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20 Health Agents Betting on Benefits By Susan Rupe

Health agents and brokers are assuming a greater role in the employee benefits world, and that role is expected to increase in the future. 18 2017 New Product Showcase Special Section


The most cutting-edge insurance products that the industry has to offer.


8D  OL Fiduciary Rule Defies Industry, GOP Attempts to Kill It By John Hilton A rundown on the three primary options to sink the fiduciary rule.


30 Beyond Price: How Honesty Will Help Win Every IUL Sale By Ron Sussman and Richard Weber 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.


44 B  etter Benefits Communication Means Greater Engagement By Kyle Addy The importance of keeping in touch with benefits managers and employees after enrollment season is over.

50 Liquid Alternatives: The Ingredient for Portfolio Diversification By Thomas J. Quinn Liquid alternatives can provide a highly effective solution to manage risk with greater upside potential.


38 H  ow Annuities Unleash the Power of Delaying Social Security


12 Productivity Hacks

An interview with Chris Bailey How do some people manage to accomplish so much more than others? Chris Bailey spent a year researching what it means to be a productive person and published his findings in the book The Productivity Project. In this interview with InsuranceNewsNet Publisher Paul Feldman, Chris gives his secrets for cutting through the clutter and making the most out of every hour of the day.


InsuranceNewsNet Magazine » March 2017

By Manish Malhotra Social Security claim deferral strongly increases the case for an annuity purchase, and a deferral-with-purchase approach dramatically improves the client’s situation.

40 A  meriLife CEO: IMOs Entering an Age of Consolidation By Cyril Tuohy The independent marketing organization channel generates billions of dollar in annuity premium each year. Here is one CEO’s insights on the changes facing this distribution channel.

52 Elder Financial Abuse: Losing More Than Money By Katie Libbe Elder financial abuse is a complex, multilayered problem and one where many people could benefit from the wisdom of professional assistance.


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54 Get More Callbacks: 10 Insurance Prospecting Email Tips That Work By Justin Brown Prospects are drowning in emails. Here is how your messages can get prospects’ attention and prompt them to take action.



58 MDRT: Three Key Trends Influencing Retirement Planning in 2017

56 THE AMERICAN COLLEGE: Virtues Are as Important as Values

By Curtis Cloke Retirees are looking for risk-averse solutions more than ever as we embark on a new year.

By Julie A. Ragatz During Ethics Awareness Month, we should challenge ourselves to think about our values and how they connect us with our communities.

57 NAIFA: Building a Successful Practice: It All Starts With You By John F. Nichols Success is a series of celebrating daily victories.

60 L IMRA: Put It in Writing: Building Trust Between Client and Advisor By Allison F. Salka Research shows formal written retirement plans have a substantial impact on retirement planning behavior.

EVERY ISSUE 6 Editor’s Letter 16 NewsWires

28 LifeWires 36 AnnuityWires

42 Health/Benefits Wires 46 AdvisorNews Wires

59 Advertiser Index 59 Marketplace


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 Bobby Mack 

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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After the Ghost Goes


don’t know whether it’s a little late or absurdly early to speak of A Christmas Carol, but I’m reminded about the story’s lesson throughout the year. The tale is often called a redemption story, but it’s more visceral than simply seeing the error of your ways. It’s the snapping awake from the nightmare to see that we’ve been spared a disastrous fate and given a chance to change our story. It’s the liberating relief of the phrase, “It’s not too late.” Of course, we don’t need a ghost to lead us through the steps down to a miserable end in the future. We can time travel by looking back. We can look at what we have done with our previous chances. We’ve all been there, promising to live the straight and narrow if we can just get out of this one. But once we’re saved, we go on our merry way. The promise could be to stay in better contact with a parent who survived a health scare. Perhaps it’s the close call at work where everything was on the line. What have we done with those second chances in the past? Many agents and marketing organizations felt that release recently when the Department of Labor filed an order to delay its fiduciary rule application. Now April 10 will be just another day rather than the date when insurance-only annuity agents were exiled from the retirement market. Was it as dramatic as that? Absolutely. The DOL targeted annuity sellers in its rule and deliberately banished the insurance sales channel. Under the rules, only financial institutions could sign off on annuity sales with retirement funds, and the DOL did not list independent marketing organizations (IMOs) or insurance agents as financial institutions. Then the DOL entertained applications for individual IMOs to become financial institutions under the rule, while hinting that the department might issue an exemption for all IMOs. After 21 IMOs applied for the status and months of deliberation, the department did issue a class exemption, but the IMO had to show it had $1.5 billion in fixed annuity premium 6

InsuranceNewsNet Magazine » March 2017

annually for each of the preceding three years. It also had to put up 1 percent in annual sales as its reserve. So, out of about 350 IMOs nationally, only a handful would qualify. After months of the industry expecting the class status, the DOL issued a nearly meaningless standard only a few months before the rule went into effect. Three court cases to stay or kill the rule also came to dead ends. The Trump administration signaled a desire to kill the rule, but had to start with a delay. Instead of an order to postpone, the president signed a memo instructing the DOL to look into the rule. Finally, the department submitted a delay rule to the Office of Management and Budget for review before its issue. Agents and their IMOs have been through a long, fitful night wondering whether they would lose most or all of their business at the end of it. Add to that the steady stream of insults they’ve received from the fee-only industry and in the financial press. Some even call it the “anti-cheating” rule.

Certainly Sen. Elizabeth Warren, D-Mass., has made IMOs her punching bag on this issue. She produced a report called “Villas, Castles, and Vacations: Protections From Financial Adviser Kickbacks, High Fees & Commissions Are at Risk.” In it, she describes the “lavish” trips that agents and advisors can win from IMOs. She doesn’t mention that many financial firms also offer trips. In fact, Transamerica, one of the companies she cited in a press release as a company that wants to keep the fiduciary rule, also offers trips to some of the same locales. That is not to say that the DOL rule doesn’t have some good intent, but it’s been wielded like a blunt instrument against an entire industry. A majority of agents care about their clients and want to do the right thing by them. Castigating all of them as cheaters doesn’t help sell this program. People do not oppose this rule because they want to cheat clients. All of this has been a roar of noise for agents and advisors needing clarity. So, news of the delay will at least dial it back from 11. This is the moment in the middle of the night when the ghost of fiduciary future has brought agents back safely to the present. The fiduciary push has eased for the moment. Many advisors and IMOs who thought they would go out of business have a new lease. But the trend toward holistic advising is unmistakable. More consumers will be turning to advisors for help with their retirement dollars. Annuities are the only products that can ensure retirees will have a revenue stream for the rest of their lives. But advisors can’t be looking at their clients purely as revenue streams for their business. The night terrors have cleared, and it is the bright light of morning. What will we do with this new day? Steven A. Morelli Editor-In-Chief

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DOL Fiduciary Rule Defies Industry, GOP Attempts to Kill It  onald J. Trump is learning how D hard it is to kill a regulation. By John Hilton


hat was once a promising panacea of pause and repeal options each turned as cold as the wintry weather that greeted 2017. And the election of a regulation rival did little to stall the Department of Labor rule momentum. So what happened? A combination of bad timing, bad luck and unfriendly court decisions. But Trump remains at the start of a four-year term, and that means hope is not completely extinguished. Let’s review the three primary options to sink the fiduciary rule that we discussed immediately following the election.


InsuranceNewsNet Magazine » March 2017

[1] Delay and Retool

This is emerging as the prime route for the Trump administration to correct what the industry sees as “unworkable” about the rule. A delay requested by the DOL filed in mid-February is the first step. Trump ordered the secretary of labor to examine the fiduciary rule and begin a process of rescinding or revising it only if the DOL finds that the rule has any of three effects: » Has harmed or is likely to harm investors due to a reduction of access to certain retirement savings products, accounts or information. » Has “resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees.”

» “Is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.” Once public notice and comment periods end, the DOL is expected to enforce a six-month delay of the rule applicability date. As it stands, the rule is slated to begin taking effect April 10. “Presumably, OMB is going to be urged on by the White House to not tarry,” said Bruce Ashton, a lawyer with Drinker Biddle & Reath. “I would expect by midMarch, or maybe late March, there would be this amendment in effect that extends the applicability.” As written, the fiduciary rule requirements for disclosures, contracts and record keeping will be enforced on Jan. 1, 2018. A delay changes everything. Most importantly, it gives the DOL

DOL FIDUCIARY RULE DEFIES INDUSTRY, GOP ATTEMPTS TO KILL IT the necessary time to amend the rule. While it isn’t the ideal scenario opponents were hoping for, circumstances have changed what is realistically attainable, Ashton said. “My reading of the tea leaves is that we’re likely to see an amendment of the regulation and the exemptions, as opposed to revocation, because so many entities are down the road to compliance,” he explained. “My suspicion is we’ll see a regulation in place but perhaps substantially modified with some additional exceptions and perhaps a cutback of what actually constitutes investment advice.”

[2] Lawsuits

Simply put, this strategy has not worked. In fact, the bevy of federal lawsuits may have hurt more than helped opponents. To recap, the National Association for Fixed Annuities sued the DOL in a Washington, D.C., court and lost. NAFA lost again on appeal. Market Synergy Group, an insurance marketing organization, filed suit in a Kansas court and lost. The company is appealing. Several trade associations sued in a Northern District of Texas court, and those suits were consolidated. A Dallas judge upheld the DOL rule in a decision last month. “I suspect it effectively ends the court route,” Ashton said of the Feb. 8 Dallas decision. The problem for opponents is the lawsuits argue many of the same claims based on the same court precedents. So, multiple judges have ruled, for example,

that the DOL did not act in an “arbitrary and capricious” manner in promulgating the rule, and that the agency does have the authority to further regulate advisors under ERISA statutes. That creates a legal problem going forward, said Erin Sweeney, a Washington, D.C., lawyer with Miller & Chevalier. “There are two district court decisions on summary judgment concluding that the new regulation is more consistent with the statute than the previous regulation,” concluded Sweeney, who previously served as senior benefit law specialist for the Office of Regulations and Interpretations at the U.S. Department of Labor. “In addition, Judge Lynn's opinion squarely addresses two of the three items that the White House directed the DOL to reconsider, and she concludes that the DOL upheld its burden,” Sweeney added. The two items are whether the rule would limit retirees’ access to retirement savings products and whether the rule would create unreasonable costs for consumers.

[3] Legislation

Since the DOL rule has few fans among the majority party in Congress, legislation crippling or killing the regulation remains in play. But it might not be feasible for several reasons. First, the rule is a high priority for vocal Senate Democrats such as Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt. They could filibuster any attempt to undo the regulation. Second, many big firms have sunk millions into complying with the DOL


rule and are not likely to be interested in killing it, Ashton said. Third, full-scale political opposition just looks bad at this point in the game. “There will be a push, if not in favor of retaining the regulation, at least not a huge outcry,” he added. “Optically, it’s just not a very good message to the base.”

Puzder Controversy

The controversy surrounding Trump’s choice for labor secretary further complicated action by anti-regulatory forces. As of magazine deadline, Andrew Puzder had yet to be confirmed. Opposition coalesced around his record as CEO of CKE Restaurants, which includes the Carl’s Jr. and Hardees chains, and revelations Puzder employed an undocumented immigrant for several years. Without a secretary in place, the agency lacks undersecretaries, including an appointee to lead the Employee Benefit Security Administration. The EBSA has direct oversight of ERISA law and the fiduciary rule. Puzder is on record as anti-regulation. Industry analysts expect the DOL philosophy to dramatically change on several regulatory fronts, including the controversial overtime rules advanced under the Obama administration. A Texas judge issued a preliminary injunction halting the overtime rules in December. The Justice Department appealed that ruling, but the Trump administration is likely to abandon that effort. Describing the overtime rule as “another barrier to the middle class rather than a springboard,” Puzder predicted that the rule would “cause some employers to reclassify salaried employees as hourly.” If so, this reclassification “would limit the ability of entry-level managers to allocate their time to satisfy the needs of the business and their personal lives.” The Obama administration claimed the current overtime rules were hopelessly out of date, and the new rules would have extended OT pay to about 4 million additional workers. 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.

March 2017 » InsuranceNewsNet Magazine


In this interview with publisher Paul Feldman, Chris Bailey discusses his yearlong quest to uncover the most effective ways to be productive 10 10

InsuranceNewsNet Magazine Âť March 2017 InsuranceNewsNet Magazine Âť March 2017



our email inbox and Facebook feed are probably jammed with stories about becoming more productive. But how many of them actually work? Who is vetting this stuff? Chris Bailey, that’s who. You can call him the productivity pilgrim, journeying through the wilderness of studies, books and articles to discover the truth. When Chris graduated from business school, he had job offers, but heard a calling instead. That calling was to take a year to research and discover what it truly means to be a productive person. Perhaps it was fate, because how many other people do you know who have been productivity nerds since high school? From his home base in Ottawa, Canada, Chris documented his fact-finding, research and discoveries on his blog. It became so popular that he received an offer to publish a book. He found through trial and error what didn’t work and happened on a discovery that seemed to contradict conventional wisdom. In this interview with Publisher Paul Feldman, Chris takes us on the journey and shares his treasure. FELDMAN: What was the Productivity Project? BAILEY: It was a yearlong series of experiments that I conducted to try to become as productive as I possibly could. I interviewed the greats, some of my favorite productivity heroes out there. I dug deep into the prevailing research that exists on the topic, all the studies and journal articles and other books that I could get my hands on. I also got my hands dirty with conducting a few productivity experiments on myself. I used myself as a guinea pig to explore what it to do as much as we possibly can every day.. I did things like meditating for 35 hours over the course of a week to experiment with focus. Our smartphones are attached at our hip throughout the day, so I used my smartphone for just an hour a day for three months. I worked 90-hour weeks, woke up at 5:30 every morning, watched 300 TED talks in a week. All of these were designed to put the research into practice, in the grand purpose

of separating the productivity advice that works from the stuff that doesn’t. Because that’s the thing about reading productivity advice. Whether you’re reading an article in a magazine or a book about the topic, you have to make up all that time and then some, or else you’re basically just looking at productivity porn. And there’s a lot of productivity porn out there that’s fun to read, but doesn’t necessarily contribute to how much you accomplish every day. FELDMAN: I love that term, “productivity porn.” BAILEY: And there’s a lot, like, “Oh, here’s how Elon Musk spends a day of his life,” or “Here’s what Abraham Lincoln did every day. He woke up and he fried a single egg and then he …”



ATTENTION But that doesn’t impact your life in any measurable way. It’s just fun to read about. There’s a lot of fluff out there. My book is about 300 pages long, but there’s a 600-page book that I didn’t write that has all the stuff that doesn’t work. FELDMAN: So after all this research you’ve conducted, what do you think everyone should know about productivity? BAILEY: People often look to how busy they are as a proxy for how productive they are. Because when we do work with

our brains rather than with our bodies, measuring productivity is more an art than a science. But busyness is really no different from laziness when it doesn’t lead us to accomplish anything. We could be busy answering email all day long and not accomplish anything of importance. And I think that’s the key. Productivity is not about how much we produce, it’s about how much we accomplish. That involves turning off the autopilot mode. We so often fall into that mode when we open up our email and then suddenly the email inbox becomes our to-do list, instead of taking a step back and thinking about what’s actually important on a daily basis. This is something that I find with the highest performers I interviewed. They work deliberately and with intention on a daily basis. They don’t work on everything on their to-do list, but instead, they work on the right things. They don’t necessarily become busier for the sake of becoming busier. They, instead, become less busy and eliminate what’s not important in their work so that they can focus on what actually produces the most value. If we are on autopilot, we’re going to be working on whatever feels the most important. We’re going to become a firefighter just putting out any flames that happen to erupt instead of taking a step back and asking, “OK, what’s actually important here? What is my intention? What do I need to accomplish?” FELDMAN: How do people get started analyzing their lives and becoming more productive? BAILEY: Take a step back and make a list of all the activities you do in your work over the course of a typical week or month, whatever the right time horizon is for you. It’s kind of a pain to do, to be honest, but I can’t think of many activities that will provide a greater return than this. Once you get all that out of your head — which is liberating in and of itself — ask yourself, “If I could only do one thing on here, all day, day in, day out, every day, which one contributes the most value?” Do the same for a second task that allows you to contribute the secondgreatest amount of value. And then the

March 2017 » InsuranceNewsNet Magazine


INTERVIEW PRODUCTIVITY HACKS third task. You’ll probably find that after two or three tasks, your productivity per task will drop off a cliff. Usually your work, at its core, involves doing maybe three things day in and day out. Everything else on that list that supports your work can be delegated or eliminated, or you can shrink how much time you spend on it. My favorite way of bringing this level of intentionality on a daily basis is the rule of three. At the start of the day, fastforward to the end of the day and ask yourself, “By the time this day is done, what three main things will I want to have accomplished?” Three sounds like a small number, but it’s wired with the way we think. We can look at the stories that we grew up immersed in — the three bears, the three blind mice, the three little pigs, the three musketeers. We award three Olympic medals — gold, silver and bronze. We even divide stories into three parts — the beginning, the middle and the end. Because it maps with the way we think, it actually allows us to remember what’s important over the course of the day. We take the time to separate what we should do from what we shouldn’t, and it only takes a minute to set those intentions. FELDMAN: What have you found is the biggest killer of productivity? BAILEY: Besides not working more deliberately, another killer is the inability to focus. We fall victim to the distractions that surround us. We spend 47 percent of our time on the internet procrastinating. It’s just a mind-boggling statistic. That means we focus deeper when we’re connected to the internet and when we’re on our phones. Things quite literally take twice as long when we’re working inside those contexts. If you think about your most productive day, you probably weren’t doing 1,000 things at once. You might not even have been connected to the internet. Maybe you were at a coffee shop or a location that’s different from your office, and focusing on one thing at one time. This is a mode that we’re getting into less and less frequently. This is the mode where we slow down enough so that we can work more intentionally in the moment and not veer off course. 12

InsuranceNewsNet Magazine » March 2017

on a moment-by-moment basis that we actually act toward these goals and these intentions that we set.

