Page 1

ALSO INSIDE How to Read People Like a Book PAGE 16

Fight the ‘Alternative Truth’ About Life Insurance PAGE 42

Selling Annuities in a Post-DOL World PAGE 48

Emerging Markets: Advisors Take Heed PAGE 58


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How One Retired Army Colonel Changed the Life Insurance Industry Forever

IN

the 1930s, America was between two major wars. World War I left many families devastated. At the time, life insurance policies excluded paying benefits if the insured was killed in an act of war. The families of men who had the foresight to purchase life insurance nevertheless found themselves without benefits when their loved one was killed in World War I. This sparked retired Army Colonel Peter J. Hennessey to establish a unique life insurance company that would change the industry forever. In this Q&A, Peter Hennessey IV, Senior Vice President at Government Personnel Mutual Life Insurance Company (GPM Life), reflects on the impact his great-grandfather had on the industry, how the company has evolved and niche markets they serve. Q: How long have you been in the industry, and what made you decide to get started in the business? I’ve been working in the insurance industry for 17 years. I got into the business because I knew how important life insurance was and I had an opportunity in front of me at GPM.

Growing up, I didn’t know much about life insurance, but I knew that if something happened to one or both of my parents, my siblings and I would still have a home to live in and the opportunity to go to college. When my father was diagnosed with cancer while three of us were in college, I realized more

great-grandfather chose a mutual company organization, since it was more difficult to accomplish in Texas, but we assume it was because he felt it was best for the policyholders. Also, it’s important to remember that the country was in the midst of the Great Depression. I’m not sure many people

If you’re focused on the needs of your customer, solutions come to light. than ever how important it might become. But luckily for him and all of us, his policies are still in force. Q: Can you give us a brief overview of the history of GPM and how it came to be? My great-grandfather, Colonel P.J. Hennessey, was distressed that life insurance companies in the U.S. had war exclusions in their policies. He had approached several companies with a proposal to develop products without the exclusion, but none wanted to do this. In 1934, Government Personnel Mutual Life Insurance Company, GPM Life, was established as the first company in the U.S. to offer life insurance policies without a war exclusion clause. We really don’t know for certain why my

1934: Government Personnel Mutual Life Insurance (GPM Life) is the first life insurance company organized as a mutual company in the state of Texas. 1934: GPM Life is the first U.S. insurer to offer life insurance products without a war exclusion. 1939: Blanche “B.T.” Hennessey is named President of GPM Life. She is the first female President of a commercial life insurance company in the United States.

were in a financial position to invest in a new and unproven life insurance company. But he was successful in launching the new company and offering the unique life insurance product. However, four years later, he died unexpectedly and my great-grandmother took the reins. She was the first female President of a commercial life insurance company in the United States. It’s a great beginning to our story, and I think it clearly demonstrates the determination that still drives the company. Q: What about GPM’s history has made you excited to be part of the company? What excited me the most was to have the opportunity to continue the family tradition

1970: GPM Life actively enters the federal employee market. 1981: Peter J. Hennessey III is named President. 1998: GPM Life enters the senior market with its first final expense product.


sales, and federal employee benefit software recognized as preeminent in the industry, and we are recognized leaders in the processing of government allotments. • Senior Market — We offer a final expense product that is among the best-priced in the industry and fast turnaround, with 90 percent of all issued business out the door within 48 hours.

and legacy of working in an industry that helps the men and women who serve our country. Additionally, working for a mutual company that puts the policyholders at the forefront of decisions, having an opportunity to live in San Antonio and getting the opportunity to work with people that I got to know well before I started to work in the office and with our field agents. These are also great benefits.

these customers, we found ourselves developing products for their families, friends and even government employees as they aged out of government service.

Q: How has GPM expanded since it first started serving military personnel in the 1930s? The military market and military personnel will always be core to our identity. Many of our policyholders are retired or active duty service members. Several GPM Life Directors are retired officers of different branches of the military. However, as the U.S. government increased the life insurance benefits paid to its service personnel, commercial carriers moved into other products or markets. As the active duty military benefits increased and access to military personnel decreased, GPM Life focused on developing more service opportunities for government employees. We actively entered the federal employee market and later, through service to

Q: What does GPM offer advisors that no one else can compete with? Broadly, we offer the sensibility of a mutual company, a focus on service to the policyholder and our agents, and financial strength. In layman’s terms, we have $1.17 for every $1.00 of liabilities. Specific to our markets:

Q: What niche markets does GPM specialize in? Today we primarily focus on three consumer markets: federal employees, seniors and individuals/families.

• Federal Employee Market — We have a unique product, unmatched in pension max

• Individual and Family Markets — The decreasing mortgage rider added to our flexible universal life (UL) policy is quite unique. The rider provides the ability to match the death benefit to the decreasing schedule of a loan, while the UL offers flexibility and a permanent insurance base if desired. Together they are an unmatched product in the industry. Q: As far as new product development goes, what is GPM’s focus for the future? We want to continue to deepen our presence in our markets. We’ll continue to focus primarily on life insurance but ensure that the products we deliver meet the needs and desires of the consumers in our target markets. Our decreasing mortgage rider is a perfect example, demonstrating that innovative and relevant solutions don’t come from just the industry giants. If you’re focused on the needs of your customer, solutions come to light. Some are legacy, some are innovative. •

Are you looking to specialize in niche markets with a rich history of service? Download the GPM Agent Niche Marketing Guide at www.GPMNicheMarkets.com.

North Coast Life 2012: GPM Life purchases North Coast Life (renamed GPM Health & Life in 2015).

2010: GPM Life enters the Medicare Supplement market. Sponsored

2016: GPM Life actively enters the mortgage protection market with the introduction of its decreasing mortgage rider. 2017: GPM Health & Life enters the Medicare Supplement market.


IN THIS ISSUE

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online

www.insurancenewsnetmagazine.com

AUGUST 2017 » VOLUME 10, NUMBER 8

FEATURE

28 How Storytelling Inspires Sales By Susan Rupe

The ability to tell a good tale can inspire your prospects to take action and can help you build relationships to last a lifetime.

INFRONT

12 F riend or Foe? Dissecting DOL Fiduciary Moves By John Hilton and Cyril Tuohy During a frenetic week in July, the Department of Labor filed a brief defending its fiduciary rule, as well as a Request For Information signaling its willingness to amend the rule. We explain how the DOL came to seemingly opposite conclusions.

LIFE

38 How to Save Your Client’s 401(k) Without Violating the DOL Rule By Ric Lager Start providing investment advice now on clients’ existing company 401(k) retirement plan accounts, before they hit retirement.

42 Fighting the ‘Alternative Truth’ About Life Insurance

HEALTH/BENEFITS

54 B  rokers Are Key to Reimagining Employee Benefits Enrollment By Meredith Ryan-Reid Employers need more help from benefits brokers. This opens an opportunity for brokers to serve employer clients in new ways, especially when it comes to benefits communication and enrollment.

By Michael Jay Markey Jr. Using mathematical facts to counter the views on life insurance expressed by a well-known “financial expert.”

58 Advisory Fees Resist Downward Pressure in 2017

INTERVIEW

16 Read People Like a Book

An interview with Dan Seidman It can take only a split second to discover whether someone is interested in what you have to say. Dan Seidman explains to InsuranceNewsNet Publisher Paul Feldman how microexpressions can serve as a road map through the sales process.

4

ANNUITY

48 S elling Annuities in a Post-DOL World — What You Need to Know

InsuranceNewsNet Magazine » August 2017

By Cyril Tuohy and John Hilton How the fiduciary rule is affecting product sales as it enters its opening months.

By Brian O’Connell Advisors fear fee erosion due mainly to increased competition from digitalbased advisory services, increased practice efficiencies, and low-cost index funds and exchange-traded funds.

58 Emerging Markets: Advisors, Pay Heed Before Setting Sail By Brian O’Connell This category of exchange-traded funds carries a fair share of risk — maybe too much, especially in single-country ETFs.


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IN THIS ISSUE

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AUGUST 2017 » VOLUME 10, NUMBER 8

Millennials, m ille nnials, millennials!

INSIGHTS

64 THE AMERICAN COLLEGE: The Forgotten Generation X

BUSINESS

62 It’s Easy Being Green: Creating an Environmentally Friendly Agency By Scott W. Johnson Simple steps you can take now will benefit not only you and the environment but also may help grow your marketing.

EVERY ISSUE 8 Editor’s Letter 26 NewsWires

By Jocelyn Wright This age group is sometimes treated like the “middle child” by advisors. But Generation X has money and power, making it a target market worth pursuing.

online

www.insurancenewsnetmagazine.com

66 MDRT: Supplementing Retirement Plans With Life Insurance By Mark Dorfman Using whole life insurance to boost retirement savings is a great option for clients who do not want to be exposed to market volatility or losses that can occur during a down year.

68 LIMRA: Millennials Seek Simplicity as They Consider Life Insurance By Lauren Finnie Millennials are attracted to simple and clean applications, and they want to be guided seamlessly toward their purchase decisions.

65 NAIFA: All Good Prospects Have These Nine Things in Common By Ayo Mseka Having a steady stream of qualified prospects is the key to success. But how do you recognize a good prospect?

36 LifeWires 44 AnnuityWires

52 Health/Benefits Wires 56 AdvisorNews Wires

67 Advertiser Index 67 Marketplace

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WELCOME LETTER FROM THE EDITOR

When Storytelling Saves the Day

I

was standing in the corner at the rear of a country club ballroom as an event planner’s nightmare was about to unfold. I was in charge of a regional sales congress conducted by the agents association where I worked before coming to InsuranceNewsNet. And so far, the day had gone well. The continental breakfast and the soup-and-salad lunch were served on time, the morning’s speakers had been entertaining, the attendees had been attentive and the exhibitors seemed happy with the turnout. So far, so good. Until 3 p.m. My cellphone buzzed. It was the last speaker for the day — the one who was the big draw for the event. She was driving from the Washington, D.C., area to Macungie, Pa., for the meeting, and she became lost. She figured she would be at least an hour late in arriving for her scheduled talk. So now what do we do, I asked myself. How will we keep our attendees from walking out? One of our association’s board members had an idea. He went to the microphone in front of the room and made a request of the group. “OK, everyone,” he said. “I want to know — who can tell us the most unusual thing that ever happened to you when you were out making a sales call? Come on up here and tell us your story.” One by one, people came up to the mic. And the stories began to flow. Someone told a tale about trying not to freak out when a kid’s pet snake escaped from its cage while the advisor was in the middle of making a presentation to the parents. A woman related how she met with a family after dark one evening and somehow lost both of her shoes in the front yard as she was walking to the front door. (She made a sale that night.) Someone else described how he met with a family who was gutting and renovating their old house. After the sales call 8

was over, he asked for a tour of the house and ended up putting his foot through the floorboards. Everyone was so caught up in the stories that they forgot about our lost speaker. Eventually, she turned up and I was relieved that we still had a full house ready to hear her speak. Storytelling saved the day for that event. There is something primal about the power of stories. I can imagine the cave-

men sitting by their fire at night, telling tales about the day’s hunting adventures. Or the ancient Greeks, sitting beneath the starry skies and spinning tales about the constellations they observed. As little children, we plead with our caregivers to tell us a story. Then we get a little older and go to summer camp where we entertain each other by telling ghost stories. This summer, as people gather for class reunions and family reunions, they will spend most of their time recounting stories of past escapades with friends or tales of long-forgotten relatives. Storytelling — it’s what we do. Advisors seem to be especially good at this. At least, that’s what I’ve observed during my years of working with them. Some of my best memories of working at the association involve times when I would sit around the table at a post-meeting dinner and listen to some of our members tell their war stories. That’s really where I learned about this business.

InsuranceNewsNet Magazine » August 2017

The financial services business is all about relationships. And one of the best ways to establish and cement a relationship is through sharing stories. That’s the theme of our Inspiration feature this month. Not only did we hear some inspiring stories from advisors who are using those stories to inspire their clients, but we also received some advice from two of the masters of storytelling, Nick Nanton and Joe Jordan. InsuranceNewsNet Publisher Paul Feldman interviewed Nick for a feature on what Nick calls “story-selling” in July 2015. As for Joe Jordan — is there anyone in the industry who hasn’t heard him speak? He has presented his message to advisors around the globe, and it’s one we should never tire of hearing: the idea that we should focus on the impact we make on others versus how much money we make. Speaking of stories, I have my own story to tell about Joe Jordan, and it goes back to my days of working for the association. We had booked him to speak at one of our regional sales meetings. Our attendees had been cooped up in a hotel ballroom most of the day, listening to speakers. Joe was scheduled last on our line up, and he took the stage promptly at 4 p.m. As usual, I was standing in the corner at the back of the room. As Joe’s presentation continued for more than an hour, I looked around the room at our attendees. No one was looking at their phone. No one was checking their watch. No one was fidgeting in their seat. Joe had the entire room mesmerized. At 5 in the afternoon. After a long day of meetings. That’s the power of storytelling.

Susan Rupe Managing Editor


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CEO

SPOTLIGHT

No. 1 Funeral Trust Marketer Reveals Secret to Success

W

HEN MIKE O’DELL, president and CEO of DelcoUSA, a division of Delco Estate Planning Services LLC, started his career in financial services in 1983, his business focused on estate and financial planning for seniors. While it was a success with over 2,000 clients, he never dreamed he would move on to pioneer a new way to help seniors plan for the future and funeral costs. The inspiration for the funeral trust began when O’Dell and Karl Dovnik Jr., an elder law attorney, conducted senior estate planning courses at local community colleges with many senior attendees asking, “OK, what happens if we go into the nursing home? Then what happens?” O’Dell and Dovnik realized there was an unmet need facing most seniors: not knowing how to protect their assets if they entered a nursing home. More than 93 percent of seniors O’Dell met didn’t have long-term care insurance — which meant relying on Medicaid in the future was a real possibility. “So we started addressing the issues,” says O’Dell. “What can you do by planning ahead of time? What could you do even if you don’t have

O’Dell knew that Medicaid was a big factor in seniors’ lives. According to the AARP Public Policy Institute, about 65 percent of nursing home residents are supported primarily by Medicaid, and Medicaid pays for 45 percent of the total nursing home bill. O’Dell wanted to share his expertise with other financial planners and agents, and he began discussions about product development with an insurer. He had specific ideas for product features that would aid clients and agents. “We weren’t looking at things from a funeral home point of view; we were working from an estate planning point of view that everybody needs a funeral trust sooner or later,” he says. “Why not let the financial planner write the funeral trust? We’re much better at working with insurance and finances than a funeral home is. Let the funeral homes do the funerals, on which they do a wonderful job, and we’ll do the financial work.”

Several years ago, Michael O’Dell literally wrote the book on funeral trust planning, changing the financial planning industry forever. long-term care insurance? How can you protect your house? How can you do some preplanning and give assets away before the Medicaid time limit?” He began reaching out to financial planners to see if they were getting similar questions. They were, and O’Dell and Dovnik got to work. Filling a Need for Seniors and Agents “In the mid-nineties, we began researching life policies that were available with a funeral trust. We investigated and realized the idea fit right into our planning. If clients would end up in a nursing home, a prefunded funeral trust did not need to be spent down for Medicaid qualification.”

“So I offered my ideas, which included a product that was truly a guaranteed issue policy, no health questions. Something easy, a one-page application that an insurance agent can easily manage. The life insurance would be assigned to the funeral trust irrevocably, which makes it Medicaid exempt. And I wanted a product that would offer competitive compensation,” says O’Dell. In 2007, O’Dell sold his financial planning practice and DelcoUSA became a division of Delco Estate Planning Service LLC. “We’re marketing more funeral trust business than anyone in the country,” says O’Dell. “I’d say we’re the only marketing company in the USA at which all we do is funeral trusts. Sponsored

Some others might offer it as a sideline, but it’s our specialty.” Helping Clients Preplan for Medicaid According to O’Dell, clients who go into a nursing home without a plan face significant financial repercussions: To qualify for Medicaid in most states, individuals have to spend assets down to $2,000 (some states may vary). O’Dell notes that funerals are expensive, even without a burial. He cites filing notices, death certificates, clergy, music, and more as some of the costs. “Even if you want cremation, many times you rent a casket so people can still have closure before they do the cremation. But that cost can average between $6,000 and $8,000.” “If you’re doing a traditional route, which includes the casket and the vault, the average cost today is somewhere in the $12,000 to $13,000 range by the time you’re finished,” says O’Dell. “So we feel that putting $15,000 in a funeral trust for most of our clients is going to be sufficient.” With funds in the funeral trust exempt from Medicaid spend-down rules, clients can have some comfort in knowing their funeral is taken care of and they can still get the nursing care they need. “We always say the best time to plan is not in a crisis situation — when you’re going to the nursing home and you’ve got so many things to do. The best time to do the planning is when you’re healthy, when you’re doing your estate and financial planning. Take care of the funeral trust ahead


Thought Leadership Interview Series

of time. That way it’s fully funded, the money’s there and it’s Medicaid exempt,” says O’Dell. Portability Adds Value The average person and agent have heard more about prepaying a funeral home for a funeral than they have about funeral trusts, but O’Dell wants to change that. “The nice thing about the funeral trust, which most people don’t realize, is that it’s payable to any funeral home in the country that provides your funeral services. If a client sets up the funeral trust in Wisconsin and later moves to another state, they have flexibility on where their funeral will be held.” He notes that portability gives the client and the family options — a real benefit for a mobile society. Prepaying at a specific funeral home generally involves the choice of specific goods and services and an irrevocable assignment to the funeral home. If a client later changes their mind, it will take additional paperwork and potentially uncomfortable conversations with the funeral home. In O’Dell’s experience, discussing the funeral trust is more appealing to clients and prospects because they are only planning to set aside funds — not picking out burial plots. Prepaying a funeral home and meeting in that environment can be upsetting, he says. “People would much rather think about these things in the comfort of their own home with an agent or in the agent’s office, not at the funeral home while looking at urns and caskets.” Filling a Niche With the Middle Class O’Dell says that about 80 percent of the funeral trust sales he does are for average seniors who are preplanning because they want peace of mind. “The funeral trust is really marketed toward the average American. It’s a nice, simple addon sale,” says O’Dell. “I always tell agents who are new to the funeral trust that they don’t need any leads if they’ve been in the business for years and have a solid book of business.” O’Dell recommends an annual review letter and working with their existing clients to ensure all their bases are covered, because they

Simple Funeral Trust With Competitive Commissions DelcoUSA offers a funeral trust product from Unity Financial Life Insurance Company. O’Dell says that it’s the product he envisioned almost 10 years ago. “We have a wonderful working relationship with Unity Financial Life Insurance Company, which is based in Cincinnati, Ohio. We are excited about being the marketing arm for Unity Financial Life’s funeral trusts.” And, he says, for older clients with old life policies that may lose cash value to Medicaid, a 1035 exchange into a funeral trust can be a viable option. He notes that in many cases, the cash value of old, paid-up policies is about the same as the death benefit. “As soon as that gets transferred to a funeral trust, immediately the money you would have lost to the nursing home spend down is now 100 percent protected under the trust.”

