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DOL FIDUCIARY RULE: IMPACT ON FINANCIAL PROFESSIONALS What does the DOL fiduciary rule mean to you and your practice? It depends on whether you are a registered representative, an investment advisory representative or an insurance-only licensed financial professional.

REGISTERED REPRESENTATIVE Currently: You may submit new FIA business under the supervision of your broker/dealer (B/D) or as an outside business activity (OBA).


INSURANCE-ONLY PRODUCER Currently: You conduct your FIA business as an insurance licensed producer appointed with multiple insurance carriers through your national marketing organization.

Currently: You submit your FIA business as an outside business activity (OBA) to your RIA as an insurance licensed producer.

As of April 10, 2017: If your B/D agrees to serve as a financial institution, your B/D will be subject to the DOL fiduciary rule and must take appropriate steps to ensure that the requirements of the BICE are met for advice recommendations on every qualified FIA sale.

As of April 10, 2017: If your RIA agrees to serve as a financial institution, it will be subject to the DOL fiduciary rule and must take appropriate steps to ensure that the requirements of the BICE are met for advice recommendations on every qualified FIA sale.

As of April 10, 2017: Either an insurance carrier or possibly an NMO must serve as a financial institution under the DOL fiduciary rule and take appropriate steps to ensure that the requirements of the BICE are met for advice recommendations on every qualified FIA sale.

Questions you need to be asking:

Questions you need to be asking:

Questions you need to be asking:

• How will my B/D treat FIAs beginning April 10, 2017? • What products will be on the approved list? • What additional requirements will be in place?

• What expertise does my RIA have regarding FIAs? • Are they new to the FIA world? If so, will their learning curve hamper the future growth of my practice?

• Am I confident that my NMO will meet and/or exceed the requirements that come along with being a financial institution? • Should I consider obtaining different licenses so I can offer other retirement products?

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January 2017



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18 The Trump Effect: How an Election Changed Everything By John Hilton

The 2016 presidential election was all about change. But what will change and when? We take a look at everything from the fiduciary rule to health care reform. INFRONT

8 F ixed Annuities Had a Strong 2016 Despite Soft Third Quarter By Cyil Tuohy Fixed indexed annuities continue a winning streak but other lines are not as robust.


30 10 Steps to Create Long-Term Client Satisfaction, Retention By Ron Sussman The beginning of a new year is a good time to reconsider how and what you’ll sell to your clients in the future.

34 Seven Life Resolutions for 2017

By Rod Rishel Carriers and distribution partners must become even more relevant, responsive and resilient to serve clients effectively in 2017.


38 C onsumers Can’t Plan for Longevity If They Don’t Acknowledge It By Will Fuller Research shows clients have difficulty grasping the reality of a retirement that could last for decades.


10 Instant Connection

An interview with Judith Glaser There’s talking and then there’s conversation. What’s the difference between talking back and forth and forging a deep, meaningful connection? Judith Glaser has been studying the ways that conversational intelligence goes deep into our DNA. She tells InsuranceNewsNet Publisher Paul Feldman how to transform your communication style and win your customer’s trust.


40 F IAs Balance the Interest Rate/Bond Yield Seesaw

InsuranceNewsNet Magazine » January 2017

By Joe Maringer Most retirees don’t understand the inverse relationship between interest rates and bond fund values.


46 Y ounger People Need LTC, Opening Coverage Gap By Brian Harrington Your younger prospects may think longterm care is something only Mom and Dad need to worry about, but they are mistaken.

50 Extreme Tax Deductions Using Cash Balance Account Plans By Bill Kanter A cash balance pension plan makes it more affordable to save for retirement at greater levels than a traditional 401(k) plan alone.

52 6 Ways to Protect Against the Biggest Threat in Retirement By Dan McGrath Save your client’s Social Security benefit, lower their Medicare costs and put money back into their overall retirement portfolio.

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54 2017: The Year Digital Marketing Delivers on Its Promise

57 NAIFA: What a G2 Needs to Know About Joining the Agency

By Chris Hooper More advisors are learning that digital marketing gives them access to data, flexibility and opportunities that they never had previously.

By Danny O’Connell When you’re the newest generation to enter the family-owned practice, don’t expect to change the entire company on Day One.


58 MDRT: Helping Clients Achieve Financial Success in 2017

56 THE AMERICAN COLLEGE: Goodbye, Vegas: What the DOL Rule Means for Reward Trips

By Lizzie Dipp Metzger Help your clients to realize that small steps toward their financial goals are better than none.

By Craig Lemoine The fiduciary rule will lead to a culture shift in most financial services firms.

60 LIMRA: Today’s Middle-class Consumer May Be Different Than You Think By Scott Kallenbach Being middle class is a state of mind and not a series of numbers on a paycheck.

EVERY ISSUE 6 Editor’s Letter 16 NewsWires

26 LifeWires 36 AnnuityWires

44 Health/Benefits Wires 48 AdvisorNews Wires


275 Grandview Avenue, Suite 100, 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 SENIOR MULTIMEDIA DESIGNER Bernard Uhden


Copyright 2017 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 275 Grandview Avenue, Suite 100, 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, 275 Grandview Avenue, Suite 100, 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 Kathleen Fackler Darla Eager

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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The Rules That Are Right


t is open season on regulations with Donald Trump’s inauguration this month, and various industries will be pushing at the gate to get at their most detested rule. The heavy burden of regulation is a mystery to people who haven’t tried to start or operate a business, but just ask them how they like dealing with a government entity — perhaps the department of motor vehicles or the Internal Revenue Service. Anyone who has bought real estate and has sat through the scribblefest of closing knows the absurdity of disclosure. Now imagine interacting with that entanglement regularly rather than once a year or so. And add fees upon fees on top of that. Then they might have a sense of how even the most public-spirited people could turn into opponents of regulation. Multiply that kind of experience over thousands of industries and millions of entrepreneurs and you have a good idea of how much pent-up frustration there is. The insurance industry saw regulations gone awry with the Department of Labor’s fiduciary rule. The DOL’s initial argument had no solid evidence of a problem. The government’s report to justify the rule did not even cite insurance industry data. The report’s writers did not support their case, but they did reveal bias against commission-based selling, calling it a conflict of interest. Rule proponents loved to ask, “What’s so hard about looking out for the client’s best interest?” But why would the rule guarantee that? The worst scams in history have been conducted under the fiduciary standard. Meanwhile, the worst violations by life insurance agents are unsuitable sales, for which the suitability standard still applies. The financial schemes stole billions of dollars while the insurance cases involved thousands. The argument for the fiduciary rule was not always clear, but some of the motivations were. A key argument was the predatory behavior of some agents and companies that targeted vulnerable, older consumers for sales that were borderline or clearly unsuitable. It is easy to conclude that the agents were chasing the commission rather than 6

looking after the client’s best interest. The industry has cleaned up this practice substantially. Some say there are still too many marketers competing on commission rates rather than on service, but the balance is tipping toward holistic advising. The market already was shifting in that direction for a number of reasons, and certainly the pull of the financial industry had a role in that. It is an example of the free market at work. But that does not mean regulations are bad. They are a necessary part of civilized life. Self-interest, even enlightened, does not ensure the public good is protected or that accountability is assured. Laissez-faire roamed freely in the 19th century, when workers and the environment had no protections. Child labor was OK, as was dumping industrial waste into waterways. The merely wealthy grew into plutocrats, and working people were ground into broken discards. As gilded mansions grew on Fifth Avenue, the Lower East Side became one of the most densely populated places in world history. That imbalance caught the attention of another Republican president from New York City who was instrumental in changing it — Theodore Roosevelt. Although he was born into wealth, he didn’t believe in a laissez-faire approach. He saw that companies ballooning into conglomerates were unhealthy for American business and citizens. His work to break monopolies earned him the name “Trust Buster.”

InsuranceNewsNet Magazine » January 2017

As police commissioner in New York, Roosevelt pushed for housing regulation to remedy the living conditions that he saw in the Bowery. He called for better transit and parks to make the city more livable. Roosevelt managed to do something about housing when he became New York’s governor by getting tenement laws passed. He also was responsible for factory inspection requirements, the first of many regulations to come when he became president. In fact, you could say that he was the father of regulation, creating the basis of the larger federal government that we have today. As president, he got a railroad regulation bill, the Meat Inspection Act, and the Pure Food and Drug Act, with which the federal government assumed responsibility for protecting consumers. Roosevelt also pushed for the regulation of insurance companies. One of his enduring legacies is the national park system, which grew out of land he set aside for preservation as public land. Much of the 230 million acres were in the West, a land he came to love when he retreated to the Dakotas to mourn his first wife. Today, almost all of that legacy is vilified by many Americans, often in his own party. But Roosevelt set the stage for American exceptionalism, whether in ensuring equal opportunity or adventuring around the world. He possessed a greatness that he could barely contain. His energy and relentlessly good spirit is still a model for us. The structure Roosevelt helped build supported the healthy, robust growth that established modern America. As we push off into this next era, we can derive some wisdom from something Roosevelt said in his first inaugural address as he stood at the threshold of the 20th century: “Much has been given us, and much will rightfully be expected from us. We have duties to others and duties to ourselves; and we can shirk neither. We have become a great nation, forced by the fact of its greatness into relations with the other nations of the earth, and we must behave as be seen as a people with such responsibilities.” Steven A. Morelli Editor-In-Chief

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Fixed Annuities Had a Strong 2016 Despite Soft Third Quarter  ixed indexed annuities continue F a winning streak, but other lines are not as robust. By Cyril Tuohy


s the third quarter’s fixed annuity sluggishness a sign of the market’s direction or just a blip on an ascending arc? It is too early to make a trend out of a single quarter, but sales overall have been looking strong for many preceding quarters. Even with the third quarter’s results, over the nine-month period ending Sept. 30, sales still rose to $91.5 billion, a 25 percent increase over the previous year, according to industry tracker LIMRA Secure Retirement Institute. There’s even more good news: Yearend sales of fixed annuities are expected to surpass last year’s sales of $104 billion by as much as 20 percent, LIMRA also reported. For the nine-month period ending Sept. 30, fixed rate deferred annuities were up 38 percent to $31 billion,book value annuities were up 21 percent to $17 billion, and market value adjusted annuities soared 70 percent to $14 billion. In addition, fixed indexed annuities rose 22 percent to $47 billion; fixed deferred annuities were up 28 percent to $78 billion; deferred income annuities increased 19 percent to $2.2 billion; fixed immediate annuities shot up 11 percent to $7.2 billion; and structured settlements inched up 2 percent to $4.2 billion, LIMRA reported. Good news all around for the fixed world. “The bigger story is that even with a big decrease in the third quarter, the year-to-date sales are still ahead of 2015, and that’s up 25 percent,” said analyst Scott Hawkins, a director of insurance research at Conning in Hartford.


The Third Quarter

But what about the “smaller story” around third-quarter sales? After roaring along during the second quarter with sales of $31.5 billion, fixed annuities hit the brakes in the third quarter when sales dipped to $27.7 billion, an increase of just 1 percent over the third quarter of 2015, LIMRA SRI data indicate.

indexed and income annuities, said Todd Giesing, assistant research director for LIMRA SRI. had June rates for five-year fixed annuities dropping from 1.61 percent to 1.48 percent, and the decline in crediting rates has meant a corresponding decline in sales, analysts said. “Lower crediting rates reflected the continued pressure on insurers’ investment

Year-end sales of fixed annuities are expected to surpass last year’s sales of $104 billion by as much as 20 percent. Wink’s Sales & Market Report, another industry data tracker based in Pleasant Hill, Iowa, reported third-quarter traditional fixed annuity sales down by as much as 59 percent to $1.2 billion compared with the year-ago quarter. FIA sales were down nearly 24 percent compared to the second quarter, Wink also said. (The company measures a narrower group of fixed annuity companies compared to LIMRA.) Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., in a news release called fixed annuity sales “sluggish.” Of the eight fixed annuity product categories tracked by LIMRA, four of them turned negative in the third quarter.

What Happened?

The 10-year Treasury hit a record low during the third quarter, which took a toll on pricing for fixed-rate deferred,

InsuranceNewsNet Magazine » January 2017

portfolios from the prolonged low-interest rate environment,” said Scott Hawkins, director of insurance research with Conning. “Insurers need to adjust crediting rates to maintain product pricing margins.” Moore agreed that the rates helped depress sales. “Several companies had big drops in their fixed annuity sales this quarter,” Moore said, “Five of the top seven sellers had double-digit declines. This is primarily a result of rate reductions to their annuities. Whenever there are reductions in interest rates, we see corresponding declines in sales — when it comes to fixed annuities and MYGAs.” Hawkins also said that with rates on the decline over the summer, deferred income, book value and immediate annuities were in a holding pattern, and advisors may have been asking clients, “You want to buy now or would you prefer to wait until after the election?”




3Q 2016

% Change

YTD 2015

YTD 2016

% Change

Fixed-Rate Deferred

$8.9 B

$8.5 B

-4 %

$22.4 B

$31 B

38 %

Book Value

$5.5 B

$4.6 B

-16 %

$14.4 B

$17.4 B

21 %

Market Value Adjusted

$3.4 B

$3.9 B

15 %

$8 B

$13.6 B

70 %


$14.3 B

$15 B


$38.4 B

$46.9 B

22 %

Fixed Deferred

$23.2 B

$23.5 B


$60.8 B

$77.9 B

28 %

Deferred Income

$680 M

$610 M

-11 %

$1.9 B

$2.2 B

19 %

Fixed Immediate

$2.3 B

$2.2 B

-4 %

$6.5 B

$7.2 B

11 %

Structured Settlements

$1.3 B

$1.4 B


$4.1 B

$4.2 B


$27.5 B

$27.7 B


$73.3 B

$9.5 B

25 %


Source: LIMRA Secure Retirement Institute, U.S. Individual Annuity Sales Survey (2016, Third Quarter)

Since the Nov. 8 election, rates have spiked. Even as rates improve, insurer portfolios will remain under some pressure because insurance companies hold big blocks of bonds bought when rates were decreasing, and it will take some time for the bonds to roll off until they are replaced by higher-yielding bonds, Hawkins said. Market watchers were also waiting for the Federal Reserve to raise its benchmark

Indexed Annuity Sales

Fixed indexed annuities (FIA), long a shining star of the fixed annuity world and which are on pace for a record $60 billion year in 2016, increased only 5 percent with $15 billion in the third quarter compared with the year-ago period, LIMRA said. Wink’s Sales & Market Report pegged FIA sales up only 3.2 percent to $14.3 billion in the third quarter compared with the year-ago period.

For the first time in years, the seven-year-term fixed annuity is rising in popularity... lending rate at its December meeting, in the wake of a robust jobs report by the Labor Department. Jeremy Alexander, president of Beacon Research, an Illinois-based fixed annuity data tracker, said he is seeing unusual growth in a particular product. For the first time in years, the sevenyear-term fixed annuity is rising in popularity, a sign that investors are willing to pay more to go out for a longer term as the yield curve steepens, which is often seen as a sign of stronger economic activity, Alexander said.

Analysts pointed to the Department of Labor’s fiduciary rule, which raises standards for investment advice into retirement accounts, as an FIA sales headwind. In the past, insurance agents and the independent marketing organizations (IMOs) they work with have been responsible for the bulk of FIA sales. But banks and broker/dealers, which are more tightly regulated, may be taking away some of those sales from the IMOs, analysts said. “The DOL fiduciary ruling has had tremendous impact on the channel,”

Hawkins said. “IMOs are now at a great disadvantage to banks and broker/dealers.” Alexander also said that under the DOL rule the easiest way for an insurance company to sell more FIAs is to go through a financial institution such as a bank, a registered investment advisor (RIA) or a broker/dealer — where 60 percent of reps already hold a Series 6 or Series 7 license. “These channels are so regulated now, so how big of a leap is it for them to go and follow and comply with the DOL? Much less than for nonfinancial institution,” Alexander said. Alexander said his data showed that FIA sales through independent broker/ dealers rose 57 percent to $7 billion in the first three quarters of 2016 over the year-ago period. Some of that may be DOL-related, but some if it might also be connected to distributors redirecting sales from the falling variable annuity market and into the rising fixed indexed annuity market, Alexander also said. “There’s been much speculation about the effect of the DOL, and I’m not one to guess, because I’ve seen evidence of a sell-off and I’ve seen evidence of a surge,” Alexander said. “So many people are going out on a limb on this.” InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.

January 2017 » InsuranceNewsNet Magazine






InsuranceNewsNet Magazine » January 2017




ow smart is your conversation? That might sound like a dumb question, but the answer affects your success in business and in life. Conversational intelligence has been Judith E. Glaser’s life's work, and the world is catching up with her. Inc. magazine rated the concept of conversational intelligence as one of the five top business trends of last year, alongside the industrial Internet of Things and datafication. Judith has been digging into research that shows conversation not only shapes opinion and motivates action but also actually changes the neurochemistry of the brain and can even affect DNA. The latest of her seven books, Conversational Intelligence, focuses squarely on the subject after years of research. Judith has been an adjunct professor at The Wharton School. As CEO of Benchmark Communications, she has worked with American Airlines, American Express, Cisco, Coach, ExxonMobil and IBM. Judith started the Creating WE Institute to spread the message of conversational intelligence around the world, certifying coaches in 65 countries. In this conversation with Publisher Paul Feldman, Judith discusses how conversational intelligence drills all the way down into our DNA.