• Boring • Frustrating • Difficult • Unstructured or ambiguous • Lacking in personal meaning • Lacking in intrinsic rewards (i.e., it’s not fun or engaging) It doesn’t matter how well you can schedule your time if you don’t also focus on what you’ve scheduled. This is another attribute that I’ve found in the most productive people. They not only manage their time well, but they also focus deeply on their work. And the best way to get there is to eliminate as many distractions as you possibly can ahead of time. FELDMAN: On the internet it is easy to go down rabbit holes and have distractions, alerts and pop-up windows. I try to shut everything down when I’m trying to focus. In doing this interview, my phone is on airplane mode, my computer monitor is off and my phone is set to Do Not Disturb. BAILEY: The reason you have to do that when it comes to our most important work is that the internet is usually more attractive. If we get a message on Facebook or somebody tweets at us, that’s going to feel more important and a lot more interesting than what we ought to be doing in the moment. We gravitate to news websites when we know they are just a couple of button taps away from the Excel sheet we’re inside of. So the best way that we can possibly deal with these distractions and these interruptions is realizing that we have to cut ourselves off, because in the moment, they’re more attractive than our work. It’s one thing to set these grand intentions and know what our goals are, but it’s

FELDMAN: Is multitasking actually counterproductive? BAILEY: We can multitask, but only with tasks that are habitual. We can walk, breathe and chew bubblegum while we step over the cracks in the sidewalk all at the same time. But when it comes to actively focusing on more than one thing at one time, we cannot multitask on a neurological level. People multitask with the wrong things. Instead of multitasking with walking and chewing bubble gum, they multitask with answering email while they listen to a podcast while they’re on a conference call. The most important work, the intentions that we set at the start of the day, require active focus. We can’t do this habitually, because anything we can do habitually, we can delegate to somebody else. It’s not where we contribute our unique value. FELDMAN: How do you build your attention muscle? BAILEY: Research shows that in any given moment, we dedicate only 53 percent of our attention to what’s in front of us. We leave half of our attention on the table. Our mind is wandering, thinking about what we did earlier in the day or what we’re going to do after we complete the current task or when we get home. Research also shows that the more often we rein our focus back to what’s in front of us, the more we build our capacity to focus. That’s all our work ever is. Our work is never in the future. It’s never in the past. We might have to connect the dots between the future, the past and the present, but our work is in front of us. That’s where we’re the most productive on a moment-by-moment basis. By upping the quality of our attention, we can increase that percentage from 53 to 63 to 73 to 83. With each increase, we become so much more productive. FELDMAN: Can you describe that as mindfulness? BAILEY: People have one of several reactions when they hear the word mindful-



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ANNUITIES | LIFE INSURANCE | RETIREMENT PLANS | MUTUAL FUNDS Male, age 50, non-tobacco preferred, minimum non-MEC death benefit, increasing death benefit switching to level at age 65, fixed annual premium of $30,000 to age 65; 20-year distribution (income taken monthly) starting at age 66; fixed loans (after basis) targeting $10,000 cash surrender value at age 120. As your clients’ personal situations change (i.e., marriage, birth of a child or job promotion), so will their life insurance needs. They should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as sex, health and age, and has additional charges for riders that customize a policy to fit their individual needs. Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments, and do not receive dividend or capital gains participation. Past index performance is no indication of future crediting rates. Also, be aware that interest-crediting fluctuations can lead to the need for additional premium in your policy. Protections and guarantees are subject to the claims-paying ability of the issuing insurance company. Both products in the competitive comparison assume a one-year S&P 500® point-to-point crediting strategy at 5.00%. The Nationwide product includes the Indexed Interest Multiplier (Multiplier), which increases the assumed interest rate by 15%; thus in this example, 5.00% assumed rate x 1.15 Multiplier = 5.75%. The Multiplier is not available on all indexed interest strategies. When it is present, the cap rate will be lower. The Nationwide product also includes the Nationwide IUL Rewards Program conditional credit of 0.20% in policy year 16 and onward. To receive the Nationwide IUL Rewards Program benefit, premium payments must meet or exceed a test of the net accumulated premium (premium paid minus any amounts taken as loans or partial surrenders) at the start of policy year 16; earlier for issue ages 51 and older. The additional 0.20% interest is applied each year from then on as long as the policy is in force. The credit will be added to the fixed interest rate strategy’s accumulated value. Guarantees are subject to the claims-paying ability of the issuing insurer. Information was compiled January 23, 2017, from Nationwide’s illustration software and WinFlex web version 2.162.1 system version 6.162.1. The information is accurate to the best of our knowledge. Life insurance products are underwritten by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, Columbus, Ohio. Let’s Face It Together is a service mark of Nationwide Life Insurance Company. Nationwide, the Nationwide N and Eagle, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2017 Nationwide. Advisor Use Only- Not Intended for Public Distribution NFV-1053AO.3 (1/17) March 2017 » InsuranceNewsNet Magazine



Why the Internet Is Killing Your Productivity The internet can destroy your productivity if you’re not careful. The best way I have found to prevent the internet from wasting my time has been to simply disconnect from it when working on a high-impact or ugly task, and to disconnect as much as possible throughout the day. After getting over the initial withdrawal, the calm and productivity you’ll experience will be unlike anything else.

The Time Economy When time was “created” by the Big Bang 13.8 billion years ago, the universe had a past, present and future for the first time. Measuring time first became important during the Industrial Revolution, when factory owners needed their workers to arrive on time. Today, in the knowledge economy, if you want to become more productive, managing your time should take a back seat to how you manage your energy and attention.

Working Less When you work consistently long hours, or spend too much time on tasks, that’s usually not a sign that you have too much to do — it’s a sign that you’re not spending your energy and attention wisely. As one example, during my experiment to work 90-hour workweeks, I found I accomplished only a bit more than when I worked 20-hour workweeks.

Becoming More Deliberate Research shows we focus on what’s in front of us only 53 percent of the time. Developing a strong “attention muscle” is what makes it possible to focus more on the task at hand, which lets us spend our time and attention more efficiently in the moment.

The Art of Doing One Thing Single tasking is one of the best ways to tame a wandering mind, because it helps you build up your “attention muscle” and carve out more attentional space around the task you are tackling in the moment. It is also a powerful tool for improving your memory. Just as working out in the gym builds the muscles in your body, continually drawing your attention back to your chosen task has been shown to build your attention muscle. 2016. Chris Bailey. The Productivity Project. Piatkus.

ness. Some people are kind of open to the idea. Other people are excited by it. And other people shut down. But mindfulness is only being aware of what we’re thinking, feeling and perceiving in any given moment. That’s all it is. If we want to increase how much attention we give to the world in front of us, a conversation we’re having or a report we’re writing, there’s no better practice than mindfulness or even meditation. 14

InsuranceNewsNet Magazine » March 2017

Meditation is the process of returning our attention back to a single object after we notice that our attention has wandered. With every return of our attention back to our breath or to whatever our object of attention is, we perform one repetition of our attention muscle. We build up our capacity and how much control we have over our attention. Mindfulness and meditation are integral to doing good work. On a certain level

— and it might sound kind of hippy-dippy — the most productive work that we do is kind of meditative. It requires focusing on one thing and becoming completely immersed inside the work we’re doing. It doesn’t involve a stressed-out attitude, but a calm, cool, connected attitude with that one thing we’re doing. The most important experiment I conducted in the course of my project was meditating for 35 hours during a week. I did as much productive work as I possibly could in the remaining 20, 25 or so hours that I had left. When I looked over the logs of this experiment, I was stunned by exactly how much I accomplished over the course of that week. I was as productive in that week as I was when I worked 50 straight hours and felt infinitely busier. This speaks to how meditation provides us with more mental clarity. Meditation might seem like a weird productivity tactic because it requires time. But if you meditate for 10, 15, 20 minutes every day, I would make the argument that you’ll earn that time back and then some with this increased level of focus. FELDMAN: How did you bring meditation in as one of your experiments? BAILEY: At the start of my project, I’d been meditating for six or seven years. I’d been into productivity for about a decade. So the two interests had been snowballing in tandem up to then. But at the start of the project, I stopped meditating entirely because I thought these two ideas directly conflicted. Meditation is about doing as little as possible for an extended period of time, just focusing on your breath. So it doesn’t look like you’re accomplishing much. Whereas productivity, I thought at the time, was about doing more, more, more, faster, faster, faster. That might be why so few people connect the two ideas. But when you look at the research, the two are incredibly connected. After I stopped meditating, I noticed that a few curious things began to happen. I worked more often on autopilot mode and I set fewer intentions over the course of the day. I became stressed out because I declined

PRODUCTIVITY HACKS INTERVIEW a few jobs to experiment with this productivity project for a year. I didn’t have health insurance. I didn’t have money coming in. I was spending all my savings doing this thing. So the stress came flooding in. My mental health took a decline — in an admittedly small way, but it still declined. I couldn’t focus. I was distracted more often. And that led me to conduct this experiment to meditate for 35 hours over the course of a week. I’d been doing meditation retreats leading up to the productivity project, so I was no stranger to doing longer stretches of meditation. But despite these two interests snowballing in tandem with one another, I’d never really connected the two ideas. I started poring over the research to consider the idea that, even though meditation is about slowing down and about doing almost nothing for a small period of time, it can really hold these profound benefits. Now when I have a huge talk coming up — TED or Google or someplace else — or I have a huge project that I’m working on, I’ll meditate more, because I know I need that extra resiliency to focus on those big projects. FELDMAN: Just as the mind is so powerful, so is the body when it comes to productivity. In your book, you talked about diet and sleep. These are two other things that most people probably don’t even think about when they think about productivity. BAILEY: All of the lessons that worked in my productivity project fell into one of three categories. The first was managing my time. The second was managing my attention. And the third was managing how much energy I had over the course of the day. That relates to how we take care of ourselves. When you zoom out, it’s remarkable how many things influence our productivity over the course of a day. It’s some of the simplest advice: exercise, eat better and drink more water. I always feel like such a mother giving this advice — you know, eat your vegetables and eat less processed garbage. But, take sleep as an example. I’ve come to view sleep as a process through which

we exchange our time for energy, and the exchange rate is pretty good. Food is another good example. Food provides us with the fuel that we burn over the course of the day in order to get stuff done. So it provides our body and brain with glucose to burn off as energy. So much about managing our energy is about doing the basics, which is why I think it was one of the smaller parts of my book. There’s only so much you can say about doing the basics like exercising and eating better.

roof, because I thought I wasn’t worthy of the success I was having. Different people experience this phenomenon in different ways. Maybe some will experience it around food. Maybe we experience it when we’re in a meeting with our boss and they’re so much smarter than we are. We can realize that it’s human to do this and we can consider whether the selftalk is actually true. It usually isn’t true and knowing that we have the capacity to question it usually turns the tide.

FELDMAN: Self-talk can also destroy your productivity. In your book, you say studies show that 77 percent of self-talk is negative. Would you tell us more about that?

FELDMAN: Getting myself more focused is definitely my big takeaway from your book. It helped me recognize what my brain was doing and why.

BAILEY: We evolved to perceive threats in our environment. Moreover, our parents evolved to perceive threats, which is why they want to protect us. But they say things like, “Put that down” or “That’s not good for you, don’t do that.” It’s meant constructively, but of course, it has a negative flavor to it, which translates to the way we speak to ourselves. This can set us back when we’re striving to become more productive. When we procrastinate, our self-talk goes through the roof. I’ve also found that as I’ve experienced more success, I’ve experienced more self-talk. This phenomenon is better now that I’m aware of it. But at first, when all this attention started coming after my book was published, my self-talk went through the

BAILEY: Knowing why we’re not wired to be perfectly productive every day is important. So many of the challenges we face when we invest in our productivity are because of our evolution. We evolved to perceive threats in our environment, which leads us to have a lot of negative self-talk that sets us back throughout the day. That leads us to multitask because we get rewarded more often when we multitask than when we focus on one thing. Focusing on one thing, despite how productive it might make us, is boring in practice because it’s a less stimulating way of working. We evolved to conserve energy for when we needed it, when we had to go long stretches without food. So our bodies evolved to crave salt, sugar and fat because those were the most energy-dense forms of foods that we could possibly consume. And we evolved to walk 5 to 9 miles every single day, which is why we have so little energy these days when we’re so sedentary. All these different things that influence our energy either set us back or propel us forward because of our evolution.

Find out more about Chris Bailey and his productivity experiments at

March 2017 » InsuranceNewsNet Magazine



ACA Reform — What Could Happen and When? President Donald J. Trump began dismantling the Affordable Care Act on day one of his presidency. Congress took steps toward repealing the law on its first week back to work in January. But replacing the law? That could take some time. House Speaker Paul Ryan, R-Wis., said that legislation to replace the ACA would be completed sometime this year. Ryan’s comments came after Trump told a TV interviewer that it might take until next year to come up with a replacement plan for the health care law. Meanwhile, a number of ACA proposals have been introduced in Congress. The Patient Freedom Act of 2017 was announced by Sens. Bill Cassidy, R-La., and Susan Collins, R-Maine. The plan calls for keeping many of the ACA’s taxes in place in order to provide revenue for the replacement proposal. In addition, the proposed bill gives states options about whether they will remain with the current health care law. Congresswoman Jan Schakowsky, D-Ill., and Sens. Sheldon Whitehouse, D-R.I., Sherrod Brown, D-Ohio, and Al Franken, D-Minn., introduced the Consumer Health Options and Insurance Competition Enhancement (CHOICE) Act, to add a publicly operated health insurance option to individual marketplaces. Sen. Rand Paul, R-Ky., introduced the Obamacare Replacement Act. Among its provisions, the proposal would eliminate the essential health benefits requirement, provide a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage, and establish incentives for consumers to contribute to health savings accounts. construction sectors. While breaking the 20,000 barrier is a psychological level for market watchers, changes in the Dow don’t mean what they used to. “One hundred points today is one-half of 1 percent. In 1972 it was 10 percent,” Jeremy Siegel, a professor of finance at the University of Pennsylvania, told NBC News.


