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January 2018


The DOL fiduciary rule delay created an 18-month breather. How will agents and distributors use it? • PAGE 18 ALSO INSIDE

SEC Takes Center Uncertainty Leading 10 Big Issues on Your New Year’s Stage on to Instability in Health Tap for the SEC Resolution: Fiduciary Issue Insurance in 2018 Connect With Gen X PAGE 23 PAGE 26 PAGE 28 PAGE 38

January 2018



data disruption How Assurity is harnessing data to disrupt life underwriting [inside cover]

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in 2018,

real-time data and predictive analytics are disrupting traditional life underwriting. The insurance industry isn’t known for innovation. But in 2018, the way it used to be will take a back seat to the expectations of the modern customer.

When it comes to using data to improve the customer experience, Assurity has it down to a science with its new Term Life with Accelerated Underwriting.

50% $25K

Assurity is significantly reducing cycle time by using real-time data for instant approvals on up to 50% of eligible applicants. A policy can be in a customer’s hands in just days. But the customer focus doesn’t end there. Assurity designed a flexible product with face amounts starting at $25,000, and with optional riders like return of premium, critical illness and disability income. From technology to product design, Assurity is turning data disruption into a competitive advantage for you. Are you ready?

Visit NOT AVAILABLE IN NEW YORK. Assurity is a marketing name for the mutual holding company Assurity Group, Inc. and its subsidiaries. Those subsidiaries include but are not limited to: Assurity Life Insurance Company and Assurity Life Insurance Company of New York. Insurance products and services are offered by Assurity Life Insurance Company in all states except New York. In New York, insurance products and services are offered by Assurity Life Insurance Company of New York, Albany, NY. Product availability, features and rates may vary by state. Policy Form No. I L1702 and Rider Form Nos. R I1705, R I0762 and R I0825-T underwritten by Assurity Life Insurance Company, Lincoln, NE.

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View and share the articles from this month’s issue


FEATURES 18 2018 — The Bonus Year

23 SEC Takes Center Stage on Fiduciary Issue

28 1 0 Big Issues on the Table for the SEC in 2018

By John Hilton The Securities and Exchange Commission is becoming more active on the fiduciary front now that the Department of Labor’s rule is delayed.

8B  lockchain May Link Insurance to a Seamless Future

By Brian O’Connell From the fiduciary standard to the pay ratio rule, the agency will have to face some tough issues in the coming year.

32 Life Insurance 2.0: Bought and Not Sold By John Lefferts and Chris Aitkens Paper-driven legacy systems have been like a ball and chain on the insurance sales process. But technology is creating opportunities to change that.

38 Make Connecting With Gen X Your New Year’s Resolution By Mark Peterson Generation X tends to be skeptical and is squeezed by competing demands for their finances. But this age group has a greater need for life insurance than other generations have.


42 A  nnuities Can Make a Trustee’s Tough Job Easier By Deborah A. Miner When faced with the responsibilities and complexities of trust management, trustees may be increasingly ready to consider putting annuity-oriented strategies to work.


10 The Success Curve of Disruption


By Susan Rupe Industry watchers worry about shoring up the health insurance marketplace, while brokers are frustrated by uncertainty and continued challenges.


By Steven A. Morelli Expect to hear more about blockchain in the coming year as industry groups begin to develop a system to bring it to the world of insurance.

An interview with Whitney Johnson Success doesn’t always follow a straight line. Whitney Johnson says the road to success looks more like an S curve. Johnson, author of Disrupt Yourself, tells InsuranceNewsNet Publisher Paul Feldman why making your way through the S curve of disruption can be tough but financially rewarding in the end.


26 Uncertainty Leading to Instability in Health Insurance

By Steven A. Morelli A look at what will happen now that annuity agents and distributors have an additional 18 months to get ready for the Department of Labor’s fiduciary rule.


» read it

44 A  nnuities Are the Cure for a Risk-Infected Retirement

InsuranceNewsNet Magazine » January 2018

By Justin Fort Recommending an annuity is like writing a prescription to keep a client’s retirement from succumbing to market and longevity risks.


50 5 Ways an HSA Can Save Your Client’s Retirement Nest Egg By Kevin Robertson Although health savings accounts are tax-advantaged accounts, like individual retirement accounts and 401(k)s, there are key differences between these accounts that make HSAs an ideal retirement savings vehicle.

54 5 Financial Personalities That Drive Client Communications By Phil Wright Advisors can better connect with clients’ beliefs and values if they customize their communication approach based on how each client reacts to financial information.

56 First Comes Trust, Then Growth

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61 NAIFA: What Really Works in Selling to Millennials By Danny O’Connell The key is in understanding how to relate to them and do business with them in the way they like.



58 Fuel Referrals by Establishing a Client Advisory Board By Sarano Kelley and Brooke Kelley Who better to enlighten you about the way you run your practice than your clients?

62 T HE AMERICAN COLLEGE: What the ‘Longevity Revolution’ Means to Financial Services By Jocelyn Wright If studies show that Americans already have a retirement savings shortage, how much worse does the problem become if we are expected to live to age 150?

INSIGHTS First Protective offers the breadth and depth of solutions, sales support and service that enable you to take your business to the next level!

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60 MDRT: Baby Steps Help Start on Long Road to Success By John F. Nichols Implementing milestones and simple daily victories will help move you forward.

64 LIMRA: What Financial Wellness Really Means for Your Clients By Deb Dupont Some insights on how advisors can help Americans alleviate their financial stress.

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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 MARKETING Katie Frazier SENIOR CONTENT STRATEGIST Kristi Raynor AD COPYWRITER John Muscarello AD COPYWRITER James McAndrew CREATIVE DIRECTOR Jacob Haas SENIOR MULTIMEDIA DESIGNER Bernard Uhden


Copyright 2018 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 reprints@insurancenewsnet. com. Editorial Inquiries: You may e-mail or call 866-707-6786, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to or call 866-707-6786, ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Avenue, Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

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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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Miners Unbound


ll I knew about the Panic of 1907 was the year it occurred and that people were a little anxious. I did not know that one man’s vindictive hubris touched off the crisis that ran through New York and across the nation, radiated through the world and shivered up the spines of the country’s financial and political leaders. It scared those leaders enough to make them realize that the decentralized treasury system could not sustain bank runs. The closest thing to a central bank sat in his private library on Madison Avenue and went by the name J.P. Morgan. Morgan used his considerable clout, dollars and wits to control the panic, as he had during previous crises. The financial fire sparked an investigation that helped create the Federal Reserve System. People were bankrupted and jailed afterward but the man who helped start it all walked away, in a rare admission of defeat. He was F. Augustus Heinze, a copper king from Montana who had come back home to New York to play with the big boys of finance. He was indirectly responsible for the panic because his brother Otto wanted to get back at the people he was certain were short-selling the family’s company, United Copper, betting that it would lose value. So, he tried to corner the market in the company’s stock and squeeze the short-sellers. AUGUSTUS HEINZE had little to do with the scheme, but his string of successes brought the brothers to the point where they could bet with perhaps excessive confidence. Augustus was a crafty, charismatic character born in Brooklyn to wealthy parents and trained as an engineer. He went off to Montana to make his fortune against brutal mine owners. Augustus fought and won all along the way, underground and in the courts. When a bunch of thugs came in from out of state to take care of him, he and his buddy mopped the sidewalk with those punks until the police came. Augustus decided to go back to New York, but this time to Wall Street. Pretty soon, he and a partner were controlling several banks and a couple of insurance 6

companies. He wasn’t all business. His partying was the stuff that filled gossip columns. So, when his detractors were betting that his company’s stock was going to drop precipitously, his brother Otto took offense and plotted retribution. Otto thought that the family owned enough of the stock that it would be possible to buy up a majority of the rest, running up the price in the process. When Otto called for the short-sellers to return the stock, they would have to turn to the Heinze family to buy the replacement. Otto would be able to name his price. He took the idea to his usual financier, who declined to back it because he thought that Otto underestimated the amount of stock he would need to be successful. Here’s the thing about schemes to corner the market: They often spring from a dark motivation such as revenge or greed and almost always end in rubble. The financier was right. The shortsellers could buy replacement stock. When the market saw that the corner had failed, the company’s stock plummeted from its great height. Depositors ran to withdraw their money from banks associated with Heinze, spreading the contagion through Wall Street and up Manhattan to Morgan’s library, where the master manipulator was able to negotiate deals to save the banks and even the city government from collapse. But F. Augustus Heinze left his hometown a broken man. WHY ARE we talking about a panic in 1907? Because it led to the Fed, which was supposed to be the regulator to corral the animal spirits when they ran wild. But doesn’t all this sound familiar? Didn’t that panic replay in some form in 1929, 1987, 2000 and 2008? All these machinations seem to protect bankers and the system but leave average Americans taking the hit. At least that’s the way it seemed to some disruptors who wanted to return control to the people. That meant creating a dependable, accessible system where currency could be traded from person to person but the system could not be manipulated by one operator.

InsuranceNewsNet Magazine » January 2018

F. Augustus Heinze

Eventually, blockchain was created by Satoshi Nakamoto, which is a shadowy pseudonym for one or more people. It is an encrypted system built and verified by cooperation. The first application was of course, bitcoin. IN THIS month’s InFront, we talk about LIMRA’s effort to help develop a blockchain for the life insurance industry, or perhaps to participate in a greater insurance blockchain. It is certainly encouraging to see the industry looking at promising ways to propel its underwriting and administration into the information age. Much like the Heinze family more than 100 years earlier, bitcoin is facing its own Wall Street test. Markets are allowing the sale of bitcoin futures, which is unleashing highly motivated market manipulators. They will have big bucks on credit riding on the price. But that might be a conceited gamble that bitcoin is like any other currency, stock or commodity. Well-ensconced masterminds might be thinking that they control the playpen and that all comers are mere suckers spilling money they deserve to lose. As Whitney Johnson explains in this month’s interview with Publisher Paul Feldman, disruptors start small, build momentum and blow right by you. They don’t play by the same rules. They see a different future. They are guided by other stars. Yesterday’s miners pulled treasure out of the ground. Today’s miners solve mathematical equations to build a vast, solidyet-ethereal network. The technology changes but the story is the same — people with sheer willpower move mountains. If 2017 was the year when we sat on the wayside in rapt astonishment, this is the year to get back on our feet and out there. As we scan the landscape of 2018, where are our mountains? Where shall we go? What shall we conquer? Let’s go. Steven A. Morelli Editor-in-chief





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Blockchain May Link Insurance to a Seamless Future LIMRA joins an insurance consortium to develop blockchain for the life industry.

What exactly is a BLOCKCHAIN? A blockchain is a distributed database and decentralized ledger that maintains a continuously growing list of records, called blocks, in chronological order. In most blockchains, new blocks and the data within (transactions, smart contracts and so forth) are confirmed and verified through a consensus process called mining. This verification process removes intermediary validation and establishes trust without the use of a centralized authority.

By Steven A. Morelli


ou might not know or think much about blockchain, but it is linking the world around you and snaking into insurance. Certainly by now you are familiar with its first offspring — bitcoin. In fact, you might even have a bitcoin wallet that you might be peering into several times an hour to check the latest crazy gain or loss. You might have even checked it while reading that previous sentence. Even though some are predicting that bitcoin will become the global currency, its underlying mechanism has even bigger potential. And that is blockchain, which encrypts data so that it can’t be changed and places it into a decentralized, linked system that others can access for verification. It is loosely called a ledger. The system was created after the 2008 crash, when the Federal Reserve, along with other quasi-governmental and governmental entities, manipulated currency and markets to stabilize the economy. Bitcoin provided a way to exchange value peer to peer anonymously without an outside agency regulating it.

After a block is confirmed and the data within it is verified through the decentralized consensus process, the block is time-stamped and added to the preexisting blocks in the chain; hence the term “blockchain.” Each computer in the system has a copy. The blockchain is encrypted, and it is considered immutable, which means that it is protected against tampering and revision. If implemented, this technology has the potential to simplify processes and drastically lower costs. From The Institutes report: Blockchain Building Blocks: Creating a world of opportunity for insurance from an evolving area of technology

It was the first time that a system proved dependable enough to support a digital currency. But the underlying blockchain theory spawned other ideas, especially Ethereum. That blockchain was different because it contains smart contracts. That means it doesn’t just store value, it also does things. In fact, it does anything — well, anything a developer can code. Walmart is using blockchain for its supply chain management; Visa and Docusign are working on a system to allow consumers to get in a car on a dealer’s lot,

Distributed Database: A database with portions that are stored in multiple locations and processing that is distributed among multiple database nodes. Decentralized Ledger: Ledgers, or systems of record for a business’s economic activities and interest, that are dispersed instead of reliant on and housed within one third-party system, such as a financial institution. Double-Spending Problem: The risk, particularly when digital currency is exchanged, that a person could concurrently send a single unit of currency to two different sources. Smart Contract: Computer protocols that facilitate, verify and enforce the performance of a contract and that can be self-executing and self-enforcing. Ether: The cryptocurrency that runs the Ethereum Virtual Machine and its blockchain. Although it is a token, like bitcoin, ether is the fuel that powers Ethereum’s computing platform. Ether is often likened to gasoline, as owners can offer ether to enact Ethereum-based smart contracts.


InsuranceNewsNet Magazine » January 2018

configure the lease and insurance, and drive off; and the Internet of Things is trying to figure out how your refrigerator will see that you’re low on mustard, order it, pay for it and have it delivered before you have your next hot dog. Besides the whiz-bang consumer applications, blockchain based on Ethereum can automate administration, increasing efficiency and accuracy simultaneously. And that woke up the usually sleepy world of insurance. The Institutes, a property/casualty professional development organization, is leading a consortium to create RiskBlock, a blockchain for P/C insurance. It would be a private permission block, which restricts access to and shares data with authorized parties in a centralized system. Unlike bitcoin, it would not be a peer-to-peer transaction in a decentralized system that the public can see. LIMRA and The Institutes announced in September that they are collaborating to expand RiskBlock to the life insurance and retirement arenas. Peter Miller, CEO of The Institutes, said the organization expects to offer a system in the P/C arena this month, but at press time, he was not certain which of four initiatives they would unveil first.



Public Blockchain: An open platform that anyone in the world can join, provided that they are able to show proof of work. A public blockchain is considered fully decentralized. Private Blockchain: Only the owner can make changes. This is similar to the current infrastructure, in which the owner (a centralized authority) has the power to change the rules, revert transactions, etc., based on need.

Blockchain could have widespread ramifications across the insurance value chain, increasing market reach and customer personalization while also cutting cost. The Institutes’ RiskBlock initiative identified these ramifications for property/casualty insurance:

Hybrid (or Consortium) Blockchain: A mix of both public and private blockchains. The ability to read and write can be extended to a certain number of people/nodes. A consortium blockchain can be used by groups of organizations that work together on developing different models by collaborating with each other, thereby developing solutions while maintaining intellectual property rights.

The four are proof of insurance, subrogation (paying first and determining fault later), first notice of loss and parametric insurance, which pays when certain parameters are met, such as crop insurance issuing a benefit when a drought is declared. The first one is likely to be proof of insurance, Miller said. “It would be much easier for a person to make sure that was updated, because it can come right off the blockchain,” Miller said of being able to provide proof of auto insurance. “It might be multiple organizations that would have access to those records. We have a prototype app to do that. So that would be much easier for consumers.” Although the application is different, the technology can be applied to life insurance, he said. “The basic underlying principles are still consistent,” Miller said. “A lot of what we’re doing is applicable. What the blockchain really does is create trust.” He illustrated how the system would create trust in the case of a car accident. “The accident would be recorded, and then the data might be sent to a garage and it might be sent to my insurance company or your insurance company because we want to know who’s at fault,” Miller said. “Then the repair might be made. Then there needs to be a payment. So there are multiple parties that are involved in that transaction, and we all agree to trust that data so it can be used over time.” The current system has inherent friction in just sorting out the facts in about 10 million annual transactions involving car accidents annually. “This is where the blockchain does a very good job,” Miller said. “Because we

all agreed this data is what is right and it can’t be changed. I can’t come back later and try to change the circumstances of that accident, because you will know it, the garage will know it and all the insurers will know it. That assurance is not possible today because insurance company A would have a record of it in their database, and insurance company B would have a record in their database, and they might be different, and then it becomes a dispute.” Robert Kerzner, CEO of LIMRA, said it makes sense that the P/C industry is pushing ahead with this technology because of the larger volume of transactions and processes it handles. As the P/C initiatives are developed and tested at the industry’s massive scale, the life industry will identify applications that could cross over. “We’re just beginning to identify the use cases,” Kerzner said. “There are transactions that should be shared, need to be shared. The key is that if we can find the right ones, we can save our members a lot of money. Our organizations are trusted by the industry, and we believe we’re in the best position of anyone to put together these concepts. We can get 20 or 30 or 40 companies at a table to say, ‘Let’s agree on how we’re gonna build this, what we’re going to do.’” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at

» Insurance products, pricing and distribution may be wildly altered as blockchain proliferation and its associated smart contracts spawn new products — like parametric insurance and insurance implanted in transactional purchases — and realize efficiencies in the insurance process, thereby lowering prices and allowing for broader reach into emerging markets. » Underwriting and risk management may see data-sharing capabilities and risk registries emerge through blockchain-enabled provenance features and peer-to-peer insurance models, as well as shared industry ledgers. » Policyholder acquisition and servicing could become more efficient because new customer data will be increasingly confirmed at the origin. In addition, insurance life cycle documents will be easily updated with blockchain technology, avoiding repeat entry and verification and easing concerns with know-yourcustomer/anti-money laundering regulations. » Claims management itself could be simplified through smart contracts, while an industry-wide shared ledger could help with multilayer settlements and fraud inspection. » Finance, payments and accounting in insurance could also change. A distributed ledger like blockchain could allow for lower-cost international payments, more efficiency in subrogation via smart contracts, and new forms of raising capital. » Insurance regulation and compliance could be transformed, as regulators would be able to monitor all insurance variables in real time and potentially create an industry-wide proof of insurance ledger. From The Institutes report: Blockchain Building Blocks: Creating a world of opportunity for insurance from an evolving area of technology

January 2018 » InsuranceNewsNet Magazine


Whitney Johnson

tells InsuranceNewsNet publisher Paul Feldman how to follow the S CURVE through disruption to success


InsuranceNewsNet Magazine » January 2018


doubt, you have heard the word “disruption” so often it ceases to have any meaning. But Whitney Johnson would say that people never had a true appreciation for what disruption actually is. Disruption is not the Amazon of today, the monster stomping into your industry. The disruption is Amazon 20 years ago when it was a mere gnat to Barnes & Noble and Borders. Disruptors are the tiny players that serve as punchlines for the big players, until those disruptors not only have a seat at the table, but own the table. Whitney has been interested in the art and science of disruption for more than 10 years, beginning when she was a highly respected equity analyst at Merrill Lynch. She was at the top of her hard-won game when she decided to apply disruption to her career. Whitney left Merrill Lynch and started an investment firm, Rose Park Advisors, with Clayton Christensen, a Harvard University professor who coined the term “disruptive innovation.” It’s always scary to walk the path of disruption. According to Whitney, it starts at the low end and scales up an S curve of progress. It is not easy, but it is gratifying and financially rewarding, as she describes in her book Disrupt Yourself: Putting the Power of Disruptive Innovation to Work. In this interview with Publisher Paul Feldman, Whitney lays out the seven steps to the nirvana of disruption. FELDMAN: How should advisors deal with disruption and make it work for them? JOHNSON: I’m really focused on this idea of personal disruption. So, you asked how a financial advisor can deal with disruption. The way I think about it is we all know that change is going to happen. In most cases, we want change. Change is desirable, but we all want it to look and feel linear and it isn’t. At a very high level, this idea of disruption is actually a way of thinking about change. I have devised a seven-point framework that allows a person to harness rather than cope with change, and become an advisor who people want to work with and someone who people absolutely want to work for.

