was 20 years ago, and at that time, the industry was making a major shift. Numerous carriers were getting acquired or going under. Since many IMOs had three or fewer carriers, these transitions cost them a third or more of their business. Cary: The first thing that Bill did was realize we needed to have additional representation of more companies, and that’s when we became a true brokerage agency.

Bill: What agents love this year is our IUL software, which includes all the tools, knowledge and presentation software needed to sell IUL. It’s an easy way for a typical term agent who’s never sold IUL to present a complicated product to a prospect without confusing them or confusing themselves. It visually compares the prospect’s existing investment product with IUL, showing premiums, differences in taxes and the death benefit – every single thing. And at the end, it’s clear. Cary: Nobody has to say a word, and 99 times out of 100 the IUL turns out to be a better investment for the client.


Bill: What’s also sizzling right now: Our exclusive mortgage protection lead program has literally doubled in size since last year. Also, we are launching a new, complete CRM tool, and it’s not just a CRM tool that everybody has heard of. It includes a lead generator. It’s a way to drive traffic to their websites and quote engines, which includes our extremely popular “Sell While You Sleep” products, Lightning Issue Term and the new Lightning Level Term.

Q: What has been the agent response to Levinson tech innovations?

Cary: The positive agent response is evidenced in our growth. Right now, our organization is growing at a phenomenal pace. Even my wife, Bill's mom, who is our office manager and my daughter, who works in licensing and contracting, are amazed at our level of activity. Before Bill came on board, we had about 300 agents. Now, we have more than 10,000 across the country.

Q: Cary, do you still prioritize interpersonal relationships?

Cary: We work to maintain our relationships with our agents and try to see as many of them as we can whenever we can. We have an annual meeting where we invite all of our agents to come to south Florida. It’s called the Levinson Expo. We don’t advertise the highest commission on the planet and then pat an agent on the back when he gets contracted with us and say, “Go get 'em, baby.” Our motto is we offer top compensation, a complete portfolio of products, an exclusive turn-key sales platform and unparalleled service.

Q: What do the agents have to bring to the table themselves in order to achieve great success?

Cary: The agents who achieve the levels of success they set for themselves are the ones who are motivated from within. You can’t be a part-time plumber and a successful life insurance agent. I don’t care if you’re in the business two months or 20 years – you have to make a full-fledged commitment. I think every agent who is truly a life insurance agent can take our tools, can take everything that we offer them, and combine it with a burning sense of enthusiasm and motivation, and become

a Million Dollar Round Table producer.

Q: What is the best motivation for an agent to have within?

Cary: Going back to what motivated me to live through doors being slammed in my face and being told to drop dead – what got me through all of that was Bob’s widow and those two little girls who were hugging me when I dropped off that $10,000 check. Of course I wanted to make more money and have a bigger house and more for my children. But what motivated me was I’m in the only business that gives to people when they need it the most, when everybody else tries to take from them. To this day that motivates me, and I believe that’s the kind of motivation that drives success.

Q: What do you love the most about seeing agents succeed?

Cary: I’ll sum it up like this, and I attribute this to Bill 100 percent. We have an agent who has had relative success in the insurance business for – well, actually longer than I have. He came to Bill one day and said, “A lot of my clients are no longer alive, but I’m getting calls from their kids and grandchildren, and I don’t know how to relate to them. Can you teach me, as if I were a 30-year-old agent coming into this business, how to be successful?” And Bill sat with him and he went through it all: how to use social media, how to work with millennials. When I see somebody transition from being that age and selling insurance the way he did for so many years to how he’s selling insurance now – very successfully I might add – that gives me the most satisfaction of anything in this business. Bill: To me, the most rewarding is seeing new agents, as well as agents who haven’t been successful in the past, come on board, listen to us, use our technology, tools and strategies and actually make it all the way to MDRT. That, to me, is the ultimate. Do you have the motivation to merge into the Levinson Fast Lane and leave your competition in the dust? Visit to access agent-favorite products and innovative marketing tools.


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October 2016 » InsuranceNewsNet Magazine


A n interview wit h

Stu H einecke by Paul Feldman , Pub




hen was the last time you called prospects and they thanked you for calling? Maybe they even asked when you could come in and see them? Never, maybe? Stu Heinecke has a method that he says can give you a 100 percent response rate. How? Through audacity. That means the kind of approach that gets prospects to say, “I just have to meet this person!” Stu does it through cartoons, because that is his special talent. He is a cartoonist for The Wall Street Journal and uses suitable-for-framing illustrations depicting his prospects, and gets the door thrown wide open for him. You are not a cartoonist, you say? Stu says in his book, How to Get a Meeting With Anyone, that you do not need a talent like that, but with some VIP cred and a clever device, you can get on any prospect’s calendar. In his book, he talks about how you can develop VIP credibility. But many insurance producers and financial advisors already have a high profile in their community. What they might not have is the surefire meeting-getter. In this interview with Publisher Paul Feldman, Stu tells how you can find your superpower to meet anyone. FELDMAN: How does a cartoonist end up writing a book about marketing? HEINECKE: Well, actually, I’m not just a cartoonist. I’m very proud of being a cartoonist and proud of being one of the Wall Street Journal cartoonists. But I’m also a marketer. When I started out, I was creating direct-mail campaigns, and I wanted to marry cartoons and personalization to direct marketing. One problem that I encountered was that David Ogilvy and his disciples were all

saying, “Don’t use humor. It doesn’t work.” Ogilvy had a lot of different things he said about humor, but it turned out that he changed his mind about it. He should have, because as I sat there in the audience listening to some of these experts talking, a lot of times they get on stage and they say, “Well, here are things you should avoid,” or, “Here are 10 things you should avoid (or 10 things you should do) to have a successful campaign.” And humor was always up there as something you should avoid. I’d think, “Gosh, these guys don’t understand it,” because I knew that cartoons were, according to readership surveys sent by magazines and newspapers, almost always the best read and remembered part of the magazines and newspapers. FELDMAN: Doesn’t humor help connect a salesperson to a prospect? HEINECKE: If you think about the nature of humor, humor is about truth being revealed in a twist, which is why when we laugh at something, we often find ourselves saying, “That’s so true.” There’s always some point of agreement, which makes them really powerful devices. That’s what I set out to do. My first two clients for creating direct-mail campaigns were Rolling Stone and Bon Appétit magazines. At the time they were doing a lot of direct mail to either acquire new customers or get them to renew. They were relentless and very sophisticated direct marketers and testers. My first two times out, I set the record for Bon Appétit and Rolling Stone. FELDMAN: That’s pretty impressive. How did you build on that success? HEINECKE: I thought, “Well, OK, now I want to spread this to the rest of the

publishing industry.” That meant I needed to reach about two dozen VPs and directors of circulation or consumer marketing at the big Manhattan-based media houses. I knew it was going to be a little bit of an interesting challenge. One percent seems to be the number quoted by so many people saying, “Well, if you get a 1 percent response rate to a direct-mail campaign, you’re doing really well.” That’s the standard. There actually is no such number, but if I applied it to my campaign to these 24, it would be a disaster even if I got a 10 percent response rate. I thought, “I need to hit 100 percent,” even though I was told that 100 percent response rates were impossible. My contact campaign was a suitablefor-framing, 8-by-10 print of a cartoon about each recipient, each of the VIP prospects I was going after. Then included was a letter that said, “This is the device I just used to create direct-mail campaigns that set records for Rolling Stone and Bon Appétit, and I think we should put this to the test for your titles.” I reached all of them, a 100 percent response rate. Not only did I reach all of them, but all of them became clients. So, it was worth millions of dollars to me, and it stemmed from a campaign that cost me less than $100. I consider that to be the nature of contact marketing, because I went out to a very small audience. When that happened, I thought, “Well, that’s really interesting. How far can I go? Who else can I reach by sending these cartoons around?” I ended up reaching a couple of presidents, a prime minister, celebrities, and just really countless CEOs and top decisionmakers. In fact, it came to the point where I thought, “I have a secret weapon. I can break through to anyone.” I finally came across this one format that I really, really liked, which is what I call a Big Board. It’s an 18-by-24-inch, quarterinch-thick, really tough foam-core board. It’s a giant version of a postcard we sent through the mail many, many times in campaigns. Then on the other side is all the branding and a message from the sender to the recipient, explaining who the sender is and why a meeting or a phone call should take place.

October 2016 » InsuranceNewsNet Magazine


Excerpted from How to Get a Meeting with Anyone byHow Stu Heinecke. Excerpted from to Get a Meeting with Anyone


Excerpted from How to Get a Meeting with Anyone Stu Heinecke. Excerptedbyfrom How to Get a Meeting with Anyone

by Stu Heinecke.

That sounds like a lot of FELDMAN: Have you worked with insurfun. Yeah, I’ll make sure ance companies? that he gets it.” Then as soon as HEINECKE: I should share this one story we’ve concluded, I with the test that we ran for a Fortune send an email saying, 300 company. They were selling through “Thank you for your producers that sell a lot of lines of inhelp. Again, this is who surance. And the producers really didn’t I am, and I’m sending want to talk to the company’s reps when this cartoon print to they called. your boss. You should They would say, “Look, I know what expect it on Friday, and you guys do, and if I need something like I will send you a track- that, I’ll let you know. Don’t call me — I’ll ing number as soon as I call you.” have it. Thank you again We put together a test of 30 Big Boards so much for your help.” to producers. These were producers with Then I turn around whom they either didn’t have relationships and I send a greeting card or had dormant relationships. with a cartoon about the Producers were sending selfies with their assistant straight away to Big Boards back to the company and lots and the assistant, with a note lots of thank-you notes and lots of lunches inside saying, “Barbara, together. Basically a lot of open doors. thank you so much for So within the first three months afyour help on the phone. I ter those hit, the company saw about a greatly appreciate it.” 20,000 percent ROI. But because those FELDMAN: You useHow your to get with Anyone I have a little extra benefit in thatfrom whenHow I to areGet producer relationships, they continue Excerpted from to system Get a Meeting Excerpted a Meeting with Anyone executive assistantsbytoStu help you. How sign the card, it’s actually my cartoonist au-by Stu to produce to this day. I have no idea what Heinecke. Heinecke. do you do that? tograph. The signature inside matches the the ROI actually ended up being. signature on the artwork, and that’s kind of Excerpted from a Meeting with Anyone Excerpted from How toIfGet a Meeting with HEINECKE: I know thatHow a lotto ofGet salespeoa nice effect. FELDMAN: somebody’s not aAnyone carStumy Heinecke. Appeared originally Stulooking Heinecke. ple say,by“Oh God, executive assistants, I in The Wall Street toonistbyand for something creSyndicate. hate ’em.Journal, They’re permission gatekeepers.”Cartoon Features FELDMAN: That process has to be a hit ative to send in the mail, you suggested Salespeople spend a lot of time thinking with the executive assistant. using visual metaphors. What are visual about how they can circumvent the gatemetaphors? keepers. But actually, executive assistants HEINECKE: Yes. My whole goal with are critical parts of these contact cam- the executive assistants is to turn them HEINECKE: Visual metaphors fall into a paigns. You really want those assistants on into allies. larger category of gifts. your side. We should be allies Here is what the scripting sounds like because part of their when we’re using a Big Board to reach out job is to find important to someone of great importance. I call up opportunities that their and ask for the executive assistant to the boss might have otherpresident of whoever it is I’m reaching out wise missed. Certainly, to. It’s usually a her. their job is to keep the So when I get her on the line, I say, “Hi, wrong people out, but my name is Stu Heinecke. I’m one of the it’s also to let the right Wall Street Journal cartoonists, a Hall people in. of Fame-nominated marketer, and I am I think of them as sending a print of one of my cartoons. The talent scouts or VPs cartoon is about your boss. While I want it of access. If you think to be a surprise to him, I don’t want it to be about it, they really are a surprise to you. So that’s why I’m reach- sort of stealth VPs. If ing out to you. Would you mind if I send they’re the executive you an email with these details? Of course assistant to the CEO, when I have a tracking number, I’d like to their work is more vissendExcerpted that to you as well. ible to the CEO than Excerpted from How to Get a Meeting with Anyone from How” to Get a Meeting with Anyone by Stu“Oh Heinecke. They’re usually saying, my gosh, the rest of the C-suite by Stu Heinecke. Appeared originally in The Wall Street Journal, permission Cartoon Features Syndicate. yes. Thank you so much. That’s wonderful. members’ work is. 18

InsuranceNewsNet Magazine » October 2016

Excerpted from How to Get a Meeting with Anyone

Excerpted from How to Get a Meeting with Anyone



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Any call to a CEO should be preceded by a few hours’ research to understand their world, issues and goals. When speaking with a CEO, you must have a clear objective for your call. If you’re seeking a meeting, why is it beneficial to the CEO, whom should attend and what will they gain? If you are proposing a strategic partnership, what’s in it for the CEO? What’s involved? R  equesting a referral is one of the most effective ways to get the CEO to listen to your reason for calling. Top-down referrals produce several advantages, which can be your shortcut to new deals.  When speaking with the CEO, make sure you get to the point quickly. How is it relevant to their situation, and how will it provide unique value to their enterprise? Never tell the CEO you already know there is a fit between their needs and your solution; always ask to explore whether there is a fit or not. People will be more engaged in calls that are informative and collaborative, rather than pitch-oriented, which can greatly improve your chances for a successful outcome. When speaking with the CEO, appreciate the value of the time they’re spending with you by not wasting it. You’re not in charge of the brevity of your call; the CEO is. A successful call with a CEO will be surprisingly short; an unsuccessful one will be even shorter. Never exit a meeting with a CEO without a specific set of next steps to carry your initiative forward.

Excerpted from How to Get a Meeting With Anyone


InsuranceNewsNet Magazine » October 2016

There are a lot of gifts that you can send. You can send cupcakes or food or sports memorabilia. The list goes on and on. And then there are interesting kinds of gifts, subcategories of gifts. People sometimes like to send half of a gift. So that would be like sending the left shoe of a really nice pair of shoes that’s actually the right size. It requires a little bit of help from the executive assistant to do that. You send the left shoe with a note that says, “I’d like to get my foot in the door and meet with you about this. When we meet, I’ll bring the other shoe.” Or it could be that they send a remote-controlled model of a Ferrari, but without the remote control. “I’ll bring the remote control unit in when we meet.” Those kinds of things. Sellers do report successful meetings by doing that, but I don’t think there’s a highest form of giving a gift. I think the highest form is using visual metaphors. They are gifts, but they’re really visual demonstrations of the value you bring or the — or maybe the problem that you want to help them solve. FELDMAN: What’s an example of a visual metaphor? HEINECKE: One of my favorite stories was from Dan Waldschmidt, who is a turnaround specialist. Well, Dan is not just a turnaround specialist, but he’s also one of the top sales bloggers in the world. His blog is called EDGY Conversations. He’s also a best-selling author with his book, EDGY Conversations. He’s an extreme athlete. He runs 100-mile races and wins. He’s an amazing guy. He described to me his method for finding new clients and new prospects for his turnaround services. He combs business news every morning, looking for stories of missed earnings estimates. When he finds one, he has this beautiful sword made up. They’re huge. They’re life-size, medieval swords made by the prop-maker who made all the swords for the movie Gladiator.

