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Life Annuities Health /Benefits Financial

MAGAZINE

July 2017

—------------------— 2017’s —-------------------—

Fastest Growing Life IMO —----------------------

PAGE 25.

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How Levinson & Associates Continues To Keep Agents Light-Years Ahead Of The Competition INSIDE COVER.


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Page 25 Ensuring Agent Success

• Hand you 1,000 new leads per month

Take a peek inside this trend-setting IMO and find out exactly what makes agents working with Levinson & Associates so successful. Hear what current agents are saying and see how joining the fastest growing IMO could be the springboard that launches your career to the next level.

• Include I-Genius turnkey sales platform • Allow clients to submit applications online while you sleep • Let you run and apply quotes on your mobile phone • Build you your own full-service website with quoting engines, health analyzers, lead captures, calculators, helpful articles, and much, much more

On the Web Where the Successful Agents Flock

• Provide a proven training platform and add designations to your title

Working with Levinson & Associates can open many doors using their turnkey sales platforms - including over six exclusive lead generating programs to choose from. Visit www.TheAgentsIMO.com today to see how working with Levinson & Associates could rev up every aspect of your career, so that in no time you’re producing business like a well-oiled machine.

• Provide the Agency Automator CRM and an e-mail marketing platform • Have the top-performing products from life and annuities to LTC and disability This and so much more is available at no charge to all Levinson active agents! To see the full, detailed list comparing how we stand up against your current company, visit

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MENT

Technolog

y Issue • Special Spon

sored Secti

Tech Innovator’s Expansion Into Product Design Enables Agents to Sell in Their Sleep

Bi l l on LEeINvDUiSTnRYs’S

B

ill Levinson, managing partner of Levinson & Associates, is a one-man technological force in the insurance industry, constantly integrating – and inventing – digital solutions to make agents’ lives easier. In this Q&A, Levinson discusses his latest innovation: a proprietary product called Lightning Issue Term™, which agents can literally sell in their sleep – online.

TH TOR TOP INNOVA SHARES HIS MANTRA S FOR SUCCES

Q: What inspired you to create Lightning Term? A: It’s an exact solution to the changes that are going on in our industry; agents and consumers are getting more comfortable using the internet. So I created a product that an agent can park on their website and social media and even email blast, and the consumer can just click on the link, run a quote, answer three health questions and get approved instantly. The policy gets mailed in 48 hours. The agent does literally nothing. Q: Are consumers comfortable buying insurance online? A: Today, many prefer to buy online. Twenty years ago, the normal way to buy a policy was having an agent show up at your house on a Tuesday at 8 p.m. Many people today don’t want that hassle, because they’re too busy or they don’t trust a stranger in their house.

PAGE 25

R INSIDE COVE

of The Future re ife is He

Q: What about agents who prefer to sell face-to-face? A: Lightning Term doesn’t mean a total change in how you sell. It’s an add-on. You can just add it to your website, and I don’t care what type of agent you are these days, you need to have an online presence. Q: What other benefits does the agent experience by

Bill L. Levinson

has been integral in many tech-related pilot programs and

LEVINSON FAST LANE:

PAGE 14

regardless of smoker or nonsmoker or male or female. Plus, it comes with a free college scholarship for all policyowners. Q: How have you seen this product impact agents? A: The older generation is getting more comfortable with online marketing, using this as an easy introduction. Younger agents are excited to finally have something like this. Plus, P&C and health agents and agencies, who have never sold life insurance before, say it’s an easy way to expand their business.

Start selling in your sleep – it’s easy! Get your free link, and download Levinson’s white paper, “Using Social

On Oct. 1 of innovator Bill this year, well-k nown techn Levinson & Levinson, managing partnology Associates, er of announced of brand-new the profit to reinve insurance salestechnology designed to release st make life “What we do into their agent value propo more that’s a lot differe The new releas effortless than ever. sition. petitors is we’re e is the latest nt from our innovations in a string that directly and put them able to take up to half of our comanswer the demaof new agents. Bill Levinson, who agents can haveback into our sales platfo profits nds a “wish-gran essentially serves of rm, so a turn-key system ter” ing to spend as without havel of agent advoc in the industry due hund reds out of to his levevery month. acy, says, “I’m ing myself, if That’s the secrettheir own pockets I were an agent constantly asksays. The result sauce ,” or looking to Levinson just out of is their succe of a simple, ssful comp user-friendly a successful switch IMOs, what would school relatio platform that letion tailors CRM define the gaps in what nship? This is how not only I identify of life insura functions to the uniqu other nce agents, e needs Levinson notice IMOs are offering.” but right in their d a huge gap ment software. laps, and it’s also delivers leads in client to active Levin available at available for While CRM tools have managezero cost son “Agents can long been turn life And it doesn agents. they were lackin insurance agents, -key systemhave a ’t simpl he y sands stop at adding thouwithout having to of new prosp First, there existeg in some very impor noticed ects to agent spend hunintegrated tools dreds out d no CRM design tant ways. s’ books. The ly for the life of availa ed specificalble throu pockets evertheir own insurance agent combined Agenc Levinson to y Automator gh Levinson’s offer a one-o , a fact that inspired That ’s the secry month. platform will and I-Genius f-a-kind platfo unique needs take these prosp et sauce.” the sale with another substa of the life agent. Along rm that is designed for zero agent involv ects all the way to the with this, he The system marketing camp that actually ntial omission from CRM accounted for includes multi ement. aigns (in helps agents ple touch point sell. This revolu systems — an integration prietary Levin s), with severa addition to a multitude pre-built email of other While You Sleep l dedic key prospectingson & Associates CRM tionar y feature of the pro” (SWYS) produ ated to Levinson’s exclus digital software is a and lead gener every complete, turnthing from whole ive “Sell cts. This 10-pr The one-stop-sh ation oduct line includ life to shortop dashboard tool. The most famou components term medic es that s of the SWY is which debut not only to called Agenc y Autom grants easy access to S products is al. ed all ator, Lightning sands of zero-a in 2013 and has since needs, but manage day-to-day busin and it enables agent accounted for Term Life™, also agents receiv gent-involvement produ tens of thouselected leads. to fill their prospectingess and client tracki s e ct ng funnels with do nothing a custom link, post it on sales. The way it works choose an age Simply enter the prefer while customis, red dia, automated consumers are driven their website, and literal of employees; range; even select incom sales territory parameter; ly to email their site via e, marketing and is lightning-fa social medirectly from and instantly receive namebusiness type and numb other st er within 48 hours (hence the product name sources. The appro businesses. a database of 20 millio s and contact information val ), . Send them unlim n consumers While agent Consumers can even pay and policies are mailed and tor, and have full analy tics ited emails through Agenc six million ning Term Life,s have been quite happy online. your emails. on exactly who y opened and Automathey could sell they had been asking with the success of Light Anot her huge clicked on for perk rarely duced Light the same way. So earlie a level term product thatis the help available to ning Level desk. Term, and it r this year, Levinson introsuccessfully only via email Whereas other tech the life agent for CRM given has s companies or will outso cess to an additi thousands of agents Automator offer suppo urce to a call aconal comes with rt reven cente satisfies consu ue stream that r abroad, Agen U.S.-based Eastern-tim support; you e cy no extra effort mer demand and requi can call durin through what business hours, and a res on live person g you “We get a lot the part of the agent. will walk you The path to such need. of feedback a monu Levin fro

AN INNOVATION + MOTI N FORMULA THAT DRIVES UNPRECEDENTED AGENTVATIO SUCCESS

carrier technology committees. He’s responsible for launching the exclusive iGenius sales platform and has been featured in many national press releases.

Q: What’s next? A: We’ve seen so much success in a very short time with Lightning Term, and we want to do the same with another big market in life right now, which is final expense. So we’re in the process of launching the first ever, zero-agent-involvement final expense product, including a free college scholarship and lead program.

on

The Life You asked for Agents’ W ish-Granter it, and Bill Levinson del ivered — ag ain.

Technology Issue • Special Sponsored Section

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Legacy Marketing Group. Leading With Passion and Innovation. Legacy Marketing Group grew from a former producer’s dream of providing respectful, top-notch service to producers and IMOs. In this Q&A, three Legacy leaders — Lynda Pitts, founder and Chief Executive Officer; R. Preston Pitts, CPA, FLMI, President; Chris Eaken, FMLI, AIRC, AIAA, ACS, VP of Compliance and Administration and Chief Compliance Officer of OnPointe Advisory and Financial Services and Niju Vaswani, Chief Marketing Officer — speak to the company’s unique history and their passion for the industry, and how both spur Legacy’s product innovation and inspire employees. Would you discuss Legacy’s founding and what values set Legacy apart? Lynda Pitts: I was a personal producer for 15 years. A lot of the attitudes, values and beliefs that form the way Legacy does business come out of that history and background. I was looking to build an organization that would have products that met consumers’ needs, but also give independent producers a company that was committed to excellent customer service, and treating producers with a level of respect that would help them be more successful in serving their clients. For instance, we instill in our employees that when we get an application, it’s not just a piece of paper. It’s someone’s hopes, dreams and financial security. It’s meaningful and makes a difference. With that understanding, our team backs up the producer because they care how accurately and quickly that application is handled. Our team respects the producer and really cares about what he or she is trying to accomplish. We are extremely passionate about the industry. That’s why we’re constantly developing new products and refreshing existing products to give consumers more benefits and more financial security. During our 24-year history, we have a substantial track record of developing products that are extremely valuable to helping Legacy producers distinguish themselves from the competition. This heritage of success continues today. For example, we’ve added fee/no-fee options to several products in recent years, which is a unique way to bring a strong accumulation component to an FIA in this low interest rate environment. We also developed a performance-driven income rider that is enhanced significantly by the annuity’s strong accumulation — a unique combination that provides powerful lifetime income opportunities. With our newest product rollout, we’ve created an innovative payout option that is tailored to an individual’s lifestyle.

That’s what we do best: Creating and evolving products that meet the challenges of the times and requests of our producers. Would you talk about your personal experience with how the industry can change lives? Lynda Pitts: As a producer, I had the unique and rare privilege of delivering death claims and knowing how they impact lives. I also have been a recipient of insurance benefits myself. My first husband and I believed in the industry that we worked in. When he died, we had not only personal life insurance but also key man insurance, which allowed me to start a new business — Legacy Marketing Group. I feel tremendous gratitude. I was able to keep my home, feed my kids, and send them to college. What other industry or financial instrument can help people the way our products do, whether it be annuities in retirement or life insurance? How powerful.

us flexible and adaptable while staying true to our core values. It creates an environment of innovation that’s solution-oriented at Legacy. Legacy has a unique position with product innovation expertise, which connects with our distribution expertise, administrative experience, commission processing, and our suitability and compliance knowledge. It’s hard to find all those factors in a single company. It allows us to form creative, workable ideas; pilot and test them; and then act on them if they benefit the IMO, producer and consumer. Would you speak to your philosophies of mutual success and “better together”? Preston Pitts: Our business model is built around serving the needs of independent producers, giving them a “home” and providing them with sales tools, training, education and technology to help them thrive. IMOs can leverage the strengths that we bring to the table, and it typically makes our

That’s why our motto is “Better Together.” We’re successful if our IMOs and producers are successful. I recently heard that on any given day the insurance industry pays out more in life insurance benefits than the government does in Social Security. It demonstrates how important this industry is to people’s financial security, their well-being and meeting their goals in life and retirement. How would you describe the experience and expertise of your employees? Preston Pitts: We’ve got an extremely strong, multidisciplinary team with the right talent to ensure we are responsive to the changing environment and make us a leader in the industry. Several members of our leadership team have been in senior roles at insurance companies. That insight gives us a unique perspective. Being able to see things from both a carrier’s and a producer’s perspective, we are able to bridge opportunities and challenges more effectively. We have employees who have been with us for a long period of time — more than 80 percent of our employees have been with us 10 years or longer, and more than half have been with us 15 years or longer. That expertise and experience makes Sponsored

IMOs stronger and more competitive in the marketplace. That’s why our motto is “Better Together.” We’re successful if our IMOs and producers are successful. That spirit of mutual success is even more important in the new DOL world, with producers now required to act in the best interests of their clients. We’re introducing RightBridge software to help producers make unbiased recommendations to their clients; RightBridge also helps them analyze, compare and document their recommendations. And we offer an E&O insurance plan that includes ERISA and fiduciary coverage for insurance-only producers at very competitive rates. The world is changing for producers, and we’re making investments in people and technology as a result. For example, we offer e-applications through FireLight®, which expedites sales and streamlines the way business is captured, submitted and processed. We also offer case design, suitability prereviews, app scrubbing and dedicated relationship managers. It’s about ease of doing business — one-stop shopping with just one sales team, one service team, one marketing team, one web portal and one contract with multiple carriers/ products. One of the biggest challenges today for producers is getting in front of customers. So we


are putting energy and resources into programs designed to help them connect with consumers in positive ways. These programs span a wide range of initiatives, from an Internet-based educational program that attracts and serves the public to leveraging national speakers to turn-key, automated marketing platforms that help producers build their brand. Would you talk about Legacy’s affiliation with OnPointe Advisory and Financial Services? Chris Eaken: More and more consumers today are motivated to work with financial services professionals who can manage all their retirement assets and provide retirement and income plans. These same consumers are also being educated to work with a fiduciary, especially in light of the DOL fiduciary rule. OnPointe, Legacy’s affiliated RIA, helps insurance-only producers expand their business to include fee-based advisory services. We show producers how to increase assets under management while continuing to grow annuity and insurance sales, and how to reposition and realign clients’ investments as circumstances change — which allows them to bring more value and services to their clients. OnPointe can also help those who are already licensed and want to improve their practice, or who may be frustrated with their current RIA or broker-

dealer, as well as IARs who have their own RIA but want access to additional money managers and support and compliance services. We’ve made it easy for them to transition their business. What can you share about the upcoming FlexMark Select SM introduction? Niju Vaswani: This is a very exciting product for us, offered through Ameritas Life Insurance Corp., with a planned late summer launch. It offers flexibility and choices both up front and during the life of the product, with features bundled in a unique way. There is a very strong income value proposition embedded in the product without sacrificing the accumulation component. It has a no-cost income rider, which gives consumers lifetime income without paying any additional cost for it, and it offers a diversity of interest crediting strategies, including several

including level lifetime income or a lifestyle payout, as well as a “booster” that can help with long-term care expenses. The lifestyle payout provides more income in the early years of retirement for consumers who want to start enjoying their free time immediately. The lifestyle payout also helps consumers plan more efficiently for Social Security. Consumers who might retire at age 65 but want to wait to take Social Security until a later age can use the lifestyle payout to bridge the income gap. Another exciting benefit is a one-time liquidity feature available for qualifying emergency situations — in addition to the annual 10 percent withdrawal. Consumers may feel more comfortable knowing they have flexibility to get access to their money if they need it for life’s what-ifs. With every product we develop, we put our dedication to innovation and sensitivity to consumer’s needs into the formula — and FlexMark

The world is changing for producers, and we’re making investments in people and technology as a result. uncapped strategies with strong participation rates that give consumers greater earning potential. It also has a proprietary index that is multidimensional and adapts to changing market conditions. Consumers have the option to upgrade, for a cost, to the MyFit Income Rider SM series, which gives them stronger income and more choices,

Select Index Annuity* is no different. It’s a perfect example of the power and diversity that we offer to our producers and consumers, and one of the reasons why we’re a leader in the industry. We hope that this launch will give more producers an opportunity to take part in the exciting organization we’ve built. •

Join CMO Niju Vaswani for an exclusive webinar:

Bridging the Income Gap Thursday, August 10, 2:00 PM EDT www.LegacyWebinar.com Learn about an exciting new way to help your clients jump-start their retirement with a “lifestyle” payout option that allows them to take more income in the early years of retirement AND maximize their Social Security benefits. For more information 855-505-8757 about Legacy products Marketing@legacynet.com and services: www.legacynet.com * The FlexMark Select Index Annuity is a single premium deferred annuity that offers both fixed and index interest options. The index options are not securities and does not constitute participating in the market or investing in any stock or bond. In approved states, FlexMark Select Index Annuities (Form 2705) are issued by Ameritas Life Insurance Corp. (Ameritas) located at 5900 O Street, Lincoln, NE 68510 and distributed by

Legacy Marketing Group®. Ameritas and Legacy Marketing Group are not affiliated. Policies and riders may vary and may not be available in all states. Optional features and riders may have limitations, restrictions, and additional charges. Ameritas reserves the right to not issue any product filed but not approved by a state regulator, and/or to make revisions to the product as required or desired prior to state approval.

Sponsored


IN THIS ISSUE

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JULY 2017 » VOLUME 10, NUMBER 7

FEATURE 26 Hall of Fame, Fall of Shame: The Redemption Story By John Hilton Advisors share how they are creatively educating the wealthy athletes of the future, as well as the planning tactics they use to protect a wayward client as much as possible under the law. Kenny Anderson Age: 46 Career Earnings: $63 million Claim to Fame: Anderson was the No. 1 high school basketball player in the country as a senior in 1989. Financial Mistake: Withdrew money from solid long-term investments to buy jewelry and cars.

Dorothy Hamill

HALL OF FAME FALL OF SHAME Michael Jordan Age: 54

Serena Williams Age: 46 Career Earnings: $81.7 million Claim to Fame: Owner of 23 grand slam singles titles, most in the history of women’s tennis. Financial Genius: Williams has more than 19.3 million followers on Facebook, Twitter and Instagram, a following that she utilizes to bolster her personal brand. According to consultant MVPIndex, her social media presence was worth more than $22 million in equivalent value for her brands.

Nolan Ryan Age: 70 Career Earnings: $25.7 million Claim to Fame: Major League Baseball’s all-time strikeout leader with 5,714. Hall of Famer.

Career Earnings: $91-$94 million Claim to Fame: Widely considered the greatest NBA player of all time. Financial Genius: Jordan became majority owner of the Charlotte Hornets in 2010. He now owns a majority stake of a $725 million franchise.

Vince Young

Age: 60 Career Earnings: N/A Claim to Fame: Hamill captured the Gold Medal in ladies singles at the 1976 Winter Olympics at Innsbruck. Financial Mistake: Invested with her heart in the failing Ice Capades show. Hamill later declared bankruptcy.

Age: 33 Career Earnings: $35.4 million Claim to Fame: Led the Texas Longhorns to a 13-0 record and the National Championship with a 41-38 win in the 2006 Rose Bowl. Financial Mistake: Took out a high-interest $1.8 million “payday loan” during the 2011 owner’s lockout.

Financial Genius: Slow and steady wins the race. Ryan is known as a shrewd and diverse investor who owns land, a bank, a restaurant and a couple minor league baseball teams. In 2010, he was a lead investor in a group that purchased the Texas Rangers for $385 million.

PLUS! Check out our special Hall of Fame, Fall of Shame poster in the center of the magazine!

INFRONT

50 H  ow Annuities Can Help Clients Live In an Accumulation Nation

10 Is Half of Fiduciary the Last of Fiduciary?

By Carolyn Johnson Accumulation-based annuities can help to keep a client’s assets safe while providing upside potential.

By John Hilton The fiduciary rule began taking effect, but it is far from a done deal.

LIFE

40 How Term Life Makes It Easier for Clients to Give Back By Knut Olson Charitable giving provisions in term life policies are an option for middlemarket families who don’t necessarily have a lot of room in their budget to contribute to charity but want to give back nonetheless.

42 Women Face 6 Challenges on the Road to Retirement

INTERVIEW

14 T he 10X Connect

An interview with Maribeth Kuzmeski Going big doesn’t necessarily mean going bigger. As Maribeth Kuzmeski explained to InsuranceNewsNet Publisher Paul Feldman, focusing your practice on a narrower niche often can be the key to expanding your practice even further.

4

InsuranceNewsNet Magazine » July 2017

By Michelle Miller Women tend to travel a rockier path toward retirement than do men. Here is how life insurance can help smooth the way.

