In This Issue: Diversity In Business Special Section PAGE 13
CHA NGE STA RTS FROM WI T H I N
How Insurance Companies Are Stepping Up To Build Diversity In Their Ranks • PAGE 20
Always Be Growing: How To Expand Your Practice
Ready Clients For Retirement In A Recession
Read More on PAGE 5
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IN THIS ISSUE Change Starts From 20 Within
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APRIL 2021 » VOLUME 14, NUMBER 4
34 Public Option Gets A New Look
By John Hilton The industry makes strides to increase diversity while confronting a tarnished history.
16 Turning Taxes Into Gold
By John Hilton Advisors and agents should focus on compliance with the Department of Labor’s investment advice rule by the end of 2021.
By Steven A. Morelli Rao Garuda’s quest to save money on taxes led him to his life’s work, while his passion for helping others drove him to philanthropy.
26 Star Wars And IUL: Sometimes You Both Frustrate Me By Jason Patterson Both the movie franchise and the insurance product work best when they focus on the right things.
8 ABG — Always Be Growing
Jim Silbernagel, founder of Real Wealth Advisors, did not have efficient access to services his clients needed, so he built them within his organization. In this interview with Publisher Paul Feldman, Silbernagel describes how his drive for constant improvement helped him expand his practice over the past 40 years.
By Susan Rupe A new administration and a new Congress mean new consideration for government expansion of health care.
38 Readying For Retirement In A Recession By David Hanzlik Financial stability in retirement can be within reach — even when it’s difficult to see.
IN THE FIELD
6 Investment Advice Rules On Standby
30 M ake Sure Your Client’s Wishes Are Carried Out
42 It’s Easy Being Green: Eco-Friendly Housecleaning By Susan Rupe It’s time to give your home or workspace a good spring cleaning. Here are some tips to get rid of the dirt in an environmentally gentle way.
44 Six Ways To Give A Great Referral By Keith Michelfelder It’s always a good time to position yourself as a business-to-business connector.
By Jeff Barnes Designating annuity beneficiaries correctly can avoid a devastating situation after your client’s death.
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InsuranceNewsNet Magazine » April 2021
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WELCOME LETTER FROM THE EDITOR
How To Regift I met someone who knew Ben Feldman. It wasn’t the first time, but each time it happens I have to know everything about Feldman. Was he really the salesman of all salesmen? Not many people even know who Feldman was. Beyond having sold the most life insurance of anybody in his time, $1.5 billion with New York Life between 1941 and 1993, many claimed he was the best salesperson ever. So, I wanted to know about the man and the legend. Feldman certainly changed the approach to life insurance sales. He popularized selling by concepts that conveyed the value of life insurance. One story was that he would take a great sum of money — $100,000 or $1 million — under armed guard to a prospect’s office, and place pennies on the stacks to show the power of life insurance. As he said: “I do not sell life insurance. I sell money. I sell dollars for pennies apiece.
have easily said he did not need to learn anything more from his colleagues. But he eagerly sought advice. Sometimes it takes a bit of humility to do the right thing for oneself.
The Real Legacy
Fewer people now know about Feldman, who died in 1993 before some insurance agents were born. But they will get the benefit of Feldman as filtered through Garuda and the countless others who Feldman affected. These gifts we pass to the next generation are our legacy, more than dollars and cents. Every news organization I worked for had some legend working there, or people there worked with the now-departed legend. The people I admired would invariably say that they weren’t to be admired as much as someone else who inspired
Names don’t matter in the end. What matters is what you do.” My dollars cost 3 cents per dollar per year.” The person I spoke with who met Feldman was Rao Garuda, who was profiled in this month’s In The Field article. Garuda met Feldman over breakfast at a conference and absorbed what he could. Here’s what Garuda told me about Feldman “He used to say one thing: ‘There’s a cost of doing something. There’s a cost of doing nothing. The cost of doing nothing is always a whole lot more than the cost of doing something.’” He expanded on Feldman’s message about wiping out taxes with life insurance strategies. Garuda processed the wisdom he got from mentors with his own experience and is now paying it forward to the next generation. He is a speaker and coach, as was Feldman and other mentors. Garuda was an excellent student and talented in many endeavors. He could 4
InsuranceNewsNet Magazine » April 2021
them. There is a humility in the recognition that they are passing a torch forward. I used to be a bit wistful about how people fade in memory after 30 or 40 years in a place or an industry. One legend I worked with was Dave Rossie, a columnist for the Press & SunBulletin in Binghamton, N.Y.. He was the voice of authority in that part of the state, writing smooth copy that carried you to the end of the column before you knew it. I probably don’t even have to say he was an unassuming guy — kind to the janitor, but tough on the crooked mayor. But he would insist that he wasn’t the stuff. That was a columnist who came before him, someone who died before I worked at the paper. Rossie always gave him the credit. I don’t remember his name. Names don’t matter in the end. The stuff you own doesn’t matter. What
matters is what you do. Karma is not a cycle of good or bad deeds coming back to you. It is the action you send out into the world, actions that affect events big and small and push other events that trigger others ... rippling on forever.
The Home Of The Brave
Something that fascinated me about Feldman was what he overcame. He was a small, portly, not exactly handsome guy with a high-pitched voice. And that is a charitable description given what I have heard. It probably took a bit of bravery to put himself out there to be judged. But when he started speaking, he was mesmerizing. You had to agree with him — it was the only sensible thing to do. Ah, to be remembered as mesmerizing. That is probably more than I can hope for. But we do have an effect on a large number of people every day. The way you treat a colleague ripples into how that colleague treats their family. How you behave toward the store clerk affects the next person in line. We are changing the DNA of our society in many ways. We can take the best of what has come before us and hand it off to the next person in line. Or we can pass on the worst. Many of us do that as well, passing malignancy like a malformed gene. The only choice we ever have is the one in front of us right now. My advice is to choose the brave one. Be well, Steven A. Morelli Editor-in-Chief
The Long Game: How I’m Preparing My Business For Growth in 2021 and Beyond
eedless to say, the events of 2020 caught everyone by surprise. In response, advisors like me were forced to navigate a challenging business environment that has carried over into 2021 and will, more than likely, continue to reframe the relationships between clients and advisors for years to come. Below I’ve outlined a few key areas I’m focusing on and how they could impact my business.
to hone in on new client segments like this, ones that I would have otherwise overlooked because I didn’t have the time or resources I needed to profitably serve them.
PERSONALIZING WITH PURPOSE — Over the past year, I’ve become acutely aware of the need for well defined processes within my business. As advisors, we need to be highly responsive to the changing needs of our clients, and while I want to customize my client’s expeTHE CORONAVIRUS — The effects of the pandemic rience as much as possible, if I make those customizaon the world economy has shown us how important tions at the cost of efficiency then my ability to properly emergency savings can be. The economic shutdown service that client will suffer. Since I’ve already offloaded exposed severe inadequacies in most people’s financial my back-office infrastructure to Brookstone, I am now preparedness—a significant portion of the American developing a standardized process for client onboarding population simply did not have the funds to carry them and retention, one that is automated, branded end-tothrough this difficult time. Additionally, businesses who end, and retains the client personalizations (goal-based weren’t prepared to work remotely were left in the lurch. planning worksheets, risk tolerance questionnaires, etc.) In my case, transitioning to remote client meet- that help me better serve the individual needs of my ings was a difficult pill to swallow. I prefer to do business clients. in person, where body language and nuanced social cues help create a deeper personal relationship with new clients. I have since learned, however, that developing MANAGING MORE THAN MONEY — The emotional a robust, digital client experience will not only help my side of our business is often overlooked but thanks to business continue to grow during the pandemic but will the pandemic it has now been brought into sharp relief— allow me to expand my reach beyond my local commu- conversations with clients routinely go well beyond nity. I’m lucky enough to have integrated a great turn- financial planning and portfolio management, centering key asset management platform (Brookstone Capital instead on what effects the events of the past 18 months Management) that allows me to put my back-office on will have on their long term well-being. I feel we have an opportunity, if not a duty, now to help clients on a autopilot while I focus on this kind of expansion. much more meaningful level in both their financial and personal lives. In 2021, I’m spending less time pushing UNLOCKING NEW DEMOGRAPHICS —Democ- paper and more time creating empathic solutions for my ratization of the financial markets has created an clients to not only help them reach their financial goals, entirely new generation of investors who are also in but to also show them I have a keen understanding of need of sound financial advice and it would be foolish the challenges they face and a genuine interest in their to ignore the potential of this client base simply because success—things they’d be hard pressed to find with one they aren’t considered high-net-worth...yet. In 2021, of the big box firms. I’m developing new segmentation strategies and highly targeted product offerings to positively impact these While 2020 generated unprecedented levels of uncerunderserved markets. Again, working with a TAMP tainty, there are steps we can take this year to better like Brookstone has given me the freedom and flexibility prepare our clients and ourselves for what may lay ahead.
Investment Advice Rules On Standby, Targets End Of 2021 Advisors and agents should focus on compliance with the Department of Labor’s investment advice rule by the end of 2021. By John Hilton
resident Joe Biden took office with an overflowing plate of items requiring immediate attention, and the Department of Labor’s investment advice rule was nudged to the side. The new administration didn’t even withdraw the Trump administration rule, preferring to let it take effect Feb. 16 and worry about working to change it later. The Biden DOL assured the industry that those changes are coming — in the form of a guidance. But prominent analysts say not to expect much to change in the short term. Instead, advisors and agents should be focused on compliance with the rule by the end of 2021. And there is a lot of work to be done, Fred Reish, a partner with the law firm Faegre Drinker, said during recent webinars. The DOL and the Internal Revenue Service are both deferring compliance with Reish the new rules until Dec. 20 as long as the “impartial conduct standards” are met. That means that recommendations by advisors and agents must be made to a best interest standard, with reasonable compensation and no materially misleading statements. “Nobody anywhere has the processes in place to satisfy these conditions, and they are burdensome,” Reish said during a late-February webinar. “It is going to take between now and December 20 for broker-dealers, banks and trust companies, insurance companies and investment advisors to get all these policies and procedures in place.” 6
InsuranceNewsNet Magazine » April 2021
In particular, firms will need to figure out ways of measuring the reasonable compensation, Reish explained, and the ways to mitigate compensation if a conflict exists. It’s going to be “a heavy lift” to get those policies and procedures in place by Dec. 20, Reish said.
An Early Surprise
The industry had expected President Biden to withdraw the rule — an incoming administration can rescind “midnight regulations” published during the final 60 days of a presidential term. The Trump administration rule has two main parts: a new prohibited transaction exemption that allows advisors to provide conflicted advice for commissions and a reinstatement of the five-part test from 1975 to determine what constitutes investment advice. The rule surprised some in the industry as a tougher regulation than anticipated from the Trump administration. In particular, it expands the fiduciary duty for advisors handling retirement plan rollovers, a transaction historically treated as a one-time, nonfiduciary service. “This exemption allows for important investor protections, including a stringent best interest standard of care for fiduciary recommendations of rollovers from ERISA-protected retirement accounts,” said Ali Khawar, deputy assistant secretary of labor for the Employee Benefits Security Administration. Brad Campbell, a partner at Faegre Drinker, said advising on rollovers will continue to Campbell be a tricky area — at least until the DOL clarifies it further. As it stands, the key aspect is whether there is any thought, even vague, of meeting the client again in the future to follow up on the rollover advice or transaction.
“If the answer is yes, we both intend to meet in the future, the DOL views it as an anticipated ongoing relationship,” Campbell explained. “In other words, the beginning of an advice relationship that is fiduciary from the initial advice.” Campbell does not expect the promised guidance to come out anytime soon. “My guess is that things will probably sit as they lie for a while, while the new administration decides how to proceed,” Campbell said. “Whether to do a new rule changing the 1975 regulation for what defines fiduciary advice, or changing or eliminating the five steps. So there’s still other shoes to drop down the road potentially, but we probably are entering a period where there’s some stability in the position the government’s taking.”
Pro-Union Bill Concerning To Some
The Protecting the Right to Organize Act (PRO Act) was originally passed by the House of Representatives in February 2020. With President Joe Biden now in office and working with Democratic control of both chambers of Congress, the PRO Act is again relevant. That has the National Association of Insurance and Financial Advisors concerned. NAIFA is leading a petition drive opposing the bill, which it claims hurts the industry by adding language that expands the definition of “independent contractor” by adopting an ABC test to define who is an “employee.” The PRO Act redefines the relationship shared between insurance producers, independent broker-dealers, and independent financial advisors with the insurance industry. “This relationship ensures consumers have the greatest access to products being offered by the insurance industry,” NAIFA said in a blog post. “Creating a new standard that does not exempt these vital individuals from the PRO Act’s ABC test
INVESTMENT ADVICE RULES ON STANDBY INFRONT
My guess is that things will probably sit as they lie for a while, while the new administration decides how to proceed.” — Brad Campbell severely limits the scope of insurance products consumers would have access to as well as general distribution of insurance products and investment advice, thereby limiting consumers’ ability to protect themselves and their loved ones.” In addition, the bill includes a host of pro-labor provisions, including banning “right to work” laws, forbidding employers from replacing strikers, and prohibiting mandatory arbitration agreements in contracts. The act also provides a private cause of action for unfair labor practices outside of the National Labor Relations Board’s jurisdiction, and introduces new civil penalties for labor law violations, including personal liability. The left-leaning Economic Policy Institute claims the PRO Act is needed to
offset anti-union concessions employers have gained in recent years. The EPI cites Gallup survey data showing that 65% of Americans approve of labor unions. However, union membership is at an alltime low of 12.1%. “Passing the PRO Act would help restore workers’ ability to organize with their coworkers and negotiate for better pay, benefits, and fairness on the job,” the EPI said in a blog post. “Passing the PRO Act would also promote greater racial economic justice because unions and collective bargaining help shrink the Blackwhite wage gap and bring greater fairness to the workplace.” But NAIFA supports the Independent Contractor Status Under the Fair Labor Standards Act rule published by the DOL on Jan. 7, 2021. But that rule was
frozen by the Biden administration on his first day in office. The rule is seen as being more favorable to employers seeking to keep some of its labor force classified as independent contractors. But the Biden team is expected to rework it significantly, or even withdraw the rule. Biden’s choice to head up the DOL, Marty Walsh, had not been formally confirmed by the Senate as this issue went to press. But Walsh enjoyed a favorable reception at his confirmation hearing and encountered no controversy. A 30-year union man, Walsh was president of the Laborers’ Union Local 223 when he was elected mayor of Boston in 2014. Walsh was a member of the Massachusetts House of Representatives from 1997 until 2014. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org. Follow him on Twitter @INNJohnH.
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April 2021 » InsuranceNewsNet Magazine
ABG ALWAYS BE GROWING
James Silbernagel reveals how he steadily expanded his practice to become indispensable to clients An interview with Publisher Paul Feldman
InsuranceNewsNet Magazine » April 2021
t might be tempting to underestimate James Silbernagel because of his calm, unassuming and humble demeanor. That would be a mistake because not only is he a well-rounded insurance agent and financial advisor, he also has a driving ambition to broaden himself and his agency even after nearly 40 years in the business. His Wisconsin-based business, The Silbernagel Group, encompasses Real Wealth Advisors, The Silbernagel Group insurance services, Real Wealth Tax and Accounting, and Real Wealth Media. The insurance business encompasses everything from retirement products to property/casualty. Silbernagel added these businesses as he pushed his practice to the next level. When he did not have efficient access to services his clients needed, he built them within his organization. That drive for constant improvement earned Silbernagel a seat on the board of Forum 400 and got him to the Top of the Table for more than 15 years, among many other honors. And he is probably one of the few people of that stature who have a weekly podcast. Silbernagel is a rare combination of gifted salesperson, holistic advisor and effective business leader. Silbernagel has been at the forefront of many changes in the insurance and financial industries, naturally embracing holistic advising long before it became a trend. In this interview with Publisher Paul Feldman, Silbernagel discusses the journey he took in building his business and shares his insight on what he learned along the way.