For the first time in its 120-year history, the Dow Jones Industrial Average hit 20,000 in trading. The Dow had been flirting with that magic number for weeks but then finally broke the 20,000 barrier a few days after President Trump’s inauguration. The market’s rally was fueled mainly by the banking, investing and DID YOU





While market watchers were giddy over the Dow’s historic high, a look back at 2016 showed the U.S. economy moved at a snail’s pace. It grew only 1.6 percent for 2016, its slowest growth pace in five years, according to the Commerce Department.

A 20 percent down payment on a home costs more than two-thirds of the average American’s annual income. Source: Zillow

InsuranceNewsNet Magazine » March 2017


It is very possible that we will get a significant boost to economic growth in the second half of next year if Trump is successful getting his program through Congress. — Sung Won Sohn, an economics professor at California State University's Martin Smith School of Business

It was the worst showing since 2011 and down from 2.6 percent growth in 2015. The reasons for the slow growth last year? Cutbacks in business investment along with efforts by companies to reduce their unwanted inventories. Economists are predicting a better performance in 2017. Many are raising their forecasts to incorporate the potential impact of President Donald Trump’s program featuring tax cuts, deregulation and higher infrastructure spending.


The 2010 Dodd-Frank financial oversight law reshaped financial regulation after the 2008-09 financial crisis. Now President Trump has taken a first step toward dismantling the law, which he termed “a disaster.” Trump has directed the Treasury Department to review Dodd-Frank, which he pledged to repeal during his presidential campaign. Trump’s signed order directs the Treasury secretary to consult with members of different regulatory agencies and the Financial Stability Oversight Council and report back on potential changes.


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


In what some experts are saying is another sign of an improving economy, fewer Americans are without access to a savings or checking account. The percentage of Americans who are “unbanked,” or do not have a bank account, declined to 7 percent in 2015 from 7.7 percent in 2013, according to the Federal Deposit Insurance Corp. The improvements mostly came from households making less than $15,000 a year. Although consumers have a number of reasons why they may not use the services of a bank, the most common reason, the FDIC found, is that they do not believe they have enough money to obtain a bank account. Lack of money was cited as the main reason by 57 percent of those surveyed.

57% of those without a bank account said it’s because they don’t have enough money

Life expectancy for today’s 65-yearold is six months shorter than it was last year


We tend to take for granted that life expectancies in the U.S. will continue to increase. But here is some disturbing news from the Society of Actuaries: Life expectancy for today’s 65-year-old is now six months shorter than it was last year. And it’s not just older Americans who are affected by this longevity shift. A 25-year-old woman last year had a 50/50 chance of reaching age 90. This year, she is projected to fall about six months short. Some of the reasons? Deteriorating health, particularly that of middle-aged, non-Hispanic whites. Other culprits are drug overdoses, suicide, alcohol poisoning and liver disease. From 2000 to 2009, American death rates improved by 1.93 percent for men


? 41M


Americans have had their identities stolen. Source: Bankrate


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

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


Forget blackjack and roulette. Unprecedented monetary policies have turned the world’s financial markets into a casino, said bond investor Bill Gross of Janus Capital Group. And global central bank policymakers are to blame. “Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly leveraged world,” Gross said in his latest Investment Outlook, titled “Doubling Down.”

“Investors/savers are now scrappin' like mongrel dogs for tidbits of return at the zero bound. This cannot end well.” — Bill Gross

Gross, who oversees the $1.5 billion Janus Global Unconstrained Bond Fund, recommended bitcoin and gold for investors who are looking for places to preserve capital. Gross blasted ultra-loose central bank policies for hindering global economies by keeping so-called zombie corporations alive and inhibiting “creative destruction.”

March 2017 » InsuranceNewsNet Magazine


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March 2017 » InsuranceNewsNet Magazine




avid Contorno’s benefits business took off when he began apologizing to his prospects. “When I start off with a prospect, usually I say, ‘Let me apologize on behalf of my entire industry on the way we handled your renewal for the last 20 years,’” Contorno

As the president of Lake Norman Benefits in Mooresville, N.C., Contorno said that this approach was part of his strategy to find success by doing the opposite of what he had been doing previously. Although he has seen a lot of ups and downs in the business that he entered at the young age of 17, Contorno said the biggest change was when he decided to stop “selling” altogether and turn to consulting instead. The main reason for this switch? He was tired of being the bearer of bad news to his clients. “I never came in to my client with good news,” he said. “I never said, ‘Hey, guess what! Your rates

“I think you’ll see that the complexity of the market, the complexity of the regulatory environment and the multigenerational workforce will continue to support the need for brokers to provide advice and consultation,” he said. MetLife marks 100 years in the employee benefits business this year. The company’s 14th annual Employee Benefit Trends Study showed that no matter what benefits are offered in the workplace, employees find the greatest benefit in one-on-one consultation with a professional to help them select the best option for their needs. Millennials led those of other generations in valuing one-onone consultations, with 60 percent saying

“I never came in to my client with good news. It was always ‘your rates are going up and your plans are getting worse.’” are going down; your plans are getting better.’ It was always ‘your rates are going up and your plans are getting worse.’” DAVID CONTORNO Contorno said he no longer wanted to obtain business by said, adding that his prospects look a bit convincing employers that he offered perplexed. “And I say, ‘I’ll be willing to bet “the least bad option of everything else that every year for the last 20 years, your that was out there.” broker comes in and says your rates went And he doesn’t stop there. His compaup 22 percent.’” ny has a full human resources consulting

they wanted to meet with a professional. The MetLife study also showed that an increasing number of brokers say they are optimistic about the benefits industry — 77 percent in 2015 versus 66 percent in 2012.

“Now you see HR departments that have fewer people and they’re mostly generalists — we want to take the benefits part of HR off their plate and serve as more of a partner.” Now that he has their attention, Contorno explains that previous brokers were not looking at the right issues for them. “I tell the employer, ‘Your health care costs are not driven by your insurance rates,’” Contorno said, setting up a discussion about a self-insurance plan. “‘But your insurance rates are directly driven by your health care costs. So the apology I give to you is for not focusing on that up to this point.’” 22

division and an on-staff ERISA attorney. Contorno’s full-feature shop is an example of what many health insurance agents are aspiring to after the Affordable Care Act left them in the cold.

The Advisor of the Future

The role of the broker will increase in the future, according to Scott Beck, vice president in MetLife’s group benefits business.

InsuranceNewsNet Magazine » March 2017


HOW TO SELL ANNUITIES TO A SKEPTICAL CLIENT FEATURE The oldest members of the youngest generation — dubbed Generation Z — are entering the workforce now, and that means an employer may have members of five different generations working within their company. These changing workforce demographics also provide opportunities for brokers who can serve the varied needs of the generations, Beck said. “This is probably the most important overarching benefits strategy that needs to be addressed,” he said. “Before you can offer products, before you can figure out what kind of enrollment techniques you want to employ, you need to understand the employee population. Think about it: Five generations in the workforce all look at benefits very, very differently.” The uncertainty of the regulatory and political climates, combined with health care reform and the demands that employers have placed on their HR departments, also will contribute to the importance of a benefits broker, he said. “We saw that as a result of the 2008 recession, many HR departments reduced their staffs. But their workload was not reduced. They are looking for folks to help fill in those gaps, and that provides an opportunity for brokers.”

‘An Extension of HR’

Susan Combs is one benefits advisor who sees her role as an extension of her client’s HR department. Combs is president of Combs & Company in New York City and a partner in Capacity, the 42ndlargest brokerage in the U.S. “In the benefits part of our business, we interface with all the employees,” she said. “We specialize in employee groups of 50 and under, so many times we end up being an extension of HR.” Combs said her goal is not to take the place of her client’s HR department, but to be their partner. “We saw that after the 2008 recession a lot of HR departments were downsized, where before you would have a number of people and each one had their specialty, such as corporate training. Now you see HR departments that have fewer people and they’re mostly generalists. So we tell them that we don’t want to take their job from them — we want to take the benefits part of HR off their plate and serve as more of a partner.”

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FEATURE HEALTH AGENTS BETTING ON BENEFITS Combs said that her clients’ employees can call her company anytime to ask questions about their benefits. In addition, her clients will hand off their new employees to her for personalized benefits orientation. Combs hasn’t abandoned the individual health insurance market, but she said her company charges clients an hourly consulting fee, plus it offers an ongoing servicing contract for people who have questions after they enroll. LIMRA figures show that sales of workplace benefits such as group life and accident insurance are on the rise. As of the end of 2015, new sales premium of critical illness insurance increased by 19 percent, or $496.2 million, over the prior year. Also during that period, group disability and accident insurance new sales premium rose by 11 percent, or $2.8 billion and $991.1 million, respectively. Group life increased by 7 percent, or $2.9 billion, and new premium for cancer insurance rose by 5 percent, or $387.9 million.

In-Force Premium (total market)

Group life

+7% $2.9 billion

+2% $25 billion

Group disability

+11% $2.8 billion

+5% $19 billion

Group dental

-15% $5,483,945

+3% $60,276,471

Accident insurance

+11% $991,100,000

+6% $2,422,314,000

Critical illness insurance

+19% $496,289,000

+10% $1,222,535,000

Cancer insurance

+5% $387,985,000

+1% $2,337,872,000

In addition to increasing sales premium, more carriers are getting into the benefits market, said Kimberly Landry, LIMRA senior research analyst. “We are seeing more companies that weren’t selling those products five or six years ago rolling out products now, so there’s

a lot more competition there now,” she said. “A decade ago, what you saw were worksite-focused carriers who were selling individual products in the worksite, fully funded by the employee. And that was their niche market. But a lot of bigger players weren’t competing there and

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InsuranceNewsNet Magazine » March 2017

Source: LIMRA

Sales on the Rise

New Sales Premium


“It’s very important to get to the bottom line of educating the worker what their benefits are and how to use them.” now they are. It’s kind of seen as an area where carriers can look for growth. And there is a growing role for workplace benefits given the rise of consumerdriven health plans.” As employees continue to be squeezed by rising deductibles and other out-ofpocket expenses, supplemental products such as accident insurance and critical illness insurance are seen as ways for workers to mitigate their risk, Landry said.

Advising Both Sides

Benefits Advisory Service in Forest Hills, N.Y., has been around for 24 years and recently became a division of One Group in order to provide the full range of benefits from property/casualty insurance to pension plans. Sher Sparano, president and founder, said she believes her company’s success comes from consulting both the group clients and their employees. One of the changes in the benefits marketplace, she said, is the array of new and complex products offered. Health savings accounts, health reimbursement arrangements and flexible spending accounts are among the products that didn’t exist when she started in the business, and are confusing for both employers and workers. “You need to know all the ways to help both the employer and the employee save


Employers Are Increasingly Embracing Voluntary Benefits Nearly half of large employers are now offering at least one of the major voluntary income protection products. But it appears as though the previously discussed increases to employee health plan premiums may have affected participation in voluntary benefits.







16% 20% 64%


Products Elected 0 1 2 3 Source: The State of Employee Benefits 2017, Insights & Opportunities Based on Behavioral Data, Benefitfocus

March 2017 » InsuranceNewsNet Magazine


FEATURE HEALTH AGENTS BETTING ON BENEFITS money and get good benefits,” she said. “And because it’s more complex now, you must be able to relate that to the employee. It’s very important to get to the bottom line of educating the worker what their benefits are and how to use them.” “Employees are confused by the complexity of health benefits today and how to use them. On the other side of that, you have to help the employer. Some of our small groups don’t have an HR department, so you have to consult on HR.” As benefits become more complex and more regulated, advisors must assist HR to make sure all the requirements are followed and that information is communicated legally and properly, she said. Knowing about HR in addition to benefits will serve the advisor well in the future, Sparano said. “HR is everything from payroll, wage and hiring, benefits, corporate rules and regulations to pensions and 401(k)s. There’s a lot to know. I think the person who is able to offer the full package is in a better position. And the human element is utmost.” The benefits marketplace will continue

to evolve but that “human element” will still be there, she predicted. “Someone said to me, ‘Benefits has about 15 years, and then it will all change. It will all be online.’ And I said, ‘But so will we be online. We will be doing it a different way, but we will still be delivering service.’”

More Choice

Rising health care costs and an improving job market have made employee benefit programs more important than ever, especially for large, self-funded employers. That was among the findings of a report, “The State of Employee Benefits 2017,” by Benefitfocus. In particular, the popularity of voluntary benefits skyrocketed between 2016 and 2017, the report said. In 2016, only 36 percent of large employers surveyed by Benefitfocus offered at least one of the three major voluntary income protection benefits — accident, critical illness and hospital indemnity insurance. But that number shot up to 47 percent for 2017. In addition, the share of employers

offering all three products nearly doubled (up from 9 percent to 17 percent), showing that employers want to provide workers with more choice in their benefits. But along with choice comes confusion — and opportunity. “For voluntary benefits, convincing workers to sign up is becoming more of a challenge,” LIMRA’s Landry said. “Employees don’t spend a whole lot of time thinking about their benefits. Employers are giving more attention to how they can improve employee communication — how they can get employees to pay more attention and understand their benefits better. They really need someone who can provide guidance and provide that communication.” Landry said LIMRA’s research shows that even in this age when consumers conduct more of their business transactions online, “people really want to talk to someone face-to-face about these products. We’re seeing the importance of having meetings in the workplace and the value of agents who are willing to do this.”

WE PROTECT THEM LIKE FAMILY. That ’s the commitment Boston Mutual Life Insurance Company brings with our suite of voluntary benefits for the workplace. Employers have the flexibility to offer a comprehensive benefits package to help their employees protect the future of their families. OUR PRODUCT PORTFOLIO INCLUDES: • • • • •

Term Life and AD&D Permanent Life Group Accident Coverage Critical Illness Coverage Short & Long Term Disability

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InsuranceNewsNet Magazine » March 2017

120 Royall Street


Canton, MA 02021



“Managing Benefits Is Increasingly Complex” Strongly agree (7-10 on a 10-point scale) < 100 Employees

By employer size

100+ Employees


56% Limited Range

eWide Range

By range of benefits offered


50% Do Not Use

Use Broker/ Consultant



By use of broker/consultant

Benefits Outsourcing Roles and Most Common Processes Performed by Vendor Type Ranked by Incidence of Outsourcing Each Process Broker-Consultant 1. Select carriers 2. Identify ways to control cost 3. Develop enrollment strategy 4. Analyze/report on plan data

Insurance Company 1. Monitor plan service 2. Provide enrollment support 3. Ongoing plan communication 4. Ensure plan compliance

Other Third-Party* 1. Manage leave administration 2. Online enrollment 3. Select carriers 4. Identify ways to control costs Source: The Guardian Workplace Benefits StudySM : Fourth Annual, 2016

Employers, Workers Need Help, Survey Says

Benefits programs are becoming more complex, and more employers say they need help. That was one of the findings in Guardian Life’s report “The Benefits Balancing Act.” Companies that find it more challenging to manage their benefits are more likely to use a broker to help them, the report found. That opens an opportunity for brokers who are able to solve their clients’ challenges, said Gene Lanzoni, assistant vice president at Guardian. “We need to change the paradigm of how benefits are sold and what that job is and what’s the mission,” Lanzoni said. “I think it’s in the broker’s best interest to be more consultative.” “A majority of brokers have been more product-oriented, more like salespeople, and not necessarily that strategic consultant to their employer clients, to really help them get their arms around all of their benefits challenges.” The Guardian report identified three main areas where employers need help from brokers. 1. Improving workplace well-being. Enhancing and promoting wellness and prevention programs. Providing resources to support workforce mental and emotional health. Offering more effective benefits communication and employee financial education. 2. Increasing benefits administration efficiency. Using exchange platforms to strengthen employee enrollment. 3. Maintaining benefits plan compliance. Assisting employers on current Affordable Care Act requirements as well as making sure they are in accord with the Family and Medical Leave Act and the Americans with Disabilities Act. “Small companies will rely more and more on their brokers to help them,” Lanzoni said, “and that’s a great role for brokers to play.” Susan Rupe is managing editor for Ins u ra n ce N ews N e t . She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at

March 2017 » InsuranceNewsNet Magazine



Life Applicants Trending Younger and Older



OVER AGE 60 45-59


-0.1% Life insurance applicants in 2016 tended to be on both extremes of the age scale, according to the MIB Life Index. The largest percentage gains in the index last year came from life insurance applicants under the age of 45 and from applicants older than age 60. Application activity increased by 1.8 percent over 2015 for both of those age groups. However, application activity in that middle age group — those ages 45 to 59 — dropped 0.1 percent over the previous year. Lee Oliphant, MIB Group president and CEO, said the uptick in activity among people under the age of 45 is an indication that insurance companies are upgrading their sales and distribution networks to appeal to younger buyers. The under-45 age group has shown steady growth in the number of life insurance inquiries over the past two years. RISING INTEREST RATES MAY LEAD TO EXPANDING MARKETS

Rising interest rates are a breath of fresh air to the life insurance marketplace, which has often struggled to breathe in a prolonged low-interest-rate environment. Industry analysts said rising rates could attract new life insurers into the market. Or they could cause insurers to re-enter an insurance line abandoned during an earlier era of falling rates. This generally would be welcomed, as more insurers in the market usually means more competitive pricing for buyers. A sudden rise in rates could tempt policyholders to surrender their contracts for new policies with higher crediting rates or bank products offering higher yields. But so far, surrender activity has been very low on permanent life insurance products, according to Conning. DID YOU




QUOTABLE We have had a couple of years of growth driven by the under-45, with the industry being able to reach that group with faster decision-making. — Lee Oliphant, MIB Group president and CEO

by more than 4 percent. The researchers also found that the impact of delinquency is most pronounced in the short term as individuals are far more likely to die as a result of an immediate debt shock than in response to lingering debt.


