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ALSO INSIDE Michel Neray: How Stories Are Better Than SEX PAGE 12
Mars, Venus And Risk: New Approaches to Selling LTCi PAGE 50
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IN THIS ISSUE
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NOVEMBER 2018 » VOLUME 11, NUMBER 11
By Steven A. Morelli Advisors are becoming holistic in their practices, and that means greater use and acceptance of technology as a way to streamline the customer experience. 30 The 2018 Tech Guide
Future-forward digital inventions that give consumers unprecedented access to products, services and information.
42 Why Do So Many Families Go Without Life Insurance?
10 Annuity Sellers Face Unhappy Trails And States’ Regulation Roundups
By David Ehrenthal A survey found that many adults understand they are putting their families at risk by not having life insurance, but they are uncomfortable discussing their mortality.
By John Hilton Ohio National’s decision to abandon service contracts for brokers who sold its variable annuities is setting a precedent that shakes the very core of the relationship between insurers and independent sellers.
ANNUITY IN The Field
34 When The Community Diversifies, So Must The Practice By Susan Rupe Brian Haney had a passion to serve others from a young age, and he devotes much of his practice to serving two demographics very different from his own.
14 H ow Stories Are Better Than Sex
40 Advisors And Technology: Crossroads Of A New Frontier
An interview with Michel Neray Good stories light up the same part of the brain that lights up when we have sex. Michel Neray has studied the way the brain reacts to hearing a story and how that can lead to increased sales. In this interview with Publisher Paul Feldman, Neray outlines the steps to telling a good story and why storytelling is an important way to connect with prospects.
InsuranceNewsNet Magazine » November 2018
By Michael Babikian Insurance carriers have put a lot of effort into streamlining the buying experience by expediting underwriting, but that alone is not enough.
46 C ould Indexed Annuities Steal The Spotlight From VAs? By Cyril Tuohy Variable annuities are showing a rebound in sales. But analysts say the indexed annuity market shows no sign of slowing down.
Now there’s someone who could use some long-term care...
50 M ars And Venus Look At Risk: New Approaches To Selling LTCi By Harley Gordon When you understand the way men look at risk differently from how women do, you are on your way to having an effective conversation on how to pay for long-term care.
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IN THIS ISSUE
View and share the articles from this month’s issue
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NOVEMBER 2018 » VOLUME 11, NUMBER 11
66 MDRT: Client Service As A Cornerstone Of Retirement Planning
56 The Millennial Dilemma: Student Debt Or Retirement Saving? By Chris Dugan The millennial generation is taking the labor force by storm. But they are faced with two competing financial needs: saving for retirement and paying down their student loans
By Clay Gillespie Clients face a multitude of issues when they prepare for retirement. Here is how you can help smooth their transition out of their working years.
60 Defining Your Ideal Client: It’s Not How But Who
58 Beat The Race To The Bottom On Fee Compression By Craig Hawley The vast majority of advisors are feeling the pain as fee compression forces them to adapt. But it doesn’t have to be that way.
68 LIMRA: It’s All In The Timing: Making The Right Retirement Decisions
By Chris Kowalik Your ideal clients are people you genuinely enjoy working with. Here’s how to get more of them.
By Cecilia Shiner Many workers base their retirement plans on factors other than their own financial circumstances.
64 NAIFA: Who Leads The Sales Dance?
EVERY ISSUE 8 Editor’s Letter 20 NewsWires
By Elie Harriett Sometimes you need to listen to clients better and follow their lead to the place where they are most comfortable.
38 LifeWires 44 AnnuityWires
48 Health/Benefits Wires 54 AdvisorNews Wires
66 Advertiser Index 66 Marketplace
275 Grandview Ave., Suite 100, Camp Hill, PA 17011 tel: 717.441.9357 fax: 866.381.8630 www.InsuranceNewsNet.com TECHNOLOGY DIRECTOR PUBLISHER Paul Feldman SENIOR CONTENT STRATEGIST Kristi Raynor EDITOR-IN-CHIEF Steven A. Morelli AD COPYWRITER John Muscarello MEDIA OPERATIONS MANAGER NATIONAL SALES DIRECTOR MANAGING EDITOR Susan Rupe AD COPYWRITER James McAndrew NATIONAL ACCOUNT MANAGER SENIOR EDITOR John Hilton CREATIVE DIRECTOR Jacob Haas SENIOR WRITER Cyril Tuohy SENIOR MULTIMEDIA DESIGNER Bernard Uhden NATIONAL ACCOUNT MANAGER BUSINESS DEVELOPMENT ADVISORNEWS MANAGING EDITOR Cassie Miller GRAPHIC DESIGNER Shawn McMillion CORPORATE ACCOUNTANT VP MARKETING Katie Frazier EXEC. ADMINISTRATIVE ASSISTANT Kelly Phillips QUALITY MANAGER Sharon Brtalik
Joaquin Tuazon Ashley McHugh Tim Mader Samantha Winters David Shanks Steven Haines Elizabeth Nady
Copyright 2018 InsuranceNewsNet.com. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail email@example.com, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 115, or firstname.lastname@example.org. Editorial Inquiries: You may e-mail email@example.com or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 717.441.9357, Ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein.
InsuranceNewsNet Magazine » November 2018
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WELCOME LETTER FROM THE EDITOR
How Tech Saves The Day
y sister-in-law, a freshly minted doctor of psychology from a prestigious university, was coming over for a visit before moving on to the next stage of her life. As we sat on the porch at sundown, the light caught Jill’s face, throwing shadows into deep lines of dread. The future stretched out before her but Jill’s thoughts were locked on one thing — money. She was buried in more than $100,000 in student loans. This was the early 1990s, when that size of student loan debt was still unusual. At least, it was to me. I was just grateful that I did not have the smarts or ambition to go for anything more than a bachelor’s. Debt became an abstraction for her; a constant presence like grief. She did not watch the money she spent. What did it matter? What is another ripple of red in a sea of red? That is the tunnel vision of scarcity. I heard quite a bit about this when I started with InsuranceNewsNet. I don’t remember who uttered it, but someone said that people who don’t have money are fixated on it the way people who are suffocating focus on air. I remembered how terror guided all of Jill’s decisions. How do you lift your gaze to look ahead when you are fixated on the potholes below you?
Generations In Chains
Today we have a couple of generations bearing this weight. Our young professional class is starting life deep in a hole that they may never get out of. These are the people who will teach our kids, represent us in court and stitch up our wounds. These are our best and brightest, shackled to ball and chain. An episode of the excellent podcast Hidden Brain focused on tunnel vision and reminded me of the phenomenon in which anxiety over scarcity derails the brain from making sound, long-term decisions. On insurancenewsnet.com, we run article after article detailing just how little 8
a new, larger residence once they have kids or they get married,” Minicozzi said.
