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Retirement isn’t built on basis points alone There’s a new conversation see more on the next page

Today’s retirement is more challenging than ever before. It’s not built on basis points alone. It’s fought for, earned, and sometimes, it’s lost. At Protective Life, we believe in helping people protect their financial futures. That’s why we’re committed to Protecting Retirement. Our diverse offerings are designed to help you have focused discussions about retirement, and provide comprehensive solutions for your clients’ principal, income, growth and legacy protection needs. Let’s shift the conversation. Let’s identify retirement needs. Let’s talk about comprehensive solutions, before products. And let’s protect what’s important for your clients’ financial futures.

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CABD.426262 (09.16) Protective Life refers to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life & Annuity Insurance Company (PLAICO). Both companies are located in Birmingham, AL.

The retirement market represents trillions of dollars but also hefty challenges. PAGE 20 13 Things the Mentally Strong Don’t Do • PAGE 12

Do’s and Don’ts of Rollovers Investing in 2017: A and Exchanges • PAGE 38 Client Guide • PAGE 48

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20 The Evolution of Rollover Advising By John Hilton

The IRA rollover market is facing tremendous pressures at the same time as it offers unprecedented business opportunity. Here is how advisors are unlocking the opportunity to think bigger than the rollover. INFRONT

8A  re Agents a Part of (Repeal and) Replace?


30 Turn Threats Into Opportunities

By Tyler Horning The wealth management industry has seen a number of disruptions in recent years. Now it’s time for the life insurance industry to experience something similar.

By John Hilton Trade organizations are fighting to make sure agents are included in discussions to reshape the Affordable Care Act.

HEALTH/BENEFITS 44 6 Steps to Increase Policy, Client Retention

By Jeff Spain A quarterly plan to boost renewals and establish yourself as the client’s advisor for life.

34 Split-Dollar Meets Sports Center

By David Szeremet How a life insurance product and a college football coach teamed up to become one of the most talked-about stories in the national sports media.


38 T he Shocking Do’s and Disastrous Don’ts of Rollovers and Exchanges By Deborah A. Miner Moving qualified and nonqualified funds among different products can lead to costly mistakes if not done correctly.


12 How to Build Mental Strength

40 IMOs Await Word on Reserving Conditions Under DOL Exemption

An interview with Amy Morin Amy Morin took the personal tragedy she experienced and turned it into a series of lessons on what it takes to become mentally strong. In this interview with InsuranceNewsNet Publisher Paul Feldman, Amy discusses how mental strength helps people cope with change.


InsuranceNewsNet Magazine » February 2017

By Cyril Tuohy Issuing a class exemption would raise the profile of independent marketing organizations to one of a financial institution on a par with regulated financial product distributors such as broker/dealers and insurers for the purposes of selling financial products under the fiduciary rule.

48 Client Interest in ESG Investing Is on the Rise By Juliette Fairley More clients are saying that environmental, social and corporate governance (ESG) investing is important to them. Why advisors should take heed.

50 ETF Market Shows Little Sign of Slowing Down By Cyril Tuohy Exchange-traded funds come in a rainbow of flavors, and investors are clamoring for more.

51 Why Investing in Europe Is Relevant to Advisors By Juliette Fairley When Britain left the European Union, some wondered whether this was the beginning of the end for investing abroad.

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52 How Behavior Modification Can Lift Clients Out of the DIPS By Robert Barnes Tactics for moving clients forward and making the appropriate financial decisions for their situation.


54 NAILBA Meeting Insights Special Coverage: Agencies Reveal DOL Opportunity Although we have heard quite a bit about the potential damage the fiduciary rule will inflict on the industry, we haven’t heard much detail about the opportunities it provides for financial services firms.

56 THE AMERICAN COLLEGE: Diversity In Financial Services: The Time Is Now By Jocelyn Wright There is little doubt that qualified minority and female candidates, if given access and opportunity, will thrive. Their companies and our industry will be all the better for it.


57 NAIFA: A Goal Not Written Down Is Merely a Wish By J. Leland “Lee” Davis Easy steps to help you achieve a successful year.

58 MDRT: Why Gen Y Should Care About Privatizing Income Protection By John Nichols Millennials frequently overlook their need to protect their most important asset: their ability to earn a living.

60 L IMRA: Turning Up the Volume on Life Insurance Ownership By James T. Scanlon Even though life insurance ownership rates are creeping upward, some coverage gaps still exist.

EVERY ISSUE 6 Editor’s Letter 8 InFront

18 NewsWires 28 LifeWires

36 AnnuityWires 42 Health/Benefits Wires

46 AdvisorNews Wires 59 Advertiser Index


275 Grandview Avenue, Suite 100, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton SENIOR WRITER Cyril Tuohy VP FINANCES AND OPERATIONS David Kefford VP MARKETING Katie Frazier


Christina I. Keith John Muscarello Jacob Haas Bernard Uhden Shawn McMillion Sharon Brtalik Joaquin Tuazon


Kevin Crider Tim Mader Brian Henderson Emily Cramer Ashley McHugh Kathleen Fackler Darla Eager

Copyright 2017 All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail, send your letter to 275 Grandview Avenue, Suite 100, Camp Hill, PA 17011, fax 866-381-8630 or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, Ext. 115, or Editorial Inquiries: You may e-mail or call 866-707-6786, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to or call 866-707-6786, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Avenue, Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

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No Squirrels Have to Die


lara really wants to murder a squirrel. Or she seems to. She is a large pit bull, but she looks like a greyhound as she exits the back door when a squirrel is in the yard. Invariably, the rodent is a fluffy-tailed flash up a tree before Clara can reach it. I hadn’t told her that it doesn’t help the stealth aspect if she barks as she charges. I guess I didn’t want to see what she’d do if she caught it. But I got the answer to that question when an escaping squirrel fell out of the tree and plopped on all fours right in front of Clara. Judging by the squirrel’s face, if rodents have obscene words, it was thinking them at that moment. Clara had her own cartoon expression that clearly read, “Huh?” After all these years of barking at and chasing these things, she had no idea what to do if she caught one. The squirrel finally obtained presence of mind to spin around and bolt, which left Clara watching in a daze. After a moment, though, she snapped back to chase and bark mode.

Disarming the Trap

Affordable Care Act opponents had a similar scenario after Donald Trump won the presidency with Republican majorities in both houses. At long last, the demise of Obamacare plopped right in front of them. Now what? As of this writing, Republicans were lined up to repeal and replace later. But even some GOP members are anxious about what the replacement might be. Some ACA rules have helped consumers. Two popular ones are the ban on pre-existing condition exclusions and allowing children to stay on a parent’s plan until they are 26. Some of the most hated Obamacare elements and effects are rising premiums, the individual mandate, restricted choice and very high deductibles. Deductibles are so high that it seems like not having insurance at all even though people are paying at least several hundred dollars a month for coverage — and some pay far more than that. 6

But Obamacare is a booby-trapped box where removing one thing causes another part to explode. Remove the requirement to have insurance but retain the ban on exclusions for pre-existing conditions and insurers are left with more sick people to pay for with fewer dollars from healthy members. Carriers will have to raise rates on the riskiest people to make up the money. And they would most likely be allowed to do that. As Senior Editor John Hilton reported in this month’s InFront column, opponents are calling for an increase in the age band allowance. The ACA allows carriers to charge as much as three times more for the most risky enrollees over the least risky. The House Republican Better Way proposal, supported by the National Association of Health Underwriters, would raise that to 5:1. That would not guarantee that the younger and healthier population will get a better rate (if they elected to buy it). But it would ensure that older enrollees will be paying more. Would anybody be paying less premium? We probably all remember that one of the main drivers for reform was the relentless double-digit annual increases in premium. So how would a new system depress those increases? That is not clear. The ideas floating around include erasing state borders for coverage, tax credits and health savings accounts (HSAs). These elements are in the Better Way proposal, but the plan does not clarify how they would cut premiums. Removing state restrictions on selling insurance would not automatically open

InsuranceNewsNet Magazine » February 2017

a national market. Provider networks still have to accept the insurance. The companies that have the capacity to negotiate deals with multiple networks are already large and would grow larger, allowing for greater economy of scale. The likely outcome would be an acceleration of the trend of larger insurance companies consuming smaller ones, leading to less competition. Economy 101 tells us that less competition means less pressure on keeping prices in check. This federalizing also flies in the face of the American state-based insurance system. Who is the regulator now? Tax credits would help, but Obamacare already has subsidies and families are still struggling. And if the credits are applied later and don’t have an effect on the premium, that would increase the impact on the family budget. HSAs always seemed like a good idea that didn’t work as well in practice. The proposal has a plan to fix them, which would be welcome. But they allow families only to spend their money more efficiently rather than control prices.

Fix or Forget?

The ACA has plenty of problems, as described earlier. Obamacare was an attempt to preserve the free-market insurance system while establishing requirements that guaranteed a level of quality and a standardization that allowed for comparison shopping. Needless to say, a lot of that didn’t work. Health insurance is more expensive and high deductibles are dissuading people from seeking care. The question is, do we fix the ACA or go back to what we had with some new amendments? Or might a third way be possible? We can be hopeful, but effective compromise might have long ago been a victim to the drive to be “right.” Maybe all we know now is the endless cycle of barking and chasing. Steven A. Morelli Editor-In-Chief

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Are Agents a Part of (Repeal and) Replace?  rade organizations are fighting T to make sure agents are included in discussions to reshape the Affordable Care Act. By John Hilton


he Affordable Care Act as we have come to know it is going to change significantly. Even Democrats agree that President Barack Obama’s signature accomplishment is going under the knife. Sweeping Republican victories at the November ballot box — led by Donald J. Trump winning the presidency — ensured that much. The question now is, what will survive, what will disappear forever and what will be changed when the new health care bill comes out of the sausage grinder? Health insurance agents plagued by dwindling commissions would emerge as winners if the future “replace” bill eliminates the medical loss ratio (MLR), said Marcy Buckner, vice president of government affairs for the National Association of Health Underwriters. “We do think that with the medical loss ratio provisions implemented on the carriers, it has resulted in higher premiums,” she explained. “So if those restrictions can be taken off the carriers, it could help ease some of the burdens that carriers are feeling on the premium side.” Under the ACA’s medical loss ratio, health payers are required to spend a minimum of 80 percent of their premium revenue on paying claims and boosting quality, while the rest can be spent on administrative fees, marketing and profits. Health insurance companies have claimed they have trouble meeting the calculations of the MLR due to treating fraud prevention and recovery differently. Previously, NAHU had supported a tweak to the MLR, removing agent and broker commissions from the administrative pool of dollars. With momentum for 8

changes to the ACA at an apex, NAHU is now asking legislators for full repeal of the MLR, Buckner said. Full repeal is something that Dr. Tom Price, Trump’s choice to lead the Department of Health and Human Services, supported as a congressman, she noted.

Working to Replace

As of this writing, GOP leaders were eagerly moving to repeal the ACA outright. Any effort to dismantle and replace the health care measure is threatened by a Democratic filibuster in the Senate. Overcoming a filibuster requires at least 60 votes — and Republicans have only 52 Senate votes in the new Congress. That means Republicans might have to rely on the budget reconciliation process. Reconciliation calls for a simple Senate majority to pass measures related to federal revenues and spending, as long as those measures are budgetneutral, meaning they neither increase nor decrease overall spending or revenues. Democrats originally passed much of the ACA in 2010 using reconciliation. The question for the Senate parliamentarian is whether full repeal of the MLR qualifies as part of budget reconciliation, Buckner said. In case the legislative route is untenable, NAHU is pursuing a parallel strategy to try to get rid of the MLR through

InsuranceNewsNet Magazine » February 2017

regulatory changes. “It’s definitely something we’re not letting go of in terms of using all of the avenues possible,” Buckner added. Other ACA items unrelated to the budget — insurance market reforms, for one — will require Republicans and Democrats to work together to achieve 60 votes. The expectation is that a full replacement measure will be tackled in pieces that could take the entire 115th Congress to complete. “There’s always the danger that if you separate legislation too much, as you go to the next piece of legislation to try and pass that, it could be compromised down to not being able to work with the other pieces,” Buckner said. “We’re hoping for thoughtful consideration as to how all these pieces are put together.”

‘Taking Our Industry Back’

Hea lth Agents For America also supports repeal of the MLR. But the organization has a long list of goals for the new health care reform measure, said President and CEO Ronnell Nolan. The overarching theme is ensuring long-term viability for agents and brokers to serve consumers, she said. “Our motto for 2017 is taking our industry back,” she added. “I describe it as the door being open, and it’s our opportunity to walk through the door and sit at the table. There are a lot of people

Health insurance agents would emerge as winners if the future ‘replace’ bill eliminates the medical loss ratio. – Marcy Buckner

ARE AGENTS A PART OF (REPEAL AND) REPLACE? who should be at the table who were not during the original legislation.” There are many tweaks and changes that can be made to improve the business of selling health insurance, Nolan said. A significant goal is reforming the essential health benefits clause. The ACA requires non-grandfathered health plans in the individual and small group markets to cover essential health benefits in 10 benefit categories, which include things like ambulatory patient services and prescription drugs. But the list also includes “maternity and newborn care,” things a 65-yearold couple has no need for, Nolan explained. “That is something that has increased rates unnecessarily,” she said. “The private market needs to create plans that the people want to purchase.” In addition, the HAFA checklist of health care reform goals includes:

» Eliminate health care “navigators.” Created by the ACA, these government counselors duplicated the work meant to be done by agents, Nolan said, adding, “We’d love to see those defunded.” » Reform the pre-existing conditions clause. A popular aspect of the ACA is the guarantee of coverage for people with pre-existing health problems. While it’s a good concept, Nolan said, “there has to be something to tweak the market so people aren’t getting on when they’re sick and getting off when they’re well.” » Expand the 3:1 ratio. The 3:1 ratio stipulates that premium rates must not vary by more than 3:1 for like individuals of different ages who are 21 years old and older. For example, if a 21-year-old woman is charged a $200 monthly premium, then a 65-year-old woman cannot be charged

“Our motto for 2017 is taking our industry back.” – Ronnell Nolan


more than $600. The ratio needs to be expanded “to maybe 5:1,” Nolan said. » Drop the plan to permit insurance sales across state lines. This was one of Trump’s campaign themes to make health insurance more affordable. But it doesn’t work, Nolan said. “We can’t figure out how anybody on Capitol Hill thinks that is going to save anyone money,” she said. HAFA produced a white paper it plans to take to Capitol Hill to make sure agents’ voices are heard as health care reform is being crafted, Nolan said. The good news, she added, is it seems Republicans “are not going to tell insurance companies how to run their businesses. “We’ve got to figure out a way to gain a competitive edge for insurance companies,” Nolan added. “If something is not done over the next few years, there’s not going to be room for an agent. And it’s the consumer who is going to lose.” 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.

Health secretary nominee Dr. Tom Price pushed for a full repeal as a congressman. But even Republicans are getting anxious about not having a replacement ready to go. February 2017 » InsuranceNewsNet Magazine


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For financial professional use only – not for use with the public. FIUL is not a retirement vehicle and does not provide a guaranteed income stream in retirement. Product and feature availability may vary by state and broker/dealer. This offer is not valid in the state of New York. Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.950.1962 M-5998_B (1/2017) 10 InsuranceNewsNet Magazine  February 2017


The Financial Engine That Can Help Drive Your Client’s Strategy A How-to Guide for Registered Reps By Jason Wellmann, Senior VP Life Distribution, Allianz Life It is common knowledge that successful financial strategies include a mix of various assets and financial vehicles, like company-sponsored qualified plans, savings accounts and securities. Core planning topics such as tax strategy, retirement, estate planning, and employee benefits and/or business planning are also important to consider. However, financial advisors often omit life insurance as a critical component of their clients’ strategies. Life insurance — specifically fixed index universal life (FIUL) — is not only a powerful financial engine but is also critical to helping protect one’s entire financial portfolio. Critical Foundation of Every Financial Strategy Life insurance should be treated with the same relevance as other financial vehicles; in fact, it should be the foundation of every financial strategy. Think of a financial strategy as having a pyramid shape, and FIUL being the base of that pyramid. If your client dies too soon, the loss of income will cut off funding for financial vehicles beneficiaries are relying on for future income (and often present income as well). Related to this, of course, is life insurance’s primary purpose: providing a death benefit for beneficiaries. The generally income-taxfree death benefit of FIUL is essential to protecting families’ finances, including supplementing their other investments. Logical Fit in a Diversified Portfolio This logical fit of FIUL into existing financial strategies goes beyond just protection, however. FIUL products can help supplement existing retirement income through their cash value accumulation potential. Policy owners can access any available cash value through income-tax-free policy loans and withdrawals (as long as they don’t exceed premiums paid).1,2 Another way FIUL can fit quite well within

existing financial strategies is by enabling tax diversification. Tax diversification supports the key benefits of life insurance as a financial vehicle: protection and accumulation potential. When your clients place their assets in a variety of financial vehicles that have different taxation structures, potential impacts of rising taxes can be tempered. As all their assets may be affected differently, the likelihood of a negative tax effect across the board can be diminished. Benefits That Resonate With Clients Focusing on the many benefits of FIUL is helpful when positioning this important financial vehicle to your clients and prospects. Tax diversification is one of these appealing benefits, as is overall diversification of one’s financial vehicles. FIUL allows a great amount of flexibility and control, with a diverse range of product, rider, premium, loan and withdrawal options. The accumulation potential of FIUL makes these life insurance products familiar territory for registered representatives and financial advisors. Another advantage of FIUL is that it has a level of protection from negative index performance. It is also helpful to point out to clients that these products are not subject to the same restrictions as are other financial vehicles: • There are no penalties for accessing cash value prior to age 59½, assuming the policy is not a modified endowment contract.1 • Accessing any available cash value through policy loans and withdrawals1 currently does not have an effect on one’s available Social Security income.