Your client’s financial health could be just as important as their physical health when it comes to mortality risk. That’s the finding from a study by the University of Colorado Denver, which found a link between debt and mortality rates. Economists found that bad credit and severely delinquent debt lead to higher individual mortality risks. The study was produced in collaboration with the Federal Reserve. The researchers found that when an individual’s credit score improved by 100 points, his mortality risk declined

Scott R. Perry has been named CEO of AmeriLife, succeeding Timothy O. North, who will now serve as chairman of the board.

InsuranceNewsNet Magazine » March 2017

Source: AmeriLife


A former MetLife regional vice president was sentenced to seven years in prison after admitting he robbed the same Connecticut bank twice and fraudulently acquired opiates. Kevin Baker of West Hartford was also sentenced to three years of probation. He pleaded guilty to robbery and obtaining a controlled drug by fraud. Authorities say Baker used a large knife to rob a First National Bank of Suffield branch in East Granby in January 2016, making off with nearly $16,000. Baker returned the following month, confronted the same teller and stole nearly $15,000. Prosecutors say Baker abused alcohol, marijuana and cocaine before becoming addicted to OxyContin. Baker says he,s not the same person and has apologized.

“It is as much Kansas City Life’s award as it is ours.” – General Agent Thomas Vanlaarhoven, Morgan 24/7 Financial Services

A team approach has helped Morgan 24/7 Financial Services ascend to the top of Kansas City Life Insurance Company. Pictured (from left): Kansas City Life President, CEO and Chairman of the Board Phil Bixby; Field Manager Eric Rosenthal; General Agent Thomas Vanlaarhoven; Field Managers Nicole Smith and Rob Greco, LUTCF.

2016 Agency Building Award winner The Agency Building Award is Kansas City Life Insurance

Life is better here.


Company’s most prestigious agency honor, bestowed only to agencies that embody the spirit of entrepreneurship, growth and building for the future.

“I’m holding the award, but it’s a team effort. We wouldn’t be successful without the Kansas City Life Home Office support. It was a tough year, but we stayed focused and kept moving forward.” – General Agent Thomas Vanlaarhoven, Morgan 24/7 Financial Services CONTACT THOMAS VANLAARHOVEN

732 383 8165

Morgan 24/7 Financial Services

80 Broad St., Ste. 5M Red Bank, NJ 07701

March 2017 » InsuranceNewsNet Magazine



Beyond Price: How Honesty Will Help Win Every IUL Sale  ocusing on the policy’s probF ability of success, instead of the cost, will get your client to say yes. By Ron Sussman and Richard Weber


et’s face it, no one wants to pay any more than they have to for life insurance. So it’s no wonder that when shown a spreadsheet of calculated planned premiums for comparable policies, the customer’s inclination is to select the product with the lowest shown outlay. If it works for choosing flat-screen TVs with similar screen qualities, it should work for life insurance. Right? What we know from a behavioral standpoint is that price is the logical tie-breaker when not much else is known or can be appreciated about a TV — or a sophisticated life insurance policy intended for lifetime use. 30

Further exacerbating the problem of “pricing” a modern life insurance policy, indexed policies are perhaps the most complicated form of universal life, incorporating many moving parts and many hidden costs that will vary over time. Planned premiums are almost always based on a calculation assumption of constancy (the illustrated rate chosen by the producer — up to what the carrier allows in the software). Meanwhile, the success or failure of the policy over time depends on the sequence of returns within a “collar” of a guaranteed minimum crediting rate (often 0 percent) and the cap/participation rate. While we know indexed universal life’s producer-specified illustrated crediting rate assumes a linear constancy, in reality IUL products will be significantly impacted by market volatility and will

InsuranceNewsNet Magazine » March 2017

more likely be an “all or nothing” pattern within each portion of account value. Expressed over long periods of time, the uneven returns — and factoring in the policy’s internal costs, such as mortality and expenses — produce a sequence of returns and charges. This sequence becomes the driving force of the policy toward success or failure to sustain coverage as long as the insured is alive. After a number of years of testing, we can say with certainty that when the planned premium is based simply on the highest illustrated interest rate a carrier allows, the illustration may win the day – but the client and ultimately the producer will lose. Such an outcome isn’t intentional. As insurance professionals, we haven’t had a better way to assess the difference between policies based on their calculated planned premiums. Until recently!

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LIFE BEYOND PRICE: HOW HONESTY WILL HELP WIN EVERY IUL SALE If we told you the lowest-cost product in a spreadsheet of eight similar top products had a 20 percent probability of sustaining to the age illustrated or — put another way — has an 80 percent chance of lapsing prior to the last illustrated age, would you recommend that product to your client? Of course not. We can make such a calculation using Monte Carlo assessments — often used by financial planners to determine the likelihood of success for a strategy in which the future outcome can’t be known. Now it’s possible to provide supplemental information about planned premium calculations that opens up the last lid on the black box of IUL. The key to this new approach of not just calculating a planned premium but also assessing its long-term sustainability is first to explore with the client their risk tolerance for a policy not achieving its lifetime objective. Is it 0 percent? Ten percent? Twenty percent? We find that even normally risk-tolerant investors will rarely accept more than a 20 percent risk that a life insurance policy might not “live” as long as they do; after all, it’s life insurance for the financial security of a family or business.

For Example:

An IUL planned premium of $8,797 for a healthy 47-year old-male was calculated ALIRT SCORE Penn Mutual



John Hancock


North American




Lincoln National






Minnesota Life


WHAT’S THE RIGHT PREMIUM? Probability of Success Illustrated Premium





10% “Average” Cap





Average Life Expectancy


First Lapse Age





Illustration Rate





using 6.48 percent — the maximum rate under AG49 for 2016 with a 0 percent guarantee and an 11 percent current cap. As in Chart 1, the calculated premium “illustrates” carrying the policy to age 120 — yet assesses under a Monte Carlo calculation as having a 50 percent or more chance of not sustaining to age 100. And if we lower the cap assumption to 10 percent, that increases the risk of lapse prior to age 100 to almost 70 percent. If the client chooses their appropriate tolerance for lapse at 90 percent, the correcting premium is $10,500 for the first several years until there’s more actual experience with account value growth. In addition, the funding level can be

managed based on how well the index, expenses and sequence of returns are actually performing.

A New Paradigm

So the most common approach to selecting the best IUL policy — “what’s the best price?” — conveys the most risk! In the new era of Department of Labor requirements for suitable product and funding recommendations, we need to redirect the client’s “price” mentality to a more appropriate conversation. With two simple one-page charts, here’s how that conversation might sound. Producer: “Using this simple approach to matching your general risk tolerance to a type of policy you’re likely to find fits

Illustrated Rate

Pay 15 Years

Confidence Level

Pay All Years

Confidence Level

















































































InsuranceNewsNet Magazine » March 2017

What’s the Point of

No Returns? The Truth About Income Rider Annuities

Income riders are designed with attractive rollups and bonuses so that your clients look at them with wideeyed optimism and think that their money can double in 10 years. But when you break it down and do the math, the reality is much different.

The truth is your client will never see one dime of those promised returns. WHERE’S THE BENEFIT? We’ve done the math — and uncovered something all advisors should see. We’ll show you exactly how the companies that build these products can offer these big bonuses and rollups — and the one calculation that can save your client from putting their hard-earned money at risk.

If you sell or have sold an income rider annuity — you need to read this special report today. DOWNLOAD THIS IMPORTANT REPORT TO LEARN:

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As an advisor with the best interests of your clients at heart — you owe it to them to get informed.

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What Crediting Rate Should We Use? Many carriers selling IUL have performed “back-testing” on the last 2530 years of returns in the Standard & Poor’s 500 index one-year P2P. Their illustration software typically defaults to an illustration crediting rate between 7.4% and 8.4% for purposes of portraying illustrated values — or calculating an answer to “what’s it gonna cost?” The proprietary “Back-testing PLUS” module underlying Sustainable for LifeSM uses close to 16,000 historic P2P returns in the S&P 500 (without dividends) to run 1,000 hypothetical illustrations. A Success Probability is derived from those illustrations to determine the sustainability of any calculated premium or cash flow design. your money ‘style,’ an indexed universal life policy would appear to meet your profile for lifetime life insurance. So the next issue to address is how to best calculate a planned premium. “When considering a long life, what’s the balance of ‘low’ premium and the likelihood the policy will last as long as you do? Ten percent? OK — based on your requirement — we should start with $10,000 a year for at least the first two years, and then re-evaluate to see if we’re on target. Does that make sense?”


How many policies should be explored so the client doesn’t get concerned we have biases for one particular carrier? There are differences between IUL policies — but exactly how those differences will manifest on behalf of the policy owner won’t likely be known for a number of years. Carrier financial strength is important, as is experience with policy service and customer focus. We don’t know which policy among a field of contenders ultimately will be best. That’s a function of too many variables, more than we can predict today — including the degree to which the client follows the payment of the recommended planned premium! If a lifetime commitment seems like too much commitment, we will occasionally provide two payment scenarios: 15 years and life. Not only might this better match the client’s sensitivity to paying “forever,” but in some policies we may discover how different payment schedules affect the outcome. For some, 34

there is a clear indication that the contract works better paying more for fewer years, where for some there is no discernible difference. This is an indicator of how the contract was designed. Clients can choose the product that works best for the payment scenario they desire.


“But if I’m going to be ‘quoting’ a higher premium than the competition, I’m going to lose the sale!” With policy information presented in this manner, you have no competition. This sale is no longer about the lowest price an agent can illustrate. Any competitor would necessarily have to answer the same questions about probability of success. And any illustration can be run through the same system for comparison. The sale then becomes more about success than price. Given the choice, what client would choose a product with a 70 percent chance of lapsing before life expectancy? This process focuses the client on the right metrics and challenges them to consider the consequences of underfunding.

What Are the Results? Three Very Important Things:

• First, your clients will have been given enough data to make a decision that will not come back to haunt you later. In the language of fiduciary, we help clients determine what’s in their best interests. • Second, clients will agree to pay more in order to increase their chances of success, thus increasing commissionable

premiums. • Last, but not least, you will have no competition because simply showing a lower-cost illustration will not be enough for clients once they are exposed to probability testing. This is a huge win/ win scenario! This idea works best for clients who need a death benefit at an affordable price. Overfunded IUL used for retirement income purposes is a different animal, but one with similar issues. Obviously since those policies are already overfunded, the issue becomes the probability of receiving the anticipated income. Here you may face the opposite side of the risk equation: Will the sequence of returns have a negative impact on the anticipated income? No matter what the situation, life insurance policies with variables that have a material impact on the ultimate success or failure of the contract are being sold routinely to clients who have no basis for understanding the implications of options pricing, market volatility, non-guaranteed cost of insurance rates and premium payment management. Using a Monte Carlo simulator to assist in the evaluation of product suitability ensures that you will sell more IUL, at higher premium levels, with a higher degree of customer satisfaction. Ron Sussman is founder and chief executive officer of and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at Richard M. Weber, CLU, MBA, AEP (Distinguished), is past president of the Society of Financial Professionals. A 45-year veteran of the life insurance industry, he is a consultant to insurers and their agents on the topic of effective and ethical selling. Contact him at

Like this article or any other? As seen in the

July 2012 issue



of InsuranceNewsN

et Magazine

Health July 2012

InsuranceNewsNet Magazine » March 2017 Exclusive digital report for LIMRA Member Companies and their Producers.

Take advantage of our award-winning journalism, customizable licensure and reprint options. Find out more at

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Insurance products issued by: Minnesota Life Insurance Company | Securian Life Insurance Company These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products. Orion IUL is designed first and foremost to provide life insurance protection. While the interest crediting options are attractive for cash accumulation, the product should always be promoted to first meet the death benefit needs of families and businesses with cash accumulation as a secondary benefit. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender charges. One could lose money in this product. Policy loans and withdrawals may create an adverse tax result in the event of a lapse or policy surrender, and will reduce both the surrender value and death benefit. Guarantees are based on the claims-paying ability of the issuing insurance company. Orion IUL is pending state approval. Product features subject to change. Securian Financial Group, Inc. Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. 400 Robert Street North, St. Paul, MN 55101-2098 ©2017 Securian Financial Group, Inc. All rights reserved. F88673-11 1-2017 DOFU 1-2017 97293

For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it would be accessible to the general public.


Annuity Buyers Trending Younger Defined benefit pensions are continuing to disappear, and that’s leading to younger clients buying annuities as a retirement income vehicle. The average age of a primary annuitant for income annuities has dropped to 65.6 years old in 2016 from 66.6 years old in 2015, according to Cannex USA. Driving the trend is the increase in sales of deferred income annuities (DIAs). Sales of DIAs have been on the rise as the market is shifting away from single premium income annuities (SPIAs). Age also is factoring in to this shift. The average age of an SPIA buyer is approximately 69-70 years old, while the average age of a DIA contract buyer is 59-60 years old.

.25% benchmark rate increase HIGHER INTEREST RATES ARE WELCOME NEWS

When the Federal Reserve raised a benchmark interest rate by a quarter percent in December, it was music to the ears of financial advisors. Higher rates give advisors the chance to contemplate shifting client assets into other life and annuity product classes, said Chad Tope, president of annuities and individual life distribution for Voya Financial. Sales of a specific fixed annuity depend on product design and client needs. But the adage that a rising rate tide lifts all fixed annuity boats seemed to apply in 2016 and would carry over into 2017, as fixed annuities deliver higher yields than comparable conserving banking sector investments. Seeking to take advantage of higher rates, Voya will launch a new fixed indexed annuity next month. If rates conDID YOU





average age of income annuity buyer dropped from 66.6 in 2015 to 65.6 years old in 2016


tinue to rise, the fixed annuity marketplace could come back even further as crediting rates rise, Tope said. Fixed indexed annuities are on track to generate $60 billion in sales in 2016, according to industry data trackers.


Asset management veteran James Mullery has been hired to spearhead sales and distribution for Prudential Financial’s annuities business. This was announced as the company diversifies away from variable annuities and into the defined income space. Prudential is repositioning its annuities business, moving toward what a top company executive called “fixed income-centric” defined income products, also known as Prudential Defined Income. Prudential, the No. 1 seller of variable annuities in the U.S. in 2012 with sales of nearly $20 billion, has retrenched over the past five years. The carrier has made a long-term decision to diversify its risk exposure and move away from relying too heavily on variable annuities.

45 percent of annuity manufacturers have introduced or will introduce new annuity products in response to the Department of Labor rule. Source: Beacon Research Source: Beacon fiduciary Research

InsuranceNewsNet Magazine » March 2017


Time Thereand are 11time companies again, we offering were told investors want security, QLAC (qualifying longevity annuity flexibility, access toWhile money contract) products. thisand is guarantees. a small and new part of the DIA market, we expect to see an uptick — Michael Treske, AIG in sales in 2016.


