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T. Campbell DIED: Aug. 8, 2017; Nashville Glen

CAUSE:AGE: Alzheimer’s disease 81 2017; Nashville ESTATE DISS: The8,country star’s first hit Aug. DIED: was Gentle on my Mind, but he wasn’t too disease Alzheimer’s gentle CAUSE: on his children, excluding threefirst of hit them from his DISS: estate.The country star’s he wasn’t too ESTATE my Mind, but of was Gentle on excluding three gentle on his children, estate. them from his

AGE: 67

Johnny Hallyday Johnny Hallyday

The Print Collector Heritage Images/Newscom

Reg Lancaster / Getty Images


Johnny Hallyday

The Print Collector Heritage Images/Newscom

The Print Collector Heritage Images/Newsco

Craig G. Sager Craig G. Sager

JoanCrawford Crawford Joan

Reg Lancaster / Getty Images

David B. Cassidy DIED: Nov. 21, 2017; Ft. Lauderdale CAUSE: Liver failure ESTATE DISS: been known The former teen heartthrob for I Think daughter, Katie AGE: 67 might I Love Cassidy, who You, but don’t tell have Ft. Lauderdale that to his Nov.6721, 2017; was dumped DIED: AGE: from the estate. failure Liver have CAUSE: DIED: Nov. 21, 2017; Ft. Lauderdale heartthrob might his The former teenYou, but don’t tell that to DISS: ESTATE I Love CAUSE: Liver failure I Think from the estate. been known for Cassidy, who was dumped Katie ESTATE DISS: The former teen heartthrob might have daughter, been known for I Think I Love You, but don’t tell that to his daughter, Katie Cassidy, who was dumped from the estate.

David B. Cassidy David B. Cassidy

Craig G. Sager

Darrell Walker/Icon SMI 945/Darrell Walker/Icon SMI/Newscom

ABC Photo Archives/ABC via Getty Images

ABC Photo Archives/ABC via Getty Images

Jerry Lewis Jerry Lewis

Reg Lancaster / Getty Images

Veronica Veronica Duncan Duncan

AGE: 73 1977; DIED: May 10, New York City attack CAUSE: Heart She left a meager ESTATE DISS: and nothsum to two children one of whom the ing to two others,with her book DIED: Apparently Aug. 20, 2017: 91 too AGE:73 73 ESTATE DISS:AGE: got the last wordAGE: Las Vegas wasn’t Nutty Professor Mommie Dearest.DIED: six children DIED: Aug. 20, 2017: DIED:May May 10, 1977; crazy about the he 1977; becauseCardiovascular Las CAUSE: Vegas NewYork York 10, City New from his first wife disease City cut them all out. CAUSE: Cardiovascular CAUSE:Heart Heart attack CAUSE: ESTATE DISS: attack disease Nutty ProfessorApparently the ESTATEDISS: DISS: She left a meager ESTATE wasn’t too She left and crazyDISS: ESTATE the sumto totwo two children nothsum a meager aboutApparently the six children from Nutty Professor wasn’t too ing to totwo two children others, one of whom ing and nothhis first wife others, because he cutabout crazy six children got the thelast last wordone with her book got them the all out. word with of whom from his first wife because he Mommie Dearest. Mommie her book Dearest. cut them all out. AGE: 74 2017; DIED: Dec. 5, France Marnes-la-Coquette, cancer CAUSE: Lung Hallyday may ESTATE DISS: rock ‘n’ roll have introduced unintroduced to France but his estate. his children from AGE: 74 AGE: 74 Dec. 5, 2017; DIED: Marnes-la-Coquette, France DIED: Dec. 5, 2017; Marnes-la-Coqu AGE: 65 CAUSE: Lung cancer ette, France 2016; CAUSE: DIED: Dec. 15, AGE: 65 ESTATE DISS: Hallyday may Lung cancer Atlanta have rock ‘n’ roll ESTATE introduced DIED: Dec. DISS:but Hallyday 15, 2016; to France unintroduced have CAUSE: Leukemia Atlanta may introduced children from estate. rock his to his ‘n’ roll France The65NBA AGE: but ESTATE DISS: CAUSE: Leukemia his children unintroduced children from his estate. broadcaster’s DIED: Dec. 15, 2016; marriage ESTATE from his first DISS: The Atlanta for broadcaster’s NBA would call foul from children them from Leukemia his first marriage how he cutCAUSE: call his will. ESTATEwould foul for DISS: The NBA how he cut them from broadcaster’s his will. children from his first marriage would call foul for how he cut them from his will. Darrell Darrell Walker/Icon Walker/Icon SMI SMI 945/Darrell 945/Darrell Walker/Icon Walker/Icon SMI/Newscom SMI/Newscom

CAUSE: Overdose of alcohol and drugs in an apparent suicide ESTATE DISS: The English baroness rudely dismissed her children from her estate for bad manners. AGE: 80 AGE: 80 DIED: Sept. 26, 2017; 2017; DIED: Sept. 26, London London CAUSE: Overdose of of Overdose CAUSE:and alcohol drugs in an drugs in alcohol and apparent suicide apparent suicide ESTATE DISS: The DISS: Therudely ESTATEbaroness English rudely English baroness dismissed her children herchildren dismissed from her estate for bad for bad from her estate manners. manners.


Terry Richards News Syndication/Newscom

Terry Richards News Syndication/Newscom

Glen T. Campbell AGE: 81

AGE: 80 DIED: Sept. 26, 2017; London


AGE: 81

DIED: Aug. 8, 2017; Nashville CAUSE: Alzheimer’s disease ESTATE DISS: was Gentle The country star’s on my Mind, first hit gentle on his but he them from children, excludingwasn’t too his estate. three of



Joan Crawford

Jerry Lewis

AGE: 91 2017: DIED: Aug. 20, Las Vegas CAUSE: Cardiovascular AGE: 91 disease


C. Trump

ESTATE DISS: to his other Cut the family of a previously children, at the urging deceased son, of another son, the futureFred, and redistributed President Donald his estate Trump. AGE: AGE:93 93 Hyde Park, N.Y. 25, 1999; New DIED: his estate DIED:June June 25, 1999; New Hyde Park, N.Y. Fred, and redistributed Pneumonia deceased son, President Donald Trump. CAUSE: CAUSE: Pneumonia the future family of a previously DISS: Cut the the urging of another son, ESTATE ESTATE DISS: Cut the at family of a previously deceased son, Fred, and redistributed his estate children, to tohis hisother other children, at the urging of another son, the future President Donald Trump.


Frederick AGE: 93

DIED: June 25, 1999; New Hyde Park, CAUSE: Pneumonia N.Y.

ABC Photo Archives/ABC via Getty Images

AP Photo/File

REUTERS/File Photo

REUTERS/FilePhoto Photo REUTERS/File

ESTATE DISS: It might surprising to know thatbe known as the a man head of a murderous “family” who wanted had people as his actual to be recognized family.

CELEBRIT Y ESTATE Frederick C. Trump Frederick C. Trump PLAN NING DISS ES

AGE: 83 CAUSE: Cardiac arrest due to 2017; Nov. 19, DIED:failure respiratory and colon Calif. cancerBakersfield, arrest due to CAUSE: ESTATE DISS: Cardiac It might and colon failurebe respiratory surprising to know that a man knowncancer as the head of a murmight be derous “family”DISS: had Itpeople ESTATEto be recognized man who wanted to know that a surprising as his actual family. head of a murknown as the had people derous “family” be recognized who wanted to as his actual family.

Terry Richards News Syndication/Newscom

Huge fold-out poster inside! PAGE 30

AGE: 83 DIED: Nov. Bakersfield,19, 2017; Calif. CAUSE: Cardiac arrest respiratory failure and due to cancer colon

AP Photo/File Photo/File AP

Charles M. Manson

Charles M. Manson AGE: 83 Charles M. DIED: Nov. 19, 2017; Manson Bakersfield, Calif.

Can Patrick Bet-David Make Insurance Cool? PAGE 10


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» read it


MAY 2018 » VOLUME 11, NUMBER 5



Dissed by Disinheritance By Steven A. Morelli

Being the offspring of a wealthy person doesn’t guarantee you an inheritance. We take a look at rich parents who disinherited the children and why.

PLUS see our fold-out poster on page 30! INFRONT


44 H  as the Time Come for the 401(k)-tization of Health Care?

8 C ourt’s DOL Decision Deepens NAIC Divide on Best Interest By John Hilton The National Association of Insurance Commissioners is looking at a bestinterest annuity standard in the wake of a federal court decision to overturn the Department of Labor’s fiduciary rule.

By Peter Marcia Is it time for employer-sponsored health insurance to follow the same path as employer-sponsored retirement plans?


33 The Barometer That Can Forecast Sales Opportunities By Lloyd Lofton Taking a deep dive into an annual insurance study can help predict who is likely to buy and how you can influence their decision.

36 Illustrations Lure Clients to Pick Dangerously Low Premiums


10 Can He Make Insurance Cool?

An interview with Patrick Bet-David Patrick Bet-David took an unconventional path into the life insurance industry and became a huge success. Now he is on a mission to save the industry by recruiting thousands of agents. In this interview with Publisher Paul Feldman, Patrick describes the inspiration behind his building the life insurance agency of the future.


InsuranceNewsNet Magazine » May 2018

By Ron Sussman A 10 percent solution to keep indexed universal life policies from failing.


40 B  uyers Look Past Marketing and Buy the Annuity’s Purpose By Jafor Iqbal and Todd Giesing Forget fancy names and marketing tactics! Research shows that consumers choose the annuities that best fulfill their investment needs.

48 Fees Are Not Just About AUM Anymore as Advisors Get Creative By Cyril Tuohy How some advisors are diversifying their fee-based models to attract a wider array of clients.

52 The Six-Step Approach to Soft-Sell Planning By Joe Schweiger The days of product pushing and cookie-cutter mentality are in the rear view mirror, so we can now move forward to a more holistic and complete approach.

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MAY 2018 » VOLUME 11, NUMBER 5

57 N  AIFA: Life Insurance Uses That Appeal to Wealthy Clients By David Appel Wealthy clients have their own set of financial planning challenges. Here are some ways life insurance can solve them.

58 M  DRT: Special Needs Planning Easier Under the New Tax Law


By Brad Elman The higher unified credit under the new tax law opens up more opportunities to parents who want to provide for specialneeds children.

54 More Than a Fancy Office: Forge An Elite Advisor Reputation By John Pojeta Here are the key behaviors that will transform you into the standard other advisors chase.


60 LIMRA: Benefit Advisors: A Vehicle, a Driver or a Passenger? By Yuliya Babushkina Research shows how brokers can address their employer-clients’ benefit needs.

56 T HE AMERICAN COLLEGE: Equal Pay Is Only Part of the Picture By Jocelyn Wright In addition to addressing the pay gap, women need to take greater control of their finances.

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6 Editor’s Letter 18 NewsWires

28 LifeWires 38 AnnuityWires


275 Grandview Ave., Suite 100, Camp Hill, PA 17011 tel: 717.441.9357 fax: 866.381.8630 PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton SENIOR WRITER Cyril Tuohy VP MARKETING Katie Frazier SENIOR CONTENT STRATEGIST Kristi Raynor AD COPYWRITER John Muscarello AD COPYWRITER James McAndrew CREATIVE DIRECTOR Jacob Haas


Copyright 2018 All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 115, or Editorial Inquiries: You may e-mail or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to or call 717.441.9357, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes.


42 Health/Benefits Wires 46 AdvisorNews Wires

Bernard Uhden Shawn McMillion Doug Cooper Sharon Brtalik Joaquin Tuazon Ashley McHugh Tim Mader Samantha Winters Kathleen Fackler Elizabeth Nady

Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.


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Rebalancing Equations


s that algebra?” owners of small businesses and blue-col- found that out the way many insurance evanThat was one of my questions lar workers had little to count on, the small, gelists do — when they pay their first death as I squinted at the PowerPoint round ball of energy that was Ben Feldman claim. He described in the interview how that slides building the case of how to would step into their lives bearing instru- event turned insurance from a business to a evaluate producer performance. ments of protection and security. crusade. As I attempted to keep up with the charts Feldman relentlessly studied products, Not only is he a comparatively young and graphs, formulas started showing up. concepts, but most of all, people. His craft guy at 39, with a long career still ahead of “That is definitely algebra,” I thought. was more actuarial art him, but he is also reI recalled days squinting at equations than science. cruiting young, diverse in high school, telling myself, “I will never Others patterned thempeople. They are people need algebra.” But it keeps showing up, usu- selves after him, focusing like Rodolfo and Cecilia ally for some kind of data analysis. Even to on objections and how to Vargas, an ambitious, proconstruct a simple query, here comes some counter them. Now those fessional couple in their basic algebra. techniques are considered 30s from El Salvador who This time it appeared during a panel discus- too heavy on selling and have a booming practice in sion at the LIMRA Distribution Conference too light on serving. Houston. in March. Insurance actuaries were reviewing But Feldman served Rodolfo came to the Rodolfo and Cecilia Vargas improved methods for measuring how well people well by getting life United States with an ecoagents sell. insurance into families nomics degree but wasn’t The analysis seemed sound and respon- when lifespans were shorter and prospects clear on how to make his way until he ran sible. For instance, just because some people for widows and orphans were dimmer. into Bet-David. Cecilia soon followed, and have large cases did not mean that they proToday, finance and insurance are converg- now they are catering to a traditionally unvided the best margin for the company. Many ing into an inevitable, but still awkward, mar- derserved Latin American community. examples showed that the agent profited far riage. Finance has been about making numBet-David knows how to hit the usual more than the company did, even sometimes bers work. It is the dry stuff of projections and fear and security buttons in selling life incosting the carrier. contingencies. surance, but he also knows how to connect The analysis was able to separate the field Life insurance has always focused on fam- with the unstated ambitions that people keep manager’s perception from ily and the worries that keep squashed inside them. That is what he uses the actual performance. Often people up at night. It is about to recruit. the managers had an impresa kitchen table and two people What do people really want? Usually they sion that was not supported looking for answers they can work at a job they hate, dragging themselves by the data. trust. from day to day, desperate to stay ahead of Basically, subjectivity plays I didn’t see that when I the bills. Even if they love their job, are they a hand. Or to put it another looked up at those charts. I where they thought they would be in life? way, humans make a mess of did see it in Dallas. What dreams are they putting off? Will their things. That was where I was a few kids get the opportunities they deserve? Is At least, that is what data weeks earlier visiting Patrick this the life they promised their spouse? science would tell you. And Bet-David, who spoke with I won’t get into the details of how Patrick certainly, that makes sense Paul Feldman for this month’s recruits because that is the subject of the Ben Feldman when you squint at the charts interview feature. Even just a second part of the interview. It is not only an and follow those lines arching few minutes of speaking with appeal to a better life for the seller but also a up to success. Bet-David will tell you that he has that oldservice to the client. He creates missionaries “But where did Ben Feldman go?” time insurance religion. more than salespeople. I couldn’t help thinking that, rememberHe has the typically atypical background. Mission. That is what those equations ing the insurance agent archetype. I learned The best insurance agents seem to come from needed. The science makes it possible. The about the legendary New York Life salesman difficult circumstances and stumble into the art makes it valuable. soon after I started at InsuranceNewsNet business and thrive. He and his family came That is not algebra. in 2008. (By the way, no relation to Paul to the United States from Iran during the Feldman, InsuranceNewsNet publisher.) Iran-Iraq War. He was working at a fitness Steven A. Morelli Feldman was the one who perfected the center in California when he found the path Editor-in-chief “pennies on the dollar” description of life in- that would take him to insurance. surance’s value. He understood clients’ fears He saw that path was potentially golden, and how to alleviate them. At a time when but he ended up finding a higher road. He 6

InsuranceNewsNet Magazine » May 2018


Court’s DOL Decision Deepens NAIC Divide On Best Interest States are hardening their positions on the annuity best interest standard.