Demystifying the Sales Process When offering FIUL to your prospects or existing book of business, spotlight the key benefits: death benefit protection, tax advantages, opportunity for supplemental retirement income and diversification. Remember the pyramid and FIUL’s role as the solid base. Life insurance underwriting was a source of difficulty and frustration in the past, but it’s not what it used to be. For example, eApplications are in use now by many carriers, allowing you to reduce the clutter and tedium of paper applications. New, accelerated underwriting programs make the underwriting process quicker and easier and are becoming more prevalent with life insurance carriers. Even better news is that your best prospects for fixed index universal life are in your existing book of business. Two common client profiles to look for are: 1. H.E.N.R.Y. (high earners, not rich yet) clients: This group includes young and affluent clients who have already maxed out qualified plan contributions or who are disqualified from contributing to a Roth IRA. 2. Transition BoomersSM: These clients are five to 10 years away from retirement and have idle assets earning minimal interest that can be used to purchase life insurance. (To view all seven client profiles who may be good candidates for FIUL, visit FIUL is a powerful asset that should be considered as part of your clients’ diversified financial strategies. There are a multitude of benefits and options for your clients to get excited about, and the sales process itself isn’t as cumbersome as it once was. Make sure your clients’ financial strategy is complete and includes protection — with FIUL. •

• There is no required minimum distribution at age 70½.3

Start today! To request your “Life Insurance as a Financial Engine” marketing kit, which includes tips on selling to your existing book of business, call 800.950.7372 or visit 1 Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional. 2 Loans may be subject to interest charges.

3 Life insurance does not provide a stream of income in retirement. Any potential supplemental income is available through policy loans and withdrawals. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Product and feature availability will vary by carrier and state. Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. February 2017 » InsuranceNewsNet Magazine




InsuranceNewsNet Magazine » February 2017


my Morin’s theories of mental strength were tempered in the furnace of some terrible days. Days such as the one when her mother died of a brain aneurysm at age 51. Then on the third anniversary of her mother’s death, Amy’s husband suffered a fatal heart attack at age 26. Amy became a 26-year-old widow who couldn’t find solace in speaking with her mother. Years later, she learned that if she could give herself permission, she could enjoy life again. She met a new man who became her husband. They moved into a new house for a new life, when they found out his father was terminally ill. If anyone was “entitled” to a pity party, it was Amy. But instead she turned to her training as a psychotherapist in Maine and made a list of 13 Things Mentally Strong People Don’t Do, which helped her through her father-in-law’s eventual passing. No. 1 on the list: Mentally strong people don’t feel sorry for themselves. Amy pushed on and even published the list, which quickly went viral, being read by 30 million people. That led to a book and two TEDx talks. Amy’s list is an essential guide for any aspect of a person’s life. The items on the list add up to a program to help us confront the things that hold us back in our personal lives and in our business. In this discussion with Publisher Paul Feldman, Amy explains how mental strength leads to the habits that build good lives.

FELDMAN: How do you define mental strength? MORIN: There are three parts to it. The

first one is about regulating your thoughts, because you want to think realistically. You don’t want to be overly negative. But you also don’t want to be overly positive, because then you could walk into a situation being too confident. That would leave you unprepared for reality, or you might end up ignoring some of the harder, tough things that are going on. It’s about regulating your thoughts so that you speak to yourself in a somewhat realistic and optimistic manner. The second part is managing your

HOW TO BUILD MENTAL STRENGTH INTERVIEW emotions, being in control of how you feel so that your emotions don’t control you. Be aware of your emotions so that you know when you’re angry or when you’re sad and how that might affect your behavior. And finally it’s about behaving productively, so no matter what kind of circumstances you’re faced with, you can figure out what you can do to make your life or somebody else’s life a little bit better. You can figure out how to tackle a problem or

hamster in a wheel, and we stay stuck. It’s really about building some self-awareness and knowing your weak spots and how to change them. So often I see people who just want to act tough, and there’s a big difference between being mentally strong and acting tough. When people are acting tough, they’ll say, “Well, I’m already mentally strong. I don’t have any problems. I don’t need to improve.”

1. Waste time feeling sorry for themselves. 2. Give away their power. 3. Shy away from change. 4. Focus on things they cannot control. 5. Worry about pleasing everyone. 6. Fear taking calculated risks. 7. Dwell on the past. 8. Make the same mistakes over and over. 9. Resent other people’s success. 10. Give up after the first failure. 11. Fear alone time. 12. Feel the world owes them anything. 13. Expect immediate results. how to face your fears — how to move forward in a way that’s going to be helpful to you in your life. The stronger you become, the better equipped you are to do those three things.

FELDMAN: Why did you approach this subject by saying what mentally strong people don’t do? MORIN: When it comes to so many other

things in life, we tell people what not to do. If you’re giving out diet advice, you wouldn’t just say, “OK, eat carrot sticks.” Hopefully you’d also say, “Eat carrot sticks, but make sure that you don’t eat too much sugar.” And when it comes to mental strength, so many people will give out advice like “Just think positive” or “Set goals for yourself.” Those things are great, but you also have to look at the things that are holding you back. Sometimes we become like a

But if you were really mentally strong, you’d be willing to say, “OK, here are the areas I can work on and these are the steps I could take.” We all possess mental strengths to some degree, but there’s always room for improvement as well. It’s taking a look at where you are, where you want to be and how you are going to take those steps to become just a little bit better every single day.

FELDMAN: What happens when people aren’t mentally strong? MORIN: We become afraid of admitting

when our feelings are hurt or we get embarrassed or we get rejected. It’s like we don’t really want to embrace those emotions, so we pretend it doesn’t bother us. We tell other people, “Well, I don’t care anyway.” It’s those sorts of things that keep us

February 2017 » InsuranceNewsNet Magazine


INTERVIEW HOW TO BUILD MENTAL STRENGTH from figuring out how to do better next time. We just put on this mask. Then you doubt yourself even more. You say things like “I can’t handle that” or “I can’t go through that again.” So then we start avoiding new opportunities rather than learning and becoming better than we were last time.

FELDMAN: The first item on the list is that mentally strong people don’t feel sorry for themselves.

FELDMAN: The second item on your list is that mentally strong people don’t give away their power. MORIN: That one is about deciding that

you’re the one in control of how you think, feel and behave. Somebody else can’t make you do anything or make you feel bad about yourself. It’s empowering yourself and changing your language. I’m guilty myself of saying things like, “Oh, I have to go to the grocery store

When we look at everything like it’s a chore, it gives us a mindset that life is happening to us and we don’t have any choice at all. MORIN: That’s a big one because I see a lot of people wasting tons of time and energy in a pity party. When something bad happens, it’s easy to think, “My luck is worse than everybody else’s” or “Nobody else has to deal with these problems.” That sort of thinking keeps you stuck because you start thinking that life just happens to you and you don’t have enough control over it to make your life as good as it could be.

FELDMAN: Do you think that control is a dominating factor for people, getting over the fact that you can’t control everything? MORIN: It’s having a balance to be able to

let go of the things you can’t control, but recognizing that even when you can’t control the situation, you can at least control your reaction. I see so many people who want to control other people. Those are people who lose their temper or put all their energy into trying to make other people happy. They really think that if they make everybody around them happy or control them, their own lives will be better. But when people do that, it’s really because they have this fear that they can’t control themselves. So they say, “I’ve got to control the environment because I can’t possibly deal with being uncomfortable.” 14

today.” But I don’t have to. It’s a choice. Sometimes it’s just recognizing that I get to do these things in life and, obviously, many people around the planet would be fortunate to go to a grocery store. They would love the opportunity. When we start to look at everything like it’s a chore, such as when the boss makes me work late or my mother-in-law makes me feel bad about myself, those sorts of things give you this mindset that, again, life is happening to you and you don’t have any choice at all. It’s about taking back your power and saying, “All right, I’m in control of my time and who I spend it with all day long. It’s really about what I want to do, and yes, there are consequences for those choices I make. But it’s still my choice.”

FELDMAN: Absolutely. You have to own it. The next one is that mentally strong people don’t shy away from change. MORIN: As a therapist, I see a lot of people

whose lives are crumbling around them. They’ll come in and say, “Gosh, I have all this anxiety because I have all this stuff going on.” But in reality, it’s not having all these problems going on that’s causing their anxiety. It’s their refusal to adapt to those things. They’ll say, “I want to keep everything the same and even though life

InsuranceNewsNet Magazine » February 2017

around me is in turmoil, I just don’t want to do anything differently.” So, people going through a divorce might say, “I have to keep living in this house no matter what,” even when they can’t afford it. Or people won’t let go of a job that isn’t a good one because they say, “I don’t want to have to go to a new place. I kind of like my job in some aspects.” Or even when people are unhappy, sometimes they say, “Well, life is bad, but it could be worse.” So they don’t want to do anything differently because they’re afraid that things will get even worse than they are now. But success is about your ability to adapt. The world is changing, and you must have the confidence in yourself that you can adapt to whatever changes you face.

FELDMAN: Change is a constant, but to be mentally strong, you can’t focus on things you can’t control. MORIN: So many people will say they have to make sure everything goes right. And they spend so much time worrying and thinking about things that they can’t control. You only have so much time and so much energy. If you could channel that time and energy into things that you can control, you could be so much more productive in life.

FELDMAN: People often make things out to be worse than they are, and they envision scenarios that are not going to happen. What’s the result of that? MORIN: That dread is so much worse for

people doing something new — going to a new job or taking some classes. They’re so worried about it that sometimes they talk themselves out of it by thinking, “What if it goes bad?” instead of thinking “How will I handle it if it goes bad?” Or thinking, “What if it goes really well?”

FELDMAN: You also don’t suggest that people focus on pleasing everyone. MORIN: These are people who say, “If

somebody asks something of me, I have to say yes” or “If somebody is angry with me, I have to fix it.” I worked with this woman who thought,

HOW TO BUILD MENTAL STRENGTH INTERVIEW When people can let go of that, a lot of times it’s really quite liberating for them to say no and see that people will still know they care and maybe respect them more.

The Five Stages of Change

FELDMAN: How do strong-minded people handle calculated risks?

Amy Morin discusses a client named Richard who needed to make some changes in his health. She uses Richard’s journey to illustrate what she calls the five stages of change.

MORIN: Most of us don’t really think about

1. Precontemplation – When people are precontemplative, they don’t yet identify any need to change. Richard was precontemplative about making any changes to his health for years. He avoided going to the doctor, he refused to step on a scale, and he dismissed any comments his wife made when she expressed concern about his health. 2. Contemplation – People who are actively contemplative are considering the pros and cons of making a change. When I first saw Richard, he was contemplative. He was aware that not changing his eating habits could have serious consequences, but he was also not yet certain how to go about creating change. 3. Preparation – This is the stage where people prepare to make a change. They establish a plan with concrete steps that identify what they are going to do differently. Once Richard moved into the preparation stage, he scheduled days to work out and chose one snack to swap for something healthier. 4. Action – This is where the concrete behavioral change takes place. Richard started going to the gym and swapped his afternoon cookies for carrots. 5. Maintenance – This often overlooked step is essential. Richard needed to plan ahead so he could maintain his lifestyle changes when he faced obstacles, like holidays or vacations. Amy Morin, 13 Things Mentally Strong People Don’t Do, 2014, William Morrow

“The best way to get ahead at my job is to show that I am ambitious and am willing to do anything anybody asks of me.” So she kept saying yes to everything. After a couple of years, everybody around her was getting promoted and she wasn’t, and she was really discouraged. But she finally went to her boss and asked, “How come everybody else is getting more responsibility and leadership positions and I’m not?” Her boss said, “I can’t put you in a leadership position. I don’t even think you

could make a decision. You just do whatever anybody tells you to do.” That was this lightbulb moment for her because she said all those years she thought she was pleasing her boss and thought she was showing that she was somebody who would go above and beyond. But in reality, she was showing him that she couldn’t stand on her own two feet. That she couldn’t be assertive and be in charge of people. We can’t read anybody else’s mind, and it’s not your responsibility to be in control of other people’s feelings.

how we calculate risk. For some reason, we spend so much time in math class figuring out things that we probably will never use later in life, but nobody really talks about how to calculate risk. Then we tend to think about risk in terms of our level of fear. We think if it feels scary, then it must be really risky. But in reality, life doesn’t work like that. Our fears are often quite irrational. Take public speaking, for example. A lot of people would be terrified to step up on a stage in front of an audience of 1,000 people, but those same people might have driven in a car to get there. The car ride didn’t scare them at all, even though your chances of death are much higher when riding in the car than when stepping on the stage. How do we balance out that logic? How do we decide how risky something is and whether we can handle it? Can I handle the rejection if it doesn’t go the way that I planned? What would I do if that happened? For a lot of people, it’s about building their confidence and then helping them tolerate some of that anxiety. Some people are so scared of calculating risk that they become impulsive and say, “Yeah, I’ll do that,” because they don’t want to think about it. And other people avoid risk because they think, “What if something bad happens?” It’s about facing it head-on long enough to come up with a plan, whether it’s a financial, social or even physical risk.

FELDMAN: I would say that a lot of our readers are risk-takers. They started their own business in this career on commission only. So they’ve really taken risks to be in this industry. What are some strategies for somebody who is a risk-taker, so they don’t take too much risk? MORIN: I’m certain you run into plenty of people who say, “I love a good challenge. I’m happy to take a risk because it could pay off.” But pay attention to your

February 2017 » InsuranceNewsNet Magazine


INTERVIEW HOW TO BUILD MENTAL STRENGTH emotions when you’re faced with an opportunity. We know that when we’re really excited about something, we tend to overlook the risk that we’re facing because we’re only looking at the big prize at the end. It’s a good idea to have people in your life who are truthful. Just bouncing that off somebody else can help you raise your logic a little bit so that your emotions don’t take hold.

The Truth About Mental Strength

FELDMAN: There’s a lot of research out there that shows the idle mind will tend to worry about things that may happen, or that it will dwell on the past. Since we already covered future worrying, what tips can you share for not dwelling on the past?

There’s a lot of misinformation and misconception about what it means to be mentally strong. Here are some of the truths about mental strength:

MORIN: This one, I think, can be a combi-

nation. Sometimes people will say, “Well, I made this huge mistake and I can’t forgive myself.” And sometimes it’s a matter of saying instead, “Something happened and it changed the way I look at myself.” People make a mistake and then think they aren’t good people or they can’t succeed. It’s about figuring out how these pivotal moments of life change your perception and how they affect who you are now, and how to use that in making your future as good as it could be. To make peace with the past, it’s important not to dwell on it. But you need to reflect on it so that you can learn and then give yourself permission to move forward. For me, it was about giving myself permission to move forward after I lost my husband. I had to figure out that it’s OK to enjoy life and to keep going. It’s a journey of self-reflection to figure out what I need to let go of so that I can move forward. For a lot of people, it’s childhood. It’s amazing that the things that happened to you when you were 4 or 5 years old can still affect you when you’re 44. Sometimes it helps to be more aware that things in your past do impact you one way or another, and then say, “How do I move forward so that I can make my life as good as it can be?”

FELDMAN: I’m going to jump to something on the list that I originally found a bit unexpected, where you say, “Mentally strong people don’t fear alone time.” Can you explain that to our readers? 16

• Being mentally strong isn’t about acting tough. • Mental strength doesn’t require you to ignore your emotions. • Y ou don’t have to treat your body like a machine to be mentally strong. • B eing mentally strong doesn’t mean you have to be completely self-reliant. • Being mentally strong is not about positive thinking. • Developing mental strength isn’t about chasing happiness. • Mental strength isn’t just the latest pop psychology trend. • Mental strength isn’t synonymous with mental health. Amy Morin, 13 Things Mentally Strong People Don’t Do, 2014, William Morrow

MORIN: I’ve talked to a lot of people about this one, and they’ll say, “Oh, I love alone time.” But then when I ask them what they do during that alone time, they’ll say they’re on social media or texting a friend. Everybody has all this background noise, and it’s so hard to get away from that with all of our electronics and digital devices. As a therapist, I work with a lot of people who have trouble sleeping at night. I used to look at all these sleep problems as potential mental health issues. But then I started asking them, “How much time do you spend in just silence during the day?” And the answer is almost always “None.”

InsuranceNewsNet Magazine » February 2017

For a lot of people, the only time that their brain has a moment to think is when they shut off the lights and put their head on their pillow. So the brain needs some time to process what’s going on in the day and to think about things. If they don’t give themselves that time during the day, their brain is going to try to take that at night. I always encourage people to spend even 10 or 15 minutes a day simply being quiet. Whether you write in a journal, meditate, or just sit and think for a few minutes, it can really help to ask yourself, “How am I doing in life? Where am I going? What do I want to be different?”