Here is some of the latest new product news. Forethought Life launched its first single premium immediate annuity. The SPIA is marketed under the brand ForeCertain. ForeCertain will be distributed primarily through banks; independent, regional and national broker/dealers; and independent marketing organizations. A fee-based version of ForeCertain, developed to meet the Department of Labor’s new fiduciary rule, is also available. Nationwide has added two indices unique to its New Heights fixed indexed annuities. The J.P. Morgan Mozaic II Index is a momentum-based index that strategically rebalances every month among a diverse range of global asset classes. The NYSE Zebra Edge Index, developed by economist Professor Roger Ibbotson and his team at Zebra Capital Management, is the first index founded on Ibbotson’s behavioral finance research on popularity. It’s also the first NYSE index to be featured in an FIA. Great American Life is expanding its annuity offerings with two new indexed strategies that earn interest based on the performance of the iShares U.S. Real Estate ETF and the S&P U.S. Retiree Spending Index. Transamerica has announced an increase in the interest cap on its FIAs. The carrier now offers index account cap rates ranging from 2.25 percent to 4.35 percent. AIG launched Assured Edge Income Builder, a new fixed annuity product issued by American General.

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March 2017 Âť InsuranceNewsNet Magazine



How Annuities Unleash the Power of Delaying Social Security S  ince the baby boomer generation has undersaved for retirement, many will need to consider longevity risk pooling through annuities.


By Manish Malhotra

t’s one thing to advise a client that annuities are an important part of their retirement portfolio. Proving that the annuity recommendation will improve the client’s situation appears to be more difficult, but it need not be that way. The existing approach to advising clients about annuities — matching essential expenses — diminishes the power of annuities. The most commonly practiced approach by advisors is to meet the client’s essential expenses using annuities. It is reasonable to expect that the retiree should have essential expenses covered by guaranteed sources, but using that as the only argument to justify the proposed annuity purchase diminishes the power of annuities in many ways. Besides missing the point that income from annuities can also be used for discretionary expenses, such a view ignores a holistic picture of the client’s situation. For example, the match essentials approach pulls the annuity away from the most 38

powerful lever to help a retiree: Social Security claim deferral. The advisor may think that an increase in the Social Security benefit through deferral will provide higher essential expense coverage and thus correspondingly decrease the amount of the annuity sale. In reality, the opposite is true — Social Security claim deferral strongly increases the case for annuity purchase, and a deferral-with-purchase approach dramatically improves the client’s situation. To explain how, I will introduce an alternate approach.

An Alternate Objective Holistic Approach

Consider an alternate approach that is based on analyzing the client’s complete retirement situation. This would include all their retirement expenses and all their cash flow sources, as well as their current investments and annuities. The agent uses software to simulate two alternative income strategies that generate the same desired retirement income, considering all income sources and under the same set of forward-looking investment returns and inflation assumptions (Monte Carlo simulation). The agent then compares the strategies on the following measures: 1. Shortfall risk: The probability of the

InsuranceNewsNet Magazine » March 2017

client experiencing a shortfall in meeting the desired retirement income because the investment portfolio is exhausted while the client is still alive. 2. Shortfall $: Total amount of dollar shortfall experienced in one of the nearworst cases. 3. Average legacy: The average amount left as a bequest at the end of the plan. Let me explain these metrics as part of a retirement income analysis framework. I’ll use a hypothetical case of Peter and Lisa, who are 65 and 64 years old, respectively. They have $540,000 of retirement assets. Peter is retiring now. Lisa will work for another year, earning $41,500 and saving $4,000 of it. Peter collects a monthly pension of $1,000 that has a 100 percent survivor benefit. Peter’s Social Security monthly benefit at his full retirement age of 66 is $1,800, and Lisa’s Social Security monthly benefit is $800. It is expected that Peter will live to age 94 and Lisa will live to age 97. They are looking to generate $70,000 of inflation-adjusted annual retirement income annually. This is tiered down, based on existing research, to 87 percent after Lisa turns 75 and to 83 percent after Lisa turns 85.


Max Confidence – $70K 104

Shortfall Risk Shortfall $

Client Defaults – $70K Shortfall Risk

out of 1,000

$95K cumulative

Avg. Legacy


Social Security Claim


Social Security Claim





Mod. Infln Prtctd

cumulative Shortfall $ $345Kover 14 years

over 18 years

Avg. Legacy


out of 1,000






Consv. Infln Prtctd

$2,088,100 of Cumulative Retirement Income by Sources

$2,088,100 of Cumulative Retirement Income by Sources

Social Security $1,100,736

Social Security $930,794

Annuities $293,450

Other Cash Flows 350,047

Other Cash Flows $331,377

Systematic Withdrawals $807,259

Systematic Withdrawals $362,537

Shortfall risk: The probability of the client experiencing a shortfall in meeting the desired retirement income because the investment portfolio is exhausted while the client is still alive. Shortfall $: Total amount of dollar shortfall experienced in one of the near-worst cases. Average legacy: The average amount left as a bequest at the end of the plan. Mod. Infln Prtctd: Moderate inflation protected Consv. Infln Prtctd: Conservative inflation protected

A fixed indexed annuity (FIA) and a single-premium immediate annuity (SPIA) are considered for the analysis. The FIA has an immediate credit enhancement of 2 percent, an interest rate cap of 2.8 percent and guaranteed growth of 8 percent simple interest rate in income base over 10 years, after which it provides a 6 percent lifetime withdrawal rate. Here is what we determined. The chart above illustrates two different retirement income strategies and their performances. 1. Client Defaults represents the default strategy that the client wishes to pursue, which is to claim Social Security at the beginning of the plan and invest all their money in a conservative inflation-protected allocation (no annuity purchases are made).

2. The Max Confidence plan represents an optimal income strategy that is based on Peter deferring his Social Security claim to 70 and Lisa claiming her Social Security at 66, switching to a higher spousal benefit when Peter has filed and then switching to a survivor benefit upon Peter’s death. The plan is based on purchase of an FIA and a SPIA, each using 20 percent of the assets, and then balancing 60 percent of the assets invested in a moderate inflation-protected portfolio. The relative superiority of the optimal strategy is clearly demonstrated by the 28 percent point reduction in the chance that the client faces a shortfall, the reduction of $250,000 in the cumulative shortfall in the near-worst case scenario, and the increase in the average bequest (the portfolio value at the end of the plan, measured in today’s

purchasing power) of $204,000. The optimal strategy fared well on all fronts. That goes against the conventional wisdom that by buying annuities one is trading off against the bequest motive. How is one recommendation so dramatically better than the other? It is because of the synergies brought about by Social Security, investments and annuities. Using the same case, this chart shows the amount of cumulative retirement income provided by each source over the course of Peter and Lisa’s retirement. Here is how this works. Obtaining an additional $170,000 in Social Security retirement benefits over a lifetime through deferred claiming reduced the amount of total income funded by retirement assets. That in itself reduces the Shortfall Risk and it also makes the combination of annuities and investments even more potent. By moving $216,000 of retirement assets into annuities that provide $293,000 of real retirement income (purchasing power measured in today’s dollars; nominal inflation adjusted payouts are higher) over their lifetime, the remaining investment balance of $324,000 needs to provide only $362,000 of real retirement income over 33 years of retirement. That dramatically reduces the Shortfall Risk. The Shortfall $ also is reduced because of the increased Social Security benefit and lifetime guaranteed annuity payouts. Best of all, the synergies that create less in total withdrawals from the investment portfolio result in a higher Average Legacy, so the client wins on all fronts. Since the baby boomer generation has undersaved for retirement, many will need to consider longevity risk pooling through annuities; self-insuring their longevity is not a viable option for them. A transparent, objective analysis, as featured above, demonstrates you are acting in the client’s best interest despite the agent’s variable compensation. Transparency builds trust, brings more referrals, increases the retirement income business for advisors, and provides much-needed guidance and security for the baby boomers’ retirement. Manish Malhotra is the founder and CEO of Income Discovery, a technology platform for managing and growing the retirement income business. Manish may be contacted at

March 2017 » InsuranceNewsNet Magazine



AmeriLife CEO: IMOs Entering an Age of Consolidation A  n insurance marketing group’s CEO gives insights into the changes facing the distribution channel that generates billions of dollars in annuity premiums each year. By Cyril Tuohy


ndependent marketing organizations (IMOs) are headed for an era of consolidation. This is happening as insurers look to form fewer but deeper relationships with distributors seeking more scale to access larger amounts of capital, the new CEO of a top IMO said. The first consolidations are expected among smaller IMOs. But within five to seven years, it’s possible that even large IMOs, sometimes called super-IMOs, will seek to merge with competitors, said Scott R. Perry, CEO of AmeriLife. However, he said, consolidation among the large IMOs would most likely be a “one-off,” rather than a trend that is likely to affect smaller IMOs. In any case, a merger among large IMOs wouldn’t take place in the immediate future. “It will likely start with the small ones, and that will keep the industry busy for a while,” Perry told InsuranceNewsNet. “Longer term — five to seven years — we could see some super-IMO consolidation.” Super-IMOs often represent other smaller IMOs, and Perry estimates that there are between 200 and 400 IMOs eligible to do business with insurers. Other independent estimates peg the number of IMOs in the U.S. at about 350. No public database exists to track the size and number of IMOs. Perry, who last month was appointed CEO of AmeriLife, offered his insights into the changes facing the IMO distribution channel. This channel generates tens of billions of dollars in life and annuity premiums every year. Even as IMOs generate billions in sales, executives are concerned about the industry’s ability to continue selling under the 40

“It will likely start with the small ones ... longer term — five to seven years — we could see some super-IMO consolidation.” Scott R. Perry, AmeriLife CEO

Department of Labor’s new fiduciary rule. The rule, which raises the standards for investment advice for financial advisors, proposed making only the largest IMOs eligible for a class exemption. This exemption would allow a handful of IMOs to continue collecting commission-based income from life and annuity sales. One of those annuity sales categories — fixed indexed annuities — is on track for a $60 billion sales year in 2016. About 60 percent of fixed indexed annuities are sold through IMOs.

The World Beyond Table Stakes

The fiduciary rule is the latest example of what Perry called “acute regulation” affecting insurers and insurance distributors. But it would be wrong to lay the blame for all future IMO consolidation at the feet of the DOL rule, he said. “Consolidation drivers are scale and access to capital, which are necessary to drive value” to agents and consumers, Perry said. Not long ago, IMOs could get by differentiating themselves through product choices and pricing options alone. But today, the information revolution has put a lot of that data at the fingertips of agents and buyers. IMOs that offer differences only in product and price — mere “table stakes”

InsuranceNewsNet Magazine » March 2017

in today’s world — are going to find tough going in the future. The reason is that these differences aren’t enough to help differentiate an agent aligned with one IMO from another agent aligned with a competing IMO. IMOs need to think about offering agents more services around customer relationship and sales lead management, electronic and simplified application capability and data reporting, electronic underwriting, digital marketing, and analytics. These capabilities are available only through robust technology investments. Smaller IMOs must decide whether to invest in technology platforms on their own or via alliances, partnerships and acquisitions to better equip agents. This is because “all those value-added activities are going to have to be delivered, and those don’t come cheap,” Perry said. Which is why IMOs need access to higher levels of capital.

IMOs Must Broaden to Survive

Perry said that over time, IMOs have become focused and narrow with a deep understanding of their respective agent marketplaces. But as IMOs have expanded to take on many of the agent-support activities that insurers used to do, some IMOs have chosen not to diversify. This presents a risk that may come back to haunt those IMOs, he said. AmeriLife, for example, has a network of more than 120,000 agents in 50 states and annual sales of more than $2.4 billion premium, mostly from annuity and health products. The company is looking to diversify into traditional life insurance. The company is considering moving “down-age” into the 45-to-60-year-old demographic. This is a change from the 62-year-old and older market where AmeriLife has carved out a lucrative niche and made a name for itself, Perry said. Insurance company executives have also hinted in conference calls over the

past year that distributors are beginning to trim their insurance carrier and product palette. This is bound to favor some IMOs over others. Perry is only the third CEO in AmeriLife’s 46-year history and is the former chief business officer of CNO Financial Group. He is in a good position to speak about how the IMO market is changing. At CNO, a holding company for three life and health insurance company subsidiaries and an investment advisory, Perry headed Bankers Life, one of those subsidiaries. He is familiar with the way long-term changes in demography are affecting the IMO intermediaries.

Attuned to Demographics

Members of the Greatest Generation, who fought in World War II, are giving way to the baby boomers taking their place. Many of these boomers have defined contribution retirement plans and are working toward retirement. They will require IMOs to help agents rethink the way to relate to customers and the way those customers relate to insurance products. Boomers, for example, are more comfortable with the networks insurers have set up with groups of doctors, hospitals and prescription drug providers. This explains the popularity of Medicare Advantage, Perry said. Changes in ethnic demographics also will affect the IMO industry. With its headquarters in a state with a large Latino population, Perry said AmeriLife is planning to increase its commitment to that market by hiring and building bilingual marketing capabilities so that consumers can engage with Spanish-speaking agents. “If you want to be successful in the Hispanic market you need a Hispanic agent, and if you want Hispanic agents in your IMO you need Hispanic managers,” Perry said. “You have to get these into your business instead of relying solely on tweaking a product or appealing to the Hispanic market by adjusting your media.” InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.

Why 48% of clients leave their advisor and how to ensure they don’t leave you Numerous regulatory issues, greater longevity and rising healthcare costs have disrupted the financial services space significantly. In order to succeed, advisors need to let go of their “business as usual” approach to meet the needs of today’s consumer. Download our white paper “5 Major Industry Disruptions that Will Change How Advisors do Business Forever” to discover: •

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Uninsured Rate at Record Low


people bought health insurance in open enrollment; up 400K over 2015

The uninsured rate for health insurance hit a record low and could drop even further. A record-low 10.9 percent of the population was without health insurance in the fourth quarter of 2016, according to data from Gallup and Healthways. The figure is the same as the third quarter of last year, which was the lowest since Gallup and Healthways began tracking insurance coverage in 2008. The highest rate was 18 percent in the third quarter of 2013, before the ACA health insurance exchanges opened on Oct. 1 of that year. The uninsured rate is expected to drop further as, federal officials said, a surge of ACA enrollment hit the marketplace after the Nov. 8 presidential election. Officials said 6.4 million people had already purchased health insurance on the exchanges in the open-enrollment period through mid-December, which is an increase of 400,000 over the same period in 2015.


Aetna is considering an appeal of a federal ruling that blocked the company’s acquisition of Humana. A U.S. District Court judge rejected the $37 billion merger because he said the new company would lead to decreased competition, especially with Medicare Advantage. The judge stated that Aetna wasn’t completely on the up-and-up over its decision to leave most of the state exchanges where it sold coverage under the Affordable Care Act. When Aetna announced in August that it was leaving the majority of the exchanges, the carrier cited financial losses as the reason. But the judge opined that Aetna’s profitability wasn’t the only the reason it exited the exchanges. Aetna, he said, also left a number of markets to improve the likelihood that the Humana deal would be approved.


You can call it Heath Care Reform 2.0 or you can call it the dismantling of Obamacare, but UnitedHealth Group calls it “potential for change.”







The company’s CEO, Stephen Hemsley, said he sees potential for changes that promote state-based markets, flexible Medicaid programs and well-structured high-risk pools as Congress and the new president determine changes to the Affordable Care Act. UnitedHealth Group has a large Medicaid business, but its UnitedHealthcare insurance division abandoned most of the new health exchange marketplaces launched under the health law. Nonetheless, the exchanges might persist “where states choose to sustain them,” Hemsley predicted.

Aetna and Allina Health System formed a joint venture with the goal of providing health coverage beginning in 2018. Source: Northwestern Mutual

InsuranceNewsNet Magazine » March 2017


We remain positive and constructive with respect to what ultimately evolves in the next phase of health care change. — Stephen Hemsley, UnitedHealth CEO

UnitedHealth Group also announced it is buying surgical center operator Surgical Care Affiliates for about $2.3 billion in a cash-and-stock deal that will add to its outpatient holdings.