By John Hilton


National Association of Insurance Commissioners subgroup will meet in person this month on its best-interest annuity standard after contentious commissioners pushed the model law back out for public comment. The Annuity Suitability Working Group met March 24 in Minneapolis at the NAIC Spring Meeting, ostensibly to finalize its annuity transactions model law. Instead the group voted to re-open the public comment period for another 30 days. New comments were accepted through April 27. According to two people who attended the meeting, some members wanted to give groups the opportunity to recast their comments in light of the March 15 decision by the Fifth Circuit Court of Appeals overturning the Department of Labor fiduciary rule. That decision lines up with the best-interest approach coming out of states such as Iowa, which has a heavy insurance presence. Iowa Insurance Commissioner 8

InsuranceNewsNet Magazine » May 2018

Doug Ommen could not be reached for comment. “I think that there’s been a misunderstanding with regard to what suitability really is,” Ommen said during a recent conference call, adding that the standard has been strengthened through the years to add disclosure requirements, for one example. “Our current rule already has a lot more than an old-line traditional suitability principle.” On the other side, states such as New York want the NAIC model law to adopt the tougher standards contained in the DOL rule. In particular they want the impartial conduct standards that went into effect June 9, 2017. The friction between the two sides was evident during the March 14 conference call, during which the working group only reached a consensus on minor language issues. Similar to the DOL rule, the NAIC model would place limits on agent compensation, require more disclosures and set a “best interest” standard. The standard would apply to annuity sales only.

Just a First Draft

Working group leadership downplayed the draft law during its March 14 call,

adding that it was only meant to get the ball rolling. NAIC model laws must then be adopted by a state before they are applicable. Several states, including New York, Nevada, New Jersey and Connecticut, bypassed the NAIC and moved to produce their own best-interest standards. Those rules are in various stages of development. The DOL rule’s impartial conduct standards should be “a guide” for the NAIC standard, said James Regalbuto of New York during the March 14 call. Those standards require annuity sellers into retirement accounts to act as a fiduciary, make no misleading statements and accept only “reasonable” compensation. But thanks to the Fifth Circuit decision, the impartial conduct standards could go away as early as May 7. The Department of Justice has until then to decide whether to appeal to court decision. Judge Edith H. Jones wrote in the majority opinion that the DOL rule “fails the reasonableness test” of the Administrative Procedures Act by extending the department’s ERISA authority to one-time IRA rollovers and similar transactions. The decision went on to admonish the DOL for exceeding its authority and

TIMELY ISSUES THAT MATTER TO YOU INFRONT re-affirmed the role of Congress, the states and the Securities and Exchange Commission in regulating agents and advisors. If the ruling holds, it could open the door for the NAIC law to have a far greater impact than it initially appeared.

A Model’s Model?

As superintendent of financial services for New York State, Maria T. Vullo has been outspoken about tougher regulations. In a comment letter, New York urged the NAIC to adopt the state’s best interest proposal, which extends fiduciary responsibility to life insurance. There is precedent for New York pushing insurance commissioners to a tougher standard. A similar NAIC working group went through several iterations of a cybersecurity model law before adopting a final version that hewed closely to the New York State regulation that took effect in March 2017. Some members say New York is hoping for a repeat with its hard-line fiduciary standard. “We believe that acting in the ‘best interest’ of the consumer is an appropriate standard for these products, which often are relied on by consumers as retirement security and estate planning,” Vullo said in a letter. The DOL rule only applies to the sale of products using retirement dollars, whereas the New York proposal would extend to all sales of life insurance and annuities. A transaction is considered in the best interest of a consumer when it is “in furtherance of a consumer’s needs and objectives and is recommended to the consumer without regard to the financial interest of the product seller,” Gov. Andrew Cuomo said in a statement.

Piwowar and Clayton to give the agency a full commission for the first time since late-2015. But the Fifth Circuit decision is probably the biggest and best news the SEC could have hoped for as it works to finalize its rule. For the record, Clayton has said the appeals court ruling will have no impact on the SEC rule. “While I think that’s probably true, it is the case that now that there’s a blank slate that the SEC has to work with,” noted Steve Boms, a public policy advisor for Envestnet. “It becomes much easier for the SEC to put forth a rule without worrying about harmonizing its efforts with the Department of Labor.” The SEC is expected to produce its rule by the second quarter of 2018, a timeline that could be impacted by the Fifth Circuit decision. SEC staff had the framework of a fiduciary rule from the days of Chairwoman Mary Jo White. While many of the same staff members remain, Clayton is a Trump appointee and will put his own stamp on the proposal, Boms said. “He and the commission staff are seeking to be very deliberate and methodical,” he said. “I would expect a prolonged process.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at

“We believe that acting in the ‘best interest’ of the consumer is an appropriate standard for these products, which often are relied on by consumers as retirement security and estate planning.” Insurers would also be required to develop and maintain procedures to prevent financial exploitation of consumers. The New York amendment completed its comment period in late February. DFS officials could make revisions, which would necessitate another comment period, or move to enact the regulation as written. It is very likely that a best-interest standard is approved by the end of 2018, a source said.

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SEC Keeps Working

Meanwhile, the Securities and Exchange Commission continues working on a best-interest standard behind closed doors. Few details have emerged on the SEC process other than the infrequent public comments from Chairman Jay Clayton. A few important recent developments are working in the SEC’s favor. For starters, Commissioners Hester M. Peirce and Robert J. Jackson Jr., both nominees of President Donald J. Trump, joined SEC commissioners Kara Stein, Michael

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May 2018 » InsuranceNewsNet Magazine





Patrick Bet-David is doing what insurance companies he is attracting Gen-Xers Millennials into the indu

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InsuranceNewsNet Magazine » May 2018



cannot … and stry



atrick Bet-David is helping answer the biggest question in life insurance sales: Where will the next generation of successful agents come from? As the United States has grown more diverse, the life insurance industry clearly has not. “Pale, male and stale” is a common refrain about the typical agent these days. Not only are agents aging out, but because life insurance tends to be a peer-to-peer sale, clients are also older, more elite and less diverse. For the industry to remain vibrant, it needs to replenish its sales force and clientele. Bet-David is building a life insurance agency where agents come from all walks of life and many are from minority groups. In fact, he likes recruiting people from outside the insurance business who show spirit and smarts but don’t come with the baggage of bad practices. He himself came from far outside the world of life insurance. He was working as a fitness trainer in Venice, Calif., home of Muscle Beach, when he became interested first in finance and then in insurance. Little in his background would have pegged him as the eventual owner of an agency at the age of 39, with more than 5,500 agents and plans to grow that number to an astonishing 500,000 in a decade. His family fled Iran during the Iran-Iraq War and immigrated to the United States in 1990, when he was 12. He bounced around low-wage jobs before ending up in the U.S. Army, serving in the 101st Airborne. When he got back, he worked at Bally Total Fitness, at the epicenter of bodybuilding. Bet-David saw the prospect of the good life in finance but found a better life in life insurance. He started PHP Agency in 2009 in Northbridge, Calif., and recruited agents nationally. The agency recently moved into a converted warehouse in Dallas that is part office, part gym, part playground, part studio — but all business when it comes to insurance. He and his recruits are serious about the agency’s mission and the transformative value of life insurance. In this interview with Publisher Paul Feldman, BetDavid tells the story of his journey and how his business became a mission.

May 2018 » InsuranceNewsNet Magazine


INTERVIEW CAN HE MAKE INSURANCE COOL? FELDMAN: How did you get started in the insurance business? BET-DAVID: Right after I got out of the military, I started working at Bally Total Fitness at Venice Beach. I met a girl who I started dating for a few months. She was working at Morgan Stanley Dean Witter, where she was the advisor to a lot of the Lakers players. We’d go out, and she would pick me up in a different car each time. I finally asked her, “How do you make your money?” She said, “I’m an advisor.” I said, “How can I get a job at Morgan Stanley Dean Witter?” She said, “Look, I went to UCLA. You need a degree.” I said, “I’m not getting a degree.” She said, “They’re not going to hire you.” I said, “Well, let’s see what I can do here.” So I put together my resume, which was probably the least impressive resume you would ever see in your life. It was Haagen-

Want to hear Patrick’s interviewwinning joke? Go here: of your team, give me a call.” I faxed this resume — because back in the day, in 1999, 2000, you used a fax — so I faxed this to 100 different places in LA — I’m talking TD Waterhouse, Goldman, Smith Barney, Merrill, Morgan Stanley, you name them — I sent it to all of them. Out of the 100, I got roughly 30 calls. Out of the 30 calls, 15 were just people who were saying that was a funny joke and your approach is incredibly funny, but you don’t qualify. We just wanted to call and tell you that that joke was hilarious. The other 15 offered me an interview. After all those interviews, it came down

On making a mission … Greatness comes from finding work that isn’t merely a job to you; rather, greatness comes from finding work that is a cause to you. When your work becomes a crusade, you will go to sleep Sunday night excited to work on Monday. There’s no feeling like it. Whether it’s fighting for a different future for this country or a different future for your family, when a cause catches your heart, there is no limit to what you can accomplish. Fighting for a cause bigger than yourself alone not only motivates you: It also inspires those around you. Every great achiever in history has inspired others. That is why we are still talking about Winston Churchill, Martin Luther King and Abraham Lincoln today. Their achievements were incredible in and of themselves, but how many leaders since then have been inspired and motivated by what those men did? Patrick Bet-David, 2011, Valuetainment Publishing

Dazs, Bob’s Big Boy, Burger King, military and then Bally. No bachelor’s, no associate’s, nothing. I mean I didn’t have a certificate to brag about anything with — simply the military. I took my resume and, on the cover letter, I included the best joke I had at that time. Under the joke on my cover letter I put, “If you’re laughing, this is exactly how all my clients are going to feel when they do business with me. They’re going to love me. If you want somebody like this as part 12

InsuranceNewsNet Magazine » May 2018

to three different offers. I went with Morgan Stanley Glendale. My day one was September 10, 2001. So on Monday, everyone’s excited, jacked up, and then the following day, 9/11 happened. My broker at the time said, “Look, guys. This is probably going to be the worst time to be involved with the industry. If you choose to leave, I understand.” A lot of people left and went to banks. I was focusing on money under management, and I said, “I’m going to go and

focus on insurance.” At that time, I started selling variable universal life with Transamerica, and our agency sold about 7,000 VUL policies in five years. That’s how I got into the life business. FELDMAN: What are some lessons you learned early on in your career selling insurance? BET-DAVID: The transition from logical to emotional. I remember when I was selling logically and it was just, “Hey, I’m going to get advanced 12 months. And, my gosh, if I write this, they’re going to pay me 50 percent of $3,000 target premium. And if I’m at this percentage, man, I can make so much money. I can make $100,000, and then I can ask my dad to retire, and I can travel the world and I can have a nice car, and I can be cool and have the girls and have all this other stuff.” And then, boom: A 19-year-old kid called me because he couldn’t afford to pay the $60 premium for an indexed universal life policy that had a $100,000 death benefit. I told him, “Keep the policy, man.” He had the policy for only three months. Well, three days later, he’s in a car that gets hit by a car that runs a red light and goes into a telephone pole. He dies at 19 years old. Two thousand people showed up to this kid’s funeral. I could not believe how many people were in love with this kid. The mom mourned for three months. She couldn’t even leave the house. It was a very bad situation for the family. For me, I hadn’t paid a single claim or been in a situation like it. He had paid only $180 into that policy and $100,000 was delivered to the mom and the dad. When that took place, insurance went from being logical to understanding the emotional. After that, I sold in a completely different way and my urgency focused more on what we do. It was no longer about a dollar. It was no longer about a contest. It was no longer about a competition. It started becoming about, “Listen, we are a very honorable profession.” FELDMAN: When you came into the business, you were selling individually. How did you make that transition from selling individually to being an agency leader and a marketing organization?

CAN HE MAKE INSURANCE COOL? INTERVIEW BET-DAVID: When I was at Morgan Stanley Dean Witter, we were supposed to go to the World Trade Center in New York for training. But after 9/11 happened, they sent us to San Francisco and we stayed at Mark Hopkins Hotel across the street from the Fairmont. During that time, they roomed us up with different people. My roommate was a guy named Ed who was driving a CLK430. If you remember back in '01, the CLK430s were like, “I cannot believe such-and-such has got a CLK430.” It was a sick car; that was a sexy car. So I said, “What do you do?” He said, “Well, I used to be with a company called Primerica.” I said, “What’s Primerica?” He said, “Their main focus is recruiting. But I just don’t believe in recruiting. I believe in selling. That’s why I left that, because every month they would pressure us to recruit people and get people licensed and all this stuff, and I just want to produce.” On the last day at Morgan Stanley, they brought in a guy who said, “Look, this is my house. This is my car. This is my wife. These are my kids. These are the events I go to. I go to all the Super Bowl events. I golf at Pebble Beach.” He’s going through the whole thing. And I’m sitting there and I’m like, “Oh, my gosh. This guy makes $3 million a year and all this. Oh my goodness. I thought only people in the NBA made $3 million a year.” FELDMAN: It must have been a real eyeopener for someone new in the business with your family background. BET-DAVID: I was a naive kid. I came from a family where my mom and dad got a divorce. My dad was a cashier at a 99cent store in Englewood, Calif. My mother went back to Iran because we ran out of money, and so I was forced to go into the military. There is nothing about my life that was like this guy’s. And no one in my life had ever made six figures. No one. My dad was making $50,000 a year — the most money he ever made. And we’d never lived in a house. I never owned Jordans. When I was 14 years old, I so badly wanted Jordans but we couldn’t get those. We went to the store in the mall, and they had size 13 Shawn

Kemp shoes that were on sale for $39 because nobody would wear size 13. I was size 11, and I asked my mom, “Can I buy these?” She said, “It’s not your size.” I said, “Mom, at this point, I’m sick and tired of wearing Payless. I’ll wear these shoes.” So, she bought those for me. I don’t come from a lot of money, so when this guy starts talking about, “I make $3 million a year and I’m doing this,” I said, “Guys, let’s take this guy out and have some fun with him.” We went out and we started talking. One drinks, two drinks, then we ask, “So

individually writing and recruiting at the same time? A lot of agencies don’t build because they think they don’t have the time to do it. BET-DAVID: Writing is predicated on four things: work ethic; product knowledge, which is competency; how-tos, which is learning how to sell; and the fourth was probably the biggest challenge I had at the time, and that was my identity. Let me explain to you what I mean by my identity. I never thought I was a money guy. I didn’t grow up in a family where

From left, INN TV Host Matt Walton and INN Publisher Paul Feldman meet with Patrick Bet-David in his Dallas office.

how’d you do it? What’s the secret?” He said, “Look, I learned how to write business. But after I learned that, I learned how to recruit. Because the way you make the big dollars is to put together a real nice shop of other advisors who know how to go out there and write. You put a massive distribution together and then, boom: You can make all the money in the world.” I became obsessed with not only writing but also recruiting. In a four-year period, I recruited 4,000 people. We were just obsessed with recruiting in Southern California. FELDMAN: What were the challenges that you had when you were

parents said, “You’re going to do whatever you can do. I believe in you, son. You’re going to be this.” No. I’ve never ever in my life been in an environment where people believed. Never. It was always critical. Nothing against my parents, but it’s just not Middle Eastern culture for us to do that. It’s very critical. Nothing’s ever good enough. My dad dropped out of eighth grade in Iran and started working because he had to take care of his mom and dad. My mother got a degree from the University of Iran but didn’t really do much with it. Identitywise, I’m sitting here saying, “Dude, I just made $3,000 in a month. That’s insane. That’s awesome. It’s a lot of May 2018 » InsuranceNewsNet Magazine


INTERVIEW CAN HE MAKE INSURANCE COOL? money. Oh my gosh, I made $5,000 in a month. I’ve made it.” I had to do a lot of self-reflection to increase my identity to go out there and realize this industry has so much potential. You can make $10,000 in a month. You can make $20,000 a month. I was working on my self-beliefs, and this is one of the reasons why I became a major advocate of reading books. I’ve read 1,600 books in my lifetime — and I didn’t start reading until I was 21. I had an English teacher named Miss Collins. I was sitting right behind this cheerleader, and I’m trying to hide be-

happened with Gilbert — my 19-year-old client who died in that car accident - believing in the product was very easy. FELDMAN: And that broadened your scope significantly, to see the impact that you were making on lives and what this industry really did. BET-DAVID: Yes. Every seven seconds, someone’s turning 65 years old. According to Boston College, a minimum of $41 trillion of wealth is going to be transferred between now and 2052, with $136 trillion the highest annual rate.

and you having to make it for yourself, and the No. 1 benefit that this country offers is the freedom to build your own business and build it as big as you want. And I think a lot of people in America don’t take advantage of that benefit. But on the industry: People don’t trust banks like they used to; they don’t trust a lot of the stock market because they don’t want another 2008 happening, where 38 percent of the market drops; they don’t trust real estate because of what happened with the real estate bubble. And this is why I chose insurance. When is the last time you heard of a life

Patrick Bet-David’s office is a glassed-in studio/man cave corner of a large mixed-use office space.

hind this girl and every flipping day Miss Collins would ask me to read. I was such a terrible reader. The entire day, I dreaded going to Miss Collins’ class because everybody would laugh at the way I would read. Math was easy for me and reading was terrible. The first time I ever finished a book on my own was when I was 21 — it was How to Win Friends and Influence People. Identity was my biggest challenge, to believe that I can actually do this, then find those people skills and stick to believing in the product. Once I started seeing what 14

InsuranceNewsNet Magazine » May 2018

Gen Y is now bigger than the baby boomers — 80 million. And these are people who are getting ready to make some of the most important decisions of their lives. They’re going to get married; they’re going to start careers; they’re going to have kids; they’re going to buy their first house. And every one of these major decisions requires them to talk about their finances — and that’s where we come in. Then there is the movement of entrepreneurship. People are starting to realize the American dream is about free enterprise

insurance company going out of business? If you go to any metropolitan city and look at the tallest skyscrapers, at the top, you’ll see the logo of a life insurance company, because they are stable. Historically, many governments have gone to life insurance companies to bail them out because insurance companies have money. And by the way, AIG went through what they went through because they went away from their philosophy and invested in some mortgage-backed securities and that got them in trouble. Their life insurance business stayed stable.