Excerpted from How to Get a Meeting with Anyone by Stu Heinecke.

Excerpted from How to Get a Meeting with Anyone by Stu Heinecke. MARKETING WITH AUDACITY INTERVIEW

Then he signs his name HEINECKE: Are you familiar with the and puts his phone num- Hoberman sphere? It’s a child’s toy that’s a Excerpted from How to Get a Meeting with Anyone How a Meeting with Excerpte ber in. Excerpted That’s it. from There’s noto Get sphere made up of Anyone a bunch of plastic piecby Stu Heinecke. by Stu Heinecke. Appeared originally in The Wall Street branding. It costs him $1,000 es that are hinged together. You pull on Journal, permission Cartoon Features Syndicate. apiece to do this. I love the any two points and that sphere expands audacity of all this. like crazy. He reports that he’s getI use that one as a visual metaphor beting essentially a 100 per- cause I want to tell people, “If you pull on cent response rate with any two points, that’s exactly what conthose swords, which is not to tact marketing does for your business. It say that he sells to everyone doesn’t take more than two contact points that he breaks through to. and a little bit of pressure on the sphere, Obviously that’s not the case and suddenly the scale just goes up drain selling anyway. matically.” But when he does sell, his It illustrates a central point of truth exassignments are worth $1 actly the way cartoons do. million and up. So he can afford to send a $1,000 item to FELDMAN: The contact marketing techseveral people and still have niques are infused with that audacity, it pay off quite well. So that’s and that makes them memorable. They a great example. talk about it to other people. Do you see this working on the insurance proFELDMAN: That’s a great ducer level? example of a high-end campaign for large con- HEINECKE: The last thing people want to tracts. What about more do is take a call from an insurance salesmodest campaigns? person and have their insurance reviewed. It’s kind of like, “Yeah, come on over and Excerpted Howreally to Get a Meeting withHEINECKE: Anyone Excerpted tome Geta aroot Meeting So they’refrom beautiful, well done. I’m designing new from cam-How give canal.” with Anyone byCEO’s Stu Heinecke. Heinecke. Then he has the name engraved paigns for clients right now. One of by Stu They’re not sitting there waiting to do on the sword along with an inscription: “If them is a box that has five metal spin- that. That’s not true of just insurance salesyou’re not all in, you’re not in at all,” which ning tops, and the letter says, “Quick, people. That’s just true of salespeople in from How to Get a Meeting with Anyone How to Get a Meeting with Excerpte isExcerpted one of Dan’s sayings. see if you can get allExcerpted five topsfrom spinning general. People areAnyone not waiting. They’re Stua Heinecke. This gets placedby into beautiful wood- and keep them spinning during by theStu Heinecke. not sitting there waiting to be pitched. en box with a handwritten note that says, time it takes to read this letter.” They don’t want to do that. “Business is war, and I noticed you lost a I think that’s a great metaphor for what So your challenge as a seller is not only battle recently. I just wanted to let you sales managers are going through be- to break through to them, but how do you know that if you ever need a few extra cause they’re always trying to keep those humanize yourself? How do you become hands in battle, we’ve got your back.” salespeople spinning. They’re always fall- a person of interest to the person on the ing over and always falling other end of all this? off the table. It’s a lot of just When we do this, what I really want to detail work to keep them have happen on the other end is to have going. the recipient say, “Man, I love the way this So what a great way to person thinks. Wow, I have to meet this say, “Do you find yourself person. I just want him to infuse this kind too busy managing your of thinking into our business.” sales team? I’ve got a soluThat’s a far cry from what usually haption I’d like to talk to you pens when you call cold and you say, “Hi, about.” have you been thinking about your insurI think at that point ance today?” they’re saying, “God, yeah, this is exactly what it’s like.” Find out more about Stu and That’s what a visual meta- get a sneak preview of How to phor is. Get a Meeting With Anyone at FELDMAN: Are there any visual metaphors that you use?

October 2016 » InsuranceNewsNet Magazine

Excerpted from How to Get a Meeting with Anyone

Excerpted from How to Get a Meeting with Anyone




Sharp Questioning Opens First of Three DOL Cases If the questioning from the first judge to consider an injunction against the JUDGE RANDOLPH D. MOSS Photo: Diego M. Radzinschi/NLJ Department of Labor’s fiduciary rule is any measure, the chances don’t look great for a stay. The federal district court in Washington, D.C., heard arguments in the first of three lawsuits asking to at least delay the DOL’s rule. Judge Randolph D. Moss seemed skeptical of arguments offered by The National Association for Fixed Annuities attorney Philip D. Bartz. At one point, Bartz and Moss had an extended back-and-forth about whether the DOL has the authority to extend ERISA law to IRAs. Still, Moss grilled Bartz repeatedly on a number of key points, including whether agents would have to violate state insurance antitrust law to follow the DOL rule and the difference between insurance and financial products. Moss had not ruled on the injunction by press-time. Another case is scheduled for a hearing on Sept. 21 in Kansas and a third on Nov. 17 in Texas.


Humana and Aetna will have their day in federal court on Dec. 5, when they will defend their planned $37 billion merger against the Justice Department’s antitrust concerns. A ruling is expected in mid-January. The Justice Department sued in July to block the Aetna/Humana merger as well as to stop another planned merger – that of Anthem and Cigna. In the suit, the feds contended that both mergers would reduce the number of national health insurers from five to three, as well as harm competition and impair consumer choice. The health insurers contend that their planned mergers would not cause any public harm. Meanwhile, Aetna said it is pulling back

from the health care exchanges in 11 of 15 states where it had offered coverage. The company said it suffered $200 million in losses from its exchange business this year and more than $400 million in losses since 2014. But a letter from Aetna CEO Mark Bertolini to a U.S. Justice Department official indicated that the insurer’s decision to pull back from the ACA marketplace also was motivated by the feds’ opposition to the Humana merger.


There’s a new word being thrown around in the wake of the Federal Reserve’s latest hint of an interest rate hike. That word is “Fedequivocation.” CNBC commentators coined the word in describing what they called ambiguous and evasive language as the Fed issues mixed signals on a rate hike. At the Fed’s symposium in Jackson Hole, Wyo., Chair Janet Yellen said the case for a rate hike had grown stronger in recent months. Investors are trying to second-guess whether the Fed will raise interest rates

There’s light at the end of the tunnel and the tunnel has a train behind it and that train is the Department of Labor. — Charles Lucius, CEO at Gradient Financial Group

before the end of the year. The Fed’s next meeting is scheduled for Nov. 1-2, but interest rate watchers said they doubt the board would move to raise interest rates so soon before the Nov. 8 presidential election.


It’s not just the one-percenters who are driving income inequality in the U.S. Our aging population is helping to widen the wealth gap as well. Americans in the 65-and-older age bracket were the only group to see their median wealth grow from 1989 to 2013, according to the Congressional Budget Office. Median family wealth for those in that age bracket increased by 67 percent, to $211,000, during that period. During that same time frame, median wealth for the 50-64 age group declined 15 percent, and those between the ages of 35 and 49 experienced a median wealth drop of 40 percent. In the under-35 age group, median wealth dropped by 23 percent to only $10,000. Older Americans can thank recovering housing prices and improving stock markets for their growing wealth. On the flip side of that, the younger generations can blame student debt and weak job markets for preventing them from accumulating assets as their elders have.









Since 2012, more than half of state legislatures have considered bills that would create government-run retirement plans for private-sector workers. Source: Pew Research

InsuranceNewsNet Magazine » October 2016

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A discussion on the issues and where tradition meets 2016


illary Clinton vs. Donald Trump. Democrat vs. Republican. Insider vs. outsider. One of these two will be the next president of the United States, barring anything crazy. Not that crazy hasn’t been a feature of this election. The candidates’ differences are fairly significant, especially October 2016 » InsuranceNewsNet Magazine




FEATURE WHEN PARTY LINES CRISSCROSS in areas of taxes, regulation and the economy. Obviously, this is a particularly unusual and historic presidential election. Not only is Clinton the first female nominee of a major political party, Trump is perhaps the most surprising and politically unknown outsider candidate in the history of presidential politics. As such, observers can’t rely on the usual party-line thinking. Is Trump serious about defying the entire GOP by supporting a return of Glass-Steagall? What is a truer indicator: Clinton’s deep ties to Wall Street or her professed commitment to strengthen Dodd-Frank? The answers are elusive, and the candidates are leaving enough doubt for experts such as Michael Lewan and Frank Donatelli to question how true to liberal and conservative principles each will be.

about what kind of a president Clinton or Trump will be. Which president would either most resemble? We think some of their insights might surprise you. Hopefully, they will give you a better sense of where the candidates stand on issues of importance to your business. Q: What presidential model would Clinton and Trump most resemble? DONATELLI: I don’t think Clinton would in any way be the same as her husband. I mean, her husband’s more freewheeling. He’s more like Trump. I mean, Bill Clinton never really had a chief of staff. He had somebody with the title of chief of staff, but he was always much more freewheeling. So I see Bill Clinton’s White House as similar to Trump’s, at least in terms of style. Hillary would be more buttoned-down, like some Republican administrations.

LEWAN: I think Clinton would model the first President Bush in terms of the way the White House is structured: buttoned-down; thoughtful; a bunch of serious advisors that Michael Lewan Frank Donatelli she listens closely to; Lewan is a longtime Democratic strat- slow, but not too slow, to make decisions. egist who once served as chief of staff to She would approach this much more Sen. Joseph Lieberman, D-Conn. Do- like a Republican than perhaps Barack natelli got his start as an assistant to Pres- Obama’s administration, or certainly her ident Ronald Reagan and later served as husband, who was impulsive and from a senior advisor on Sen. Bob Dole’s 1996 time to time, sort of made decisions on presidential campaign. a whim. Lewan and Donatelli co-host a radio Frank, is there anything about Clinton show called Talking Politics, and they had or Trump that would remind you of the a question-and-answer session on stage Reagan White House? at this year’s Insured Retirement Institute Government, Legal and Regulatory DONATELLI: I do think so. Now, Bush Conference. The pair recently joined the 43 and Reagan were very disciplined in InsuranceNewsNet editorial team on a the sense that they had a definite strucconference call to update the issues in the ture. The White House set about to Trump/Clinton race. marshal the formidable array of weapWhat follows is part of their spirited ons to get those initiatives enacted. So discussion of issues important to the fi- you had a legislative play; you had pubnancial services industry. We cover taxes, lic liaison by getting all major groups to regulation, the economy and the Afford- support the initiative. able Care Act. And then you had the president travelWe also talked with Mike and Frank ing around, trying to gin up support. You 26

InsuranceNewsNet Magazine » October 2016

had a press strategy. So everything was geared toward getting those initiatives enacted. I would see Clinton moving in that direction. I just wouldn’t see Trump doing that. I think Trump would try to do a lot of things administratively, the way Obama has tried to govern for the last couple of years. And his advisors would have to rein him in and remind him to be more focused and disciplined. Q: The tax proposals of both Clinton and Trump are well-known. Trump wants to reduce the number of federal tax brackets and reduce the corporate tax rate to 15 percent max. Clinton favors surcharges on the wealthy and increasing capital gains rates along with limiting itemized deductions. Whoever is elected will be working with Speaker of the House Paul Ryan, a policy wonk who is energetic about tax reform. What are the chances of substantial tax changes? LEWAN: There’s a lot of common ground on fixing the tax code, starting with international taxes — this whole area of repatriation and American companies moving overseas. This is a way of bringing some money back and starting to build some confidence between the leaders of both parties that more broadscale tax reform at the corporate level, and ultimately the personal level, can be done. I think, come January, either of these people elected president will start moving on international taxes as probably the only thing that can get done in the short run to fix the tax code. DONATELLI: The last major overhaul of the tax code happened 30 years ago under Reagan in 1986. But there does seem to be a glimmer of possibility this time. There has to be something in it for both parties. And as Mike says, for Democrats, it’s the chance to eliminate a lot of tax preferences; for Republicans, it’s the chance to lower rates. I personally think that there’s a chance for a deal here if both parties — if the leadership will approach this in an open way. It’s a brand-new administration.

Q: As for specific taxes of interest to the insurance industry, how safe is the tax status of insurance products? LEWAN: I don’t believe that either a Democratic president or a Republican president will go after inside buildup. It just doesn’t make sense. It doesn’t really hold political water. It’s too easy to knock down on Capitol Hill. The tax-free nature of insurance products, being outside one’s estate, will continue. It’s sort of baked in the cake now as part of the American economic system, and people have come to expect that. DONATELLI: I think to change these would be very difficult. Maybe something on the corporate-owned life insurance. I mean, there are some abuses there. But generally speaking, these are very important products. Q: Regulation of the financial services industry is yet another area where the new president could have a significant impact. For example, Trump supports repealing the Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Barack Obama in 2010. Clinton has said she would strengthen Dodd-Frank. Likewise, Clinton voiced support for the controversial Department of Labor fiduciary rule. Trump has not addressed the DOL rule, but is presumed to oppose it. How will Clinton or Trump approach regulation? LEWAN: If Clinton was elected president, and even if the Democrats were to take the Senate as part of her victory, I don’t think there’d be great changes in the fiduciary rule or Dodd-Frank. The fiduciary rule has happened at this point. Notwithstanding what might be happening in federal court, I think it’ll continue to move forward and be implemented. DONATELLI: As far as a Trump administration is concerned, I think the mere fact that Obama proposed the fiduciary rule means that Trump would move pretty quickly to try to get rid of it. I don’t know that he understands all the implications of Dodd-Frank. I think he could be swayed on regulatory issues that affect maybe community banks and smaller banks.

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INCOME TAXES: Wants a 4 percent surcharge on incomes exceeding $5 million and a 30 percent minimum rate on adjusted gross incomes above $1 million. The Clinton tax plan also calls for limiting itemized deduction benefits to 28 percent, and increasing rates on medium-term capital gains to between 27.8 percent and 47.4 percent. She also wants to raise the top estate tax rate to 45 percent and reduce the threshold to $3.5 million.

INCOME TAXES: Calls for a “simplified” tax code with four brackets: 0, 12, 25 and 33 percent. Most itemized deductions would be eliminated, except for charitable giving and mortgage interest. Trump favors axing the estate tax, the alternative minimum tax, the Affordable Care Act taxes and the marriage penalty.

ESTATE TAX: Has said she would reduce the threshold to $3.5 million for individuals and $7 million for a couple. The tax would be applied to more families, with very wealthy families paying taxes on a higher portion of their assets. She would also increase the tax rate on affected estates to 45 percent.

ESTATE TAX: Favors eliminating the “death tax,” as he and other Republicans refer to it. The Trump plan would permit even the wealthiest people to bequeath their assets without being taxed.

SOCIAL SECURITY: Has said she will expand Social Security benefits by increasing taxes on the wealthiest Americans, raising the cap on Social Security taxable income and taxing other income not currently taken into account. Opposes raising the retirement age.