ANNUITY

48 T esting the Market for Fee-Based FIAs By Cyril Tuohy With new fiduciary standards taking effect, carriers have lined up feebased fixed indexed annuities for independent marketing organizations and their advisors to sell.

HEALTH/BENEFITS

54 H  elp Prevent an Accident From Turning Into a Financial Sinkhole By Steve Hesler Talk with your employer clients about how offering accident insurance can help their workers protect their financial well-being.

58 Summer Reading On Retirement

By Brian O’Connell Hot insights for helping your clients prepare for their post-employment years.


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IN THIS ISSUE

View and share the articles from this month’s issue

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JULY 2017 » VOLUME 10, NUMBER 7

66 MDRT: A Delicate Balance: Technology and Interpersonal Communications By Marcus T. Henderson Sr. How to maintain a social media brand while remaining professional.

INSIGHTS

64 THE AMERICAN COLLEGE: Unconscious Bias Hinders Efforts to Diversify the Advisor Force By Jocelyn Wright We all hold certain unconscious beliefs about certain individuals and groups.

BUSINESS

62 How to Deal With This Guy

By R. Morris Sims Whether they are passive-aggressive or explosive, all difficult people have one characteristic in common.

EVERY ISSUE 8 Editor’s Letter 24 NewsWires

65 NAIFA: States Should Not Be Competing With Retirement-Plan Advisors

By Jafor Iqbal Why having a formal plan is a gamechanger in terms of retirement readiness.

By Mark Briscoe When it comes to offering retirement plans to consumers, advisors have it covered.

38 LifeWires 46 AnnuityWires

68 LIMRA: A Formal Plan: Advisor Priority and Client Confidence Booster

52 Health/Benefits Wires 56 AdvisorNews Wires

67 Advertiser Index 67 Marketplace

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WELCOME LETTER FROM THE EDITOR

The Exponential Explosion

I

know what Mom’s going to say. She was talking about a store she wanted to visit but she wasn’t sure it was open that day. Even as she turned to me, I already was pulling out my iPhone. “Put that in your Funk & Wagnalls.” That was a joke she came up with some time ago when I would look things up as we spoke. Many of us are used to doing that. Many a dinner with colleagues or friends is punctuated by the informal Google race — who can find the best answer fastest. It seems more common the younger a person is. I attended a business editors’ conference several months ago where I ended up at a table of 20-something-year-old journalists. One person mentioned the app Nextdoor, and as she spoke, everybody at the table pulled out a phone. Initially, that seemed rude; but within moments they not only had found the app but had downloaded it and were already trading snark about their neighbors. Last month in Venice, Calif., I noticed a young couple in a restaurant eating dinner and looking at their phones. Again, that seemed rude, until I realized they were talking to each other about what they were looking at. It is just a different way of interacting. I used to be wistful about what we’re losing as we run along the accelerating pace of change. But I have come to understand that I had to leave my bag of expectations behind. When I travel now, I pull out my phone to reserve a flight, book a hotel, request an Uber ride. Ten years ago, that was as science fiction as Buck Rogers. In fact, I now have a watch I can talk to. I used to be on the late adopter slope of the technology curve, but there is not even a ledge on that side anymore. If you wait, something else comes along pretty quickly. And you lose the advantage of the moment. This is life in our time of exponential change. That’s a phrase thrown around casually these days, but few realize the power of the exponent. One expression is the now-familiar Moore’s Law. Gordon Moore, co-founder of Intel, realized that the number of transistors per square inch would double about every year. Doubling upon doubling is dizzying. We are at the point where we can no longer predict where technology will be in a few years. 8

InsuranceNewsNet Magazine » July 2017

Salim Ismail is an evangelist of exponents as the founding director of Singularity U n i v e r s i t y, which studies and fosters disruptive change. He was once a vice president of Yahoo, leading a division dedicated to exploring and exploiting the most promising disruption. He found that mission impossible because Yahoo’s culture was built to reject change as much as a body’s immune system fights infection. That’s not peculiar to Yahoo. Pretty much every organization is built to withstand change rather than exploit it. Ismail explained this at the LIMRA annual meeting last year, where he outlined what 10X change really means. One of his most striking examples was in the energy industry. The price-performance ratio of solar power doubles every 22 months, he said. That alone means that the United States can derive all its power from solar within two decades. Along the way, maybe even within five years, he said, utility companies will no longer exist. But his bigger story has to do with the 20plus technologies zooming along that trajectory. When they intersect, the combination produces vast change. Together, those advances are accelerating even faster. Artificial intelligence is just starting to use machine learning to create more AI. The conventional wisdom says we are living in a time of incremental change — that the real technological shift occurred around the turn of the 20th century. Think of the changes between 1865 and 1920. At the end of the Civil War, we didn’t yet have the telephone, electric lights, cars, airplanes, passenger elevators, functional indoor plumbing, flush toilets and the list goes on. Life was dramatically different by the end of World War I. When we compare 1965 to today, we don’t see the same vast change. Someone from the mid-’60s transported to today might be amazed but would probably still recognize most of what she is seeing as dramatic improvements to the objects she already knows, such as telephones, cars and TVs. But that might not be true if she popped

into 2030. We might even have a hard time adjusting. Because exponential change is happening in different technologies simultaneously, we can’t even predict what will happen. Just take the combination of AI, energy and drones and try to guess what that will bring. Already we are seeing drones designed to fly as swarms, where they execute precise, quick maneuvers without hitting each other. These meteoric developments are changing life but not to everybody’s benefit. Those who are not keeping up will find themselves more the victims of technology rather than the beneficiaries. We find that in our industry of insurance and financial advising. People who do not become comfortable with the internet, digital marketing and robotics will find themselves in a rapidly shrinking market. That also goes for escalating standards of advising. I attended a Central Pennsylvania Financial Planning Association meeting recently featuring Michael Kitces, an advisor well-known for his blog and speaking engagements. He spoke about Roth IRAs, which I’ve read quite a bit about. But his presentation that morning went miles beyond the usual Roth versus traditional IRA discussion. It was far more sophisticated than presentations I have typically seen at insurance events. This level of expertise is the future of advising. But nobody gets there in a leap. The curve is too steep for that. We all have to be constantly learning and adopting technology as it unfolds for us. We can’t let fear hold us back. Mom has her own iPhone, but she quickly gives up trying to learn how to use it, worried she will do something wrong on the phone. She instead asks me to look things up, if I’m around. Of course I do the search for her, even as she sits there holding all the answers in her hand if she would only look. Steven A. Morelli Editor-In-Chief


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INFRONT TIMELY ISSUES THAT MATTER TO YOU

Is Half of Fiduciary the Last of prior adminFiduciary? “The istration made The fiduciary rule began taking effect, but it is far from a done deal. By John Hilton

A

lthough the controversial fiduciary rule began taking effect June 9, its final disposition remains very much in doubt. In fact, the next step is a big one and will come when the government issues its response in a Texas lawsuit. That response, due by July 3, will serve as the first extensive clues on new Secretary of Labor Alexander Acosta’s strategy for the rule. The Texas lawsuit is headed by the U.S. Chamber of Commerce and is one of four filed in federal courts nationwide. But the court has not yielded any success and is not expected to in the future. The real value in the DOL court brief is the hints it will provide on department strategy for the rest of the year. While the surprise election of President Donald J. Trump did not lead to the

a decision that those concerns were outweighed by what the prior administration wanted to do.” – Labor Secretary Alexander Acosta

In particular, the Best Interest Contract Exemption. It creates a private right of action in the form of a contract signed by client and advisor. There is speculation that the contract provision could be eliminated. In June 7 comments before the House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, Acosta signaled a willingness to

Conflicted advice costs investors $17 billion annually, the Obama DOL concluded, a finding opponents say is deeply flawed. quick death of the fiduciary rule, Trump did throw up a very big roadblock. The president, while far more consumed with tax reform, health care and a host of other issues, nonetheless issued a Feb. 3 memorandum ordering the DOL to review the fiduciary rule. That memo gives Acosta an opening to make substantial changes to the parts of the rule scheduled to take effect Jan. 1, 2018. It’s those parts that the industry hates the most. 10

InsuranceNewsNet Magazine » July 2017

give rule opponents more deference. “Concerns were voiced in the original rulemaking process, and the prior administration made a decision that those concerns were outweighed by what the prior administration wanted to do,” Acosta said. The Office of Management and Budget received a Request For Information from the DOL on June 6. The RFI seeks information from industry players and is the first step in the DOL review, Acosta said. The DOL rule establishes a fiduciary

standard for anyone working with retirement dollars. The DOL under former President Barack Obama claimed commission-based “conflicted advice” costs investors $17 billion annually, a figure widely disputed within the industry.

DOL Options

Trump’s memo ordered the DOL to answer specific questions. “You are directed to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice,” the memo stated. “As part of this examination, you shall prepare an updated economic and legal analysis.” Acosta has a full six months ahead to oversee study efforts to answer these questions. A Harvard Law School graduate, former clerk to Supreme Court Justice Samuel Alito, and a former law school dean, Acosta isn’t likely to endorse a strategy destined to fail legal scrutiny. The DOL study will put the Obama administration’s analysis under the spotlight. Conflicted advice costs investors $17 billion annually, the Obama DOL concluded, a finding opponents say is deeply flawed.


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INFRONT IS HALF OF FIDUCIARY THE LAST OF FIDUCIARY?

“I welcome the Department of Labor’s invitation to engage constructively as the Commission moves forward.” – Securities and Exchange Commission Chairman Jay Clayton

Advisors who tell clients they earn a 4.5 percent commission on the premium paid into a fixed indexed annuity are more transparent than advisors who tell clients they stand to earn between 3 percent and 6 percent, for example. On Jan. 1, 2018, the BICE mandates are scheduled to take effect. This means significant disclosure of information to clients, as well as a contract signed between client and advisor. The contract creates the private right of action giving clients an avenue to sue. Sources speculate that Acosta, who is on record opposing regulation that hampers the free market, will try to knock out the contract requirement.

Et Tu, SEC?

Consultant Jack Marrion co-authored a 2015 study that concluded the DOL relied on inappropriate or unknown data and failed to acknowledge that financial advisors are already regulated by the states. However, several federal courts have accepted the DOL studies as legitimate

making no misleading statements, and accepting only reasonable compensation. It’s the last mandate that makes some in the industry nervous. After all, what one person thinks is “reasonable” another person might not. There’s no need to go cutrate either, analysts say.

Surprising news emerged from the SEC in June as new Chairman Jay Clayton announced that the agency will take public comment on a fiduciary standard. proof of investor harm, underscoring the difficulty Acosta faces. Rule opponents argue that it will cost small savers access to financial advice and cost them more in the long run. Whether the DOL can back that up with hard data remains to be seen.

Impartial Conduct Standard

The June 9 Phase I implementation holds agents and advisors to the Impartial Conduct Standard. The more onerous Best Interest Contract Exemption will not come into play until Jan. 1. The three parts of the Impartial Conduct Standard are acting in the client’s “best interest,” 12

InsuranceNewsNet Magazine » July 2017

“When we’re counseling clients, our consistent advice is that reasonable compensation does not mean that the commission you receive on an annuity has to be below average for the industry,” said Joshua J. Waldbeser, an associate with the law firm Drinker Biddle. The idea is to charge market rates and be in the middle of the pack, he added. Consulting firms and benchmarking companies have plenty of data that will help guide advisors on compensation. The more specific advisors are with the commissions they earn from an annuity or life insurance sale, the better, Waldbeser said.

Surprising news emerged from the SEC in June as new Chairman Jay Clayton announced that the agency will take public comment on a fiduciary standard. Many opponents of the DOL rule maintain that the SEC should be developing any fiduciary rule. In fact, Dodd-Frank legislation specifically tasked the SEC to consider developing a fiduciary standard, but political considerations have kept the SEC from fulfilling that mandate. In its latest announcement, the SEC said it will examine 17 different areas, including questions of how investment advice should be defined, whether the SEC should consider a “disclosure-based approach” or a “standards-of-conduct-based approach.” The SEC vowed to study how investors and industry players have adapted to the DOL fiduciary rule in crafting its own standard. Both Acosta and Clayton say they want the DOL and SEC to work together on investment-advice regulation. “I welcome the Department of Labor’s invitation to engage constructively as the Commission moves forward with its examination of the standards of conduct applicable to investment advisers and broker/dealers, and related matters,” Clayton said. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.


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13


INTERVIEW

T

hinking big is not necessarily about thinking big. In fact, thinking big is about small slices, according to Maribeth Kuzmeski, who is familiar to many InsuranceNewsNet readers for her numerous speaking engagements and the seven books she has written on marketing. Not only has she worked with many financial advisors, but she became licensed as an advisor herself just so she could help her fellow advisors market themselves. She has seen what scales, and it is not by going wide. It is by focusing on niches, where reputations spread quickly and experts excel. Many advisors know Maribeth through her Red Zone Marketing concepts, which she developed from her lifelong love of football. But the game she is talking about here is more like chess, where a player has to think many moves down the board. In this interview with Publisher Paul Feldman, Maribeth discusses how good businesses can grow to be great by making deep connections with clients. FELDMAN: What would you tell financial advisors who want to think big and 10X their business? How would they go from six figures to seven or from seven figures to eight?

10X

THE

CONNECT Maribeth Kuzmeski tells how going narrow can be big

14

InsuranceNewsNet Magazine » July 2017

KUZMESKI: In this environment in 2017, there is a real attack on the value of financial advisors. The attack is coming from the government that thinks it needs to regulate the advisors’ ability to be in the best interests of the clients. The attack comes from inside and outside the industry. The media talk negatively about the fees and value of financial advisors. If we don’t change the conversation and start to message our value better, we don’t really have any value. And defining that value isn’t like having a silly value proposition. It’s having something that somebody can remember, talk about and share with somebody else. Most of financial advisors’ business still comes from referrals — from other people talking about how great you are. But if people don’t know what to say or if they start believing some of these negative messages about financial advisors, we’re really in a lot of trouble.


THE 10X CONNECT INTERVIEW We have to be stronger with our message. We might have done a value proposition before, but it was probably something that was very cleansed and it sounded like we work with everyone because we can. We have to speak to specific markets about the specific things that we do. And there’s a whole formula that we’ve proven really works for developing a value proposition. It is an overview statement. It’s even a graphic of what that value proposition looks like. People are visual today. We can’t throw a bunch of words at them and think they’re going to remember it. People don’t necessarily like to do a lot of digging and finding things. They like to see things at a glance — here are the three things that we do.

After that, he says, “The third thing that we do, and really what we bring, is Team Alpha.” He talks about the credentials of each person on this team. He puts it not in terms of years, but more in terms of what they have learned. Then he talks about studies on the value of an advisor. You can really prove out that the value of an advisor is worth 3 and 4 percent. So he says, “What we do altogether is worth far more than 3 percent, but we certainly don’t charge 3 percent. Our average fee is 1.2 percent.” Finally, he asks, “Do you have any questions about our value?” The people on the other side of the table always say no because of how he’s explained it. Not only is this a great referral tool, it’s also a great closing tool.

FELDMAN: Can you give us some examples of advisors’ three statements on value?

FELDMAN: It’s a dynamite way of explaining it and it’s easy for the client

KUZMESKI: Absolutely. We have an advisor who primarily does investments. He talks about investing redefined and planning for life-changing outcomes. First he says to prospects and clients, “Let me share the three things that we do,” and draws three circles like a Venn diagram. This isn’t something that’s pre-printed in some slicked-up marketing brochure that lets people know he’s trying to sell them something. This is something he is actually drawing out on a white board or on a piece of paper for the prospect or the client. And he says, “The first thing we do is outcome-based planning,” and he writes “outcome-based planning” in the center of the first circle. Then he explains what he does as it relates to outcome-based planning, proving why this should be something clients would pay for. So he’s writing down words like “integration” and “risk management” and “goals.” Then he actually gives it a number. He says, “The value of what we do under outcome-based planning is worth about 1 percent of your assets.” Then he says, “The second thing we do is investment management,” as he writes that in the second circle. And then he goes through the things that he and his firm do on investment management. So he is peeling the onion and sharing a little bit more information, talking about the institutional research that they do.

unless it relates directly to them. So when it does relate directly to them, all of a sudden their ears perk up and they listen. That’s why niches work. We have a client in California who works with people who are getting ready to retire from the aerospace industry. It’s a very specific marketplace, but once you get one client, it becomes a lot easier to get more and start to get the word to spread. And all of a sudden you’re not working very hard to bring in the new business. You’re working hard to serve the new business. FELDMAN: What are some characteristics of the person with a 10X mindset? KUZMESKI: It is somebody who is willing to take a risk. There are advisors who are willing to do that and there are a lot of

People are visual today. We can’t throw a bunch of words at them and think they’re going to remember it. to grasp before you start getting into more complex things. KUZMESKI: People remember things in threes. However, we do have some clients who will talk about things in fours, in quadrants. Clients actually can understand it. They can get it. And they can walk away with more clarity on what this financial advisor actually does. FELDMAN: Knowing who you are is the first step. What’s another step that you would need to take to be a 10X advisor? KUZMESKI: We have taken advisors to 10X many, many times and the reason that it has worked is because they had a strong foundation. They really understand who they are, what they do, and then they are able to clarify it and explain it. But on top of that is having a niche. Because the word will travel a lot faster inside of a niche. Of the most successful advisors we work with, almost all of them have at least one, if not two, three and four niches. The problem today is that we have an attention deficit disorder society where nobody is paying attention to anything

advisors who are not necessarily that excited about trying something new. Those are not the 10Xers. FELDMAN: What are some of the types of things you see these 10Xers doing? KUZMESKI: Seminars are still working. They don’t work like they did before, but they still work. And I think the reason they don’t work like they did before — when you sent out an invitation and got a hundred people to show up — is because people aren’t paying attention to anything anymore. So we’re not capturing their attention with good messaging. When we have good messaging on a seminar invitation, we can capture the people’s attention. Especially if it’s niche marketing or focused on where you’re really speaking to people, they will come. For example, you could target somebody who is getting ready to retire from a specific company. And you can say this is an event just for people who are getting ready to retire from XYZ Company and then you talk about all the things that you’re going to present. July 2017 » InsuranceNewsNet Magazine

15


INTERVIEW THE 10X CONNECT There are all sorts of complexity that happen once you move into that retirement zone. We have advisors who are using LinkedIn and social media to be able to effectively target niche markets and they’re successful doing it. FELDMAN: We have a speaker at the Super Conference who is going to be talking about how you can generate one lead per day for free on LinkedIn. KUZMESKI: It’s true, depending on your market. If your market is retirees, that wouldn’t work. But working people put it all on LinkedIn. And we can gain a lot from LinkedIn searches. We have one client who is focused on a really small niche. Through LinkedIn, they found more than 200 people who actually fit into that niche reasonably in their location. When you have a list of 200 people that you focus your marketing on, you can get much better results. So rather than sending them a postcard, you can send them a $15 package because you have only 200 to send to. And that’s going to blow their socks off. FELDMAN: So let’s talk about messaging. What is some messaging that you’re seeing that’s most effective today and how has that changed over the past five or 10 years? KUZMESKI: Unfortunately, it hasn’t changed nearly as much as it should. But there is something advisors don’t really like to do, but it’s incredibly effective — tell your story. Statistics show that 80 percent of the reason that someone chooses to do business with a financial advisor is because of the advisor. It’s not because of the name on the door. It’s not because of the products they sell. It’s because of the way they feel about that advisor. And since that’s the case, we must do a better job at telling our story and letting people know a little bit about us before they come in to see us. Nine out of 10 people are going to Google you before they come in to see you. And if they have more than a million dollars, it’s 10 out of 10. They’re all going to do it. It’s not like I need to hire a private investigator. 16

InsuranceNewsNet Magazine » July 2017

Strategies for Making It All About Others – and Becoming Likable at the Same Time 1. WELCOME DEMEANOR The fact is that we generally like people who show they like us. There are certain behaviors that put people at ease and let others know you are interested in them — both from near and far. This welcoming element is communicated verbally through kind and welcoming words, and also nonverbally by the upbeat, positive energy you give off, your facial expressions (smiling, looking at the other person) and your general demeanor (posture, handshakes, hugs, close distance). 2. RELEVANCE TO THE OTHER PERSON Relevance has to do with the degree to which you express interest in another person’s interests and needs. When you show genuine interest in someone’s passion or their needs, you create a bond. They know you are sincerely interested in them. Therefore, asking questions such as “What’s the biggest challenge you face in your business?” or “How is your training for the marathon going?” shows them you are concerned with things that may be important to them. Perhaps even more powerful is demonstrating a deep common interest, such as being actively involved in a charity or cause that you both care about. That type of relevance can have even more of an impact in shaping another’s perception about you. It tells the other person that you are a lot like them, and they want you to be a lot like them.