GLASER: Exactly. We have spent 35 years in my business working with companies, including in the insurance and the financial industries. I’ve been studying what makes great leaders, and it turns out that great leaders have a sensitivity to how their conversations impact others. People who are less successful focus much more on what they want to say or advocate, and they have less sensitivity toward their impact on others. Therefore, they frequently end up being asked to leave their companies because of the negative impact they may have, focusing too much on themselves. It’s that “I”-centric nature that some leaders have, versus the “we”-centric nature that is evolving in the world today. Great leaders take the time to connect with others. They listen to connect, not to judge or reject. Those are some of the

nect with each other on these three levels. The first level is very transactional — that’s when people exchange information, when they confirm what they know. If we were to watch it, the patterns would be telling and asking — back and forth, tell and ask. Level one has a lot to do with getting together and confirming what they know so they’re on the same page. Brokers have ideas about what types of things to recommend for their clients, so level two is where we have a thought about what we want to recommend and what we want to advocate to our clients. Level two is called “positional” conversations because I have a position and I want to make sure my clients understand that these are powerful tools that would be great for them to have. Level three is the one I spent most of my life researching because I started to see

FELDMAN: What is the significance of conversational intelligence? GLASER: Conversational intelligence is a new intelligence that I’ve discovered, and I’ve worked with many neuroscientists, scientists and psychologists to answer the question “Is this really a step beyond emotional intelligence?” What we’re learning from the research is that every human being is hardwired with the conversational intelligence capability — how to connect with others, to navigate with others and to grow with them. And it’s something that happens when you’re very little. Even, we’ve discovered, in the womb, babies and their mothers are exercising their DNA for conversational intelligence. FELDMAN: We’ve all heard about IQ and EQ, but it seems that people don’t understand that leaders find success because of the way they communicate.

Conversational Intelligence. Judith E. Glaser. Bibliomotion. 2014.

early insights we had that helped us realize there’s a global interest in conversational intelligence. FELDMAN: You say there are three levels of conversation. Can you explain a little bit about that? GLASER: It’s a really fascinating part of my research, and it took me by surprise so much that I stopped my publisher from publishing the book Conversational Intelligence: How Great Leaders Build Trust and Get Extraordinary Results. They actually stopped the press so that I could talk more about what I call levels one, two and three. It turns out that all human beings con-

there was another level where, when people come together and connect in a great way, their brains actually open up. This is where the neuroscience of conversation fits in. If we trust someone, our brain will open up and enable us to have exchanges that I call “share and discover.” That’s the dynamic. It’s not a push and pull; it’s not a tell and ask. It’s sharing because I feel trusting that I can share something with you and you won’t harm me. It’s discovering in that I feel I’m going to learn something from you, and it’s going to make it better for both of us. Level three is called “transformational” conversations. I have given it a subtitle, which is “co-creating.” When I observe

January 2017 » InsuranceNewsNet Magazine


INTERVIEW INSTANT CONNECTION people, such as insurance agents, working with their clients, there’s something wonderful that happens where the agent goes from pushing or selling into sharing and discovering. FELDMAN: So how do conversations trigger neurochemistry in the brain? GLASER: This is actually one of the big parts of conversational intelligence and what we spent a huge amount of time researching and validating with neuroscientists. The subtitle of my book is How Great Leaders Build Trust and Get Extraordinary Results. One of the things I started to look at is what the brain is doing when we’re in trust with another person. And what is the brain doing when we’re in distrust? I looked at lots of neuroscientists’ research and discovered Angelika Dimoka, who joined Fox Business School at Temple University over a decade ago. I think she was the first neuroscientist in the world to join a business school’s staff. She pulled together more than 100 researchers and scientists to look at where they thought trust lived in the brain. The output from that research is still one of the best examples of collective wisdom or the co-creation of psychologists and neuroscientists to put insight into the world. They figured out that trust exists in the prefrontal cortex, which is right behind your forehead, and it is the youngest part of our brain. It’s the most sensitive part of our brain because when we’re interacting with each other and I feel that I can’t trust you, I start to get a cortisol bath in my brain. That actually closes down the door to the prefrontal cortex, which is what I need to make really smart decisions. That particular part of the brain looks at wisdom, insights, strategies, decision-making, how to trust somebody and how to empathize with people. That takes us from the animal into what it means to be human. You can consider it like two feet on the pedals of a car. One is what’s going to stop us from connecting, and that’s going to be the amygdala, located in the limbic brain. The amygdala and the primitive

brain talk to each other and say, “Close down. We’re not going to share. We’re not going to be open to engage with this person because we don’t trust them.” That’s what cortisol does. The other is a go if I’m engaging with you and I feel trust and that you have my best interest at heart. We toggle back and forth a lot, feeling uncertainty — “Do I trust or do I not trust?” But those are the dynamics, the chemistries and the locations in our brains where trust and distrust live. For everybody in business, in a family or a relationship, understanding the chemistry of the brain, specifically relat-








Conversational Intelligence. Judith E. Glaser. Bibliomotion. 2014.

ing to how people form a “we”-centric partnership, is vital. FELDMAN: Can you tell us about your STAR skills — Skills That Achieve Results? GLASER: I was benchmarking the best leaders in the world, those who run big businesses and small businesses, to find out who really stood out among the rest, and why. So I designed a whole concept called STAR skills, Skills That Achieve Results. And each one of the points of the star had

InsuranceNewsNet Magazine » January 2017

an attribute that a salesperson or a leader in a business should understand and practice in order to create a chemistry that makes people feel trusted and trusting. The STAR skills model has building rapport first and not putting the task or the sale in front. The second two skills go hand in glove with each other. One has to do with how we engage around questions, and the other has to do with how we engage around listening. It turns out that listening to connect, not judge or reject, is something that’s very different from typical listening. Many times, people fall into listening to validate what’s on their mind, like in level one. Or in level two, people are listening so they know how to influence somebody to their point of view. All of those feel manipulative to the brain and to the heart and to our being. There is something different about listening to connect, not judge or reject, that changes the way one human being perceives another or feels about another. Those customers who were experiencing someone who was listening to connect rated that salesperson much higher than the people who were listening to influence or listening to have their sales point heard. FELDMAN: Is listening to connect the same as active listening? GLASER: It’s actually a step beyond active listening, because what you need to be doing is actually talking to your own brain and getting centered on focusing on “In what way am I going be able to connect with this person? In what way am I going to appreciate who they are and what their story is?” Every time we engage with somebody, there’s their story and our story. If my story is “I’m going to see if I can sell as much as I can to this person,” it activates distrust. Believe it or not, we have found people feel that. I’ll give you an example to make a distinction. Many times, clients will say, “You know, I really think I should have a policy, but I’m not quite sure I’m able to afford it.”

INSTANT CONNECTION INTERVIEW Somebody who’s listening actively might your point of view” is an example. with them. You’re celebrating the underrepeat that back and say, “So what you’re People who are successful create a pull standing that you’re having with them. saying is that some of the policies you’ve energy, and those who are not as successful Success and celebration are experienced seen so far are too expensive or not ap- create a push energy. That could be “push in the brain with a lot of beautiful neupropriate?” They interpret what the other away” energy, which is the worst case for rotransmitters that make us bond with anperson said very quickly, because that’s one somebody who’s in sales. other person and feel good. And, in fact, way of clarifying what people say. Human beings who are in conversation we feel good the next time we see them. But we’re pushing it a step further. We’re love to feel connected to another per- So it’s really creating a platform for current saying that in order for us to be appreciat- son. When you and the other person are and future success. ed by the people we’re selling to, we must speaking and there’s some type of coming step into their world. FELDMAN: And then, to And instead of quickly wrap up the STAR skills, confirming what they’re there’s dramatizing the saying, we must do more message. Trust is something that happens between people and inside of us. We need to bridge discovery. our outer spaces and our inner spaces to ensure trust is alive for both parties. Here We get to know what GLASER: A lot of times, we’re is a list that summarizes the “I to WE” shift. their world feels like or in a conversation and it’s so T – Transparency (Language of the reptilian brain) what it feels like to be in easy to want to push and sell their shoes. That’s a difand push and sell. But what • I-centric: Secrecy; closed doors; threats; lack of clarity; lack of alignment. ferent experience than helps the person buy is to use •W  E-centric: Openness; sharing of threats, intentions, aspirations and objectives; confirming what we different ways to express what movement toward establishing common, aligned objectives. know by repeating what we do. R – Relationships (Language of the heart brain) the client said, or some For example, if I were to talk • I -centric: Rejections; resistance; retribution; adversarial relationships; version of it, in order to about insurance and say, “It’s suspicion. move forward. like having a safety net always • WE-centric: Respect; rapport; caring; candor; nonjudgmental listening to sitting there waiting for you to deeply connect and build partnership. FELDMAN: How do you ensure that your future is safe,” suggest using discovthat’s a metaphor. And, boy, U – Understanding (Language of the limbic brain) ery questions? does that have power on hu• I-centric: Uncertainty; focus on tasks; unrealistic expectations; disappointman beings. The idea of a metment; judgment. GLASER: It’s asking quesaphor activates different parts • WE-centric: Understanding; ability to stand in each other’s shoes; empathy for tions for which you don’t of our brain, not just a linear others’ “context;” seeing and understanding (or standing under) another perhave answers. In a sense, brain but the holistic brain — spective of reality; partnership; support. it’s actually asking quesin this case, about taking care tions, not leading quesof the future. S – Shared Success (Language of the neocortex) tions. Clients would then connect • I-centric: promotion of self-interest; focus on “I” and “me;” seeking of personal I worked with a conon being safe and bring you recognition and reward. sulting firm in the U.K. into their world by buying, • WE-centric: Bonding with others to create a vision of shared success; building years ago. I was practicbecause they think you care of a shared vision that holds the space for a bigger framework for mutual sucing these skills with them, enough to take the time to cess; pursuit of shared interests and celebration of shared successes. and people were asking help them envision what this leading questions such as product is all about. Sixty-five T – Testing Assumptions and Truth-Telling (Language of the prefrontal cortex) “You’d really like to come percent of the brain is visual, • I-centric: Reactions of anger, anxiety, withdrawal, resignation. on board with this proso this really amplifies that • WE-centric: Regular, open and nonjudgmental discussion of assumptions and gram, wouldn’t you?” or part of our brain as we’re endisappointments as part of collaborative problem solving; identification and “It looks like this is what gaging with others in the condiscussion of “reality gaps” and effort to close the gaps for mutual success: you want, isn’t it?” versation. willingness to start over again if distrust emerges. You’re actually asking Conversational Intelligence. Judith E. Glaser. Bibliomotion. 2014. them to say yes to someFELDMAN: How important is thing that they’re not storytelling to conversationinterested or potentially not interested in together of the minds, there’s an opportu- al intelligence? saying yes to. nity to celebrate success. Something like, Listening to connect and asking ques- “Wow, it sounds like we’ve been through a GLASER: Stories are wonderful. People tions for which you don’t have answers get journey together in this conversation. The hearing stories about other people’s sucyou more deeply into the mind and heart things that we’re connecting on now seem cess is like having somebody next to them, of the person you’re working with. It’s a to be so important to you, and I’m really patting their back and saying, “Everything whole different approach. “I’d love to get a thrilled to be able to help you with this.” will be great. Just move forward and you’re better sense of how the world looks from You’re celebrating your moment of time going to be fine.”

Shifting from I to WE — It Takes TRUST

January 2017 » InsuranceNewsNet Magazine


INTERVIEW INSTANT CONNECTION It’s such a security blanket when the stories tell us what is great and what is good and help us step into that picture, even though it’s somebody else’s. Stories that tell us to be careful or cautious about something are a way in which somebody says, “I want to help protect you from the challenges you’re going to have.” So, two different kinds of stories — one to tell you to avoid something and the other to tell you to move forward in something. In either case, if they’re used appropriately, they can be another way to bond you and that other person. FELDMAN: You say that we’re hardwired to immediately recognize people’s intentions, and you call those “vital instincts.” Can you tell us a little bit more about that? GLASER: In 0.07 second, human beings can pick up whether we’re going to like an-

tell me that it’s even quicker than 0.07 second, which is hard to fathom. FELDMAN: Is that need to connect overriding everything else? GLASER: We crave connection. We crave appreciation. We crave being part of the inner team. There’s research showing that people’s minds gravitate toward relationships, and they think about how to enhance a relationship or how to deal with a relationship that’s not in good shape. There was a time when it was said that physical safety was the most important thing in the world for human beings, but we’ve discovered that it’s not anymore. It’s that ability to be connected and bond with other human beings that is the thing people crave most. Some people have even said they’d rather be hit by a car than be embarrassed in front of colleagues. So, being appreciated in the eyes of others is a powerful and

“Great leaders take the time to connect with others. They listen to connect, not to judge or reject.” other person or not like them, whether we can trust them or not. There are questions that people ask in their brain. They may not be fully conscious, but at the chemical level, they’re asking these questions — “Is this person a friend or a foe? Can I trust them or not? Can I be open with them? Can I connect with them and engage with them in a fair way?” They’re these mini-questions that I believe live in the cells. Those cells are designed, as part of our DNA, to pick up on the trustworthiness of another person as quickly as we can. If that’s the case, we can walk into a roomful of strangers and gravitate toward a certain person because we feel trust or we avoid another person because we feel distrust. It’s a phenomenon I’ve watched over and over and over again and studied, and so it’s really fascinating. In fact, I’ve had some physicians who’ve been studying this 14

important vital instinct. It’s something we must consider when we think about how to shape and create workplaces or relationships that really are supportive of each other in many important ways. FELDMAN: What is the “third eye,” and how does that work with conversations? GLASER: The third eye is something that exists in every human being’s brain. It’s the ability to make a link between intention and impact. This is one of my favorite stories because it’s so profound and really tells a lot about conversational intelligence. There was this executive who reported to the CEO at Verizon. Out of the seven people who reported to the CEO, he got some of the lowest ratings this particular year. It turned out that he put somebody in the hospital because he had such a heavy hand with people who reported to him. He

InsuranceNewsNet Magazine » January 2017

thought of himself as a “best practice” leader. But he was putting pressure on people to be as successful as they could — read books about leadership, write perfect memos, whatever it was. His idea was “I’m a best practice, and I want my people to be too.” Well, human resources finally got involved, and they said, “We need to get this guy a coach to see if he even belongs in our company.” Because when somebody who has been working with the company for 25 years ends up in the hospital, saying, “I’d rather leave the company and forget my pension than work with this guy,” you know you’re dealing with somebody who’s really a terror in the workplace. We worked together on all the things he was doing. He would redline his people’s papers that were going to go to the CEO and sometimes have 12, 13, 14 iterations. And each time, people’s ability to connect with him went down and their fright about him went up. FELDMAN: How did you approach this manager? GLASER: First, I let him get clear with me about what he meant by “best practice leader.” I didn’t go in and say he was wrong. I was trying to figure out his definition so we could explore what to do. It was a little hard for him to get that he wasn’t the best leader in the world, but he was willing to do with me what I call “being an experimentor.” I wanted to help him develop his third eye so that he could see the impact he was having on others and, in some way, be able to modify how he engaged with people. So I asked him to experiment with one thing. I said, “I notice that you do a lot of telling — telling people what to do, telling people how to do it. And I’d like to find out if we could shift something and just experiment with it.” I said, “What if, before the next meeting, you created an agenda, but first you asked the people who are coming to the meeting what they’d like to put on the agenda, not just have it be what you want?” That was something new for him, but he said he would be willing to try it. Then I said, “What happens if you could also go into the meeting the next day and again ask people to look over the agenda with you, to see if there’s anything they want to add? Ask them, ‘Is there something

INSTANT CONNECTION INTERVIEW really important missing?’ or ‘How should we deal with this particular issue?’” Again, something he had never done before. So, all of a sudden, he was not in the bad side of level one or two, which is where people then start to get locked into addiction to being right or “Hell, I’ll show you all” syndrome. But he was level three, engaging with how they can make the business better. He did that with his people for the first time in maybe forever, and four of his people gave me a call at the end of the day. The quote from one of them was, “What did you give my boss to drink?” FELDMAN: You gave him some Kool-Aid. GLASER: I gave him the right Kool-Aid. And the boss was so profoundly impacted by this, he allowed me to facilitate a meeting with his direct reports to talk about “What would success look like?” If we could make sure that we build a business unit that’s going to have the most successful things happen in it, what would success look like? And he got so hooked on not being right but learning about how to elevate his leadership. He’s a changed person, and he soared the next year and the next year and the next year after as a real best practice leader. FELDMAN: What are some tools that you can give for getting in and maximizing level three conversations? GLASER: We’ve been doing what are called 15-day or 30-day projects, or challenges, in companies all over the world and asking people to just take one of the three approaches I’m going to give you and let people do it. But we also ask them to also stay living in it, to see if they could keep a journal and keep track of things that change in their world as a result of it. The first one is listening to connect. Again, people listen for information. They listen to confirm what they know. They listen to influence others. There are far fewer people out in the world today who listen to connect with other human beings and really step into their world. I would say take on a 30-day challenge or a 15-day challenge and record how your life changes when you’re listening to connect. What do you see different in your families?

