InsuranceNewsNet Magazine - June 2018

Page 1

Annuity Awareness Month Special Section PAGE 31

When Taking RMDs Is Not In Your Client’s Best Interest PAGE 56 Annuities Can Help Boomers Choose Wealth Transfer Plans PAGE 58

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SUperrs! Sellepage 14

Do you have what it takes to join Family First Life’s army of high-producing agents?

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Danielle Byrne – FFL Tri-State East Danielle Byrne is the #1 female vice president at Family First Life and owner of FFL Tri-State East. She has been licensed since 2012, but didn’t start protecting families on a full-time basis until 2014. As a proud mother of two and a dedicated Navy wife, her family and career values are not separate. Danielle and TriState East believe in selfless, honest service for the agents they work with and the families they protect.



Matt Smith – FFL Northwest Matt Smith is the #1 career agent in personal production with Family First Life. He operates and owns one of the largest agencies inside the IMO, and he believes he can train agents to have the same results. He specializes in getting agents into advanced markets like FIAs and IULs, while focusing on the bread and butter of simplified issue life products to put families and agents first.

Bryan Mendenhall – FFL Central Division Bryan Mendenhall is the president of Family First Life Central Division. He was in the fitness industry for more than 10 years before switching to insurance. Looking for a fair opportunity to make the money he felt he deserved, he joined Family First Life. Since then, he’s been able to double his income and even issue paid more than $500,000 last year. He attributes much of this to the training and support he receives from Family First Life.




Mike Killimett – FFL South East Mike’s philosophy from the beginning has been, “I believe in protecting families as I would want mine protected. I place families/clients’ needs first.” It’s a simple motto. And it’s one that’s helped fuel his agency’s $2 million in issue paid volume per month. He might have only started in insurance in 2010, but today his team is on pace to break $25 million paid volume just eight years later!


Are You Ready To Make A Real Difference? L DIVISI


Brent Abernathy – FFL Gulf Coast Brent has applied the same work ethic that brought him success in major league baseball and as an Olympic Gold medalist to the insurance business over the last eight years. He runs an agency that issues more than $1.5 million worth of business each month and prides itself on making a difference in their clients’ and their agent’s lives. Making $100,000+ per year in the Family First Life Gulf Coast agency is not extraordinary; it has become the norm!

Michael Pheil – FFL Atlantic Michael is a vice president with Family First Life and owner of FFL Atlantic, one of the fastest growing agencies within FFL. Training new agents and developing leaders within the group to build agencies under the Atlantic umbrella is something that motivates him on a daily basis. FFL Atlantic’s culture is one that cultivates a team atmosphere, encouraging others to build their own army of agents to help as many families as possible both within FFL and the families with whom they meet.

The hardest working, best intentioned and most genuine agents deserve the highest comp, best training and greatest support in the industry.







Domonique Rodgers – FFL Golden State Domonique got into the insurance industry in 2011 and has one of the fastest growing agencies in FFL, issuing over $400,000 a month. With the aim of wanting to do for others what has been done for him, Dom’s karma is being repaid as he is on track to finish the year with well over $6 million issue paid.

Andrew Taylor – FFL USA Young, innovative and adaptive, Vice President Andrew Taylor is constantly seeking ways to implement new sales strategies to crack the code of the life insurance industry. Andrew’s agency is steadily moving toward their goal of issuing over $10 million worth of life and annuity volume this year. Andrew states, “It is truly fun working with Family First Life. We can protect more clients and pay the agents what they deserve. It’s a win-win for everyone.”










John Wetmore – FFL East Coast John is the vice president of Family First Life East Coast, which is now closing in on issuing $1 million worth of life and annuity business per month. He has been in the life insurance industry for five years and has LY FIRST L MI I quickly achieved a favorable reputation for his work ethic, selflessness, and skills as a mediator and mentor. EA T S T C OA S Through Family First Life, John has proven time and time again that if you are willing to put families first, the rest will fall into place. FA




Frank Eufemia – FFL Maryland Frank Eufemia is a VP with Family First Life and the owner of Family First Life Maryland. He is also a Hall of Fame producer and has issued more than $1.3 million in life insurance as a Family First Life producer. He is one of their best sales trainers and has a passion for helping agents and clients alike. His agency is growing like crazy and is on pace to have a banner year. He has promoted one VP and two sales managers already this year. Family First Life has been a game changer not only for his family, but also for so many other agents.

Ryan Montalto – FFL United Ryan is a vice president with Family First Life and partners with other independent agents to help them succeed personally in business while also helping families in need of life insurance. He entered the insurance industry in 2014 and became one of the Top Rookie Producers that year. Since then, he’s earned three Top 25 National Producer awards and continues to lead a team that issues millions each year in paid volume.



Conrad Pawlowski – FFL Midwest When families experience tragedy without financial protection, their lives can become stressful and undone. Conrad’s passion is problem solving with a genuine and caring manner, which always leaves families in a better-protected financial position than when he first met them. That passion extends to also growing the financial wellness of agents, a basic tenet of the midwest agency.





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Gaylin Ware – FFL Balanced Options Gaylin joined Family First Life in 2015 and aggressively worked his way to becoming a VP and an elite producer. Under his leadership, guidance and unwavering commitment to helping families, Family First Life Balanced Options was founded and, in 2017, logged issued paid volume of $1.6 million. As a visionary, Gaylin focuses on team building and professional growth, while maintaining the core values of Family First Life.











Athena Villanueva – FFL Coastal Athena Villanueva is the vice president of Family First Life Coastal. She has been in the industry since late 2010. Athena has one of the fastest growing agencies with Family First Life, tripling production in the past six months. She’s gone from $60,000 a month to $200,000 a month with steady growth. Athena’s desire to help others is always a top priority in her business.


Marc Mead – FFL Tri-State Marc joined Family First Life in January 2014, looking for an outlet to fulfill his passion of helping families improve their situations day in and day out. In working with agents in the field to protect families and protecting families himself, Marc looks at his career as ministry unto the Lord. With an insatiable desire to be successful, Marc believes that all his dreams can be realized through great mentorship, hard work and the ability to serve.

Jack Yiu – FFL Financial One of Family First Life’s top producers and member of FFL’s Hall of Fame, Jack is setting his sights high in 2018. His agency’s team goal is to consistently issue $500,000 per month by year’s end. “This has been one of the most rewarding experiences of my life, being able to work among the best in the industry,” he’ll happily report. His hard work ethic and desire to improve lives can be seen in everything he does.

Mickey Taylor – FFL 4 Corners Mickey started in the insurance industry in 2016 and has become the fastest growing vice president in all of Family First Life. He doesn’t over complicate it; he believes strongly in following the successful system FFL has created. He says, “When you add passion on top of the sales training FFL offers, your business will change.”


Paul McClain – FFL West Coast Before joining the insurance industry at 19 years old, Paul’s early career involved pumping septic tanks. But with the training of Family First Life, he was able to rapidly grow his insurance business to more than $1 million issue paid per month and has issue paid over $500,000 a year in personal sales. He’s a firm believer that when putting people first, you can reach your full capacity.


Terry Herron – FFL T.H. Group Terry is a VP with Family First Life and owner of the T. H. Group. With experience in the insurance industry since 2011, Terry has made tremendous strides forward, both personally and in the growth of his business. He is currently leading and coaching many new agents toward reaching their own goals as well. He believes in and sets the example of working hard. His strong passion for helping families feel secure, including his own, is the foundation of the T.H. Group’s overall success.

Drew Jerdan – FFL Global Drew Jerdan is the proud owner of Family First Life Global. He started selling insurance in 2010 after realizing that his true passion was helping people and insurance was the best vehicle to accomplish his goal. Today, FFL Global has 100 active agents, 10 of who rank in the top 50 of all Family First Life personal producers. Their current growth trend will continue through 2018, staying on track to hitting a production goal of $20 million.

Are you ready for agent independence? Go to and discover how working with Family First Life can …


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Post-DOL Ignition By John Hilton

The industry braces for skyrocketing annuity sales now that the Department of Labor fiduciary rule is all but dead. 31 Annuity Awareness Month Special

Great minds from six different companies offer their own ideas on how financial professionals can help Americans in new and lucrative ways.


12 T he Amazing Fiduciary Race

By John Hilton What’s next now that the Department of Labor appears to be out of the fiduciary issue, and who will be the big winners in the aftermath? We break it down.


48 The Life Insurance Solution To Long-Term Care Planning By John Heck Clients are desperate for ways to protect their assets from the increasing costs of long-term care. Here is how a life insurance trust can help.

52 Tax Law Unlocks Life Insurance Opportunity In Estate Planning


62 3 Ways To Start The Hospital Indemnity Plan Conversation By Bradd Chignoli Your clients’ employees may not realize how much they can be on the hook for a hospital stay. Here is how a hospital indemnity plan can mitigate the economic risk.

By Darwin Bayston The new tax law includes two reasons why you should discuss whether it makes sense for your client to sell an unneeded life insurance policy.


56 W hen Taking RMDs Is Not In Your Client’s Best Interest


14 How To Turn Non-Agents Into Super Sellers An interview with Patrick Bet-David Patrick Bet-David wants to have 500,000 new agents trained and selling over the next 10 years. In Part 2 of his interview with Publisher Paul Feldman, he describes his unique method of engaging recruits and exposing them to life-changing training. 6

InsuranceNewsNet Magazine » June 2018

By Jack D. Aiken Moving money into an annuity and leveraging the advantage of the high payouts avoid the risks of taking required minimum distribution during down market periods.

58 A nnuities Can Help Boomers Consider Wealth Transfer Plans By Rich Lane Although annuities typically are seen as a means to grow assets and distribute them during retirement, a fixed annuity also is a sound option for transferring a client’s wealth to loved ones.

66 Attract Millennial Clients With A Service Subscription Model By Levi Sanchez Millennials are comfortable paying for subscription services such as Netflix. Financial advice should be no different.

68 Six Signs Your Client Has Outgrown You By Brian O’Connell What happens when clients don’t believe their advisor is keeping pace with their expanding financial picture.

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73 N AIFA: Why You Need A Business Succession Plan, Now By Ayo Mseka and Michael DiCenso The business case for creating a formal succession plan, and critical steps for its implementation.

74 M DRT: Annuities Uncover Hidden Retirement Plan Opportunities


By Eszylfie Taylor Clients may not completely understand the opportunities annuities hold for retirement plans.

70 When You’re Sitting On Top of A Mountain But It Feels Like A Rut By Kerry Johnson The drive that causes someone to become super successful can also cause them to be extremely dissatisfied.

76 LIMRA: Single Retirees In Search Of LTRs With Advisors By Jafor Iqbal Single retirees are largely responsible for their own retirement security. This represents an opportunity for advisors.


72 T HE AMERICAN COLLEGE: When A Reverse Mortgage Makes Sense For A Client By Jocelyn Wright It is time for more financial professionals to adjust their approach to reverse mortgages.

EVERY ISSUE 10 Editor’s Letter 22 NewsWires

46 LifeWires 54 AnnuityWires

60 Health/Benefits Wires 64 AdvisorNews Wires


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FPLAG.900687.05.18 For Financial Professional Use Only. Not for Use with Consumers.

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.

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

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When Rockefeller Was Rich


hatta we? Rockefeller?” That’s what my mother would say to me about pretty much everything that involved money. She was a single mom in New York City in the 1960s. The city was then in a growth spurt as the world capital of big buildings, big noise, big dreams. Think of it and you’ll hear honking horns and fast talkers. Mystery, opportunity and danger awaited at every turn. It was a tough place to be alone and raising a son, particularly in a time when that was still unusual. I was remembering all this as I sat vigil in a hospital room earlier this year in a ritual becoming more familiar to baby boomers. My mother was struggling with pneumonia, that “complication” often cited as the cause of death in obituaries. People suffer debilitating illnesses for years, but pneumonia seems to be the one that swoops in to turn out the lights. She escaped from it once before, but that was years earlier. Boomers’ parents are the first generation pushing the boundaries of longevity. That borderland is the province of hospitals and long-term-care facilities. It isn’t so much living longer as it is dying longer. When my aunt and I arrived at the hospital, we thought we were too late. Mom was ashen, gray-white with her mouth hanging slackly. We both stood, hand over mouth, just looking. My aunt announced, “I’m getting a nurse!” and turned to go just as my mother woke up and blurted, “Why?”

sale, regardless of consequences to the buyer. Studies have pointed out the effects of scarcity. A Harvard Magazine article about the book Scarcity: Why Having Too Little Means So Much pointed out “if the mind is focused on one thing, other abilities and skills — attention, self-control and long-term planning — often suffer.” Those deficits have obvious consequences not only for advisors and their clients but also for anyone’s quality of life. A fiduciary standard might call for advisors to put their clients’ interests first, but it is the healthy mindset that allows advisors to do it by reflex.

Scarcity’s Tunnel Vision

What Is A Rockefeller?

In this month’s interview with Patrick BetDavid, he spoke about the effects of scarcity. The discussion was a continuation of last month’s segment, in which he shared details of his difficult childhood. In that edition and this one, Bet-David talked about how that kind of background can lead a person to think small — to feel desperate yet undeserving. That perspective can result in tunnel vision of a target. For example, if people are accustomed to a certain monthly income, they may feel that is as much as they deserve and fail to see outside that range. That tunnel vision also creates a desperate seller focused on making a 10

InsuranceNewsNet Magazine » June 2018

So, I was used to scratchy, coarse wool pants and even grew accustomed to the holes in my coat pockets that I could stick my thumbs through. Kids don’t understand why they can’t have what they want, especially when they are surrounded by the plenty of New York City. I understood much later what it was like to be responsible for another human being. And I appreciated what it would have been like for a single mom making her way in Mad Menera New York. But I also realized that even tougher than all that was constantly having to tell her child no. Now, I know it’s my own sense of scarcity that keeps me sitting when I should be standing, staying when I should be going.

The Actual Payback

During the vigil at my mother’s hospital bed, I remembered how she would answer almost any request that involved spending: “Whatta we? Rockefeller?” She doesn’t have much of a New York accent, but she would adopt one for that bon mot. I did not even know what a Rockefeller was. Was it somehow rock-related? Fellerrelated? All I knew was it had money, and we were not it. She did work for an oil company, but it was not Rockefeller’s. She was then a travel agent at Continental Oil Co., where she would climb the veritable corporate ladder as the company grew into Conoco.

To pass the time, I chatted with my mother about taking the train to see her and the errands I was doing. She grabbed her handbag as we spoke, pulled out her checkbook and started writing. I knew what she was doing. “Mom, really, I don’t need anything. It was no big deal.” She ripped the check off the book and thrust it at me. It was for $500. I thought of what that money would have meant back in those days, when our rent was $130 a month. That check would have seemed like a small fortune. I looked up at her and said, “Whatta you, Rockefeller?” I thought she would laugh, but she narrowed her eyes as if I were somebody she was trying to remember. She turned and looked out the window. I knew where she was going. She was back in 1960s midtown New York, when the city was thrumming with excitement and where she strode young and invulnerable with the future expanding in front of her. When we are at that moment looking back, we can see what we really treasured. We can sense that it was the struggle that made us stronger, healthier and ultimately happier. And richer than Rockefeller. Steven A. Morelli Editor-in-chief

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The Amazing Fiduciary Race State and federal regulators have been battling for a decade to establish a fiduciary or bestinterest standard for financial services. Much has happened already in 2018 to sap momentum from the Department of Labor and give it to the SEC. We handicap those agencies, plus what is happening at the state level.

By John Hilton


ndependent insurance agents and broker-dealers might emerge as the big winners once the decadelong push for tougher standards is complete. Emphasis on might is important. As this magazine went to press, the efforts by the DOL, the Securities and Exchange Commission and the states were heading in different directions. But there are at least three reasons why independent agents and B-Ds appear to be in good shape going forward: 12

InsuranceNewsNet Magazine » June 2018

» No uniform standard. The commission crowd cheered loudest when the SEC released its Regulation Best Interest. Despite taking steps to further regulate nonfiduciaries, the agency clearly stated, “We are not proposing a uniform standard of conduct for broker-dealers and investment advisors in light of their different relationship types and models for providing advice.” That’s a big endorsement of commission sales. » No heightened lawsuit threat. When the Fifth Circuit Court of Appeals tossed the DOL fiduciary rule, the lawsuit threat accompanying the Best Interest Contract Exemption went with it. And it does not appear to be coming back. » Little momentum for tough state rules. The National Association of Insurance Commissioners is trying to produce a best-interest model law for annuity sales and having little success with even modest rules.

SEC The Place To Be

The industry, lawmakers and regulators appear close to fulfilling the generally agreed-upon regulatory answer of a decade ago: let the SEC set the rules. It just took many years and many hurdles to get there. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 singled out the SEC as the agency that should study and produce fiduciary or best-interest standards as needed. Years of political wrangling ensued, with the agency short two members from late 2015 until this year. In January, commissioners Hester M. Peirce and Robert J. Jackson Jr., both nominees of President Donald J. Trump, joined SEC commissioners Kara Stein and Michael Piwowar, along with SEC Chairman Jay Clayton. In recent remarks, the chairman said he expects the SEC to establish the authoritative rule for the industry. “There are too many regulatory cooks in the kitchen,” Clayton reportedly said during a May forum.

THE AMAZING FIDUCIARY RACE INFRONT The SEC released a set of three rules in April. The rules appear to have no impact on insurance agents, who are regulated by state insurance laws. Here are the significant points for broker-dealers: » Sets a best-interest standard for securities transactions or investment advice about securities. The SEC does not refer to the standard as a “fiduciary” obligation, however. » Restricts use of “advisor” and “adviser.” Opponents lobbied regulators to crack down on what they claim is misleading use of these titles by nonfiduciaries. The SEC agreed. » Stepped-up disclosures. The rule includes new disclosures on things such as compensation and proprietary products designed to make sure the client is informed. In addition, a new “relationship summary” disclosure of no more than four pages is required to explain the basic relationship and any disciplinary actions. » No lawsuit option for investors. The SEC makes it clear that it does not intend the rule to “create any new private right of action.” Existing FINRA arbitration is the likely remedy for aggrieved investors, analysts say. The SEC is accepting public comment on its rule for 90 days after it is published in the Federal Register. The agency will also hold public forums on the rule in four cities: Houston, Denver, Atlanta and Miami.

DOL (98 Percent) Dead

In normal times the industry could consider the DOL fiduciary rule dead and buried. Alas, these are not normal times in Washington, D.C. That said, the rule is seemingly 98 percent dead anyway. That 2 percent comes via two remote possibilities: » The federal government could petition the U.S. Supreme Court to take the case. While the high court accepts a very small number of cases annually, this issue – the power of a cabinet-level agency to regulate – likely would be appealing. But given

A few states, including Nevada, New Jersey and Connecticut, passed regulations or have them in the works. But New York is on the verge of approving rules that have the industry buzzing. that the Trump administration is a vocal opponent of the DOL rule and declined to appeal the Fifth Circuit ruling, any further appeal seems illogical. » The Fifth Circuit could undertake an en banc review on its own. In a 2-1 decision, the court sided with a group of industry plaintiffs on March 15. An en banc review enlists the entire court to rehear the case. But AARP and three states (New York, California and Oregon) filed separate motions asking for an en banc review and the court denied both. Again, it appears the court decided that a full review of the decision is not necessary. Fifth Circuit 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 reaffirmed the role of Congress and the SEC in regulating agents and advisors.

States Take A Stand

If there is a wild card in the regulation of financial services, it is the states. Tasked with oversight of insurance, several states say they are tired of waiting for federal regulators to set best-interest or fiduciary standards. A few states, including Nevada, New Jersey and Connecticut, passed regulations or have them in the works. But New York is on the verge of approving rules that have the industry buzzing. New York regulators are even urging the NAIC to adopt its best-interest version, which covers life insurance as well as annuities.

The NAIC Annuity Suitability Working Group produced a draft rule but is not getting anywhere close to a consensus on it. The group was expected to meet May 31-June 1 in Kansas City to discuss the proposal again. The New York rules would: » Require disclosure of all suitability considerations and product information that form the basis of any recommendation. » Permit agents or brokers to make a recommendation only if they have a “reasonable basis to believe that the consumer can meet the financial obligations under the policy.” » Prohibit an agent or broker from telling a consumer that a recommendation is part of financial planning, investment advice or related services (unless the agent or broker is a certified professional in that area). The department plans a March 1, 2019, effective date, after which insurers will have six months to comply. “New Yorkers must be confident that the insurance agents, brokers and companies that they rely on are recommending the right products for them, and that the consumer’s best interests are paramount,” said Maria T. Vullo, superintendent of the New York State Department of Financial Services. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at

June 2018 » InsuranceNewsNet Magazine



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InsuranceNewsNet Magazine » June 2018



atrick Bet-David expects to have about 500,000 insurance agents in 10 years. Is that ambition or just simply hubris? You might think it was just boasting from a 39-year-old upstart until you hear his recruiting and training process. He is building his business at an exponential rate by converting mere mortals, who know little about insurance, into super sellers — and recruiters. You can see the difference in his methods by looking at his Dallas office. Beyond the reception area, playroom for clients’ children and meeting rooms, you’ll step into a warehouse-sized area containing the usual cluster of cubicles. But then there’s the game area next to the gym and the full-sized classroom on the second-floor balcony — all within the same huge room.

modest background and the drive that propelled his mission to become a force within the life insurance industry. In this segment, Bet-David tells InsuranceNewsNet Publisher Paul Feldman how he engages his recruits in meaningful dialogue and exposes them to life-changing training. FELDMAN: You have a different way of recruiting. What is your system and how did you develop it? BET-DAVID: The developmental process is three, six, 12 months or more. A fast-starter could take three months to train; somebody who is regular could take six to 12 months; and you may even have some agents who take two to three years. And 80 percent probably fall under the category of 12 months to 36 months. When I started, I had a couple of guys who would go write business and then

So my edge became “I’m going to be a little bit more patient, a little bit more tolerant on their learning curve while still working with them.” Eventually you find a handful of people who fully buy into it. Then it becomes so easy to develop the next layer because you already have a set of people who are also helping you develop the next layer of agents. But the initial transition is very frustrating. FELDMAN: How do you overcome the fact that this is mostly a commission-driven business and they’re not going to earn an income for three months, six months, 12 months? BET-DAVID: This is one of the reasons why I don’t believe in the full-time model. When Morgan Stanley Dean Witter recruits people, they have a minimum of

Cecilia Vargas, left, speaks with Sheena Sapaula as Rodolfo Vargas chats with a producer on the phone and Matt Sapaula checks social media. The two couples were struggling for traction in their lives before they became super sellers and recruiters with Patrick Bet-David. Within that room is a bustling, diverse, young hive that any marketing organization or brokerage would die for. In the corner is a glass-walled room that serves as Bet-David’s office and video studio. And this is just the home office. Across the country are more than 5,000 agents not only selling but also relentlessly recruiting, ensuring exponential growth. In the first part of this interview, which ran in InsuranceNewsNet’s May edition, Bet-David described his exceedingly

quit after they got their first chargeback. Then I realized what qualities to look for when recruiting, and I put a system together. At first, you have to hold their hand, walk them through each step, give them proper direction and make sure you’re as hands-on as possible. I saw that a lot of my competitors didn’t want to do that because they didn’t have tolerance with people and they expected everybody to get it as they got it.