CAN HE MAKE INSURANCE COOL? INTERVIEW FELDMAN: Those factors turned into your mission to help grow this industry as a whole by sharing your vision? BET-DAVID: It became a crusade and the vision for the business. The audience that’s going to be reading this are not going to be greenies; they’re going to be people who are already licensed or they’re running a distribution, right?

“You could leave life right now. Let that determine what you do and say and think.” — Marcus Aurelius

FELDMAN: Yes, mostly middle- and late-career people building on their success. BET-DAVID: I would ask them to go back and remember that level of excitement the first time they made $10,000 in a month. Think about that level of excitement the first time you bought a house. Go back and think about the struggles you had when you couldn’t close but five policies in a month, and you were so embarrassed because in your office you weren’t anybody — you were kind of like on the verge of quitting. The industry will do much better if the current insurance agents who are making a lot of money can go back and remember what it was like when they first were coming up. Look at it more as a public service and not as, “I’ve already made my money. My only concern right now is my golf handicap.” Bullshit. In the Bush family, they have a tradition — and this came from their grandpa, George Bush Senior’s father. The culture they had in their family was simple: No. 1, go make your million. No. 2, when you make your million, set aside a retirement account for your wife; set aside an account for your kids; set aside the money for your retirement and don’t ever touch that money again. Once you do that, then go give back to the country that gave you the opportunity to make the million. I think insurance executives, CEOs and IMOs are doing a good job at No. 1 but a terrible job at No. 2. There’s a part of this industry that’s public service. We’re not entitled to this life. No one’s entitled to this ridiculous life that we have, but it just so happens that we got lucky to end up in this country. Out of these 193 countries in the world, we’re living in America. It just so happens that we luckily got into the insurance business. Nobody

wakes up, goes to college and says, “I want to be a life insurance agent,” except for two people I’ve met in my life. If the industry connects with that, then realizes, “I am as selfish as they get. I’ve got that car. I’ve got a $100,000 membership to this country club. I have courtside season tickets,” all this that I hear about when I go to these conferences - go back and train some greenies, damn it. FELDMAN: It seems like you see quite a few successful people who need to do a better job of giving back to the industry? BET-DAVID: The way some of these

insurance people are selling the industry, it just irks me. Like my skin hurts when I sit and listen to them. They sound like some of the snobbiest, most arrogant people. I want to say, “Stop it, man. You are not as special as you think you are.” Marcus Aurelius was the most beloved emperor Rome ever had. Every time they would go to their annual parade, he would have a slave whisper into his ear, “Marcus, you’re not as special as you think you are. Relax. Don’t let this get into your head.” It was called a memento mori. Marcus connected to the people because he never felt like he was superior. The insurance industry is filled with bureaucrats and aristocrats, and it’s just ridiculous to me.

NEXT MONTH: Patrick Bet-David shares how you can successfully bring new agents and advisors into the industry to multiply your business and help even more people. Also, discover his personal plan to recruit 500,000 new agents by 2029. PLUS: Don’t miss your chance to meet and see Patrick LIVE at the 2018 InsuranceNewsNet Super Conference in Chicago, Sept. 26-28! Visit today for details. May 2018 » InsuranceNewsNet Magazine





InsuranceNewsNet Magazine » May 2018

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eware of Virtual Currencies, Banks Told Many people have been getting on the virtual

currency bandwagon, but a global financial body warned central banks about the risks of introducing their own virtual currencies. The Bank for International Settlements, an international organization for central banks in Basel, Switzerland, said virtual currencies issued broadly by central banks could worsen bank runs. A virtual currency could do that by making it easy to move money entirely out of the commercial banking system with a mouse click during a panic. But virtual currency isn’t all bad, the report added. It said virtual currencies issued for wholesale use only — that is, by banks and financial institutions to settle payments rather than by consumers for purchases — could help make trading securities and foreign currencies more efficient. That would not be so far from how central banks operate today. They already use an electronic form of money in the reserve accounts at the central bank that can be held only by banks and other designated financial institutions. Everyone else can access money issued by the central bank in the form of cold hard cash.


Even though they are adults themselves, many of today’s millennial generation still depend on Mom and Dad for support. And it’s costing parents big-time. A study by TDAmeritrade said baby boomer parents are losing an average of more than $11,000 a year to their millennial offspring. But that cost doesn’t include just cash. Parents frequently provide unpaid help to the younger generation – ranging from transportation to child care to household help. Millennials reported receiving, on average, the equivalent of more than $8,000 annually from their parents who provided these services. Boomer parents said they provided their children with an average of $4,500 in the past year for things such as groceries,

phone bills and other living expenses. And then there’s student debt – for which 12 percent of millennials received help from Mom and Dad.


If more Americans are going around looking rich these days, it’s because more of us are in t he m i l l iona i re bracket. The number of millionaire households in the U.S. jumped by more than 700,000 in 2017, according to a report from Spectrem Group. The U.S. now has a record number of millionaire households – more than 11 million. Surging stock prices and rising housing values are fueling the growth of millionaire households, Spectrem said. Since the financial crisis, the number of millionaire households has nearly doubled. In 2009, there were just under 6 million millionaire households.


I don’t hear much concern on tariffs and trades or the deficit from my clients, but I am hearing about taxes. — Andrew Rosen, owner of Diversified, an advisory firm in Wilmington, Del.

It’s grown every year since, and is now well past the precrisis level of 9 million millionaires.


Alzheimer’s disease keeps running up a higher tab, and women are bearing most of the caregiving burden. The Alzheimer’s Association’s latest report shows that 5.7 million Americans have the disease and it’s costing us $277 billion a year. That pricetag doesn’t include the unpaid time and effort of those who care for family and friends who have the disease. “In 2017, 16 million Americans provided an estimated 18.4 billion hours of unpaid care in the form of physical, emotional and financial support — a contribution to the nation valued at $232.1 billion,” the association said. The association estimates that it costs $341,000 on average for the health needs of someone with the disease from diagnosis to death. Families pay 70 percent of this out of pocket.


KNOW The investment firm BlackRock says it is looking into creating new



investment funds for investors that excludes firearm makers and retailers.

InsuranceNewsNet Magazine » May 2018

Source: Associated Press



InsuranceNewsNet Magazine » May 2018

DISSED BY DISINHERITANCE COVER STORY for the grandchildren are gone because of the legal challenges that my brother has made in every aspect of the planning,” Bernstein said. “He’s lost every challenge that he’s made.”

When the family sued the estate, Donald Trump stopped paying medical expenses for Fred Jr.’s grandson, who has cerebral palsy, according to The New York Times.



is something that even a French man would regard as rude. A French rock ‘n’ roller, no less. That was the judgment of Eddy Mitchell, speaking of fellow French rock pioneer and friend Johnny Hallyday, whose children found out they were excluded from his estate after he died of lung cancer at 74. “I don’t understand how someone can disinherit his children,” Mitchell told the BBC, after Hallyday, aka French Elvis, left his entire estate to his fourth wife. Although Hallyday died on Dec. 5, 2017, the children were still fighting over the estate at press time. It is a familiar refrain in many celebrity estates. The past year alone saw quite a few headlines featuring famously disowned children. And although the public expects such dramatics from actors and musicians, advisors are also seeing it more often with their own clients. Some advisors have seen it up close. Ted Bernstein can talk to his clients of his advisory, Life Cycle Financial Planners, about the pain caused by disinheritance because it happened to him. The Boca Raton advisor actually did not mind. In fact, he told his parents they did not need to leave him anything because he was financially secure. That wasn’t the case, though, with one of his four siblings. His brother often relied on their parents’ help. Bernstein advised his father to at least provide for that brother, mostly because of his brother’s three children. Instead, his father cut all of the children out of the estate and left everything to the grandchildren. The disinheritance blindsided Bernstein’s three sisters. Whether their father intended it or not, the cut hurt. “Even though my three sisters really didn’t need anything financially from my father,” Bernstein said, “all of them were pained by being skipped over.” But Bernstein’s brother also wanted to share the pain. “My brother has wreaked havoc, and half of the assets that my father had at the time of his death that were intended

Johnny Hallyday may have introduced rock ‘n’ roll to France but unintroduced his children from his estate.

Bernstein advocated for keeping his brother in the will, but Fred Trump Jr. was not so lucky. Or at least his children were not.

The family claimed Donald Trump had undue influence, but it was not because he was a brother with a vested interest. Generally speaking, that in itself does not constitute undue influence, according to All in the Fractured Family Andy Mayoras, a Trump died young at 43 of a heart attack Michigan estate atrelated to his alcoholism. He was the eltorney who wrote dest son of Frederick C. Trump Sr., an the book Trial exacting father who built a real estate & Heirs: Famous empire in and around New York City. Fortune Fights! with But as Fred Jr. withered under his father’s his wife, Danielle, a demands, his younger brother Donald fellow attorney. They are also working on thrived. a TV documentary series called Fortune Donald Trump grabbed the baton of Fights set to appear late this year. golden boy and ran out of Queens and “When one sibling suggests cutting into Manhattan to build upon his fa- out somebody else, that’s not undue ther’s legacy. After Fred Jr. died in 1981, influence,” Mayoras said. “That’s just Donald helped his father draft a will that influence.” excluded Fred Jr.’s family. The charge of undue influence is common when estates are challenged, particularly if people leaving the estate were elderly and near death when they changed the documents. But it is not as simple as someone using influence in making a suggestion. “You have to do it in such a way using improper The siblings Trump circa 1970s: from left, Robert, means that overcomes the Elizabeth, Fred Jr., Donald and Maryanne. person’s own wishes where May 2018 » InsuranceNewsNet Magazine




Frederick C. Trump excluded the family of a previously deceased son, Fred, and redistributed his estate to his other children, at the urging of another son, the future President Donald Trump.

in 1969. The crime spree in the bohemian canyons of Los Angeles was considered one of the epitaphs marking the passing of the ’60s “innocence.” But actual family members want to be associated with Manson since he died at 83 on Nov. 19, 2017. One is Jason Freeman, a grandson. Mayoras said Freeman is contesting a 2002 will that disowned Manson’s family and gave everything, including his body, to a collector of “murderabilia” — memorabilia related to notorious killers. Another man, Matt Lentz, claimed he is Manson’s son given up for adoption and has a 2017 will naming him as beneficiary and another memorabilia collector as executor. Mayoras said Lentz’s will would supersede earlier ones if he can prove his case. Yet another man, Michael Brunner, also claims to be Manson’s son. A judge in March released Manson’s body to his grandson. Another judge still has to decide who gets the objects and rights to Manson’s estate, which includes earning royalties on Manson’s music.

David Redfern—Redferns/Getty Images

in effect you’re substituting your own Although the Trumps and Campbells wishes,” Mayoras said. “It can be through might be atypical families, they had typicoercion, undue threats, flattery and cal estate issues. Sometimes we see atypbribery. The classic example is ‘Mom, ical families with atypical issues. Not Always a Fight if you don’t want to go into a nursing That would be the case with the Complex families often lead to estate home, well, you better change your will Manson family. challenges. Usually it is because the last and leave everything to me or I’m going With Charles Manson, “family” has a family gets favored. In the case of NBA to put you in a home.’ ” couple of meanings. Of course, there is broadcaster Craig Sager, the children The Fred Trump Jr. family alleged the Manson family of the grisly murders from his first family called foul on how Donald Trump used undue influence because the patriarch had Alzheimer’s disease. The suit was amicably settled, Donald Trump told The New York Times. Glen Campbell’s family is also fighting over his estate because of accusations of undue influence. The country music star’s Alzheimer’s diagnosis was disclosed in 2011 and documented in the movie I’ll Be Me. Campbell was married four times and had eight children, so his will was bound to be challenged when he excluded the three children from his second marriage. That and other issues have kept the estate in court since his August 2017 death. In March, Campbell’s widow, Kim, had to ask the court to grant her more Glen T. Campbell wasn’t too “gentle” on his children, than $500 million to pay for exexcluding three of them from his estate. penses. 22

InsuranceNewsNet Magazine » May 2018



Charles M. Manson, known as the head of a murderous “family,” had people who wanted to be recognized as his actual family.

Sager left his estate after he died of leukemia at 65 on Dec. 15, 2016. But it was clear those offspring would not be happy with just about any outcome. Sager left his first wife for his second, who was welcomed into the network and NBA “family,” according to children from the first marriage. The children were cut from the will but said they wanted no part in their father’s estate and want no part of the court proceedings that keep drawing them back in. The notably generous Jerry Lewis left a last gift for headline writers as they gleefully reported that he had the last laugh by excluding the six children from his first marriage. His children have not contested the will, according to reports. And Lewis, who died at 91 of heart disease on Aug. 20, 2017, certainly had the right to do what he wanted with his estate. But the public exposure is not a laughing matter for those left behind. In fact, disinheriting is becoming depressingly

familiar with multiple marriages and relationships. David Cassidy is associated with The Partridge Family theme song but he was a bit miserable for a big chunk of his life as he struggled with substance abuse. Along the way, he had three marriages and a son. He also had an out-of-wedlock daughter, Katie Cassidy, who became an actress best known for her role in the TV series Arrow. Before he died of liver and kidney failure on Nov. 21, 2017, Cassidy cut his daughter from the estate and left most of it with his son. Whether she was aware of the exclusion or not, she was at his bedside as he passed. She texted days later that her father’s last words were “so much wasted time.” Unproductive is what many estate planners and lawyers would say about the public exposure of private pain, which is why many advocate for trusts.

Solid Trusts Add Structure

A will is a public document, but trusts

generally are not. They can contain the details of the client’s wishes and also the mechanisms to fulfill those wishes. Many advisors find their wealthy clients are worried about the impact of their money on their heirs, particularly troubled ones. Clients might be tempted to withhold money from an heir not only because of impairment like substance abuse, but also deflated ambition. Some high-profile billionaires have said they will not be leaving the bulk of their estate to their children. “Warren Buffett’s probably the most famous example,” Mayoras said, adding that many wealthy people are worried about affluenza. “They’ll say, ‘I’m not going to leave an inheritance to my kids because I don’t want trust fund babies. I want them to be hardworking and build their own lives and their own careers and not just be a sponge off of this money,’ which is a very valid concern, but there are other ways to address it than simply disinheriting.” With a trust, it does not have to be all or nothing. May 2018 » InsuranceNewsNet Magazine



Jerry Lewis , aka the Nutty Professor, wasn’t too crazy about the six children from his first wife — he cut them all out.

“Trusts can be very creative,” Mayoras The possibilities are endless, he said: has a law degree. “And I’m seeing more said. “We had somebody who was suc- “How money is distributed to the next and more of these incentive trusts that cessful. He built up a small business and generation can really be limited only by parents are setting up for even adult made a good amount of money. His kids your imagination.” children. And of course, life insurance is were already financially well off, but he usually a crucial part didn’t want the grandkids to be lazy. He Life Insurance Feeds the Trust of that plan because wanted them to value hard work like he David Szeremet, a vice president of adit’s often the most did. So he set up his trust so that they vanced planning at Ohio National Life, efficient asset to would get a distribution each year by calls the behavior-modifying instrufund that trust.” bringing their tax returns to the trustee, ments “incentive trusts,” and they are beIn case of an imand the trustee would match whatever coming popular. paired heir, a trust they earned.” “I review a lot of trust documents in can also help manage a life insurance Trusts can also add flexibility for the my daily activities,” said Szeremet, who payout — a lump sum of danger to trustee. “You can have exceptions for the military or teaching where somebody wasn’t necessarily in a position to make as much money but was still a hardworking, productive member of society,” Mayoras said. “There may be some exceptions or some extra credit.” The flexibility can extend to limits and conditions, such as for behavior. “A lot of times we put in drug and alcohol language,” Mayoras said. “Somebody has a drug or alcohol problem, and they need Craig G. Sager’s children from his first marriage would call foul for how to produce a clean drug or alcohe left their mother for another woman and cut them from his will. hol screen each year.” 24

InsuranceNewsNet Magazine » May 2018


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Former teen heartthrob David B. Cassidy might have been known for I Think I Love You but don’t tell that to his daughter, Katie Cassidy, who was dumped from the estate.