What do you see different in partnerships? The second is to ask questions for which you don’t have answers — again, a beautiful way for you to connect with other people — and keep track of what happens differently as a result of asking those kinds of questions. Third, keep in mind that the words that you think you hold and others hold are probably further apart than what you thought. Really get inside the other person’s thinking and see what happens. I would suggest those very simple “conversational essentials” will serve you well. Would you like me to share a story that’s absolutely one of the most amazing ones I’ve ever had in my career? FELDMAN: Absolutely. GLASER: I got a call three years ago from someone who heard me on the radio. She said, “I just have an instinct that you’re going to be able to help me and help my family with something that we’ve been struggling with for a while.” She said, “We have a daughter and it’s not fully clear in our mind or the doctor’s mind if she’s on the [autism] spectrum or whether she has something that is disabling her from connecting with other people. But something’s going on in there, and we haven’t been able to figure it out.” After four minutes with the woman, I said, “Your energy is very strong. My sense is that you need to give people more space in engaging with you. And if it’s your daughter, I think that she was trying to connect to you, but it wasn’t satisfactory to you, and she was feeling the negative judgment or the frustration that was coming across.” They had moved out of the city and to a farm. They were spending a lot of money on trying to figure out how to give an environment to their daughter and nothing was working. They came from Australia to visit me in New York City, the whole family, and we sat together. Her daughter, had already benefited from what the mother was doing to shift their interaction dynamics. They went back and later moved into another house. They didn’t have to live on a farm with horses and sheep. They just had to get through some conversational intelligence coaching. And all of a sudden, their lives as parents and their daughter’s life as

a beautiful, young child evolving into the world changed so dramatically that they’ll never forget this. And as a result of this, we formed a Creating WE institute in Australia, run by this woman because she wants to bring this work around the world with us. I met them in Australia just a couple of weeks ago, and their daughter is one of the most superstar kids in her school. The parents cannot believe how she started to grow up into a whole different perspective because the parents gave her a beautiful environment. She was conversationally sensitive to helping herself step up into who she was becoming. She’s working with the United Nations, Kids for UN. She has the ability to stand in front of an audience and make them laugh — the adults in the audience can be adults, not just the kids. She takes care of her friends in beautiful ways. FELDMAN: It seems so basic, but they don’t teach that stuff in school. That’s a basic human function to be able to have a conversation with others. GLASER: That’s right. It’s kind of like we assume just because we’re all human beings and we talk to each other that we’ve nailed that, and it’s so not true. We now know epigenetics is a big field. We now know that conversations turn genes on and off. That’s powerful. Every parent should know that when they’re holding a baby inside, how you have conversations with your child internally, in your belly, has an influence on how they show up when they come into the world. All the atmosphere that gets created is going to be translated into what your body knows to do or not do. And now that we are learning more about the genes and how they work, we have to sit back and revisit a lot of things — education and schools, how we onboard people into companies, what kind of environment we create. There’s a world here of phenomenal research. I’m actually going to go back and get another graduate degree, a Ph.D. in neuroscience and phenomenology and anthropology, because this is like the beginning of a whole new wave of thinking about what it means to be human. So you’re right. You’re absolutely right. Why don’t we do this?

January 2017 » InsuranceNewsNet Magazine




Aetna, Humana Fighting Feds in Court The planned marriage between Aetna and Humana almost made it to the “I do” stage before the federal government’s antitrust folks stepped in and halted the deal. After that, it was off to the courtroom. The Justice Department sued in an attempt to block the Aetna/Humana deal. Meanwhile, Aetna attempted to smooth the way for government consent of its $37 billion takeover of Humana by attempting to sell some of its assets to Molina Healthcare. The feds were not impressed, saying that Molina is unlikely to make up for the competition that would be lost from the Aetna/Humana merger. Aetna’s acquisition of Humana would leave the carrier dominant in Medicare Advantage coverage for the elderly in 364 counties in 21 states, Justice Department lawyers argued. Aetna and Humana are not the only two companies whose planned mergers are threatened to be torn asunder by the Justice Department. The Justice Department filed a similar antitrust suit seeking to halt Anthem’s $48 billion acquisition of Cigna. found that people with health insurance use more medical care than the uninsured, and some of the newly insured turned out to be sicker than those who were already covered.

$3.2T Total Spending $9,990 per Person U.S. HEALTH CARE TAB HITS $3.2 TRILLION

The nation’s health care spending grew at the fastest rate in eight years, reaching the $3.2 trillion mark in 2015, according to the federal government. The reasons? More people having coverage under the Affordable Care Act and the skyrocketing price of prescription drugs. The $3.2 trillion price tag amounts to an average of $9,990 per person, although the largest share of that money was spent on the sickest patients. Health spending grew about 2 percentage points faster than the overall economy in 2015, according to the U.S. Department of Health and Human Services. The HHS report found that nearly 91 percent of U.S. residents now have coverage. But it also DID YOU





No sooner were the results of the Nov. 8 presidential election announced than the first resignation was announced by one of President Barack Mary Jo White O b a m a’s m a j o r SEC Chairman appointees. Mary Jo White said she would leave her job as Securities and Exchange Commission chairman when Obama leaves office. White became the 31st chair of the SEC in April 2013 and was one of the SEC’s longest serving chairs. During White’s tenure, the SEC brought more than 2,850 enforcement actions, more than in any other three-year period in the commission’s history. She obtained judgments and orders totaling more than $13.4 billion in monetary sanctions. The

Spending by private health-insurance plans U.S. Department of increased by 7.2 percent in 2015. Source: Health and Human Services

InsuranceNewsNet Magazine » January 2017

For those investors who have tried to stick out their conservative nature by remaining in bond mutual funds, a raise in interest rates could be the beginning of Armageddon. — Curt Knotick, owner of Accurate Solutions Group, Butler, Pa.

SEC charged more than 3,300 companies and more than 2,700 individuals, including CEOs, CFOs and other senior corporate officers.


A six-term congressman and orthopedic surgeon is President-elect Donald Trump’s pick to lead the Department of Health and Human Services. Rep. Tom Rep. Tom Price R-Ga. Price, R-Ga., has been a leading critic of the Affordable Care Act during his time in Congress. If confirmed by the Senate, Price would play a central role in Republican efforts to repeal and replace the current health care law. Price has emphasized that Republicans want to keep the protections for those with existing medical conditions without mandating that all individuals carry coverage or pay a penalty to support an expanded insurance pool. He said the congressional GOP wants to address “the real cost drivers” of health care price spikes, which he said were not necessarily sicker patients, but a heavy regulatory burden, taxes and lawsuits against medical professionals. Trump chose Seema Verma to become administrator of the Centers for Medicare & Medicaid Services. Verma, a consultant from Indiana, helped Gov. Mike Pence transform Indiana’s Medicaid program. Those changes required many enrollees to pay monthly premiums to get full coverage, shut off coverage for six months to some who fail to pay and charged fees for inappropriate visits to the emergency room.





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Could the ACA Be Stalling?

It has been three years since the first Americans signed up for 28.6M 28.4M 2015 health insurance under the Affordable Care Act. Now a gov2016 ernment agency is sending out signals that the law may have hit a wall as far as getting people into coverage. The Centers for Disease Control and Prevention released a report suggesting the ACA may be reaching a limit to its UNINSURED effectiveness. The CDC said the number of uninsured people dipped by only 200,000 between 2015 and the first six months of this year, which it called "a nonsignificant difference." The findings come from the National Health Interview Survey, which has queried more than 48,000 people so far this year. The CDC study found that during 2015, an estimated 28.6 million U.S. residents were uninsured. The corresponding number through the first six months of 2016 was 28.4 million. Health and Human Services Secretary Sylvia Burwell has set a goal of enrolling about 1 million more customers for 2017, but outside experts say that's going to be a challenge. The next president will inherit a program still in search of stability.

Advisors report feeling increasingly monitored rather than supported by their firms. — Sonia Sharigian, senior product manager and report co-author at Market Strategies, on the Department of Labor fiduciary rule

and 1.46 percent for women annually. From 2010 to 2014, American death rates plunged to 0.6 percent for men and 0.42 percent for women.


Forget blackjack and roulette. Unprecedented monetary policies have turned the FEWER AMERICANS ARE world’s financial markets into a casino, Life expectancy for ‘UNBANKED’ said bond investor Bill Gross of Janus CapIn what some experts are saying is another today’s 65-yearital Group. And global central bank polisign of an improving economy, fewer old is six months cymakers are to blame. Americans are without access to a savings “Our financial markets have become a shorter than it or checking account. Vegas/Macau/Monte Carlo casino, waThe percentage of Americans who was last year gering that an unlimited supply of credit Helping people build, protect, transfer wealth since 1986, LifePro has seengenerated it all when comesbanks to selling life are “unbanked, ” or do not have and a bank byitcentral can successinsurance. Theretoare7 certain to take with a client, specific words to guidefully the reflate conversation, and an exact account, declined percent steps in 2015 global economies and reinfrom 7.7 of percent in 2013, according to appointments. AMERICANS ARE FASTER vigorate GDP the growth to lower formula materials to present within It’sDYING with this experience that we nominal have crafted precise the Federal Deposit Insurance Corp. The We tend to take for granted that life but acceptable norms in today's highly blueprint of how to sell life insurance - specifically, Indexed Universal Life (IUL). improvements mostly came from house- expectancies in the U.S. will continue to leveraged world,” Gross said in his latest holds making less than $15,000 a year. increase. But here is some disturbing news Investment Outlook, titled “Doubling Although consumers have a number from the Society of Actuaries: Life expecDown.”Videos w/Analytics Seminar System Educational of reasons why they may not use the ser- tancy for today’s 65-year-old is now six upthe your seminar attendance proven customers through your marketing “Investors/savers are vices of aStep bank, most common reason, with months shorter than it was last year.Drive new tactics used by top advisors. System includes funnel with educational wealth-building now scrappin' like the FDIC found, is that they do not beAnd it’s not just older Americans who invitations, slides, script, andaffected more. by this longevity shift. videos, collection, and user tracking. lieve they have enough money to handouts, obtain are A email mongrel dogs for tida bank account. Lack of money was cited 25-year-old woman last year had a 50/50 bits of return at the as the main reason by 57 percent of those chance of reaching age 90. This year, zero bound. ThisCampaigns canClient Lifecycle™ Process she is projected to fall about six months Automated Email surveyed. not end well.” short. the Gain the trust of your clients throughout Grow sales opportunities and turn leads into — Bill Gross Some of the reasons? Deteriorating appointment process with branded letters, customers with personalized, automated health, particularly that of middle-aged, Gross,campaigns. who oversees the $1.5 billion flowcharts, follow-up email 57% of those withoutreports, and calculators. non-Hispanic whites. Other culprits are Janus Global Unconstrained Bond Fund, a bank account said drug overdoses, suicide, alcohol poisonrecommended bitcoin and gold for invesit’s because they don’t have enough money ing and liver disease. tors who are looking for places to preAmplify your life insurance business! Attend the 2000 two-day training event indeath San Diego, on March 14th and 15th! From to 2009, American serveCA capital. rates improved by 1.93 percent for men Gross blasted ultra-loose central bank policies for hindering global economies by keeping so-called zombie corporaDID YOU tions alive and inhibiting “creative deAmericans have had their struction.”

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The DOL’s fiduciary rule is only one of the things likely to change under the Trump administration.


InsuranceNewsNet Magazine » January 2017



eeling relieved? You’re not alone in the financial services industry as 2017 dawns with pro-business Republicans controlling Congress and the White House. That doesn’t mean agents and advisors can relax and ignore what is going on in Washington. President-elect Donald Trump and lawmakers have an agenda that will affect the insurance world in many ways. How? Let’s look at what is at stake: Taxes: House Speaker Paul Ryan is determined to push tax reform and he may have his best opportunity. The result would be a significant tax reduction for investors. But can he and Trump come to an agreement? Fiduciary Rule: Trump has not commented on the Department of Labor rule specifically, but his surrogates have said he is opposed. The path to killing the rule is a little more complicated, but a delay is likely. Regulation: Other significant regulations promoted by the Obama administration — from the Dodd-Frank Act to DOL overtime rules — are certain to be gutted or killed. In 2012, Trump 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.” ACA: The president-elect said repeatedly on the campaign trail that he would eliminate Obama’s signature health care program. But the practical implications of doing so are not insignificant. What can Republicans realistically accomplish? Editor’s note: After assessing the issues and variables affecting them, the InsuranceNewsNet editorial team came up with odds that successful reform will result.

The Time for Tax Reform?

This is Ryan’s hope, the one issue he has longed to see to completion. With a like-party president and a Senate majority, tax reform should be a slam dunk. Yet, it isn’t. Comprehensive tax reform is “still a tough, tough nut,” said Michael Lewan, longtime Democratic strategist. “Think about it: We haven’t had significant tax reform since the early days of the Bush administration. Speaker Ryan and Donald Trump are going to have to fashion a coalition of Democrats to get any type of meaningful tax reform done.” Then there is the personality clash between Trump and Ryan, who refused for months to explicitly endorse the president-elect. Will those hard feelings be left in the past once the curtain comes down on inauguration festivities? For sure, there is ample promise for harmony between the Speaker and the White House since the two leaders share similar tax-cut plans. Both would slash the top income tax rate from 39.6 percent to 33 percent. Both would reduce taxes on corporations, in largely similar ways. Ryan’s entire tax philosophy represents a move away from simply slashing the top income tax rate. Instead, the GOP is focusing on targeted tax cuts and exclusions to benefit high earners with investment income.

Whether House Speaker Paul Ryan, R-Wis., can work with Trump might be the key to tax reform.

The Ryan plan drastically slashes taxes on both corporate income and income from capital gains, dividends and interest. Likewise, it cuts the corporate income tax to 20 percent, and allows taxpayers to exclude 50 percent of their net capital gains, dividends and interest income. Some of those changes will make many in the insurance industry happy, but they might also be disappointed by the Ryan/ Trump treatment of the estate tax. Trump supports full repeal and Ryan voted for the Death Tax Repeal Act of 2015. The estate tax has an 80 percent probability of being repealed by Trump and the Republican Congress, said Ken Kies, managing director of The Federal Policy Group, a Beltway lobbying firm. “Our best opportunity to stop this is to convince the Republican leadership that having Trump sign on to an estate tax repeal — something that would benefit his family — would be a disaster from a public relations standpoint,” he said. Kies predicted that Trump’s top priority would be what he called “one big budget deal” that would encompass repeal of the Affordable Care Act, an infrastructure program and tax reform. “And we think that will be done by the August recess,” he said. The incoming treasury secretary, Steve Mnuchin, promised 3 to 4 percent growth. The Trump plan to encourage repatriation of the estimated $1 trillion that large U.S. corporations hold in foreign subsidiaries will help offset the loss of revenue, Mnuchin said. Trump has proposed a special 10 percent rate on overseas funds the companies shift back to the U.S. ODDS OF A TAX REFORM BILL: 60%

Is the Fiduciary Rule Toast?

Trump did not mention the DOL fiduciary rule during the campaign, but Anthony Scaramucci, his top Wall Street advisor, assured the industry that the president-elect will work to defeat it. This is one issue where Trump and Ryan will find agreement. The Speaker is the top lawmaker to speak out against the DOL rule, which was published in April 2016 and is scheduled to begin taking effect on April 10. Since the rule is already on the books,

January 2017 » InsuranceNewsNet Magazine





1. Proposes having three tax brackets — 12, 25 and 33 percent — down from the current seven.

1. Streamlines the number of tax brackets from seven to three — 12, 15 and 33 percent.

2. Increases the standard deduction for joint filers to $30,000, from $12,600, and the standard deduction for single filers from $6,300 to $15,000.

2. Increases the standard deduction to $12,000 from $6,300 for single individuals and to $18,000 for single individuals with a child. Married couples filing jointly would see their deduction increase to $24,000 from $12,600.

3. Caps itemized deductions at $200,000 for married-joint filers or $100,000 for single filers. 4. Eliminates the estate tax, but would enact taxes on capital gains at death. No position on gift taxes. 5. Proposes a one-time tax for domestic businesses with trillions of dollars overseas, hoping to incentivize these companies to bring their foreign capital back to the United States. 6. Offers manufacturing companies the choice to deduct the full cost of their capital expenses (“full expensing”) in exchange for no longer being able to deduct net interest payments.

3. Eliminates all deductions except for mortgage interest and charitable gifts. 4. Abolishes the estate and gift taxes. 5. Proposes a territorial system that would only tax companies based on the location where goods are sold. 6. Allows businesses to immediately and fully write off capital investments. 7. Cuts the top corporate tax rate to 20 percent.

7. Proposes a 15 percent corporate tax rate. The top rate for corporations is currently 35 percent.

however, getting rid of it will not be easy. The simplest thing Trump can do is delay the rule while the administration develops a long-term strategy for it. “What are Trump’s priorities going to be?” said Scott Kallenbach, research director for LIMRA’s strategic research. “He’s got a lot up in the air right now. You’re seeing stories that he’s going to focus on Dodd-Frank and Obamacare, tax reform, immigration reform, the Iranian nuclear deal. So I think it’s a matter of where does the DOL fit in this list?” Permanent repeal of the rule, which holds anyone working with retirement funds to a “best interest” standard, can happen three ways: » Lawsuits. As of early December, opponents were 0-2 via the lawsuit route, with federal judges in the District of Columbia and Kansas rejecting plaintiffs’ requests for a preliminary injunction. That is not as bad as it sounds. After all, opponents need only to win one case out of the four to cripple the rule, whereas the government needs to win every case. A third lawsuit filed in Northern District of Texas court appears to be the strongest opposition case. The district, as well as its appeals circuit court, 20

is known for being tough on government agencies. Judge Barbara M.G. Lynn heard the case Nov. 17 in Dallas. A group of plaintiffs are led by the U.S. Chamber of Commerce. » Legislation. The House Financial Services Committee has legislation ready to go, gutting both the fiduciary rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Financial CHOICE Act would block the DOL from implementing its fiduciary rule by incorporating it into the Retail Investor Protection Act, which passed the House last year. Introduced by Rep. Ann Wagner, R-Mo., the RIPA requires the Securities and Exchange Commission to move first on fiduciary rulemaking before the DOL can act. The bill eliminates several Dodd-Frank provisions, including federal “bailouts” and the Volcker Rule, which restricts trading activities at banks. Under CHOICE — which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs — the Financial Stability Oversight Council would no longer be able to designate risky non-banks and others as “systemically

InsuranceNewsNet Magazine » January 2017

important financial institutions.” The FSOC was created by Dodd-Frank to review the systemic risk to the capital markets presented by large, global financial institutions. MetLife has fought the designation, which was considered one of the reasons the company shed its advisor unit. The FSOC’s authority to break up a large financial institution if the Federal Reserve

Rep. Ann Wagner, R-Mo., could emerge a big winner after months spent fighting the fiduciary rule.