$10 million. If you don’t do $10 million under management in year one, you go under probation. That number has increased at this point, by the way. The $10 million was back in 2001. I’m assuming today it’s probably $15-$20 million. Goldman Sachs and some of these other guys are at $30, $40, $50 million in year one. So you’re automatically setting people up for failure. They always say 98 percent of brokers who pass their Series 7 will not stay in the industry. They’re June 2018 » InsuranceNewsNet Magazine


INTERVIEW HOW TO TURN NON-AGENTS INTO SUPER SELLERS right. That number’s pretty accurate. FELDMAN: How is your model different? BET-DAVID: When you sell based on having to make money to pay the bills, you start looking at customers with a dollar sign. There’s a moment when salespeople realize that the customer is going to say yes. Then they do the math: “$250 a month at 12 months— that’s about $3,000 and I’m making 50 percent. That $1,500 is going to make my $320 payment on my Ford Focus and pay my $170 on my phone bill that I’ve been late on for the last two months.”

they made $800 in their first month. It’s cool, but it wouldn’t replace their $4,000 income. The next month, they might make $1,200. Next month, $2,200. Then it’s $6,000. “Oh my gosh, I just made $6,000. I’ve never made this kind of money in a month before.” Well, let’s do a minimum of $4,000 for three months in earnings and then let’s go full-time.

bring in what you call “greenies” as your business model rather than somebody who has some insurance experience?

BET-DAVID: I don’t mind bringing in people who have some insurance experience, but I’ll give you the point on why I like greenies. If I bring in somebody who says, “Well, the last company was giving me 85 perFELDMAN: You typically look for cent. If you give me 90, I’ll come over someone who is not in the business. there,” that conversation is over with. I What qualities are you looking for? don’t even entertain it. I just wish them all the best. BET-DAVID: The age I look for is 25 to I don’t negotiate. I say, “Here’s our 40. I like somebody who is competitive, I system and our work. And we offer you like somebody who’s played sports. I like something that none of the other guys will offer you. And with your 85 percent contract that you had at the last job how much money did you make?” “I made $72,000.” “Yeah, so listen, we have people with a 75 percent contract who are making a million a year income and you’re bragging about a contract that you want? No, it’s the system that you want from us. I wish you all the best.” I like greenies because they don’t have all these prior misconceptions or three different places they worked and this person said this and that person said this and this person said this and that person said this. So I would much rather bring in greenies because The Vargases and Sapaulas appear as top producers on I can direct them with the the leadership wall in the lobby of the Dallas office. culture that we have and that gets them to move at the The client doesn’t know that’s happen- somebody who has a supportive spouse. speed that we’re growing versus having ing. But the salesperson has gone into Somebody who has a point to prove, any hiccups. So I’m a fan of speed and efthat state where they start selling based like, “My father always saw my older ficiency. With greenies, we tend to work on panic mode. They’re not selling based brother and just never really saw me as a lot faster than with people who are not on what’s best for the client’s family. somebody that could do it,” or “When we greenies. But if I can get somebody to sell part- got a divorce it was pretty ugly, and I just time while they keep their full-time gig, feel like he didn’t believe and I want to FELDMAN: What is your pitch to get they’re not in a desperate mode to sell. prove to myself that I can stand up on my someone into the business? They’re not going to pressure somebody own two feet.” to buy a policy that’s going to charge And then I look for a certain level of BET-DAVID: Step No. 1 is I have to get to back. I learned early on that a chargeback coachability and willingness to want to know the person. Say I talk to somebody would take away the motivation from a learn. and find out they have worked in an acnew agent. Taking them part-time alcounting firm for six years and they like lowed me to retain more people. Maybe FELDMAN: Why do you choose to the stability. But they don’t like waiting 16

InsuranceNewsNet Magazine » June 2018




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INTERVIEW HOW TO TURN NON-AGENTS INTO SUPER SELLERS another 14 years to be making $120,000. They don’t like not having the vacation their spouse wants. And they don’t like not being able to send their kids to the school they would like. I would say, “So, it sounds like you’re a stand-up guy. You’re a husband who wants to do well for his wife. You have two kids. You want to be a good father.

I’ll talk about different generations. According to Boston College, a minimum of $41 trillion of wealth is going to be transferred between now and 2052 — and a maximum of $136 trillion. So I talk about the baby boomers, the digital generation, the millennial generation. And how millennials are now bigger than the baby boomers — 80 million — and

Patrick Bet-David and Publisher Paul Feldman speak in front of a sculpture of Optimus Prime, which stands guard next to the front door of Bet-David’s home office in Dallas. Bet-David says Optimus Prime is a Transformer character who stands for high values and leadership against evil. You’re a good employee at your company. It sounds like you’re doing a lot of good things in your life but the question becomes, are you OK continuously living the way you’re living without any of these things that are important to you becoming a reality?” “I am not.” “So it’s fair to say that you’d keep your options open.” “Yes.” FELDMAN: What’s the next step? BET-DAVID: I tell my story on how I went from my background to getting involved with the industry. Then I sell the industry. 18

InsuranceNewsNet Magazine » June 2018

these are people that are getting ready to make some of the most important decisions of their lives. They’re going to get married, start careers, have kids, buy their first house. And every one of these major decisions requires them to talk about their finances. That’s where we come in.

Then I talk about the movement of entrepreneurship. How people are starting to realize the American dream is about free enterprise and your having to make it for yourself. 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. Even if you do something on a parttime basis, you should start a business for yourself because that’s the biggest benefit this country offers that many countries out there do not offer. People don’t trust banks like they used to. People don’t trust a lot of the stock market because they don’t want another 2008 to happen, where 38 percent of the market drops. They don’t trust real estate because of what happened when that industry all of a sudden collapsed and so many people lost their homes. So I chose insurance because when was the last time you heard of a life insurance company going out of business? If you go to any major city and see the tallest skyscrapers in every city, when you look at the logo all the way at the top of the skyscraper, you’ll typically find 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 away from their philosophy, and they invested in some mortgage-backed securities and that got them in trouble because they decided to go into that business. Their life insurance business stayed stable; it was the other side of their business that took a hit. Then it comes to PHP, People Helping People — age, culture, vision, speed, community, fun, travel, technology, value obtainment, social media and equity that we offer. We’ve got two more years

I foresee the life insurance industry going to a million licensed agents by 2029, and we want to recruit half a million licensed agents by 2029.

HOW TO TURN NON-AGENTS INTO SUPER SELLERS INTERVIEW of giving away equity. We’ve already done five years. We want to give seven years of equity. We’re doing one more percent of the company this year. We’ll do another percent of equity next year as well. Then I tell them the way that we’re different than everybody else, the way that we put our events together, the way we have fun together, and then I go into selling my vision and what I foresee taking place with PHP. I foresee the life insurance industry going to a million licensed agents by 2029, and we want to recruit half a million licensed agents by 2029. I know it sounds insane, and you’re probably listening to me right now saying, “This guy’s out of his mind.” But we started off with 66 agents. We have 5,400 agents and with the access to social media, why shouldn’t somebody be able to get that number of licensed agents? I mean we’re talking 0.1 percent, 0.15 percent of the population — that’s really not a big number to hit.

else moved here because of their spouses. I had a very good relationship with the spouses. After I meet with the spouse, I say: “Mary, I really enjoyed spending time with your husband. Obviously, he loves you and he said a lot of good things about you. He’s really doing this business truly for you because he said that you always wanted to go to Italy, and you haven’t had the chance and that really bothers him. And he feels like right now the job he has at the

So while we’re there, they’re buying a policy because I have the husband and wife together. I’m doing a needs analysis on them. I’ll get the questions. We’ll fill out the paperwork. Then the following day he’s doing three appointments in the field, sitting with his parents, his best friends and their wives, his brother, his sister. He’s got to do 10 of those until we take him in the field. We start making phone calls and booking those appointments and getting him

accounting firm is not going to put him in a position to take you to Italy any time soon, and he wants to deliver it for you. “You know, it’s pretty impressive to be married to a husband who loves you as much as he does.” “Oh my gosh, did you really say that, Babe?” “I did.” “Oh wow, thanks, Babe. Well, OK.” Boom! It’s done from there. I talk to them about the other things they want to do and how this will make them possible. And then I say, “I would like to invite you to the office yourself so you can see the operation, see where your husband is going to be. You’re going to see who he’ll be working with, and you can feel a little bit more comfortable with the people who are working with us.”

licensed. The goal is to get a check in his hands within the first 40 days. And if I get a check in his hands within the first 40 days, the rest is pretty easy.

FELDMAN: After you get them on board, how do you make somebody be successful? How do you help them be successful? BET-DAVID: Step No.1 is, I’ve got to meet their spouse. And I know that’s not traditional in this industry. When I started, I kept recruiting people, recruiting people, recruiting people and then two months later they’d quit. They would call me and say the following: “You know what? My wife is just not happy about me doing this.” And I thought, you know what? I am so sick and tired of hearing that. So I made the rule to meet with the spouse within 24 to 48 hours. FELDMAN: Harvey Mackay said the same thing when I interviewed him. What is that process like for you? BET-DAVID: I’m a massive believer. I moved our company from California to Dallas. There was only one employee who didn’t move to Texas from California. It’s because she was eight months pregnant and her husband had a ridiculous job and was making six figures. She was a case manager making $35,000 a year. So I said, “I totally understand.” Everybody

FELDMAN: How do you train? BET-DAVID: We do a classroom training, which will be Tuesday nights from 7 to 10, and then on Saturday mornings from 10 to noon, and then the rest of the time is on-the-job training. They’re shadowing me on an appointment — at the kitchen table. The real bread and butter is the more kitchen table presentations you see with me, the better you’re going to do. We’re constantly in the field training new people. That’s our big game plan. The more I do that, the more I can duplicate June 2018 » InsuranceNewsNet Magazine


INTERVIEW HOW TO TURN NON-AGENTS INTO SUPER SELLERS somebody, because you’re seeing in real life what objections are going to come up. Then when we get in the car, they say, “You know, she asked you about that 403(b). What’s that? I’ve heard of a 401(k) but what’s a 403(b)?” “A 403(b) is kind of like a 401(k) but for a nonprofit employee.”

service. You get up and you tell people what to do. No one remembers anything and they leave. I like role-play. Our best offices are the ones that focus on role-play. We’ll do case studies. For example, let’s say one office has 50 agents in training. We’ll take the top 10 senior people in that office and put them in different groups.

it is to be the person who is willing to be shadowed, because everything I am telling you may sound easy but it’s a lot of work. You’re dealing with people’s insecurities. You’re dealing with people’s fears. You’re dealing with people who don’t believe they’re worth making six figures. You’re dealing with people that maybe never had any experience with work ethic. You’re dealing with spouses who want their husbands home at 5:30 because they think they’re off with another girl. There is just a bunch of things you’re dealing with. The reason why very few people are willing to do this is because it takes work, patience, tolerance and believing. Most people eventually hit a wall and they go home and have this conversation. “You know what, Babe? I am so tired of these people. How many times do I need to tell them that,” dot, dot, dot, dot, dot, “I’m burned out baby. I don’t know if …” And the wife is going to say, “I’m so sorry, Babe. Maybe you should go to that old job. You didn’t seem so stressed out, Baby.” “I think I’m going to do that, Baby.” And boom! And what they don’t realize is they were about to have a breaking point. They were about to go into a whole new era of their business because they were going to have a surge of a couple people rising up and actually delivering. But when you hit that wall, it really messes with your head. I’ve seen so many people have zero faith in what’s around the corner, and they drop the ball. FELDMAN: So many people in life quit right on the precipice of success.

And “Hey, Bobby, did you notice when they said this? And then you know why I said that?” “No, I was wondering.” I’ll explain it and then we’ll role-play over and over. As we’re driving in the car at 6 or 7 at night, we have a 20-minute break. We’ll go to Starbucks, have coffee or dinner and we’re getting to know each other. There’s a relationship being built as well while we’re running appointments.

Then we give them a handout with five scenarios such as “Here’s a 29-year-old male, single, no kids, who works at suchand-such place, makes $80,000. Here’s his current financial situation. What would you recommend?” Then I tell them to role-play together. Do a case study and come back and you have to present to us what you would recommend. Then we talk about it.

FELDMAN: A lot of your training depends on role-play. Why is that?

FELDMAN: That combination of shadowing, field training and role-playing sounds pretty effective.

BET-DAVID: A lot of other training is lip

BET-DAVID: But the challenge with all of


InsuranceNewsNet Magazine » June 2018

BET-DAVID: All the time. The breaking point comes from making good habits. If you have bad habits, it’s not going to help you no matter where you go. When I hear somebody tell me they’ve had 20 different jobs, in the back of my mind I’d say, “This is going to be the 21st job because you’re about to go to your 22nd.” Because if you just continue to quit and leave, that’s a habit you’re developing. Eventually you just have to stick it out and go through the annoying, difficult challenges. And very few people are willing to do that.

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June 2018 » InsuranceNewsNet Magazine


NEWSWIRES well, sh oot...

Bad Days For Wells Fargo Wells Fargo has been on the wrong side of the feds recently.

First, the bank was hit with a $1 billion fine to settle claims that it charged nearly 600,000 customers for auto insurance they didn’t need, leading to about 20,000 repossessions. The fine was reported to be a record for the Consumer Financial Protection Bureau. A week later, The Wall Street Journal reported the Department of Labor was questioning Wells Fargo’s practices in recommending retirement savings vehicles for its customers. The DOL was looking into whether Wells Fargo has been pushing its customers to take their money out of low-cost corporate 401(k) plans and roll their holdings into more expensive individual retirement accounts at the bank. The DOL also is questioning whether Wells Fargo’s retirement-plan services unit pressed account holders to buy in-house funds, generating more revenue for the bank.


I believe we have to do the ACA fixes or else the individual markets will collapse in some states. — Sen. Susan Collins, R-Maine

proposed it as an alternative to the ACA’s mandate to buy coverage as part of his health care reform efforts.





Think the 2008-2009 global financial crisis is behind us? Not so fast, warned the International Monetary Fund. Christine Lagarde, IMF managing director, warned of danger on the horizon as world debt rises to $164 trillion. Addressing a meeting of the World Bank Group, Lagarde cautioned that although most nations around the world are experiencing growth, they should prepare for a possible downside of that growth. That high level of global debt is particularly troublesome, Lagarde said, noting that public debt in advanced economies is at levels not seen since World War II. And if recent trends continue, most lowincome countries will face unsustainable debt burdens.

One way to cut the number of uninsured in the U.S. is to enroll people in individual health care plans automatically, according to a California congressman who introduced a bill to do just that. Congressman Ami Bera Bera, D-Calif., wants to give the states grants to set up pilot programs to automatically enroll eligible people in Affordable Care Act plans or Medicaid. People would still have 60 days to opt out if they wanted to, so they would not be forced to buy coverage. Bera said he believes people are more likely to sign up if the default is to be signed up and they need to actively opt out of coverage. He is not alone in considering an automatic enrollment. Sen. Cassidy Bill Cassidy, R-La.,


of Americans said they had to choose KNOW 30% between paying for medical bills or necessities like food or heat.



InsuranceNewsNet Magazine » June 2018

Source: University of Chicago

The Great Recession may be in the history books, but many Americans feel as though it never went away. Ten years after the financial crisis, 52 percent of Americans say they are still feeling its impact, according to a report by Morning Consult. Those earning between $50,000 and $100,000 annually were the most affected, with 57 percent saying they are feeling some impact from the economic downturn. And Americans said there is plenty of blame to go around for the recession. Americans blamed politicians more than any other group for the recession, with 73 percent of respondents laying the blame at their feet, just above the 72 percent who blamed big banks. Nearly two-thirds of Americans said they fear another downturn in the near future, adding that they were avoiding taking on additional debt and spending on big-ticket items in case the economy takes a turn for the worse again soon.

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Elon Musk’s Falcon 9 successfully lifts off from the SpaceX launch site at NASA’s Kennedy Space Center in Florida. The February 6 launch was considered a big success for SpaceX. 24

InsuranceNewsNet Magazine » June 2018



nnuities have been stumbling after years of accelerating growth, but Jack Marrion has a simple reason why that pace might pick up again — agents and advisors are getting back to selling. “A number of agents I spoke to said last year that they weren’t selling as hard, they weren’t working as hard and they weren’t meeting with people as much as they used to because of their confusion and uncertainty over what might happen with the DOL,” said Marrion, president of Advantage Compendium, a consultant to the insurance industry. “Agents have heard that all-clear siren. Trouble is fading away. You can come out of the shelter and do business again.” The biggest all-clear sign has been the pushing back of the Department of Labor’s fiduciary rule, particularly the wholesale rejection of the rule on March 15 by the Fifth Circuit Court of Appeals in New Orleans. That is opening the door for what the industry expects will be fairer rules from the Securities and Exchange Commission. Annuity sales should spike, starting in the second half of 2018 Regulation rulemaking was the main culprit for the slump, but economic and market factors contributed. Distribution channels were disrupted, and agents shied away from annuities. Positive news for annuities falls into two general trends:

“Agents have heard that all-clear siren. Trouble is fading away. You can come out of the shelter and do business again.”

» General market conditions. Simply stated, the conditions for selling annuities vastly improved. The court’s decision to kill the DOL rule is one example.

» The RIA potential. Annuity companies have long aspired to break into the registered investment advisor market. The timing might be right for it to finally happen, analysts say.


Due to a variety of pressures, annuities have struggled lately to maintain their foothold even in the insurance world. In 2017, total annuity sales were $203.5 billion, a decline of 8 percent from the prior year, according to LIMRA Secure Retirement Institute. The lingering threat of regulation is the most significant factor, but the threat might be dissipating. The DOL fiduciary rule took partial effect in June 2017 but was tossed out by a New Orleans appeals court March 15. The federal government did not appeal by the May 1 deadline, and the Fifth Circuit denied separate appeals by AARP and three states (New York, California and Oregon). Barring an unlikely last-minute reversal by either the court or the government, the DOL rule is dead. “It wasn’t that the customers went away last year. It’s that the agents did,” Marrion explained. “They stayed hunkered down until all this business with the DOL either got resolved or went away. But it looks like it might have gone away.” June 2018 » InsuranceNewsNet Magazine



26,000 25,500 25,000 24,500 24,000 23,500 1/29/2018



Marrion ticked off three additional reasons to be bullish on annuities going forward: 1. Rising interest rates. The Federal Reserve hiked rates to 1.75 percent last month, the highest since 2008. Chairman Jerome Powell projects a total of three rate hikes this year. 2. Market volatility. Factors such as trade wars and international conflicts are contributing to instability in the markets. 3. Bully pulpit. A phrase coined by President Theodore Roosevelt in 1900 is an apt description for the impact President Donald J. Trump is having. The current stock market “bull” run stands at 110 months. By midsummer, it could match the longest bull market since World War II, Marrion noted. At some point, it has to end. And that makes investors more nervous with each succeeding month, Marrion said. Many of them remember the 2008-09 crash, when many Americans lost a sizable portion of their retirement savings. “It’s not really an accumulation story that we’re talking about in 2018; it’s a protect-what-you’ve-accumulated story,” 26

InsuranceNewsNet Magazine » June 2018






Marrion said. “And that’s the story that people are going to be listening to as the market keeps getting choppier and choppier.” Sales of fixed annuities — a product aimed at offering growth with protection from any losses — surged following the 2008-09 market crash. FIA sales could logically rise again. Otherwise, bond returns have been hurt by rising interest rates. A $100,000 U.S. Treasury bond purchased in August 2016 would be worth just $86,000 if sold today, Marrion noted. “We have a rising interest rate market, and in Finance 101 you learn that when interest rates go up, the value of existing bonds goes down,” he added. The Fed could hike rates another 2 to 3 percent in the next couple of years. “The value of existing bonds is going to get hammered,” Marrion said. “Maybe bonds aren’t the best place to be if you’re trying to protect what you’ve accumulated.”

“Most presidents are very shy about saying anything that will affect the financial markets,” he said. “The current president is not reticent about expressing his opinion, even if it might affect the market. We have a bull market in its 10th year, and it’s sensitive to nerves.” Meanwhile, efforts to establish some form of a best-interest standard that tightens regulation of annuity sales is ongoing. The Securities and Exchange Commission has a rule based on additional and clearer disclosures. The National Association of Insurance Commissioners is working on a best-interest model law for annuity transactions. Theoretically, each state would then adopt that law, although the 50-state disparity of opinions makes that a dicey goal. The bottom line is there will likely be tougher regulation of annuities to come, but signs are it won’t be restrictive enough to inhibit stronger sales.

Trump Unplugged

Financial advisors have shied away from annuities. That was an unfortunate development that limits retirement planning to this day, said Jamie Hopkins, Retirement Income Program co-director at The American College. “We’re trying to figure out how to take a lot of these investment products, insurance and other areas, and actually

The wild-card factor comes from the West Wing, where a tweet by President Donald J. Trump can send the stock market into a frantic sell-off. We’ve seen it happen several times already this year. Trump’s use of the bully pulpit will likely continue to have implications for the markets, Marrion said.

Evolving in the Insurance World

Source: 2018: Annuity Sales Rebound, NAFA and Advantage Compendium, Ltc.

The wild swings in the Dow Jones Industrial Average so far in 2018 are due in some part to the provocative statements and tweets from President Donald J. Trump, market analysts say.