Trust Product — Unity Financial Life Insurance Company Single-Premium Life Product With Funeral Trust The fastest-growing privately held life insurance company in America according to Inc. Magazine, 2008, 2009, 2011, 2012 and 2013. Unity Financial Life Insurance Company is a leading provider of life insurance products for the preneed industry and funeral trust business. Even with their rapid growth and financial size, they’re small enough to provide personal expertise and service to agents. Founded in 1964, Unity Financial is currently licensed in 47 states plus the District of Columbia. • Issue ages from 10 to 99 • Guaranteed-issue, single-premium life policy • Multipayment plan is available • No health questions and no underwriting • Medicaid and VA compliant in most states

• One-page application • Appropriate solution for many seniors • Death benefit paid directly to any funeral home • Excess funds go to the estate of insured (which may be subject to Medicaid recovery laws)

may not have considered Medicaid requirements and funeral preplanning. Because the funeral trust is simple, most agents who have been trained have an easy time explaining it to clients. “It’s a tremendous market with this product, because baby boomers are aging. The funeral trust business is going to explode with 10,000 baby boomers retiring every single day.” Dedicated Agent Support DelcoUSA may be unique because it includes an elder law attorney who assists agents with

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technical Medicaid questions. O’Dell notes that while there are similarities among Medicaid rules in most states, his staff understands the nuances. O’Dell notes that many agents are looking for different avenues to increase revenues. He feels the funeral trust is a great opportunity for Medicare agents in the off-season, for instance. He says it’s not complicated to explain to someone that they need to put money aside if they don’t have long-term care insurance, especially when 90 percent of people haven’t planned their funerals. •

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INFRONT TIMELY ISSUES THAT MATTER TO YOU

Friend or Foe? Dissecting DOL Fiduciary Moves During a frenetic week in July, the Department of Labor filed a brief defending its fiduciary rule, as well as a Request For Information (RFI) signaling its willingness to amend the rule. We explain how the DOL came to seemingly opposite conclusions.

By Cyril Tuohy and John Hilton

A

s the calendar turned from June to July, long-suffering opponents of the Department of Labor fiduciary rule were supposed to finally see some relief. It did not go exactly according to plan. DOL responses to a court appeal and a separate Request For Information yielded mixed messages on how the agency will treat the fiduciary rule going forward. The latter offers the most promise for the industry, with the DOL signaling a willingness to soften the burdensome exemption mandates. At worst, phase two of the rule could be delayed beyond the Jan. 1, 2018, effective date, the DOL suggested. Phase one of the rule took effect June 9. It requires advisors and agents selling into retirement accounts to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. The former response filed in the U.S. Court of Appeals for the 5th Circuit in New Orleans was decidedly not industry friendly. Some analysts had questioned whether President Donald J. Trump’s administration would even defend the fiduciary rule in ongoing litigation. Labor Secretary Alexander Acosta left no doubt, signing off on a blistering defense of 99 percent of the rule. Why the inconsistent strategy? The answer isn’t as complicated as it might seem. A lawyer with an extensive background in law, Acosta treated the court case in strict legal terms, analysts say. The Request For Information offers opportunities to remake the rule, and the DOL appears willing to do just that. 12

Only One Change

Plaintiffs in the court case include the American Council of Life I n s u rer s , t he U. S . Chamber of Commerce and many others. They lost federal court rulings earlier this year and appealed to the 5th Circuit. Filed July 3, the DOL brief deviated in one respect from the Obama administration: The BICE’s condition reLabor Secretary Alexander Acosta seems to be asking stricting class action for public input to change the fiduciary rule substantially, waivers should be vabut also defended the rule in federal court. cated as it applies to arbitration clauses, the brief said. concluded that the exemption’s condi“The government no longer defends tions are necessary to protect retirement that condition in light of the Acting Solic- investors from the harms posed by conitor General’s construction of the Federal flicted transactions involving these comArbitration Act in a case pending before plicated products.” the Supreme Court, but that condition is The brief maintained the DOL stance severable from the remainder of the fidu- that variable and fixed indexed annuities ciary rule, as the rule itself makes clear,” are too complicated to be sold without the brief said. investor protections. Government attorThat change matters little to the insur- neys rejected the idea that annuities are ance side, said one industry veteran, add- already well-regulated, and that the DOL ing “we can’t arbitrate anyway.” rule will restrict access to key retirement Otherwise, the agency defended the products. entire fiduciary scheme, including the “DOL reasonably concluded that any controversial BICE. Plaintiffs want contraction in the market share of such most to see the BICE disappear, or at products as a result of the fiduciary rule least be amended. It requires signifi- would reflect not harm to consumers but cant disclosures to clients, as well as a a reduction in mismatched recommendasigned contract, and creates a class-ac- tions of products to investors,” the brief tion right to sue. stated. Sellers will need to comply with the BICE to continue selling variable and ‘Would It Facilitate Advice?’ fixed indexed annuities on a commission Industry opponents fared much better in basis. the RFI published July 6. In it, the DOL “DOL reasonably determined, on the floated some promising options, and basis of the extensive record before it, that gave wide discretion to industry comconflicted transactions involving certain ment topics. annuities should be required to satisfy Annuity advocates most want to see the BICE,” the DOL response read. “DOL fixed indexed annuities moved from the

InsuranceNewsNet Magazine » August 2017


August 2017 Âť InsuranceNewsNet Magazine

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INFRONT FRIEND OR FOE? DISSECTING DOL FIDUCIARY MOVES

TWO SIDES OF THE DOL Issue

FIAs

Best Interest Contract Exemption

Request For Information

Signaled a willingness to ease regulation of FIAs, including a potential return to sales under the less onerous PTE 84-24 exemption.

Suggests willingness to simplify the contract, suggesting various activities — such as fee-based sales — that could prompt a streamlined contract.

Several. Suggests “recent innovations” in industry could prompt changes to “exemptions and compliance mechanisms.” Asks for input on delay of Jan. 1, 2018, effective date.

5th Circuit Court Brief

Maintained Obama administration stance that variable and fixed indexed annuities are too complicated to be sold without investor protections.

Countered that plaintiffs “have failed to identif y any reason why the fiduciary rule, including its associated exemptions, should be vacated in full.”

Just one. Argued for vacating the rule’s current prohibition on class-action waivers, which it calls “a discriminatory obstacle to arbitration.”

burdensome BICE, and returned to the less-stringent Prohibited Transaction Exemption 84-24, or PTE 84-24. It could happen. DOL regulators signaled Thursday that they are keen to explore the advantages and drawbacks of expanding the types of annuities covered under PTE 84-24 as part of a broader review of the fiduciary rule’s exemptions. “Would it facilitate advice to expand the scope of PTE 84-24 to cover all types of annuities after the end of the transition period on January 1, 2018?” regulators asked. The answer from the annuity community is an unequivocal yes. Regulators also indicated an interest in looking at the implications of expanding the definition of what constitutes a financial institution beyond banks, broker-dealers, insurers and registered investment advisors (RIAs). Expanding the definition of a financial institution to include more independent marketing organizations (IMOs) is a key element in the FIA calculus. Regulators initially seemed to ignore the status of IMOs, which sell the lion’s share of the $60 billion worth of FIAs sold every year. But the DOL solution was to set the bar for IMOs to qualify as financial institutions so high that only about a dozen 14

Suggested Changes

IMOs could even contemplate it. “Either regulators need to move all FIAs back to the 84-24 exemption and develop a workable exemption so that the bulk of the 300 to 400 IMOs operating in the U.S. can continue selling FIAs,” said Judi Carsrud, government affairs director for the National Association of Insurance and Financial Advisors, “or they can redefine what is a financial institution.”

New Share Classes

Within the RFI, the DOL indicated it is prepared to help advisors with their uphill climb by possibly carving out new exemptions and amending existing ones. Recent innovations in the financial services industry are helping create more streamlined exemptions and compliance mechanisms, the department said in the 13-page RFI published in the Federal Register. Innovations include new mutual fund share classes, fee-based annuities, and new advisory reporting and data analytics programs. “It makes sense for the [fiduciary rule] regulation to be adaptable to the reality of what’s happening,” said Aron Szapiro, director of policy research for mutual fund tracker Morningstar. With the fiduciary rule seemingly here to stay in one form or another, the exemp-

InsuranceNewsNet Magazine » August 2017

tions are the most efficient way to amend a rule designed to reduce conflicts of interest among financial advisors. “It’s easier to create another exemptive class than to get rid of the existing ones,” Szapiro said. Other policy analysts were more circumspect about the DOL’s latest efforts to gather still more information to be used to fine-tune a policy that is hundreds of pages long and generally unpopular with many — though not all — financial advisors, Carsrud said. “One more prohibited transaction exemption for mutual fund shares isn’t going to make much of a difference to anybody, I don’t think,” she said. Possible exemption pathways include a new class of mutual fund shares called “T-shares” that will help advisors maintain traditional commission-based revenue models. Another new mutual fund class known as “clean shares,” anchored in the level-fee model, may reduce conflicted advice. Fee-based annuities would also seem to “mitigate or even eliminate” potential conflicts of interest, the DOL said. There’s nothing in the DOL’s information request that indicates the changes regulators are hinting at are too high a hurdle to overcome, though perhaps not by Jan. 1, 2018, when the fiduciary rule is scheduled to be implemented in its entirety, Szapiro said. But even so, regulators appear open to a rule delay to allow the industry more time to implement new systems and procedures. “If commenters believe more time would be necessary to build the necessary distribution and compliance structures for such innovations, the Department is interested in information related to the amount of time expected to be required,” the DOL 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. 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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InsuranceNewsNet Magazine Âť August 2017


READ PEOPLE LIKE A BOOK INTERVIEW he eyes may be the window to the soul, but the face is the mirror of emotions. Once you learn to read the cues in a person’s microexpressions, you will have a good idea of what that person is feeling. What is a microexpression? It is a fleeting, split-second expression that might not even register in your awareness if you are not attuned to it. Why is all this important to sales? Dan Seidman says a person’s face is basically a road map through the process. Read it, and you will know where to go next. Dan was recognized as the International Sales Training Leader of the Year in 2013 and has designed sales training in the U.S. and across the planet from Ho Chi Minh City, Vietnam, to Caracas, Venezuela. He bases his microexpression insight on the research of Paul Ekman, who inspired the TV series Lie to Me. In this interview with Publisher Paul Feldman, Dan says the ability to read microexpressions will not only guide your sales process but also help you navigate all your relationships. FELDMAN: How did you get interested in Paul Ekman and microexpressions? SEIDMAN: I read about Paul Ekman in Malcolm Gladwell’s book Blink 12 years ago. And I was fascinated by the ability to look at somebody’s face and be able to

know what feelings were underlying the conversation. People do a good job of hiding with the poker face they generally use. I started researching Ekman and eventually contacted his organization. [Dan is now a board member of the Emotional Intelligence Academy.] His research reveals that you can decode the human face and that facial expressions are universal. People in the U.S. make the same face for joy as the indigenous people in Papua New Guinea do. Ekman actually did the research. He filmed people all over the world and found that everybody showed the exact same facial expressions for seven key emotions that we want to focus on, seven universal microexpressions. They are disgust, anger, fear, sadness, happiness, surprise and contentment. What was really cool is, he found that people who have been blind from birth also make the same facial expressions even though they’ve never seen other people’s faces. He calls that part of the evolutionary process. I’m not a big fan of evolution myself, but that’s the context of what Ekman says where it comes from. This was an opportunity for sales professionals, entrepreneurs and business

basketball. To know whether a player with the ball is going to shoot the ball or put his head down and dribble. And then finally, one area where it’s being used that’s really fun is in movie making. Ekman has contributed to an Academy Award in Visual Effects for Lord of the Rings. Remington Scott was the wizard who built emotions into the faces of digital beings like Gollum, and we’ll continue to see movie creatures become more “realistic.” FELDMAN: It’s extraordinarily fascinating to get insight into the psyche of your clients. Have you used this effectively in sales training? SEIDMAN: I’ll summarize how I tell people to deal with it when they become aware of it. You have to talk about the elephant. So if someone is angry, you have to talk about their anger. Now, how you talk about it is the tricky part. You can’t just go out there and say, “Well, you’re really angry, and tell me about that.” You have to do softening statements. You must have trust and rapport so that they’ll share things with you that they wouldn’t normally share in a sales setting. FELDMAN: How does someone train at recognizing microexpressions?

A microexpression or emotional leakage is a flicker of emotion that reveals a person’s true feelings in a very brief moment, less than a fifth of a second. pros to use this to really understand their buyers at the level they’ve never been able to understand in the past. You also can imagine that a counselor would find this extremely valuable. And in the legal profession, attorneys and judges really need to know if people are telling the truth. Poker is a huge area where there’s been a lot of training done with Ekman’s work. There are people in England who are analyzing what they call attack intent — in

SEIDMAN: It takes a lot of practice. For example, I had a DVD where you can watch faces and guess what emotion is being revealed. I had a flight from Chicago to Los Angeles with my son, who was 12 or 13 at the time. We sat for like an hour and a half and kept going through these things and laughing at how bad we were, but we got better and better. Well, later on we were in a retail store and the owner of the store was arguing with a customer, and he asked the customer, “what

August 2017 » InsuranceNewsNet Magazine

17


INTERVIEW READ PEOPLE LIKE A BOOK would you like me to do to make you happy?” And the suggestion that the customer made was really a bad idea, because there was this look of disgust that flashed for just a split-second on the owner’s face. And I turned and looked at Josh — and I said, “Did you see that?” He goes, “Yeah! It was disgust! He was really upset; he was disgusted with the suggestion the guy gave him to resolve the problem.” So, that was a big wow moment for us — to be able to pick that up in other people. What I realized from that was, I used to think that listening was the most critical element to selling success. Listening training is a huge neglected area in the sales profession. I spend a lot of time on it in training. But now I realize that listening isn’t as important as just paying attention is. If we can pick up these visual cues, we can get as much information and better information than we can get simply by being great listeners. So I’m seeing that we need to be better at simply paying attention. FELDMAN: So, it is more important to become better observers? SEIDMAN: Absolutely. I’ve discussed this with Cliff Lansley of the Emotional Intelligence Academy. He is Paul Ekman’s partner and runs their global training out of Manchester, England. He said the steps in the process are simply put this way: awareness, understanding and influence.

THE 7 CORE EMOTIONS

DISGUST

FEAR

CONTEMPT

SURPRISE

ANGER By greater cognitive effort, I mean it takes work to make up a story and keep the other person from seeing behind it. This extra effort gets exposed when one has the ability to read that flicker of “emotional leakage” in the other person’s face. He also pointed out there are actually six communication channels that reveal a person’s true feelings. They are content, in-

GO TEST YOURSELF Take a quick test on some of the approaches used in the courses by the Emotional Intelligence Academy, at innmb.com/eiatest I mentioned to him how salespeople often wonder whether a prospect is telling the truth or not. Lansley said according to the science of deception, we understand that lies are linked to emotions and require greater cognitive effort than the truth, and that liars over-control their behaviors. 18

teraction style, voice, face, body and body psychophysiology. A really adept person can monitor all six channels. A single clue is not enough to judge what’s really going on. He said there is no Pinocchio’s nose — no single obvious visual

InsuranceNewsNet Magazine » August 2017

HAPPINESS

SADNESS cue — that tells you somebody is lying. Sometimes it’s the words they use. How they interact with each other. It’s their voice or body language. Things like that. You can’t just rely on the facial coding. You can start learning how to identify these by starting with a frame of reference you’re already familiar with. For example, some people are absolutely terrified of snakes. There’s a whole bunch of things that happen to their body when they see a snake. They kind of freeze — they stop for a moment, hoping that the animal will not notice them. Their heart rate increases at the same time everything else is slowing down. Their eyes widen. Their brows raise and squeeze together and their mouth stretches sideways. Basically, the blood is flowing away from the surface of the skin and toward essential organs and large muscles in the legs, like they’re getting ready to bolt. There are all these things going on with people when they experience a true fear reaction. Their body is suddenly a different type of beast when they experience a really dramatic emotion at the far end of the spectrum.