FELDMAN: You have had an illustrious career of nearly 40 years in this industry. How did you get started in the business? SILBERNAGEL: I started right out of high school by making appointments for life insurance agents for estate planning in 1982. It was probably the best training that anybody could have because it was a numbers game. You just had to call and call and call and call and book appointments. So, not realizing it at the time, I didn’t get too concerned when people said no. I just knew I had to make X number of
ALWAYS BE GROWING INTERVIEW calls, I’d get this many yeses, and I’d make so much money per appointment. I never had a base pay or anything like that. It was completely results-based. Then I ended up working for a small agency, but they only had so many appointments that they needed each week. So, it ended up being a very part-time job. While I made good money for a kid back then, $10 to $15 an hour, I only worked two hours a week or three and a half hours a week. So, I couldn’t make ends meet with that. They referred me to another place,
insurance. I ended up getting my securities license and slowly but surely got involved with that side of the business. I started doing estate planning, partnering with an attorney. Now we’re at the point where we’re pretty much a one-stop shop. I have a CPA firm in my office, and I actually own the firm. I’m not an accountant, but I have a CPA running it. I also have a property and casualty firm. We have an attorney who has regular office hours with clients where we take an active role in the estate planning process.
One thing we’re taught in the industry is “Don’t have a meeting with just one spouse. You want to have them both there.” Because otherwise you’re going to have to repeat yourself. and after I qualified several thousand leads for them over a few months, they said they had too many leads and they’d never get to them. In the meantime, I got my health insurance license and my life insurance license, and the owner of the firm gave me a script and said, “Go out and start selling stuff.” That was my training. I did that for a while but then decided I wanted to get into my own thing because I’m just doing one product. To me, that was kind of boring. I wanted to do other things and the owner wanted me only to sell these Medicare supplements. I ended up starting my own business, and I had some challenges there because unbeknownst to me, the state was changing the commission structure. They lowered commission rates to literally 25% of what I was expecting. I ended up going into credit card debt to the tune of about $50,000 that first year until things got rolling. When they changed the rules like that, I realized I needed to be much more diversified in my practice. They also levelized commissions in long-term care insurance, which I was doing a little bit of. I discovered NAIFA, which back then was NALU. They had LUTC courses that helped me learn about not only life insurance, but also disability income
We do the light work and the attorney does the legal work. And we don’t share compensation, but we share the client. What we found by working together and communicating together is that we all can be a lot more efficient. I would say the emphasis right now is on retirement planning. It’s kind of like a waterbed — you push on one end of it and it ripples on the other end. If all you’re doing is looking at one aspect, not only are you not serving the client very well, but you’re really limiting your own opportunities. Our clients pretty much stay with us and we have multiple lines of business with them, which helps solidify the client but also helps us to have predictable income streams. We have 17 or 18 employees. We also have some other people who aren’t necessarily employees but we work pretty closely with them.
FELDMAN: It’s a whole different world out there with videoconferencing and clients becoming more comfortable with the technology. How is tech working out for your firm? SILBERNAGEL: Tech saves time, especially working with canceled or rescheduled April 2021 » InsuranceNewsNet Magazine
INTERVIEW ALWAYS BE GROWING meetings. One thing we’re taught in the industry is “Don’t have a meeting with just one spouse. You want to have them both there.” Because otherwise you’re going to have to repeat yourself. Things get lost in the translation. It’s best to have them both there at those meetings.
So, we’re sending that out. We get referrals from that. One thing is, through our one-stop shop we also ask for referrals and cross-refer people between the different business entities. That has been very successful. Another thing that has really helped, and I’ve done programs on this, is
One thing is, through our onestop shop we also ask for referrals and cross-refer people between the different business entities. That has been very successful. But if one’s running late from work or whatever, that either sets you way back or extends your day a lot, where you’re twiddling your thumbs for a half-hour waiting for them. Or they just plain old reschedule and now that’s a time slot you cannot get back — it’s gone. And now you have to reschedule and shake up another time slot. That’s not very efficient. With video teleconferencing, that spouse could be running late from work and they could stay at their desk at work and still have the conference there or when they get in the car. They go on their smartphone and they can still be part of the meeting. So, it is amazing how much more efficient you can be. I never imagined how big of a difference that would make.
FELDMAN: How have you found prospecting during these times? And what prospecting technique do you find successful? SILBERNAGEL: I have a program called Real Wealth that I made to give back to the industry. It’s a way for advisors to touch base with their clients, basically once a week or once a month. I use my own services, so I interview a lot of people just like you’re interviewing me. And we do a podcast that’s designed for the client with the general theme of “Don’t go it alone, use your professionals.” 10
InsuranceNewsNet Magazine » April 2021
the family meeting. When clients come in today, we do have a focus on retirement planning. So, we’re getting a lot of people in their 50s or 60s, and I talk about how we do estate planning. One of the things I require of every client used to be a suggestion, and nothing ever happened. Now I tell them when I engage them, “Hey, if your kids aren’t at the point where they’re ready for all this yet because they’re too young, we’ll figure it out. I need a commitment from you that at some point we are going to have a family meeting.” We’ll determine how deep we get into any information. For example, if they don’t want to go through “We have a bank account at ABC that has $32,463.82,” we don’t have to go into that detail. If they want to, that’s fine, or we can be very generic. The clients love that we care enough to get the kids involved. We go through the stuff and then I tell them, “This is the type of planning that we’re doing for your parents, but probably would be worthwhile for you.” The kids who schedule a meeting are worth our time because they have the right mindset. They’re motivated to get things done. The kids who don’t set an appointment with us, it’s because they’re embarrassed because they’re a financial wreck and they haven’t done a lot of planning or whatever. So, they self-screen. I
don’t have to offend anybody or have any minimums for them to be worthy or anything like that. What’s interesting is now I’ve touched base with them. And then with our program, I put them on my podcast list. They’re going to get dripped every single week. Either I’m going to make them clients right away or, when the parents leave this earth — guess what — they’re leaving an inheritance to these kids who have nothing. It gives us an opportunity at that time to keep the money that we’ve helped grow stay with the business. It’s continuity. I don’t really have to prospect. We have a system of prospecting, but it’s not like I’m out doing cold calls or mailers or anything like that. It doesn’t cost a heck of a lot of money. I remember the old days where it cost you $3,000 to do one mailer. For $3,000, I could be sending my content out for the next three years every week. Leveraging technology is a huge thing.
FELDMAN: Does your team approach help with that range of prospects and clients? SILBERNAGEL: Right now, I have an advisor who is 10 years my junior, and I have another advisor who interned for me and now has three years in the business. So not only can I capture those generations as clients, but I can connect them with someone who is in their own age group. Having that team approach really allows us to do a good job for clients and make them feel comfortable no matter what level they’re in.
FELDMAN: You mentioned you have a CPA firm in the office, which is a smart move for an agency. How did you bring that on board? SILBERNAGEL: It was started maybe 15, 20 years ago. I realized I had a lot of problems connecting with different CPAs when we had a mutual client, and I wasted a lot of time playing phone tag. Then I also had a client who really needed some help. They were getting older and needed some help with paying their bills and everything. That prompted me to look into bringing in a CPA.
ALWAYS BE GROWING INTERVIEW Eventually, I decided to start a new CPA firm, and they’re on-site. And I’ll tell you what — we use that CPA firm to drive business because we offer a first-year discounted rate to do tax returns for people over 50. We deliver the tax returns as financial advisors. The interesting thing about that is with us being involved, the CPA is giving better service because we’re reviewing what they did. Also, the CPA prepares a letter with the tax planning opportunities that they might have and we’re able to discuss that stuff.
FELDMAN: You also have a property/casualty business. How long ago did you start that? SILBERNAGEL: That started more than 20 years ago, and it actually started because I’m also a CFP. And in CFP classes you learn about property/casualty, protecting against liability and your personal property against losses. And I’m a big believer in umbrella insurance. I got to the point where I had a couple of people I was referring business to. One was with a major P/C firm, and he was an employee captive agent. And another one had a big independent agency. I tell people, “If you want to go with the big-name brand company, go to this guy. If you want to just shop it around with a bunch of different companies, go to this guy.” Then I have to tell them, “Make sure you let them know that I sent you or they may not return your call.” That’s how great the service was. That’s how I started it. Then they dropped the ball on some pretty big referrals that I gave them and I decided, “Boy, if I’m going to do anything, I’ve got to do it myself to make sure they get the right service.” We implemented something similar to what we do in financial planning. We strongly recommend at least annual reviews so people stay current with their policies. We had one client who had their policies reviewed and they were still paying for one of their kids as a driver on their policies. That kid had graduated from college three years before, and has been living away from home. They ended up buying these policies and then nobody sees them after they buy the policy until there’s a plan. So we decided to have a high-touch, high-service
model. And again, it’s just when someone comes in as a referral of our property/casualty agent. She says, “Hey, have you done an estate plan? Are you doing financial planning, retirement planning? Would you like to save some money on taxes?” They’ll tee us up. Part of our process is that every client gets their stuff reviewed to make sure there are no holes in their policies.
FELDMAN: How would you recommend somebody consider adding a CPA or a property and casualty agency to their business? SILBERNAGEL: The way I did it offers a lot of control. But you need to have some deep pockets and perseverance to make that work. I think the best thing you could do is find a small CPA firm that’s looking to grow and sit down and have coffee with them. Maybe they even would be willing to be in the same office as you. But it is a challenge to find the right person. What I liked is that when I hired them, then they had to take my phone calls. So, I’m a little bit of a control freak. I want to make sure I control all the controllables, and you have to have the right mindset there. Before that, we would share the client, not necessarily the revenue. But then I sent them a referral and they didn’t send me one back. Well, you’re never going to grow that way. You have to look at it this way: I’m going to do whatever’s best for the client. We’ll share the client, that will make us more efficient, and we win and the client wins.
FELDMAN: You do a lot of interviews with a lot of different advisors and coach them as well. What are some strategies that you see people doing today that are working in the market? SILBERNAGEL: I think one thing I see happening more today that didn’t happen before is a lot more advisors are getting up to speed on long-term care insurance. I see that as one of the biggest things going forward. I also see a lot of advisors who are not getting fully educated on it, and I think that’s going to be a problem. That’s a huge thing. I do see the model that we have where
a lot more advisors are looking to get into a tax practice. One thing I didn’t mention is if you’re in a position to do so, buying an existing tax practice might be the best thing to do. If you’re not an expert on one thing, collaborate with another advisor. I see a lot of that happening, collaboration groups. I think a lot of that is happening because the agency system, where everything’s taken care of and you’ve got a track to follow for learning, is a dying system. And then using and leveraging technology — that’s a huge step too.
FELDMAN: Do you see a lot of colleagues who aren’t getting on board with technology? SILBERNAGEL: It amazes me that some agents today don’t even have a client management system. That’s basic oneon-one stuff that’s been around for more than 20 years. Then having a systematic way to keep track of stuff makes it easier to hire people, makes it easier for people to step in. I’ll tell you what, if you don’t know technology, hiring someone who knows how to use technology makes a huge difference. I know the millennials get a bad rap, and a lot of us in the business were afraid to hire younger people. But one thing I found is the generation that came after them is a lot more focused on work, and they’re not as flippant. What I mean by that is after 18 months, millennials are bored out of their minds, and they’re on to the next opportunity, which is OK if you understand that from the beginning. They’re very smart, and they’re the first generation raised with computers. So, they’re very comfortable with that. But the generation that came after them, their parents went through hard financial times. So, they were raised a lot different from the millennials. If you don’t have the skills, you can find people who do. There’s a lot of that happening out there. There’s a lot of opportunity.
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April 2021 » InsuranceNewsNet Magazine
$15 Minimum Wage: Pro or Con?
$15 Wage: Cutting Jobs Or Cutting Poverty?
1M out of poverty 17M get a raise $10B less spent on government benefits
1.4M jobs eliminated $54B increase in deficit $31B increase in unemployment benefits
As Congress continues to debate hiking the federal minimum wage to $15 an hour, the questions remain: Would an increased wage help workers? Or would it hurt job growth? The Congressional Budget Office took a look and here’s what it found. Raising the federal minimum wage to $15 an hour would lift nearly 1 million people out of poverty but would leave even more people without any job at all, the CBO said, as it predicted 1.4 million jobs would be eliminated as a result. A higher minimum wage also would raise costs for Americans and for the federal government itself, as Medicare, Medicaid and Obamacare pay more to lower-wage health workers, CBO said, although fewer people would be on welfare. The deficit would take a $54 billion hit over the next decade. Analysts said government would have to pay about $31 billion more for unemployment benefits “because more workers would be unemployed.” But the brighter side of the debate is that the CBO predicted 17 million people who currently make less than $15 an hour would see their income raised, as would another 10 million who would be making just above the minimum rate. In addition, fewer people would use government programs such as food stamps, which would cut about $10 billion in spending from those programs over a decade.
PANDEMIC HITS WOMEN ON MULTIPLE FRONTS
Women are not OK in the age of COVID19. Between lost jobs, less pay and no childcare, women have been hit particularly hard by the pandemic. More than 2.3 million women have left the workforce since February 2020, bringing their labor participation rate to levels not seen since 1988, according to the Nat ion a l Women’s Law Center. Women accounted for 100% of the jobs lost in December alone. Whether they have been laid off or had to leave the workforce to take care of children, many women struggle to make ends meet. Meanwhile, one in four women are thinking about leaving the workforce or downshifting in their careers to meet the demands of the COVID-19 world, according to a report from Lean In and McKinsey & Co. The implications could have far-reaching effects for women even after the pandemic is a thing of the past. Emily Martin, vice president for education and workplace justice at NWLC, warned that long-term unemployment could lead to a widening DID YOU
of the gender pay gap and eventually have an impact on the amount of money women are able to save for retirement.
COVID-19 STIMULUS LIFTED 1.6M OUT OF POVERTY
Federal stimulus checks and additional unemployment benefits lifted 1.6 million Americans out of poverty in January, according to economists at the University of Chicago and University of Notre Dame. In December, Congress passed a $900 billion COVID-19 relief bill that offered $600 stimulus checks and a $300 weekly boost in unemployment benefits. It also extended jobless benefits to those who don’t typically qualify, such as self-employed and gig workers. That infusion of cash into the economy led the U.S. poverty rate to fall to 11.3% in January from 11.8% in December, the economists said. But although this marked a turning point in poverty rates since the start of the pandemic, the researchers found more than 8 million Americans fell into poverty in the second half of 2020.
The kind of troubling inflation that people like me grew up with seems far away and unlikely. — Federal Reserve Chairman Jerome Powell
THE SURPRISING IMPACT OF COVID-19 ON RISK TAKING
More than a year into the pandemic, and we are still learning more about the ways COVID-19 impacted Americans’ lives. And researchers found a few surprises. FinanceBuzz surveyed 1,000 Americans, half of whom either tested positive for COVID-19 or had a family member who did. They found that although nearly half of respondents (48%) said the pandemic made them less likely to take financial risks, one in five said they are more likely to take financial risks. Many of the risk-takers said they either found opportunity in the pandemic’s economic disruption or they faced financial setbacks that they hope to recover from. Nearly one-quarter (24%) said they believe investing in Bitcoin is as risky as visiting a grocery store with no mask on. More than one in five (43%) said they don’t have a will or an advanced directive. A sizeable percentage engaged in financially risky behaviors, with 17% saying they began day-trading stocks or maxed out a credit card since the pandemic hit. But the survey also showed optimism for the year ahead. Half of those polled said they have a positive outlook on what 2021 will bring for their finances, while about 10% were pessimistic about 2021’s financial outlook.
Mortgage debt in the U.S. passed $10 trillion for the first time at the end of 2020. Source: LIMRA
Source: National Association for Business EconomicsSource: Federal Reserve
InsuranceNewsNet Magazine » April 2021
THE 2021 DIVERSITY ISSUE SPECIAL SPONSORED SEC TION
The Diversity In Business Special Section features companies that are taking the lead in putting diversity and inclusion at the center of their culture. IN THIS ISSUE
DE&I At OneAmerica: Inclusion Takes All Of Us Featuring OneAmerica • Page 14
2021 Diversity Issue • Special Sponsored Section
DE&I At OneAmerica: Inclusion Takes All Of Us Leading by example to deliver a commitment
neAmerica® is more than just the name of a company — it represents unity and the commitment the company has to building and strengthening its relationships. The approach that OneAmerica takes with diversity, equity and inclusion (DE&I) is rooted in principles of valuing differences, designed to create broad awareness of perspectives and built to create interest in financial services careers, products and new markets. OneAmerica makes every effort to help associates feel safe, remove barriers and engage in open dialogue. Its approach — rooted in principles of inclusion — is scalable and sharable and creates new opportunities that extend to customers, distribution partners and community partners. By making meaningful progress on DE&I, OneAmerica is attracting, retaining and developing the best talent. In turn, diverse and inclusive teams have proven to effectively connect with and serve underrepresented communities and to cultivate new market opportunities. This translates to better economic and social outcomes for everyone. In addition, the drive for DE&I is creating innovative solutions within the organization’s operations.