THE SUCCESS CURVE OF DISRUPTION INTERVIEW FELDMAN: How do we get started in managing disruption? JOHNSON: One of the reasons it’s so hard for people to deal with disruption is because it seems very unpredictable at a very basic level. Every single person is on a learning curve or an S curve. The S curve was popularized by Everett Rogers in 1962. He was using it to gauge how quickly an innovation would be adopted. We actually can use this S curve to help us deal with the unpredictability of disruption. I’ll talk it out, and then we can talk about how you can use this framework. At the low end of the S, that base of the S, we know that adoption is going to be very slow. Then you reach a tipping point in a market. Once you reach a tipping point in 10 to 15 percent of the market, you enter this inflection point and you move into hyper-growth. Then, at 90 percent of saturation at the top of that S, the growth tapers off. What we think about in terms of our products and services actually can help us understand the psychology of disruption. You might be a brand-new financial advisor, and you’re working really, really hard and you feel like you’re not getting any new clients, not closing the sale and it doesn’t seem to be working — it’s because you’re at the low end of the S curve. When you know that, you can allow yourself to be patient. When you go home frustrated and discouraged for the first six months, you say, “It’s OK. I’m at the low end of the S curve.” As you put in that time and that work to figure out exactly what you’re doing, you start to go into that inflection point. That’s where you’re working hard, things are happening, you feel confident, you feel competent, and that is really the exciting part of the S curve. Typically, you’re going to hit that part after you’ve been spending about a year on an assignment and you really feel like you know what you’re doing. Then you

get to the top of the S around four or five years in, after you’ve been putting in at least 40 hours a week, where everything has become very easy and you know exactly what you’re doing. You get a little bit bored at that point. You need to consider jumping to a new S curve. Now that does not necessarily mean that you change companies. It may not even mean that you need to change roles. But it does mean that you need to

be thinking about how you’re running your business. Maybe if you’re in one geographical area alone, you look at another area. Or if you’ve been selling only one type of product, perhaps you sell another product. Or if you’ve been approaching how you prospect, perhaps you look at prospecting differently and take advantage of technology. You’re giving yourself enough to learn that you stay engaged and excited about the business that you’re in. FELDMAN: What is the first step? JOHNSON: The very first thing we can do is take on the right kinds of risk. I would argue that in order to be even more successful and possibly have revenue go up significantly more over the next couple of years, you must be willing to take on market risk rather than competitive risk. Market risk says there is an opportunity but there’s no competition. When there is no competition, your odds of success are six times higher and your revenue opportunity is 20 times greater based on the theory of disruption.

January 2018 » InsuranceNewsNet Magazine


INTERVIEW THE SUCCESS CURVE OF DISRUPTION So, what could that look like for an advisor who wants more clients? A competitive risk would be, “I’m going to look in my town and at all the people who already have an agent working with them, and I’m going to try to pick them off my competitor’s insurance agency.” But what if you went after people who don’t have insurance or who are newly married or are just moving into the area? Then you’re finding ways to take on market risk. You’re playing where other people aren’t playing, where they haven’t necessarily thought of playing. Then your odds of success go up significantly. You’re not trying to dislodge people from what they’re already doing. You’re inviting them to do something brand new. When you take on market risk, it may seem less certain because you don’t know whether they want insurance or not, because you’re playing where other people aren’t. But it becomes a higher odds prospect and higher odds opportunity for you.

children who are supporting the people in this area.” So, they were playing where other people weren’t playing and looking where other people weren’t looking. FELDMAN: No. 2 is play to your distinctive strengths. JOHNSON: The way that you start to move up your S curve now is to play to your distinctive strengths, meaning what you do well that other people around you do not. A great example of this is the koala. So, the koala we all know is this great, cuddly little animal. It sleeps up to 20 hours a day.

That becomes their distinctive strength because it’s something that they do well that all the other people around them don’t do well. So, they can differentiate themselves and become a go-to person in that marketplace. FELDMAN: Not everyone knows what their strengths are. What’s the best way to find them? JOHNSON: I think what’s so interesting about our strengths is we don’t know what they are. Even if we do know what they are, we don’t actually value them because there are things that we do so naturally

FELDMAN: What are the difficulties of market risk? JOHNSON: For the individual, often when you go in and you do something new, you look like a silly little thing and people think you’ve lost your mind. It doesn’t make sense. It’s not logical. You’re attacked more frequently. But that’s where the opportunity is — doing something that doesn’t necessarily appear logical immediately. A few years ago, I was talking to a business that was building nursing homes. They were trying to get outside funding for the business. The consultants and bankers would come in and say, “This market doesn’t support these nursing homes.” What the business was saying was, “Well, the market doesn’t support it based on the demographics of this area, but it does support it based on the demographics of the 12

You look at a koala and you think, “How can it possibly make a living for itself? How can it possibly survive?” Well, it survives because it eats eucalyptus leaves, which are poisonous to pretty much every other animal in the animal kingdom, including humans. So that just becomes the koala’s distinctive strength. Going back to the financial advisor. Say you’ve got a lot of people in your area who are approaching the market in one way, such as focusing on their connections; then you have someone come in who can think about this in a very math-oriented way and talk people through what the opportunities are.

InsuranceNewsNet Magazine » January 2018

and so habitually that it’s like the air that we breathe. We don’t actually value the air that we breathe until we don’t have that air anymore. People can ask themselves, “What makes me feel strong? As I go throughout my day, when do I feel invigorated and when do I feel energized and when do I feel strong generally?” And if you still can’t answer that question, when you finish an activity, make a note like, “I feel I have a lot of energy right now. Good. That makes me feel strong.” Over time, you will see this pattern of what makes you feel strong and that’s when you are in direction with your

THE SUCCESS CURVE OF DISRUPTION INTERVIEW strength. The trick is to be willing to actually use that strength on purpose, and not just when you’re in a bind and need to get yourself or the people around you out of some sort of predicament. Another way you can know what your strengths are is to listen to the compliments you get. We as human beings tend to deflect compliments because it’s sort of unseemly to listen to what people say we do well. I think there’s also an evolutionary reason for not listening to compliments. If you focused on what you did well, you would become prey instead of becoming a predator. And yet the compliments we get are really people identifying for us what we do very, very well instinctively and naturally. For at least a week, write down the compliments you receive, because you’ll say, “Wow! I’m really good at this.” Then ask yourself, “Am I actually using this thing that I’m really good at every single day of my life?” I’ll give you a super simple one that I think is really applicable. I was doing a

facilitated session at a construction firm. I asked people, “What compliments do you get?” This one young man, probably about 30 years old, raises his hand. He’s surrounded by all these construction workers and he said, “Well, people tell me I have nice eyes.” Well, first of all, everybody started laughing, but then I said, “OK. So, what’s the distinctive strength here?” He said, “Not everybody has nice eyes.” Then the question was, “All right. So, if people enjoy looking at your eyes, do you make sales calls over the phone or in person?” And everybody was like, “Hahaha, in person.” And yet, so often we don’t lean into that thing we do naturally, instinctively well. As a manager, one of the things you can do to make sure people are as productive as possible is to identify their strengths. Let them know you value that strength and you want them to lean into it because it’s going to make them and your organization that much more productive.

FELDMAN: What are some ways a manager can help identify those strengths? JOHNSON: What’s fun is if you were to do an activity with your management team, for example, say, “Tell me the superpowers of every person on our team.” And then you ask the person, “So I have this list of eight superpowers that your colleagues say you have. Are you using your superpowers systematically every single day you’re on the job?” This is a super fun exercise that might be fun for you to do in your next management meeting. FELDMAN: The next one is embracing constraints. That one is a surprise. How do you leverage constraints? JOHNSON: It’s so interesting, isn’t it? Let me illustrate what I mean by this and help people get into this mindset. The most famous scenes in the movie Jaws came about because the mechanical shark that Steven Spielberg wanted to use simply didn’t work. Spielberg was completely over budget.


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INTERVIEW THE SUCCESS CURVE OF DISRUPTION He was out of time. He needed to get this done. So, he finally decided to shoot all the scenes in the film from the shark’s point of view and let the music — which I’m sure is playing in your head right now — and our imagination do the rest. You look at that and ask, “Was he successful in spite of his constraints or because of his constraints?” There was this postmortem of 200 failed startups. They divided them into funded startups and unfunded startups — the ones that had money from external sources and the ones that didn’t. The No. 1 reason that the funded startups went out of business was that they ran out of cash. It was only the No. 10 reason the unfunded startups failed. There is a pattern here. People are successful not in spite of, but because of, their constraints. If you think about it, the law of physics says you need friction. You have to have friction in order to climb a mountain, in order to drive a car, in order to climb an S curve. So, one of the things that we can do inside the workplace is say, “What do I feel

like I don’t have enough of? Do I feel like I don’t have enough time? Do I feel like I don’t have enough expertise in myself or on my team? Do I feel like I don’t have enough buy-in from people inside the organization to get things done that I want to get done?” Then say to yourself, “How can I turn this ostensible lack into a tool that will allow me to actually become that much more effective and become that much more profitable?” FELDMAN: The fourth one is battle entitlement. Does that happen when things are going really well? JOHNSON: Yes, this is when you’re in the sweet spot on the S curve and everything is working. Your revenue is growing and it might even be accelerating. Your margins are expanding. The inclination is to say, “This is the way things will be and they should always be this way.” Things are so comfortable that we need to battle our entitlement and ask questions like, “What could I be doing differently?”

This whole notion of battling entitlement comes in many, many guises. You might have some people say, “Well, I worked hard for everything I have. I’ve bootstrapped myself.” Sometimes we show up late for meetings and make people wait. That’s a form of entitlement as well because we’re saying my time is more valuable than another person’s time. But you need to think, “I don’t want to get too comfortable, so how can I disrupt myself and disrupt my business so that I don’t get fat and happy, but continue to grow?” FELDMAN: That is a great point because many of our readers have been in the business for 20 years or more. They have their book of business and their clients and they’re not innovating within themselves. They’re not pushing themselves. How can they do that? JOHNSON: We’ll go to No. 5, stepping back to grow. You step back in order to move forward. It’s sort of a natural law

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InsuranceNewsNet Magazine » January 2018

THE SUCCESS CURVE OF DISRUPTION INTERVIEW because you crouch before you jump and you bring a golf club back in order to swing forward. It can be to let people who work for you do something else. Maybe you have people you have trusted and who have been working for you a long time and they want to try something new. It’s important to let them try something new because that loss of productivity in the near term can help productivity overall in the long term. A way to get ourselves to step back in order to grow is to recognize that there really is no such thing as standing still. If we’re not moving forward, we’re actually moving backward. While our business over the short term may be just fine — like if we’re making $200,000 this year and we will next year and the year after that — we need to be disrupting ourselves in some form. Maybe it’s not exactly how we’re changing our business, but how we are finding ways to make sure we’re not staying stuck in our personal lives as well. Because if you’re willing to stay stuck in your personal life, that’s going to impact your professional life. FELDMAN: That is a tough one because nobody wants to step backward. JOHNSON: We don’t, and this goes back to this idea of people thinking you’ve lost your mind. In our society, we say we want forward movement. Climb the ladder, keep climbing the ladder. So, the one example of a personal disruptor who I think is really important is Lady Gaga. We all know Lady Gaga whether we like her or we don’t like her. It doesn’t matter. This is a person who climbed the ladder way to the top of the charts. And then what did she do? She jumped to the bottom of a new ladder, one her fans could have hated because she’s collaborating with Tony Bennett on a jazz album. She’s doing a Sound of Music tribute at the Oscars. You think that Lady Gaga is trying to channel Julie Andrews. Then she’s producing country albums, and yet this step back she took completely paid off because she goes to the Super Bowl, and that performance had the largest audience ever, ever, ever in the history of music.

People might laugh at you in the short term. But think about net present value, what do you have to do with net present value? You give up some cash in order to get more cash in the future. It’s the same for you in your life and your business. You give up something in the near term to get something more in the long term.

if we don’t get A’s then we’ve become a failure. Part of becoming an adult and disrupting yourself is to separate those two. Separate how I did this year with my business from the core piece of who I am.

FELDMAN: Let’s go to No. 6, failure, because failure is so much fun.

JOHNSON: That is this willingness to take a step forward and gather feedback and adapt. When you’re playing where no one else is playing, that means you’re trying to create a market that doesn’t yet exist. So, you have to be discovery-driven. What’s so fascinating to me is that 70 percent of all successful new businesses end up with a strategy different from the one they started with. You have to conserve enough cash so that, as you’re figuring out what the best business model is and how to run it, you still have enough cash left over so you can lock and load and move up your S curve.

JOHNSON: Right, failure is so not fun. Failure is a big step back. So that’s the first thing. It’s also important to realize that whenever we start something new, there’s this fantasy of it being simple and linear, and then it isn’t. I think that when it isn’t simple and linear, we need to give ourselves the space to be sad that it didn’t work. I’m not talking about day-to-day stuff. I’m talking about stuff that we’re really emotionally invested in but it doesn’t work. We need to allow ourselves to be sad because the sadness means that we had energy in it and it mattered to us. If we try to pretend that we’re not sad, then we lose the energy, and then we need to take that step back to move forward. I think about my failures, such as bombing a speech in front of hundreds of people. People totally hated that speech. I had all of these terrible comment cards. Yet, because of that, I completely reworked what I was doing, I doubled down to the point that last week I was in Mexico City giving a speech to 1,200 people and they loved it. But I had to take that step back. I had to have that failure. I needed to give failure its due in order to move forward. We have to get rid of the shame that we sometimes feel when things don’t work out, because when we allow a mistake to become a referendum on us, our identity, the core of who we are — that’s when we lose. It’s shame that limits disruption. It’s shame that limits moving forward and disrupting yourself. It’s actually not failure. Now there’s a good reason why we do that; because as kids, we were exposed to the notion that if you get an A on your test you’re good and you’re a success. If you get a B on your test, you’re bad and a failure. So, as we go through life, we think

FELDMAN: No. 7 is driven by discovery. How does that fit into this?

FELDMAN: Does a person have to do all seven to succeed? JOHNSON: Almost every individual has one or two of these accelerants that they do better than others. Some people are great at taking risks, so they lean into taking risks. Some people are going to be really good at bouncing back from failure. So be willing to do lots of little tests because you know you’ll be resilient. Find out which of these seven accelerants you do well and lean into them when it comes to change. Then, you’ll be that much more successful in riding the waves of disruption that are always present for every single one of us who are in the business world. One of the things that textbooks on disruption don’t tell you is that disruption is by definition scary and lonely. But remember, when you’re on the path to disruption, your odds of success are six times higher and your revenue opportunity is up to 20 times greater. If you’re scared and if you’re lonely, you’re on the right path. So, there you go. Those are words for you to live by over your next year.

January 2018 » InsuranceNewsNet Magazine



Dow Breaks Records — Again The Dow Jones industrial average made history, surging past the 24,000 mark just

one month after it broke the 23,000 mark. Since President Donald Trump took office, the Dow has increased nearly 6,000 points — about 25 percent. It has recorded 79 daily highs since Trump’s inauguration. The S&P 500 also reached an all-time high of 2,638.22, and the Nasdaq neared a record high. The Nasdaq has climbed 30 percent since the presidential election.


Trump nominated a former pharmaceutical executive as the nation’s next secretary of health and human services. Alex Azar may have worked for Big Pharma in his previous life, but he told a Senate panel that one of his top priorities will be making prescription drugs more affordable. REUTERS/Yuri Gripas

past $20 trillion “is the type of thing that should keep people awake at night,”

Yellen said in testimony before the Joint Economic Committee. She said expenditures on Medicare, Medicaid and Social Security will grow more rapidly than tax revenues as the U.S. population ages. Despite her warning, Yellen said the U.S. economy was strong beyond the ballooning national debt, with the country near full employment and the financial system steadied by Dodd-Frank. DID YOU




Azar, whom Trump nominated to replace Tom Price, would be the first HHS secretary to come out of the pharmaceutical industry. Price stepped down in September amid criticism over his use of expensive chartered jets to travel. “Drug prices are too high,” Azar told the Senate health committee, pledging to

look at ways to increase competition and stop drugmakers from gaming the system. Azar was an executive at Eli Lilly after having served in HHS under former

Nebraska’s first-of-its kind long-term care savings plan, which was created by the legislature in 2006, came to an end on Jan. 1 due to a low level of participation. Source: Scottsbluff (Neb.) Star-Herald

InsuranceNewsNet Magazine » January 2018

Bull markets don’t die of old age. They die of fright, and what they’re most afraid of is recession. — Sam Stovall, chief investment strategist at CFRA Research

President George W. Bush, first as general counsel and then as deputy secretary.



Janet Yellen is on her way out at the Federal Reserve, but she had a few choice words for Congress before she exited the nation’s central bank. The fact that U.S. debt is about to soar

Richard Drew / AP



What, me retire?


The Great Recession began roughly a decade ago, but to many Americans, it’s as if the economic event never happened.

Forty percent of respondents to a Hartford Funds survey said the recession had no impact on their lives. But some of

their other responses tell a different story. A large percentage reported that they avoid the market (42 percent) and have altered their spending and savings habits (46 percent). Others (26 percent) shifted their retirement timeline and plan to work longer than they’d hoped, and 25 percent had to change jobs or take on additional jobs. When asked about preparation for the next recession or market downturn, almost half (43 percent) of respondents said they are taking a wait-and-see approach to the markets. Nearly one-fifth of Americans (17 percent) are confident in their investments and aren’t touching their portfolios to prepare for the next recession or market downturn, while 21 percent are increasing their investments to take advantage of the upside.

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INSURANCE INDUSTRY licensing SURPLUS LINES TAX FILINGS Secretary of State & Department of Revenue Filings


January 2018 » InsuranceNewsNet Magazine


Feature Story

The DOL fiduciary rule delay created an 18-month breather. How will agents and distributors use it?


by Steven A. Morelli


elcome to the bonus year. Independent annuity agents and the marketing organizations that serve them were against the proverbial wall, blindfolded and enjoying a last vape when the Department of Labor’s (DOL) new secretary, R. Alexander Acosta, issued a fiduciary rule reprieve until mid-2019. Now instead of exiting from the annuity market en masse, dazed agents and independent marketing organizations (IMOs)

find themselves with a new lease on life, albeit a short-term one. But what will agents and IMOs do with this year? Early indications at the end of 2017 were that it might not be spent selling annuities. That was Robert A. Kerzner’s concern when the LIMRA CEO laid out the facts in a third-quarter industry briefing in November. “The S&P was up 4.5 percent,” Kerzner said, “yet we’re just not seeing any positive impact this normally would have had on annuity sales.”

In the third quarter, fixed annuity sales dropped below $50 billion for the first time in 15 years. The rising equities market usually lifts fixed indexed annuities, typically linked to the S&P 500. Most expectations were that the third quarter would see a rebound of annuity sales because it was the first full quarter since the DOL rule went into partial effect on June 9. The most onerous parts of the rule were put off for another two years at that point. Those parts were the exemption requirements on indexed and variable annuities,


SEC Takes Center Stage on Fiduciary Issue • PAGE 23 18

Uncertainty Leading to Instability in Health Insurance • PAGE 26

InsuranceNewsNet Magazine » January 2018

10 Big Issues on the Table for the SEC in 2018 • PAGE 28

The BONUS Year and the consumers’ right to sue. It also paused one of the most debilitating aspects — the exile of most IMOs and their agents from selling FIAs or VAs to anyone with IRA money. So, why didn’t agents come running back to the annuities market? And will they stay away this year as well?