InsuranceNewsNet Magazine » May 2018

active in the business and children who aren’t active in the business,” Szeremet said. “The active children are the ones who are pouring their blood, sweat and tears into the business, and they are the logical successors.” But just leaving the business to the active children would be seen as unfair.

Terry Fincher/Daily Express/Hulton Archive/Getty Images

someone with an issue such as a substance abuse problem. “What we see more often is having the life insurance payable to a trust,” Szeremet said. “The trust can hold, manage, protect those assets from the beneficiary’s creditors and predators. And in many cases, it protects the beneficiary from himself.” Special needs trusts are also often funded by life insurance. Because developmentally disabled adults are outliving their parents more often, parents are anxious about the care their children will need later in life. This is where a lump sum paid into a trust is especially useful. “Trustees can then use those funds over time to supplement government benefit programs — medication that perhaps isn’t covered by programs,” Szeremet said. “And basically they protect the individual’s standard of living and their dignity. Life insurance is flexible and efficient from the trustee’s perspective.” Another way life insurance helps is to settle what could otherwise be seen as an inequitable distribution of a large asset. The answer might be disinheriting — but with love. “I would call it the family business scenario, where you have children who are

Quite often, the family does not have the cash to make up for the difference because the money is in the business. “The idea would be to leave the business to the active children through the estate planning documents and potentially disinherit the inactive children,” Szeremet said. “But equalize things with life insurance. Quite honestly, the inactive children on the cases I’ve worked on, they’d rather have the life insurance money, anyway.” The rule of thumb is the death benefit would be 50 percent of the business’s value. “Let’s say it’s a million-dollar business,” Szeremet said. “This kid inherits the million-dollar business. On the other hand, this other child is going to get $500,000 tax-free cash in hand. So would you rather have a million-dollar illiquid business that you may not be able to find a buyer for and you have no idea how to run it? Or would you rather have $500,000 cash in your hand?” It takes quite a bit of discussion beforehand, and that’s where an insurance agent comes in. “The idea there is to work with the family and communicate with everyone to reach a figure that people can say, ‘Yeah. That’s fair.’ But admittedly, not every family can reach these well. Not a perfect world out there,” Szeremet said.

The English baroness Veronica Duncan rudely dismissed her children from her estate for bad manners.


George Hurrell

“If agents have a good enough relationship and are in a strong enough position, they can be the catalyst for these conversations. The advisors I work with who have the best relationships with their clients really have no difficulty bringing up these issues. And it’s often welcomed by the families.”

Abeyance of Malice

Talking could also help dial down the anger that fuels much of the disowning. Or perhaps even simple annoyance. That was the situation with the case of the cranky British baroness. Veronica Duncan, aka Lady Lucan, achieved macabre fame in 1974 when her husband, John Bingham, the seventh earl of Lucan, apparently killed their nanny because he mistook her for his wife. Duncan was also assaulted when she interrupted the attack. Bingham ran off, left a bloody car and incriminating evidence and disappeared. Since the event Duncan had been reclusive, living in the London house where the assault occurred and where she sat under the gaze of her presumably late husband’s portrait. When she committed suicide at age 80 in September 2017, she left her entire estate to a homeless shelter. In her will, she cited etiquette as the reason to exclude her three children. “In view of the lack of good manners and reverence shown to me as their parent,” the will said, “I do not wish any of my three children to benefit from my death any more than they have to.” In response, at least one of the disinherited heirs displayed the grace the baroness said they lacked. “I applaud the decision by Mother to make a legacy to Shelter, a fantastic and worthwhile charity,” said John Bingham, the eighth earl of Lucan. But some of the disinherited do not take the dissing so lightly. In fact, one case resulted in a long-lasting laugh: Mommie Dearest. That was the book Christina Crawford wrote about her mother, Joan Crawford, and changed the elegant movie star forever into a drunken, wire-hanger-obsessed, shrieking shrew. She had excluded two of her four adopted children from her will.

Joan Crawford left a meager sum to two children and nothing to two others, one of whom got the last word with her book Mommie Dearest.

Including Rather Than Excluding

Ted Bernstein, the Florida insurance agent, said it is usually better to leave people something rather than excluding them. Some planners use a clause in which heirs will forfeit the inheritance if they challenge the estate, a no-contest technique nicknamed the Sinatra clause after the no-nonsense crooner who popularized it. But Bernstein is looking at it more as a way to break a cycle of anger that loops back on the family. He speaks from experience because of his family’s situation. Bernstein’s father cut people out of the estate and left them to wonder why. In Bernstein’s case, not only was he excluded but so was his son from his second marriage — the only one of 11 grandchildren to be dropped from the estate. His son was left to struggle with why the man he thought of as his grandfather apparently did not like him. Bernstein’s father also drained some of

his legacy by excluding the son who was destined to sue if he was cut out of the estate. Bernstein’s three sisters also dealt with their own sense of rejection as the drama ricocheted through the family. Much of the hurt in some estates comes from unspoken conversations about unapproached issues, something that advisors can help draw out. “During life, I think it gets repressed and nobody wants to talk about this,” Bernstein said. “You can’t do your planning effectively without stopping the repression and letting the issues come to the surface and start to deal with them.” Steven A. Morelli has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at

May 2018 » InsuranceNewsNet Magazine




IUL To The Rescue! Indexed universal life sales were a bright

spot in the overall life insurance sales picture for 2017. IUL also appears to be subsidizing insurers with low fixed universal life sales. Nine of the top 10 IUL sellers had sales increases in the fourth quarter last year compared with the third quarter, according to Wink’s Sales & Market Report. Seven of those top 10 sellers had double-digit increases in fourth-quarter sales compared with the third quarter. Fourth-quarter 2017 IUL sales rose 20 percent to $575 million compared with the third quarter, Wink reported. Fourth-quarter IUL sales were up 7.6 percent over the fourth quarter of 2016. IUL sales in 2017 rose 6 percent over 2016 to $1.9 billion.


Permanent life insurance has many benefits for the consumers who own it, but a recent study showed consumers don’t know much about those benefits. An Allianz Life survey showed that slightly more than half of those with an annual income of $100,000 or more did not know that permanent life’s cash value could help fund college education or supplement retirement income. Two-thirds were unsure whether benefits paid from life insurance are taxable. The study also found that fewer than half of those with a financial professional have permanent life insurance and one-quarter don’t currently have it, but would like to learn more about it.


Employer-sponsored life insurance continues to decline, according to LIMRA. In 2017, only 48 percent of employers offered life insurance to their workers. This represents a 23 percent decline since 2006. DID YOU




Even though access to workplacebased life insurance has dropped, employees continue to recognize it as a valuable benefit. Six in 10 employees say life insurance is important to them, regardless of whether they currently have it available to them through their employer.

It’s been a great overall quarter for indexed life, but it can’t remain this way forever. — Sheryl J. Moore, president and CEO, Wink Inc.


What would consumers be willing to give in order to get a better life insurance premium? How about a saliva sample?


of advisors believe it’s likely their clients would submit saliva to obtain a more favorable life insurance premium

23% fewer U.S. employers are offering life insurance to their workers Percent of employers offering life insurance as a benefit









Source: Hidden Currents: Under-the-Surface Changes in the Employee Benefits Markaet (2018), LIMRA

In 2016, LIMRA research revealed that more Americans rely on group life insurance than individual life insurance (108 million versus 102 million) to protect their families. This was the first time in history that employer-sponsored life insurance exceeded individual life insurance.

An overwhelming number of insurance advisors (97 percent) said in a survey they believed it was likely their clients would submit saliva to obtain a more favorable life insurance premium. And 82 percent said clients would submit saliva to automate and streamline the underwriting process. What was interesting is that almost 20 percent of those surveyed had provided saliva samples themselves for consumer services like and to assess their own genetic makeup and ancestry.

New York Life reported record 2017 operating earnings of $2.06 billion.

InsuranceNewsNet Magazine » May 2018

Source: New York Life



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The Barometer That Can Forecast Sales Opportunities Tucked within the Insurance Barometer study are insights that can help you get inside the prospect’s head and lead their buying decision. By Lloyd Lofton


always have been interested in consumers’ perceptions, attitudes and financial concerns — you know, how they think and act when making buying decisions. How can we learn these things about consumers, and why would it matter? What would it mean to our business if we could predict what problems our prospects are most interested in solving, how they make their buying decisions, where they prefer to make these purchases, and why they make the investment in their lives and the lives of their families? The 2017 LIMRA, Life Happens Insurance Barometer Study might provide us some insights. I have been using their annual survey since the first one came out in 2011. They begin with a broad overview, then drill down into some specific consumer buying behaviors. Each year, I get something different out of the report and find I can incorporate some of the nuggets of insight into my marketing plan, business model and vision to grow my business.

I thought I would share some insight that jumped out to me. One issue we often hear about is “the most common financial concern is the ability to afford a comfortable retirement.” This is particularly interesting given all the news coverage about tax cuts, health care, state tax deductions, jobs, homeownership and other socioeconomic issues that have a direct impact on people’s perception of the quality of retirement they must look forward to — or not. I found one conclusion they made in the survey to be of particular interest, given what I hear from my peers about this topic. You know how you get a lead, marketing piece or inquiry about one topic (product), and you can develop tunnel vision to the point where you talk to the prospect about only that particular product? Well, a conclusion they made on this topic opens an ancillary issue that we might start including in the client conversation.

More Room for Life Insurance

The conclusion was “Estate/legacy concerns and health care concerns have decreased, suggesting there is more room for life insurance in the minds of consumers.” Did you get that? Consumers’ concern about estate/legacy and health care matters has decreased, so life insurance may be something to discuss with prospects

when talking about other concerns. In this 2017 Insurance Barometer Study were some buying behaviors we might pay attention to, some behaviors that might be indicators of other products consumers have an interest in. Respondents of the survey indicated their other concerns include “long-term care, financial security of dependents, credit card debt and having a comfortable retirement.” What this means to me is that maybe the initial qualification conversation (and it should be a conversation, not an interrogation) should center on the things that matter most to people. This is not just a list of what features a product has, but a conversation of what prospects are concerned about. You know, make sure you ask questions not to reply; instead, ask questions to “understand.” Eight in 10 respondents say that a married person with one or more young children needs life insurance. How many of your prospects or clients have children, yet you never bring up life insurance for the kids because you are there on a particular “market” lead? If for no other reason May 2018 » InsuranceNewsNet Magazine


The mental spacetheir where consumers deliberate money matters is a


more concerned aboutWhen a financial number ofbecome competing financial priorities. they issue, deliberate their money matters a place “financial mindscape,” oristhe that issue gets more andissue, a larger share of become more concerned aboutattention a financial “financial mindscape,” or the place budget. To understand where financial concerns compete for that issuethe gets more attention and a how largerAmerican share of consumers weigh how theirAmerican life insurance needs relative where financial concerns compete for the budget. To understand attention. THAT CAN FORECAST SALES OPPORTUNITIES to weigh other financial is important consumers their life priorities, insuranceitneeds relativeto see attention. what’s happening their “financial to other financial priorities, itinside is important to see mindscape.” what’s happening inside their “financial mindscape.”

Consumer Financial Concerns

than to protect their kids’ “insurability,” that’s reason enough to bring it up, isn’t it?Figure 1 — Financial Concerns In fact, the survey showed that “consumer Figure 1 — Financial Concerns demand for life insurance is greater than 42% Money for retirement 20% actual ownership.” 42% Money for retirement 20% 37% Moreover, the survey found that 70 Support if Disabled 8% 37% percent of respondents say they need Support if Disabled 8% 35% Long-Term Care Services life insurance, yet only 59 percent own 12% 35% Long-Term Care Services life insurance; 57 percent say they need 12% 34% Medical Expenses 7% long-term care insurance, but 14 percent 34% Medical Expenses own it. This is some valuable information 7% 30% Credit Card Debt 8% when putting together your marketing 30% Credit Card Debt 8% 30% plan, lead orders or income models. Monthly Expenses 13% 30% Another finding in the survey was “life Monthly Expenses 13% 27% Mortgage/Rent insurance owners are more interested in 5% 27% Mortgage/Rent other financial products.” So if you are 5% 27% Financial Hardship for Dependents 5% selling life insurance, but your message 27% Financial Hardship for Dependents fails to include life event issues, you may 5% 26% Final Expenses 3% limit your prospect pool. 26% Final Expenses 3% 23% For example, the survey found that conLosing Money on Investments 8% 23% sumers see life insurance as a way to saveLosing Money on Investments Very or Extremely Concerned 8% 22% Dependent's Education for retirement. This means that retirement 5% Top Financial Concern Very or Extremely Concerned 22% is now one of the top five reasons for own- Dependent's Education 5% 20% Top Financial Concern Leaving an Inheritance 2% ing life insurance. Another interesting find20% Leaving an Inheritance ing — and one that you may want to make 2% Source: 2017 Barometer Insurance Study, LIMRA and Life Happens part of your marketing language — is that 39 percent of respondents wish their spouses or partners had more life insurance. Did you know that people recognize insurance product is the interest consum- » Saving goals — Concern over savings their own dependence on the primary ers have demonstrated in simplified un- occupies the second tier, primarily due to wage earner? The survey found that “69 derwritten plans. According to the report, concern over a comfortable retirement. percent of respondents would have trou- “seven in 10 respondents indicate they ble paying living expenses in two years or would be likely to purchase life insurance » Living expenses — Everyday expenses less if they were to lose their primary wage priced by using data without a physical 10 occupy the third tier; the level of concern ©2017, LL Global, Inc.™ Life Happens earner.” What marketing message could exam.” onandthese items is roughly equal to savings 10 ©2017, evolving, LL Global, Inc.™ and you use that would uncover this “trouble”? So while consumers are I Life Happens goals. We often think that we are what mat- must ask the question: “Are we as an inters to our prospects. Of course we mat- dustry providing enough information to » Life coverage — These concerns occuter, but maybe not as much as we think. help consumers make informed and intel- py the lowest tier, which implies they get The survey addressed this when it found ligent buying choices?” Maybe not, as one the least amount of attention and share“almost two-thirds of respondents report concerning finding was that “four in 10 of-wallet. that buying from a well-known company millennials believe a term life policy costs is an important factor in the purchase more than $1,000 a year (which is more Now what does all this mean? What process of life insurance.” than five times the actual cost).” can you get out of the 2017 Insurance Another helpful bit of information Barometer Study? I constantly talk about Selling Has Evolved from the study showed that consumers predictable buying behaviors. People talk I hear all the time that selling has changed, “allocate their household budget across a from their frame of reference, and people that the “old” way of selling doesn’t work. I number of competing financial priorities.” hear from their frame of reference. don’t agree at all. But I do agree that where From the first Barometer in 2011 to the Is your message to the marketplace and how we get in front of prospects have most recent one six years later, we learn from your frame of reference or from the evolved. Are you evolving? that the financial mindscape of American consumer’s frame of reference? Another nugget from the survey found consumers contains a stable hierarchy of Lloyd Lofton is the past presthat consumers added another avenue to financial concerns. ident of the Senior Insurance researching if not purchasing their soluMarketing Association and tions. The survey revealed that online » Health coverage — When combined, the managing partner of 7 purchases of life insurance have tripled concern over disability, long-term care Figure Sales Tools, Marietta, since the barometer’s inception in 2011. and medical expenses consistently occu- Ga. His latest book is Leads to Results. Lloyd may be conAnother evolution in the sale of pies the top tier of this hierarchy. 

tacted at


InsuranceNewsNet Magazine » May 2018

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Illustrations Lure Clients to Pick Dangerously Low Premiums Why asking clients to pay a little more could head off a whole lot of problems. By Ron Sussman


e all know that many large carriers are raising or attempting to raise the monthly deduction rates (also referred to as cost of insurance, or COI) for older universal life and (in rare cases) variable universal life policies. The increases are huge and the impact on policyholders, especially those over the age of 75, is extremely painful. You might assume that the increases are related to poor mortality results, since this is what carriers have been telling us for many years. But you would be wrong. In fact, mortality is not even a factor in the vast majority of cases. So, you say, “It must be interest rate compression.” And, while low interest rates are a problematic for all carriers, interest spreads are only one component of the actual issue. The root cause of this grab for cash from your clients’ accounts is something the industry created: spreadsheeting. This sales technique, which commoditizes life insurance by encouraging clients 36

InsuranceNewsNet Magazine » May 2018

to choose the least expensive illustrated coverage, is the real cause of the industry’s problems. This is an institutionalized problem that starts with carriers and ends with client disappointment. Let’s face it; no one wants to spend “too much” for insurance. But showcasing premiums as if you were presenting a beauty pageant does more harm than good. Over the last few years we have reviewed large numbers of policies. All of these policies have what seem like egregious increases in the monthly deduction rates (MDR). At first, we were mystified by the huge and seemingly random increase in rates. I would not be surprised to find that some of the carriers just backed into these rates by deciding how big a profitability hole they were trying to fill, with no actuarial justification. But as we spent more time reviewing policies and trying to give our best advice to aggrieved policyowners, we could not help but notice an undeniable pattern. The largest increase in actual premiums required to continue coverage is always to policies that have been underfunded. In one case, we reviewed a policy where the client (who ironically is an insurance agent

himself ) paid only the minimum required COI cost from the inception of the policy. He is now 76 and has paid $360,000 for a policy with a $300,000 death benefit, and continues to pay to limit his losses. This is not where you want to be after 20 or 30 years of payments. However, this pattern tracks perfectly with the actions of a few carriers who made it clear that they were trying to make money on policies that were severely underfunded by premium financing and life settlement schemes. The life settlement industry may be the poster child for this behavior, but make no mistake, the blocks of business on which these rates have been raised are full of everyday policyowners who paid what the agent told them at the inception of the sale, or less, without regard for the notices they’ve been getting for years about lower and lower interest rates. And while the debate about whether the MDR increases are justified continues in the courts, I think we need to step back and place the blame where it really rests, the industry’s addiction to selling insurance as a commodity and the public’s complete lack of understanding of our products.