Money As Mission
people have saved for retirement. Most of us wince with a little recognition when we see those headlines. Few of us feel prepared for retirement or maybe even a major life emergency. It is obvious that people need help with their finances. The structures that used to support Americans are crumbling. Pensions are gone, government services are starved and even if Social Security remains intact, it is unlikely to keep pace with real inflation. The insurance and finance industries are among the only institutions that can help. In the magazine’s feature this month, we focus on how technology goes hand in hand with holistic planning, which is the direction the insurance industry is headed. In the feature, you will meet Arielle Minicozzi, a millennial leveraging tech to help other millennials. She is a fee-only advisor in Arizona who was able to automate at least 85 percent of her practice so she can focus on helping clients. The article explains all the tech Minicozzi uses to guide clients through her process. She is not doing it just because she likes tech, although she does love the challenge of figuring things out. She is ultimately adopting tech to be efficient so that she does not have to focus on wealthy clients. Minicozzi can pay attention to the people who need her most, the ones starting out in life, still shellshocked from growing up in a world reeling from 9/11 and the Crash of 2008. “I focus on millennials. I really try to work with people who are interested in purchasing a home — whether that be their first home or they’re upgrading from their starter home to
InsuranceNewsNet Magazine » November 2018
I remember when insurance agents used to radiate enthusiasm for helping families. I still see that on occasion from agents, but I do not hear the passion of the righteous that I used to hear. I see some of the passion in new advisors who go into the business to help rather than score big wins. People like Minicozzi, whose wholesome energy enlightens a dark, cynical time.
“I did want to focus on the millennial generation because we really can use that extra boost, especially coming of age after the recession — and a lot of us have student loan debt,” Minicozzi said, adding that this upbringing left people less than confident. “A lot of us know more than we think we know but we don’t feel comfortable because we’re scared of money.” Scared of money. I couldn’t help but think of Jill all those years ago. I lost touch with her over the decades but I saw through extended Facebook relations that she went on to marry and have three children. She also faced three kinds of cancer. Jill could have used help back in the 1990s to have made sense of her financial difficulties. She did not need anyone’s judgment on the wisdom of taking on that much student debt. She needed help. You are the person who can help the Jills of today. I wish I could go back to that porch, sit down next to her, and let her know that this debt, this terror, is not life. It is just numbers. The future will bring fantastic highs and deep lows. That is real life.
Steven A. Morelli Editor-in-Chief
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Annuity Sellers Face Unhappy Trails And Regulation Roundups Ohio National tells sellers they can kiss their trails goodbye. By John Hilton
he decision by Ohio National to abandon service contracts for brokers who sold its variable annuities staggered industry watchers. It’s not that Ohio National is a big player in the VA market — they are not. It’s not that they can’t walk away because they probably can — depending on how the contracts are written. What is causing so much consternation is the precedent that shakes the very core of the relationship between insurers and independent sellers. For that reason, a strong pushback on Ohio National is likely in the coming weeks and months. “I have never heard of anything similar to this in the entire 20 years I have served in the insurance industry,” said Sheryl Moore, president and CEO of Moore Market Intelligence. In addition to the Ohio National stunner, annuity sellers are keeping one eye on various state-level regulations that continue to progress. To recap, Ohio National informed broker-dealers in a Sept. 28 letter that it will terminate “any and all servicing agreements” on Dec. 12. That means all compensation, specifically trail commissions, stops on that date. The decision is believed to be the first of its kind in the industry and affects variable annuity contracts purchased with a guaranteed minimum income benefit rider. The GMIB is appealing to clients looking for guaranteed income in retirement. For insurers, the generous VA benefits are a drain on their books in an extended low-interest-rate era. In a statement, Ohio National pointed to its Sept. 6 decision to exit the annuity business to focus on life and disability insurance. 10
Ohio National informed brokerdealers in a Sept. 28 letter that it will terminate “any and all servicing agreements” on Dec. 12. That means all compensation, specifically trail commissions, stops on that date. “This strategy will continue to reinforce our long history of mutually beneficial relationships with broker-dealers and our network of financial professionals,” said Christopher A. Carlson, president and CEO.
LPL Financial, the largest independent broker-dealer in the cou nt r y, qu ick ly grasped the implications and fired back Christopher A. with a strong memo of Carlson, President and CEO, Ohio support for its sellers. National “We are actively challenging Ohio National to reverse their decision regarding compensation,” the memo read. “We will make it clear to all of our other annuity partners that the Ohio National decision regarding future compensation is unacceptable. We are currently evaluating all annuity sponsor contracts and seeking to identify anything we can legally change or amend in order to protect your commissions in the future.” It doesn’t take much reading between the lines to see the message here. Industry sources agree LPL or other broker-dealers will likely move quickly to challenge Ohio National and discourage other insurers from following suit. In the meantime, consumers could be the big losers. Ohio National told brokers they can still serve their clients, but that seems unlikely since their commissions are being taken away.
InsuranceNewsNet Magazine » November 2018
“If the agent’s not getting any commission, what’s his incentive to properly manage the assets?” Moore said. “How are they acting in their clients’ best interest if they’re cutting their agents’ commission? It’s almost as if they’re saying ‘We want you to get rid of this business.’”
New Jersey Introduces Fiduciary Standard
New Jersey became the latest state to attempt to tighten sales regulations in the wake of the defeated Department of Labor fiduciary rule. The rulemaking, being initiated by the New Jersey Bureau of Securities, would impose a fiduciary duty on all New Jersey investment professionals, requiring them to place their clients’ interests above their own when recommending investments. “New Jersey is pursuing state-level regulatory reforms that would enhance the integrity of its financial services industry by holding every investment professional to the highest standard under the law,” Gov. Phil Murphy said. The governor claimed the forthcoming rule will be the “strongest investor protections in the nation.” The details will determine whether that turns out to be correct, but there are concerns that a patchwork of differing standards could emerge. There are about 2,120 broker-dealers, plus 205,000 of their agents, registered in New Jersey. Neighboring New York plans to enforce its best-interest standard beginning Aug.
ANNUITY SELLERS FACE UNHAPPY TRAILS AND REGULATION ROUNDUPS INFRONT 1, 2019, for annuity contracts, and six months afterward for life insurance contracts. The New York rules are roughly similar to the hated DOL fiduciary rule, but extending the rules to life insurance sales set an entirely new bar. “New York, being fairly aggressive on this front, kind of got out in front of everybody as much as they could with the idea they were going to push for their standard to be the nationwide standard,” said William T. Mandia, a partner at Stradley Ronon, a Philadelphia law firm. That has industry watchers concerned as more and more states ponder their own rules. “There’s a potential for states to start doing things that conflict,” said Bradford P. Campbell, a partner at Drinker Biddle & Reath, during a recent webcast.