A Model Of Intentionality And Listening
OneAmerica has been focusing on DE&I for years, not as a standalone initiative or program, but by taking intentional, pragmatic actions that deeply ingrain it into every aspect of the company’s culture. In leading by example, OneAmerica can be a model that agents and brokers can emulate. This culture of inclusivity can help them form new relationships and partnerships. “We want people to be their authentic selves and to be able to contribute and reach their full potential,” says Kim Thomas, vice president, diversity, equity and inclusion. “We are very focused on relationships. This extends to every perKim Thomas son we contact, from customers to community to distribution partners.” It all starts with listening — an important and often overlooked step in the process of creating a truly inclusive environment that is based on mutual trust. In 2020, OneAmerica leaders held a series of listening sessions to hear perspectives on racial injustice, to bring the outside impact of the organization in and to encourage candid conversations. Almost 2,300 associates participated. 14 14
InsuranceNewsNet InsuranceNewsNetMagazine Magazine »» April April2021 2021
“When we finished with our listening sessions for associates and leaders, we repeated the process with many of our distribution partners,” says Jen Pittman, vice president, communications and community affairs. “The whole experience gave us a very full view of different perspectives, and we built action plans based on what we heard.” Each OneAmerica listening session began with a set of operating principles, including “listen for understanding” and “focus on your intention, not on using the perfect words Jen Pittman to express yourself.” “We wanted to understand perspectives from the field — their own perspectives as well as what they’re hearing from distribution partners and customers,” says Thomas. “What do we need to know? What do they want to know? The feedback from these sessions better equips us to share our DE&I strategy and approach in a way that enables OneAmerica and our partners to reach underrepresented communities and markets we may not have approached in the past for a number of reasons.”
Diverse Perspectives And Input Broaden Sales Opportunities And Markets The distribution partners and policyholders of OneAmerica benefit from the home office having an open DE&I dialogue. “You can look at it as added market share,” says Kristin Blakeslee, national director of recruiting & agent development. “Dialogue leads to insights. Insights create opportunities to reach markets that perhaps they wouldn’t have otherwise connected to. This is because they’ve got more information, maybe more comfort going into some
THE 2021 DIVERSITY ISSUE ONE YEAR LATER: THE ONES WHO PROSPERED COVER STORY
2021 Diversity Issue • Special Sponsored Section
markets that perhaps they weren’t knowledgeable about before.” Having the field educated about diversity, such as the different ways people define family and their unique values, cultures and beliefs, empowers them to have a better understanding of and sensitivity to people’s needs. This understanding can help customers and clients get the exact products they need. “Our internal DE&I efforts will allow us to bring fresh and new ideas to our distribution partners because we’ve got diversity of thought,” says Blakeslee. “With that focus on diversity and inclusion, we are bringing different people to the table to solve problems and to create new ideas. “For example, the American College has been a great partner when it comes to diversity,” adds Blakeslee. “Typically, its African American Financial Services Conference is attended by African American agents. We took the approach this past year
“The Pathways program connects new talent with career opportunities and mentors in our industry,” says Pittman. “We see impact from this work, and we know we’ll be able to scale up faster by sharing this program in an open-source format. Other businesses may be interested in using all or part of this approach, and we’re excited to share our work product.” OneAmerica has already begun sharing its Pathways playbook and curriculum resources with other companies. The challenges of COVID-19 even led to the development of virtual curriculum modules, adding to the program’s versatility. “We understand every company and situation is unique, so we encourage businesses to use program pieces that work for them,” adds Pittman. “There may be components or lessons we have learned along the way that are applicable to other companies. We make our playbook available because we are committed to
“Our internal DE&I efforts will allow us to bring fresh and new ideas to our distribution partners because we’ve got diversity of thought.” — Kristin Blakeslee to expand and promote our invites to everyone so they have the opportunity to learn. The diversity of response and attendance we saw really showed care, concern, support and interest in the African American community.”
DE&I Community Efforts Drive Career Interest In Financial Services
The drive of OneAmerica to create even more inclusivity also involves an innovative community workforce program. It has doubled its investments in innovative, community-based programs that address the root causes of inequality by focusing on economic empowerment, access to education, building social capital and creating career opportunities. The OneAmerica Pathways program, developed in 2018, creates career awareness, builds stronger career opportunities and develops new talent from underrepresented communities. The Pathway tiers implemented to date include Pathways to Sustainable Income for OneAmerica associates, which puts all employees on track to achieve a sustainable income, and the Pathways Junior Fellows program, a full-time, paid summer employment opportunity for high school students. The third tier, the Pathways Career Track program, is launching this year and includes co-op opportunities for college students as well as a part-time apprenticeship program for students starting in their junior year of high school.
achieving greater DE&I outcomes across the industry and in the communities that we serve — not just within our company. “The Pathways solution is scalable, so any size of organization can use our playbook,” says Pittman. “Agents with smaller offices can find value too because it’s built on the foundation that every single interaction is meaningful. If a small office is looking for a way to connect with the community, it could be a very meaningful community investment for even one or two participants.”
To learn more about the Pathways playbook, which shares scalable best practices on DE&I that will work for your business, contact Kristin Blakeslee at email@example.com.
OneAmerica® is the marketing name for the companies of OneAmerica.
April 2021 2021 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine April
A Visit With Agents of Change
TURNING TAXES INTO
When Rao Garuda asked why his taxes were so high, little did he know that the question would send him on his life’s quest
BY STEVEN A. MORELLI
ao Garuda was living what many people would have called the American dream less than 15 years after he arrived in the United States from India in 1963, with $7 in his pocket. By 1978, he was an engineer and his wife was a doctor. They had two children and lived in a Cleveland suburb. Garuda even had a red VW Karmann Ghia in the driveway. It might all seem perfect to an observer, but Garuda could not shake the feeling that the dream had a dark lining. He and his wife were making $140,000 annually, a hefty sum for the late 1970s. Garuda was making less than half of what his wife was, but that was not a problem. Rather, it was that taxes were taking all of his salary every year. After immigrating from India, working through college to get an engineering degree and starting a new life in Ohio, he essentially was working for nothing. So, he quit. “My wife thought I was nuts,” Garuda said. “But I was stubborn. I said, ‘What is the point of my working? I have to give up 100% of what I make for taxes, plus borrow money from you, so why am I working?’” Garuda decided to go in a completely different direction and went back to school full time to become a paralegal. But his wife had little to worry about. It seemed as though whatever Garuda did, he did it well. He got straight A’s, except for one vexing B. In fact, he did things so well that others would open doors for him to step into a better, more lucrative career. For example, after Garuda started working for a law firm, they noticed the quality of his work and recommended another direction for him. “The attorneys took a liking to me,” Garuda said. “They said, ‘Hey, you’re an engineer. You’re a pretty smart guy, and you don’t have a language problem and you can speak well. And also you’re a good student. You did a nice job in your law school. So, why don’t we have you work with us in setting up these defined benefit plans?’“ He started working with ERISA documents and was paid $15 an hour, not bad in the early 1980s. Then the lawyers pointed the way to yet another direction. After a few months, the attorneys said Garuda should get his insurance license. “They said, ‘Hey, it’s not fair to you. You’re very well qualified, and we think that you should be in the insurance business. But we want you to go to The American College and get a CLU and a ChFC,’” Garuda recalled, “because we think you’ll have a much better future, and we kind of like you. You have a very good personality.
TURNING TAXES INTO GOLD — WITH RAO GARUDA
We think you’d do very well in sales and marketing.” Garuda took the idea home to his wife, who once again pronounced him crazy. “She said, ‘You’ve never sold anything in your life. I think you should get a real job where you get a paycheck just like I do.’” Of course, he was stubborn once again. He obtained his designations and licenses, and started selling in 1981 just as a recession was expanding across the country. He made $250,000 in his first year.
In fact, taxes became his signature proposition. He still slips easily into the argument: Look at the mammoth national debt, edging into $30 trillion. How are politicians going to pay that off? “They will go after the ultra-wealthy,” someone might say. But those folks have the experts who help them reduce their tax bills. So, who is left? The upper middle class, such as doctors.
Learning To Sell
In all fairness, even Garuda shared his wife’s skepticism at first. He put up the same objection to the lawyers’ suggestion. He had never sold anything. Wasn’t it a better idea just to give him a salary? “They said, ‘No, no, no. Just do it. We’ll help you sell,’” Garuda recalled. “‘We have these defined benefit plans. And every time you set up a plan, people have to put in maybe $300,000, and they’re saving 70% tax on $300,000. And then you have to invest that money in the market. And by the way, you can also sell some life insurance in those plans.’” Garuda sold 26 pension plans and 26 life insurance policies in that first year. He had two things going for him at that moment — support from his law office and a perfect pool of candidates in his own social circle because not only was his wife in the medical field, but also he had eight other doctors in his family. He developed the niche of helping doctors who were in small, private practices. As he was gaining success and bringing home big commission checks, his wife’s skepticism antenna went up again. “She said, ‘Are you sure this is real money? Is this legal?’” Garuda said. He became the rookie of the year at the CLU chapter in Cleveland. Five years later, he qualified for Million Dollar Round Table’s Top of the Table. The lawyers helped him shape his introduction pitch to help spark interest in social situations. At any gathering with medical professionals, other guests would invariably ask Garuda what he did, and he had a hook hidden in two sentences. “Well, I save half of your money in taxes,” Garuda would say. “I cut your tax bill by half.”
Rao Garuda with his wife, Radha, and sons Sanjay (center) and Gopal (left).
Garuda was completing the circle that started in 1978 when he asked why taxes were taking so much from his family. At that time, his family was in the top bracket, with a tax rate of 70%. Garuda had planned to finish his associate degree in law, go to business school, and then attend law school for his juris doctor. But the lawyers offered a chance for him to shortcut that process right after receiving the associate degree. Here was a chance to help busy professionals understand their tax exposure. The uberwealthy had the lawyers and accountants to reduce their tax burdens. What did highly compensated professionals have? Pretty fat retirement funds just begging for political attention. How much of their individual retirement accounts and 401(k)s did they hope to see when they needed the money most? These are the kinds of questions that Garuda used to provoke action now to
IN THE FIELD
prevent a bigger problem later.
Teaching To Sell
Alan Porter was selling final expense term life and mortgage protection insurance when he met Garuda at a marketing group’s conference, where Garuda shared his tax planning strategies. Along with absorbing Garuda’s tax insight, Porter also connected with a particular thing that Garuda said: “There are two important days of your life — the day you are born and the day you find out why.” Porter had been a Black Hawk helicopter instructor in the U.S. Army until he retired in 1993. He studied the manuals until he knew every nut and bolt and all the ways things could go wrong so he could teach pilots how to get out of trouble. Porter knew his reason for being was to educate people, and after the conference he got on the phone to talk to Garuda about it. Porter was selling a couple of products at that time, but with Garuda’s help he realized he needed to break out on his own and be a more holistic advisor, like Garuda. He even adopted Garuda’s niche of serving doctors’ practices with tax planning strategies by working with their accountants and lawyers. Also like Garuda, Porter spread the word, writing articles for 320 publications, by Porter’s estimate. Porter caught Garuda’s passion for helping people in their financial situations. It’s a passion that keeps Porter working at age 69 with no thought of retiring, much like Garuda at age 79, still putting in a full day. But perhaps what impresses Porter most is Garuda’s philanthropy. For example, Garuda goes back to his native India each year for a humanitarian project. “He works with Doctors Without Borders and helped 150 people get fitted with prostheses so they could walk again,” Porter said. “But one of the stories that sticks with me is the year before that, he goes over there and they’re restoring people’s eyesight. They haven’t been able to see for years because of cataracts. And Rao’s in the hospital with April 2021 » InsuranceNewsNet Magazine
A Visit With Agents of Change Rao Garuda, second from the left, sponsors an annual trip to India with American doctors to help provide medical care. In 2018, they fitted 150 people with prosthetic limbs. Garuda has made it his life’s mission to raise $500 million for has raised $300 million.
this guy recovering, and they’re starting to take his bandages off his head and the guy’s holding Rao’s hand. Rao asked him, ‘What do you see?’ He said, ‘I see an angel sent from God to restore my eyes,’ and he’s looking right at Rao.”
Learning To Give
Garuda said he was driven to philanthropy by his gratitude for the opportunities given to him and his family. His two sons went beyond the expectations he and his wife had for them. One became a gastroenterologist and married another doctor. His other son finished second in his class at Harvard University and at 27 became one of the youngest managing directors at Merrill Lynch. Garuda’s lifetime mission is to raise and give away $500 million, and he has already raised $300 million. He even inspired one of his clients to give to charities the $150 million he made from an IPO. In his most recent humanitarian trip to India, he took 15 doctors from the Cleveland area to treat people for free in 10 “miracle camps.” “Each day, there were 1,000 people from the villages, the poorest of the poor in India who did not even have the bus fare,” Garuda said, also recounting the scene that Porter described. “And the last day of the camp, we rounded up 150 people who never walked in their life because they did not have legs. So we fitted them with prosthetic devices, and for the first time in their lives they were able to walk on their own legs. And you can imagine the whole city came out. They were throwing flowers at these doctors and the patients were crying.” Although Garuda thinks big in his giving, he was inspired by a small observation 18
InsuranceNewsNet Magazine » April 2021
he made while helping out in a Cleveland soup kitchen 25 years ago. “This was February, and it was snowing like crazy,” Garuda said. “When I went there in downtown Cleveland, there were 250 people waiting in line for one meal. I asked myself, ‘How in God’s name can this happen in the greatest country in the world?’ So, that really pissed me off so badly I said, ‘I want to help as many people as possible and make sure this never happens.’” He also wants to help others see the need that is all around them. “There was one time I went with a group of youngsters who were very well to do,” Garuda said. “I said, ‘We’re going to buy about 30 blankets, linen blankets. And we’re going to go put them in this station wagon. And we’re going to go downtown, and you’ll see all these people who are sleeping on the sidewalks in cardboard boxes.’” He told them to wrap people in the blankets and see their reaction. As he predicted, the young people were moved by the experience. “These youngsters who were given everything, who had everything done for them, for the first time in their lives they saw the joy of giving,” Garuda said. “They saw how they could make such a huge difference. That is the joy of practicing what we preach.” Steven A. Morelli is editor-in-chief for Insurance NewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at firstname.lastname@example.org.
Variable annuities are sold by prospectus. Your clients should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. A prospectus can be obtained at securian.com or 1-866-335-7355. An annuity is intended to be a long-term, taxdeferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals. Variable annuities have additional expenses such as mortality and expense risk, administrative charges, investment management fees and rider fees. The variable subaccounts of variable annuities are subject to market fluctuation, investment risk and loss of principal. MultiOption annuities and optional benefits may not be approved in all states and product features may vary by state. Not all products, features and optional benefits are available from all firms. We reserve the right to limit or discontinue acceptance of future purchase payments after the contract is issued. This may limit the ability to increase the contract value through additional purchase payments. If an optional benefit is elected in the contract, this may also limit the ability to increase the value used to calculate the optional benefit. 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. The Indexed Account options described here can be accessed through the purchase of the MultiOption Momentum variable annuity. This material must be preceded or accompanied by a current MultiOption Momentum variable annuity prospectus. You should consider the investment objectives, risks, charges and expenses of the portfolio, Indexed Accounts and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. Please read the prospectuses carefully before investing. 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. Securities offered through Securian Financial Services, Inc., member FINRA/ SIPC, 400 Robert Street North, St. Paul, MN 551012098, 1-800-820-4205. Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates. Minnesota Life Insurance Company and Securian Life Insurance Company are affiliates of Securian Financial Group, Inc. The information presented above is solely intended for use by financial professionals. Such information is not intended for public consumption or dissemination.