Probability Funding Probability Funding

Male Age 50, Preferred Non-smoker Male Age 50, Preferred Non-smoker Million Death Benefit UL $1 Million Death$1Benefit Indexed Indexed UL





91.10% 4,000

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Succeed Fail


Minimum Premium ($10,700)

Carriers are notorious for pricing their policies using competitors’ products as the benchmark. Every carrier obtains competitive data and constructs their products to be at the top of one grid or another. Whether it’s the least expensive premium for a death benefit product, or the highest income from an indexed universal life policy, spreadsheeting is rampant and the industry has made no effort to stop it. This is a particularly pernicious problem for current assumption non-guaranteed UL and IUL products. You could reasonably argue the industry shot itself in the foot and therefore should be required to suffer through these periods of interest rate compression with lower margins, regardless of the actions of the policy owners. And I would agree. The contracts give the client the right to pay whatever they want; therefore, the carriers are obligated to live by the terms of the contracts. And let’s not forget the ravenous appetite many large carriers had for stranger-owned life insurance, investor-owned life insurance and other schemes they knew would come back to haunt them but took on anyway. It’s a zero-sum game. In this case, the loser is your client. While carriers are not likely to address

10% Increase ($11,770)

this issue, we can and should do something to prevent this from happening in the future. Fortunately, a solution is much easier than you might think. Here are few suggestions that may not be bullet-proof, but are sure to minimize future pain: 1. Stop spreadsheeting! The lowest premium policy is also the least likely to succeed. 2. If you must spreadsheet, encourage your clients to pay more than the minimum premium the illustration system calculates. This applies to income scenarios too; lower the expected income, and don’t illustrate the maximum allowable number. 3. Ask carriers to come clean about nonguaranteed “black box” products. None of these have ever delivered their illustrated promises. If you can’t understand the scheme or you can’t explain it to your client in clear English, don’t sell it! 4. Illustrate using a rate that can be reasonably achieved. The AG 49 rate is not a scientific number and is often overstated.

I can say with a high degree of confidence that the increased COI rates we have been seeing are directly related to the high percentage of policies that have been and continue to be severely underfunded. Based on our internal analysis, most of these problems could have been avoided if clients had paid roughly 10 percent more than what was illustrated at the time of sale. That’s not a scientific number, as all policies are not created equal. But it’s a good start. Minimum funding will continue to haunt the carriers for decades to come, and maybe longer if the carriers don’t stop encouraging sales using illustrated pricing schemes that encourage a race to the imaginary bottom. This means you cannot trust any carrier illustration unless all components are guaranteed. Right now, all of the action in MDR increases centers around UL policies where the components are not guaranteed. But, to be fair, UL is a very understandable product when compared to IUL or VUL. Imagine the carnage a decade or two from now when your clients with overfunded IUL find out the income they were counting on is a mere fraction of what they expected. Imagine a world where market volatility makes the cost of options so expensive that cap and participation rates are severely reduced, and consider that the MDR is not guaranteed either. This is not conjecture. These are legitimate risks that could cause carriers to consider another round of MDR increases. Carriers are not concerned about this, but you should be. Asking your clients to pay 10 percent more than the lowest illustrated rate may not solve this problem entirely. But if this round of increases is any indication, the additional premium will materially affect the outcome for the better. Ron Sussman is founder and chief executive officer of and CPI Companies. He counsels high-net-worth individuals through risk management analysis and life insurance planning strategies. Ron may be contacted at

May 2018 » InsuranceNewsNet Magazine



Consumers Warm Up To Annuities


Consumers are rapidly warming up to 73% of consumers said they annuities and want agents and advivalued lifetime income in sors to talk to them about the products, 2018; up from 61% in 2017. according to a survey. The 2018 Guaranteed Lifetime Income Survey showed interest in annuities growing over the previous year’s survey. Since last year, 73 percent of consumers said they consider lifetime income a very valuable addition to Social Security. This is an increase over the 61 percent who said they valued lifetime income last year. A greater number of consumers are also insisting that advisors explain guaranteed income options and strategies. Long-term care expenses were listed as the greatest financial concern in retirement, the survey showed. LTC expenses were followed closely by market downturn and outliving retirement savings.


Fee-based annuity sales are rising, although they still make up a tiny sliver of overall annuity sales. So what’s it going to take for fee-based annuities to crack the registered investment advisor channel? One fee-only advisor shared her thoughts. “I am usually only interested in an annuity for its ability to give the client some tax-deferred growth,” Karen Van Voorhis, an advisor with Sapers & Wallack in Newton, Mass., said. “I want a place to park taxable money; therefore it needs to be low fees. The income stream is completely irrelevant to me. We don’t need sexy, that’s not an appeal. When I hear sexy, I think what’s this going to cost?” Cracking the RIA channel has become something of a hot topic within insurers and some company insiders like Allianz Life’s Cory Walther believe demographic, regulatory and technology trends have generated new momentum for many RIAs to finally take serious notice. Fee compression, brought on by lowcost investment products, means RIAs DID YOU




may not be so quick to walk away from guaranteed income products for clients turning their attention to the decumulation phase of the retirement portfolio.


Even though 18 percent of all U.S. households own an annuity, many annuities will never be activated for monthly income. That could leave potential tax consequences for beneficiaries. In particular, many annuity-holders are unaware of exchanges under Internal Revenue Code section 1035, which can offer tax benefits for beneficiaries as well as provide tax-free long-term care benefits, should they be needed. The Pension Protection Act encourages individuals to plan for the possibility of needing additional funds to cover LTC. The PPA enables income tax-free withdrawals from specific annuity contracts that pay for qualifying LTC

Americans have nearly $3 trillion in fixed and variable annuities.

InsuranceNewsNet Magazine » May 2018

Source: OneAmerica

There are 11 companies That unknown thatoffering QLAC (qualifying longevity annuity people are staring at contract) products. While this is makes guaranteed lifetime a small and new part of the DIA market, wethat expect to see an uptick income much in sales in 2016. more interesting

to them.

— Doug Kincaid, senior director of Greenwald & Associates

expenses or LTC insurance premiums. This includes fixed interest annuities with LTC benefits. Under section 1035, an existing annuity can be exchanged into a new annuity on a tax-free basis, so all one needs to do is transfer all or a portion of the existing annuity into a hybrid annuity product featuring LTC protection.


Multi-year guaranteed annuity sales fell 9.5 percent to $30.3 billion in 2017 compared to 2016. This comes ’s after insurers cut GA Y back on attractive GM rates due to the low N I LL interest rate levels, a FA market expert said. “A couple of insurers in 2016 had attractive rates and had MYGA specials so MYGAs were coming off a strong 2016, but are now lower in 2017,” said Sheryl J. Moore, president and CEO of Wink Inc. MYGAs lock in rates for more than one year and typically issue rates anywhere from two to 10 years. To guarantee those rates over long periods, insurers must set aside enough money in reserve to honor the contracts. Other types of fixed annuities of shorter rate durations that declare interest annually are easier to manage from a reserving standpoint.




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Buyers Look Past Marketing and Buy the Annuity’s Purpose annuities they are purchasing, advisors and other financial professionals will be best equipped to address retirees’ and pre-retirees’ specific goals.

Research provides insights into how advisors can find their best annuity clients and match them with the right products. By Jafor Iqbal and Todd Giesing


Similar investment objectives in annuities draw buyers from similar age groups in similar proportions

hy and when do investors buy an annuity? How much do they invest, and in what types of annuities? Answers to these simple questions can give advisors and other financial professionals a clear understanding of how they can find their best clients and grow their annuity business. LIMRA Secure Retirement Institute’s 2017 Annuity Buyers Metrics study shows that although annuities are called by different names, their core values matter most, and they attract buyers with similar investment objectives. When we connected the investment objectives of a particular type of annuity to its buyers, we began to see a simple pattern — annuities appeal to pre-retirees and retirees by addressing three major investment needs: accumulate, preserve the principal and receive predictable retirement income. By understanding the trends between buyers, their investment needs and the

The annuity industry is full of a confusing array of acronyms and technical jargon. However, by looking at buyer profiles, it is clear that buyers are attracted to the key underlying value proposition of an annuity, despite its name. When more than one annuity type offers the same core investment objectives, the annuity types attract buyers from the same age groups in almost the same proportions. For example, a variable annuity (VA) with GLBs (Guaranteed Lifetime Withdrawal or Income Benefit), an indexed annuity with a GLWB (Guaranteed Lifetime Withdrawal Benefit) and a deferred income annuity (DIA) offer guaranteed lifetime income for later use as the core value and are different mostly in terms of their risk-return-flexibility tradeoff in income or return on investments. Nearly 60 percent of buyers are from two age groups — age 56 to 65 — near or at

Percent of buyers for annuities offering guaranteed lifetime + income later VA with GLB

Indexed with GLWB

Percent of buyers for annuities offering principal protection + growth

Deferred income annuity

Indexed without GLWB









Under 51

51 to 55

56 to 60

61 to 65

66 to 70

71 to 75

Age of buyers


Fixed-rate annuity




retirement. In a similar way, the proportion of buyers from different age groups does not vary for fixed-rate deferred annuities and indexed annuities without a GLWB — both types of annuities offering protected growth as their core value. Therefore, investment goals determine what annuities are suitable for whom. A VA without a GLB is suitable for investors looking for long-term, tax-deferred growth of their investments. As the tax-deferral benefit can be appealing to all investors of all ages, there is no particular age group more inclined to buy these annuities. As such, VAs without GLBs attract buyers from all age groups quite evenly — remaining within a close range, the lowest at 6 percent to the highest at 14 percent. It is not to say that the multiple annuity types addressing a particular investment objective do not differ from each other. They do; they vary in terms of mechanics — how passively or actively they are managed, the degree of risks assumed by buyers and insurance companies, the choices of investment options, degree of control, fees, etc. However, to a prospective annuity investor, annuity types differ mostly in terms of risk-return-flexibility trade-off.

InsuranceNewsNet Magazine » May 2018

76 to 80

Over 80


Under 51

51 to 55

56 to 60

61 to 65 Age of buyers

66 to 70

71 to 75

76 to 80

Over 80


Advisors will do better to use plain language with their clients in explaining annuities, focus on clients’ retirement goals and see how annuities can address their clients’ particular concerns.


Buyers put a lot in lifetime guaranteed income annuities


Average premiums for annuities guaranteeing lifetime income are quite attractive — nearly 50 percent higher than other types of annuities. For example, buyers invest on average around $150,000 in singlepremium immediate annuities (SPIAs), DIAs and VAs with a GLB. After investing in a home, annuities are arguably the second-largest purchase people make in their lifetimes. Annuities serving the principal protection market — fixed-rate annuities and indexed annuities without a GLB — draw similar average premium sizes, ranging from $89,000 to $95,000. There are two reasons for such high investments in guaranteed income annuities: 1. Investors buy these guaranteed-income annuities at or in retirement, when many investors are at the peak of their earnings or accumulated assets. $113k 2. Mass-affluent and affluent households $110k typically purchase these annuities. A recent LIMRA Secure Retirement Institute study of retirees shows that 80 percent of retired households (with at least an annual income of $35,000) that own an annuity have more than $100,000 in investable assets.

Confusion about the Department ofVariable Labor fiduciary rule during 2016 didnon-GLB not inhibit buyers’ appetite for annuities or guaranteed income Comparison of average premiums and buyers between 2015 and 2016 in different types of annuities shows little impact from the DOL fiduciary rule turmoil during 2016. Essentially, the average premium sizes in different types of annuities remain largely stable. Of course, DOL-related confusion caused some distribution channels and their advisors to regress from annuities in general. As a result, principal protection products such as fixed-rate annuities and indexed annuities without a GLWB received 35 percent of total new sales of $168.3 billion in 2016 (13 percent higher

Percent of buyers for annuity offering market growth


VA without GLB 35%






Under 51

51 to 55

56 to 60

61 to 65

66 to 70

71 to 75

76 to 80

Over 80

14% Age of buyers



Average new premium by types 7% of annuities: 2015 and 2016 2015

0% 2016

$113k $110k

Under 51

51 to 55

$148k $117k $116k $148k



56 to 60





$148k $148k

61 to 65 $150k


66 to 70

Age of buyers

$107k $95k $86k




$107k $95k

Variable non-GLB



Fixed-rate Indexed nonAnnuity GLB

Indexed GLB Variable GLB



than in 2015). New premiums received in more opportunities to present annuities to nonVariable GLB clients’ DIA needs. SPIA annuities Fixed-rate offeringIndexed guaranteed incomeIndexed for GLBserve their Annuity GLB later use declined 16 percent from $89.8 billion in 2015 to $75.3 billion in 2016. Note: LIMRA Secure Retirement Institute’s However, the steady premium sizes point 2017 Annuity Buyers Metrics study includout that the advisors who continued to sell ed retail annuity sales of 50 companies in annuities did as well in 2016 as they did in 2016, thus representing $134.7 billion and 2015. 1.17 million contracts that covered 80 perAnnuities can address investors’ differ- cent of the market. ent investment goals. However, annuities, as a retirement solution, must address the Jafor Iqbal is assistant vice investors’ specific goals. Once the advisors president, LIMRA Secure Retirement Institute. Jafor know what their clients’ retirement and may be contacted at jafor. investment objectives are, it is easy to find i q b a l @ i n n f e e d b a c k .co m . the right annuity and fit it in the client’s Todd Giesing is director, anportfolio. A formal retirement planning nuity research, LIMRA Secure process can help advisors understand their Retirement Institute. Todd clients’ concerns, challenges and goals. As may be contacted at todd. more advisors complete a retirement come plan for their clients, there will be May 2018 » InsuranceNewsNet Magazine




Cigna Acquiring Express Scripts The list of mega-mergers in the

health-care world keeps getting longer. In the latest deal, Cigna announced it will spend about $52 billion to acquire the nation's biggest pharmacy benefit manager, Express Scripts. Cigna was the target of an acquisition bid by Anthem. But Anthem ended that $48 billion offer last spring, accusing Cigna of sabotaging that deal. Cigna, in turn, said Anthem "willfully breached" its obligation to get regulatory approval. A federal judge and an appeals court had rejected the combination after antitrust regulators sued to stop it.