NAIC To Revisit Annuity Sale Rule
After a couple of up-and-down summer meetings on its annuity sales rule, a National Association of Insurance Commissioners’ subgroup was slated to meet Oct. 22-23, after this issue went to press. The Annuity Suitability Working Group wants to have something resembling a final annuity sales rule to present at the NAIC Fall Meeting in San Francisco Nov. 15-18. The idea is to create a model law that state insurance commissioners can take to their legislatures for adoption. Commissioners see that as an avenue toward uniformity of industry rules. To date, however, agreement has been fleeting as more-liberal states such as New York split with more-conservative colleagues in the Midwest. The working group was to pick up where it left off during an August meeting in Boston, when New York officials challenged the group to favor a tougher standard that includes life insurance. “Certainly, this committee should keep active in this and not just accept the working group’s report and move on,” said Maria T. Vullo, New York superintendent of financial services. “There’s no reason that the suitability should not apply to both, annuities as well as life insurance.” The Life Insurance and Annuities Committee must vote to approve anything the working group recommends. Then the full executive committee must adopt. 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. Follow him on Twitter @INNJohnH.
November 2018 » InsuranceNewsNet Magazine
S E I R STRO R E T T E B E A THAN
ow h s l l e t Y ERA N L E in’s H a r C I b M e h t p tu h g i l s e i r o st ER
NT E C E R U PLEAS
InsuranceNewsNet Magazine » November 2018
e know that stories are good for you, but did you know how good? Stories trigger the same part of the brain that really likes sex and other pleasures. So you know that has to be good for sales. That is according to Michel Neray, who has helped more than a thousand clients create and sharpen their stories. Not only do good stories help build sales, but they also help people become more effective leaders in all facets of their lives. Neray is also the co-author of the book The Great Crossover: Personal confidence in the age of the microchip. Neray has pulled together his science and business management background with his marketing copywriting career
HOW STORIES ARE BETTER THAN SEX INTERVIEW We know that when we listen to character-based stories, our brains make oxytocin, which in turn increases levels of empathy, trust and safety. We know that stories light up the same part of the brain that pleasure does. And when I say pleasure, I mean it lights up the same part of the brain that lights up when we have sex. It’s that core to who we are as a species. We know that good stories excite our dopamine neurons, which make listeners feel good and therefore more receptive. We know for a fact that stories change our brain and body chemistry. What is the evolutionary advantage behind this? Well, we learn through stories. We learn from other people’s mistakes, which is why in many cases we love hearing stories where other people have failed.
it, although we may not know that consciously. Most of us are naturally good storytellers. When we come home from the office and we say, “Hey, you’ll never believe what happened today. So and so stood up in the boardroom meeting and announced this, and I couldn’t believe my ears.” Or “I went to the coffee machine and started chatting with one of my colleagues and you’d never believe what they told me, and this happened.” On one hand, it’s incredibly easy for us to tell stories. On the other hand, if you really want to study the craft of storytelling, there are a lot of moving parts. There’s the actual structure of the story. Most people don’t even know the point of their story. They start telling a story and they kind of ramble on or they have three endings or three beginnings and it takes a while to get to the point. Knowing the point of your story is key. But I would caution people listening to or reading this from saying, “Therefore I should know what the point of this story is before even starting to attempt to tell it.” That would be a mistake. It’s only through the telling and retelling of our story that the points of our story become clear to ourselves.
“We know that stories light up the same part of the brain that pleasure does. And when I say pleasure, I mean it lights up the same part of the brain that lights up when we have sex. It’s that core to who we are as a species.” to create a new way of engaging buyers. Telling stories is not just a way of packaging information, but it also lights up the listener’s brain with delight. But only if done correctly. And how do you do that? It starts with a deep dive, Neray tells Publisher Paul Feldman in this month’s interview. FELDMAN: We hear so much about the importance of a story. But why is it so important for salespeople to tell stories? NERAY: Storytelling is the way that we are wired as human beings. Anthropologists as well as neuroscientists believe that storytelling evolved as an evolutionary advantage for humanity. Our minds and our bodies physically and chemically respond powerfully to both telling and hearing stories.
When we watch a movie or read a book or see a play, we’re empathizing with the main character, seeing what they go through, and in the back of our mind what we’re really doing is saying, “Well what would I do if I were in that situation? How would I handle that challenge?” And that’s how we learn. That’s why these stories, whether they’re stories in conversations, whether they’re stories in movies or plays or books — that’s why we are so drawn to them and that’s why they’re so powerful. FELDMAN: What are the keys to telling a good story? NERAY: There are lots of keys. People don’t realize how naturally we tell stories. We’ve been listening to stories our entire lives, right from our cradles. We actually recognize a good story when we hear
FELDMAN: What is the difference between the point and the purpose of a story? NERAY: It is understanding the distinction between the personal element of the story, which is, “Here’s what happened to me; here’s what I went through. Here’s how I was feeling. Here is what happened next,” in terms of action. And then the universal element of the story, which is, “Here is the general insight or the universal insight that we can all learn from.” That’s the stuff of morals. That’s the stuff of generalizing it to the point of being able to apply it in many different situations. FELDMAN: You study a lot of neurolinguistic programming. How does NLP apply to stories? How can we use that to tell better stories?
November 2018 » InsuranceNewsNet Magazine
INTERVIEW HOW STORIES ARE BETTER THAN SEX NERAY: NLP has become a massive field that people use for their own purposes. I understand NLP to be really a decoding of the way the brain works. It’s about understanding what triggers people’s interests. Understanding the skepticisms and concerns that they have that they may never voice to you out loud, that they may never even be aware of themselves. Having a sensitivity of what those might be, we can address those things in our stories. For example, I’m working with a group of insurance brokers serving business clients who tend to be older and successful. And these brokers tend to be younger. So you might imagine that a skepticism that the clients have is, “Why should I deal with you? You are young and inexperienced.” They’ll never say that. They’re too polite, most of them. But the broker has to say, “What can I possibly do to overcome that skepticism?” It’s not as tightly defined as a sales objection. It’s more of an ingoing skepticism. The person who’s on the listening end, who’s evaluating the person in front of them, might not even be fully aware that they have this skepticism. But they have it in the back of their mind. That kind of sensitivity comes from an understanding of neurolinguistic programming. The broker can begin with the client with a story of how they had a perception of somebody that they were working with who was younger than they had expected, but they realized the person was up on all these new techniques that they weren’t aware of and brought fresh thinking to the subject matter. Then they realized that they were hearing the same-old, same-old from everybody else that they had been dealing with. If you make it too obvious, if you make it like a real insurance story, then the person is saying in the back of their mind, “Yeah, yeah, yeah, this is too obvious. They’re just saying this to me to position themselves in a better way.” But if you take an experience and a story that relates to something outside of the field, then what you’re really doing is
implanting in the listener’s mind, “There’s something in here that could be a huge benefit if I just open up a little bit and overcome some of my skepticisms.” And the story could be something from an everyday occurrence of going to the store or dealing with someone at the office or another vendor at the office or something like that. Really, that’s all we want. FELDMAN: You have talked about sales telepathy. What does that mean and how can we apply that? NERAY: There’s an interesting story behind this. My background is marketing copywriting. I would write all kinds of copy, whether it was headlines for bill-
Sales telepathy is all about structuring a sales conversation that is story-like and creates a platform for people to accept you as a possible solution provider, and open their minds to what you have to offer. And to also overcome any of those skepticisms or lessen any of the skepticisms that we were talking about earlier that they have in the back of their mind. You might’ve heard the saying, “People buy with their hearts and rationalize with their heads.” So we think we are making rational decisions all the time, but really what we’re doing is rationalizing what we want to do anyway. It’s helpful for everybody to understand their own drivers and their own motivations and why they make decisions.