Roaring Markets and Fading Safety

Market analysts and distributors offer a few reasons that are affecting buyers and sellers and how those trends might play out in 2018. Two key reasons on the buyer side are reluctance because of the publicity about the DOL rule and the roaring equities markets. It seems all eyes have turned away from the safety of insurance products and toward the arrow shooting up the stock charts, according to Joseph Corio, a senior vice president at URL Financial, an IMO in Harrisburg, Pa. “Everybody has a little bit of greed in them — some more than others,” Corio said. “We used to see a lot of money coming from mutual funds, and now that money is staying put because it’s been doing well. So they’re hesitant to move it to an indexed annuity where preservation of principal is key. They want to try to get that 8, 10, 12 percent return that they’re hearing about.” Indeed, data show that more money is exiting annuities than entering them. LIMRA reported that FIAs had the first downturn in net flows in five years. Net flows are the total premium sales minus surrenders, withdrawals, inter- and intra-company exchanges, and benefit payments. The other types of annuities have seen a downward trend of net flows since 2009. Conning market researchers noted that more annuities are exiting their surrender periods. But it is looking like those dollars are not annuitizing or going into new annuities. Conning is forecasting that net flows will continue to drop into 2018. Corio’s IMO is not dependent on annuity sales, because it offers an array of services and products for life and health, with a focus on Medicare. Corio said they have been finding more success with life insurance products that include living benefit riders. They have multiple benefits that make them a good retirement planning tool.

Individual Annuity Sales TotalU.S. annuity sales fell 13 percent in the (in billions) third quarter U.S. Individual Annuity Sales (in billions)

Fixed Total annuityVariable sales fell 13 percent in the third quarter $56.8

















Variable $34.2 $35.5











U.S. Individual Annuity Sales (in billions)







$18.8 $38.0




2013 $18.8

Q4 $23.9

Q1 $25.1




2014 $25.7


Q4 $24.2


$31.7 $61.1


Q1 $21.9





$36.2 $25.7 $25.1$36.4 $24.0 $23.9$35.7 $23.0 $34.2 $21.9 $34.2 $35.5 $24.2












$32.3 $31.5 $29.4 $26.6 $26.9 $27.9 $27.5 $31.7 $32.9 $23.9 $36.0 $25.9




2015 $27.5



Q1 $32.3

Q2 $31.5


2016 $27.9






















$29.2 2017 $25.0

This was the first quarter where annuity sales fell below Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 quarterly Q4 Q1 Q2 Q3 Q4 annuity Q1 Q2 Q3 This was the first time $50 billion since 2002. $16.6

sales fell below $50 billion since 2002. This was the first quarter where annuity sales fell below 2013

Preliminary Results





$50 billion since 2002.

Preliminary Results

Life Insurance Market Share Third Quarter 2017 YTD

January 2018 » InsuranceNewsNet Magazine


Feature Story

U.S. Individual Life Insurance Growth Rates by Product

Source: LIMRA’s U.S. Retail individual Life Insurance Sales Summary Report, Third Quarter 2017

It’s especially good for clients who already have annuities and are concerned about the next generation getting taxed on the gains. “We’re suggesting to agents that instead of putting money into another annuity,

for home health care or nursing home care if his health goes sour. That alleviates the long-term care piece, a little bit. And if they die, the $160,000 goes to the beneficiary tax-free, so they can use that to pay the taxes on all the other investments that we helped them with over the years. And if something changes and they want their money back, they can get their money back at any time or surrender the policy for even greater than the premium.” Riders, particularly living benefit options, have been a bright spot in the life insurance market, which has seen a bit of dimming along with annuities. In the third quarter of 2017, sales in each segment of life insurance dropped, except for term.

“Everybody has a little bit of greed in them — some more than others.” letting it grow and the gain will be taxed, why not look at a single-premium life product?” Corio said, using a hypothetical client in his late 60s who puts $100,000 in a policy. “That provides him about $160,000 with death benefit instantly — day one. That death benefit can be used 20

Sales Exit With Sellers

The other factor in slowing sales is sellers

InsuranceNewsNet Magazine » January 2018

themselves. Many of Corio’s 2,400 agents are dialing down their business, down to 12 hours a week in some cases. They still make six-figure incomes, but they aren’t pulling in much new business. This is typical nationally as the average agent age advances into the 60s. As with many IMOs nationally, Corio’s URL Financial is having difficulty recruiting new agents. Many of his prospects in the Harrisburg area are already contracted with all the companies URL represents. Younger people tend to go into finance rather than insurance. So, why not go into finance also? Many industry experts suggest that IMOs would do well to participate in the financial sector. In fact, URL did dip a toe in that water 10 years ago by developing a securities division. But it is a tough pool to swim in. Regulation was demanding, and supervision requirements were costly to maintain. URL ended up selling that division. Corio did not rule out taking another pass at securities at some point, but URL has

The BONUS Year

M A R K ETRisk R I SK Market S&P 500 Performance (1929–2016)

64 Positive Years: Average Positive Return

Sources: Thomson Investment View and Standard & Poor’s (S&P), a division of The McGraw-Hill Companies Inc. Each year listed in the chart reflects the average annual performance of the S&P 500 ranging from 1/1/1929 to 12/31/16.


Average Annual Return


5.7% 5.5% 5.5% 5.2% 4.9% 4.0% 2.1% 1.4% 1.3% 0.5%

24 Negative Years: Average Negative Return


1947 1948 2007 1987 2005 1970 2011 2015 1994 1960


11.1% 10.9% 10.0% 7.7% 6.6% 6.6% 6.3%


NEGATIVE YEARS -20% or Less -22.1% -24.9% -26.5% -35.0% -36.9% -43.3%

2002 1930 1974 1937 2008 1931

(12–18%) -14.7%

-7.2% -8.1% -8.2% -8.4% -8.5% -8.7% -9.1% -9.8% -10.1% -10.8% -11.6% -11.9%


1944 1972 1949 1986 1952 1979 1988 1964 2012 2006 2010 1971 2014 1965 2016 1959

20% or More

(0–6%) 1977 1946 1932 1929 1969 1962 2000 1940 1966 1957 1941 2001

-0.4% -1.0% -1.4% -3.2% -4.9%

1939 1953 1934 1990 1981

The Standard & Poor’s (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization U.S. stocks. Indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index. Performance figures represent past performance & do not guarantee future results. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC. Advisory Services offered through ValMark Advisers, Inc. An SEC registered investment advisor | 130 Springside Drive, Akron, OH 44333 | 800.765.5201

found some success in the financial sector in another way — with financial advisors. Getting financial advisors to sell insurance products has been an ever-growing insurer strategy, especially over the past few years, because of the declining agent sales force and tightening regulatory pressure on commission-based sales. But advisors are not leaping aboard that train. According to LIMRA, fee-based fixed indexed annuities made up less than 0.5 percent of FIA sales in the third quarter of 2017. Fee-based VAs did marginally better at 2.5 percent of sales. But much to Corio’s surprise, he is finding some success with the living benefit riders on life products. Although insurance agents have not been as quick

1933 1954 1935 1958 1995 1975 1945 1936 1997 2013 1980 1985 1950 1955 1989 1938 1991 2003 1998 1961 2009 1943 1951 1967 1976 1996 1963 1983 1982 1999 1942


(6–12%) 1973

1968 2004 1993 1992 1956 1978 1984

19.8% 19.0% 18.8% 18.5% 18.4% 18.4% 16.8% 16.5% 16.0% 15.8% 15.1% 14.3% 13.7% 12.5% 12.0% 12.0%

54.0% 52.6% 47.7% 43.4% 37.4% 37.2% 36.4% 33.9% 33.4% 32.9% 32.4% 32.2% 31.7% 31.6% 31.5% 31.1% 30.6% 28.7% 28.6% 26.9% 26.5% 26.0% 24.0% 24.0% 23.8% 23.1% 22.8% 22.5% 21.4% 21.0% 20.3%

to put those products in their tool box, financial advisors have been interested. “We’re seeing more and more wealth managers starting to use it because it is an efficient way to transfer wealth,” Corio said. “They want to know what’s out there so they can best serve their clients.” Corio is working the phone, cold-calling just like in the old days. Except now he is recruiting financial advisors. And finding success.

Annuities Blending With Finance

You don’t have to sell Robert Klein on insurance products. The financial advisor in Newport Beach, Calif., sees himself as a retirement income advisor and considers life insurance and annuities critical


elements in planning. “I’m not strictly fee-based or commission-based,” Klein said. “I do what’s best for the client.” He is keeping a worried eye on the stock market because he believes many people are forgetting the lessons of 10 years ago. “People are ecstatic that it is at this height,” Klein said of the market’s phenomenal rise since 2009. “But at the same time, people have a short memory and forget that the market lost 50 percent within 18 months, October 2007 and March 2009.” He reminds clients of those down years, introducing the reliability of an annuity if there is an absence of a strong, secure stream such as a pension or rental income.

January 2018 » InsuranceNewsNet Magazine


Feature Story

U.S. Industry Individual Deferred Annuity Net Flows*

U.S. Industry Individual Deferred Annuity Net Flows* Deferred Annuity Net Flows $42.0



Fixed-Rate Deferred

$55.1 $23.8

$15.7 $15.3





Source: LIMRA Secure Retirement Institute *Net Flows = Inflows less outflows and does not take into consideration investment performance.


Klein uses a range of annuities. He might suggest that a client could do well to take $100,000 out of the market and put it into a qualified longevity annuity contract (QLAC), which avoids the required

“It’s always about how annuities are presented,” Klein said. “You can never equate the market with a secure lifetime income. It’s not about a return. It’s about how long you are going to live. If you present it as a return, the client is never going to be on board with that.” He focuses on the income, which he said could be substantial, depending on when the client puts in the money and how long they defer the payout. Klein finds that helps soothe retirement anxiety. “It helps people sleep better at night,” he said. “People get really anxious when they don’t have any plan at all or people don’t follow through the plan.” That is the key to 2018 — the all-purpose plan. No year is typical now. Records

“You can never equate the market with a secure lifetime income. It’s not about a return. It’s about how long you are going to live.” minimum distribution at 70½ that other products carry. But wouldn’t clients be hesitant to take money out of the roaring stock market and put it into something that would pay a few percent interest? 22

InsuranceNewsNet Magazine » January 2018

are set and broken every day in finance, climate and the limits of crazy news. A plan has to be built to withstand extreme conditions. Klein suggested a bit of financial Zen to soothe clients. “There is always stuff going on that is totally beyond your control,” he said. “All you can do is plan around it. Do the best you can to reduce the risk. You do the best you can.” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at steve.

store in s ' t a h W for 20 18?

The BONUS Year

SEC Takes Center Stage on Fiduciary Issue In light of the delayed fiduciary rule, the Department of Labor may fade into the background as the SEC becomes more active.


By John Hilton

he fiduciary rule has been the major financial services issue for the past few years, and 2018 will be no different. But there will likely be a venue flip. Analysts expect the Department of Labor to recede into the background, with the Securities and Exchange Commission becoming more active. The SEC began accepting public comment this summer, and Chairman Jay Clayton has repeatedly called it a priority. That is particularly welcome news to rule opponents, who have long pushed for the SEC to take the lead on any fiduciary standard. With the DOL having delayed full implementation of the fiduciary rule until July 2019, the runway is clear. “It’s long been a Republican tenet on this issue that it’s squarely in the SEC’s purview,” said Steve Boms, longtime Washington, D.C., lobbyist. Overall, financial services should expect another strong year with President Donald J. Trump giving Republicans control over the three branches of government.


SEC You Next Year

Robert Jackson will be seated early in 2018. By then, Clayton should be fully immersed in SEC operations and the agency could move quickly, Boms said. “My view is that this is no longer a Department of Labor issue,” he added. “I see more collaboration between the Labor Department and the SEC moving forward, particularly as the SEC becomes fully staffed up.” The 2010 Dodd-Frank financial reform law gave the SEC authority to propose a uniform fiduciary standard, but they did not agree upon specific language. That’s

Clayton was confirmed on May 4 and, in one of his first official actions, issued a call for comments on a fiduciary standard. In October, he told lawmakers that the SEC was hard at work drafting a proposal. The agency has offered no timelines with its work, and past chairs spoke enthusiastically of a fiduciary “I see more collaboration between standard. But observthe Labor Department and the SEC ers say signs point to a bolder SEC that has a moving forward, particularly as the good chance of followSEC becomes fully staffed up.” ing through this time. For starters, odds are good that the SEC could operate with a full commission soon. The when the DOL stepped in with a rule that board has been short on members since expands the “investment advice fiduciary” Republican Daniel M. Gallagher and definition under ERISA. Democrat Luis A. Aguilar resigned in late But the rule applies only to qualified 2015. money invested in retirement plans. Add Politics kept those openings from be- in various states working on specific state ing filled until now, but analysts expect fiduciary laws, and industry execs are conRepublican Hester Peirce and Democrat cerned. January 30 – President Donald J. Trump will deliver the traditional State of the Union address to Congress. Many consider this the president’s first real address since he has had a year to establish his agenda and make appointees. The address is sure to lay out Trump’s vision on the economy, taxes, regulation and other issues of significance to financial services. JIM LO SCALZO / POOL, EPA-EFE

January 3 – Legislators convene at noon to open Session II of the 115th U.S. Congress. It is likely that tax reform and the government funding omnibus bills will be settled by the close of Session I. If not, they will likely head the agenda. The Financial CHOICE Act heads the list of bills of interest to financial services. The bill passed the House in June and would overturn much of Dodd-Frank and cripple the DOL fiduciary rule. It faces an uphill battle in the Senate.

Legislative goals might be a tad dicey later in 2018 with its being a highly charged election year. But the historic tax reform deal showed what can get done if GOP leadership flexes its muscles, analysts say.

January 2018 » InsuranceNewsNet Magazine


Feature Story “It just makes more sense that there’s a more consistent standard across the board as opposed to different agencies having different standards,” said Kevin Mayeux, chief executive officer of the National Association for Insurance and Financial Advisors (NAIFA). Rule opponents are also watching the courts, where a consolidated lawsuit in the

Standard, which is to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. Those requirements are already cutting off access to financial advice for small savers who need it most, industry executives say. But the real concern lies with the second phase of the fiduciary regulation. In a Feb. 3 memo, Trump tasked the DOL with studying whether the rule will deprive Americans of retirement advice and/or add undo cost burdens. The pending fiduciary rules deal with the exemptions: the Best Interest Contract and Prohibited Transaction 84-24 exemptions. The former mandates a signed contract with the investor in order to sell variable and fixed indexed annuities. That contract comes with the potential for a lawsuit down the line. It is very likely the DOL will remove the class action component from the BICE, analysts say. Likewise, regulators could tackle the role of insurance marketing organizations (IMOs) in the sales process. The Obama DOL seemingly ignored IMOs, leaving them off the list of qualified financial institutions needed to sell products under the BICE. Banks, insurance companies, registered investment advisors and broker-dealers are the financial institutions under the rule. The DOL then created an unwieldy exemption that satisfied nobody — permitting IMOs with at least $1.5 billion in premiums over each of the three previ-

“Surely there will be other changes as well. DOL officials are in information-gathering mode and vow that the evidence will guide its work.” Fifth Circuit Appeals Court in New Orleans awaited a ruling as the year drew to a close. The Fifth Circuit is generally considered the most conservative in the country, with decisions that frequently define the government’s role narrowly. The lawsuit — brought by plaintiffs such as NAIFA, the American Council of Life Insurers and others — asks the court to toss out the fiduciary rule.

DOL Huddles Up

One thing industry analysts agree on: the DOL is a mystery with regard to its fiduciary rule. The Trump DOL failed to prevent the initial regulations from taking effect June 9. That part of the rule requires advisors and agents to follow the Impartial Conduct

March 6 – Texas kicks off primary election season. Several states follow with May primaries, and June 5 is the year’s “Super Tuesday,” as voters in eight states, including California and New Jersey, head to the polls. It is a crucial election for control of Congress. The minority party traditionally gains seats in an off-presidential election year. Republicans hold a slim twoseat margin in the Senate and a 24-seat advantage in the House. States to watch include Arizona (Aug. 28), where Sen. Jeff Flake (R) is not running for re-election, and Texas, where six incumbent House members — five of them Republicans — are not running. 24

InsuranceNewsNet Magazine » January 2018

ous fiscal years to join the group. Surely there will be other changes as well. DOL officials are in information-gathering mode and vow that the evidence will guide its work. Exactly what the DOL is doing in the coming months might be hard to discern. The department isn’t obligated to make its work public until it is ready to solicit public comment. “It’s to a large extent up in the air. I do think in the first half of [2018] we’ll see some activity,” Boms said. “I just can’t say what that activity will be. There are just so many other variables related to Labor and the SEC that are not directly related to the fiduciary rule.” Another thing to watch is the pro-rule camp. This not-insignificant coalition includes fee-based planners such as the Financial Planners Association and broadbased consumer groups led by the Consumer Federation of America. They could turn to the courts early in 2018 in a bid to keep the rule on track. “We’ve reached no conclusion at this point regarding a possible lawsuit, but we are weighing our options,” said Barbara Roper, director of investor protection for the federation.

Legislative Report

While 2018 is a huge election year in Congress, there are still opportunities for legislation to pass, analysts agree, especially early in the year. One thing is clear: Republicans will have to work with Democrats to pass anything once tax reform is done. The tax reform vote is Senate Republicans’ last chance to pass legislation under reconciliation rules,

April 17 – Taxes must be filed by this date. If Republicans complete their tax reform package, Tax Day will look much different in 2019. Highlights of the GOP tax plan: reduces the corporate tax rate from 35 to 20 percent; repeals the estate tax and the alternative minimum tax; sets the “pass-through” tax rate for small business at 25 percent; reduces brackets for personal income tax from seven to three or four; doubles the standard deduction, but eliminates many others, such as the deduction for state and local taxes.

May 9 – Carriers may begin submitting applications to the Center for Medicare & Medicaid Services (CMS) for plans to be offered on the federally facilitated marketplace for 2019. All plans to cover essential health benefits, pre-existing conditions and preventive services. Plans also will be offered in various “metals” tiers – platinum, gold, silver and bronze.

The BONUS Year Venue

Status Update

Department of Labor

Could not prevent the initial phase of the fiduciary rule from taking effect June 9. This part requires anyone selling into retirement accounts to adhere to Impartial Conduct Standards. DOL staff focused on the second phase of the rule and published a rule Nov. 29 officially delaying full implementation until July 2019. The second phase deals with exemptions — specifically, the liability associated with selling variable and fixed indexed annuities. During 2018, the DOL will collect data showing the impact of the rule on the industry and consumers. Legal experts predict they will find enough evidence to soften the more punitive aspects of the Obama-era rule.


Rep. Ann Wagner’s Retail Investor Protection Act is the primary legislative vehicle Republicans have used to counter the DOL rule. It requires the SEC to be the lead agency on any fiduciary standard. The RIPA was folded into the Financial CHOICE Act, which passed the House in June. Two variables make it unlikely the RIPA concepts will pass the Senate. First, Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are Wall Street critics who have filibuster power and are likely to use it. Second, a bipartisan group of senators agreed in November to a scaleddown version of the Financial CHOICE bill dealing only with some Dodd-Frank Act provisions. If passed, their deal will exempt about a dozen midsize banks from Dodd-Frank regulations.