The scale keeps moving upwards for American adults. New data shows that nearly 40 percent of them were obese in 2015 and 2016, a sharp increase from a decade earlier, federal health officials reported. The statistics were gathered in a largescale federal survey that is considered the gold standard for health data. The survey showed that nearly a decade earlier, in 2007 and 2008, only 33.7 percent of Americans were obese. The survey counted people with a body mass index of 30 or more as obese, and those with a B.M.I. of 40 or more as severely obese. While the latest survey data doesn’t explain why Americans continue to get heavier, nutritionists and other experts cite lifestyle, genetics, and, most importantly, a poor diet as factors.



UnitedHealthcare wants to crack down on emergency room claims. DID YOU




The health insurer launched a policy directed at hospital claims for the costliest and most intensive emergency room services.

The intent was to address “inconsistencies in coding accuracy” by hospitals for the intensive level 4 and level 5 services. The policy also applies to freestanding emergency rooms. Hospitals will see claims reduced or denied when coding was inappropriate, the insurer said. The UnitedHealthcare policy is directed at changing hospitals' behavior rather than patient behavior, said Laura Wooster, executive director of public affairs for the American College of Emergency Physicians.


Medical bills might not directly cause bankruptcies as originally thought, medical issues wreak havoc with a family’s finances.


My biggest concern is that for many who are trying to buy health insurance and are not eligible for premium subsidies, they will be increasingly priced out of the market. Sabrina Corlette, Georgetown University's Health Policy Institute

Hospitalizations cause only about 4 percent of personal bankruptcies among non-elderly U.S. adults, according to an analysis published in the New England Journal of Medicine. Researchers also estimated that hospitalizations were responsible for only about 6 percent of bankruptcies among patients who had no insurance. They noted that hospitalization rates are lower in that patient group compared to the overall non-elderly population.

Although a hospital stay in itself is usually not the reason for personal bankruptcy, one of the study’s authors, Raymond Kluender of the Massachusetts Institute of Technology, said hospital stays often are the first event that triggers a "chain of struggles with medical expenses and medical debt." The health and financial strain combine to create employment difficulties among other problems that stress families, the report said.

Premiums for the lowest priced silver plans in each region increased an average of 32 percent from 2017 to 2018. Source: The Urban Institute

InsuranceNewsNet Magazine » May 2018






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Has the Time Come for the 401(k)-tization Of Health Care? What lessons from the 401(k) retirement account can employers and brokers apply to health benefits? By Peter Marcia


mployer-sponsored health care plans continue to face long-term uncertainty as we move through 2018. As they have for nearly 30 years, employers will continue to walk the tightrope between maintaining value for their workers and maintaining profit margins as health plan costs continue their never-ending upward trend. But first, let’s take a look at the political landscape as it pertains to health care. Under the Affordable Care Act, we have experienced the establishment of federal, state and private health care exchanges, along with the expansion of Medicaid. While the Republicans promised ACA 44

InsuranceNewsNet Magazine » May 2018

repeal, the Democrats discussed the possibility of a single-payer system, all of which were to be the “future of benefits delivery.” However, with federal funding of under extreme pressure and the recent repeal of the individual mandate penalty, the future of benefits delivery looks as uncertain today as it appeared certain only three years ago. While employers have assumed the burden of long-term health care inflation, workers have been impacted as well. Hourly compensation remained stagnant and benefit contributions continued to increase — leading to less comprehensive core health care coverage. Confronted with a familiar future, employers and employees continue to look for new ways to address these same issues. Beyond the traditional employer-sponsored health care plan, many employers are looking at voluntary benefit programs, such as accident, critical

illness and hospital indemnity insurance, and employer/individual tax advantaged funding programs (flexible savings accounts, health savings accounts or health reimbursement accounts) to help employees cover out-of-pocket costs. However, these are not long-term solutions.

Everything Old Is New Again

To many, the health-care cost crisis of the past 30 years looks remarkably similar to the retirement crisis of the 1970s, with one exception. No health care solution similar to the 401(k) plan for retirement has emerged over the past 30-plus years. Let’s take a look at 401(k)s and how we can apply some of their principles to health care. Before the advent of the employer-sponsored, self-directed, defined contribution 401(k) retirement plan in 1982, many employers would offer their long-term employees traditional defined

HAS THE TIME COME FOR THE 401(K)-TIZATION OF HEALTH CARE? HEALTH/BENEFITS benefit pension plans. In fact, for most of the 20th century, the prevailing practice was that workers should be compensated in retirement for their years of work as employees. As a result, most workers were likely to stay with the same company for the majority of their careers. Over the decades, as employees entered retirement, the defined benefit pension plans became a burdensome liability for many companies. These defined benefit plans, funded or in many cases underfunded entirely by the employer, became unsustainable as the financial crisis of the 1970s began. In order to deal with this crisis and protect employees from pension defaults, Congress in 1974 passed the Employee Retirement Income Security Act (ERISA). This bill mandated that companies both fund and insure such defined benefit pension obligations and set up an insurance mechanism through the Pension Benefit Guaranty Corporation (PBGC). In 1978, in an effort to expand company sponsored retirement alternatives, the Revenue Act (of 1978) introduced IRS Code Section 401(k) allowing rank and file employees to defer a portion of annual income as deferred compensation. On Jan. 1, 1980, Section 401(k)’s permanent provisions to the Internal Revenue Code allowed the use of salary reductions/ deferrals as a source of employee retirement plan contributions. So, what did the 401(k) changes to the tax code provide employees? » Within reason, it allowed employees the freedom to select and manage their own retirement investment options. » It allows contributions on a pretax basis, reducing the amount of tax one pays the year it is deferred. » These plans/funds were portable, so as employees change jobs, their 401(k) plans can be rolled over into individual retirement accounts sheltering earnings on a tax-deferred basis. » Access to funds as there are generally loan provisions, such that employees may borrow against the balance. » Although withdrawals are permitted, they come with a significant penalty.

The emergence of federal, state and private health insurance exchanges, while not perfect, did in fact provide a health plan delivery platform for what might be the next revolution in benefit plan delivery circa 1978.

The employer, for its part, began facilitating employee retirement savings through employee payroll deductions, corporate matching programs, providing plan administration and monitoring/ managing plan investment options. A possible solution circa 1978? As a small employer, we sit in the front row of the health care chaos, spending more than $25,000 in 2018 to provide our employees access to family coverage. Like many other employers large and small, we will again search for meaningful cost-effective alternatives as we look for ways to meet the challenge of creating exceptional value to attract and retain employees. Is it time for the 401(k)-tization of employer-sponsored health care benefits? Is it possible we are at or near a similar inflection point in the delivery of employee benefits? We are seeing the increased popularity of employer-sponsored high-deductible health care plans, the expansion of employer/individual tax advantaged funding methods (health reimbursement arrangements, health savings accounts, flexible spending accounts) and the early stage expansion of both federal and private health care exchanges. So the time that will define contribution employer “sponsored” health care plans is not far in the future. Further, the health plan delivery model has indeed changed over the past five years. The emergence of federal, state and private health insurance exchanges, while not perfect, did in fact provide a health plan delivery platform for what might be the next revolution in benefit plan delivery circa 1978 — 401(k)-tization.

“Dear Employee: Enclosed is a check for $25,000 with access to a high-quality federal, state or private exchange. Shop for the benefits that you believe are best for your family.” As health insurance costs continue to rise and employers find it increasingly difficult to offer their workers valuable insurance plans, we need to try something different. In the coming years, employers may explore a more flexible model whereby employees are given a defined dollar amount and allowed to determine what health coverage is most suitable for them in the marketplace — the “401(k)-tization of health care plans.” While many may see this global shift requiring a new blueprint for managing, communicating and delivering global employee benefit programs, we simply see this trend as an acceleration towards a new tier of employer-sponsored voluntary benefits that will include health care. Peter Marcia is CEO of YouDecide, a voluntary benefits outsourcing firm. He may be contacted at

Like this article or any other? Take advantage of our awardwinning journalism, licensure and reprint options. Find out more at May 2018 » InsuranceNewsNet Magazine



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More Retirees Could Be Financially Fragile

The booming economy may be easing many Americans’ retirement fears, but a looming storm could smash that optimism to bits. The Center for Retirement Research at Boston College looked at how easily today’s retirees could weather a financial shock, and described the forces likely to increase the financial “fragility” of people who aren’t even retired yet, such as younger baby boomers and Generation X. Here are some of the factors that could lead to a financially fragile retirement. Declining pensions, combined with raising the Social Security full retirement age, means less dependable retirement income for future retirees, the center said. This means that Americans will have to save more of their own funds for retirement, and many Americans haven’t kept up with their retirement saving. Spiking medical expenses and a decline in income when a spouse dies, especially when women become widows, also lead to retirement fragility. Finally, living on a fixed income in the face of rising expenses can put a strain on retirement finances.


More affluent Americans could wind up before the divorce court judge in 2018, and tax reform could be one reason, a legal group said. The key issue is the elimination of the alimony tax deduction, and big bucks are at stake. Basically, if you have not reached a divorce settlement or received a court order awarding alimony on or before Dec. 31, 2018, alimony will no longer be tax deductible for the paying spouse, nor will be it taxable income to the payee.

An overwhelming 95 percent of members “anticipate the new tax plan will change the ways in which divorces are settled and a clear majority of 64 percent believe that the cases will now become more acrimonious,” reports DID YOU




the American Academy of Matrimonial Lawyers (AAML). Likewise, 62 percent of respondents feel that the changes in the tax plan “offers a greater benefit to the payee in terms of spousal support and 59 percent are finding that husbands are showing a greater sense of concern on the legislation’s repeal of the alimony deduction.”

It's exactly those 'wait and see' attitudes that cause a recession. — Nobel Prize-winning economist Robert Shiller

Nearly three-quarters of wealthy millennials said they are trained and knowledgeable about their family’s portfolio and are beginning to take more measured risks with their individual investment strategies. Despite that knowledge, 71 percent said they seek professional advice before making investment decisions. Even though these wealthy millennials look to advisors for help, the research found that the relationships between advisors and their wealthy young clients could be improved.


Sustainable investing is on the rise across the globe, according to a Schroders survey of investors in 30 nations.


The next generation of wealthy families is coming of age, and researchers are studying their views on investing.. Oppenheimer Funds and Campden Research recently published a study “Coming of Age” which looks at three main areas for young ultra-wealthy families. Those areas are investment acumen, investment behavior and relationships with advisors. The study found that while ultrawealthy millennials have an increasing influence in managing their families’ wealth, only 21 percent said they are fully satisfied with their families’ current objectives, and many plan to make changes in how investments are managed when they take full control.

More than three-quarters of respondents said sustainable investing is more important to them now than it was five years ago. Nearly one-third said it was significantly more important and 46 percent said it was somewhat more important. The sustainable investment trend appears to be stronger in Asia and in the Americas than in Europe. Indonesia ranked first among nations in regard to the popularity of sustainable investment, followed by India and the U.S. According to the survey, investors see sustainable investing as a way to drive not only societal, social and environmental change but also generate profits.

Americans spent $69.51 billion on their pets in 2017, up 4.1% from 2016.

InsuranceNewsNet Magazine » May 2018

Source: LIMRA

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Fees Are Not Just About AUM Anymore as Advisors Get Creative Advisors are constructing new fee models to serve younger clients and build their wealth. • Cyril Tuohy

of $1,000 to tens of millions of dollars.

he bedrock advisory payment model of charging a percentage of assets under management, seems to be loosening its stranglehold. AUM isn’t about to disappear, but it is giving way to alternative models tailored to younger investors with lower asset levels. A recent survey of 956 advisor responses found that 87.7 percent of advisors used AUM as part of their fee structure, 43.7 percent used retainers as part of their fee structure and 26.6 percent used hourly fees as part of their fee structure. “Whereas five years ago, the AUM-only category would almost certainly have been over 70 percent, today it represents almost exactly one-third of the respondents,” wrote Bob Veres, author and publisher of the 2017 Inside Information AUM/fees Survey. “More than 85 percent of the respondents still charge some form of AUM, but just under two-thirds are now supplementing AUM fees with retainer or hourly (and some commission) revenues.” Other fee structures muscling in on AUM-only is healthy and helps attract younger investors, said Matthew Jackson, a consultant with the strategy and marketing firm Simon Kucher & Partners. “AUM makes [advisors] focus on the affluent, but what of the other 90 percent? They have needs and they have money to pay for those needs as well,” said Jackson, co-author with Wei Ke of the report, “The Future of Fees.” The Achilles heel of the AUM model has always been that the amount paid to the advisor has had little or no bearing on the value delivered by the advisor. Charging a 1 percent fee on $1 million in assets generates $10,000 for the advisor, while charging a 1 percent fee on $100,000 in assets generates $1,000 for the advisor. Did the advisor do 10 times the work for

Beth Jones, founder of the fee-only registered investment advisor Third Eye Associates with offices in Red Hook, N.Y., New York City and Washington, D.C., links her fee with a corresponding service, which helps clients see what they are paying for. “It’s about how you present it to the client — I never talk about the money until I’ve talked about the value and what it includes,” she said. Third Eye invites clients to choose between bronze (13 service hours), silver (19 service hours), gold (27 service hours) and platinum (41 hours) plans that offer gradations of service and service hours. A fixed fee for the basic bronze plan runs $2,500, for the comprehensive individual silver plan $3,500, for a couples’ gold plan $4,000 and for a platinum plan suitable for a business $5,000. In addition to the base package, beginning with Year Two, clients buy ongoing maintenance costs at a fixed price, an hourly rate or as a percentage based on AUM. A bronze plan client with few assets or short-term needs might be charged an extra $1,500 a year, or $200 an hour for ongoing maintenance. Ongoing maintenance for the gold plan couple comes as a percentage of assets for investment management, and for a platinum plan maintenance Third Eye charges on a standard sliding scale based on percentage of AUM. Investment management can be dropped for clients interested in planning only. The flexible ongoing support pricing structure serves the client and the advisor since the revenue model does not hinge entirely upon AUM. A client with no liquid assets can still


48 48

InsuranceNewsNet Magazine Magazine »» May May 2018 2018 InsuranceNewsNet

the former client than for the latter? Not likely, industry analysts said. Will an advisor who charges 1 percent chase a client with $1 million in assets over one with $100,000? Almost certainly. Small advisories, not the billion-dollar midsize firms and multibillion-dollar registered investment advisory behemoths, are leading the hunt in the diversification of fee-based models, Jackson said.

The Hourly Model

Enter the likes of Mark Berg, an advisor with Timothy Financial Counsel in Wheaton, Ill., who swears by paying only for time used. Berg is unusual among fee-only financial firms in that Timothy Financial provides hourly advice, with overall costs falling into a window depending on the level of planning. Young “Next Gen” clients are charged the hourly rate of $220, or the equivalent of $1,200 to $4,300 for a basic plan. A follow-up question that requires five minutes of Timothy Financial’s time incurs a pro-rated fee based on the five minutes. Mid-level “Level Three” clients are charged an hourly rate of $280, or between $4,200 and $8,400, for anywhere from 15 and 30 hours of work. Clients with complex insurance and estate planning needs pay $400 an hour for 40 hours or more, which comes to $16,000 or more for a “Level 5” plan, according to the advisor’s website. A target AUM becomes irrelevant under this time-based model. “It’s a textbook blue ocean strategy,” Berg said. “We’re filling a need that others right now are choosing not to serve.” Target client: Clients with a net worth

A Three-Part Mix of Fee and AUM


become a client, widening the reach of the firm. Jones retains the AUM model since “nothing makes money like an AUM fee,” but the goal is to attract clients — 40-somethings with a 401(k) — who can’t bring assets to the firm just yet but will do so one day. Target client: affluent middle Americans with $500,000 to $2 million in assets.

Fixed-Fee Only

Carolyn McClanahan of Life Planning Partners in Jacksonville, Fla., charges a recurring flat fee with no AUM component. Fees vary from one client to another based on complexity. The minimum fee is $10,000, but that buys a full-service model that encompasses investment management, follow-up and implementation. Life Planning Partners sets the base

at $5,000 but the average fee is closer to $17,000 and clients who don’t qualify for the $10,000 minimum are referred out. McClanahan, a former doctor, offers health care and aging planning in addition to cash flow projection and tax planning. “I had many doctor clients — some had a lot of money, and some didn’t,” she said. “The fees were very disparate between them, and it didn’t feel right.” When assets move past the $2 million threshold, charging a fixed fee starts to become cheaper than the AUM model. Life Planning Partners is now acquiring clients in the $10 million to $30 million asset range. Target client: the “millionaire next door” with $2 million to $10 million in net worth.