I’m just going to lean over and punch your name in my laptop or my phone, where 80 percent of the searches happen, and see what happens. When I do that, I’m going to find something about you. Now, I’m looking for you because I’ve heard something about you. Because you have a reputation or your client has told me how great you are or something like that. So, I’m going to do this search and see if this financial advisor may be someone I’d like to work with. And when I do that online search, what we find is that the

3. EMPATHY Empathy consists of your ability to “put yourself in the other’s shoes,” to identify with them, understand how they feel and appreciate the situation they’re in. You know them in important ways, and they feel that you know. Additionally, when you develop a sense of who they are without judgment, they feel accepted just as they are. Being an empathetic person says a lot about your ability to connect with others. 4. AUTHENTICITY People who are authentic, genuine and real are usually at ease because they’re not trying to cover anything up. In turn, their being at ease puts others at ease. Authenticity is giving others the idea that what you see is what you get. Real people are easy to be around because you feel safe knowing that you can trust what they say. In sales, less of the memorized pitch and more of the informal conversational approach is exceptionally more successful. Wouldn’t you want to buy from someone you could really believe was giving you things as they truly are? No pretense, no fluffing up the facts — true authenticity. Maribeth Kuzmeski, The Connectors, 2009, John Wiley & Sons

online reputation supersedes the regular reputation. If somebody goes online and they find the advisor’s website doesn’t look like it’s been updated in 10 years, that’s not attractive today. In fact, people don’t actually want to go meet with the financial advisor. They know they should. They know they need to. They’re looking for an out and a lot of advisors’ online reputations give people the out. You’re still getting the referrals. People love you. They know how good


Forget linear growth — It’s time to

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July 2017 » InsuranceNewsNet Magazine

17


Keynote: Jay Abraham

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InsuranceNewsNet Magazine » July 2017

FL JU IP F IC O Y R DE M TA OR IL E S

Special Thanks to Our Sponsors


THE 10X CONNECT INTERVIEW

Nine out of 10 people are going to Google you before they come in to see you. And if they have more than a million dollars, it’s 10 out of 10. They’re all going to do it. you are. But somebody comes and they look at you online and maybe it’s really not all that great and you think maybe this guy is getting ready to retire. I don’t even know what’s going on here. And then they decide not to reach out and contact you. All of the good work should not come down to what a LinkedIn profile looks like, but people are looking for an out and we can’t give it to them. So how do we give them the in? How do we say this is someone you need to come and meet with? And the way to do that is to warm up your messages. There are some advisors who will really do that and tell a warm, personal story. But warm up a little bit beyond “I’m a financial advisor, I’ve won a bunch of awards and you should come in and see me.” That actually makes me think I’m probably going to get judged. This is probably not going to be a very good thing to come in to see this advisor. We always ask advisors to do this on their LinkedIn profile — answer the question “Why are you in this business?” Because it probably comes down to the meaning this business has for you, the good work that you’ve been able to facilitate by being a financial advisor. Talk about your story. Why is this industry important to you? Why is this business important to you? How did you get into this business? And if that’s in the first paragraph of your LinkedIn profile or the summary section of your LinkedIn, then that’s really going to warm them up a little bit. It’s going to make them think, “Maybe I should come in and meet with this person.”

FELDMAN: That’s really powerful. What are some ways of fixing your online presence? KUZMESKI: Well, there are some really easy things that can be done. We think this must be a daunting task and this will cost a whole bunch of money. But it doesn’t have to. I would start with taking a look at your LinkedIn profile and making sure that at least it’s filled out. You have a picture there. And then you have a good summary section, which falls right below your picture and your title, but tells a little bit of your story. That really answers the question of why you are in this business. The second thing that I would do is take a look at your website. If you haven’t updated it lately, there are a lot of new templates available to help you do that. Simply changing the template can make a big difference in how that website looks. If the website looks like it was created in this century, that would be a really good thing. There are some websites that are absolutely terrible. And it’s not because they were terrible when they were put up. They look terrible now because there are so much better templates available. The other thing is, I would cut out about 90 percent of the content you have on your website, which isn’t hard to do. You take out all the fluff and paragraph after paragraph talking about financial planning services. Instead, throw a graphic up there. Graphics can be created in PowerPoint. It doesn’t cost you anything. Put a graphic up there and show your process as op-

posed to telling the process. Because as I mentioned before, people really don’t read anymore and they don’t want to read. They want to see things at a glance. You would think that if somebody is getting ready to invest their life savings with you, wouldn’t they would want to read something about you? But that’s actually not the case. They won’t even watch a video that’s more than a minute and a half long. And that’s how they’re going to decide whether they’re going to invest their money with somebody. FELDMAN: A lot of the advisor websites are “me-centric.” It’s about them and what they do rather than what they provide for the client. KUZMESKI: That’s exactly right. And that’s why if you’re working with niches, you can talk about the work you do specifically for a certain type of person. Then the prospect feels when they’re viewing this, that this is actually talking to them, as opposed to “we do all these great things and have all these certifications.” It’s really sharing the specific things that you do in a way they can remember. It’s going to have an impact on them as opposed to spelling out a laundry list of features and stuff that the advisor does but no one really can remember. FELDMAN: Can you give me an example of somebody who you’ve worked with who has really turned it around and has taken their business to an extreme level of success? KUZMESKI: I actually worked with many advisors along these same lines, but I’ll share with you the very first financial advisor we ever worked with. That advisor had $10 million of assets under management. And if you think about it, that’s not a lot. In fact, he really couldn’t afford to pay me. He needed something to be able to get his business going. So we’re talking about basically working from ground zero. I came in and I put a marketing plan together. He really didn’t think it was going to work. So he suggested instead of paying me to implement this, he would pay me on performance. I would get paid only on what actually comes in. July 2017 » InsuranceNewsNet Magazine

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INTERVIEW THE 10X CONNECT So I actually had to get licensed because I was sharing commissions. I got a Series 6, 63, 65 and health insurance license so that we could do this. We found three niches that we were going to focus on with super-low-cost marketing because he didn’t have any money. And within five years he went from $10 million to more than $200 million in money management and kept it growing from there. He wasn’t the smartest advisor. But he had a lot of really great skills. He was able to connect with his clients and, once he got the clients, we just started to work those niches. We would have eight people come to a seminar — eight people who were getting ready to retire from a company — and he would get them all as clients. And then we’d have another seminar the following week and have five to 10 people come and he would get them as clients because he was speaking to a particular target market. He wasn’t serving big dinners and all of that. We were serving them Chex Mix and some drinks — and not alcoholic drinks. And they were still coming because they wanted the information. That’s how powerful a niche can be. And then we took that one niche and we actually created three separate niches, and that is the way that it works. We’ve seen advisors be able to go to the next level by doing that.

establishing the strategic alliance?

FELDMAN: What are some other ways of elevating business?

Hear from Maribeth Kuzmeski LIVE at the Advisor Super Conference

KUZMESKI: If we look at where 10X growth comes from, it is often from strategic alliance relationships. An average strategic alliance relationship is worth $11 million in new assets year in and year out. So it’s big. It’s big and it can be a lot bigger than that. I know a lot of advisors have tried doing these relationships and they can be disappointing. But we have done a lot of research on why it doesn’t work and what we can do to fix it. And we have seen incredible growth. All you need is one accountant or one divorce lawyer or one estate planning lawyer who will refer business to you and you create this stream and it’s amazing. FELDMAN: What are some ways of 20

InsuranceNewsNet Magazine » July 2017

KUZMESKI: We looked at what advisors are doing wrong and we found a few things. One of them is before you meet with somebody, it might seem like they’re going to be great because you have a client in common or you see that they have a big business and they have all these people they can refer to you. But I would ask them if they are growing their business. Because if they’re not actively out there growing their business, they have a very limited amount of space to have this conversation about this financial advisor they just had lunch with. They’re not going to call their client of 20 years and say, “You know, I just met with this guy for lunch and so I think you should talk to him.” The conversation doesn’t come up. That phone call doesn’t get made, and it’s just, “Hey, the guy’s great,” but they don’t actually take the steps to refer. If it’s a growing entity, we have found, then they have the opportunity to talk about it. Which means you’ll probably have to look at younger partners in law firms and accounting firms. Those are the ones that seem to generate the most business today. The second thing that you have to ask is where they are getting their new business. The answer to that question can be a deal killer because if they say they get some

business from Merrill Lynch or somewhere like that, that means that they’re getting all of their new business from your competitors. If they’re getting all of their new business from your competitors, there’s no way they’re going to turn around and give it to you. They can’t. It has been proven out that 99 percent of strategic alliance relationships fail because the advisor refers business but the other professional doesn’t refer business back. That’s because in a lot of cases they can’t. Or they’re not the referring type. But I think we can control that better than we can control the fact that if they’re getting their new business from somebody else there’s not even an opportunity. FELDMAN: Those seem like logical questions to ask and I can see how they get missed frequently. KUZMESKI: So, many of these relationships fail. And advisors don’t even want to hear about it anymore because they say, “I know, I tried that.” But very rarely has someone told them what they could do differently to make it work better as opposed to “Well, just send them some baskets at tax time and you’ll get all this new business.” It just doesn’t work like that.

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S Y A D 0 3 N A H T S S IN LE ir flage. With the c a p s O IM high-end crowded hnological, lock” in the c b te e w th e n n o ir unce the “new kid nals. Net to anno , LLC is the s p w u e ro N G e ce professio c e n n g ra ra o a b ou t ra u u e s s k in In ro e B fe s ent li d, Brett Sas sting p ch o d n u re n ra e te ro b p g In e m s d e a u c in S io n f it d b a se o Bad Uncle ,” this amb Make Insura to our broa nder of the m u Uncle Sam o te d F s a y d B s n “ a g d r in n e ship bra nique sell ork. ing Memb any, New Y tive Manag thods and u u e lb c A m e x g in E n g ti e e in th mark eak with ment/train cent enroll hance to sp c re a d d n a a h e e s n W profile we were hoping to attract. We plan respo h, massive to grow our membership to 1,500 by the their launc Q: Who is Make Insurance Interesting, and what competitive advantage do you give brokers? A: Make Insurance Interesting is more than a name; it’s what we do! We created a marketing program called Bad Uncle Sam to position whole life insurance (one of the oldest products in the industry) in a fresh, new way. The Bad Uncle Sam marketing program gives brokers a way to present the many benefits of whole life insurance to consumers in an exciting, relevant and easy-to-understand way. As a result, our brokers have been closing huge cases without buying leads or prospecting. 22

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Q: Your company was the featured advertiser on our annual pullout centerfold in the May 2017 issue “Too Busy to Die.” We understand you got a strong response from that ad; can you tell us a little more about that? A: Sure. I must admit we were a little nervous about the commitment we made with InsuranceNewsNet and whether or not we would accomplish our goal of launching our membership model with such a bold first ad. I’m happy to say the response has been amazing! We are closing in on 500 broker inquiries, with no sign of it ending anytime soon. Those who have joined our membership from that ad have the exact

end of next year, and InsuranceNewsNet is going to be one of our primary means to accomplish that goal. Q: Tell us more about your first event in Albany. It sounds like you guys hosted a pretty nice event.

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So to get our first enrollment group off on the right foot, we set the entry bar pretty high. Those who joined our membership “on the ground floor” had to make the journey to Albany, New York, and complete three days of training. We had brokers in attendance from 20 states, with some driving more than 10 hours! We have received nothing but praise, and that is credited to our amazing team here at Make Insurance Interesting.

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Uncle Sam and team Brett (second from left) with Bad this team is going to kill it! kin Ran n leaders David and Kevi

Q: You said “formidable.” That’s a strong word; aren’t you afraid of scaring brokers away with words like that? A: No, and we make no bones about it. What we do is not simple, it’s not quick and it’s not easy. Having said that, professionals who recognize and understand that meaningful programs are not packaged any other way have no problem investing their time and energy with us. Most seasoned pros are tired of feeling like they are cogs in someone else’s wheel. Our approach is more like a partnership, where each side brings important contributions. We know raising the bar will limit the number of brokers who pursue our model, and we believe wholeheartedly that doing just that will benefit everyone involved.

sub-15 percent approval rating of the U.S. Congress. People are fed up with gridlock, infighting and never-ending harmful partisanship. Bad Uncle Sam catches people’s attention, stirs their emotions, and gets them to listen, agree with our messaging and want to know more. Our brand is better than any gold-phone number. Bad Uncle Sam starts a conversation about things that people want to talk about, things important to them and interesting topics that they know will affect them well into the future. Our selling system is supported by a custom presentation that hits topics like the history of taxes, current effective tax rates and the unavoidable risk of most qualified plans. When followed, the selling system converts 80 percent of prospects to an application. We are extremely proud of that.

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Q: How are you getting the word out about the Bad Uncle Sam marketing program?

A: Bad Uncle Sam is obviously a tongue-incheek twist on the age-old personification of our government. Just the mention of Bad Uncle Sam typically causes one to smile, laugh and, nine out of 10 times, inquire, “What is Bad Uncle Sam?” It’s a logical reaction when you consider the abysmal

A: We recently just started running TV commercials and are working in local markets with our member brokers and managing brokers. As we increase our national footprint, we will turn to national advertising. We are testing Fox News, the Discovery Channel and other demo-appropriate

Q: Besides TV, are there any other types of promotions you’ll be doing? A: We are going to continue hosting enrollment/training events like the ones we had in Albany and Los Angeles. We will also have a big booth at InsuranceNewsNet’s 2017 Advisor Super Conference in September. I’m hoping to throw a big cocktail party for everyone. Q: If our readers want more information, where should they go? A: They can go to www.BadUncleSamOffer. com to see how we are filling a marketing void and the results our current brokers are experiencing. I have to thank InsuranceNewsNet for our explosive growth. We are thrilled with the quality of brokers we are meeting from your magazine. I’m also very excited to say a few words from the big stage at the 2017 Advisor Super Conference.

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www.BadUncleSamOffer.com July 2017 » InsuranceNewsNet Magazine

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NEWSWIRES

QUOTABLE

Appeals Court Upholds AIG Bailout

Our objective is to get it done this year.

A federal appeals court said it was legal for the government to bail out AIG in the midst of the financial crisis. The ruling overturned a lower-court decision favoring the insurance giant’s former CEO. Ex-AIG chief Maurice “Hank” Greenberg had alleged that the $85 billion bailout of AIG in September 2008 violated the Constitution’s Fifth Amendment by taking control of the company without “just compensation.” The unusual case raised the issue of limits on the government’s power in responding to financial catastrophe. Greenberg had demanded $40 billion in damages from the government for himself and other AIG shareholders. AIG has since returned to financial health and fully repaid the bailout.

CALIFORNIA SENATE OKs SINGLE-PAYER

California moved one step closer to a single-payer health care system as the state Senate voted in favor of it. The bill to create Healthy California passed the Senate despite the estimated $400 billion annual price tag that comes along with it. That’s right — $400 billion a year to implement universal health care in California. The estimated cost is higher than the state’s $180 billion annual budget. How will California pay the tab for health care? A legislative analysis said that about $200 billion could be raised from a new 15 percent payroll tax, which would require a two-thirds vote from both houses. The other $200 billion could come from existing federal, state and local spending on health care. But the federal government would have to approve any changes to Medicaid funds for the program. If approved into law, Healthy California would cover more than 39 million people. DID YOU

KNOW

?

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The gap is partially driven by an aging world population. Life expectancy has risen on average by about a year every five years since the middle of the past century, and half of babies born in the U.S. and Canada in 2007 may live to age 104, according to the report. In Japan, the figure is 107 years.

RETIREMENT SAVINGS GAP COULD HIT $400T

We’ve heard all the news about people living longer and not saving enough for retirement, but how bad is it really? According to a Bloomberg report, the world is facing a retirement savings shortfall $400T that will reach $400 tril- retirement gap lion by the year 2050. To put it in perspective, that $400 trillion figure is more than five times the size of the global economy, according to a World Economic Forum report. The U.S. alone is facing a $70T retirement savings shortglobal economy fall of $100 trillion by 2050. The $400 trillion number is derived from the amount of money government, employers and individuals would need to provide each person with a retirement income equal to 70 percent of their annual earnings before leaving the workforce.

More than 60 percent of employees said they are contributing less to their 401(k) plans because of rising healthcare costs. Source: Bank of America / Merrill Lynch

InsuranceNewsNet Magazine » July 2017

— Treasury secretary Steven Mnuchin, speaking on tax reform

AETNA SEEKING A NEW HOME

Hartford is nicknamed the “Insurance Capital of the World,” as the city is the headquarters for several insurance companies and includes major operations of several more. But now Hartford may have one less reason to claim the insurance capital crown with the news that Aetna is seeking to move its headquarters elsewhere. Mark Bertolini, Aetna’s CEO, said the insurer remains committed to its roughly 6,000 Connecticut-based employees and its Hartford campus. However, he said the company wants to broaden its access “to innovation and the talent that will fill knowledge economy-type positions.” Susan Winkler, executive director of the Connecticut Insurance and Financial Services Cluster, an association of 32 insurance and financial services industry leaders, said even if Aetna moves its headquarters, Connecticut will remain the insurance capital of the world. “Connecticut has a rich history of insurance practice,” she said. “Our workforce is really second to none. We have the most insurance jobs, the most actuaries. We write the most premiums. We are the insurance capital, and that’s not going away.”


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capture, built-in quoting engines, calculators, health analyzers and much, much more. To top it off, they maintain an industry-leading compensation plan along with innovative tech and exclusive sales programs like the Levinson Scholarship Platform.

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I made the best decision of my life by getting appointed with Levinson & Associates last year. Thank you so much for your great support. Levinson always provides me with up-to-date information on my cases, as well as many carriers to choose from. Your company has the latest technology and programs to make my job so easy! Kudos for being THE BEST!

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Since 1972 July 2017 » InsuranceNewsNet Magazine

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FEATURE

HALL OF FAME FALL OF SHAME

THE R EDEM P T ION ST ORY BY JOHN HILTON Antoine Walker earned about $110 million in his NBA career, but wasted it all on frivolous purchases and undisciplined financial planning. After declaring bankruptcy in 2010, Walker joined Morgan Stanley as a consultant and now travels the country counseling young athletes on the importance of sound money management. 26

InsuranceNewsNet Magazine Âť July 2017


HALL OF FAME, FALL OF SHAME FEATURE

E

x-basketball star Antoine Walker once played $15,000 hands of blackjack in the prestigious Las Vegas VIP rooms. He reportedly financed an entourage of up to 70 people and built his mother a Chicago mansion with an indoor swimming pool. Then there were the suits, the jewelry, the cars and the $1,800 dinners. The 6-foot-8 Walker loomed large and lived large during a 12-year NBA career that saw him earn $110 million. Two years following his 2008 retirement, Walker filed for bankruptcy. More than anyone, his stunning tale of burning through tens of millions of dollars brought notoriety to athletes who go bust. Well-paid athletes are similar to the high-net-worth clients who seek the professional help of advisors every day. Athletes, however, may lack the financial sophistication of typical high-net-worth clients. Their fall might be steeper and messier than the norm. In this article, advisors share how they are creatively educating the wealthy athletes of the future, as well as the planning tactics they use to protect a wayward client as much as possible under the law. Today, Walker is chasing redemption within financial services. He tells young athletes of his financial woes at educational forums sponsored by Morgan Stanley’s Sports and Entertainment Group. The SEG, headed by Drew Hawkins, is in its fourth year and has 93 directors across the U.S. The group advises “hundreds” of athletes and is rapidly growing, according to Hawkins. Ex-NFL linebacker Bart Scott, who made about $50 million in his career, joined Walker as a Morgan Stanley consultant. “It’s huge,” Hawkins said of the former athletes fronting the program, “because they can say one thing and I can say the same thing, and me saying it does not carry the same level of credibility that it does coming from them.” Seven thousand student-athletes sat through Morgan Stanley programs during the past two years, Hawkins said. The group has agreements in place with some professional teams as well as college football’s Senior Bowl in Mobile, Ala. There is no sales component to the program.