Industry leader Jeremy Rettich cuts through the chaos. Jeremy Rettich had his first IRA before he had a driver’s license. Being a second-generation advisor, he in many ways grew up in the financial services industry. He started at the ground level of the business, worked his way up to advisor support (case design, marketing and coaching), and now he’s the president of Virtue Advisors and Virtue Capital Management. In this Q&A, Jeremy presents essential questions financial professionals must be able to answer and outlines steps they should take to set themselves up for success post DOL. Q: What are some of the biggest DOL rule concerns you are hearing from financial advisors? Most advisor confusion relates specifically to how the DOL rule could impact their business model based on their professional licenses, from having only an insurance license to holding a series 6 or 7 in addition to an insurance license. Plus, they are unsure how their broker/dealer will respond to the DOL rule. Another big concern I have heard from advisors relates to working with either a financial marketing organization (FMO) or a national marketing organization (NMO) in conjunction with an RIA that is independent of the FMO or NMO. They are uncertain how the two separate companies will be able to adapt to the DOL rule and allow them to continue to grow their business and work with clients as seamlessly as possible. Q: What should every financial professional do prior to April 10, 2017? Evaluate the current RIA, broker/dealer and/or FMO relationships you have in place to ensure they are prepared to adapt to the new rule and do so in a way that will allow you to thrive in this new, post-DOL environment. If you are considering making a change to another RIA or broker/dealer, doing so prior to

April 2017 will make the transition less cumbersome since you will not be subject to the DOL rules or the BICE. Q: What are some other steps financial professionals can take to help ensure their success in a post-DOL environment? Work with partners who truly understand your specific business model. Ask your current partners how they are planning to comply with the new DOL rule and how those changes may positively or negatively impact your business model. Many broker/dealers, RIAs and FMOs have shared widely varying strategies to adapt to the new DOL rule. Financial professionals need to ask questions of their partners to fully understand how their changes will play a role in their business model moving forward. Q: How is Virtue uniquely positioned to help advisors in a post-DOL world? The DOL rule will enable Virtue to showcase our platform and how it can help advisors grow their business post DOL. Virtue’s executive team has extensive experience operating an FMO (over 13 years) as well as RIAs (over 10 years). We feel this is the key ingredient to providing a successful advisory platform for advisors who hold an insurance license and a series 65 and 66 license.

Virtue understands what advisors need from their FMO and RIA partners. We know that RIAs and FMOs historically have not worked together cohesively, and we’ve resolved these issues in order to provide an FMO that works in unity with an RIA. Our FMO has top-notch marketing and case design, while the RIA likewise offers a platform with risk-averse money management strategies, compliance and comprehensive case design. We’ve created a platform that helps advisors market their practice, offering insurance and money management solutions under one roof, and we have been doing so for many years. Q: What resources do you offer financial professionals to help ensure their success? All of our advisors have access to cutting-edge technology, marketing, case design and support that helps them continue to grow their business. We like to say we are a technology company in the financial services arena, and we have many automated solutions in place and more to come in 2017. Most importantly, Virtue understands annuities as well as gathering assets, while most of our peer group does not understand how to use both effectively. This allows us to help advisors continue to utilize both solutions.


Investment Advisory Representative

• How will my B/D treat FIAs beginning April 10, 2017?

• What expertise does my RIA have regarding FIAs?

• What products will be on the approved list?

• Are they new to the FIA world? If so, will their learning curve hamper the future growth of my practice?

• What additional requirements will be in place?

Insurance-Only Licensed Producer • Am I confident that my FMO/NMO will meet and/or exceed the requirements that come along with being a financial institution? • Should I consider obtaining different licenses so I can offer other retirement products?

DISCOVER HOW YOU CAN ENSURE YOUR SUCCESS IN A POST-DOL ENVIRONMENT NO MATTER WHAT HAPPENS! Get instant access to everything you need to know by downloading the Financial Professionals’ Guide to the DOL Rule at or call 844-588-3834. January 2017 » InsuranceNewsNet Magazine


FEATURE THE TRUMP EFFECT finds that the firm “poses a grave threat to the financial stability of the United States” would also disappear if the bill is passed. The bill would also require the Consumer Financial Protection Bureau to be subject to bipartisan oversight and congressional appropriations. The legislation route will be messy, particularly if Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., opt to filibuster and rally public opinion against the measure. Republicans may not want to spend valuable political capital on such an effort. And that leaves: » Regulation. Perhaps the most effective route to terminate the fiduciary rule would be for Trump’s new labor secretary to suspend the rule while the agency crafts a new one. That would mean following the exhaustive process of public notice, supporting studies, public hearings and publication. But it would get rid of the rule without having to rely on getting a set number of votes. The incoming secretary of labor could direct the agency not to spend any resources to enforce the fiduciary rule. However, that would have no impact on the most severe aspect of the rule: the litigation exposure. Now that the rule is published, if it takes effect on April 10, advisors will be vulnerable to private lawsuits.



FEATURES OF REPUBLICAN ACA REPLACEMENT Republican House members rolled out an Affordable Care Act replacement in June. It represents the first concrete alternative to the Obama plan in the six years since the ACA passed. The plan rejects the unpopular mandates and penalties, but retains many of the features of the ACA in tweaked form. The costs and impact on the number of insured Americans are unknown. Here are four pillars of the GOP plan: A refundable tax credit for those without employer-provided insurance. Recipients would not be subject to income limits and would not be required to purchase insurance through an exchange. More pl ans would be offered, including lowcost, low-benefit plans. Greater access to private health savings accounts, or HSAs. Republicans favor the idea of pairing high-deductible health

Industry In Flux

plans with tax-free health savings accounts. Backers say this model helps Americans “understand the true cost of care, allows them to decide how much to spend, and provides them with the freedom to seek treatment” on their own terms. Sends costliest patients to subsidized high-risk pools. The GOP plan establishes state-based “high-risk pools” for the sickest and directs $25

Trump and the Republicans may have dominated on Election Day, and the DOL rule may well be doomed. But Main Street advisors such as Taylor Sledge say they need to keep planning for a fiduciary world. For Sledge, founder of Sledge & Co. in Madison, Miss., that means getting additional licenses and spending more time on compliance issues. The 29-year-old Sledge offers a full array of financial planning services and said his small firm needs to be prepared for whatever regulations come from Washington. “We take what we are dealing with and we try to use it as positively as possible, but it is not something that I am choosing to view as a hurdle,” he said. “It is a challenge that I will choose to view as an opportunity.” Even if the DOL rule eventually disappears, the Securities and Exchange Commission is working on its version of a fiduciary standard as well. While the SEC is mired in political squabbling and has two vacant seats, many in the industry feel the agency should take the lead in developing a fiduciary rule. SEC Chairwoman Mary Jo White has said its fiduciary version is not close to completion. White an-

SEC Chairwoman Mary Jo White resigned her seat a year early after Trump won the presidency, leaving the uniform fiduciary standard undone. InsuranceNewsNet Magazine » January 2017

billion in federal support to them over 10 years. Reforms Medicaid and Medicare. These longterm entitlement programs would be reformed through a mix of block grants to the state and privatization. GOP plans do not describe cuts in coverage, but backers envision long-term federal spending reductions as part of the reform package.

nounced she will resign and forgo the final two years of her term. That means Trump can fill three vacancies and short-circuit any regulation the SEC has in the works. Still, uncertainty remains, said Howard Schneider, founder and president of the consulting firm Practical Perspectives, Boxford, Mass. “As we’ve seen with so many things, there’s a lack of clarity with what that policy is going to be as there’s been no stand taken on the DOL fiduciary rule issues yet,” he said weeks after the election. “Advisors proceed with plans to implement the rule and what changes that means to their home offices and advisor offices, but at the same time the rule might never be implemented, or implemented in a very different way than people anticipated.” Eszylfie Taylor, president of Taylor Insurance and Financial Services, Pasadena, Calif., has a foot in both worlds as a commission- and fee-based financial advisor. The DOL rule might be more impactful, but is not much different from many other regulations that constantly change. The advisor world is best focused on making the best of whatever happens, he said. “Everyone will need insurance, everyone needs estate planning, everyone needs advice,” Taylor said. “No matter what the DOL says, everyone has to plan for retirement. So at the end of the day there’s always a need for the work that we


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January 2017 » InsuranceNewsNet Magazine



THE FIDUCIARY RULE LAWSUITS The National Association for Fixed Annuities vs. Thomas E. Perez, secretary of labor Summary: Following an Aug. 25 hearing, Judge Randolph D. Moss waited until Nov. 4 to reject NAFA’s request for a preliminary injunction halting the rule. Moss rejected the appeal request for an injunction Nov. 23. NAFA appealed to an appellate court for an emergency injunction. U.S. Chamber of Commerce (and other plaintiffs) vs. Department of Labor and Thomas E. Perez Summary: This is a consolidated case from three original lawsuits. A hearing took place Nov. 17 before Judge Barbara M.G. Lynn in Dallas.

Market Synergy Group Inc. vs. Department of Labor, Thomas E. Perez and Phyllis C. Borzi, assistant secretary of labor Summary: Judge Daniel Crabtree denied MSG’s request for a preliminary injunction Nov. 28. Like the first two cases, MSG claims DOL acted outside its authority in creating the fiduciary rule.

Will the Overtime Rule Be Fired?

Employers gained a bit of clarity in late November when a Texas judge granted a preliminary injunction freezing the Department of Labor overtime rule. Judge Amos Mazzant of the Eastern District of Texas granted a preliminary injunction to 21 state plaintiffs, led by Nevada. The rule affects an estimated 4.2 million workers who were to be newly eligible for time-and-a-half wages for each hour they worked beyond 40 each week. The rule would roughly double the $23,660 threshold at which executive, administrative and professional employees are exempt from overtime. The DOL estimates the new rule would affect more 24

than 4 million workers, and 19 percent of all insurance industry workers. Mazzant ruled that the plaintiffs proved both the likelihood of winning a court case, and irreparable financial harm — two key standards often difficult to achieve to gain an injunction. The Labor Department could seek an expedited appeal to get the law free of the courts during President Barack Obama’s final weeks. Or the agency could drop the appeal after Republican President-elect Donald Trump takes office Jan. 20. The DOL has strong grounds for an appeal, said lawyer Erin M. Sweeney of Miller & Chevalier in Washington, D.C., but it might not matter. “Even with an expedited appeal, it will be the Trump administration that will have the final word,” she added via email. In August, Trump cited the overtime rule as an example of the type of burdensome business regulations he would seek to roll back as president. Employment lawyer Don Phin said the insurance industry isn’t the focus of the law. But that doesn’t mean the industry wouldn’t be affected in a significant

InsuranceNewsNet Magazine » January 2017


Pulling the Plug on the Affordable Care Act?

Thrivent Financial for Lutherans vs. Department of Labor and Thomas E. Perez Summary: Case is scheduled to be heard March 3. Unlike the other lawsuits, Thrivent is specifically challenging the DOL rule’s class-action component. Thrivent’s 29-page lawsuit claimed the DOL rule will render its dispute resolution mechanism obsolete.

do and there will always be a way to work within the rule to help our clients.” Should the rule be abolished, “the annuities and commission-based products agents will be pretty ecstatic, I would think,” he said. But it’s hard to predict anything in the financial services world, he added. Those who predicted a market crash upon Trump’s election were stunned when the opposite happened, Taylor noted.

way. Agencies would need to know the new rules on who is considered exempt because they are considered “administrative,” for example. Reached after the decision, Phin said it wasn’t “totally surprising” given the opposition and the court venue. He also agreed the overtime rule looks to be dead. “At the minimum they know they can drag things out to next term and give the Trump administration an opportunity to change the regs,” he said.

The centerpiece of the campaign, and the issue that analysts agree drove much of voter anger, was the Affordable Care Act. Trump vowed to repeal the legislation, and that puts him in complete agreement with GOP leadership in Congress. As of early December, GOP leaders were touting a plan to repeal the ACA without a replacement. That could give Trump an easy campaign promise to fulfill as early as his first day in office. But what would the eventual replacement legislation look like? The president-elect named House Republican Rep. Tom Price of Georgia as his secretary of Health and Human Services. Price helped craft a House GOP plan on health care that was unveiled over the summer, relying on individual tax credits to allow people to buy coverage from private insurers.

Labor Secretary Thomas Perez, the man behind the fiduciary rule, may see his DOL legacy torn apart within months of a Trump administration.

THE TRUMP EFFECT FEATURE The proposal fell far short of a full-scale replacement, leaving key questions unanswered including the size of the tax credits, the overall price tag of the plan, and how many people would be covered. Since the election, Trump has endorsed keeping certain popular parts of Obamacare, including a provision barring insurers from excluding people with pre-existing conditions from coverage, and another allowing young adults to stay on their parents’ health plans. Ryan endorsed keeping those parts of the law. But Democrats insist there’s no way to keep the popular parts of the law without the elements people don’t like, including requirements for individuals to carry coverage or face tax penalties. Insurers have said they can only extend coverage to people with pre-existing conditions by having large groups of customers, including healthy people who don’t cost as much to insure. Carriers would likely raise rates on the riskiest customers, assuming they would be allowed to adjust rates. Losing the requirement that individuals buy health insurance and a potential loss of subsidies could throw the market into turmoil, according to Marcy Buckner, National Association of Health Underwriters vice president of government affairs. NAHU is working with Trump’s transition team and favors an approach that would keep consumer costs down while ensuring the marketplace is stable. “The worst outcome in this would be that subsidies would be repealed,” Buckner said. “This would lead to everybody but the sickest Americans leaving the marketplace and put the marketplace into a death spiral.” Any changes to the ACA will be modest and will be implemented over a period of time, said Susan Combs, founder and head of Combs & Co., an insurance brokerage firm based in New York City. “Remember that the GOP needs a supermajority and all 52 GOP and 8 Dems would have to vote on it, and I don’t think they can get it,” she said. As far as agents are concerned, “we were needed before the ACA, during the transition to the ACA and, yes, we’ll be needed during any changes that will come to the ACA,” Coombs added. The different provisions of the ACA have many tentacles, which makes repealing

or changing them a challenge, said Ronnell Nolan, president and CEO of Health Agents for America. Any changes made to the ACA need to address consumer affordability, Nolan said. “Until affordability is addressed, consumers can’t afford the coverage and we have nothing to sell them,” she said. Agent commissions also must be addressed as part of health care reform, Nolan said.

Aegis Risk, a health care consulting firm in Alexandria, Va. The ACA prohibits setting lifetime limits on benefits in any health plan or insurance policy. Before the ACA, individual medical expenses would hit the $1 million benefit cap that the employer had in the plan and the claimant would go to Medicaid or become a ward of the state, Siemers explained. Hospitals and pharmaceutical companies have benefited from the removal


The Financial Services Institute (FSI), the largest trade association for independent financial services firms and independent financial advisors, conducted a poll of more than 1,300 financial advisors following the election. The poll focuses on critical industry issues facing independent financial advisors — including the Department of Labor (DOL) fiduciary rule. For which candidate did you cast your vote for president? Trump • 71% Clinton • 19% Other • 10% Should President Trump revoke the DOL fiduciary rule? Yes • 86% No • 14% Do you plan to acquire another practice or book of business in the next 1-5 years? Yes • 34% No • 66%

If yes, what is your primary motivating factor for the acquisition: Need for scale to remain profitable • 28% Opportunity too good to pass up • 19% Excited about the future of the business • 23% Expand services and clientele you sell • 19% Other • 11% Looking forward to 2017, many are calling for tax reform. Should raising taxes, cutting spending or both be considered? Raise taxes • 3% Cut spending • 49% Both • 26% Other • 22%

“Commissions could be mandated as they are with Medicare Advantage. Or we could have some kind of a fair compensation act. The biggest issue is going back to affordability — insurance companies saying if they’re not making a profit, they aren’t paying a commission.” Health care reform needs to start with bringing the right people to the table, Nolan said. “In passing the original ACA, they didn’t bring the doctors or the insurance companies or the agents to the table,” she said. “I think they will do that differently this time.” A change to the unlimited maximum benefits is one under-the-radar ACA reform that can give insurance companies relief, said Ryan Siemers, principal with

Do you plan to retire or sell your practice in the next 1-5 years? Yes • 21% No • 79% If yes, what is your primary reason for exiting the business: Retirement • 64% Compliance burdens • 7% DOL fiduciary rule • 12% Opportunity to monetize practice • 4% Career change • 1% Other • 12%

of caps, he added, making it difficult to amend that aspect of the ACA. “There are some deep-pocketed interests in the health care world that would work to stop any move to alter unlimited lifetime benefits,” Siemers said.


Managing Editor Susan Rupe and Senior Writer Cyril Tuohy contributed to this story. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at

January 2017 » InsuranceNewsNet Magazine



3Q IUL Sales Picking Up, Report Finds


Indexed universal life sales continue to grow in a post-AG 49 enDown 5% Up 3% vironment, and third-quarter sales from 3Q from 2Q figures bear that out. Despite IUL 2015 2016 sales dropping 5 percent from the year-ago period, IUL sales were up nearly 3 percent over the second quarter, noted Sheryl J. Moore, president and CEO of both Moore Market Intelligence and Wink, Inc. AG 49 was put in place to fight a perception that IUL illustrations weren’t appropriately reflecting the results that could reasonably be expected from this type of policy structure. Transamerica maintained their No. 1 ranking in indexed life sales, with an 11.7 percent market share, and Pacific Life Companies moved up to the No. 2 carrier position. National Life Group, Minnesota Life and Nationwide rounded out the top five companies, respectively. Transamerica Premier Financial Foundation IUL was the No. 1-selling indexed life insurance product for the 11th consecutive quarter.


of men have a life insurance policy


of women have a life insurance policy


Women continue to trail behind men when it comes to owning life insurance, according to LIMRA. A LIMRA study showed only 56 percent of American women own life insurance, compared with 62 percent of men. In addition, women who do own life DID YOU




insurance have less coverage than men do. Women have an average of $160,782 in coverage, compared with men’s average coverage of $206,357. LIMRA’s research showed that women recognize they need more coverage, but are not likely to buy life insurance or increase their existing coverage. Nearly half of the women surveyed said they need more life insurance coverage. However, only 44 percent of women said they plan to buy more life insurance within the next 12 months. The main reason behind the shortfall in coverage? Lack of affordability, according to a majority of the survey respondents.