The McDonald’s Menu

Bill Simonet of Simonet Financial Group in Kyle, Texas, prefers the choice-based model with a high-touch financial advice framework. Needs-based financial planning packages with bundled service hours come in four flavors: fundamentals, standard, premium

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May 2018 2018 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine May

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financial risk management and employment benefits review for an annual fee of $2,400. The investment fee schedule for accounts managed directly are priced at the preferred rate. A “wealth planner standard” menu covers two planning meetings a year, more comprehensive planning that includes education, retirement and basic estate planning, as well as 10 hours of financial service for an annual price of $3,000. Investment fees also are priced at a preferred rate. “Wealth planner premium” entails four planning meetings a year, 15 hours of annual advice and an “advanced” planning approach covering tax and investment planning, special needs care and small business retirement strategies. The premium option sells for $3,600 annually. Simonet’s metaphor is one with which many people are familiar when choosing a cell phone plan or a car with interior trim levels and engine options. “I want you to pick up the phone and call me if you have questions,” he said. “If you’re looking at buying a car, ask me about interest rates. How much do I put down? How much of the car can I afford?” Clients are alerted when they approach their allowable maximum under their plan to consider moving up a package – not unlike using data in a cell phone plan. Target client: Young professionals, working Americans saving for college, affluent and high net worth

The ‘Gen X’ Model

Jude Boudreaux of Upperline Financial in New Orleans knows that AUM doesn’t work for clients with illiquid assets of less than $1 million. But many clients generate liquid incomes and still need advice. Instead of charging a fixed fee based on a percentage of AUM, he uses two alternatives for financial planning: a 1 percent fee generated from a client’s monthly income and a 0.5 percent fee generated from a client’s net worth. For consulting, he charges between $75 and $250 an hour. When clients are young and own a very 50 50

InsuranceNewsNet Magazine Magazine »» May May 2018 2018 InsuranceNewsNet

small asset base, the income-based fee dominates. A new college graduate bringing home $3,000 a month in salary might be charged $300 a month, for example. As clients age, the net worth-based fee rises over time with assets. The 1 percent fee of monthly income and the 0.5 percent fee from net worth isn’t set in stone as other factors like future earnings potential, number of accounts, and the client “engagement” factor may tilt the fee structure a bit. “We want to have flexibility,” Boudreaux said. “There is no magic number.” Young professionals who have assets but who also carry a lot of debt are candidates for Upperline because these clients, while they often don’t meet minimum investable thresholds now, exhibit growth potential long into the future. Target client: HENRY, or high earning, not rich yet.

Segmentation by Personality

Michael Solari, owner of Solari Financial in Bedford, N.H., built his pricing model based on the engagement level of the client based on the delegator, the collaborator or the do-it-yourselfer, or DIYer, archetypes. Delegators, who are happy to let Solari manage their money, pay an upfront fee for the plan and an ongoing fee for advice and investment management. Collaborators, who prefer maintaining a continuous relationship but want to retain financial decisions on trades and plan execution, pay an upfront fee and an ongoing fee for advice — but not investment management. DIYers pay an upfront fee for the plan and an hourly fee for on-demand service. “You should segment clients by personality and not just assets,” said Solari, a member of the XY Planning Network. The ongoing fee is higher for delegators and collaborators, but the upfront fee is higher for DIY clients. For Solari, charging a client twice as much for the same service because that client has double the assets of another client makes no sense. Target client: Gen Xers, Gen Yers, DIYers.

Super Retainer

Advisor Steve Lockshin of AdvicePeriod in Los Angeles keeps it simple. He offers advice and collects a check. Period. Clients might even get discount for placing assets on the automated platform. There are no overarching AUM fees, no investment management fee, no subscription fees or percent of income calculations. Of course, Lockshin’s clientele tends to be among the ultrahigh net worth (UHNW) segment where tax issues and specialist needs rank highest. That intersection of his acquired experience around legal and tax issues enables him to deliver a “lateral approach” that focused and siloed lawyers and accountants simply can’t match, Jackson said. Rather than applying a rigid basis point charge to part or all of the $100 million net worth, the fee might come somewhere between $100,000 and $350,000 to cover trust and estate planning, retirement planning, cash flow management, portfolio tax minimization, risk management and philanthropy. While AUM does play a role, for the bulk of the book of business it is a “walk-on” role and caps are applied to each asset segment. Even a fee of as low as $1,000 was profitable for this advisor. Standalone investment management services for clients in the accumulation phase and with less than $10 million in investable assets pay 0.95 percent of assets under management, according to AdvicePeriod’s website. Target client: UHNW or ultrahigh net worth client with $50 million or more in net worth. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.

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The Six-Step Approach to Soft-Sell Planning Breaking down the steps involved in the client acquisition process using a thorough needs-based approach. • Joe Schweiger


e’ve all walked into a car dealership and been hassled to buy that car we don’t need or walked into a department store and been told we must buy certain items without our needs ever being considered. The days of the “hard-core close” type of salesman has for the most part, had his day. This is especially true in the financial services industry as increased regulation and scrutiny have been placed upon those of us giving advice on individuals’ retirement accounts. Although many may see this type of increased responsibility as an impediment to a successful practice, a slight shift in perception can change that viewpoint. With today’s ever-increasing presence of robo-advisors, the plethora of financial information available on the internet, and the ease of use of different electronic platforms to purchase financial products, the question of “Why work with an advisor at all?” has entered into many investors’ minds. Because of this, a more consumer-driven approach continues to evolve. This approach highlights the true benefits of holistic planning. This shift in the sales process for financial service professionals has been transitioning away from the product-driven approach to a needs-based approach, which is well warranted. If we don’t understand the individuality of each client and put their financial needs and desires at the forefront of the planning process, someone else will. Taking on change is never an easy process, but it’s necessary for continued growth. Advisors who understand this, continuously develop their skills so their practice can flourish. Although there are many different approaches you can use, there is a fundamental process that should be at the core of every advisor’s business model for a successful practice. By using this process, growth can be captured through multiple channels which include both renewal and 52 52

InsuranceNewsNet Magazine Magazine »» May May 2018 2018 InsuranceNewsNet

referrals. Below, we will break down the steps involved in the acquisition process using a thorough needs-based approach to ensure your clients’ ultimate satisfaction. Step 1: Establishing the Relationship This step is perhaps one of the most important steps in the process. It is here when you first sit down with a prospective client, let them know about your capabilities and philosophy, identify the services you will provide, determine the responsibilities, and disclose important information including compensation, conflicts of interest and material facts. The benefit of this openness to the client is that it builds trust and rapport in the relationship, along with identifying any roadblocks you may incur along the way. Another major advantage of initiating the meeting with this step is that the advisor can disqualify clients. One thing most advisors struggle with is the idea that they must serve any client who comes along. When establishing relationships with prospects, it’s important that you do so for the right reasons. Most financial planning objectives, such as retirement or estate planning, are meant to be long term. If you’re unable to picture a relationship with a client lasting for an extended duration, it is better to find out sooner than later. This will reduce and eliminate potential headaches and problems down the road, and help you align yourself with clients who have a sense of reciprocity. Step 2: Data Gathering After the relationship has been established, the advisor now shifts the meeting towards a fact finding and data gathering session. During this step, it’s important to be as thorough and detail oriented as possible by using multiple communication methods. Interviewing and active listening techniques are crucial in obtaining a deep understanding of the client’s goals and

objectives, which are not always black and white. The use of both quantitative and qualitative client information is necessary to make sure we have a complete picture of a client’s financial situation, so we can properly address strengths and weaknesses. Step 3: Analyze and Develop After the initial client meetings have concluded, it is time to sift through the information you have gathered so you can formulate a plan for the client. Obviously, the amount of work you do in Step 2 can make all the difference. By having a prioritized list of the client’s goals, current balance sheets, cash flow statements and other pertinent information, you can successfully evaluate and determine how likely the client is to accomplish the goals they have in their current situation. From there, you can make the potential recommendations to strengthen the chance of financial success. It is important to document any assumptions used such as inflation, life expectancy and assumed interest rates so you can easily communicate them to the client. Step 4: Communicate Recommendations The next step of the process focuses around helping clients understand their current position, along with steps that can be taken to strengthen the likelihood of achieving their financial objectives. Here we will disclose the assumptions that were used along with the interdependence of each recommendation. Clients must understand the impact of not implementing specific parts in the plan. For example, if you recommend a client purchase long-term care insurance to protect their assets in case of a chronic illness, their retirement funds could be easily exhausted from the inability to perform two of the six activities of daily living if they fail to implement the coverage. Being objective is important as it continues to influence an open and honest relationship between client and advisor. This


confidence that is built can be a tremendous benefit as it will continue to establish you as a trusted advisor — as opposed to a “product pusher” — in the eyes of your clients. One of the most important aspects of this step is to verify the client understands what is being presented. Creating a financial plan can expend a lot of time and resources, and it will all be for nothing if the message is lost in translation.

and informing them of specific insurance processes will help facilitate the execution of the recommendations. It is also crucial for an advisor to let the client know whether there are limitations of the advisor’s expertise. If an outside party is needed, having the appropriate contact information and potentially sitting in on the meeting can make the difference of whether or not the plan will be put into effect.

Step 5: Implementation You’ve successfully shown the value of the services you provide to your client. You’ve demonstrated competence and ability to help that client achieve financial independence. It is now time to take the action necessary to execute the appropriate recommendations. Determining which responsibilities fall on which party is a great start. If, for instance, a life insurance policy is to be used for estate liquidity needs, explaining the steps the client will need to undertake is imperative. By educating the client on the different intricacies of the life insurance application, explaining the underwriting process

Step 6: Monitor Plan As mentioned previously, these planning relationships, once established, are meant to be long term. There are multiple benefits that come from systematic reviews. The recurring contact you make with clients encourages the relationship to grow. Life situations also can be very dynamic. Scheduling periodic reviews with the client throughout the duration of the plan can ensure the greatest possibility of success. Having the client understand that communication responsibility falls on them as well is of critical importance. As certain life-changing events occur, they can create the need for revisions to the plan.

As the financial services industry continues to evolve, it’s important we make the changes necessary to go along with it. There are plenty of tools available to help you improve the process by which you conduct business. The days of product pushing and cookie cutter mentality are in the rear view, so we can now move forward to a more holistic and complete approach. This process brings tremendous benefits to your practice. Understanding that each prospect and client is different and unique is a perfect place to start. Using a systematic approach will help to maximize your time and resources, which will in turn promote increased productivity to your practice. The trust and rapport that is made will help promote long-lasting, reciprocal and prosperous relationships that will last a lifetime. Joe Schweiger, CFP, is a field support professional with LifePro Financial Services, San Diego. Joe may be contacted at

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At a certain point, the markers that used to represent success become the norm, and these items — like a nice office — aren’t what will set you apart.

More Than a Fancy Office: Forge An Elite Advisor Reputation Here are seven key behaviors that set elite advisors apart from the rest.


By John Pojeta ow do prospects know that you are one of the top advisors in their region? Well, you have the designations, right? Do the fancy initials at the end of your name command respect? Maybe, but in a class of 400 doctors, the No. 1 graduate and the No. 399 graduate both get to say that they are accredited physicians. Trust for doctors these days isn’t high despite their credentials, and I think most people would agree that trust for advisors also is experiencing its share of growing pains. You might have a fancy office, but the advisor down the street has a fancy office, too. You both also have a website and business cards. At a certain point, the markers 54

InsuranceNewsNet Magazine » May 2018

that used to represent success become the norm, and these items — like a nice office — aren’t what will set you apart. All of the “stuff” that can define you as an advisor may not convince prospects that you are an elite resource amid the sea of competition. That “stuff” includes:

To be the advisor on stage rather than the advisor in the crowd takes more than paying an admission fee. Your approach to your business must be elite in order to forge an elite reputation.

» Clean, professional space.

Flip the script for a moment. What do you do when you need a high-level resource in your personal life or in your business? You don’t plug a search term into Google and pick the top result. You talk to your network. You look at reviews. You visit the expert for a consultation. Whether we’re talking about the specialist looking at your kidney or the advisor who is going to manage your company’s 401(k), you don’t settle for the baseline. Your top prospects won’t either. In our work with top advisors from around the nation, and we have identified seven key behaviors that set them apart.

» Pleasant and helpful staff. » Timeliness of the advisor and staff. »T  ech-savvy with processes (virtual signatures, virtual whiteboard, etc.). »G  reat presentation and product knowledge. » Awesome service model. Welcome to the baseline, the basic standard for what it means to be professional.

Be the Standard Other Advisors Chase

MORE THAN A FANCY OFFICE: FORGE AN ELITE ADVISOR REPUTATION BUSINESS 1. Specialize. A jack of all trades and a master of none is not compelling to prospects, and that generalist approach will disqualify you from the high-value prospects who need a certain kind of expert. Specializing means turning away some business that doesn’t fit your focus in the short term, but in the long term it allows you to carve out and conquer a clearly defined niche. I get it, seeing revenue walk out the door is hard, but it sets you up for that game-changing mega-client who needs a specialist. 2. Tell the right story. Your ideal prospects already work with an advisor, and they regularly field pitches from your competitors (your current clients are

4. Go beyond referrals. Referrals are excellent sales opportunities, but when they are your sole source of sales opportunities, your insights will not travel far beyond your bubble year over year. Your sales pipeline needs prospects from outbound activity like appointment setting, seminars, advertising and events so you can get your message in front of truly new audiences. 5. Build your platform. Thought leadership is not merely a buzzword. Your public-facing insights can be a powerful way for you to demonstrate what makes you elite. Sharing those insights via email (to prospects and clients) and via social media primes your audience to re-share

Once a year, take a bizarre or off-the-wall idea and give it an honest effort, which means giving it the attention and time it would need to truly succeed or truly fail.

doing the same, by the way). To unseat the incumbent and stand out from the crowd, the way you communicate with prospects at all levels of your sales and marketing must have a distinct voice and speak to those prospects on an emotionally compelling level. 3. Be consistently deliberate. When an advisor says, “This year is flying!” it can mean the advisor is getting washed away in the flow rather than making each day its own specific opportunity for growth. Set a plan, set a schedule for new business activity, and stick to it even if it means hiring a business coach to hold your feet to the fire month after month.

content and refer business to you. This platform can mean being an expert to your prospects as well as your peers. 6. Embrace experiments. Trying something new is uncomfortable, but your most powerful opportunity to grow is often hidden in the unknown. Once a year, take a bizarre or off-the-wall idea and give it an honest effort, which means giving it the attention and time it would need to truly succeed or truly fail. You may even need to hire help to execute an idea such as a video blog or a podcast or your own industry conference, but if that’s what it takes to get you to do something new, do it.

7. Surround yourself with elite people. The saying “show me your friends, I will show you your future” rings true. Your peers and partners should be challenging you with new ideas. Your coach should be giving you feedback and criticism. This means being bold enough to stand with giants and also humble enough to admit when you are wrong and can improve. An elite advisor doesn’t rise to prominence in an instant. But pushing yourself to adopt the behaviors and drive the activity of an elite advisor — month after month, year after year — gives you the ability to forge the kind of reputation that warms a room for you, the kind of reputation where audiences are happy that you’re the one on stage talking because they know that when you talk, they should listen.

Returning to Your Roots

When many of us first started in this business, we had the experience of running into an old friend and having them ask, “So what are you doing now?” When we replied that we are a financial advisor or an insurance agent, the response ranged from a chuckle to a look of pity. We took a risk getting into the business, and after a great deal of hard work, that risk paid off. The risk you took then helped you to find the growth you’ve experienced up until now. Don’t lose that mentality that you had in those early days. Stay hungry. Stay willing to try new things. Continue capturing new opportunities. That’s how elite advisors think, and that mentality will help to drive everything we’ve suggested you do. John Pojeta is the vice president of business development at The PT Services Group. He previously owned and operated an Ameriprise Financial Services franchise for 16 years. John may be contacted at

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

Equal Pay Is Only Part of the Picture By Jocelyn Wright


he latest Gender Wage Gap report indicates that it would take until 2059 for women to reach parity with men if the ratio continues at the same rate it has from 1959 to 2015. The 2016 Report on the Status of Women by the Institute for Women’s Policy Research revealed that the median fulltime earnings for women was $41,554 compared to $51,640 for men. Not surprisingly, earnings remained steady or improved for women across each race and ethnic group except for black women. Between 2015 and 2016, white women working full-time experienced an increase of nearly 5 percent (4.9 percent), while Asian and Hispanic women saw increases of 2.8 percent and 0.1 percent, respectively. Black women on the other hand had a decrease in earnings of 1.3 percent over the same period. A recent example of the pay gap between women was shared by actress Octavia Spencer, who is black, during a panel discussion aptly titled “Women Breaking Barriers” in January at the Sundance Film Festival. Spencer told the audience how fellow actress and co-star Jessica Chastain, who is white, helped her negotiate a higher salary for The Shape of Water. It all started after the two actresses had a conversation about unequal pay. Spencer told Chastain that women of color make substantially less than their white female counterparts. (This is important because discussing salary is still largely a taboo subject regardless of the industry). Chastain, unaware of this disparity, wanted to do something about it. She told Spencer that she would negotiate their salaries for the movie and promised they would be compensated equally. And negotiate she did. After all was said and done, both actresses reportedly ended up making five times more than what they asked for initially. 56

InsuranceNewsNet Magazine » May 2018

Kevork Djansezian/NBC—NBCU Photo Bank via Getty Images

Equal pay for women and men addresses only one financial problem faced by women. Women also need to take greater control of their personal finances.