Fiduciary Scorecard 1. DOL Rule: The DOL fiduciary rule is virtually dead after the Fifth Circuit Court of Appeals tossed out the rule March 15. The government declined to appeal, and separate appeals by AARP and three states were rejected by the court. There are two very slim chances the rule could be revived: The U.S. Supreme Court could get the case, although the federal government would have to request the hearing. Since the government did not appeal the Fifth Circuit decision, that seems unlikely. Likewise, the Fifth Circuit could initiate a review of its decision, but since it declined two review requests by petitioners, that also seems unlikely. 2. SEC: The agency’s “Regulation Best Interest” targets commission-based sales by broker-dealers but does not apply to insurance agents. It requires additional disclosures and mitigation of conflicts but does not give investors the right to sue. Critics, including SEC Commissioner Kara Stein, say it does not go far enough. 3. The States: As the National Association of Insurance Commissioners struggles to find consensus on an annuity transactions model law, some states are moving ahead with their own rules. New York, in particular, is in the public comment phase of a controversial package of rules that apply to both annuities and life insurance. New York state officials say they will adopt the rules this year. 4. The Courts: Consumer groups such as AARP have shown a desire to litigate the fiduciary issues and they remain a factor. The Consumer Federation of America, in particular, has repeatedly expressed a willingness to go to court if any rules fall short of fiduciarylike protections for investors. 5. Legislation: Republicans have long touted the Financial CHOICE Act as the vehicle to put any fiduciary regulation in the hands of the SEC. However, the House and Senate have been unable to agree on a comprehensive bill. With the DOL rule seemingly dead and the SEC rule on the table, this legislative angle now seems unnecessary.

build them back into the comprehensive planning,” he said. “It’s very different than most other professions. Typically, you have a generalist, and then specializations build off of it. But we’re kind of backwards in the way we did that.” As regulation of agents and advisors appears heading to a more consistent standard for all, it will affect the marketing and sales of annuities. The task for annuity companies is to win over RIAs. So far, they are embracing the challenge. As the DOL rule crept closer to reality, with its punitive liability attached to commission-based sales of variable and fixed indexed annuities, providers turned to fee-based concepts. Even though the DOL rule is likely to disappear, the feebased annuities are not. Insurance companies including Pacific Life, Great American Life and Lincoln Financial Group have launched fee-based variable and fixed-indexed annuities over the past year. Rather than charge an upfront commission, the advisor is paid in the form of annual fees on the assets. The potential to appeal to the advisory side is too great to turn back. But to date,

market penetration has proven elusive. Fee-based variable and indexed annuities, considered critical to attracting RIAs, finished 2017 with sales of $2.3 billion, or about 3.1 percent of all variable and indexed annuity sales, data show. Fee-based variable annuity sales in 2017 reached $2.2 billion, but that was still only about 2.7 percent of all VA sales

Speaking during recent earnings calls, insurance company executives say they are full speed ahead on fee-based product lines. “While in the early stages, sales momentum is growing in our variable annuity business as product portfolio expansion enables us to take market share now while fee-based products, such as Core

“RIAs are now talking about annuities.” — Jason Wellmann

last year, according to preliminary data released by LIMRA Secure Retirement Institute. Fee-based indexed annuities finished with sales of $138 million, just 0.4 percent of all indexed annuity sales last year. Still, while these numbers are low, they are rising.

Income, will build over time and help support long-term growth,” said Dennis Glass, president and CEO of Lincoln. The biggest issue is sorting out the complex compensation issues, Hopkins said. “There is a compensation hurdle upfront,” Hopkins said. “Traditional June 2018 » InsuranceNewsNet Magazine







3.50% Mar 17 Apr 17 May 17 Jun 17 advisors that are being paid as assets under management or something similar to that are typically hesitant to use assets that would reduce their assets under management and essentially lower their compensation.” The problem is that many of the early fee-based annuity product designs are ill-suited to any fair compensation arrangement, analysts say. “More annuities have been created as of late to fit more in a flat compensation arrangement,” Hopkins said. “That is something and with account values, so there are ways to operate around that, but it’s still a lot of work today for a traditional advisor depending on their compensation.”

Hybrid Model

A separate potential trend that could bridge the compensation gap is the “hybrid” advisor, who accepts both commissions under the insurance model and fees as a fiduciary. Robert Klein is a hybrid financial advisor focused on retirement planning in Newport Beach, Calif. He turned to fixed annuities after seeing so many investors lose big chunks of their retirement portfolio in the 2008-09 market crash. Fixed annuities allow clients to make gains in the market while offering complete downside protection. 28

InsuranceNewsNet Magazine » June 2018

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“If you’re specializing in planning, especially retirement income planning, you’re shortchanging clients if you don’t have a working knowledge of what annuities can do,” said Klein, founder of the Retirement Income Center. There needs to be “more education at the RIA level,” Klein said. Traditional advisors can make annuities work on a

to be a little bit more palatable because they might take commissions off of it or have a flat slanting fee,” Hopkins said. “Perhaps it doesn’t really matter; we don’t see a lot of advisors out there in the world using that model.” The key might be changing perceptions. For many in the advisory world, annuities are an anathema treated with

“It’s not really an accumulation story that we’re talking about in 2018, it’s a protect-what-you’veaccumulated story.” — Jack Marrion commission basis if they establish a separate department focused on retirement income planning, he added. Hybrid advising might be a trend that picks up momentum as regulation takes shape. It might already be happening, according to Cerulli Research data. Hybrid assets rose in market share from 6.2 percent in 2006 to 8.8 percent in 2016, the firm found. “With hybrid model advisors, it’s going

a scorn personified by Ken Fisher’s career-defining “I hate annuities” spiel. DPL Financial Partners talked to 118 RIAs and found that 70 percent consider insurance “an important component of a holistic financial plan.” Yet, just 25 percent offer clients the full range of insurance products. In other words, they shy away from annuities. Some of the skepticism is justified. But the days of wild surrender charges and

Source: 2018: Annuity Sales Rebound, NAFA and Advantage Compendium, Ltc.

Rising interest rates are going to hurt the value of existing bonds. That makes fixed indexed annuities a better option for investors going forward, said Jack Marrion, longtime industry analyst.

POST-DOL IGNITION COVER STORY other high fees are probably gone for good. Fiduciary and best-interest regulatory scrutiny is coming from state as well as federal regulators. “The fiduciary rule came in place, and it caused a lot of companies to revamp some of their products and bring down fees,” Hopkins said. “Some of the products came down dramatically. So that’s

While the bill contains several components, an important one would allow employees to invest their employer-sponsored plan assets in a portable annuity. Employees could take the annuity with them if their employer switches to a new plan provider or the employee changes jobs. A similar bill was introduced in the

“More annuities have been created as of late to fit more in a flat compensation arrangement.” — Jamie Hopkins really a good thing for advisors and consumers to feel a little bit more comfortable with the product.”

Changing Attitudes

Many retirement experts expect annuities to continue to gain in stature from an unlikely partner: the federal government. Even as DOL bureaucrats sought to attach legal liability to the sale of variable and fixed indexed annuities, other Obama administration officials were encouraging the use of annuities in retirement planning. In particular, a 2015 White House Conference on Aging report recommended “access to, and use of, annuities or other arrangements designed to provide a lifetime stream of income through retirement.” “Adding lifetime income options to 401(k)-type plans and IRAs will help transform their savings into future income,” it said, noting this will “reduce the risks that retirees will outlive their savings or that their living standards will be eroded by investment losses or inflation.” Even though Obama is gone from the Beltway scene, the support for annuities is now bipartisan and has spread to Congress. In March, Senate Finance Committee Chairman Orrin Hatch, R-Utah, introduced the Retirement Enhancement Savings Act of 2018 with ranking member Sen. Ron Wyden, R-Ore.

House and enjoys bipartisan support. “Working Americans are struggling to set money aside for retirement,” Wyden said in a news release. “This bipartisan bill gives employers incentives to make it easier for their employees to save. It also allows seniors over 70 to make tax-free contributions to their IRA. These types of provisions are key to addressing our country’s savings crisis.” The Obama administration Treasury Department boosted annuities in 2014 by authorizing qualified longevity annuity contracts (QLACs). The Treasury guidance permits QLAC owners to defer required minimum distributions to as late as age 85. Klein has sold a good number of QLACs over the past 3-1/2 years, and every sale has been to a high-net-worth client. “The primary purpose of each sale has been to provide sustainable lifetime income later in life,” he said. The subject of QLACs is coming up more frequently with clients, Klein said, and he has seen an uptick in interest in QLACs, a special kind of deferred income annuity. Last year, 34.8 percent of income annuity quotes were for income annuities with a start date of 13 months or more, according to CANNEX USA, an annuity quotation tracking service. In 2016, 32.1 percent of income

annuity quotes were for DIAs with a start date of 13 months or more, and in 2015, only 28.3 percent of quotes were for DIAs with the delayed start date, CANNEX reported.

Advisors Should Know FIAs

It’s no secret why governments and analysts are linking annuities to retirement savings, despite their sometimes spotty reputation. Americans cannot rely on Social Security alone. Americans 40 to 45 years old report a median retirement account balance of $14,500, according to the Schwartz Center for Economic Policy Analysis. That is less than 4 percent of what the median-income worker will require in savings to meet his or her retirement needs, Harvard Business Review reported. Meanwhile, Social Security offers a persistently declining percentage of the required retirement income. For a median-income worker, Social Security minus Medicare premiums today covers about 29 percent of their preretirement income, down from 40 percent two decades ago, HBR added. The responsible financial advisor is serving the client well if he or she strongly considers a fixed indexed annuity, said Roger G. Ibbotson, emeritus professor of finance at the Yale School of Management. He bases his affinity for FIAs on the faltering bond market. While bond yields recently hit 3 percent for the first time in four years, that is well short of the 7 and 8 percent and even double-digit bond yields of the 1990s. A $100,000 U.S. Treasury bond purchased in August 2016 would be worth just $86,000 if sold today. “In many scenarios, indexed annuities are likely to outperform bonds in the future, even after costs are deducted,” said Ibbotson, who recently released a paper titled “Fixed Indexed Annuities: Consider the Alternative.” Of course, there is a downside, and the product fits specific client profiles best. “The downside is liquidity. You’re actually making a commitment for a number of years when you buy, at least with annuities in the accumulation stage,” Ibbotson said. “You’re protecting against longevity risk in retirement because we don’t know June 2018 » InsuranceNewsNet Magazine



$265 $239

$156 $128 $109








$111 $82













$117 $105

LIMRA Secure Retirement Institute Annuity Sales Estimates 2009









$108 $96


Please attribute any reference toFixed this material Secure Retirement Total Annuityto LIMRAVariable Annuity Institute 1

Source: LIMRA Secure Retirement Institute, U.S. Individual Annuities survey


Sales values in billions how long we’re going to live.” moving in the direction of trying to tai- growth of fee-based annuities, an August $239 $238products that actually meet $237the $236 Principal protection is the key for this lor-make 2017 study found that products are hit$230 $222 $220 type of client. You de-risk the portfolio needs of investors,” he said. ting the$222 market faster, there is more $204 nearing retirement, but FIAs still give the transparency in how agents are paid and client some chance to participate in mar- ‘Talking About Annuities’ efficiency is improving in the administra$158 $156 ket returns, he explained. Taken together, perception, regulation, tion of annuities. $147 $145 $141 $140 “We don’t know when we’re$128 going to product evolution and market conditions $133While some insurers are doubling $117 die, and here’s the problem — we might are all trending in the direction of annu- down on their career $108 force, said consullive too long and outlive our assets,” ities becoming a stronger part of the RIA tant Chris Eberly, many others are look$111us pay $109 help Ibbotson said. “But annuities product line. ing for RIAs $105 through which to distribute $103 $97 annuity products.$96 $84 $82 $80 $72 Insurers are attracted to RIAs because they are growing rapidly and are more profitable and capturing more assets faster than other 2008 2009 2010 2011 2012 2013 2014 2015 2016 channels. 2017 “I’ve not come across a carrier saying Please attribute any reference to this material to LIMRA Secure Retirement Institute we’re dumping our captive and going RIA,” Eberly said. “But I have come across 1 Source: LIMRA Secure Retirement Institute, U.S. Individual Annuities survey Sales values in billions carriers saying we have a captive, but we want to grow our RIA.” for the rest of our life, and they help us “RIAs are now talking about annuto achieve that goal. So ultimately what ities,” said Jason Wellmann, senior vice InsuranceNewsNet Senior we’re describing here is insurance.” president of Life Insurance Sales for Editor John Hilton has covered business and other The important thing with fee-based Allianz Life. beats in more than 20 years annuities is what they can accomplish for The distribution channels are changing of daily journalism. John advisors and clients, Ibbotson said. along with the product designs as the in- may be reached at john.hil“I recognize there are some problems dustry responds to regulation and chang- with the industry, but I think they’re ing demographics. In addition to the

“In many scenarios, indexed annuities are likely to outperform bonds in the future, even after costs are deducted.” — Roger G. Ibbotson


InsuranceNewsNet Magazine » June 2018

Source: LIMRA Secure Retirement Institute, U.S. Individual Annuities survey (Sales values in billions)

LIMRA Secure Retirement Institute Annuity Sales Estimates Although the annuity market has been dropping the past few years, a shift Total and equity Fixed Annuity in regulation market conditions is Variable setting upAnnuity a comeback.

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In this year’s Annuity Awareness Month Thought Leadership Series, great minds from six different companies offer their perspective on products, process, and the future of an ever-changing annuity marketplace.



Transperency. Independence. Objectivity. Featuring Scott Matheson and Dennis Rupp of TIAA-CREF Life Insurance Company PAGE 32

Retirement Spotlight: The Strategy to Help Clients Better Prepare By Graham Day of AXA Distributors, LLC PAGE 38

Great-West Financial Annuity Helps Advisors, Investors Manage for Market Cycles A Q&A with Lance Carlson of Great-West Financial PAGE 34

This Asset-Based Alternative to LTC Insurance May Be the Solution A Q&A with Chris Coudret of OneAmerica PAGE 40

Get to the Heart of Retirement Matters By Douglas Dubitsky of The Guardian Life Insurance Company of America PAGE 36

It’s All About Accumulation Potential A Q&A with Ron Barrett of Fidelity & Guaranty Life Insurance Company PAGE 41

InsuranceNewsNet Magazine » May 2017

June 2018 » InsuranceNewsNet Magazine


The Annuity Issue • Special Sponsored Section

Transparency. Independence. Objectivity. A unique approach for RIAs and their clients


rom building strong relationships to helping clients feel more confident about their financial well-being, advisors act as financial quarterbacks and help clients chart their overall financial plan. However, there are several industry trends that are making it difficult for advisors to provide this type of service to their clients, including:

» Commoditization of asset management services » Growing competition for financial planning services » Continuous launch of new and different Robo-Advisors or self-serve financial products

» Increasing scope of customers’ financial planning needs So how do registered investment advisors (RIAs) continue to demonstrate their unique value to their clients and attract new clients to their firms as efficiently as possible? The key is to partner with an expert who can provide industry-leading financial solutions and white-glove service on behalf of the RIA. Insurance is one of a clients' most significant financial needs. Of nearly 125 million U.S. households, 48 percent are under- or uninsured (LIMRA, 2016 Life Insurance Ownership Study). RIAs can differentiate themselves by offering a Scott Matheson, CLU, ChFC high-quality insurance solution but do it Manager, Product efficiently by partnering with TIAA-CREF Strategy & Execution Life Insurance Company (TIAA Life).

Industry-Leading Financial Strength

TIAA Life offers strong name recognition, superior financial ratings, a collaborative approach and dedicated employees who support RIAs’ productivity and success. TIAA Life is one of only three insurance groups in the U.S. to hold the highest ratings currently awarded by all four leading independent insurance industry rating agencies. “Ratings and stability are really imDennis Rupp, portant in the RIA community, where Director, Insurance they need to make the highest-quality Wholesaling recommendations to their clients for life insurance and annuities,” said Scott Matheson CLU, ChFC, manager, product strategy & execution, TIAA Life. “When they consider working with TIAA Life, they’re getting the A.M. Best top tier.”

A Unique Approach to RIAs and Their Clients

With TIAA Life, advisors own the relationship with their clients. TIAA Life sees its role as supporting and guiding advisors and their staff, as well as offering insurance-related back-office support, which frees up advisors’ time and reduces their overhead. “Clients and RIAs build the relationship together; they look to us as a facilitator,” says Dennis Rupp, director, insurance wholesaling, TIAA Life. “The advisors do the planning. They come up with what solution the client needs, and we help them implement that solution. That advisory relationship is at the heart of everything we do.” Rupp adds that “it’s important for RIAs to understand that TIAA Life operates as a collaborative resource. “We respect the sanctity of client relationships,” he said. “Some companies see an advisor’s clients as potential sources of future revenue. TIAA Life takes a different approach; we work to protect and preserve the individual advisor relationship.”

Client-Friendly Products With Growth Potential

From risk mitigation to wealth protection and legacy planning, life insurance and annuities can be important aspects of wealth planning. Incorporating product solutions that meet these goals in an RIA’s practice can help advisors gather and consolidate assets and preserve their central role in managing client wealth. “Clients appreciate The key is working with the low-cost, low-expense right insurer and products. products1 that give “We bring innovative them the opportunity products to the market without having to worto maximize their ry about how it impacts returns by paying less a traditional, commisin fees and expenses." sion-driven distribution model,” says Rupp. “Our affordable solutions are designed to be transparent and easy to understand. There are no hidden fees.” One way in which RIAs add value to their client relationships is by selecting product. TIAA Life’s noncommissionable lineup is competitively priced, offers a simplified cost structure and has no surrender charges. “Clients appreciate low-cost, low-expense products4 that give them the opportunity to maximize their returns by paying less in fees and expenses,” said Matheson. “It’s become more important in life insurance and annuity products, where you can really show a difference if you’re using fee-based or fee-only products with low costs and no surrender charges.”

TIAA Life holds the following ratings as a result of its relationship with TIAA: A.M. Best (A++), Fitch (AAA) and Standard & Poor's (AA+), and the second highest possible rating from Moody’s Investors Service (Aa1).1 In addition, TIAA Life has a Comdex rating of 99. TIAA Life is a wholly owned subsidiary of Teachers Insurance and Annuity Association of America (TIAA), which recently celebrated 100 years of putting clients first.


InsuranceNewsNet Magazine » June 2018

The Annuity Issue • Special Sponsored Section

Solutions Designed for RIAs

At the heart of TIAA Life’s RIA platform is a white-glove service philosophy. For RIAs, it’s a unique insurance service and support model. TIAA Life representatives handle all required insurance-related activities. Since TIAA Life’s salaried personnel act as the agents of record, there is no need for the advisor to have an insurance license. This model offers a fiduciary-

Why TIAA Life? Your Own Sales Team You don’t have to be a licensed insurance agent. You can focus on planning — and leave insurance sales, case design and processing to us. Technology Dedicated advisor secure site to view managed accounts, plus integration with your portfolio management system. Value Competitively priced solutions with transparent and low up-front fees and no surrender charges Customization Wide range of investment options, including over 60 funds from 20 money managers Performance 77% of Intelligent Variable Annuity’s investment accounts received a Morningstar overall rating of 4 or 5 stars across all asset classes (as of Dec. 31, 2017)2 Financial Strength TIAA Life has a Comdex score of 99 3 and is a member of one of only three insurance groups in the United States to hold the highest rating available to U.S. insurers from three of the four leading independent insurance company rating agencies. 4 friendly way for advisors to integrate insurance with their wealth management planning. “Many advisors don’t have an insurance license for various reasons,” said Rupp. “As a result, they may refer life insurance business out or not address it at all. We offer the alternative to work with TIAA Life to offer life insurance and annuities when they’re an appropriate part of the financial plan.” “We’re a partner that can work with them whether they’re

licensed or not, a partner that can actually bring in third-party tools and resources and even advanced planning professionals who can help with a more complex planning situation,” said Matheson. “Plus, advisory fee compensation can be assessed from within our insurance products.” We provide comprehensive integration of a client’s insurance holdings with the advisor’s portfolio management system.

A Full Suite of Products for RIAs

TIAA Life offers a full suite of non-commissionable products that help clients manage taxes and protect and transfer wealth, including term life insurance, universal and variable universal life, survivorship products, and annuities. Having that breadth of services in one place helps RIAs consolidate and retain client assets — and manage more of their overall portfolio. In addition to cost transparency and one-stop financial management, TIAA Life’s Intelligent Life Variable Universal Life and Intelligent Variable Annuity (IVA) also have a broad base of fund options that make it easy for an advisor to customize an appropriate asset allocation. They offer a wide range of investment options, including more than 60 funds from 20 well-known money managers. “When clients move to the TIAA Life lineup, they’ll be able to select investment options from some of the most noted quality names in the investment space, names like TIAA, of course, but also Vanguard, Dimensional, T. Rowe Price and PIMCO, among others,” said Matheson. “In addition to TIAA’s brand strength, offering a diverse lineup of high-quality investment options really backs up the RIA’s product recommendations.” TIAA Life’s IVA is a non-qualified, flexible, premiumdeferred annuity with some of the lowest fees in the industry. “IVA has several unique attributes,” said Rupp. “One is the pricing structure of the product. The mortality and expense charge is banded, so the higher the value, the lower the M&E charge. It’s that simple. As a matter of fact, our IVA has been named to Barron's Top 50 Annuity list five years in a row.5” “And after 10 years, the mortality and expense charges completely go away. Nobody else does that,” said Matheson.

RIAs looking for top-notch insurance and annuity products, as well as unique back-office support, can check out how TIAA Life’s products stack up against the competition at:

To learn more, call 866.966.5623.