We’ve seen a mini-trend of U.S.-based insurers being acquired by Japanese companies recently. Now a U.S.-based company is selling off a

New York Life expects to pay participating policy owners a record dividend payout of $1.77 billion in 2017.

InsuranceNewsNet Magazine » January 2017

Source: New York Life


Our industry continues to face challenges, including changing regulations and persistent low interest rates. — Gary T. “Doc” Huffman, Ohio National chairman, president and CEO

Japanese life insurer. AIG agreed to sell Japan’s Fuji Life Insurance to FWD Group, a Chinese company. AIG said it will continue to provide property insurance services in Japan. The terms of the deal were not disclosed.

Peter Hancock, AIG’s chief executive, said the company is continuing to sell assets to streamline AIG’s operations and free up capital for stock buybacks.


New York state regulators are proposing regulations aimed at curbing premium hikes on certain life insurance policies. “Under New York law, life insurers may only increase the cost of insurance on in-force policies when the experience justifies it and only in a way that is fair and equitable,” said New York Financial Services Superintendent Maria T. Vullo. The proposed regulation requires life insurers to notify the state at least 120 days before a planned price increase so that the state may review the request. In addition, insurers would be required to notify consumers at least 60 days before a planned rate hike. Decreased profitability from low interest rates has moved certain life insurers to impose significant cost of insurance hikes on older life insurance policies.

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10 Steps to Create Long-Term Client Satisfaction, Retention  rganizing your sales practices O and providing your client with as much information as possible will help you grow your client and renewal base. By Ron Sussman


ife insurance is a long-term investment with many potential risks and rewards. But in this protracted low-interest-rate environment, many carriers have chosen to increase mortality costs on huge blocks of older policies. So it may be time to reconsider how and what you will sell to your clients in the future. Agents need to ask themselves, “Am I capable of learning from the industry’s behavior in a way that will enhance my value to clients? What advice should I be giving to clients who are understandably nervous about the ‘trust me’ components of many of the products I sell? What can I learn from the recent spate of cost of insurance (COI) increase announcements?” Let’s start with the assumption that you want to provide the most suitable and sustainable product advice. Let’s also assume that by doing so, you will attract new clients, rebuff the competition, and grow your client and renewal base. How can you attract and retain new clients and have them recommend you to others? Start by organizing your sales practices. Following are 10 suggestions that will help you organize your practice for maximum results:

1. Learn to read and understand insurance contracts. Everything that takes place post-issue will rely on the wording of the contract, to which no changes 28

can be made. Focus on the sections that describe how premium payments are received and credited, and how timing affects the contract. Then make sure you understand the mortality or “COI” provisions and how they may be changed by the carrier. If there is a persistency bonus or other nonguaranteed component, make sure you understand the triggers. Finally, read every amendment and rider. For every policy you deliver, create a digital file with a copy of everything your client receives.

2. Show illustrations based on more than one interest rate scenario, and keep them in your file. In today’s environment, the guaranteed interest rate should be your baseline for current assumption universal life (3 percent is reasonable). For indexed UL, use no more than 5 percent as your target rate, to which you should add a lower and a slightly higher rate illustration. For variable life, 6 percent is an acceptable gross return, and for whole life, the current dividend scale should be used along with an illustration using a lower dividend return of at least 100 basis points. Guaranteed UL should be illustrated with premiums that guarantee the coverage for life!

3. Understand the risk/reward value propositions and communicate them to your clients. If you don’t understand

InsuranceNewsNet Magazine » January 2017

how the pattern of returns works to enhance or detract from your client’s policy values, your client surely doesn’t understand it either. Don’t sell that product!

4. If you sell IUL, use a Monte Carlo simulator to deconstruct the policy and predict the probability of success. If a thousand simulations of market returns show a 20 percent probability of the policy lapsing before the client’s life expectancy, your clients need to know this before they make a decision. Typically, it takes only an additional 5 percent to 10 percent increase in the annual premium to raise the odds to a more reasonable 85 percent to 90 percent probability.

5. Advise your clients to pay the premium with the highest probability of success. Regardless of the contract, create a file titled “Open in Case of Buyer’s Remorse,” which should contain the illustration the client signed, along with an illustration showing the premium

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Open for details...

How a $20 Book Turned Jim Fox into a $20 Million Producer in 2 Short Years Vertical Vision’s Jim Fox was looking for a way to take his production to the next level. He decided to write a book called, “I Love Annuities…And You Should Too!” It was designed to help potential clients understand the different stages of retirement, all the pitfalls and how to protect their families. Soon after the book was released, it hit the best-seller list. Jim couldn’t believe how this simple, easy-to-read book helped launch his career. He said the book has done more for his business in the last 2 years than anything he’s ever tried since being in the industry.

“3 Ways My Business Has Totally Changed After Writing a Book”

1 2 3

Prospects call me: People who have read my book reach out to me for help. My favorite story has to be a call I received from a local doctor who bought and read the book while traveling to Florida. He needed $15 million of life insurance! Referrals: After the book hit the best-seller list, my existing clients started to ask me how to get the book for their family, friends and coworkers. I’m getting more referrals than I’ve ever received before. Differentiated myself from the competition: I’m a 28-year veteran of this industry, and it took me 25 years to figure out that you have to differentiate yourself from the competition, and that’s exactly what this book did. I just wish I had done it 20 years ago!

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LIFE 10 STEPS TO CREATE LONG-TERM CLIENT SATISFACTION, RETENTION they originally considered and the report showing the low probability of success. That way, in the future, when someone suggests to your client that they could have paid less, they will open the file and remember that they paid a little more for peace of mind. Attach this file to the policy when you deliver it.

the policy to lapse before it matures.


6. Learn to show your clients a chart that illustrates the spectrum of risk. On the left is the policy with the least risks (term, GUL, nonparticipating whole life, etc.). Next should be participating whole life, then UL, IUL and finally variable life. Be prepared to discuss how a properly funded contract, regardless of type, mitigates much of the future risk of underperformance.

7. Don’t make your sale about price. Virtually all of the problems we are seeing today with COI increases are in some way related to minimized premium funding patterns. Insurers have a difficult time making money if clients pay the rock-bottom minimum. This is particularly true for current assumption UL. Moreover, paying the very least possible premium severely magnifies the problems that clients might experience in the later years of the contracts. Those problems may be unfixable and cause 32

8. Don’t assume that today’s problems are isolated to UL products. Whole life dividends contain a mortality component that is adjusted every year. Bad mortality results, or reduced profitability on a block of business, are reflected in the dividend. Between interest rates and mortality experience, many blocks of whole life will see less than projected dividends for at least the next seven to 10 years, even if interest rates start to trend upward.

9. Encourage your clients to maximize their returns, where possible, by adjusting premium payments to achieve the desired results. For example, with a variable policy, encourage them to add to the payments when markets are down, and restrict payments when markets are overenthusiastic. This requires more attention to policy performance and market trends, but results in much better returns and happier clients.

advise adjustments as needed. A policy with moving parts — UL, IUL, whole life, variable — must be treated as an investment with market volatility. The pattern of returns has a material impact on the outcome, as do the premium size and pattern of payments. Policy owners do not understand the annual reports they receive from the carriers and cannot reasonably be expected to change their payment behavior without your assistance. We recently worked with an 85-yearold man who purchased a UL policy in 1983. The client retained all of the original sales materials that showed a level premium based on a “conservative” rate of return of 8 percent! What he actually paid was significantly different. He essentially waited for the lapse notice each year and paid the minimum required premium as stated in the notice. To date, his family has paid $341,000 into a policy with a face amount of $240,000. And they continue to pay in order to limit their loss. In this client’s file of documents was every single communication with the carrier. Noticeably absent were in-force ledgers, which were never obtained. This is a tragedy that could have easily been avoided by constant monitoring and possibly a commissionable replacement policy with guarantees. Most importantly, you can increase your sales volume significantly and receive more referrals simply by disclosing the risks, recommending the right premium level to achieve the highest probability of success and paying attention to details. Ron Sussman is founder and chief executive officer of and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at ron.

Like this article or any other? As seen in the

10. Monitor policy results at least biennially (every two years) and

July 2012 issue



of InsuranceNewsN

et Magazine

Health July 2012

InsuranceNewsNet Magazine » January 2017 Exclusive digital report for LIMRA Member Companies and their Producers. This report may be redistributed freely and may not be edited or modified without permission from InsuranceNewsNet.

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Carriers are using LegacyShield’s Digital Platform to help advisors increase their clients’ lifetime value One of the biggest missed revenue opportunities for the insurance industry is selling customers only one of their many products. Innovative carriers have discovered that using LegacyShield’s platform is a great solution to capture additional revenue. LegacyShield’s platform allows carriers to better engage with customers and seamlessly offer additional products based on their current needs.

Carriers who offer LegacyShield with their policies can... Increase Engagement: Actively communicating with customers in a meaningful way can create trust and improve their overall experience. Monetize Lifetime Value: Making customers aware of additional products that can help meet their current needs leads to an increased lifetime value. Create Customized Offerings: A customized marketplace to fit the needs of carriers’ current sales models.

Make 2017 the year you increase customer lifetime value! To access LegacyShield and download our white paper, “Offer Digital Legacy Planning to Increase Customer Lifetime Value,” call 844.308.0707 or go to January 2017 » InsuranceNewsNet Magazine



Seven Life Resolutions for 2017 AIG executive offers ways to be more relevant, responsive and resilient in 2017. By Rod Rishel


he Department of Labor fiduciary rule. The repercussions of protracted low i nterest rates. Fewer feet on the street to provide protection and income planning solutions. Legions of Americans still lacking life insurance protection, sufficient income for retirement or solutions for catastrophic long-term care expenses. As we begin the new year, challenges loom large. But opportunities abound as well. Carriers and distribution partners must become even more relevant, responsive and resilient to serve clients effectively in 2017. Relevant, responsive, resilient. Here are the meanings of those three words.

and training, whether it’s participating in issues-oriented educational webinars or checking out interactive online tools and other resources designed to be shared with consumers. It’s especially important to take the time to explore new tools during times of regulatory, economic and political flux. That’s because changing times such as these require distribution professionals to grow clients' knowledge of the role that protection solutions play in increasing financial security. LIMRA’s 2016 Insurance Barometer study points to significantly increased financial concerns in the U.S. over the past year and “suggests today’s consumers are more concerned about their financial well-being than at any point in the last six years.”

With employer-sponsored pensions largely having been replaced by 401(k) plans and other defined contribution plans, Americans have had to bear increasing responsibility for their own financial readiness. We have little reason to believe the trend will change.

» Relevant — appropriate, significant, important. » Responsive — quick to react in the way that is needed, appropriate or right for a particular situation. » Resilient — strong, irrepressible, quick to recover. More relevancy, responsiveness and resiliency would likely benefit all sectors of the financial services industry, whether it’s life insurance, health insurance or annuities. But how might life insurance professionals, in particular, become even more relevant, responsive and resilient? Here are seven suggestions.

1. Dig deeper. By deepening customer insights across market segments, the different generations of consumers and diverse multicultural communities, life insurance professionals have the potential to deliver 34

solutions expertly tailored to evolving needs. That’s important because the protection gap remains substantial. More than 19 million consumers understand the need for life insurance, but also lack an individual policy, according to LIMRA.

In fact, LIMRA recently reported that only 60 percent of households own some form of life insurance, down from 72 percent household ownership in 1976.

2. Be proactive. As long as there is a need for protection and income planning, opportunities will exist for life insurance professionals to be proactive in providing consumer education about the most appropriate solutions. This will remain true even though it likely will be within the framework of different record-keeping and reporting requirements than in the past. “The advice model is not dead; producers do not need to be intermediated by change if they begin to leverage companies’ tools to help them be more productive and to expand into new markets,” LIMRA President and CEO Bob Kerzner said recently. “Our research indicates people still want and need advice. Even the millennials tell us they want help when it comes to buying life insurance or saving for retirement.”

3. Train and retrain. Most carriers, brokerage general agencies and independent marketing agencies are committed to helping educate financial professionals. Leverage their tools

InsuranceNewsNet Magazine » January 2017

4. Impart “utility.” Consumers will face myriad health and financial challenges over their lifetimes. Professionals can help position consumers to address these challenges by educating them about the variety of products that offer integrated or available riders. These riders are designed to address a range of financial needs, whether chronic or critical illness, disability, long-term care or longevity. Advisors who can help position consumers to solve their financial challenges also may help their own livelihoods become more resilient. Additionally, carriers may respond to protracted low interest rates by issuing solutions with more complex designs. These designs will transition from heavy emphasis on guaranteed premium products to offerings that require more client education. Life insurance professionals may be well-served by monitoring client needs even more closely to gauge whether new solutions are appropriate.

5. Look to permanent life insurance. The new year also may be an opportune

time to focus on expanding client knowledge of permanent life insurance solutions structured for both accumulation and protection. When seeking fitting solutions, review the ways in which policyholders can access cash value in the products, as many consumers crave flexibility. Index products, which offer upside potential and downside protection, may be key as many consumers likely won’t be able to rely on social programs to fulfill their needs for lifetime income. With employer-sponsored pensions largely having been replaced by 401(k) plans and other defined contribution plans, Americans have had to bear increasing responsibility for their own financial readiness. We have little reason to believe the trend will change.

6. Know the new rule. By the time this article is published, litigation may have resulted in a court injunction delaying implementation of the DOL rule beyond its scheduled effective date of April 10. But even if that happens, it’s incumbent on financial professionals to continue planning as though the rule will take effect soon, given the changes implementation would bring. Those who maintain close contact with their carrier partners, BGAs or IMOs regarding changes to reporting requirements may have the greatest likelihood of remaining compliant and resilient. The protocols may vary, but guidance will be issued with them.

7. Bring a broad portfolio. It’s vital to have the capability to use expansive, diverse product portfolios to fulfill clients’ ever-changing needs. Without these offerings at hand, it’s not easy to pinpoint the ones that may be right for each individual client. Furthermore, in the mission to continue supplying consumers with the best products every time, being equipped with smart solutions and a thorough comprehension of how they’re designed to work is instrumental to being relevant, responsive and resilient. Rod Rishel is chief executive officer of life, health and disability, AIG Consumer Insurance. He may be contacted at rod.rishel@



FIAs Record Strongest Growth in 3Q Fixed indexed annuity (FIA) sales continued on a roll, increasing 5 percent in the third quarter, to $15 billion, according to LIMRA Secure Retirement Institute. In the first nine months of 2016, FIA sales increased 22 percent, compared with the TOTAL FIA prior year, to $46.9 billion. ANNUITY SALES Meanwhile, indexed annuity sales were on SALES $15B track to make 2016 a banner year, with sales ex$53.6B pected to hit the $60 billion mark by year-end, according to Wink’s Sales & Market Report. But the sales surge in FIAs didn’t carry over into the rest of the annuity market. Total U.S. annuity sales were $53.6 billion in the third quarter, down 11 percent from the prior year, according to LIMRA. This is the second consecutive quarter of decline in overall annuity sales. Year to date, total annuity sales declined 2 percent to $170.9 billion. For the third consecutive quarter, fixed annuities have maintained the majority of the annuity market sales. In the third quarter, fixed annuity product sales represented 51 percent and variable annuity (VA) sales held 49 percent of the market. Two years ago, VAs had a 61 percent share.



Moving another step closer to the fiduciary world, the Department of Labor is likely to develop a new financial institution category. This would allow independent marketing organizations (IMOs) to sell FIAs with retirement funds. However, the reserving requirements might be a high hurdle for those marketing companies. Reserving requirements have emerged as a major issue for regulators. This is because the financial institution carries the professional liability on behalf of agents who could later be sued for recommending an annuity that in hindsight was not in an investor’s best interest. If the class exemption is granted, it would raise the profile of qualifying IMOs to one of a “financial institution” for the purposes of the sale of financial products and advice into and for retirement accounts. This would put IMOs on a par with four other financial product distribDID YOU





utors — banks, broker/dealers, registered investment advisors and insurers. The bulk of FIAs are sold through independent agents and IMOs. When IMOs weren’t included as financial institutions, some wondered aloud whether selling fixed indexed annuities under the DOL’s new fiduciary rule was still viable.


Fee-based annuities could see a bigger piece of the pie, thanks to the Department of Labor fiduciary rule. As insurers repackage commission-based annuities into fee-based products to comply with fiduciary regulations, the products could be more attractive to financial advisors who avoid selling commission-based annuities. That’s the word from the chief executive of

Variable annuity sales totaled $25.9 billion in the third quarter, the lowest quarterly sales level since 1998. Source: LIMRA

InsuranceNewsNet Magazine » January 2017

While There are fixed 11 companies annuity sales offering have been QLAC (qualifying sluggish, longevity multiyear annuity contract) products. guaranteed annuityWhile salesthis areis a smallfairly doing and new well.part of the DIA market, we expect to see an uptick — president inSheryl salesJ. Moore, in 2016. and CEO of Moore Market Intelligence and Wink, Inc.

Lincoln Financial Group. “With fee-based annuities currently representing a small portion of industry sales, we see this as a big distribution growth opportunity,” said Dennis R. Glass, president and CEO of Lincoln Financial Group. In the meantime, some distributors are gearing up to move ahead with commission-based sales, which are still allowed under the DOL’s new regulatory regime. Those who want to continue with commission-based sales of variable annuities and fixed indexed annuities will do so under the Best Interest Contract Exemption (BICE). Fixed annuities will continue to be sold under the less onerous Prohibited Transaction Exemption 84-24 (PTE 84-24).