HOW TO BUILD MENTAL STRENGTH INTERVIEW But it’s amazing the number of people who will say, “That’s boring” or “I don’t want to do that” or “It’s not worthwhile” or “I don’t have time.” If you don’t have time to set aside 10 minutes a day, that’s a big problem. You should be able to value yourself enough to say, “I can give myself 10 minutes of time out of the 24 hours per day.”

FELDMAN: So many people make excuses for not being able to do that. Even as I was reading your book, there were times when my mind was going all over the place and I had to stop and just take that time. MORIN: It’s a strange world we live in,

where it’s hard to take 10 minutes of time and build that into your schedule. There’s so much pressure to be productive, and so if it’s 10 minutes of not doing anything, people feel guilty. But then when you look at how much time most people waste scrolling through social media or getting lost in a trail on the internet, you can definitely make the time. You have to make it a priority in your life.

FELDMAN: In today’s society, it seems as if there are a lot of people out there who feel the world owes them something. And this obviously goes against what you’ve found. MORIN: So many people say the younger

generation feels entitled. But I think if we all were honest, we’d have to say that if we put time into something, we would be entitled to the outcome we want. Or people will say to me, “Bad things happened to you, so it’s great that you ended up writing a book because you deserve success.” But life doesn’t work like that. There’s no fairness czar up there who’s handing out fairness gifts based on how good of a person you are or how much you’ve endured in life. And for people to be able to stop trying to keep score or figuring out what they think they deserve in life, it can go a long way toward their being kind and generous simply because they want to be, not because they expect to get those things back tenfold.

FELDMAN: The last item on your list is that “Mentally strong people don’t

expect immediate results.” It always amazes me how many quit when they are on the precipice of a breakthrough. MORIN: Of course, because of the internet

and things like that, we do expect things to happen fast. You can order something online and have it delivered to your door in a matter of hours. It seems as though everything in life should happen fast. In my therapy office, I’ll see people who come in and two weeks into their treatment they say, “Therapy doesn’t work. I need medication. I need something that’s

the gym more often, what are you going to do on the days when you’re really tired or the days when you have to work late or the days when you can’t get up early for one reason or another? Know that this is going to be part of the process. When we set new goals for ourselves, we feel motivated in the beginning, so it’s easier to stick to it. But after one, two, three weeks, our motivation declines and then it’s easy to talk ourselves out of it. Sometimes it’s about asking, “What steps can I take to increase the chances that I’ll stick to it?” It might be a matter of

If you don’t have time to set aside 10 minutes a day, that’s a big problem. You should be able to value yourself enough to say, “I can give myself 10 minutes of time out of the 24 hours per day.” going to work right now because I can’t do this any longer.” And I’ll have to explain to them that if you’ve had depression for 10 years, we’re not going to get rid of it in two weeks. It’s going to take time. Or people who say they want to lose 50 pounds and they lost five pounds in two weeks but it is not fast enough. We have to learn how to be patient and how to stay on the right track. How to look at a setback and know it’s just one step backwards. I think the average New Year’s resolution lasts until about Jan. 18.

FELDMAN: So what are some ways to train yourself to not give up? MORIN: Part of it is to plan for the set-

backs, to know that there will be bumps in the road. Say it’s dieting. How are you going to plan for the hard times, such as the party that could derail your diet? Or if you say you want to start going to

having the gym shoes next to the bed or not having the remote on the couch. For some people, it’s a matter of writing a list. For example, writing down the top 10 reasons why they should stick to this goal. When they lose their motivation, they can read the list.

FELDMAN: Is breaking it down into smaller goals part of the answer? MORIN: Absolutely. Have those smaller

objectives that you set. Instead of saying, “I’m going to lose 80 pounds” or “I’m going to save a million dollars,” ask yourself, “What am I going to do today, and how will I know if I’m successful at the end of today?” If you can look at the small steps, we have something that’s in sight and it feels like the big goal is within reach. Then it’s much easier to stay motivated than when we just keep our eye on that big prize.

February 2017 » InsuranceNewsNet Magazine



Actress’ Death Could Spark Blockbuster Claim When Star Wars actress Carrie Fisher died unexpectedly in December, Hollywood lost its beloved Princess Leia. But insurers are bracing to lose a record-breaking $50 million in so-called contract protection cover. At the time of her death, Fisher had completed filming Star Wars Episode VIII, and she had been expected to have a major role in Star Wars Episode IX, due for release in 2019. Sources said Disney had taken out $50 million in contract protection cover as insurance in case Fisher was unable to act in the new Star Wars films. With her death, the insurance policy is likely to trigger a claim. The policy was written by Exceptional Risk Advisors in New Jersey, but Lloyd’s of London will be handling matters from here. Assuming Disney takes the $50 million payout, sources said it would be the “biggest-ever single personal accident insurance claim.”


President Trump nominated Wall Street lawyer Jay Clayton to replace Mary Jo White a s S e cur itie s and Exchange Commission chairman. Observers say Clayton’s nomination Jay Clayton could mean the end SEC Chairman Nominee of the SEC’s efforts to produce a fiduciary rule raising the standards for anyone working with retirement funds. Republicans in recent years have criticized White’s SEC for focusing too much on enforcement and not enough on its other missions. White got more companies to admit guilt and took more cases to trial than her predecessors did. Following Trump’s surprise win in November, White announced she would step down one year early.


The insurance industry expects to lose about one-quarter of its workforce to retirement in the next decade. How to deal

with this mass exit of workers? Invest in more workforce development, industry leaders said. Insurance lobbyists told a Connecticut legislative forum that the state should consider funding workforce development programs at local colleges. The insurance industry is a major sector of the Connecticut economy. “By next year, 25 percent of the industry is going to be five to 10 years away from retirement,” said Hugh Barrett, who works in government relations for MassMutual, which has 1,800 workers in Connecticut. Connecticut lawmakers authorized $17.8 million in borrowing in 2011 to start manufacturing programs at three community colleges. But insurance lobbyists want to see state funding for training for insurance industry careers.


The First National Bank of Mom and Dad is taking a hit in paying for college. More parents are taking out student loans for their children. The average parent borrows $21,000 in student loans for their children’s education, according to a recent study by researchers at the University of Southern


KNOW Wyoming is the state with the lowest



average in-state college tuition rate.

Source: The College Board

InsuranceNewsNet Magazine » February 2017


While Washington has been assuring all Americans, ‘Don’t worry, those premium increases don’t affect you because Washington is covering more of the subsidies,’ in truth a lot of taxpayers are bearing a higher burden for those subsidies. — House Ways and Means Committee Chairman Kevin Brady, R-Texas, on the Affordable Care Act.

California and the University of South Carolina. The debt comes as these parents are approaching retirement, and it is on top of the loans students take out to pay for their own education.


Percentage in each income group with education-related debt

< $30K $30K - $64K $64K - $120K

6.7% 11.7% 13.8%

> $120K


Parents with a household income of $120,000 or more borrow an average of $30,000 for their children and are more likely to take out student loans, according to the research.


The Federal Reserve said goodbye to 2016 by raising interest rates for the second time in a decade. Now Federal Reserve Chair Janet Yellen said to expect three or more rate increases this year. The Federal Open Market Committee announced that three rate hikes in 2017, two or three in 2018 and three in 2019 are likely. But the environment in which the Fed will likely raise rates is different than previously, said Thomas Wilson, senior investment manager at Brinker Capital. “A year ago, you had high-yield spreads that were at two-year highs, which were telling you something was wrong,” he said. “This year, the macro environment has changed dramatically.”


Could the ACA Be Stalling?


Advisors report feeling Let’s shift theincreasingly conversation. monitored rather

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

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

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


Forget blackjack and roulette. Unprecedented monetary policies have turned the FEWER AMERICANS ARE world’s financial markets into a casino, Life expectancy for ‘UNBANKED’ said bond investor Bill Gross of Janus CapIn what some experts are saying is another today’s 65-yearital Group. And global central bank polisign of an improving economy, fewer old is six months cymakers are to blame. Americans are without access to a savings “Our financial markets have become a shorter than it or checking account. Vegas/Macau/Monte Carlo casino, waThe percentage of Americans who was last year gering that an unlimited supply of credit are “unbanked,” or do not have a bank generated by central banks can successaccount, declined to 7 percent in 2015 fully reflate global economies and reinfrom 7.7 percent in 2013, according to AMERICANS ARE DYING FASTER vigorate nominal GDP growth to lower the Federal Deposit Insurance Corp. The We tend to take for granted that life but acceptable norms in today's highly improvements mostly came from house- expectancies in the U.S. will continue to leveraged world,” Gross said in his latest holds making less than $15,000 a year. increase. But here is some disturbing news Investment Outlook, titled “Doubling At Protective Life, we understand that retirement plans aren’t learn” more visit: Although consumers have a number from the Society of Actuaries: Life expec- To Down. built on basis points through listening, of reasons why they alone. may notThey’re use the crafted ser- tancy for today’s 65-year-old is now six careful evaluation a common clear understanding of what’s most “Investors/savers are vices of a bank, theand most reason, months shorter than it was last year. important at every stage of your clients’ lives. now scrappin' like the FDIC found, is that they do not beAnd it’s not just older Americans who lieve theyRetirement have enoughwas money obtain theare affected this longevity shift. A mongrel dogs for tidProtecting builttoaround simple ideaby that a bankwant account. Lack of for money cited last year had a 50/50 bits of return at the people protection the was things they 25-year-old care about,woman like their as the main reason by 57 percent of those chance of reaching age 90. This year, zero bound. This canhomes, cars and other assets. We know your clients care about surveyed. she is projected to fall about six months not end well.” retirement, yet many are unsure of how to short. protect the assets — Bill Gross they’ll rely on to support their needs. Some of the reasons? Deteriorating that of middle-aged, Gross, who oversees the $1.5 billion That’s57% why when you call us, we’ll start by health, talking particularly about of those without non-Hispanic whites. Other culprits are Janus Global Unconstrained Bond Fund, a bank account said comprehensive solutions for your clients’ unique needs. drug overdoses, suicide, alcohol poisonrecommended bitcoin and gold for invesit’s because they don’t Then, when the strategy is right, we’ll show you how our have enough money ing and liver disease. tors who are looking for places to preportfolio of annuities can help protect your clients’ principal, From 2000 to 2009, American death serve capital. income, growth and even their legacies. rates improved by 1.93 percent for men Gross blasted ultra-loose central bank policies for hindering global economies by keeping so-called zombie corporaDID YOU tions alive and inhibiting “creative deProtective Life refers to Protective Life Insurance Companyhave (PLICO) andtheir its affiliates, including Protective Life & Annuity Insurance Company (PLAICO). Annuities Americans had struction. ”

? 41M


are issued by PLICO in all states except Newidentities York and in stolen. New York Source: by PLAICO. Bankrate Both companies are located in Birmingham, AL. CABD.5504 (08.16)

For Financial Professional Use Only. Not for Use With Consumers. February 2017 » InsuranceNewsNet Magazine



The retirement market represents trillions of dollars but also hefty challenges. BY JOHN HILTON


InsuranceNewsNet Magazine Âť February 2017



he IRA rollover market is retirement market “will be impacted in facing tremendous pressure myriad ways” by outside forces. at the same time it offers “Advisors accustomed to parlaying deunprecedented business fined contribution plan assets into tradiopportunity. tional wealth management relationships Advisors like Juli Mc- via IRA rollovers face new obstacles,” Neely know that the key to associate analyst Dan Cook wrote in the unlocking the opportunity report. is to think bigger than the rollover. A client-centered approach is going to McNeely Financial Services in Spen- win IRA rollover business in the new parcer, Wis., is leanadigm, analysts say. ing more toward At McNeely, that fee-based advising means prospecting and comprehenwith a light touch. sive planning. That McNeely Finanmeans a bigger time cial hosts a variety investment and inof social events corporating things designed with no well beyond a simgoal in mind other ple investment plan than for clients and — such as health guests to have fun. care costs and longThe company hosts term budgeting. experts in topics of “Our clients are interest to clients, just really happy such as trapshootwith the peace of ing, for an evening mind they have of light fun. that everything has “We try to make been considered it very easy for our and it’s not just a clients to introduce quick decision,” said “There are so many things that re- us to other people,” company president ally play into individual retirement McNeely said. “We McNeely. “There ladies’ nights and planning right now. I can’t see how do are so many things men’s nights, and we that really play into it can be successfully done with- try to isolate them by individual retire- out that comprehensive planning.” the topic we try to ment planning right — Juli McNeely do. But they’re never now. I can’t see how financial events.” it can be successfully done without that comprehensive planning.” CHALLENGES TO FACE According to LIMRA projections, the Nine out of 10 new IRA accounts are roll“retirement income opportunity” market overs, according to the Investment Comis expected to soar to $15.1 trillion by the pany Institute (ICI). year 2023. IRAs currently hold $7.3 trilThe President’s Council of Economic Adlion, representing 30 percent of U.S. total visers estimates that $300 billion is rolled retirement market assets. That compares over annually, a figure that is only growing. with 18 percent two decades ago. So what’s the problem? Several, actually, as regulators, market forces and client expectations are all evolving along with the rollover market. Some of what now passes for “best practices” might not work for agents and advisors going forward, for a variety of reasons. Cerulli Associates concluded in a recent report that providers, asset managers and advisors who participate in the Source: Investment Company Institute (ICI)

Some of the challenges facing advisors hoping to capture some of the bulging rollover market include: » Better Planning: Clients are exposed to a variety of financial planning possibilities these days, from roboadvisors to traditional advisors to self-management. Studies show clients want human interaction with a professional, but one who is well-versed in retirement, health care and financial planning. » Regulation: While the Department of Labor’s fiduciary rule might not survive long under President Donald J. Trump, it won’t be going away soon. And the momentum for a fiduciary standard has proven stubbornly persistent through Republican and Democratic administrations. » More Licensing/Training: The best way for agents and advisors to protect themselves from liability and offer complete financial planning is through more education. The questions then become what licenses to pursue and what training is best. » Avoid Common Rollover Mistakes: With so much more attention being paid to the trillions of dollars at stake with the retiring boomer generation, IRA experts say agents and advisors cannot afford to be lazy or sloppy. The costs are sure to be much higher than the rewards.


The new fiduciary regulation threat is the most pressing — and unsettled — issue facing advisors, Cerulli analysts say. The prospect of tightened compliance will force advisors and their broker/ dealers (B/Ds) to evaluate whether it is worth the additional time, effort and fiduciary liability to continue pursuing

9 out of 10 new IRA accounts are rollovers February 2017 » InsuranceNewsNet Magazine


FEATURE THE EVOLUTION OF ROLLOVER ADVISING rollover assets, Cerulli concluded. “Cerulli asserts that the hurdles that the DOL conflict of interest rule creates will force another round of ‘in or out’ for the population of advisors operating in the employer-sponsored retirement plan market,” said Jessica Sclafani, associate director. “Some advisors will be mandated by their B/D or wirehouse to choose between [defined contribution] plan business and traditional wealth management rather than operate in both channels,” she added. Retirement specialist advisors, who generate a majority of their revenue from employer-sponsored retirement plans, are best-positioned because they are wellversed in trends impacting the retirement market, Cerulli said. Those advisors are mostly accustomed to acting in a fiduciary capacity for DC plan sponsors. Some advisors without retirement plan expertise will find the regulatory environment prohibitive and exit this market, Cerulli predicted. However, the remaining advisor population will have to build specialized knowledge of the market if they intend to continue servicing DC plans. This need for specialization creates opportunity for DC investment-only (DCIO) asset managers and outsourced fiduciary providers, such as Mesirow and Morningstar, to support advisors who are interested in growing their DC plan business but lack the expertise. “Cerulli expects that advisors will increasingly turn to fiduciary outsourcing providers either because their B/Ds prohibit them from acting in a fiduciary capacity or because they lack the appetite or ability to take on the greater fiduciary responsibility currently set forth under the new regulation,” Cook explained.