We think we are making rational decisions all the time, but really what we’re doing is rarationalizing what we want to do anyway.
boards, radio commercials, TV commercials. I would write magazine-length articles, brochures, homepages and letters at the beginning of annual reports on behalf of CEOs. I had developed my own style of writing — because you always test and gauge what kind of response you get. I had developed this formula, this loose formula that I called sales telepathy. People kept coming up to me and saying, “Michel, you must’ve done NLP.” And for the first five years of people telling me this, I would shrug my shoulders and ask, “What’s NLP?” But I kept getting this feedback, to the point where I said, “I’d better figure out and investigate what NLP is, because people keep thinking that’s what I do.” And I discovered that a lot of the techniques that I had developed quite on my own were very similar and analogous to what people who’d studied NLP were doing and had discovered.
InsuranceNewsNet Magazine » November 2018
I think it would make the world a better place if we all understood why we do what we do. When we rationalize something, we have to be able to look at ourselves and laugh at ourselves: “Ha ha, I just made myself believe that there was a rational reason for me doing this. Ha ha, that’s very funny.” This is where I get on my high horse about the ills of the world. Many of the problems of the world are driven by things that are in the back of our minds that we don’t even understand. For example, racism comes from stereotyping. Again, an evolutionary advantage. We are wired to generalize, categorize, put in boxes and stereotype. Taken to an extreme, and not that far of an extreme, I have to say it leads to racism. And if we understand that, problems that come from racism might be lessened. FELDMAN: How does a person read what the other person’s skepticism
HOW STORIES ARE BETTER THAN SEX INTERVIEW might be? In the case of sales, it could be a variety of issues. NERAY: Very often people would say to me, “Yeah, but I have no idea what their skepticisms are. If I work with 100 different people, probably I have 100 different skepticisms to work with.” But in fact, we find that I could have 100 people in the room and I list the top three skepticisms that they have, we’re going to have 80 percent of the people in the room nodding their heads. To go even further, they’ll say, “How did you know? How did you know that’s what I’m thinking?” That’s where the sales telepathy comes from. If you come right out and say, “Hey, listen, I know if I were in your position I might be thinking…” and list the top three things, then people say, “You know what? Now that you mention it, I do think that.” FELDMAN: What about the “why” you do what you do? Is that important to talk about with a prospect and, if so, when do you talk about it?
NERAY: We’re not so interested in this particular case of why I sell insurance. We’re interested in why I sell insurance in this particular way. There’s always a story behind that. It’s not easy to find, but there’s always a story behind that. That’s where the gold is; that’s where the differentiation is. FELDMAN: How do you discover your own story? NERAY: It does require a second person to help you peel back the layers for you. I had to do the same thing for myself. I was running an ad agency and my clients kept on telling me, “Michel, how did you get to our differentiation so quickly?” And for the longest time I would just shrug my shoulders. We’re taught to feel uncomfortable with compliments. In most cases we don’t take them graciously. We tend to shrug them off and say, “Oh, that’s nothing. Thank you, but oh, that’s nothing.” That’s what I’d been doing and I never really paid much attention to it.
The real reason why we say “Oh, that’s nothing” is because it really does feel like nothing to us. “I don’t know; it’s just what I do.” How many times have we said that to people? What I’ve learned is that when somebody says that to me, I really have to stop and pay attention and ask, “Well, what exactly was I doing, and what exactly was that person referring to? What challenge specifically did that person have?” Remember, everything relates back to the challenge that the other person has. That’s what piques their interest and their listening. Because they want to know how to solve their own problems. They’re not interested in me for my sake. They’re interested in me for their own sake. This goes back to the storytelling theory of why we watch and why we become so involved with characters. We want to learn what we should do or could do in a situation that they’re facing. FELDMAN: How did you discern your own story?
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Call: 844.259.2993 Or visit: dplfp.com/revelation November 2018 » InsuranceNewsNet Magazine
INTERVIEW HOW STORIES ARE BETTER THAN SEX
The D.I.G. Methodology The Five Layers Of Differentiation
Dig deeper to stand out by using Michel Neray’s steps to set yourself apart from others.
The First Layer: ‘What’ Differentiation
The “What” Differentiation can be best described by this very straightforward question: Do you get better results than everyone else in your industry? What we’re looking for here are the generic, quantitative end results that everyone in your field would love to promise. It’s what your clients want when all is said and done.
The Second Layer: ‘Who, Where and When’ Differentiation
The thinking behind the “Who, Where and When” Differentiation goes something like this: If you can’t legitimately and credibly claim that you are the best in your field, how can you narrow the definition of your field or highlight an aspect of your business so that you can be best or unique in something? Can you narrow the definition of what you do, where you do it, when you do it or who you do it for that would enable you to claim a differentiating advantage?
The Third Layer: Upper ‘Why’ Differentiation
The Upper “Why” Differentiation answers a key question always at the back of potential clients’ minds, whether a person verbalizes it or not: “Why should I believe you have the capability to do what you say you can do?” What do you tell your clients to give them more confidence that you can actually deliver the goods?
The Fourth Layer: ‘How’ Differentiation
The “How” Differentiation is most powerful in mature industries that have a lot of competitors. “How” you do what you do is as unique to you as who you are. No one is wired quite the same way you are, and no one has the same set of formative experiences, perspective or DNA. Like it or not, you have a unique way of viewing the world around you.
The Fifth Layer: Deeper ‘Why’ Differentiation
It’s not about why you do what; it’s about why do you do how you do what. Perhaps the challenge you are driven to solve today is a challenge you faced yourself. Perhaps the thing you help other people overcome is the lesson you learned — the hard way. Perhaps the lesson you help other people learn is the same lesson you continue to learn over and over again.