U.S. Court of Appeals for the Fifth Circuit

A three-judge panel heard arguments July 31 in New Orleans. A ruling was expected by the end of the year, but hadn’t been released by press deadline. Plaintiffs include the National Association of Insurance and Financial Advisors and many other similar organizations, which petitioned the court to toss out the DOL rule. The Fifth Circuit has a history of conservative opinions limiting the power of government to regulate industry.

which eliminate the filibuster option. “When you look to 2018, is there really a desire by Congress to work together to address some of these issues?” asked Diane Boyle, senior vice president of government relations at NAIFA. She says how the tax vote ends up will help determine “how much healing time is needed, and then how much can you get done before the campaigning, when it becomes impossible?” The Financial CHOICE Act, which June 20 – Deadline for carriers to submit applications for plans to be offered on the federally facilitated marketplace. CMS has 45 days to review the applications.

rolls back much of the Dodd-Frank Act and bars the DOL from passing a fiduciary standard, is the most significant bill of consequence to the industry. It passed the House in June. However, Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are likely not interested in any compromises on anything involving financial services, Boms said. A bipartisan group of senators reached a deal in November to exempt about a dozen midsize banks from

Dodd-Frank regulations, he noted. “If the Senate is going to be able to pass anything,” Boms said, “it’ll be something much closer to that deal.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@ Follow him on Twitter @INNJohnH.

September 17 – CMS posts lists of plans to be sold on the federally facilitated exchange for 2019. The list includes the number of plans available, carriers offering the plans and counties in which the plans will be available. There is a two-day period for making corrections to this list.

July 27 – Congress begins summer recess. Members frequently hold events in their districts during these weeks. Session resumes on Sept. 4. September 25 – States send CMS their final recommendations. January 2018 » InsuranceNewsNet Magazine


Feature Story

Uncertainty Leading to Instability in Health Insurance Industry observers wonder whether the marketplace could collapse if the individual mandate is abolished.


By Susan Rupe

wo words come up in nearly every conversation regarding the future of the health insurance market in 2018: uncertainty and instability. The uncertainty over the continued chipping away of the Affordable Care Act (ACA) could lead to instability in the marketplace, industry observers warn. In particular, the ACA’s individual mandate is like that crucial piece in a Jenga game that collapses the entire tower of wooden blocks when it is pulled out. As of press time, Congress was still considering whether to abolish the individual mandate as part of its tax reform proposal. But if lawmakers are successful in repealing the requirement that everyone have health insurance coverage, the rest of the ACA could be in danger of falling unless Congress enacts measures to shore up the marketplace. Adding to the jitters surrounding health care in 2018 is President Donald Trump’s decision to end cost sharing reduction (CSR) payments to health insurers. The

payments are part of the ACA and help offset insurers’ costs of offering affordable plans to poor Americans.

Individual Mandate, CSR Payments

Washington needs to take action to keep the ACA marketplace stable and viable for 2018 and beyond, said Sara Collins, vice president, health care coverage and access, with The Commonwealth Fund. Keeping the individual mandate and funding those CSR payments are essential to that stability, she added. “Funding those CSR payments would

bring much greater certainty to the 2019 enrollment period and stability to the marketplaces in terms of carriers being more likely to participate,” Collins said. “If that doesn’t happen, there is a risk that some insurers may not participate in the 2019 enrollment periods and that some counties might not have plans available for people to enroll in. So it really is important that that there is legislation to fund those payments.” The repeal of the individual mandate “would be very destabilizing,” Collins said. Repealing the individual mandate “would cause insurers to raise their

September 17-25 – Carriers send CMS their signed agreements and confirmed health plan lists. After this is done, CMS will announce the number of plans available in the federal marketplace and amounts of premiums charged. November 1 – First day of open enrollment for health insurance on the federally facilitated marketplace. Consumers can go to to enroll in coverage or enroll with the assistance of a health insurance agent who is certified to sell on the federal marketplace or of a navigator. 26

InsuranceNewsNet Magazine » January 2018

November 6 – Election Day. The entire U.S. House of Representatives, as well as one-third of the U.S. Senate, will be up for election today. December 13 – The final day congressional votes can be scheduled. Any bills that are not considered by 3 p.m. are considered dead and must be reintroduced in January in the new 116th Congress.

The BONUS Year premiums in anticipation that healthier people would be less likely to buy coverage under the circumstances,” she said. The Congressional Budget Office estimated the individual mandate repeal would cause average individual premiums to increase by about 10 percent in most years of the next decade. “That would be a significant cost for federal government, which funds the tax credits,” she added. Despite warnings about higher premiums, the majority of those who buy coverage in the individual market aren’t feeling those increases, because they are eligible for tax credits to help them afford coverage. So keeping those tax credits in place is another critical factor in maintaining stability in the marketplace, Collins said.

Can ACA Repeal Be Done in 2018?

If Congress didn’t pass any ACA-related legislation by the time everyone popped the champagne to start the New Year, will they get a chance to do it in 2018? It could happen, but it would be a challenge, according to Diane Boyle, senior vice president, government relations at the National Association of Insurance and Financial Advisors (NAIFA). “Even if the individual mandate is repealed in tax reform in 2017, there are a number of members on both sides of the aisle who want to sit down and roll up their sleeves and address some of the concerns, especially in the individual market,” she said. “But I just don’t know how much healing time is needed to get that bipartisan effort going in the new year. “And then the challenge becomes how far can you go into an election year until everyone shifts into campaign mode? At that point, the chance for bipartisan effort on big items diminishes.”

Looking for Solutions

In the midst of the nail-biting over the ACA’s future, one industry organization is offering Washington some ideas on what it believes is the key to keeping the marketplace stable — and that key is ensuring continuous coverage. America’s Health Insurance Plans (AHIP) is looking at what regulators can do to keep people covered even if the individual mandate is abolished, said David Merritt, AHIP executive vice president of strategic initiatives. The organization sub-

mitted comments to the U.S. Department of Health and Human Services (HHS) outlining its concerns. Among AHIP’s suggestions is that HHS could implement policies to require continuous coverage for individuals who are eligible to obtain health insurance for a special enrollment period. AHIP’s recommendations included: » Giving states greater flexibility in selecting essential health benefit benchmark plans. » Modifying the medical loss ratio (MLR) to allow carriers to exclude certain taxes from their MLR and rebate calculations. » Allowing greater flexibility in plan benefit designs and expanding preventive care in high-deductible health plans. “We think that funding the CSRs would be essential to delivering more stability,” Merritt said. “We think finding an alternative to the individual mandate, if that is going to be repealed in the tax reform bill, is imperative. “There are other options that policymakers can do to stabilize the markets, such as reinsurance, where high-cost, high-need patients can get the care they need but have a range of insurance options that they can choose from to get their coverage. We think reinsurance — even if it’s at the state level — can be an important part of the discussion. So we’re focusing on solutions and how to stabilize these markets. We have a commitment to serve that market, but there are challenges. We need policymakers to act.” Merritt said health insurers’ reactions to the ACA differ, “depending on who you ask.” “Many health insurance providers are committed to serving that market. Many plans have actually expanded their presence on some of the ACA exchanges. Others who were in the exchanges have decided to pull back. It really depends on the local market. Some are more stable than others.”

Optimistic But Concerned

Guy Furay said he is “optimistic but concerned” as he looks at the health insurance climate for 2018. Furay is president of The Insurance Source, a group and individual health insurance and benefits agencies in Greer, S.C.

“The health care system was broken before the ACA came along,” he said. “But instead of fixing the problems, the ACA created others.” Furay said he would like to see lawmakers keep the parts of the ACA that work for consumers while fixing the parts of the law that are broken. But in order to do that, something needs to “break through that logjam in Washington.” He is especially concerned about what he called “carriers trying to cherry-pick the areas where they want to do business,” giving consumers less choice and higher premiums. Health insurance brokers have taken a beating under the ACA, dealing with disappearing commissions and fewer carriers to work with. In addition, those who serve the group market have to deliver the bad news of increased premiums to their clients. “But we will persist because we have people who need our help,” Furay said. “As long as there is a role for the broker in the ACA, I will be there.”

Frustration Among Agents

NAIFA members are expressing frustration over the future of health insurance, Boyle said. “Certainly, the individual market has always been challenging,” she said. “When you add additional challenges, some of the agents simply choose to focus their practices in a different manner or a different area. Others have embraced and want to work through it. “But the frustration is still there, and combined with the uncertainty, it makes for a difficult environment. It’s extremely frustrating because it’s the policy and the political implications that have to be worked through before adjustments can be made to anything. Agents are trying to serve their clients, but they’re running into obstacles, and then they’re told, ‘We can’t address your obstacles until tax reform is done or until — insert a different issue.’” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at

January 2018 » InsuranceNewsNet Magazine


Feature Story

10 Big Issues on the Table for the SEC in 2018 Securities industry experts weigh in on the most important issues on deck for the SEC.


By Brian O’Connell

he U.S. Security and Exchange Commission (SEC) may well expect plenty of overtime for managers and staffers in 2018. Why? Because there is no shortage of potential game-changing issues for the government agency watchdog group to address in the coming year. From the harmonized fiduciary standard to the rapid rise of cryptocurrencies, the following are the most pressing issues facing the SEC in 2018, according to securities industry experts.

1. Fiduciary Standard

The SEC is wading into the thicket of fiduciary rules for retail investment advisors. But where it is going is anybody’s guess, said Britt Whitesell Biles, former assistant chief litigation counsel at the SEC and a recently named partner at Stein Mitchell in Washington, D.C. “Chairman Jay Clayton told Congress in October that the SEC is drafting its own fiduciary rule and that the agency would work to ‘harmonize’ its fiduciary rule with the controversial Department of Labor fiduciary rule,” Biles said. “The SEC has been taking public comments, but there is not yet any insight into what an SEC fiduciary rule might look like or how it could be harmonized with the Department of Labor’s fiduciary rule. This is sure to be a hot-button issue for the SEC in 2018.”

2. Cybersecurity

Clayton made cybersecurity a key part of his agenda when he joined the commission on May 4. “Chairman Clayton’s focus on cybersecurity was a natural progression of the work that the SEC already had done in the cybersecurity space, including a ground28

breaking enforcement action against Chinese nationals who traded on the basis of nonpublic information that was obtained by hacking prominent international law firms,” Biles said. But when Clayton announced the SEC’s continued focus on cybersecurity, the SEC had not yet disclosed that its EDGAR system had been hacked to obtain information used for illicit trading. “Once the SEC identified itself as both a victim of a cybersecurity breach and an agency with a regulatory agenda focused on cybersecurity, the SEC ensured that every action that the agency takes on cybersecurity — whether in the regulatory, enforcement or examination space — will be closely watched by Congress, regulated entities and investors,” Biles said.

3. Retail Strategy Task Force

The SEC’s Division of Enforcement has renewed its concern for retail investors, said Kenneth Yeadon, a former SEC enforcement attorney and now a securities litigation and enforcement partner at Chicago-based Hinshaw & Culbertson. Retail has long been a concern for the SEC, and the division formed the Retail Strategy Task Force to develop effective strategies and methods to identify potential harm to retail investors, Yeadon said. “The Task Force draws on the SEC’s experience in this area and will use the SEC’s technology and data analytics to identify large-scale wrongdoing,” he noted. In the coming year, the SEC will likely be investigating and bringing enforcement charges in the microcap market and against Ponzi schemes and offering frauds, where victims typically are retail investors. “In addition, the Task Force will focus on misconduct involving investment professionals and retail investors,” Yeadon said.

InsuranceNewsNet Magazine » January 2018

4. Cryptocurrencies

Not very many people actually understand blockchain or cryptocurrency — even at the SEC, said Jason Hilton, a partner at Hilton Advisory in Rochester, N.Y. “Right now, I believe they are in a rush to get the right people together to educate themselves and catch up,” he said. Hilton said it’s important that the SEC do something soon, as the digital cryptocurrency market is moving along with virtually no regulation. “There’s no one to stop or prohibit a fraudulent situation,” he said. “Already investors have been swindled and taken advantage of, losing lots and lots of money in the process. “The biggest issue the SEC will be looking at is creating more realistic valuations of cryptocurrencies,” Hilton added.

5. Simplified Disclosure Requirements for Public Companies

Public companies are required to file quarterly reports for the first, second and third quarters and an annual report after the conclusion of the fourth quarter, noted David Lavan, a former special counsel in the SEC’s corporate finance division. “Those documents have all grown fatter over recent years with more required disclosure, but the result has been to create a document that is less user-friendly and has buried material information among less-material required disclosures,” he said. Perhaps the best example of the need for more focus on disclosure can be seen in the proxy materials that public

The BONUS Year companies send to shareholders regarding agenda items for annual shareholder meetings. “Proxy materials used to be 10 to 15 pages long, maximum,” Lavan said. “Now the section of the proxy materials addressing required disclosures of executive compensation alone run between 10 and 20 pages long. Those disclosures seem to have a less-than-direct connection to investment performance.”

6. New Revenue Standards

A great deal of time will be spent by the SEC’s Office of the Chief Accountant reviewing and understanding the adoption of the new revenue standard that public companies have to implement this year, and their progress on the new leasing standard required at the beginning of 2019, said Sean Clements, managing partner at Dacarba in New York City. “Both of these standards have wide-reaching implications,” Clements said. “SEC reviews and resulting comment letters about non-GAAP financial measures and disclosures and expanded Management’s Discussion and Analysis (MD&A) will likely continue to be a focus.”

7. Fallout From the Supreme Court’s Kokesh Decision

The single biggest issue facing the SEC in 2018 is the impact of the Supreme Court’s June 2017 decision in Kokesh v. SEC, Stein Mitchell’s Biles said. In that decision, the court applied a five-year statute of limitations to the SEC’s orders for disgorgement, the surrender of ill-gotten gains. “Every year between 2014 and 2016, the SEC obtained orders for disgorgement in amounts in excess of $4 billion. Undoubtedly, much of the ordered disgorgement reflected ill-gotten gains to which the SEC would no longer have a claim after Kokesh,” Biles said. That is because of an “ominous” footnote in the Kokesh decision that raises a legal issue that could upend the SEC’s enforcement program, Biles said. “The federal courts do not have express legal authority to order disgorgement in SEC enforcement actions,” she said of the footnote. “Before Kokesh, the authority to order disgorgement was thought to come from the inherent equitable powers of the federal courts because no statute authorizes the disgorgement remedy.”

But Kokesh ruled that disgorgement was a penalty, which means that the authority to impose disgorgement cannot come from the federal courts’ inherent equitable powers. Thus, federal courts have no inherent power to fashion remedies. “Consequently, the Supreme Court’s highlighting and reservation of this issue will prompt defendants in SEC enforcement actions to challenge whether the SEC can obtain disgorgement in any case,” she said. “If federal courts find that they lack the authority to order disgorgement, that will signal the end of the SEC enforcement regime that has prevailed for the last four decades.”

8. The Future of SEC Administrative Proceedings

The constitutionality of the SEC’s administrative proceedings has been hotly contested over the past few years, resulting in a circuit court split on whether the SEC’s process for hiring administrative law judges violates the Appointments Clause of the Constitution, Biles said. “The United States Court of Appeals for the Tenth Circuit ruled in Bandimere v. SEC that the SEC’s administrative law judges are ‘inferior officers’ who must be appointed in accord with the Appointments Clause,” she explained. Ultimately, the lack of certainty surrounding the constitutionality of the SEC’s administrative proceedings virtually stopped the SEC from bringing cases before its in-house tribunal. The SEC is asking the Supreme Court to review the case. “The Supreme Court will decide in 2018 whether to take the case, but a decision by the Supreme Court on whether the SEC’s administrative proceedings are constitutional or not would not come before 2019,” Biles said. “Therefore, the future of the SEC’s administrative proceedings will remain uncertain throughout 2018.”

9. Broker/Dealer Scrutiny

The population is aging, and regulators are concerned about how firms and advisors help these near-term retirees manage their assets, said Denver Edwards, principal at the law firm of Brellser, Amery & Ross, and a former SEC attorney. As a result, the SEC’s Office of Compliance Inspections and Examinations (OCIE) “will evaluate advisors related to recommendations about retirement

accounts and treatment of senior investors,” Edwards said. For example, on the issue of retirement accounts, OCIE has a multiyear program (ReTIRE) focused on senior investors because large numbers of baby boomers are approaching retirement, Edwards said. “OCIE will look at how broker-dealers service investors’ retirement accounts, the type of products that broker-dealers offer to them, advisors’ oversight processes, basis for the recommendations, conflicts of interest, and marketing and disclosure,” he said. Additionally, senior investors require “special attention” because they rely on returns from investment portfolios to fund retirement more so than prior generations did, Edwards said. FINRA’s Rule 2165, Financial Exploitation of Specified Adults, becomes effective in February 2018. It is highly likely that OCIE will focus on the implementation of the new rules, and more broadly on firms’ compliance programs to protect seniors from abuse, Edwards said. “This is an area of concern for the SEC, but it is a priority for other federal agencies and state regulatory authorities as well,” he said.

10. Pay Ratio Rule

The SEC is plowing ahead with the CEO pay ratio rule, said Kenneth E. Yeadon, former SEC enforcement lawyer and now with Hinshaw & Culbertson in Chicago. “The rule will require most public companies to disclose the ratio of their CEO’s annual pay as compared with the annual compensation of their median employee,” he said. While some speculated that the rule would not go forward, it appears that the disclosure rule will go into effect as scheduled early this year. “The rule will require companies to identify their ‘median employee’ to meet their disclosure obligations,” Yeadon added. Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books The 401(k) Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms. Brian may be contacted at

January 2018 » InsuranceNewsNet Magazine



IUL Is Bright Spot in a Sputtering 3Q Indexed universal life sales continued to roar ahead in a sputtering life insurance

market, according to the latest data. IUL sales rose 8 percent in the third quarter compared with the year-ago period, market tracker LIMRA reported. Wink’s Market & Sales Report had similar figures, reporting a 6 percent rise in third-quarter IUL sales to $479.5 million compared with the year-ago period. But overall new sales of life insurance stalled in the third quarter, LIMRA reported. Premiums fell 2 percent compared with the year-ago period. Policy counts also dropped, by 3 percent in the third quarter compared with the prior year. In the past 10 years, policy count has fallen 21 out of 40 quarters, LIMRA CEO Robert A. Kerzner said.


Surveys show that most adults with families know they need life insurance and want to buy it. Yet, a persistent gap exists between those who say life insurance is a crucial planning tool and those who actually own life insurance. A Princeton University survey hit on one of the biggest issues. Thirty-three percent of respondents said shopping for life insurance is too difficult

or confusing. Automation to the rescue! eApplications can remove that difficulty, said Ken Leibow, head of distribution technology and strategy/procurement for Global Bankers Insurance Group. Leibow was among the speakers at the National Association of Independent Life Brokerage Agencies (NAILBA) Annual Convention. eApps have yielded great success at closing policy sales, Leibow told NAILBA members. The key is to get the technology in the hands of agents, many of whom are busy and perhaps slow to adapt to new methods. Leibow also suggested having an upsell component to the process. That could be something as simple as a quick calculation that informs agents to remind clients they could get $200,000 more in additional coverage for another $50 a month. DID YOU





Executing a buy-sell agreement is one of the most important and responsible tasks a business owner can undertake. So it is surprising that so many of these agreements are done inefficiently, said Joe Ross, vice president of Joe Ross sales productivity and business development for AIG Financial Distributors. Ross shared some of the issues and described potential solutions for the buysell conundrum at the NAILBA Annual Convention. He recommended a way to fund buy-sell agreements with life insurance that may allow the

funding to be triggered by death, health issues and longevity. Most agents have spent their careers trying to figure out which approach to buy-sell works best, Ross noted, considering stock redemption or cross purchase or trusteed cross purchase, or maybe something else.


Carriers have a New Year’s resolution for 2018, and that’s to improve their digital distribution channels. Novarica’s annual survey on the state of information technology spending in the

QUOTABLE Whole life is an older, stodgy product and more expensive to a large extent. — Mary Pat Campbell, vice president of insurance research for Conning

coming year revealed many insurers gave themselves failing or barely passing grades on their portal capabilities. Of large life and annuity insurers, 38 percent said that their current agent portal capabilities were “poor,” and 31 percent

said they were “acceptable,” according to the report.