SOCIAL SECURITY: Has not proposed direct Social Security plans, but Trump has said his policies will generate more Social Security payroll taxes by bringing back jobs and by getting rid of “deficits, waste, fraud and abuse.” He has said he is opposed to cutting benefits or raising the retirement age.

HEALTH CARE: Plans start with building on the ACA, with more options for people with high health care costs, subsidies for middle-income people and restrictions to control high drug prices. She also supports a “public option,” the direct sale of health insurance by the government.

HEALTH CARE: Has proposed a six-point plan that starts with repealing the Affordable Care Act. Ensuing measures would permit the sale of insurance across state lines, require price transparency for medical care, promote tax deductions and health savings accounts, and transform Medicaid into a block grant program.

REGULATION: Supports business and Wall Street regulations passed under President Barack Obama. In comments and writings, Clinton has proposed strengthening the DoddFrank Act, eliminating the carried interest tax loophole, imposing a “risk fee” on banks with more than $50 billion in assets and enacting a “high-frequency trading” tax.

REGULATION: Has said he will oppose government regulations that hurt the economy and cost jobs. In 2012, he wrote that “government regulations cost us annually $1.75 trillion. They constitute a stealth tax that is larger than the amount the IRS collects every year from corporations and individuals combined.”

LEWAN: Does Hillary Clinton throw her lot in with the Bernie Sanders people and Elizabeth Warren on questions like the fiduciary rule, but not cut back but actually expand Dodd-Frank? And I am concerned that even as she approaches her own inauguration day, she’s already going to have one eye on the Iowa caucuses in four years. DONATELLI: What exactly does Hillary Clinton believe when it comes to regula28

tory issues like this? American business, for what it’s worth, is placing a big bet that she is going to come down a more moderate path than Obama, let alone Bernie Sanders and the rest of the left wing of the Democratic party. LEWAN: We don’t really know enough about Donald Trump to know if he’s really a conservative in economic terms or a populist of some sort, where he could take positions much

InsuranceNewsNet Magazine » October 2016

closer to Elizabeth Warren and Bernie Sanders. Q: The Obama administration timed the fiduciary rule rollout to insulate it from a new administration. If Trump won the election, would he have some options to derail the rule? LEWAN: Certainly a president has the authority to sort of pull an old executive order. President George Bush the second

WHEN PARTY LINES CRISSCROSS FEATURE did that on several of Bill Clinton’s initiatives. But I think it would be way down on Donald Trump’s list to do it in the first hundred or even thousand days of his administration. DONATELLI: Lack of enforcement or degree of regulatory zeal is always a weapon in the hands of the executive. But I’m sure advisors, if only to keep the plaintiff ’s lawyers away from them, would want some clarification and legal certainty. So I’m sure they would at least move to try to clarify the rule a little more. Q: Some studies have come out that indicate the economy does better under Democratic presidents. But of course, there has been some argument about whether that is the president or his times and circumstances. What is your take on that debate? DONATELLI: I think far more important than the party of the president is what policies are being followed. Both Barack Obama and Bill Clinton were Democrats, but they followed very different policies. And so

Pundits Michael Lewan, left, and Frank Donatelli, right, speak during an Insured Retirement Institute conference in June in Washington, D.C. They are joined by moderator John H. Brown, vice president of government relations for Jackson National Life Insurance Co.

the result is that the economy boomed under Clinton … but under Obama, who’s probably the most pro-big-government, regulatory president we’ve had since Lyndon Johnson, we’ve had terrible economic growth his entire presidency. A bigger pie just helps everyone. And that means getting a handle on tax reform. Hopefully it means cutting back on useless regulations a little bit. It means giving a little more sway to the private sector. LEWAN: Frank, I think you’re absolutely

right: we need a president who focuses on growth, not redistribution. Hillary Clinton, at least if you look at what her husband did and the kind of advisors that she is likely to bring aboard, there will be a change from President Obama’s view of the economy toward, if you will, a more pro-growth, pro-business approach. DONATELLI: Whoever the president is that will give those kinds of goals a higher priority, whether they be Democrat or Republican, is going to bring a greater growth to our economy and more jobs.

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October 2016 » InsuranceNewsNet Magazine





“I think Trump would try to do a lot of things administratively, the way Obama has tried to govern for the last couple of years.” Q: The Trump movement is based on a take-back-America concept — a feeling that the same old economic policies pushed by both parties for decades have led to a stagnant economy, stagnant wages and a deteriorating middle class. But a recent survey from the National Association for Business Economics of more than 400 experts found that 55 percent support Clinton’s economic policies, while Trump finished third with 14 percent. Libertarian Party nominee Gary Johnson received 15 percent support. What do you make of this? DONATELLI: I do like the idea of taking a fresh look at things. It is true that insiders, however you define that term, become comfortable with a certain way of speaking, and most importantly with kind of eliminating things and focusing only on a narrow set of policies that they think are possible. LEWAN: The outsiders, Sanders and Trump, have done us a bit of a favor, at least on trade, and perhaps on some other issues as well. Because they make us question what we had thought was sort of accepted policy. DONATELLI: On the other hand, you have to be able to accomplish these things too. And so you also need people with a pragmatic streak who not only have big visions but have some idea how they want to accomplish it. Q: Trump’s stated position is to repeal the ACA and replace it with a plan based on free-market principles that allows insurance to be purchased 30

across state lines. Clinton, meanwhile, vowed to strengthen the ACA and introduce an affordable health care and prescription drug plan. Is the Affordable Care Act headed for major changes regardless of who wins? LEWAN: I’d be shocked, given what happened to Hillary Clinton back in 1993 and

DONATELLI: The most popular option would be some sort of a tax credit or a deduction to allow people to purchase private plans. So it’s sort of an indirect subsidy in that way. But you would eliminate the whole bureaucracy that governs the exchanges now. Q: What can the new president do to avoid the gridlock that plagued Obama? DONATELLI: Obama reaps what he sows. I mean, he’s an executive order guy because that’s what he wants to do. He has never wanted to work with Congress. Never. He thinks it’s beneath him to actually lobby members of Congress. LEWAN: Words of great wisdom, Frank. I actually do believe Hillary Clinton and Speaker Ryan, both as sort of policy wonks and both having an ideology but also a bedrock desire to get things done,

“Hillary would be more buttoned-down, like some Republican administrations.” 1994, if she would try in her first term even — and certainly not in the first year or two — to make significant changes to the Affordable Care Act. DONATELLI: I would disagree a little bit, because I think circumstances are going to require her and the Congress to do something because the exchanges are imploding. If you don’t have insurance companies participating and you have these huge premium increases going on, something is going to have to be done to stabilize the exchanges. LEWAN: There’s a fairly thoughtful Republican plan that Speaker Ryan and others have worked on. Obviously it’s a starting point, because you can’t just repeal this. You have to repeal and replace.

InsuranceNewsNet Magazine » October 2016

can find ways to work together, be it on tax reform or regulatory policy, that will make some sense. DONATELLI: I really believe that the new president, whoever that is, has a chance to break that. They owe it to the country, whoever is elected, to make every effort to work in conjunction with the Congress. And I believe that if they do that, you might be able to get some things done next year. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.


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For Financial Professional Use Only. Not for Use With Consumers. October 2016 » InsuranceNewsNet Magazine



How Principals Prepare for Takeoff Principals decide when and how to transition from their agencies. By Cyril Tuohy


lifford P. Ryan is looking forward to his next parallel life. An avid bicyclist, runner, hiker and boater, the 57-yearold also recently earned his private pilot’s license in the active life he enjoys in Maine as he builds his financial and insurance agency. He plans to transition further into that life over the next decade. It will not be the first parallel life for Ryan. He started as a financial advisor in 1983 and started his own agency, Elder Planning Advisors, in 1996 while in the Naval Reserve. He retired from the service in 2003 after more than 25 years in the Navy and Reserve. But about eight years ago, much like clients who realize they have to plan for the inevitable, Ryan started to think about the “what ifs.” What if he never made it into the office in beautiful Cape Elizabeth? What if he just never woke up? That got him planning for the two possible transitions — the abrupt or the gradual. Ideally, he envisions a time when he can still participate in an organization but in a different way, maybe spending more time thinking about bigger-picture challenges instead of tending to all-consuming dayto-day matters. “If I find the right person and it works out, then I imagine a three-to-five-year transition period, and then I just fade away,” he said. But what about an exit of the more sudden, unplanned variety? That prospect got him talking to other agency owners and principals, and it wasn’t long before he’d drawn up a “standby agreement” with a counterparty who stands ready to buy Elder Planning Advisors in case of Ryan’s early demise, he said. The nonbinding agreement was etched with the help of FP Transitions in Lake Oswego, Ore., and Ryan says he’s had discussions with another suitor. Ryan’s 32

Clifford P. Ryan; his wife, Laurene; and his stepdaughter Erin, flying near St. Petersburg, Fla., March 2016.

even talked to his stepson in college about what the profession entails. Elder Planning Advisors also functions as a registered investment advisor, and Ryan said he’s given some thought to splitting the RIA from the insurance agency functions, an arrangement that he calls a “partial sale.” The pressure on agency principals to sell is coming from many directions. With about 75,000 advisors working at insurance agencies, brokers and producer groups around the country, the channel is the largest of the advisor channels, larger than the independent

broker/dealer and wirehouse channels, according to figures compiled by Tiburon Strategic Advisors. Many of those producers and principals belong to the baby boom, members of which are opting to sail off into retirement by the hundreds of thousands every year, according to industry researchers and consultants. It’s also no secret that the world is changing for insurance and financial professionals with shrinking compensation and expanding regulation. Commissions were already decreasing when the Department of Labor let loose its conflict

Selling Your Business — At a Glance

The clearer the goals of an agency principal selling his or her business, the more likely the sale will accomplish the objectives. Here’s a checklist for agency principals thinking of selling their business.

InsuranceNewsNet Magazine » October 2016

• Professional help: Look to seasoned tax, succession and planning professionals with years of experience in selling agencies, even if that means going out of town or out of state. • Multiplicity of options: Understand different avenues for sales, partial sales and contract options. • Valuation: The market value of an agency is often derived from among many angles, and there is more than one appraisal method to value the business.

• The successor: Develop a clear succession plan with regard to the successor. Are you passing the agency on to a relative, one or more in-house employees, or selling the agency to an outside buyer? • Your clients and employees: What do you want to happen to your employees and your clients after you have left the business? How do you want them to be treated, and will the future buyer meet those goals?

HOW PRINCIPALS PREPARE FOR TAKEOFF BONUS FEATURE of interest rule, designed to relocation to larger quarters in reduce and standardize comIndianapolis to accommodate pensation. the growth. Combine that declining Cash-flow lenders have typcompensation with an everically been absent from agency growing stack of required doctransactions in the past beumentation and you are left cause insurance agencies trawith ample motivation for ditionally had no hard assets to agents and advisors to be eypost as collateral. ing the door. Insurers have also been dialA Bittersweet Moment ing up the direct-to-consumWhen a family business traner channel, according to Aite sitions out of the family, it Group consultant Samantha can be bittersweet. Steven J. Chow in a report published Aronson sold Aronson earlier this year. Insurance in Needham, Mass., Clifford P. Ryan and his wife, Laurene, at Coral Castle, “The agency distribution earlier this year to the brokerHomestead, Fla., February 2016 channel is no longer the most age Acrisure Agency Partners. commonly used channel by life and an- Recurring Fees Boost Values, None of Aronson’s three children were nuities carriers, as 94 percent of respon- Luring Buyers interested in continuing what Aronson’s dents report using direct-to-consumer If agents and advisors have raised a stink grandfather Samuel started in 1919. channels versus 83 percent using an about tougher regulation, the good news Aronson, 63, started thinking five agent,” Chow wrote. is that the movement toward fees and years ago about looking for an outside Independent agencies and brokerages trails has added to the value of agencies, buyer, and two years ago he began talking still haul in about 70 percent of annu- said Bueermann. to publicly held brokers, private equial life insurance premium, according to Agencies with recurring revenue gener- ty-backed brokers, banks and private buyLIMRA, so the independent channel is ate values of 2.5 times to more than three ers about a sale. still going strong, although not as strong times trailing 12-month earnings, while “It’s sad that there’s not a fourth generas in decades past. agencies that rely on transaction revenue ation,” Aronson said. “I would have premay fetch only 1.2 times and as low as 0.5 ferred one of my children take it over, yes, RIAs Also in Merger Mania times trailing 12-month earnings. for the sake not only of longevity but to go Financial advisors are not immune to the “If you have an pressures. RIAs had a record year for agency doing $1 milmergers and acquisitions in 2015, with lion in first-year comRIA transactions increasing 37 percent missions on a variety to 123 transactions, according to DeVoe of insurance prod& Co.’s RIA Deal Book. ucts, it could be priced Other financial advisors “may accel- sub-$1 million easily,” erate their exit or seek to combine forc- Bueermann said. “But es if and when competition increases” if you have a mix of from robo-advisors, new competitors fees and trails coming entering the segment and heavier reg- in the door, the busiulation, wrote David DeVoe, managing ness could be priced at partner. two times or more.” A firm in Oregon that helps agencies Oak Street Funding, Norman Aronson (seated). with succession planning expects a 35 a commercial lender From left: Bunny Aronson, Lee Aronson and Steve Aronson. percent increase this year in transitions to financial services Steve and Bunny would eventually in which a first-generation advisor sells businesses, including go on to run the agency. the practice to a second generation insurance agencies, made up of the advisor’s children or said that it had more than quadrupled on and create something bigger and betemployees. revenue over the past five years and that ter with them.” “We’ve seen demand up way high,” said its maximum loan size had also gone up As it turns out, Aronson will be working Brad Bueermann, CEO of FP Transitions, $20 million. with his children on other projects, but as adding that his company this year will do “Emerging industries with intangible far as the family insurance business is conmore than 200 formal succession plans. assets like future commissions and fees cerned it’s pretty much the end of the line. FP has added to its analytics and legal continue to create demand for cash-flow Aronson and his sister, Bunny, bought teams to handle the documentation nec- financing,” said CEO Rick Dennen in the agency from their father more than 30 essary for long-term stock transfers. June while announcing the company’s years and grew the agency to more than October 2016 » InsuranceNewsNet Magazine


BONUS FEATURE HOW PRINCIPALS PREPARE FOR TAKEOFF two dozen employees. They arranged for an orderly and eventual exit after selling the business earlier this year. They and longtime managers each have a three-year contract to continue running Aronson Insurance, after which Aronson and his sister have the option to renew, and Aronson says he wants to continue working in the business for another decade. “The first thing after deciding to sell is you want to know what your life and career will be like in five to 10 years,” he said.