1. TIAA Life’s Intelligent Variable Annuity’s maximum annuity expense charge ranges from 0.45% to 0.70%. If the Guaranteed Minimum Death Benefit option is selected, the fee is 0.10% and the maximum expense charge ranges from 0.55 % to 0.80%. All expense information presented here is as of the prospectus dated May 1, 2017. Please see the prospectus for more information. According to Morningstar, the average annuity expense charge is 1.30% for all nongroup variable annuity subaccounts in Morningstar Direct as of 4/16/18. ©2018 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 2. According to Morningstar, 37% of Intelligent Variable Annuity’s investment accounts received 4 stars and 40% received 5 stars as of 12/31/17. Morningstar ratings reflect historical risk-adjusted performance, and are subject to change every month. Past performance does not guarantee future results. Some restrictions and fees may apply so see the prospectus for details. 3. Highest possible ratings held by TIAA Life from all major rating agencies and a score of 99 on the Comdex. Comdex ratings data as of 2/1/18. The ranking is a composite of the average percentile ranking of ratings received by each insurer from the rating agencies. 4. For its stability, claims-paying ability and overall financial strength, TIAA-CREF Life Insurance Company is a member of one of only three insurance groups in the United States to hold the highest rating available to U.S. insurers from three of the four leading independent insurance company rating agencies. TIAA-CREF Life Insurance Company (TIAA Life) is a wholly owned subsidiary of Teachers Insurance and Annuity Association of America (TIAA). TIAA Life holds the following ratings as a result of its relationship with TIAA: A.M. Best (A++ as of 6/17), Fitch (AAA as of 11/17) and Standard & Poor's (AA+ as of 8/17), and the second highest possible rating from Moody’s Investors Service (Aa1 as of 2/18). There is no guarantee that current ratings will be maintained. The financial strength ratings represent a company’s ability to meet policyholders’ obligations and claims and do not apply to variable annuities or any other product or service not fully backed by TIAA Life’s claims-paying ability. The ratings also do not apply to the safety or the performance of the variable accounts, which will fluctuate in value. 5. "The Top 50 Annuities” – Barron (2013–2017)


June 2018 » InsuranceNewsNet Magazine


The Annuity Issue • Special Sponsored Section

Great-West Financial Annuity Helps Advisors, Investors Manage for Market Cycles Index-linked deferred annuity offers potential to achieve gains while managing downside risk


channels, including banks, independent broker-dealers and s clients near retirement, registered investment advisors. it’s natural for them to How does Great-West Capital Choice™ annuity help adplace more value on provisors and clients manage for market cycles? tecting what they have Our cap rates are competitive, and we’re getting great feedearned. But that doesn’t back from advisors and broker-dealers, especially when we mean they have to choose between compare against what’s available in the field today. growing and protecting a portion of their We have a bigger budget for the derivative market, so we assets. Great-West Capital Choice™ (Capcan actually provide a better cap rate. For example, our cap ital Choice) allows them to do both, and rate as of May 18, 2018 — if you were willing to take a 10 peron their terms. cent floor — on the S&P was 11.25 percent. Great-West Capital Choice™ is a single premium deferred Capital Choice comes with a six-year withdrawal charge. index-linked annuity designed to provide clients with upside An annual fee of 1.2 percent on the starting contract value potential up to a cap, measures of downside protection1 and enables the product to offer a higher participation rate. flexibility, so they can adapt a strategy annually to meet their Cap rates matter to consumers who want to grow their aschanging needs. sets, and if we can give them higher cap rates to participate in Lance Carlson, head of distribution at Great-West Finanthe market, over time they can allow for better annuity percial, offers insight into a variety of linked-index and protection formance for the consumer. So, we purposefully have a stated options and how advisors can tailor a strategy to match clients’ fee, and being able to use that fee to offer higher cap rates is a risk tolerances and appetites for growth potential. strong consideration. Are consumers becoming more interested in not havMost companies offer either a buffer or a floor. What ing to choose between growing and protecting their assets are the benefits of having both available? when it comes to retirement? Capital Choice offers two distinct levels of protection option Absolutely. There are clients who may not need income features, the floor and the buffer. A client may choose a floor, a today, but they have savings for income down the road and buffer or a combination of both to create a strategy that matches are unsure where to invest it, especially based on what’s been their appetite for potential accumulation with their risk tolerance. happening in the market recently. The ability to not only grow When downside protection is the priority, the floor acts as a assets, but also be able to have levels of protection from the “stop-loss,” adding a measure of protection for your investment downside, is a shift from traditional annuities where the goal was to guarantee income for as long as they lived and also give them the potential for growth. Folks who have money that they want to put away for their long-term retirement income don’t necessarily want to pay for a guaranteed income rider today. Capital Choice allows clients to be in the market. The product is designed to mirror the linked indices to offer potential growth if the market does well, but clients can also choose their level of downside protection. We see Capital Choice as a high-value product that makes When you are more confident in the market When downside protection is your priority sense in the marketplace and The floor acts as a “stop-loss,” protecting The buffer protects your investment when is available for a broad array of your investment when index losses occur index losses occur within the buffer, but not consumers. That’s why Greatbeyond the floor. beyond. West has both fee- and commisFor example, if you select the -10% floor and For example, if you select the -10% buffer and sion-based versions of Capital the index falls 15%, you incur a loss of 10%. If the index falls 25%, you incur a loss of 15%. If Choice designed specifically to the index rises, you may enjoy growth up to the index rises, you may enjoy growth up to your cap — in this case 11%. your cap — in this case 12%. work well with all distribution FOR ILLUSTRATIVE PURPOSES ONLY


InsuranceNewsNet Magazine » June 2018

The Annuity Issue • Special Sponsored Section

when index losses occur beyond the floor. When the client is more confident in the market, the buffer adds a measure of protection for their investment when index losses occur within the buffer, but not beyond. And investors can change their protection strategy annually. Our cap rates are set every two weeks based on the current market environment. There is a lot of opportunity for advisors to grow their business with this product. When these products started almost a decade ago, industry sales were a few million. They were almost at $9 billion in 2017. What was the thought process behind the four indexlinked options selected for the product? Capital Choice enables advisors to choose one or more well-known index-linked options: S&P 500® Price Return Index, Russell 2000® Price Return Index, NASDAQ-100 Price

What are index-linked annuities? Index-linked annuities are long-term, tax-deferred investments designed for accumulation. They have associated contract fees, involve investment risks subject to the underlying indices and may lose value. Earnings are taxable as ordinary income when distributed. Withdrawals in excess of the free amount, or full surrender of the contract, may be subject to withdrawal or surrender charges, and may apply a market value (or similar) adjustment, which may increase or decrease the amount an investor will receive. Withdrawals prior to 59 ½ may be subject to a 10% additional tax. Allocations are not invested directly in an index. There is a substantial risk of loss of principal depending upon the chosen Index Strategy. The cap is the percentage that determines how much the account can grow, which may cause it to underperform the market index. The cap may change each contract year based on the strategy chosen but will be no less than 1.5%.

Return Index and MSCI EAFE Price Return Index. We’re starting with those four. They offer choices for consumers within one contract itself. We think that advisors should have the ability to mix and match the index-linked options, based on their clients’ needs. What value did Great-West gain by taking a slower approach to launching Capital Choice? Capital Choice is the first index-linked annuity from GreatWest Financial, but it wasn’t the first to market. When you’re not first in something, you can analyze what’s being sold in the marketplace and what features and benefits are really resonating. You can build products by listening to consumers and listening to independent broker-dealers and registered investment advisors. What’s different about Capital Choice’s standard death benefit? The contract comes with a return-of-premium death benefit2 as standard, and investors up to 90 years old are eligible to purchase the product. Some competing products are only available to buyers no older than age 85. For a client who’s worried about a spouse or leaving a legacy with this particular asset, I think having a return of premium death benefit imbedded into the cost is a comforting advantage. The client knows if they don’t need or use the income, they can at least pass on what they started with.

Visit to download a comprehensive product information sheet and watch an informative video that will help your clients achieve their full retirement potential, while also managing risk.

A linked-index is one (or more) of the third-party broadbased securities indices available to investors under the contract. Any guarantees are subject to the terms and conditions of the contract and the claims-paying ability of the insurer. 1. Protection options are referred to as crediting factors in prospectus. Allocations are not invested directly in an index. 2. Beneficiaries receive the greater of the surrender value minus any premium tax or the purchase payment less any surrenders, withdrawals and premium tax. The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which the communication relates. Before investing read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more information about the issuer and this offering. These documents are available for free by visiting EDGAR on the SEC website at Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send the prospectus if requested by calling toll-free 1-877-723-8723.

Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York do not offer or provide investment, fiduciary, financial, legal or tax advice or act in a fiduciary capacity for any client unless explicitly described in writing. Please consult an investment advisor, attorney and/ or tax advisor as needed. Great-West Financial®, Empower Retirement and Great-West Investments™ are the marketing names of Great-West Life & Annuity Insurance Company, Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: New York, NY; and their subsidiaries and affiliates, including registered investment advisers Advised Assets Group, LLC and Great-West Capital Management, LLC. AM483488-0518

Carefully consider the investment objectives, risks, fees and expenses of the annuity and/or the investment options. Contact us for a prospectus, a summary prospectus and disclosure document, as available, containing this information. Read them carefully before investing.

The S&P 500® Index is a product of S&P Dow Jones Indices LLC (SPDJI), and has been licensed for use by Great-West Life & Annuity Insurance Company (Great-West). Standard & Poor’s®, S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Great-West. This annuity product is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) or have any liability for any errors, omissions or interruptions of the S&P 500 Index.

Securities offered or distributed through GWFS Equities, Inc., Member FINRA/SIPC and a subsidiary of Great-West Life & Annuity Insurance Company.

The Russell 2000® Index is a trademark of Russell Investments and has been licensed for use by Great-West Life & Annuity Insurance Company (Great-West). This annuity product is not

sponsored, endorsed, sold or promoted by Russell Investments, and Russell Investments makes no representation regarding the advisability of investing in this annuity product. Equity securities of small and mid-size companies may be more volatile than securities of larger, more established companies. Nasdaq®, NASDAQ® and NASDAQ-100® are registered trademarks of Nasdaq, Inc. (which, with its affiliates, is referred to as the “Corporations”) and are licensed for use by Great-West Life & Annuity Insurance Company. The product(s) have not been passed on by the Corporations as to their legality or suitability. The product(s) are not issued, endorsed, sold or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the product(s). Foreign investments involve special risks, including currency fluctuations, taxation differences and political developments. Index linked annuity contracts (ILVA-Core, ILMGA-Core, ILVARIA-Core, ILMGA-RIA-Core) and appropriate state variations are issued by GWL&A. GWL&A is not licensed to do business in New York. Contracts may not be available in all states. The products or securities referred to herein are not sponsored, endorsed or promoted by MSCI, and MSCI bears no liability with respect to any such products or securities or any index on which such products or securities are based. The prospectus contains a more detailed description of the limited relationship MSCI has with Great-West Life & Annuity Insurance Company and any related products. Foreign investments involve special risks, including currency fluctuations, taxation differences and political developments. NOT FDIC, NCUA/NCUSIF INSURED | NOT A DEPOSIT | NOT GUARANTEED BY ANY BANK OR CREDIT UNION | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | FUNDS MAY LOSE VALUE | NOT A CONDITION OF ANY BANKING OR CREDIT UNION ACTIVITY

June 2018 » InsuranceNewsNet Magazine


The Annuity Issue • Special Sponsored Section

Get to the Heart of Retirement Matters Spark meaningful client conversations, make better connections and inspire confidence By Douglas Dubitsky, Vice President, Head of Wealth Management Products & Financial Planning at The Guardian Life Insurance Company of America®


or an advisor, it’s critical that you can speak to all the facets of a client’s retirement. It requires a 360-degree personalized approach since the realities of retirement matter across every aspect of their lives. To get to the heart of the matter, Guardian offers tools that include 20+ conversation starters you can use with clients. These conversation starters can be part of the foundation that helps you build a holistic approach to client interactions and helps them discover their retirement reality. When helping a client consider an annuity by factoring their entire life into the process (using Guardian’s 360-degree Retirement Matters™ approach below as a guide), you can be the client’s advocate who helps them have a more confident retirement.

1. Health Matters

Health care costs and people’s average life spans are both rising steadily. Addressing all of your clients’ concerns, including health habits, family history and the unknown, can help them build a confident retirement plan. Four in ten retirees encounter higher-than-expected health and long-term care costs, so it’s important to understand their health care concerns. For instance, some clients are counting on caregiving from a family member, while others cannot or will not. Knowing these facts sets the expectations for their retirement reality.1

Well before clients retire, they can map out the approximate number of vacations they expect to take, factor expected inflation into the costs of those trips and then multiply those costs by the number of years they expect to travel actively. Then, they can see what the total costs are and discuss including that amount in their retirement planning.

4. Relationship Matters

Relationships are deeply important to all of us. Take the time to understand your clients’ relationships and how they might change after retirement. What will it take to maintain them? How can they make friends in their second act? Retirees may need to pay dues or travel in order to maintain relationships. Some may want to make new acquaintances by taking classes. If activities are important to clients’ relationships, considering the costs now can help them plan for the relationships that matter most to them.

The 360-degree View of Retirement Matters™ 1. Health

Address clients’ concerns about rising health costs, planning for long-term care and illness, and Medicare availability.

2. Home

Help clients navigate the complexities of balancing costs and desires when determining where to live.

2. Home Matters

Our research has shown that one of clients’ top concerns is securing housing in retirement2. Help clients create a plan that addresses their specific needs, whether it’s staying in their home, downsizing or moving. This will not only help make their income last longer, but also allow them to live the lifestyle they’ve always wanted.

3. Lifestyle Matters

How will your clients spend their additional time after they leave the workforce? This has proven to be one of the bigger challenges retirees face — especially after spending most of their lives working. By learning how they want to stay active during retirement, you can help create a plan that makes their transition smoother while supporting them financially. For example, the chance to take frequent and extended vacations is something many retirees look forward to. But the costs of those vacations add up.

3. Lifestyle

Consider clients’ hobbies and recreational activities, and help them contextualize when planning.

4. Relationships

Ensure clients’ plans include a way to maintain their most important relationships.

5. Money

Inspire confidence in your clients with a plan that considers guaranteed and non-guaranteed income options to meet their needs and desires, while addressing their fears.

1. Sources of Retirement Income — A Study of Retirees: LIMRA 2. Guardian’s Study of Retirement Reality, 2017-2018. The study conducted was a fully blind concept with participants ranging from 45 to 65 years of age with $100,000 in investable assets, all with mixed levels of retirement preparedness.


InsuranceNewsNet Magazine » June 2018

The Annuity Issue • Special Sponsored Section

Start the Conversation What do your health and wellness habits look like today? What state, region or country do you want to live in? What are your current hobbies and interests, and which do you plan to pursue in retirement? Who are the most important relationships in your life with: a partner, kids or your friends? How much do you have in savings, and what is your asset allocation? 5. Money Matters

No one can plan financially if they don’t know what they’re planning for. That’s why we should look at each client’s financial state in the context of their health, home, lifestyle and relationships to make a clear plan that supports the retirement they’ve envisioned. The goal of an advocate, of you as their advisor, is to help clients feel secure and comfortable with their planning decisions so that no matter the state of the economy, they can make their dreams a reality. A health event, inflation or market fluctuations can impact retirement savings. A steady source of monthly guaranteed income can help prevent your clients from running out of money. While the marketplace seems volatile, your clients can move confidently into retirement with your help.

One of the most effective ways to maintain wealth is to preserve investment principal by using alternate income sources for day-to-day needs. That’s why products such as annuities can be critical components of a wealth preservation plan. They can provide clients with a steady income stream to meet everyday living expenses without siphoning off wealth or impacting the legacy they want to leave loved ones. Help them do a full assessment and understand what the sources of guaranteed income are, like an annuity, and non-guaranteed income sources, like a 401(k), as you set a plan with them.

Connect With Clients Where They Live

Clients are seeking the kind of customized service and advocacy you already provide for financial planning. At the same time, their fears about retirement relate to much more than just their financial situation. By addressing their individual wants, needs and experiences, you have an opportunity to differentiate yourself and create a deeper connection. You can have an even greater impact on your clients’ financial readiness by understanding what really matters across the full scope of their retirement — and it starts by asking the right questions.

Start generating meaningful retirement discussions with your clients. Visit to download a client-friendly tool that can help.


RISING HEALTH CARE COSTS Health care costs are rising fast! FOR A MARRIED COUPLE IN GOOD HEALTH LIVING TO AVERAGE LIFE EXPECTANCIES Estimate of amount of money needed to pay for Medigap and Medicare premiums, and other outof-pocket expenses. Long-term care not included!


Age 65

Age 65 IN 2010

IN 2020



Source: Employee Benefit Research Institute (EBRI) Issue Brief No. 351, Funding Savings Needed for Health Expenses for Persons Eligible for Medicare, December 2010.

2018-58326 04/18 (Exp. 04/20)

June 2018 » InsuranceNewsNet Magazine


The Annuity Issue • Special Sponsored Section

Retirement Spotlight:

The Strategy to Help Clients Better Prepare

Multistage variable annuity offers flexibility and adaptability to clients’ needs By Graham Day, Managing Director, Head of U.S. Individual Retirement Sales, AXA Distributors, LLC


elping clients meet their retirement planning goals can be a challenge. They often know their objectives but may not understand the products that can help achieve them. For many clients, protecting principal is a big concern, but they also recognize the need for growth to meet rising health care costs and manage the risk of inflation in the future. Financial professionals are looking for ways to help clients — especially those with a low tolerance for investment risk — find that balance. But clients aren’t just concerned with their own financial well-being. They want the flexibility to protect a spouse — whether they have one now or plan on of consumers expect marrying in the future. And they inflation to have an are worried about leaving a legacy impact on their retire7 after death for their loved ones. ment expenses. The challenge for many financial professionals is helping these multifaceted clients understand annuities and how they can help address all of these concerns. Educating clients about the benefits of variable annuities, such as AXA Equitable’s Retirement Cornerstone®, is a great start toward of consumers are interhelping them achieve their retireested in learning about ment goals. principal protection. 7



Inflation Protection

Each year, even with low rates of inflation, the dollar buys less and less. That means the future purchasing power of hardearned retirement dollars can be negatively affected over time. With Retirement Cornerstone® and the Guaranteed Minimum Income Benefit (GMIB) rider,1 available for an additional fee, clients can receive income that can potentially rise in retirement to help address inflation. But Retirement Cornerstone® can also address volatility and interest rate concerns a client may have. Investors also have the opportunity to increase their guaranteed income payments in three ways: capture gains in the market, take advantage of potentially rising interest rates and withdraw less now to get more later. Clients looking for an inflation strategy may be interested in the flexibility to take income when needed or potentially grow income for the future to help keep pace with inflation — both features of Retirement Cornerstone®.

Rising Income Potential MarketBased Resets5

Rising Interest Rates

What You Don’t Take, You Make

Captures possible market gains with annual resets

Takes advantage of potential interest rate rises with a compounding, Treasury-tied roll-up rate

Credits what’s left of the annual amount to the benefit base when the client takes less than the full amount

Retirement Cornerstone® variable annuity contract is offered by prospectus, which contains more complete information, including investment objectives, risks, charges, expenses, limitations and restrictions. Please read the prospectus and any applicable supplements, and consider this information carefully before purchasing a contract. A variable annuity like Retirement Cornerstone® is a long-term retirement product that allows investors the ability to invest for growth potential on a tax-deferred basis. In essence, an annuity is a contractual agreement in which payment(s) are made to an insurance company, which agrees to pay out income or a lump-sum amount at a later date. Retirement Cornerstone® provides guaranteed benefits through optional riders, which are available for an additional fee and may be elected only at the time of the application. The investor must be within certain ages to be eligible for the riders. Note that the investor’s retirement income is not protected until he or she begins paying for the rider. Once the first contribution or transfer is made, the investor is subject to a waiting period (10-15 years) before he or she can exercise the benefit to avoid reducing the benefit. AXA Equitable reserves the right to increase or decrease the benefit fees in the third year and may raise the GMIB/ GMDB fee to a maximum of 2.3 percent each. There are contract limitations, fees and charges associated with variable annuities, which include, but are not limited to, operations fees, sales and withdrawal charges, administrative fees, and charges for optional benefits. Withdrawals may reduce the death benefits and living benefit, will reduce the cash surrender value, and will, for tax purposes, come from any gain in the contract first. For costs and complete details of coverage, speak to a financial professional. The variable investment options will fluctuate in value and are subject to market risk, including loss of principal. Distributions taken prior to annuitization are generally considered to come from the gain in the contract first. If the contract is tax qualified, generally all withdrawals are treated as distributions of gain. Withdrawals of gain are taxed as ordinary income and, if taken prior to age 59 1/2, may be subject to an additional 10 percent federal tax. 38

InsuranceNewsNet Magazine » June 2018

The Annuity Issue • Special Sponsored Section

7 in 10

conservative investors fear they will run out of money. 7

Conservative investors need and want lifetime income.

Two-for-One Guaranteed Income

With 51 percent of Americans marrying at some point in their lives, spousal protection is an important part of retirement planning. But with the median age for marriage increasing,2 no one knows how far in the future it will happen for them. Retirement Cornerstone® with the GMIB rider provides clients with the certainty they want and the flexibility they need:

» Less upfront decision-making. » Guaranteed income protection for both spouses at no

additional cost beyond the rider fee. In other words, no requirement to pay more to cover two lives versus one.

» Built-in spousal continuation feature at no cost, and it can even be selected after the contract is signed. 3

If you're

If you're

If you're


you can elect income for

at issue and become


you can elect income for

at issue and stay

you can elect income for

at issue and become


Based on AXA’s one-page spousal continuation flyer.

Guaranteed Legacy in ALL Market Conditions

With Retirement Cornerstone®’s “Greater of” Death Benefit,4 available for an additional fee, investors will receive the same benefit growth as their income benefit (up to age 80). They can lock Opportunity to in top-performing years in up marGrow Assets for kets and receive guaranteed annual Loved Ones growth6 in down markets on top of the reset value to enhance and potentially build upon their legacy for loved ones. They can also receive distributions without reducing the Principal death benefit.1 Protection

Enhancing Benefits With Retirement Cornerstone ®

With today’s market conditions, a Market-Based well-rounded retirement plan that Resets includes strategies to guarantee income and preserve wealth for beneficiaries can be crucial. Retirement Cornerstone® is a multistage variable annuity that offers your Guaranteed clients the flexibility to address those Compounded goals with features and options that can Growth 6 adapt to their changing needs. Educate your clients about how Retirement Cornerstone® can help manage spousal income, customize income, take advantage of potentially rising interest rates and provide death benefits for loved ones with our free web app: If you are a financial professional, call our sales desk at 888.517.9900.

Visit to download a special report with valuable consumer insight based on our recent research study with Insured Retirement Institute (IRI).