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INTERVIEW READ PEOPLE LIKE A BOOK

5 BENEFITS OF READING EMOTIONS

FELDMAN: So take me through the process. What do you have to do to start grafting this and to use this in your own life, in your own work? SEIDMAN: Repetition and seeing the faces so they are instantly recognizable. The interesting thing is, a lot of us are good at this with people we have a long-term relationship with. If you think about somebody you have been close to for many, many years, you pick up those nonverbal clues sooner than when you actually hear the verbal explosion or joy or whatever. You have digital resources where you can watch videos over and over again. You pick up all the cues in their eyes, around their mouth and start to recognize what emotion is in there. When I train people in this, I use a really fun exercise. I ask reps in a room to choose a superpower that would help them increase their sales performance. Some creative things they come up with include precognition — the ability to predict the future. In essence, a salesperson is saying, “I’ll be known for my 100 percent closing ratio because I can predict the future.” Or superhuman endurance, working harder but not smarter. Or how about time travel, and I can go back and redo the sales call and fix what I did wrong. Immortality — I’ll study the best salespeople and become the best person who ever sold. Their superpower might be mind control — “You must buy from me; nothing is more important than saying yes right now.” Or flying — “I’m sick of being stuck in traffic all the time; going to my sales calls.” So I set up learning by explaining that this training reveals a superpower that’s under the radar. You want to know whether people are being truthful or deceptive. So when their words don’t match their facial expressions, you know there is something going on. You know you’re in trouble. FELDMAN: How else can people train in recognizing microexpressions? SEIDMAN: Another way to learn this is to practice the emotion part on your face. I was teaching this last week and I used the opening scene from The Hangover: Part Three. If you didn’t see this movie, it opens with Zach Galifianakis, who bought a giraffe, and he’s driving down the freeway 20

• Spot concealed emotions and better understand, in the moment, what the other person is experiencing. • Improve your emotional intelligence by not only seeing feelings in others, but increasing awareness of your own. • Significantly enhance relationships, as people who spot microexpressions are better liked by co-workers. • Increase your capacity for empathy, and help others feel more understood and “seen.” • Better understand others, even from different cultures, by recognizing these universal expressions. when the giraffe’s head gets cut off by an overhead bridge. He doesn’t know what happened to the giraffe, but there’s a huge accident behind him. So he starts to hear all these crashes and he pulls to a stop. He sees cars smashing into each other, an 18-wheeler slides sideways and all these giant steel pieces of metal unsnap and fall off and go rolling across the highway. It’s this huge disaster, and in that instant, you see like this smirk on his face. He’s kind of disgusted at how stupid these people are. It’s almost like contempt. So, what are you going to do as a sales pro when you see an expression like that? Maybe you made a suggestion and they show surprise about your suggestion — you’d better respond to that emotion. Perhaps you’d say, “is that idea something you didn’t expect?” You’re acknowledging their feelings, and it’s almost mystical to the other person. Here’s a quick side note on the emotion contempt. If you see contempt when you’re in a relationship with someone you think is close to you, you’re going to be in trouble in that relationship because that’s a

InsuranceNewsNet Magazine » August 2017

very extreme emotion for someone to feel about somebody they care about. Certain emotions are a warning. When you see the cue, you better realize you might be in for a battle. It’s just practice. See it everywhere, notice it, and we get better at knowing what the truth is. It’s as simple as that. FELDMAN: I remember reading in your book The Secret Language of Influence about language patterns when something is not congruent and you know there’s something really wrong. Would you tell us more about that? SEIDMAN: People are motivated by pain or gain, but what best motivates buyers to buy? This is the oldest argument in selling, and I have researched it. You have gain-based — or benefit-based — selling, which is what Zig Ziglar and Tommy Hopkins were talking about in the 1970s and '80s. Then along comes Summer Sales Institute, in the late '80s, telling everybody you could only motivate people to buy if you could find their pain and identify their pain points.


Indexed UL Can’t Should Be Sold to Seniors

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IT’S ABOUT TIME SOMEONE SET THE RECORD STRAIGHT.

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21


INTERVIEW READ PEOPLE LIKE A BOOK We know from cognitive psych that either pain or gain is a motivator for buyers. You have to know which one you’re talking to and then change your language. I was interviewing a potential sales manager for a company I’m working with right now. And he was very much a gainbased person. All of his ideas were “Here’s a benefit, here are the good things that’ll happen, we want to build a really successful sales team” — that sort of stuff. But when I asked him about his sales practices, he flip-flopped and said, “Well, I think pain is a really big motivator for people, and you find people’s pain points.” He was giving these platitudes that he knew he should say because they’re popular right now. But the rest of his body didn’t really buy into it. It was just the words that he had to lay out here. He was kind of kissing up to me in the interview — he was showing that he was smart or that he understood things better than he really believed. And it made me very uncomfortable all of a sudden in the conversation — like he wasn’t being completely honest with me. So, sometimes, you get that feeling whether somebody is credible because of their use of language. As a sales pro, you match a buyer’s decision-making process — whether it’s

pain-based or gain-based. You do it well when you communicate with them in their dialect. If you speak about problems with a pain-based person, then you’re speaking their dialect. If you talk about goals and visions and making money and all the good things that can happen with a gain-based person, then you’re speaking their dialect. So you want to match the language skills they’re exhibiting to show how they make decisions. The other thing to understand in language is whether people are internally or externally motivated. This doesn’t mean somebody is an introvert or extrovert; it just means they either make a decision based on their past background and experience or they make a decision based on getting that feedback from other people — affirmations, testimonials, that sort of thing. That’s another thing to understand how people are motivated to make decisions: whether they fly solo with their decision or they get advice and ideas from others. FELDMAN: Can you give us an example of all this in action? SEIDMAN: Say you’re on a sales call, talking to a couple about annuities. You

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InsuranceNewsNet Magazine » August 2017

start talking about the market and what’s happened in the market in the last year or two and whether they’ve made the proper adjustments. And you say, “Hey, the last couple of years have been kind of a wild ride in the market.” And the woman has this flicker where her lips go down and there’s a moment of sadness. You realize that something had to have happened that made her sad. Right away that would be a cue for you to ask her, “So what happened to you guys personally in this market change? Are you riding out losing money and getting things back?” The woman might look at you and say, “We were going to go on this incredible cruise to China — a spectacular cruise for 30 days. And all of a sudden we didn’t have the cash to do it. And this dream I’ve had for so long just kind of disappeared. We think we might go back one day soon.” So you have all this information from that cue that you got — she tipped you off with her microexpression. When people share a story, they create emotional context for the conversation. You want your potential clients to go into a story. Good stories or bad stories, whatever. You create emotional context. So you might say something like, “Wow, so what would it take for us to get you to the point to get on that trip?” Now you’re giving her hope. So we’ve actually taken the conversation off a little bit of a rabbit trail because she gave us a hint that there was something going on — that there was a bad memory attached to this conversation. Now we’re giving her hope about the something bad that happened and maybe we can turn it around. That’s the kind of thing that I teach salespeople to do — increase their awareness. Don’t just be a good listener, but pay close attention. Then handle it professionally but in a kind way, because you want people to talk to you like you’re a friend — like they’re going to share their innermost dreams and desires with you at some point in time. We’re talking about money, and that’s what money is for. It’s for good things to happen. It’s to keep bad things from happening. You create context when you understand a microexpression.


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5

1

You need a plan. Create and commit to implementing an annual business plan that defines in a clear and simple way what is needed for you to attain success. Most advisors fail right here, because they list too many things and lose sight of the goal. The reality is that success comes from focusing on one main goal. It might take some digging and deep thought to figure out what your main focus is. But once you find it, you’ll realize that everything else falls into one of two categories: supporting elements or — in many cases — clutter. Anything that doesn’t directly support your main goal is clutter and should be eliminated immediately.

Not just learn, but master. Coaching is a pathway to mastering those abilities.

Join a community of advisors. It’s an interesting concept, isn’t it? The idea of a community of advisors is not something you hear every day. Advisors work at their business alone, for the most part. You might have a staff or team, but you are still running the team. Alone. Where do you get new growth ideas from? Who do you know who can help you with tomorrow’s apDressander has joined | BHC pointment when you fear you don’t quite have enough juice to close the deal? Who can you share the struggle with? Joining a community of successful adviFINANCIAL MARKETING sors pursuing their dream practice can help with all those questions. It also gives you a higher sense of fulfillment as you work day to day knowing someone in your community has your back. For more information on how you could Dressander hasboost joined simplify your| BHC success, your sales and attain a more fulfilling work-life balance, go to www.simplicitysuccess.com today. And while you’re there, see how our upcoming immersion retreat can give you the FINANCIAL MARKETING skills, coaching and community that your business has been craving! •

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own business, so they can skip the trial-anderror methods other advisors struggle with.

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SIMPLICITY FINANCIAL MARKET

Get a coach. Sounds like a mentor, but this involves a lot more individual, hands-on coaching. Every professional needs a coach. Name a professional sport in which coaches aren’t used. If you had a choice between using one of the top five professional golfer’s clubs and working with a coach for six months, which would you choose? You need a coach to help you organize your success and to hold you accountable for doing what’s necessary to grow. Being a professional means you must master several areas relevant to growing your business.

David Vick and Mike Dressander are principals with Simplicity Financial Marketing, a life and annuity IMO known for creating the ultimate work-life balance for its agents. For more information on how Simplicity could simplify your life, visit www.simplicitysuccess.com.

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August 2017 » InsuranceNewsNet Magazine

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INTERVIEW HOW TO SIT AT THE HEAD OF THE AFFLUENT TABLE

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InsuranceNewsNet Magazine » August 2017


Special Thanks to Our Sponsors

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NEWSWIRES

QUOTABLE

Fed Chair Says the Financial System Is Safer Federal Reserve Chair Janet Yellen looked back at the financial crisis of 2008 and said she hopes a similar event will not occur “in our lifetimes.” Yellen told a group at the British Academy that the banking reforms put in place in recent years have made the financial system safer. As a result, the world should be able to avoid the type of devastating crisis that struck the global economy nine years ago. Yellen said the system is better able to handle any shocks that might occur if investors began dumping assets out of concerns about a future financial threat — the scenario that effectively pushed the global economy off a cliff in 2008. “I think we have a strong banking sector that’s well-capitalized and has a lot of liquidity,” she said.

TRADE GROUPS RACE TO REACH THE ASIAN MARKET

Industry professional associations are struggling with stagnant or declining membership in the U.S. but are finding fertile ground overseas. Two organizations in particular are setting their sights across the Pacific Ocean in an effort to reach life insurance professionals.

The National Association of Insurance and Financial Advisors (NAIFA) launched its Life and Annuity Certified Professionals (LACP) certification for life and annuity pros. NAIFA officials said they see a huge demand for professional certification in Asia, where a designation such as LACP is seen as the equivalent of a college degree. Meanwhile, The American College DID YOU

KNOW

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announced a partnership with GAMA International to develop what they call “streamlined credentials” for international markets.

STATES CONSIDERING THEIR OWN FIDUCIARY RULES

It’s apparently not enough for some states that the Department of Labor (DOL) has begun implementing a fiduciary rule. Nevada has passed its own fiduciary rule, and other states are expected to follow suit. Uncertainty was the driving force behind the Nevada rule. Although the DOL rule has begun taking effect, its future is in doubt, as a Republican Congress and administration could amend or repeal it. Also, the Nevada law clearly defines brokers and others as “financial planners” and subject to a higher standard of service. Financial planners are also required to disclose to clients any profit or commission they would receive if the advice were followed.

50% of financial advisors surveyed said they plan to increase their recommendation of exchange-traded Source: Financial Planning Association funds in the coming year.

InsuranceNewsNet Magazine » August 2017

Half of America has no financial cushion. They are living really close to the edge. — Jennifer Tescher, president and CEO of the Center for Financial Services Innovation

ONLY 50% OF AMERICANS ARE ‘MIDDLE CLASS’

Just what is “middle class” anyway? And how many of us are in that income stratum? It depends on who you ask. A survey by Northwestern Mutual found that 70 percent of Americans consider themselves middle class. However, a 2015 report from Pew Research Center shows that the middle class has been shrinking over the past four decades and now makes up only 50 percent of the United States’ total population.

70% OF AMERICANS BELIEVE THEY ARE ‘MIDDLE CLASS,’

BUT ONLY 50% ARE

Of the survey participants who labeled themselves as middle class, 50 percent earn between $50,000 and $125,000 annually. Although these Americans consider themselves in the middle, the actual dollar amounts needed to qualify as middle class are slightly lower. Pew Research Center defines it as adults whose annual household income is two-thirds to double the national median, which was $55,775 as of 2016. That means singles making anywhere from $24,000 to $72,000 annually are middle class. But single people are far less likely to consider themselves middle class. Only 57 percent of single men and 59 percent of single women label themselves as such, compared to 84 percent of non-single men and 74 percent of non-single women.


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August 2017 » InsuranceNewsNet Magazine

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HOW TO TELL STORIES THAT

INSPIRE SALES

Storytelling is as old as mankind. Here is how advisors are using the craft to inspire prospects to take action. BY SUSAN RUPE


HOW TO TELL STORIES THAT INSPIRE SALES FEATURE

W

hen Ann Baker Ronn visits a prospect, she brings a goose. It is a plush toy, and within that goose is a gold-colored egg. Ronn tells the prospect the Aesop fable of the goose that laid the golden egg and asks: “If you

Ann Baker Ronn with her goose had a goose that laid golden eggs, which would you insure: the goose or the egg?” The correct answer to Ronn’s question is the goose. In Ronn’s version of the tale, the goose represents the prospect’s ability to earn a livelihood and the egg represents the prospect’s income. Ronn is the owner of Income Protection Solutions in Houston and is a believer in the power of storytelling to connect with prospects. “I think people are visual learners,” she said. “So often, we are so tied up with giving prospects facts and figures when all you need to do is tell someone a story.” The toy goose is only one visual aid that she uses to make her point. She sometimes will display the obituary of her former client, Tom. Tom was a mountain climber and triathlete, but a brain tumor brought him down and eventually killed him at the age of 52.

“We had sold him life insurance, but when I found out he had a brain tumor, I kept asking myself, ‘Why didn’t I talk to him about disability insurance when I had the chance?’” Ronn said. “That experience

authors of StorySelling. The book tells sales professionals how to “sell without selling” by telling their brand’s story. When the human brain hears a good story, it emits oxytocin, the so-called

“Storytelling gets people involved and engaged, and it makes them want to know more about how we can help them.” really changed my discussion with clients and it’s a story I tell them.” Charts are another type of visual aid that can spark a story with prospects, Ronn has learned. She often shows prospects a chart that spells out the odds of dying before age 65 versus the odds of becoming disabled before age 65. Seeing this chart gets the prospect thinking about the importance of owning disability insurance and starts the conversation. In the case of one client who owned high-end restaurants, Ronn recalled, the client had come to her about buying life insurance, and she showed him a chart illustrating the need for DI as well. “I pulled out a chart showing him what he could expect to earn from now until he reached his full retirement age at 67,” she said. “It was like a light bulb went off for him. He realized that he needed to protect a $2 million asset, and that started us talking about disability insurance.” Ronn mentors younger advisors and recommends they brush up on their storytelling skills. “I was mentoring someone who is new to the business and talked with him about telling stories,” she said. “And he said, ‘But I don’t have any stories.’ So I told him that it’s OK to borrow other people’s stories.” Storytelling “is really the only way to be successful in this business,” Ronn contended. “We give people too many facts and figures. Storytelling gets people involved and engaged, and it makes them want to know more about how we can help them.”

A Basic Human Level

Storytelling connects people in physical as well as emotional ways, according to one of the experts on the subject, Nick Nanton. Nanton and JW Dicks are the

“love hormone,” Nanton said. “So by telling stories, you have the ability to create a biochemical bond that is second to none when it comes to building trust.” Transportation is another phenomenon that occurs when people hear a good story, Nanton said. To understand the concept of transportation, he explained, think about what happens in your mind when you read a fiction book. You mentally transport yourself into a character

Nick Nanton in the book, putting yourself in that character’s shoes. And your brain reacts the same way that the character’s brain reacts in a given situation. “So if you tell your story correctly, not only do you create a biochemical reaction,

August 2017 » InsuranceNewsNet Magazine

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FEATURE HOW TO TELL STORIES THAT INSPIRE SALES

Four StorySelling Plots Use one of these plots to create a story that will inspire your prospects to take action. Overcoming the Monster There are plenty of “monsters” that your potential clients want to see destroyed — it’s just a matter of identifying the ones that fit into your profession or life story. Perhaps you took on the establishment in some significant way to come out on top. Maybe you’re a financial advisor who saw what the crash of 2008 (another “monster”) did to innocent people — and you set out to build an investment strategy that safeguards your clients’ assets in case another crash happens. There are many ways to go with this plotline that would pay off for any business. Rags to Riches This is perhaps the easiest plot to translate to StorySelling, since it’s such a universal experience. Most entrepreneurs started with virtually nothing and built their businesses from scratch — and they have plenty of stories to illustrate that point. Even if you come from well-off circumstances, you probably still have stories of the difficulties in beginning your business. The Quest First ask yourself, did you undergo a quest of your own to find something unique and special to add to your business? If you had to search for the perfect location or the most powerful product or service to sell, or even just strive to be the best at what you do, that could be your version of The Quest. Communicating what you went through to find what is most vital about what you do also gives potential clients an appreciation of that process, as well as an appreciation of the value of your business. That creates a desire to buy this wonderful “something.” Rebirth Rebirth is an amazing StorySelling plot if you’ve gone through tough times and made it back to success. That kind of triumph inspires people and makes them want to listen to what you have to say.

StorySelling, Nick Nanton and JW Dicks, Celebrity Press, 2013

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InsuranceNewsNet Magazine » August 2017

but people put themselves in your shoes and they transport themselves into your position,” Nanton said. “And over time, if you tell your story effectively and personally, your clients begin to feel like they were part of your journey — like they have been on the journey with you. “When this is done correctly, it becomes much harder if not impossible for customers to look elsewhere, because they actually feel like they helped you achieve your success. So going to your competitors would actually be tearing down something they helped to build.”