Who buys long-term care insurance and why? America’s Health Insurance Plans commissioned a study, and here’s what they found.

2/3 of LTCi buyers expect the cost of insurance to increase 1/3 want to protect their assets from the cost of care The majority of those buying LTCi now (about two-thirds) said their top reason for buying coverage when they did was because they expect the cost of insurance to increase in the future. Onethird of the study respondents described themselves as “planners” and said they bought coverage to protect their assets in the event they needed care in the future. About 60 percent of respondents said they would be more interested in learning about LTCi if it were sponsored by their employer. The study also found that 96 percent of LTCi plans sold in 2015 covered both nursing home and in-home care, and that shorter-duration policies are gaining ground.






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Better Benefits Communication Means Greater Engagement There’s no off-season when it comes to benefits enrollment. Here is how health insurance brokers can ensure a winning season by keeping in touch with benefits managers throughout the year. By Kyle Addy


they feel about the place they work. In fact, employees who rate their benefits education highly are also much more likely — 76 percent — to rate their workplaces as very good or excellent, according to the Colonial Life/Unum U.S. Worker Benefits Survey. Helping your client foster a better, longterm relationship with their employees drives up retention, morale and productivity

When it comes to benefits communication, there’s a significant disconnect between employers and employees.

Fewer than 40 percent of employers have a formal benefits communication plan. 90 percent of employers believe their approach is effective.

Only a third of employees say they understand their benefits very well. Nearly all — 98 percent — agree it’s important. Build a Bond With Workers

Strong benefits communication does more than help your clients’ employees make better benefits choices during open enrollment. It also helps your clients hold on to their top talent by increasing job satisfaction and workplace loyalty. Research shows there’s a strong, direct tie between how employees feel about their benefits communication and how

InsuranceNewsNet Magazine » March 2017

— and all three affect expenses and revenue. The cost of replacing a worker – recruiting, screening and training – represents a huge drain on an employer’s resources, but that’s exactly what happens when a worker leaves for perceived greener pastures. Now add in the challenge of performance-managing out a disengaged employee, who later must be replaced. Of course, great benefits communication

Sources: LIMRA, Help Employers Connect the Dots, 2016. Unum, 2014 U.S. Worker Benefits Survey, 2015. Colonial Life survey, 2013.


ports metaphors are often used to drive home key points in business. Here’s one of them: There is no off-season. That means when it’s time for benefits enrollment, your group clients have reviewed the options and are knowledgeable and prepared, and their employees should already have a good idea of available benefits options. Your clients want a smooth enrollment period that goes according to plan, with strong engagement and high participation. But if you think you’re already delivering the best benefits communication service to your clients, and your clients in turn think their employees understand their benefits, you might be surprised to learn there’s still more you can do. Research shows fewer than 40 percent of employers have a formal benefits communication plan. Yet a majority of them — 90 percent — believe their approach is just right, according to LIMRA’s 2016 “Help Employers Connect the Dots” report. But their workers disagree: Only a third of employees in the Colonial Life/Unum U.S. Worker Benefits Survey, which was released last year, said they understand their benefits very well. Once you’ve realized there’s much more that can be done with benefits communication, how do you effectively seize the opportunity? First, make sure you really know your audience — that’s a crucial element of effective communication. The same is true when recommending insurance products to fit a client’s needs. Know their business, what your client’s employees want and anticipate changes that might be needed

for benefits plans from year to year. You can achieve this only through relevant, frequent communication with your clients throughout the year, not simply just before and during open enrollment. It’s crucial to maintain relationships with human resources departments — or, at smaller companies without traditional HR, benefits administrators — that extend well beyond the enrollment period.

BETTER BENEFITS COMMUNICATION MEANS GREATER ENGAGEMENT HEALTH/BENEFITS alone isn’t going to change a slacker into a superstar, but the positive culture created by committed employees is closely connected to the success of the company itself. Executing a great benefits communication plan in partnership with the client creates tremendous value for them and increased appreciation of your relevance.

Ongoing Dialogue

Keep the benefits conversation with clients going all year, and encourage them to communicate with their employees. Here are some simple low- or no-cost ideas to build benefits and health knowledge beyond enrollment season: » Benefit of the month — Speak to clients about running a series of articles on their employee intranet site explaining in plain language different benefits and how to tell whether they’re a good fit. Just because you explained the nuances of disability coverage six months ago doesn’t mean an employee who’s now expecting a baby will remember it. Keep the stories archived where they’re easy to find and refer back to.

» Promote free external resources — There are several websites that have a wealth of information on benefits and health. » Be the on-site expert — As benefit consultant, you’re uniquely positioned to be an expert resource for employers. Offer to help them by holding on-site open hours or brown-bag lunch-and-learns through the year to explain different benefits and answer their questions.

The Bottom Line on the Bottom Line

Avoiding turnover is only part of the cost-control formula. There are hard dollar costs associated with employees not understanding and using their benefits to protect their health and well-being. Not taking advantage of preventive care coverage such as health screenings and flu shots for fear of the doctor’s bill can lead to more serious illnesses and lost time at work that might have been avoided. If your company offers more than one health plan option — for example, a lower-deductible, higher-premium traditional

preferred provider organization plan and a high-deductible “consumer-driven” plan with lower premiums — it’s important for your employees to understand how each works so they can make the best financial and health decisions for themselves and their families. Health savings accounts and flexible spending accounts can help employees plan for and manage health care expenses — but only if they participate in them. And that won’t happen if they don’t understand them. Your clients have other responsibilities to keep them busy throughout the entire year. Year-round, ongoing communication about benefits can better prepare them when open enrollment comes back around — and retain a loyal client for you. Kyle Addy is vice president, core market solutions, Colonial Life. Kyle may be contacted at



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March 2017 » InsuranceNewsNet Magazine


NEWSWIRES Gen X Likes Robo-Advisors

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40% of robo-advisor users were between the ages of 35 and 51 in 2016, up from 31% in 2015.

Robo-advising is on the increase, and Generation X investors are behind that growth. That’s according to Cogent Reports, which found that affluent Americans between the ages of 35 and 51 now represent 40 percent of robo-advisor users, up from 31 percent last year. Gen X actually is the second wave of adopters where robo-advice is concerned, the report found. Millennials were the early adopters, but they were willing to invest in lesser-known brands offering an alternative solution for managing investment portfolios. Affluent Gen X investors are less trusting of the financial services industry compared to millennials, according to the report. Furthermore, Gen Xers are less likely to seek advice from an investment professional than members of other generations are. folios away from money market funds, deposit accounts, cash, variable annuities, mutual funds and individual stocks. Changes in the product mix are due in part to the Department of Labor’s fiduciary rule that will favor some product categories over others.





Gen Xers are not only increasing use of robo-advice, they are driving future development of automated investment advice offerings. — Julia Johnston-Ketterer, senior product director at Market Strategies

saying they intend to buy an ETF this year. Financial advisors echoed these findings, saying that 94 percent expect to invest in ETFs in client portfolios in the coming year, with 46 percent of those new purchases funded by cash savings. The survey also revealed that one in four investors already uses ETFs. These investors tend to be younger, more engaged in managing their finances and more optimistic about their financial futures than the overall investment population.



Expect to see a shift in the product mix in client retirement income portfolios over the next two years, a Cerulli Associates report predicted. On the increase are exchange-traded funds, fixed annuities, long-term care policies and other investments. Variable life contracts, separate accounts, alternative investments and bonds are other options that could gain ground. But advisors are expected to move port-


ETFS ATTRACTING MORE INVESTOR ATTENTION Exchange-traded funds (ETFs) are attracting the eyes of more investors these days. A BlackRock survey said ETFs will play a bigger role in investment portfolios in 2017, with 52 percent of U.S. investors

THEAIG AVERAGE RETURNits ONretail AN INITIAL OFFERING was 20 percent is rebranding mutualPUBLIC fund family this year. The average increase in the first day (or “pop”) is 13 percent.

to AIG Funds from SunAmerica Mutual Funds

Source: Renaissance Capital

InsuranceNewsNet Magazine » March 2017

Source: AIG

New Year’s resolutions have long been tossed into the trash with a shrug and a sigh of “maybe next year.” More than twothirds of Americans said their New Year’s resolution had to do with improving their finances, according to the National Endowment for Financial Education (NEFE). But about one in three reported their financial life is worse than what they want it to be. Transportation issues topped the list of the most significant financial setbacks that Americans experienced last year, with 23 percent citing transportation woes. Other top unexpected events included housing repairs/maintenance (20 percent) and medical care for an injury or illness (18 percent).

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March 2017 » InsuranceNewsNet Magazine



n this exclusive interview, Dean Zayed, President and CEO of Brookstone Capital Management, shares what has made Brookstone a national leader in the RIA space and predictions for what the wealth management community will face in the new administration. Q: What’s unique about your own journey in the financial services industry? My background wasn’t in financial services. After graduating law school, I became an estate planning attorney and immediately saw a direct correlation between estate planning and financial services, and how there was a client need for this complete approach of providing a consistent set of advice that addressed both. I began to explore the financial industry and quickly decided to start my own firm that would pioneer the idea of what I called a multidisciplinary practice, which was just a fancy way of describing the “one-stop shop” I envisioned. I obtained both insurance and investment advisory licensure (the Series 65). With that powerful combination of insurance and managed money, I was able to provide independent advice that included access to virtually the entire universe of financial products and services. In 2006, I was inspired to leverage the expertise I had developed and focused on helping other advisors grow their practice by optimizing the intersection of insurance and securities, which is why I started Brookstone. This is now my 20th year as a practitioner, and I still maintain the estate planning law firm and my personal advisory practice, both of which were the foundation for building Brookstone to what it is today. Q: What do you think 2017 will bring for the wealth management industry? 2017 has a very important regulation looming, which I’m sure is familiar to everyone. The DOL ruling will change the face of our industry and how daily business is conducted by independent insurance agents. Now more than ever, insurance-only producers should be exploring an RIA partnership to ensure that a fiduciary standard is met each and every time. Choosing the right RIA partner will be an important decision for advisors in 2017, as many firms have not adapted to today’s complex industry. In anticipation of the pending changes in 2017, Brookstone has strengthened our compliance infrastructure and made the appropriate modifications to our investment platform and fees.


InsuranceNewsNet Magazine » March 2017

Financial Insights Q: Do you think the new administration will have an impact on the wealth management community? I’ll save the punditry for the pundits. But I will comment on three themes that are likely to remain intact during the new administration. First, fee compression is real. If your fees are too high, you will not be competitive, and you won’t be operating in the best interests of your clients. We aggressively reduced fees

to our platform regularly, with the singular goal of providing the best solutions to our advisors. Those solutions are not limited to a handful of third-party money managers. Brookstone understands the needs of individual investors and the need for our advisors to have a competitive advantage for every situation. With that in mind, we offer an open architecture platform where our advisors can navigate a broad universe of low-cost mutual

RAISE Your Investment Philosophy

Brookstone refers to their investment philosophy as “RAISE,” which stands for Risk Appropriate Investment Strategy Evaluation. The concept is simple, as they aim to achieve six important goals: 1. 2. 3. 4. 5. 6.

Deliver competitive returns Avoid large losses or drawdowns Incorporate a risk-managed approach Offer both brand name and boutique money managers Utilize a combination of strategic/tactical and active/passive approaches Focus on goals-based performance and do not chase benchmarks

across Brookstone, without reducing our independent advisors’ compensation. Second, performance matters. We built a value proposition around protecting on the downside, but that was not good enough. We also want to participate meaningfully on the upside. We boldly revamped our investment platform to be effective and relevant in all market cycles. Third is the move toward total portfolio construction that contemplates insurance or annuity needs with thoughtfully allocated managed money. We conscientiously moved our education and internal support infrastructure toward supporting total portfolio construction. In brief, the focus on total portfolio construction has positioned our advisors more competitively in the marketplace. We feel strongly that any advisor who focuses on these three themes will be perfectly positioned to navigate any challenges and opportunities that a new administration would bring. Q: What makes Brookstone different when it comes to asset management and planning? I truly believe that we have some of the sharpest talent in the industry at Brookstone. Our in-house team includes three CFAs, one of whom is our Chief Investment Officer, who are instrumental in shaping our investment platform. We differ from our competitors because we do not outsource our investment intelligence or our back office infrastructure. We create new solutions and enhancements

funds, ETFs and SMAs to create customized solutions for clients. With our RAISE philosophy (see above) in mind, we know how important it is to provide maximum flexibility for our advisors. Q: How can advisors help their clients exercise patience and discipline throughout changing investment markets? Going back to our RAISE philosophy, we educate advisors to set expectations with clients around goals-based performance. Too often, clients are focused on the headline of major market indexes, which can have a negative effect on their perception of performance. In many instances, clients have to understand that their individual goals and risk tolerance may not directly correlate to certain market indexes. Understanding this upfront will help create that patience and discipline across all market cycles. Q: How do your strategies manage both performance and protection? Over the past few years, many RIA firms have relied solely on using defensive tactical management, which is designed to perform in specific market cycles with limited upside capture. Understanding the need to provide clients with positive returns and to protect against potential downside, Brookstone created the RAISE 360 Select models. Our RAISE 360 Select models are designed to be competitive throughout changing markets S P O N S O RED CO N T EN T

with Dean Zayed

and are a globally diversified blend of strategic and tactical components. Each model aligns with a specific risk profile using a range of equities and fixed income vehicles engineered by our seasoned Investment Committee. We truly believe that this approach gives clients the security of downside protection, while still participating in upside performance, and the results have validated this! Q: What is your advice to advisors during a bear market? A key principle of our RAISE philosophy is to avoid large losses with a risk-managed approach. While we always seek to deliver competitive returns, our core belief has been and always will be to manage downside risk. Advisors need to manage client expectations, not just in a bear market but in all market conditions, by thoroughly profiling their clients’ goals and risk tolerance. Brookstone has a seasoned team of professionals who are on call to assist advisors with specific client cases, recommendations, proposals and portfolio designs, and education on any number of topics. Q: How does Brookstone’s platform serve the performance-focused investor? Again, we remove most limitations and give our advisors much more than a handful of antiquated solutions. We have the ability to provide any solution that may be applicable to the individual investor. Our investment platform is one of the most comprehensive and customizable in the independent RIA space, and our advisors have seen the benefit of that from client satisfaction. By having a large menu of solutions, including those with a performance-focused investor in mind, we create a competitive advantage for every Brookstone advisor. Couple this platform with a home office staff whose singular mission is to help our advisors grow their business, and you have the truly special culture and value proposition that has made Brookstone a national leader in the RIA space. •

To learn more about Brookstone, request their exclusive guide “Performance Matters” by visiting

March 2017 » InsuranceNewsNet Magazine


Liquid Alternatives: The Ingredient for Portfolio Diversification How to help emerging high-net-worth clients replace fixed income in a low-rate/low-yield environment. • By Thomas J. Quinn


or the past decade, the Federal Reserve has maintained interest rates at unprecedented lows during the financial crisis, the Great Recession and the ongoing recovery. In recent years, nearly one-third of all government bonds worldwide have been posting negative yields. This has radically changed the way that bonds will perform and the ways they should be used. Now that the Fed has signaled a slow return to more normal interest rates starting with a quarter percentage point increase in December 2016, we expect further complications for advisors and their clients in the foreseeable future. Fixed income was once the fulcrum with which advisors helped many clients to manage risk as they transitioned from maximizing growth during the accumulation period to generating a stable income stream during retirement. But as my recent research demonstrates, fixed income’s potential for managing risk and mitigating losses during the accumulation stage has been severely diminished — and will continue to erode — while forcing clients to endure near-zero returns. This will be exacerbated as rates rise, as outlined here.

Accumulation Challenge for EHNW Clients

The challenge is extremely acute for clients who are in the accumulation stage of their financial life cycle, in particular those with emerging high net worth (EHNW). With investable assets between $500,000 and $1 million, these EHNW clients are often in their mid-40s to late 50s. They are at a pivotal point where they are trying to maximize their retirement assets while balancing several competing priorities. » They are in their peak earning years and peak income tax bracket. » They are actively building wealth and don’t currently need income. » They must maximize returns but are working toward an unknown retirement target. » They need more tax deferral. They can max out qualified plans and can easily give up liquidity. » They must slowly dial back downside risk as they approach retirement, but 2 to

Investment Objective

Forward-Looking Outlook


Predictable income

Low, but still predictable

“Safe” income has never been lower.