Insurers in 2017 are keen on adding business intelligence and selfservice capabilities for agents and customers, according to Novarica. Other projects include completing core implementations, rolling out new underwriting tools and leveraging cloud models. Insurers are aware of these shortcomings, and a majority said they plan to replace or undertake major enhancements to their agent portals in 2018. Among large life and annuity companies, 23 percent said they plan major enhancements and 31 percent said they plan new replacements, the survey found.

New York Life will pay a record dividend payout of $1.78 billion Source: Business Wire in 2018, the largest in the company’s history.

InsuranceNewsNet Magazine » January 2018


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January 2018 » InsuranceNewsNet Magazine



Life Insurance 2.0: Bought and Not Sold A technology overhaul could flip around the “sold, not bought” model. By John Lefferts and Chris Aitkens


ife insurance is sold and not bought. This quote has been the mantra of the insurance industry for generations. Life insurance is perhaps the most difficult and complicated financial product to sell and by far the most painful to buy. It’s also the reason commissions are extremely rich, while those who don’t specialize in it, such as independent broker/dealers and registered investment advisors, often don’t touch it. But the financial services business is undergoing transformational change driven by new regulations, digitization of everything and huge demographic shifts. And the life insurance industry is not exempt from these forces of change. Here are some influences shaping the life insurance business going into the future — sort of a “Life Insurance 2.0.”

The Purchasing Process Must Change

The life insurance purchasing journey is in the Dark Ages. The buying experience today for most every product is moving to digital on every device from the desktop down to the mobile phone. Contrast that to the way life insurance is sold — think Groundhog Day. First, you have to find someone who needs coverage. Anyone want to talk about dying? It’s not an easy discussion to initiate. Then if you do find someone who will listen, the primary method for helping a prospect find the right coverage is by thumping multiple 20-page illustrations on their desk or kitchen table complete with numbers they won’t understand and legalese they can’t comprehend. Then perhaps after several meetings held weeks apart, if the prospect trusts your recommendation, you have to fill out a very detailed multipage application digging into some very personal and private information. Then comes the drawing-

bloodand-peei n g-i n-acup part scheduled whenever the paramedic can get to the client. Finally, after requesting all the medical information, which can take months to secure, the underwriter mulls over all the information, and if the history matches the underwriting guidelines, a policy is approved. Then it takes up to another month before the actual policy is issued and ready for delivery. All told, the buyer will have endured

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InsuranceNewsNet Magazine » January 2018

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a 2-3-month process with very little communication along the way. Could we make this any more difficult? It’s the very opposite of how today’s buyer wants to make transactions. It’s antisocial, the opposite of real time and totally paper driven.

Investment in Insurtech Is Hot

There has been huge growth and investment in insurtech. While investment in fintech is beginning to show signs of maturity, with a reduction in investment by 47 percent in the second quarter of 2017, the fintech subcategory of insurtech is just getting started. A highly respected consulting firm in this area estimates that investment in property/casualty insurance technology lags banking (fintech) by up to five years and lags the life and annuity segment by another couple of years. But with the increased investment and new technology players entering the space, that lag time is closing. Tell someone you’re in the insurance business, and nobody wants to talk to you. Tell them you’re in the insurtech 34

Summary of Non-Guaranteed Values Jim Anderson 45-year-old male

business, and everyone wants to talk with you. Technology makes the insurance industry a bit more exciting. The insurance industry is beginning to attract tech talent like never before, and this will move the industry into the digital age.

Mortality and Underwriting Meet Biotechnology and Digital Data

Dr. Craig Venter runs the human genome project in La Jolla, Calif. He has been instrumental in sequencing human DNA, and, like in all things technology, the advances over the past couple of years have been astounding. Sequencing a human genome now costs $1,345, compared with the $95 million it cost in 2001, according to the U.S. National Human Genome Research Institute. In a few years, you could possibly get your complete DNA for a fraction of today’s cost. Having your DNA tested presents valuable information to an insurer. What if you knew that you had a high likelihood of getting Alzheimer’s disease in 20 years? There are measures you can take today to prevent that from happening if you know it. The same is true about various cancers

InsuranceNewsNet Magazine » January 2018

and other life-threatening diseases. And with information readily available over the internet, several carriers are experimenting with being able to gather data from third-party sources to issue up to $2.5 million in face amount almost immediately upon receiving an electronic application. Armed with all this digital information, an insurance company no longer needs prospects to bleed and pee. They may no longer need to access volumes of medical information from the prospect’s doctor. And having this information in advance helps the insurer get to “yes” faster instead of “no” later. Underwriting for life insurance is about to be changed forever — and for the better.

The Digitization of Everything

Blockbuster has given way to Netflix, K-Mart and Sears have yielded to Amazon, and Tower Records was beaten down by iTunes. Everything is moving to digital, and so is the insurance industry. While the insurance industry has been slow to adopt new technology, there are signs that this is beginning to change. By

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LIFE LIFE INSURANCE 2.0: BOUGHT AND NOT SOLD using data integration, cloud technology and new digital formats, technology allows insurers to digitize the purchasing experience without having to change their legacy systems. Imagine a digital lead-nurturing program that, through analytics, targets customers based on specific demographics and online habits along with life events that trigger the need for life insurance. Perhaps through Facebook or other social media, a client clicks on a message that seems personalized to them and their particular situation, taking them to a landing page educating them on the features and benefits of a particular life insurance product. Once the prospect has been educated online through various media such as video, storyboards or a Khan Academy, type of explanation, they then fill out some personal information online that begins to prepopulate an illustration and application. If they choose to, they can talk to an agent or advisor unless they prefer to continue on their own. With the data input about name, age, face amount and premium, multiple illustrations can be run simultaneously and rendered on a simplified policy comparison chart with visual interactive graphs. The information is viewable on any device and is complete with the compliance-approved illustrations attached if the prospect wants to review them.

Nontraditional Channels Will Be Compelled to Address Life Insurance Needs

The big story in financial media has been the margin compression in the wealth management space. The Department of Labor’s fiduciary rule and the advent of robo advice are moving the dial on that even more quickly. With assets under management (AUM) fees expected to be cut from today’s standard of 1 percent to about 25 basis points, and commissions fading away, RIAs and independent broker/dealers will need to find revenue from somewhere else. The general belief is that charging fees for comprehensive financial planning (as opposed to commoditized investment management) is one way to go — whether it’s a flat fee, an hourly charge or baked into a higher percentage of AUM. But one of the primary tenets of 36

Blockbuster has given way to Netflix, K-Mart and Sears have yielded to Amazon, and Tower Records was beaten down by iTunes. financial planning, as taught by the Certified Financial Planning curriculum, is life insurance. How can advisors meet their fiduciary requisite and not address their client’s life insurance needs? I don’t think they can. But why don’t advisors address those life insurance needs today? You guessed it — it’s complicated! And it makes the advisor look stupid if they don’t have it mastered. But what if the process to address the client’s life insurance needs is digitized and made seamless? That’s where the advisor can step up and make life insurance part of their value proposition and fiduciary duty. At the same time, life carriers are actively looking for alternative lines of distribution, since the traditional agent is a dying breed. Look to see new forms of permanent life insurance priced for the advisory marketplace so the conflict of interest over commissions is taken away. And technology will enable the RIA and independent broker/dealer to address life insurance needs in a far more consumer-friendly way.

Robo Advisor as a Proxy for Robo Insurance

Not surprisingly, the majority of fintech investments early on went toward B2C direct models trying to disrupt the space through what we know as the robo advisor. Now that we’ve seen a couple of them crash and burn, there seems to be a reorientation toward using technology to enable rather than replace the advisor. In insurtech, we’re likely going to see the same. The majority of insurtech investment is currently going toward B2C models attempting to go around the current distribution channels, following the

InsuranceNewsNet Magazine » January 2018

theme of disruption. But just as we’ve seen the robo advisor shift following the fintech trend, within a couple of years we’ll see the same with insurtech. Technology in insurance will reset from attempting to bypass the traditional channels to enabling them. There is no other industry as ripe for a technology overhaul as the life insurance industry. Paper-driven legacy systems have been like a ball and chain on technology progress. However, the dynamics impacting the industry are creating opportunities to change that. The painful process of finding a prospect and the multi-month purchasing timeline are on the cusp of changing through new technology. It will be the carrier or distribution firm that finds a way to change the buyer experience through new technology that will win in the future. However, as life firms have been in cost-containment mode the past several years, the talent to create a digital platform is slim. Carriers and distributors are more likely to partner with insurtech firms to create the future platform while using their current resources to keep the lights on with legacy systems. Imagine if we could flip the old quote around and say, “Life insurance is a product that is bought and not sold.” John Lefferts, CFP, CLU, ChFC, is chief revenue officer with Assurance. John may be contacted at john. lef ferts@innfeedback. com. Chris Aitkens is senior vice president of smart office sales at Ebix. Chris may be contacted at chris.

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Make Connecting With Gen X Your New Year’s Resolution It may seem as though the economic deck is stacked against Generation X, but research shows this age group has a greater need for life insurance than other generations do. Here is some insight into how to reach them. By Mark Peterson


t’s no wonder an often-cited Pew Research article referred to Generation X as “America’s neglected middle child.” This is the population group comprising people born betwen 1965-1979. The youngest of this generation will turn 39 in 2018, while the oldest will celebrate their 53rd birthdays this year. Wedged between the baby boomers and the millennials — and being the least populous generation of the three — Gen Xers don’t always garner as much attention as the wealthier boomers and more numerous millennials. However, advisors who 38

understand the unique challenges and communication preferences of Gen Xers may be well-positioned to help meet these clients’ needs in 2018.

Compelling Challenges

Not every Gen X consumer is cut from the same cloth. As in dealing with members of any generation, it’s vital to address each client’s individual circumstances. But many Gen X consumers face similar, daunting challenges. A savings shortfall. As Gen Xers advance in their careers, upgrade their homes and take on additional family commitments, they may face a plethora of new financial hurdles for which they’re unprepared. Over the past nine years, Gen Xers’ salaries have stagnated. This age group also has the highest number of underwater mortgages than any other generation, according to the Manhattan Institute. Many Gen Xers aren’t saving enough to resolve

InsuranceNewsNet Magazine » January 2018

their short-term dilemmas, much less prepare for retirement and leave a legacy. Consider that parents may spend more than $181,000 on tuition, room and board for just one child’s education at a four-year private college, according to a 2017 report by the College Board. Furthermore, some Gen X parents are still paying off hefty student loans they incurred during their own educations. Student loans weigh far more heavily on members of Gen X because getting a four-year degree cost them a lot more than it did their parents. As a result, savings have suffered. Although experts recommend that, by age 45, you have four times your salary saved, not many Americans are on track. In fact, Gen X parents are saving even less than millennial parents are. NerdWallet’s analysis of recent Harris Poll research found that the lower savings rate of Gen X moms and dads, compared with millennial

MAKE CONNECTING WITH GEN X YOUR NEW YEAR’S RESOLUTION LIFE parents, could set Gen X up to retire with savings that lag those of the millennial parents by more than $400,000. A rising divorce rate. Savings among Gen X also may be negatively impacted by the divorce rate in this cohort. The divorce rate for Americans younger than 50 is approximately twice as high as it is for adults 50 and older, according to Pew Research. Furthermore, the divorce rate for adults ages 40-49 has risen since 1990. A life insurance gap. Although Gen Xers are more likely than millennials to own life insurance, they also are more likely to acknowledge being underinsured, according to LIMRA. And the gap between needs and ownership probably won’t close anytime soon, as Gen Xers told LIMRA they don’t receive periodic policy reviews as frequently as they would prefer. A lack of confidence. LIMRA also found that only 39 percent of Gen X consumers have high expectations of their retirement. Compare that with the 58 percent of millennials and 43 percent of nonretired boomers who feel the same way.

“All but just a few of the Gen Xers in this research have begun preparing for retirement. Most have a 401(k) or other pension plan, and savings accounts are also mentioned. Fewer cite other financial preparations, but some have life insurance, investments, college education savings plans, and a handful are considering long-term care insurance.”

Smart Approaches

available online. To reach them, you must support their needs and substantiate your claims with research and a variety of unbiased sources. Give control. Gen X consumers prefer to be in the driver’s seat when it comes to making decisions. Provide multiple scenarios for them to consider. The ability to offer customizable products and flexible choices can help bridge barriers to fulfilling needs. Explain worst-case options. Acknowledge Gen Xers’ lack of confidence in the future, and educate them about solutions that provide for “a way out” in case their needs change. For example, as appropriate based on each client’s circumstances, share details about life insurance products that offer a return-of-premium feature or have riders designed to provide access to an accelerated portion of the death benefit (with a corresponding decrease in the death benefit) in the event of chronic illness or longevity. Be connected. Leverage technology to help serve Gen X comprehensively. Learn about new, carrier-provided, generation-focused online tools that — upon giving responses to just a few basic questions — can instantaneously suggest engagement strategies, provide insights

Despite the challenges Gen Xers face, it may not seem easy to connect with and serve this age group. After all, they’ve been called skeptical. Many were latchkey kids or children of divorce. Others became highly self-reliant by necessity. Gen Xers are people whose mindsets were shaped in part by scandals (from Watergate to Enron), inflation and a culture of distrust of authority. They were inundated with TV commercials as kids and don’t want to be pushed to buy today. Following, however, are several ways to foster effective engagement with Gen X. Start with their parents. Ask your boomer clients about their Gen X sons and daughters. Find out whether the parents will give you a referral. With wealth potentially passing someday from the parents to their children, you have the opportunity to serve both generations, and the parents’ endorsement may help jump-start a conversation with their offspring. Initiate research. Gen Xers are the most active cybershoppers, having made more online purchases over the past year than any other age group, according to a recent KPMG report. These consumers make buying decisions based on facts, data and reviews, all of which are readily

Leveraging the Gen X Retirement Market: From Overlooked to Opportunity, Weber Shandwick and point to potential solutions. Be succinct. Everyone is busy these days, but Gen Xers are busy “on a whole other level.” Many are working long hours in stressful management positions and also taking care of children and aging parents. Therefore, be brief, be brilliant and be gone. Cut to the chase, and focus on delivering results quickly.

A Call to Action

Clearly, the challenges facing Gen X are substantial. As a post on the LIMRA’s Industry Trends blog put it, “Gen X needs our products, services and support the most. They started their adult lives at a disadvantage, compared to the boomers, and many were adversely affected by the Great Recession. Their recovery has started, but they have fewer years ahead of them than millennials have to plan for their future and save enough. For the financial services industry, now is the time to pay attention to Gen X.” Mark Peterson serves as executive vice president and chief distribution officer, life insurance, AIG. Mark may be contacted at

January 2018 » InsuranceNewsNet Magazine



Annuity Sales See Historic Drop In 3Q

Third-quarter annuity sales were down to at least a 15-year low, and industry analysts are struggling to understand why. Overall fixed and variable annuity sales dropped 13 percent to $46.8 billion compared with the yearago period, LIMRA reported. It marked the first time total annuity sales have fallen below the $50 billion mark in 15 years. The dive in annuity sales in the midst of a robust equity market and at a time when 10-year Treasury yields are higher than they were last year left some industry experts stumped for answers. The market might start to recover next year. LIMRA estimated sales of indexed annuities in 2018 will rise by 5 percent to 10 percent, and sales of income annuities are also forecast to grow by 5 percent to 10 percent.


The Hartford has entered into a deal to spin off its annuity and life businesses to a group of investors. Talcott Resolution, The Hartford’s run-off annuity and life businesses, will be


31% 1 n w o d from 3Q 20 6

Genworth announced it reached an agreement with Oceanwide Holdings Group to extend the deadline from the previous date of Nov. 30. The extension,

sold to a group of investors led by Cornell Capital, Atlas Merchant Capital, TRB Advisors, Global Atlantic Financial Group, Pine Brook and J. Safra Group. The Hart-

ford will receive $2.05 billion in the sale. The acquiring investor group has deep experience in the insurance industry, and is poised to operate the Talcott Resolution franchise as a standalone company.


The deadline for Genworth’s proposed sale to a Chinese insurance company has

been extended yet again — this time to April 1 as the companies continue to seek

regulatory clearance for the deal. DID YOU





Genworth said, “allows additional time for regulatory reviews of the transaction.” The proposed $2.7 billion acquisition was first announced in October 2016, and it was approved by Genworth shareholders in March. The original deadline to complete the deal was Aug. 31. The deal has since been delayed under a review by the Committee on Foreign Investment in United States, or CFIUS, a multiagency committee that scrutinizes acquisitions of U.S. businesses by foreign entities.

Therefixed are 11annuities, companies interest offering With QLAC (qualifying longevity annuity rates drive sales and when rates contract) While this sales is are poor,products. fixed annuities a small and new part of the DIA pull back and rates are still not market, we expect to see an uptick good. in sales in 2016. — Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc.


An 18-month delay in implementing key parts of the Department of Labor (DOL) fiduciary rule has eased its viselike grip on annuity distributors, company executives told analysts. Abating regulatory pressure around annuity transactions also should give insurers and distributors more time to shape a rule in a manner that will help retirement savers, the executives said during thirdquarter earnings conference calls. “I think this pause plus the distance from June 9 is beginning to ease the impact of the DOL from a sales standpoint,” said Dennis R. Glass, president and CEO of Lincoln Financial. Before the June 9 implementation of the fiduciary rule’s initial clauses, advisors and distributors told insurers they wanted to continue selling annuity products, said Eric Steigerwalt, president and

CEO of Brighthouse Financial.

Sales of all types of fee-based annuities sold by Lincoln Financial totaled $79 million in the third quarter, nearly as much as the company’s entire fee-based annuity sales in 2016.

InsuranceNewsNet Magazine » January 2018

Source: Lincoln Financial

January 2018 Âť InsuranceNewsNet Magazine



Annuities Can Make a Trustee’s Tough Job Easier Trustees tasked with a tough job are using annuities in trusts to leverage the benefits of both. By Deborah A. Miner


ough jobs make for popular TV viewing these days. TV programs explore offbeat occupations ranging from dirty to disgusting to dangerous. What’s one daunting job, however, that has yet to be spotlighted? The job of acting as a trustee. Serving as a trustee is no easy task. Being legally and morally bound to manage trust property in a responsible and productive manner — without any personal conflicts of interest — a trustee must act solely and prudently for the benefit of the trust’s beneficiaries. When faced with the responsibilities and complexities of trust management, trustees may be increasingly ready to consider putting annuity-oriented strategies to work. Are you ready to discuss those strategies with your clients?

and transferring property to the trust. The trustee administers the trust according to the terms of Mike Rowe has made a career from exploring the toughest, dirtiest jobs. the trust document. But he has never tried the toughest — being a trustee. The grantor may create a trust during their lifetime (inter vivos) the timing of distributions can be or by will at death (testamentary). Al- important, especially for trustees who most any property can be placed in trust. want to accumulate income for later Examples include a residence, a business, distribution. Undistributed gains inside and assets such as stocks, bonds, life in- an annuity are not generally defined surance, annuities and cash. The trustee as trust income under most state trust receives legal title to the property. laws and do not have to be distributed A grantor who retains the right to re- to current income beneficiaries. This voke or modify the trust creates a revo- can provide flexibility and allow trustcable trust. For income tax purposes, ees to request distributions only as the grantor is treated as the owner of the needed.

TAX CONSIDERATIONS Of Using Annuities In Trusts A nonqualified annuity contract owned by a non-natural person (such as a trust) generally will not be treated as an annuity contract. This means that a valuable tax advantage — income tax deferral — may be lost. An exception — when the nonqualified annuity contract is held by a trust as an agent for a natural person. In such instances,

A Trustworthy Alternative

All the traditional advantages of nonqualified annuities, plus added ones provided by today’s new features, are attracting attention from trustees. Decision-makers overseeing various types of trusts are open to exploring the significant tax, spendthrift, diversification and income protection advantages that may accompany nonqualified annuities. As always, proceed with caution. Different sets of rules, each complex, govern annuities and trusts. Mixing the two can result in unexpected and unintended tax and distribution consequences. Building your knowledge of the basics is essential.