“We wanted to have the ability to develop a robust education program that was fun, that was interactive and engaging, that was non-sales-oriented, with the idea that we could better educate individuals and start at earlier stages of their careers,” Hawkins explained.

‘I’m not going to be stupid’

NBA All-Star Kenny Anderson assured a New York Times reporter that “I know the value of my money” in a 1998 interview. “I’m not going to be stupid enough to just spend it like crazy,” added Anderson, a New York City playground legend. Anderson definitely wasn’t and isn’t stupid. After signing a $15 million rookie contract with the New Jersey Nets in

accountant created trusts. Anderson was married five times and has eight children. Bercu parked a chunk of money in a trust, from which the interest generated enough cash to pay alimony and child support while preserving the principal for his client. “We picked up some life insurance and annuities, and we still have them today,” Bercu added. “We got that early on when things were good. We had to get a lot of life insurance to backstop the trusts, to support the trusts that we set up for the mothers of the children.”

Setting family boundaries

The idea of setting boundaries is a key point in Professor Glenn Wong’s Sports Law and Business Program at the Sandra

“We did that knowing this guy is going bankrupt,” Bercu said. “You didn’t have to be a rocket scientist to see that. He spent all the money. He started playing poorly near the end, so he wasn’t as attractive to the ball clubs.” 1991, he bonded with accountant Scott Bercu. Both had an affinity for finance and numbers. The straight-talking Bercu, who works mainly with actors and entertainers, came up with a financial plan to which Anderson readily agreed. His allowance was $10,000 a month. “I told him he had a partner from day one,” Bercu recalled, “and he looked at me kind of funny … I told him that partner was Uncle Sam. You’re making $15 million, and that’s a lot of taxes to pay.” As Anderson lost his financial discipline and dug a deeper and deeper hole, Bercu employed investing methods to safeguard as much money as he could. For example, he put Anderson’s house into a trust well in advance of a threeyear “look-back” period that accompanies bankruptcy. The law includes the lookback period to discourage people from hiding assets. “We did that knowing this guy is going bankrupt,” Bercu said. “You didn’t have to be a rocket scientist to see that. He spent all the money. He started playing poorly near the end, so he wasn’t as attractive to the ball clubs.” Marriage and children presented another thorny financial issue for which the

Day O’Connor College of Law at Arizona State University. “One of the biggest ideological battles that athletes must fight in the financial management arena is the notion that they’re the savior for their family and community and therefore must take care of everyone,” said Wong, an expert in sports law. In its first semester, the course is a hybrid of personal finance, business and law. Everyone benefits from more knowledge of personal finance, Wong said, but the program is especially geared to help ASU athletes who will become instant millionaires in pro sports. The pitfalls begin on day one, he said. “No athlete ever intends to squander or mismanage the money they receive from a professional playing contract,” he explained. “The attitude I have seen in many players is ‘$10 million? I’m never going to be able to spend all of that. I’m fine,’ or ‘Finances? My agent/advisor handles that. My job is to play my sport.’” Advisors face unique challenges in financial planning for athletes, Wong said. “Whereas some young people might be willing to invest in high-risk ventures in an attempt to grow their assets, athletes who have already earned significant income July 2017 » InsuranceNewsNet Magazine

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FEATURE HALL OF FAME, FALL OF SHAME are best suited to be conservative first in their investment strategy before venturing into high-risk investments,” he noted. In 35 years as an accountant and advisor, Don Christensen has seen “every kind of dumb investment” you can imagine. He heads up the Professional Athlete Division at Ronald Blue & Co., a Christian-based financial advising firm. The firm advises more than 100 active and retired players and coaches with a more hands-on approach, Christensen said. “We do a holistic thing for our ballplayers,” he said. “We run a family office, basically. Their paychecks are sent to us, and we pay their bills. … Most of our athletes are Christians. So I’m very active in helping them give their money away also.” Ronald Blue employs “biblical principles” to financial planning, Christensen said. In particular, the “borrower is a slave to the lender” (Proverbs 22:7).

Kenny Anderson Anderson was the No. 1 high school basketball player in the country as a senior in 1989. He withdrew money from solid, long-term investments to buy jewelry and cars.

“I say, ‘Listen, if you don’t want accountability, I’m probably not your guy,’” Christensen said. “Because when they run out of money, they’re going to want to blame everybody else. I don’t want to be there when they run out of money if I can help

Dorothy Hamill Hamill captured the gold medal in ladies’ singles at the 1976 Winter Olympics at Innsbruck. She invested with her heart in the failing Ice Capades show. Hamill later declared bankruptcy.

“When they come to me and say, ‘I want to lease a car,’ I say, ‘Well, let’s look at this. Why would they lease you that car?’” Christensen explained. “‘There’s a moneymaking thing in there. So if it’s a good deal to lease the car and you’re going to own the car for a while, then it’s a good deal to pay it off.’” Like many advisors, Christensen starts a new client off with a comprehensive plan that includes life goals years down the road. For athletes who have a limited high-earnings life, he adds a provision to their budget: “We use a rule of thumb that for every $50,000 of lifestyle, you’ll need at least $1 million of liquid assets saved.” Some athletes don’t want to adhere to the plan and tire of the financial discipline Ronald Blue requires. 28

InsuranceNewsNet Magazine » July 2017

them. If they don’t want to listen, I say, ‘Hey, why do you want to pay me a fee if you’re never going to listen?’”

FALL OF SHAME KENNY ANDERSON Standing barely 6-foot, Anderson, 46, is a little man who excelled in a big-man’s game. Growing up in Queens, Anderson attended the famed Archbishop Molloy High School. College recruiters started showing up at the school when Anderson was in sixth grade, and he made the cover of a city tabloid when he was just 14. By the end of his high school career, he was a four-time Parade All-American, a feat not accomplished since Lew Alcindor (later known

as Kareem Abdul-Jabbar), and the consensus top player in America. After a two-year career at Georgia Tech University, Anderson was the second pick in the 1991 NBA draft, by the New Jersey Nets. Although somewhat disappointing as a pro (selected for one All-Star game), Anderson played 14 years and averaged 12.6 points and 6.1 assists per game. He also made $63 million. Anderson filed for bankruptcy the year he played his final NBA game — 2005. Anderson was knowledgeable and interested in his finances, Bercu said, and he understood his earnings potential would be short-lived. But he lacked discipline. “Kenny, unfortunately, is a sweetheart and was a sweetheart,” Bercu said. “He wouldn’t say no, and he couldn’t say no. I’d say no, but a lot of times, he’d overrule me. He was just a giving sort of guy, but he gave beyond what he could afford to.” Anderson also liked cars — and jewelry. “I was his jeweler’s best friend,” Bercu said. Anderson owned 10 cars at one point, according to media reports, from a Porsche to a customized Range Rover. He reportedly paid up to $75,000 annually on car insurance and maintenance. In his bankruptcy paperwork, Anderson listed $41,000 in monthly expenses and 69 creditors, the New York Daily News reported. While married to his second wife, Tamiyka, Anderson bought a 16,000-squarefoot home in Atlanta for $2.1 million and rarely lived there, the paper reported. Anderson actually showed remarkable financial restraint during the early years, Bercu said. He signed a five-year, $15 million deal with the Nets and initially pursued a sound financial plan with Bercu’s team. After that, things fell apart with his


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As your clients’ personal situations change (e.g., marriage, birth of a child or job promotion), so will their life insurance needs. They should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as sex, health and age, and has additional charges for riders that customize a policy to ft their individual needs. Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments, and do not receive dividend or capital gains participation. Past index performance is no indication of future crediting rates. Also, be aware that interest-crediting fuctuations can lead to the need for additional premium in your policy. Protections and guarantees are subject to the claims-paying ability of the issuing insurance company. The Nationwide Indexed Interest Multiplier (Multiplier) is available on two of the six Nationwide indexed interest strategies in the Nationwide YourLife IUL Accumulator. The Multiplier increases the indexed interest rate by 15%; for example, 5.00% interest rate x 1.15 Multiplier = 5.75%. Indexed interest strategies with the Multiplier may have lower participation and/or cap rates than indexed interest strategies without it. The Nationwide YourLife IUL Accumulator also includes the Nationwide IUL Rewards Program conditional credit of 0.20% in policy year 16 and onward. To receive the Nationwide IUL Rewards Program beneft, premium payments must meet or exceed a test of the net accumulated premium (premium paid minus any amounts taken as loans or partial surrenders) at the start of policy year 16; earlier for issue ages 51 and older. The additional 0.20% interest is applied each year from then on as long as the policy is in force. The credit will be added to the fxed interest rate strategy’s accumulated value. Life insurance products are underwritten by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, Columbus, Ohio. Nationwide, the Nationwide N and Eagle, Nationwide YourLife, Nationwide IUL Rewards Program, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2017 Nationwide. NFV-1197AO (04/17) May 2017 » InsuranceNewsNet Magazine

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FEATURE HALL OF FAME, FALL OF SHAME second contract, which raised Anderson’s salary substantially. “It got to the point where I would tell him that he didn’t have the money to buy a Bentley, and he’d say, ‘Yes I do. I have it in my stock accounts, so take it out of there,” Bercu recalled. “And he started to ignore the discipline that we tried to instill in him. Ultimately, he began to deplete those accounts.” DOROTHY HAMILL Hamill famously skated her way into America’s heart with her wholesome image and gold medal-winning performance in the 1976 Olympics. Sporting the soon-to-be-popular bobbed hairstyle and a pixie smile, the 19-year-old Hamill won the ladies’ singles program at the Innsbruck games. In the process, Hamill is credited with creating a new skating move, the camel spin that turns into a sit spin, which became known as the “Hamill camel.” Hamill also won the 1976 World Championships and then turned professional. Asked to join the Ice Capades by

Vince Young Led the Texas Longhorns to a 13-0 record and the national championship with a 41-38 win in the 2006 Rose Bowl. He took out a high-interest $1.8 million “payday loan” during the 2011 owners’ lockout.

no more Ice Capades. It wasn’t just that I once skated for the company, it was also the thought of all those skaters out of work.” While the Hamill-produced “Cinderella Frozen in Time” won praise and even aired on ABC, the decision proved unwise financially. Hamill declared bankruptcy in 1994. The Ice Capades was sold to Pat Robertson’s International Family Entertainment in 1995 and later shut down.

Nolan Ryan Ryan is known as a shrewd and diverse investor who owns land, a bank, a restaurant and a couple of minor league baseball teams.

Donna Atwood, Hamill was a show headliner beginning in 1977. Then in her 50s, Atwood had been the show’s star for decades and had acquired a financial stake in the Ice Capades. Hamill sought to follow in her footsteps. But times had changed, and the Ice Capades were no longer drawing the same crowds. After Ice Capades folded due to attendance declines, Hamill and her husband bought the financially strapped company’s assets in 1993. She formed her own company, Dorothy Hamill International, of which she was president. Hamill revealed her motives in a Sports Illustrated interview: “It was breaking my heart to think there would be 30

InsuranceNewsNet Magazine » July 2017

Hamill, 60, would endure further hardships, battling depression and breast cancer. She would regroup and remarry, and she continues to skate and appear in television specials and has published two books about her life. VINCE YOUNG How did ex-NFL star quarterback Vince Young blow through a reported $60 million in just seven years? It turns out it was in some of the most foolish ways possible. At least a gambler has a chance to win. And buying cars and other toys leaves the owner with an asset, albeit usually a heavily depreciated one. Young did things like buying out 120

seats on a Southwest Airlines flight in 2007 because he wanted to fly alone. He spent $5,000 a week at The Cheesecake Factory in Nashville, and he reveled in ordering $600 shots of Louis VIII cognac for himself and teammates. To say these are not good investments would be putting it mildly. But it was part of an overall pattern that drove Young from the NFL far too early. In 2006, Young reached the pinnacle of his football life. He had led the Texas Longhorns to a national championship game victory, 41-38, in one of the most talked-about title games in college football history. The Tennessee Titans made Young the third pick in the 2006 NFL draft and signed him to a five-year deal worth up to $58 million. Of that, $25.8 million was guaranteed. Young played five years in Tennessee before making one-year stops with the Philadelphia Eagles and the Buffalo Bills. Young, 33, last played in 2012 and officially retired from the NFL two years later. According to spotrac.com, which tracks sports contracts, Young earned $35.4 million in NFL salary. He also signed endorsement deals worth $30 million with Reebok, Campbell’s Soup, Madden NFL, Vizio and the National Dairy Council, CBS News has reported. The financial troubles came quickly. Young was one of many players who took out high-interest, high-dollar loans during the NFL owners’ lockout in 2011. While the league agreed on a new contract with players in August 2011 without any games missed, Young missed a payment on the $1.8 million loan. Pro Player Funding invoked its right to call in the full loan, plus interest. A court ruled in favor of PPF.


Failure To Survive

ANNUITY BUYERS SHIFT, BRINGING AN INDUSTRY ALONG WITH THEM FEATURE

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FEATURE HALL OF FAME, FALL OF SHAME Young took out the PPF loan so he could throw himself a $300,000 birthday party, said Ronald Peoples, president and CEO of Peoples Financial Service. Peoples recalled the loan in a deposition after Young claimed Peoples and Houston lawyer Major Adams II mismanaged $5.5 million in endorsement money. Young filed for Chapter 11 bankruptcy in January 2014, a move he later petitioned the court to rescind after he reached settlements with PPF and Adams/Peoples. In 2013, Young graduated from the University of Texas with a degree in youth and community studies from the College of Education. The university hired the former football star in 2014 as a development officer for program alumni relations and to raise money for programs that assist first-generation and low-income college students.

HALL OF FAME NOLAN RYAN Hall of Famer Nolan Ryan, 70, reached the pinnacle of his post-baseball businessman life when he led a complex $590 million transaction to purchase the Texas Rangers in 2010. At the time, the Rangers were in bankruptcy, and Ryan teamed with Chuck Greenberg, a Pittsburgh sports lawyer. Their winning bid included $385 million in cash and assumed liabilities, according to the New York Times. Ryan’s bid topped a rival group led by media tycoon Mark Cuban. The equity stake in the team more than tripled after the team signed a new television deal with Fox Sports Southwest that pays the Rangers $80 million a season, more than four times the previous deal. On the field, Ryan played 27 seasons in major league baseball and is the all-time leader in strikeouts, with 5,714. Ryan was elected to the Baseball Hall of Fame in 1999, his first year of eligibility, with 98.79 percent of the vote, the third-highest percentage in history. Ryan’s business empire is modest by high-net-worth standards, but it is marked by steady, conservative investments one would expect from a laconic Texan. He built a portfolio of land, a bank, a restaurant and stakes in two minor league baseball teams. His most notable business venture is Nolan Ryan’s All-Natural Beef in Huntsville, Texas. The beef production and distribution 32

InsuranceNewsNet Magazine » July 2017

In a Rush to Succeed On the football field, Emmitt Smith led his teams to big victories.

Smith began his playing days with a Pensacola high school state football championship. He ended it a threetime Super Bowl champion with the Dallas Cowboys and the National Football League’s all-time leading rusher. So it isn’t a surprise that Smith, 48, is racking up big wins in the business world as well. Upon retiring in 2005, Smith made his first business deal with another former Cowboys’ great — quarterback-turned-developer Roger Staubach. Smith and Staubach formed Smith/Cypress Partners, a real estate company that developed parcels in densely populated areas as commercial properties anchored by national retail chains. The partnership grew from a conversation several years earlier, when Smith asked Staubach for pointers on the real estate game. Staubach invited him to come to his office in the offseason and serve as an intern of sorts, which Smith did. The partnership took off with a string of successful projects. By 2006, the privately held firm had transactions totaling $26 billion and 835,000,000 square feet of space, according to a CNN report. “I understand how the deals are cut," Smith told Fortune Magazine in 2007. "I'm not an engineer. I'm not a contractor. And I'm still learning the jargon. But I understand deals, and the only way to grow is to be in the middle of the deals." From there, Smith’s business plan included sporadic media work while his business empire took shape. He does TV work and public speaking and won “Dancing with the Stars” in 2006. Today, Smith runs several companies spanning real estate, construction and technology. He is a Certified Commercial Investment Member (CCIM) and a Realtor. Current businesses include: ESmith Legacy, a premier real estate development and asset management firm; EJ Smith Construction, a Dallas-based commercial and civil construction manager and general contractor; E Smith Realty Partners, a national commercial real estate services company; E Smith Capital Partners, specialists in the procurement of commercial real estate equity and debt financing; and Prova Group, a mobile authentication company. — John Hilton

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Indexed UL Can’t Should Be Sold to Seniors

ANNUITY BUYERS SHIFT, BRINGING AN INDUSTRY ALONG WITH THEM FEATURE

IT’S ABOUT TIME SOMEONE SET THE RECORD STRAIGHT.

Nobody can deny that seniors dominate as the biggest and most sought-after market for agents and retirement planners. But advisors are getting some bad advice these days when it comes to selling Indexed UL to this lucrative group.

MORE THAN 90% OF THE AGENTS WE TALK TO BELIEVE THE SAME MYTHS: • “Seniors simply can’t get approved”

• “Underwriting on an IUL policy takes too long”

• “There’s not enough time for the policy to grow”

• “IULs are best sold to Gen Xers and Millennials”

• “Fees are too high to capture gains”

WHAT AGENTS NEED TO KNOW.

Agents are being done a huge disservice by excluding Indexed UL for their senior clients. If this is your mindset, make no mistake: you’re missing out on one of the best ways to fulfill your moral obligation to senior clients by offering them a way to control their taxes and their losses, receive tax-free income and have a tax-free benefit to pass on to their heirs.

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July 2017 » InsuranceNewsNet Magazine

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July 2017 Âť InsuranceNewsNet Magazine

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FEATURE HALL OF FAME, FALL OF SHAME company sells millions of pounds of meat across the country. Ryan lives at his private Gonzales River Ranch in Gonzales, Texas, a 7,000-acre property that doubles as a family home and working cattle farm. MICHAEL JORDAN Like many athletes successful off the court, Michael Jordan had financial smarts and discipline early in his career. Fresh off leading the University of North Carolina to an NCAA national championship, the 21-year-old Jordan signed a five-year, $2.5 million deal with Nike. It was the beginning of a lifelong partnership that would earn both parties immense wealth from the Air Jordan brand. As Jordan won NBA championships with the Chicago Bulls in the 1990s, his business acumen was just as successful off the court. Nike’s Air Jordan business included shoes and other merchandise and was so profitable that the company decided to break it out as the Jordan Brand. That business brings in roughly $1 billion annually. In 2013 alone, Jordan’s affiliation with Nike netted him a reported $90 million. While the Bulls won their first three NBA championships in the early 1990s, the team sold out all home and road games. Jordan the businessman recognized his value and demanded a $30 million annual salary, which he received. Jordan began a twin campaign to capitalize on his popularity off the court. He became the marketer in chief, raking in many additional millions endorsing Coca-Cola, Chevrolet, Gatorade, McDonald’s, Ball Park Franks, Rayovac, Wheaties, Hanes and then-telecom giant MCI. After retiring from the NBA in 2003, Jordan focused on building his various businesses, which included a Jordan Brand

Michael Jordan Widely considered the greatest NBA player of all time, Jordan became majority owner of the Charlotte Hornets in 2010. He now owns a majority stake of a $725 million franchise. clothing line he co-operated with Nike, as well as Michael Jordan Motorsports, a professional motorcycle racing team. In 2006, Jordan got back in the league when he purchased an ownership stake in the Charlotte Bobcats (renamed the Hornets in 2014) franchise. Four years later, Jordan bought out the majority shareholder to become the first former NBA player to become the majority owner of a franchise. The investment proved to be a shrewd business move. Thanks to new television contracts, the average value of an NBA franchise had nearly tripled since 2010. The Hornets turned Jordan’s reported $275 million investment into a majority stake of $725 million. In addition, endorsements never slowed for Jordan in his post-playing days. Court documents revealed he made $500 million in endorsement income from 2001 to 2012. His net worth is roughly $1.3 billion. SERENA WILLIAMS The younger half of the famous tennis champion Williams sisters, Serena’s approach to business has a decided millennial influence. In short, she leveraged her social media presence to build a personal brand empire worth an estimated $150 million.