Variable annuities are sold by prospectus. Your clients should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. A prospectus can be obtained at securian.com or 1-866-335-7355. An annuity is intended to be a long-term, taxdeferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals. Variable annuities have additional expenses such as mortality and expense risk, administrative charges, investment management fees and rider fees. The variable subaccounts of variable annuities are subject to market fluctuation, investment risk and loss of principal. MultiOption annuities and optional benefits may not be approved in all states and product features may vary by state. Not all products, features and optional benefits are available from all firms. We reserve the right to limit or discontinue acceptance of future purchase payments after the contract is issued. This may limit the ability to increase the contract value through additional purchase payments. If an optional benefit is elected in the contract, this may also limit the ability to increase the value used to calculate the optional benefit. 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. The Indexed Account options described here can be accessed through the purchase of the MultiOption
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April 2021 » InsuranceNewsNet Magazine
Change COVER STORY CHANGE STARTS FROM WITHIN
Starts From Within
How insurance companies are stepping up to build diversity in their ranks
By John Hilton
arcus Creighton delivered results as a MetLife financial securities representative from 2001 to 2014. The African American advisor secured the largest employer in Missouri as a MetLife client in 2014, according to court documents. A nonprofit health care organization, the client signed up for MetLife’s legal benefit plan and its PlanSmart financial literacy program. The legal benefit plan alone meant $750,000 in first-year revenue, while
MetLife settled this 2015 lawsuit claiming race bias for $32.5 million in 2017. The insurer denied all claims in the lawsuit. 20
InsuranceNewsNet Magazine » April 2021
PlanSmart opportunities brought the potential for many more millions in MetLife revenues. Yet, MetLife terminated Creighton later in 2014. In May 2015, Creighton filed a lawsuit in federal court, claiming the company systematically discriminated against its Black employees and ultimately paid them less than their white co-workers. Creighton claimed that MetLife “almost entirely excludes” Black financial service representatives from forming “favorable” teams when combining client accounts, a common company practice, court documents say. He also alleged that MetLife steered the most lucrative accounts and opportunities away from Black brokers and denied them equal access to the company’s “Delivering the Promise” Gandy training program. A judge approved the lawsuit as a class action and MetLife settled for $32.5 million in July 2017. MetLife denied all allegations and claims asserted,
according to the settlement agreement. The Creighton case is a recent reminder that many Black agents and advisors claim racial discrimination still exists. MetLife is only one of many companies accused of discriminatory practices. And although the industry has made great strides, work remains to be done. “There’s a disconnect in the education and the opportunity,” said Chris Gandy, president and founder of Midwest Legacy Group in Chicago and president of NAIFA-Chicagoland. “In my 22 years being in this business, I’ve led seven companies, seven of the largest companies, in production for a year. And here’s what I can tell you: Never was there a knock at my door for an opportunity for a promotion.”
‘Concerning To Us’
In another case resolved in 2020, Jackson National Life Insurance Company paid $20.5 million to 21 complainants to settle claims in a race, national
CHANGE STARTS FROM WITHIN COVER STORY origin, and sex discrimination and retaliation lawsuit brought by the U.S. Equal Employment Opportunity Commission. The EEOC’s lawsuit, filed in September 2016, charged that Jackson tolerated a work environment hostile to female and African American employees in Jackson’s Denver and Nashville offices. African American employees were referred to as “lazy,” had stress balls thrown at them and were subjected to racially demeaning cartoons, the complaint said. In addition, a high-level manager referred to multiple African American female employees as “resident street walkers,” the complaint said, and female employees endured sexual comments and leering from male co-workers. The EEOC’s suit also alleged that Jackson discriminated against African American and female employees in the terms and conditions of employment, such as paying them inferior compensation and regularly passing them over for promotion, and selecting less-qualified white male employees over the complainants. After the settlement was announced, a Jackson National spokesman said that the company agreed to settle the lawsuit in order to “move forward.” “While there has been no finding by a court or jury that Jackson violated any laws, we are humbled and recognize that the associates who made claims in this case believe they were not treated fairly or in a way that aligns with Jackson’s core values,” said spokesman Patrick Rich. “This is concerning to us, as it is not consistent with who we strive to be.”
Making The Change
Despite these incidents, many financial services companies are going beyond statements in efforts to become more diverse, especially during the past year. In addition to being the right thing to do, it just makes good business sense. “Now it is getting that focus and real energy and investment in mindshare at the top of the house,” said Liz Caswell, associate director, markets research for LIMRA/LOMA. “And that’s really accelerating the changes that were already underway, but perhaps at a less intensive level.” Most insurers have created “business resource networks,” or BRGs, for different minority groups. The BRGs allow for professional growth, resource sharing and discussion on diversity issues. Prudential is a leader in this concept, with BRGs that date to 1993. Some insurers have set specific goals. For example, Lincoln Financial’s eight-point plan includes a pledge to “grow minority representation at the officer level (assistant vice president and above) by 50% over the course of three years, with a special focus on the Black officer population.” “We have a responsibility to do far more than raise awareness about difference and inclusion,” said Allison Green, chief diversity officer at Lincoln. “Our
‘Proxy Discrimination’ Still An Issue In Insurance By John Hilton
egulators and consumer advocates are fighting a different kind of race and insurance issue in 2021 — proxy discrimination. More insurers are relying on big data to guide underwriting and set what is expected to be impartial, by-the-numbers pricing. But critics say it is anything but. There are numerous examples of how big data algorithms discriminate against communities of color. For example, a 2018 study by Consumer Reports and ProPublica found disparities in auto insurance prices between minority and white neighborhoods that could not be explained by risk alone. ProPublica and Consumer Reports examined auto insurance premiums and payouts in California, Illinois, Texas and Missouri, and found that insurers were charging premiums that were on average 30% higher in ZIP codes where most residents are minorities than in whiter neighborhoods with similar accident costs. Courts have consistently ruled that “redlining” based on race is illegal. Some consumer advocates say insurers might not even know of many cases of “unintentional” discrimination if a computer algorithm is producing it. “We don’t claim insurers are looking for ways to indirectly discriminate against communities of color,” said Birny Birnbaum, executive director of the Center for Economic Justice. “Rather, it’s about getting insurance to examine their practices for unintentional disBirnbaum crimination, and to change those practices within the risk-based framework of insurance.” Birnbaum spoke during a meeting of the Special Committee on Race and Insurance formed by the National Association of Insurance Commissioners. In August, the NAIC adopted “guiding principles” for use of artificial intelligence based on the Organisation for Economic Co-operation and Development’s AI principles that have been adopted by 42 countries, including the United States. After robust discussions, regulators added a principle encouraging industry participants to take proactive steps to avoid proxy discrimination against protected classes when using AI platforms.
Birnbaum lobbied for stronger steps. At least one regulator, Washington Insurance Commissioner Mike Kreidler, wants more action as well. In July, Kreidler reached out to insurance company CEOs and urged them to stand behind their recent pledges to end discrimination and racial inequities by supporting his proposal to ban the unfair practice of using credit scoring in setting prices for auto, homeowners, renters and life insurance. “The use of credit scores in insurance is discriminatory and unjustly targets people of color, those with lower incomes, and individuals and businesses struggling during the coronavirus pandemic,” Kreidler said. “The insurance industry claims that people with lower credit scores are more likely to file future insurance claims. I believe it’s inherently abhorrent, unfair and unjust.” Retired insurance executive Sonja Larkin-Thorne has concerns about big data, including unregulated use, lack of privacy, accuracy, transparency, and unintentional bias and discrimination. Insurers can collect information on shopping habits, driving patterns, race, age, occupation, education, voting history, marital status, work salary and Facebook friends, she said during the NAIC summer meeting. Federal and state regulation is needed, she said, as are laws requiring companies to unlock the data and resulting algorithms so consumers know what’s being collected and how it’s being used to underwrite and price insurance products.
April 2021 » InsuranceNewsNet Magazine
COVER STORY CHANGE STARTS FROM WITHIN responsibility is not just to those who work with us but to our industry, the markets we serve, those who are underserved, and the communities where we live and work.” Most insurers have diversity directors at the executive level and ramped up hiring efforts in 2020. At American Family Insurance, for example, the company set a bold goal of increasing racial and ethnic diversity by 50% in three years, said Estelle Blockoms, life distribution director for the insurer. “We believe that focusing on attracting, retaining, developing and promoting a diverse workforce is key to our success in the coming years,” she said during a recent LIMRA Distribution Conference session. “We have it in our focus areas and we have it in our culture
statement. It’s a layered approach for leadership all the way down.”
There’s a trickle-down effect when Black communities are able to participate in financial planning, retirement planning and all the related benefits, Gandy said. It starts with an advisor force that mirrors those communities, he added. “My history has been that there was never a minority or diversity individual who walked into my house, sat my table, and actually talked to my mother about protecting her family and making sure that she was able to leave wealth to her children,” Gandy said. “That did not happen.” According to the latest Federal Reserve data, white Americans hold nearly 85% of the nation’s wealth, versus just 4.1%
A Tarnished History Of Race-Based Policies By John Hilton
he insurance industry faced a racial reckoning of sorts following the May 25 death of George Floyd at the hands of Minneapolis police. To the industry’s credit, many of the diversity efforts that followed were initiated from within. But some consumer activists say racial problems remain unsolved in the insurance industry. Some premium-setting algorithms lead to proxy discrimination, they claim, and the industry remains largely white. In March 1881, Prudential announced that its life insurance policies sold to Black adults would be worth one-third less than those sold to whites. 22
InsuranceNewsNet Magazine » April 2021
for Black households. Studies show that Black Americans value life insurance products and the security and wealth accumulation and transfer they represent, Gandy noted. “One way we can directly impact the change that we’re talking about creating,” Gandy said, “specifically in the African American and diversity communities, is to do business with somebody that does not look like you over the next 12 months.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
The death of George Floyd on May 25, 2020, prompted many in the insurance industry to look at racial inequity.
But their weekly premiums would remain the same. Prudential was one of the nation’s largest insurers at the time and its competitors, such as Metropolitan Life, quickly followed with similar inequitable policy adjustments. And with that, life insurers entered a dark period of race-based policies based on racist and junk science. It would take more than 120 years for insurers to pay reparations to the Black community. “Our past hasn’t always been that great, to tell the truth,” said Paul Graham, senior vice president, policy development, at the American Council of Life Insurers. Graham shared the dark history of the life insurance industry during a meeting of the Special Committee on Race and Insurance put together by the National Association of Insurance Commissioners.
For several years following the Civil War, and passage of the 14th Amendment guaranteeing equal protection in 1868, Black Americans could purchase life insurance on equal terms with whites. The Black community generally purchased “burial policies” for as little as 10 cents a week, enough coverage to insure their death costs were covered. Prudential began selling life insurance to John Dryden Black Americans, many of them freed slaves, in 1875. By 1881, the insurer discovered it was paying a higher proportion of benefits to
A TARNISHED HISTORY OF RACE-BASED POLICIES COVER STORY Black customers than to white customers. States Respond Prudential founder John F. Dryden, The blatant discrimination of race-based who would later represent New Jersey policies did not go totally unchallenged. in the U.S. Senate, responded with a Several state legislatures passed laws forcMarch 1881 letter informing agents ing insurers to accept Black customers that benefits for adult Black policies on the same terms as whites, including would be cut by one-third. In addition, those of Massachusetts, Connecticut, and the weekly premium for infant policies Rhode Island in the 1880s and New York, was increased by five cents, although the Minnesota and New Jersey in the 1890s. benefits were unchanged. In the former southern Insurance agents at the slave states, the discrimitime carried around two nation against Black polrate books, one for whites icyholders continued for and one for Blacks, the decades. NAIC has said. The rates “We get to 1940 and for Black people were even at that time, 40% sometimes as much as of life insurers did not 30% higher. sell policies to Black To justify the changes, Americans,” Graham said. Prudential was forced to “Around 1948, there were get creative with the data. the first adopted raceCompany statistician merged mortality tables, Frederick L. Hoffman companies started pricing wrote a 329-page thesis and selling their policies Prudential statistician claiming the genetic inon a merged basis.” Frederick L. Hoffman pubferiority of the Black race According to The lished notorious research supported discriminatory Insurance Yearbook pubfor race-based insurance insurance rates. He had lished in 1940, another policies in August 1896. plenty of junk science to 20% of insurance compawork with, the online magazine JSTOR nies sold life insurance to Black customDaily reported in a 2018 article. ers at equal rates, but did not solicit their Without a significant body of med- business. And 10% accepted Black cusical evidence available on Black health tomers, but on a mortality table rated up and mortality, researchers relied on from the American mortality experience. Civil War records, state health reports, Many Black entrepreneurs established census statistics and comparative mor- life insurance companies in efforts to tality records in large cities, said John service minority communities. In 1939, S. Haller Jr., emeritus professor in the Swedish economist Gunnar Myrdal reSouthern Illinois University Department ported that there were 67 Black-owned of History, in a 1970 journal article. insurance companies that survived the The generally accepted, and unprov- Great Depression. However, he called it en, post-Civil War view, Haller wrote, a “poor substitute” for what was really was that slavery had been “extremely needed — recognition from the whitehealthy” for Blacks. Also, it was thought owned insurance giants. that slaves “had been immune to tuberIn 1964, the landmark Civil Rights Act culosis, insanity, malaria, and tropical was passed, theoretically eliminating the diseases,” he added. Further medical studies found that to be false, and also confirmed that Black freedmen were at a much higher mortality risk than they were as slaves. Time and further studies have concluded that while Blacks indeed died at a higher rate from diseases such as cholera and pneumonia, the cause is attributable President Lyndon Baines Johnson signs the Civil Rights to poverty, racism, poor nutrition and Act of 1964, which banned working conditions, and lack of proper race-based insurance. medical care.
North Carolina Mutual Life Insurance Co. was one of the more successful Blackowned life insurance companies started in the early 20th century.
discriminatory practice of charging different life insurance premiums. However, in 2000, a lawsuit was filed, alleging some existing policies from the 1960s were not changed and Black policyholders were still being charged higher premiums than whites for industrial life insurance policies.
Ida Lee Johnson lived in Bartow, Fla., when she joined a lawsuit against Mutual Savings Life Insurance in December 1999. She only attended elementary school and was able to read “a little bit,” she said during a court deposition.
A newspaper headline trumpets passage of the historic Civil Rights Act of 1964.
Johnson purchased an “Industrial Weekly Whole Life Policy” from Mutual Savings in 1962, when she was 37 and lived in Marietta, Ga. Her policy was designated a “colored cash” policy, with a face value of $1,000 and a weekly premium of 96 cents. Initially, the premiums were collected on a weekly basis by Mutual Savings agents. By the time the lawsuit was amended a third time in April 2002, Johnson had paid a total of $1,884.48 in premiums for a life insurance policy that will pay death benefits of only $1,000, court documents said. Mutual Savings, today part of the April 2021 » InsuranceNewsNet Magazine
COVER STORY A TARNISHED HISTORY OF RACE-BASED POLICIES
John Moses Avery, born soon after the Civil War, became an agent for the North Carolina Mutual Life Insurance Co., eventually becoming a vice president and director of the company.
Kemper Corp., sold burial policies to both Black and white consumers, plaintiffs claimed, but maintained separate “colored cash,” “white cash,” “colored burial” and “white burial” premium structures. A 45-year-old Black person who purchased a typical $1,000 policy from Mutual Savings would pay $1,560 more than a white person for the same amount of life insurance and accidental death benefit insurance, solely because of his race, plaintiffs said.
Eli Harold (58) and quarterback Colin Kaepernick (7) take a knee during the national anthem before a game on Sunday, Nov. 27, 2016. Al Diaz/TNS/Newscom
The Mutual Savings lawsuit was one of 16 major case settled by insurers between 2000 and 2004. Those cases covered 14.8 million policies sold by 90 insurance companies between 1900 and the 1980s. Together, the settlements required the companies to pay more than $556 million, NBC News reported in 2004. Most of that money was paid in restitution to policyholders or their survivors, but some of it in fines, legal costs and charitable contributions. Most insurers opted for negotiated settlements, which enabled them to avoid bad publicity and announce a break with past practices. “The settlement addresses policies that were issued decades ago amid circumstances that are no longer prevailing today,” Robert H. Benmosche, then MetLife chairman and CEO, said after agreeing to a 2002 settlement of up to $160 million. “MetLife prides itself on providing the best products and services to all of our customers.”