Three Steps

Telling a story that connects on an instinctual human level comes down to three steps, Nanton said. That formula is answering these three questions: 1. Who are you? 2. What are you doing now? 3. What is your vision of the future? Nanton explained it further. 1. Who are you? Nanton said answering this question also includes telling where you came from and what you have in your past that relates to what you are doing now. In addition to answering these, you need to add what Nanton calls “personal hooks.” “For example, if you grew up playing football and you walked on to the college football team. Or you played a lot of soccer and you went to the Junior World Cup,” he said. “The more you can layer in what other people have in common with you, you build affinity. And affinity builds trust, so if someone is like you, you trust them. So people think, ‘They like the same things I like and I’m a good person, so they must be a good person too.’” 2. What are you doing now? The second part of this question, Nanton said, is “and how is it helping others?” “You might tell your prospect something like, ‘Here is what I do and here are two or three different types of clients I’m helping,’” he said. “You lay out those two or three scenarios or case studies. Maybe you can do it as a video or a podcast. People can see that you are helping others who are like them and you can help them too.”


HOW TO TELL STORIES THAT INSPIRE SALES FEATURE

Left to right, daughters Sarah and Rebecca, wife Jo and Val Mikesell 3. What is your vision of the future? People want to know what you think the future looks like and how you can help them in the future, Nanton said. “Because if you have no vision for the future, if you don’t see a positive future, then people aren’t interested,” he added. The buying process for insurance products has many emotional and financial considerations attached to it. That makes

what they really want, that’s everything,” he said. “At that point, you’re building a relationship, and I don’t think there’s anything stronger than that.”

Telling Your Own Story

Val Mikesell’s website is devoted to storytelling, containing a number of videos that tell stories illustrating the importance of owning various life insurance products. Mikesell is owner and presi-

“It’s always a better approach to use stories to connect with someone. There is an adage that says, ‘Facts tell; stories sell.’” storytelling especially important in getting a prospect to act, Nanton said. “It’s always a better approach to use stories to connect with someone,” he said. “There is an adage that says, ‘Facts tell; stories sell.’” The story-selling concept moves to the next level when an advisor can get prospects to tell their own stories. “If you can get them to reveal to you

dent of The Mikesell Group in Bellevue, Wash. Mikesell’s interest in using storytelling as a sales tool stems from his personal story. A number of years ago, he had a heart attack that left him temporarily disabled. “I had just finished playing basketball early in the morning,” he recalled. “I was on my way home and I had shortness of

breath. I thought it was an anxiety attack. It kept getting worse. I recognized I had a problem.” Mikesell said he went to the hospital, where he was treated for a heart attack and had a stent put in. But surviving the heart attack was only part of his story. “I was scared, but I wasn’t scared for me — I was scared for my family,” he said. “It took me four or five months to get through it and get back to work. In this business, when you’re not at work, the commissions aren’t coming in, but the bills keep coming in.” It didn’t take long for Mikesell’s family to burn through their savings during the time he was unable to work. They were lucky enough to be able to dig themselves out of the financial hole, but it took time. Back when Mikesell was disabled, there was no such thing as a life insurance policy with a living benefit provision. If such a product had existed then, and if he had owned it, his family’s financial situation would have been drastically different, he said. Today, he tells his story as well as the stories of others he knows who have been hit with what he calls “the snakes that are out there — things like cancer, heart attack and stroke.”

Not Enough Are Using It

Although storytelling may come naturally to some advisors, not enough of them are using that technique, Mikesell said. “Part of it is that there is a lack of good content material for telling stories,” he said. “I also don’t think there are good platforms for sharing stories. People, for the most part, are in that two- or three-minute video-driven world where if you can’t illustrate a concept in a two or three minute video, then they don’t have much interest in it. If you can provide them with a video that can capture their attention that drives the point home, then they will listen to you, and that gives you the opportunity to ask how you can serve them.” The sales process is not about “throwing numbers out there,” Mikesell said. “If you do that, you won’t make the connection. And as for storytelling, if you can’t do it, your competitors will.”

Keeping a Memory Alive

Karen Babbar uses storytelling to serve two purposes: keeping her late son’s memory alive and educating prospects

August 2017 » InsuranceNewsNet Magazine

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FEATURE HOW TO TELL STORIES THAT INSPIRE SALES they die,” she said. “As for long-term care, when you’re young, you don’t think you will ever use it.” But Rana’s situation was different. When he was 35, he began to suffer debilitating seizures and was unable to work.

Babbar said her son was well-known in the community, and those who knew him and knew his story come to her asking for advice on how to protect their own families. “What I tell everyone is, you never can tell when you’ll need insurance, so it’s

“It’s not what life insurance does after you die, but what it can do when you’re alive — that’s what’s inspiring. That’s the story.” Karen Babbar on the importance of life and long-term care insurance. Babbar is a New York Life agent in San Ramon, Calif. When her son, Rana, was only 18, she bought him a long-term care policy as well as a life insurance policy with a disability waiver of premium. “People think life insurance is for when

His illness progressed to the point where he needed full-time care before dying four years later. The insurance that his mother purchased for him when he was 18 paid for his care. Rana’s family filed the long-term care claim, and that enabled him to receive the care he needed. In addition, the cash value that had built up in the life insurance policy helped pay for Rana’s living expenses.

Joe Jordan

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InsuranceNewsNet Magazine » August 2017

better to plan ahead of time when you’re young and healthy,” she said. “It’s notw what life insurance does after you die, but what it can do when you’re alive — that’s what’s inspiring. That’s the story.”

A Matter of Survival

When it comes to storytelling, few in this industry can mesmerize an audience like Joe Jordan can.


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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) August 2017 » InsuranceNewsNet Magazine

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FEATURE HOW TO TELL STORIES THAT INSPIRE SALES The inspirational speaker and behavioral finance expert is the author of Living a Life of Significance. He is a former senior vice president at MetLife and has spoken to financial services groups all over the globe. Jordan’s speaking gigs are filled with stories that put a human face on the world of insurance products. He often tells the story of how his family was devastated financially after his father died unexpectedly and without life insurance. He also

1. Belonging 2. Purpose 3. Storytelling 4. Transcendence People who have a religious or spiritual background can relate to these pillars, Jordan said. “People who belong to a religious group — they have a purpose that’s bigger than themselves,” he said. “And they tell it through stories — look at the Gospels and the Quran and the Torah and all the great

“When you hear a story that you can relate to ... all defense mechanisms go down, and then you can get into a discussion.” shows a video titled “Mother-in-Law,” which tells a story about long-term care from the point of view of an ailing elderly woman who is forced to move in with her son and his family. The ability to tell a story and relate to clients is what will separate the human advisor from the robo-advisor, and what will help the advisor survive in the high-tech, post-fiduciary world, Jordan said. “What can face-to-face distribution do that technology can’t do? Technology can’t create trust,” Jordan said. “Trust is an impulse, not a calculation. Trust is not earned by the weight of evidence but by the depth of the desire to help people rather than to convince them of something.” An important element of creating that trust with clients is the ability to tell them a story they can relate to, Jordan said. “No matter what statistics you give someone, they don’t get it. It just rolls right off their back. All wisdom comes from specific human experiences. When you think about it, what people remember are stories,” he said. “When you hear a story that you can relate to, all pretenses go down, all defense mechanisms go down, and then you can get into a discussion.”

religious texts. All stories, and it’s all hiding in plain sight.” There’s a “business reason” behind these pillars, Jordan said. “It’s others who give our lives meaning, by giving community and connection,” he said. “And if I have a strong connection with someone and I trust them, I really don’t care how much it costs.” As for how this all relates to the Department of Labor fiduciary rule, Jordan said the DOL rule’s premise is the commoditization of all transactions and no advice. “But the only noncommoditized thing we provide for people is advice. It’s the storytelling that is the thing that gets people there,” he said. Even though digital communication has made people more connected than ever before, loneliness and isolation are at epidemic levels, Jordan said. “The things that really give people their purpose and meaning in life have to do with others,” he said. “And the idea of storytelling is to be able to connect with people because of common experiences. In our business, the way of making a connection with people is not by giving them statistics; it’s by giving them stories.”

A Pillar of Significance

Telling More Stories

Storytelling is so important to Jordan that he listed it among his “four pillars” of living a significant life. Those pillars are: 34

How do you work storytelling into your client presentation? Jordan said the first step is to “get out of the transactional

InsuranceNewsNet Magazine » August 2017

mode of selling and move to the idea of fact-finding — learning what makes people tick.” During the fact-finding process, you can ask the prospect a question such as: “Do you believe you may have to take care of an elderly parent someday?” “Here is where you get an idea of what’s on their mind and what their situation is,” Jordan said. “Then it’s the idea of where you can very innocently come up with a story that relates to that client. “It could be something like ‘My wife’s mother lives in the attic’ or ‘My brother died at 33 years old and left behind a wife and kids.’” Jordan said to beware of the prospect who does not want to share their own money story. “If you get someone who clams up and doesn’t want to tell you anything, pack up and go. “But if they do share a story, you know you’re in like Flynn, and then you can relate on a human basis. No robo-advisor can do that.” Storytelling in the sales process is a matter of using human and emotional elements as opposed to analytical elements in helping fulfill a prospect’s needs, Jordan said. “In this business, we should think a little less and feel a little more,” he said. “Storytelling is one of the important structures for this. The people in this business who are able to create trust and relationships are the ones who will succeed.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan. Rupe@innfeedback.com.

Have an inspiring story of your own? We’d love to hear from you! Send your tales of inspiration to editor@insurancenewsnet.com and we might just feature you in an upcoming article!


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Get more information and download your free CPA direct info kit at: www.CPADirectKit.com August 2017 » InsuranceNewsNet Magazine

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LIFEWIRES

QUOTABLE

MetLife Board OKs Brighthouse Spinoff The spinoff of MetLife’s retail life insurance and annuity business became official in July. MetLife’s board gave its approval to spinning off that part of the company’s business into the new company, Brighthouse Financial. Delaware insurance regulators approved Brighthouse’s request to acquire key MetLife businesses operating in Delaware and do business in the state under the Brighthouse name. Brighthouse Life Insurance Co., domiciled in Delaware, will have more than 2 million policies and annuity contracts in force and more than $220 billion in assets.

WHAT INFLUENCES THE ONLINE BUYING EXPERIENCE?

CHINESE INSURANCE MOGUL REPORTEDLY DETAINED

The Chinese insurer Anbang has been under scrutiny for a string of multimillion-dollar purchases around the globe, including its purchase of the worldfamous Waldorf Astoria Hotel in New York City. Now its chairman is reportedly detained by regulators amid accusations of possible financial misconduct. Wu Xiaohui was “temporarily unable to perform his duties due to personal reasons,” said a one-sentence statement on the company website. Anbang’s global shopping spree has raised questions about how it is paying for its pricey purchases. The privately held company said the money was raised by shareholders. The company has suffered a series of setbacks including failing to complete its proposed purchase of U.S.-based Fidelity & Guaranty Life for $1.6 billion. DID YOU

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Amazon, Netflix and Uber. Those are three examples of companies using the online experience to disrupt an industry. But what do they have to do with buying life insurance? “Insurance consumers are influenced by what they see and experience in other channels like Amazon, Netflix and Uber,” said Luis Chipana, an analyst with Celent’s insurance practice in Bowling Green, Ohio. As a result, insurers have started to open new channels and are improving existing online channels. “The way these companies operate has made consumers expect the same experience from other industries,” Chipana said. “They want reviews, suggestions and ease of buying by click.” Some 93 percent of people 25 years and younger are willing to buy insurance online, compared with only 63 percent of people 26 and older, according to a new Celent report.

In 2015, life insurance premium growth rose 12 percent in China and 7.7 percent in India over the previous year.

InsuranceNewsNet Magazine » August 2017

Younger generations like millennials are more inclined to buy insurance online as long as they get discounts and have a clear idea of what they are being offered. — Luis Chipana, an analyst with Celent

NEW YORK IMPOSES CYBER REQUIREMENTS

Insurance advisors have enough regulations imposed on them already, and now New York state is requiring another set – this time addressing cybersecurity. The New York Department of Financial Services is requiring more than 3,000 financial institutions to implement a formal cybersecurity policy to address the rising threat of cyberattacks.

Under the new rules, covered entities, such as insurance companies, agencies, insurance brokerage firms and individual insurance professionals licensed to do business in New York, are required to maintain a written cybersecurity policy and conduct regular risk assessments within company-focused cybersecurity programs. Insurance businesses and insurance professionals who do not maintain office space in New York are also subject to the new rules.


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

37


LIFE

How to Save Your Client’s 401(k) Without Violating the DOL Rule Don’t let fear of the unknown keep you from branching into a new market for your practice. By Ric Lager

I

n the summer of 1999, one of my online research providers began to furnish historical price charts on mutual funds. In addition, their service allowed me to rank mutual funds by past investment performance and current relative strength calculations. My clients owned a few mutual funds at that time. But they were forced to own many more mutual funds in their company’s 401(k) retirement plan account. Not knowing any better, I asked one of my best law firm clients at the time if he would be interested in an independent, third-party analysis of his menu of Fidelity mutual funds on his law firm 401(k) retirement plan. My client’s response was, “Absolutely. I would love a second opinion on my 401(k).” I was shocked when I received a copy of my client’s quarterly 401(k) statement. He had three times the amount of money in his 401(k) than he had in the investment account that I managed with him. Since that meeting, I built an individual company 401(k) retirement plan participant investment advice niche business upon a single phone call and follow-up meeting. I have not stopped prospecting for individual company 401(k) investment advice clients in the last 18 years. I recently presented a conference call to investment advisors on how I built my individual company 401(k) investment advisory business. No surprise that the first question they asked me was how the recent enactment of the Department of Labor (DOL) fiduciary rule would affect my practice. I am not a compliance expert. But I do know a little bit about the registered investment advisory (RIA) business. Under the 38

DOL rule, a fiduciary level of investment advice will be phased in on all company retirement plans and individual retirement accounts (IRAs). In the RIA’s world, providing investment advice on any client asset base, regardless of location, is a fiduciary act. For an advisory fee, I provide fiduciary investment advice to all my clients on all the accounts that I manage.

The most important thing to realize about the fiduciary rule is that it has taken years to get to this point. This topic has also gained the attention of individual company 401(k) and IRA account investors.

How to Explain to Clients

A call from an insurance advisor to a good client will generate a positive response. You certainly can use the current headlines to change your investment advisory practice forever. The key words to explain to your client are “fiduciary” and “disclosure.” Those terms make up the largest part of the DOL rule. You can easily cover both of those concepts in a 30-second phone conversation. The phone call should end with a request for a copy of their current

InsuranceNewsNet Magazine » August 2017

company 401(k) retirement plan menu and most recent quarterly statement. A fiduciary acts in the client’s best interest at all times. That new level of liability would be no problem for your insurance practice. You are not selling investment products in this example. Remember that the client is locked into a default company 401(k) retirement plan menu. Your fiduciary act is to provide investment advice on that menu of mutual fund options available on the company 401(k) retirement plan menu. The full disclosure part requires more work. Individual investors never take the time to completely analyze the annual costs on the default menu of their company 401(k) retirement plan. Your fiduciary act is to obtain that information and feed it back to the client in terms that they understand. Your next fiduciary act is to provide the complete disclosure of the annual investment performance of each default menu mutual fund option. This information is a legal requirement of company 401(k) retirement plan sponsors and providers. Again, your individual company 401(k) participant client has never taken the time to review or understand the information. Again, I am not a compliance expert. But I have read more Employee Retirement Income Security Act opinions and sat in on more DOL rule webinars than most insurance agents have. The consensus now is that if a fiduciary investment advisor establishes an investment advice relationship with an individual company 401(k) retirement plan participant prior to retirement, that advisor has a much easier set of requirements to gain the IRA rollover.

Start the Process Now

Every investment advisor wants the company 401(k) retirement plan rollover. Why not start that process while your best


HOW TO SAVE YOUR CLIENT’S 401(K) WITHOUT VIOLATING THE DOL RULE LIFE clients are still working? Would you like to move your investment advisory relationship to the front of the line with your best near-retirement clients? If you start providing investment advice now on their existing company 401(k) retirement plan accounts, there will be no line when they retire. Many investment advisors who contact me for information on establishing an individual company 401(k) investment advice business operate from a standpoint of fear. Don’t let the fear of the unknown stop you. Did I know that I could really help my lawyer client improve his company 401(k) retirement plan investment management decisions? No. Did I know that when I offered a logical and organized investment management strategy for the law firm’s Fidelity mutual fund menu, every other lawyer at my client’s firm would become a prospect for me? I soon figured that out. The most important thing that I did was not let the fear of the unknown stop me from trying to use my investment research tools

to help my client’s 401(k) account. I realized that the most important event to come from my career-changing experience took place in my own mind. I let go of my fear. Your fear may tell you the following: » I am only an insurance agent. I can’t ask my clients for copies of their 401(k) retirement plan menu and most recent quarterly statements. What value can I provide? » I don’t have any experience with mutual funds. What resources are available to me to explain cost and investment performance history to my clients? » No advisor at my broker/dealer has ever provided individual company 401(k) retirement plan participant investment advice before. What will the compliance department say? What is the largest piece of stock and bond market investment assets owned by your best clients who are still employed? If your client household has two working partners, I don’t even need to ask you the

same question. The answer in both cases is the household company 401(k), 403(b) or 457(b) retirement plan accounts. The U.S. stock market is at near alltime highs. Interest rates in this country already are rising off all-time lows. Where will your next great client assetgathering opportunity come from? I already explained it to you. Why wait several years for a potential company 401(k) retirement plan rollover — and then stand in line with every other investment advisory in your local market? Begin a game plan now to become the investment advisor of record on your best clients’ company retirement plan accounts while they, and their spouse or partner, are still working. Ric Lager is founder and president of Lager & Co., a registered investment advisory firm based in Golden Valley, Minn. He was the co-creator of the “No More Pies” investment series for financial advisors and author of Forget the Pie: Recipe for a Healthier 401(k). Ric may be contacted at ric.lager@innfeedback.com.