1. Taking a withdrawal from the Protected Benefit Account during the first contract year after funding the benefit or taking a withdrawal greater than the Annual Withdrawal Amount in any given year may reduce guaranteed income amounts and may have an adverse effect on guarantees. 2. "U.S. Census – Marriages and Divorces Number and Rate by State: 1990 to 2009" (PDF). 3. Age restrictions apply. See Prospectus for more information. 4. Must elect GMIB to take advantage of this option. Not available in New York. 5. Benefit Base can be “reset” to equal the Protected Benefit Account Value on contract anniversaries. Note that a reset may extend the GMIB exercise date. 6. Death Benefit Base can grow and compound by annual Roll-Up Rate. 7. Protection, Growth and Income, Helping Consumers Reach Retirement Goals, based on a research survey conducted on behalf of the Insured Retirement Institute and AXA Financial Certain types of contracts, features and benefits may not be available in all jurisdictions. We offer other variable annuity contracts with different fees, charges and features. Not every contract is available through the same selling broker/dealer. Investors can contact us at (212) 554-1234 to find out the availability of other contracts. AXA Equitable, its distributors, and their respective representatives do not provide tax, accounting or legal advice. Investors should consult your own independent tax and legal advisors as to any tax, accounting or legal statements made herein. All contract and rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed solely by the claims-paying ability of AXA Equitable. “AXA” is the brand name of AXA Equitable Financial Services, LLC, and its family of companies, including AXA Equitable Life Insurance Company (NY, NY), AXA Advisors, LLC, and AXA Distributors, LLC. Retirement Cornerstone® 17 is issued by AXA Equitable Life Insurance Company (NY, NY). Co-distributed by affiliates AXA Distributors, LLC, and AXA Advisors, LLC (member FINRA, SIPC). Retirement Cornerstone® is a registered service mark of AXA Equitable Life Insurance Company. Contract form #s: ICC12BASE4 and ICC12BASE3 and any state variations © 2017 AXA Equitable Life Insurance Company. All rights reserved. 1290 Avenue of the Americas, New York, NY 10104, (212) 554-1234 G88552 GE-2094960 (5/18) (Exp.5/20) June 2018 » InsuranceNewsNet Magazine


The Annuity Issue • Special Sponsored Section

This Asset-Based Alternative to LTC Insurance May Be the Solution Linked-benefit annuities with LTC protection can tackle client concerns


aving a fixed stream of income — or not having one — can factor heavily into a client’s retirement experience and its enjoyment. That’s why annuities often play a vital role in a solid retirement plan. But what about clients who have saved and invested enough to live on during retirement without their annuity? For some clients, transferring existing annuities or other assets to a special type of annuity that combines long-term asset growth with longterm care (LTC) benefits may be an effective way to maintain their comfort and dignity in the future. Chris Coudret, vice president and chief distribution officer, OneAmerica®, offers insight into this LTC-planning option and ways to prepare for LTC expenses with annuities. Q. What kind of strategy can be useful for clients when they have existing annuities that are not needed for retirement income? Deferred annuities provide peace of mind for a lifetime income stream. Overall, retirees who have an annuity are more confident about being able to live the lifestyle they want in retirement than are those who don’t own an annuity, according to LIMRA Secure Retirement Institute. However, money set aside as “just in case” income can be forgotten about when it’s not needed, or worse, can come back to haunt retirees and beneficiaries as taxable income. Linked-benefit annuities provide a unique opportunity to use the annuity for tax-free long-term care benefits, with the option for lifetime LTC benefits and a death benefit if LTC benefits are not needed. Q. What are the tax advantages of linked-benefit annuities? Any part of the annuity used for LTC expenses won’t be taxed. For example, if a person purchases a linked-benefit LTC annuity paying $100,000 as premium, and if the account grows at 4 percent annually, 18 years later, the annuity value would be slightly more than $200,000. If, during the remainder of the annuitant’s life, the entire annuity value is paid out for LTC claims, none of the more than $100,000 gain in the contract would be taxed. On the other hand, if investment accounts such as securities or CDs with a similar gain were liquidated, the gain would be subject to capital gains taxes (in the case of securities) or ordinary income tax (in the case of CDs). Not only do securities and CDs incur taxation, they also increase provisional income for purposes of taxation of Social Security benefits — potentially further increasing the overall tax bite encountered by the taxpayer. Q. Are there advantages to this approach if the client never needs to use the LTC benefit? With linked-benefit products, if LTC is never needed, the assets are transferred to the insured’s heirs. Even if some LTC benefits


InsuranceNewsNet Magazine » June 2018

are used, any unused value is transferred. This eliminates one of the major concerns of stand-alone, health-based LTC insurance — the “use it or lose it” concern. In addition, since the linked-benefit annuity uses policyholders’ assets, they may choose to liquidate the annuity at any time. Whether the policyholders need LTC, change their minds or pass the value of the annuity to the next generation through a death benefit, a linked-benefit annuity provides peace of mind. Q. Does a linked-benefit product offer an option for older clients who may not qualify for other kinds of LTC protection? Deferred annuities aren’t medically underwritten the same way life insurance and health-based LTC insurance are underwritten. Thus, an older or less-healthy individual — with exceptions — who may be denied health-based LTC coverage or life insurance could still qualify for a product that will assist with payment of LTC expenses. In fact, a linked-benefit annuity product may be the most efficient method of funding for the risk of LTC expenses for these individuals, when considered with the tax advantages I mentioned. Q. How does a 1035 exchange support clients who want to pursue this strategy? As people near retirement age, they and their financial advisors often consider repositioning assets to transition from working years to retirement. Many people find this an ideal time to exchange a deferred annuity to a linked-benefit annuity offering LTC benefits. To better suit the needs of the insured, a full or partial 1035 exchange is an option. In a gain situation, a 1035 exchange enables the policyholder to postpone the recognition of that gain. With a linked-benefit annuity, if the gain is partially or entirely used for LTC expenses, the distributions will be income-tax-free. With a traditional deferred annuity, if withdrawals are made for expenses, including LTC expenses, any gain will be taxed first at ordinary income rates.

Find out how to put your clients’ assets to work through a suite of asset-based long-term care solutions, and get your free annuity sales kit at

OneAmerica® is the marketing name for the companies of OneAmerica. Products are issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary or investment advice.

The Annuity Issue • Special Sponsored Section

It’s All About Accumulation Potential F& G’s New Accelerator Plus® FIA Series


on Barrett, vice president, annuity distribution and key accounts, Fidelity & Guaranty Life Insurance Company, shares insights into the features of F&G’s Accelerator Plus fixed deferred indexed annuity series. The series offers a retirement solution with strong earning potential that can help protect clients from market downturns, provide tax-deferred account accumulation and guarantee lifetime income through annuitization options or the Income Rider (Enhanced Guaranteed Minimum Withdrawal Benefit Rider). For certain clients, an Accelerator Plus annuity can be an important financial tool to help meet long-term retirement needs.

How does the initial premium (vesting) bonus work? To jump-start a client’s account value, we apply a seven percent1 bonus to all funds received in the first year. This bonus amount is credited to the total account value and eligible to earn interest from the date of issue. The bonus is immediately available for income rider payments or as part of the death benefit. The bonus amount and any interest earned on that bonus amount vest over the annuity surrender charge period.2 How can index crediting options drive performance? The protected growth of the accumulation values gives clients choices so that they can design and customize Accelerator Plus. F&G offers index interest crediting options for Accelerator Plus based on two indices: the S&P 500® or the exclusive Barclays Trailblazer Sectors 5. In addition, F&G offers a number of term options that the client may choose from. They can choose either a fee or a no-fee index interest crediting option; the fee options allow clients to buy higher caps or participation rates as compared with the no-fee option.3 Also, the client can still choose to put their money in a fixed crediting option for one year.4 The best part is the ability to diversify or allocate their funds in multiple index interest crediting options and, more importantly, reallocate at the end of each index interest crediting period. What is F&G’s Power Producer program? It’s a unique program that entitles F&G’s life and annuity producers to be part of a nonqualified, deferred compensation arrangement. For

qualifying agents, F&G makes regular credits to an account established by the company for the producer’s benefit. Power Producers also receive red-carpet service and subsidized E&O coverage.

Ask your IMO partner whether you qualify for the unique Power Producer program, exclusively available from Fidelity & Guaranty Life Insurance Company. And discover whether F&G’s Accelerator Plus annuity could give your clients the very financial boost they’re seeking.

Visit AcceleratorPlus.html.

1. Varies by state and product. 2. Surrender charge period and amounts vary by state and product. 3. Annuities that offer bonus features may have higher fees and charges, longer surrender charge periods, lower credited interest rates, and/or lower cap rates and declared rates than annuities that do not provide the bonus feature. 4. Indexed interest rates are subject to a cap and/or a spread and a participation rate. Caps and spreads are subject to change at the discretion of Fidelity & Guaranty Life Insurance Company. 5. Part of EGMWB Rider that has an annual charge. 6. The income base is not a value that can be withdrawn or surrendered for cash. The income base is used solely to calculate the guaranteed withdrawal payment and rider charge. 7. 0% spread only guaranteed for initial crediting period. Caps, spreads and participation rates are current rates for Accelerator Plus 10 and are subject to change. 8. Vesting premium bonus reflects current Accelerator Plus 10 rate and is subject to change. State, age and surrender charge schedule variations apply. 9. Doubles income payments for single annuitant (1.5 times for joint annuitants) when clients cannot perform two of the six ADLs and meet other requirements. Subject to state availability. Subject to state availability. Restrictions may apply. Form numbers: API-1018 (06-11), ACI-1018 (06-11); et al. For producer use only – not for use in solicitation of consumers. “F&G” when used herein refers to Fidelity & Guaranty Life, the marketing name for Fidelity & Guaranty Life Insurance Company issuing insurance in the United States outside New York. Life insurance and annuities issued by Fidelity & Guaranty Life Insurance Company, Des Moines, Iowa. The Power Producer arrangement is unfunded. Your account value is a “bookkeeping” account that is subject to risk of forfeiture in the event of insolvency or bankruptcy of the Company or such other claims as may be made by the general creditors of the Company. The Power Producer program is a deferred bonus compensation plan for eligible appointed agents of Fidelity & Guaranty Life Insurance Company. Terms are as stated in the Power Producer plan document, which Fidelity & Guaranty Life may amend, limit or terminate at any time. FGL reserves the right to exclude products at its discretion. S&P 500® is a trademark of The McGraw-Hill Companies Inc. and has been licensed for use by Fidelity & Guaranty Life Insurance Company. Standard & Poor’s does not sponsor, endorse, promote or make any representation regarding the advisability of purchasing the contract. Barclays Bank PLC and its affiliates (Barclays) are not the issuer or producer of Fixed Indexed Annuities and Barclays has no responsibilities, obligations or duties to contract owners of Fixed Indexed Annuities. The Index is a trademark owned by Barclays Bank PLC and licensed for use by Fidelity & Guaranty Life Insurance Company as the Issuer of Fixed Indexed Annuities. Fidelity & Guaranty Life Insurance Company as Issuer of Fixed Indexed Annuities may for itself execute transaction(s) with Barclays in or relating to the Index in connection with Fixed Indexed Annuities. Contract owners acquire Fixed Indexed Annuities from Fidelity & Guaranty Life Insurance Company, and contract owners neither acquire any interest in the Index nor enter into any relationship of any kind whatsoever with Barclays upon making an investment in Fixed Indexed Annuities. The Fixed Indexed Annuities are not sponsored, endorsed, sold or promoted by Barclays, and Barclays makes no representation regarding the advisability of the Fixed Indexed Annuities or use of the Index or any data included therein. Barclays shall not be liable in any way to the Issuer, to contract owners or to other third parties in respect of the use or accuracy of the Index or any data included therein. 18-0515

June 2018 » InsuranceNewsNet Magazine


Ameritas leaders are industry leaders

Robelynn H. Abadie, RFC, CAP, LUTCF

Abadie Financial Services Baton Rouge, LA

Frank S. Hennessey, ChFC, LUTCF Premier Planning Group Phoenixville, PA

Kevin P. Nicholson Walsh & Nicholson Financial Group Wayne, PA

Kim G. Allen, LUTCF

United Wealth Advisors Group Watertown, NY

Jarrod F. Hirschfeld

Peter C. Browne, LUTCF DFG - PRB New York, NY

Josh A. Jalinski

Stephen L. Bruneau, CLU, CFP

Mark A. Cecil, CFP

Boston 128 Companies Weston, MA

United Wealth Advisors Group Bethesda, MD

John C. Kenan

Patrick J. Kenney, CPA

Wilcox Financial/ Wilcox Sports Management Toledo, OH

Jalinski Advisory Group Toms River, NJ

Southeast Financial Services Greensboro, NC

Wilcox Financial/ Wilcox Sports Management Toledo, OH

Tony J. Ojeda

Mitchell W. Ostrove, CLU, ChFC

Joseph S. Pantozzi, CLU, ChFC

Ronald G. Pray, CLU, ChFC

Midlands Financial Benefits Lincoln, NE

The Ostrove Group White Plains, NY

Alpha Omega Wealth Las Vegas, NV

Cenco Altmann Affiliates Gilroy, CA

Any agency referenced is not an affiliate of Ameritas or of any of its affiliates.

Michael R. Wilcox

Wilcox Financial/ Wilcox Sports Management Toledo, OH


Peter J. Winovich III

Wilcox Financial/ Wilcox Sports Management Toledo, OH

InsuranceNewsNet Magazine » June 2018

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2018 Ameritas Mutual Holding Company

2018 MDRT Top of the Table Ameritas salutes our valued field associates who have attained the highest levels of MDRT membership.

Angelo E. Cilia, CLU, ChFC CF Advisors Group Pittsburgh, PA

Merle D. Miller, RFC

David J. Fazzini, LUTCF

Friese Financial Advocates Libertyville, IL

Brett A. Moldenhauer

Richard C. Moldenhauer,

Midwest Financial Solutions Iowa City, IA

Moldenhauer & Associates Orchard Park, NY

Arnold J. Price

Stuart J. Raffel, CLU, CPC, RFC

Price/Raffel LA Los Angeles, CA

Mark E. Friese, CMFC

Premier Planning Group Phoenixville, PA

Price/Raffel LA Los Angeles, CA


Moldenhauer & Associates Orchard Park, NY

Brian P. Walsh, CLU, ChFC, RFC Walsh & Nicholson Financial Group Wayne, PA

Keith M. Gillies, CLU, CFP, ChFC United Wealth Advisors Group La Place, LA

LeaAnn M. Moore, CRC

David R. Guttery, RFC, CAM, RFS Nowlin and Associates Trussville, AL

William C. Moore, CFP

Midlands Financial Benefits Lincoln, NE

W.C. Moore Financial Services Centreville, VA

David B. Wentz, J.D., LUTCF

R. David Wentz, J.D, CLU, ChFC

Tax Favored Benefits Overland Park, KS

Tax Favored Benefits Overland Park, KS

DST 1364 5-18

June 2018 » InsuranceNewsNet Magazine


2018 MDRT Court of the Table

Zachary H. Blume

C. Robert Brown, CLU, LUTCF

James R. Christensen Jr.

Raneshwar K. Gupta

SumCal Los Angeles, CA

United Wealth Advisors Group Memphis, TN

inSource Benefits Group Omaha, NE

Total Asset Planning Cincinnati, OH

David A. McBride

David E. McClure

Christopher M. Pirtle, LUTCF

Michael C. Polin

Sovereign Financial Group Midvale, UT

Koehler Financial Group Las Vegas, NV

Peake Financial Silver Spring, MD

Premier Planning Group Phoenixville, PA

This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to: Ameritas Life Insurance Corp., 5900 O Street, Lincoln, Nebraska 68510; Ameritas Life Insurance Corp. of New York, (licensed in New York) 1350 Broadway, Suite 2201, New York, New York 10018; and Ameritas Investment Corp, member FINRA/SIPC. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit Any agency referenced is not an affiliate of Ameritas or of any of its affiliates. DST 1423 5-18


InsuranceNewsNet Magazine » June 2018

Frank G. Heitker, CLU, FLMI

Tobin C. Hoffmann

Dominick F. Impastato Jr., LUTCF

S. Patrick Kelley, ChFC

Premier Planning Group Cincinnati, OH

Hoffmann Financial Services New Braunfels, TX

United Wealth Advisors Group Metair, LA

David White & Associates San Ramon, CA

Daniel J. Scholz, CLU, ChFC Ameritas Financial Center Omaha, NE

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2018 Ameritas Mutual Holding Company

June 2018 » InsuranceNewsNet Magazine



Nationwide Moving to Independent Model

Nationwide said it plans to set free its captive agents and sell entirely through independent agents by July 1, 2020. The carrier already distributes products through 10,000 independent agents. The company is one of the largest carriers that currently sells products through both exclusive and independent agents. Exclusive agents will have several options to transition to an independent contract by July 1, 2020, the company said. As as agents transition, they may continue to work a s as a Nationwide agent and operate as they do do today. After they transition, agents will be able to broaden their partnerships and the products they offer.

insurance buyers said they would be more likely to purchase life insurance if they didn’t have to go through a physical exam, according to the 2018 Insurance Barometer Study by LIMRA and Life Happens. Prior LIMRA research found 9 in 10 companies either have developed or are in the planning stages to develop automated underwriting programs. Additionally, three-quarters of those who have implemented automated underwriting say their companies have achieved their goal of reducing the time it takes to issue a policy.


Only 15 percent of all U.S. households shop for life insurance in a 24-month period, according to LIMRA research. Of those, only two-thirds actually get a quote for a life insurance policy. So what about those “stuck shoppers” who start the buying process but don’t complete it? LIMRA research shows there about 19 million of them and many carriers are looking for ways to turn those shoppers into buyers. Simplified underwriting may help grease the wheels and make the buying process easier, researchers said. Fifty-two percent of potential life DID YOU





There’s another acquisition in the life insurance world. Kuvare US Holdings purchased United Life. United Life was founded in 1962 and is licensed in 37 states, represented by about 1,500 independent life agencies.

QUOTABLE There’s a really fine line between being appropriately persistent and being annoying and turning prospects off. — Todd Silverhart, LIMRA director of insurance research


Few Americans recognize the name Anbang Insurance Group, even though most Americans know its most famous possession, New York City’s legendary Waldorf Astoria Hotel. After Anbang went on a global asset-buying spree that included the Waldorf, Chinese regulators seized control of the insurer and questioned its stability. Anbang’s founder, Wu Xiaohui, went on trial on charges he defrauded investors and misused company money. Now Anbang is receiving a $9.6 billion bailout from a Chinese government-run fund. It’s the latest in a string of scandals rocking the Chinese insurance industry. The industry’s former top regulator was charged with taking bribes, and other insurers have been accused of reckless speculation in stocks and real estate.

Kuvare US Holdings operates as a holding company. Through its subsidiaries, Kuvare provides insurance services such as annuities, life insurance and supplemental products.

Penn Mutual introduced its latest permanent life insurance product, Survivorship Choice Whole Life.

InsuranceNewsNet Magazine » June 2018

Source: Penn Mutual


The Life Insurance Solution To Long-Term Care Planning How a life insurance trust can help protect clients’ assets against the increasing costs of long-term care. By John Heck


ong-term care is a topic that my clients have wanted to talk about more frequently in recent years. More specifically, my clients are asking, “How are we going to pay for LTC?” Everyone knows they are living longer, and they are afraid of running out of money. It is no wonder that paying for LTC is on the minds of so many aging Americans when you consider 70 percent of people over 65 will require some form of LTC in their lifetimes, according to the Medicare & You handbook. The U.S. Department of Health & Human Services tells us that the national average cost of a home health aide is $30,240 per year and a private room in a nursing home can set you back $80,440 annually. Naturally, the answer to “How are we going to pay for it?” depends on the individual client’s specific needs and circumstances. But first, let’s address this question from a 30,000-foot view, and then we will focus on specific strategies. There are three possible ways to pay for LTC. The most obvious choice is to purchase long-term care insurance. Or clients can self-insure, meaning that if they have enough money, they can pay out of pocket for any care they may need. Finally, if clients qualify for Medicaid, the government will pay for their care. Let me pause here and debunk a popular myth. When I bring up the topic of Medicaid planning with a client, they will often say something like, “No way! I don’t want to go on Medicaid. They are going to put me in a dungeon. I don’t want to be chained to the radiator in the basement. I am afraid of the dark. I don’t like spiders.” That is not how Medicaid works. Let’s say you have LTCi and enter a nursing home, or you are paying out of 48

InsuranceNewsNet Magazine » June 2018

pocket and you run out of benefits or money. What happens to you? Do they toss you out in the street? No. If you are out of money and require a skilled nursing facility, you likely will qualify for Medicaid. The facility that you and your family have selected will keep you there in the same room with the same services as before while Medicaid picks up what you cannot pay for. They have to, by law. This happens all the time. Sadly, in many cases, a patient failed to do the proper planning ahead of time and spent down all of their assets. Now they are broke, and Medicaid is their only choice. There is a better option.

Proper Planning

First of all, why should someone own LTCi? Most say you should purchase LTCi to pay for care if you need it. That’s what LTCi does. That is not why clients should own it. They should own LTCi to protect their assets. Owning LTCi is a net-worth issue. Here’s what I mean. If a client’s net worth (excluding their primary residence) is: » Less than $500,000: Clients are likely to be unwilling or unable to afford the premium necessary to purchase a quality LTCi policy, especially since the consumer who buys LTCi tends to be 65 instead of 35, when it is quite affordable. » Between $500,000 and $2 million: Clients can comfortably afford a quality LTCi policy. Plus, these clients have

enough assets worth protecting. So, purchasing an LTCi policy makes a great deal of sense for these clients. » Greater than $2 million: Self-insuring is a viable option. Clients have enough money, properly managed, so that even a long-term illness will not deplete their assets. In fact, clients in this worth category may never touch their principal. That is not to say my wealthy clients do not own LTCi. Some do. But for them, it is a peaceof-mind issue, not a net-worth issue.

Medicaid Planning

Now that you know who should own LTCi, who should self-insure and why, let’s look at a critical and often overlooked aspect of your client’s LTC planning and how someone qualifies for Medicaid. Medicaid will pay for a client’s LTC only if they have no money and only if they need skilled nursing care. However, clients are permitted to have certain assets and still qualify. These exempt assets are: 1. Primary residence. 2. One car. 3. $116,000 for a married couple or $2,000 for an individual. 4. Assets held in certain kinds of trusts. And here is the opportunity for you to help your client, their estate and their family.

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LIFE THE LIFE INSURANCE SOLUTION TO LONG-TERM-CARE PLANNING The trusts I am referring to are funeral trusts and estate trusts. Since Medicaid is a federal program administered by the states, exemptions and use of these trusts may vary slightly in your state. These trusts are usually administered by a life insurance company. The trust will own a life insurance policy on the client and/or spouse. This policy is usually guaranteed issue, in some cases to age 99. The policy is intended for paying final expenses, leaving a legacy, avoiding probate, etc. Claims are often paid within 48 hours, without a death certificate. This is key because it creates liquidity for the family when they need it most. If a loved one dies on Monday, when does the funeral home want to get paid? On Wednesday, or in four to six weeks, when most life claims are paid? The biggest benefit? The asset is exempt from Medicaid. This does take a little planning, though. Assets placed in these trusts are irrevocable. Once assets are assigned to the trust, loans are unavailable and the policy cannot be surrendered. There is also a five-year look back for shelter from Medicaid. Here are a couple of examples of how I have used these tools to help my clients.