NERAY: I sat down with a friend of mine at my dining room table and he asked me very simple questions. “What do you do next? And why do you do that?” He forced me to think about it and give him the answers. Then I said, “I don’t know, isn’t that obvious?” He said, “No, it’s not obvious.” But it was obvious to me and I guess it’s not obvious to everybody else. That’s why it has value to everybody else. What we do so naturally, we also do invisibly, which is why most of the time we’re not even aware of our own greatest value. FELDMAN: Once you have the answers on the process, what’s next? NERAY: Then we say, “Well, where did that come from?” In my case, it’s something that took me 40 years to deconstruct and figure out. My mother was a Holocaust survivor — she spent a year in Auschwitz. I grew up as a little French-Jewish kid in an English-Protestant school, because my mother was from France. So we moved to Montreal, which ostensibly was Frenchspeaking, except I grew up in a little English neighborhood. So I grew up as a little French-Jewish kid in an English-Protestant school in a French-Catholic province. And it didn’t matter what group of kids I hung out with — I was always the odd kid out. I was a shy kid. And you might think a shy little kid like that might do everything in his little power to kind of blend in and not stand out, but that’s not what I did. In reverse-engineering why I do how I do what I do, I believe that the reason why I never tried to blend in was because of the experience of my parents in the Second World War — my mother being a Holocaust survivor and my father fighting in the French Foreign Legion. Just being keenly aware of never again wanting to be ashamed or trying to hide who I was. FELDMAN: Thanks for sharing that story. How would I, as a regular business owner, an insurance agent, do that exploration? What are the steps to do that? NERAY: If you ask the usual and expected questions, you’ll get the usual and
InsuranceNewsNet Magazine » November 2018
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INTERVIEW HOW STORIES ARE BETTER THAN SEX expected answers. The classic way that most people would start this is they’ll ask, “What are you passionate about? What do you love doing? There’s a whole other back theory around positive versus negative. We’d like to think of ourselves as positive people. We think that what drives us mostly are the positive things in life, like what we want to accomplish. But in fact, most of us are driven by what we don’t like. And so asking, “What are you passionate about? What do you love about what you’re doing?,” you’re going to get the same kind of bunk that everybody else gives: “Well, I love helping
the process. How do you get down to that differentiator of what makes me special and why people like my service in particular? NERAY: Key in that second step is the question, “What underlying principle does that violate in my point of view? What do I think is so wrong or bad or counterproductive about that?” And really examining that very carefully. That leads to the motivation. And then the next question would be, “Well, why am I so sensitive about that? Why does that really get stuck in my craw?” That brings up a thought process about
pitch. And if I could do that, and elicit that kind of interest from the person standing in front of me, then chances are they’re going to say, “Well, I’d love to know more, because you’ve just hit on one of my frustrations too.” FELDMAN: Crystalizing that understanding into provocative questions gets people thinking about the value you would deliver to them? NERAY: Yes, which is directly related to a challenge or frustration that they have with the way that they are currently handling their insurance needs.
I need to go down that road of really looking at the way the industry works and asking, what drives you crazy about it? Because subconsciously that’s what you’re trying to fix. people retire better with peace of mind,” et cetera, et cetera, et cetera. So a key question that I ask by going the negative route is, “So what drives you crazy about the way that other people in your industry operate?” Now, it might appear that we’re slamming other people, and nobody likes to slam the competition. But I need to go down that road of really looking at the way the industry works and asking, what drives you crazy about it? Because subconsciously that’s what you’re trying to fix. This goes back to evolution theory — that we are all driven to solve problems. As human beings, we are problem-solving machines. That is what has created all the progress in this world. If we weren’t driven to solve problems and fix things that didn’t work or fix things that could work better, then we wouldn’t have this highly civilized, mechanized world that we live in today. FELDMAN: That’s a great way to start 18
who I am as a human being, why I feel a certain way about these topics and where I learned it. FELDMAN: So in your case, in asking those questions and peeling back the layers, it led you to your childhood and how you developed and how you survived. NERAY: Yes, in my case it did. And in a surprising number of other examples that I’ve worked with, it always leads to a pivotal stage of somebody’s life. FELDMAN: Is it also important to let the audience know why you’re telling the story? NERAY: Yes, the third step is the phraseology of it. Now I know what I do that’s unique, and I know why I do how I do what I do. Now, how can I turn that into communication that works? Can I turn this into provocative questions? That is my version of the elevator
InsuranceNewsNet Magazine » November 2018
FELDMAN: And all that comes down to understanding your own story. NERAY: When I started with that mindset, I became much more highly aware of the unique differences that everybody else brought to the party. I truly believe that is the reason why 40 years later I was so successful and am so fast at helping my clients really home in on their key differentiation. Sometimes it takes a conversation. Sometimes it takes a week of meetings. Sometimes it takes a facilitated workshop. There’s always a story. I didn’t come at storytelling from just a theoretical or academic point of view. I came at it because I saw firsthand the power of storytelling in sales, marketing and advertising.
NEXT MONTH: Michel Neray reveals why elevator pitches are lame.
Survey Says: Life Insurance Discounts Can Motivate Healthy Behavior By David Wilken, President, Life, Global Atlantic Financial Group
hat role do insurance incentives play in inspiring customers to live healthier lifestyles? Can life insurance companies actually move consumers toward better behavior? And if so, how? A recent study commissioned by Global Atlantic revealed the answers to these questions and other interesting insights into the link between wellness and insurance habits. The survey clearly indicates that the vast majority of consumers would be motivated to maintain their weight level and get regular checkups if they were offered cost-ofinsurance discounts in connection with these behaviors. WELLNESS INCENTIVES ARE ATTRACTIVE TO CONSUMERS Conducted in July 2018 by Echo Research, a global market analytics firm, the national survey of 1,003 U.S. adults covered topics related to wellness, health and insurance. Here are some highlights from our findings: • Nine out of 10 consumers (92%) would be motivated to maintain a specific weight level, and four out of five (81%) say they would be more likely to have an annual checkup if offered a life insurance discount or incentive. • Millennials were more likely than older age groups to indicate that they would be motivated by discounts to get annual checkups (85% versus 79%) and maintain a specific weight level (95% versus 90%). • Individuals with household incomes of $50,000 per year or more would be more likely than those with lower incomes to be motivated to get annual checkups (87% versus 75%) or maintain a specific weight level (95% versus 90%).
WELLNESS INCENTIVES ARE AVAILABLE TODAY This year marks the 10th anniversary of the launch of Global Atlantic’s Wellness for Life® rider. We were the first insurance company to introduce such a rider, and to date, we’ve issued more than 50,000. The recent survey results confirm that consumers are attracted by
lifestyles can save money on life insurance much in the same way that good drivers can save on auto insurance. In our experience, customers who have purchased the rider have greater life expectancy. The conclusion is clear: savvy consumers are eager to take advantage of options that
Under the approach our Wellness for Life® rider pioneered, people with healthy lifestyles can save money on life insurance much in the same way that good drivers can save on auto insurance. the opportunity to save in this way. We offer the Wellness for Life® rider on permanent life insurance policies. This rider gives policyholders discounts on insurance costs if they visit the doctor at least once every other year and manage their weight within a range determined when they buy their policy. Under the approach our Wellness for Life® rider pioneered, people with healthy
reward them for making healthy decisions, and these decisions can have a positive impact on their lives.
For more information, visit GlobalAtlanticLife.com, call 855.887.4487, Option 3, or email firstname.lastname@example.org.