‘We Cannot Ignore’
Since those settlements, efforts to eliminate racism from the insurance industry continue. For example, Texas Gov. Rick Perry signed a law making race-based
NC MutuaL Life Co. building.
diversity and inclusion for our employees and the workforce.” Industry efforts to heal wounds and address lingering racial issues are ongoing and important, officials say. “The needless deaths of Ahmaud Arbery, Breonna Taylor and George Floyd
“The needless deaths of Ahmaud Arbery, Breonna Taylor and George Floyd have led to a movement on racial equality that we cannot ignore.” — Ray Farmer, NAIC president insurance pricing a felony in the state. In 2016, former NFL quarterback Colin Kaepernick drew the public’s attention to a movement that continues to grow. The Black Lives Matter effort focuses on police brutality and racial injustice. After George Floyd died in police custody on May 25, 2020, the insurance industry stepped up with a significant statement. It read, in part: “We stand committed to sustained partnership in the community to drive solutions to address systemic inequality. And we stand committed to fostering
have led to a movement on racial equality, that we cannot ignore,” said Ray Farmer, 2020 NAIC president, during opening remarks at the NAIC Special Session on Race and Insurance. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org. Follow him on Twitter @INNJohnH.
More People Interested In Life Careers With unemployment rates continuing to be higher than normal, many of those who
are searching for new careers are looking to the life insurance industry, LIMRA found. Candidate testing for field sales positions in 2020 increased 31%, driven by candidates from the hospitality, health care, transportation, construction and information technology sectors, according to LIMRA research. But a bigger candidate pool doesn’t always translate into more agents. In fact, there was an 18% drop in the number of recruits who were contracted in the first half of 2020, compared with the prior year. The study finds that candidates with nontraditional backgrounds are less familiar with the industry. Thirty-three percent say they know “nothing or very little” about a financial services sales career, compared with 17% of candidates with traditional financial backgrounds. Nearly half (46%) of nontraditional candidates are concerned about being able to answer in-depth questions from prospects and clients, and three in 10 say they worry about being accepted as a trusted financial advisor.
COMPLEXITY KEEPS ADVISORS IN THE ONLINE GAME
A recent survey showed that life insurance sales are increasingly moving online, but the complexity of the life insurance sale means there is still a need for advisors to be part of the process. The Society of Insurance Research looked at trends in the sales process and found that 59% of industry professionals believe that there is a major move toward consumers purchasing insurance online. The survey showed that industry professionals believe consumers are moderately comfortable with online purchase of life insurance and are more comfortable with some of the online servicing options for life products. But consumers still see a need for life insurance advisors, the survey said. This is especially clear when it comes to filing claims or submitting paperwork. Fiftythree percent said life insurance consumers are DID YOU
more comfortable submitting paperwork through an advisor instead of online. In fact, 27% of professionals believe that the life space is not ready for a full online experience yet.
PANDEMIC HASTENS DIGITAL ADOPTION
The COVID-19 pandemic sped up the pace of adoption of digital solutions at major life insurance carriers, according to an LL Global survey of senior executives. Pre-pandemic, the surveyed executives said their companies had already begun to transform underwriting and improve the customer journey, using advanced analytics and artificial intelligence. LIMRA research confirms this — in 2019, more than 8 in 10 carriers had in place or planned to implement automated underwriting programs. Once the pandemic hit, these tools were particularly important when traditional underwriting means were unavailable due to social distancing guidelines. As a result, more than a third of companies reported
QUOTABLE In comparison to other industries, the life insurance market remains relatively stable. This may have attracted many people looking to find a new career. — Margaret McManus, LIMRA and LOMA
expansions to their automated underwriting programs. Digital tools have also helped transform the customer experience during COVID-19 as companies used e-applications, e-signatures, e-notarization and e-delivery of policy documents when faceto-face interactions were not possible.
WHAT DO AGENTS WANT THIS YEAR?
What’s on agents’ wish lists for 2021? Flexibility and more time for client interaction top the lists. Vertafore surveyed the independent agency workforce and found that agencies may need to reassess the five-daya-week office culture, with only 15% of agents saying they want to return to the office full time. But although 1 in 5 agents said they want to work fully remote, agents ultimately want more time in their day for meaningful client interaction. Agents said they continued to find their work rewarding but more stressful in 2020. Fewer respondents plan to stay in the industry more than 10 years, and many are looking at retirement. Most (85%) would recommend a career in insurance. However, many also stated that the industry is stressful and were more hesitant about recommending a career in insurance to a friend. More than half (54%) would leave the industry for a better work-life balance.
Northwestern Mutual surpassed $1 billion in new life insurance premium sales in 2020. Source: The Wall Street Journal Source: Northwestern Mutual
April 2021 » InsuranceNewsNet Magazine
I have a ng i bad feelthis. t u o b a
Star Wars And IUL: Sometimes You Both Frustrate Me The best Star Wars movies are those that stick to the storytelling. Likewise, indexed universal life insurance sales can veer off course when we focus on the wrong things. By Jason Patterson
he Death Star trench run in the original “Star Wars” movie was tense, and I loved it as a kid. But when Luke Skywalker, about to be pushed into the Sarlacc’s mouth, sprang off the desert skiff’s plank and caught his lightsaber in “Return Of The Jedi” — that was a pivotal moment for me as a child. It deepened my love of a galaxy far, far away. Years later, the disappointing (to me) prequel trilogy came out and my love for Star Wars was almost quashed. I still had the original trilogy, but that was all I really had. These days, we are knee-deep in Star Wars. The Sequel Trilogy, “Rogue One,” “Solo,” “The Clone Wars,” “Star Wars Rebels,” “The Mandalorian,” video games, books, comics and more! Some of it is great, some of it is bad, and some of it is fine. It is disappointing, though, that 26
InsuranceNewsNet Magazine » April 2021
something that was so great can also be so frustrating. At times, indexed universal life insurance, especially how it is positioned and sold, makes me feel the same way.
Focused On The Wrong Things
I think Star Wars veers off course when it focuses on the wrong things — silly humor, midi-chlorians and the subversion of fan expectations. IUL sales can veer off course when we focus on the wrong things as well. What are some of the wrong things? Let’s talk about two items. First, why do we focus so much on looking at which carriers have the highest income solves? I know why we do (we’re
The Right Things Relationships between the main characters Well-plotted storytelling Action scenes The Wrong Things Silly humor Plot veering off course
often focused on the big numbers) but why do we put so much stock in it? An IUL illustration is run using a very specific set of parameters and assumptions that will almost certainly not happen in the real world, yet we are often asked, “Which carrier has the best income solves?” and that information is often the determining factor in a sales recommendation. How many of us would purchase a computer or a smartphone based on which one has the highest multicore performance score in Geekbench? I would guess not many view that statistic, important though it may be, as one of the crucial deciding factors in a purchase decision.
The Right Things Greater upside potential Flexibility Tax-free gains The Wrong Things Focus on the highest income solves Focus on the highest cap rates
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LIFE STAR WARS AND IUL: SOMETIMES YOU BOTH FRUSTRATE ME Second, why do we focus so much on which carriers have the highest cap rates? Again, I know why we do, but, again, why do we put so much stock in it? Cap rates will fluctuate based on a number of factors, such as market volatility, interest rate volatility, general account returns and options prices. We cannot control any of those factors, yet we are often asked, “Which carriers have the highest cap rate right now?” How many of us would purchase a house with a 3/1 adjustable rate mortgage and assume that the interest rate in the first three years will be the same rate in year 20? We would need to assume there will be movement either up or down, and plan accordingly. IUL illustrations certainly allow us to make changes to the default assumptions, such as lowering the illustrated rate from the default or max illustrated rate, or we may be able to insert a schedule of returns so that we can see the product’s performance when some years show a 0% return. Too often, though, we look at numbers on a ledger as the determining factor in why one product is recommended over another. Those numbers certainly matter, especially when a client’s budget and premium tolerance are more limited, but other criteria should be given more weight.
Focus On The Right Things
In my opinion, Star Wars stays on course when it focuses on the right things — relationships between the main characters, satisfying character arcs, well-plotted storytelling, and action that serves the story and characters. IUL sales stay on course when we focus on the right things as well. What are some of the right things? There are many considerations in any life insurance sale, including IUL sales, and in some cases, this may mean unlearning what you have learned. Here are a few questions to keep in mind to help guide our discussions so we do not put too much focus on a number on the ledger page or a cap rate: $ Is the life insurance need for personal
or business purposes?
$ Is the focus on death benefit protec-
tion, accumulation/income or somewhere in between? If it is protection-focused, is there a preference between lifetime guarantees or life expectancy guarantees? 28
InsuranceNewsNet Magazine » April 2021
Death Star trench run: Trench run defense (TRD) was an anti-capital ship tactic modeled on the success of Rebel Alliance starfighters against the Death Star at the Battle of Yavin. Desert skiff: The Bantha-II cargo skiff, also known as the desert skiff or sand skiff because of its use on desert planets like Tatooine, was a repulsorlift utility vehicle produced by Ubrikkian Industries. Kessel Run: The Kessel Run was a hyperspace route within the Akkadese Maelstrom used by smugglers and unscrupulous freighter captains to move spice from the spice mines of Kessel. Midi-chlorians: Midi-chlorian counts were linked to potential in the Force, ranging from normal human levels of 2,500 per cell to the much higher levels of Jedi. Parsecs: Parsec is a unit of distance equal to 3.26 light-years. The system used by starship navigators throughout the galaxy to record the location of star systems was based on parsecs, with one unit on the coordinate scale corresponding to 15 parsecs. Sarlacc: Sarlaccs were dangerous, carnivorous creatures, as well as one of Jabba the Hutt’s favorite pets, that inhabited the Great Pit of Carkoon in the Dune Sea of Tatooine. SOURCE: Wookieepedia $ Is there an interest in non-S&P 500
indices for diversification purposes, or is there more comfort in using the S&P 500? $ Is there a desire for long-term care or
chronic illness protection?
$ How highly does the client value a
carrier that offers proactive post-issue policy management programs?
These questions, and many others, get to the heart of the matter. The client has goals to accomplish via life insurance, and our role is to assist in finding the right carrier and product to accomplish those goals.
The Kessel Run Was Just A Shortcut
Han Solo is famous for making the “Kessel Run” in 12 parsecs. As a child, I thought that was because the Millennium Falcon was very fast, since Han’s boast was in the context of the Falcon’s speed. It turns out that a parsec is a unit of distance, not time. The movie “Solo” shows that Han took a dangerous shortcut through the Kessel Run, and that is how he made the Kessel Run in 12 parsecs. We all want rules of thumb and shortcuts to help us make a complex decision quicker and easier. Looking at numbers on a ledger, a temporary cap rate, or any other
singular feature as a shortcut to determining a product’s strength is quick and easy, but it is short-sighted. If we are relying on cap rates, illustrated values, or other similar items that can (and will) change, we are likely to be disappointed. But if we are basing our decision on product features, riders and benefits that will not change, we are far less likely to be disappointed. May this serve as a gentle reminder of the importance of taking the time to understand our clients’ needs, their goals, and a the best overall package that a carrier and product can deliver, even if it is not the best income solve, highest cap rate, lowest premium, or any other preconceived notion we have of what is “best.” Jason Patterson, ALMI, ACS, is a life product analyst at Crump Life Insurance Services. Jason may be contacted at email@example.com.
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Perceived Value Drops For Guaranteed Income
The COVID-19 pandemic is having a wide-ranging and often complex effect on perceptions of annuities and guaranteed income. A recent white paper from Greenwald Research and CANNEX shows a significant overall decline in consumers’ perceived value of guaranteed income in addition to Social Security, from 71% to 63% between studies done in February 2020 and August 2020. Perceived Value Of Guaranteed Lifetime Income In Addition To Social Security
SOURCE: Greenwald Research and CANNEX
Although almost half of consumers reported feeling less financially secure (46%) and close to a quarter (22%) were less comfortable with risk during the pandemic, they were also less likely to agree with the importance of people over age 50 having a strategy in place to protect their portfolio against significant investment loss. In contrast, the new paper shows financial professionals’ perception of the value of GLI products to consumers increased significantly during the same period. Half of financial professionals reported that client receptivity to GLI products had grown since the pandemic’s onset. And 25% reported an increase in the number of clients asking about annuities that provide guaranteed lifetime income.
AIG PURSUES SALES STRATEGIES FOR LIFE & RETIREMENT
As an industry leader in annuity sales, AIG is drawing plenty of interest in its plans to divest itself of 19.9% of its Life & Retirement division. During the insurer’s fourth-quarter earnings call, executives said AIG is open to taking on a minority partner for the business, but is moving ahead with selling the 19.9% stake through an initial public offering. “We are pleased with the level of interest in quality potential partners for life and retirement business and believe a sale of a minority stake could be an attractive option for AIG,” CEO Peter Zaffino said. “We are carefully weighing the relative merits of this path compared to a minority IPO.” AIG announced the planned sale of its Life & Retirement business in DID YOU
October, succumbing to pressure from high-profile investors to split it off from the insurer’s property/casualty operations. There are no plans to further break up the Life & Retirement business, Zaffino said.
SURVEY: RETIREMENT ACCOUNTS STEADY
Americans might be dealing with a lot and have been for a long time, but retirement readiness is not suffering, according to one survey. From Oct. 1, 2019, through Sept. 30, 2020, John Hancock Retirement observed participant behavior and data with a focus on retirement readiness, retirement planning and retirement investing. John Hancock defines retirement readiness at a plan level as the projected ability for participants to
QUOTABLE We don’t expect the market will be as hot necessarily [in 2021]. — Conor Murphy, executive vice president and chief operating officer, Brighthouse Financial, during a fourth-quarter earnings’ call
replace 70% or more of their workplace earnings in retirement. The resulting State of the Participant 2021 study shows that the percentage of participants achieving retirement readiness slipped very slightly from 49.6% on Sept. 30, 2019, to 47.9% on the same date last year. “The data we observed into and through a challenging 2020 is actually quite encouraging,” said Lynda Abend, chief data officer, John Hancock Retirement. “It reinforces the roles that participant engagement, plan design and the resilience of retirement savers play in keeping people on track toward a secure retirement.”
NEW ANNUITY LANGUAGE AIMED AT CONSUMERS
If consumers could better understand annuity language, they might be inclined to buy more products. At least that’s the theory the Alliance for Lifetime Income is working with. A nonprofit consumer education organization devoted to helping Americans address the risk of outliving their retirement income, ALI released a new edition of its Annuities Language Glossary. This new resource for consumers and financial professionals builds on the original glossary by adding new terms and definitions to reduce complexity and demystify annuities, providing simpler language they can understand, the ALI said.
American Equity fourth-quarter gross annuity sales of $1.8 billion doubled from the year-ago quarter.
Source: American Equity earnings report
April 2021 » InsuranceNewsNet Magazine
Helping a client set up the beneficiary designations on their annuity contract can be similar to a painting project.
Make Sure Your Client’s Wishes Are Carried Out Help your client set up beneficiary designations on their annuity contract correctly to ensure their intended distribution after their death. By Jeff Barnes
hen my wife and I moved into our house seven years ago, she asked me to paint a spare bathroom because she didn’t care for the dated colors. She brought it up to me again the other day, so I told her, “Honey, I said I will do it. You don’t need to remind me every six months.” Of course, I was stalling because, one, I hate painting, and two, I’m sure hunter green and burgundy will come back into style eventually. Well, they aren’t back in style — yet — so I started the project, finally. While I was taping off the trim, I considered how painting projects are 80% preparation and 20% actual painting. And it isn’t until you are completely finished painting and remove the masking tape that you truly know how well you did. Because the 30
InsuranceNewsNet Magazine » April 2021
masking tape doesn’t lie. Helping a client set up the beneficiary designations on their annuity contract can be similar to a painting project. Sometimes it’s not until after the client dies that you find out whether you helped them set things up as they truly intended. Or even worse, you find out you didn’t. And once they have died, there is no going back; a client can’t sign a beneficiary change form from beyond. Unfortunately, I have seen situations where a death claim did not pay out as
As part of your fact-finding, ask your client, “How do you want these monies disbursed when you are gone?”