Serena Williams Owner of 23 grand slam singles titles, the most in the history of women’s tennis. According to consultant MVPIndex, her social media presence was worth more than $22 million in equivalent value for her brands.

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InsuranceNewsNet Magazine » July 2017

As of early June, Serena had more than 19.3 million followers on Facebook, Twitter and Instagram. According to the MVPIndex, which ranks athletes based on social media reach, Serena was the 16th most valuable athlete in the United States in 2016. Her social media presence was worth more than $22 million in equivalent value for her brands. On the court, Serena is considered by some to be the greatest women’s tennis player of all time. She has 23 major title wins, one more than the legendary Steffi Graf. Serena has won $81.7 million in prize money, more than double the earnings of her nearest competitor. At 35, Serena is regarded as the top women’s player in the world in a sport that considers 30 the age of decline. Serena hasn’t played since January, as she is pregnant with her first child. Her inactivity allowed Angelique Kerber to surpass her as No. 1 in the WTA rankings. Serena’s many endorsement deals include Nike, Wilson, Beats by Dre headphones, IBM and Delta Air Lines. But she is leaving her mark in the fashion world, where Serena designs and sells a personalized fashion line in an equity deal with the Home Shopping Network. Serena joined sister Venus in a pair of high-profile sports business partnerships. The sisters own a small equity stake in the Miami Dolphins, becoming the first African-American women to own a piece of an NFL franchise. In 2016, they bought shares in the Ultimate Fighting Championship, a popular mixed martial arts empire run by Dana White. InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.


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LIFEWIRES

Life Insurance: Helping Boost Retirement Income

TOP 5

REASONS PEOPLE LIFE INSURANCEB:UY 85% 67% 63% 54% 52%

Final expenses Replace lost wages Transfer wealth / inheritance Pay off the mortgage Supplement retirement income

We’ve heard the saying that life insurance isn’t for the people who die; it’s for the people who live. But a recent LIMRA study shows that an increasing number of those who buy life insurance are not buying it to benefit a loved one but to benefit themselves while they are still alive. Fifty-two percent of those surveyed in LIMRA’s 2017 Insurance Barometer Study said they bought life insurance to supplement their retirement income. Despite this shift in viewing life insurance for its “life” component instead of its “death” component, the top four reasons for purchasing life insurance continue to be more traditional.

DID YOU

KNOW

?

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LIFE INSURANCE: A KEY TO BLACK WEALTH

Eugene Mitchell is a man on a mission – a mission to create $50 billion in wealth for the black community. Mitchell is a corporate vice president and market manager in the African-American Market Unit for New York Life. His motto is “If black lives matter, then black wealth should certainly matter too.” How would Mitchell create that $50 billion in wealth? Here’s the math: multiply 200,000 families by $250,000 in life insurance and that creates $50 billion of tax-free income. Instead of thinking of life insurance as only a means to cover funeral expenses,

MassMutual has a new logo as part of its campaign to refresh the 166-year-old brand. Source: PR Newswire

InsuranceNewsNet Magazine » July 2017

A baby boomer is just as interested as a millennial when it comes to making the online buying process fast and easy. — Marvin Feldman, President and CEO of Life Happens

Mitchell urges black families to consider life insurance as protection and an investment for future generations. Mitchell and his fellow New York Life agents plan to celebrate reaching the $50 billion milestone by having their portrait taken on the steps of the U.S. Capitol in August.

AXA EXPLORES U.S. LIFE UNIT IPO

CHINA LIFE ON A U.S. BUYING SPREE

A Chinese insurer is seeing the U.S. as ripe for investment as it goes on a buying spree of American real estate. China Life will spend about $950 million to purchase a 95 percent stake of 48 commercial properties in the U.S. The properties total about 5.5 million square feet in size and are located in 21 states. China Life will acquire a 95 percent stake in the assets portfolio from ElmTree, a private equity firm and leading real estate developer. ElmTree will retain a 5 percent stake in the portfolio and continue to take care of the properties.

QUOTABLE

AXA plans an initial public offering of part of its life insurance and asset management operations in the U.S. The sale of a minority stake in AXA’s U.S. life unit would take place by mid-2018. Analysts estimate the IPO could raise $3 billion. Thomas Buberl, AXA’s chief executive officer, said cash raised through the IPO would expand AXA’s health and property/ casualty insurance in countries like Thailand and Indonesia. In addition, he said, the public sale could be good for AXA’s U.S. operations because it would give the U.S. business its own stock listing and raise the company’s profile in this country. AXA, based in Paris, entered the U.S. financial services market by acquiring control over Equitable Life in 1991. AXA changed the name of Equitable Life to AXA Equitable Life Insurance in 2004. Meanwhile, AXA announced it plans to hire 550 workers in Charlotte, N.C., making Charlotte the company’s largest location in the U.S., although its U.S. headquarters will remain in New York.


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855-277-2090, ext. 8120 July 2017 » InsuranceNewsNet Magazine

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LIFE

How Term Life Makes It Easier For Clients to Give Back Charitable giving provisions traditionally have been included only on permanent insurance, but more recently, carriers have begun incorporating them into term insurance products as well. By Knut Olson

A

mericans are generous. Year over year, charitable giving continues to be on the rise, with many people choosing to donate in the form of a direct contribution. In fact, charitable donations hit a record $373.25 billion in 2015, according to the Giving Institute. The 2016 and 2017 Philanthropy Outlook predicts that total giving will increase by 4.3 percent from 2016 to 2017. But as our pocketbooks continue to be stretched thin, it may not always be feasible to give as much as we’d like to our favorite causes. After all, while giving $5 at the grocery checkout or $20 to your neighbor’s charity run is helpful, these don’t always feel like substantial contributions. Fortunately, agents can help their clients meet their charitable aspirations through their life insurance policies. Traditionally, leaving a charitable legacy through a life policy has been achieved in a few different ways, each with its own advantages and potential tax benefits. You’re likely familiar with some of the more common options. A policyholder can designate their registered charity of choice as the beneficiary, transfer ownership of the policy to a charity or name their estate as the beneficiary with instructions to allocate funds to a favorite charity. 40

InsuranceNewsNet Magazine » July 2017

But recently, the industry has begun seeing a new trend — the emergence of charitable giving provisions. Charitable giving provisions are making it easier and more affordable than ever for clients to support a cause that’s meaningful to them. And while charitable giving provisions currently are offered by only a few carriers, these provisions are gaining in popularity. They traditionally

more than their premium. Charitable giving provisions do not always require additional premiums or reduce the value of the death benefit. The payment generally is made as a donation in the name of the insured to the registered charity of their choice, or it can be split among multiple charitable organizations. The donation is often 100 percent tax-free (in that it does not need to be included as part of the insured’s estate) and may be eligible for a charitable tax deduction. These provisions can be attached to a policy as a rider, or in some cases they already are included as part of the policy. And once the policy is issued and a charity selected, no further action is usually required from the policyholder. So your clients won’t have to worry about incurring the costs and administrative burden of setting aside funds for their charity of choice in an estate or gift trust.

Who Is It For? have been included only on permanent insurance, but more recently, carriers have begun incorporating them into term insurance products as well.

How It Works

Depending on the value of the policy, the carrier will donate an additional 1 to 2 percent of the face amount to a charitable organization of the policyholder’s choice – as long as it’s a qualified 501(c)(3) charity. And although there are sometimes limitations on the maximum donation amount, this provision still enables your clients to make a contribution by paying nothing

A charitable giving provision is a great fit for clients who are active in giving back to their local communities through volunteerism or fundraising, and who want to leave a lasting legacy by continuing their charitable giving after death. And although this feature undoubtedly will appeal to community-minded and altruistic clients, you don’t have to be a dedicated philanthropist to appreciate the added value that a charitable giving provision offers. It’s a great option for middle-market families that don’t necessarily have a lot of room in their budget to contribute to charity but want to make a greater impact than they would be able to otherwise.


HOW TERM LIFE MAKES IT EASIER FOR CLIENTS TO GIVE BACK LIFE With a charitable giving provision, they don’t have to choose between protecting their family and giving back. Clients who are looking for financial products that align with their values and support the common good are also a market for a charitable giving provision. Millennials are a good example of this market segment. In fact, given comparable price and quality, 89 percent of millennial consumers are likely to switch to a brand associated with a cause, and 40 percent are willing to pay extra for a brand that reflects the image they wish to convey of themselves, according to Edelman research. Given that millennials comprise more than one quarter of the U.S. population and an estimated $200 billion in buying power and are set to inherit approximately $30 trillion in wealth from baby boomers, this demographic is certainly a powerful market segment.

Sales Strategies

When price point and coverage are competitive across carriers, a unique added

When clients are presented with the opportunity to give back without paying additional premium ... the choice is simple. value like a charitable giving provision really can set a product apart and help you close the deal. Because when clients are presented with the opportunity to give back without paying additional premium and without compromising their protection needs, the choice is simple. Sales success often comes from not only meeting your clients’ needs, but appealing to their wants as well. In today’s tough economic climate, clients want to feel good about the products they choose — and that includes life insurance. Whatever the motivation for your clients — whether they see the provision as a way to leave a charitable legacy, give more than they would otherwise be able to afford or just feel good about their purchasing decisions — you can help them achieve it. Because after all, when you’re meeting

with a new prospect, talking about the policy details is only one piece of the conversation. And to many clients, it’s likely not the most interesting or relevant part. Today’s prospect also wants to talk about what the policy represents: financial security, paying off a mortgage, ensuring their family’s future is protected, covering the cost of college and now, how they can make a meaningful impact by leaving a charitable legacy. Charitable giving provisions are one more powerful way you can connect with your clients to help you make the sale. Knut Olson is president, North American life insurance and annuity, Foresters Financial. Knut may be contacted at knut.olson@ innfeedback.com.

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July 2017 » InsuranceNewsNet Magazine

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LIFE

Women Face 6 Challenges On The Road To Retirement From their greater longevity to their higher likelihood of critical illness, women face a number of hurdles in retirement readiness. Here is how life insurance can ease the way. By Michelle Miller

A

recent LIMRA study found that women represent a valuable and loyal client base for advisors. Yet, more could be done to enhance these relationships. According to LIMRA’s report, “The Road Ahead: Building Female Client Relationships to Last,” part of the key to serving women better is “to better understand the distinct differences between female and male clients.” Much has been written about the fact that women, in general, live longer than men, and that their greater longevity often has a profound impact on their financial futures. Here are six other unique retirement challenges of women, along with actionable pointers on how to help address each issue. Challenge No. 1: Women are less confident than men are about retirement. A separate LIMRA report, on retirement attitudes by generation, relayed that women 42

InsuranceNewsNet Magazine » July 2017

of all ages are less confident than men are about knowing what their retirements will look like. Only one-third of women said they are confident about their retirement, compared with 53 percent of men. Drilling down deeper, the report revealed that only 6 percent of Generation X women “strongly agree” they are confident they will achieve their desired retirement lifestyle. As LIMRA pointed out, “Gen X women, in particular, could benefit from retirement planning activities that boost financial decision-making confidence.” Response: Ramp up educational outreach to female clients. Help women make the most of free retirement and protection planning resources that are designed to assist them in viewing and navigating the road to retirement. Interactive online tools and handy calculators provide opportunities to engage and inform. In addition, carrier-provided resources — to help approach planning needs from the different perspectives of each generation — are available to support outreach to female clients. Challenge No. 2: More women than men are underinsured. LIMRA recently found that only 56 percent of American women have life insur-

ance coverage. This level remains well below men’s ownership rate of 62 percent. Response: Help women realize they need more life insurance. Check current client files and during your customer annual review, point out specific opportunities you see for additional life insurance coverage. A husband may be insured, but his wife may not be. Also note whether a female client may have added to her family, gotten divorced, or started or closed a business since purchasing a policy. A woman who purchased an affordable term life insurance policy and then experienced an improvement in her financial position may welcome a solution that offers even greater flexibility. A term policy may be eligible for conversion to a permanent life policy without evidence of insurability. Women may have a better opportunity to lock in lower premium rates on a permanent life policy by purchasing it sooner instead of later. Challenge No. 3: Women prioritize other needs over retirement saving. Women are less likely than men to make retirement saving a priority, according to a LIMRA report on retirement attitudes by generation. Two-thirds of men agree that saving for retirement is important, but


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Insurance products issued by: Minnesota Life Insurance Company | Securian Life Insurance Company Securian Financial Group, Inc. www.securian.com Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. 400 Robert Street North, St. Paul, MN 55101-2098 ©2016 Securian Financial Group, Inc. All rights reserved. For financial professional use only. Not for use with the public. This material may F88056-2 Rev 5-2017 DOFU 3-2017 130415

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43


LIFE WOMEN FACE 6 CHALLENGES ON THE ROAD TO RETIREMENT only half of women concur. This may be in part because many women prioritize family needs above their own individual needs. But, as a Department of Labor blog shared recently, “Women stay at jobs for shorter periods of time, work part-time more frequently, and are more likely than men to interrupt their careers to raise children or take care of family members. As a result, women work fewer years and contribute less toward their retirement.” Response: Introduce solutions designed to build cash value. Help female clients consider multipurpose financial products that are designed to provide utility and build cash value as well as offer preferred tax treatment, based on current tax law. Always tell clients to consult a qualified tax expert when considering their own situation, however. Review indexed universal life (IUL) insurance solutions that are structured for volatility control as well as robust accumulation and to offer upside potential based on market performance. Keep in mind, too, that a variable universal life (VUL) insurance product may be appropriate for some women. Challenge No. 4: Women face greater retirement income dilemmas than men do. As the National Institute for Retirement Security explained in a recent report (“Shortchanged in Retirement: Continuing Challenges to Women’s Financial Future”), the median income of women age 65 and older is consistently 25 percent lower than the median income of men of the same age. Furthermore, for those ages 80 and above, the gap widens to 30 percent. Response: Inform women about multiple retirement income products. Help female clients plan early on to leverage retirement income products such as annuities. But also keep in mind that some life insurance solutions allow the policy owner to elect to receive guaranteed withdrawal benefits when the terms of the contract’s rider are met. As the client’s needs may change, consider solutions that will also allow her to surrender the policy and receive up to 100 percent of the premiums paid (although some limitations and restrictions will apply). 44

InsuranceNewsNet Magazine » July 2017

Challenge No. 5: Women are more likely than are men to need long-term care. More than two-thirds of nursing home residents and more than 70 percent of people who receive long-term care in a residential care community are women, according to the U.S. Department of Health and Human Services. Furthermore, a recent HealthView Services report reveals that projected long-term care costs for a woman who turned 55 in 2016 and will spend 2.19 years in a nursing home sometime between the ages of 85 and 89 are nearly $695,000.

more than they do men. After a heart attack, women are less likely than men to receive drug therapies that are known to improve survival rates, according to the Women’s Heart Association. This contributes to a higher rate of complications after heart attacks in women than in men, even after adjusting for age. On average, within six years of a heart attack, 46 percent of women (compared with 22 percent of men) are disabled with heart failure. The financial consequences of disability and critical illness can be dire for women.

Women tend to traverse a rockier road to retirement. Understanding their unique needs and priorities is a key first step in smoothing their way to a more secure future. Response: Raise awareness of financial solutions for care. Explain the differences between longterm care (LTC) insurance, LTC riders on life insurance, and chronic illness riders on life insurance. LTC policies and riders may be cost-prohibitive or too restrictive for some women, especially given the requirements to incur expenses and submit receipts for reimbursement. Chronic illness riders on life insurance pay when the insured qualifies under the rider terms; receipts for long-term care or other expenses are not necessary and the benefit can be used for virtually any purpose. No longer do all chronic illness riders require the insured’s medical condition to be permanent in order for the insured to collect benefits. Challenge No. 6: Women are more prone to disability and critical illness than men are. Stroke is a leading cause of serious longterm disability in the U.S., and each year more women than men have a stroke, according to the National Stroke Association. And stroke is not the only affliction that affects women worse than it does men. Heart attacks also harm women

Response: Help protect women against these contingencies. Options abound for female clients to guard financially against many types of costly health care crises. Solutions range from standalone disability and critical illness insurance policies to modestly priced life insurance products that offer built-in critical illness protection and available disability income riders. Ensure that women know their risks and how to mitigate them.

Easing the Way

The issues and potential solutions described above are not meant to be all-inclusive, as women face a plethora of challenges with retirement and protection planning. And, just as with male clients, every female client is different. One thing is clear, however. Research shows that women tend to traverse a rockier road to retirement. Understanding their unique needs and priorities is a key first step in smoothing their way to a more secure future. Michelle Miller serves as U.S. Head of Marketing, Life, AIG Consumer Insurance. Michelle may be contacted at michelle. miller@innfeedback.com.


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ANNUITYWIRES

FIA Sales Tumble 14% in 1Q

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New Department of Labor fiduciary rules have weighed on sales of fixed indexed annuity (FIA) products. First quarter FIA sales dropped 14 percent to $12.9 Q1 2016 Q4 2016 Q1 2017 billion compared with the year-ago pe$14.7B $13.2B $12.9B riod, according to Wink Inc. FIA sales in the first quarter of 2017 dipped 3 percent compared with the previous quarter. 3% First-quarter sales of multiyear guaranteed annuities (MYGAs), which offer a 14% fixed rate over a period of several years, tumbled 17 percent to $9 billion, Wink reported. MYGA sales rose 36 percent compared with the fourth quarter of 2016. Fixed annuity sales in the first quarter also saw a downturn – dropping 6 percent to $1.1 billion over the year-ago period, Wink reported. However, fixed annuity sales rose 6 percent over the previous quarter.

LOW INCOME LITERACY SUGGESTS SIMPLE ANNUITIES

With fewer retirees knowledgeable on the subject of generating income in their post-employment years, simple income annuities could emerge as shining stars. An American College survey showed that 74 percent of retirees earned a failing grade when it comes to understanding income in retirement. In addition, nearly one in five respondents said they are not knowledgeable about annuity products in retirement, but 74 percent also said having a source of guaranteed lifetime income in retirement is important. It all adds up to a greater role for simple income annuities, said Jamie Hopkins, DID YOU

KNOW

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46

Retirement Income Program co-director at The American College. Talking to retirees about investing all or a portion of their $200,000 nest egg into an income annuity generating $700 a month for the rest of their lives? It doesn’t get much easier than that — so long as a retiree is content on $700 a month from the nest egg for the rest of their lives, Hopkins said.

?? ?? ANNUITIES VS. THE 4% RULE

Most planners are familiar with the 4 percent withdrawal rate research laid down more than 20 years ago by now-retired advisor Bill Bengen. The Bengen Rule, a rule of thumb to establish a retirement income floor, is based on a 30-year time horizon.