Methodology The Global Atlantic Wellness Survey was completed by Echo Research using an online omnibus methodology among a random sample of the general U.S. adult population. A total of 1,003 interviews were completed between July 23 and 25, 2018. The overall margin of error for this sample size is +/- 3.1% at the 95 percent confidence level. Products and riders are issued by Accordia Life and Annuity Company, 215 10th Street, Des Moines, Iowa. Rider form number ULWFL-E14. Wellness for Life® Rider availability varies by state. Products and riders are not available in New York. Global Atlantic Financial Group (Global Atlantic) is the marketing name for Global Atlantic Financial Group Limited and its subsidiaries, including Accordia Life and Annuity Company, Commonwealth Annuity and Life Insurance Company, Forethought Life Insurance Company and Global Atlantic Re Limited. Each subsidiary is responsible for its own financial and contractual obligations.
S P O N S O RED CO N T EN T
November 2018 » InsuranceNewsNet Magazine
Household Incomes Creeping Upward As solid economic growth helped put
more people into full-time jobs, median U.S. household income rose for a third straight year in 2017. But income inequality also increased as the wealthiest Americans took home even bigger paychecks. The U.S. Census Bureau reported that income for a typical U.S. household, adjusted for inflation, rose 1.8 percent, from $60,309 in 2016 to $61,372. The proportion of Americans living in poverty dropped for the third straight year, to 12.3 percent from 12.7 percent. Although the number of people with full-time permanent jobs rose by 2.4 million last year, the bureau report showed that households are still feeling the damage inflicted by the Great Recession. U.S. households are still earning essentially the same that they did in 2007 just before the Great Recession. And their inflation-adjusted median income remains slightly below the record in 1999 of $62,000, the bureau said.
TRUMP TAKES AIM AT CHANGES FOR RETIREMENT SECURITY
President Donald Trump issued an executive order aimed at increasing Americans’ retirement security. The executive order has two main points: raising the age when people with traditional individual retirement accounts and 401(k)s must start taking required minimum distributions, and making it easier for small businesses to offer retirement plans to employees. Currently, those who have a traditional IRA or a 401(k) must begin taking distributions at age 70½ . Trump has given the U.S. Department of Treasury six months to consider pushing back that age to something older — because Americans DID YOU
are living longer. Trump also gave the U.S. Department of Labor six months to determine whether the government could ease regulations that would allow more small businesses to offer retirement plans to their 42 million employees. In 2017, roughly 89 percent of workers at private-sector employers with 500 or more workers were offered a retirement plan, compared with only 53 percent of workers at private-sector employers with fewer than 100 workers.
US COULD LOSE BIG IN TRADE WAR The head of the world’s biggest money manager issued a warning about the ongoing trade war between the U.S. and China. BlackRock CEO Larry Fink said the U.S. is a “big winner” over China in the
The average national credit score has reached 704, an all-time high.
InsuranceNewsNet Magazine » November 2018
Knowing that the job market is strong, knowing that one has a regular paycheck, does wonders for consumer confidence. — Jennifer Lee, senior economist at BMO Capital Markets
short term. But the U.S. could lose big over a longer term, he warned. “The greatest problem that I see, and this is what I’m hearing from our clients, is this unilateralism that the United States has been taking,” he said at a Yahoo Finance conference in New York. This unilateralism, he said, could send non-U.S. companies to China and endangers the dollar’s status as the world’s reserve currency. Fink heads the largest money manager in the world with $6.3 trillion in assets under management.
HOW THE CRASH AFFECTED SAVING HABITS
The financial crisis may have occurred a decade ago, but many Americans are still digging their way out. Sixty-five percent of people say they have not fully recovered, according to a survey from Betterment. Some people stopped saving altogether. Of the 59 percent of people who had a savings plan in place in 2008, more than one-quarter said they stopped saving for retirement or contributing to their 401(k) in the years since. Meanwhile, 14 percent continued to save their money, in cash only, signaling their distrust of the financial system. Only 10 percent of those surveyed reported they are investing more, while two-thirds said they are investing less. About 20 percent of the survey respondents reported losing between $10,000 and $49,999 in the stock market crash.
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Get instant access to our marketing materials at lgamerica.com/microsites Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, MD and William Penn Life Insurance Company of New York, Valley Stream, NY. Banner is licensed to do business in 49 states and District of Columbia. William Penn does business exclusively in New York; Banner does not solicit business there. The Legal & General America companies are part of the worldwide Legal & General Group. Claims paid based on unaudited statutory/GAAP financial statements; all other statistics based on 2017 year-end results. For broker use only. 18-230
he next time agents or advisors say they don’t do tech because that is for young people, ask them two questions.
1. Do you golf? 2. Do you have a digital watch?
That might be all you need to trigger a flood of laudatory comments about the GPS apps they use to improve their game. Byrke Sestok swears by his Apple watch for guidance on the course. As a 41-yearold financial advisor, he can be considered a kid in the financial business — especially compared to insurance agents. That is true on the golf course as well. “Most of the people I play with are older than me, in their 50s and 60s,” said Sestok, co-founder of Rightirement, White Plains, N.Y. “And they all have GPS watches. Very few of them have the Apple watch but they all have GPS watches.” The watch helps off the course, too. Sestok uploads the data for analytics, much like a client can keep an eye on goals with a financial app. “It allows me to tie my handicap index into the app and monitor it and I can upload my rounds directly from the phone data,” he said. So, how is it the same technophobes who prefer pen and paper will take to golf tech? “It’s something they’re passionate about,” Sestok said. “People don’t like 22
change, right? But if you know you can definitely get improved performance, you’re probably going to go through the difficulties of change. And in golf, knowing how far you hit the ball is pretty important. So people are willing to adapt the technology.” And if advisors are passionate about holistic advising — or they want to be — they will need to become comfortable with tech.
Holistic Needs Tech
Insurance companies are turning to holistic advisors. And clients are raising their expectations of all advisors. Consumers entering the target years for insurance and financial advice are not content with pen and paper and “just trust me” advising. Deloitte examined this issue in its report “10 Disruptive Trends in Wealth Management,” which described a “Rewired Investor.” “With her expectations shaped by her interactions with non-financial digital firms (e.g., Google, Facebook, Amazon) as well as smartphones and other digital devices, she expects to be able to access advice anywhere and at any time, through multiple channels and devices as part of a cohesive, rich digital experience,” according to the report. “The Re-wired Investor has come to view risk through a different lens: she perceives risk as downside, rather than volatility. As a result, advisors have had to emphasize capital markets and hedging strategies that seek downside
InsuranceNewsNet Magazine » November 2018
protection more than traditional portfolio allocations that seek to manage risk through diversification.” Even insurance companies traditionally focused on products are taking to the diversification message. In a survey conducted by EY, life insurance executives said they understood that consumers want holistic advising that explores options. The execs also know that tech will build the bridge to get the industry where consumers want it to be. “There is a need for a holistic, goalsbased planning approach,” according to the EY report, “Opportunities in a Challenging and Fragmented Landscape.” “Manufacturers and distributors alike have an opportunity to set themselves apart by engaging customers through the process of retirement and financial
Byrke Sestok says his usually tech-averse older colleagues take to technology to improve their game.