Take a Top-Down Look at Trusts

A trust is a fiduciary relationship. One person holds property for the benefit of another. The grantor creates the trust by executing a trust document 42

income earned on the nonqualified annuity contract each year is not subject to current income tax or the additional 3.8 percent net investment income tax.

This deferral can be extremely valuable for taxable income retained by irrevocable non-grantor trusts.

trust and is taxed on trust income. A revocable trust does not remove the trust assets from the grantor’s estate. A grantor who relinquishes the right to amend, modify, change or revoke the trust creates an irrevocable trust. Property in a carefully drafted irrevocable trust is removed from the grantor’s estate and placed beyond the reach of creditors and judgments.

Why Consider an Annuity?

Nonqualified annuities may interest trustees for many reasons. The potential tax deferral and ability to control

InsuranceNewsNet Magazine » January 2018

Some trustees may be attracted to the financial strength and stability of highly rated insurers. Others may be interested in the income guarantees offered by the many different riders available today. The absence of underwriting also may appeal to grantors and/or annuitants of older ages or failing health.

Tax Implications to Consider

Section 72(u) of the Internal Revenue Code (IRC) provides that a nonqualified annuity contract owned by a non-natural person (such as a trust) generally will not be treated as an annuity contract. Thus,

ANNUITIES CAN MAKE A TRUSTEE’S TOUGH JOB EASIER ANNUITY a valuable tax advantage — income tax deferral — may be lost. However, an exception is provided when the nonqualified annuity contract is held by a trust as an agent for a natural person. For a trust to qualify as an agent for a natural person, all beneficiaries — both income and remainder as well as current and future — must be natural persons. In such instances, income earned on the nonqualified annuity contract each year is not subject to current income tax or the additional 3.8 percent net investment income tax. This deferral can be extremely valuable for taxable income retained by irrevocable non-grantor trusts. Consider this: Taxes on trust income are compressed into only five brackets. The highest rate, 39.6 percent, begins at just $12,501 of income for 2017. In comparison, married couples filing jointly don’t reach that rate until $470,701 of taxable income (for 2017).

Next Steps: Explore the Opportunity

Trusts come in many different types. Their

TOP 6 BENEFITS Of Using Annuities In Trusts • Potential tax deferral. • Ability to control the timing of distributions. • Ability to accumulate income for later distribution. •U  ndistributed gains inside an annuity are not generally defined as trust income under most state laws and do not have to be distributed to current income beneficiaries. This allows trustees to request distributions only as needed. • Income guarantees offered by annuity riders. • Absence of underwriting.

potential benefits vary by type and local laws. Annuities may not be appropriate for all of them. Factors such as the purpose of the trust, the terms of the trust and the controlling state law must guide the decision-making. Still, for clients tackling the tough job of being a trustee, using annuities in trusts can leverage the benefits of both. Pairing sound investment options and innovative planning strategies, a trust-owned annu-

ity may provide flexibility to help pursue a number of wealth goals, including income and estate objectives. Deborah A. Miner, J.D., CLU, ChFC, is assistant vice president of advanced markets for W&S Financial Group Distributors. Deborah may be contacted at deborah.miner@

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Annuities Are the Cure for a Risk-Infected Retirement By concentrating on prescribing the right annuity prescription for your client’s retirement, you will find success in annuity sales. By Justin Fort


uccessful salespeople do not see themselves as “salespeople,” nor do they act like them. Instead, they believe they are experts who take a consultative role with their customers. They understand who their customers are and what they want and need. They have an expert level of knowledge of their products and services and know how they can benefit their customers. This is especially true when presenting annuities to prospects. Before you can sell 44

annuities, you must learn to serve your clients effectively. Any positive business or service relationship begins with a level of trust and mutual respect. A great way to develop trust and respect is to have your clients’ best interest at heart and focus on serving their needs. Do you see yourself as an annuity salesperson or as an annuity consultant? How do you want your clients to see you? Consult with them; don’t sell them. Here are three tips to help you take the focus away from selling annuities and focus on being an annuity consultant.

1. Know Who You Serve – And Keep Them From Making the Wrong Choice

Ask yourself the following question: Who do you serve? Your clients, of course! They

InsuranceNewsNet Magazine » January 2018

rely on you to make recommendations for what they want and need. However, sometimes the best way to serve your clients is to tell them when an annuity is wrong for their financial situation, needs and goals. Clients need you to help guide them to the right choice for them, even if an annuity is the wrong way to go.

2. Build a Positive Relationship

Why should someone buy the same thing from you that they could buy from 50 other people? Maybe it’s because they like you. Maybe it’s because you are knowledgeable. It is not because of the amazing products you sell, because prospects can buy them from many other sources.


AALU.ORG 703.641.9400

ANNUITY ANNUITIES ARE THE CURE FOR A RISK-INFECTED RETIREMENT Most likely, your clients are buying from you because they are buying you. Building a positive relationship with clients based on mutual trust and respect is not easy. But it is worth every minute of effort and can lead to win-win scenarios. Win-win scenarios can happen more often than you think. Your clients can get the right products and services they need, and you can get paid to assist them. It’s easy to uncover the win-win. Start by finding out what your clients want and then work hard to give it to them. So why aren’t more of your clients and prospects telling you they want to purchase an annuity? When was the last time you got a call from a prospect asking for an annuity? Probably never. Why? Because most consumers — and even many advisors — do not really understand annuities. Those who say they hate annuities may have the least amount of knowledge about them. They need help, information and, most important, guidance from a professional they can trust. Your clients want and need guarantees for their retirement plans. They simply do not know that an annuity may be the vehicle they need to achieve these guarantees. No one wakes up in the morning and says, “I need an annuity for my retirement plan,” but many people stay up at night worrying about how they will protect their money from market loss, inflation, taxation, longevity, fees and more. They want to ensure that they will not run out of money in retirement. Therefore, it is not the annuity but rather what the annuity can provide that your clients want and need. You simply need to help them see what it is that they truly want and then give it to them.

3. Educate Your Clients

What do your clients know about annuities? How much of what they say they know is fact and how much is fiction? Ask questions and find out. Your clients probably know much less about annuities than you think. I have come to learn that most people — including the successful, educated and wealthy — know very little about investments, insurance products and retirement planning overall. This is where education is essential. You must learn what your clients know and do not know about annuities. 46

No one wakes up in the morning and says, “I need an annuity for my retirement plan,” but many people stay up at night worrying about how they will protect their money from market loss, inflation, taxation, longevity, fees and more. Imagine you are a doctor prescribing an annuity to your patient as a cure for a retirement infected with risk. Just as your patient would need more information before agreeing to swallow an antibiotic for a bacterial infection, your client probably needs more information before they swallow the annuity pill. And just as your patients would want to know that they are working with a real doctor, your clients want to know they are working with a bona fide professional. Recommending an annuity is like writing a prescription. A doctor would not write a prescription for an antibiotic unless a bacterial infection was present in a patient. Annuities are like antibiotics in that there are many different types and a variety of potential uses. They vary in terms of strength, pricing and side effects. Specialized antibiotics have been developed to fight specific types of bacterial infections. Similarly, specialized annuities have been developed to fight specific types of retirement risks, improve financial health and promote overall wealth wellness. Know what ails your client, and write a prescription for the appropriate annuity that best serves them. Providing honest and objective guidance for the selection and use of annuity products is critical. There are many types of annuities and many potential features associated with each type. Proper placement and use of annuities within a comprehensive retirement plan can improve most retirement plans. Your job is to teach, show and explain to your clients why annuities may be right for them. Study the products and services you offer to the degree that you would con-

InsuranceNewsNet Magazine » January 2018

sider yourself the authority on them. Make recommendations wisely, and be prepared for tough questions. Embrace tough questions and even objections, as they are opportunities for you to educate your clients. Spend time to prove to customers that your relationship with them is more important than a transaction. Do not cut corners or offer partial truths. Cutting corners and engaging in high-pressured sales tactics are dangerous practices — dangerous for your client and dangerous for you. Not only will this lead to fewer annuity sales, but it also will likely lead to complaints, fines and ultimately a failed career. The financial services industry already has a bad reputation in the minds of many. Please do not make it worse. Instead, make it better. Put your clients’ interests first, and strive to give them what they want. Success will follow, I promise. So, stop trying to sell annuities, start serving your clients’ needs and watch your annuity sales soar. Justin Fort, RICP, ChFC, CFP, MSFS, is president of Fort Wealth Management, Austin, Texas. Justin may be contacted at justin.

Like this article or any other? Take advantage of our award-winning journalism, licensure and reprint options. Find out more at

FEDERAL EMPLOYEES ARE THE RIGHT NICHE TO GROW YOUR BUSINESS! One of the big keys to success for financial advisors is to have a market that can produce a consistent, repeatable and sustainable source of prospective clients year after year. The Federal government is the largest employer with over 2.7 million full-time, permanent civilian and postal workers. Currently, few financial advisors have the skills needed to properly assist Federal employees with their risk management, investment, and retirement needs.


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Federal Employee Group Life Insurance (FEGLI) - Evaluating existing life insurance coverage and costs to protect their family and assets while employed and in retirement.

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Voluntary Contribution Plan (VCP) - Utilizing the VCP program benefits and regulations to assist with positioning assets into a Roth IRA based on suitable.

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Disability Coverage - Review existing long-term disability coverage to see if coverage is adequate to protect the employee and their family.

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Long-Term Care Insurance - Identifying the future potential needs for Long-Term Care and options to cover for the cost.

Our FedEd Financial Advisor Training Program provides financial advisors with knowledge, tools and support they need to assist Federal employees with their benefits, investments and retirement planning. The FedEd class is a two-day classroom-style program where participants learn about Federal employee benefits along with marketing support to help them build their clientele. Many advisors have found that one of the best methods to meet potential clients is by offering educational benefits seminar programs. We offer you the ability to license our FEBA Employee Benefits Seminar Program, “Understanding Your Federal Benefits,” which includes slides, and workbooks.

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January 2018 » InsuranceNewsNet Magazine




Bronze = ‘Free’ for Many In previous years, many Americans decided to ditch health

I wish we had a crystal ball, so we have given up trying to predict anything in health care right now.

insurance in favor of paying the fine for not having coverage because the fine was less expensive than paying health insurance premiums. But in 2017, a number of Americans discovered “free bronze.” The Kaiser Family Foundation said roughly 2.32 million people could find a lowtier bronze plan for no cost at all, due to taxpayer-funded subsidies built into the Affordable Care Act. Compare that with the phased-in tax penalty for not having coverage — now at $695 per adult or 2.5 percent of qualified income. In the early years of the ACA, that penalty served as a nudge to get coverage. The result was a sicker-than-expected customer base and steadily rising premiums, Kaiser reported.

AND THE TOP HEALTH PREMIUM IS ... When you think of a location in the U.S. that might have high health insurance premiums, you probably would think of a city with a high overall cost of living — maybe New York or San Francisco, for example. You probably wouldn’t think

— Stuart Clark, managing director and national spokesperson for Advisory Board Co.

The top drivers of these high costs are new drug regimens and more expensive radiation technology. Physician services that included follow-up outpatient services also helped hike treatment costs.


there is a small patient pool to balance out risks. Actuaries predicted it was a place where the insurance companies might be paying out more to cover claims than they receive in premiums. Compounding the issue is Charlottesville is a more expensive coverage area because the primary provider is University of Virginia Health System, an academic medical center that charges higher rates for its care than a community hospital does.

BREAST CANCER COSTS COULD STRAIN MEDICARE A benchmark silver plan for a 40-year-old individual is $1,011 a month in Charlottesville.

that Charlottesville, Va., holds the record for high health insurance costs, but it does. Residents of Charlottesville and surrounding Albemarle County purchasing individual insurance from the federal marketplace for 2018 pay for the most expensive plans in the country, Kaiser Family Foundation reported. What makes Charlottesville so pricey for health insurance? One is a lack of competition among health insurers. In addition, small communities like Charlottesville tend to be pricier to cover because DID YOU




The cost of treating breast cancer is projected to climb by nearly one-third from 2010 to 2020. Breast cancer accounted for the highest proportion (13 percent) of the $124.6 billion in Medicare money spent on cancer care in 2010, according to a West Virginia University research team. The researchers found the average cost of care nationwide was $28,075, but those averages were higher for women living in metropolitan areas, the Northeast, areas with at least four cancer hospitals nearby or areas where the average household income was higher than $50,000. Average costs of treating breast cancer were also higher for black women.

Health care has overtaken Social Security as the top consumer concern, with more Americans reporting health issues and thinking about how to save for health care. That’s according to research by Hearts & Wallets. Percent of U.S. households that named health care as their top concern




The percentage of U.S. households that named health care as their top concern jumped to 44 percent in 2017 from 39 percent in 2016. The percentage of those say-

ing they are most concerned about Social Security dipped to 39 percent in 2017 from 40 percent in 2016. In an interesting twist, more households are reporting that they, their spouse or partner, parent, or in-law experienced serious health issues or suffered from a serious chronic condition over the past four years. Health care was a top issue across all age groups, the research showed. But consumers are taking action to help put this fear to rest. When asked to describe what actions they are taking to deal with health care, the majority of respondents said they bought health, long-term care or life insurance.

The true cost of the opioid drug epidemic in 2015 was $504 billion.

InsuranceNewsNet Magazine » January 2018


Source: Council of Economic Advisers


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5 Ways an HSA Can Save Your Client’s Retirement Nest Egg The long-term uses and benefits of a health savings account can make it an attractive retirement savings vehicle. By Kevin Robertson


n the early days of health savings accounts (HSAs), much of the industry focus was on educating consumers and employers on HSAs’ shortterm functions — such as how to open the account, contribute to the account and pay for medical expenses. Now that HSAs have been around for more than a decade, and given how their popularity has soared in recent years, the educational focus is shifting toward a deeper understanding of HSAs’ longterm uses and benefits, particularly as a retirement savings vehicle. The retirement savings gap is a significant hurdle for many Americans, especially as baby boomers approach retirement age. Increased media attention and discussion of retirement savings have improved Americans’ awareness of the 50

financial shortfall many of them will face when it comes to having sufficient retirement funds. According to a 2015 U.S. Government Accountability Office (GAO) study, 29 percent of Americans 55 and older don’t have a retirement nest egg. Those who do have retirement funds don’t have enough money to cover essential living expenses — 55- to 64-year-olds have an average of $104,000 in savings, and those ages 65 to 74 have saved an average of $148,000. Additionally, the specific areas of need within this gap are not widely understood by most Americans. Retirement spending covers a broad spectrum of expenses. But the greatest expenditures people face in retirement are their health-related costs. A recent study by Health View Services estimates a healthy 65-year-old couple retiring today can expect to pay more than $400,000 (not adjusted for inflation) in health care expenses alone during retirement. That’s taking into account Medicare Parts B and D, supplemental insurance, dental and vision

InsuranceNewsNet Magazine » January 2018

insurance, deductibles, copays, and other out-of-pocket health care costs. The study also predicted that these expenses will increase by an average of 5.5 percent per year during retirement, twice the U.S. inflation rate. HSAs are gaining recognition from consumers and employers as one such tool for retirement savings due to their triple tax advantage and long-term investment capabilities. While these two benefits are becoming more widely accepted, there remains an opportunity to educate employers and consumers on additional features that make HSAs more beneficial than other retirement savings vehicles. Although HSAs are tax-advantaged accounts, like individual retirement accounts and 401(k)s, there are five key differences between these accounts that make HSAs an ideal retirement savings vehicle.

1. Offers Triple Tax Benefits

Although this aspect of HSAs is more well-known, it is worth restating that

5 WAYS AN HSA CAN SAVE YOUR CLIENT’S RETIREMENT NEST EGG HEALTH/BENEFITS HSAs are the only triple tax advantaged account in existence. Funds are contributed pretax and grow tax-deferred. Withdrawals are made tax-free when funds are used for IRS-qualified medical expenses. This is a significant advantage over traditional retirement options, such as a 401(k) or an IRA, which are subject to income tax when withdrawn to pay for medical expenses. HSA funds can be used tax-free for medical expenses and require fewer posttax funds to cover those expenses. For example, if your client has a $400 medical expense, they can withdraw $400 in HSA funds or $500 in 401(k) or an IRA funds, given a 20 percent tax rate, to pay for the medical expense.

decades, this use may be one of the greatest potential health care savings opportunities in America today. Although Medicare Part A does not have a premium cost, other Medicare premiums (such as for Parts B and D), along with any out-of-pocket health care costs, can be made tax-free and penalty-free. Paying for Medicare premiums with HSA funds can save your client a considerable amount of money compared to paying out of pocket or using another retirement savings vehicle where the funds will be subject to income tax.

3. Pays for Medicare Premiums

One of the most powerful advantages an HSA offers is the ability to pay for Medicare premiums on a tax-qualified basis. Given that most Americans could end up paying these costs for years, if not

5. Covers Non-medical Expenses With Income Tax

HSA funds don’t have to be used to pay for medical expenses. For those age 65 and older who do not require all of their HSA funds to cover health care costs, the funds can be withdrawn for any reason without penalty. However, HSA distributions not used to pay for IRS-qualified medical expenses are subject to income tax, similar to traditional 401(k) and IRA distributions.

Building a Holistic Retirement Strategy

2. Circumvents Required Minimum Distributions

Most retirement savings vehicles, including IRAs and 401(k) plans, have required minimum distributions (RMDs). This requires consumers over the age of 70.5 to withdraw a certain percentage, based on age, of funds each year from their retirement savings accounts. Not only will this create an income tax liability, but it also may have other downstream impacts. These include the possibility of triggering higher tax brackets, Medicare means testing and qualification for income-based programs for seniors. For example, the amount that consumers pay for Medicare Part B premiums is based on their income level. Income withdrawals forced by RMDs may significantly impact the means testing and drive up premium costs. Since HSA funds are not subject to RMDs, there is a significant advantage to having funds in an HSA rather than another retirement vehicle such as an IRA or a 401(k).

funds for future reimbursement to take at a later date — without any impact on their taxable retirement income.

For example, just considering Part B alone, a Medicare Part B enrollee with a $100,000 income level will pay at least $187 per month in premiums for the next 15 years, totaling $33,750. Assuming an income tax bracket of 20 percent, the retiree would need to withdraw $40,500 from their 401(k) to cover their lifetime Medicare premiums. By using an HSA to pay these premiums, the retiree will save $6,750.

4. Reimburses Medical Expenses at Any Time

HSA funds can be used to reimburse medical expenses incurred anytime after the HSA is established, even in retirement, many years after an expense has occurred as long as your client documents their expenses. This means that your client can continue to accumulate savings in their HSA, while paying for medical expenses out of pocket and building up

Incorporating HSAs into your clients’ retirement strategy does more than help grow a larger nest egg. It gives your clients a set of funds that works smarter and more efficiently than other retirement savings vehicles to save them money. About 20 percent of privately insured Americans are covered by an HSA-qualified health plan, according to Kaiser Family Foundation. In addition, 53 percent of firms with 200 or more employees offer a high-deductible health plan with a savings option (HSA or health reimbursement account) as a health plan option. So whether or not you are working actively within the HSA environment, it is likely your clients have considered or are considering an HSA. By incorporating an HSA discussion into your value stream, you can provide your clients with useful and relevant information, differentiate yourself from other advisors, and reinforce your crucial role in the benefits process. Kevin Robertson is senior vice president and chief revenue officer, HSA Bank. Kevin may be contacted at

January 2018 » InsuranceNewsNet Magazine



Powered by

Consumers Say No Debt Is Good Debt

When it comes to borrowing money in retirement, nearly two-thirds of consumers said their advice is “Just say no.” LIMRA research found 67 percent of consumers believe retirees should avoid borrowing money for any reason. Despite that opinion, however, retirement-age Americans keep piling on the debt. Debt levels for those 65-80 increased 40 percent from 2003 to 2015, according to the New York Fed Consumer Credit Panel. The amount of debt held by Americans ages 65 and over increased from over $2 billion to nearly $22 billion between 2005 and 2015. This debt is holding retirees back from living their ideal retirement lifestyle. Seventy percent of retirees without debt told LIMRA they are confident they will be able to live the lifestyle they want, while only 51 percent of retirees holding debt feel the same way. One sore spot when it comes to retirement debt is student loans, according to the Government Accountability Office (GAO). The number of federal student loan borrowers 65 or older rose by 385 percent between 2005 and 2015, the GAO reported.