Advisors Are Susceptible to the Same ‘Mental Foibles’ As Are Clients

Agency principals and advisors preparing for nearly every succession plan but their own has become something of a truism within the industry. Yet the botched succession handoffs continue. In the Olympics, dropping the baton will get a relay team disqualified or cause it to lose the race. But in the agency business, bungling the transition means — at best — walking away from hundreds of thousands of dollars. At worst, it could be an invitation to costly litigation in the future. Agency owners spend decades making sure they have prepared their clients to transition their assets to the next generation. Yet these same agency owners seem strangely paralyzed or forgetful about preparing for the day they pass on their own life’s work. It’s as if principals no longer have the energy, the drive or the interest to orchestrate their own exits on the highest possible note. After applying the basic rules of estate planning to their clients, somehow those same rules don’t apply when it comes to their own practices. “They don’t spend enough time on their own affairs. They always take care of their clients, but they never take care of themselves,” said financial planner Gary L. Pittsford, author of Your Family Business, Your Family Net Worth. Pittsford is founder of Castle Wealth Advisors in Indianapolis. Deals structured to benefit the seller often seem rushed. A job the owner should have planned three to five years ago ends up being cobbled together in nine months, like a misfiring engine running on three cylinders instead of four. “I think advisors are subject to the same weird mental foibles that our clients are sometimes,” Clifford P. Ryan, an insurance and registered investment advisor in Cape Elizabeth, Maine, told InsuranceNewsNet. “It’s a widespread problem in the industry.” Agency principals who look no further than their well-worn “territory” for help often end up with accountants and lawyers who are neither estate planners nor mergers and acquisitions specialists. This often leaves owners stewing about what might have been. Pittsford said owners of large agencies in small towns need to find accountants, lawyers and estate planners who manage agency transitions for a living, even if it means going out of town or even out of state to find them. Principals then need to press the tax and legal professionals to come up with more than one way to sell the business, he said. Best-practices templates and strategies for succession planning are available from broker/dealers, insurance companies, the National Association of Insurance and Financial Advisors, Million Dollar Round Table, estate planning specialists, and consulting companies. — Cyril Tuohy

Steve J. Aronson holds his granddaughter, both wearing Red Sox caps. None of Aronson’s children will be following their father into the business.

Selling the agency from father to children, and then from the children to an outside broker involves special expertise, which Aronson had courtesy of mergers and acquisition lawyer David A. Bakst at Morrison Mahoney in Boston. When the agency passed on to Aronson and his sister in the mid-1980s, Aronson recalls how they did everything they could to allow their parents to ease out of the agency when the time came — having them work five, four, three and then two days a week. He credits his father with having the foresight to arrange for a smooth landing out of the industry — so smooth was the handoff that clients didn’t even notice his father, Norman, was no longer in charge. “Dad not only made it easy, but he made it seamless,” Aronson said. “It was a 10-year process because he was doing some very careful planning and he wanted to do it the right way for everybody,” Aronson also said. “He wanted to be fair, and he took inkind payments over a 10-year period of 34

time, discounting them for the value we had brought to the business,” he said. “There was no reason the public should know who owns the business.” Fast-forward 20 years, and the Aronson Insurance agency sales cycle is repeating itself, this time to an outside buyer, which Aronson settled on because Acrisure had no intention of tinkering with Aronson’s business model. In true Aronson fashion, though, Steve and Bunny have secured their quality of life well in advance, and have even taken

InsuranceNewsNet Magazine » October 2016

care of their sibling who long ago decided she wasn’t interested in the business.

Pressure to Sell

Not every agency sale is as smooth as the Aronsons’. Nor are principals necessarily looking to provide continuity for clients or to protect the quality of life for former owners or key personnel. Many agency owners prefer selling to the highest bidder, while others prefer leaving simply because they don’t care to


A View of the Competitive Environment

The nature of the competitive threat to independent agents comes in many forms and may contribute to reasons why agency principals decide to sell their practices. Lower price.....................................................................................71% Better brand recognition/marketing......................................... 48% Better quoting of sales process................................................... 22% Access to specialty products....................................................... 14% Industry or risk specialization.................................................... 11% More accessible advice and servicing..........................................8% Superior onboarding processes.....................................................8% Superior claims service..................................................................7% Source: Accenture Independent Agent Survey “Evolving to Compete and Win in the Long-Term,” 2015

Direct-to-consumer Overtakes Agency Channels

Percentage of insurers responding that they will utilize the following channels for product distribution. D2C channels................................................................................ 94% Agent channels............................................................................. 84% Worksite channels........................................................................ 39% Affinity relationships.................................................................. 39% Bank channels............................................................................... 28% Source: Life and Annuity: Shifting to Direct to Consumer report, Aite Group, 2016

Gaining on the Agent Channel

Even though the agent channel is responsible for the bulk of life insurance premium sold, insurance companies expect to diversify their distribution channels.

Agents Number in the Tens of Thousands

Insurance and producer groups lead the industry in terms of financial advisor channels.

Does your insurance company use the following channels for product distribution or have plans to do so in the next 24 months?

Insurance agencies, brokers and producer groups............ 74,804 Independent broker/dealers................................................... 67,290 Wirehouses............................................................................... 47,386 Regional broker/dealers...........................................................29,955 Fee-based financial advisors................................................. 28,528 Dually registered financial advisors.................................... 24,825 Discount brokerage firms.......................................................18,006 Retail banks...............................................................................14,332

D2C channels................................ 100% (2018 est.)......94% (2016)

Source: 1/15 Envestnet presentation; Tiburon Research & Analysis

Source: Life and Annuity: Shifting to Direct to Consumer report, Aite Group, 2016

remain in the business. But in any case, principals preparing their agency for sale before they retire should be ramping up instead of dialing down. Just gliding to a stop or hitting the brakes means the agency isn’t likely to sell for as much, and it is not in the best interests of the people the agency serves, said Brett Amendola, president of Aegis Wealth Partners in Connecticut, an agency of Guardian Life Insurance. “Don’t let your clients suffer,” said Amendola, 47, who recently merged his practice with National Financial Network in New York. “Keep your eye on the ball,” he said. “Go out on a high note, like Michael Phelps.” That also helps set a higher price on the business. “The hardest thing in insurance is how to value your practice — assuming you build your agency around customer service and relationships,” said Dwight N. Lankford, 71, president and owner of MidAmerica Estate & Insurance Services in Houston.

Agent channels................................83% (2018 est.)......83% (2016) Affinity relationships..................... 61% (2018 est.)......39% (2016) Worksite channels...........................50% (2018 est.)......39% (2016) Bank channels.................................. 39% (2018 est.)......28% (2016)

Lankford, who is passing his agency on to his son Brent, who joined the practice four years ago, says he has a solid client base but his referral network is “incredible.” The strengths of an agency’s future earnings are referral networks, strategic alliances, the makeup of the client base, the lines of business and the agency’s brand. For traditional asset-based lenders, these assets were difficult to value, but with the expertise of cash-flow lenders, that’s begun to change. New sources of financing agency sales have opened the possibility of selling the agency in two distinct marketplaces: external, as Aronson chose to do this year, or internal, as his father chose to do a generation ago. The fastest growth at FP Transitions is coming from internal succession plans, said Bueermann, and he attributes that to the industry shifting from selling an insurance or investment product to selling a service or advice for long-term protection and financial planning.

For decades, insurance agency producers and principals sold insurance company products, but with the rise of advisory and planning, agents and advisors collect fees in exchange for looking after the financial health and well-being of clients over a long period of time. “The kind of talent that holds the relationship to the practices needs to be incentivized, so we’re moving from an external sale to an internal sale,” Bueermann said. “That’s good for clients, quite frankly,” he said. “You’re not dealing with somebody who says, ‘Here’s your new advisor.’” Good news not only for clients but also for agency sellers. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at

October 2016 » InsuranceNewsNet Magazine




Bleak Profits, Looming Job Cuts at MetLife

One quarter doesn’t tell a story. One year often doesn’t tell a story.

More changes are in the news at the nation’s largest life insurer. MetLife announced a second-quarter profit drop of 94 percent, partly as a result of low interest rates. As a result, the carrier will reduce expenses by $1 billion, including job cuts, by the end of 2019, according to CEO Steve Kandarian. Kandarian told analysts that the drop in profits “will require us to reduce head count,” but he did not go into details. Kandarian cited “significant headwinds” facing the industry, forcing MetLife to “do even more to avoid simply running in place.” MetLife has its headquarters in New York City and employed 69,000 workers as of the end of last year. That number included the 4,000 advisors in the MetLife Premier Client Group, which was acquired by MassMutual in July. MetLife is fighting an appeal of a federal court ruling that found the Financial Stability Oversight Council erred in designating the insurer as a systemically important financial institution – or “too big to fail.” The FSOC is appealing that court decision, and arguments in the case are scheduled for Oct. 24 in the U.S. Court of Appeals for the D.C. Circuit.


Although new individual premium grew 2 percent in the first half of the year, a rising star had a bit of a dip. Indexed universal life dropped 7 percent in premium, in only the second decrease in 10 years, according to the LIMRA U.S. Retail Individual Life Insurance Sales Survey. The cause has been attributed to the National Association of Insurance Commissioners’ adoption of Actuarial Guideline 49 (AG 49), which limits policy illustrations. Universal life new premium fell 4 percent in the second quarter due to the decline in IUL sales, which account for 55 percent of total UL sales and 20 percent of all individual life premium year-todate. Whole life was still going strong, though. Sales continued to climb as new premium increased 6 percent in the second quarter. DID YOU





A Florida furniture store owner was pronounced dead while he was traveling in Venezuela back in 2013. But he was found very much alive after he and his wife attempted to cash in seven life insurance policies worth a total of $9 million. Jose Lantigua was discovered riding in a car in North Carolina with his wife, Daphne Simpson, behind the wheel. Simpson reportedly has a plea deal in the works and was recently released from jail. Lantigua is still facing multiple charges. Lantigua had been living under another man’s name in a mountain home on the edge of the Appalachian Mountains, using a bogus driver’s license and passport that got him eventual convictions on passport fraud and identity theft.

86% of women advisors surveyed said they believe the industry is making progress toward gender diversity.

InsuranceNewsNet Magazine » October 2016

Source: Insurance Industry Charitable Foundation

— William Pargeans, A.M. Best vice president, on second-quarter results for life insurers


ELife has introduced eTerm Express, a life insurance offering designed with an entirely paperless application and approval process. eTerm Express is powered by a distribution platform incorporating electronic underwriting and what the company calls Straight-Through-Processing. No lab tests, exams, APS or teleinterviews are needed. Applications are approved in real time within minutes with multiple underwriting classes if qualified for coverage up to $500,000. The policy is delivered instantly online to qualified applicants. Using the eLife Platform, an application can be completed and the in-force policy electronically delivered in as little as 15 minutes, said CEO Christopher Snyder.


Federal prosecutors want to seize the death benefit proceeds from life insurance policies taken out by the San Bernardino shooter prior to a December mass murder that killed 14 people in a government building. A judge ruled that the government can take the $275,000 in death benefit paid to the mother of Syed Farook. Farook and his wife were shot and killed by law enforcement officers after they shot and killed 14 people at an office holiday party. In making the ruling, the judge agreed with prosecutors that assets derived from terrorism are subject to forfeiture. Authorities want the money to go to surviving victims and families of the dead.

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Securian Financial Group, Inc. is the parent corporation of Minnesota Life Insurance Company and Securian Life Insurance Company, a New York authorized insurer. Certain financial highlights are presented at the parent level only. Data as of December 31, 2015. Securian Financial Group, Inc. Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Both companies are headquartered in Saint Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. 400 Robert Street North, St. Paul, MN 55101-2098 • 1-800-820-4205 ©2015 Securian Financial Group, Inc. All rights reserved. F82624-19A Rev 8-2016 DOFU 9-2015 22277

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October 2016 » InsuranceNewsNet Magazine



Match the Right Permanent Insurance With the Right Needs and facilitate a schedule to convert their term coverage gradually? How do we customize the coverage to the client’s budget and resources to obtain a portfolio of inBy Richard M. Weber surance policies that will cover their lifee all know the reality: Term time needs? insurance is cheap. By In addition to the other diversification comparison, permanent choices, clients will want to consider insurance is expensive. their unique risk tolerance, investment It’s difficult enough to get clients to experience and time horizon. I advocate take action and buy the amount of life a custom-designed portfolio that beinsurance they really need — much gins with insuring the client’s core less get them to pay five to 10 times needs with convertible term and paras much for permanent life as they ticipating whole life. Conservative would for term. As we in the life inPerhaps the portfolio may be Guaranteed surance industry know, term insurtopped off with additional styles of Balanced ance is at its best when it provides permanent insurance that — in addifamilies and businesses the protection Current Assumption to covering human life values — Aggressive/Very tion they need for a specific and defined also conform to the client’s needs and period of time. expectations for value, annual outlay, We also know that families rarely have Many of our clients start out with large accumulation of cash values and death enough of that protection. The other re- protection needs and significant poten- benefit. I describe this as making efficient ality is that when it comes to lifetime tial for increasing their income over their choices. solutions, term doesn’t work; it’s neither working lives. As their income grows, the mathematically nor actuarially designed typical insured client will face a number A Couple Considers Converting to be affordable for a lifetime. of options to begin allocating their re- Their Coverage Here’s an example. Typically, the 11th sources toward the objective of “retiring Let’s consider Paul, a 40-year-old man year’s guaranteed renewal premium of a in the style to which I will have become earning $80,000 a year as a middle man20-year term policy is 15 to 20 times the accustomed.” ager with a regional auto parts wholesalinitial period of guarantees. And it rapidly How do we advise this type of client er. He is married to Sharon, a 35-year-old A client with an aggressive investment style often will have a conservative insurance style.



increases from there on an annual basis. We always would attempt to underwrite the client for a new policy (albeit with a new contestable period), but sometimes it’s not possible. As a result, the client is stuck in a a term policy that quickly becomes unaffordable. And that may be all we can do. For many in our economy, insuring for a lifetime comes with financial and timing challenges.

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InsuranceNewsNet Magazine » October 2016


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LIFE MATCH THE RIGHT PERMANENT INSURANCE WITH THE RIGHT NEEDS paralegal making $30,000 working halftime until their 12-year-old daughter and 10-year-old son enter high school. Although their combined income is above the national median, it has been difficult for them to balance all the current needs of running a household. Saving for retirement has been restricted to less than $8,000 a year withheld from their salaries in 401(k) accounts. Fortunately, this couple “gets” the difficulty of maintaining a reasonable standard of living if either of them were to become disabled or die prematurely. They are in the 11th year of 20-year $1 million and $400,000 term policies on him and her, respectively. They also have acquired disability income policies offering $4,000 and $1,500 per month of income protection, respectively. Paul and Sharon are ready to reprioritize their budget to increase their annual retirement savings significantly. They have been able to free up $10,000 now. They expect to have an additional $20,000 a year available when Sharon returns to work full time during their younger child’s freshman year in high school – five years from now. Paul and Sharon also have determined they want to maintain their combined $1.4 million of death benefit protection until each of them turns 50 — with progressive reductions to a lifetime amount of $500,000 on Paul and $200,000 on Sharon. They consider this as the legacy that — at a minimum — will give their children more flexibility when planning their own retirement. Here’s the strategy we would discuss with this couple: With the $10,000 additional savings allocation for the next five years, we would recommend putting up to 50 percent into risk-appropriate mutual funds or exchange-traded funds. At the same time, we would re-underwrite their current term insurance to new, select-age policies that will save money now and allow for eventual conversion to whole life in order to obtain the ultimate amount of lifetime coverage. When the couple is able to increase their savings in five years, we would draw up a plan to continue converting their term insurance. This would better ensure the long-term affordability of that lifetime coverage with the added benefit 40

of providing a substantial cash reserve to draw upon in retirement. Focusing on the consumer’s question of “what kind of policy is best for my circumstances and needs?” we find it useful to consider how advisors make strategic asset allocation recommendations to new clients.