HOLISTECH: THE FUTURE OF ADVISING IS HOLISTIC TECH COVER STORY
The future of advising is
holistic tech By Steven A. Morelli planning. Advisors will be called on to help build such relationships. To deliver this level of information, advice and service in a scalable way, significant investments in process and technology will be required.” Tech is even key to targeting middle-income consumers, a demographic that insurers acknowledge is underserved. The EY report cites “the economics for advisors” as a major hindrance to reaching this segment — a nice way of saying that there isn’t any money in it for advisors. But it can pay for companies and sellers through tech that eases and accelerates the sales process. “Developing more cost-effective distribution strategies (most likely by increasing the use of digital channels) would help make the middle market more attractive,” according to the EY report. “Such technological advances, along with simplified processes, may lead to future profitability in this market.” No wonder, the report writers said, that advisors have been moving up-market. But despite the gold rush, even the wealthy market is underserved. “The number of advisors with the credentials and sophistication to serve this market is low,” the report said. “Many prospects have never been approached by an advisor — a situation that will only get worse, given the shortage of suitable advisors.”
Surely, advisors must be clustered way at the top of the wealth pyramid. Wrong again. “The lack of qualified advisors is especially acute relative to the ultra-high-networth market (individuals or families with assets greater than $30 million),” according to the report, which added the additional factor of new generations of consumers that the Deloitte report had identified as the Re-wired Investor. So, will carriers and perhaps wholesalers build a digital bridge straight to the consumer? They have tried, but companies found out that although the bridge has one access point, it has many off-ramps.
But how prepared are advisors to take on more of a holistic role? Sestok said tech is essential to making it work from prospect to plan. It takes software. “Cool software like Riskalyze, which allows your client to go in and do kind of an in-depth risk analysis questionnaire that reports to you and the client what their risk number is on a scale of zero to 100,” Sestok said. “So that you can in theory better position their investment portfolio to match their risk tolerance.” It is one of the many tools he has adopted to help automate important functions. Ever since the 2008 financial crash, Sestok
“When they do it on paper, there's a 65 percent error rate,” Wallace said. “If you do it electronically, it's 100 percent accurate. So, the average sales cycle for a paper app is like 52 to 55 days. The average sales cycle for an electronic app is like 17.” Insurers discovered what online retailers know as cart abandonment, when consumers start the buying process but bail before ringing the register. Nationwide ran into that tendency last year when the company tried to sell an annuity online in Arizona. After six months, the carrier realized that consumers want a human to jump into the process at some point.
has been sure to gauge client risk tolerance accurately. Otherwise, clients may not stick with the well-laid plan the next time markets go south. “Most people don’t really know what their risk tolerance is until risk actually hits,” Sestok said, adding that good risk analysis software can yield surprises for advisors and clients. “You’ll find people who think they’re aggressive investors
November 2018 » InsuranceNewsNet Magazine
nichannel experience that consumers now expect
teracting with a life insurance agent (54 percent),
while better addressing the needs of an increasingly
and marriage (53 percent), continue to be the most
complex consumer base.
important events leading them to consider purchase
COVER STORY HOLISTECH: THE FUTURE OF ADVISING IS HOLISTIC TECH FIGURE 2
Future life insurance buyer cycle Buyer Cycle Future Life Insurance
Independent But Necessary
Quality of ﬁnancial advice from agent drives customer decision to buy or not buy
all my client data,” Sestok said. “I might lose some investment performance reporting if I ever needed to break away from LPL — although I have no intention of doing so at this time.”
Sestok’s reluctance to participate fully in LPL’s tech offerings is part of a larger disMARKETING DEFICIT connect that confounds efforts by finanCarrier marketing NEW FINANCIAL DIGITAL GAPS triggers awareness cial and insurance companies to develop Customer conducts individual HURDLES of life insurance research on policies and carriers Competing ﬁnancial tech initiatives with agents and advisors. and identiﬁes an agent to work priorities drive with through social prooﬁng Clearly, opportunity exists. In a Deloitte decision to hold or lapse policy (even as survey with more than 1,600 25-to 54-yearpriorities shift) Deloitte, Embracing Digital Disruption old consumers released earlier this year, Source: Deloitte analysis. people said they were eager to use a digital Deloittefor Insights | deloitte.com/insights may not be able to tolerate more than a Sestok has a website his practice and platform to research life insurance options. moderate style of investing, so you can his bio page has a button that says “sched- In fact, 90 percent said they would but they right-size the portfolio.” ule” on it. That connects with Calendly, also said they would be willing to manage But he has also found that clients have which allows prospects to schedule a their accounts that way. become dangerously complacent: “It’s 5 15-minute call with him without having But guess what they wouldn’t do — they amazing how short-memoried people to talk to anybody. And more important, were not likely to buy without an agent’s are. Basically, they’re moving up in a not taking staff time to talk with him. help. When respondents were asked what straight line.” Sestok is an LPL Financial advisor but he helped them with their decision-making, When Sestok reminds clients of the does not rely on the company for his tech. 93 percent said an agent’s follow-up was at crash and they remember their portfolio He supplies his own software and keeps least “somewhat helpful,” with 44 percent had lost 35 percent of its value, he then his data, rather than store it with LPL. That saying the contact was “very helpful.” asks them, “Well, should we take that in was a hard-learned lesson for him. So, agents and advisors are integral to mind?” “Whatever data you put into their the sales process but independents are Sometimes that answer is “no, full systems, they own it — and frankly I stubbornly disconnected from the carristeam ahead,” but it is the clients who are don’t trust anybody,” Sestok said. “It er’s system. doing the choosing with their eyes open. might be the New Yorker in me but if Insurance companies have a long histoThe risk analysis is just one of the tools I give somebody my data, even though ry of trying to go digital and automate. In he uses for holistically advising and keep- they’ve said they deleted it later, why fact, some of those earlier initiatives from ing clients in contact. He uses a Redtail should I believe that?” several decades ago are coming back to customer relationship management sysIt is not a mistrust in the company. He bite companies. That’s because insurers tem, one of the more commonly used just doesn’t want to repeat what happened are having difficulty retrieving data from CRMs for financial advisors and insur- when he left another large firm years ago. systems using technology long buried by ance agents. He uses eMoney Advisor Pro “I don’t mind LPL having data,” Sestok generations of successive tech. for financial planning. said. “I’m not worried about LPL mismanAnd the companies’ effort to connect Financial planning software tends to aging it. I just don’t want to be in a situa- tech with independent agents has been fall into either the cash flow- or goals- tion where I can’t take it with me if I need around since there have been independent based approach, although eMoney does to. I’ve made two career changes in my 17 agents. both. But this category of software is years as a financial planner. In the first Robert McIsaac, senior vice president growing beyond just structuring scenari- change, a lot of my data was captive and of research at Novarica, a tech advisor for os. Many offer portals for advisors to work it was a real problem. It was a disservice to insurance companies, remembers those with clients in real time to reshape