Members of every generation swear they won’t repeat the mistakes of their elders, but Generation X is proving that wrong. Gen Xers confessed in a recent survey that they are on course to repeat the baby boomers’ financial mistakes.

IT’S NOT ABOUT GETTING RICH What exactly is “the American dream?” For some, it’s owning the house with the white picket fence; for others, it’s starting their own business. But for most of us, it’s not about getting rich. In fact, only 11 percent of Americans told Pew researchers that you have to get rich in order to achieve the American dream.

Nearly half of baby boomers (47 percent) said that spending money on things they didn’t need and getting too deep in debt were the biggest financial mistakes

they made when they were young. Gen Xers aren’t far behind their elders, with 44 percent saying they spend too much and 22 percent accumulating debt. When it comes to preparing for retirement, Gen Xers have one concern that the baby boomers don’t have. Prioritizing college savings for children is further complicating Gen X’s retirement planning, with 71 percent supporting their children and 28 percent saying their kids’ education is putting a damper on their retirement saving. DID YOU




The majority of Americans (77 percent) said having freedom of choice in how to live is the essence of the American dream.

Having a good family life comes in second


The do-it-yourself investor is one of the biggest challenges I face. — James Barnash, a financial advisor at SGL Financial in Buffalo Grove, Ill.

(70 percent). However, money does enter into some parts of living the dream. Sixty percent said being able to retire comfortably is an important part of the American dream, while 43 percent listed having a successful career and owning a home as crucial to achieving the dream.

CALL THEM GENERATION GRUMPY We’ve heard all about the baby boomers, Generation X, the millennials and even Generation Z. But there’s another age group we haven’t heard much about, and they aren’t happy about it. Let’s call them Generation Grumpy — those born between 1962 and 1971. These middle-agers are unhappier than previous generations and have been this way for years, according to the University of Chicago’s General Social Survey. By 2016 members of this group were 12 percent less likely to say they were satisfied financially and 18 percent more likely to say they were unhappy, according to the survey.

The survey also revealed that they have been less happy than other age groups ever since the early 1990s, when most of them were in their 20s. So what’s all the grumping about? Money, of course! Generation Grumpy reached their peak earning years only to find they are no longer peak earning years. This group finds itself wedged between high-earning baby boomers who are reluctant to give up their jobs to retire and younger workers who are gaining ground in the job market.

About 1 in 7 Americans over 65 worked full time in 2016, compared with 1 in 12 in 2000. Source: LIMRA

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

InsuranceNewsNet Magazine » January 2018

Source: University of Chicago

A Unique Approach to CPA Partnerships Proven to TRIPLE YOUR INCOME!


onfidence in the financial services industry is, sadly, declining. Recent high-profile cases have made it significantly more difficult for financial advisors to bring in the new business they need. Let’s face it: the public is skeptical — at best. So, what does a financial advisor need to do to meet new clients, earn their trust and, just as importantly, make sales? Partner with America’s most trusted advisor: the CPA. There are hundreds of CPA referral programs in the market today. Unfortunately, most do very little to improve an advisor’s bottom line. CPA Direct is unique because it is designed to help advisors generate successful, strategic alliances with CPAs and, as a result, reach their income goals. To help you understand what CPA Direct can do for your business, let’s take a look at some of the most common questions we receive: Q: What makes this program unique? No other CPA program will TRIPLE your income in 6 months. Q: How is CPA Direct REALLY different from other CPA programs? CPA Direct is not a traditional referral program. Instead, our model creates productive business alliances with qualified CPAs and their clients. Not only are you working together to build your respective businesses, you are helping the CPA become a hero to their client who never knew he/she had anything to be concerned about with respect to taxes, retirement distribution planning, estate planning and asset protection. Together, the advisor and CPA are working toward a common goal — help clients be in the best possible tax and financial situation and avoid the pitfalls of improper or incomplete planning. Q: Why do I need to partner with a CPA when I just want to make more sales? Who is the most trusted advisor? You? Your business partners? No! CPAs are widely considered the most trusted advisors.

The number of “new” clients you get is meaningless, regardless of any program you participate in. Who cares if you get 100 or even 200 new clients if you are unable to make a single sale? Barry Bulakites, President and CEO, Table Bay Financial

Although you may be amazing at your job and have a flawless record, Americans are highly skeptical when it comes to our field and they are constantly bombarded with endless stories, news articles, movies, etc., about the “evil” financial services industry. Q: How many new clients can I expect? The more important question should be how many more selling opportunities can you expect? The number of “new” clients you get is meaningless, regardless of any program you participate in. Who cares if you get 100 or even 200 new clients if you are unable to make a single sale? Who says those new clients are in a position to (or even want to) do any business with you? With CPA Direct, these issues are covered. The average advisor can expect to get at least 20 selling appointments per month. Of course, this is just an average; a variety of factors, such as geography, time of year, size of your local population, how many hours per week you work, etc., will logically impact precise numbers.


Q: What really makes this program effective? Unlike our competitors, we have been successfully working with CPAs for decades and we truly understand the psychology of the CPA. Our approach and revolutionary system delivers CPAs in your area who are eager to partner with you and help their clients. Q: How fast can I increase my production if I join CPA Direct? That’s up to you! CPA Direct offers advisors a host of marketing platform options, many of which can be immediately deployed even before being paired with a qualified CPA. We don’t believe in limiting an advisor’s potential by making them wait a period of time before they are permitted to use our marketing materials and sales strategies. Of course, the more an advisor takes advantage of the exceptional training and educational opportunities we provide, the faster the advisor will make sales.

To learn more about how CPA Direct can help you achieve your 2018 income goals, visit and download your free info guide.

January 2018 » InsuranceNewsNet Magazine


5 Financial Personalities That Drive Client Communications Language is more than the words you speak. It’s also the way your client interprets those words. • Phil Wright


magine that history’s greatest financial guru came to your town to spill all their secrets. Would you be eager to hear this person speak? Of course you would! But what if this financial advisor speaks only French and the extent of your French is ordering French toast for breakfast? This fabulous French advisor could stand at the podium and shout all the secrets to delivering a market-beating yield every year, but you wouldn’t understand a word because this person isn’t speaking your language.

Language Is More Than Dialect

To connect with clients, your words are as important as the numbers. Most people know they should watch their financial matters more closely. Similarly, most people know they shouldn’t eat hamburgers and French fries for lunch every day. Why do these people continue to neglect their finances and pass on the salad? When clients listen to your advice, they may hear your exact words but interpret those words differently, according to Christine Whelan, best-selling author and professor at the University of Wisconsin. This is the concept behind Money Languages, a set of investor personalities created by Whelan’s team of interdisciplinary researchers and practitioners from a largescale, national sampling of more than 1,500 adults that emphasized married individuals living in the same household. Financial knowledge may not be enough, and facts don’t necessarily move the needle with investors. Two clients could be identical in many relevant ways — the same age, income, outflow, investment plans and target retirement date. However, their respective beliefs and values could be starkly different, resulting in opposite attitudes and behaviors regarding money. Thus, every client engages in 54 54

a different behavior based on identical knowledge.

Determine Your Client’s Financial Personality

According to Money Languages, advisors can better connect with clients’ beliefs and values if they customize their communication approach based on how each client reacts to financial information. With a tailored approach, clients can better understand the reasons behind a financial plan and how that plan will help them achieve their goals. This doesn’t mean changing a client’s financial plan. Rather, this is about changing how you communicate the plan, and the first step is determining your client’s financial personality.

1. The Seeker: As a generous, optimistic and spontaneous investor, the Seeker experiments to find the best approach to financial planning. The Seeker understands saving is important but lacks attention to detail and finds new information distracting. Expect Seekers to look for an exit if you ask them to review a financial plan’s details.

InsuranceNewsNet Magazine Magazine »» January January 2018 2018 InsuranceNewsNet

If you want to capture the Seeker’s attention, keep the conversation forward-looking and focus on the big picture. Avoid digging too deeply into the details in the beginning. Focusing on future possibilities allows you to explore more investing strategies, which keeps the Seeker engaged. Kick off the conversation on a positive note to better connect with the Seeker. Appeal to the Seeker’s adventurous spirit by saying, “Let me show you some exciting new options and how your plan can evolve over time.”

2. The Believer: The Believer generally is financially optimistic. To the Believer, the purpose of money is to make life enjoyable. The Believer is typically generous and creative. However, the Believer also has trouble grasping how today’s small actions can lead to tomorrow’s rewards. To help Believers envision how a financial plan can help them reach those enjoyable life goals, ask, “When you imagine your financial future, what does it involve?” Not only does this conversation starter tap into the Believer’s creative line of thinking, but it also opens the door to discussing strategy in a way that’s relatable to the Believer.


With a tailored approach, clients can better understand the reasons behind a financial plan and how that plan will help them achieve their goals. 3. The Worrier: As suggested by the name, the Worrier is cautious about finances and always on the lookout for potential problems. Tracking money is usually stressful — to the point that the Worrier avoids it. The Worrier is risk averse and can become agitated when it comes to investing. For the Worrier, you want to create a calming conversational tone, which is best done by addressing all concerns head-on. Transparency is key to calming your Worrier clients. In addition to talking about their concerns, be prepared to discuss solutions to put any anxiety at ease. You can better understand what gives the Worrier anxiety by saying, “Let’s talk about the potential risks and how we can address them.”

their savings account and even in their piggy bank. Splurging is not a part of the Tracker’s vocabulary. In fact, the Tracker is the opposite. Spending money on even a necessity makes a Tracker cringe. Although Trackers are detail-oriented and on top of their current finances, looking at their long-term financial picture can be difficult for these clients. Help the Tracker feel in control while encouraging a forward-looking approach by saying, “Let me show you how you can track your progress toward these goals.”

planning to create a strong financial future. Planners may have great saving skills; however, they tend to shy away from unknown growth opportunities. Planners are creatures of habit, but they could be missing valuable opportunities. To help Planners move out of their comfort zone and explore new growth options, open the conversation with “I would like to share some ideas on how we might enhance your existing plans.” Perhaps you recognize one or more of these personality profiles. You may have one client who is a Tracker and another who is a Worrier. No matter how alike your clients may seem, each investor requires a unique communication strategy, depending on that person’s distinct values and beliefs. If you can communicate and connect with your clients in a money language they understand, you’re more likely to build the kind of trust that won’t get lost in translation. Phil Wright is the vice president of marketing communications at Jackson National Life Distributors and an award-winning financial writer. He focuses on the development and creation of marketing and business content. He is a Registered Principal and a Certified Fund Specialist (CFS®). Phil may be contacted at

4. The Tracker: Deeply aware of his or her finances, the Tracker knows how much is in their retirement account, in

5. The Planner: When it comes to finances, the Planner is confident and optimistic. The Planner understands money is a means to enjoying life, but investing is also necessary to ensuring a bright future. Planners are clear about their needs and wants, and they value

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First Comes Trust, Then Growth A trust-building customer experience is the foundation for growing a client base and distinguishing your advisory firm from the rest. • Mitchell H. Caplan


hat’s the biggest competitive advantage that is essential for advisors to attract and retain satisfied clients? The customer experience is that key competitive advantage, according to the third annual Advisor Authority study of more than 1,600 registered investment advisors (RIAs), fee-based advisors and individual investors nationwide.

Communication Is Key

Although trust comes first, both advisors and investors say that good communication is the second most important attribute of the advisor/investor relationship. Likewise, when asked to name the factors that contribute to a successful customer experience, both advisors and investors say that quality of communication tops the list. As the study

Track Record Matters

When it comes to the business of managing their finances, investors want results — and they look for the track record to prove it. Investors say a proven track record ties with good communication as the No. 2 factor in the advisor/investor relationship. And take note: High-networth and ultra-high-net-worth investors said a proven track record is far more important than good communication.

One-on-one Relationships Drive Success

When asked what creates a successful customer experience, one-on-one relationships are rated the No. 1 factor by advisors and a very close second by investors. As the study shows, to build strong relationships with clients, you must make the entire process more interactive. This means working closely with clients to understand their concerns, providing a guided experience that educates them and working together to identify the right solution. High-net-worth and shows, quality communication includes ultra-high-net-worth investors say a pereffectively listening to investors’ con- sonal one-on-one relationship is the No. cerns and showing that you understand 1 factor for a more successful customer Advisor ADVISOR AUTHORITY 2017: The Future of Advice their needs by recommending solutions experience. Authority Chapter 1 – Customer Experience: The DNA of the Advisor/Investor Relationship that are in their best interest.

“A forced retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental.” And for the greatest success, trust must come first. Trust is the single most important attribute to make the advisor/ investor relationship work, according to this study on the customer experience. Advisors rate trustworthiness No. 1 by a wide margin, as do investors. Creating a successful customer experience built on a culture of trust is also fundamental for the growth and health of a profitable practice. More than nine in 10 RIAs and fee-based advisors — including those who earn more and manage more assets under management (AUM) — say that the customer experience is vital to their value proposition. More than eight in 10 agree customer experience will become even more important for helping them attract and retain clients in the next 12 months. As competition increases and pricing pressure grows, a successful customer experience built on a culture of trust can help you distinguish your firm and stay relevant to your clients. Start with these actionable insights from advisors and investors. 56 56


InsuranceNewsNet Magazine Magazine »» January January 2018 2018 InsuranceNewsNet

All Investors


Trustworthy Proven track record


Good communicator


Ultra High Net Worth

High Net Worth

34% 23% 15%

34% 21% 7%





Easy to understand




Adds value






Willing to take risks



Good listener



10% <1% 5% 4%

*Responses less than 2% not displayed

"Trust ultimately comes down to your credibility. The only way to establish that credibility and to create that trust is to offer a great client experience that is differentiated and focused on what

“We're working to earn clients’ trust every day and it is our responsibility as a business to develop and cultivate a culture of trust. Trust isn’t given, it’s earned. And it comes down to doing what is in your clients’ best interests at all times.”


Michael Aroesty, CFP® Financial Advisor, Managing Director, Strategic AIM™ D.B. Root & Company

Data Enhances Understanding


To create a successful customer expeAdvisors With All Advisors High AUM rience, analyzing data to better understand clients’ expectations and behavior is Trustworthy 44% 34% important to advisors and investors alike. Good communicator 11% 16% The most successful advisors — those who earn more and manage more AUM — are Good listener 9% 8% almost twice as likely to adopt artificial Proven track record 8% 13% Advisor ADVISOR of Advice intelligence and data analytics to betterAUTHORITY 2017: The Future Authority 1 – Customer Experience: The DNA of the Advisor/Investor Relationship understand and better serveChapter their clients. Easy to understand 7% 2%

Nothing Can Replace Face-to-Face

Adds value



HighEarning Advisors

33% 15% 15% 8% 11% 9%

Technology may be a way of life, but Intelligent 6% 8% 4% investors said THE it is no replacement for DEFINING CUSTOMER EXPERIENCE: Key to Advisors’ Value Proposition Empathetic 5% 6% 5% the human touch. In the age of instanto take risks taneous digitalexperience communications, both as the way anWilling The customer can be defined advisor and investor 3% interact at all points 6%in their 1% investors and advisors high marks relationship. And as ourgive study shows, customer experience is truly the DNA of this relationship—essential than 3% not displayed forfor one-on-one relationships and quality nurturing and retaining satisfied clients, and fundamental for the*Responses growthlessand health of a profitable practice. communication to create a successful cusAdvisor Authority Report tomer experience. And they still say that More than 9 in 10 RIAs and fee-based advisors (94%)—including the most successful—say that the customer experience is an important face-to-face is their preferred method of over another. By a wide margin, investors financial outlook than those who do not part of their value proposition. Advisors, including the most successful, most commonly say this is because customer experience communication. say the experience No. 1 factor in choosing an advi— and their optimism has improves client retention (27%). And when asked if the customer will become more important for attracting andyear-over-year, retaining sor is(86%) years of experience, while personalincreased. Yet, two in five investors (42 clients in the next twelve months, more than 8 in 10 advisors agree—including those who earn more and manage more AUM. Transparent, High Value, Low Cost, ized advice for a holistic financial plan is percent) do not have a financial advisor. As our results show, investors clearly benefit and gain confidence from your services. And the opportunity is huge. Two in five investors More Choices second and maintaining a fiduciary stan- Even among the most affluent, slightly (42%) do not have a financial advisor. Even among the most affluent, slightly more than one-third of the HNW (37%) and Ultra HNW (37%) Investors said that to contribute to a suc- dard is a close third. Other factors quickly more than one-third of those with high do not have an advisor. cessful customer experience, advisors can decline in importance. net worth (37 percent) and ultra-high net put clients first by focusing on products If you’re new to the industry, team up worth (37 percent) do not have an adviCUSTOMER EXPERIENCE: IMPORTANT TO ADVISORS’ and services that are high-value and transwith VALUE more PROPOSITION seasoned advisors to create a sor. The opportunity is huge. parent while offering lower costAdvisors and more successful To attract new clients, and to nurture with Highcustomer experience. Build All Advisors High AUM choices. When it comes to products and partnerships with accountants, trust at- and retain your current clients, invest in Earning Advisors “One of the most important services, those with high net worth said torneys and estate planners to provide creating a unique customer experience, parts of the client experience 6% 7% 8% that a broad choice is especially important. more holistic advice — especially when cultivate a culture of trust and work on it is to make it about the serving high-net-worth and ultra-highevery day — because trust isn’t given, it’s 7% relationship. It ultimately Experience, Holistic Planning and net-worth clients. earned. comes down to making Fiduciary Standard Abecustomer experience built on trust decisions that will in their Year-over-year, three items stand out Add Value and Drive Growth best interests.” adds tremendous value. It shows your when investors the fac- Investors who clients that you understand their con93% 94% are asked to name93% 93% work with an advisor tors that lead them to choose one advisor are far more optimistic aboutMichael their cerns, Aroesty, CFP® recognize their needs and can Financial Advisor, Managingsolutions in their best interest. provide Very/Somewhat Important NotNot Very/Not At At AllAll Important Very/Somewhat Important Very/Not Important Director, Strategic AIM™ It also creates a competitive advantage D.B. Root & Company WHY CUSTOMER EXPERIENCE IS CRITICAL TO VALUE PROPOSITION that is fundamental for the growth, health and profitability of your pracAdvisors With HighAll Advisors tice. When trust comes first, growth High AUM Earning Advisors will follow. It improves client retention


It improves the advisor-investor relationship


It distinguishes my firm from other advisors' firms











It helps attract prospective clients




It creates a competitive advantage


It helps increase client referrals


*Responses less than 9% not displayed


Mitchell H. Caplan is CEO of Jefferson National, now operating as Nationwide’s advisory solutions business. Mitchell may be contacted at mitchell.