Indexed annuity sales are predicted to fall 5-10 percent in 2017 and another 15-20 percent in 2018. Source: LIMRA

InsuranceNewsNet Magazine » July 2017

There are distributors 11 companieshave offering Insurance been so busy(qualifying preparing for the fiduciary rule QLAC longevity annuity that they haven’t beenWhile able to focus contract) products. this is on show amarketing small andproducts. new partSales of the DIAit. market, we expect to see an uptick

— Sheryl J. Moore, president and CEO of MooreinMarket Intelligence in sales 2016. and Wink Inc., on a first-quarter drop in fixed indexed annuity sales

But with rising longevity rates, does the 4 percent rule still hold true? And is the longevity risk – the risk of retirees outliving their income – an argument for annuities? Using income annuities delivers a more efficient approach to meeting retirement spending goals than commonly thought, according to retirement income planning expert Wade D. Pfau at The American College. An investments-only strategy can support greater legacy amounts than partial annuitization in the event of early death. But those higher legacy amounts come at the cost of not having a contractual income guarantee and having less liquidity, Pfau argues in a paper titled “Retirement Income Showdown: Risk Pooling vs. Risk Premium.”

I SHOULDA HAD AN ANNUITY!

If they knew then what they know now, would they have chosen an annuity over a lump sum? Turns out that many lump sum recipients, if not always a majority, agree that annuities provide plenty of benefits, MetLife’s Paycheck or Pot of Gold Study has found. More than half – 52 percent – of lump sum recipients agreed that their budget would be more predictable if they’d chosen annuity payments from an employer pension or defined contribution plan, the survey found. Far fewer lump sum recipients — 34 percent — said it would be easier to pay for necessities if they had chosen monthly annuity payments instead of a lump sum.


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July 2017 » InsuranceNewsNet Magazine

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ANNUITY

Testing the Market for Fee-Based FIAs In response to the DOL fiduciary rule, carriers are recasting commission-based fixed indexed annuities into fee-based siblings. By Cyril Tuohy

W

ith new fiduciary standards taking effect, carriers have lined up new fee-based fixed indexed annuities (FIAs) for independent marketing organizations and their advisors to sell. Insurance companies said they want to be prepared for the June 9 implementation date of the Department of Labor’s fiduciary rule, which is designed to steer distributors away from commission-based sales. But independent agents and advisors, who have sold billions of dollars’ worth of fixed indexed annuities in the past 10 years, rarely get excited about fee-based annuities. The market will simply have to wait and see whether distributors take to feebased models. “It’s a little too early to tell if fee-based indexed annuities will experience successful sales levels,” said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink, publisher of the indexed life and annuity industry tracker Wink’s Sales & Market Report. “I definitely think that the outcome of the DOL’s proposed fiduciary rule has the power to influence sales of these products going forward,” she said. In any case, recasting commission-based fixed indexed annuities into fee-based siblings isn’t difficult, said Ron Grensteiner, president of American Equity Investment Life, a top seller of fixed indexed annuities. “We have a couple of products on the shelf that are just a matter of stripping off the commissions and leaving the surrender charges and the other features intact, and then increasing caps and participation rates on those products and putting them out there,” he said in an analyst conference call. “So, there is no filing that we feel we have to do — it’s just something that we haven't done yet, and we’re waiting to see if there is a demand for it,” he said. Insurers have recently introduced a wave of changes to variable annuity product lines, including the launch of fee-based variable annuity products. 48

InsuranceNewsNet Magazine » July 2017

Choices, Choices and More Choices

Still, carriers insist advisors and distributors are better off with choices under the DOL rule, which requires advisors to uphold a “best interest” standard. “We believe in choice, and in allowing advisors and consumers to decide which model is best for their retirement income objectives,” said Brian Kroll, head of annuity solutions for Lincoln Financial Group. “Commissions and fees can both be in the best interest of clients,” he said. Since the launch of Lincoln Core Capital, the company’s fee-based FIA for registered investment advisors, the company has added fee-based versions of Lincoln Covered Choice 5 and 7 to its FIA portfolio, the company said. With the FIA market on track to register 2016 sales growth of about $60 billion, an 11 percent increase from 2015, insurers don’t want to miss out on potential sales because they don’t have a fee-based product for distributors to sell. Retirement investors like FIAs because they offer higher returns than bank products at a time when interest rates — although rising — are still very low by historical standards. Toss in a bull market celebrating its eighth anniversary, and retirement investors searching for higher yield have even more reason to buy an index-linked annuity that exposes principal to minimal risk yet lets investors share in market gains. Transamerica, for example, has already taken advantage of the strong stock market performance by offering index account cap rates ranging from 2.25 percent to 4.35 percent, rates superior to what investors could collect on bank savings or certificates of deposit. Other insurers such as Nationwide, Athene and Great American have made changes to the index options tied to the companies’ respective FIA families to take advantage of performing asset classes.

Fee-Based Product Brands

Earlier this year, Voya Financial launched its Voya Journey Index Annuity with a “two-stage” interest-crediting approach. The annuity offers advisors the flexibility to use more than one interest crediting

strategy to match long-term financial goals. Voya Journey Index Annuity is sold via commission, but the company is developing an advisory version for release later this year, the company said. “In today’s low-interest-rate environment, the Voya Journey Index Annuity is a good alternative to taxable bank certificates or the volatility of bond mutual funds,” said Carolyn Johnson, CEO of annuity and individual life at Voya Financial. Also earlier this year, Allianz Life, the nation’s biggest seller of FIAs, announced the launch of Retirement Foundation ADV Annuity, the company’s first fee-based fixed indexed annuity. “There is a growing market demand for fee-based products and we believe Retirement Foundation ADV will be wellreceived,” said Matt Gray, Allianz Life senior vice president of product innovation. Late last year, Great American Life Insurance signaled it was ready to enter the investment advisory channel with the release of Index Protector 7, a fee-based FIA with an optional guaranteed income rider. “This is a relatively new development in the fixed indexed annuity marketplace,” said Joe Maringer, national sales vice president of Great American Life. “Due to the persistently low interest rate environment, advisors may be seeking alternatives for the traditional fixed income portion of clients’ investment portfolios.” The annuity, sold through financial advisors at Raymond James, complements Great American Life’s commission-based indexed annuities already in the market. “We invited Great American to provide an annuity option for those advisors and clients who prefer an advisory arrangement,” said Scott Stolz, senior vice president, PCG (Private Client Group) Investment Products, at Raymond James. “We believe that, given the changing regulatory landscape, the need for fee-based annuities will only grow,” he said. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@ innfeedback.com.


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49


ANNUITY

How Annuities Can Help Clients Live in an Accumulation Nation Accumulation-based annuities can help clients grow their retirement nest egg. By Carolyn Johnson

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e live in an accumulation nation, where most Americans want more of just about everything: more monthly data on our smartphones, more upgrades when buying a car and more vacation time to spend with family and friends. Why would our clients’ mindset be any different when planning for a secure financial future? This is where accumulation-based annuities (ABAs) might be a good fit in your client’s financial portfolio. Typically, most advisors think of annuity products for their ability to generate income in retirement. Although this is certainly a valuable feature, individuals also need help growing their nest egg, considering almost half of working Americans have less than $50,000 saved for retirement, according to the Voya Retire Ready Index. What’s even more telling is that “financial security” often does not rise to the top of everyone’s list of priorities. According to Voya’s recent consumer survey, 45 percent of Americans chose their smartphones, cars or vacations over financial security when asked which item they would be least willing to give up. With this backdrop in mind, it’s clear Americans need solutions that can help them grow their retirement assets and build a secure financial future — without having to sacrifice the items that matter to them most along the way. And with sales

45% 50

for accumulation-based annuities jumping more than 65 percent between 2012 and 2016, according to LIMRA data, it appears more individuals are turning to the growth potential and protection these products can offer. Here are some ways ABAs can help your clients get more out of their financial portfolio.

What are ABAs, and how do they stack up to other products?

Accumulation-based annuities are designed to help clients grow their assets. It might sound simplistic, but considering the low-interest-rate environment we’ve been enduring, clients are looking for products that offer them better returns. For example, the 10-year Treasury rate has fluctuated up and down in recent years — even hitting 1.37 percent in July 2015, the lowest rate since 1900. Clients who had money invested in certificates of deposit or money market accounts gained only modest returns. ABAs offer individuals another option — one that can keep their assets safe while providing them greater upside growth potential. Therefore, it’s not surprising ABA sales have increased from $59.3 billion in 2012 to $99 billion in 2016, according to LIMRA data. Another reason for this jump is the way ABAs differ compared with annuity products used for income. For starters, ABAs tend to have a shorter surrender period. Typical annuities with an income rider option have a surrender period lasting 10 years or longer, while the range for most ABAs is between five and eight years. For

Almost half of Americans chose smartphones, cars or vacations over financial security

InsuranceNewsNet Magazine » July 2017

clients looking to avoid a surrender charge altogether, this is becoming more common with accumulation-focused investment-only variable annuities (IOVAs). However, it is important to point out that longer surrender periods typically translate into stronger growth potential. The varying level of risk your clients are comfortable taking is also a major factor when determining how these products stack up. For example, if you look at fixed indexed annuity ABAs compared with investment-only variable annuity ABAs, the earning potential of an IOVA can be greater because your client’s premium is invested directly in the market. Plus, there is no cap rate to curtail potential growth, which is a common feature of many fixed indexed annuities. Yet with an IOVA, the trade-off for higher growth potential is the possibility of losing money if the market declines. If your client is looking for 100 percent principal protection, then a fixed or fixed indexed annuity could be the solution.

Is there a market segment that’s a particularly good fit for ABAs?

ABAs have become a favorite among independent producers, broker/dealers and banks. One reason for their popularity in the bank channel, in particular, is the high correlation of fixed and fixed indexed annuities to other conservative investment solutions that are typically sold by banks, such as CDs, market-linked CDs and money market accounts. For advisors working in the bank channel, being able to offer an alternative (such as a fixed indexed annuity ABA) that offers greater earning potential and still provides principal protection makes for a compelling sales story.


HOW ANNUITIES CAN HELP CLIENTS LIVE IN AN ACCUMULATION NATION ANNUITY ABAs have evolved to meet the needs of both conservative and aggressive clients while also helping address short-term and long-term financial goals. As a result, advisors working in the independent producer and broker/dealer channels have been able to use ABAs in a wide range of circumstances.

cause of the various products, durations and strategies available, a good next step is for the advisor to present their client with a few options. For example, the advisor first could present a seven-year FIA using the Standard & Poor’s 500 index annual point-topoint strategy, which has averaged slightly more than 4 percent in the past Who is the ideal client seven years. As a second option, RETAIL ANNUITY SALES ARE SHIFTING for an ABA? the advisor could show the cliThe design of ABAs has ent a six-year FIA using a more $206.7 $204.7 evolved over the years to aggressive index strategy that $196.3 $191.7 $183.1 become more dynamic than also has averaged slightly more the traditional fixed annuithan 4 percent during this time $100.0 $83.5 $108.7 ty. As result, these products period. As a next step, the advi$109.0 can be ideal for a wide varisor should explain the benefits $116.1 ety of clients. For example: and trade-offs of each option. For example, the seven-year » If a client is looking to FIA meets the client’s financial earn a fixed rate over the objectives and uses the most $99.0 $95.7 $88.4 $79.0 course of five or seven years, common and popular index $59.3 then something as simple as strategy, the S&P 500 annua fixed annuity focused on al point-to-point strategy. The $7.7 $8.3 $9.7 $9.1 $9.2 accumulation could be a downside is that the client’s good option. money is tied up for a longer period of time compared with the » If a client is worried about six-year FIA product. But the Accumulation Income Later Income Now unexpected dips in the more aggressive index strategy market but also wants more means there’s a higher risk of Source: LIMRA Secure Retirement Institute growth potential than just a fixed rate, not getting the 4 percent annual returns then a fixed indexed annuity focused on the client hopes to obtain. The client now accumulation might be a great solution. What approach should an advisor feels empowered to make an informed deYour client will enjoy the benefit of princi- take to selling an ABA? cision, which could translate into a longpal protection, and there’s an opportunity It’s vital for every advisor first to under- term relationship — the ultimate goal of for more growth by linking to several in- stand their client’s financial goals. This any advisor. dex strategies. advice might seem basic, but it sets the ABAs — like many financial products — foundation for the entire conversation. come in multiple flavors, each offering » Perhaps you have a client who is an ag- With that being said, when it comes time slightly different features to help meet gressive investor. This person also could to present an ABA to clients, it’s always your client’s financial goals. And having have maxed out their qualified contribu- helpful to provide multiple solutions, ed- this flexibility is definitely a plus, especially tion plans, such as their 401(k) or individ- ucate clients on the differences between in our accumulation nation. ual retirement account, and could now be the options you present and try to keep Next to wanting more of just about evlooking for a nonqualified solution to put the dialogue as simple as possible. Here’s erything, Americans value the freedom some significant money away for the next an example of one potential scenario: to make their own decisions above all. 15 years. An IOVA focused on accumulaBy providing your clients with another tion is something they might want to con- » An advisor speaks with a client and option to help grow their retirement nest sider. These products provide an array of learns during the conversation that the egg, you’re not only helping them build a investment options, most have a low-cost client wants tax-deferred growth, wants secure financial future, but also doing it in structure and, in some cases, might not to stay pretty conservative and hopes to a way they will appreciate. have a surrender schedule. earn around 4 percent annual growth on average. After digging a little more, the Carolyn Johnson is CEO of » If a client is really focused on grow- client also indicates they want complete annuities and individual life, Voya Financial. Carolyn may ing their assets, but also likes the option market protection and they don’t want be contacted at carolyn. of taking income down the road, then a their money tied up for any longer than johnson@innfeedback.com. multi-functional ABA could meet their seven years. Based on this information, needs. More carriers are designing these several FIAs focused on accumulation types of ABAs to provide strong growth potentially could meet their criteria. Be-

2012

potential, but also to have a mandatory income rider built into the annuity product. This gives the client flexibility to take income in the future if their situation happens to change. These types of multifunctional ABAs are becoming increasingly popular for clients who want to have their cake and eat it too.

2013

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July 2017 » InsuranceNewsNet Magazine

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HEALTH/BENEFITSWIRES

Feds File $1B Suit Against UnitedHealth UnitedHealth Group is in hot water with the feds. The Department of Justice sued the company over allegations that the insurer wrongly received at least $1 billion from Medicare. At issue are Medicare “risk adjustment” payments based on what the justice department said were inaccurate data submissions. Risk adjustment payments are made to private insurers that operate Medicare Advantage plans. UnitedHealthcare, the company’s health insurance division, is the nation’s largest provider of Medicare Advantage plans. The federal lawsuit comes in a whistleblower case first brought by a former UnitedHealth Group employee. In the suit, the government alleges that UnitedHealth made patients appear sicker than they were in order to collect higher Medicare payments than it deserved.

CMS: BRING BACK THE BROKERS

The Centers for Medicare & Medic a id S er v ic e s (CMS) wants to bring brokers back in helping small employers to offer health insurance to their workers and to promote agent and broker participation in the process. CMS intends to propose a rule that would change how small employers and their workers in the Small Business Health Options Program (SHOP) Marketplace enroll in coverage for 2018. SHOP Marketplaces were created as part of the Affordable Care Act to make it easier for small employers to provide health coverage to their workers. However, insurance company and agent/broker participation, as well as overall enrollment in the SHOP Marketplaces, has been lower than anticipated, the CMS said. Under the approach CMS intends to propose, instead of enrolling online at HealthCare.gov, employers would enroll DID YOU

KNOW

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directly with an insurance company offering SHOP plans or with the assistance of an agent or broker registered with the federally facilitated SHOP.

HHS: AVERAGE HEALTH INSURANCE PREMIUMS DOUBLED SINCE 2013

Just how much have individual health insurance premiums gone up in the wake of the Affordable Care Act (ACA)? Premiums for individual health insurance plans have doubled since 2013, the year before many of the ACA mandates took effect. That’s the word from the latest U.S. Department of Health and Human Services (HHS) analysis. According to the report, average in-

Healthcare Premiums Increase: 2013 2017 $2,784 $5,712

The cost of health care for a typical American family of four receiving coverage from an employer-sponsored preferred provider plan is more than $26,000 for 2017. Source: Milliman

InsuranceNewsNet Magazine » July 2017

QUOTABLE

The status quo is unsustainable. — Alleigh Marré, U.S. Department of Health and Human Services

dividual market premiums more than doubled from $2,784 per year in 2013 to $5,712 on HealthCare.gov in 2017 – an increase of $2,928, or 105 percent. All 39 states using HealthCare.gov experienced an increase in individual market premiums from 2013 to 2017. Sixty-two percent of those states using HealthCare. gov saw 2017 premiums double from 2013. Three states – Alaska, Alabama and Oklahoma – saw premiums triple from 2013 to 2017.

15 STATES FILE SUIT TO PRESERVE ACA SUBSIDIES

Attorneys general from 15 states and the District of Columbia have sued the federal government over a crucial component of the Affordable Care Act, cost-sharing reductions. These are the subsidies that help people cover their copays and deductibles. These subsidies are an aspect of the federal health care law that could be eliminated even if Congress fails to repeal the law. The cost-sharing reductions, paid directly to health insurers, are expected to total $9 billion nationally. If the payments stop, it is expected that health insurers will raise rates to make up the difference. But if the ACA remains in force, lower-income people will apply federal tax credits to keep their costs down - and with higher premiums, the tax credits will also have to increase substantially. Earlier this year, the Kaiser Family Foundation released a study showing that eliminating the cost-saving reductions would actually wind up costing the federal government more than it saves.


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HEALTH/BENEFITS

Help Prevent an Accident From Turning Into a Financial Sinkhole If you’re looking to offer new solutions to business clients who are struggling to offer a comprehensive, competitive benefits program while controlling ever-rising costs, consider bringing accident insurance to the table. By Steve Hesler

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t the risk of sounding like Yogi Berra, no one plans to have an accident. But anyone can plan to protect against an accident’s financial consequences by buying accident insurance. Accident insurance is pretty much what it sounds like: coverage that helps with the costs of an unexpected injury, such as a fracture, dislocation, cut or burn. Plans 54

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come in all shapes and sizes, but typically cover services such as emergency treatment in an emergency room, doctor’s office or urgent care facility; hospital admission; surgery; medical imaging; X-rays; and sometimes rehabilitation and occupational therapy. A growing number of customers are seeing value in accident insurance. Voluntary accident sales grew 11 percent from 2014 to 2015, with nearly $1 billion in annualized premium and more than $2.4 billion of in-force premium, LIMRA reported. That trend continued in 2016 with another 2.3 percent increase in industry sales — and much more than that for some top voluntary carriers. If you’re looking for new solutions for your clients struggling to offer a

comprehensive, competitive benefits program while controlling ever-rising costs, consider bringing accident insurance to the table. Here are seven tips to get you started: 1. Follow the money. Or lack of it. There’s a big gap between the average major medical insurance deductible and what most Americans have on hand for an emergency. Kaiser Family Foundation reported the average major medical insurance deductible is almost $1,500, with high-deductible health plans having deductibles of more than triple that amount. Compare that with the Federal Reserve Board’s findings that half of Americans say they would have trouble coming up with just $400 in an emergency, and


HELP PREVENT AN ACCIDENT FROM TURNING INTO A FINANCIAL SINKHOLE HEALTH/BENEFITS only 37 percent could cover a $1,000 emergency room visit with money they’ve saved. Use those numbers to talk with your clients about how offering accident insurance can help their workers bridge that gap and protect their financial well-being. 2. Feel their pain. Accidents happen — a lot. Thirty-nine million Americans seek medical help for injuries every year, according to the National Safety Council. And the pain may get worse when the bill arrives. Take a broken arm, for example: Without health insurance, a trip to the emergency room for a broken arm can cost $2,500, according to CostHelper. If surgery is needed, the cost of that broken arm jumps to $16,000. Point out that accident coverage can give your clients’ employees access to affordable ways to get the care they need when the unexpected happens. 3. Bust the myths. Be sure your clients and their employees understand that health and auto insurance may help pay expenses from some accidents, but likely leave gaps. Many accidents treated in hospital emergency rooms are related to sports, not driving. Basketball, bicycle riding, exercise, football and soccer are among the top injury-producing sports, the National Safety Council reports. And many common accidents such as falls, burns and cuts occur at home, which the Centers for Disease Control and Prevention reports is by far the most “popular” place for nonfatal accidents. Even good major medical insurance can leave workers with significant out-ofpocket costs following an accidental injury. Those costs include emergency room fees and copayments, not to mention those high deductibles. There also may be nonmedical costs health insurance doesn’t cover, such as rehabilitation, caregiver fees, travel costs to treatment and lost income from being out of work. 4. Beat the competition. Without question, major medical, life and disability insurance form the foundation of a solid employee benefits program. But they’re not enough if your clients want to offer a competitive benefits package that attracts and retains the best talent. Bringing them solutions to offer an affordable, comprehensive benefits program helps them (and you) beat the competition.