Calculating a Planned Premium for UL-Type Policies

Assessing Risk Tolerance

Typically, in the first interview with a client, the focus will turn to assessing risk tolerance in the typical categories of conservative, balanced and aggressive allocations. As we might expect, speculative options will not be attractive to someone with a conservative risk tolerance. In fact, such a client will be drawn to policies with substantial guarantees, such as participating whole life. Similarly, a client with an aggressive risk tolerance naturally will be drawn to some of the current assumption policies of life insurance, although — surprisingly — we find that the more aggressive the client’s investment style, the more conservative their insurance style! Remember that universal life-type policies don’t have stipulated premiums. We calculate them in response to the client question “What’s it gonna cost?” The typical problem with calculating UL-type

InsuranceNewsNet Magazine » October 2016

planned premiums is the tendency to assume overly optimistic crediting rates in preparing the illustration. For most clients, the “pricing” reality of current assumption policies is demonstrated best using the more realistic planned premium calculation rates suggested in the chart on this page. After clients understand that the substantially higher calculated premiums are more likely to sustain the coverage — although that’s still not guaranteed — many will choose participating whole life with its guaranteed premiums and substantial accumulation of tax-advantaged cash value growth (as long as premiums are paid when due). These are not arbitrary numbers. With today’s extremely low fixed-income returns, an insurer’s bond portfolio cannot reliably support higher than a 3 percent UL projection for the foreseeable future. For indexed universal life and variable universal life — policy styles whose crediting rate depends on direct or indexed performance of the stock market — extensive volatility research with sophisticated software tools provides the “safe” initial illustration rates indicated in the chart. The slogan “Buy term and invest the difference!” largely has been discredited. One reason is that it’s human nature to want to spend the difference on more attractive and immediate things. Another reason is the actuarial and mathematical construction of term insurance: It’s not designed for a lifetime. And although that’s a catchy slogan, advisors and their clients will appreciate the fact that life rarely imitates cliché. When lifetime needs or the uses of life insurance seem indicated by a factual pattern, are supported by financial resources, and address the client’s desire to provide for their family or heirs, a more sophisticated approach must be taken. That approach must consider risk tolerance and the opportunities for additional asset accumulation with specific tax advantages from life insurance designed for a lifetime. Richard M. Weber, CLU, MBA, AEP (Distinguished), is president and primary consultant for The Ethical Edge, providing fee-only analytics and consulting services to family offices and high net worth individuals. He may be contacted at







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October 2016 » InsuranceNewsNet Magazine



To Age 100 — and Beyond! Life Insurance for a Lifetime  he over-100 population is T projected to increase 10 times by midcentury. By Palmer Williams


lthough there are plenty of news reports about the growing number of centenarians in America, few people believe they will be among them. The fact is, the chances of reaching age 100 are greater for all of us, as the World Health Organization projects the global number of centenarians to increase tenfold between 2010 and 2050. At the same time, data from LIMRA show that nearly six in 10 Americans have life insurance, and many of them bought it more than 15 years ago — when policies looked very different from ones on the market today. Before 2004, a majority of permanent life insurance policies were designed to endow (or mature) when the policyholder reached age 95 or 100, versus more recent policies that mature at age 121. In many cases, when a policy reaches maturation, the owner receives the cash value, and there is no longer a death benefit — an outcome no one wants or expects. Financial professionals need to talk with their clients about longevity to ensure clients are covered in their later years and even beyond age 100. Although some older policies offered riders to extend the maturity age, replacing or adding coverage might offer a better solution. In addition to life insurance coverage, planning for potential long-term care expenses becomes even more important as people live longer. All these issues can be covered in an annual policy review. This is a good place to start understanding a client’s broader goals and the role life insurance can play in meeting them.

Starting the Conversation

Asking the right questions in the right way can make all the difference in ensuring a client has the best policy for their needs. 42

There are many elements to consider, but it’s most important for financial professionals to determine whether clients have an existing policy and to consider how their financial situation has changed since they obtained coverage. Additionally, life events such as the birth of a child or a divorce might affect the amount of life coverage required. Here are five checkpoints to cover in the conversation. [1] Understand your client. Start with your client’s long-term goals and objectives. Ask about their current financial picture and their plans for the future. Also explore their eligibility for life insurance, such as whether any health considerations might affect their ability to obtain coverage or the price of it. Family considerations are, of course, front and center in understanding your client. For example, as a family’s situation changes, the policy beneficiaries may need to change too. In one case I was involved with, an ex-spouse sought to collect — and ultimately received — the death benefit from a life insurance policy, because the contract’s beneficiary

InsuranceNewsNet Magazine » October 2016

designations had not been updated. Another example would be life insurance purchased to cover college expenses for children who have since graduated and no longer need this type of protection. [2] Determine the appropriate amount of insurance for your client's needs today. Ask clients about paying off debts, covering final expenses, replacing income, sending children to college, funding long-term care needs and expectations for wealth transfer, to determine whether they currently are carrying the right amount of insurance for their situation. When identifying the appropriate amount of coverage, many insurers and financial firms now offer tools to conduct a comprehensive needs analysis, including income replacement, debt protection and funding for children’s education in the event of a primary wage-earner’s death. In other cases — funding a buy-sell agreement between business owners or equalizing an estate with illiquid properties among heirs — a different analysis should be used to determine the appropriate face amount.

TO AGE 100 — AND BEYOND! LIFE INSURANCE FOR A LIFETIME LIFE [3] Identify the best type of life insurance for the client. Each type of life insurance is designed to meet different client needs. Generally, term insurance is a good choice for income replacement or shortterm needs and is typically a good fit for those in the middle market. Meanwhile, permanent insurance (whole life, universal life or variable universal life) may be most appropriate for longer-term needs or for wealth transfer to maximize the assets clients pass on to the next generation. Sometimes, a blend of term and permanent insurance can adequately cover both income replacement and wealth transfer objectives. Many permanent life insurance policies may also offer benefits that can be utilized while the client is still living, such as using the cash value to provide supplemental retirement income on a taxadvantaged basis and optional riders that cover long-term care or chronic illness expenses. As for the type of permanent policy — whole life, UL, VUL or indexed UL — the advisor will have to gauge the client’s risk tolerance to help find the most suitable design.

[4] Evaluate the existing policy. Conduct a “stress test” on existing policies by examining the terms and conditions and in-force illustrations to assess performance and premium funding. Look at the policy’s projected performance using the same assumptions used when the policy was purchased. Also consider the minimum premium that would be required to fund the policy to maturity and how long the policy would last should the client stop paying premiums entirely. If the policy is a VUL, make sure the assumed rate of return is reasonable and aligns with your client’s risk tolerance. Review how long the policy is projected to stay in force, looking especially at older policies to understand what happens to the contract if the client reaches age 100. For permanent policies issued prior to 2004 that are designed to endow at age 100, it’s important to understand what happens to the policy when it reaches maturity. Consider a UL policy that has a $500,000 death benefit but only $30,000 in cash value on the policyholder’s 100th birthday. At that time, the policy endows and the policyholder will — absent a

maturity rider providing for payout of the death benefit — typically receive only the cash value, as the policy coverage will cease. [5] Explore whether a new policy would be appropriate. After reviewing the existing policy, consider what a new policy would do for the client, especially in light of their current health or any surrender changes that might come into play. It might be the right time to obtain a policy with optional riders to cover long-term care or chronic illness expenses. The most important day for clients to have their life insurance in force is the day that they die. Proper care and diligence during policy reviews can make sure that happens no matter how long they live. Palmer Williams is national sales director, Saybrus Partners. Palmer may be contacted at palmer.

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October 2016 » InsuranceNewsNet Magazine



2Q FIA Sales Surge

Good to Great?

We know fixed indexed annuity sales did great in the second quarter, but there was a difference of opinion on just how great. LIMRA Secure Retirement Institute reported that second-quarter FIA sales were $16.2 billion, 30 percent $15.5B $16.2B higher than the prior year and surpassed all quarterly sales records. In the first half of the year, indexed annuity sales increased 32 percent to $31.9 billion, compared with the first six months of 2015, LIMRA said. Wink also reported strong second-quarter sales, but just not as strong as LIMRA cited. According to Wink, total second-quarter indexed annuity sales were $15.5 billion, up more than 3 percent when compared with the previous quarter and up nearly 28 percent when compared with the same period last year. “Second-quarter sales are typically unremarkable, but this quarter was greater than every quarter but last year’s record fourth quarter,” said Sheryl J. Moore, president and CEO of both Moore Market Intelligence and Wink. “This really speaks to consumers’ demand for safe money products that can outpace rates at the bank.” The two organizations have differences in some carriers they survey and interpretations of what counts as an FIA. But they do agree that sales will not have as good a year in 2017 because of the Department of Labor’s fiduciary rule, which will change business for some sellers and block independent marketing organizations. Variable annuity sales were not so stellar in LIMRA’s report. In the second quarter, VA sales totaled $26.9 billion, down 25 percent. VA sales fell 22 percent in the first six months of 2016 to $53.5 billion. This is the lowest first half of the year for VA sales since 1998 and the first time VA sales have been below $30 billion for two consecutive quarters since 2002. Despite the fact that sales in all retail fixed product lines recorded double-digit growth, the drop in VA sales pulled the overall results down. In second quarter 2016, total U.S. annuity sales were $58.4 billion, 3 percent lower than the prior year.


Here is the latest on new annuity products launched recently: Annexus launched the BCA Elevate suite of fixed indexed annuities. BCA Elevate features exclusive access to the Merrill Lynch RPM Index, which leverages six global asset classes including equities, fixed income, and real assets such as gold and real estate. BCA Elevate is issued by the Athene Annuity and Life Co. DID YOU




Great American Life is expanding its product offerings to include a fee-based FIA and optional guaranteed income rider. The Index Protector 7 FIA marks Great American’s entry into the investment advisory channel. As one of the first fixed indexed annuities to hit this emerging market, the Index Protector 7 is designed for Investment Advisor Representatives who offer fee-based services. Despite the fact that sales in all retail fixed product lines recorded double-digit growth, the drop in VA sales

Allianz Life was the top seller of individual annuities in the first half of 2016, with sales of more than $5.8 billion Source: LIMRA

InsuranceNewsNet Magazine » October 2016


There are 11was companies offering This quarter greater than every QLAC (qualifying longevity annuity quarter but last year’s record fourth contract) products. While this is quarter. a small and new part of the DIA —market, Sheryl J. Moore, president and we expect to see an uptick CEO of both Moore Market Intelligence and Wink, on second-quarin sales in 2016. ter annuity sales

pulled the overall results down. In second quarter 2016, total U.S. annuity sales were $58.4 billion, 3 percent lower than the prior year.


Just as in the U.S., China’s population is faced with a long life expectancy and many years spent in retirement. So what does that mean for the American retirement savings market? LIMRA SRI and the Society of Actuaries are studying the challenges faced by the Chinese retirement system. They found that only two in 10 Chinese workers have a formal retirement plan and that the Chinese system of social pensions is unsustainable in its current form. As a result, Chinese policymakers are looking to other markets, such as the United States, for guidance.


of Chinese customers were interested in tax-deferred annuity products The LIMRA SRI research also found that more than half (55 percent) of Chinese consumers were interested in tax-deferred annuity products. A tax-deferred pension scheme has been proposed, and foreign insurers will be allowed to participate. If this proposal is enacted, the product portfolio in China becomes more diverse, and thus more attractive to companies and consumers.

October 2016 Âť InsuranceNewsNet Magazine



FIA Supervision Under Fiduciary Rule: ‘Suitability on Steroids’ W  hat independent insurance agents who sell fixed indexed annuities can expect under new supervision frameworks from marketing organizations authorized to act as financial institutions.

M By Cyril Tuohy

arketing organizations that are authorized to act as financial institutions under the Department of Labor fiduciary rule are proposing new supervision frameworks for their agents or representative affiliated with a registered investment advisor (RIA). So what does this mean for independent insurance agents who sell fixed indexed annuities? The agents can expect those new frameworks to be more rigid and require stiffer due diligence. There also will be an increased transparency about how much commission-based agents will be paid. That’s according to application materials from the organizations seeking to be authorized as financial institutions under the new rule, which takes effect in April 2017. Agents can expect more preapproval of compensation, a more limited set of products to sell and no compensation side deals, documents show. 46

“One of our carriers called it suitability on steroids,” said David Rauch. He is chief operating officer and general counsel of Annexus, a product-design and marketing company in Scottsdale, Ariz. But it may be a different story once agent information and product details are loaded into computer platforms, and once the compliance machinery is in place and agents are fully trained, he said. In the long run, agents may find many processes more user-friendly than in the past. Seven marketing organizations have filed applications with the DOL to become “financial institutions.” This is considered critical for independent agents who want to continue selling commission-based FIAs. These types of annuities are popular with certain investors, as they promise income but have potential to earn higher rates of interest than bank deposits. FIAs are on track for a record year of $60 billion in sales. More marketing organizations are expected to file for financial institution status over the next several weeks.

Heaped Compensation

Agents who sell fixed indexed annuities under the DOL’s Best Interest Contract Exemption can expect a commission payment structure to resemble a broker/

InsuranceNewsNet Magazine » October 2016

dealer model. The structure would include paying out through a grid and through levelized commissions. That’s according to Chris Eaken, vice president of compliance and administration with Legacy Marketing Group, an independent marketing organization (IMO) in Petaluma, Calif. Legacy has applied for financial institution status. Legacy executives foresee their financial institution offering “heaped compensation,” similar to that of a broker/ dealer. But they also may support agents moving to a fee-based business model such as an RIA. Heaped compensation is where advisors receive most, if not all, of their compensation upfront. Trail compensation, by contrast, is paid out over the life of the contract. “Our financial institution will offer insurance and financial advisors proprietary products through multiple carriers,” said Preston Pitts, president of Legacy Marketing. “Heaped levelized compensation will remove conflict of interests for our advisors so they can focus on providing products and services that are in their clients’ best interest.” Broker/dealers also identify what are known as Offices of Supervisory Jurisdiction (OSJs). These are branch offices that recruit representatives and monitor the


Nobody can deny that seniors dominate as the biggest and most sought-after market for agents and retirement planners. But advisors are getting some bad advice these days when it comes to selling Indexed UL to this lucrative group.

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• “There’s not enough time for the policy to grow”

• “IULs are best sold to Gen Xers and Millennials”

• “Fees are too high to capture gains”


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October 2016 » InsuranceNewsNet Magazine


ANNUITY FIA SUPERVISION UNDER FIDUCIARY RULE: ‘SUITABILITY ON STEROIDS’ sale of products and programs in accordance with the Financial Industry Regulatory Authority (FINRA). “Legacy envisions a similar pattern in which the IMO will work with subindependent marketing organizations, or subIMOs, much like a broker-dealer works with Offices of Supervisory Jurisdiction or branch offices,” said Niju Vaswani, chief marketing officer of Legacy. But “to what degree the IMO will assume responsibility and operate in a capacity similar to an OSJ or branch office is yet to be determined,” Pitts also said.