Here’s a flurry of product-related news: • Annexus has partnered with Nationwide to distribute Nationwide’s New Heights FIA through independent marketing organizations. • Securian has added four new annuity solutions to its suite of products. They are SecureLink Future, an FIA; Achiever Lifetime Income, a guaranteed lifetime withdrawal benefit for SecureLink Future; Premier Protector, an accelerated death benefit with spending flexibility; and MultiOption Advantage, a variable annuity for fee-based platforms. • Genworth announced its IncomeAssurance immediate need annuity is now available nationally. The product originally had been offered for sale in 20 states.



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Consumers Can’t Plan for Longevity If They Don’t Acknowledge It R  esearch shows that although consumers realize they are likely to spend decades in retirement, they don’t expect to save enough money to support themselves for a long postemployment period. By Will Fuller


etirement savers as recently as 20 years ago could rely on a pension plan, Social Security and a healthy return from a portfolio of equities and fixed income to retire comfortably. But what worked in the past won’t necessarily work today. Today, traditional income approaches such as the 4 percent withdrawal rule for sustainable income may not work in the face of low interest rates and unpredictable equity markets. Retirement savers face living longer, the uncertainty of Social Security and market returns, and less access to traditional pensions. As a result, savers are forced into taking on more risk

to generate the income needed to maintain their retirement lifestyles. Reality is setting in. Because of increasing life spans, today’s savers face the possibility of a much longer retirement with less income. Advisors must turn to guaranteed lifetime income solutions that are vital for helping consumers achieve their retirement objectives.

According to this research, 48 percent of Americans believe it is likely they could run out of retirement savings, and about a third believe they will outlive their savings. Yet there is a tremendous gap between these concerns and consumers’ actions to prevent them. Although 71 percent of advisors recommend that consumers plan for more than 25 years of retirement, only 27 percent of Americans expect to save enough money to support themselves for this amount of time. If Americans are going to live additional, more productive and fulfilling years in retirement, they need to have a long-term financial plan — one that guarantees income and helps ensure a comfortable and secure future.

The Retirement Opportunity

Many Americans envision retirement as an opportunity to pursue personal interests, spend more time with family and friends, and enjoy the fruits of their many years of labor. However, with the life expectancy of the average American nearing the 80s, retirees are faced with the possibility of outliving their savings. And as science and medical care continue to improve, that concern quickly can turn into a reality. Lincoln Financial Group and Hanover Research conducted a 2016 study on longevity titled “The Longevity Opportunity: Planning for Longer Lives as a Family.”

Addressing Consumer Concerns

Although many consumers understand the importance of saving for retirement, they often avoid initiating a conversation with advisors about the best ways to save and find income once they stop working.

Younger conusmers recognize they should not rely on Social Security but need help planning their retirement. Expected primary source of income

Total consumers

Social Security


Personal savings


IRA or Roth IRA


Individual investment account

Reverse mortgage

5% 59% plan on using at least one type of investment account1







19% 12%




Defined benefit plan

Millennials (18-34)



Defined contribution plan


Younger Gen X (35-44)

15% 6% 6% 62% plan on using at least one type of investment account

19% 14% 12% 7% 58% plan on using at least one type of investment account

1. Investment account defined as defined contribution plan, IRA or Roth IRA, individual investment accounts, defined benefit plan, annuity, or reverse mortgage. Source: U.S. Social Security, “Status of the Social Security and Medicare Programs,” 2015. (


InsuranceNewsNet Magazine » January 2017


Advisors could address specific components of longevity risks with their clients more often. 100% 80%

How often advisors address specific issues related to longevity risk (percent of advisors who always address the issue)

60% 40%








Impact of inflation

Impact of long-termcare costs

Ability to leave assets to survivor/ heirs

Tax implications of liquidating assets

Impact of health costs

Impact on standard of living

20% 0%

Running out of money

Advisors must start the dialogue with clients about longevity to help them overcome their planning inertia and prepare for a long and secure financial future. Education about guaranteed lifetime income that annuities can provide plays a critical role in longevity planning. These products provide savers with guaranteed income they cannot outlive and cannot find in other investment products, making proactive conversations between advisors and clients all the more important. Here are some highlights from our research about the realities of longevity and guaranteed lifetime income solutions that help solve for the risks — and opportunities — of living longer. » 49 percent of consumers are not aware of the potential impact of longevity risk. Despite the growing dialogue about longevity, Americans underestimate its impact. Without sufficient funds, many will not be able to maintain their standard of living throughout a prolonged retirement. This could result in the need to downsize living arrangements, spending less time enjoying social gatherings with family and friends, or sacrificing savings intended for family heirs or charities. By developing a retirement plan that incorporates a guaranteed income component, Americans can ease the financial impact of a long retirement

and make that retirement a more satisfying time. » 48 percent of consumers acknowledge they do not have enough saved for retirement. For those who lack sufficient savings for retirement, having an open dialogue with a financial advisor — and starting that conversation today — is critical. Financial advisors can explain a number of innovative and flexible solutions, including guaranteed income options such as annuities that can help savers plan for expected and unexpected expenses in retirement. » 45 percent of consumers do not want to envision themselves as elderly, and 32 percent are not comfortable discussing health or personal matters. Discussing the future with an advisor can be challenging for many consumers. But unexpected major expenses can offset savings and derail financial plans. Because of this, it is critical for consumers and their advisors to explore options to protect assets and guarantee income. This could have a lasting effect not just on retirees but on their loved ones as well. It’s not unusual for families to help care for aging relatives in retirement. But frequently, financial support for these relatives is not feasible. Our 2015 Cost of Care

survey showed that an unplanned care event in retirement may result in a retiree having to spend their savings two to three times more quickly than they originally had planned. Retirement should be filled with optimism and enjoyment. But Americans can achieve a secure retirement only by planning ahead today. Consumers’ frequent hesitation to open a dialogue about longevity presents an opportunity for financial advisors to start the conversation, educate them on options and solutions, and develop a proactive and realistic approach to retirement income planning. Progressive solutions in the annuities space — driven by innovations in automation, delivery and technology — are transforming the financial planning experience and amplifying the conversation about longevity. Even if consumers are hesitant to open the conversation, it is up to financial advisors to raise awareness of the imminent nature of longevity risk and ultimately close the gap between awareness and action. Will Fuller is president, annuity solutions, Lincoln Financial Distributors and Lincoln Financial Network. Will may be contacted at will.

January 2017 » InsuranceNewsNet Magazine



FIAs Balance the Interest Rate/Bond Yield Seesaw

W  hy adding FIAs to a retirement portfolio can offset the risks of other investments and help retain satisfied clients.


By Joe Maringer

he carriers you work with are likely committed to developing products that help you attract new clients. But they also strive to provide you with tools that will help you keep the clients you already have. Consider the case of fixed indexed annuities, which may provide the boost clients need to increase their earning potential and protect their principal. Let’s look at why fixed indexed annuities may be beneficial to your client’s retirement plan. When interest rates rise, the share prices of longterm bond funds fall, meaning bond fund investments can be risky in a rising interest rate environment. In a 2014 survey conducted by The American College, 61 percent of retiree respondents didn’t understand this inverse relationship between interest rates and bond fund values. To help clients understand the correlation between rising interest rates and bond prices, think of a seesaw. When interest rates rise, the value of outstanding

bonds falls because the interest they pay is less than what investors could receive on a new bond. This could cause the value of a fixed income portfolio to decrease. Fixed indexed annuities can help avoid the negative impact of rising interest rates because they credit interest that is based, in part, on the performance of a market index. Additionally, fixed indexed annuities offer tax-deferred growth, annual penalty-free withdrawals, the opportunity to receive lifetime income, and

Increase in retention


Increase in profits

principal protection. While bonds may be risky in a rising interest rate environment, equity investments can be risky for individuals with a shorter investment horizon, such as those who are nearing retirement. Equity markets are near all-time highs, but as history has shown us, when long-run bull markets end, the decline can be pretty dramatic. The average bull market lasts around five years, so now may be

InsuranceNewsNet Magazine » January 2017

the time to talk about moving some gains into a lower-risk option. A fixed indexed annuity allows your clients to continue to participate in market growth, while protecting from market declines. Adding fixed indexed annuities to your offering of financial solutions can be an effective way to retain existing clients and grow your customer base, which will increase your revenue. Your clients trust you and are looking for your recommendations to maximize their retirement in-

SOURCE: Frederick Reichheld

come. Expanding your portfolio of products and services will demonstrate your commitment to addressing your clients’ wants and needs more comprehensively.

Why Client Retention Is Key

To understand why offering FIAs can help with client retention — and why client retention is so important — take a look at today’s busy world. We jump from task to task and are constantly looking for ways to

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ANNUITY FIAS BALANCE THE INTEREST RATE/BOND YIELD SEESAW streamline, simplify and synergize. From what's in your local supermarket to the technology you have right in your home, today’s consumers want bundled solutions. Who doesn’t want to keep things simple, right? Think about what’s located within a grocery store. There’s often a coffee shop, a florist, a bank, sometimes even a doctor’s office. Now think about your local telecommunications provider. They probably offer solutions for television viewing, home security, wireless internet, landlines and mobile phones. These businesses have figured out that customer satisfaction increases, as do loyalty rates, when they can offer quality service and one-stop shopping. Banks and other financial institutions have mastered the art of the one-stop shop for decades. The more products they make available or the greater percentage of the customer’s wallet they keep in-house, the better the likelihood that the customer relationship remains intact. Inherent in retention metrics are lower costs, better revenue earning opportunities and more engaged customers. In their book, Human Sigma, Gallup researchers John Fleming and Jim Asplund state that “engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.” Further, research shows that it costs nearly seven times as much to acquire a new customer as it does to retain an existing one. If you’re still not convinced that retaining clients is worth so much, allow me to share Frederick Reichheld’s research. His results show that increasing customer retention rates by just 5 percent increases profits anywhere from 25 to 95 percent. You can’t argue with statistics like that. So, what does this mean to

you? Quite simply, it means that in order to continue moving your business forward, client retention is just as important as client acquisition. Client retention requires increasing the array of products and services you sell. With the advent of the Department of Labor fiduciary rule, that road to retention could be even more critical to your practice. Although the DOL rule is meant to simplify the retirement savings journey for clients, it has created additional considerations for those who provide products and services in the retirement marketplace.

of retirees don’t understand the inverse relationship between rising interest rates and bond fund values. SOURCE: The American College

How the DOL Rule Changes Our Businesses

One thing that should always be top of mind, DOL rule or no, is considering whether you are able to offer the comprehensive products and services that best serve your clients. This requires a significant effort of both education and coordination, but your diligence is the key to greater business success. Because the DOL rule is a sea change, every retirement industry participant is re-evaluating product solutions and how they are delivered. Like death and taxes, change is one of the certainties of life. But the way we respond to change is the linchpin of reaching new customers, as well as increasing satisfaction for our existing customers. A deliberative and thoughtful response may help us better reach the potential customers that we aren’t reaching today. If increasing the array of product solutions is the goal, you need both access and the ability to offer tools and services that address consumers’ evolving wants, needs and expectations. What are your goals to get there? Will you learn new technology? Will you secure new licenses and credentials? Take on new product lines? What about bundling your current offerings? Is it time to expand into commission and advisory insurance products? Now is the time to ask your clients how they want to work with you moving forward. Because I assure you, if you’re not asking them about the relationship structure that aligns with their goals, someone else is! Joe Maringer is national sales vice president for annuities with Great American Insurance Group. Joe may be contacted at joe.maringer@

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January 2017 » InsuranceNewsNet Magazine



Anthem Threatens to Leave ACA Marketplace

Anthem could be the next major health insurer to walk away from the Affordable Care Act marketplace if its performance doesn’t improve in 2017, the company’s CEO said. Anthem CEO Joseph Swedish said the company will continue “to assess the longterm viability of our exchange footprint” in 2017, indicating that Anthem could vacate the marketplace for 2018 if its performance does not improve. Anthem’s departure from the marketplace would mean that nearly all major U.S. for-profit health insurers have scaled back from offering health care on the government exchanges. UnitedHealthcare, Aetna and Humana already have pulled back from the exchanges. Anthem sells products in 14 states under the Blue Cross Blue Shield brand. Swedish said insurers need to obtain better prices under the law and find ways to improve the regulations governing the plans’ sale and administration.


The individual long-term care insurance market has been in decline, and the news that another carrier is leaving that segment is one more indication of how tough things are. John Hancock said it will no longer sell individual stand-alone LTCi policies, citing falling consumer demand and prohibitively high capital requirements for the long-term care business. Hancock’s in-force long-term care block will not be affected by the decision. In 2014, John Hancock was the No.

3 seller of individual and group LTCi policies in the U.S. behind Genworth and the No. 1 LTCi seller, Bankers Life, according to industry statistics. DID YOU





More Americans may be obtaining health coverage, but how many really know their out-of-pocket costs? A Sun Life Financial study showed that more than half of Americans (54 percent) are clueless about the amount of their out-of-pocket maximum. Meanwhile, 34 percent don’t know the amount of their deductible and 30 percent don’t know the amount of either one. Despite this lack of knowledge about out-of-pocket costs, Americans are concerned about what their health insurance pays for. More than three-quarters (77 percent) said they are worried about their employers cutting back on coverage. In addition, 62 percent said their employer-provided plans are rarely enough to

64% of Americans have delayed obtaining health care to avoid paying high deductibles.

Source: Northwestern Mutual

InsuranceNewsNet Magazine » January 2017

Source: Business Wire Source:

QUOTABLE Premiums are too high, out-ofpocket costs are too high, so health insurance is not an attractive product to consumers right now. — Michael Trilli, health insurance analyst with Aite Group

cover unexpected costs and that additional coverage is needed. Nearly two in three employees said they would be willing to pay for voluntary benefits to fill the gaps in their workplace coverage.


Zenefits was supposed to disrupt the way health insurance and benefits are sold and managed. But the company has found it sel f d i sr upted instead. The online software company automates health insurance, payroll and other human resource functions. And it has been investigated by regulators in 17 states for allegations that its employees sold health insurance without having the proper licenses. Most recently, California regulators fined Zenefits $7 million on charges that the company allowed unlicensed employees to sell insurance in that state. The $7 million fine came on the heels of a $25,000 fine levied by Idaho on similar allegations. The Washington State insurance commissioner ordered Zenefits to stop distributing its employee benefits software for free, noting the tactic violates Washington state insurance law against inducements.


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The insurance most people have doesn’t cover the cost of services and support they need when they can no longer care for themselves because of an accident, illness or cognitive disorder.

Younger People Need LTC, Opening Coverage Gap People under 65 and still working might not realize how much risk they face in LTC exposure. By Brian Harrington


ost employee benefit packages have a glaring coverage gap that is becoming increasingly harder to ignore as baby boomers become older and younger employees become caregivers. I’m referring to group long-term care insurance. This is coverage that helps employees protect their retirement assets and shoulder their responsibilities as caregivers should they or a family member need extended long-term care services. Health insurance covers medical services such as doctor visits, hospitalizations and prescriptions. Life insurance provides a death benefit. Disability insurance provides supplemental income 46

when employees can’t work due to illness or injury. And retirement plans help employees build a nest egg. But none of these types of insurance covers the cost of services and support that people need when they can no longer care for themselves because of an accident, illness or cognitive disorder. That’s where group LTCi fits in. Group LTCi can be used by policyholders of all ages who are permanently or temporarily unable to perform at least two activities of daily living (eating, bathing, dressing, toileting, transferring and continence) or who suffer from a cognitive disability. If, for example, an employee is injured in an auto accident and needs help with bathing and dressing, and perhaps needs some home modifications, their group LTCi coverage likely would pay for that. Long-term care services can be expensive. The cost of long-term care continues to rise year over year in most care

InsuranceNewsNet Magazine » January 2017

settings, according to Genworth’s 2016 annual Cost of Care Study. These costs are increasing, especially for services in the home, which is where most people choose to receive care. Nationally, the median monthly costs for the services of a homemaker or an in-home health aide for 44 hours a week are $3,813 and $3,861, respectively. The national median monthly cost of a private nursing home room is $7,698; assisted living, $3,628 per month; and adult day care services, $1,473 per month. Contrary to what many believe, longterm care is not for just older people. In fact, our Beyond Dollars Study found that long-term care is increasingly being used for younger policyholders. The percentage of care for recipients 65 years of age and older fell from 81 percent in 2010, the first year of the study, to 60 percent in 2015. This means that 40 percent of people requiring long-term care services are

YOUNGER PEOPLE NEED LTC, OPENING COVERAGE GAP HEALTH/BENEFITS under the age of 65. That same survey also found more long-term claims stem from accidents than from illnesses.

Benefits for Workers

Purchasing group long-term care insurance through an employer has significant advantages for workers: » Affordability. There is a cost advantage to workers buying long-term care insurance when they are healthy, especially when they can add coverage through a future benefit option. » Portability. According to the consumers we surveyed, portability — the ability for workers to take the coverage with them when they change jobs or retire — is the most attractive feature of group longterm care insurance. » Fewer underwriting requirements. Because group long-term care insurance is, in part, underwritten at the group level, fewer underwriting requirements may be needed at the individual level for employees during initial enrollment. However, this depends on the plan and benefits the employee chooses. » Family coverage. Under writing requirements generally are more stringent for employees’ relatives. However, workers’ spouses, parents, grandparents and adult children also may be able to take advantage of the group pricing, even if the worker chooses not to enroll. That’s an important benefit, considering that people are becoming caregivers at younger ages. Our Beyond Dollars Study showed that 60 percent of caregivers are between the ages of 25 and 54. In fact, the average age of caregivers has decreased from 53 to 46 since 2010, according to our study. » Online enrollment. Our study showed consumers like the idea of being able to go online to learn more about long-term care insurance, estimate costs and apply for coverage. » Easier payment options. Employees can pay premiums via payroll deduction, if offered by the employer, or via electronic funds transfer or direct bill.