With regulators looming, rollover strategies that do not provide demonstrable benefits to clients are in the crosshairs. Meanwhile, retirees are faced with growing financial pressures that come with increased longevity and skyrocketing health care bills. The answer to both client and advisor problems could be the same: holistic planning services. Agents and advisors who expand their scope and provide interdependent planning are going to adapt 22

well to the future, analysts say. GAINING THE SKILLS That means not only recommending In the same CFP survey, 66 percent of investments but also projecting outcomes investors said they would be “very conthat marry investments to savings with cerned” if their advisor had not been given other sources of retirement income, such any formal training in comprehensive as Social Security or pensions. And then personal financial planning, to the point factoring in living costs, health care ex- where they’d seek another advisor. penses and even legacy planning. In the new world of holistic planning, Eighty-one percent of respondents to an advisor is likely to see an eclectic range a 2014 survey by the Certified Financial of issues. More importantly, advisors will Planner Board of Standards said they need a wide range of knowledge and skills would rather work with an advisor who to best serve their clients. integrates all areas of their financial life One person might have clients with than with someone who specializes in a trust fund who need tax advice incorone or two areas. porated into their plan. Another person The study, conducted by ORC Inter- might be caring for an elderly parent national, surveyed consumers with more and need Medicare and estate planning than $100,000 in investable assets. knowledge. And on and on. The process is usually the same for evMcNeely engages with a sort of supery client, McNeely said, starting with port group to share ideas. If one advisor identifying how much money they need is faced with a new situation brought by now and how much they’ll need in the their client, maybe another member of future. the group has more experience and stratLaddering is a common strategy for egies to share. IRA rollover retireShe also takes ment planning, and continuing educaone McNeely relies tion classes. on where appli“The additional cable. Structuring education I’ve reretirement income ceived allowed me that includes things to be that more like delaying Socomprehensive adcial Security and visor,” she said. “For sinking a chunk example, taxation. of money into a I’m not a CPA, but deferred income I understand taxannuity creates a ation a lot better diversified portfonow that I’ve taken lio that protects the courses.” “The market is gigantic, and it’s theDavid client, she said. Royer, na“There’s no cook- growing at a very fast rate. I would tional sales director ie-cutter approach recommend to all of the agents out of Guaranty Inin this,” McNeely there, learn as much as you can.” come Life, is a nasaid. “Everyone is a — David Royer tionally recognized little bit different.” IRA rollover expert This type of holistic planning helps who teaches courses in using tax rules to build trust and a deeper relationship with maximize rollover benefits. the client, McNeely said. Sometimes it “The market is gigantic, and it’s growmeans playing bad cop, usually when a ing at a very fast rate,” Royer said. “Here’s client is overspending their plan. But not what happens almost 100 percent of the always. time: The retiring employee asks whoever “I do have clients who save their entire they are dealing with in HR, ‘What do I life, and they continue to save even in re- have to do about my 401(k)?’ tirement,” she said. “They have not flipped “And almost 100 percent of the time, the switch to now we’re going to spend the HR person says, ‘You don’t have to do the assets. I have had conversations with anything. You can leave it where it is.’ So clients, saying ‘You do have the ability to they do.” spend more.’ It does happen.” Nearly all clients can be separated into

InsuranceNewsNet Magazine » February 2017



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Traditional variable annuities




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Analyst note: Data are sorted by value. / Sources: Cerulli Associates, in partnership with IRI

one of two categories, he said. The “accredited investor” comes with at least a working knowledge of various investment strategies. “For that person, you can get as complicated as you want,” Royer said. But the typical small saver whom most agents and advisors deal with will not possess that level of investment understanding. That’s why acquiring additional

president’s change agenda, the DOL rule doesn’t appear to be a high priority. After all, he never mentioned it during the campaign. A Trump surrogate has said the rule will be dumped. Even if it is, many in the industry are migrating toward a fiduciary standard anyway. “We’re really taking each client on a case-by-case basis,” McNeely said. “We’re still moving forward. We are going to

regulators will agree on a standard that falls somewhere between suitability and fiduciary responsibility. At stake for agents and advisors is heightened liability tied to the recommendations they make with clients’ money. Pressure is growing from several stakeholders (including the fee-only sector) to hold anyone making investment recommendations to a “best interest” standard. As long as the fiduciary rule remains, advisors will have to consider these general guidelines when doing rollovers:

Some advisors without retirement plan expertise will find the regulatory environment prohibitive and exit this market. licensing and education is crucially important, Royer said. “This is all about knowledge,” he added. “I would recommend to all of the agents out there, learn as much as you can.”


Unless the Trump administration effectively blocks implementation, the DOL fiduciary standard begins taking effect April 10. With everything on the new 24

have some conversations with some clients about moving to a fee-based model.” Despite a political environment that favors elimination of the DOL rule, many are hesitating because it isn’t a one-party or one-person agenda. The rule was first put forth during President George W. Bush’s administration, and the Securities and Exchange Commission is working on its own version. Speculation is making the rounds that

InsuranceNewsNet Magazine » February 2017

» Sell under the full best interest contract exemption. This means significant recordkeeping and disclosures, as well as a signed contract agreeing to act in the client’s “best interest.” » Sell under the “level-fee fiduciary” exemption, which is a much less burdensome version of the full BIC exemption. An LFF receives only an advisory fee and no additional compensation.


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FEATURE THE EVOLUTION OF ROLLOVER ADVISING » Sell under Prohibited Transaction Exemption 84-24 if a fixed-rate annuity contract is part of the rollover plan. This is a much less burdensome hurdle, but the advisor still agrees to act in the best interest of the client. Regardless of what happens, agents and advisors should always adhere to a best interest standard, she added.


IRA distributions to be spread over three generations. Learning the details is a must for advisors, Royer said. “Now a modest IRA can generate a lifetime of income that can span over three generations,” he writes. “This is one of the biggest gold nuggets in the tax code.” 2. Not properly designating beneficiaries. While it would seem that choosing who will inherit the money left in an IRA would be simple, Royer said it isn’t. The reality is that many children and grandchildren who inherit a qualified plan will be forced into rapid distribution, causing rapid taxation, due to beneficiary mistakes.

would rather work with an advisor who integrates all areas of their financial life than with someone who specializes in one or two areas.

“Sometimes I shake my head and say, ‘Why did someone put you in this product? Because you’re going to be locked in for 10 years, or you’re going to have a high surrender charge,’” McNeely said. “No one wants to hurt a client at a time when they’re supposed to be having the time of their life.”


Insurance-only agents also need to be wary of the source-of-funds rules, Royer said. The source-of-funds issue refers to emerging regulatory requirements concerning what advice insurance and financial advisors can give to consumers. The shorthand version is that if you’re not licensed to sell an insurance or securities product, don’t give specific personal advice to consumers about that product. Ongoing debate over the source-offunds rule has evolved into a turf war between Wall Street and the insurance industry, Royer said. Current standards are generally traced to an Iowa bulletin in 2011. In the financial area, the bulletin says it is “permissible” for insurance-only agents to discuss general information. Examples include general discussions about balancing risk and diversification, and discussion with consumers about their risk tolerance, financial situation and needs and about the stock market in general terms. Also permissible is discussion that provides advice about insurance products as part of a financial plan. But client-specific advice involving securities is prohibited. Examples include discussing risks specific to a consumer’s 26

individual securities portfolio and providing advice regarding the consumer’s specific securities or the securities’ investment performance. Insurance-only agents must disclose that they are insurance agents and are authorized to sell insurance. Regulators do go after source-of-funds violators. Two agents in Arkansas were investigated and fined by the state securi-

ties department in 2014 for sales activities in a Social Security seminar where a fixed indexed annuity was sold to a senior. Among other things, the regulators had charged that the agents provided “investment advice” without proper securities registration, and that the agents had commented on the customer’s specific securities holdings.


Royer is closing in on 50 years in the financial services industry. In 2004, he developed “The Keys to the IRA Kingdom,” a course in which he teaches advisors how to get the most out of an IRA for their clients. He preaches helping IRA owners avoid mistakes that could cost them valuable funds for retirement. A few important common mistakes: 1. Not taking advantage of the “stretch” IRA option. In 2002, the IRS changed the tax and distribution rules, in part to help prevent owners of retirement plans from outliving their retirement savings. These new rules also created an income planning opportunity that would allow the taxes on

InsuranceNewsNet Magazine » February 2017

3. Not taking advantage of tax-saving strategies. Two strategies can transform taxable IRAs into tax-free income or a tax-free inheritance, and agents and advisors need to know them. Proper use of a Roth IRA conversion or IRA arbitrage can equate to substantial tax savings for clients, Royer said.


Ed Slott has more than 20 years of teaching agents and advisors the arcane rules and practices associated with IRA rollovers. He has a simple Golden Rule: “If it’s in the client’s best interest, it’s always in your best interest as an advisor.” Regardless of regulatory outcomes, Slott is convinced that accountability is here to stay. “There’s still going to be accountability if you are making the wrong recommendations because you didn’t know how “If it’s in the client’s best inter- many options there est, it’s always in your best in- were and what facterest as an advisor.” — Ed Slott tors to consider with


2017 IRA RULES CHANGES Agents and advisors who work with retirement accounts are seeing rules changes beyond the Department of Labor fiduciary rule. Several other tweaks and changes took effect Jan. 1. They include: • Higher Social Security taxes for high earners. The ceiling for earnings subjected to Social Security taxes jumped from $118,500 to $127,200 in 2017. That translates to 12 million additional workers paying more into the system. Earnings that exceed the taxable maximum are

not taxed by Social Security or used to calculate retirement payments. • Higher secondary IRA income limits. For those who contribute tax-deferred income to a 401(k) plan, the ability to make similar contributions to an IRA is phased out for individuals earning $62,000 to $72,000 ($99,000 to $119,000 for couples), up $1,000 from 2016. For those who don't have a 401(k) but have a spouse who does, the tax deduction is phased out if the couple's income is $186,000 to $196,000.

each option,” he said. “That’s something you have to be educated on. It can’t just be ‘Let’s do an IRA rollover because it’s better for me as an advisor.’ You have to show why it’s better for them as a consumer.” Although there are six options for plan funds — IRA rollover, leave in plan, roll to new company plan, take lump sum, Roth IRA conversion, or in-plan Roth conversion — Slott focuses on just two. “Basically, it comes down to leave it in the company plan or roll it to an IRA,” he explained. “The other options are just offshoots of that.” While taxes, regulations and investment options are the big things advisors need to be aware of, they are not the only

Those who do not have a 401(k) or other type of retirement account at work can make tax-deferred IRA contributions regardless of their current income. • Higher income thresholds for Roth IRAs. Income limits for those wishing to contribute to a Roth IRA were increased by $1,000 for an individual and $2,000 for couples. Roth IRA contributions are phased out for those earning between $118,000 and $133,000, or $186,000 to $196,000 for couples. • Income eligibility for the Saver’s Credit is increased slightly. The income limits for the so-called Saver’s Credit are being increased by a modest $250. That means anyone earning less than $31,000 in 2017 could qualify for a tax credit worth between 10 and 50 percent of 401(k)

factors in play. For example, creditor protection. IRAs have bankruptcy protection under federal law, but state laws vary. “It’s imperative for any advisor to know his own state’s creditor protection statute,” Slott said. “That’s important. You don’t want to get caught on this one.” Likewise, the rules forbid life insurance and loans from an IRA. Clients who have either need to know their options in detail, Slott said. “What I would tell a client is ‘If you have life insurance in the plan, you may want to leave it in the plan,’” he added. “They might say, ‘That’s not an issue. I’ll cash out the life insurance and move ev-

and IRA contributions up to $2,000. For couples, the figures are $62,000 in earnings and contributions up to $4,000. • Early account withdrawals for Hurricane Matthew victims. Hurricane survivors in North Carolina, South Carolina, Georgia and Florida can take IRA withdrawals and loans. Likewise, the six-month ban on 401(k) contributions after a hardship distribution will not apply to hurricane-related distributions taken between Oct. 4, 2016 (Oct. 3 in Florida) and March 15, 2017. Distributions could still trigger income tax and a 10 percent early withdrawal penalty, and a 401(k) loan must be paid back within five years or upon leaving the job to avoid taxes and penalties on the outstanding balance of the loan. — John Hilton

erything over into an IRA.’ But you have to ask.” Education on these and other issues will prove crucial to taking advantage of what is a bulging IRA rollover market, Slott said. “They can take the high road, or the proactive road, and learn this stuff,” he said. “Then they’ll be in position to have a tremendous edge.” 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.

February 2017 » InsuranceNewsNet Magazine




Individual Life Premium on the Rise in 3Q Whole life drove life insurance sales in the third quarter, according to LIMRA. Third-quarter individual new annualized premium rose 2 percent compared with the prior year, and whole life sales experienced 10 consecutive years of growth. LIMRA expected the overall policy count to show an increase at year-end, resulting in the second consecutive year of positive growth. Whole life (WL) premium increased 9 percent in the third quarter, and it was up 8 percent as of Sept. 30. WL now represents 36 percent of the total life market.


Wells Fargo came under fire when it was revealed that its sales representatives opened thousands of accounts without its customers’ permission. In the fallout from the scandal, Prudential suspended sales of its MyTerm life insurance policies through the scandal-plagued bank. The term life policies represented only a small amount of Prudential’s business. MyTerm sales through Wells Fargo amounted to about $4 million between 2014 and third quarter 2016, Prudential’s chief operating officer, Stephen Pelletier, said. Prudential says it sold a relatively small amount of term life insurance products through Wells Fargo’s retail banking outlets. Prudential suspended sales of MyTerm through Wells Fargo pending the insurer’s own investigation. Prudential is being sued in one instance by three former Wells Fargo e mp l o y e e s alleging a cover-up and in another instance by a class action plaintiff. The DID YOU




insurer said it wants to make sure Wells Fargo customers were not sold a term policy they didn’t ask for.


A Texas housekeeper’s family had taken out $5 million in coverage on her life prior to her murder. Now a federal judge has granted the FBI’s request to seize those proceeds from policies taken out by the family. Anita Fox, 72, of Hurst, was found stabbed to death in September 2014 in an upscale home in Colleyville. Authorities said two members of the transient group known as the Irish Travelers killed Fox to collect on her $1 million life insurance policy — which she didn’t know about. Fox’s children came under federal

Mike Brandriet, a nine-year veteran of Allianz Life, was named president of the company. Source: Allianz Life

InsuranceNewsNet Magazine » February 2017

Continued market volatility and low interest rates make whole life products attractive to consumers looking for protection and steady investment growth. — Ashley Durham, LIMRA

investigation for insurance fraud and a possible murder conspiracy. The FBI wants to seize $5 million from several life insurance policies taken out on Fox by her children.


Mobile devices continue to house more aspects of consumers’ lives. So it’s not surprising that life insurers should invest more effort to mobile initiatives. LIMRA research found that mobile initiatives among life insurers at least doubled in the past five years. Why the push to mobile? The top three reasons, LIMRA found, were keeping pace with competitors, keeping up with consumer demand and providing better service to policy owners. Mobile access for policy owners is advancing more slowly than is access for consumers and financial professionals, LIMRA found. However, given the likely increase in demand, most companies surveyed said they plan to expand their offerings to policy owners soon.


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Turn Threats Into Opportunities  hat a “lone wolf” life insurW ance producer can learn from the changing wealth management environment. By Tyler Horning


ven though I consider myself a life insurance purist, I must admit I am an avid reader of the investment advisory press. Over the years, I have been overwhelmed by the stories of immense change in the wealth management industry. More recently, the wealth management sector has experienced some seismic events: » Not one but two major financial crises. » New regulation. » Technology companies entering the business in the form of robo advisors. » An aging advisor force and business succession issues. » A major shift from commission compensation to a fee-only world. Wealth managers are experiencing an unprecedented pace and scope of change, which is accelerating rapidly. It seems that the life insurance business 30

now is poised for a similar period of disruption, growth and evolution. The question is not if change will take place, but when and how it will occur. We are seeing the early signs of this revolution across many facets of our business: » Electronic applications. » Exam-free underwriting. » Engagement with clients via social media. » Programs of healthy engagement tied to insurance policies. » An aging producer force. » The impact of lower interest rates on insurance companies. As an insurance producer, I can feel the impact of these changes and many more like them. These changes are similar to a snowball rolling down a hill while picking up size, speed and momentum. We are just getting started. So the question is, what can we learn from the wealth management business’s recent journey? I argue there are two major strategies wealth managers have implemented to help cope with these shifting circumstances: Create

InsuranceNewsNet Magazine » February 2017

an institutionalized team approach and embrace technology. Proactive producers should use the playbook pages of teams and technology to turn defense into offense in their business. Using this playbook will turn potential threats into opportunity. Let’s look at each of these topics individually.

[1] Create an Institutionalized Team Approach

Sustainable wealth management practices have been able to differentiate themselves by institutionalizing their relationships. Instead of seeking to draw a client or referral source to a practice because of an individual, the goal is for a client to fall in love with the practice’s process and team. We have seen this approach in action with numerous investment advisor partners of ours. The lead advisor, who has remained by the client’s side for years, is able to transition that relationship to the junior advisor seamlessly. The planning, the discovery and the institutional knowledge about each client is not lost, but instead transferred to the next generation within the organization.

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February 2017 » InsuranceNewsNet Magazine


LIFE TURN THREATS INTO OPPORTUNITIES Successful investment advisory practices are now teams of specialists brought together for the common goal of creating and implementing a client solution. This strategy gives clients great comfort and builds institutional value for the firm. In fact, this concept of a team and a succession plan for clients may no longer be a best practice for registered investment advisors — it might become a requirement. In June 2016, the Securities and Exchange Commission proposed a rule that would require RIA firms to have a written plan for succession in the event of a principal’s retirement or death. It is obvious the SEC views succession planning as a vital component of protecting clients. Why should your business be any different? What would it mean if this requirement were to come to your business? How have you planned for succession in your practice?

[2] Embrace Technology

Technology can be viewed in two ways — as something to be feared or as something that can help make us more effective and efficient. Generally, the wealth management business is embracing new technologies. Individual firms that embrace innovation to supplement their core skills and value proposition are thriving. Advisors who are not embracing technology are being marginalized and replaced. As an example, the process to open and fund an account once required an in-person meeting, five unique sets of paper forms and two weeks of processing time. Today this can be done online in five minutes or less. Clients can use their custodian’s website to complete all necessary self-service actions and get real-time account updates. In contrast, our clients find the process of procuring life insurance crazy. In a one-click world, the amount of paper and time that it takes to secure a policy doesn’t make sense. Imagine the impact technology giants such as Amazon and Google will have when they focus their attention on our industry. If you think this is unfathomable, stop kidding yourself. Recently, you might have caught a glimpse of headlines reading “Will Google and Amazon Offer One-Click Life Insurance?” and “What 32

Technology can be viewed in two ways — as something to be feared or as something that can help make us more effective and efficient. If Google or Amazon Sold Insurance?” How can anyone expect that tech companies like these won’t have a substantial impact on how consumers purchase our products? The results for those of us who sell life insurance would be equally dramatic. How have you embraced the newest life insurance technology available today? What percentage of your policies are completed using electronic applications and electronic delivery?