5. Control client costs. Explain that with voluntary accident insurance, employees select and pay for the coverage if they want it, so there’s no direct cost to your clients. Employees can buy coverage for themselves, and sometimes their spouse or partner and their eligible dependent children. Bonus points: Most accident plans also are compatible with health savings accounts. This could be increasingly important if proposed changes to the health care reform law continue to make

expenses resulting from a nonfatal gunshot wound, and a well-being assistance benefit that helps pay for routine preventive care such as a colonoscopy, mammogram or blood test. Some plans also allow employees to customize their coverage further by choosing from a variety of optional riders. These can include a disability income rider that pays benefits if the injury keeps the employee out of work, a critical illness rider that pays a lump sum when a serious illness such as

Many accidents treated in hospital emergency rooms are related to sports, not driving. Basketball, bicycle riding, exercise, football and soccer are among the top injury-producing sports, the National Safety Council reports. HSAs more attractive to consumers and employers. 6. Keep it simple. Accident insurance is a relatively simple, straightforward benefit to explain to your clients and their employees. It’s usually indemnity-based, meaning it pays a set amount based on the injury and treatment the insured receives. For example, a policy might pay $1,400 for a broken leg or $2,800 if surgery is required to treat it. The benefits are paid directly to the insured and aren’t reduced by what some other insurance might pay. Unlike workers’ compensation, it can cover injuries that happen off the job as well as at work. 7. Make it personal. Today’s newer accident plans offer greater customization and even more value. Your clients may include additional benefits in their base plan to create coverage that best meets the needs of their employee population. Examples include an “active lifestyles” option that increases the benefit amount, a gunshot wound benefit to cover

heart attack or stroke is first diagnosed, or a hospital confinement rider that helps pay for hospital admission to treat a covered sickness. These tips show your clients the value in voluntary accident insurance. It’s simple, affordable coverage that meets a growing need for today’s financially fragile workers. By bringing accident insurance to the table, you can help your clients offer a more comprehensive, competitive benefits program while controlling their benefits costs — and create a new revenue stream for your practice. Steve Hesler is an assistant vice president of product development at Colonial Life. Steve may be contacted at steve.hesler@innfeedback.com.

Like this article or any other? Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.

July 2017 » InsuranceNewsNet Magazine

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NEWSWIRES 46% of retirees die with $10,000 or less in savings

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Almost Half of Americans Die Nearly Broke

They say you can’t take it with you when you die, but a large percentage of Americans nearly run out of it before they die. A study by the National Bureau of Economic Research found that almost half of Americans die nearly broke. Of the general population, 46 percent of retirees die with savings of $10,000 or less. Among retirees who are single, the percentage climbs to 57 percent. The picture is a bit less bleak when taking assets such as homes into account. Still, 57 percent of single-adult households and 50 percent of widowed households had no housing equity to show when they died. In addition to having little savings when they die, a good many seniors are carrying credit card debt. ValuePenguin research showed that seniors aged 65 to 69 have an average of $6,876 in credit card debt, while seniors 70 to 74 have $6,465 on average. And while seniors 75 and over have the least amount of credit card debt among all consumer age groups, they still carry an average balance of $5,638. Twelve percent of seniors with debt said they expect to die before they pay off what they owe.

FINANCIAL SERVICES CASTING NETS FOR YOUNGER PROS

It’s no secret the investment industry has a choppy record of attracting young financial talent. But with 100,000 brokers retiring in the next 10 years and half the industry talent age 55 or higher, some industry titans have had enough and are actively recruiting much younger advisors. Exhibit A is Merrill Lynch. Early this year, Merrill’s brokerage division launched a new initiative to land and train younger advisors – a move that’s been a long time coming for an industry showing signs of growing long in the tooth. While Merrill hires upwards of 3,500 new brokerage trainees annually, the company isn’t putting any hard numbers on its new “youth movement” recruiting process. But the fact that compan decisionDID YOU

KNOW

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makers are openly talking about the need to attract younger talent emphasizes Wall Street’s need for newer, fresher blood. RIA M&A rose 29% over Q1 2016

RIA M&A rose 22% over Q4 2016

RIA M&A SURGES 29% IN 1Q Advisors are facing “operational fatigue” in dealing with regulation, technology and noncore activities. That fatigue has led to a spike in sales of advisories with assets under management between $100 million and $250 million. The first quarter of 2017 was the most active one ever when it came to mergers and acquisitions among registered investment advisors (RIAs). That was the word from David DeVoe, managing director at industry tracker DeVoe & Co.

THE8AVERAGE RETURN ON AN INITIAL OFFERING was 20 percent in 10 of defined contribution planPUBLIC participants who roll their this assets year. The average increase in the first day (or “pop”) is 13 percent. into an individual retirement account speak to someone Source: Renaissance Capital

before performing the transaction.

InsuranceNewsNet Magazine » July 2017

Source: LIMRA

QUOTABLE

Our industry has become so over-regulated that it is just no fun anymore. You spend more time doing cover-your-(butt) stuff than you do actually helping people. — Phillip R. Reames, founder of Reames Financial in Kalamazoo, Mich.

Mergers and acquisitions among RIAs in the first quarter rose 29 percent, to a record 44 transactions over the year-ago period. RIA mergers increased 22 percent from the fourth quarter 2016. Advisors of all sizes are exploring sales and mergers in the first quarter, but sales of advisors with assets under management of between $100 million and $250 million spiked highest, DeVoe said. Sellers with assets of $100 million to $250 million comprised 50 percent of RIA sales, the research found.

FAKE NEWS COULD HURT FINANCIAL LITERACY “Fake news” is one of the buzz phrases of the year. But misleading and false news articles are hurting Americans’ ability to make good financial decisions, according to the American Institute of Certified Public Accountants. An institute survey found that 58 percent said fake news is a serious threat to their ability to make sound decisions. Top financial issues that people said they are wrestling with include those tied to health care (44 percent of respondents), stock market investing (40 percent), retirement (36 percent), and buying or selling homes (35 percent). “It can be difficult enough to understand the financial impact of proposed changes in laws and regulations without having to deal with a sea of disinformation,” said Greg Anton of the institute. “Social media can serve to amplify the impact of fake news, particularly when many people are sharing articles that come to the same conclusion.”


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July 2017 » InsuranceNewsNet Magazine

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Summer Reading On Retirement From helping them save enough money for retirement to getting their estate planning in order, here are 3 hot insights into guiding your clients toward their post-employment years. • by Brian O’Connell

Prepare Your Clients to Retire Early With This Checklist Many clients dream of an early retirement, but they may not have considered the harsh realities of leaving the workforce early. Here is how you can help them prepare.

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o millions of Americans, retiring early is the lifestyle Holy Grail. But many who attempt early retirement find the financial burden too tough, and by then it might be too late. Money managers like to think that’s where good planning — along with a good financial planner — enters the picture. And why not? A good financial advisor can assess a client’s key financial needs, identify income sources and lay out a road map (OK, Google Maps) for access to cash and investments, among other things. All that would help both the advisor and client understand the reality — and the realistic potential — of an early retirement. But there are some harsh realities linked to any talk of an early goodbye to a client’s working years — and savings are at the top of the list. “By and large, early retirement only makes sense for individuals who have enough saved to cover 70 to 80 percent of 58 58

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their preretirement income, as that’s usually the amount needed to maintain one’s standard of living in retirement,” said Karen Wimbish, senior vice president at U.S. Bank Wealth Management. In addition to typical retirement planning strategies, Wimbish said advisors also must consider immediate as well as long-term considerations. The shorter time frame constraints that go with early retirement planning demand it, she added.

Steps to Take

To cover those planning issues, advisors should take the following steps: Assess likely expenses: Expenses related to housing, taxes, health care and large onetime expenses all must be cataloged and considered. “It’s important to remember that lifestyle expenses such as entertainment, dining and gifting all are not likely to dimin-

ish, and may even increase, in retirement,” Wimbish noted. Understand income sources: On the opposite front, tally up all income from sources such as plans and pensions, Social Security, and savings. Then strategize on the order in which to withdraw from those sources to minimize the tax impact, Wimbish added. Understand the access to those sources of income: One of the challenges to overcome when working with early retirees is how to access retirement funds for income without being subject to the 10 percent early withdrawal penalty, said William Stack, founder of Stack Financial Services in Salem, Ore. “There is an exception to the penalty, called Rule 72t, which must be followed strictly and is effective for those retiring prior to turning age 59 1/2,” Stack said. “We have seen clients as young as 47 retire using this method.” The primary challenge for advisors is that withdrawal rates allowed by the IRS


RETIREMENT SUMMER SPECTACULAR

probably will not match the earnings rate of the account. “That has to be coordinated with the earnings rates of their other assets,” he added. Plan ahead — way, way ahead: This tip is really more applicable to younger retirement savers, but the fact is, the sooner a client starts planning for early retirement, the better their chances of achieving that early retirement. “I don’t know one person who decided late in their career they want to retire early and then actually did it. I think every person should decide to retire early on the day they begin their career,” said Terry Kennedy, president and CEO of Appreciation Financial, a retirement services com-

pany focused on public-sector employees. “(But) getting people in their 20s to think about what their 60-something-year-old self will want and need in retirement is the challenge.” Plan for unexpected purchases: Clients need to have a spending plan for retirement, but a big part of that is planning for big purchases that aren’t on clients’ spending radar right now. “For example, what many people don’t think about, particularly if their car is already paid for, is that they will likely need to replace their vehicles at least once or twice during retirement,” said Ilene Davis, a money manager with Financial Independence in Cocoa, Fla. “If they don’t allow

for the purchase price at the start, they may find their retirement planning undermined.” Davis advised those planning for early retirement to save for big purchases and emergencies separately from saving in investment funds “so when average investment return is calculated, those funds are not included in principal.” Nobody is saying that early retirement is too steep a hill for advisors and their clients. But reality dictates early preparation, a significant financial checklist that needs addressing, and some candid discussions between planner and client about when early retirement really makes sense. Cover that ground and it may not be too late to think about early retirement.

Four in 10 Say They Need $1 Million to Retire Happy Financial advisors are on the hot spot with many clients who don’t have near $1 million in their retirement savings.

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ere’s an “uphill climb” in the making for financial specialists. About 40 percent of U.S. career professionals estimate they’ll need $1 million to “retire comfortably,” according to a new Employee Benefits Research Institute study. Yet the average 401(k) balance at Fidelity-administered retirement plans is only $92,500 in 2017, according to the company. However, on the bright side, that figure

is up $4,300 from 2016. While incomes vary, and 401(k)s aren’t the only source of retirement income, financial advisors are on the hot spot with many clients who don’t have near $1 million in their retirement savings. That leaves money managers playing either the “blame game” or the “reduced expectations” game (or maybe both) with their clients who don’t yet see the handwriting on the wall. “Right now, 52 percent of American

households are at risk of not being able to maintain their standard of living in retirement, according to the Center for Retirement Research at Boston College,” said Pamela Yellen, financial expert and two-time New York Times best-selling author. That’s a big problem, as demographic and financial problems continue to mount for retirement-minded Americans, Yellen added. “First, people continue to live longer but aren’t working longer,” Yellen noted. “According to the Social Security Administration, 25 percent of people turning 65 today will live past 90, and one out of 10 will live past 95, yet most financial planners base their projections of how much money you’ll need on your living to age 85 or so.” “What if you’re one of the lucky ones who hangs on until 100 or longer? And just how lucky will you feel if you can’t provide for yourself during those final years?” Yellen said. “The only way out of that box is to assume you’ll live to age 100 and use that as a timeline in determining how long your money will need to last.”

No Surprise

A big part of the problem, and an issue that requires addressing by the money management sector, is that many otherwise-savvy career professionals aren’t focused on making up any retirement savings ground. “Having worked in the retirement field July 2017 2017 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine July

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RETIREMENT SUMMER SPECTACULAR

for more years than I care to remember now, the EBRI study does not surprise me at all,” said Collin Plume, president of Noble Gold Investments in Los Angeles. In Plume’s experience, very few people — including “highly intelligent” career professionals such as surgeons, lawyers, and even financial professionals like insurance brokers and traders — fully understand the way pensions and defined contribution plans really work. “These people think that it’s the job of the fund managers to aim their pension funds at the levels that are expected,” Plume said. “It always comes as a shock when people realize that it is ultimately their responsibility to make sure that their funding is sufficient for their needs.” The “retirement savings gap” problem is compounded by the inability of savers (especially younger ones) to leverage the asset growth benefits of compound interest. “Based on my experience as a college business professor, I’d say a great many investors don’t comprehend the earning power of compound interest,” said Timothy Wiedman, a finance professor at Doane College in Lincoln, Neb. Younger investors wouldn’t have major retirement savings problems in middle age if they realized that investing in relatively safe, low-cost stock index funds will allow compound interest to do most of the work.

“If younger workers just did that, most could sock away a million-dollar nest egg prior to retirement,” Wiedman pointed out. For example, if a 23-year-old fresh out of college puts $3,000 per year into a Roth Individual Retirement Account that earns a 7.8 percent average annual return, 44 years later at retirement that $132,000 of invested funds will have grown to $1,009,275,

saving is a lot more personal than that,” said Ryan Farnung, a retirement specialist with GPS Financial Advisors in Pittsford, N.Y. As retirement grows nearer, savers must look at making ends meet via a variety of strategies, Farnung added. Those strategies include personal savings, Social Security benefits, any pension income they may have, and expenses or loan payments

“It always comes as a shock when people realize that it is ultimately their responsibility to make sure that their funding is sufficient for their needs.” Wiedman calculated. “Plus, since those funds are in a Roth IRA, income taxes aren’t an issue,” he added.

‘The $1 Million Mantra’

For those tens of millions of working Americans who are well past the age of 23, making up ground on lax retirement savings — even with stellar financial advisory help — is tough sledding. “The $1 million mantra has certainly gained a lot of traction over the past decade, but the reality is that retirement

that they will no longer have to incur or service. “On the flip side, there are many future retirees who will need much more than $1 million in order to maintain their current lifestyle,” he said. The retirement problem isn’t going away; it’s looming even larger over the U.S. financial landscape. With so many workers unmindful, at the least, of the issue, it’s up to financial advisors to take the reins and steer workers back on track toward a stable retirement.

How Advisors Can Turn the Tide on Estate Planning Estate planning is more than just having a will. Here is how advisors can help address the roadblocks in the planning process.

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new study demonstrates the serious problems financial advisors face in getting clients to make estate planning a priority. The report, from BMO Wealth Management, finds that more than 55 percent of Canadian adults between the ages of 35 and 54 don’t have a will, and 40 percent of 60 60

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all adults “have never discussed their estate intentions with their children.” “Communication about your estate plan helps to reduce potential conflict among your heirs in the future and to ensure that your estate is distributed as you would like,” the report stated. By and large, financial advisors tell

InsuranceNewsNet that the estate planning communications process, along with the actual execution process, continues to be a nonstarter for too many clients — even affluent ones. “I sound like a broken record with my clients and continually bring the topic up at each meeting until they finally get tired hearing about it from me,” said Brett Anderson, president of St. Croix Advisors in Hudson, Wis. “Yes, it’s hard to come to terms with our own mortality, not to mention hugging the monster when it comes to facing the family issues that are involved with our estate planning.” But a good planner can help address the unknowns, fears and land mines that are hindering clients in the estate planning process, he added. Few money managers argue with that


RETIREMENT SUMMER SPECTACULAR

position, but as the old laboratory saying goes, “There’s theory, and then there’s actual execution.” “I’m not surprised about the BMO results,” said Karen Strauss, a Scottsdale, Ariz.-based financial planner and founder of the Sensible Money financial management blog. “Many people prefer to avoid dealing with the fact that they’re aging and the prospect of the end of life.”

‘Far From the Truth’

The most common error Strauss sees from clients is the belief that because they have a will and trust, everything is in order. “But this is far from the truth. In fact, for many, a will may be the least important part of their plan,” she said. Clients need to know that the primary purpose of estate planning is leaving assets according to their specific wishes, operating under a “family legacy” platform. “It’s not that complicated,” Strauss said. “Many estate planning goals can be accomplished by properly structuring account registrations, asset titles and beneficiary designations.” So what is the best path to good estate planning? Couple the communications process with that “creating a family legacy” marketing plan that gets clients moving on their family’s financial future, many say. To do that, financial advisors have to play a big role. “With estate planning, you’ve got to use your financial advisor, especially on the family communications front,” said Maggie Johndrow, a financial planner with Farmington River Financial Group in Farmington, Conn. “One of the reasons that I joined Farmington River as a younger advisor was to bridge the gap between existing clients and their children,” she said. “Often, when we have meetings with our existing clients,

we encourage them to bring their children into a meeting to make the conversation a family affair.” Clients may be reluctant to have that conversation, but they shouldn’t be, Johndrow said. “One certainly does not need to disclose everything to their children, but it helps to get the conversation started,” she explained. “Using a financial advisor as an educator and mediator in the conversation also alleviates a lot of tension.” Families should have the estate planning talk as early as possible, given family age realities, Johndrow added.

events for both ends of the spectrum: for newlyweds and expectant parents and for those already in retirement.” This format seems less daunting to many people because it’s getting general information versus speaking specifically about your situation, Johndrow added. “We’ve found that most people, after they attend a seminar and realize what estate planning entails, end up wanting to better prepare themselves,” she said. Perhaps the best strategy in the family legacy theme is to merge an emotional appeal with a structural one. “When doing financial planning, I dig deep, get to know my clients and their families,” said Breanna Reish, a certified financial planner at TriCord Advisors in Riverside, Calif. “We then have discussions about their passions and how they want to leave that legacy with the ones they love. Once we get through those exercises, I remind them that we cannot do that without the proper documents in place. “I have a very comfortable and candid relationship with some clients. With them, the conversation may become very blunt. With others, I kindly bug them enough

The estate planning communications process, along with the actual execution process, continues to be a nonstarter for too many clients — even affluent ones. “Have the conversation while everyone is healthy,” she said. “There are few things more disheartening than having the estate planning conversation when a family member is already sick. The entire family is stressed, and they feel they are pressured to make important decisions quickly.”

until they get it done, but they know I bug them because I truly care.” Truly getting clients on board with an estate plan is an uphill climb. But appealing to their family legacies, it appears, is a good way to get the ball rolling before it’s too late.

Get Families Together

Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books The 401(k) Millionaire and CNBC’s Guide to Creating Wealth. He’s a regular contributor to major media business platforms, including CBS News, The Street.com and Bloomberg. Brian may be contacted at brian.oconnell@ innfeedback.com.