Benefits for Employers

Group long-term care insurance also can provide significant benefits for employers. Chief among them is helping prevent lost productivity due to workers’ caregiving obligations. Six in 10 caregivers reported being employed at some point in the previous year while caregiving, according to the report “Caregiving in the U.S.” Twenty-five percent of those caregivers were millennials and half were under the age of 50. Among them, 56 percent worked fulltime. Six in 10 caregivers reported having to cut back their working hours or having received warnings about their on-thejob performance or attendance. The

Study. That adds up to 455 hours per week missed due to caregiving. If each of those workers averages $54 an hour in salary, that’s equal to $24,570 a week, which equates to an annual cost of $1.27 million in lost productivity.

Brokers as Advisors

For employee benefits brokers, group long-term insurance is an opportunity to deepen their portfolio of existing relationships by offering a benefit that not only provides the missing piece of the puzzle but can also elevate their clients’ benefit packages from a competitive standpoint. The need for long-term care is not going away anytime soon. If anything,






2015 Source: Genworth’s Beyond Dollars Study

bottom line is that when employees are consumed and distracted by their obligations as caregivers, productivity can suffer. According to the 2014 Gallup-Healthways Well-Being Index, 13.4 percent of caregivers are employed full time. What does that mean in terms of lost productivity? Let’s look at a hypothetical example. In a company with 500 workers, 65 (13.4 percent) likely are providing care for a loved one. On average, each of them misses about seven hours per week to do so, according to our Beyond Dollars

it will escalate. Brokers are in a unique position to present a solution that provides as many benefits for employers as it does for their employees and their families, who stand a good chance of dealing with long-term care as a care recipient or as a caregiver. Brian Harrington serves as leader of Genworth’s group long term care insurance business and distribution leader for Genworth’s U.S. life insurance division. Brian may be contacted at brian.harrington@

January 2017 » InsuranceNewsNet Magazine



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Americans Say Yes to Retirement but No to Preparing Americans seem to be depending on wishful thinking when it comes to retirement planning. That’s the word from Prudential Investments, which found that Americans say that retirement is their top financial priority, although most are unprepared for it. Although 80 percent of Americans said retirement was their top priority, Americans would give themselves a C average in retirement preparedness – 12 percent would give themselves a failing grade. Inertia is a big culprit in this lack of preparedness, the Prudential study found. Seventy-four percent of pre-retirees said they should be doing more to prepare for retirement but 40 percent said they don’t know what to do. Confusion also hampers pre-retirees. Sixty-three percent said they believe investing is complex and confusing, and 64 percent said they are overwhelmed by the number of products available.





Millennials most certainly don’t want to use their parents’ financial advisor, due to issues of relatability. Every child wants to rebel a bit. — Douglas Boneparth, partner at Longwave Financial

into what is known as an “encore career.” The desire to continue working in retirement was nearly the same across all three generational groups in the workplace: baby boomers, Generation X and millennials. Fifty percent of boomers said they plan to work during retirement, while 52 percent of millennials and 51 percent of Gen X had similar plans.



The corporate pension continues to go the way of the dodo bird as more companies freeze their defined benefit (DB) plans or close them entirely. A Vanguard survey showed the number of corporations that have frozen their defined benefit pension plans increased by 6 percentage points (to 37 percent) and the number of closed plans (34 percent) was up by 9 percentage points from 2012. The combination of low interest rates and increasing longevity is behind the trend of companies getting out of the pension business in favor of defined contribution plans. The corporate pension may be disappearing, but the public sector continues to offer DB plans. The DB plan remains an attractive tool for recruiting employees, Vanguard researchers said. On the minus side of that, however, is that most of those plans are underfunded, researchers added.



When most people envision retirement, they think of endless days spent relaxing on a sunny beach or golf course. But nearly half of those currently in the workforce said they expect to work at least parttime in their retirement years, according to a survey by Transamerica Center for Retirement Studies. Some will need the income or benefits that employment provides, while others look at retirement as a time to move

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

Pre-retirees hold about $8 trillion in assets.

Source: Chubb Capital Source: Renaissance

InsuranceNewsNet Magazine » January 2017

Student loan debt is weighing down the millennial generation, but some relief may be in sight. The federal government is poised to forgive at least $108 billion in student debt over the next several years. As an increasing number of borrowers seek aid in paying down their debt, the result is lower revenue for the federal program to finance higher education. President-elect Donald Trump has said he favors setting student loan payments at 12.5 percent of the borrower’s income and forgiving balances after 15 years. He also wants to see the federal student loan program phased out and lending shifted to the private sector. The Government Accountability Office rep or te d that about 8 million Americans are in default on their student loans. The average balance of borrowers in income-driven repayment plans is $67,000.



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January 2017 » InsuranceNewsNet Magazine


INCOME $650,000 401(k) MAXED –––––––––––––––––––––––––––––––– TAXES $250,000

INCOME $650,000 Cash Balance Plan $235,000 –––––––––––––––––––––––––––––––––––––––––––––– TAXES $140,000

Extreme Tax Deductions Using Cash Balance Account Plans A way for clients to increase their retirement plan contributions while paying less in income taxes. • By Bill Kanter


ruce is a successful doctor who is 60 years old and married. He has two medical offices and a dedicated staff, and his income, including investment income, is $650,000 per year. Although he contributes the maximum amount permitted to his 401(k) plan, the actual amount of state and federal taxes that he paid was more than $250,000. Recently, Bruce adopted a cash balance plan for his practice. This allows him 50

to contribute more than $235,000 to his retirement plan and deduct this amount from his income. The new amount he pays in taxes is less than $140,000, giving him a whopping $110,000 in actual tax savings.

What Is a Cash Balance Plan?

Generally speaking, there are two types of company retirement plans: defined benefit plans and defined contribution plans. In a defined benefit plan, a specified annual retirement benefit (based on

InsuranceNewsNet Magazine » January 2017

the employee’s salary) is provided for each employee. The type of defined benefit plan that most people are familiar with is the typical company pension plan. In a defined contribution plan, the actual retirement benefit that the employee receives will depend not on the employee’s salary but rather on the contributions made to the plan plus investment gains and losses. The most common example of this type of plan is a 401(k) plan. Although both of these traditional retirement plans offer the ability to put away money on a tax-deferred basis, they both have their limitations. With a defined benefit


plan — such as a traditional company pension plan — there is only a stream of income paid out to the employee upon retirement. There is no “cash balance” that the employee is able to take and move should they desire to do so. On the other hand, a defined contribution plan such as a 401(k) plan has a cash balance for the employee to take upon retirement. However, the account balance is the responsibility of the employee, and annual contributions to 401(k) plans are significantly limited. A cash balance plan eliminates these limitations. A cash balance plan is a hybrid plan that has elements of both. A cash balance plan is technically a defined benefit (pension) plan in that a series of annual lifetime payments is made available to the employee upon retirement. However, like a defined contribution plan such as a 401(k), a lump sum benefit in

plan each year. Not only will this money grow tax-deferred, but the senior employee/owner also receives an enormous tax deduction annually.

Growing Popularity and Favorable IRS Rules

In September 2014, the IRS finalized cash balance plan regulations. This has added leeway to the ways in which asset managers can manage cash balance plans. These new rules include broader options for choosing what is known as the interest crediting rate (ICR) for the plan and also allow the plan sponsor to use different crediting rates for different groups of participants. This way, older employees can use a lower and more conservative investment rate, which allows for a much greater tax-deductible contribution to their plan.

growth of cash balance plans is that they provide a great benefit to employees. Employers want to help their most dedicated workers save for retirement, and a cash balance pension plan makes it affordable to do so at higher levels than does a traditional 401(k) plan alone. Because plan owners are required to invest a certain percentage in employees’ retirement accounts, the tax savings are greatly enhanced. This allows the firm to recruit, hire and retain quality employees.

Complexity and Cost

Cash balance plans are more costly to establish than traditional 401(k) plans. Typical cash balance plan setup costs range from $2,000 to $5,000, according to Kravitz, and annual administration fees are approximately the same amount. One of the reasons for this is that there is no one way to define a cash balance plan, and each plan would be unique to each company. That is why it is so important for each firm Business to work with experts in owners the fields of tax law, plan design and administrawanting to tion, risk management, contribute and actuary tables. more than However, the tax adthe tradivantages that come with tional 401(k) plowing six-figure annual limits to contributions into the cash their retirebalance plans outweigh the ment while costs, especially for older accruing business owners. Business owners over the age Bruce certainly feels this substantial of 45 who are looking to increase way. His goal is to work for tax savings another 10 years. If he does their retirement savings so, his actual tax savings substantially in the coming years will be well over $1 million. When you factor in the growth on that savings the cash balance plan is available for the Cash balance plans made up 28 per- as well as the growth of the assets in the employee to roll over to their individual cent of all defined benefit plans in 2015, tax-deferred cash balance plan, the deciretirement account. according to retirement plan consulting sion to set up a cash balance plan for his Of even greater benefit to high-income firm Kravitz. This is up from just 3 per- business was one of the best decisions he earners such as Bruce is the fact that cent in 2001. The number of cash balance ever made. tax-deductible contributions to a cash plans rose by 22 percent in 2012 alone. balance plan are based on the owner’s This growth is due to many small and Bill Kanter, J.D., MBA, is an and worker’s age and job classifications. midsize companies, especially those that attorney and financial planner in Chicago and the owner of Therefore, owners and workers who are employ high earners, adding cash bal- Kanter Wealth Management. close to retirement age (like Bruce at age ance plans to supplement their current Bill may be contacted at bill. 60) can contribute massive amounts of 401(k) plans. “above the line” or pretax money to the Another reason for the explosive

Who would benefit most from cash balance plans? Professionals with high incomes, such as doctors, engineers, lawyers, orthodontists, etc.

Highly profitable companies

January 2017 » InsuranceNewsNet Magazine


6 Ways to Protect Against the Biggest Threat in Retirement By implementing a strategy to control and minimize Medicare costs, you are saving your client’s Social Security benefit. • By Dan McGrath


t’s the job of a financial professional to help clients pay for their health care costs in retirement. But what if you could help them control these costs, too? You can’t beat the system. But you can understand the relationship between Medicare and retirement income, consider five investment options that may not be top of mind, and have this conversation at the beginning of all client relationships. By doing these things, you can help your client control health care costs in retirement, fund those costs and ultimately save their Social Security benefit.

Medicare: What You Need to Know

Let’s start at the beginning: defining what we mean by “controlling health care costs in retirement.” The first step is to develop a working knowledge of how Medicare operates, as that knowledge is a critical component of successful planning — i.e., successfully controlling health care costs. Medicare premiums are based on taxable income: The more income you have, the higher your costs. The premiums are derived by the Centers for Medicare & Medicaid Services through the use of the Medicare means testing brackets or, as it is known, the income-related monthly adjustment amount (IRMAA). Medicare clearly outlines what constitutes “income.” Simply, any income that shows up on lines 37 and 38b of your client’s federal tax return is used to determine their premiums. Unfortunately, maximizing the amount of income that hits those tax return lines is exactly what most financial professionals have helped their clients do. First, you must understand what constitutes income by Medicare’s definition. After that, you will see that if the following alternative investment options are included in a client’s strategy early on, 52

they can help save a client’s Social Security benefit, lower their Medicare costs and put money back into the overall retirement portfolio. All of these things will help you demonstrate that you truly are looking out for your client’s best interests, which as we know is essential in a post-DOL world. Furthermore, looking out for a client’s best interests theoretically will help you maintain that client relationship for years to come. Let’s take a step back and address one point mentioned previously: saving a client’s Social Security benefit. What does that mean? An individual or couple pays for the bulk of their Medicare through their Social Security check. So whatever Medicare premium your client is responsible for comes directly out of their Social Security check. By implementing a strategy to control and minimize Medicare costs, you literally are saving your client’s Social Security benefit.

Alternative Investment Options

Understanding Medicare’s definition of income allows you to consider alternative investment vehicles that do not count as income according to Medicare’s determination. Before you sit down with clients to discuss paying for health care in retirement, you may want to consider these sometimes overlooked and often underused investment options: 1) Roth IRA: In terms of controlling health costs in retirement, a Roth investment is arguably the easiest option. Although an individual Roth IRA has income limitations, the Roth provision through an employer’s retirement plan,

InsuranceNewsNet Magazine » January 2017


such as a 401(k), does not. Clients should ask their employers if they offer a Roth alternative to the company 401(k) plan. 2) Life Insurance: For those under 50 years old, life insurance is a powerful financial option to help control health costs in retirement. Permanent life insurance provides the ability to generate income in retirement through the cash value portion of the plan. If structured properly, this cash value is deemed a loan to the policyholder and does not count as income to the IRS or in terms of Medicare’s IRMAA. Another great option is to add a rider for long-term care (LTC) coverage onto the policy, which can help fund a portion of LTC needs without raising taxable income or, in turn, Medicare premiums. 3) Certain Nonqualified Annuities: Certain types of annuities do not count as income. These nonqualified annuities are variable annuities that have been annuitized. Once annuitization happens, a portion of the income generated is exempt from taxation. The amount that is taxexempt is dependent on how long the money has been invested in the annuity, the age of the annuitant and the structure of the annuity itself. When annuitized, the income created from a nonqualified annuity has the luxury of generating a tax exclusion ratio. This tax exclusion ratio, which can range anywhere from 20 percent to 80 percent, can help generate much-needed income that is not recognized by Medicare or the IRS. This means that 20 percent to 80 percent of that income is not included in the IRMAA calculation. 4) 401(h): A 401(h) plan is a retirement vehicle to cover medical expenses. This account can piggyback on an employer retirement plan. In addition, unlimited assets can be deposited into a 401(h). Incoming funds are tax-deductible. Assets grow tax-deferred. When those assets are distributed, that distribution is tax-free assuming the money is used for health expenses for the owner, their spouse or a dependent. This account cannot be discriminatory. If one person elects to place

a certain percentage of their retirement assets in the plan, then all participants must do the same. This investment option is perfect for small-business owners with a couple of participants in the plan. The idea is to help fund the health costs of the account owners, in addition to anyone who may become a dependent later in life, such as a parent who did not plan for LTC events. Once the 401(h) is created, investments can include anything, such as stocks, bonds, annuities, life insurance or mutual funds. 5) Health Savings Account (HSA): HSAs operate similarly to 401(h) accounts — assets do not impact “income” because they are used for health expenses. Unlike a 401(h), though, there is an annual investment limit. HSAs are established by an employer and are good for businesses of all sizes. Most employers

opportunity to access cash to help offset any costs and control the possibility of generating too much income in any given year.

Timing Is Everything

Understanding how Medicare works and considering a few alternative investment options that can bolster your client’s retirement comfort are only two-thirds of the solution. The final takeaway is to know how important it is to start this conversation at the beginning of the client relationship. The long game is the winning game when it comes to managing health care costs in retirement. As you’re well aware, many investment plans take time to mature before yielding healthy returns. While you can’t beat the system, you can learn to operate within it to better support your clients through smarter financial planning. The impact of using

In 2017, total monthly Medicare Part B premiums for a high-income senior couple will top $10,000.

Source: Centers for Medicare & Medicaid Services

who offer a high-deductible plan have the HSA option. Employees typically aren’t aware of this option, nor do they fully understand it. 6) Home Equity: One of the greatest assets many retirees have is the equity in their homes. When clients tap this equity, either through a home equity loan or a reverse mortgage, they essentially are giving themselves a loan. Therefore, it does not count as income. Leveraging home equity gives retirees yet another

one or more of the five investment options listed here can mean the difference between clients enjoying their retirement versus struggling to make ends meet. Dan McGrath is co-founder of Jester Financial Technologies. He is the author of What You Don’t Know About Retirement Will Hurt You! Dan may be contacted at

January 2017 » InsuranceNewsNet Magazine



2017: The Year Digital Marketing Delivers on Its Promise D  igital marketing allows you to target your message to specific prospect groups as well as allows for speed and flexibility. By Chris Hooper


ccording to, 65 percent of businesses said generating traffic and leads is their top challenge. Traditionally, the financial services industry has addressed this challenge through marketing channels such as direct mail and mass media advertising. The industry, however, has been slow to embrace and adapt to any of the new digital marketing channels that have become available. 54

At the end of 2016, independent insurance producers were beginning to turn to digital marketing. As a result, they quickly learned they now have access to data, flexibility and opportunities that never were available before. In 2017, producers can expect to see the following trends in digital marketing: A reduction in direct mail. Last year saw a significant drop in direct mail for the financial services industry. Direct mail can work, and it’s still an effective way to reach new prospects, but it’s becoming increasingly expensive and inefficient. Independent producers are quickly learning they can easily acquire new clients through digital marketing,

InsuranceNewsNet Magazine Âť January 2017

often at a lower cost per conversion. This trend certainly will continue in 2017 as more producers feel comfortable marketing through digital channels. Retirement income planners should be pleased to know that baby boomers are currently the fastest-growing demographic on Facebook, and they're the ones who spend the most time using it. Younger users may be leaving Facebook to focus on social media sites such as Snapchat and Instagram, but the boomers continue to socialize through Facebook. Greater investment in social media advertising. The drop in direct mail campaigns will continue to be directly

2017: THE YEAR DIGITAL MARKETING DELIVERS ON ITS PROMISE BUSINESS proportional to the rise in social media adoption. As producers continue to experiment and test social media marketing, they will find the cost savings and ease of prospecting to be invaluable. As a simple comparison, workshop and seminar producers using direct mail can expect to spend, on average, $125 to $150 for each household that registers for an event. By running similar messages in a digital format, most producers can bring their costs down to $40 to $60 per household. On occasion, I’ve even seen campaigns with costs below $12 per household. Mass targeting replaced by microtargeting. Producers should know which message attracts each type of prospect. A 55-year-old woman can be shown a different image than a 60-year-old woman sees. Different types of ad copy and photos can target different genders or prospects with specific occupations and interests.

producer who wanted to hold an educational workshop at a local college campus. His target demographic was married homeowners between the ages of 55 and 64 with investible assets of more than $100,000. The producer was very involved with his church community and wanted to reach out to fellow church members. On top of that, he was an avid bicyclist and wanted to market to the bicycling audience as well. We decided to split-test the campaign into three subgroups. One ad group went out to pre-retirees within a 10-mile radius of the meeting venue. A second ad group focused on active Christians in a slightly larger radius. The final ad group targeted bicyclists in the same area. Using a single landing page for all three sets of ads ensured that the messaging was appropriate across all three ad groups. When the campaign was complete, the agent was able to attract more than 110 registrations for the event, with healthy

Social media sites such as Facebook and Instagram and search engines such as Google have incredibly detailed information about each of their specific users. Producers limiting themselves to mass media and direct mail are unable to get very specific about whom they target. Filtering their marketing by prospects’ age, location, ethnicity, gender and income is one of the limited options producers have when it comes to mass media or direct mail. In addition, the accuracy of the data on mailing lists is questionable at best. By contrast, social media sites such as Facebook and Instagram and search engines such as Google have incredibly detailed information about each of their specific users. They know what consumers like and dislike, and they understand their users’ interests. This may seem a little scary, but it’s not all that threatening. It simply allows producers to show the right ads to the right audiences. It also makes it easier for them to spend their advertising budgets more efficiently. I know an independent insurance

traffic coming in from all three ad groups. Quicker, more flexible campaigns. I know another independent insurance producer who was planning a Social Security workshop. We built landing pages and started running Facebook ads to get people signed up. Two days after the ads started running, he called me in a panic. “You won’t believe this,” he told me. “The library just called and told me they double-booked our workshop. They said I can’t use the meeting room anymore! What are we going to do?” “How quickly can you book an alternate venue?” I asked. “If you can get something quickly, we can update the ads and landing pages, and no one will know the difference.” Fortunately, the campaign was still in the early testing phase and had received only a few registrations. Once the producer found a new venue, we updated the campaign and reached out to everyone who had registered to let them know about the venue change.