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August 2017 » InsuranceNewsNet Magazine

39


LIFE

Fighting the ‘Alternative Truth’ About Life Insurance Dave Ramsey’s statements about life insurance don’t hold true when countered with mathematics.

By Michael Jay Markey Jr.

I

t’s time to correct Dave Ramsey and his society of Ramsonites with math and reason. My goal is to help you, the advisor, fight the faulty mathematical premises Ramsey and his team spread more quickly than the flu in a pediatrician’s waiting room. I hope to help you dispel Ramsey’s commonly spouted truths with math, fun, wit and a dash of sarcasm. The journey starts at DaveRamsey.com, in the blog section. There we find the gem, “The Truth About Life Insurance.” Here is Part 1 of Dave Ramsey’s version of truth: Your insurance person will show you wonderful projections, but none of these policies performs as projected. We must assume Ramsey and team intentionally used the word “none.” Why is the word none important? Any answer that leads anywhere other than the validation of the truth makes the “truth” false. Cash value life insurance has been in existence in the United States since the 1760s. Has any single, solitary policy over the last 250 years performed as projected? Of course, some have. Any answer other than no means Ramsey’s truth is false. Using the word “none” was a stupid mistake, but it illustrates Ramsey’s strong bias against this insurance product. No amount of math, oops, I mean, who knows what amount of math it would take to convince Ramsey that cash value life can be a good tool? Here’s Ramsey truth No. 2: If a 30-year-old man has $100 per month to spend on life insurance and shops the top five cash value companies, he will find he can purchase an average of $125,000 in insurance for his family. I used a life insurance calculator for a 30-year-old, preferred best nonsmoker with guaranteed coverage to age 100. The 40

lowest rate I found was $49.98 per month. Even the worst rate was nowhere close to $100. We’ll use the $49.98, since Ramsey tells listeners to meet with a good life insurance agent to get the best — often meaning the lowest-cost — insurance. For this example, I’m using a guaranteed universal life (GUL) policy. Although an indexed universal life policy without the guaranteed coverage would require less premium and therefore further dampen Ramsey’s flawed math, I instead wanted to use a GUL for one simple reason. The policy projection is guaranteed to perform as projected, and this basic principle makes Ramsey’s earlier comment of “none” even more idiotic. Consider the actual premium needed was only $49.98 per month rather than the $100 per month Ramsey indicated. The actual premium, for a product that is guaranteed to do what it claims, is still 50 percent less expensive than what Ramsey claimed. Now for the third Ramsey truth: If this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100. Earlier in this article, I used an underwriting class of preferred best nonsmoker for two reasons. One, according to the Centers for Disease Control and Prevention, is that fewer than 16 percent of American adults smoke. Two, a standard-health smoker would cause the monthly term insurance premiums to be five times higher than the amount Ramsey gave. With statistics and reason on my side, I went with preferred best nonsmoker. To get the term quotes, I went to Ramsey’s go-to, Zander Insurance. The monthly premium for a 30-year-old nonsmoker with preferred best underwriting was $10.31 a month, not $7. No big deal? Sure it is. This is 50 percent higher than what Ramsey stated. Any answer other than yes means it’s not true. Are premiums only $7 per month? Nope. Sorry. As a percentage, not even close.

InsuranceNewsNet Magazine » August 2017

Ramsey cash value life insurance truth No. 4: All of the $93 per month disappears in commissions and expenses for the first three years. After that, the return will average 2.6 percent per year for whole life, 4.2 percent for universal life and 7.4 percent for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America and Kiplinger’s Personal Finance and Fortune magazines. The same mutual funds outside the policy average 12 percent. You missed the ingenious Ramsey marketing at work, didn’t you? I did too the first time. He cites Kiplinger and Fortune for life insurance policies, but then right after the citation, he slides his own highly debated and many-times-debunked 12 percent rate of return for mutual funds. Wade Pfau of The American College wrote an article called “A Warning to the Advisory Profession: DALBAR’s Math Is Wrong.” Here Pfau compares the DALBAR’s stated Standard & Poor’s 500 annualized return with reality. Meaningful to this piece was his computation of the time-weighted annualized return. Time weighted means money invested equally each month rather than all at the beginning. Looking at each 20-year period ending from 2003 to 2016, there wasn’t a single


The Bill Levinson period yielding a return greater than 12 percent. In fact, nine of the 14 20-year periods had a gross rate (no fees deducted) of 8.03 percent or less. The median was 5.40 percent — but we’ll come back to this. Ramsey false truth No. 5: Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years don’t go to your family upon your death. The only benefit paid to your

BTID: “Buy Term and Invest the Difference” If someone buys term insurance and invests

the difference, by the time they reach age 57, this is what they will have accumulated.

house is paid for and you have $700,000 in mutual funds, you’ll become self-insured. Say hello to my li’l friend. My little friend is a financial calculator. This is going to be fun. Here are our inputs. The lowest-price term policy was $10.31 per month, whereas the lowest-price GUL was $49.98 per month. The difference is $39.67, but after a 5.75 percent upfront sales commission, $

$

$

Best-case Scenario $

Worst-case Scenario Median-case Scenario

family is the face value of the policy, the $125,000 in our example. This is generally true with GUL. However, Richard Rosen wrote an article for Investopedia called “Life Insurance With an Increasing Death Benefit,” in which he

which Ramsey has long publicly supported, we can invest $37.38 per month. Going back to Pfau’s piece, the highest S&P 500 annualized rate over any 20-year period ending since 2003 was 11.35 percent, whereas the lowest was 5.04 percent,

We need to calculate two things: 1. How much will our 30-year-old have in 20 years? 2. How much will they have at age 57?

states, “If the policy is a UL with an increasing death benefit, upon the death of the insured, the beneficiary would receive $500,000 of insurance — plus any accumulated cash value.” So does the big bad life insurance always keep your cash value? No. Again, any answer other than 100 percent yes is a no. One more Ramsey truth is, in fact, a Ramsey lie. Ramsey truth No. 6: When you are 57 and the kids are grown and gone, the

and the median was 5.40 percent. The average was 7.46 percent. Why did I exclude the average? First, median represents the exact middle; half of the results are better and half are worse. Second, averages can be very misleading. For example, the average person has one breast and one testicle. Clearly incorrect. Here’s a mathematical example. Firstyear return of 50 percent and a second-year return of 50 percent give you an average of zero, yet in reality it’s 25 percent.

August 2017 » InsuranceNewsNet Magazine

41

F CUS

Sponsored by Levinson & Associates

Online Life Insurance Platform Meets Next Generation Of Client Needs Bill L. Levinson

Y

our client base is rapidly changing. And it could mean you’re leaving easy opportunities on the table. When I started in this business, face-to-face interactions, multiple appointments, and constant phone calls were the norm. That’s how most clients (the Silent Generation and early Baby Boomers) preferred to do business. And frankly, that’s how I still prefer to handle things. These days, however, a new client base is entering the market. It’s a generation of client-driven shoppers, where people prefer to research and (if possible) buy online, instead of call, meet, and interact. That goes for most forms of insurance, too. From rental, homeowners, and auto all the way to health. When it comes to life insurance, however, most companies remain in the Stone Age, refusing to meet the demands of the modern consumer. And that means you could be leaving easy opportunities and commissions on the table. … commissions you can even earn while you sleep. At Levinson & Associates, for example, all active agents are equipped with Lightning Term Sales Platforms® right on their own website. This unique feature allows clients to quote AND purchase their own term life policies up to $150,000 directly from the agent’s website – giving the agent credit and commission for the sale, without the need for interaction. And as an added incentive, clients purchasing Lightning Term® through a Levinson & Associates agent website also receive up to one free year of tuition at 340+ colleges and universities across the country. While we strongly advise agent involvement for policies larger than $150,000, if your agency or IMO doesn’t offer clients the ability to purchase online, you can rest assured this emerging market will find an agency that does. • Bill L. Levinson is the managing partner of Levinson & Associates, a national life and annuity IMO since 1972 found online at www.carylevinson.com.


LIFE FIGHTING THE ‘ALTERNATIVE TRUTH’ ABOUT LIFE INSURANCE

BTID Account Balances at 57

Best How much will the 30-year-old have in their investment account by age 50 if they buy term and invest the difference? They will have somewhere between $15,645 and $33,384, when we compare the best, worst and median rates of returns. Ramsey says at the end of the 20-year policy, our 30-year-old crash test dummy will no longer need life insurance. So from age 50 to 57, we can invest the entire GUL premium minus commissions, which comes to $47.10 per month. In the chart below, you can see how the additional years of compounding, combined with a higher monthly investment, changes the best, worst and median scenarios. The highest balance at age 57 came to $77,078, whereas the lowest was $26,912, and the median was $39,429. In all but one scenario, the invested bal-

Worst

Median

ance was less than half of the life insurance given up. Ramsey says if the 30-year-old follows these steps, by age 57 their investments will be $700,000. To get to $700,000, it takes investing $214 per month at a 12 percent rate of return, plus $212,651, which is the amount accrued from BTID based on Ramsey’s faulty assumptions. I should mention Ramsey’s BTID figure of $212,651 is a whopping 275 percent higher than our best scenario. Using our best, worst and median life insurance numbers and adding the accumulated value of $214 invested each month at the best, worst and median rates garners a balance between about $500,000 and $175,000. Ramsey often says that if he’s just half right, you’re still in good shape. Hmm … the median represents half. The BTID

BTID Plus $214 Invested per Month Buying term insurance and investing the

difference – plus adding $214 monthly to that investment – doesn’t yield anywhere near the $700,000 that Dave Ramsey says it will. Best 42

InsuranceNewsNet Magazine » August 2017

Worst

Median

median balance plus median accumulated value of the $214 invested each month creates a balance of only less than $200,000. Would you call this self-insured? Would you call it OK? Projections don’t always pan out. This is one area in which I agree with Ramsey. He should address this in his own planning. Oh, wait — he doesn’t do planning. He does what he calls “counseling,” since he’s not licensed to do planning. Here is Ramsey truth No. 7: The truth is that you would be better off to get the $7 term policy and put the extra $93 in a cookie jar! At least after three years you would have $3,000, and when you died, your family would get your savings. Remember Ramsey overstated the cash value life premiums by 50 percent and understated the term premiums by 50 percent. The difference between the two types of life insurance, as we noted earlier, is only $37.38 per month. If that $37.38 were put in a cookie jar, after three years, the cookie jar would have $1,345. After 20 years, it would have only $8,971. Even Ramsey’s false amount of $93 per month is only $22,320 after 20 years. Near the beginning of Dave Ramsey’s article, he wrote, “Sadly, over 70 percent of the life insurance policies sold today are cash value policies.” No, Dave, sadly, more than 70 percent of the advice you give today on cash value life insurance is wrong, misleading, deceiving and borderline fraudulent. I’m sure Ramsey would argue his opinion, but his argument isn’t grounded in fact or math. In fact, on April 11, Ramsey said on his show, “A man with experience is not at the mercy of a man with an opinion.” Ramsey is not a licensed insurance agent, financial advisor, investment advisor, accountant or financial planner, and he doesn’t carry the experience those with these credentials have. Like most, Ramsey has an opinion. His is an opinion void of mathematical reason. Bad math leads to bad advice, and bad advice hurts people. Michael Jay Markey Jr. is a co-founder and owner of Legacy Financial Network, Kentwood, Mich., and is the author of Fireproof Your Retirement. He may be contacted at michael.markey@innfeedback.com.


The stars have aligned for a BRIGHTER LIFE EXPERIENCE Securian’s newest IUL product, Orion Indexed Universal Life, offers: • The potential for faster coverage and compensation. • New indexed accounts. • An array of digital enhancements. LEARN HOW Orion can take your indexed life sales to new heights. Contact your Life Sales Support Team today: 1-888-413-7860, option 1.

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Insurance products issued by: Minnesota Life Insurance Company | Securian Life Insurance Company These materials are for informational and educational purposes only and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products. Orion IUL is designed first and foremost to provide life insurance protection. While the interest crediting options are attractive for cash accumulation, the product should always be promoted to first meet the death benefit needs of families and businesses with cash accumulation as a secondary benefit. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender charges. One could lose money in this product. Policy loans and withdrawals may create an adverse tax result in the event of a lapse or policy surrender, and will reduce both the surrender value and death benefit. Guarantees are based on the claims-paying ability of the issuing insurance company. Orion IUL is pending state approval. Product features subject to change. Securian Financial Group, Inc. 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 ©2017 Securian Financial Group, Inc. All rights reserved. F88673-11 Rev 6-2017 DOFU 1-2017 97293

For financial professional use only. Not for use with the public. This material may not be reproduced in any form where it would be accessible to the general public. August 2017 » InsuranceNewsNet Magazine

43


ANNUITYWIRES

Financial Planners Don’t Love Annuities It could shape up to be a very bad year. The focus on fees and taxes is expected to make life difficult over the next year for life and annuity products in the eyes of financial planners, a survey on investing trends found. Usage or recommendations of fixed, variable and indexed annuities fell by several percentage points from 2016 to 2017, the survey of certified financial planners found. The survey was conducted by the Financial Planning Association, Longboard Asset Management and the Journal of Financial Planning. Planners showed a predilection for mutual funds, exchange-traded funds (ETFs) and cash equivalents as their go-to planning products for the next year, the survey found. While mutual funds and ETFs don’t have the same tax-deferral advantages as a variable annuity, their payouts are taxed at lower rates.

SHORTER SURRENDER PERIODS REDUCING COMMISSIONS

Agent commissions are dropping as new indexed annuity products with shorter surrender charges hit the market. First-quarter indexed annuity commission received by agents dropped to 4.96 percent from 5.37 percent in the year-ago period, data from Wink’s Sales & Market Report indicate. “Shorter-term products pay lower commissions,” said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink, publisher of the life

Percent of all FIA sales with surrender period of less than 10 years. DID YOU

KNOW

?

44

and annuity industry data tracker Wink’s Sales & Market Report. Surrender charges penalize an annuity contract holder for canceling the contract before a certain date, and allow insurance companies to recoup their commissions paid upfront to advisors on the sale of a commission-based contract. Charges are typically pegged to a sliding scale with higher charges in the earlier years and lower charges in the later years before disappearing altogether.

ALLIANZ LIFE’S INDEX VA SALES TO HIT RECORD IN Q2

Allianz Life’s index variable annuity (VA) sales are a bright spot in an otherwise contracting VA market. A pair of new index VAs was expected to help Allianz sell a record volume of the product in the second quarter. Allianz sold $1.45 billion worth of index VAs last year, compared with $592 million for traditional VAs. It is the first time index VAs have outsold

Ohio National launched its ONdex Income Accelerator guaranteed living withdrawal benefit rider, which is guaranteed to increase by at least 3 percent a year. Source: Ohio National

InsuranceNewsNet Magazine » August 2017

QUOTABLE

There areare 11 companies Agents obviouslyoffering having QLAC (qualifying longevity annuity to work just as hard as they did contract) products. Whileeven this isless last quarter, to make amoney. small and new part of the DIA market, we expect to see an uptick —inSheryl J. Moore, president and sales in 2016. CEO of Moore Market Intelligence and Wink Inc.

the company’s regular VAs, the company said. The company sold more than $420 million worth of index VAs in the first quarter.

GOODBYE, PAYCHECK — WE’LL MISS YOU

What will Americans miss most when they say goodbye to their workplace? Will it be the interactions with co-workers and customers? The fancy title? The coffee and doughnuts in the break room?

What Americans say they will miss most in retirement is receiving a steady paycheck. That’s the word from the Indexed Annuity Leadership Council, which found that about half of working Americans expect to miss their steady paycheck most when they leave their employment days behind. In addition, nearly half said they were worried about outliving their money. The steady paycheck is not the only financial-related thing that Americans will miss in retirement. About 26 percent said they will miss their health insurance.


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August 2017 » InsuranceNewsNet Magazine 45 412893 US (08/17)


ANNUITY

Selling Annuities in a Post-DOL World — What You Need to Know As the Department of Labor’s fiduciary rule enters its opening months, here is how the rule is affecting product sales.

Carriers Report Minor Issues in Opening Weeks of DOL Rule Annuity sales were still coming in as the fiduciary rule was in its early weeks. By Cyril Tuohy

E

xecutives from annuity carriers reported minor disruptions to agents and distributors after the Department of Labor (DOL) fiduciary rule’s first phase. Sales of annuity products were still “flowing in” from agents selling annuities into retirement plans, said Ray Wasilewski, chief operating officer, life companies, for FBL Financial Group. FBL Financial is a top seller of insurance in the Midwest. One of the company’s annuity products, however, was suspended, as the commission was too low and it made no sense to raise the commission on it, Wasilewski explained. “All of our products in qualified plans are DOL-ready,” he said. The DOL fiduciary rule, which raises investment advice standards into retirement accounts, requires that agents earn reasonable compensation and that commission structures remain more or less level across similar products. 46

FBL Financial operates under the Farm Bureau Financial Services brand, whose primary subsidiary is Farm Bureau Life Insurance. Some of Farm Bureau Life’s annuity sales processes are still being done manually, company executives said. If the rule remains, those processes will be fully

only to sell life insurance are in a more difficult spot.