Stable principal

Questionable to poor

As rates begin to rise, prices will decline.

Moderate return


Low rates equal low returns, and rising rates will make this worse.


Persists, but not as strong

As rates rise, correlations may rise slightly.

Tail risk protection

Limited and more expensive

Rates cannot decline far enough to generate strong double-digit returns.

50 50

InsuranceNewsNet Magazine Magazine »» March March 2017 2017 InsuranceNewsNet

3 percent returns on bonds are not enough to reach their retirement goals. Given the current challenges of using fixed income for those with emerging high net worth and other clients in the accumulation stage, liquid alternatives can provide a highly effective solution to manage risk with greater upside potential. In addition, using asset location to enhance the performance of liquid alternatives can help these clients maximize accumulation at the same time that it helps minimize yearend tax bills.

Choosing the Right Liquid Alternatives

Alternatives can provide a controlled range of exposure to the market in different scenarios. In addition, they can provide a unique source of returns and risk to your clients’ portfolios that can significantly enhance diversification. Historically, these types of alternatives strategies have been the exclusive domain of institutional investors and those with high net worth. But liquid alternatives, including ’40 act mutual funds, exchange traded funds (ETFs) and variable insurance trusts (VITs), offer many of the same characteristics of hedge funds. They use the same nontraditional investing strategies while also providing daily liquidity, lower fees and greater transparency. Alternatives are not a magic asset class. But they can be very effective as a specific strategy to address a specific risk in the portfolio. Advisors should take a targeted approach to identify alternative strategies that will meet their clients’ specific needs. My recent research examines three types of alternative strategies that can serve clients’ need for risk protection while also meeting their need for higher returns. They are managed futures, hedged equity and merger arbitrage.


Alternatives are not a magic asset class. But they can be very effective as a specific strategy to address a specific risk in the portfolio. » Managed futures can help hedge equity tail risk by providing outsized return potential in periods of extreme equity market declines. Tail risk events are rare, but during times of crisis or financial market distress, the magnitude of losses suffered by all asset classes at the same time can decimate a portfolio. Managed futures have historically provided a powerful level of portfolio protection in “crisis” markets, without significant negative impact on returns in normal markets. » Hedged equity can help reduce risk near retirement by providing a defined “floor” to limit downside risk from stocks. Most clients cannot endure the near-zero returns of fixed income. They need greater growth potential to meet their goals. A long-short equity strategy with a defined downside hedge in place, typically called a hedged equity strategy, can provide more dependable downside protection than bonds. This eliminates the risk of sharp losses from stocks while also capturing most upside in normal markets. » Merger arbitrage can help manage interest rate risk. The worst-case scenario for fixed-income investors is that interest rates rise quickly. This may not be likely, but the worst case rarely is. It is common for advisors to add floating rate loans to traditional bond portfolios to ease this duration risk. While loans can limit interest rate sensitivity, they do not diversify the liquidity and credit risk common in most diversified bond portfolios. Merger arbitrage is an alternative strategy that can offer a return similar to loans, with much lower volatility and substantially lower drawdowns.

The Power of Asset Location

Many advisors do not adopt alternatives because of their high tax costs. Liquid alternatives tend to be highly tax-inefficient, but proper asset location with a tax-deferred vehicle can minimize the impact of taxes and potentially increase returns between 100 and 200 basis points per year, without increasing risk. Asset location is the proven strategy of holistically evaluating a client’s holdings across all of their accounts and locating tax-inefficient assets in tax-deferred vehicles. By using asset location, advisors can expand the universe of potential investments and leverage more high-quality alternative strategies that may not have been considered due to their tax implications. To maximize the benefits of asset location, begin with the optimal investment mix to meet a client’s objectives and risk profile. To size a client’s tax-deferred accounts to the optimal level, based on the tax efficiency of assets in their portfolio and their liquidity needs, first max out qualified plans, then use vehicles such as low-cost investment-only variable annuities (IOVAs). IOVAs are designed to maximize the power of tax deferral on advisor-managed portfolios. Several factors must be considered to fit the fee-based or fee-only model. » Low fees and no commissions: Just as taxes erode performance, so do fees and commissions. » No surrender charge: Flexibility is imperative. Back-end surrenders can lock up assets for extended periods. » Broad set of underlying investment options and unlimited trading: Use these to execute the optimal investment strategies.

Add Value and Increase AUM

Fixed income has been an effective tool for advisors, allowing them to solve for both accumulation and income over a client’s life cycle. While bonds will remain a critical component for generating retirement income, the current low-rate/low-yield environment is forcing advisors and their clients to reconsider their use of fixed income during the accumulation stage. Alternative strategies are effective substitutes during the accumulation period, to manage risk while generating greater returns. Today many liquid alternatives, such as ‘40 Act funds, are available to help mitigate specific risks while capturing more upside potential than fixed income can. One of the biggest impediments to using liquid alternatives is their tax implications. Just as using liquid alternatives to replace fixed income can boost the performance of a client’s portfolio, using asset location can further enhance the performance of these liquid alternatives and is fundamental to maximizing returns. This challenging environment of low rates and low yields is likely to produce investment outcomes not seen in the past 35 years. Both the greatest challenge and the greatest opportunity are in the accumulation stage. Liquid alternatives combined with asset location can help you add greater value for your clients and increase assets under management for your firm. Thomas J. Quinn, CFA, is chief investment and research officer with Jefferson National. He may be contacted at thomas.quinn@

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Elder Financial Abuse: Losing More Than Money When older Americans experience financial loss and exploitation, the effect reaches beyond their own bank accounts. • Katie Libbe


lder financial abuse is getting more attention as people realize the significant impact it is having on older Americans’ financial security. Yet there is still a lot that the financial services community needs to learn about this complicated issue. Namely, it’s that elders aren’t the only ones being impacted by financial abuse. When we launched the findings of our 2016 “Safeguarding Our Seniors” study in November, we emphasized that both the

caregivers said the elder they care for has experienced financial abuse or exploitation with a financial loss. Furthermore, respondents revealed that elder financial abuse is not an isolated occurrence, with a full 40 percent of all active and potential caregivers confirming that their elder has experienced financial abuse more than once. In terms of financial impact, respondents noted the average financial loss to victims was $36,000. This amount was 20 percent higher than estimated in the 2014

Take Action Against Elder Abuse

Here are some ways your older clients and their caregivers can help protect against elder financial abuse: » Plan ahead to protect their assets and ensure that their wishes are followed. » Consult with a financial professional or attorney before signing complex agreements or anything they don’t understand. » Build relationships with professionals who are involved with their finances — they can assist in monitoring for suspicious activity. » Limit use of cash — using checks and credit cards leaves a paper trail. » Trust their instincts and feel free to say no. From the Allianz Life “Safeguarding Our Seniors” study

incidence and financial impact of elder financial abuse may be worse than previously thought. Originally commissioned in 2014, “Safeguarding Our Seniors” found that about 20 percent of family and friends reported knowing an elder who experienced financial abuse. The 2016 study focused on family and friends in active elder caregiving roles, or those who could be in those roles soon. It found that more than one-third of active 52 52

study, with nearly half of respondents saying the effect on the elder victim was “major loss” or “financial ruin.” Equally troubling, nearly 90 percent of active and potential caregivers said they also experienced a financial impact from the abuse, with the average cost to them also reaching $36,000. This was a direct result of having to compensate for their elder’s loss. This is the part of the story that deserves a closer look — the effect that elder

InsuranceNewsNet Magazine Magazine »» March March 2017 2017 InsuranceNewsNet

financial abuse is having on caregivers and the additional support necessary for this growing segment of our society.

Financial Strain on Caregivers

Even for those who do it professionally, caregiving is a taxing occupation fraught with numerous challenges. When you consider that many who provide this service are simply friends and family of the elder accepting the additional burden out of the goodness of their hearts, the caregiving role takes on increased importance. In fact, when asked how they feel about their current caregiving situation, a full three-quarters of caregivers said providing care for their elder is almost like a full-time job. As America’s population ages, there will be more people fulfilling this position, meaning more people will be susceptible to the myriad difficulties that accompany the task. Unfortunately, financial strain is at the top of this list of difficulties. The “Safeguarding Our Seniors” study found that the average caregiver provides more than $7,000 per year in both cash and noncash (driving to appointments, delivering meals, social engagement, etc.) support. They also are spending more than 10 hours a week providing noncash support, and fewer than half of current caregivers receive some form of financial assistance for that support. These statistics are troubling enough on their own, but they are exacerbated when the elder in question has been a victim of financial abuse. The costs to caregivers are a staggering 56 percent higher — totaling almost $8,400 per year — for those caring for financial abuse victims. Furthermore, in cases where the elder is a financial abuse victim, the need for those elders to receive some sort of financial assistance from their caregiver is more than double that of situations where financial abuse has not occurred.


Detriment to Retirement Planning

It should come as no surprise that caregivers are concerned about this trend and the effect it will have on their own retirement years. Two-thirds of active caregivers said the cost of providing care for their elder is having a significant effect on their finances and that they worry about having enough money to retire because of what they are spending on caregiving. Once again, when elder financial abuse is part of the picture, that anxiety is even greater. Nearly 80 percent of caregivers responsible for an elder who is a financial abuse victim indicated concern about the effect caregiving is having on both their current finances and their retirement savings. In addition, this financial stress has created a moral gray area that many caregivers are constantly struggling to reconcile. Although the majority (81 percent) of current caregivers agree that it’s all right to accept some of the elder’s money to cover expenses, if offered, significantly fewer (66 percent) agree that it’s all right for a caretaker to reimburse themselves for any expenses without informing the elder every time.

Advocating the Role of the Financial Professional

It’s clear that elder financial abuse is a complex, multilayered problem and one where many people could benefit from the wisdom of professional assistance. Although seven in 10 caregivers are currently talking to their elder about financial abuse and scams, many caregivers believe these discussions are challenging. These caregivers said they are hesitant to have frequent conversations on the topic for a variety of reasons, including believing that it’s none of their business, believing that the elder is capable of managing their own finances, or believing that such discussion makes the elder uncomfortable. So what’s the best way to address this issue? The majority of caregivers agree that open and honest conversations about finances are most effective in preventing their elder from becoming a victim, which in turn would help minimize the financial impact on caregivers themselves. The majority of active and potential caregivers (58 percent) also agree that the participation of a professional third party could help make these conversations

easier, especially if past elder financial abuse is involved. More than three-quarters of people caring for victims of past financial abuse would welcome the assistance of third-party professionals versus fewer than half of caregivers (43 percent) where the elder was not a victim. It is hoped that elder financial abuse is already on your radar as a discussion topic worthy of attention, but this topic may extend to more of your clients than you previously thought. Take the time to connect with clients and discuss how caregiving factors into their lives, whether they are currently looking after a loved one or if they have the potential to become involved in caregiving in the near future. A proactive approach to addressing caregiving and the prospect of elder financial abuse can make a significant difference in clients’ approach to managing their finances now and saving for the future. Katie Libbe is vice president of consumer insights for Allianz Life. Katie may be contacted at katie.libbe@

March 2017 2017 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine March

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Get More Callbacks: 10 Insurance Prospecting Email Tips That Work W  ays to make your email marketing stand out and entice your prospects to call back. By Justin Brown


mail is the lifeblood of a good sales strategy. You don’t need to be the best writer or even have the best email system to be successful. All you need are a few ideas and some commonsense guidance to get more callbacks from your email prospecting.

[1] Subject lines

Research shows that 35 percent of email recipients open a message based on the subject line alone. So if your message has a bad or even a mediocre subject line, you’re already starting behind the eight ball. Think of the subject line like the lens cap on a camera. Even the very best cameras will take the same dark photo if there is an obstruction. Don’t let your subject line be the obstruction. Keep subject lines short, sweet and relevant. Email experts say that 65 characters is the ideal length of an email subject line. Here are some suggestions that you 54

might try to incorporate into your next sales email subject line.

you be interested in a quick review of your policies?”

» Hello, [first name] — your new rates are almost ready to review.

» “Is there a good time to discuss what best fits your situation?”

» How much is 10 minutes worth to you?

Consider the placement of your question as well. Asking up front, or even in the subject line, might get different responses than asking at the end of your short sales email, when the answers might be more detailed. Don’t ask more than two questions in the same email. Just one question is best so you’re not scattering directives in your email and confusing your prospect.

» Your recent insurance rates for [specific item]

[2] Ask questions

Questions elicit responses. People want to share their knowledge and information when questions are directed at them. I would not recommend jumping right in with the meat and potatoes of your sales pitch, however. Saturated sales questions like that can be tough to digest for prospects in the investigative stage, so jumping right in with “What are you looking for in your insurance policy?” might not get your email inbox blowing up with responses. Softer, less direct approaches just might, though. » “Would you be interested in a free insurance consultation over the phone?” » “If I can save you $100 or more, would

InsuranceNewsNet Magazine » March 2017

[3] Provide examples

Real-world examples or estimated models that closely resemble the real thing are a powerful asset to have in your sales arsenal. Life insurance agents often do this to model out a prospect’s financial landscape. When customers see examples of how a service or product impacts their life, finances and risk potential, they can more easily visualize the need or at least see the concepts you’re pitching in practical terms. This validates your approach and the service or product being offered.

GET MORE CALLBACKS: 10 INSURANCE PROSPECTING EMAIL TIPS THAT WORK BUSINESS You might be asking, “Well, how do I prepare an example when I don’t have much information on the prospect?’ This is where the email questions above are especially useful. Ask your prospect whether they are interested in having a personalized example, unique to their situation, prepared for them. This allows you to offer the example and gives you time to prepare one if they are receptive to your approach.

[4] Time sensitivity

The element of time is a staple of the ad world and for good reason. It gets a reaction. Recall the restaurant coupons with expiration dates or the latest TV commercial that says “offer ends soon.” This doesn’t translate directly to insurance leads, since you don’t have the ability to offer time-sensitive discounts, but it can be used more indirectly. Consider the following: » Is there a new law that is changing on a specific date that could impact your prospects? » What seasonal changes may impact your prospect’s coverage or premiums?

by creating a “customized” analysis of their risk, future plans or personal situation. The more specific you make your pitch, the more you’re talking directly to your prospect’s needs and personalizing your service. That leads to prospect interest and ultimately more callbacks.

[6] Value selling

Value is not just cost-centric. Your prospects may find value in the amount of time you can save them, the comprehensive features of the policy you’re recommending, or the ease of transitioning them from one plan to another. It goes without saying, however, that most people are looking for products and services where “best” and “cheapest” intersect. But what if you know you cannot compete with another agent or carrier on price? That’s where you need to focus on value selling. In your prospecting emails, try to identify the value for your prospect immediately. If you know other agents or carriers can’t compete on the service level, leverage that and try to sell the sizzle up front, not the steak. Many customers are willing to pay more for significant value, provided it’s presented in the right way.

A different approach to this might be your own availability. An example would be to let the prospect know that you are available for the next two weeks for a phone consultation to focus on getting them the best coverage. Although you may still be available after that period, you’ve provided a window for them that puts a value on your time and effort. This shows that you’re focused on their needs for that period of time and offers a small hint at the scarcity of your time after that period.

[7] Share content

[5] Personal touch

» Email prospects a tip sheet on common insurance mistakes that could cost them money.

Personalization is a vital part of making people feel comfortable. We call friends by their first names for a reason and treating your prospects this way can disarm even the coldest shoulder. Use your prospect’s name in your email subject line or as the greeting out of the gate. “Hi, thanks for your email, Josh” sounds better than “Hi, thanks for your email.” Remember that personalization can be more than just calling your prospect by name. Try personalizing the experience

You may have heard the phrase “Content is king.” If you have a blog, you should use it to share your latest and best content. This validates your expertise for your prospects. However, if you don’t have a blog, you still can share content. Here are some ideas to help you get started. » Leverage data from your carrier to show prospects the market conditions.

» Send a checklist of what to look for in an insurance policy, carrier or agency.