Margaret’s Facts • Age 73, single • Has pension & Social Security • Wants to pay for her funeral and leave some money to her four grandsons • $200,000 in investments • Owns a $13,000 life policy with $8,600 cash value • Cannot qualify for LTCi

Case Study: Margaret

Margaret is a healthy 73-year-old woman with back and knee issues that prevent her from qualifying for LTCi. If she needed care, she would have to pay out of pocket until she spends down her $200,000. If she applied for Medicaid at that point, she would be declined because she still has $8,600 in the life policy she was saving for her final expenses. She now would have to surrender this policy and spend those funds before Medicaid would approve her. Here is what we did instead. 50

InsuranceNewsNet Magazine » June 2018

Clients are permitted to have certain assets, such as those held in certain trusts, and still qualify for Medicaid...

Pay for Frank’s Care


Estate Trust on Frank


Estate Trust on Evelyn


Medicaid Exempt


We transferred her cash value with a 1035 exchange into a policy owned by an estate trust, guaranteeing her funeral expenses will be covered. Since Margaret also wants to leave her grandsons money when she is gone, we placed another $30,000 in a separate policy owned by the estate trust. Margaret is fairly healthy. Barring unforeseen health issues, it is expected she will not need LTC within five years, so the look-back period is a nonissue for her. We have achieved three very important goals for Margaret: 1. Covered her final expenses. 2. G uaranteed a legacy to her grandsons. 3. E xempted these assets from Medicaid spend-down.

Case Study 2: Frank and Evelyn

Frank is 82, he has no LTCi and he just entered a nursing home. Evelyn is 78, healthy and afraid she will run out of money paying for Frank’s care. They have Social Security and annuity income, a $200,000 home with a $100,000 mortgage plus $600,000 in investments. We know that the primary residence is an exempt asset, so we paid off the mortgage. We purchased a life policy on Frank owned by the estate trust. The policy has a $100,000 single premium. Evelyn wanted to make sure that when she dies, her daughter, who lives in another state, had the immediate liquidity to come to Florida to handle the wrap-up of her estate and not be a financial burden.

So, we purchased a policy on Evelyn with a $50,000 single premium. We expect Frank’s care to cost $250,000 over the next five years. This will have to be paid for out of pocket, since this planning was not done in time to satisfy the five-year look back. In five years, if Frank is still alive, here is what Evelyn’s situation will look like. She has a home worth $200,000 that she owns free and clear, $150,000 in exempt estate trusts and $100,000 in other exempt liquid assets as half a married couple. Frank will then qualify for Medicaid. When Frank dies, Evelyn will have $200,000 equity in the home, $100,000 from Frank’s trust-owned life policy and $100,000 in other assets, totaling $400,000. Perhaps this is not the ideal situation, because this planning didn’t start until Frank was in a nursing home, but it’s a far better situation than potentially spending down more and never getting Frank on Medicaid. Only about 1.8 million people in the United States have a net worth more than $2 million. That isn’t a very high percentage of the population (0.6 percent to be exact) who can self-insure. Not only are a significant portion of your clients open to this conversation, but they also are desperate for this type of planning. John Heck is the founder of Adagio Financial Group, Fort Myers, Fla., and a member of the Project Development Team at the John Galt Institute. John may be contacted at

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These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affi liates, have a fi nancial interest in the sale of its products. An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax-qualifi ed plan, the tax deferral feature offers no additional value. Qualifi ed distributions from a Roth IRA are generally excluded from gross income, but tax and penalties may apply to non-qualifi ed distributions. Please consult a tax advisor for specifi c information. There are charges and expenses associated with annuities, such as surrender charges for early withdrawals. Some products may not be available in all states and

features may vary by state. Not all products and features are available from all fi rms. Guarantees are subject to the fi nancial strength and claims-paying ability of the issuing insurance company. The indexes are not available for direct investment. Insurance products are issued by Minnesota Life Insurance Company or Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in Saint Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the fi nancial obligations under the policies or contracts it issues. 17-70350 ICC17-70350 Securian Financial is the marketing name for Securian Financial Group, Inc., and its affi liates. For fi nancial professional use only. Not for use with the public.

Securian Financial Group, Inc. 400 Robert Street North, St. Paul, MN 55101-2098 ©2018 Securian Financial Group, Inc. All rights reserved. F91378 Rev 6-2018 DOFU 6-2018 457226

June 2018 » InsuranceNewsNet Magazine



Tax Law Unlocks Life Insurance Opportunity In Estate Planning The new law raised the estate tax exemption; it also made it simpler and more profitable to sell the unneeded life policies. By Darwin Bayston


state planning professionals have been poring over details in the Tax Cuts and Jobs Act of 2017 and assessing the potential implications for their clients. While the lower rates for corporations and most individuals grabbed the headlines, two less publicized aspects of this new tax law could have an effect on your senior clients.

Doubling The Estate Tax Exclusion

The most dramatic component of the new tax law for estate planners was the doubling of the current exclusion for estate tax calculations. Effective Jan. 1, the lifetime exclusion from estate tax, gift tax and generation-skipping tax increased to approximately $11.2 million per person, or $22.4 million for a married couple. The tax rate 52

InsuranceNewsNet Magazine » June 2018

on any wealth transfer in excess of those new exclusions is a flat 40 percent rate. This dramatic increase has widespread implications for the advice you give your clients, but one specific area of impact is related to the way you assess life insurance policies as investment vehicles within estate plans. For decades, estate planning professionals have worked with high-networth clients — primarily those who are already retired and in their senior years — to purchase life insurance policies as a funding mechanism for paying estate taxes after their deaths. This typically involved buying large policies with hefty premiums, keeping those policies in force every year, and then using the death benefit to pay the estate tax bill served to the client’s heirs. However, the passage of the tax law means that a large number of high-networth estates will now fall within the amount that is excluded from estate tax calculations. That means your clients

may no longer need those life insurance policies as a vehicle for paying estate taxes. In those circumstances, you have a unique opportunity to help those senior clients obtain maximum value from policies they no longer need, as opposed to simply lapsing or surrendering the policies back to the insurance companies from whom they bought those policies.

Fixing An IRS Revenue Ruling

For more than 100 years, Americans have had an established legal right to sell their life insurance policies. The courts have consistently held that a life insurance policy is considered your client’s personal property, and thus your client has the right to sell that policy just like any asset your client owns, such as a house or a stock. This is an important option for your senior clients to know about, especially if they own a life insurance policy they no longer need or can afford. Rather than simply lapsing or surrendering that policy


Before Tax Law

(Estimate before tax law went into effect) 1. Find the adjusted cost of insurance Deduct cost of insurance from premiums paid ($318,026 - $270,271 = $47,755) 2. Deduct new adjusted cost from settlement amount ($442,000 - $47,755 = $394,225) 3. Calculate capital gains tax $394,225 x 0.25 = $98,556 This person should expect to pay roughly $98,556 in taxes under the previous tax law.

After Tax Law

(Estimate after tax law went into effect) 1. Find the adjusted cost of insurance

idea to consult with an accountant or other financial advisor before entering into a life settlement transaction. Generally speaking, any taxable gain realized by the original owner of a life insurance policy will be regarded as long-term capital gain. The receipt of the death benefit is not subject to federal income tax unless there has been a sale of the policy (a transfer for value). But this important change to the tax code regarding life settlements will eliminate a lot of confusion that haunted many advisors in recent years, and will make it much easier to determine whether it’s in your client’s best interest to sell a life insurance policy the client no longer needs or can afford. Here is a case comparison. The bottom line is that life insurance policies should be evaluated like any other client asset. Is this holding in their portfolio serving a valuable purpose, or would it be better to liquidate and reallocate? The answer will depend on the client’s life circumstances, personal objectives, overall estate holdings and, of course, the specific market value of the client’s life insurance policy. However, the new tax law includes two major reasons to have the discussion. Darwin Bayston, CFA, is president and CEO of the Life Insurance Settlement Association. Darwin may be contacted at darwin.bayston@

Deduct premiums paid from the net settlement amount ($442,000 - $318,026 = $123,974) 2. Calculate capital gains tax $123,974 x 0.25 = $30,993 back to the insurance company, they can sell it to a third party for immediate cash in a life settlement transaction. This is an option for seniors, especially those who are struggling with unexpected health care bills or a shortfall in retirement income needs. However, for the past several years, many estate planning professionals have been hesitant to recommend the sale of a client’s life insurance policy because of a confusing revenue ruling in 2009 from the IRS. This rule required policyholders to deduct the “Cost of Insurance” charges from their policy in order to determine an accurate tax basis. Unfortunately, since it’s very difficult to obtain that precise data, many estate planners concluded it was too much of a hassle for their clients — and the tax consequences would be too great — to go forward with selling their policy. Instead, many of those clients simply surrendered their policies and walked away from an asset of potentially greater value to them. The new tax law reverses the effects of that 2009 IRS revenue ruling and eliminates the need for taxpayers to obtain Cost of Insurance charges on their policies if they have opted for a life settlement. This reform takes away an obstacle that stood in the way of many seniors who wished to sell their life insurance policies. To be clear, there are still likely to be tax consequences for your clients who sell a life insurance policy, so it’s always a good

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June 2018 » InsuranceNewsNet Magazine



Annuities Poised For A 2018 Comeback

Everyone loves a great comeback story — especially annuity watchers. Several variables are lining up to make 2018 and beyond promising for annuity sellers, said Jack Marrion, president of Advantage Compendium, a consultant to the insurance industry. Yo annui ties Here are some of his reasons: Rising we did it! interest rates, stock market volatility, a court overturning of the Department of Labor fiduciary rule and the Trump Effect on the economy. The long-running bull market has many investors nervous that a bear market is lurking around the corner. Fixed indexed annuities, in particular, are a great product for maintaining growth while offering protection from any losses.


There’s hope for variable annuity sales, even though they are down 50 percent compared to a decade ago. A Morningstar expert pointed to a number of factors leading to a tailwind for VA sales. Those factors include rising interest rates, the Federal Reserve’s intention to raise benchmark lending rates still further this year, and the invalidation of the Department of Labor fiduciary rule that made VA sales more difficult. Insurers filed dozens of new fee-based VAs last year in an effort to attract a broader set of distributors — such as fee-based registered financial advisors. But traction is slow and fee-based VAs still represent only a sliver of overall VA sales, which are overwhelmingly sold via commission.


Workers have a message for their employers: Tell us more about annuities! Eighty percent of defined contribution plan participants said they’re interested in putting some or all of their money into annuities, a survey found. Despite this, many companies fail to offer annuity choices within their employer-sponsored plans, according to the 2018

Retirement Confidence Survey issued by the Employee Benefits Research Institute and Greenwald & Associates. Some workers, particularly those close to or in retirement and lucky enough to benefit from a corporate pension, are still hesitant about annuities, the survey found.

I will be able to live the retirement lifestyle I want 71%


Women w/ annuity

end of the DOL fiduciary rule


LIMR A Secure Retirement Institute research shows single retirees feel vulnerable to longevity risk, but an annuity can help ease their minds. Single retirees — particularly single female retirees — feel less secure about their financial security in retirement and are more concerned about outliving their savings than those who are married

My savings and investments won’t run out if I live to be 90 74%




Women w/o annuity

Men w/ annuity

Men w/o annuity

Women w/ annuity

Women w/o annuity

Men w/ annuity

Men w/o annuity

Source: Singlehood in Retirement: A Study of Retirees, LIMRA Secure Retirement (2018)

On the other side, employers hesitate to offer annuities. Employers that offer a corporate pension, companies who want assurances in the face of fiduciary responsibilities, and employers who prefer that income be handled outside the plan prefer to steer clear of annuities, EBRI researchers said.

right product for them now.

InsuranceNewsNet Magazine » June 2018



of those who do not buy an annuity KNOW 80% said they like the product but it’s not the 54

Therecan are 11come companies You outoffering of QLAC (qualifying longevity annuity the shelter and do business contract) products. While this is again. a small and new part of the DIA market, we expect to see an uptick — Jack Marrion, president of Advantage in sales Compendium, in 2016. on the

Annuity ownership improves confidence for single retirees





or have partners, LIMRA SRI found. Four in 10 single retirees believe their savings won’t be enough if they live to age 90. Nearly half of single women are not confident their savings will last through age 90. LIMRA SRI found single retirees who own an annuity are more likely to believe they can achieve their desired lifestyle in retirement and their savings will last if they live to 90. The study also shows single retirees who own an annuity are less likely to withdraw more than they expected from their savings.

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When Taking RMDs Is Not In Your Client’s Best Interest For many clients, fixed annuities are the way to meet their retirement concerns, especially when they are faced with the consequences of taking required minimum distributions from qualified funds. By Jack D. Aiken


he blanket requirement that owners of qualified funds begin distributions at age 70½ violates the fiduciary standard. Here’s why. Numerous surveys report that the No. 1 concern of retirees is that they will run out of money before they die. Yet compulsory required minimum distributions increase the risk of running out of money by compelling that money, wisely saved for retirement and its associated uncertainties, be distributed at a purely arbitrary time unrelated to the personal financial needs of the owner. Worst yet, the intent of the original minimum distribution regulations was to ensure, that to whatever degree possible, the owner had distributed, and thus been taxed on, all of their qualified money by the time of their death. The motive is bad. The process is bad. The result for the client is bad. There is nothing about this circumstance that could be said to put the needs of the individual owner above all else. Until such time as compulsory RMDs can be removed from the tax code, guaranteed annuities offer the best protection against this abusive practice. Very few Americans have saved nearly enough money for the retirement they imagined they would experience. If we apply the widely recognized 4 percent rule to $1 million saved, we get a $40,000 annual income stream that is “reasonably” likely to last 30 years. With a pretax income of $40,000, after applying 20 percent for an array of federal, state and local taxes, the net is perhaps $32,000, and our millionaires will have about $2,700 per month to pay for the stuff for their lives. 56

InsuranceNewsNet Magazine » June 2018

Many of the sustainable distribution models use a 90 percent likelihood as “reasonable.” That’s a little like Russian roulette with a revolver that holds 10 cartridges. It will probably be OK, but it’s really hard to be comfortable, don’t you think? With $1 million, your client has about a 90 percent chance of netting $2,700 each month for 30 years. But most Americans have far less than $1 million. The U.S. Census Bureau reports that the net worth, excluding home equity, for married households of any size age 65 and older is $148,823. Even including home equity, the number is only $323,254. For single and younger households, the numbers are much lower. Overlooking the many barriers to actually implementing a planned and managed distribution of assets with an account of

interest ends up being abused in favor of other objectives.

It’s All About The Timing

An important element of building a sustainable withdrawal strategy is related to the timing of withdrawals as a function of market fluctuations. Withdrawals taken during down-market periods have a disproportionate effect as compared to withdrawals taken during boom periods. When people have control of their assets and the responsibility for their own best interest, they manage these issues to suit their individual circumstances. They know to not buy high and sell low. But if they are compelled by arbitrary RMDs to make withdrawals without regard to market conditions, they have lost control of their circumstances. As a result, both their current and future welfare are put at risk. In the face of these circumstances, guaranteed fixed annuity products can provide unique protections and planning advantages as compared to market-based alternatives. Foremost among the advantages of fixed annuities is their ability to provide a guaranteed income for life. There is no other product or strategy that can do that. To guarantee a specified, predetermined income, no matter what and for as long as one lives, is the cornerstone of meeting the No. 1 concern of the majority of retirees. Clients can be guaranteed there will be income for as long as they live. Only annuities can provide that assurance. Critics of annuitization strategies are quick to jump on liquidity and inflation risks, but those complaints are just red herrings. By structuring deferral and income periods, liquidity can be maintained — certainly as much liquidity as can safely be provided for with market-based alternatives.

Until such time as compulsory RMDs can be removed from the tax code, guaranteed annuities offer the best protection against this abusive practice. such meager size, using the 4 percent rule, a 70-year-old married couple might realize a net monthly after-tax income of perhaps $400 per month if they amortize their entire net worth. Of course, all this is just arithmetic. What do you have? What will it earn? How long will you live? Mix all that together and out pops the answer. But distributing all of their carefully saved resources strips families of the ability to determine how they had hoped to provide income retirement. It also wipes out their reserve for the unexpected. Nonetheless, the mandated distribution requirement is arbitrarily triggered, and the client’s best


We know that the No. 1 concern of retirees is outliving their income. But a close second to that concern is their desire to have adequate income.

Current annuity product designs provide a wide range of contractual and trigger-based liquidity features tied to real-world life events. Easy access to funds triggered by riders relating to illness, chronic care, disability and even unemployment are just a few of the annuity features that can boost liquidity. There are even products that guarantee a return of the premium paid. You will not find that sort of liquidity in even the slickest play with big-caps and bonds balanced with just the right dash of emerging markets. A growing number of guaranteed income immediate annuities offer a commutedvalue option. It is possible for your clients to eat their cake and have it too. When you stagger features and benefit periods across carriers and product designs, you can provide high income guaranteed for life, safe liquidity options and performance. Many financial professionals are oblivious to the unmatched performance provided by guaranteed fixed annuities. We know that the No. 1 concern of retirees is outliving their income. But a close second to that concern is their desire to have adequate income. Clients want to know that they will get the maximum amount of secure income that their savings will provide. Annuities lead the way here as well.

Making the Comparison

Let’s look again at our 70-year-old with $1 million. We assume there’s about a 90 percent chance that $1 million can provide $40,000 per year for 30 years. So how would a guaranteed annuity compare? If we put the

entire $1 million into a life-only annuity, a 70-year-old man could be guaranteed about $70,000 per year for as long as he lived. Not just a 90 percent shot at 30 years but a 100 percent guarantee for the balance of his life. And not just $40,000, but $70,000. And we don’t assume it; we know it. A couple both age 70 with $1 million can get a guaranteed $60,000 per year for as long as either of them lives. When you can guarantee a 50 percent income increase, that is a really great result. With that result, it is a bit of a stretch to suggest that not incorporating annuities as the major element of a retirement plan could ever meet a client’s best interest standard. Some advisors may question why we would advocate putting all of our hypothetical client’s money into an annuity. Is that a breach of fiduciary duty? I can say that over the years, there have been a number of circumstances where we have put essentially all of a client’s money into an annuity. To do so is not typical, but doing so is certainly not taboo. We have worked with people who have had essentially all of their money in annuities — some since the 1950s. No client has ever lost a penny. The accounts have grown worry-free. And low-middle-income families have accumulated literally millions of dollars having never done anything but save their money in annuities. So the short answer is “Yes, I do advocate something very different from a ‘diversified portfolio’ that gives you a 90 percent chance of getting 4 percent for 30 years.” If we accept the wisdom of 4 percent

as an acceptable sustainable withdrawal objective, fixed annuities can meet that standard with 100 percent certainty using only two-thirds of the client’s available resources. The remaining $300,000 can be left for liquidity, dealing with inflation and enjoying the excitement of watching what’s happening in emerging markets. Using the guaranteed strong performance of fixed annuities would certainly give any client more options than would otherwise be available. Thus the notion of keeping strong options open brings us back to the “no option” reality of RMDs. How can fixed annuities best deal with that travesty? One answer lies with early leveraging of the performance and guarantees provided by annuities as primary elements within the retirement plan, including within qualified plans. Instead of delaying withdrawals from qualified accounts until RMDs are forcefed, push qualified money into annuities and exploit the guarantees and high payouts. There has long been a bias against putting tax-deferred plans within qualified plans. Because of good evidence in support of doing so, that notion is changing and, if there was ever any validity to the notion, it fades before the benefits of guaranteed high income. As many people have the bulk of their savings in qualified plans, there is considerable benefit in bringing the best performer to bear on the largest block of money. If your client is already at the point of being forced to take RMDs or face a 50 percent penalty, moving money into an annuity and leveraging the advantage of the high payouts avoid the risks of taking withdrawals in down periods. Once a client is in the annuity, there are no down periods. Although there are more things to consider than presented here, there are zero smoke and mirrors in the numbers shown. For an overwhelming majority of clients, fixed annuities are the absolute best way to meet their retirement concerns, particularly when those clients are faced with taking RMDs. Jack D. Aiken is president of LTA Marketing Group, Fargo, N.D. Jack may be contacted at

June 2018 » InsuranceNewsNet Magazine



Annuities Can Help Boomers Consider Wealth Transfer Plans Positioning a fixed annuity as a wealth transfer vehicle is a great way to help clients ensure they are leaving their lifetime of savings to their heirs as intended. By Rich Lane


he oldest baby boomers are 72 and likely retired or approaching the next chapter in their lives. After being in the workforce for more than four decades, many baby boomers have spent their working years amassing wealth. Now, as their children start buying homes and beginning their own families, they may be looking to pass on their financial legacies to future generations. Now can be a good time to connect with boomers about the benefits of a wealth transfer strategy. Positioning a fixed annuity as a wealth transfer vehicle is a great way to help clients ensure they are leaving their lifetime of savings to their heirs as intended. Here are key questions to anticipate from clients and answers to consider when talking about the benefits of purchasing a fixed annuity as part of a wealth transfer strategy.

Why do I need a wealth transfer plan?

For some clients, a wealth transfer strategy has probably crossed their mind, but they may think they have several years before a formalized plan is needed. Others may not see the need to create a wealth transfer plan because they have talked to their spouse and children about their intentions. Both of these are common scenarios you will likely hear when speaking with clients. In these instances, it’s important to remind clients that an unexpected event can happen to anyone at any time, and that during that time of loss, having to make big decisions about finances could be an added burden for their loved ones. Creating a well-thought-out plan of 58

InsuranceNewsNet Magazine » June 2018

Now can be a good time to connect with boomers about the benefits of a wealth transfer strategy.

who the beneficiaries are and how they should receive funds can save their loved ones additional family stress and decision-making during an already challenging time.

Why should I use a fixed annuity?