Building a New Suitability Desk

Futurity First Financial, which owns three IMOs, is planning to support a commission and a fee-based model for its agents, CEO Mike Kalen told InsuranceNewsNet. While insurance carriers are still developing their post-DOL commission options, it’s most likely agents will opt for a commission-based model, for which Futurity First will offer three options. For 10-year-plus surrender charge products with full income riders and index options, the company will offer an upfront commission of around 7 percent for the same product class regardless of the insurance carrier offering the product. A second option, a hybrid commission, is expected to offer agents a 3 percent to 4 percent upfront sales commission with a 50 or 60 basis-point asset-based or trail commission. It’s expected there would be a third option as well: a 1 percent trail commission for the length of the annuity contract. “Compensation will be aligned with the complexity of the product, and agents will have choice of the type of commission,” Kalen said. “Everything with a full income rider and a 10-year-or-more surrender period all will have essentially the same commission to ensure objectivity across insurance carriers. More complex products receive more services (from the agent) and therefore higher compensation.” Less-complicated products will have

lower commissions, but also offer commission options, Kalen said. Supervising agents will be done by Futurity First’s sales and suitability desk, which will be staffed by professionals who have advisory experience. The policies of supervision will be created and monitored by senior managers and their compliance officer, he said. The group will be headed by an industry veteran with advisory experience and educational credentials such as Chartered Life Underwriter, Chartered Financial Consultant, Retirement Income Certified Professional or Certified Financial Planner designations. In addition, the head of the group will be paid through a salary and bonus, tied to quality rather than sales volume, Kalen added. The staff will have a strong mix of sales and suitability experience. They also will be paid salary and bonuses tied to quality rather than sales volume. IMOs and insurance companies have “internal sales support” desks to manage sales, but the Futurity First sales and suitability/best-interest desk is completely separate from the support desk, Kalen said. It will be led and primarily staffed in Hartford, Conn. The sales and suitability desk will sign off on the sales of an FIA for BICE-related sales conducted by independent agents and advisors in Futurity First’s three IMOs, as well as the 100 or so partner agencies and sub-IMOs affiliated with them, Kalen said. Also, Futurity First will have a set of tools to support broker/dealers who distribute FIAs to help integrate them with their BICE policy, he added.

Some insurance companies indicated they would not stand behind independent agents who face the potential of future litigation exposure ...


Variations on a Theme

The DOL’s fiduciary rule was developed to prevent agents from “steering” retirement plans and retirement investors into products that, while suitable, weren’t necessarily in the best interest of the retail investor yet paid higher commissions to agents. Regulators, therefore, are most interested in how marketing organizations

InsuranceNewsNet Magazine » October 2016

are proposing to supervise independent agents to ensure that the terms of the DOL rule are enforced. In response, the marketing companies have proposed slightly differing models but remain vague about the exact details. Financial Independence Group, a marketing organization based in Cornelius, N.C., favors a framework modeled after an RIA. The framework “will be adapted as appropriate for insurance-only agents” to monitor and supervise sales of FIAs, the company said in its DOL filing. InForce Solutions, a marketing organization for Allianz Life, has indicated it prefers a supervisory framework modeled after FINRA, which supervises broker/ dealers. Legacy seems to favor a hybrid model, company executives told InsuranceNewsNet. Meanwhile, Futurity First is building an entirely new desk through which to supervise agents. Supervision of independent agents emerged as an issue in the spring. At that time, some insurance companies indicated they would not stand behind independent agents who face the potential of future litigation exposure, on the grounds that the product they sold wasn’t in the best interest of a client as required by the DOL rule. This reluctance on the part of insurers caused some independent agents to wonder about the future of FIA sales. In response, marketing organizations are seeking financial institution status from the DOL to stand behind the thousands of agents whom organizations recruit to sell billions of dollars’ worth of FIAs every year. “The most important aspect is what each of the (IMO) entities says about how they are going to supervise the agents who are going to work for them and whether an IMO can serve as a financial institution,” Bruce L. Ashton, partner with Drinker Biddle & Reath, told InsuranceNewsNet. Drinker Biddle represents several marketing organizations in their applications before the DOL. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at

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October 2016 » InsuranceNewsNet Magazine




1 in 4 Employers Face Double-Digit Premium Increases More than half of U.S. employers are shelling out at least 5 percent more for worker health insurance than last year, and nearly one in four is facing a rate hike of 10 percent or more. These findings were part of a recent Arthur J. Gallagher survey. Although the majority of employers surveyed said they believe health care benefits are an important part of attracting and keeping workers, they are looking at strategies to rein in costs. Among those strategies: telemedicine, narrow network health care plans, consumer-directed health plans and self-insuring. Employers are also exploring less common options to rein in costs. Some are using defined contribution arrangements to give workers a specific amount of money to buy their own insurance and provide them with access to a private exchange. Although fewer than 5 percent of employers have adopted these arrangements, that figure is expected to triple by 2018. Drug Cost Per Person


United States


Other Nations


Prescription drug prices in the U.S. are more than double those of most other nations. That’s according to researchers at Harvard Medical School. In 2013, per capita spending on prescription drugs in the U.S. was $858, compared with an average of $400 per capita in 19 other industrialized nations. Prescriptions make up about 17 percent of U.S. health care services, according to the Harvard researchers. What’s driving these high prices? Pharmaceutical companies blame research and development on new drugs for the high price of current prescription medications. However, the Harvard researchers contend that many new drugs are developed with funding from the National Institutes of Health and other government agencies. DID YOU




Researchers said the biggest reasons for high drug prices are monopoly rights from the U.S. Food and Drug Administration, as well as exclusivity connected to patents. These delay the introduction of cheaper, generic versions of name-brand drugs. The report said the higher costs could also be the result of different factors, from sicker-than-expected enrollees to possible problems in the way the states report their preliminary Medicaid data.


States are pushing back against “step therapy,” which is when insurers require clients to start with older and cheaper drug therapies before stepping up to more expensive and riskier treatments. A number of states are pushing back against this policy, also known as the “fail first” approach. More than a dozen states have laws prohibiting step therapy, and at least five other states have passed legislation against it recently.

The annual cost of caring for elderly stroke survivors in the U.S. is $40 billion. Source: Pittsburgh University Northwestern of Post-Gazette Michigan Mutual

InsuranceNewsNet Magazine » October 2016

Source: Business Wire

It’s expensive to develop medications, but not as much as portrayed ­— drugs are priced based on what the market will bear. — Dr. Aaron Kesselheim, Harvard Medical School researcher

Critics of step therapy contend that insurers are forcing patients to try older, less expensive treatments for months before agreeing to cover pricier ones, even if a patient’s physician is confident that the less expensive treatment won’t work for the patient. Insurers argue that step therapy has improved their ability to cover a wide range of patients and medications.


A big part of the Affordable Care Act was the expansion of Medicaid. Now a report finds the costs involved with that expansion are going up faster than previously anticipated. The ACA provided for the federal government to pay the entire cost of the Medicaid expansion from 2014 through the end of this year. In a recent report to Congress, the Centers for Medicare and Medicaid Services said the cost of expansion was $6,366 per person for 2015, about 49 percent higher than previously estimated. Between 9 million and 10 million people are covered by the expanded Medicaid. CMS experts had predicted most of the Medicaid-eligible would sign up in 2014, the first year that expanded Medicaid was available, and Cost of Medicaid that demand expansion is 49% would drop off higher than estimated in 2015. However, the opposite happened and costs went up. The federal government has been picking up 100 percent of the tab for the first three years, until 2017, when states will start paying an increasing amount of the bill. That portion will top off at 10 percent by 2022, with the feds providing the remaining 90 percent.


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New MetLife Dental Program Helps Employers Meet the Needs of More Employees


he traditional workforce of the past has been replaced by a new norm—a mix of full-time employees, part-timers and consultants. While this new norm combines unique generations, different aspirations, and a new way of thinking about the workplace and employee benefits, dental remains a must-have benefit. A new program from MetLife—MetLife TakeAlong DentalSM—is designed to complement employers’ traditional MetLife group dental benefits, offering an individual coverage option for the segment of the workforce not eligible to participate in a traditional employer-sponsored dental plan.1 MetLife TakeAlong Dental can support employers’ efforts to find ways to meet the unique needs of this growing mobile and nontraditional workforce when it comes to offering dental benefits while balancing cost concerns with employee needs.

In fact, 80 percent of employees indicate dental benefits are important when deciding whether to accept a job, according to the same study. And compared with those who don’t have dental insurance benefits, employees who have dental benefits are significantly more satisfied with their benefits (88 percent versus 42 percent) and are more likely to stay with their employer (82 percent versus 70 percent). The implications for emEmployees who ployee loyalty are significant. indicate dental benefits With four in 10 employees— are important when particularly millennials— deciding whether to saying that retiree benefits are accept a job a key reason to stay with their employer, MetLife TakeAlong Dental can help serve as a retention tool that’s easy to implement.

They want to take it with them

In the same study, 61 percent of employees said they are extremely interested in taking benefits with them when they retire or change jobs, an increase of 11 percent over the previous year. Employees who said they are extremely interested in taking benefits with them when they retire or change jobs Employees who are satisfied with their benefits

Employees who are more likely to stay with their employer

Dental – a must-have benefit

Multiple trends in the American workforce in recent years have caused fewer workers to have access to traditional dental coverage at work. An increasing number of the workforce are part-time or consulting either by choice or because they are underemployed. As employers continually strive to attract and retain the best talent, dental insurance is a key benefit. Yet many workers do not have access to any sort of dental program, and many employers have not been able to fill this gap. According to the 14th Annual MetLife U.S. Employee Benefit Trends Study (see more at, only 63 percent of employers provide dental coverage to employees, yet 68 percent of employees feel dental is a must-have benefit. 52

InsuranceNewsNet Magazine » October 2016

Yet only 44 percent of employers currently offer portable benefits, with only 34 percent of employers agreeing that portable benefits are important in helping employees plan for their futures. While not a replacement, MetLife TakeAlong Dental can be used as an alternative to COBRA,2 helping attract top talent with access to a highly-desired benefit employees and their dependents can take with them.


rtable dental Portable dental MetLife TakeAlong solutions Dental keeps it simple nefits benefits solutions for employers and advisors Advisors are well aware of MetLife as a high-quality at grow your that grow your dental carrier with exceptional service. Now MetLife is launching this innovative program, MetLife TakeAlong siness business Dental, that helps advisors grow their business through deeper relationships and an ongoing revenue stream, as, where applicable, commissions are paid no matter where life takes employees as long as the coverage stays in force.3 And at little to no additional cost to employers, MetLife TakeAlong Dental is a perfect complement to a MetLife group dental plan. MetLife supports the end-to-end administration from enrollment to employee/retiree billing to ongoing service. And there is no additional work for advisors; MetLife provides a full-service solution from enrollment to billing to service and renewal.

Robust coverage, broad network and exceptional service

Employees are often skeptical of individual coverages because they typically provide less coverage, smaller networks or even just discounts. MetLife TakeAlong Dental is different. It provides covered services similar to MetLife group plans, including the same network of over 358,000 dentist access points, online access and claims handling that are available to all of MetLife’s group benefits customers. When complementing MetLife group dental coverage, MetLife TakeAlong Dental delivers consistency across an employee population.

The last dental program they will ever need

MetLife TakeAlong Dental is another example of MetLife’s innovation to help employers find the right SM SM mix of solutions to better balance costs and employee needs. MetLife TakeAlong Dental allows employers to be ew, innovative program A new,for innovative part-timers, dental program for part-timers, confident in a solution that dental can help attract and retain sultants, and retirees. consultants, and retirees. employees.

etLife TakeAlong MetLife Dental TakeAlong Dental

fe’s TakeAlong DentalSM is designed to complement MetLife’s TakeAlonggroup DentalSM is designed dental to complement group dental and provide your clients with a dental program plans and provide that youroffers: clients with a dental program that offers:

To find out more about MetLife’s dental coverage and programs, including the new obust coverage plus the same broad network • Robust as coverage traditional plus the same broad network as traditional MetLife TakeAlong Dental, visit MetLife group plans MetLife group plans

asy implementation and administration with• Easy little implementation to no and administration cost with little to no cost or employers for employers

ortable dental coverage that individuals can •take Portable dental with coverage them that individuals can take with them

with our experienced professionals to offerWork a new with our experienced voluntary professionals to benefit offer a new voluntary benefit 1 Coverage fora the segment of the revenue workforce not covered under an employer’s groupfor plan, an provide new stream your business that can provide a new and revenue deepen stream for your business and deepen such as part-timers, consultants, and retirees, is subject to a minimum number of enrolled onshipslives. with your clients. relationships with your clients. Contact MetLife for complete details. 2 MetLife TakeAlong Dental is not COBRA coverage and does not affect any employer obliga-

tion to provide COBRA coverage. out more at Find out more at 3 Availability of commissions is based on group size and MetLife guidelines.

Availability of MetLife TakeAlong Dental is based on MetLife’s guidelines, group size, and state approvals. Like most insurance policies/benefit programs, insurance policies/benefit programs offered by Metropolitan Life Insurance Company (MetLife) and its affiliates contain certain exclusions, exceptions, reductions, limitations, waiting periods and terms for keeping them in force. Certain administrative services are provided through Careington International Corporation, Frisco, TX (Careington). Careington is not affiliated with MetLife or its affiliates. Please contact MetLife for costs and complete details. In certain states, availability of MetLife’s individual dental product is subject to regulatory approval. L0916477675[exp0917][All States][DC,PR] © 2016 Metropolitan Life Insurance Company, New York, NY 10166

CS © 2016 Metropolitan Life Insurance Company, New York, NY ER USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC.

L0816475833[exp0817][All 1608-659621 CS © 2016 Metropolitan Life Insurance Company,States][DC,PR] New York, NY L0816475833[exp0817][All States][DC,PR] FOR PRODUCER USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC.

October 2016 » InsuranceNewsNet Magazine



How We Lost Only 0.4% of Our Clients to Competitors Last Year This three-legged stool is the basis for happy clients and a successful niche practice. By Elie Harriett


ast year was the greatest year we had since we started producing back in 2003. Not only did nearly 100 percent of our clients continue to put their faith in us and trust us, but more of them than ever before also sent family, friends and neighbors to us. We were only about half a dozen more referrals from turning people away this year. And we did it without any kind of marketing or advertising, or even a desire to sell products. I should explain myself. My partner and I run a niche insurance agency. We are specialists. We sell only one type of product category and three products: Medicare supplements, Medicare Advantage and Part D prescription drug plans. We sell no other products except in unique circumstances. We try to repre54

sent every carrier we can. And every client can call us directly with problems. When October comes around, we stop marketing. We begin calling all our clients back, and offer to take one more look at their coverage. We don’t try to sell them anything new; we just call our clients and try to determine whether the product we

three main concepts we use to sell and conduct our business. Let us share them with you. Don’t go in with a specific product to sell until you know the situation. When we first meet with someone, we do not go in with a decision to sell Carrier A or B. We start fact-finding.

already sold them will meet their needs in the next year. And if it won’t, we fix it so that a new one will. Once we started taking notice of all the referrals we were getting, we started asking how or why we were referred. The answers were actually a reflection of the

The carrier means absolutely nothing at this point. Get the prospect’s prescription bottles — not the list, the bottles themselves. If you are looking at a Medicare Advantage plan, get the list of the client’s doctors and a list of medical services

It is almost A MAGICAL CLOSE when clients can point to a price and carrier name on a screen and say, “I can do that.”