Setup May Vary By Carrier
Don’t assume that each carrier’s annuity contracts operate the same way. Is the annuity contract owner-driven or annuitant-driven? The distinction is important. An owner-driven contract triggers a death-claim payout upon the death of the owner — not the annuitant. On owner-driven contracts, you need to consider joint ownership; does the contract As part of your fact-finding, pay out on the death of the first owner, or ask your client, ‘How do you does it continue until want these monies disbursed when the death of the secyou are gone?’” ond owner? Annuitantdriven contracts might intended. How did it happen? Something be more appropriate when non-natural was overlooked, the annuity contract ownership applies (corporate-owned, was misunderstood, or the advisors trust-owned), where there is no “death” simply didn’t ask the right questions or of the owner and the death of the annuiconduct due diligence. I’m sharing my tant triggers the death claim payout. experiences with the hope that you can avoid potentially devastating situations Setup Combinations Abound with your clients. Consider the setup. Single owner/single
ANNUITY MAKE SURE YOUR CLIENT’S WISHES ARE CARRIED OUT could suddenly show up trying to claim a piece of the pie.
Distribution: Per Stirpes Or Per Capita? Per stirpes distribution uses a generational approach to distributing an annuity to beneficiaries. If the beneficiary precedes the client in death, the benefits would pass on to that person’s children in equal parts. Spouses are generally not part of a per stirpes distribution. For example, if the client has two children, and one precedes the client in death, the surviving child would receive half and the children of the deceased child would get the other half. Per capita distribution gives all members of a particular group an equal share of the distribution. The share of any beneficiary who precedes the client in death is shared equally among the remaining beneficiaries. Within a beneficiary designation, per capita typically means an equal distribution among the client’s children.
annuitant, joint owner/joint annuitant or owner other than annuitant. There are a multitude of combinations for nonqualified annuities. Know how the annuity contract works in all situations. Here’s an example: A married couple has two grown children to whom they want to pass money after they have both died. They choose an owner-driven annuity contract for their nonqualified money. A joint ownership is established with “surviving spouse” as the primary beneficiary and both children listed as contingent beneficiaries. The nursing home waiver or terminal illness waiver could apply to both owners. Upon the death of the first owner, the surviving spouse potentially has three options on a death claim:
» Keep the annuity contract going 32
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with the use of spousal continuation.
» Move the funds to another carrier. » Take receipt of the funds through a death claim payout.
In addition, both owners are subject to nursing home and terminal illness waivers. If the owners die simultaneously, the proceeds go to the children instead of the parents’ estate.
Establish Contingent Beneficiaries
Use contingent beneficiaries to avoid claims paying to a client’s estate. When a claim is paid to a client’s estate, it can take much longer for the claim to be paid and could end up being paid to someone other than the client’s intended recipient. That uncle no one has heard from in decades
Per Stirpes vs. Per Capita
Per stirpes generally means that the descendants of the deceased beneficiary will inherit their share. Per capita generally means assets will be passed on equally to the beneficiaries who are living at the time of the death of the person whose death triggers the death payout. This is important if a beneficiary predeceases the client. Does the carrier default to one or to the other? Don’t assume a client’s will is going to override everything, because it usually doesn’t.
When To Address Beneficiary Designations
Annual reviews provide an excellent opportunity to see whether anything in your client’s life has changed. Marriage and divorce as well as the births of children and grandchildren are big life events that should be considered. An annual review can also be an opportunity to make corrections if things are not set up as intended. Not to mention it’s an opportunity for additional sales, finding money in motion and getting referrals. Asking the right questions and knowing how the carrier’s annuity contract actually operates after a death occurs can help you make sure you are painting the best outcome for your clients and their loved ones. Sales tip: The next time you begin to fill out an annuity application with a client, start with the beneficiary section. That way, you are starting with a more emotional part of the process and you are spending an adequate amount of time on a very important part of the paperwork. Painting tip: Stall as long as you can. Those trendy colors from yesteryear will come back in style. You’ll see. Jeff Barnes is national senior accounts manager, EquiTrust Life. He may be contacted at firstname.lastname@example.org.
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Nearly Half Of Workers’ Mental Health Suffers American workers are seeing
Percentage Of Workers Reporting Mental Health Issues, By Generation
their mental health suffering in the time of COVID-19, a study from The Standard revealed. Nearly half (46%) of full-time Source: The Standard American workers are suffering from mental health issues, marking a significant increase from 39% one year ago. Among workers struggling with mental health issues, more than half (55%) report those issues have been affecting their work since the pandemic began. Nearly one in 10 employees have experienced lower productivity or missed work because of addiction or substance abuse. Among workers struggling with addiction or substance abuse issues, more than one-third (36%) say it has affected their work more since the pandemic began. One in three survey respondents say that half or more of their work time suffers when they are struggling with mental health or substance abuse issues.
INSURANCE EXEC PAY OUTPACES REVENUE
Total direct compensation for top health insurance executives increased faster than their companies’ revenue growth between 2019 and 2020. Compensation rose between 8% and 14% year over year from 2019 to 2020. This was higher than the 3% increase in total revenue for these companies during that same period. This was among the key findings of BDO’s Health Insurance Executive Insights Report. The report found salaries for health insurance CEOs and most other top executives are increasing faster than the typical merit increase, which hovers around 3%.
TOP HEALTH CARE TREND: INDIVIDUAL EXCHANGES
Employer-based coverage will continue to dominate the health insurance landscape in 2021. But the individual health care exchange could gain ground as more workers become freelancers and independent contractors. That was the No. 1 trend in health insurance and voluntary benefits discussed during a recent webinar by Aite Group. The rise of freelancers and conAverage Change In Actual Pay From 2019 to 2020 tractors, along with the spike in 13.5% 12.4% 11.7% the number of jobless Americans since the pandemic, means chang8.7% 8.5% 7.6% 7.2% es to employer-based coverage 5% 4.9% 4.9% 4.7% 4.9% are afoot, said Michael Trilling, Aite research director. But, he said, CEO Top Financial Top HR Top Legal even before the pandemic, employers Executive Executive Executive were searching for options to alleviBase Salary Total Cash Compensation Total Direct Compensation ate the cost of health insurance. The DID YOU
QUOTABLE We need you to explain the value proposition of health insurance as well as help consumers with the difficult choice about what plan best meets their and their family’s needs. — Jeff Grant, acting director of The Center for Consumer Information and Insurance Oversight
employer channel will remain dominant, Trilling said, but more people will look for coverage on the individual health care exchanges.
BROKERS REQUIRED TO DISCLOSE COMMISSIONS
As of Dec. 27, 2021, federal law will require health insurance agents and brokers to disclose all commissions to current clients as well as prospects. The Consolidated Appropriations Act of 2021, the federal budget act passed by Congress and signed by President Donald Trump on Jan. 3, contains a section aimed at commission transparency in health insurance. The law requires health insurance agents and brokers to detail their services as well as their direct and indirect commissions to current and potential clients. Section 202 of the law calls for disclosure of direct and indirect compensation for brokers and consultants working with employer-sponsored health plans as well as enrollees in short-term medical plans. The law applies to commissions of $1,000 or an amount set by the secretary of labor.
33% of U.S. adults will take advantage of the new health insurance special enrollment period, or know someone who will. Source: healthinsurance.com
April 2021 » InsuranceNewsNet Magazine
Public Option Gets A New Look Several bills establishing government-run health programs already have been introduced in Congress. Would they give consumers more options or would they destabilize the market? By Susan Rupe
new administration and a new Congress bring renewed opposition by the industry toward the possibility of a gradual broadening of current public health care programs — namely, the public option and single-payer health care. Why do we have these proposals now? “In general, there’s a lot of frustration that the cost of coverage is so much higher than it was in the past,” Janet Trautwein, CEO of the National Association of Health Underwriters, said at the association’s virtual Capitol Conference earlier this year. “Largely, it’s because of the high cost of medical care. But it’s also frustration over cost-sharing — how high deductibles are compared to in the past. People are asking, ‘Is there a different way to do this?’” Frustration with the current system has led to full-blown single-payer proposals as well as to proposals for incremental additions to current government-run programs, Trautwein said. These proposals include Medicare for All, a buy-in to Medicare, a buy-in to Medicaid and a public option. “What’s interesting and different and scary is that all of these programs would likely be permitted to use government-set prices in competition with private insurance,” she said. “Many providers have expressed concern over this. If everyone is paying Medicare rates, providers wouldn’t be able to stay in business. When you have a public option proposal offered alongside a private option, it creates a really unlevel playing field and it’s dangerous for the private system.” Several bills establishing government-run health programs already have 34
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been introduced in Congress. Trautwein gave a rundown on all of them. Medicare for All Act. Most recently introduced in the House in 2019, this bill would replace private health insurance with a single-payer program for all U.S. residents. This would replace all current coverage, including the current Medicare system, Trautwein said. Coverage would be mandatory, and private or supplemental health insurance would not be permitted. Government would set the pricing for health care providers. The bill would cover a comprehensive set of services, including dental, vision and long-term care, with no cost-sharing. Physicians would not be permitted to take on private-paying patients outside the federal program. Medicare buy-in proposals. Introduced during the previous House session, H.R. 1346/S 470 has not yet been reintroduced during the current session. It would permit a Medicare buy-in for those ages 50-64 for Parts A, B and D. Affordable Care Act premium tax credits and cost-sharing reductions would be available to reduce premiums and cost-sharing expense. The House version of this bill added a public plan Medicare Supplement. Those who are eligible for Medicaid cannot buy into this plan. Trautwein said it is unclear whether health insurance brokers have a role in this proposal.
Changes to Medicare eligibility. Proposed by the Biden campaign, this plan is different from a buy-in, Trautwein said. It creates an actual change to the Medicare eligibility age. Workers would be able to opt out of employer-sponsored coverage in favor of this program. Trautwein said it is unclear what the cost of accepting coverage at a younger age would be, and it’s unclear whether coverage would be offered on the health insurance exchange or whether participants would be eligible for a tax credit. Public option proposals. Several of these have been announced, and all would create an unlevel playing field by establishing a government-set premium rate that would be lower than private insurance, Trautwein said. At the federal level, some proposals envision a public option run entirely by the Centers for Medicare & Medicaid Services. Other federal proposals envision programs run by other entities, such as carriers that already participate in the Medicare program. Some proposals are aimed at only the individual market, others include the small-employer market and a few extend to the large-employer market. Medicaid buy-in. Also known as the State Public Option Act, this proposal would allow states to create a buy-in for Medicaid. It would use modified community ratings, deductibles and coinsurance according to ACA rules. It would
Public Option Effects • The public option would compel hospitals and other providers to accept unsustainably low reimbursement rates, causing them to eliminate some services to patients, create waiting periods that would reduce services to patients, or leave unprofitable urban and rural areas. • The public option could put more than 1,000 rural U.S. hospitals at high risk of closure by using Medicare provider reimbursement rates. These hospitals depend on a mixture of patient payment methods to allow them to provide services in these areas. SOURCE: NAHU
PUBLIC OPTION GETS A NEW LOOK HEALTH/BENEFITS apply to the individual market. Primary care providers would be paid Medicare rates instead of Medicaid rates. Rates paid to other providers are not specified. NAHU’s position on Medicare for All is that it would reduce standards of quality, eliminate choice, and create delays in treatment and access to care. This would be the result of doctors being unable to
executive turned health insurance whistleblower said he believes “another option for health insurance is good for you and bad for the insurance companies.” Wendell Potter is a former executive at Cigna and Humana, and now is president of the Center for Health & Democracy. Potter wrote a recent op-ed in Colorado’s Vail Daily, in which he spoke in favor of
government-run health care will happen this year, given the focus in Washington on pandemic relief. Lauren Crawford Shaver heads the Partnership for America’s Health Care Future, an ad hoc alliance of American hospital, health insurance and pharmaceutical lobbyists committed to preventing legislation that would lead to single
Single-Payer/Public Option Legislation SOURCE: NAHU
Choose Medicare Act HR2463/S1261 Establishes a Medicare Part E public option for individuals and business to opt into.
Medicare Buy-in HR1346/S470 Allows ages 5064 to buy into Medicare.
treat as many patients for the amount they would be paid, some doctors dropping out of the system, and continued financial pressure on hospitals.
An Uneven Playing Field
The public option “would destabilize current insurance markets by creating an unlevel playing field,” said Chris Hartmann, NAHU vice president of congressional affairs. “This would have the devastating effect of closing hospitals.” A public option would destabilize the market by compelling providers to accept payments at much lower rates than private carriers can require them to accept, he said. More than 1,000 rural hospitals would be put at high risk of closure under a public option using Medicare provider reimbursement rates. These hospitals depend on a mixture of patient payment methods to allow them to provide services. In addition, Hartmann said, the public option raises the questions of how much it would cost and how it would be paid for. The cost of Medicare for All is not sustainable, Hartmann said, adding that such a plan would carry a price tag of $32 trillion over 10 years and an average tax increase of $24,000 per household at a time when the financial viability of our current Medicare plan is already in question.
Bad Debt Is Hurting Hospitals
However, a former health insurance
State Public Option Act HR1277/S489 Allows states to establish a Medicaid buy-in.
Medicare X HR2000/S981 Establishes a public option to be offered on exchange.
a public option proposal under consideration in Colorado. Potter poked a hole in the argument that a government expansion of health care would deal a financial blow to rural hospitals. “The business practices of private insurers are perhaps the real (and biggest) threat to the state’s rural hospitals, and hospitals that serve racial and ethnic minority groups,” he wrote. He cited a report by the Kaiser Family Foundation that found the gravest danger to small hospitals is “the outrageously high deductibles private insurers have imposed on Americans.” The Kaiser report stated that many Americans end up buying high-deductible plans because the premiums are more affordable than those of plans with lower out-of-pocket costs. But consumers find they don’t have enough money to cover their deductibles, and the result is that hospitals are experiencing a growing problem of bad debt. To try to collect this debt, hospitals send unpaid bills to a collection agency or are forced to write the bills off as charity care. According to the nonprofit National Rural Health Association, bad debt for rural hospitals has gone up about 50% since the passage of the Affordable Care Act in 2010. Meanwhile, the executive director of an alliance committed to preventing single-payer health care said she is pessimistic on the chances that an expansion of
United States National Healthcare Act/Medicare for All HR676/S1804 Replaces private insurance with single-payer program for all U.S. residents. 117/14 cosponsors
payer health care, expanding Medicare or creating Medicare for All. Shaver also addressed NAHU on her belief that COVID-19 is driving the health care conversation in the U.S., and Medicare for All “is merely a talking point right now … it has lost steam in the broader conversation.” Although Shaver was pessimistic on the likelihood of Medicare for All going anywhere in Congress this year, she said “there is still a lot of conversation around a public option.” President Joe Biden campaigned in favor of establishing a public option over a single-payer system. “But the devil is in the details of how you would pay for a public option,” Shaver told NAHU members. “At the federal level, I believe it will be hard to pass a public option at this point.” Shaver said she expects to see some public option bills introduced in Congress this year, “but it won’t drive the day. The public option is on the administration’s priority list, but it’s probably item three or four.” Susan Rupe is managing editor for I n s u r a n ce N ews N et . She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at susan.rupe@innfeedback. com. Follow her on Twitter @INNsusan.
April 2021 » InsuranceNewsNet Magazine
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Women Run SEC Steps Up Reg BI Exams The Securities and Exchange Commission will get tougher in its Regulation 401(k)s Better Best Interest reviews this year, according to the agency’s exam division. In particular, the SEC will look into brokerages’ compliance with Reg BI, Pop Quiz Time! which went into effect in June. OK, hotshot! Here’s The agency had focused its exams what the Securities and Exchange on whether sellers were making a Commission will good faith effort to follow the rule. evaluate in the But this year, the SEC plans to get Regulation BI exams: tougher by seeing whether brokers • Continued evaluation of firm are making investment recommendapolicies and procedures, including tions in their clients’ best interests. evaluating specific firm processes for compliance with Reg BI, and alTwo main points will focus on Reg terations to firm product offerings, BI requirements that extend beyond including the removal of higher-cost customer-specific suitability: products when lower-cost products are available. • Broker-dealers must have a reasonable basis to believe that recom• Evaluation of how firms have considered costs in making a mendations are in retail customers’ recommendation. best interests. • Evaluation of the processes firm • Broker-dealers must have implepersonnel have used to make recmented their written policies and proommendations to new customers. cedures effectively.