Although annuities typically are seen as a means to grow assets and distribute them during retirement, a fixed annuity also is a sound option for transferring a client’s wealth to loved ones. A key benefit of a fixed annuity is that the money isn’t taxed until a distribution is made. You can work with your clients to determine a preselected payment stream for their loved ones. With this approach, there is no large tax burden for the heirs to shoulder as they may have with a single, large lump-sum distribution. Additionally, using a fixed annuity for wealth transfer offers clients the option to predetermine a plan for how the beneficiaries receive the proceeds. This is a restrictive endorsement option that can help clients control their wealth from the grave. This option can help with beneficiaries who may not be ready for the responsibility that comes with larger sums of money. Knowing their loved ones won’t become overburdened by taxes and that

clients can manage how the money is distributed can help clients understand why a fixed annuity can be a responsible vehicle for passing on their wealth.

How do you name the beneficiaries?

After clients have decided to go with a fixed annuity for their wealth transfer strategy, designating beneficiaries is the next step in the process. Although designating the beneficiaries may seem like an easy decision, it is important that clients approach the process with a long-term perspective. Remember to ask the following questions to help clients feel comfortable about who receives their money and what type of access the beneficiaries will have. » Who would you like to include on your list of beneficiaries? Unfortunately, we all have heard stories where wealth transfer plans were not predetermined and families were in disagreement about the financial distribution of a loved one’s funds. Determining beneficiaries can help eliminate any potential issues and set the stage for wealth transfer and the client’s desired financial legacy. As part of the conversation, remind clients that while they feel very confident

ANNUITIES CAN HELP BOOMERS CONSIDER WEALTH TRANSFER PLANS ANNUITY about their designated beneficiaries now, it will be important to review the list with clients periodically, as family dynamics and circumstances can change. Ask clients whether designations have changed in light of divorce, remarriage or death to avoid payments going to the wrong people due to out-of-date listings. Also, during this time, it’s important to determine the designation percentages are accurate and the payout strategy for disbursing proceeds still is practical for each beneficiary. » Are you interested in predetermining how proceeds will be distributed to beneficiaries? Many fixed annuities have restrictive endorsement options that provide clients with control from the grave. This option can help with beneficiaries who may not be ready for the responsibility that comes with the money. For example, Betty, a boomer widow, has three children and wants to start thinking about how they will inherit her assets at her death. She has some money

in the bank and some in annuities, and her liquid net worth is $750,000. She needs income from her investments to supplement her Social Security and wants liquidity in case she needs nursing home care in the future. She knows that two of her children would be able to handle a lump sum of benefits responsibly, but she is concerned about her third child, who is constantly asking her for money and taking out loans. To help accommodate Betty’s needs, you could offer a growth annuity with a nursing home waiver with monthly interest payments and a restrictive endorsement. This wealth transfer option would give Betty full control over her interest and principal during her lifetime, while the restrictive endorsement could help ensure lump sums are given to her two responsible children and a designated annuity payment is provided to her spendthrift son. With this wealth transfer plan, Betty could have peace of mind knowing her hard-earned savings would be used by all three of her children as she intended.

» Have worst-case contingencies been considered and covered? It’s important that clients do more than designate a primary beneficiary. Help your clients understand the importance of contingent beneficiaries, too. When clients fail to include this information, they risk having proceeds go to their estate, perhaps entangling beneficiaries in a long legal process. This probably is not what the client would have wanted. Answering these common questions and helping your baby boomer clients understand the benefits of a fixed annuity wealth transfer can help ensure their hard-earned savings are used as intended by the intended. Working with your clients to create a wealth transfer strategy for their intended heirs can help provide peace of mind that their money will be in the right hands. Rich Lane is the second vice president of individual annuity sales and marketing for The Standard. Rich may be contacted at

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More Ways To Avoid The ACA Penalty The Trump administration gave consumers more ways

to get off the hook for not having health insurance. The administration added several “hardship exemptions” that consumers can use to avoid paying the penalty for failing to have coverage. Under the new rules, people can apply for a hardship exemption that excuses them from having to have health insurance if they live in an area where there are no marketplace plans or only one insurer selling marketplace plans. In addition, consumers who oppose abortion can apply for a hardship exemption if they can’t find an affordable marketplace plan that does not cover abortion. Consumers also may be exempt if their personal circumstances make it difficult to buy a marketplace plan, including the inability to find a plan that gives them access to specialty care they need. It’s unclear whether the new rules will have much of an impact in 2018, analysts say. That’s because starting in tax year 2019, the penalty for not having health insurance will be eliminated, so the new exemptions will mostly apply to penalty payments for 2018 taxes and in the previous two years.



A planned merger between Humana and Aetna was dashed by a federal judge, and CVS Health went on to acquire Aetna. Now it appears Humana may have found a new suitor. Walmart is in the early stages of acquiring the health insurance giant, The Wall Street Journal reported. The details of the proposed deal were not available, the Journal said, and neither party would comment. In 2015, Humana and Aetna were headed down the road to a merger, and Anthem was on the way to acquiring Cigna. But these deals failed to go through when the federal courts sided with the Justice Department’s case that they would harm competition. DID YOU




The ACA individual mandate penalty may be going away starting next year, but New Jersey wants to keep it. The state legislature passed a bill that would re-impose the tax penalty on anyone who forgoes insurance. The bill awaits Gov. Phil Murphy’s signature. The move is part of a push by some states to shore up their hea lth insurance markets before the 2019 enrollment season, after President Trump and congressional Republicans repealed the individual mandate penalty as part of last year’s tax-cut bill. California and Rhode Island are studying whether it’s worth re-imposing the most unpopular part of the ACA. Maryland approved a reinsurance program to cover its high-cost customers.


It’s just still a nasty soup right now that’s brewing and we’re looking ahead to 2019 and it’s not a really great picture right now. Matt Eyles, senior executive vice president of America’s Health Insurance Plans, on 2019 ACA plan rates

If the New Jersey measure becomes law, the state joins Massachusetts as the only states to use the mandate penalty as a way to compel their citizens to maintain coverage.


The cost of treating opioid addiction keeps going up, with employers spending $2.6 billion to treat opioid addiction and overdoses in 2016, an eightfold increase since 2004. Even more significant than the high pricetag is that more than half was spent on treating employees’ children. Kaiser Family Foundation found that this spending cost about $26 per health plan enrollee. These rising costs come as spending on opioid prescriptions is falling. Kaiser said spending on opioid prescriptions dropped 27 percent since hitting a peak in 2009. Workers share the costs. Steve Wojcik of the National Business Group on Health says for every $5 increase, employers typically cover $4 and pass $1 to workers.

The nation’s long-term care insurers paid $9.2 billion in claim benefits in 2017 to about 295,000 individuals. Source: American Association of Long-Term Care Insurance

InsuranceNewsNet Magazine » June 2018


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3 Ways To Start The Hospital Indemnity Plan Conversation How to convey the economic risk of health emergencies.

A standard hospital indemnity insurance plan may include:

By Bradd Chignoli


icture this: An employee receives a call at work from her child’s day care telling her that her son has fallen on the playground and hit his head hard. They’ve called an ambulance, which will take him to the hospital, and she rushes to meet him there. Upon arriving, the frantic mother finds that her son is doing well, but the hospital would like to hold him overnight for monitoring. Instead of being able to focus on her child, the mother’s mind immediately jumps to her bank account. Like those of most Americans, her bank account contains just a few hundred dollars. She is not able to focus fully on her son’s recovery because she’s preoccupied with how she’ll pay for hospital costs that won’t be covered by her medical plan. Unfortunately, this scenario is far from rare, and it’s stressful for employees. According to research from the University of Michigan, even people who have health insurance pay — on average — about $1,000 out of pocket for a hospital stay. A recent Consumer Reports survey also showed that Americans now say their biggest concern is health care. As employees look for solutions to address their financial concerns, they’re turning to the workplace more than ever. According to MetLife’s Annual Employee Benefit Trends Study, 62 percent of employees are looking to their employers for more help in achieving financial security through employee benefits, compared with 54 percent in 2016. Employees’ desire to leverage workplace resources to limit out-of-pocket health care expenses such as copays and deductibles, as well as related expenses such as child care and transportation, has driven solid growth in supplemental health products over the past few years. 62

InsuranceNewsNet Magazine » June 2018

»C overage for hospital admission, accident-related inpatient rehabilitation and hospital stays »G uaranteed acceptance for employee and other eligible family members » Convenient payroll deduction »P ortable coverage if the worker leaves the employer Eastbridge’s most recent U.S. Voluntary/ Worksite Sales Report showed that critical illness and accident insurance continue to hold large percentages of the voluntary sales mix. However, hospital indemnity insurance is actually growing more rapidly. Hospital indemnity insurance is a lesser-known option that pays a lumpsum benefit that could be used for

out-of-pocket costs including hospital stays, accident-related inpatient rehabilitation, plan deductibles, copays for doctor visits and extra costs for out-of-network care beyond what medical plans cover. According to the Eastbridge report, hospital indemnity sales were up 16 percent year-over-year compared to a 13 percent increase in critical illness sales and

Benefits lead to less worry

Because of benefits I receive at the workplace, I worry less about unexpected health and financial issues.





3 WAYS TO START THE HOSPITAL INDEMNITY PLAN CONVERSATION HEALTH/BENEFITS nearly flat sales of accident insurance. As hospital indemnity plans become more prevalent, employers will want to be on the forefront of information and insights about products that meet their workers’ needs. As a broker talking with clients about their benefit packages, here are three suggestions for emphasizing the relevancy and value of hospital indemnity plans. 1. Reshape the health care conversation. Health care is no longer only about medical plans. Supplemental health offerings such as hospital indemnity plans are key financial security resources that should be a part of holistic health care conversations. According to MetLife’s study, 84 percent of workers said hospital indemnity insurance is a must-have or nice-to-have benefit. This coverage acts as additional financial security for employees who want to protect themselves from out-of-pocket health care costs that are not covered by medical plans. In addition to plan deductibles, copays and hospital stays, the hospital indemnity lump-sum payment can be used for such things as testing and diagnostics, emergency care, and benefits that are helpful after confinement such as prescription drugs, transportation for follow-up treatments, or even nursing and hospice care.

The right benefits save money for today’s employees Nonmedical benefits such as critical illness and accident coverage help me limit my out-of-pocket medical expenses.


By adding a hospital indemnity plan, employers will be well-positioned to meet employee demand and reap the value when it comes to loyalty.

3. Underscore the importance of communication. Employees are asking for options such as hospital indemnity plans that help limit their outof-pocket exposure, but the MetLife survey found that just a quarter of employees say they really understand how hospital indemnity insurance works. This shows that adding a hospital indemnity plan to (Source: Eastbridge U.S. Voluntary/Worksite Sales Report) a benefits package is not enough. employers. In fact, about 75 percent of Communicating this offering well is also employees say that the ability to choose critical. Look for simple solutions that their benefits keeps them loyal to their use layman’s terms to help employees unemployer, the MetLife survey showed. derstand the benefit and how it may be According to the survey, 45 percent of relevant to their lives. employers plan to increase the number of nonmedical benefits offered to their As the workplace continues to evolve, workers in the next one to three years. employers’ ability to engage their 2. Ground your discussion in data. When employees have the ability to choose the benefit options they want at work, they feel more loyal to their

Hospital indemnity, gap and supplemental medical product sales were about $622 million in 2016, up 16 percent over 2015.

workers and cultivate loyal, productive workforces is paramount to their ability to differentiate and reach their business goals. When designing employee engagement strategies, offering the products employees care about continues to be foundational. Hospital indemnity is one of those products, and it’s poised for more growth. Employers that are on the forefront of offering it will be those well-positioned to win when it comes to attracting and retaining talent. Bradd Chignoli is senior vice president of national accounts in group benefits at MetLife. Bradd may be contacted at

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



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Women Should Plan Financially To Live 100 Years

Who wants to live to be 100? Two out of three American women said they do, 1 in 4 adult women but 60 percent of them said they fear haven’t planned financially blowing through their savings before for their future. they blow out those 100 candles. That’s the word from a Merrill Lynch survey that showed women have more difficulty building wealth than men do. One in four adult women, and almost a third of women between the ages of 30 and 44, said they haven’t planned financially for their future. Women reported they are as confident as men are in most financial tasks. But investing was the important exception. Only a little more than half of the women surveyed said they feel confident about managing their own investments. But investment confidence increases with age, as 60 percent of silent generation women said they were confident about investing, compared with 46 percent of millennial women.


Financial services firms are getting fed up with high compliance costs, as 90 percent said they expect such costs to rise, according to a recent Accenture report. Additionally, 25 percent of surveyed firms reported spending more than 5 percent of net income on compliance. Increasingly, a tougher regulatory environment has put many advisory firms in a bind. “Over the past 10 to 15 years, advisory firms have seen more regulations on the books, and the regulatory bodies have appreciably increased the enforcement of the regulations that are on the books,” said Jeff Groves, president at southern California-based ComplianceWorks. Hiring professional compliance help has grown more expensive, as well, with chief compliance officer salaries rising to more than $150,000 annually, he said. DID YOU




Right now, financial services firms are grappling with three major compliance risks, fraud and financial crime risk, business risk, and cyber risk. — Jim D’Arezzo, CEO of Condusiv Technologies

least $500,000 spent down only 11.8 percent in the first 20 years of retirement. Why are retirees holding the purse strings so tightly? They’re uncertain about how long their money might need to last or they’re worried about facing high medical or long-term care expenses down the road. Some retirees want to be sure they have something to leave to heirs. Others find it difficult to shift their mindset from accumulating savings to spending them down.


Too many retirees are resigning themselves to eating day-old bread and setting the thermostat just above freezing because they are afraid of spending down their assets too quickly. That’s the word from the Employee Benefit Research Institute, which found the fear of running out of money is pushing many retired seniors to shortchange themselves when it comes to funding their living expenses in retirement. EBRI found retirees are spending their assets rather slowly. The average retiree with less than $200,000 in nonhousing assets before retirement spent down about one-quarter of their assets after 18 years. For those who had between $200,000 and $500,000, the average had spent down a little more than one-quarter of their assets over 18 years. The average retiree with at

Slow wage growth weighs heavily across all generations of American workers, a study found. The Prudential Financial American Workers Survey found a lack of job prospects and the cost of higher education also are troubling to those in the workforce.

Workers said they need employers to provide access to financial products and education. More than three-quarters — 76 percent — of workers believe employers have a role in providing access and opportunities to help employees succeed, the survey found.

53% of workers age 60 and older say they are postponing retirement.

InsuranceNewsNet Magazine » June 2018

Source: LIMRA

Source: CNBC

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Attract Millennial Clients With A Service Subscription Model Young professionals are already accustomed to being billed regularly for services they receive. Financial advice should be no different. • Levi Sanchez


illennials are set to inherit trillions of dollars over the next few decades in the greatest wealth transfer in history. Tapping into this tech-savvy, social-media-driven and highly educated market of prospects is on the minds of most advisors these days. As a millennial myself, I have insight and perspective into my generation’s needs for financial advice, tendencies when it comes to seeking advice, and mentality when it comes to purchasing goods or services. Millennials are comfortable paying for subscription services such as Netflix, Amazon Prime, Xbox Live or Stitch Fix — all billed either monthly or annually at a fixed fee. It’s simple, it’s transparent and it’s easy to understand. When it comes to financial advice, it’s no different! 66 66

InsuranceNewsNet Magazine Magazine »» June June 2018 2018 InsuranceNewsNet

The Traditional Advisor Billing Models

The traditional advisor billing models include commissions or a percentage of assets under management. Ever since I entered the industry four years ago, I haven’t interacted with many advisors who still use commissions as the core of their business. They may offer life insurance, annuities or long-term care insurance; however, products that produce a one-time commission aren’t their largest revenue driver. In my opinion, there’s a good reason why they do this, as commission-based models will shortly be nonexistent due to consumers becoming more educated about what it means to be a fiduciary and the conflicts of interest that can arise when selling commission products. Especially the millennial demographic that Googles everything before trusting it.

In addition, the AUM model typically requires a significant amount of assets before an advisor will take on a new client. At the wirehouse where I began my career, that minimum was $250,000. Most millennials don’t have $250,000 just lying around, and this reality has left a major gap in the availability and demand for financial advice.

The Subscription Model

My firm was established at the end of 2017 with the help of a network of fee-only advisors who pioneered the subscription/ retainer business model. We provide comprehensive financial planning services for millennials using a “subscription” fee as one of our billing options. The subscription fee is charged monthly, and debited directly from our clients’ checking accounts. This fee covers all financial planning and investment management services. We work with young professionals between 25 and 30 years of age. The floor for our fee schedule is $75 a month, and as clients build assets we move them to an


AUM fee of 0.8 percent of assets annually. In order to get in the door millennials who haven’t built up significant assets, the subscription model offers an opportunity to service them while still being profitable.

get from us, even if it’s not necessarily a monthly contact, which the vast majority don’t want anyway.

Why It Works From a Service Perspective

From a business perspective, it’s important to model how offering a subscription service (probably at a lower revenue-perclient basis) affects your bottom line. In our case, we modeled what would happen if we maxed out our client base with subscription-only clients, and whether we could still be in business. Our practice is virtual for the time being and doesn’t have significant overhead; therefore, we passed the test. However, not everyone may be comfortable taking a pay cut while you wait for the “potential” in subscription clients

The subscription model allows you to work with people who have the “potential” to grow into AUM clients. And it allows us to grow with our clients to help build their net worth and implement healthy financial habits early. Also, as I mentioned, many services today are offered through ongoing subscriptions rather than a one-time upfront cost. Consumers have grown accustomed to this form of billing as long as the value is ongoing.

Why It Works From a Revenue Perspective

The subscription fee allows you to get strong prospects in the door before your competition does. That doesn’t mean you have to take everyone; you can still be selective about who you choose to ultimately onboard as a client. The key is to provide ongoing value through a financial planning process that can justify a monthly subscription fee. We communicate upfront with clients that while we charge monthly, we’re not necessarily going to be in touch every month. The majority of work on the financial planning front will be conducted and implemented at the beginning of our relationship; however, as a client’s life and situation changes, oversight and ongoing advice will be required to we’re adapting to those changes financially. In addition, we’re managing their assets on a discretionary basis, ensuring we’re tax-efficient, rebalancing when necessary and maintaining a properly diversified portfolio. Having these discussions at the outset of the client relationship sets the expectations of what they’re going to

eventually moving to an AUM fee. We also have AUM clients, and expect that base to grow as well. It’s very unlikely our clientele will only be paying for a subscription.

Be Transparent

Again, the hope with subscription clients is that they’ll eventually build enough assets to move over to our AUM model, which typically aligns with the growing complexity of their financial situation. For every client we onboard, we’re transparent about the fact they’ll be moved to an AUM fee once they hit a particular amount of assets that we directly manage. Millennials in particular want and need transparency in order to do business with you. Think about it — Amazon clearly gives their consumers everything they need to know about the product they’re

selling you online. You can compare and contrast pretty much every product you could ever want. Entire businesses exist that review products and services online for customers before they buy. If you’re not clearly outlining your fees, what you do, and your process on your website or in initial meetings, millennial prospects are likely to be turned off. They’ve Googled you, researched your firm or spent time asking other people about your services. Being transparent from the get-go gives you the best chance to appeal to a millennial prospect.

Why You Should Consider Offering a Subscription Fee

Offering a subscription fee opens the door to great prospects regardless of the assets they currently have. One example is a recently graduated dentist. They may have a couple hundred thousand dollars in student loan debt, and no assets. They’re definitely a great long-term prospect, and the sooner you get them in the door and show them your value, the more likely you’ll have them as clients when they’re making a couple hundred thousand a year, stashing away $50,000 and building significant investable assets. The subscription fee allows you to get strong prospects in the door before your competition does. That doesn’t mean you have to take everyone; you can still be selective about who you choose to ultimately onboard as a client. Millennials want direction and advice about their finances, but that direction and advice need to be accessible to them. Sure, there are a million personal finance “gurus” and bloggers out there offering information for do-it-yourselfers, but not everyone wants to do it themselves! Roboadvisors offer investment management at a low cost, but their planning expertise is still far behind what a niche planning practice can offer. Not to mention that algorithms will never be able to connect on an emotional level with clients the way a human advisor can. Levi Sanchez is a financial planner and co-founder of Millennial Wealth, Seattle, Wash. Levi may be contacted at

June 2018 2018 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine June

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Six Signs Your Client Has Outgrown You Several things contribute to clients outgrowing their advisors. In particular, advisors should be wary of these six things, as they could be signs their client is ready to move on. • Brian O’Connell


inancial advisors have enough on their plate without looking over their shoulder at clients thinking about moving on to new advisory experiences. But it happens when clients don’t believe their advisor is keeping pace with their expanding financial picture. “While some people in the retirement-planning stages worry about outliving their money, others have a different concern: that their money is outgrowing their investment advisor,” said Eric Kearney, a money manager at South Florida-based Retirement Wealth. “It’s not unusual for the size of the client’s investment to increase well beyond their advisor’s level of experience and knowledge.” Increasingly, Kearney added, high-net-worth individuals often demand more creative, sophisticated planning for their needs than their original advisor is able to provide.