One way for advisors to get families together on the estate planning page is to offer a free estate planning workshop – there’s a more substantial “comfort level” in a group setting, Johndrow said. “We often host free estate planning workshops for our clients and encourage them to bring their friends and family,” she said. “We’ve provided estate planning

July 2017 2017 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine July

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BUSINESS

“He needs a mother very, very badly.” Peter Pan’s daughter about Captain Hook in the movie “Hook”

How to Deal With This Guy Somehow, they never learned how to play well with others in the sandbox. By R. Morris Sims

H

ow do you deal with difficult people at work? You know the people I’m talking about, right? People who are arrogant, bullies, they know it all, they’re always right, they won’t collaborate or compromise, they’re passive-aggressive and myriad other characteristics. As salespeople, if we don’t like a person, we don’t have to engage them in the sales process. There are plenty of other people to sell to. However, we will inevitably encounter a person we must collaborate with regardless of personal feelings. I’m thinking about home office employees, underwriters, service providers, vendors, your own employees and other people you meet every day. They may be difficult, but we do have to deal with them. Now, many of these people are very helpful and it’s easy to collaborate with them. However, every group has its percentage of difficult people. In my 40 years of work experience, 62

InsuranceNewsNet Magazine » July 2017

I think I have seen all kinds of difficult people. On my very first job out of college, there was a bully who wouldn’t leave me alone. I dreaded going to work if I knew he was going to be there. Arrogant experts are probably the ones who cause my stomach to churn the most right now. They are always right, they know it all, and they talk down to others and generally show a total lack of respect for everyone around them. Difficult people come in all different shapes, sizes and temperaments, and it is absolutely no fun to work with any of them. Some can be passive-aggressive, and others explosive. But one thing difficult people do have in common is narcissism.

Why do people behave like this?

I’ve concluded that difficult people are just people who choose to deal with life in ways that cause the rest of us grief.

But why are they choosing to live life and interact in this difficult fashion? I believe it’s because they have found their own way to feel good about themselves. I’m not a psychologist, but my guess is that low self-esteem and a lack of self-confidence play out in their behavior. Difficult people want to be included in what is going on. They want to be in the “in crowd” and play with all the popular kids. They want to be respected for the value they bring to the table. They want others to trust them. They want to be promoted and move up in the organization. They want to be a positive part of the group they are in. Isn’t that true for most of us? But somewhere along the line, difficult people got the wrong idea of how to go about it. The chances are they were treated badly somewhere in their career and they are modeling that bad behavior now, whether they realize it or not.

Some can be passive-aggressive, and others explosive. But one thing difficult people do have in common is narcissism.


HOW TO DEAL WITH THIS GUY BUSINESS

What can we do?

The main question is this: What should we do differently? How do you and I work with difficult people in a positive manner without going stark raving mad? Keep in mind that you are not the one with the problem; the difficult person has the problem. You are not going to change their behavior. You can only change your behavior. If you change how you respond to a difficult person, you often will discover their behavior will improve. There is one caveat: You must truly be sincere and act with integrity. If you’re playing a game or trying to use “technique” you’ll come off worse than a bad salesperson on a bad day at a bad used car lot. Be honestly sincere about trying to find win-win situations. Here are some ideas you may want to consider when you find yourself working with someone exhibiting difficult behaviors. [1] Communication is the key to any relationship. If you’re not careful, the relationship can go very wrong. Overcommunicate with the difficult person. Include them in everything you think they should be included in, and include them in as much of everything else you possibly

can. Ask their opinion, a lot. Show them respect, especially in front of others. Listen to them, have a conversation, and listen some more. We all want to be heard. [2] Don’t wimp out and become wishy-washy. Stand your ground but do it calmly. You should never raise your voice or lose control. Ask a lot of questions. Help the other person see the reasons why you are moving in the direction you are moving. [3] Say please and thank you just like Mama taught you. Kindness will go a long way toward defusing difficult behavior. [4] Garner more influence. People allow us to have influence with them because of the way they perceive us. And you can improve someone’s perception of you. The most important way to begin that process is to show the other person professional respect. Be nice and treat them fairly. Reciprocity is a source of power and influence that works. You be good to me, and I will be good to you. [5] Get on the same side of the table as your difficult person. It’s called empathy, right? Put yourself in their position

and see the situation from their point of view. I know it’s not the easiest thing to do. I also know that if you can defuse the situation before the explosion, you all will be much better off. I remember calling an agent who was enraged with my department, and he had every right to be. He answered the phone and I said, “John, I understand that my department has cost you valuable time, they’ve been unhelpful, and if we don’t get this fixed it’s going to cost you big money. I’m just calling to apologize and tell you I will find a real solution to the problem today.” He was the nicest guy I spoke to that week. I have one question for you now. Do you see yourself in the description of any of these difficult people? How are you treating the people around you, and is there an area where you can improve? R. Morris Sims, MSM, CLU, ChFC, is the CEO of Sims Training and Consulting. He is the author of Practical Influence. He began his career as an agent with New York Life and, after 32 years, retired as the vice president and chief learning officer of the agency. Morris can be contacted at morris.sims@innfeedback.com.

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THE AMERICAN COLLEGE INSIGHTS

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

Unconscious Bias Hinders Efforts To Diversify the Advisor Force How many potential advisors or corporate leaders have not been given an opportunity or promotion because of their age, name or appearance? By Jocelyn Wright

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everal weeks ago, I was talking with a friend and catching up on what was going on in her life. She shared with me some of the challenges she was having in finding full-time employment. It had been more than three years since she was laid off, and she now found herself in the category of the underemployed. This meant that she was working in a position where she was not only overqualified, but underpaid. Over the course of these three years, she has had numerous interviews. She frequently received positive feedback after interviews and had been told that she was among the top candidates, only to find out that she did not get the position. This was beginning to take a financial and emotional toll. We discussed everything from her qualifications to her appearance. And it occurred to us that perhaps the reason she had been unable to secure a comparable position was that she did not fit “the part” — she was nearly 50 years old and overweight. I know this sounds shallow and may seem hard to believe. However, it was the proverbial elephant in the room that needed to be discussed. After our conversation, I began thinking about how biases impact our profession and what we can do about it. First, let’s define bias. There are two basic types of biases — explicit or conscious, and implicit or unconscious. These types of biases exist beyond the obvious forms of race and gender. Bias can extend to age, religion, sexual orientation or weight, to name a few. Unconscious bias as described by the University of California, San Francisco, Office of Diversity and Outreach is “prejudice in favor of or against one thing, person or group compared with another, usually in a 64

InsuranceNewsNet Magazine » July 2017

way that’s considered to be unfair. Biases may be held by an individual, group or institution and can have negative or positive consequences.” Additionally, unconscious prejudice occurs more often than conscious bias. And although some are reluctant to admit it, we all hold certain unconscious beliefs about certain individuals and groups. The good thing is that, although it is difficult, unconscious bias is not fixed and can be reshaped. For example, Marianne Bertrand and Sendhil Mullainathan studied unconscious bias in hiring practices in their report, “Are Emily and Greg More Employable Than Lakisha and Jamal?” The researchers selected help-wanted ads in Boston and Chicago and randomly assigned white-sounding or black-sounding names to resumes. The outcome: Resumes with white-sounding names received 50 percent more callbacks for interviews than those with black-sounding names. So much for getting your foot in the door. Although this is only one example of unconscious bias, there are plenty of others. How many potential advisors or corporate leaders have not been given an opportunity or promotion because of their age, name or appearance? According to the report “The Real Effects of Unconscious Bias in the Workplace,” several unconscious biases present in the workplace are: 1. Affinity bias — the propensity to favor individuals like oneself.

2. Halo effect — the tendency to give a person the benefit of the doubt because you like them. 3. Perception bias — the predisposition to form stereotypes and presumptions about groups that prevents you from coming to an unbiased conclusion about members of those groups. 4. Confirmation bias — the propensity of individuals to look for information that affirms pre-existing assumptions or beliefs. 5. Group think — occurs when individuals go above and beyond to assimilate into a particular group, and do not fully express themselves. This is particularly detrimental to the workplace in that it impedes innovation and creativity of the overall organization. The University of California, San Francisco, Office of Diversity and Outreach provides strategies for addressing unconscious bias. They encourage using both individual and institutional strategies that include 1) self-awareness, 2) recognizing the nature of bias, 3) open dialogue with others (especially people from different groups), and 4) facilitated discussions and sessions supporting bias training. If we are going to create a more diverse profession that is committed to recruiting and developing talent, we must address the issue of unconscious bias and how to deal with it effectively. Gerard J. Holder, author of Hidden Bias: How Unconscious Attitudes on Diversity Undermine Organizations and What to Do About It, emphasizes that our prejudices are learned behaviors and added, “It’s a learning process that has to be done over a period of time, not a training that can be done in three hours.” 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.wright@ innfeedback.com.


NAIFA INSIGHTS

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.

States Should Not Be Competing With Retirement-Plan Advisors Advisors already offer a wide range of products to help Americans prepare for a financially secure retirement. By Mark Briscoe

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f you are an advisor working in the retirement-planning space, you need to let your lawmakers and clients know this important fact: Going into the retirement plan business to compete with financial advisors is not a proper role for governments. Americans need to save more for retirement. Consider these statistics: Four out of 10 workers have saved less than $50,000, according to a survey by PwC, and only 15 percent have put aside more than $300,000. Some 25 percent have not saved a dime. Even among baby boomers, 30 percent have less than $50,000 in retirement savings. To address these shortfalls, a number of states have decided to establish government-run retirement programs. Unfortunately, they are looking at the problem from the wrong end. Creating new products to compete with existing private-market options will not avert a retirement savings crisis. In fact, it could make matters worse. As a professional advisor, you know that you and your colleagues already help millions of Americans prepare for financially secure retirements. Rather than forcing workers to make minimal contributions to generic plans and accumulate small balances unlikely to make discernible dents in real-world retirement costs, you work with your clients to meet specific goals and address their real retirement needs. You work with businesses to set up affordable plans tailored to their specific employees. The market already offers a robust slate of products, including employer-provided plans, individual retirement accounts, annuities and various insurance products. This range of products meets the needs of

every imaginable situation and is affordable and readily available in every state. The U.S. Treasury Department’s MyRA addresses the needs of investors with very small balances. In short, the problem is not a lack of options for workers. Instead of going into the retirementplanning business, state governments should encourage workers and employers to take advantage of existing private-market options and increase plan contributions. The states of New Jersey and Washington have done this by investing in education and working with firms to set up marketplaces where workers can shop for private-market plans. Although several states have passed legislation that would create state-run plans, none has put such a plan into operation yet. A major stumbling block has been consumer-protection rules for retirement plans established under the Employee Retirement Income Security Act (ERISA). The states complain that they cannot create viable plans if they or employers must comply with ERISA regulations. Late in the Obama administration, the Department of Labor (DOL) removed this obstacle by exempting state- and municipal-run plans from protections that apply to all other plans available on the private market. This not only would put investors at risk, but would create an uneven playing field and limit choices available to employers and workers.

Preserving the Private Market

Earlier this year, however, new federal legislation removed the DOL’s ERISA exemption for state- and municipal-run plans. These new laws failed to produce big headlines, but they are crucial to preserving the private market for retirement plans and preserving consumer protections for people saving for retirement. That’s why NAIFA joined other groups and fully activated its grass-roots and political advocacy efforts to support the bills. “I don’t know why state and city

governments would want to spend scarce resources to compete with firms and advisors who are successfully helping clients in the retirement planning and products business,” said NAIFA president Paul Dougherty. “It doesn’t seem like something they would be particularly good at. But if they are going to get into that business, they should not have a competitive advantage over established plans, especially when that advantage would come at the expense of safeguarding workers saving for retirement. They should have to follow the same rules.”

Why Private Markets Are Better

Private-market plans have many advantages over state-run plans above and beyond the ERISA protection for consumers. Workers who participate in employer-sponsored plans often benefit from employer-matching contributions, auto-enrollment policies and auto-escalation provisions. State-run plans also would require employers to abide by burdensome and perhaps even contradictory rules. If municipalities also established similar retirement plans, employers could find themselves contending with different rules established by more than 100 government departments. Everyone knows that Americans should better prepare themselves for retirement. Fortunately, plans are available, along with advisors who can help. There are roles for government to play in providing education, incentives and encouragement. And it should ensure that consumer-protection regulations appropriately apply to all retirement plans. But when it comes to offering plans to consumers, advisors have it covered. Mark Briscoe is senior director of strategic communications at NAIFA. Mark may be contacted at mark.briscoe@ innfeedback.com.

July 2017 » InsuranceNewsNet Magazine

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MDRT INSIGHTS

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

A Delicate Balance: Technology and Interpersonal Communications It is possible to maintain a vigorous social media presence and keep on the right side of compliance. By Marcus T. Henderson Sr.

S

ocial media and technology constantly advance to provide advisors new opportunities to connect and engage with customers. These opportunities streamline communications like never before. However, regulations and compliance structures haven’t adapted at the same pace, resulting in less agile marketing plans. These structures are necessary for practice and client protections, but they create a minefield of obstacles for promotional strategies. Compliance departments are not in a position to approve advisor content in real time. Instead, advisors create promotional calendars months in advance to receive approvals. This means information we are able to share may be retrofitted, outdated, reserved and slowed down. Many firms have a group of advisors who run the gamut in age and experience levels, and each group has unique challenges to adapt to these restrictions. While senior-level associates work toward fluency in a new medium’s technology, the junior staff learns to restrict the frequency of posting in order to remain compliant. In this challenging environment, it is possible to develop a curated, targeted and engaged strategy for your practice. At my firm, we’ve taken steps to safeguard our communications strategies to engage with clients and bridge the gap.

Create a Personal Social Media Brand

The first rule of a compliance-friendly social media strategy is to completely avoid promotion of products or services. Instead, showcase your personality. Your clients want to do business with people they like and feel they know; social lifestyle marketing is a digital extension of the relationship building you do in 66

InsuranceNewsNet Magazine » July 2017

face-to-face meetings and telephone calls. This keeps social media purely social and helps elevate your brand. Engagement helps put your business in front of your prospects and clients. When your social connections see a post or photo from you in their feed, they’re reminded of who you are and what you do. This frequently prompts a next step. My client relationships continue to be impacted positively by this strategy. I’m able to interact instantly with prospects and clients in a way that was not possible when I first started in this business. It has helped me to market myself but also allows me maintain and develop meaningful relationships.

Keep It Professional

As you are a trusted partner in your client’s money management, it’s critical that your posts show you in the best possible light and portray a professional persona. With this in mind, I recommend sharing the elements of your life that make you relatable — a healthy mix of personal and professional moments — without oversharing or bragging. To add a personalized human touch to your online presence, share meaningful milestones such as becoming a grandparent, getting married, graduations and all the things that people appreciate in life’s journey. While

professionally focused posts won’t overtly promote your services, you can highlight your visibility in the industry with photos from events, travel, company culture, etc. Include your position and workplace in your profile description to remind your followers what services you provide and how they can reach you. From there, they will be able to click through to your site and take the next step.

Find a Balance

Although social media is a great tool, it is not a replacement for traditional relationship building. No matter how far technology takes us, it never will overcome the importance of human interaction. The more we rely on social media and technology to do the heavy lifting, the less focused we become on face-to-face interaction with clients. Automation and technology-based operations systems, particularly roboadvisors, have had a major impact on our industry in this way as well. As a result, many advisors spend less time developing their professional personas, to the detriment of their client relationships. There’s a direct relationship between which communication medium each generation of advisors uses and that generation’s technology fluency. Older advisors who entered the professional world before


MDRT INSIGHTS the days of advanced technology have a lifetime of perfecting interpersonal, face-to-face communication skills. On the other hand, younger professionals who have gone their entire lives with access to technology often rely too heavily on email and social media, and may lack in-person communication skills. Personality is the single most vital asset in relationship-driven businesses. Despite new technologies, people want to do business with advisors they like and trust. To streamline and improve client relations, find a balance be-

Your clients appreciate when you engage with them and provide value to their lives. That’s one thing your computer cannot do. tween in-person and technological communication tools. For example, use technology with the goal of scheduling phone or in-person meetings for more meaningful points of contact. Companies should work with advisors at every level to strengthen their individual communication weaknesses.

A Proactive Solution

It’s more important than ever before to develop creative ways to bring client relationships to the next level while also meeting regulation restrictions. For most advisors, that begins and ends with the advancement of their professional persona. Your clients appreciate when you engage with them and provide value to their lives. That’s one thing your computer cannot do. My mantra to help staff members develop this side of their professional persona is “Work harder on yourself than you do on your job.” Internal processes and standards help firms cope with the industry’s regulations. It’s unlikely that regulations and compliance processes will become any less stringent over time. In fact, as new communication tools and social platforms become available, new regulations and guidelines probably will be enacted. In addition to influencing regulations, technology threatens to change the industry itself. Adaptable guidelines take the guesswork out of communication and can lessen the burden on your compliance department. Marcus T. Henderson Sr., LUTCF, president and CEO of Henderson Financial Group Inc., is a 25-year MDRT member with nine Court of the Table and six Top of the Table honors. He serves as lead financial advisor for his wealth management firm in Brentwood, Tenn. He may be contacted at marcus.henderson@ innfeedback.com.

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LIMRA INSIGHTS

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.

A Formal Plan: Advisor Priority and Client Confidence Booster Having a formal, written retirement income plan can be a game-changer in client retirement readiness, and should be a priority of every advisor working with pre-retirees. By Jafor Iqbal

Percentage of Pre-retirees Who Feel Well Prepared for Retirement (score 8-10)

R

etirement may be near for many pre-retirees, but a majority of them do not feel very confident about what comes next. A recent LIMRA Secure Retirement Institute study, “Dear Advisor…,” shows half of pre-retiree households feel only somewhat prepared for retirement. This feeling also is pronounced among a large portion of households with moderate income ($50,000 to $75,000) or moderate assets ($500,000 to $999,999). Only three in 10 pre-retirees say they are well-prepared for retirement.

A Real Confidence Booster

One factor emerges as a real confidence booster: It’s not income or assets, or whether a pre-retiree works with an advisor, but rather having a formal, written retirement income plan. Nearly seven in 10 pre-retirees (67 percent) who have a formal plan said they felt well prepared, compared with just a third (34 percent) of those people who did not have one (see chart). Even among affluent households with financial assets of $500,000 or more — who tend to have greater investment knowledge — eight in 10 with a formal plan felt well prepared, versus five in 10 without a plan.

A Formal Plan Matches Reality With Expectations

A formal, written retirement income plan allows pre-retirees to put on record their retirement goals, match their expectations with reality, and trade off choices and needs. The plan explains, among other things, the best age to claim Social Security benefits; how much of expenses, 68

InsuranceNewsNet Magazine » July 2017

Source: “Dear Advisor…”, LIMRA Secure Retirement Institute, 2017; the findings are based on a survey of 1,050 U.S. working adults aged 50-75.

including health and long-term care costs, to cover with guaranteed or predictable income; and how to take withdrawals from different accounts to save on taxes. Having a realistic picture supported by tangible numbers — on what they can afford and how to generate enough income in retirement to maintain their lifestyle — gives pre-retirees an important boost in confidence. However, these formal, written plans are not as prevalent as they should be. LIMRA SRI research finds: » Only 10 percent of all pre-retirees have completed a formal plan. » Less than 40 percent of pre-retiree households working with an advisor have completed a formal plan. The others have either no plan or rely on an informal one.

A Formal Plan Should Be the Advisor’s Priority

Formal retirement income planning provides a real opportunity for advisors. Seven

in 10 clients buy additional insurance, annuity and investment products recommended in a plan. Prior LIMRA research also shows a distinct connection between advisors’ engagement with clients’ retirement income planning and high client satisfaction, loyalty and degree of asset consolidation with the advisor. Nearly a quarter of high-net-worth clients with a plan have consolidated more than 90 percent of their portfolio with their advisor. That percentage is three times higher than for those who do not have a plan. Moreover, once settled with an advisor or an institution, retirees tend not to move assets, and as a result their assets become sticky. This is a win-win proposition. Jafor Iqbal is assistant vice president, LIMRA Secure Retirement Institute. Jafor may be contacted at jafor.iqbal@ innfeedback.com.


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InsuranceNewsNet Magazine - July 2017  

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