InsuranceNewsNet Magazine » October 2016

the client can reasonably expect to use that year. Then, plug the drugs into the website, and be accurate about it. If clients are serious about finding an Advantage plan, then once you’ve confirmed their drugs with one or two carriers, look at their doctors. Explain the costs, good and bad. Remember, you are not a doctor. So if a client says they want to change their prescription or their doctor so they can get into a particular insurance plan (which happens more often than it should), you must counsel them that it is better to try to find a different insurance carrier than to risk changing their lifesaving medication or their physician! Insurance is there to protect them. If it puts a person’s life at risk, then the wrong product is in place. If clients don’t know whether they want a Medicare supplement plus Part D or an Advantage plan, we go over the pros and cons of each. My personal preference is for my clients to go into Medicare supplements. My parents have a Medicare supplement. I wish I were old enough to have a Medicare supplement! However, I never tell that to my clients unless they specifically ask. I have clients who are perfectly happy in Medicare Advantage plans, but I tell all my clients about the pros and the cons of each type of coverage. Don’t disparage either choice. Recommend both in the best light possible for their specific situation unless there is an actual lifestyle or medical reason to recommend one plan over another. When it comes to Medicare supplement prices, I use a web service. For a very small fee, this service will put in front of the client the price of every supplement, whether I sell that supplement or not. This eliminates the objection “I wanted to see what other prices are out there.” Now, if we hear that objection, we know we do not have this client’s trust. It is almost a magical close when clients can point to a price and carrier name on a screen and say, “I can do that.” The sale is made, and the clients came to that decision themselves. People don’t need you in order to buy insurance. I’m sorry to break this news, but you are not needed to sell insurance anymore. Internet, direct mail, telephone calls, newspaper inserts, TV ads — even October 2016 » InsuranceNewsNet Magazine


HEALTH/BENEFITS HOW WE LOST ONLY 0.4% OF OUR CLIENTS Google — are selling insurance now. None of these ways of selling is as effective as you are, but they’re catching up. In my world, about one-third of all products are sold by mail, internet or inbound calls direct to insurance companies. Prospects don’t need me, and a lot of them know it. We figured this out and changed our strategy because of it. We now tell people we are going to become their personal benefits coordinator. We are going to help them when a problem comes up. Every client has our cellphone numbers. We tell them that if the insurance doesn’t work the way we told them it will, call us. Directly. Don’t call a secretary or an assistant or the company. Call us. We’ll call the company. We might pass the call off to an assistant or someone who works with us. But the client doesn’t need to know that. They tell us the problem. We call them back with the answer. The client doesn’t care how the problem gets handled as long as the problem gets handled. They need only talk with us, and the rest gets handled as if by magic.


Prospects don’t need me, and a lot of them know it. We figured this out and changed our strategy because of it. This is our second-best source of referrals: simple claims assistance. Clients may not need you in order to buy insurance, but they definitely need you to help fix it. Really, it does not take much time out of your day to answer a call, take notes and send them to someone internal to handle. You can be bothered to back up your word with service! Annual reviews are everything. This is the No. 1 reason for clients sticking with us and referring us — and we stumbled on it by accident. During our first Medicare annual election period, we lost 25 percent of our overall clients and increased our new client number by only about 10 percent, so we started asking those who left

InsuranceNewsNet Magazine » October 2016

us why they did. The answer was simple. Their prescription drugs either were not were covered or covered poorly the next year, so they went somewhere else. After the new year, we started taking calls from upset clients complaining that their health plans changed. They expected someone to notify them instead of having to read the literature. So the next year, we started calling all our clients and looking at their plans again, recommending changes when necessary. Our lapse rate began to drop. As selling time became less available because we were doing so many annual reviews in such a short period, we stopped marketing. After a few years, referral rates rose. The simple act of talking to a client every year


There is no better way to establish credibility than to tell a person, “The best I can do is Company B. However, Company A might be better, and here is why.” to rework their prescriptions and Medicare Advantage copays leads to a client’s friends and family saying, “I want that!” We don’t lose income by doing this. The drug plans pay a $26 annual commission. This is not something to sustain a business on. But when a client goes to another agent for prescription advice, that other agent doesn’t move just the prescription plan; they move everything. By protecting these $26 products, we are protecting the hundreds and thousands of dollars in renewals we already earned. When you add in the new referrals, suddenly you have a workable income. Finally, a word about not representing every company. There is no better way to establish credibility than to tell a person,

“The best I can do is Company B. However, Company A might be better, and here is why.” Whether the two companies are close in price or not, clients appreciate the honesty. If they’re close, a lot of times the client will choose to go with us anyway. If the company we do not offer is just plain better for a client’s specific circumstance, we explain why and connect them with that company. We’ll walk away without the sale, but we did the right thing. Nothing, absolutely nothing, makes us happier than receiving a referral from someone we directed to a competitor because of the way we conducted ourselves, or that person calling us back the next year and asking us whether we could look

at their coverage again because they trust us more than they trust the company they decided to do business with. Ethics are universal, and we feel these rules transcend all products and will increase the community reputation of any broker. Find out what the client needs before trying to sell it to them, assist with claims and problems, and conduct annual reviews. This is our three-legged stool, our secret sauce. This is the reason only four out of our 1,200 individual clients dropped us last year. In a world where the economy shifts, the regulatory environment changes and products become more complicated, the act of personalized service for each individual continues to be what each and every client is really looking for. Elie Harriett co-owns Classic Insurance & Financial Services Co., specializing in Medicare-related insurance. Elie may be reached at

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October 2016 » InsuranceNewsNet Magazine



Powered by


Retirement Insecurity Moving Across Generations

Social Security withdrawal is an irrevocable decision - there are no do-overs. You have one chance and one chance only to get this right.

That three-legged stool is getting wobbly. The traditional threepart approach to retirement funding – pension, Social Security and individual savings – is becoming more of a challenge than ever, according to a study. The 17th annual Transamerica Retirement Survey showed that 45 percent of baby boomers expect to see their standard of living decrease in retirement. Among Generation X, 83 percent said they expect their age group to have it worse in retirement financially than their parents. Only 18 percent of millennials said they are very confident about their future retirement. Among the survey’s findings, 61 percent of all workers said they have not fully recovered from the Great Recession; 77 percent of workers are worried Social Security won’t be there for them when they retire, and 65 percent of workers believe that they can work until age 65 and still not have enough retirement savings. Which brings us to what many describe as the new “fourth leg” of retirement funding – continuing to work. The survey found that 38 percent of workers expect to receive some income from employment during their retirement, with 15 percent expecting it to be their primary source of income in retirement.


A 3 percent default deferral rate? That’s so 2011! A T. Rowe Price report found that more employers are increasing the default employee contribution rate to 6 percent when they auto-enroll employees into retirement plans. Other findings in the report show that about half of the plans administered by T. Rowe Price have adopted an auto-enrollment feature, a 28 percent increase since 2011. Plans with an auto-enrollment feature have a participation rate of 88 percent, while those that do not have this feature have a participation rate of just 48 percent.


What’s higher than Amazon’s annual revenue and greater than the combined DID YOU


yearly sales of Home Depot and Lowe’s? America’s student debt. Current student debt in the U.S. stands at $1.4 trillion, according to recent report published in collegedebt. com. A Moody’s analysis states that student debt obligations are growing much faster than credit card debt or auto loans, while average salaries for recent graduates are not keeping up. The average student debt in the United States has increased to about $29,000 – that’s double the amount of debt since 2009, the U.S. Department of Education reports. Moody’s reports that student loans require an estimated $160 billion in annual payments in order to cover their


THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING wasaccumulate 20 percent of working millennials say they will never this year. The average increase in the first daytheir (or “pop”) is 13 percent. $1 million in savings over lifetime.

? 2/3

Source: Renaissance Capital


InsuranceNewsNet Magazine » October 2016

— Ed Vargo, Burning River Advisory Group, Cleveland

liability. One in five borrowers owes more than $50,000 in student loans, and 5.6 percent carry a debt load of more than $100,000.

LOOK OUT! GEN Z ENTERS WORKFORCE Enough about the baby boomers and their needs! Never mind about Generation X or the millennials! Generation Z - those born in the mid-1990s and later – is growing up and the oldest members of that group are trickling into the workforce. This means it’s possible that the workplace of today could house four generations of employees! It may be a bit too early to determine what Gen Z’s needs will be as they mature financially. But Principal Financial Group studied the various generations and discovered their different financial needs and behaviors. Millennials are most likely to ask mom and dad for financial advice, The Principal’s report found. Baby boomers are apprehensive about retirement saving. Generation Xers are beginning to realize that their own retirement is approaching. A recommendation from a family member is what is most likely to get a millennial or a Gen Xer to meet with a financial advisor, The Principal found. More than two-thirds of those in the millennial or Gen X age groups said they would like to get their financial advice in person.



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October 2016 » InsuranceNewsNet Magazine


How Advisors Can Capitalize on the Crowdfunding Boom T  he boom in crowdfunding is only one piece of the growing financial technology industry. The popularity of this approach is leading consumers to consider a broader range of alternative investments. By Dayne Roseman


attended a technology convention in the early 2000s, and it seemed as though I couldn’t take a step without overhearing a conversation about crowdfunding. Years later, it appears that the crowdfunding sector has picked up even more steam. You can thank the Jumpstart Our Business Startups (JOBS) Act of 2012 for some of the heat this sector has generated. Once signed into law, the JOBS Act helped everyday individuals have a chance to start their own companies by using crowdfunding. Crowdfunding made it possible for entrepreneurs to raise money from large pools of small investors, in turn helping their businesses get the capital 60

needed to grow and prosper. Leveraging the accessibility of the internet and the relaxed regulatory environment created by the JOBS Act, crowdfunding has seen the amount of money invested double or more each year since 2010. An estimated $34 billion was invested in crowdfunding in 2015, from $880 million in 2010, according to Forbes. The sector has grown so popular that inflows this year are expected to surpass those of venture capital, which invests an average of $30 billion annually, according to a report by e-commerce website Massolution. The World Bank estimated that crowdfunding revenues would reach $90 billion by 2020. What is even more interesting is that crowdfunding is only one subsector of the booming financial technology industry. Today this industry includes everything from robo-advisors and e-investment products to cutting-edge ways to refinance homes, cars and student loans. Last year, $22.3 billion was

InsuranceNewsNet Magazine » October 2016

invested in fintech, compared with $1.8 billion only five years ago.

Why Crowdfunding Stands Out

Investors like crowdfunding because it bypasses the middlemen, financial jargon and high upfront capital that plague many traditional investment options. For example, sites like Realty Mogul and CrowdStreet allow individuals to make smallscale investments in their own neighborhoods. The personal connection enabled by these models is turning formerly apathetic buyers into real estate enthusiasts. Although this crowdfunding expansion is exciting, it isn’t without compromise. The problem, it seems, is one of self-discovery. Propelled to the front of the fintech conversation right as it hit its stride, crowdfunding has been forced to find its way while under the spotlight. As the world watches its every move, crowdfunding has had to traverse a changing regulatory landscape and, more important, figure out what it really wants to be.

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HOW ADVISORS CAN CAPITALIZE ON THE CROWDFUNDING BOOM As an example, let’s use Fundrise, the longtime (or as longtime as one can be in a new industry) darling of the crowdfunding world. Just before Thanksgiving last year, the ultrahyped platform that touted itself as the anti-real estate investment trust announced it had raised $60 million to form e-REITs. Many were shocked. While e-REITs aren’t exactly the same as REITs — they aren’t traded on an exchange and have slightly less liquidity — the fundamentals of the two are the same. When asked why it turned into what seemed to be the antithesis of its original model, Fundrise’s founders cited easing regulations and the need to reform existing products. Although the company is keeping its promise to provide real estate-backed financial products that are

The Movement Toward Alternative Investments

Fundrise’s legacy might not be in its product but rather in the movement it created. Because of Fundrise, along with thousands of other successful crowdfunding companies, millions of people are now more comfortable with not only the idea of crowdfunding but also the broader range of alternative investments. Today there is a class of people hungry for investments outside stocks, bonds and cash. Much like hitting the gym or going to the doctor, alternatives have long seemed to be the investment class that people turn to only when things go south. To a certain extent, this makes sense. Alternatives tend to work countercyclically to the broad financial markets, making them a compelling asset

have provided strong countercyclical advantages, income streams for those in retirement and revenue for those who sell them. Although all of these are good reasons to consider annuities, none of them touches on the accessibility themes found in other areas of the alternative sector. Furthermore, annuities don’t enhance traditional, more familiar assets in a way we’re hearing investors increasingly request. To leverage this new interest, check out alternatives based on rethinking a tangible, familiar asset. One of the most popular avenues is real estate. Financial professionals are exploring REITS (and now e-REITs), mortgage investment corporations and commercial mortgage notes, among others — and are advising their clients to do the same.

As it turns out, news of crowdfunding’s death has been greatly exaggerated, and capital still flows openly into the sector. more accessible and have lower fees, the market’s takeaway was that the formerly red-hot crowdfunding phenomenon was cooling down. The weeks that followed were filled with questions about the viability of crowdfunding. Silicon Valley was abuzz with theories about the future of what everyone once thought was the future. As it turns out, news of crowdfunding’s death has been greatly exaggerated, and capital still flows openly into the sector. However, we have begun to notice an interesting trend that was underlying Fundrise’s decision. As much as people crave the way crowdfunding democratizes investing, individuals and their advisors are showing an increased interest in how the qualities of crowdfunding can be applied to other products, particularly alternative investments. 62

class to hedge against volatile markets. However, the growing interest in crowdfunding is highlighting lesserdiscussed benefits of alternatives: accessibility and transparency.

How Advisors Can Take Advantage of the Trend

With fewer of the red tape barriers that plague traditional assets, alternative investments are set to be the most popular asset class in the coming years. But despite the growing conversation about that asset class, many potential investors still don’t understand what an alternative investment is. This presents a very interesting opportunity for those who are qualified to give financial advice. As an advisor, you can educate your clients about this increasingly popular asset class. You may have dipped a toe into the annuities bucket. For years, these products

InsuranceNewsNet Magazine » October 2016

By stripping the category of its barriers, the alternative real estate market is becoming more transparent than ever before. Nestled between teenage crowdfunding opportunities and archaic, traditional models, alternative real estate products offer a middle ground for enhancing a portfolio without sacrificing the security that comes with more traditional assets. And as a trusted advisor, you’re the mentor who can lead your clients to these products. Dayne Roseman is the managing director for Woodbridge Wealth. Dayne may be contacted at

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8 Strategies to Maximize Your Clients’ Charitable Giving N  ot all charitable gifts are created equal. Here are some considerations in matching clients with the most suitable giving method.