No More Lone Wolves

These developments in the wealth management space were at one time unthinkable to “stockbrokers.” Over the past 20 years, we have seen an industry of brokers shift into “wealth managers.” What I am saying may seem unthinkable today in our business of independent, eat-what-you-kill, lone-wolf “producers.” Nevertheless, change is coming whether we like it or not. Fully embracing these ideas can happen only when a firm has size and scale. Teams take time to build. Team members need career paths and opportunities to grow. Training relationship managers takes time and experience. Embracing new technologies takes specialists and resources. A firm needs bench strength. All of the moving pieces need to be managed and nurtured, but the results are well worth the effort. There are two ways to accomplish the goal of becoming an institutionalized, tech-savvy practice. The first is to build it, which takes time, resources and patience. For most producers, this is not something they have the interest or aptitude for, and it would take attention away from their business development activities. The alternative is to join it. Wealth management firms are building platforms

and practices designed to endure through and leverage these changes. Those lonewolf producers who haven’t been able to institutionalize their connection with clients can partner with those firms who have. Naysayers will tell you that the wealth management business is a completely different animal with an important advantage — recurring revenue. This is true. Nevertheless, the life insurance business does have recurring revenue. It just takes a different form. Referrals from clients and referral sources, as well as policy updates and term conversions, all exist within your current book of business. This playbook will help ensure that recurring revenue will end up in your pocket rather than in someone else’s. The producer who is able to focus on institutionalizing their practice — or partner with a practice that has institutionalized — will survive and thrive in this new world. Those who choose not to do so will take on water and ultimately sink. Our industry must and will adapt. The unprepared producer will experience declining income, declining firm value and a declining number of prospects. Producers will have two simple choices over the next five to 10 years — adapt or die. Tyler Horning is principal with TDC Life, Maumee, Ohio. Tyler may be contacted at tyler.horning@

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February 2017 » InsuranceNewsNet Magazine



Split-Dollar Meets SportsCenter Why a life insurance product became one of the most talkedabout topics in the national sports media, and how you can apply this lesson to clients in your marketplace. By David Szeremet


hen a story about life insurance is reported by media outlets such as ESPN, the financial services community sits up and takes notice. Add outspoken University of Michigan head football coach Jim Harbaugh to the equation, and you have the most talkedabout life insurance story in recent years. What’s it all about? Split-dollar. The concept of split-dollar is simple — two parties by agreement share in the rights and obligations of a life insurance

payments of $2 million. The death benefit is unknown, but based on Harbaugh’s age (52) and relative health, it is estimated to be as high as $75 million. Harbaugh owns the policy subject to a collateral assignment in favor of UM. So, in essence, UM is providing Harbaugh with an interest-free loan of the life insurance premiums. There are some tax considerations to this arrangement. Each year, Harbaugh must include imputed interest in his income. It is taxed like compensation. The amount is calculated by multiplying the cumulative premiums by the applicable federal interest rate (the short-term AFR). Harbaugh would be able to obtain extra cash through this arrangement if he wants or needs it. The agreement grants Harbaugh access to the policy’s cash value as long as the policy’s cash value

exercises the collateral assignment and receives its premiums back through the policy’s cash value. The assignment is then removed, and Harbaugh keeps the policy and any remaining cash value. This payback provision motivates Harbaugh to stay with UM. After the six-year period, the agreement may end and UM will be reimbursed for its premiums paid (from the policy’s cash value). However, the plan may be amended. For example, if the relationship is going well, the parties could extend the agreement beyond six years. This is one of the flexible aspects of split-dollar, and something that makes it attractive to employers. In the end, the only cost to UM is the opportunity cost on the premiums. Harbaugh’s cost is the annual income he must recognize for tax purposes, which

A split-dollar arrangement has advantages for both employers and employees. EMPLOYER ADVANTAGES


• The ability to provide a low-cost benefit to employees.

• The ability to obtain better life insurance coverage at less cost.

• The employer can take a tax deduction on the portion of the premiums paid for the employee’s benefit.

• The ability to protect their family.

• U pon the employee’s death, the employer will receive the total of all premiums paid on behalf of the employee. • The plan can be designed so that the employer retains complete flexibility – modifying or ending the arrangement as they choose. • Can be used as an employee incentive. policy. In this case, the two parties are the employer, the University of Michigan (UM), and the employee, Harbaugh. In essence, the policy premiums, cash value and death benefit are shared or “split” between UM and Harbaugh. Because UM is a public entity, the split-dollar agreement was released to the public. Here is a rundown of what the agreement provides. Beginning in 2016, UM was scheduled to make six annual life insurance premium 34

• If the employee is in a higher tax bracket, they may be able to reduce their income tax liability when their employer pays the premiums. •P  rovides estate liquidity.

Michigan head coach Jim Harbaugh has a split-dollar life insurance contract with the university.

exceeds certain thresholds. This makes the UM plan somewhat unique because a typical split-dollar plan does not grant the employee access to the cash value while the split-dollar plan is in place. If Harbaugh dies while the agreement is in force, UM receives its premiums through the death benefit split. Harbaugh’s beneficiary receives the remainder. But what if he is no longer at UM? If Harbaugh quits, is fired or leaves, UM

InsuranceNewsNet Magazine » February 2017

is typically a small amount compared with the premiums. There also may be income tax consequences later when Harbaugh accesses cash value from the policy, depending on the nature and extent of the policy withdrawal. The split-dollar plan has features that work in favor of both UM and Harbaugh. Harbaugh gets the life insurance protection he needs and the potential for cash value accumulation at an affordable cost, while UM has little or no risk in providing

the funds to pay the premiums. You may not have a major university or a Big Ten Conference football coach in your community, but you can use the same concept with business owners in your marketplace. Think of Harbaugh as the CEO of the football program. The split-dollar plan is one of his fringe benefits. Split-dollar is generally appropriate for executives, officers and managers. Split-dollar can be established for a single participant, such as in the Harbaugh case, or for a group or class of employees. In a typical plan, management and officerlevel employees may be offered the ability to participate. Virtually all of them will opt in. Split-dollar can fit in with nearly any type of entity, from publicly traded corporations to closely held limited liability corporations and S corporations to nonprofit entities. Split-dollar can be compared to a Section 162 executive bonus plan. Both types of plans are non-qualified. They do not have to be pre-approved by the IRS, and they generally fall outside the rules and restrictions of the Employee Retirement Income Security Act. In addition, with both plans, employers get to pick and choose who will participate. However, under a Section 162 executive bonus, the employerâ&#x20AC;&#x2122;s cost recovery is limited to the income tax deduction it may receive for its premiums paid. Under split-dollar, the employer can be reimbursed for all premiums paid, and potentially reimbursed for the interest on the premiums if the employer so desires. The Harbaugh split-dollar case should be a wakeup call for all life insurance advisors: Split-dollar is alive and well. If you are not familiar with the split-dollar concept, you may unwittingly be letting lucrative opportunities pass you by. Authorâ&#x20AC;&#x2122;s note: All is not perfect with the case. There are concerns in the underwriting community. They feel the risk of loss may be great because UMâ&#x20AC;&#x2122;s football team has been getting killed by Ohio State University in recent years. David Szeremet, JD, CLU, ChFC, is second vice president, advanced planning, at Ohio National Financial Services, Cincinnati. He may be contacted at david.



New York Targets Annuity Replacement Practices The New York Department of Financial Services (DFS) wants annuity carriers and advisors to perform an adequate suitability review when recommending an annuity sale or replacement. The DFS has issued guidance to remind life insurers, producers and distributors of their obligations under New York insurance law. Suitability review requires sellers to determine the appropriateness of the sale or replacement of any annuity contract when recommending such a transaction to a consumer. DFS officials said they have discovered that some insurers, producers and distributors have been recommending that consumers replace existing deferred annuities with immediate annuities. The consumers were encouraged to do so without consideration of lost benefits and without being shown a comparison between the income benefit available under the consumer’s existing annuity and the amount available under the proposed annuity. This violates New York insurance regulations.


Athene USA is a major player in the world of fixed annuities, and its parent company is fresh off an initial public offering. But that’s not enough for Athene. The carrier wants to broaden its horizons and expand retail annuity distribution through banks and broker/dealers, CEO Grant Kvalheim said. The company is a subsidiary of Athene Holding, which raised $1.1 billion in an initial public offering in December. Athene USA was Grant Kvalheim the No. 2 seller Athene CEO of indexed annuities in the U.S. in the third quarter, with $1.6 billion in sales. The company sells FIAs through independent marketing organizations (IMOs), and has relationships with as many as 30,000 independent agents through those IMOs. IMO distribution relationships will continue, but the company is looking DID YOU




to grow through other channels as well, Kvalheim said. “We want to grow in banks and broker-dealers because they are doing more and more of this business,” he added.


A holistic planning approach that focuses on developing retirement income for clients — that’s what the Insured Retirement Institute (IRI) predicts more advisors will adopt as they focus on developing retirement income for clients. The IRI released a report that finds strong demand for lifetime income based on demographics, increasing longevity and the demise of traditional pensions. The report concludes that holistic retirement planning with a focus on income-generating strategies will help advisors address this demand while adding value to the client-advisor relationship. The IRI also discussed the impact of rising interest rates. Although rates are still historically low, if they can continue to increase at a gradual pace, the report suggests the market may respond by offering higher crediting rates on fixed

The fixed annuity market sold a record-breaking $85.5 billion in the first three quarters of 2016. Source: Beacon Research

InsuranceNewsNet Magazine » February 2017

The There recent are 11rise companies in interest offering rates may be a positive QLAC (qualifying longevity annuity development for the industry contract) products. While this isas we move into 2017. a small and new part of the DIA market, we expect to see an uptick — Insured Retirement in sales in 2016. Institute president and CEO Cathy Weatherford

annuities and more generous payouts on both fixed and variable products offering lifetime income. Should rates normalize, it will take some time to have an effect, so rising rates should be viewed as having a late-2017 impact on product design and/or sales.


Here’s a flurry of product-related news: • Security Benefit launched Select Benefit Annuity, a fixed indexed annuity that offers contract holders the ability to accelerate the amount of income taken in the first 10 years. This single-premium FIA features a new, optional accelerated income rider that offers clients the ability to secure higher annual income for the first 10 years after starting income without jeopardizing their long-term financial security. • The Standard introduced Strategic Choice Annuity 7, a new singlepremium deferred index annuity with returns based upon the performance of the J.P. Morgan U.S. Sector Rotator 5 Index. Strategic Choice Annuity 7 combines the strength of an annuity contract with the ability to receive interest based on increases in an index with adjusting investment allocations. Strategic Choice Annuity 7 uses a pointto-point account with a seven-year index term. Unlike the typical indexed annuity, which credits interest annually but limits those credits by a cap, the Strategic Choice Annuity 7 has no cap and credits interest at the end of seven years.


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February 2017 » InsuranceNewsNet Magazine



The Shocking Do’s and Disastrous Don’ts of Rollovers and Exchanges M  istakes, whether they are simple or complex, can be costly. Here is how to avoid them. By Deborah A. Miner


nnuities may be categorized in many ways — immediate versus deferred, single versus flexible premium or fixed versus variable. Another way to classify annuities is by whether they are “qualified” or “nonqualified.” Qualified annuities are those held within a qualified retirement plan or an individual retirement account. All other annuities generally are considered nonqualified. This distinction is critical because the tax rules applicable to qualified and nonqualified annuities can and do vary.

Rollover Do’s and Don’ts

Trillions of dollars are held in retirement plans. Those dollars may move between plans, financial institutions and financial products tax-free — provided certain rules are followed. The term “rollover” often is used to describe any tax-free transfer of qualified funds — funds held within qualified plans, 403(b) plans, 457(b) plans and IRAs — from one retirement plan to another. This is inaccurate and can be misleading. A rollover occurs when the distribution check is made payable to the participant or IRA owner and then redeposited in the same or a different retirement plan. For purposes of this article, all other transfers between trustees of different plans will be referred to as “trustee-to-trustee transfers.” O Do use trustee-to-trustee transfers whenever possible. X Don’t do a rollover. Stricter rules apply to rollovers than to trustee-to-trustee transfers. Rollovers must be completed within 60 days, and an IRA owner is restricted to only one rollover from any IRA to another within any 12-month period. Plan administrators must withhold 20 38

percent from distributions of qualified funds (other than from IRAs) made payable to plan participants. Required minimum distributions (RMDs) are not eligible to be rolled over. Under the RMD regulations, any amount subject to an RMD that is distributed during a calendar year is first treated as an RMD. Example: Sam is 72. He withdraws $50,000 from his only IRA and plans on rolling it over to an IRA immediate annuity. The distribution check is made payable to Sam. If Sam has not yet taken his RMD for the calendar year, he can roll over only the portion in excess of his RMD. If he rolls over the entire amount, he will have made an excess contribution to the IRA in the amount of his RMD and he will be subject to the 6 percent excess contribution penalty. RMDs can be transferred in a trustee-to-trustee transfer, but Sam must still take his RMD for the transferor plan for the calendar year of the transfer.

O Do use a trustee-to-trustee transfer from a qualified plan to an IRA if the client is under age 59½ and would like to use the different exceptions to the early distribution penalty that are available only with an IRA. Examples of these exceptions would be for a first-time homebuyer or for higher-education expenses.

InsuranceNewsNet Magazine » February 2017

X Don’t do a trustee-to-trustee transfer if your client is retiring at age 55 or older and wants to use the “early retirement” exception available only for distributions from qualified plans and 403(b) plans. O Do use a trustee-to-trustee transfer to a single premium immediate annuity (SPIA) if your client is at least age 59½ and wants IRA income for two. A joint-and-survivor SPIA with a spouse who is the IRA owner’s sole beneficiary will satisfy the RMD rules. A joint-and-survivor annuity with a non-spouse beneficiary also will satisfy these rules if the amount of the payments to the non-spouse beneficiary after the IRA owner’s death is reduced in accordance with a specified percentage from a table in the Treasury regulations. Example: If the age difference between an IRA owner age 70 or older and a non-spouse beneficiary is 19 years, the IRS table requires payouts to the non-spouse beneficiary after the IRA owner’s death to not exceed 75 percent of the payouts made before the IRA owner’s death.

1035 Exchange Do’s and Don’ts O Do always remember that there is

no “rollover” option with a 1035 exchange of one nonqualified annuity for another. X Don’t ever let a check be made payable to the client in a 1035 exchange. This recently was reinforced in IRS Private Letter Ruling 201625001. A taxpayer

mistakenly signed a “lump sum payment” form instead of a 1035 exchange form. The lump-sum payment was deposited into the taxpayer’s checking account and subsequently was used to purchase a replacement annuity. The taxpayer requested forgiveness for the error, stating that the original annuity and the replacement annuity were exactly as they would have been had the error not occurred. The ruling held that the distribution was taxable in the year received. It noted that neither the Internal Revenue Code nor the regulations make any special provision for the purchase of an annuity contract with amounts distributed to the policyholder under another contract. In addition, the ruling said that because the annuity contract was a nonqualified contract, no rollover provision applied to the amount received. Simply endorsing the check to the second insurance company would not change the result. X Don’t consider exchanging a nonqualified deferred annuity for a SPIA if the client is under 59½ — unless one of the exceptions to the 10 percent early distribution penalty will apply. In most cases, the client cannot rely on the immediate annuity exception. With respect to a 1035 exchange, the new annuity’s date of purchase is considered to be the same as the date of purchase of the original deferred annuity; thus, the new immediate annuity does not count as an immediate annuity for purposes of applying the 72(q)(2)(I) immediate annuity exception to the 10 percent early distribution penalty. O Do work with the original insurance company to ensure it will report an exchange on Form 1099-R as a Section 1035 tax-free exchange. There are many valid reasons for moving qualified and nonqualified funds among different products. Remember, there is also a very important reason to make sure it is done correctly: the difference between having thousands of dollars currently taxable to your clients — or not. Deborah A. Miner, J.D., CLU, ChFC, is assistant vice president of advanced markets for W&S Financial Group Distributors. She may be contacted at

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IMOs Await Word on Reserving Conditions Under DOL Exemption M  arketing organizations say reserve requirements might be too high to conduct business.