Red Flags

So, what are the warning signs that a client is thinking about moving on? Here are several red flags advisors should learn to recognize. The client has an “outdated” portfolio. “A typical scenario sees someone continually growing their net worth, then later realizing that their portfolio never really changes,” Kearney said. “The advisor is using the same approach over and over again. By the time the client explores a second opinion, they can see they should have graduated from this very simple portfolio hundreds of thousands of 68 68

InsuranceNewsNet Magazine Magazine »» June June 2018 2018 InsuranceNewsNet

dollars ago. That’s usually when they realize they’re in a fee-ridden portfolio.” The advisor is unaware of options. Many investors aren’t aware of their full range of options, Kearney said, adding that their advisors often aren’t aware of them either. “If a client is never offered any new ideas or strategies, such as lowering their taxes, reducing their mortgage payment or being offered a long-term care alternative, that means the current advisor is probably stale, and they’re not interested in offering you proactive-type service,” Kearney said. There’s a lack of consistency, especially on communication. “Wealthier clients with multiple financial pieces in motion notice when advisor contact is inconsistent,” Kearney said. “There are a lot of people, even with multimillion-dollar accounts, who think, ‘Maybe my account is just not big enough for my advisor to pay attention to me.’” Yet that’s usually not true, he said. It’s often just a matter of the advisor not having the right systems in place. “It’s important for an advisor to have a team with a point-ofcontact person whom the investor can reach anytime,” Kearney said. There’s little capacity to grow with their clients. If an advisor hasn’t had any real experience with wealthier individuals, then they tend to hold back clients who started small and grew their wealth substantially, said Marc Labadie, partner at CR Myers & Associates in Southfield, Mich. “This is a relative concept that can occur on all levels of wealth,” he said. “We all have ‘sweet spots,’ or ideal clients. They tend to be


within a similar wealth range.” If an advisor’s typical client has a net worth of $1 million to $2.5 million, “they may not be well-equipped to work with a client whose net worth surpasses that range substantially,” Labadie said. The advisor has not achieved similar financial success. The idea of high-level executives, CEOs and business owners taking financial advice from financial reps is “odd,” Labadie said. “Most wealthy people I know and work with want to deal with people who have achieved a similar level of success in their own business,” he said. “People they can relate to and who they know are dealing with the same planning concepts and dollar amounts that they understand.” The advisor focuses too much on jargon. If the advisor has limited or no credentials, he or she may well concentrate the majority of client planning sessions discussing the market or particular positions in the portfolio, said Lou Cannataro, a wealth management advisor with the Northwestern Mutual Wealth

There are a lot of people, even with multimillion-dollar accounts, who think, ‘Maybe my account is just not big enough for my advisor to pay attention to me.’ Management Company in New York City. “Quite often, the advisor will use an avalanche of industry jargon, market predictions and what they think is going to occur in the markets,” Cannataro said. “But that’s just a façade for an advisor whose planning acumen is paper-thin.” This advisor’s value approach when securing a new client may have been sold as “market sophistication.” “Yet once the client eventually understands that asset allocation and consistence are responsible for 90 percent of the returns, they begin to question their advisors about the real value of the relationship,” he explained.

See It Forward

For clients on the fast path to upward financial mobility, the key is to ask the right questions before signing on. For advisors, the

key is answering those questions knowledgeably and with a forward-looking vision. “There comes a point when a client knows he or she has outgrown their advisor, but you don’t want that to be too far down the road,” Kearney said. “Before they get an advisor, or when looking for a new one, I think people really have to ask them, ‘Who is your typical client? Do you match my needs? Do you deal with a certain range of net worth and have minimums?’ “People want to know if they’re working with an advisor who really understands them.” Brian O’Connell is a former Wall Street bond trader and author of the best-selling books The 401k Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms. Brian may be contacted at

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When You’re Sitting On Top Of A Mountain But It’s a Rut Why so many ultra-successful professionals are so unhappy. By Kerry Johnson


att is a $1.5 million producer. He has a new Porsche 911, a Maserati, and a 5,000-square-foot house overlooking a valley. He has two beautiful kids, a gorgeous wife and no debt. He has it made — except for the happiness part. He is frustrated about paperwork, staff, compliance regulations and parent company edicts. But many top producers are frustrated. The difference is that Matt isn’t happy. But he likes his career and his freedom. He loves his income. Why can’t he just count his blessings? More than one-third of the U.S. population has mental health problems. Some are more severe than others. In graduate school, a professor jokingly told me the difference between neurotics and psychotics. 70

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The joke is that neurotics build castles in the sky, psychotics move into them and psychologists collect the rent. I have always thought about the differences more concretely. If you ask a psychotic what two plus two equals, they will say 36 or 98 or 112, with no sense of reality. If you ask a neurotic the same question, they will always say four. But then they will follow up with “Why does it always have to be four? It makes me nuts it can’t be five once in a while.” The drive that causes someone to become super successful can also cause the psychological disease that causes dissatisfaction. Let’s look at a U.S. postal worker who works an 8-to-5 day with no pressure. They know their job, they show up for work and they get paid. They rarely get fired, they sometimes get promoted, but they have no motivation to work harder and make more money. By contrast, the super sales producer is unemployed until his next sale, and is

always under stress. When I was 26 and a new stockbroker, my manager encouraged me to buy a new BMW 535. His attitude was that a producer with financial stress was a harder worker than a financially comfortable one. But the stress super producers feel is self-inflicted. Why? The super producer has a hole in their ego constantly in need of filling. Super producers are super competitive and they struggle to reach the next level. Managers love these producers but also find them challenging. These super producers complain constantly, sometimes think things are unfair, and are generally headaches for those who work with or supervise them.

Why Aren’t They Happy?

John had a good year. He grew his business to $2 million in income and is really irritated it wasn’t higher. His goal was to increase income by 25 percent. But it rose only 10 percent, and he isn’t happy about it. The average annual household income

WHEN YOU’RE SITTING ON TOP OF A MOUNTAIN BUT IT’S A RUT BUSINESS in the U.S. is $54,000. Only 1 percent of Americans earns more than $500,000 annually and has a net worth of more than $1 million. But that doesn’t matter to maladaptive, irrational super producers. Why aren’t they happy? It could be a non-approving father or a critical mother. It could be a poverty-stricken upbringing. But these folks are constantly trying to fill the void, struggling to be good enough. I renewed my driver’s license a while ago. The last step was a photo. I was third in line. The photographer told each person before me to put their feet in the yellow outline, look at the camera, wait for the flash and walk to the checkout counter. When it was my turn, I handed him my paperwork and said, “Won’t you be glad when you can rotate out of this job to another DMV station?” He said, “I have been here doing the same job taking

The opposite is true. They need more stroking, more praise and more injections of self-worth than the others do. It is a counterintuitive concept for most colleagues and managers. These super producers sometimes diminish praise by saying things such as, “It’s not enough,” or “Let’s see what happens next month.” Managers or colleagues think since super producers don’t accept strokes well, they don’t want praise. But these super producers need praise even more than less-gifted people do.

Catch Them In The Act

One solution is to catch super producers in the act of being successful. When they complain about paperwork, tell them how well they are managing their time. When they whine about a slow internet connection, tell them you will work on it, but at

It is hard to be gratuitous with a super producer. They are looking for any reason to build their selfesteem. Since they find it hard to self-praise, the praise they crave needs to come from you. driver’s license photos for 25 years. Then he said, “Put your feet in the outline, look at the camera …” This is not a super sales producer. Super sales producers become bored easily and need to be challenged constantly. Most important, they need to feel valued. In my coaching practice, we guarantee clients will increase their business by 80 percent in eight weeks. Because we commit our clients to a business plan first, it’s hard not to get them on track to an 80 percent increase in eight weeks. Our clients only need someone to hold them accountable. But the super sales producers are different. They need more praise than the rest. It was my mistaken belief that the biggest producers were emotional giants psychologically. I thought they were more emotionally insulated than lesser producers.

their lofty level it’s only a speed bump. Remind them of how well they have done before, or of a hurdle they overcame earlier. You can say, “Hey, Jim, remember the case you sold that produced $50,000 last month? Boy, you worked hard on that. You are absolutely gifted. You are the best I have ever seen.” It is hard to be gratuitous with a super producer. They are looking for any reason to build their self-esteem. Since they find it hard to self-praise, the praise they crave needs to come from you. Obviously, you want that praise to be sincere. But a rule of thumb is to praise them three times a day and rationalize that as a way of training them to be even more successful than they already are. Remember, you are trying to fill an emotional hole. Don’t worry about sterilizing your super producer. They will

only produce more and be happier in the process. I have three daughters. I have always told each she is my favorite. It’s now a family joke. But there’s a reason to my madness. One of my heroes was Congressman Jack Kemp. He was an NCAA All-Pro quarterback at Occidental College, won the NCAA championship and later played quarterback for the Buffalo Bills. He went on to be a U.S. congressman, and even was Sen. Robert Dole’s running mate against Bill Clinton in the 1996 presidential campaign. Just before the NCAA championship, Kemp’s college coach called him into his office and said, “Jack, you are a natural born leader. You are the most gifted and hardworking player I have ever coached. I need you to lead this team to a national championship. Motivate the rest of the players to give all they can in the game and we will walk away with the championship. But don’t tell any of the players we had this conversation.” Kemp said, “OK, Coach. Thanks for believing in me. I will bring back the trophy.” They went on to win the championship, and Kemp went on to a great career. At a reunion decades later, one player walked up to Kemp and said, “Coach liked me best.” Kemp laughed at such a random statement and asked why he thought that. The lineman said, “Coach called me into his office before the national championship and told me I was the most gifted and hardworking player he had ever coached. He told me to lead the team and motivate the other players.” The coach told every player the same thing. The Occidental College football coach won a national championship by motivating the maladaptive irrational super producers to even greater things. Kerry Johnson. MBA, Ph.D., is a best-selling author and frequent speaker at financial conferences around the world. He is the creator of Peak Performance Coaching. He 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.

When A Reverse Mortgage Makes Sense For A Client Advisors may be skeptical about the benefits of a reverse mortgage, but it can be an important part of the retirement planning conversation. By Jocelyn Wright


t has been more than 55 years since the first reverse mortgage was written. The year was 1961 when a banker at Deering Savings & Loan of Portland, Maine, created the loan to help the widow of his former high school football coach. Since then, the reverse mortgage has evolved in many ways. I did not come to learn about this unique loan product until about 2007 or so. I was still early in my planning career and had few, if any, clients in or approaching retirement. Therefore, this was not an area in which I gave much attention. Not to mention that what was being written at the time about reverse mortgages was not all positive. The stories did not always talk about how the loan helped an elderly homeowner access much-needed equity to stay in their home. In some unfortunate cases, homeowners were taken advantage of and put in even more precarious financial situations. Even just a few years ago, for some financial advisors, the mere thought of discussing a home equity loan or a reverse mortgage with clients as part of the overall retirement planning conversation was, and in some cases may still be, seen as taboo to their compliance department. Other advisors may have even been expressly prohibited from discussing the topic altogether. Given that America is in the midst of a retirement income crisis, this is not only unacceptable, but also it is irresponsible. Fast-forward to today. Reverse mortgages, also known as Home Equity Conversion Mortgages, have undergone numerous changes. The Housing Wealth in Retirement Symposium, co-hosted by The Funding Longevity Task Force 72

InsuranceNewsNet Magazine » June 2018

at The American College of Financial Services and the Bipartisan Policy Center, is attempting to fill a void in this space. The goal of the symposium, held on March 23 in Washington, DC, was to facilitate collaboration between stakeholders including regulatory agencies, nongovernmental organizations and the financial services community to address the underutilization of housing wealth in retirement. Experts from across the industry came together for this one-day event to share their thoughts on this increasingly important, and in many cases still misunderstood, topic. Speakers included thought leaders such as Wade Pfau, Shelley Giordano and Christopher Mayer. Jamie Hopkins is an outspoken proponent of the need to incorporate reverse mortgages or home equity into the retirement income planning conversation. In a recent article, he stated, “The home, a potential reverse mortgage, or an existing forward mortgage are clearly factors that need to be considered when reviewing a client’s financial plan. While many advisors do review the existing mortgage and perhaps recommend refinancing, this is usually where the advice stops — leaving a wide range of factors affecting the client’s situation unexplored.”

Addressing the Challenge

The Bipartisan Policy Center’s June 2016 report, Securing Our Financial Future: Report on the Commission on Retirement Security and Personal Savings, presents a comprehensive package of proposals to address six key challenges. One of those challenges is failure to build and use home equity to support retirement security. The report explains that housing is an integral part of savings. “Americans own more than $12.5 trillion in home equity — a sum that rivals the $14 trillion that Americans hold in retirement savings. For individuals or couples who lack substantial savings in a retirement plan but who

Americans own more than $12.5 trillion in home equity — a sum that rivals the $14 trillion that Americans hold in retirement savings. own their residence, homeownership can be a major source of retirement security. “A variety of mechanisms exists for tapping home equity to fund regular consumption needs in retirement; for example, homeowners can downsize, use a reverse mortgage or sell their home and rent instead. These approaches have advantages and drawbacks; retirees with home equity should be aware of the available alternatives and have independent advice to make an appropriate choice for their circumstances.” It is time for more financial professionals to adjust their approaches to reverse mortgages. Ignorance is neither an excuse nor an option. The Retirement Income Certified Professional courses are an example of curriculum that professionals can use to increase their knowledge and understanding around the use of housing wealth. Finally, Hopkins contends, “By ignoring home equity and the benefits of a reverse mortgage, the advisor may be placing the client in a worse situation than if there had been an error or omission. The failure to plan or the failure to consider an option can also lead to liability.” 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.

Why You Need A Business Succession Plan, Now A business succession plan makes sure that you, your clients and your staff will be taken care of when you are ready to exit the business. By Ayo Mseka and Michael DiCenso


any advisors hesitate to create a succession plan for their business, even though they are worried about what will happen to that business after they are gone. In fact, according to some estimates, most advisors do not have a formal succession plan that details how and when they intend to exit the business. This situation is startling, considering the fact that, according to some studies, about 12,000 to 16,000 advisors are expected to retire each year over the next 10 to 12 years. To help advisors take the first steps in creating their succession plans, we recently spoke with NAIFA member Michael DiCenso, who shared the business case for creating a formal succession plan and critical steps for implementation. NAIFA: Why is it important for agents and advisors to have a written succession plan? Michael DiCenso: Currently, only 5 percent of agents and advisors have a written succession plan. Advisors need to have a plan in place to ensure the long-term success of their companies. A succession plan is also a vehicle that can be used to monetize the business and provide greater benefits, services and deliverables to clients. NAIFA: What different types of succession plans are available to agents and advisors? DiCenso: Succession planning is different for every firm. It is based on the wants, needs and desires of the owner or owners. Some owners will want to stay involved, but in a reduced capacity. Some will not want to change their duties and responsibilities

and others will want to walk away from the business completely. The options for advisors include: [1] Hiring someone to transition the firm to. This can be difficult due to the lack of new blood that is entering our industry. [2] A partnership/merger/acquisition. This is finding a firm that will enable you to grow your business and offer your clients greater services and resources, while allowing you to back away from areas of the business you do not want to be involved in, going forward. A partnership allows the sharing of revenues and resources. A merger allows some portion of monetization, while allowing the owner to stay involved over an agreed-upon period, with responsibilities remaining in place for the seller to perform (i.e., sales, service, being the face of the firm, doing away with management, business operations or records). An acquisition allows an owner to fully cash out of the business and move on to retirement or to pursue other opportunities. NAIFA: What steps can advisors take to grow and monetize their business as they prepare to exit? DiCenso: There are many steps they can take. For example, the process could be first to find a partner who will provide some monetization and growth opportunities. Over time, this partnership could move to a merger or an acquisition. But remember that every situation and owner is unique, and the right solution for each firm will differ. NAIFA: Share a few ways advisors can begin to create a succession plan. What should be their first steps? DiCenso: The first step is for the advisors to truly understand all the metrics of their business and solidify the practice-management process in the following ways:

» Assessment of the revenues by niche, services offered and delivery. » Assessment of profitability by niche, services offered and delivery. » A ssessment of resources/staff and efficiency. » Revenues by staff by service offering. » Profits by staff by service offering. • Revenue per client. • Profit per client. » Overhead as a percentage of revenues/ profits. » Assessment of technology and efficiency. What I consistently see occurring in our industry is that owners are working in the business instead of on the business. In other words, they are selling to and servicing their clients, but they are spending little time strategizing, growing and focusing on the parts of their business that drive the most revenues and profits. They spend little to no time planning for their successful growth and succession. Most advisors are good salespeople and service providers. As a result, those are the areas to which they gravitate in their business rather than to running, managing and operating their business. Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Contact her at Ayo.Mseka@ Michael DiCenso is a nationally recognized speaker and expert in the retirement services and wealth-management industry. Michael may be contacted at

June 2018 » InsuranceNewsNet Magazine



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

Annuities Uncover Hidden Retirement Plan Opportunities Annuities bring needed stability and security to a well-rounded retirement portfolio. By Eszylfie Taylor


lients as well as advisors may not completely understand the opportunities annuities hold for retirement plans. Although they don’t necessarily provide the highest possible rate of return, annuities can bring needed stability and security to a well-rounded portfolio. As clients are likely unaware of the capabilities, it is your responsibility to communicate the potential benefits and considerations for their retirement and overall financial strategy.

Explain Financial Safety Net

Asset classes have three possible outcomes for clients: gain money, lose money or break even. Although many clients hope to earn money through their portfolios, consultative meetings may reveal they are not willing to risk losing anything in order to do so. With certain types of annuities, clients are protected from negative risk potential and gain a financial safety net for their retirement plan. When properly structured, annuities can provide hesitant clients the opportunity to eliminate loss and pursue financial growth. After clients understand the benefits of annuities, a logical discussion can motivate them to transfer a portion of their investments into annuities to move their money out of a position of risk. After their objections are answered, most clients will seriously consider annuities and feel

reassured about their value. Clients who believe their current savings will not be substantial enough to maintain their standard of living during retirement should be particularly interested in annuities.

Determine Risk Avoidance

When clients acknowledge that annuities are a good fit for their holistic financial plan, it is vital to determine their risk avoidance and tolerance levels. Ask how much money they are truly willing to lose. Dig deeper to determine the amount of money lost in an investment that would cause them to lose sleep at night. This is the amount that you need to ensure is protected and set aside with annuities. This ratio will be different for everyone. Help each client take into account how much they have saved for retirement, their current financial stability and their future saving power — all of which will influence how much they might consider placing in annuities. Similar to other products and planning strategies, age is not necessarily a determining factor for how much clients should set aside. Individuals establish their own comfort levels. For instance, one of my most aggressive clients in terms of investment risk is 85 years old. Other advisors likely work with extremely conservative investment clients who are only in their late 20s. Do not rely on age as an indicator for change in investment strategy. Rather, continue to revisit plans on a regular basis and adjust accordingly as each individual’s financial needs change. There’s no perfect product, and annuities are no exception. Clients should

Dig deeper to determine the amount of money lost in an investment that would cause them to lose sleep at night. This is the amount that you need to ensure is protected and set aside with annuities. 74

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invest only a portion of their savings into annuities to complement a well-rounded financial plan anchored by other tactics. This can provide predictable outcomes to balance other investments subject to risk and volatility. With this strategy, a client’s standard of living should not be compromised if the market goes down.

Match Client Needs To Annuity

Consider clients’ plans and financial goals when selecting the type of annuity that would best fit their situation. A combination of various annuities can help serve clients’ unique needs, risk tolerance and time horizons. Wealth distributions provide a source of income postretirement, and certain annuities also offer a guaranteed death benefit, so clients will not lose any of the money they invest. If you are not already using annuities as part of your financial advising strategy, it may be time to incorporate them into your conversations with clients. Annuities can be a valuable tool for financial planning that will make clients feel more secure, fill out their retirement plans and help maintain their standards of living postretirement. Eszylfie Taylor is the founder and president of Taylor Insurance and Financial Services in Pasadena, Calif., and creator of The Taylor Method, his sales training system for financial advisors. He is a 15-year member of MDRT. In 2015, he was the recipient of NAIFA’s Advisor Today Top 4 Under Forty award. Eszylfie may be contacted at






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

Single Retirees In Search Of LTRs With Advisors Single retirees who work with an advisor are more confident in their retirement security than those who do not. This represents an opportunity for advisors. By Jafor Iqbal


edia often depict retirement as idyllic — a couple holding hands and taking a long walk by the water or sitting on a white beach in a pair of easy chairs. Rarely are single retirees portrayed similarly. However, single retirees are an important part of the U.S. retirement market. Should advisors view the single retiree market differently? They should.

The Single Retiree Market Is Big

According to LIMRA Secure Retirement Institute’s analysis of the Federal Reserve Board’s 2016 Survey of Consumer Finance data, there are 7.6 million single pre-retirees and retirees aged 55 or older in the U.S. with investable assets of $100,000 or more — nearly two-thirds of them are single women. In addition, single pre-retirees and retirees control $6 trillion in investable assets. This represents great opportunity for financial professionals. Single retirees face unique retirement challenges compared with their married counterparts. In general, single retirees are largely responsible for their own retirement security, which includes their financial, emotional and physical well-being. As these individuals face these challenges, it is critical that they exercise prudence — and seek an advisor’s help — when making decisions about retirement.

Single Women Retirees Feel Less Confident

A new LIMRA SRI study of more than 1,100 single retirees with annual incomes of at least $35,000 finds single retirees — particularly single women retirees — feel less secure about their financial security in retirement and are more concerned 76

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about outliving their savings than those who are married or have partners. These concerns are more pronounced with single women retirees. More than 4 in 10 single retired women worry that their savings and investments will not last if they live to be 90 years old, compared with just 3 in 10 single retired men. Apart from higher longevity risks — especially for women — there are other reasons for low retirement confidence: (1) single retirees may have no one to rely on; (2) single retirees spend proportionately more of their income on essential expenses such as housing, food and utilities than couples do; and (3) many single retirees do not own their primary residences. The study shows that many single retired women underestimated their expected expenses primarily because of higher expenditures for housing and the need to provide financial support to (mostly younger) family members.

Working With An Advisor Improves Outcomes

LIMRA SRI finds single women retirees greatly benefit from working with an advisor. Those single women retirees who work with an advisor are more risk tolerant, are more knowledgeable about investments and have more confidence in their retirement security. Despite having considerable income, 40 percent of single women retirees who do not have an advisor have zero risk tolerance — four times higher than the women who work with an advisor. Three-fourths of single women who work with an advisor are confident about being able to live the retirement lifestyle they want, compared with about half of the women without an advisor. In addition, the confidence of single retirees gets a boost from higher annuity ownership and higher likelihood of having an income plan when they work with an advisor. Annuity ownership is double among single retirees with an advisor compared to

retirees without one. Advisors also completed a formal income plan for one-third of their single retiree clients. Percent of Single Retirees – Men & Women (Strongly or somewhat agree)

Have an Advisor 74%


Don’t Have an Advisor 69%






Confident that I’d be able to live the retirement lifestyle I want

66% 48%



Confident that my savings and investments won’t run out by age 90

Advisors Benefit From Working With Single Women Clients

Advisors who work with single women clients will be rewarded. Half of single women retiree clients consolidated 90 percent or more of their assets with their advisors — twice as much as single men clients. Nearly one-third of women clients trust their advisors with 100 percent of their assets — a proportion three times higher than that of single men retiree clients. This trust and reliance on advisors have important future implications. More than one-third of single retirees want to rely on their advisors for more help in financial decision-making as they age. Therefore, the capacity and skill to deliver a personalized formal income plan will be the key to building growth in this market. Advisors should consider relationships with their single retiree clients as longterm and prepare accordingly. Advisors helping clients with a solid plan will have an edge over their competition by making their single clients confident and lifetime loyal clients. Jafor Iqbal is assistant vice president, LIMRA Secure Retirement Institute. Jafor may be contacted at jafor.

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