SEC Nominee Glares At Robinhood
• Evaluation of the processes firm personnel have used to recommend complex products. • Evaluation of the processes that firms have used to identify and address conflicts related to recommendations.
SEC chair nominee Gary Gensler said the agency should look at how to protect investors who use online stock-trading platforms that employ
flashy tech gimmicks that entice them to trade more. Gensler, who was a chair of the Commodity Futures Trading Commission during the Obama administration, was asked about the roiling stock-trading drama involving GameStop shares that has spurred calls for tighter regulation of Wall Street. “At the core it’s about protecting investors,” Gensler said. Among the issues to be examined, he said, is the use of “behavioral” technology in stock-trading apps, particularly Robinhood. “What does it mean when you have balloons and confetti-dropping behavioral prompts to get investors to do more transactions? We’re going to have to study that and think about it.”
Demand Drives RIA Comp
As the wealth management industry expands, so does the competition among registered investment advisors to poach talent from their competitors, according to Schwab’s RIA Compensation Report. In 2019, 75% of firms surveyed added staff, with the median firm hiring two people. That pace of hiring was projected to continue in 2020. Compensation is 74% of RIAs’ expenses. Median cash compensation at RIA firms grew by about 4% in 2019, according to the report. 36
InsuranceNewsNet Magazine » April 2021
Women run 401(k)s better than men do, according to a Morningstar report. Plans administered by women were more likely to have designs
that encourage participation and diversification, by including target-date funds, au-
tomatically enrolling workers and governing plans better. “We find that the probability of a plan offering these services is higher if the plan administrator is female, and the differences are statistically significant,” according to the report. “In other words, female plan administrators run better plans than their male counterparts.” In 2000, only 30% of plan sponsor committees were women, but that increased to 50% by 2017, the report found.
Investors Want ESG
The SEC says that consumers are demanding investment strategies that are focused on sustainable, socially responsible, impactful, and environmental, social and governance factors. The agency will prioritize emerging risks, including those relating to climate and ESG, according to a report from the
SEC’s Division of Examinations. The division will look at disclosures by RIAs on sustainable investment products along with related advertising, policies, practices and proxy voting procedures.
Where Do They All Come From? RIAs’ favorite recruiting channels, besides other RIAs, are: 33% Colleges 16% Banks 12% Wirehouses 10% Broker-Dealers
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Readying For Retirement In A Recession Those approaching retirement are facing a heavy fog of uncertainty over a volatile stock market and no sign of when normalcy will return. • By David Hanzlik
ncountering a recession right before retirement can be anxiety-inducing for anyone. With market conditions taking on a disproportionate significance in the five years immediately prior to and following an exit from the workforce, it’s no surprise that this period is known as the “fragile decade.” The current downturn caused by the COVID-19 pandemic has added layers of challenges for savers approaching retirement. Between job concerns, a volatile stock market and no clear insight into when normalcy could return, near-retirees are currently facing a heavy fog of uncertainty. Unfortunately, notwithstanding the pandemic, recent data has only underscored how the near-retiree demographic is, on the whole, lacking when it comes 38
InsuranceNewsNet Magazine » April 2021
to retirement planning. According to the 2020 Retirement Income Literacy Survey from The American College of Financial Services, more than 80% of Americans between the ages of 50 and 75 failed a basic retirement literacy quiz, driven in part by not being informed about safe withdrawals and misunderstandings around the implications of rates of return. With this preexisting low financial literacy as a backdrop, the pressure on advisors to ensure that near-retirees’ plans remain viable before withdrawals begin has never been higher. However, by using some of the signposts of behavioral finance, advisors can successfully guide their clients through the unpredictability that lies ahead.
In the midst of a oncein-a-lifetime event like the COVID-19 pandemic, everyone is feeling some strain. Sure, near-retirees may be closer
to the end of their time in the workforce — but because of their seniority, many are also more vulnerable to layoffs or forced buyouts. Additionally, despite potential signs that an economic recovery could be on the horizon, market volatility remains high. Taken together, this can pack a powerful punch on these clients’ sense of security. As a result, many will question whether they should turn back and ditch their existing equity allocations and try to hitch their portfolios to products less at the mercy of the stock market. While such second-guessing is understandable, advisors know that unless there’s an unexpected need to be solved for within an existing retirement plan, rushing for the exits within portfolios can more often than not bring about suboptimal outcomes. Instead, advisors in this situation should discuss with near-retiree clients the goals they set out to achieve in the first place for retirement, and walk them through the structure of their existing strategies to illustrate where the rubber meets the
READYING FOR RETIREMENT IN A RECESSION
road. Going back to basics can go a long way toward easing worry, while setting the stage if any changes really need to be made.
Don’t try to play the market
A lt houg h a recession will tempt many near-retirees to adjust risk allocation midstream, others will be tempted to charge headfirst into the uncertainty by gaming a recovering market. Traditionally, the markets do tend to preempt the economy when it comes to bouncing back from recessions. With many major indices spiking upward over the past few months, it’s easy to see why banking on better days ahead holds some appeal. However, while upticks in the stock market are a welcome surprise, the economy still has a number of challenges. Between an overheating, far-overweight tech sector, yo-yoing cyclicals, and the uncertainty around future stimulus, the big picture here is far from rosy. Steep corrections and broad volatility are still par for the course. Moreover, when it comes to the market, it’s important to remind clients that no one ever knows what lies ahead. So in the midst of a recession caused by a black swan event, making impulsive or temporary asset allocation decisions based on hope is a steep gamble to make. And with
near-retirees staring down withdrawals in the not-so-distant future, this risk could turn into a secondary punch that many retirement income plans will, ultimately, be unable to bear.
Do plan ahead
Human behavior is, by nature, imperfect. This presents hefty roadblocks for advisors to steer around. An essential strategy to combat this, particularly with near-retirees during a recession, is to work with clients to think not just one step ahead, but multiple steps ahead, and then identify the offshoots and repercussions of each of those steps. Just look at the environment we’re in today — the decade-old bull market was exceedingly long in the tooth, so a 2020 downturn occurring, in and of itself, was not a complete surprise. However, it was the severity and speed of this downturn that caught many off guard. While many near-retirees might have been able to stomach some degree of stress in their retirement savings accounts from market volatility, additional burdens such as job loss or benefit cuts may have sprung into view nearly overnight, complicating the future of their financial stability. Advisors should proactively sit down with their near-retiree clients and hold candid conversations about the new challenges they face in light of the
Consumers Need Help Understanding Investments And Risk
26% 28% 18% 35%
understand that the value of bonds and bond funds falls as interest rates rise. know that actively managed mutual funds have higher fees than ETFs.
know that B-rated corporate bonds have higher yields than AAA corporate bonds or Treasury bonds.
know that a negative single year return in a retirement portfolio has the most significant impact on longterm retirement security if it happens at the year of retirement, suggesting a fundamental lack of knowledge about investment risk in the pre-retirement and retirement period. SOURCE: The American College 2020 Retirement Income Literacy Survey
current recession, and map out the possible stressors and solutions. Take, for example, the question of job security. If the answer is not a reassuring one, take time now to talk clients through what their planning landscape would look like — before a layoff or forced buyout comes. If this scenario were to occur, what could their options for health care be? Do they have ample emergency savings? Would their existing plan still work if they remain retired and didn’t seek a new job? In this example, preparing some Plan Bs within existing retirement plans can be helpful as well. For some, it will be more favorable to stay in the workforce, even with a part-time job, in order to defer Social Security. Sources of guaranteed income can help provide a cushion against lost sources of funding. And tightening up existing budgeting — perhaps from debt consolidation or trimming some everyday sources of spending — can help pad savings accounts and help buy some time. The potential upside from small changes in the near-term can clarify longer-term uncertainty, and can reassure near-retirees that they’re not just waiting for the next shoe to drop. Do be a partner. Retirement is supposed to be a relaxing time in your life to stop, breathe and take inventory of all that has been accomplished. But when the time to exit the workforce coincides with an economic downturn, the possibility of reaching the finish line gets harder — and scarier — to envision. No matter what near-retiree clients are feeling, advisors must remember that they are trusted teammates. If support and empathy are at the forefront of an advisor’s practice, then financial stability in retirement can be within reach — even when it’s difficult to see. David Hanzlik is vice president of annuity and retirement solutions, CUNA Mutual Group. David may be contacted at email@example.com.
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April 2021 » InsuranceNewsNet Magazine
Vitamin A Gives You A Boost Inside And Out
Whether it’s protecting your eyesight, strengthening your heart or clearing up your skin, vitamin A is the nutrient that supports your body inside and out. Vitamin A preserves your eyes, helping to maintain night and dim light vision, as well as protecting the eyes against developing cataracts. The vitamin’s antioxidant properties boost your immune system while defending cells from damage. Vitamin A strengthens the heart and lungs by supporting the growth of healthy cells and tissues. And taken externally, vitamin A is the basis of many products that clear up acne or heal skin damage. Despite its importance to our diet, most people don’t need a vitamin A supplement, as they usually get enough of the nutrient from their diet. It’s commonly found in orange and yellow vegetables. Gait variability refers to the stride-tostride fluctuations in walking, which, in part, allows researchers to quantify movement with aging and disease.
WEIGHTED HULA HOOPING: GIVE IT A WHIRL
SOMETHING IN THE WAY YOU MOVE
The way you walk can help health experts assess whether you have Alzheimer’s disease. A recent study analyzed walking patterns and brain function of 500 older adults. The study examined how different walking patterns can help medical professionals diagnose different types of dementia. Researchers compared impairments in the participants’ walking pattern, also known as gait, and compared it with the patterns of those who have different cognitive disorders, including Alzheimer’s. Participants who had a high variability in gait pattern were shown to have Alzheimer’s disease 70% of the time. DID YOU
Remember hula hooping as a kid? You probably didn’t realize it was a great workout as well as a lot of fun. Hula hooping is a low-impact workout that can help you burn calories and lose weight. A weighted hula hoop can add more resistance and intensify your workout. Exercise such as hula hooping can be a fun change to your cardio routine. A 30-minute hula hoop workout can help you burn up to 210 calories, according to the American Council on Exercise. A vigorous hula hooping session is comparable to cardio kickboxing, step aerobics or a boot camp workout in terms of heart rate and calorie burn.
Sitting is more dangerous than smoking, kills more people than HIV and is more treacherous than parachuting. — Dr. James Levine of the Mayo Clinic
OVERCOMING THE LOSS OF A PET
We’ve spent more time than usual with our fur babies as the pandemic kept many of us cooped up at home. So, when it’s time to say goodbye forever to a beloved pet, we may experience feelings of trauma and grief. Here are some ways to cope. Give yourself permission to grieve. Most of us consider pets to be members of our family, so it’s OK to treat a pet’s death the same as you would the death of a family member. Be prepared to go through a range of emotions: from denial to confusion to even guilt. Figure out the best way to memorialize your pet. And you may find you need to come up with new daily routines without a dog to walk or a cat to feed. Find ways to fill the void your pet left behind. Eventually, you will be ready to accept a new pet into your life while still accepting the loss of the pet that died.
Cell phones may carry 10 times more bacteria than toilet seats.
InsuranceNewsNet Magazine » April 2021
Source: University of Arizona
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It’s Easy Being Green: Eco-Friendly House Cleaning Here’s the dirt on cleaning in an environmentally gentle way. By Susan Rupe
e’ve spent more time indoors than usual over the past year, and we probably notice the dust and cobwebs more than we ever did. Spring is here, and that means it’s time to give our living space and working space a good cleaning. But you don’t have to destroy your indoor environment in order to destroy dirt and germs. Here are some environmentally friendly ways to spring-clean your space. Check under your kitchen sink or in your utility closet. Chances are you’ll find quite a collection of cleaning solutions. Do you really need them? Probably not. Instead, you can find most of the cleaning products you need in your favorite store’s grocery aisle. And you’ll save money in the process. Items such as baking soda, lemon juice and white vinegar cost pennies compared with the 42
InsuranceNewsNet Magazine » April 2021
price of expensive detergents. Add borax, hydrogen peroxide and olive oil to your shopping list and you have most of what you need for a “green clean.” Baking soda has some grit to it, which makes it an excellent scrubbing tool. When mixed with an acid such as vinegar or lemon juice, baking soda creates a solution that disinfects, loosens dirt and cuts through grease. Borax is a powder that comes in a box. You’re likely to find it hiding on a lower shelf amid all the detergents in your store’s laundry section. Borax is great for disinfecting, whitening and deodorizing fabrics. You can add a half-cup of borax per gallon of water to your carpet cleaning machine to boost its cleaning power. Or you can sprinkle some borax on your carpets, let it sit for a few minutes, and then vacuum to get a fresh and clean carpet. Powdered borax on a damp sponge will get your shower or bathtub sparkling clean. Be sure to rinse surfaces thoroughly with clear water after you’re done scrubbing. If you suspect your dog needs some
spring cleaning, sprinkle borax on Fido’s bed, carpet or anything else that may harbor fleas. Let the borax sit for an hour and then vacuum thoroughly. Insects hate borax, so if spring brings an infestation of ants or water bugs, a mixture of borax and sugar sprinkled wherever you see the pests will make them scram. Olive oil, vinegar and water may make a basic salad dressing, but they also can clean the wooden surfaces in your home in an eco-friendly way. A good formula for floors is to combine a quarter-cup of olive oil with a third of a cup of vinegar and five cups of hot water. You can add a few teaspoons of lemon juice or a few drops of your favorite essential oil if you don’t want a vinegary scent left behind. The recipe for wood furniture polish is a half-cup of vinegar and a half-cup of water mixed with four tablespoons of olive oil. Add 20 or 30 drops of essential oil to add fragrance. Combine in a spray bottle, shake well, spray on a cleaning cloth and wipe down the furniture. Chances are your windows are looking dingy after winter’s rain and snow.
IT’S EASY BEING GREEN: ECO-FRIENDLY HOUSE CLEANING INBALANCE Vinegar and water are all you need to get them clean again. A quarter-cup of vinegar mixed with two or three cups of water will do the trick. You might want to add a few drops of lemon juice before spraying the solution on the glass. Wipe windows with an old newspaper or a cotton rag to get them streak-free. Hydrogen peroxide is an eco-friendly way to sanitize your home. You can find hydrogen peroxide in the first aid section of your local drugstore. But a word of caution — don’t mix hydrogen peroxide and vinegar or the resulting peracetic acid will irritate your skin or cause permanent damage to your lungs. Use hydrogen peroxide in place of bleach to get out tough fabric stains such as blood, perspiration, grass or wine. Combine two parts of hydrogen peroxide with one part of your favorite dishwashing liquid to create your own stain remover. But test the solution on an inconspicuous area of the item first because hydrogen peroxide is a mild bleach. Hydrogen peroxide will kill mold when you apply it full-strength using a spray bottle or a rag. Let it sit for 30 minutes and then clean. But hydrogen peroxide will not get rid of mold stains, so you will need to deep clean afterward to eliminate them. You also can spray hydrogen peroxide on doorknobs, sinks, countertops and other germ-prone areas of your home or office. Allow it to dry and you’re good to go. Another way to clean in an eco-friendly way is to eliminate the disposable items you use for cleaning. Disposable floor cleaning pads spread chemicals throughout your home and then end up in the landfill. Fabric softener sheets clog your dryer vent with fibers and then go into the trash after only one use. Instead, invest a few additional dollars in products you can reuse. You can buy microfiber mop pads that are electrostatically charged and will clean dirt and grime off your floors as well as the disposable ones. Instead of throwing them in the garbage, throw them into the washer and they will be ready to clean your floors another day. Likewise,
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electrostatically charged microfiber dusters can be used over and over again, and you can toss them into the washer when they get dirty. Get rid of those disposable fabric softener sheets and buy dryer balls made of wool. They have the additional bonus of reducing wrinkles in your clothing and saving drying time. And finally, if you want to take a natural approach to cleaning but don’t want to be bothered going the do-it-yourself route, there are plenty of chemical-free cleaning products out there that will do the job. With a little research and a little ingenuity, your indoor space can be green as well as clean. Susan Rupe is managing editor for I nsura n ce N ews N et . She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@ innfeedback.com. Follow her on Twitter @INNsusan.