By Cyril Tuohy

he Office of Management and Budget has until late March to review the Department of Labor’s exemption allowing insurance intermediaries, such as independent marketing organizations, to sell fixed indexed annuities with retirement funds under the conflict of interest rule. Any changes requested by OMB’s Office of Information and Regulatory Affairs to the DOL’s document must be made within the 90-day period, an OMB official said. The OMB review is the last step before the DOL receives the green light to publish the blueprint of the framework in the Federal Register. The rule was expected to require IMOs to meet certain conditions in order to 40

qualify as a financial institution. Issuing Rauch, general counsel and chief operata class exemption would raise the profile ing officer of Annexus, an annuity product of IMOs to one of a financial institution development company in Scottsdale, Ariz. on a par with regulated financial product Annexus and 19 other marketing ordistributors such as banks, broker/deal- ganizations have individual financial ers, registered investment advisors and institution applications pending before insurers for the purposes of the sale of fi- the DOL. nancial products and advice into and for When IMOs weren’t included as financial retirement accounts. institutions, some wondered aloud whether The status is critiselling fixed indexed annuities under the cal for IMOs because DOL’s new fiduciary rule was still viable. a financial institution is required to guarantee that the terms of the best interest As a fifth category, IMOs simply would contract exemption (BICE) are upheld. need to give notice that they intend to The exemption is required for fixed in- apply under the BICE, and then move dexed and variable annuities purchased ahead. It would be up to the DOL to auwith qualified retirement money. dit the IMO if regulators want to confirm “In the end, the idea is to have an IMO standards that may be necessary to qualor FMO that does the same thing as the ify under the terms of the fifth category, companies — banks, broker/dealers, reg- Rauch said. istered investment advisors and insurers Whether to grant financial institution — in the other four classes,” said David status individually to IMOs or as an entire

InsuranceNewsNet Magazine » February 2017

IMOS AWAIT WORD ON RESERVING CONDITIONS UNDER DOL EXEMPTION ANNUITY class had been on the regulators’ radar for months after the DOL announced in April 2016 that fixed indexed annuities, on which agents collect a commission, would have to be sold under the fiduciary rule’s BICE. The bulk of fixed indexed annuities are sold through independent agents and IMOs. When IMOs weren’t included as financial institutions, some wondered aloud whether selling fixed indexed annuities under the DOL’s new fiduciary rule was still viable. IMOs recruit independent insurance agents to sell fixed indexed annuities, a $60 billion segment of the fixed annuity

Setting the proper levels of capitalization requirements is considered a vital point for regulators that need to allow IMOs and the thousands of agents to continue to operate profitably in the market yet ensure that safeguards remain. Capitalization and reserving set too high could hamper an IMO’s ability to conduct business. But if the capitalization levels are set too low, IMOs representing agents may not have enough to pay a legal judgment levied against them, said the chief executive of a marketing organization that applied for financial institution status.

Dear Department of Labor, I hereby wish to express my interest in applying under the best interest contract exemption. Thank you!

- IM O

As a fifth financial institution category, IMOs simply would need to give notice that they intend to apply under the BICE, and then move ahead. It would be up to the DOL to audit the IMO if regulators want to confirm standards that may be necessary to qualify under the terms of the fifth category. market. In exchange for recruiting agents, IMOs provide sales, marketing and compliance help to agents.

Reserving Requirements

Investors look to FIAs to guarantee their investment principal while generating higher returns than they would receive in other products during an era when interest rates and the income generated by those savings remain at record lows. As a result, FIAs represent one of the best-selling annuity products in the market. But before setting the parameters for IMOs as an entire class, regulators are grappling with how IMOs meet capitalization and reserving requirements, Rauch said.

“If a financial institution is going to stand behind the recommendation of their advisors, they need to be capitalized well enough to withstand changing market conditions and be able to ensure longevity and stability for the customers they serve,” Mike Kalen, CEO of Futurity First Financial, told InsuranceNewsNet in October. Kalen said he was generally in favor of setting capital and financial strength requirements for IMOs, so long as the requirements are not too onerous. Futurity First Financial owns three IMOs. Federally regulated banks and state-regulated insurance companies are routinely audited to make sure claims reserves are set at appropriate amounts.

But IMOs, which aren’t similarly regulated, haven’t had to face the same capital requirements. So who is responsible for making sure IMOs are adequately capitalized? For the moment, that’s not quite clear. “I don’t see how the DOL could transfer this to state regulators — whether an IMO is qualified to, and acting as a financial institution, seems to be a DOL-only issue, to be overseen and regulated by DOL,” Rauch said. Many IMOs have listed per-occurrence errors and omissions, or E&O, limits of $5 million and aggregate E&O limits of $10 million, IMO application materials indicate. However, this isn’t nearly the same as setting capitalization requirements, which affects the balance sheet of a company. Regulators are expected to release the capitalization and reserving framework shortly. They are said to have all the information they need to develop a short list of bullet points — not pages and pages of fine print — for requirements necessary for the fifth and final class of “financial institution.” The 20 IMOs with applications before the DOL are Advisors Excel, Topeka, Kan.; Alpine Brokerage Services, Marlton, N.J.; AmeriLife Group, Clearwater, Fla.; Annexus, Scottsdale, Ariz.; Brokers International, Panora, Iowa; Clarity 2 Prosperity, Westlake, Ohio; ECA Marketing, Eden Prairie, Minn.; Futurity First Financial Corp., Hartford, Conn.; Financial Independence Group, Cornelius, N.C.; Gradient Insurance Brokerage, Topeka, Kan.; Ideal Producers Group, Overland Park, Kan.; InForce Solutions, Woodstock, Ga.; Insurance Advocates; Kapolei, Hawaii; InsurMark, Houston, Texas; Legacy Marketing Group, Petaluma, Calif.; M&O Financial, Southfield, Mich.; Saybrus Partners, Hartford, Conn.; The Annuity Source, Bellevue, Wash.; Kestler Financial Group, Leesburg, Va., and First Income Advisors, Eden Prairie, Minn. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.

February 2017 » InsuranceNewsNet Magazine



What Do Workers Want? Customized Benefits!

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To borrow from a popular fast-food chain’s slogan, workers want to “have it Disability Insurance 47% their way” when it comes to employee Source: Employee Benefits Face Off: Worker Positioning of Retirement Plans in a benefits. Benefits Wallet (2016), LIMRA Secure Retirement Institute A LIMRA study found 73 percent of employees across all age groups would like the ability to customize their workplace benefits to suit their individual needs. This strategy, often called a “benefits wallet,” offers flexibility to the employee, but it could also undermine some key features that have increased retirement savings within workplace retirement savings plans. A benefits wallet setup gives each employee a certain amount of money annually to allocate toward the benefits they want. Employees ranked health care coverage, retirement savings accounts and vacation as the three most popular workplace benefits.


Forget bedside manner or a degree from a prestigious medical school. Consumers choose a doctor on the basis of whether that doctor accepts the consumers’ insurance. A new HealthMine report said 63 percent of consumers say accepting their insurance trumps other criteria for selecting a doctor. Personal referrals, compatibility and use of technology are considered far less often. Fifty-six percent of respondents said that they search for a doctor by choosing from in-network doctors in their health plan. Only 28 percent search online for doctors with expertise that meets their needs, and just 20 percent ask a friend or relative for a recommendation. However, despite rising health care costs, many consumers haven’t made any changes to the way they manage their health even though 90 percent of consumers believe their health could be improved.






The health insurance world has been marked by a number of mergers and acquisitions in the past year. In the most recent deal, WellCare Health Plans will acquire Universal American, a publicly traded health care benefits company that specializes in Medicare Advantage plans. The all-cash deal has an equity value of about $600 million, both companies announced. The sale is expected to close in the second quarter of this year. WellCare will pay $10 per share of Universal common stock. WellCare said it expects to retire Universal American’s outstanding preferred shares shortly after closing.

California is the state with the most long-term care insurance policyholders – 600,000 individuals. Source: Northwestern Mutual Source: American Association for Long-Term Care InsuranceSource: Business Wire

InsuranceNewsNet Magazine » February 2017

QUOTABLE It could be that at least some of these [health] plans are turning a corner, and some may have hit bottom in 2015 in terms of financial performance. — Katherine Hempstead, Robert Wood Johnson Foundation


More than half of all spending on health care in the U.S. goes toward 20 conditions, according to a study. The Institute for Health Metrics and Evaluation at the University of Washington studied 155 conditions and found that diabetes was the most expensive, with a total of $101 billion spent on everything from diagnoses to treatment costs. In addition, spending on diabetes increased 36 times faster over an 18-year period than did spending on the second-most-expensive condition – heart disease. The study tracked personal health care spending over the period 1996-2013 and found that a total of $30.1 trillion was spent on health care in the United States during that time. Heart disease was the top cause of death for those 18 years. Back and neck pain were the third leading health care cost, according to the study. Aside from the top three conditions, hypertension and injuries from falls made up 18 percent of all personal health spending and totaled $437 billion in 2013. Other conditions among the top 20 included musculoskeletal disorders, such as tendinitis, carpal tunnel syndrome and rheumatoid arthritis.

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6 Steps to Increase Policy, Client Retention Rising premiums, combined with increased consumer advertising, have led to the commoditization of the insurance business. Here are some tips for keeping the advisor in the process. By Jeff Spain


olicy persistency and client retention are concerns for both the insurance carrier and the individual advisor. A carrier’s quality of business is of paramount importance, as not all business is good business. Pricing is based on morbidity/ mortality, administrative costs and lifetime commission expenses, with a percentage for carrier profit. When business falls off the books too fast and does not meet persistency needs, the impact is felt at all levels. Premature cancellation increases administrative costs, impacts lifetime commission expenses and could affect morbidity/ mortality calculations. It also creates debt management issues when advances on commission are used. For the advisor and agency, cancellations obviously affect debt management, income stream, cash flow, return on investment, administrative costs, lead costs and marketing costs. It is considered a sales industry standard that it is cheaper and more cost-effective to keep an existing client than to attract a new one. Furthermore, cancellations hurt not only the advisor’s income, but also the advisor’s mentality. The “why” of cancellations and the hard work that was put into the sale can reverberate to the next client, thereby affecting the next sales opportunity. With the inception of the Affordable Care Act, policy/client persistency has taken a huge step — backward. Rising premiums, combined with advertising urging consumers to “shop your insurance for the lowest price,” have commoditized the health insurance relationship. The value of the agent has been minimized, 44

yet has expanded given the overall complexity of the ACA. Given the cause and effects, how can we impact the sales process to enhance the conservation of our sales efforts? Working with varying distribution models across the country, we have identified six key best practice activities. When effectively executed, these tactics will enhance the quality of your business. Using just one or two of these practices will improve your business; executing all six of them will have an incremental effect.

[1] Pre-qualify your client

The best salespeople ask questions. These questions should be designed to explore your prospect’s socio-economic background. As an insurance professional, you may know, understand and empathize with the client. However, you cannot assume the same insurance package will fit each prospect. I have found that health insurance clients who qualify for high subsidies understand the value of supplemental insurance products, but they lack the financial means to fund these voluntary insurance products. Thus, you must sell to their budget. Effective questioning can determine that budget, get a prospect in agreement, and find the appropriate financial solution to fill the financial gaps created by the high-deductible, high-coinsurance ACA plans.

[2] Become a specialist

Yes, you sell health insurance; you know your products, carriers and processes. But it’s important that you project an image of specialization and professionalism to your client. Let the client know you specialize in this field. Let them know you are the expert. It “ain’t bragging”; it is a fact. Prospects respond to your experience level. They need and want to know what others

InsuranceNewsNet Magazine » February 2017

6 STEPS TO INCREASE POLICY, CLIENT RETENTION HEALTH/BENEFITS in their shoes are doing. They will buy “the most common package.” They will respond to “this is the most popular,” “this is what others are doing” or “this is what I just recommended to someone else”? Ben Feldman was a pioneer in the art of the package sale (read Ken Smith’s book Sales Lessons from the Masters). Create package sale option A or option B. Create the basic package or the premium package. Give clients options of good, better or best. Each sales professional, in preparation for open enrollment, should develop options A and B for the individual medical prospect, the couple and the family. People are accustomed to buying a car using a monthly dollar amount they can afford. Selling the health insurance package should be the same way. Selling to a client’s budget, with the option they have chosen, will increase policy retention.

renewal time or when a premium is late. Clients leave when they do not feel appreciated or when they feel neglected. Create a defined client communication plan that means you touch base at least once every quarter. Early on, it is easy to contact the client: “Did you receive your

[3] Tell a personal story

Stories sell. The value of a critical illness and accident policy is best sold by a story of how the policy works and the benefits to the insured. Keith Leech has a four-step question process for this. “Whom do you know who has suffered a heart attack, cancer or a stroke? Were they expecting the heart attack, cancer or stroke? Did they suffer financially or emotionally? Would cash have helped?” These same questions can be used for accident and hospital indemnity plans as well. Stories sell; your current client base is where to start.

[6] Become their agent for life

This means two things: Do not sell a product. Instead, sell your services, build a long-lasting relationship and be there for your clients as their agent for life. A great agent is passed down from parents to children. Sell them life insurance! LIMRA research keeps showing us how underserved middle-income America is, and that the majority of workers only have whatever life insurance they are offered through work (meaning their life insurance could replace only one year of income if they die). LIMRA research reveals one of the false impressions people have about life insurance is that it is too expensive. Offer them life, and solidify a longlasting relationship. Ralph Waldo Emerson said, “Shallow men believe in luck. Strong men believe in cause and effect.” Don’t leave your renewal income and client retention to luck. Have a plan to keep them both.

[4] Create a summation page

Create a simple, fill-in-the-blank template on which you outline the coverage purchased, the deductible/copay, the carrier, and the amounted debited from the client’s checking account or credit card. When package selling, it is important to differentiate each product purchased and focus the benefits of each policy toward the client’s financial solution. Some of our top agents, agencies and call centers use the summation template email. Have the client sign the summation sheet just as they did in signing the application. Make it part of the sales process.

[5] Communicate with your clients

To increase retention, your client shouldn’t hear from you only when it’s

Communicating with the client in the second and third quarters requires more creativity. I am a fan of contacting clients for special insurance events such as June 28, National Insurance Awareness Day, a day created to review insurance coverage. October is National Critical Illness Awareness Month. September is Life Insurance Awareness Month. June is National Safety Month and May is National Disability Insurance Awareness Month. The more you search, the more occasions for contacting clients you can find. I prefer to use those months when we can offer a product as a solution. This makes CI, accident, DI, and life pertinent and valuable. The fourth quarter is policy renewal time. It’s the time when successful agents have a plan to review and renew with each client. Life happens, and your clients experience life-changing events! You won’t know about them unless you ask. Work with your clients on a proactive basis before the competition can step in.

insurance cards?” “Did you receive your policy via email?” “Are there any questions or concerns?” “Remember, there will be two withdrawals from your checking account.” These are great emails or phone calls to make within the first 30 days of the sale.

Jeff Spain, CIC, AFIS, CWCA, is vice president, channel sales, of Chesapeake Life. Jeff may be contacted at

February 2017 » InsuranceNewsNet Magazine



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Americans Optimistic About Making More Money When Americans raised their glasses to toast the beginning of 2017, they looked forward to improved financial fortunes in the new year. Americans showed optimism regarding their personal finances for 2017, according to a survey by Allianz Life. Nearly one-third of those surveyed were optimistic that they will make more money in the near future. For many respondents, this positive financial outlook prompted them to want to get their financial house in order, either on their own or with the help of a financial professional. Nearly one in three of those surveyed (32 percent) said they would be more likely to seek advice from a financial professional in 2017. This was the highest percentage in the study’s history. Respondents also chose financial professional (25 percent) as the top professional they would access if they could do so for free. Respondents also fessed up to some bad financial habits in the past year. The most common one was “spending too much money on things I don’t need,” followed by “saving some, but not as much as I could” and “not saving any money.”


In a perfect world, everyone would grow old gracefully and be independent for as long as possible. Most senior citizens assume losing their ability to maintain their finances won’t happen to them, but the numbers aren’t in their favor, according to a Fidelity Investments study. Only 9 percent of adults aged 50 to 80 believed they would lose the ability to manage their day-to-day finances. But 60 percent said they witnessed it happen to someone they know, and 40 percent helped manage their own parents’ finances. Studies show that financial decisionmaking peaks around age 53 and gradually declines. A significant majority (60 percent) of the older adults surveyed worry about burdening their families with the task of managing the finances. But at some point, most older adults need help to manage their spending and bill paying. On average, children step in to assist when parents are 75 years old. DID YOU




INVESTORS DEMAND BOTH ROBO, HUMAN ADVICE High-tech? Or high-touch? Why not both? Today’s investors need both hightech and hightouch forms of advice to satisfy their increasingly complex financial needs, according to a study conducted by the Financial Planning Association and Investopedia. The survey showed that investors are happy with using robo advisors, but are more satisfied when using both a human advisor and an automated investing platform. Investors said they are highly satisfied with using robos — 73 percent of respondents indicated they are satisfied or very satisfied with their primary automated investing platform. Similarly, 75 percent of investors primarily working with a financial advisor are also satisfied or very satisfied.

In 2016, more than 3.3 million borrowers held $74.5 billion in parent PLUS loans used to pay for Source: Renaissance Capital their children’s education. Source: U.S. Department of Education

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.

InsuranceNewsNet Magazine » February 2017


RIAs and fee-based advisors are facing tremendous change, from the influx of new technologies to the DOL fiduciary ruling, but one priority remains constant: knowing what matters most to clients. — Mitchell Caplan, CEO of Jefferson National

Respondents were divided on what types of planning they would prefer to do with a financial advisor versus a robo. Nearly one-third of those surveyed said they would use a financial advisor for tax planning, and 39 percent would use either an advisor or a robo for investment planning.