[8] Social proof

Social proof can be anything from testimonials and published quotes to awards and website badges, among some others. It’s a way to inform prospects that you’re not only worth your salt, but you can prove it!

Because insurance is an intangible product and customers are opting for you to act on their behalf for a “service,” leveraging social proof helps you rise above the numbers and validates you and your agency. One study said more than 70 percent of Americans look at product reviews before making a purchase. Since they most likely will research who you are anyway, it might help make it easier for a prospect if you offer up your social proof for them. » Append your awards/recognition to your email signature. » Leverage a short testimonial in your email signature. » Add relevant and trusted website badges to your site or emails (Better Business Bureau, Chamber of Commerce, A.M. Best, Moody’s, SSL/Verisign, etc.). » Include your social profiles in your email signature.

[9] Use humor

Jokes can be lighthearted or whimsical, and can help you disarm the most stubborn person. But some discretion is essential if you go this route. I’ve seen some classy examples that related to the product or industry, and I’ve witnessed others that were cringe-worthy. If you’re going to add a touch of humor, remember that professionalism is never a bad thing.

[10] Simplicity wins

Keep it simple! Complexity will kill even the best sales strategy. What that means is: Don’t waste their time or yours. Email marketing to prospects should be straightforward and easily digestible. There are many ways to get more callbacks from your prospecting emails, and there is no one-size-fits-all strategy. Go forth and test a few of these. You’ll be getting more callbacks and setting up new appointments in no time. Justin Brown is the content manager for Justin may be contacted at

March 2017 » InsuranceNewsNet Magazine



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

Virtues Are as Important as Values W  e need a clear understanding of the importance of virtue so that we can better live our values.


By Julie A. Ragatz

irtue is a fitting concept to think about as we observe Ethics Awareness Month in March. Our industry spends much time promoting the concept of values but much less time on the concept of virtue. This is unfortunate because we need a clear understanding of the importance of virtue so that we can better live our values. Values are beliefs about those things that are good and important. Values are identity-constituting, since what we believe to be good and right defines who we think we are as individuals and how we wish to represent ourselves to the outside world. Shared values can be a tremendous source of cohesion among members of a group who can support each other in living their values. People with similar values find it easy to be in each other’s company because they operate under the same assumptions that they take for granted those actions they should perform and those actions they should avoid. At the same time, groups whose members have dissimilar values are often tenuous and unstable. Because they have different conceptions of the good, they have different priorities. Thus, it can be challenging to unify individuals within such a group behind a coherent plan of action. At this point, we have not mentioned whether there are “good” values or “bad” values. Clearly, groups throughout history have embraced values that are exclusionary and even harmful to other groups. There are business organizations that have chosen to pursue their values in a way that violates their genuine obligations. It is often said, “When your values are clear, your decisions are easy.” This does not necessarily mean that your decisions are good. In short, while values might serve as a shorthand rationale for those things that we prioritize, it does not 56

necessarily imply that those values are the right values in the sense of meeting our obligations to other people and ourselves.

A Mistake to Shy Away

Many people shy away from the term “virtue” because of its “Sunday school” connotation, but this is a mistake. The idea of moral virtue was first discussed by the Greek philosopher Aristotle, who lived around 400 B.C. According to Aristotle, virtue is a disposition or a tendency to act well in a certain area. Virtues provide us with the ability to “see” the world in the right way. The virtuous action represents the middle point between excess and deficiency. Aristotle argued that acting virtuously promotes the physical, emotional and social flourishing of the individual. Consider three wellknown virtues: generosity, justice and courage. Generosity enables us to identify correctly situations in which generosity is called for and then identify which form the generous action should take in that particular case. Justice helps to identify situations of injustice and to know what just action is required. A courageous person knows when an act of courage is required and what action should be taken in that particular situation. Virtue, then, enables its possessor to identify situations in which moral actions are required and to perceive the correct response. How do virtues connect with values? Values themselves say nothing about how to identify situations in which a value is at stake or what it means to “live” that value. For example, many organizations have adopted “respect for others” as a value. However, the virtue of justice is necessary to identify situations in which people are being disrespected and to identify the necessary actions to take in each particular situation.

Why Virtue Is Necessary

Virtues can help to adjudicate when there is a value conflict. For example, if an individual values both “promise-keeping” and

InsuranceNewsNet Magazine » March 2017

“promoting the good of her clients,” she may feel torn when it appears that the only way to look out for the interests of her client is to break her promise of confidentiality. Clear values make for easy decisions only when there is one value at stake. Finally, possessing virtue is essential to being an excellent financial advisor. Acting responsibly as a financial professional requires several virtues: courage to know when and how to have difficult conversations with your clients, justice to know how to distribute your limited resources among your clients and others who depend on you, and proper humility to describe accurately your accomplishments and skills to clients and prospects. How do you become virtuous? A colleague recently commented that change happens when “pain pushes until the vision appears.” Recall that virtue promotes happiness. People who are miserly, cowardly and unjust are often unhappy and socially isolated. They will begin to change when the “pain pushes” them to do so. However, this does not need to be a solitary affair. Aristotle believed that people learn to be virtuous through living in virtuous communities. We learn to be virtuous by watching other virtuous people, and we are motivated to be virtuous when we see positive changes in our own lives. This is why building an organizational culture that supports both virtues and values is so important. During Ethics Awareness Month, we should not only challenge ourselves to think about our values and how they connect us (or disconnect us) from our communities, but we should also think about how we can change ourselves for the better by becoming more virtuous individuals. We will be the happier for the effort. Julie A. Ragatz is director of the Cary M. Maguire Center for Ethics in Financial Services and assistant professor of ethics at The American College. She may be contacted at julie.


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.

Building a Successful Practice: It All Starts With You S  tart by knowing yourself and your team, and surrounding yourself with the people, resources and programs that will help you succeed.

processes and people were needed as the company reached new levels of success. Dan Sullivan taught me to think about what would be needed if your company were 10 times the size of what it is today.

By John F. Nichols

2. Surround yourself with people, resources and programs.


ver the past few months, a number of people have asked me how I did it — how I grew a profitable and sustainable financial services business. There are many elements to building a successful business. Here are three I have used repeatedly in growing as a person and in growing our firm.

1. Know thyself from two perspectives.

The first perspective comes from learning about your passion, capabilities and personality, and those of your team members. Profiles such as the Kolbe Index, the Harvard Temperament Test and the Hogan Leadership Assessment can help you learn and understand who you are, how you strive forward, how you think and how you act. As you build your team, you want to surround yourself with people who fill your gaps to ensure a strong team. Realize that not everybody is a starting pitcher or a salesperson. The second perspective comes from defining and knowing exactly the service and value that you offer. During my participation in NAIFA’s Leadership in Life Institute, I was forced to write down the mission and vision for our business. Furthermore, we created a written business plan that laid out the specific action steps to take, which brought the business to life. We have had several iterations of this business plan while staying true to our mission! Doubling the revenue of our business was easy when we were going from $100,000 annually to $200,000 annually. But it was much more difficult going from $1 million to $2 million in annual revenue. Why? Because different tools,

You may find these people in your neighborhood, your associations, nonprofit organizations, travel clubs, theaters, etc. People love working with like-minded people — especially when they can have fun together. Invest in the resources that help you perform your best. Resources such as the books I have read, the videos I watch and the associations in which I am active all have contributed toward my reaching my goals. Participate in programs that inspire, teach, and propel you and your team to strive forward, learn new and better capabilities, and help build your bigger future. Many offerings are available inside and outside of our industry. I participate in at least one program a year and have done so for the past 30 years. These include business plan writing, public speaking, writing, marathon running, strategic thinking, earning my master’s degree at the age of 45, and even photography classes. All of these activities have contributed in small and big ways to my personal and professional lives. My mantra: Strive forward because our mission is not complete — we have miles to go before we sleep.

3. Celebrate daily victories.

The third element I have used to grow our firm is daily victories. It is what we do today that will compound our growth personally and professionally in the future. As Stephen Covey taught in his book The Seven Habits of Highly Effective People, first things first. I wake up, make the bed, do my six-minute plank, work out (a 60-minute run or a weight workout), suit up, do one hour of reading, make my first

10 calls of the day and then drive to the office. Imagine if you really focused on specific daily victories — behaviors that you will commit to and that will have a positive impact on your personal or professional life. What would they be? Now imagine if everyone on your business team did the same. How much more productive and happy would everyone be? People love accomplishing tasks and being rewarded with a happy face, a high five or something else that reinforces positive behavior. What’s the old saying? Inch by inch, it’s a cinch! Success is a journey of ups and downs, filled with many great days as well as with days of wonder. It all begins with you. Former NAIFA President John F. Nichols, MSM, CLU, is president of Disability Resources in Chicago. He is a nationally recognized consultant, the creator of DI products and administration systems, and an expert witness in disability proceedings. John may be contacted at john.nichols@

March 2017 » InsuranceNewsNet Magazine


The Million Dollar Round Table is the premier association of the worldâ&#x20AC;&#x2122;s most successful life insurance and financial services professionals.


Three Key Trends Influencing Retirement Planning in 2017 M  ajor income and tax factors that retirement advisors and their clients must consider. By Curtis Cloke


uring a long flight back to the United States after spending time in Singapore working with financial advisors, I began to think about the retirement trends we can anticipate in 2017. While in Asia, I met with a collection of financial advisors eager to learn about the retirement strategies in the U.S. and how to apply them to their clients. Each country and group of advisors brought its own unique challenges to the table, and this provided me with a wealth of knowledge from which to learn. Regardless of the product availability and structure of the attendeesâ&#x20AC;&#x2122; national economies, one fact remains: People understand how to save, or they at least understand the concept of saving, but struggle to comprehend how to convert that savings into an optimal income solution. Major income trends are emerging in the United States. World economies continue to be volatile, and it was quite evident while talking to advisors in Singapore that retirees are looking for riskaverse solutions more than ever as we embark on 2017.

Hesitancy in the U.S. Markets

It is no secret that the Department of Labor fiduciary rule has created uncertainty among large corporations about their long-term corporate strategy. There is much ambiguity about what will happen, but regardless of the ruling, the perception will have a dramatic effect on the marketplace. We already have seen this corporate matriculation affect annuity sales in late 2016. The Insured Retirement Institute found that industrywide annuity sales in the third quarter totaled $51.3 billion. This is an 8.2 percent drop from sales of 58

$55.9 billion during the second quarter of 2016, and a 12.3 percent decline from $58.5 billion in the third quarter of 2015. With fewer annuity sales anticipated

reason for optimism within the annuity marketplace! Retirees transitioning into the distribution phase are ideally situated to start capitalizing on this trend.

This year, we saw a nominal increase in the cost of living adjustments (COLA) of 0.3 percent. This increase made little impact on monthly benefits, but the major change will be in payroll taxes. in 2017, there should be more mortality credits available conceptually. With more mortality credits available and interest rates trending upward, there is

InsuranceNewsNet Magazine Âť March 2017

Social Security Changes

Every year around October or November, the Social Security Administration (SSA) releases its changes for the following year. This year, we saw a nominal increase in the cost of living adjustments (COLA) of 0.3 percent. This increase made little impact on monthly benefits, but the major change will be in payroll taxes. Nearly 12 million people, especially

MDRT INSIGHTS small-business owners, will be affected by the change. The SSA raised the amount of income subject to taxation to 7.3 percent, the largest rate increase in more than 30 years. If you make less than $127,200 in 2017, this change won’t have an effect on how you are taxed. Why is this an important trend heading into 2017? For employers that pay the 6.2 percent payroll tax, their costs will increase. The increase will be even more dramatic for the self-employed, who could see a tax increase of over $1,000. Keep an eye out for how this can affect your insurance practice, as your employees will be eager to know more.

Home Equity Strategies

The majority of baby boomers have purchased a home during their lifetimes, and for many families this is the largest asset they have. Most people heading into retirement want to stay in the comfort of their homes or slightly downsize. Despite the availability of reverse mortgages, the negative stigma that surrounds them has been difficult to alter. The Bi-Partisan Policy Center released a report recently stating that half of all Americans are “home rich, cash poor,” indicating that, at minimum, half of their net worth is in their home equity. Before you rush to judgment on considering strategies about how your mortgage can work within your retirement plan, understand the landscape. If more than half of Americans are home rich and cash poor, you are eliminating potentially half your prospects by not understanding how to implement home equity into a client’s complete retirement plan. In past years, financial advisors and consumers scoffed at using mortgages as a way to generate retirement income. But regulation, education and learning by mistake have brought more clarity to various strategies. I anticipate home equity strategies being more involved in retirement income conversations in 2017 and coming years. While these three trends shed some light on the United States retirement spectrum, there are many outlying influencers on the horizon. Aging demographics around the world will sway economic trends for years. In addition, after years of dwindling interest rates, we are seeing a slow recovery toward normalcy. Despite what appears to be a bounceback in the U.S. from 2008, as advisors we still need to keep track of other related trends elsewhere. The key will be to remain prepared for anything and everything. Curtis Cloke, CLTC, LUTCF, RICP, is CEO of Thrive Income Distribution System. He is a renowned industry speaker and workshop educator and has over 29 years of experience in retirement planning. Curtis is a 17-year Million Dollar Round Table member with nine Top of the Table and two Court of the Table qualifications. He may be contacted at curtis.

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Put It in Writing: Building Trust Between Client and Advisor Formal written retirement plans have a substantial impact on retirement planning behavior

By Alison F. Salka


espite what the future may hold for advisors under the Department of Labor (DOL) fiduciary rule, advisors are still finding ways to provide reliable service and planning for retirees and pre-retirees. However, managing the implications of the new fiduciary rule will still be troublesome. Advisors in the retirement industry will need to prove that they put their clients’ best interests first when providing retirement savings and investment advice. This could lead to more advisors leaving the business, particularly those who are older and less willing to adapt their practices. For those who elect to stay in business, there is an opportunity to demonstrate that their advice supports their clients’ financial goals without fear of DOL fiduciary rule implications. A LIMRA Secure Retirement Institute study, “Benefits of Retirement Planning,” suggests formal written retirement plans may offer advisors a way to improve retirement outcomes for their clients and can help build stronger, lasting relationships with them. The study revealed the differences between those who have a formal written plan and those who don’t: » Half of clients who have a formal written plan said they feel very prepared for retirement, compared with only 17 percent of those without one. » Seventy-eight percent of clients with a formal written plan have developed a specific plan for generating income from savings; only 38 percent of those without a formal written plan have done this planning. » These clients are twice as likely to 60

Retirees and pre-retirees with a formal written retirement plan

Retirees and pre-retirees with NO formal written retirement plan



50% 42%


17% Feel very preparerd for retirement (results based on pre-retirees only)

Have estimated how many years their assets will last

convert a portion of their assets into a guaranteed income product. Financial risk factors — including rising health care costs, potential inflation and market instability — can wreak havoc on hard-earned retirement savings. The process of developing a formal written plan usually addresses these concerns. The plan helps empower retirees and preretirees and encourage them to approach their advisor with questions, and it gives them the confidence to consider themselves financially successful. Clients have more favorable opinions of financial planners who create written financial plans. Research has shown this leads to increased client satisfaction and loyalty. Clients see their advisors as more accessible, as having a better understanding of their clients’ long-term needs and as more likely to put their clients’ interests

InsuranceNewsNet Magazine » March 2017

Have a specific plan for generating income from savings

first. Yet our research shows that only one in seven advisors currently offers written retirement planning to all of their clients. We have learned that developing formal written retirement plans offers tremendous value to both clients and advisors. Nearly two-thirds of clients whose advisor created a formal plan said they are comfortable referring their advisor to their friends and family. At a time when it’s critical for advisors to show their recommendations are in clients’ best interests, they must provide evidence that they have well-thought-out and documented plans. In today’s DOL world, this is an excellent achievement. Alison F. Salka, Ph.D., is senior vice president and director, LIMRA Research. Alison may be contacted at alison.salka@

Source: The Benefits of Retirement Planning, LIMRA Secure Retirement Institute, 2016

A  study revealed the differences between clients who have a formal written retirement plan and those who don’t.

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InsuranceNewsNet March 2017  

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