No harm done. Now imagine the same scenario, but instead of running the campaign digitally, suppose the producer sent out postcards to five or six thousand people. What would the producer have done then? Once postcards ship, there’s not much you can do. If the venue cancels your event, you’re sunk. In addition to having flexibility, independent insurance producers will find that they can significantly shorten the duration of their campaigns without sacrificing the number or quality of responses. No longer do producers have to plan four or five weeks out to set up their direct mail campaigns. Digital campaigns can be set up quickly, and the budgets can be manipulated easily to generate a strong response in a short amount of time. While the possibilities of digital marketing are endless, the details can start to get confusing. Is it best to run ads on a cost-per-click (CPC) basis, or would cost per mille (CPM), also known as cost per thousand, be more effective? Or what about cost per action (CPA)? Should the campaign focus be primarily on Facebook advertising, or should one also look into search engine marketing (SEM) on sites such as Google and Bing? The answer: It depends. It depends on what you are trying to accomplish and the overall goals of your marketing efforts. Getting people to attend a seminar or workshop may require one approach, while attracting more likes to a Facebook page will require a different strategy. My recommendation: find a trusted digital marketing provider to manage and run digital marketing campaigns. Think about it. A producer would never advise clients or prospects to try developing their own retirement income plans. Clients or prospects need to work with an expert (you!). When it comes to digital marketing, leave it to the experts who understand not only how to create ads that prospects will respond to but also run the campaign in the most optimized, efficient way possible. Chris Hooper is seminar marketing specialist with M&O Marketing, Southfield, Mich. Chris may be contacted at chris.

January 2017 » InsuranceNewsNet Magazine



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Goodbye, Vegas: What the DOL Rule Means for Reward Trips T  he Department of Labor’s conflict of interest rule means that financial institutions must begin to create a new fiduciary culture. By Craig Lemoine


pril 10 will kick off a new era for the financial services profession. On that day, the Department of Labor conflict of interest rule swings into effect. The DOL rule waves the fiduciary flag broadly, and it will impact our profession from A to Z. The rule holds financial institutions (FIs) accountable for client calls to action. Registered reps are not the target of this DOL rule, but their broker/dealers are. FIs must begin to create a new fiduciary culture if they are to be in compliance with the rule. This new fiduciary culture means the end of some of the frills we have become accustomed to receiving. Noncash compensation has been an accepted business practice for decades. Reward trips may be incentives for the sales tied to a specific insurance or investment product. “Sell more than $50 million of XYZ annuity and it’s Banff for you.” Sometimes these reward trips are perks for reaching specific production levels at a financial institution. “We have diamond, platinum, gold, bronze, lead and brimstone production levels. The diamonds get a private jet trip to Banff. Avoid the brimstone trip. You’ll need a mask.” On the surface, these trips do provide an opportunity for collegiality, continuing education, and some harmless rest and relaxation. But dig deeper into the DOL rule and you will find some prohibitions that can take the wind out of the sails. Most existing commission and financial planning fee models qualify as prohibited, allowing the DOL to control behavior through a classwide prohibited transaction exemption (PTE). Two that likely will be used in distributing insurance products are 84/24 (allowing the commission sale of 56

fixed annuity products in individual retirement accounts and qualified plans) and the best interest contract exemption, or BICE (allowing the commission sale of products with variable and market elements). In other words, if a financial institution plans on paying commissions for the distribution of products, it will need to pay those commissions in accordance with DOL guidelines.

Standards of Care

Both 84/24 and BICE require financial institutions to act with prudence and adopt alternative fiduciary cultures. Financial institutions that will continue operating in the retirement space must adopt impartial conduct standards of care. These conduct standards require that advisors: » Give advice that is in the retirement investor’s best interest. » Charge no more than reasonable compensation. » Make no misleading statements about investment transactions, compensation and conflicts of interest. » Implement policies and procedures reasonably and prudently designed to prevent violations of the impartial conduct standards. Reward trips are difficult to justify through the lens of a fiduciary culture.

InsuranceNewsNet Magazine » January 2017

Incentivizing the sale of a product or family of products over others may encourage conflicted advice. Production-based reward trips also face scrutiny, as they may encourage sales over prudence and client loyalty. If a financial institution incentivizes its advisors to meet a production goal, that goal may put them out of a fiduciary mental model. Such a culture shift creates an unexplored new space for travel and recognition. Financial institutions will still be free to reward advisors based on their processes, their behavior and their adherence to fiduciary standards. Developing incentives for behavior rather than for reaching sales goals would look very different and may have a Field of Dreams “build it and they will come” flavor. Look for companies to recognize top producers at annual training and compliance meetings rather than at exclusive events.

Culture Shift

Annual training meetings and events will begin reflecting a fiduciary culture. Look for more continuing education and process-oriented speakers; look for less emphasis on motivation and selling techniques. Locations for training, compliance meetings and recognition events may change to those more accessible to all field agents, with fewer meetings in exotic places associated with financial success and prestige. These changes represent initial steps in the financial services profession’s greater journey toward embracing the new fiduciary standards. There will still be rewards, but they will be accompanied by prudence, loyalty and the best interest of the clients we are pledged to serve. Craig Lemoine is director of The American College Northwestern Mutual Granum Center for Financial Security. Craig may be contacted at craig.lemoine@


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.

What the Next Gen Should Know About the Family Biz

What's your policy on naptime?

W  hen you’re the next generation to join the practice, you must represent the agency the same way the older generation and the rest of the staff have done. By Danny O’Connell


hen I ask people how they got into the financial services industry, the most common response I receive is “A family member was successful in the business and recruited me.” In last month’s column, I discussed what you need to know if you are thinking about bringing a member of the younger generation into your family’s firm. This month, I am addressing the younger family member who is considering joining the family business. If you are thinking about joining a family firm or a first-generation (G1) agency, here are a few things you need to know. » Make sure you understand the business model. One of the great things about our business is that it has many aspects and you can employ many creative methods to build your practice. So before you join a firm, make sure you fully understand their business model. This includes understanding how they attract new clients, what lines of business they handle and their support structure. » Valuation. In a smaller agency, ask about and know the valuation. I heard a great piece of advice from a G2 dentist who joined his father’s practice. They had the business valued when he joined so they would know exactly how much value the G2 brought into the business when it was time for transition planning. » Be vocal. You must let your boss or the G1 know what you need and expect and what motivates you. If you feel appreciation through words, gestures, awards or

money, let them know. Additionally, be sure they are in a position to give that to you and understand what it means. If they do not provide this, let them know this and how much it means to you. Come up with a plan for how they can deliver what you need. Being vocal also means understanding expectations. You must speak up, because your joining the agency is now shifting the G1’s comfort zone. The G1 might not want to admit it, but if you really are passionate about your work, you will ask legitimate questions, question the way the G1 has done business and at times make the G1 uncomfortable.

you discover that the profession, office or position is not your passion, you owe it to yourself and the G1 to let them know so that each party can find the solution. » Have a great attitude. You have to walk into the office with a sincere attitude. Too many G2s want to be in the business because they want to earn a good living, but their attitude destroys the culture of the company. Of course, you have to work harder, follow the rules, continue to learn and help motivate others. The rest of the company, right or wrong, is looking at you on your first day to see whether you have what it takes to lead the organization. You want to give them something to believe in. Having a great attitude also includes dressing professionally, carrying on appropriate conversations, doing your work to the best of your ability and following procedures. No one owes you anything because your family name is on the door. You must represent the agency just as the G1 and rest of the staff have, and continue to do.

No one owes you anything because your family name is on the door.

» Be observant. On Day 1, you are not expected to change the entire company; in fact, they do not want you to. Most of your new co-workers do not want change. So observe how things are done, politely ask why things are done that way and, if you figure out a better way, approach the right person at the right time with your ideas. » Be patient. When you first join an agency, you might want to start working on a million different things. But you must choose what you believe is important, be willing to be the point person and be sure to follow through. Although it can be difficult, the G1 is often resistant to change. This does not mean you have to wait years for change or improvement. The G1 will want your input, but be sensitive about their feelings and needs as well. » Find your passion. Your passion might not be sales — it could be in areas such as illustrations or operations. But once you find your passion, pursue it with all you have, and you will never “go to work,” because you truly will enjoy what you do. If

» Put things in writing. Once you have found your passion and you begin to find success, have a conversation with the G1. Be specific about your timeline, your expectations and your goals. You also should list important benchmarks such as compensation changes, ownership changes, etc. Make sure you put these in writing and review them regularly. Danny O’Connell is CEO of Next Level Insurance Agency, a Dallas-based agency specializing in employee benefits, executive benefits and retirement. Danny may be contacted at danny.

January 2017 » InsuranceNewsNet Magazine



The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.

Helping Clients Achieve Financial Success in 2017 S  o many clients start the year with good intentions but end up falling behind. Here are some suggestions to help them have a successful new year. By Lizzie Dipp Metzger


he new year is a great time to help clients create healthier financial habits. One excellent place to start is by encouraging them to make financial resolutions that will get them closer to their money goals. Here are four goals advisors should consider when looking at their clients’ financial planning for 2017. 1. Gain control of a budget. Monitoring their budget is the clients' first step in taking control of their finances. If they are not tracking their spending and spending less than they earn, they cannot achieve their long-term financial goals. 2. Get out of debt. It’s important for clients to realize that if they are accumulating debt, any money they save is negated by the amount of debt they have. I encourage clients to make eliminating debt their first priority. 3. Increase savings. Help clients set savings goals that they can reach in a certain amount of time, and make sure they remain aware of what they are spending and what they are saving. If they have various savings priorities — such as a vacation, an emergency fund, a house, etc. — help your clients differentiate between them. This way, they can also celebrate small “wins” as they save for each desire, then start saving for the next. 4. Save for retirement. The earlier clients begin, the better, because they can amass more savings over a longer period of time. Retirement saving directly affects how comfortable clients will be when they reach that phase of their lives. 58

So many people start with the best of intentions but end up another year behind with planning and saving. For your clients' financial planning to be successful, take time throughout the year to monitor their progress. Here are a few recommendations for different client types.

surance come into play. The key is that betting on only one asset class is rarely as beneficial as choosing investments that work for all client goals. After clients move beyond the tax deduction, advisors can determine the proper allocation overall and suggest the most appropriate solutions.

For High-Income Professional Clients — Taxes

For Business Owners — Diversification and Protecting Assets

High-income earners generally are limited when it comes to deductions, so they are looking for more ways to save on taxes. When working with these clients, the key is perspective. It can be difficult to explain to your clients that there are only certain ways to deduct taxes. If they are employees and not owners, as these high-wage earners often are, the ways are very limited. After their maximum pretax deductions are achieved, help clients analyze the different asset classes and determine where investments, annuities and life in-

InsuranceNewsNet Magazine » January 2017

Business owners generally have in excess of 80 percent of their assets in their business. This is the definition of keeping all your eggs in one basket. A business owner’s greatest growth can come from their business. However, so can the greatest risk. You can help them de-risk their assets through diversifying their portfolio. When working with business owners, advisors often create a financial gap analysis based on cash flow. Although a business is the key source of cash flow, advisors want to look at a point in the future when the owner can have suffi-



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cient assets to maintain their cash flow even without their business. Determine the gap, and then guide clients to start saving outside of the business to fill it.

Some clients may fear they have to save this large amount all at once. Help them realize that small steps are better than none.

For the Family — Retirement and Education

For All Clients

People often find themselves in a panic when they realize just how far behind

» Individual retirement account (IRA). IRAs offer important tax advantages that can add up to a significant amount of money for retirement. IRA contributions can be made up until April 15, so this is a great option for clients who did not set financial planning goals in 2016.

So many people start with the best of intentions but end up another year behind with planning and saving. they are in planning for their goals. Empower your clients to take steps that will get them started. When planning for a family, prioritize goals and start working toward them. Advisors frequently run a quick analysis to identify the gap clients have to fill to achieve a particular goal.

» Automatic savings plan. If a client made a specific financial resolution to save more, automated savings will make them follow through, because the cash is drawn directly from their bank account. » Cash value life insurance (CVLI). CVLI serves as an excellent long-term option that can supplement the fixed income portion of the portfolio. With



FC, 21

rates extremely low and yield difficult to find, the internals in a long-term CVLI can be very appealing as an alternative asset class. It’s important to understand the client’s needs, as the advantage of this comes from the basket of options it offers. » 529 savings plan. 529 plans are a simple way to save for college. They are not tax-deductible, but all growth is taxfree if the funds are used for qualified expenses for higher education. Furthermore, if the child for whom the funds are earmarked doesn’t use all the funds, the remainder can be moved to an account for a second child. Lizzie Dipp Metzger, CFP, AEP, is president of Crown Wealth Strategies, a financial services firm in El Paso, Texas. She is a five-year MDRT member with three Court of the Table and two Top of the Table honors. Lizzie may be contacted at

January 2017 » InsuranceNewsNet Magazine


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


Today’s Middle-class Consumer May Be Different Than You Think T  he definition of middle class goes beyond how much money someone earns. By Scott R. Kallenbach



Financial Worry Among the Middle Class 30%

It seems impossible to save for the future.


I live paycheck to paycheck.

What’s on Their Mind?

25% I worry about always being in debt.

Of those actually in the middle class, 25 percent self-identify as working class. Why? They’re feeling the financial strain (see chart above). They want to be financially responsible, but they also say they would have a hard time quickly “dialing down” their lifestyle if they had to. (This tells us there’s not much room left in families’ budgets for any additional cuts.) And how secure do people believe their middle-class lifestyle is? They believe it is

InsuranceNewsNet Magazine » January 2017

more and more difficult to sustain, with 68 percent saying “It is getting harder and harder to be able to live a middle-class lifestyle.” Perhaps even more profound, just 49 percent believe “the American Dream is still alive for the middle class.” The reality for most, as they look at the options in their lives and careers to move toward a fulfilling future, is they can’t do things without financial worry. They don’t have unrealistic expectations (they’re not envisioning luxurious lifestyles on beaches) — but they want to be able to do things they want to do and change their lives for the better.

The Opportunity Ahead

This all points to an opportunity for the industry to transform its approach and to change how we present ourselves to this market. Instead of talking about the products we offer, we can lead with some of the ways we might be able to help people. We know there is a gap between consumer perception and industry intention. Part of the solution is making people feel we really want to close that gap, that we want to serve them in a real, individualized and authentic way. This kind of transformation is key to reaching the middle class, and it likely will benefit all segments of the industry. Source: LIMRA and Maddock Douglas (2016)

ow do people see themselves now and in the future? How does that help us understand what they want and the best way to connect with them? The U.S. middle class today is certainly one segment that presents an opportunity for financial services companies to form stronger, authentic connections. However, two big questions in our industry for some time have been whether the middle class really can be served and whether we can serve it well. To answer them, it’s important to understand what lifestyle continuity means to today’s middle class. The phrase “lifestyle continuity” is powerful, as in “I want to continue to be able to live the way that I live, but I want to be able to do different things inside that.” Current industry thinking about the “right” ways to maintain one’s lifestyle (such as insurance, investing, retirement savings and budgeting) may not align with middle-class needs, attitudes and beliefs. Realistically, how are they likely to prepare for the future? Recent research defines the middleclass from the consumer perspective. We found that “middle class” is much more than just a number. It’s not about how much money they make or how much money they have — it’s about how they live. Being middle class is truly a state of mind. Interestingly, when we overlaid the Pew Research definitions of class

compared to how people self-identified, we found that most people think they’re middle class. In fact, about eight in 10 consumers who are technically upper class self-identify as being in the middle class. The same is true for just over onethird of the working class.

Scott R. Kallenbach, FLMI, directs LIMRA’s Strategic Research program, which identifies and examines strategic issues that can impact the financial services industry. Scott may be contacted at scott.



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