There are two predominant types of investors: the Return Seeker and the Relationship Seeker. That’s among the latest findings from Jefferson National’s Advisor Authority Study. Return Seekers tend to be younger and wealthier, while Relationship Seekers are older and less affluent. In addition, the study identified three main types of advisors: the Tactical Manager, the Active Advisor and the Relationship Builder. Tactical Managers and Active Advisors target younger clients and have higher assets under management, while Relationship Builders target older clients and have less AUM. The study found strong alignment between certain investor types and certain advisor types. For example, the Return Seeker investors and the Tactical Manager advisors prioritize active investing and low-touch engagement. They tend to anticipate an increase in volatility, are likely to revise their strategy in response and are more confident in robo advisors. The Relationship Seeker investors and Relationship Builder advisors prefer passive investing and high-touch engagement. They tend to be more concerned about low returns on investment, are less likely to respond to volatility and are less confident in robo advisors.

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Client Interest in ESG Investing Is on the Rise Environmental, social and corporate governance (ESG) investing often has been discussed as the next big investing fad. • Juliette Fairley


dvisors who ignore the advent of ESG investing could miss out on some serious returns for their clients’ portfolios. At Schroders alone, ESG engagements have increased from less than 100 in 2008 to nearly 500 last year in 33 countries globally, according to Schroders data. “Client interest has increased and so has the demand for reporting on governance,” said Jessica Ground, global head of stewardship with Schroders. “Our chief executive, Peter Harrison, has identified this as one of the key strategic areas for Schroders and an area where, if we are doing this analysis, it can help us come to better investment decisions.” ESG investing has been discussed for many years as the next big investing fad. The idea involves measuring these three central factors to determine the sustainability and ethical impact of an investment in a company or business. 48

Following in Schroder’s footsteps, below are three things advisors need to know about ESG investing.

1) Expect More ESG Products in 2017

An increasing number of scoring, indexing and rating systems are emerging to support a growing ESG values and belief system. Current benchmarks and indexes include the Calvert U.S. Large Cap Core Responsible Index, the Dow Jones Sustainability U.S. Index, and several others. “As interest by investors rises, the supply of products will grow to meet the demand,” said Peter J. Creedon, CFP with Crystal Brook Advisors in New York. Just this year, both Morningstar and Schroders introduced new ways to rank and score ESG investments. “I primarily use Morningstar’s new integration with Sustainalytics to consider the overall ESG score of a mutual fund or ETF,” said Justin Arnold, founder of Wash-

InsuranceNewsNet Magazine » February 2017

Park Capital in Denver. While the Morningstar Sustainability Rating raises awareness of how well mutual funds and exchange-traded funds manage risk and opportunities in the areas of ESG, the Schroders Fundamental Risk Score weights the most prevalent risk factors in investment performance over the long term. “There are six or seven individual scores that analysts have to input, with ESG being explicitly one of them along with quality of the industry and quality of management,” said James Gautrey, CFA and portfolio manager with Schroders. “It then tallies an end score.” For example, Nestle has a fundamental risk score of 3.2, and European chemical company BASF has a fundamental risk score of 5.2.

2) ESG-Related Investments Offer Competitive Returns

The perception has been that investi ng a long ESG l i nes ca n cost a portfolio returns, but studies show


something different. Ten-year average annual performance ranged from 6.05 to 7.49 percent, compared to 7.31 and 7.35 percent for the S&P 500 and Russell 3000 indexes, according to TIAA Socially Responsible Investing Performance Analysis. “ESG strategies can enhance shareholder

cording to a “Fiduciary Duty in the 21st Century” report. “There is evidence that suggests ESG investing may be beneficial to long-term performance,” Arnold said. “As a result, it may be an advisor’s fiduciary responsibility to integrate sustainability into the investment process.”

Clients are demanding ESG investments that reflect their opinions. value,” said Jimmy Lee, certified fund specialist and CEO of the Las Vegas-based Wealth Consulting Group, which has some $900 million in assets under management. “It makes sense that corporate governance and doing the right thing can increase your bottom line.” Avoiding considering long-term investment value drivers, which include environmental, social and governance issues, is a failure of the fiduciary duty, ac-

3) Expect More Clients to Inquire About ESG

Whether or not an advisor incorporates ESG-related investments they should at least be aware of their potential impact and growing demand in the event of client inquiries, especially among millennials. Some 87 percent of millennials reported that they would stay with a financial advisor who is communicating with them about an ESG investment style,

according to a TIAA Global Asset Management survey of investors and advisors. “Clients are demanding ESG investments that reflect their opinions about climate change, eating healthier and organically, religious beliefs, fossil fuel alternatives, decent living wages, and supply chains that have sustainably sourced products,” Creedon said. Investors born in the 1980s and 1990s are among the most active investors in ESG trends, at 93 percent. That compares with 68 percent of Gen Xers and 51 percent of baby boomers who say that social or environmental impact is important when making investment decisions, according to the 2014 U.S. Trust Insights on Wealth and Worth survey. Juliette Fairley is a New York City-based business and finance journalist who has written four personal finance books and has reported for major news organizations. Juliette can be reached at

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February 2017 » InsuranceNewsNet Magazine



ETF Market Shows Little Sign of Slowing Down Investors crave exchange-traded funds for their flexibility, liquidity and convenience. • Cyril Tuohy


ouble-digit growth in assets held in exchange-traded funds (ETFs) over the past year indicates the ETF market shows little sign of slowing down. This growth is occurring as investors crave the funds for their flexibility, liquidity and convenience. Fueled by the passive investing boom, ETFs now make up a big subset of the indexing market — and its fastest-growing one at that. ETFs are here to stay, whether advisors like it or not. ETFs do have their place in an investment portfolio. This is especially true in a market notching all-time highs, as the market has recently in the wake of the Nov. 8 election, said Alexander G. Koury, an advisor in Scottsdale, Ariz.

require a minimum $3,000 investment. ETFs aren’t sold directly by mutual fund companies but are instead listed on an exchange, where they can be bought and sold through a brokerage account. Along with index mutual funds and indexed separate accounts, ETFs are a subset of the index investing products market segment, said Chip Roame, managing partner of Tiburon Strategic Advisors in Tiburon, Calif.

ETFs Notch 12.1 Percent Growth

Howard Erman, a financial planner in Seal Beach, California, calls ETFs a blessing and a curse. ETFs are inexpensive, which is important to a middle market investor. But

A Rainbow of Flavors

Investors are clamoring for more, not fewer, ETFs. That’s according to a survey of 175 financial advisors by Brown Brothers Harriman & Co., a New York-based company handling ETF custody, and, an ETF news and analysis website. Among the new flavors of ETFs the industry has come up with to manage volatility: international fixed income ETFs, commodity ETFs and even something called “smart beta.” Smart beta is a “catchall for any quantitative investment strategy that is mechanized into an index and sold through mutual funds, ETFs and separate accounts,” wrote Rick Ferri in a January 2014 article in Forbes. But smart beta isn’t as smart as it sounds. “In this mad ‘me too’ dash, there is now plenty of junk out there, especially of the so-called ‘smart beta’ variety,” said Kashif

There were more than 1,700 ETFs in the U.S. this year, more than double the 728 ETFs in 2008. But beware, he cautioned. Some ETFs pose significant risks to investors, and too many investors have no clue how ETFs work. “Most people believe you can ‘set it and forget it,’ but that can’t be further from the truth,” Koury said. Even the indexing industry’s elder statesman John Bogle, founder of indexing leader Vanguard Group, has expressed reservations about the growth of ETFs, which are geared to trading instead of buying and holding. What draws investors to ETFs like bees to honey? ETFs are diversified. They come in all shapes, sizes and asset classes. They are also liquid. Like individual stocks, they trade on exchanges during market hours. Most of all, they are convenient. The financial barrier to entry is much lower than for mutual funds, many of which 50

ETFs also are unmanaged and don’t offer protection in falling markets, which fade farther from view as the bull market approaches its eighth anniversary in March. As investors turn away from active management and toward passive management and indexing, ETFs are expected to grow, analysts said. In 2008, the year the financial crisis almost dragged the nation into depression, ETFs in the U.S. held an estimated $531 billion in assets, according to data from the Investment Company Institute. But by October, assets had grown to more than $2.3 trillion, an increase of 12.1 percent over the 12-month period ended October 2015. There were more than 1,700 ETFs in the U.S. this year, more than double the 728 ETFs in 2008 and 29 ETFs in 1998, Roame estimated.

InsuranceNewsNet Magazine » February 2017

A. Ahmed, president of American Private Wealth in Woburn, Mass. “The term itself is quite dumb.” For the moment, though, the money — if not the smart money — is on smart beta. The Brown survey found 97 percent of investors plan to maintain or add to their smart beta investment positions next year. Among survey respondents, 59 percent indicated they had purchased a smart beta ETF in the past year, a 10 percentage point jump from 2014. “Smart beta products are going to grow,” Roame said. “They will proliferate.” InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.


Why Investing in Europe Is Relevant to Advisors The historic Brexit vote left some wondering whether it’s time to abandon investing in overseas markets. • Juliette Fairley


ngland voted to exit the European Union in 2016, and other countries could follow suit, but advisors and fund managers suggest that now is not the time to abandon investing abroad entirely. “Some European companies will thrive despite the turmoil because they are better structured as global enterprises and are more attractively valued than their U.S. peers,” said John Fischer, a registered investment advisor and president from Andalusian Wealth Management. The concern among experts is the rise in power of extremists that could prompt other countries in the EU to start the process of withdrawal from the newly formed trading bloc as well. In 2017, Holland and Germany will hold parliamentary elections, while France will vote in a new president. “If the far right or the far left gets in power by winning a very large part of votes, then you can infer that there might be a vote on exiting the European Union in other countries a couple of years down the road,” said Martin Skanberg, manager of the Schroder European Fund. To avoid the volatility created by an uncertain political environment, Skanberg suggests sticking with European health care companies such as Roche and Novartis in Switzerland and Sanofi in France, as well as biotech and innovation companies.

“They are seeing a lot of pricing pressure because generic drugs are coming in,” said Skanberg. Although staying invested domestically in comparable companies such as Merck and Pfizer is tempting, adding international stocks to a U.S. portfolio can increase expected returns and decrease risk, according to Zack Shepard, vice president of Matson Money, which manages $6.6 billion in Scottsdale, Ariz.

Assuming stocks in the U.S. will continue to do well is an expectation that could falter, especially with a new president on the horizon, according to Daniel D. Joss, founder of Joss Financial Group in Williamsburg, Va. “Many are guessing at what the Trump administration will change, but no one knows for sure,” Joss said. “As a result, a global approach to equity investment is prudent.” That global approach to investing includes emerging markets. “If you’re a long-term investor, as long as

A global approach to equity investment is prudent. “International small-cap stocks are an asset class that investors should own due to their long history of consistent returns,” Shepard said. International small companies have returned more than 14 percent annualized since 1975, which includes during times of turmoil and uncertainty, according to the Dimensional International Small Company Index. “International equities combined with domestic investments provide for diversification and growth in a fund or portfolio over the long term,” said Kelly Luethje, CFP, with the Willow Planning Group in Boston.

you get high yields and the currencies are cheap, you’ll be fine, and it’s not just what’s going to happen in Italy, France or Holland — if the price of oil falls again, that will affect Colombia, Brazil and Russia,” said Matthew Michael, product director, emerging markets debt and commodities at Schroders in London. Juliette Fairley is a New York City-based business and finance journalist who has written four personal finance books and has reported for major news organizations. Juliette can be reached at juliette.fairley@

February 2017 » InsuranceNewsNet Magazine



How Behavior Modification Can Lift Clients Out of the DIPS W  ays to nudge clients along the path from creating a plan to implementing it. By Robert M. Barnes


ehavior modification is one of the most important tools we advisors can use to help our clients. After all, it’s not enough that we make a great plan for our clients — we must ensure the plan is implemented. In helping your clients, you often encounter what I call DIPS along the way. DIPS is an acronym I use that stands for Denial, Ignorance, Procrastination, and Stuck or Stubborn. It can be challenging 52

when you interact with clients to help them understand your viewpoint or suggested plans. When encountering an obstacle in the planning process, my first step is to determine whether my client fits any of the DIPS categories. Are they in denial? Are they unaware or ignorant of the issue? Are they procrastinating? Are they stuck or perhaps stubborn? How do we as advisors work with clients in each of these situations? DENIAL is either the action of declaring something to be untrue or the refusal of something requested or desired. One of

InsuranceNewsNet Magazine » February 2017

the good things about the life insurance industry is that we don’t often face denial. Most people accept and understand that they ultimately are going to die. Where they perhaps fool themselves is when they believe it is not going to happen soon. A client’s refusing to get coverage now is essentially procrastination. If we think about denial in a retirement planning situation, someone might believe they will die before they retire or perhaps early in their retirement, so they don’t believe they need to save a lot of money for retirement. It is important to handle this argument with sincerity, so it’s essential that you acclimate yourself

HOW BEHAVIOR MODIFICATION CAN LIFT CLIENTS OUT OF THE DIPS BUSINESS with the client’s thinking, perceptions and beliefs. Perhaps no one in their family has lived past age 70. However, we might consider it ignorance if their belief is that they will die before reaching age 70.

that they won’t move forward? Or do you consider terminating your relationship with the client? Perhaps the client wasn’t procrastinating; maybe they were stuck or being stubborn, or both. Stuck, the past tense of stick, is defined as “immovable, baffled, beaten or at one’s wit’s end.” Let’s say the client hasn’t been procrastinating over buying insurance, but instead they had “analysis paralysis.” The client didn’t know what was the right

prolonging their decision process through procrastination or even stuck — they are stubborn. For example, you may make a great argument as to why a client should implement your plan, but they refuse to budge. IGNORANCE is the lack of knowledge This might be when we let a client go or or information. Ignorance is the easiest when we decide to protect ourselves by of the DIPS for an advisor to overcome. documenting the client’s action, inaction It usually signals additional education is or difference of opinion. In other words, needed. A client may be ignorant about make a plan of action or recommendathe risks and challenges they tion, and get it in writing that face. It is our primary role to they understand your point DENIAL educate our clients and make but are not going to impleRefusal of somethem aware of things they may ment your advice. thing requested not have considered. After We often see this when it or desired. they are informed of their sitcomes to selling long-term uation, a client might rethink care insurance. We can deSTUBBORN their decision. scribe the potential need of IGNORANCE Determination For example, a client may having LTCi coverage, but cliLack of not to change end up agreeing they should ents aren’t going to budge, or knowledge or one’s attitude have life insurance because at least not right now. There is information. or position. they have been made to unno reason to argue with clients derstand they must have covonce you understand you have erage in place before they need a difference of opinion. You it. We must educate clients must accept it and move on. PROCRASTINATION about the fact that it takes At the end of the day, it can Delaying or money and good health to be difficult to deal with others, postponing something. acquire life insurance. In a rebecause humans are complex It is perhaps our tirement planning perspective, beings. I try to understand my biggest challenge. you must help clients underclients and their perspectives stand that although they might and beliefs as much as possithink they are going to die beble. I try to speak in plain Enfore reaching age 70, perhaps glish and without a lot of the they still should plan as if they might live thing to do so they did nothing because insurance jargon that can be confusing. longer. The reality is, education can turn they were afraid to make the wrong I try to have my clients implement the ignorance into knowledge but we need choice. best recommendation I have for their sitto make sure clients care. If clients have I once had a client who was stuck be- uation, but if they don’t care to act, for the knowledge, but they still don’t care or cause, like his father, he had this under- any of the DIPS reasons, I document that don’t care enough, we will find ourselves lying fear that if he were to buy life in- reason to the best of my ability and unbattling procrastination. surance, he would die soon afterward. He derstanding. had just built a big house, and he had two Using the DIPS acronym is essentially PROCRASTINATION is the action of de- young children. I kept trying to persuade a checklist for me to follow when faced laying or postponing something. It is per- him to protect his family because the with planning obstacles. By visiting each haps our biggest challenge with clients. risk was far too great not to. Of course, it DIPS category, I try to determine how to You may want to help clients implement took a while to find out he was stuck and help a client move forward and make the a plan, but find that they are not ready or not procrastinating. Stuck can be hard to appropriate financial decisions for their motivated to act on that plan. overcome and may be confused with be- situation. Ultimately, my goal is to leave To overcome procrastination, we ing stubborn. clients in a better position than how I must be proactive and persistent. But at found them. the same time, we must be careful not STUBBORN is having or showing dogged How do you deal with the DIPS? to cross the “pest” line. The act of being determination not to change one’s attipersistent often will have an end point. tude or position on something, especially Robert M. Barnes, CLU, ChFC, For example, you advise the client in in spite of good arguments or reasons to CWPP, is president of Integrated Insurance Consulting. each annual review that they need to do so. It also means “difficult to move, re- He specializes in business and start saving more for their retirement, move or cure”. estate planning. He may be but years go by and nothing changes. Do Let’s face it: Sometimes people aren’t contacted at robert.barnes@ you stop giving this advice and accept in denial, ignorant regarding the matter, February 2017 » InsuranceNewsNet Magazine



Agencies Reveal DOL Opportunity


he Department of Labor’s fiduciary rule inspired many protests against the damage the regulation will inflict on businesses. But some also pointed out opportunities presented by the rule. Although we have heard quite a bit about the potential damage, we haven’t heard much detail about the opportunities. So InsuranceNewsNet Publisher Paul Feldman and other INN staff members spoke with insurance marketers at the National Association of Life Brokerage Agencies annual meeting in November to find out more. The meeting was after the election, so the respondents knew the rule is likely to be challenged by the Trump administration. But they said that many of the changes are still likely to remain.