Independent Agent Channel

For insurers with large sales volumes conducted through independent agents, the fiduciary rule will force agents to make some changes to sell fixed indexed annuities (FIAs). Agents will have to apply more diligence to record-keeping and disclose conflicts of interests — issues likely to give some agents discomfort, said Ron Grensteiner, president of American Equity Investment Life. There will be some disruption, “but it’s just a matter of time before they make the changes and get used to the adjustment,” he said. American Equity is a top seller of FIAs. Broker/dealers (B/Ds) are trimming the roster of companies on their “approved shelf,” Grensteiner said. American Equity’s Eagle Life subsidiary, which sells annuities into banks and B/Ds, is on many of those approved lists even if American Equity isn’t, he added. “We continue to work with more boots on the ground at Eagle (Life),” he said.

“It’s just a matter of time before they make the changes and get used to the adjustment.” Ron Grensteiner, president of American Equity Investment Life automated by Jan. 1, when the full rule is slated to go into full effect. The second phase of the rule will require greater compensation disclosures and a contract between advisor and client to sell certain annuities. For the most part, the DOL rule hasn’t affected the way agents do business in part because Farm Bureau sells through a multi-line captive agency system, CEO Jim Brannen said. Companies that rely on agents licensed

InsuranceNewsNet Magazine » August 2017


NOT TOO LATE: AN ANNUITY CAN HELP CLIENTS WHO NEED LTC NOW ANNUITY

August 2017 » InsuranceNewsNet Magazine

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ANNUITY SELLING ANNUITIES IN A POST-DOL WORLD

IMOs Have Tricky Path to Sales Under DOL Rules Insurance marketing organizations are figuring out the best route to take in selling annuities under fiduciary rules. By John Hilton

I

nsurance marketing organizations (IMOs) are playing a guessing game while selling annuities under the Department of Labor (DOL) fiduciary rules, experts say. The issue is how to sell variable and fixed indexed annuities for the remainder of the year. Phase one of the DOL rules went into effect June 9, but with two “transition” exemptions: the Best Interest Contract Exemption (BICE) and the Prohibited Transaction Exemption (PTE) 84-24. Ideally, IMOs and field marketing organizations (FMOs) would sell under the transition BICE, said Michael P. Kreps, a principal at Groom Law Group. The transition BICE is less onerous than the transition PTE 84-24. However, the BICE also requires a “financial institution” to oversee those variable and fixed indexed annuity sales. IMOs and FMOs cannot serve as financial institutions under the DOL rules. But the transition BICE language is flexible enough that it would seem to permit marketing organizations to sell under that exemption — at least until Jan. 1, 2018. 48

Phase two of the DOL rules, with the full BICE mandates, is slated to take effect on that date. “My understanding from the department is during this period they don’t plan to put IMOs and FMOs out of business,” Kreps said during a webinar sponsored by Groom Law Group and the Insured Retirement Institute. “They want to give

rules mandate Impartial Conduct Standards for all sales with retirement account funds. These standards have three requirements: use a best-interest standard, accept only reasonable compensation and make no materially misleading statements. Industry disclosure schemes seem to be more than adequate in most cases, said Thomas Roberts, a member of Groom Law Group’s fiduciary practice group. Some of the phase one requirements by the transition PTE 84-24 are more difficult, Roberts noted. Michael P. Kreps, a principal at Groom Law Group For example, “failure to disclose a conflict of interthem a path, so the BICE is the path.” est is in itself deemed to be a misleading Meanwhile, a “blanket exemption” to statement,” he said. permit marketing organizations to serve as That goes beyond what is mandated financial institutions is “unlikely to be final- by the transition BICE. Still, insurance ized in the near future,” Kreps added. marketing firms are shying away from At the heart of it, the DOL rules are the BICE. feared because they establish a private “I attribute it to sort of a lingering right of action allowing investors to doubt. A lingering concern,” Roberts sue for nondisclosure of a conflict of said. “Rather than risk the possibility interest. that transition period BICE might not be available, we would just feel better going Impartial Conduct Standards the 84-24 route and doing the extra work For the remainder of the year, the DOL necessary.”

“My understanding from the department is during this period they don’t plan to put IMOs and FMOs out of business.”

InsuranceNewsNet Magazine » August 2017


ANNUITY SELLING ANNUITIES IN A POST-DOL WORLD

Surrender Charges’ Disappearing Act The shorter surrender periods and no surrender charges are the result of annuity companies offering fee-based financial advisors new options that coincide with the dawn of the Department of Labor’s fiduciary rule. By Cyril Tuohy

S

urrender charges on fee-based variable annuities seem to be retreating faster than the polar ice caps, new filings reveal. The shorter surrender periods and no surrender charges are the result of annuity companies offering fee-based financial advisors new options that coincide with the dawn of the Department of Labor’s fiduciary rule. The rule began taking effect June 9. Nearly two dozen of these contracts were filed between Dec. 1 and May 30, Morningstar’s filings indicate. “These advisor-sold contracts typically have no surrender or a very short surrender (period) with very low penalties,” said

ing scale with higher charges in the earlier years and lower charges in the later years before disappearing altogether. With commission-based variable annuities, insurers bear a greater portion of the risk than with a fee-based model. “Shorter term surrender charge products are in our future, whether it’s fixed, indexed or variable; that’s what I’ve heard,” said annuity seller Bob Quinlan, owner of Quinlan Insurance & Financial Services in Winona, Minn. Under a fee-based model, advisors earn a fee even if the investor turns in his or her variable annuity early after a year or two. That represents a much lower risk for insurers. Lincoln Financial, Voya Financial, AIG, Jackson National, Transamerica, Nationwide, Pacific Life and Great West Life have recently launched variable annuities with no surrender charges, company websites indicate. Lower surrender charges could provide a boost to new variable annuity sales, which fell 21.4 percent to $101 billion in 2016 compared with 2015, Morningstar reported earlier this year.

“Shorter term surrender charge products are in our future, whether it’s fixed, indexed or variable; that’s what I’ve heard.”

Sales of 10-Year Products Soften

In the coming months, advisors can expect insurance compaBob Quinlan, owner of Quinlan Insurance & nies to release more shortFinancial Services in Winona, Minn. term surrender products, said annuity market expert Sheryl Kevin Loffredi, senior product manager, J. Moore. Moore is president and CEO of annuity solutions, for Morningstar. Moore Market Intelligence and Wink Inc. Surrender charges penalize an annuity Insurers perceive longer surrender contract holder for canceling the contract charge products as harder to justify under before a certain date. They also allow in- the fiduciary rule’s best interest contract, surance companies to recoup their com- she said. missions paid upfront to advisors on the First-quarter sales data appear to bear sale of a commission-based contract. this out. Charges typically are pegged to a slidIn the first quarter, 22.1 percent of fixed 50

InsuranceNewsNet Magazine » August 2017

indexed annuity (FIA) sales were for FIAs with a seven-year surrender period. This is compared with 16.2 percent in the first quarter of last year, according to Moore. Compared with the year-ago quarter, FIAs with shorter surrender periods racked up higher percentage sales gains than FIAs with longer surrender periods, Wink reported earlier this year. FIAs with durations of more than 10 years have seen a drop in first quarter sales, said Carolyn Johnson, CEO of annuities and individual life with Voya. “We’ve seen a shift from our 10-year to our seven-year product,” she said. Quinlan, the annuity agent, sells two or three indexed annuities out of the dozens he has access to. He said the most popular is the seven-year surrender charge FIA. “The 10-year surrender charge is too long,” he said.

Recent I-Share Low/No Surrender Charge Filings

Advisor-sold variable annuity contracts with no surrender or short surrender penalties are called I-shares. A listing of recent I-share filings or other variable annuities carrying no surrender charges or relatively low surrender charges appears below: Product Company Core Income with I-Shares.........Lincoln National Polaris Advisory Income.............AIG Elite Access Advisory...................Jackson National TA Variable Annuity I....................Transamerica Life Investor Advantage RIA Class............................................Lincoln National American Legacy Advisors........Lincoln National Choice Plus Advisory....................Lincoln National Investor Advantage Advisory............................................Lincoln National Smart Track Advisor.....................Great West Life Pacific Odyssey...............................Pacific Life Destination Architect 2.0............Nationwide Preferred Advantage....................Voya 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. 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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HEALTH/BENEFITSWIRES

HealthCare.gov Dropout Trend Continues

Number of Exchange Customers in Millions

More consumers are dropping out of the health coverage they signed up for under the Affordable Care Act, according to the U.S. Department of Health and Human Services (HHS). About 16 percent of consumers who signed up for coverage this year through public health insurance markets had canceled their plans by early spring. HHS figures show that 10.3 million people were signed up and paying their premiums as of March 15. That’s 1.9 million fewer than the 12.2 million who initially signed up during open enrollment season, which ended Jan. 31. In previous years many people who initially signed up also wound up dropping out, for a variety of reasons. In the first part of last year, the dropout rate was similar, about 13 percent. It increased as the year went on. Monthly enrollment averaged about 10 million people in 2016. Some of the main reasons for dropping out include finding job-based insurance, problems paying premiums, and becoming eligible for Medicare. A new analysis from HHS also found higher dropout rates in areas where insurers have left the program. Aetna and UnitedHealthcare also report they have robust anti-fraud programs. Doctors’ activities often leave a paper trail, investigators said, and insurers are sharpening their attention to prescribing patterns that can be one of the first signs of fraud.

HEALTH INSURERS CRACK DOWN ON PAINKILLER FRAUD

Health insurers are jumping into the war against opioid abuse, this time targeting doctors who fraudulently prescribe the painkillers. Highmark has formally referred 50 cases to law enforcement over the past three years, said Kurt Spear, the insurer’s vice president for financial investigations and provider review. Spear estimated the insurer has informally referred another 50 to 100 cases. DID YOU

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EVERGREEN HEALTH BECOMES FOR-PROFIT

Another health insurance CO-OP is going away – sort of. The Maryland Insurance Administration approved plans for Evergreen Health to be acquired by investors and convert to a for-profit insurance company. Evergreen Health was one of 23 consumer oriented and operated health plans (CO-OPs) created under the Affordable Care Act (ACA). Of those 23 CO-OPs, only a few are still in operation.

Pharmacy costs will comprise 17 percent of employer health spending in 2017, compared to just 14 percent in 2007. Source: PriceWaterhouseCoopers

InsuranceNewsNet Magazine » August 2017

QUOTABLE

We have a whole lot of people who are insisting on what health care reform should be. The more people you have at the dinner table, the harder it is to serve the meal that everyone would want. — David Grunke, speaker and coach with the Grunke Group in Madison, Wis.

Most of the CO-OPs established under the ACA have closed or are in the process of winding down. The financial pressure of starting an insurance company coupled with the ACA’s cost-sharing requirements led to their demise.

GOOD-BYE HARTFORD, HELLO NEW YORK

When Aetna announced it was looking to move its headquarters out of Hartford, Conn., company officials weren’t specific about where they planned to move. All the wondering ended, though, when it was announced the New York City would be the new home for the insurance giant. Aetna will move its headquarters by the end of 2018, after nearly two centuries in Hartford. Mark Bertolini, Aetna’s CEO and chairman, said New York City is a “knowledge economy hub” and a driver of innovations. But although Aetna’s corporate executives are moving out of Hartford, the company is not abandoning the city. The company will keep its Hartford campus, where about 6,000 employees will continue to work.


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HEALTH/BENEFITS

Brokers Are Key to Reimagining Employee Benefits Enrollment Employers need their benefits brokers to do more than sign up workers for coverage. By Meredith Ryan-Reid

T

oday’s workforce is more diverse than ever. Multiple generations are working side by side. In addition, certain demographic groups, such as single women, are on the rise in the workforce. Meanwhile, workers expect their employers to meet their personal needs and help them achieve financial security. Faced with the challenges of a diverse workforce and increasing worker expectations, employers are looking to their broker and consultant partners for increased support. This creates an opportunity for brokers to deliver for employer clients in new ways, especially when it comes to benefits communication and enrollment.

A Growing Partnership

MetLife’s 15th annual U.S. Employee Benefit Trends Study (EBTS) shows that 54

the importance of the employer-broker relationship is increasing. The support employers are now seeking from brokers doesn’t stop at product selection. Employers are looking for full-service partners in areas from strategy and products to communication and enrollment. According to the EBTS, 63 percent of employers say they are looking to brokers to provide insights on benefit trends and employee needs, 62 percent are looking to brokers for help communicating benefits to employees through resources like benefits handbooks, and 64 percent are looking for benefits administration support, including enrollment. In each of these categories, employer interest is up significantly from last year, jumping by 10 percentage points. These gains highlight an opportunity for brokers to deepen relationships with clients by delivering on the needs of employers and their workers.

support through the workplace, employees continue to be disconnected from the resources that can help alleviate financial concerns. According to LIMRA, nearly half of women today are without any type of life insurance, yet MetLife’s EBTS shows that life insurance is offered in the majority of workplaces. EBTS also shows that less than a third of employees understand most supplemental health benefits, yet more than half of employees are concerned about having enough money to cover outof-pocket medical costs. With this in mind, MetLife took an in-depth look in 2016 at the barriers that keep employees from understanding and, in turn, taking full advantage of their benefits. What we found is that employees, regardless of employer or industry, have common unmet needs:

Employees’ Unmet Benefit Needs

» They don’t have the time or energy to dig in.

Despite an interest in financial security

InsuranceNewsNet Magazine » August 2017

» They can’t navigate the benefits information they receive.


BROKERS ARE KEY TO REIMAGINING EMPLOYEE BENEFITS ENROLLMENT HEALTH/BENEFITS

What Employers Want From Benefits Brokers

» They don’t know who to turn to with questions. » When they don’t understand their benefits, they assume they don’t need them. When asked about their benefits, employees said things such as “There is all this information, but I don’t even know how to get it. Sometimes I accidentally find things”; “I wish I knew more about what the company offers — I feel like there’s a lot, but I’m not sure what. If I had an easier way to get to the benefits information up front, I would know more”; and “If I had a question, I guess I’d look on the portal. I didn’t know there was an 800 number.” Across the board, because of these four common unmet benefits needs, many workers are walking away from benefits that can help them be more financially secure. With workers looking to their employers for help with financial security, there is a key role for not only employers but also their trusted broker partners to play in helping workers understand their benefits, make informed decisions and easily enroll.

Four Immediate Actions to Improve Enrollment

As a broker discussing enrollment strategies with clients this year, consider these four unmet needs and recommend four subsequent actions employers can take to better deliver on workers’ needs and create a more productive enrollment experience. [1] Streamline enrollment materials to help workers navigate. Workers are overwhelmed by the information explosion at enrollment time. According to EBTS, about 40 percent of workers are confused by the information they receive from their employers about their benefits. Help cut out the clutter so workers can easily find succinct information that’s relevant to them, and prioritize the content so they get the most important information up front. [2] Create simplified, snackable information that’s easy for busy workers to digest. According to EBTS, more than two in five workers are stressed by the enrollment process, and many think it’s too complicated. During their busy workdays, they don’t have the time or energy

70% 60% 50% 40% 30% 20% 10% 0% Providing Insights on Benefit Trends & Employee Needs

2016

2017

Assistance With Creating or Maintaining an Employee Benefits Handbook

Providing Benefits Administration, Including Enrollment

Source: MetLife’s 15th Annual U.S. Employee Benefit Trends Study

to dig in, and in the evenings or on weekends, life gets in the way. This is why so many workers wait until the last minute to enroll. When they have simple, digestible content, workers can absorb information quickly yet still make informed decisions for themselves and their families. [3] Provide well-equipped representatives for questions. According to EBTS, only 37 percent of workers strongly agree that benefits communications give them the information they need to make the best decisions. When they have questions, one of the resources most preferred by workers is one-on-one consultations with benefits enrollment representatives, EBTS showed. However, many employers aren’t providing this opportunity. Encourage employers to leverage external resources, such as benefits communications firms, to assist. If you don’t have a relationship, ask your carrier. Carriers should be key partners in creating a great enrollment experience for workers. [4] Provide personalized information aligned with life events to make benefits more relevant. With multiple generations working side by side, you are unlikely to be able to reach each generation with the same communication or

message. Only about half of workers say that their employers’ benefits communications address their life stages and personal situations. Yet on the whole, workers say that personalized messages and materials reflecting life events or life stages would be effective for learning about benefits, according to EBTS. Given the diversity of the workforce today, this is more important than ever for employers to consider. By supporting employers in taking these steps to improve their workers’ benefits enrollment experiences, you’ll continue to add value as a trusted partner. More important, you’ll help employers cultivate the loyal and engaged workforce they’re seeking by enabling workers to depend on the workplace as a source of financial security. Meredith Ryan-Reid is senior vice president, distribution development and benefits delivery, group benefits, MetLife. Meredith may be contacted at meredith.ryan-reid@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.

August 2017 » InsuranceNewsNet Magazine

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NEWSWIRES

Powered by InsuranceNewsNet.com

What’s in the Future For Independent Advisors? Thanks to regulations and changing trends, financial advisors are walking a tightrope as they seek to adapt and survive. Need more evidence of that? Look at this trend from an industry consultant. Fee-based registered financial advisors (RIA) and dually-registered advisors are pulling away rapidly from their commission-based independent representative peers with securities licenses, according to Tiburon Advisors. “I would say that the RIA portion of this business and the dually-registered portion of this business are booming, doing extraordinary well, assets are going up a lot,” said Chip Roame, Tiburon managing partner. But the traditional commission-based, broker/dealer business — saddled with stagnant revenues and the shift in revenue models to favor more fee-based business — isn’t doing well. It may even see negative growth in the future, he added.