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Fuel Referrals by Establishing A Client Advisory Board The best way to attract more of your ideal clients is to put some of your existing clients to work advising you. By Sarano Kelley and Brooke Kelley


hen you’re looking for feedback on how to improve the services you offer or how you can attract more of your best clients, try tapping directly into the source — your client base. Who better to enlighten you about the way you run your practice than your clients? This is where a client advisory board is immensely valuable. What is a client advisory board? It’s a group of your ideal clients brought together on a regular basis to provide input on what they like about your offerings and to give pointers on how and where you could make improvements. The goal is to create a stellar client experience that will make you a leader in your market niche. 58

It can be a little scary to ask for your clients’ candid evaluations, but keep in mind you have their trust and loyalty. They want to see you succeed! They can give you an outsider’s perspective, pointing out gaps in your services that you probably can’t see because you’re too close to the process. You can ask for their input on proposed changes and new services or suggestions on how to improve your marketing methods to attract prospects like them. Your prized clients are your “intel.” Once you decide you want to establish a client advisory board, start by doing your homework. Through the years, we’ve compiled a list of valuable tips for forming a client advisory board for our coaching clients. We’d like to share them with you.

Think It Through

Determine your reasons and objectives for setting up a board, and make sure you’re willing to invest the necessary time and effort in it. Also, make sure you’re willing to act on the suggestions you receive;

InsuranceNewsNet Magazine » January 2018

otherwise the clients on the board won’t feel needed or appreciated. Make a list of areas where you’d like to receive feedback. For example: Are you considering a change in your fee structure? Are clients getting all the information they want during a review meeting? Are you planning to revamp your website? Are clients satisfied with the performance statements they receive? You might even include a question as simple as: Do you like the coffee we serve in the office? Be sure the queries address the clients’ personal experiences — ask what you can do for them, not vice versa.

How Many Members Do You Need?

We generally recommend that a board consist of somewhere between eight and 12 clients. If you involve too many people in the experience, it can become unwieldy and unproductive — just like having too many cooks in the kitchen. Instead, make sure you create an environment where everyone has a chance to be heard. You also might

FUEL REFERRALS BY ESTABLISHING A CLIENT ADVISORY BOARD BUSINESS consider two- or three-year board terms so you can give other top clients a chance to participate and provide fresh ideas.

Who Should Be on the Board?

Select potential members from your list of best clients — those you’d like to clone. One of the goals of forming a board should be to determine how to attract more of your ideal clients. Consider inviting clients who are well-connected or influential in the community or business world. Do they have large social networks? Diversity is another important aspect. Include men and women, single and married clients, retirees, and professionals from various careers or businesses. Be sure to include younger clients, particularly if you’re gearing up to serve the needs of millennial investors, who stand to inherit some $30 billion from baby boomer parents.

find that advisors often don’t know how to approach this conversation. The right communication and words are crucial, so here’s a suggested dialogue. Advisor to client: “I want to ask you for a favor, and I want you to know in advance that I’m not expecting anything and I’m fine if your answer is ‘no’ or ‘not now.’ I’ve been fortunate to have a number of great clients like you who have made a tremen-

you to discover how your clients view you and your services and to collect valuable advice on promoting and branding your practice.

Agenda and Follow-up

Estimate how much you can accomplish in the time you’ve allotted. Send out the agenda to board members a week or two in advance, and include any materials that might be pertinent, such as a mock-up of a new brochure you’re working on. Leave time for socializing and networking after the meeting. Following the event, send out a note thanking the members for their attendance and input. You can include minutes from the meeting and let the members know which suggestions you may be moving forward on. Expect your board members to hold you accountable, which means they’ll want to know how you will incorporate their input into your future plans. Establishing a client focus group can help you strengthen relationships with your best clients, as well as provide a huge payoff in terms of business growth. The more you know about your clients’ likes and dislikes and what makes them tick, the easier it is to craft a financial advice experience that will exceed their expectations. And that can lead to a steady flow of referrals — without even having to ask for them.

Remember, you don’t ever want to ask for referrals outright during a board meeting.

How Often and Where to Meet?

Once clients understand your market focus and commitment to building a business that puts them first, they’ll naturally start referring others to you.

Most boards meet once or twice a year, depending on how busy their members are and how many topics you want to cover. Generally it’s best to hold the meeting outside the office — in a restaurant banquet room, for example. That way you can include a nice meal. However, make sure it’s clear that this is a business meeting and not merely a social event.

Who Should Conduct the Meeting?

Many advisors find it’s helpful to have an outside facilitator handle the agenda. You could ask a client who is experienced in meeting planning, a center of influence involved with your firm or a wholesaler, for example. This way, you can take a more neutral role and give your full attention to the topics of conversation. Plus, clients will feel less inhibited about expressing themselves when someone else is running the meeting. Take notes or ask participants whether you have their permission to record the meeting.

How to Invite a Potential Member

After you’ve made a list of potential members, you’ll want to call them personally. This lets them know you truly consider them to be valued clients. Unfortunately, we

dous difference in my career. I’ve asked some of them to provide me with counsel on how I can meet more people like them and become the leading resource for [your niche — for example, physicians and small businesses]. This client advisory board would be like an ongoing focus group, and initially what I’d most like is advice on marketing our practice. “I’m sure you have a lot going on, but I’m wondering whether you might be able to join the group for an annual dinner meeting where we can share our marketing ideas and get your input.” Remember, you don’t ever want to ask for referrals outright during a board meeting. Once clients understand your market focus and commitment to building a business that puts them first, they’ll naturally start referring others to you. We call this “reversing the deal flow” — when prospects call you asking to become clients. These meetings are an important way for

Sarano and Brooke Kelley are co-founders of The Kelley Group, a leading provider of speaking, coaching and training to elite advisors and senior managers in the financial services industry. They are the authors of Reversing the Deal Flow: The Secret to Prospects Calling You to Become Clients. Contact Sarano Kelley at sarano.kelley@ and contact Brooke Kelley at brooke.

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January 2018 » InsuranceNewsNet Magazine



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

Baby Steps Help Start on Long Road to Success The successes you achieve on a daily basis are like compound interest, building up to help you achieve your long-term goals. By John F. Nichols


t’s important to set long-term goals and a big-picture vision for your practice if you want to achieve success. Imagine where you’d like to be in your personal, professional and public relationships. If it seems unattainable or years down the line, don’t get discouraged and give up. Implementing milestones and simple daily victories will help move you forward, build momentum and amplify your actions and intentions toward success. Develop positive habits you can practice every day to gain control over your long-term goals and causes. Much like compound interest, victories you achieve

Your goals are limitless and likely diverse, but will typically fall into one of three categories: personal life, professional life and public persona. Below are a few personal examples of daily victories I’ve enacted to achieve success.


Physical fitness is important for most professionals, and it is particularly important to me. I start each morning with healthy habits to stay in shape and remain a healthy, happy person. While my coffee percolates, I hold a plank for six minutes (or longer), and then reward myself with a cup to reinforce the behavior. When I started this ritual, I was able to hold a plank for only 30 seconds, but I built up my strength and endurance over time. Simple habits in your everyday life have a domino impact over time.

To achieve your goals, it’s important to align them with causes that strongly reflect your passions and resonate on multiple levels. on a daily basis build on each other and increase your capabilities. Each day, your victories will bring you one step closer to your overall goal. Find ways to reward yourself for achieving daily victories along the way. This reinforces the behavior and is more effective than waiting until you’ve reached the end goal to reward yourself.

Setting Goals and Defining Causes

To achieve your goals, it’s important to align them with causes that strongly reflect your passions and resonate on multiple levels. The more importance and meaning you attach to your goals, the more likely you are to work toward them on a daily basis. Deep degrees of connectivity between your values and long-term goals will give your actions purpose and make you a happier person. 60


Success comes from investing in your professional network and your industry, which enables you to perform at a high level. Each day, I invest in my practice by learning more about the industry and communicating with contacts. I take a half-hour to read journals and trade publications each morning over coffee, and I make at least 10 business-related telephone calls before I let myself leave for the office. I dedicate my time to productivity and set myself up for success early in the day. I’m more informed and actively develop and maintain business relationships, which bolsters my practice.

InsuranceNewsNet Magazine » January 2018


Seek out industry associations and networking opportunities to shape your goals at a high level. For me, the Million Dollar Round Table membership provides rich opportunities designed for my success. I’m able to surround myself with successful professionals, participate in study groups and seminars, and even give back to meaningful causes. If you’re not ready for MDRT, invest your time and money in professional and industry communities that encourage you to engage and grow in the industry and set your mind up for success. It’s difficult for most financial professionals to segment their days and achieve work-life balance — especially for those who own their own practice. As our lives are so intermingled, it’s easier to find balance in daily behaviors rather than black and white areas. Decide as you go along whether opportunities and actions fit into your plan and will bring you closer to your dreams and goals or if they’ll derail your progress. You have the power to bring everything into alignment and avoid problems. John F. Nichols, MSM, CLU, is a nationally recognized disability benefits consultant with Disability Resource Group. As a life and qualifying MDRT member, he has two Court of the Table and nine Top of the Table qualifications. John may be contacted at


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 Really Works in Selling to Millennials Social media.



Power bricks.

To achieve success in the millennial market, be flexible, use social media to share relevant information and create a unique client experience. By Danny O’Connell


am not a millennial or a baby boomer. Having joined the insurance industry more than 11 years ago, I know that the majority of people in the industry are either older members of Generation X or younger baby boomers. The million-dollar question is: How do we relate to the largest population bubble, the millennials? How do we sell to them? How do we build lasting symbiotic relationships that benefit our clients and make our careers more meaningful? First, understand that millennials grew up with the internet, which gave them the ability to fact-check and research almost anything with a few clicks of a mouse. Then keep in mind the following as you try to relate and sell to them: They want to do research and will fact-check you. As advisors, we often think we know it all and believe we know what’s best. However, thanks to the internet, everyone else in the world now has almost as much information as we do. Instead of worrying about competing with the internet, though, tell your prospects where they can research what you are saying. If you want to build trust, tell millenials where they can do research about your products, including their pros and cons. Explain and communicate options. Because millennials are accustomed to looking everything up, you must be ready to explain the full spectrum of the products you offer. Have something simple and visible to show them, and illustrate your options to your younger prospects. Be sure to explain how the products work, how they are used to address specific problems and how they differ. They do not place much importance on trophies or plaques. With this

generation, everyone received a trophy just for being on the team. So your award or plaque doesn’t resonate with them. They put more stock in referrals from friends who have done business with you. They want to know you have done right by their friends, they can trust you and you can accommodate their schedules. Skip the tie and grab a cup of joe. Most millennials have been employed only in casual work environments. What we consider nontraditional offices are the norm to them. As a result, they are open to meeting with you while you are getting a cup of coffee and don’t minding receiving calls on the weekend or in the evening. The other side of the coin is that many of them may want to meet with you during nontraditional office hours and not necessarily in your office. It used to be that prospects wanted to see your office to get a feel for how successful you are. Now, with so much business conducted over the internet or the telephone, most of them are just as happy meeting at a coffee shop or participating in conference calls. Create a unique experience. You don’t have to rent a hot air balloon, but as a marketing piece, have something small, or useful to them, such as cellphone battery bricks. Do something small to stay in front of them and to thank them for their business. Let them feel that you can create solutions as unique as they are. Millennials are also more interested in learning that you are doing something positive for the world, so be sure to show what you are

doing to support your community and the world around you. Be available. I hear from older successful advisors how they work only a couple of weeks a month or a few months a year. While millennials might want to meet during nontraditional hours, that doesn’t mean you have to work yourself ragged. If you want to get into the millennial market, give yourself time during the day to do the things you want to do, and be available for a call or a cup of coffee during the hours they want to meet with you. Be social. Use social media to share useful, relevant information with your clients. Celebrate your team and show your personal as well as your professional side. People don’t want to go to Facebook and read about how they are underinsured. Instead, share stories about how your products have changed lives in a positive way. There is no secret to having success in the millennial market. For many of us, millennials have been a mystery, but the key is in understanding how they differ from us as well as how to relate to and do business with them in the way they like. Danny O’Connell, is the CEO of Next Level Insurance Agency. His practice focuses on employee benefits, life, disability and retirement. He has served on the NAIFA-Dallas board since 2013 and on the NAIFA-Texas board for the past two years. Danny may be contacted at

January 2018 » InsuranceNewsNet Magazine



With over 90 years of experience, The American College is passionate about helping students expand their knowledge and opportunities as financial professionals.

What the ‘Longevity Revolution’ Means to Financial Services With longer life spans becoming the norm, the traditional thinking about retirement saving must be upended. By Jocelyn Wright


magine that the person who ends up living to be 150 years old already has been born. That is exactly what CNBC contributor Ron Insana said to the attendees of the 2017 Financial Planning Association Conference in Nashville. In 2015, the average life expectancy for a newborn was 78.8 years. The National Center for Health Statistics lists the life expectancy for the average male at 76.3 years and 81.2 years for women. Japan currently has the longest-living population reported in the world. Experts claim that because of active lifestyles, good diets and supportive family structure, the average 60-year-old can anticipate living until age 86. The oldest-lived documented individual was Jeanne Calment of France, who died in 1997 at age 122 years and 168 days.

Sonia Arrison, author of 100 Plus: How the Coming Age of Longevity Will Change Everything, From Careers and Relationships to Family and Faith, believes that her toddler son has a chance of living to 150. She contends that we are experiencing a “longevity revolution” and that soon triple-digit life spans will not be an exception but the norm. 62

This increase in longevity is a result of tremendous strides made by scientists in areas such as growing new organs from adult human stem cells, creating body parts with 3-D printers, and the holy grail of biological engineering: using gene therapy to successfully treat diseases such as hereditary blindness and leukemia. Further, numerous scientists and billionaires in Silicon Valley are working tirelessly to reverse the aging process using blood transfusions. It all sounds like something out of a science fiction novel. However, according to a report released by the U.S. Census Bureau along with the National Institute on Aging, the population of those 90 and older has nearly tripled over the past 30 years, reaching 1.9 million in 2010. It is projected that this population segment

InsuranceNewsNet Magazine » January 2018

will more than quadruple over the next four decades. By 2050, people 90 and older will comprise 10 percent of the older population (individuals age 65 and over). This represents a significant increase from 1980 and 2010, when the rate was a mere 2.8 percent and 4.7 percent, respectively. Although improvements in lifestyle and advances in medicine and technology can increase our average life expectancy, we have to stop and ask a few questions. What does this mean for work? What does it mean for planning? A research psychologist at the Life-span Development Lab at Stanford University, Tamara Sims, said, “My mentor Laura Carstensen talks about redesigning the model and expanding our definition of

THE AMERICAN COLLEGE INSIGHTS middle age. It requires a cultural change, no easy task.”

Borrow Time

Sims suggests that people “borrow time from their golden years.” Translation — consider working part time in the early years. “This would allow time to pursue creative goals, raise a family and stay healthy,” with the understanding that an early retirement of age 50 or 55 is a thing of the past. We will need to rethink work and life in general. Social science gerontologist Dawn Carr said, “It’s not realistic to think you’ll spend 30 years working to finance 60 years of life.” She recommends that Generation Y and Generation Z be more deliberate in selecting careers that “allow you to

If studies show that Americans already have a retirement savings shortage, how much worse does the problem become if we are expected to live to age 150? grow and develop over a long time. You may want to recognize that your work life very well should continue much later than we’ve been conceiving. Meaningful work can give you purpose and value, and enhance later life.” Is it me or does this sound like an endorsement for a career as a financial advisor? A longer life expectancy requires us to rethink our plans for retirement. If studies show that Americans already have a retirement savings shortage, how much worse does the problem become if we are expected to live to age 150? What does this mean for groups such as minorities and women who suffer more negative financial outcomes, especially in their senior years? This puts an even greater emphasis on the importance of early financial education and retirement planning. Jocelyn Wright is the chair of The State Farm Center for Women and Financial Services at The American College. Jocelyn may be contacted at

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Listen to “the” podcast top advisors trust to acquire ideas to ignite exponential growth in their business.

This month … LES BROWN reveals why conquering yourself and mastering your mind ... is the first step to winning in life. ROGER LOVE explains why your voice is your most powerful sales tool, and how to use it to turn indifferent prospects into raving fans.

January 2018 » InsuranceNewsNet Magazine


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What Financial Wellness Really Means for Your Clients Money is the most prevalent source of stress for Americans. Here are some insights on alleviating Americans’ financial distress. By Deb Dupont


he concept of “financial wellness” is everywhere lately. So much so that when LIMRA hosts groups who work in the workplace retirement space, we frequently receive requests to include “financial wellness” as one of the top topics for discussion; yet, when we bring it up, someone invariably asks “What is it, really?” Someone might falsely assume that financial wellness is limited to “retirement readiness,” but do we really understand what financial wellness means or what it’s about? Part of the problem in trying to apply a definition to financial wellness is that the wellness we speak of is different for everyone. We can identify pieces of what financial wellness might be, but they will fit together differently for different individuals and their circumstances. Maybe a better approach to answering “What is financial wellness?” is to first ask what it isn’t. It isn’t financial distress. In October, LIMRA asked 1,051 Americans about their levels of financial stress rated on a 1-to-10 scale. Only 5 percent reported no financial distress at all, and another 5 percent reported the lowest level of stress at 1 out of 10. Almost a quarter (23 percent) reported high financial stress (8-10 on the scale), with another 50 percent reporting moderate stress (4-7). In 2015, the American Psychological Association reported that money was the most prevalent source of stress for Americans. The word “stress” is much like the term “wellness.” It’s amorphous, shifting from individual to individual. But there are pieces of what would be considered low or no financial stress that can be widely agreed upon, such as being able to pay the 64

bills, keep food on the table and keep the lights on. That’s setting a low standard, though, and does not aspire to more than meeting basic needs. There is a structure to how people interact with money and build financial security — with wellness efforts such as financial products and offerings. This structure helps people move along a spectrum from survival to planning to a point where they can enjoy their assets and circumstances: » Earn — receive an income. » Live — meet basic needs. » Save — set something aside for both short- or longer-term needs and goals. » Protect — establish basic protections for a financial foundation and future (health/wealth/retirement). » Enjoy — make use of, or enjoy, your efforts (in both the immediate and longer terms). The workplace, as the foundation for financial security and income, is a logical place for offering financial wellness support. Offering education, engagement and tools that help employees counter financial stress and make progress in their interactions with finances is integral to helping them make the best use of benefits programs. Increasingly, the financial services industry is connecting financial wellness support to benefits offerings. The industry is doing so because employers are realizing the importance of financial wellness as well as the implications of financially distressed and distracted workers. What a wellness program looks and feels like is another question, with an amorphous answer. What it means for everyone to enjoy their assets, as a financial goal, will vary from person to person. For example, saving for retirement may be very different for a worker who can count on a defined benefit plan for at least some

InsuranceNewsNet Magazine » January 2018

income than it would be for one who will be completely responsible for funding their own retirement. The following common principles can be a foundation for a wellness effort, whether executed in the workplace and/or facilitated by advisor interaction: » Holistic and relevant — focusing on individuals’ whole financial lives, not just benefit by benefit, or focusing on retirement without considering other and much more immediate financial objectives. » Educate, then engage — building baseline knowledge, the traditional approach to benefits communication, isn’t enough. Establish context for products and other solutions. » Flexible — delivering via individuals’ methods of choice, on their terms and in their own time. Perhaps a baseline answer to “What is financial wellness?” — freeing folks from financial distress and enabling them to move beyond simply “living” to “saving, protecting and enjoying” — is a fine place to begin understanding it and how employers, providers, advisors and benefits programs can help us achieve it. Deb Dupont is associate managing director, workplace retirement research, at LIMRA Secure Retirement Institute. Deb may be contacted at

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InsuranceNewsNet Magazine - January 2018  

The Bonus Year - The DOL fiduciary rule delay created an 18-month breather. How will agents and distributors use it?

InsuranceNewsNet Magazine - January 2018  

The Bonus Year - The DOL fiduciary rule delay created an 18-month breather. How will agents and distributors use it?