By Brett Sause

he last few months of the year are commonly referred to as the “season of giving,” a time when charitable donations increase dramatically. As advisors, we can work with our clients to develop a plan for their charitable giving that aligns with their financial goals and overall wealth management. Here are eight common charitable giving strategies.

[1] Charitable Lead Trusts

Charitable lead trusts are one of two trustbased donation agreements. Charitable lead trusts provide an income flow to a charitable organization for a period of time, after which the donated assets may be returned or distributed to other noncharity beneficiaries. This is one of the few charitable giving techniques that can generate income tax, gift tax and estate tax deductions for clients.

[2] Charitable Remainder Trusts

A charitable remainder trust provides income to donors for life or for a specified number of years, up to 20. Like a charitable lead trust, this option is not contract-based. Based on the discounted value of the future gift to charity, the contributions will generate a current income tax deduction for clients. Both the charitable lead trust and the charitable remainder trust are ideal for clients who have a strong charitable commitment and who wish to minimize estate tax or income taxes, or who have significant illiquid assets that are not generating income.

[3] Pooled Income Funds

These are created and managed by a charity, 64

into which a donor transfers assets. In return for the donation, the client (or their designee) receives a lifetime income paid from the earnings of the fund. Upon the death of the income beneficiary, the value of the remainder interest is removed from the pooled income fund and transferred to the charity. Pooled income funds are a good alternative for clients who would like a current income stream from donated property but do not want to incur the costs and legal fees of establishing a charitable remainder trust.

established and funded by a single source to hold, manage and distribute gifted assets. Because private foundations are the most complex means of giving, they are more susceptible to possible operation for the private benefit of donors and managers. As a result, the Internal Revenue Code contains special rules for private foundations that do not apply to public charities. With a high cost to establish and maintain, this planning technique should be reserved for high-net-worth clients.

[4] Charitable Gift Annuities

A donor-advised fund is a separately identified fund held and administrated by a qualified public charity that allows clients to make contributions and be eligible for an immediate tax deduction. The sponsoring organizations generally allow the donor to serve as an advisor to the fund or to name another person to serve as an advisor. Because a donor-advised fund can be established relatively quickly, it can be a useful year-end tax planning tool that offers immediate income tax advantages.

This is a direct contract between a charity and a donor, whereby the donor transfers assets to the charity in return for an unsecured promise to pay an income stream. Because the annuity payments are not secured, it’s imperative to encourage clients to review the charity’s financial picture and its historical success with other fund payments.

[5] Life Insurance Policies

Life insurance can enable a client to provide a more substantial contribution to charity than would otherwise be possible. The simplest form of a charitable gift using life insurance is the designation of a charity as the policy beneficiary. Upon the client’s death, the estate will receive a charitable deduction equal to the amount of the death proceeds passing to charity. As with many other charitable planning techniques, the rules relating to the use of insurance for charitable giving can be complex, and they often encompass both state and federal laws. In particular, insurable interest laws, which can vary from state to state, should be reviewed when a client is considering charity-owned life insurance. The benefits of this option include revocability, simplicity and changeability.

[6] Private Foundations

A private foundation, or a family foundation, is a charitable nonprofit organization

InsuranceNewsNet Magazine » October 2016

[7] Donor-Advised Funds

[8] Qualified Plans

When they want an alternative method of donating, certain taxpayers may transfer funds from their individual retirement accounts to an eligible charitable organization by designating the charity as their beneficiary. Under this option, the charity will be treated as receiving the distribution. Neither the client nor their estate will owe income taxes on the amount. Brett M. Sause, LUTCF, LTCP, CLTC, is the principal and CEO of the Atlantic Financial Group, a boutique financial firm in Easton, Md. He is both a life and a qualifying member of MDRT, with three Court of the Table qualifications. Brett may be contacted at brett.


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.

5 Things to Do Today to Guarantee Success in 2017 D  on’t wait until December to start planning for next year. By J. Leland “Lee” Davis


ou may not have noticed, but you’re already in 2017. As a practical matter, many of the prospects and clients whose transactions you’re working on right now won’t bear fruit until after Jan. 1. Here are five things you can do now to guarantee success in the coming year.

[1] Evaluate and Assess

Is your plan working? Where are you in relation to your 2016 goals? Your lifetime goals? Each month in our practice, we evaluate precisely where we are on our business goals in terms of percentage of completion; we’re either ahead or behind. In addition, we look at our personal objectives, such as our individual financial goals, family objectives and health. If we’re not on track in a particular area, we consider what changes need to happen. Most important, we write it down. All of it. Then we act on it. In doing so, we position ourselves to take the next steps — or at this time of the year, to be fully prepared for a record 2017. You can too.

[2] Mobilize Your Resources

The people, systems and information you need to achieve your personal and professional goals are readily available and waiting for you. All you have to do is access them. In terms of people, initiate or expand a mentoring relationship (formal or informal) in the areas of life most important to you — those areas in which you’d like to make the most progress. If it’s business, go to a respected local producer whose results you aspire to achieve and arrange a breakfast meeting. Prepare a list of questions beforehand.

Most successful producers are happy to help, but they are seldom asked. If you’re in a study group, offer to head up 2017 goal setting for the group. The maxim “If you really want to know a subject, teach it,” applies. If you’re not in a study group, start or join one. As for resources, they are everywhere. The NAIFA and Million Dollar Round Tables websites are treasure troves of information on marketing and goalsetting, such as the MDRT “Whole Person” methodology, sales ideas and more. Seriously consider hiring a coach, then following their advice to the letter. Spend the money on this endeavor, knowing that wise expenditures on marketing can often come back two-, four- or even tenfold.

identify ways to accomplish that goal. Taking this approach can set the stage for a record year in your business — and in your life.

[4] Tweak the Plan

You must write it down. Your written plan can focus your mind’s enormous power to achieve your goals. Refining each goal and the elements needed to achieve it is an ongoing process. Actively look for minor improvements that could make a huge difference. Keep in mind that no one gets there alone. Inspire your team members, and take excellent care of them. If you don’t have great administrative help, get it. Determine whom you will need on your team. Then hire them, inspire them and train them.

[5] Commit

[3] Reach

Have you ever noticed what an Olympic sprinter does at the finish line? They lean forward. They reach for every single scintilla of a second in that last moment. You should too. Stretch yourself in each goal area in your life, especially at the end of 2016. Be sure to set “stretch” goals that will come into play if you find yourself ahead. In your 2017 planning, use the “add a zero” technique and add one “0” to your business goals. If you are working toward $100,000 of income, for example, add a zero to come up with $1,000,000. Ask yourself: If I had an unlimited marketing and staff budget to get to $1 million, what would need to be in place? Then, work back to the things you came up with that you can do in 2017. This will put the original goal in perspective and will help you

If you eat bacon and eggs for breakfast, you know that the chicken was involved; the pig was committed. Commit to have your 2017 plan ready to go by Halloween and, like the pig, give it your all (the good news is that you’ll stay alive, or course!). A person who is 100 percent committed to a result is an awesome force of nature. Be one. Our business provides an amazing opportunity to impact the lives of others while simultaneously improving our own. Think big. Think positive. As Ralph Waldo Emerson put it so eloquently, “Do the thing and you will have the power.” Good luck in 2017. J. Leland “Lee” Davis, LUTCF, is a frequent industry speaker and an author with multiple MDRT Court of the Table and Top of the Table qualifications. His firm, JL Davis Financial, is located in Denver, Colo. Lee may be contacted at lee.davis@

October 2016 » InsuranceNewsNet Magazine



With over 89 years of experience, The American College is passionate about helping students expand their knowledge and opportunities as financial professionals.

Helping Clients Make Good Choices F  inancial advisors should have the goal of increasing their clients’ autonomy in the decisionmaking process. By Julie A. Ragatz


he recent release of the Department of Labor (DOL) conflict of interest rule reinforces the importance of client education. Client education is crucially important because financial professionals’ legal and moral obligations center on the belief that clients have the right to determine which course of action is in their best interest. When individuals are empowered to make these decisions, we refer to them as autonomous decision-makers. One goal of financial advisors should be to increase their clients’ autonomy, which advisors can do by providing clients with the best information in a manner that is designed to help clients correctly incorporate it into their decision-making process. However, this is not an easy task. A recent study conducted by the Cary M. Maguire Center for Ethics in Financial Services and the New York Life Center for Retirement Income was published in the Summer 2016 issue of The Journal of Retirement. The study examined the top ethical concerns of financial advisors working in the field of retirement income planning. Respondents indicated, in order of priority, they were concerned about: [1] Protecting clients from elder financial abuse. [2] Clients’ understanding of the complexities of their retirement income plans. [3] Clients’ ability to understand the financial products and services offered to them. [4] Sales representatives or other agents misrepresenting financial retirement income products to clients. [5] Retirement income professionals lacking proper knowledge about Social Security claiming strategies to best serve their clients. 66

The qualitative aspect of the study was a series of interviews with financial advisors. The results indicated that advisors believed the majority of any misrepresentation that occurred was the result of advisors’ lack of knowledge rather than any sort of intent to harm the client or intent to benefit at the client’s expense. All of these concerns get to the heart of the matter: a professional obligation to promote clients’ autonomy. We often think that promoting autonomy is simply a matter of transmitting relevant information to the client. However, this is not enough. If our goal is to create autonomous clients, we need to think in a more holistic fashion. Specifically, autonomous decisions have the following characteristics:

» Not overwhelmed by emotion.

It is perfectly acceptable to appeal to emotions in persuading people to purchase a suitable product or service. It is ethically unacceptable, however, to attempt to overwhelm a client’s rational capacities through emotional manipulation. Just as people can be blinded by passion, they also can be blinded by emotion.

» Free from unwanted interference: Clients should determine from whom they receive advice and counsel. This freedom from unwanted interference also should apply to family members and other interested parties. The implication is that advisors must be acutely aware of the possibility that their elderly clients may be the victims of elder abuse or exploitation as a result of interference by those trying to take advantage of them.

» Relevant facts placed in the appro-

priate context. As we know, facts take on different importance when placed in a particular context. For example, consider the true statement that the United States Treasury does not have sufficient cash on hand to make good its pledge to guarantee money deposited in Federal Deposit Insurance Corp.-backed savings accounts. Unscrupulous advisors could present these facts

InsuranceNewsNet Magazine » October 2016

in a way that could lead unsuspecting investors to believe that their money is not safe and secure in an FDIC-insured savings account. In this case, facts are used to persuade people of the truth of a highly debatable conclusion. The lesson is that it is not sufficient to present the facts to clients, but it is necessary to present the facts in the appropriate context that allows people to reach an accurate and reasonable interpretation easily.

» Providing sufficient time to reflect upon alternatives. Ethics demands that we do not create a false sense of urgency and that we encourage people to take the time that they need in order to make a good decision. There are certainly reasons for an advisor to encourage a client to act now; some of these reasons are altruistic (i.e., advisors are well-aware that clients may put off important decisions about financial matters due to fear or discomfort), but some of these reasons are selfish (i.e., the advisor’s dominant interest is in closing the sale). Part of what it means to promote autonomy is to allow clients to determine the pace of the decision-making process. One of the heartening findings of the study was that most respondents were convinced that the vast majority of advisors (and their organizations) were interested in and committed to doing business in accordance with ethical principles. The danger, according to the respondents, was that a lack of advisor and client education can prevent advisors from making good recommendations, which results in limiting clients’ capacity for autonomy. The positive conclusion is that a lack of education is a clear problem that has a clear solution. Advisors and their clients simply need to work together to achieve it. Julie A. Ragatz is director of the Cary M. Maguire Center for Ethics in Financial Services and assistant professor of ethics at The American College. She may be contacted at julie.



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Advisors Don’t Always Practice What They Preach C  lients assume their advisors have business transition plans in place for their practice, but research shows that’s not always the case. By Laura Murach


e never know where life’s journey will carry us. That’s why the financial services industry’s most important role is helping families prepare for whatever may happen. LIMRA research shows that although advisors are diligent in making sure their clients are ready for an uncertain future, many lack similar plans for their own practices. Furthermore, clients expect and assume their advisors already have continuity and succession plans in place. LIMRA recently surveyed nearly 900 U.S. advisors and 1,600 consumers to gather their thoughts on business transitions. Our research uncovered a significant gap between client expectations and reality. Clients assume their advisors practice what they preach and have business transition plans in place, but that’s not always the case. Nearly all clients believe their advisor is prepared for an unforeseen exit from the business. Only 1 percent of clients believe their advisor is not prepared. The reality is quite different, however, as just 50 percent of advisors are prepared with a business continuity plan. We saw similar results for succession planning. Nine out of 10 clients expect their advisors to carry out their obligations without disruption. Among clients whose advisors are age 50 and older, twothirds believe their advisor has started preparing for retirement. By contrast, the research shows up to half of advisors do not have succession plans. Clients expect the truth with no smoke and mirrors. Trust is one of the top three most important factors a client considers when working with an advisor — it’s the 68

foundation of the relationship. Our research found that for many clients, loyalty lies more with individual advisors than with the companies they represent. Clients believe their advisor has earned their loyalty and always makes decisions in the client’s best interest. The desire to make a difference in people’s lives often is cited as the primary reason an individual chooses a career in financial services. These inherent characteristics of caring, protecting and “doing good” are the motivation behind why many stay in the career for so long. That’s why business continuity and succession plans are so important. An advisor’s lack of planning for their practice is risky and does not meet their clients’ needs and expectations properly. The industry faces two significant challenges: the maturing sales force and a changing environment with more regulation. These challenges make business transition plans more essential than ever. Many in the industry believe the new Department of Labor fiduciary rule will trigger a mass exodus of older advisors who may leave earlier than originally planned just to avoid the new regulation. Furthermore, the Securities and Exchange Commission is proposing an amendment to its prior rule regarding business continuity and transition plans for investment-oriented advisors.

InsuranceNewsNet Magazine » October 2016

Nearly nine in 10 advisors start their businesses from scratch and spend their working lives building a successful practice. So why leave something that important to chance? Business continuity and succession plans are essential to ensure the practice can continue into the future. Our research suggests the most likely reasons advisors don’t have plans are mainly increased demands on their time and that they simply don’t know what to do. Many advisors admit they lack the knowledge and understanding of how to build a plan. Developing business continuity and succession plans is complex and timeconsuming. Valuating the practice is a difficult but essential process for these types of plans. Identifying a problem often can reveal an opportunity. Advisors who gain the knowledge and experience in building continuity and succession plans for their peers can differentiate themselves and provide an important service for their clients. With proper planning, one advisor’s legacy is another’s future. Laura A. Murach, ACS, ALMI, is an associate research director, distribution research for LIMRA. Laura may be contacted at laura.murach@



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InsuranceNewsNet Magazine - October 2016  
InsuranceNewsNet Magazine - October 2016  

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