70% of age

65+ expected to use long-term care

BUDGETING FOR RETIREMENT? DON’T FORGET TO INCLUDE HEALTH CARE!

More advisors are figuring health care costs into the retirement equation. With medical expenditures taking up a greater share of a retired household’s expenses, some planners might even go so far as to consider discussing medical spending in retirement a fiduciary duty. In 2011, the average annual out-of-pocket health care cost for a head of household between 65 and 74 years old was $4,383. That was about 11 percent of total household spending, according to a 2015 analysis from the Employee Benefit Research Institute (EBRI). For head of households 85 and DID YOU

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older, the average out-of-pocket health care cost was $6,603, or 19 percent of household expenses. The present value of lifetime health care costs for a 65-year-old couple retiring today would come to about $404,000, according to HealthView’s 2017 Retirement Health Care Costs Data Report. Included in that $404,000 are health care premiums for Medicare Parts B, D, supplemental and dental insurance, deductibles, copayments, hearing, vision and dental out-of-pocket costs. For a 55-year-old couple retiring today, lifetime health care costs are estimated at $499,000, according to HealthView.

FEMALE BREADWINNERS NEED FINANCIAL ADVICE As more women become the family breadwinners, they are more in need of advice on how to inherit wealth or pass their own wealth on to loved ones. That’s the word from RBC Wealth Management, which found that the majority of women, even as they take on more family responsibilities, are “unprepared” to adequately “give or receive” a

are 21,488 fee-based financialPUBLIC advisors, of whichwas 11,888 THEThere AVERAGE RETURN ON AN INITIAL OFFERING 20 are percent thisregistered year. The average in the first day (or “pop”) is 13 percent. with theincrease Securities & Exchange Commission, and about

Source: Renaissance Capital with state regulators.Source: Source: Securities and Exchange Commission 9,600 registered LIMRA

InsuranceNewsNet Magazine » August 2017

QUOTABLE

It’s quite simple - those who don’t know how to handle money urgently need help when in receipt of sudden wealth. — Rob Drury, who runs the Association of Christian Financial Advisors

family inheritance. That’s a pretty big deal, as receiving an inheritance could provide a bonanza of financial opportunities for U.S households in paying down debt, covering college tuition, or saving for retirement, among other big-ticket financial obligations. It’s also why financial professionals should advise women, especially those household breadwinners, to get help in maximizing their inheritance experience, the report said.

AMERICANS’ CREDIT SCORE GOING UP

688 in 2005

700 in 2017

Americans are improving their credit-worthiness and it shows. The average FICO credit score has hit the 700 mark – which is considered in the “good credit” range. It’s the highest average score since FICO began tracking credit scores in 2005. The increasing average means more people’s scores are getting better, moving closer to the next category: “very good credit,” which kicks in at 740 on the FICO score. In addition to the average going up, there are also more people on the very high end (800 plus) — super-prime borrowers — than there are on the very low end (600 or below), also known as subprime borrowers. In the wake of the recession, many people acted in ways that may have hurt their credit score -- making late payments, keeping large balances on their credit card and taking on more credit than they could handle. But more people are putting those credit problems behind them, said Ethan Dornhelm, FICO’s vice president for scores and analytics.


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Advisory Fees Resist Downward Pressure in 2017, Despite Fears A report cites some “compression” in the investment advisory space — but not for the reasons industry professionals may think. • Brian O’Connell

D

espite widespread industry fears, financial advisory fees seemed surprisingly robust in mid-2017 and should stay that way for the rest of the year, experts say. Advisors fear fee erosion due mainly to increased competition from digital-based advisory services, increased practice efficiencies, and low-cost index funds and exchange-traded funds (ETFs). A white paper from Envestnet cites some “compression” in the investment advisory space — but not for the reasons industry professionals may think. “While there has been compression in the total fee charged to clients, highlevel trends mask the reality that the vast majority of fee compression has been driven by the compression of investment management costs rather than the component of the total client fee paid to the financial advisor,” the report stated. 58 58

Guessing blindly about pricing trends has often led advisors to be concerned they are charging fees that are too high. On the other hand, firms may assume their financial advisors are charging submarket fees, the paper said. Envestnet, which tracked 900,000 financial advisory accounts to come up with its data, reported that total client fees “have declined” over the last several years. The rate of decline seems to be driven primarily by the type of advisory program used, and not by clients fleeing the marketplace due to any perceived high costs of doing business.

Falling Fees

Investment advisory fees fell slightly across the board, although fees did climb one basis point in a single client category — those who have between $100,000 and $250,000 in assets.

InsuranceNewsNet Magazine Magazine »» August August 2017 2017 InsuranceNewsNet

In more affluent client categories, fees did fall on average, Envestnet reported, with the $500,000-to-$1 million category experiencing fee declines of four basis points. Client assets in the $5 million-andup range saw fees fall by three basis points. The type of investment product advisors use also has an impact on fees, the report stated. “In programs where client fees have declined the most, such as mutual fund (MF) or ETF wrap accounts or separately managed accounts (SMAs), advisors are seeking out the lower-cost passive solutions, bringing down overall client fees,” Envestnet stated. Yet client fees in unified managed accounts (UMAs) that included only managed strategies “saw little erosion,” according to the report, falling by only three basis points. “It’s believed that the UMAs’ potential to deliver more value to investors through accessible tax management and the simplicity of one account has contributed to the resiliency of client fees,” the report noted.


ADVISORY FEES RESIST DOWNWARD PRESSURE IN 2017, DESPITE FEARS

% Change 2016 to 2014

% Change 2016 to 2014

% Change 2016 to 2014

% Change 2016 to 2014

-1.7%

-5.6%

-3.6%

-1.8%

1.65% 1.42% 1.19% 2014

1.17%

1.17%

2015

2016

2014

1.40%

2015

1.70% 1.61%

1.59%

2015

2016

1.69%

1.67%

1.34%

2016

2014

2014

2015

2016

Envestnet analysis of APM, MF/ETF wrap and SMA accounts that ranged between 509,000 in 2014 and 743,000 accounts in 2016. UMA V2 accounts analyzed ranged between 7,300 in 2014 and 11,700 accounts in 2016.

Envestnet also cited the “resilience of financial advisor fees” as money managers strive to provide more affordable service solutions while keeping revenues stable. “In the case of SMAs and UMAs, where advisors have the opportunity to deliver additional value through tax management, financial advisor fees actually increased 1 to 3 basis points, whereas in MF/ETF Wrap and APM programs average advisor fees decreased 3 to 5 basis points,” the paper stated. But ask actual financial advisors, and they will cite their own reasons for fees remaining relatively solid in 2017. “Advisory fees have remained steady because advisors are doing the same amount of work and bringing the same value to their clients’ financial lives,” said Pedro Silva, a financial planner at LPL Financial in Shrewsbury, Mass.

‘No Oversupply of Advisors’

Regulatory factors come into play, as well. “In many ways, the new Department of Labor rules will likely reduce the number of advisors, which, in turn, means there is no oversupply of advisors willing to work for less,” Silva added. Advisors have also been proactive in reducing the fees of the investments they’re choosing, he noted. “By using ETFs, and individual stocks, advisors can reduce the overall costs of a portfolio while still providing active management and oversight,” Silva said. To Silva, the idea that someone should do the same amount of work but get paid less is unique to this industry.

“I can now go online and see videos on how to repair my own dryer, but that doesn’t mean the appliance repair person should be paid less,” he said. Other advisors are turning the traditional fee model on its head and opting for subscription payment models. That move resonates especially well with millennials, who

ent asset levels,” Linden explained. “You might pay 1 percent on the first $500,000 of assets, then 0.85 percent on the next $500,000 and so on. This blended fee structure can be confusing.” The monthly subscription model helps “ensure that high fees don’t rob your financial future while fairly compensating

“Advisory fees have remained steady because advisors are doing the same amount of work and bringing the same value to their clients’ financial lives.” Pedro Silva, a financial planner at LPL Financial in Shrewsbury, Mass. are used to paying subscription fees for services like Amazon Prime and Netflix. “A monthly subscription-pricing model is easy to understand and explain,” said Rosemary Linden, a money manager at Plan to Prosper Financial Strategies in Del Mar, Calif. Clients, particularly younger ones, appreciate transparent fee structures, Linden said. “They can think of a financial planning subscription fee just like any other bill they pay for a monthly service, such as their cellphone bill or gym membership,” she noted. Additionally, assets under management fees aren’t easy to explain. “They’re often calculated based on your average portfolio value in a given quarter, and the percentage fee changes at differ-

planners for the value we add with our services,” she added. There’s little doubt that the financial advisory profession is under pressure from several fronts. But for now, at least, fees remain relatively stable, and if Envestnet’s numbers are right, that should be the case for the foreseeable future. Brian O’Connell is a former Wall Street bond trader, and author of the best-selling books The 401(k) Millionaire and CNBC Creating Wealth: An Investor’s Guide to Decoding the Market. He’s a regular contributor to major media business platforms, including CBS News, TheStreet.com, and Bloomberg. Brian may be contacted at brian.oconnell@ innfeedback.com.

August 2017 2017 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine August

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Emerging Markets: Advisors, Pay Heed Before Setting Sail “Emerging market exposure should be a consistent strategy for investors, and not one predicated on current market conditions,” said Robert Johnson, president and CEO of The American College. According to Johnson, the two major advantages of emerging markets are higher potential stock returns than in developed markets and their relatively low correlation with those markets. “From 1988 through 2013, a broad emerging markets index had a mean annual return of 14 percent,” Johnson said, citing data from the 2015 book Invest With the Fed that he helped write. “Over that same time period, the S&P 500 had a mean annual return of 10.5 percent.”

Greater Volatility

Emerging markets are the place to be in 2017, as long as investors stay diversified, keep an eye on rates, and cap their portfolio allotment, one advisor said. • Brian O’Connell

M

oving through 2017, emerging markets are outperforming the Standard & Poor’s 500, the Russell 2000 and the MSCI EAFE indexes. But before advisors set sail for overseas markets, analysts warn caution. This crop of winners among exchange-traded funds (ETFs) also carries a fair share of risk, maybe too much risk, especially in singlecountry ETFs. By the numbers, emerging markets are roaring this year. The benchmark MSCI EM index stood at more than $1,000, as of June 1. The index is up 25 percent on a year-to-year basis, rising 150 points since December 2016. On an individual basis, First Trust Chindia ETF (FNI) leads the pack, up 27.75 60 60

percent on a year-to-date basis, as the two main Asian Tiger countries continue to show strength. The Columbia Beyond BRICs ETF (BBRC) is also humming, with a year-to-date return of 15 percent through the end of May. On the downside, Latin American country funds are getting decimated, with the benchmark Latin America 40 ETF (ILF) down 84 percent. Europe-themed ETFs are down, too, by 15 percent for the year. Yet, ask a professional Wall Street observer and you could get a lecture on why evaluating current market conditions with emerging market funds isn’t a good strategy. While you’re at it, don’t put too much stock in rates of return if you don’t cover a few key risk factors.

InsuranceNewsNet Magazine Magazine »» August August 2017 2017 InsuranceNewsNet

Yet while the emerging market index had a higher return, it also had greater volatility over that time period. “The broad emerging market index had a standard deviation of 23.7 percent annually and the S&P 500 had a standard deviation of 18.3 percent,” Johnson said. “Over that same time period, the correlation between the emerging markets index and the S&P 500 was 0.66.” Emerging markets “look attractive for a couple of different reasons,” Johnson added, mainly due to valuation levels and the path of expected future interest rates. “Emerging markets indices sell at a deep discount to the broad U.S. market,” he explained. “While the S&P 500 is selling for roughly 20 times earnings, emerging market funds are selling at closer to 12.5 times earnings. From a value standpoint, there looks to be more margin of safety in emerging markets.” Interest-rate trends factor into emerging market fund returns as well. “From 1988 through 2013, emerging markets provided a robust 16.5 percent return in rising interest rate environments, while only returning 8.4 percent in falling rate environments,” Johnson said. “This is exactly the opposite pattern we found in


EMERGING MARKETS: ADVISORS, PAY HEED BEFORE SETTING SAIL

U.S. stocks, as from 1966 through 2013, the S&P 500 returned 15 percent when rates were falling and only six percent when rates were rising. “With most analysts predicting a rising rate environment, emerging market equities are poised to perform well,” he added.

we have seen recently with Brazil,” Johnson said. A recent corruption scandal in the Brazilian government led to enormous oneday losses in Brazilian stocks and funds. The iShares MSCI Brazil fund (EWZ) lost 16 percent on May 18.

“Emerging market exposure should be a consistent strategy for investors, and not one predicated on current market conditions.” Investors should diversify their holdings across emerging markets, Johnson recommended. “Some broad emerging market index funds such as the Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX) are appropriate,” he said. “The fund is well diversified across several emerging markets and has an expense ratio of 0.32 percent, compared to the average expense ratio of similar funds which stands at 1.46 percent.” Going the “single country” route is just too risky with emerging market ETFs. “The bottom line is that individual emerging markets can be quite volatile as

“Investors would be wise to diversify across markets, either by purchasing several country emerging market funds or by holding a fund that broadly diversifies across the globe,” Johnson said.

Never More Than 5 Percent

For advisors looking for a percentage range with emerging market portfolio investments, Ben Westerman, a money manager with HM Capital Management in Clayton, Mo., provides some guidance. “As a general rule, we invest a portion of client stock allocation to international equities. The usual starting point is 15 percent,” Westerman said. “Of that 15 percent,

roughly 20 percent is in emerging markets. This brings the total exposure to emerging markets of about 3 percent of the overall stock portfolio.” Westerman said he would not invest more than 5 percent of a client’s overall investment in emerging markets. Also, he would advise clients to be prepared to go through cycles of five to seven years where emerging markets will underperform the S&P 500. Overall, emerging markets are the place to be in 2017, as long as investors stay diversified, keep an eye on rates, and cap their portfolio allotment to five percent, as Westerman advised. Do that and watch your clients benefit from having a well-traveled investment portfolio. 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.

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BUSINESS

Simple steps that you can take now not only will benefit you and the environment but also may help grow your marketing.

It’s Easy Being Green: Creating an Environmentally Friendly Agency Give yourself a marketing edge while you help save the planet. By Scott W. Johnson

T

he 2015 Nielsen Global Survey of Corporate Social Responsibility and Sustainability showed that almost three out of four millennials are “willing to pay extra for sustainable offerings.” The study also showed that members of Generation Z, who are in the 16- to 21-year-old age range, are willing to shell out more “for products and services that come from companies committed to positive social and environmental impact.” How is your agency poised to take advantage of this trend? There is a simple set of steps you can take now that will not only benefit you and the environment but also may be able to help your marketing efforts.

Green Your Agency

Something happened while the federal government attempted to create a carbon62

neutral agreement that ended in political gridlock. States, municipalities and organizations stepped in to fill the void. Looking to promote small businesses that care for the environment, some states have stepped up with a semiofficial approach. But how does a typical insurance practice become a green business? Greening your insurance agency will take time and resources. A smart first place to start is with a small assessment of where you currently are. Next, consider some of the simpler steps based on their ease of implementation and overall cost. Electronic signature technology: E-signature tools are the quickest and easiest place to start. If your agency is not using electronic signature for every single policy you issue, you are wasting your time, resources and future. The environmental impact of moving to e-signature is clear. The amount of paper that a medium-sized agency can save in a year would fill pallets. E-signature has numerous side benefits that don’t

InsuranceNewsNet Magazine » August 2017

affect the environment, such as greater security, increased speed of operations, and the ability to force clients to initial specific coverage limits as the agency sees fit. Think errors and omissions here. Some agencies have not stopped with just one e-signature solution; they have chosen to use DocuSign, Adobe Sign and others. Green cleaning supplies: I never thought green cleaning supplies were important, until I had kids and found my youngest son licking our table. I began to ask myself, what exactly is in these cleaning supplies and why do I need them in my home and in my office? How dirty did my desk really get since the last time the cleaning crew was here? Many cleaning supplies are loaded with chemicals that can be overkill for daily general cleaning. There are milder alternatives derived from plants and not produced in petrochemical factories. Save the hardcore stuff for the occasional spring cleaning. Recycling: Almost everyone does


IT’S EASY BEING GREEN BUSINESS this, but how many companies enforce it? Recycling is probably the best environmental policy that is easy for your clients to see when they come into your office. The American Forestry and Paper Association reports that 96 percent of communities in the United States have some access to paper recycling. What does it say to potential clients when they come into your office and see your staff throwing away paper? Anyway, after you elect to use electronic signature, you will not need much enforcement of paper recycling. Reduce the junk mail: We’ve all done it. We’ve signed up potential clients for our physical mailing list which automatically sends out an endless stream of letters. Cutting down on this form of marketing can really reduce your carbon footprint. Suggestions include moving to postcards and email newsletters. Constant Contact and Twitter may get you just as far on half the cost. More expensive but worth it: If you are really energetic and want to make a big impact, other green-friendly policies involve moving to 100 percent recycled

Question your carriers: After you become a green agency, clients may ask about your carriers. Which carrier do you think is the most green? First off, Forbes does not list any American insurers on its 2017 list of the world’s most sustainable companies. Short of some national ranking, you may have to base your opinions on insurance carriers’ websites. Perhaps during your face-toface meetings with your carriers, you can ask them directly for information concerning their environmental policies. Tell them your clients want to know!

Becoming a Certified Green Business

There are all sorts of programs to certify green credentials, but be careful in assuming what is and is not legitimate. California, Illinois and a few other states have government-sanctioned programs to credential businesses as green. Some local programs — either working with their state, such as Los Angeles Green Business, or separate ones, such as MiamiDade Green — allow local businesses to become certified.