Lynne Rosenberg

Founder/Owner, Innovative Solutions Insurance Services, Los Angeles Our organization does not do a lot of annuities; however, we do work with a lot of financial professionals. My goal is to continue emphasizing the importance of insurance planning for not just their top customers but for all of them. And perhaps they’ll have more of a focus in listening to that story. I also think that the insurance companies in 2017 are moving quickly toward more of a drop-ticket, accelerated underwriting process. That will match very well with what advisors are used to with selling an annuity on a drop-ticket basis. Right now, the process of buying or selling life insurance is a miserably long and difficult one. So as we utilize technology and move toward more automated, bloodless, urineless, APS-less underwriting, the investment advisor will embrace this far more. And hopefully they’ll have another reason to start looking more at life insurance than they have in the past.

Dennis Martin

Vice President, Senior Business & Product Development Officer, One America Financial Partners For us, the biggest impact is in our retail system. It’s creating a more concrete view of what we want to offer and how we’re going to do that. We’re creating a robust product and service environment for our agents to meet the needs of their clients, but it’s not necessarily a wide-open 54

architecture approach. Companies, distributors and advisors alike will be more selective and move to a more limited, but still comprehensive, product shelf offering that will meet the best interests of their clients. When it comes to disclosure, some of those things are going to be uncomfortable for advisors when they first start. We have tried to focus on how to use that as an opportunity to explain and reveal the value you provide.

Dave Wickersham

President/CEO, The Leaders Group, Littleton, Colo. Nobody is looking at life insurance right now. A hundred percent of the effort is being spent on annuities, mutual funds and managed money. Between now and Jan. 1, we’re going to have to come up with the expectations of what the policies and procedures look like to sell life insurance. Financial advisors are going to have to do a financial plan for their customers, which they’ve not all done in the past. We know that 98 percent of the advisors in the wirehouses are licensed to sell insurance because they sell annuities. If somebody is licensed to sell life insurance and doing a financial plan that does not include life insurance, we believe there’s a high possibility that the firm can be sued in a class-action lawsuit. They don’t have to sell life insurance, but they have to provide that information if they’re doing a financial plan. The penetration of life insurance in the wirehouses has been at 2 percent at least

InsuranceNewsNet Magazine » February 2017

since I started the business in 1979. It’s still there now. I think this is going to give the industry the opportunity to get penetration that could be as much as 10 to 15 percent. That would be a good deal for the industry. It’s also a good deal for consumers because, as we all know, we’re more uninsured than we’ve ever been.

Mark Williams

President/CEO, Brokers International, Des Moines If we become a financial institution, this is what’s going to change for the agent — more documentation first and foremost. They have to justify the sale and justify the product. They’re used to doing some of that but not used to doing all of that and definitely not putting it on paper. So they have to do much more documentation than they’re doing today. We will probably as a financial institution require them to have a contract with us that allows us the oversight and says that they’ll do this due diligence in return for our signing the best-interest contract. They’ll literally have to choose one FMO to do business with as a financial institution. Many insurance-only agents right now have their appointments with several different FMOs. They might be with one FMO for one carrier and one FMO for another carrier. You have to choose one, because you won’t be able to be with two financial institutions. An insurance-only agent isn’t used to an audit, meaning having someone come out to their office and look through their files. That’s going to be different because most likely we’re going to require an audit. Any financial institution is going to require one either every year or every two years or every three years, much like a broker/dealer.

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Diversity in Financial Services: The Time Is Now T  he financial services industry can take a lesson from two organizations that have made concerted efforts around diversity and are working to create a leadership pipeline for women and minorities. By Jocelyn Wright


have attended a number of conferences over the past year that were focused on creating a more diverse and inclusive environment for women within the financial services profession. But as I reflect on these conferences, I have to ask myself an important question: At the rate we are progressing, will the industry ever achieve parity for women in my lifetime? The audiences at these events were 99 percent female, I noticed. I have long contended, if our industry is to realize any significant change in the representation of women, that change must be driven from the top down. The leaders in charge of enacting policy, who happen to be male, must act as our allies in creating substantive change. Our industry can take a lesson from two organizations that have made concerted efforts around diversity and are working to create a leadership pipeline for women and minorities. The 30% Club originally was created in the United Kingdom in 2010 by executive leadership (chair and CEO members) of FTSE 100 companies. Their goal was to increase the number of female directors on their boards to a minimum of 30 percent by 2020. The 30% Club in the United States subsequently was launched in mid-2014 with a similar goal for increasing gender diversity on S&P 100 boards. At last count, the percentage of women directors in the U.S. had increased from 20.2 percent to 23.3 percent. At this pace, the 30% Club in the United States will be very close to achieving its goal by 2020. 56

Research shows that 30 percent is a significant benchmark in that it represents the inflection point where critical mass is reached. When a minority group reaches the 30 percent level, it is believed that the strength of their collective voice is heard, and they are no longer perceived as representing the minority. Another organization driving change is the National Football League, which established the Rooney Rule in 2003 to create opportunities for minorities in professional football. The rule requires teams to interview at least one minority candidate for each open head coach, general manager and front office position. Earlier this year, the rule was expanded further to include women as potential candidates for executive openings in the commissionerâ&#x20AC;&#x2122;s office. Although these efforts are in no way perfect, they do demonstrate an effort on the part of these organizations to create change. Research has shown a link between a companyâ&#x20AC;&#x2122;s performance and increased female representation. By having a diverse group of employees and leaders at the table, you eliminate the possibility

InsuranceNewsNet Magazine Âť February 2017

of groupthink and create a more open environment for the exchange of ideas. I would like to challenge our industry leadership to put their money where their mouths are if they are truly serious about diversity and inclusion, and not simply giving it lip service. Imagine the progress our profession would make if the executives and leaders of the major companies came together around a common goal. It would be good not only for the industry but, more important, for the clients we serve. There is little doubt that, if given access and opportunity, qualified minority and female candidates will thrive. Their companies and our industry will be all the better for it. The time is now. We can no longer sit by idly and wait for real change to occur.

There is little doubt that, if given access and opportunity, qualified minority and female candidates will thrive.

Jocelyn Wright is director of The American College State Farm Center for Women and Financial Services. Jocelyn may be contacted at jocelyn.wright@


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.

A Goal Not Written Down Is Merely a Wish S  uggestions that will lead you to a massively successful year. By J. Leland “Lee” Davis


e’re still early enough into 2017 to fine-tune your plan for a successful year. The year will bring many great opportunities for you to succeed beyond your wildest dreams. By adhering to a few simple do’s and don’ts, you can achieve personal success this year.

Do’s Set goals. Embrace the Million Dollar Round Table’s Whole Person concept. Set spiritual, family, business, financial and health goals. Be specific about those goals, and make them measurable. Set both regular and “stretch” goals. Your regular goals should be what you plan to attain with consistent effort. Set a stretch goal that is about 10 percent to 20 percent higher in each category. That way, when you achieve your objectives early, you can really hit it out of the park. Write down your goals (as well as just about everything else that’s important to you). Leave your brilliant mind free to focus on achieving, not on having to remember things. A goal not written down is merely a wish. Announce your goals to your closest friends and family. Engage them in supporting you, and ask them for what you need. Hold yourself accountable. Better yet, have someone else hold you accountable. Monitor your results daily, weekly and monthly. Track your progress, and make adjustments. Engage with mentors. Find individuals who are proven successes in each

Don’ts Don’t take shortcuts. Do what’s required honestly and with integrity. Don’t go it alone. Assemble a team and delegate to that team.

area you want to master. Ask for their help and for their agreement to meet with you periodically (meeting virtually is fine). Do what they do. Embrace their suggestions.

Don’t lose faith. There’s a 100 percent certainty you will experience challenges in life. The greater the goal, the greater those challenges will be. Embrace them and work through them.

Commit to engaging with more people. This means performing the requisite number of phone calls, contacts, meetings, closes and new transactions.

Don’t rush. Stay purposeful, and don’t miss an opportunity because you’re in a hurry.

Manage your time rigorously. High achievers have exactly the same amount of time you do. Achieving results comes from focusing on high-value activities — and delegating everything else. Stay positive. Optimists tend to be correct over the long haul, while pessimists usually are wrong. Be a beacon of optimism to others around you. Practice the law of attraction, knowing you’ll get more of what you focus on the most. Think of yourself as a magnet for the right people and opportunities at all times. Be generous. Serve your community and profession. Take on a needed position. Better yet, take on a leadership role. Be an example to others in everything you do. Realize that people are watching. It matters how you act and what you do in your daily life. Strive to show your best self at all times. Be charitable. Commit to giving a meaningful part of your income away to causes you care about. You can’t outgive the universe. Stay patient. Everything you need to achieve your objectives is within your grasp.

Don’t take no for an answer. Be sure your actions, ideas, and recommendations are founded on logic and on what’s right. Be passionate about them, and others will come around. Don’t lose focus. There will be times when your commitment will waiver or you simply will not be as strong. At such times, change your “state” by walking around, exercising or going outside for a while. Don’t argue for your limitations. Get the words “can’t” and “try” out of your vocabulary. You can do anything you set your mind to. Don’t worry — especially about things you can’t control. Do not concern yourself about things you can’t impact personally. Don’t give up. No matter how late it is in the race, run hard through the finish line. You’ll be amazed at what happens during those last few yards. May 2017 be your best year ever! J. Leland “Lee” Davis is a managing director and financial advisor at JL Davis Financial, an advisory practice of Ameriprise located in Denver, Colo. He may be contacted at

February 2017 » InsuranceNewsNet Magazine



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

Why Gen Y Should Care About Privatizing Income Protection Individual disability plans are portable and put the insured in control of their recovery. These factors make individual DI an ideal product for the millennial lifestyle. By John F. Nichols


f there is anything that we’ve learned about the millennials, it’s that they do not play by the old rules. Millennials have different priorities for what they want out of their work and their lives. They want to believe in a cause and make a tangible difference. They believe money is important, but they believe having an impact is just as important, if not more so. Millennials have grown up in a time when the old models of working for the same company from graduation to retirement don’t hold up anymore. Instead, millennials are known for frequent job changes, thinking of their work as fundamentally temporary. Millennials are also more entrepreneurial than any other generation in the current workforce. The problem is that employer group income protection insurance plans are especially ill-fitting for this lifestyle. What happens to their group insurance plans when they decide to join another company, or if they quit in order to work for themselves?

Individual vs. Group Disability Insurance

Individual disability insurance plans have two great features that make them ideal for millennials: They are portable, and they provide comprehensive 24/7 coverage. Insureds own their policy and they can take it wherever they go. It is not beholden to any particular employer, any particular doctor or even any particular treatment. Individual plans put the insured in control. As a recovering quadriplegic, when I decided to start rehabilitation after my 58

Can your clients really say that over the course of 40 or 50 years, their bodies will never suffer some sort of accident or illness?

accident, I looked into the rehabilitation provision on my medical insurance plan. The plan had a maximum benefit payment cap of $10,000 with a 50 percent copay, and I qualified for one 50-minute outpatient session a week. There was absolutely no way that level of medical care would be enough. Luckily, my individual disability insurance benefits provided me some much-needed choice and control. Instead of mandating a certain amount and duration of physical therapy, my disability insurance plan paid me cash that I could use at my own discretion. I hired both an occupational therapist and a physical therapist. They came to my house for two hours a day, five days a week, for more than a year. That was the level of care I needed to give myself the best chance to maximize my recovery. I never would have received this type of care without my individual disability insurance benefits.

InsuranceNewsNet Magazine » February 2017

Who Needs Long-Term Care Insurance?

I cannot put enough emphasis on the importance of intensive, long-term rehabilitative care. It was the difference between surviving and living. I had a neighbor with an injury similar to mine. However, unlike me, he was never able to obtain the rehabilitation he needed and instead spent 20 years in bed being cared for by his family. He admitted to me that every day he prayed that he wouldn’t wake up the next morning. He was tired of suffering and seeing his loved ones suffer as they cared for his every need. If your clients do not protect their ability to do the things that they love, what do they have left? Too often, younger people fall into a pattern of thinking of themselves and their bodies as invincible. We expect our cars will wear out. We expect our homes might be flooded or catch fire. We understand objects that are important




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to us need to be protected, but for some reason, that understanding rarely extends to our bodies. Many Americans are planning to work into their late 60s or early 70s. Can your clients really say that over the course of 40 or 50 years, their bodies will never suffer some sort of accident or illness?

Protect Clients’ Most Valuable Asset, Their Ability to Work

Twenty-one percent of young adults reported on a LearnVest survey that they don’t have disability insurance because their jobs aren’t physical. Nevertheless, skills and talents are about more than just our physical bodies. Even if your clients have white-collar jobs with no physical requirements, they need to protect against the loss of energy and mental acuity that so often comes from an accident or illness. And if their human capital isn’t valuable enough, what about their dignity and independence?

Improve Future Financial Stability

It’s undeniably true that young people carry more debt than older generations, and it’s understandable for them to feel cash-strapped. But the simple fact is that there is always a way to get what you need and there is always an excuse not to do something. Disability insurance is not a “nice to have,” it’s a must-have! Disability insurance offers a steady and consistent stream of income if your clients are unable to work due to a sickness or accident. Disability insurance protects their ability to have and maintain their lifestyles, their relationships, their material possessions and their financial well-being. In addition, it preserves their self-reliance, choice, control, recovery and their dreams for the future. John F. Nichols, MSM, CLU, is a nationally recognized disability benefits consultant with Disability Resource Group. As a life and qualifying MDRT member, John has two Court of the Table and nine Top of the Table qualifications. John may be contacted at


Pg 43




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February 2017 » InsuranceNewsNet Magazine


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


Turning Up the Volume on Life Insurance Ownership S  ome encouraging statistics on life insurance ownership by American households. By James T. Scanlon


IMRA data suggest more than 87 million American households own some form of life insurance, and that number is on the rise. The volume of households owning life insurance has increased by 5 million in the past six years. Volume will continue to grow. The total number of U.S. households grows by almost 1.5 million each year. If life insurance ownership rates remain stable, then ownership volume will continue to grow by about 1 million households per year. Market penetration is stable. The study data reveal that 70 percent of households own life insurance. This level of market penetration is equal to what was recorded in 2010. The stability in market share is encouraging news, because market share had been declining gradually for the previous 50 years. Between 1960 and 2010, the ownership rate for life insurance fell from 83 percent of U.S. households to 70 percent. Much of this loss in market share is recent. Between 2004 and 2010 there was an eightpoint drop in market penetration.

But Millions Need More Coverage

Will market penetration start to decline again? Jolts to the economy can have a significant impact on the life insurance industry. The Great Recession of 2007-2009 caused a substantial contraction in life insurance ownership rates. Consequently, analysis of the 2016 data indicates more than 60 million households now need more life insurance coverage. With so many households underinsured, it’s unlikely that ownership rates will drop over the next few years. Instead, it’s possible that market penetration for life insurance will grow and that growth 60

in life insurance volume will accelerate. What is the sales potential in the underinsured market? Among underinsured households, the average coverage gap is $200,000. With 60 million underinsured households in the market, it suggests the sales potential of the underinsured market is currently $12 trillion. Here are the best opportunities for the industry in the underinsured market: » Current life insurance owners. Half of the underinsured market consists of households that already own life insurance. The average coverage gap among these households is about $225,000, which equals a market opportunity of $7 trillion. This segment includes 9 million households that own group life only, that tend to have larger coverage gaps and that should be encouraged to buy coverage that complements their basic group policy. » Higher-income households. About one in three underinsured households earns $100,000 or more per year. The average coverage gap in these households is almost $400,000, which equals a market opportunity of $6 trillion. » Couples ages 45 and over. Couples ages 45 and over with no children represent one in five underinsured households. With an average need of almost $270,000 per household, they have a sales potential of $3 trillion.

InsuranceNewsNet Magazine » February 2017

COVERAGE GAPS STILL EXIST 48% of households (60 million) have a life insurance need gap of $200,000 on average. The LIMRA data on life insurance ownership are very encouraging. The data surrounding the growth in ownership volume should be trumpeted across the industry to encourage everyone in the business. Here are some ways the industry can take advantage of this trend: » Make sure marketing and distribution partners know they are part of a growing industry. This will help build momentum in business and consumer markets. Place more emphasis on trends in ownership volume than on trends in market penetration. » Get consumers thinking about their life insurance coverage adequacy by using simple facts, e.g., half of all U.S. households are underinsured and the average coverage gap is about $200,000. » Motivate consumers by asking them whether they want to be among the group that does not adequately protect their families. Do they know which group they are currently in? The market need is there. The sales opportunities are there. There is positive momentum, and there is continued growth ahead. James T. Scanlon, M.S., HIA, is senior research director, insurance research-markets, with LIMRA. He may be contacted at james.

Source: LIMRA

VERY GOOD NEWS The market grew by almost 5 million house holds. That’s an increase of 6 percent in just six years. More than 87 million households own some form of life insurance.



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InsuranceNewsNet Magazine - February 2017  

The Evolution of Rollover Advising

InsuranceNewsNet Magazine - February 2017  

The Evolution of Rollover Advising