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April 2021 » InsuranceNewsNet Magazine
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Six Ways To Give A Great Referral Agents are always looking for ways to bring new prospects into their orbits, but giving a referral to someone else can be a great way to position yourself as a valuable resource. By Keith Michelfelder
onsistent referrals are the holy grail of any sales enterprise. Building a business on referrals creates a loyal client base at a low cost of acquisition. The advisor has built-in credibility with the prospect. The prospect typically is not as price sensitive. And the prospect is more likely to refer you to another prospect. In a pandemic world, referrals are more important than ever. The COVID-19 crisis has limited the ways we can seek new 44
InsuranceNewsNet Magazine » April 2021
business. Your best clients are likely struggling to conduct business effectively in the new normal. Now is an excellent time to position yourself as a business-to-business connector. Your existing clients will begin to see you as a valuable resource for their business in addition to being an insurance or financial planning wizard. So how can advisors give a proper and effective referral? Here are six ways.
You have two ears and one mouth for a reason. Active listening techniques will help you better understand what your client is attempting to communicate. Pay attention to facial expressions. The human face is very expressive and is able to convey an enormous amount of information. Noted public speaker Patti Wood suggests that when you briefly match
facial expressions with your clients, it not only shows your clients that you are listening, it creates the same chemicals in your brain that body language shifts are creating in theirs. You will actually feel what they are feeling and understand them more effectively. Look at the client directly, even if you are on a Zoom call. You do not have to glare at them and drool. Making eye contact 70% of the time indicates that you are engaged in the conversation. Show that you are listening. Nodding is a great way to demonstrate that you are listening without saying a word. Try to block out any distractions. Give the client your undivided attention. Don’t mentally prepare a rebuttal. Your goal is to identify and tactfully solve a problem, not win a debate. Actively listening does not mean you have to be a confessional, psychologist or sin eater for your client. Your goal is not to be the emcee at the pity party. Your goal is to identify the problem and position yourself as a problem solver and resource.
Identify And Offer
After you have identified the root cause of your client’s pain and have made a proactive suggestion for a solution, adding a
SIX WAYS TO GIVE A GREAT REFERRAL BUSINESS
Make Sure It’s A Good Fit When you give a referral, make sure the people you are introducing are a good fit. Here are some things to keep in mind in making sure you are giving referrals to the right people:
» They should be great at what they do. » They will keep their word and follow up on the introduction. » They are easy to deal with. » They will appreciate the referral. benefit you have experienced using the solution is even more powerful. For example, “Amy, I hear you. These virtual meetings have become tedious. Have you considered a way to differentiate your company from the competition? We have been using a catering company that specializes in Zoom meetings. It has worked wonders. The meeting participants are happy and more attentive. They look forward to Zooming with us.” By identifying the problem and offering a solution, you create a natural opening to give a referral.
Strong relationships are built on mutual respect. You must ask both the person to whom you are making the referral and the person who is receiving the referral for permission to make the introduction. Both parties will appreciate that you demonstrated respect for their time.
Make The Introduction And Provide Context
Both parties should be aware of the reason you are connecting them. This can be accomplished with a three-way email or through a phone call. For example, “Amy, thank you for sharing your virtual meeting challenges. I want to introduce you to Chad. Chad is an award-winning restaurateur who, during the pandemic, has shifted his business to catering virtual meetings. We have successfully used his services in the past, and it has been a hit! Perhaps he can help you too.” Similarly, prepare the receiver of the referral with the reasons you are making the introduction. For example: “Chad, I would like you to meet my client, Amy. Amy is struggling with the monotony of Zoom
meetings. You helped me make my Zoom meetings better. Do you think you can do the same for Amy?” The introduction should also provide the preferred method and appropriate times for connecting.
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Be A Facilitator
It is not your job as a connector to close the deal, but it is helpful to offer a small suggestion regarding how the two parties can meet. It can be simple. For example, “I noticed that Bob’s Bagels has reopened. Perhaps you two can meet for a cup of coffee?” This is a gentle nudge for the two parties to connect without creating an awkward interaction.
Get Out Of The Way
Your job is done. It is not your responsibility to be the director of marketing for Amy or Chad. It is acceptable to follow up to see whether you made a productive introduction. This information will help you become a more valuable connector in the future. Giving good referrals is a rewarding skill. You will have the power to touch and change lives. Giving referrals also will help you build a powerful network of thoughtful people. As a result, not only will your sales figures grow, but also your life will become fuller and more rewarding. Keith Michelfelder is director of business development with Portsmouth-SmartLife Financial Group in Stuart, Fla. Keith may be contacted at firstname.lastname@example.org.
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Be Known For Something Instead Of Unknown For Everything Choosing and establishing your niche market doesn’t limit you; it helps you achieve more success.
workforce with large student loan debt, or on prospects who are planning to leave the workforce and need help understanding their separation options.
know that person and how they connect socially. This will give you a much more effective and targeted means to be introduced to your prequalified prospect.
By Adrian George
Developing A Niche COI
ow do you respond when a prospect asks, “What do you do?” Some of you may simply respond by giving them your title such as “I’m a financial advisor.” Others may launch into an elevator pitch only to see the prospect start to look for a way out of the conversation. It’s essential to see this question from the prospect’s point of view and understand what they really want to know is, “What do you do for people like me?” If your practice focuses around a certain profession or demographic, then your marketing, planning, product and referral processes must reflect that in order to answer this question. By doing so, your closing rate can increase and you will be able to speak more directly with those you like to work with. Let’s explore how you can be known for something rather than unknown for everything.
Choosing A Niche Market
You may think a niche limits you to working within a specific profession, such as doctors and dentists. But you can broaden your niche to focus on any identifiable segment of the population with similar interests that you feel connected to. It may be working with certain age groups, ethnicities, lifestyles or even recreational interests you enjoy. To choose your niche, consider the biggest concerns of the segment you’d like to serve. For example, young families might be more concerned with protecting their income, while pre-retirees might be more concerned with how to create retirement income or how to transfer their business to their children. Maybe you’re focused on new graduates who are entering the 46
InsuranceNewsNet Magazine » April 2021
It’s critical to research and explore the common needs or concerns of whoever you choose to work with. A great technique is simply asking your ideal client to go for lunch to gain their insight into an article you want to write. You can also ask them the top questions they’ve always wanted to know the answers to and then create a video series of questions and answers on that topic. This is a great way for you and your centers of influence to create tailored assets that can be sent to clients and prospects. Writing an article or creating a short video requires you to have an in-depth understanding on an issue while being able to communicate it in a concise way. Whether you share the video on your website, on social media or in an industry publication, you are building content to establish credibility within your niche. If you’d like to host an event or speak at a university, having conceptual articles and videos will demonstrate credibility and establish yourself as a must-have speaker. This creates more opportunities for you to become recognized as an expert, reaching your niche and building a pipeline through your marketing efforts.
Finding Prequalified Referrals
Referrals are the most inexpensive and effective tactic in your marketing tool chest, yet many advisors have no process for obtaining them. Worse, the referrals they receive are rarely prequalified. Leverage your niche market and make referrals easier for your clients. Narrow down their mental Rolodex of who to introduce by providing a name you’ve sourced from social media. This person should be someone they’re connected to and who is in a similar niche as your client. Ask how they
Professional alliances, or centers of influence, can be great resources to obtain new clients within your niche, and you should have a process for creating a healthy referral relationship. To find the right fit, ask yourself four questions. First, do they work with clients like yours and will they introduce you in response to client concerns that fit your expertise? Second, do you like each other and can you develop trust through a social relationship? Third, would they co-present at a seminar with you, ideally bringing some of their own clients? Fourth, you’ll want to clearly set expectations that you are seeking referrals and ask them what they need from you to feel confident in doing so. If they don’t refer business to you after these steps, move on and repeat with another COI who may be a better fit.
Refine Your Processes
As you establish your niche market, be prepared to continually refine your processes. This requires time and discipline, but the rewards will lead you to achieve more success. By creating a repeatable interview, planning and recommendation process, you can anticipate areas of interest or concern with your clients. This, in turn, increases their acceptance of your advice. Remember, clients don’t recommend a product you’ve sold them; they recommend your understanding of who they are. Adrian George, CFP, CLU, TEP, has almost 30 years in the financial services industry. He has received three Court of the Table and two Top of the Table honors. He may be contacted at adrian.george@ innfeedback.com.
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.
Should You Align Your Investments With Your Values? Industry professionals predict sustainable investment choices for investors will continue to expand. By Brian Haney
hen it comes to growing your money, sometimes what you do or do not invest in matters as much as how well your investment performs. It’s not about just risk; it’s about personal values. In this era, we have the unique opportunity to feel good about not only our portfolio returns but also what we invested in and how we achieved those returns. That is precisely why sustainable investing is gaining in popularity as investors increasingly seek to align their investments with their personal values and seek to work with financial professionals who understand them not only as investors but also as value-driven individuals. One way to accomplish this goal is to use an investment approach that focuses on environmental, social and governance criteria. An ESG lens considers issues such as climate change, pollution control, gender equality and diversity, human rights, and corporate board composition. ESG-aware investing pursues opportunities by managing risks associated with corporate actions, policies and trends related to things such as sustainability; environmental impact; societal and community contributions; diversity, inclusion and engagement practices; and the demonstration of sound corporate governance. Since the 1960s, sustainable investment strategies have shifted from an exclusionary approach to an inclusionary one. Over time, this shift has broadened the supply of investment offerings to meet growing investor demand. Interest in sustainable investing accelerated significantly in the 2000s. According to a McKinsey study, assets in these types of investments grew by an estimated 38% from 2016 to 2018 in the U.S., rising from $8.7 trillion in 2016 to $12 trillion in 2018. Globally, sustainable investments total $23 trillion, which represents
26% of all professionally managed assets, McKinsey reported. A common misconception is that sustainable investing — including ESG-driven strategies — imposes hurdles on performance. After all, aren’t most companies more motivated by profits than they are by values? You might be surprised to find out the reality is quite the contrary. But you do not need to throw ethics and values out the window in order to achieve good returns. The Journal of Banking and Finance reports longer-term historical performance suggests that ESG strategies have performed similarly to comparable traditional investments on an absolute basis and a risk-adjusted basis. Sustainable investment strategies, like any investments, do come with risks. Another misconception is that demand is driven mainly by younger investors. Yet research suggests that investors across generations are interested in sustainable investing. Although millennials are apt to discuss sustainable investing with their financial advisors, other generations have expressed interest as well. A 2020 Wells Fargo/Gallup survey found that 82% of surveyed investors showed interest in choosing investments based on the environment, human rights, diversity and other social issues — if those investments provided returns similar to the market average. One interesting case in point: Thompson Reuters, under the corporate brand Refinitiv, created an index to transparently and objectively measure the relative performance of companies against factors that define diverse and inclusive workplaces. The index ranks more than 7,000 companies globally. It identifies the Top 100 publicly traded companies with the most diverse and inclusive workplaces, as measured by 24 metrics across four key pillars: diversity, inclusion, people development, and news and controversies. Not only have these companies scored well, but the index also has outperformed the Thompson Reuters Global Total Return benchmark, demonstrating that diversity
and inclusion can also lead to profitability. Perhaps values really can drive growth! Industry professionals predict that sustainable investment choices for investors will continue to expand. In fact, some analysts predict that ESG factors could become a normal consideration of most investment strategies, particularly those intended for younger investors, who tend to expect greater transparency of their investments. In fact, it may surprise you to know that today sustainable investing accounts for about $1 out of every $4 under professional management in the U.S., according to The Forum for Sustainable and Responsible Investment. The time is now for advisors and planners to develop our expertise in socially responsible investment and ESG investing. Although it is important to remain investment agnostic, some practitioners have chosen to specialize more in this area. Advisors recognized by organizations such as The Forum for Sustainable and Responsible Investment and Green America help consumers interested in value investing by deploying rigorous investment selection and screening processes that support optimal performance and also measure the societal and environmental impact of the firms themselves. Becoming an advisor who is confident about using traditional vehicles but passionate about finding unconventional ways to accomplish client goals — especially if doing so better aligns with their personal beliefs — may create a significant competitive advantage. Our role should be simple: to understand not just where a client wants to go but also who they are and what values they have so that we can examine all the appropriate options that can fit and empower them to move forward with confidence. Brian Haney, CLTC, CFS, CFBS, CIS, LACP, is a Certified Income Specialist and avid supporter of sustainable investing. He is the author of The Retirement Income Pyramid. He may be contacted at email@example.com.
April 2021 » InsuranceNewsNet Magazine
More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.
Now Is The Time To Embrace Diversity, Equity And Inclusion An organization’s commitment to DEI is increasingly influential in attracting and retaining talent. By Elizabeth Caswell
he events of 2020 compel us to acknowledge the impact of racial, gender and ethnic inequities on communities and workplaces across the U.S. The socioeconomic systems constraining prosperity for all who are willing to learn and work hard are staggering in our capitalist economy. Workplace standards, market commitments, community investment and political advocacy are elements of the proactive approach currently underway across the financial services sector. COVID-19, civil unrest and a presidential election brought U.S. citizens to new levels of awareness, conversation and action to address diversity, equity and inclusion challenges in the workplace. A renewed sense of organizational urgency and goal setting is being met with accolades and readiness by the legions of those working on these issues, and other employees as well. An organization’s commitment to DEI is likely to be an increasingly influential factor in attracting and retaining talent. As financial services organizations rise to the equity and inclusion challenges within their own workplaces, there is broad acknowledgment that more must be done to reach underserved and underrepresented markets. Examples include accelerating product and service flexibility and competencies, such as multilingual education and purchase tools, as well as planning resources specifically designed for women. The essential purpose of financial services professionals is to help people achieve their financial goals. This includes sharing in clients’ challenges and successes as members of our community — personal, professional 48
InsuranceNewsNet Magazine » April 2021
or both. This is the guide that financial services firms use to demonstrate their commitment to DEI. Here are some of the ways firms can get it right. Start at the top. Boards of directors who understand the financial opportunity fueled by our soon-to-be majority-minority demographics have a DEI plan in place that is reflected in all of the
go far, go together. It is with this conviction that life insurers and other financial services industry leaders are working together to build coalitions and programs that drive equality and upward mobility for women and minorities. The CEO Diversity Pledge for Action, innovated by PwC, is a collaboration that has gained considerable momentum. CEOs from
board committees’ plans — including finance, human resources and investment. Leaders define their “why” and use it as a guiding light to develop strategies and to make funding decisions. Act locally. Prudential is an example of a leader in the financial services industry for their commitment to strengthening communities. Through their impact-investing portfolio, foundation and direct employee engagement, Prudential drives transformation within their walls and in the communities they serve. Fortune’s 2019 Change the World List recognized Prudential for investing in affordable housing, committing more than $5.6 billion in more than 30 U.S. cities. Be transparent. Metrics enable an organization to understand the true levers of progress as well as the outcomes. When all stakeholders know what combinations of programs and policies work, they can replicate them and pivot as needed for scale across their own and other organizations. Embrace that baseline metrics will evolve to meet the maturity of the organization’s capabilities and appetite. Collaborate. It is often said that if you want to go fast, go alone; if you want to
1,400 organizations — including LL Global and every board member of the American Council of Life Insurers — have signed the pledge to create a more inclusive workplace for employees, communities and society. Organizational resilience is one of the most important elements of success in effecting change with DEI. We are not the first generation to deal with these issues, in and out of the workplace. We will not be the last. The struggle is part of the human condition. Achieving the mission and goals of our industry regarding DEI means truly committing to change. It’s not only the right thing to do but also will contribute to our industry’s continued success. Elizabeth Caswell is a researcher, author and speaker focused on financial services topics, including product ownership, financial needs, and consumer attitudes and behaviors. She is the LIMRA representative to LIMRA’s member committee, focusing on diversity and inclusion, as well as the Women’s Markets Study Group. She may be contacted at firstname.lastname@example.org.
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Disability • Life • Medical • Contingency
Petersen International Underwriters
(800) 345-8816 F www.piu.org F email@example.com
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Change Starts From Within: How Insurance Companies Are Stepping Up To Build Diversity In Their Ranks.