E-signature tools are the quickest and easiest place to start. If your agency is not using electronic signature for every single policy you issue, you are wasting your time, resources and future. paper, allowing employees to work from home (and therefore shrinking your office footprint) and considering renewables such as solar power as your primary energy source. Another earth-friendly consideration may be to contribute funds to a local environmental charity. Such a charity may be seeking contributions for something like a new wilderness park. This consideration can come with its own separate marketing benefits as well. Having your agency’s name connected with a well-known and well-regarded community environmental group may come with instant green credibility.

In general, the certification process allows you to provide documentation about how you are saving the environment. The California Green Business program, usually available through a local chapter, will require a certain number of environmental policies to be instituted before an organization can become certified. You also will have to make an environmental pledge. More states will likely set up their own certification programs, opening up the potential for you to be the first green-certified insurance agency in your state. Chair a meeting, write your congressman or offer to donate your time to

help create such a program.

Turning Green Into Green

After your agency becomes green, how do you market that greenness? Just because you and your agency are saving the planet does not mean that your clients will know this. Marketing greenness to your clients and the community could be what separates you from the agency down the street. As with every marketing program, it must be specific to the task and the client. Since you know that millennials may be more caring of the environment than those of other age groups — they may be a good marketing niche for you. But don’t make the mistake of sending out 3,000 mailers to announce how much you care for the environment. Consider your marketing efforts with a green eye. You might begin marketing with a simple news release, written and submitted online. Follow up with a blog post on your website, complete with the usual social media posts. Consider creating a simple green emblem that demonstrates your environmental commitment and add it to your emails, websites, business cards and documents. From there, you can use your new green credentials to add your company to a few of the many online green business directories. You may even want to make your greenness part of a concerted marketing effort that fits into your overall marketing plan. Consider adding it to the bottom of your company listing on various social media and Yellow Pages-type listings. Remind your clients of your green credentials by including a mention at the bottom of your company email signatures. Perhaps your environmentally conscious clients will be more likely to refer you in a green manner — electronically! Scott W. Johnson is the owner of Whole VsTermLifeInsurance.com, a division of Marindependent Insurance Services. His agency in Marin County, Calif., has been a California Certified Green Business for about two years. Scott may be contacted at scott.johnson@innfeedback.com.

August 2017 » InsuranceNewsNet Magazine

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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.

The Forgotten Generation X This generation has money and power. Yet companies often ignore Generation X in favor of the baby boomers or the millennials. By Jocelyn Wright

“M

arcia, Marcia, Marcia!” is a classic line any fan of the 1970s hit TV show The Brady Bunch would recognize when Jan, the middle daughter, expressed her frustration over the constant attention given to her older sister, Marcia. This is a scene all too familiar to Generation X as companies fall over themselves trying to reach the older, “popular” baby boomer sibling or even grab the attention of the younger, “adorable” millennial sibling, leaving the Gen Xer feeling like the forgotten middle child. Generation X was born between 1965 and 1980. Gen Xers are the smallest of the three generations. They comprise roughly 65 million people compared with their boomer and millennial counterparts, with approximately 77 million and 83 million people, respectively. It is worth noting that the other generations span about 20 years while Gen X spans only 15 years. Gen Xers are known for their resilience. They were born during a time of transition. In their youth, Gen Xers likely grew up in a household where both parents worked outside of the home. Or they grew up with divorced parents, as the national divorce rate peaked in 1980. This led to the creation of the term “latchkey children” where Gen Xers had to take on additional responsibility at home. They also came of age during an expansion in technology — from microwave ovens and remote-control televisions to cell phones and computers. At the start of Gen X’s working life, an increasing number of jobs were being sent 64

overseas, and more companies began moving from defined benefit to defined contribution plans. Gone were the days of working for one employer your entire career and retiring with a gold watch and a pension. And who can forget the stock market crash of 1987, also known as Black Monday? This made way for a growing sense of cynicism with Generation X feeling as though the rug were being pulled out from under them. But through it all, they persevered.

competing financial priorities and need advice on how to balance them.

Money to Burn

[5] As Gen X women increasingly take on caregiving responsibilities for elderly parents and relatives, it is a good time to talk to them about their own needs should something unexpected happen to them and how they hope to be cared for in old age.

The first Gen Xers began turning 50 in 2015. According to an American Express OPEN Forum, Gen X has money to burn. Although they only account for 25 perMillennials, cent of all adults, they represent 29 m ille nnials, percent of estimated millennials! net worth dollars and 31 percent of total income dollars. In 2016, The American College State Farm Center for Women and Financial Services released “5 Ways to Help Gen X Women Achieve Their Financial Goals.” It states that Generation X women are focused on reducing debt, driven largely by mortgages, while trying to save for their children’s college education and for retirement. The five ways include: [1] Gen X women could benefit from a plan and a product to help them save for their children’s education. [2] Even though retirement is not far off for some Gen Xers, few have calculated what they need to maintain their lifestyles in retirement. Gen X women need reliable tools to set goals and schedules for retirement savings. [3] It is time that Gen X women understand how financial services professionals can help. There is some lack of trust that must be overcome. Yet, Gen X women face

InsuranceNewsNet Magazine » August 2017

[4] Most Gen X women say they are saving for retirement through a workplace retirement savings plan, but they are less likely than boomers to use other products that can help them save and invest for retirement. Gen X women could benefit from advice on how to diversify beyond workplace plans.

We no longer can overlook the power of this generation. Why should it be an either/ or strategy where the attention is focused primarily on retiring boomers because they have more assets? It can be an also/and strategy where we invest the time in developing relationships with Gen Xers prior to retirement. The oldest Gen Xers have just turned 50, leaving them with at least 10 additional years of employment before retirement. This is a critical period for them as they are more likely to be sandwiched between raising children and caring for aging parents. Members of Generation X also stand to inherit assets from their parents. Now is a good time to schedule family meetings. This will provide the children of older clients an opportunity to interact with advisors, and could go a long way in establishing trust that likely would increase the chances of a continued relationship. Gen Xers have a unique position as a generational bridge to the younger millennials and the even younger Generation Z, as well as the older boomer and silent generations. It is time Generation X gets the attention it deserves. 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.

All Good Prospects Have These Nine Things in Common What to look for as you build your prospect pipeline. By Ayo Mseka

H

igh-producing agents know that the key to success is having a steady stream of highly qualified prospects to convert into clients who are interested in working together to secure a sound financial future for themselves and their loved ones. But how do you tell a good prospect from a “poor” prospect? What are the characteristics to look out for as you build your prospect pipeline? Some of the answers to these questions can be found in the book titled Unlimited Sales Success by Brian Tracy and Michael Tracy. The book lays out the fundamentals of successful selling in today’s complex sales arena and identifies some of the best practices of top performers. In the chapter titled “Power Prospecting,” the authors share what they believe are characteristics possessed by all good prospects. [1] A good prospect is someone with a problem your product or service can solve efficiently and cost-effectively. Once you are clear about the problem your product or service can solve, you then should identify those customers who are the most likely to have those problems. For example, a question that salespeople often ask their business-to-business prospects is “What problems in your business keep you up at night?” [2] A good prospect has a need that your product or service can satisfy. What need would your prospects have that would make them the ideal customers to buy your product or service as soon as possible? Prospects usually have three types of needs, the authors note: 1. The need may be obvious. In this case, you should ascertain how you can best satisfy this need.

2. The need may be unclear. You need to work with the prospect to clarify the need. 3. The need may be nonexistent. As an honest professional, you can tell the prospects that what they are currently using is appropriate for them at the moment. [3] A good prospect has a goal that your product or service can help them achieve. The primary buying motivation for all products and services is some improvement for the purchaser. When a prospect has a specific desire to improve their life in some fashion and your product can help them achieve this goal, it is likely that they can be a good prospect for you. [4] A good prospect has a pain or concern that your product or service can take away. [5] A good prospect has the power and authority to make the buying decision for your product or service. If the prospect recognizes the fact that they have a problem, a need or a pain, but have no authority to make a buying decision and you cannot get to the person with the authority to do so, the sales process usually will come to a halt. [6] A good prospect likes you and your company, as well as your product. People are primarily emotional in their decisionmaking, and almost all emotions revolve around how one person feels about the other. [7] A good prospect can become a multiple purchaser if they are satisfied. It

is not a good use of your time and energy to spend a lot of effort on making a single small sale. The types of prospects you want to seek out and work hard to acquire are those who have the capacity to buy large quantities of your product or service if they are happy with their first sales experience with you. [8] A good prospect is a center of influence — someone who can open doors for you to reach other prospects. Sometimes a single sale to a highly respected customer can open the door to other individuals or corporations that respect that customer. [9] A good prospect is easy to sell to and service. The best prospect is a potential customer in the office next to yours and on the same floor. At least that customer is located nearby and is easy to get to. The authors add that one of your main goals as a top salesperson is to maintain high levels of positive energy. To do so, you must reduce the amount of time you spend face-to-face with negative people. When you recognize the fact that you are in the presence of a negative person or a poor prospect, end the meeting quickly and wish the person well. You then move on to the next person, who might be more positive and receptive to what you are offering. Ayo Mseka is editor of NAIFA’s Advisor Today magazine. Ayo may be contacted at ayo.mseka@innfeedback.com.

August 2017 » InsuranceNewsNet Magazine

65


MDRT INSIGHTS

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

Supplementing Retirement Plans With Life Insurance Clients may think that the funds they have accumulated in their defined contribution plan will be enough to shore up their retirement and take care of their dependents, but they are mistaken. By Mark Dorfman

H

e was saving his nickels for the day he retired, but his early demise didn’t let him enjoy retirement. Gone by the age of 62, my father-in-law had spent decades contributing to a traditional retirement plan that was never used. But even if he had survived long enough to enjoy a decade or two of retirement, the retirement plan alone never would have provided the lifestyle he was accustomed to. Defined benefit plans, which once stood the best chance of matching your retirement lifestyle, have been relegated to times past. At $18,000 a year, today’s 401(k) limit is hardly enough to keep up with the anticipated expenses a retiree will face. Insurance premiums alone in retirement can practically bankrupt you, whether it’s premiums for Medicare and supplemental insurance, long-term care insurance, homeowner’s insurance or liability insurance. There are also taxes that don’t go away simply because you’ve retired, such as real

Then what would be left over to pay for travel or buy the grandkids presents? The only option is for clients to start saving more than they think they need. Once they have maxed out their traditional retirement plan, a well-thought-out life insurance program can be a smart tool for additional savings.

Planning for Unexpected Death

Life insurance primarily can help protect clients in the case of unexpected death. If a client lives long enough and sticks to their

61 percent of Americans said their families would assume debt if they died tomorrow, and 38 percent of them said the debt would be $10,000 or more. estate taxes on a lovely retirement condominium or income taxes on money withdrawn from a traditional retirement plan. Going out to see a movie or eat at a restaurant is getting more and more expensive. 66

retirement plan, they have a reasonably good chance of meeting their goal. But if that client dies unexpectedly, a qualified retirement savings plan wouldn’t be able to fill in the financial gaps like a life insur-

InsuranceNewsNet Magazine » August 2017

ance policy would. Since life insurance is the only vehicle that can fully complete the deliverance of a vast sum of money immediately after a client signs up for a policy, it protects clients in a more complete way than a traditional retirement plan could. According to a recent study conducted by the Million Dollar Round Table (MDRT), 61 percent of Americans said their families would assume debt if they died tomorrow, and 38 percent of them said the debt would be $10,000 or more. Of those who have dependents, 47 percent said their dependents would run out of money in two years or less without their personal income. If a client relies on their retirement plan to be their safety net in the case of unexpected death, it can put their family at serious risk. An individual retirement account or 401(k) plan simply cannot complete the savings element for their spouse or children like life insurance can.

A More Stable Investment Option

Individuals using a qualified plan to save for retirement have limited investment options, typically confined to purchasing stocks and bonds, either directly or


MDRT INSIGHTS

ADVERTISER INDEX Advertiser

Pg

Advertiser

Pg

Allstate

IFC

Kansas City Life

37

American National

7

Levinson & Associates

41

American Tax Planning Institute

15

NAFA

57

AssessBest

39

Nationwide

9, 33

Brokers International

13

Oxford Life

19

Advisors today should focus on educating clients and inspiring them to develop ambitious retirement savings early on, explaining the different investment options, and monitoring their progress year after year. Where possible, encourage

Brookstone Capital

IBC

Park Avenue Securities

5

DelcoUSA

10-11

Peak Pro Financial

21

ECA Marketing

27

Petersen International

53

There is a big opportunity for advisors to reach millennials by engaging in financial education and working in tandem with their employers.

EquiTrust

49

Securian

43

Foresters

45

Simplicity Financial Marketing

FC, 23

Gameplan Financial Marketing

51

Table Bay Financial

35

GPM Life

2-3

The College for Financial Planning

47

Imeriti Financial Network

1

Tucker Advisors

BC

through mutual funds and exchange-traded funds. In doing so, they may be exposed to market volatility, which may have been OK earlier in life but becomes less desirable for people as they prepare for retirement. For many clients, riding the ups and downs of the market is not an ideal way for them to save. Using whole life insurance to boost retirement savings is a great option for clients who do not want to be exposed to market volatility or losses that can occur during a down year. By contrast, the dividend payout of a whole life insurance contract is far less volatile than that of a typical stock portfolio.

Becoming Warriors for Financial Education

them to max out their retirement plans. If there is still some disposable income left over, look to life insurance as another tool in your arsenal. Perhaps one of the biggest challenges is getting millennials to engage in conversations about products such as life insurance that aren’t inherently attractive or interesting. There is a big opportunity for advisors to reach millennials by engaging in financial education and working in tandem with their employers. Although it is an employer’s responsibility to provide access to education on their qualified plans, too many companies fail in this education role. Advisors would do a great service to their industry by focusing on education rather than sales. If advisors take it upon themselves to become warriors for financial education, the public would be more inclined to engage in discussions on how to save for retirement and protect their futures. Mark Dorfman, CLU, ChFC, is CEO and founding partner of ODI Financial. He has been a member of the MDRT since 1997. He was appointed 2008 Top of the Table chairman and divisional vice president. Mark may be contacted at mark.dorfman@innfeedback.com.

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67


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.

LIMRA INSIGHTS

Millennials Seek Simplicity as They Consider Life Insurance The millennial generation is all grown up, and they are better prospects for buying life insurance than many expected. But millennials want to keep the buying experience simple. By Lauren Finnie

T

he millennial generation is the name given to the group born between 1981 and 1997. This entire generation has reached adulthood, and they account for nearly one-fourth of the U.S. population. As such, they present an important market segment for the financial industry. Millennials show a preference for shopping and buying online. As a result, businesses are developing innovative technologies to improve their penetration of the millennial market. The life insurance industry has an opportunity to tap into this market by focusing on millennials’ shopping and purchase preferences. Millennials want simple online methods for accessing life insurance information and purchasing policies. Their benchmarks for these capabilities include Amazon and Uber, which means millennials have high service expectations and they want the same type of user experience from financial service providers. Yet, online capabilities may not be the most important consideration when marketing life insurance to millennials. The 2017 Insurance Barometer study, conducted by LIMRA and Life Happens, identified a number of factors that negatively affect life insurance ownership among these young consumers. » Half of millennials who looked into buying individual coverage online still do not own coverage. The main reason is because they do not see value in the protection. This suggests the value proposition for life coverage is a critical element in marketing to millennials online.

68

Misconceptions also play a critical role in marketing effectiveness. For example, younger adults are the age group most likely to qualify for life insurance and to have the lowest premiums per dollar of coverage. Yet, many millennials believe the opposite is true.

age annual growth rate of mobile payment transaction volume from 2016 to 2021 is 62 percent, according to the 2017 Digital Economy Compass by Statista. Easy access to making payments via a mobile device is an important factor when considering the purchase of life insurance.

» Three out of four millennials (73 percent) overestimate the cost of life insurance. On average, they expect life insurance to cost three times more than it does. This is a significant barrier to purchasing — 78 percent of millennials who are without life insurance think it is too expensive.

» Digital social interaction is important. Peer-to-peer (P2P) models are designed to provide a community-like experience where users feel connected to other insureds. With the amount of time millennials spend on their phones (ranging from just under two hours to more than two and a half hours per day), the appeal to social media and P2P platforms for easy peer interactions and listening to personal testimonies is an important factor for purchasing life insurance for more than half of these individuals.

» Almost half of millennials (42 percent) think they won’t qualify for life insurance. This assumption may prevent millions of millennials from exploring their life insurance options. This mistaken belief must be addressed before marketing effectiveness will increase in this segment. Millennials were born into the information age. They are accustomed to finding answers to their questions online. The life insurance industry can leverage interactive online tools to correct misconceptions and build a better appreciation of the value in having coverage.

What Else Millennials Have Taught Us

The millennial generation has challenged product design and marketing across industries. They are attracted to simple and clean applications, and they want to be guided seamlessly toward their purchase decisions. The life insurance industry has a great opportunity to learn from millennial attitudes in order to anticipate the needs of the next generation (Generation Z), whose members are even more inclined to use technology. » Mobile access is required. In 2014, the number of mobile devices exceeded the global population. The anticipated aver-

InsuranceNewsNet Magazine » August 2017

» The demand for simplified issue products will continue to grow. Fifty-three percent of millennials find the ability to avoid face-to-face interaction an appealing benefit of simplified underwriting. Seven in 10 respondents (71 percent) would be likely to purchase life insurance priced via personal data — without having to submit to any medical testing. While industry marketers and financial professionals need to focus their resources on their best sales prospects, much of the information in the Insurance Barometer study suggests millennials are better prospects than many expected. These findings will open the door to great opportunities in the marketplace. Lauren Finnie is Senior Analyst, Markets Research, LIMRA. Lauren may be contacted at lauren. finnie@innfeedback.com.

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