» Identify and promote best practices to ensure fundamental fairness for all workers.

Salesforce is a company that exemplifies that commitment. Instead of just giving lip service to wanting equal pay for women, Salesforce CEO Marc Jessica Chastain helped Octavia Spencer get five times her salary for their movie together. Benioff, not only conducted extensive examWhen asked, Chastain said, “she inations of employee salaries but also went a (Spencer) had been underpaid for so long. step further and has spent nearly $6 million When I discovered that, I realized that I to close the gap. When asked, Benioff said, could tie her deal to mine to bring up her “My job is to make sure that women are quote. Men should start doing this with treated 100 percent equally at Salesforce in their female costars.” pay, opportunity and advancement.” There In fact, not only men but also women, as should be more men like him in leadership. seen in Chastain’s case, can do this. During Taking the conversation another step Frances McDormand’s acceptance speech further, Faith Read Xenos, founding partfor Best Actress at this year’s Academy ner at Singer Xenos Schechter Sosler Wealth Awards, she left the audience with two Management, believes there is still an words: “inclusion rider.” This means that important aspect of the recent movements A-list talent (male and female) can ask for that we have yet to deal with fully. That and demand diversity in future projects by aspect is women taking greater control of including it in their contracts. Although their personal finances in order to become McDormand only recently learned about more engaged in their investment portfolios. this option, it apparently has been around Xenos said, “While #MeToo has been for some time. Imagine if inclusion riders an incredibly successful movement and existed in all professions. one long overdue, it remains incomplete without also advocating for women to Equal Pay Pledge take control of their financial indepenThe Equal Pay Pledge enacted by for- dence through smart and strategic investmer President Barack Obama was an ing. After all, even if we solve the gender attempt to advance equal pay in the U.S. pay gap or the other issues women today More than 100 companies signed on to face, they will never be fully secure without embrace equal pay policies and recognize a long-term strategy for building wealth.” that doing good is also good for business. Although we have come a long way, there The pledge included commitments to: is still quite a distance to go. There is an African proverb that says, “If you want to » Play a critical role in closing the national go fast, go alone. If you want to go far, go pay gap. together.” We cannot ask others to do for us what we are not willing to do for ourselves. » Conduct an annual company-wide gen- Now is the time. der pay analysis. » Review hiring and promotion processes to reduce unconscious bias and barriers. » Include equal pay efforts into other equity initiatives.

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


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.

Life Insurance Uses That Appeal to Wealthy Clients Here are a few non-tax reasons your clients should secure life insurance. By David E. Appel


egardless of the size of your client’s estate or the changes to estate taxes brought on by the new tax reform act, there are many “non-tax” reasons why your clients should keep an estate plan current, or maintain or secure new life insurance. Planning for children with disabilities, charitable planning, legal incapacity, moving internationally, spendthrift children, asset or privacy protection from creditor claims and divorce, business succession, providing liquidity options, or family dynamics are just a few important factors your clients should keep in mind while planning. Let’s take a quick look at some of these non-tax reasons why your clients should secure and lock down a life insurance plan today and not wait until it’s too late. As the title of my book Buy Your Tomorrows Today states, clients need to realize that they should secure life insurance while they are young and healthy. Waiting until they are older and dealing with difficult permanent health issues is not the ideal time to start shopping for life insurance coverage.

Children with Disabilities

Costs related to care for a special needs child or family member can be staggering and difficult to accurately account for. Moreover, who will care for or pay for the care of a special needs beneficiary when the primary caregiver dies? Funding a special needs trust with a life insurance policy can help replace the services of a caregiver and provide the funds to help supplement or enhance government benefits.

Charitable Planning

Life insurance can replace or replenish an inheritance from a large gift made to charity. In these cases, either the client can leave

the family whole by replacing the amount of their large gift with a life insurance policy or they can use some of their regularly scheduled annual donations and leverage some of those dollars with a life insurance policy naming the organization the owner and beneficiary of the policy.

Legal Incapacity

A long-term care event can have a drastic impact on an individual’s overall retirement portfolio. Accordingly, a growing concern among many is how to pay for these expenses should the need arise. A life insurance policy with a long-term care rider can be an effective way to protect an individual’s family and preserve their assets. The death benefit can be accelerated to pay for that care, protecting primary retirement assets. If care is not needed, the death benefit is fully preserved and can enhance the legacy that is left to the family.

Domicile Changes

Life insurance must be considered and/or reviewed if your client is a U.S. citizen living abroad, is on an expatriate assignment, or has decided to make an international domicile lifestyle change. Being a non-U.S. citizen with ties to the U.S. via family, a trust, and ownership in a U.S. company or property are also reasons to consider U.S.based life insurance. There are many issues to address with these types of changes.

Spendthrift Children

There are multiple ways to deal with spendthrift children through trusts and other instruments by using the “control from the grave” language. But more importantly, a life insurance death benefit can replace assets inside an individual’s estate, giving them the flexibility and freedom to spend down assets during their lifetime while still ensuring that their loved ones will receive an inheritance.

Asset/Privacy Protection

The structure and ownership of life

insurance are critical as part of overall planning. Who has access to equity or cash value during one’s lifetime or who gets the death benefit at death are issues that must be considered upon inception and could possibly be changed in the future. If life insurance is properly structured, it can be protected from creditors and allow families privacy in the distribution of funds.

Business Succession

For many high net worth individuals, some or all of their estates may consist of business interests. Life insurance can provide a funding source for a buy-sell agreement for a smoother transition from one business owner to another or help provide liquidity to the family in transition. Without life insurance, the business and/or the surviving owners may not have the necessary liquidity to buy out the estate, placing strain on the decedent’s family or business.

Provide Liquidity

A life insurance death benefit can provide liquidity at a time when it is needed the most. Here are a few ways life insurance can provide the requisite liquidity to help facilitate wealth transfer goals. » Pay final expenses such as funeral costs or extinguish debt. » Pay capital gains and income taxes on assets that do not receive a step up in basis such as capital gains taxes due on assets previously transferred to an irrevocable trust or individual retirement account or 401(k) assets. » Settle or equalize an estate among beneficiaries.

Family Dynamics

Life insurance can be used to equalize an inheritance in a blended family to help avoid discord at death. Also, estates can be made up of various assets, some of CONTINUED ON PAGE 59 May 2018 » InsuranceNewsNet Magazine



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Special Needs Planning Easier Under the New Tax Law The higher unified credit under the new tax law allows a parent to keep more assets, including life insurance, inside the estate before they become taxable. By Brad Elman


ll parents going through the estate planning process consider their children’s future and wellbeing. Parents who have a child with special needs may find the process is easier under the new tax law, originally known as the Tax Cuts and Job Act, which went into effect in January. The most common priority for special needs planning is to maintain a disabled child’s eligibility for government benefits. The second priority often is to determine how the parents will provide supplemental support for the child to pay for items not included in those benefits. Parents can directly provide supplemental support for their child during their lifetimes. After parents die, their estate can be made payable to a special needs trust. The assets in the trust can be invested to provide the ongoing supplemental support to the disabled child. All the assets, including life insurance owned by the parents, will be included in the parents’ estates for federal estate tax purposes, since the parents owned the assets until their death. There is often a tradeoff between control and tax efficiency in the estate planning process. The best way for a parent to control an asset is to own it, but ownership makes assets subject to estate tax. Irrevocable trusts can be used to exclude an asset from the estate, but by definition, the parent gives away the assets to an irrevocable trust and the trust must be outside their control. Parents of disabled children typically value simplicity, control and flexibility over estate tax efficiency. The larger unified credit under the new law eliminates the estate tax for single parents with 58

InsuranceNewsNet Magazine » May 2018

estates under $11,200,000 or a married couple with an estate under $24,400,000. This allows for more control and flexibility with less tax exposure.

Contrasting Then and Now

I am the father of wonderful young man with special needs. When Spencer was born in the early 1990s, the unified credit was $600,000 per parent. At the time, almost every parent of a child with special needs had to take into consideration the impact of estate taxes on their plans. I had to decide, “Do I care more about control or more about estate tax efficiency?” Although there were complex legal, tax-efficient workarounds to create additional control with an irrevocable trust, most parents with disabled children don’t have the bandwidth or interest to take on the complex solutions. If the increase in the unified credit was the only benefit, it would be a huge one, but there are other benefits as well. Life insurance is one of the best and least expensive ways to help support any family should a parent die prematurely. It is an extremely efficient instrument to fund a special needs trust to provide supplemental support for a child with

special needs after one or both parents die. Parents would purchase a permanent policy, which can be structured as a second to die policy or a single life policy. Whenever a client purchases life insurance, one of the important considerations is who will own the policy and will it be subject to estate tax. The higher unified credit under the new law allows a parent to keep more assets, including life insurance, inside the estate before they become taxable.

Special Needs Planning Before the New Law

Prior to the law change, if a family was concerned about estate taxes they would use life insurance owned by an irrevocable life insurance trust as part of their plan. With this strategy, they needed to take care not to include a disabled child in annual exclusion gifts to the trust as access to the gift could impact benefits eligibility (assets greater than $2,000 can affect the child’s government benefits eligibility). Although there may be work-arounds to this issue, the increased exemption alleviates estate tax concerns for all but the largest estates. Now, many parents are free to retain ownership of assets until death.


When A Disabled Child Predeceases The Parents

When using life insurance to fund a special needs trust, we assume the child will outlive the parents. A disabled child’s life expectancy is a difficult topic to discuss. The parents want to know what will happen to the life insurance if the child predeceases them. The new law eases the process, as parents can personally own the policy rather than the trust, with less estate tax concern. Parents usually appreciate the flexibility to re-purpose the policy’s cash value or death benefit if they outlive their disabled child given high premium costs. This is much more difficult if the policy is owned by an irrevocable trust. Another planning challenge for parents who care for an adult disabled child in their home is the impact of a longterm care event. One parent could end up caring for their spouse and child as a result. Life insurance within the estate not only permits the parents to access cash value to pay for long-term care or other emergencies, it also allows a policy to have a long-term care rider for the parents. Planning for the future is a challenge for any parent, but these challenges are greater for families with special needs where the future may be unclear. Having maximum flexibility in the planning process makes the decision-making process easier. Although there are no guarantees that the unified credit will remain at the current level when a parent dies, it is one less thing to worry about today. Brad Elman, CLU, CLTC, of Los Altos, Calif. is an insurance agent with Northwestern Mutual Life and a registered representative of Northwestern Mutual Investment Services. He is a founding member of the Northwestern Mutual Special Steps program dedicated to helping families of children with developmental disabilities plan for their financial security. Brad is a 26-year MDRT member with 16 Court of the Table and one Top of the Table qualifications. Brad may be contacted at



which — such as business interests, real estate and art collections — are harder to divide than others. A life insurance death benefit can help equalize an estate and ensure equity among all beneficiaries. Estate planning is about so much more than estate “tax” planning. Legacy planning is all about hopes, dreams and providing protection to those the deceased loved and the causes close to their heart. Life insurance can help to enhance that legacy and facilitate numerous wealth transfer goals beyond estate tax planning. Don’t allow your client to leave it to chance. David E. Appel, CLU, ChFC, AEP, is managing partner with Appel Insurance Advisors, Newton, Mass. David may be contacted at





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Benefit Advisors: A Vehicle, a Driver or a Passenger? Advisors serve many roles in the workplace, depending on the employer’s benefit priorities. By Yuliya Babushkina


enefit advisors have been a staple of the employee benefits world for many years. However, employers are challenged with balancing costs and new demands from an evolving workforce. As a result, employers closely scrutinize the products and services they receive from their advisor as well as the value their advisor brings to the table. Eight out of 10 private-sector employers with 10 or more employees currently offer insurance benefits to their workforce. Offering benefits is an important yet costly enterprise for companies. In addition to insurance, employers offer retirement plans, paid time off and a whole array of nontraditional benefits, such as work-life benefits, health wellness programs and career advancement opportunities. All of these components are part of a complex program that requires significant investment in administrative, technological and human resources. An advisor must carve out a role that supports the employer’s benefit priorities.

Employers Who Want to Go It Alone

According to LIMRA’s new study, at least one third of employers view benefit advisors as the backseat passenger, someone they will gladly leave behind given the opportunity. These employers believe that they already have the ability and expertise to obtain benefits without the help of an outside advisor. There are two primary reasons for this sentiment: 34 percent of these employers state that they currently receive nothing but transaction support from their advisor, and 60 percent believe they could save money working directly with the carrier to obtain nonmedical benefits. Of the employers who would prefer to work directly with a carrier, four in 10 60

InsuranceNewsNet Magazine » May 2018

Are Brokers Addressing Employers’ Most Pressing Issues? Percent of employers who think that the following issues are important and percent of employers who think that their advisor brings value to address these issues... Important issues for employers

Benefit advisors provide value to address issue

Controlling employee benefits costs



Recruiting and retaining employees



Matching employee benefits to company needs



Managing benefits plans



Legal requirements and compliance needs



Managing benefit enrollment process



Meeting the needs of the diverse workforce



Benefit communications/education



Finding the best technology solution for employee benefits



Addressing the needs of the "gig" economy workforce



think they could have even better benefit choices if they purchased nonmedical benefits directly from a carrier. While it is true that we are looking at a relatively small proportion of employers who would jump on the opportunity to purchase benefits directly from carrier, it is still worth considering since the undercurrents of this sentiment are making their waves even through the advisor community. Recent LIMRA benefit advisor survey finds one in five advisors believe employers will work more directly with carriers over the next three years.

Employers Who Value Their Advisor

For some companies and industries, benefit advisors are the only trusted, secure, open-door vehicle into the benefits marketplace and benefits options. Seven in 10 employers believe that it will be very difficult for their company to obtain benefits without the help of an advisor. While it seems that majority of employers do not question the current employer-advisor-carrier benefits process, there is a caveat to these statistics. Similar to the employers who are already confident

that they have the ability to handle employee benefits without a benefit advisor, many employers who responded that they lack the expertise to forgo benefit advisor indicated that their advisor offers only transactional support. Without a service component, advisors, in essence, are just a “vehicle,” serving an access point that can be substituted by any other.

How to Cement the Advisor-Employer Relationship

Employers currently rely on benefits advisors to help them onboard products and services. If technology or innovation removes the need for a liaison, how will advisors distinguish themselves to remain valuable? The future will certainly require not only stronger ties between employers and benefit advisors, but a variety of them. Moving from a “product-oriented” model to a “service-provider” paradigm seems to be the only reliable solution for advisors to stay relevant in the employee benefits world. While decisions regarding employee benefits are being made mostly in the C-suite, benefit advisors have the potential to get into the driver’s seat and offer their consultative services at the time and in the area most relevant to employers. Take, for example, the two biggest challenges that employers face today: cost containment and recruitment needs. The first one is widely recognized and routinely addressed by benefit advisors, but only four in 10 employers report that their advisor brings value in tackling their recruitment and retention needs, the second most challenging business issue for employers. Benefits advisors who can step up and fulfill this growing challenge will likely become indispensable in the eyes of plan sponsors. Yuliya Babushkina is assistant research director, Insurance Research, LIMRA. She may be contacted at

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InsuranceNewsNet Magazine - May 2018  

Dissed by Disinheritance: When estate planning hurts the ones they love

InsuranceNewsNet Magazine - May 2018  

Dissed by Disinheritance: When estate planning hurts the ones they love