scenar- the client that the data was captive because days clearly. He started with Prudential ios to answer different questions, such as it breaks the continuity of client service.” in 1978, when companies were trying to “what if I retired five years earlier than we He was able to retain clients in the establish tech norms with a distribution planned?” move, but not their data. So he had to start system that was slipping away from their This helps an advisor be a more respon- reporting from scratch. grasp. sive resource for clients, instead of having Then he got his own eMoney soft“I think carriers get lost in thinking that to wait a few days or so to draw up a re- ware so that when he moved to create they have control in the market,” McIsaac port. Right during the meeting, an advisor Rightirement, it was not as painful. And said. “It was a food fight inside the comcan say, “Let’s take a look.” although he could access a CRM through pany between the distribution arm — the Clients can log on themselves to answer LPL, his firm has its own subscription to broker-dealer, for instance — and the their own questions and the program can keep the data securely in-house. product manufacturers.” alert the advisor when that happens. “Now I’m just in a position where I own Companies at that time behaved as if 24
InsuranceNewsNet Magazine » November 2018
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COVER STORY HOLISTECH: THE FUTURE OF ADVISING IS HOLISTIC TECH they still had primacy and could dictate terms. But McIsaac saw that was no longer true with the advent of independent distributors and agents. Companies accustomed to having a captive sales force did not have the same level of control over the third-party sellers they were ceding distribution to. “I tried to argue the important fact they’d already lost the primacy and that they had to listen to what their distributors were telling them, in terms of the technology they were going to support,” McIsaac said. “Because the distribution partners aren’t going to care what you say because they’ve got other options to go to.” As he predicted, the market itself shaped the platforms for processing, mainly Ebix and iPipeline. “They were very effective at getting some level of critical mass of carriers to participate in the platform,” McIsaac said of the tech companies. “And because it made life much easier for distributors, carriers found themselves between a rock and a hard place. Either you play on the platform or you stand by your guns, your
principles or whatever it is you’re standing by, and give up market share. That’s a technology that’s controlled by the IMO, by the general agent, by somebody else.” But the distributors are facing the same tension that financial advisor Sestok has with LPL. Insurance agents want to keep client data in their house. They want their own customer management system. McIsaac said that ends up being a tug-of-war. “The challenge becomes producers want the CRM to be something that they own and control,” McIsaac said. “Many of the companies I worked for struggled with that because we viewed the data as being ours. The producer viewed the data as being theirs.” One of the players at the center of that tug is iPipeline, which started in 1995 as Internet Pipeline, back when the internet was being called The Information Superhighway. More than two decades later, acceptance is still an issue among sellers. Tim Wallace, iPipeline CEO, said the industry is still trying to get agents to input customer data directly into the system.
“I think the biggest hurdles, quite frankly, are behavioral,” Wallace said. “The majority of the producers in the marketplace, most of them grew up without technology. Most of them are continuing to do the quotes and fill everything out on paper.” Often the agent will fill in a 20- to 40page life insurance application and either give it to an administrative person in their shop or pass it to a distributor. “It’s taken 10 years for the industry to get to about 25 percent adoption of electronic apps,” Wallace said. “So, 75 percent of all life insurance applications today as we sit here in 2018 are still done on paper.” Besides being inefficient, the transfer from handwritten to electronic forms slows the underwriting process to a crawl. Why? Errors. “When they do it on paper, there’s a 65 percent error rate,” Wallace said. “If you do it electronically, it’s 100 percent accurate. So, the average sales cycle for a paper app is like 52 to 55 days. The average sales cycle for an electronic app is like 17.” That means with paper applications, the whole process is close to two months long.
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HOLISTECH: THE FUTURE ADVISING COVER STORY Ineﬀective marketing eﬀortsOF continued toISbeHOLISTIC exposed,TECH as respondents were most likely to choose personal referrals when purchasing life insurance How respondents found life theirinsurance carriers. marketing efforts continue With an e-app, it drops to a little over two Ineffective weeks. to be exposed
If an agent is doing a high volume, Robo-advisor recommendation Walk-in Wallace finds that if an agent does about 3% 4% Other Personally referred five apps electronically, they are likely to 4% stick with that process. So, what does an Responded to ideal e-agent look like? marketing campaign “The agents who are really out there on Respondents were over seven the bleeding edge typically have their own 7% times more likely to choose websites,” Wallace said. “They’re marketInquired carriers based on personal ing on social media, whether it’s through online referrals over marketing 9% Facebook or Instagram. They’re tweeting. 54% They’re out there buying leads so that they campaign eﬀorts. can then develop marketing programs, typically either through Facebook or Called e-mail or even some through direct mail an agent 19% pieces. They’re constantly working their Deloitte, Embracing Digital Disruption existing account base for one upsell opportunity or cross-sell opportunitySource: as wellDeloitte analysis. as referrals. They’re tracking and they’re marketing organization if they become if you’re selling through that independent Deloitte Insights | deloitte.com/insi putting that into their CRM. They’re do- uncomfortable. That puts carriers in an channel, are responsible for that agent channels, only 9 percentdifficult found their current prowe are seeing an interesting evolution ing e-mail campaigns through a database increasingly position because exercising fiduciary responsibility to thatin the p of consumers that they’ve developed over regulators areinquiry demanding documentation buying vider through an online (see figure 4). severalclient,” years. Wallace said. “So that a several-year time frame.” show compliance. means you must have documentation that Overall,tocarriers should invest But who will lead the agent to the e-wa“If you take a look at the regulations that agent understood the needs of that more in marketing efforts to ter? It is tough to say, because independent issued by the New York Department of customer and they understood the type identify the most effective agents can easily move on to another Financial Services,timing, you as a carrier, even of product that they were selling them in content, and channel to engage each individual consumer and to inform them of the full value of a life insur-
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COVER STORY HOLISTECH: THE FUTURE OF ADVISING IS HOLISTIC TECH
Agents’ Opinions: Importance of Tools Agent portal for online quoting, illustration systems Agency management system Agent portal for information on customers, book of businesss, etc. Comparative rater CRM Mobile tools provided by insurers Other 0% Most important
Second most important
Third most important
Novarica, Agent/Broker Survey
relation to other products that they could have offered them because the agent has run multiple quotes.” That puts distributors in the middle of serving carriers and agents — marketing organizations such as Crump Life Insurance Services.
When Insurance Plugs Into Finance
Crump, based in Harrisburg, Pa., is a top marketing organization for traditional insurance agents. The IMO is accustomed to processing paper applications from agents and tries mightily to get agents to submit electronically. That e-acceptance is still slow, without much prospect of gaining much acceleration. But a fundamental aspect of the business is changing. As the insurance industry turns to financial advisors and holistic planning, Crump is expanding to provide a wide array of products to cover a span of a client’s needs: long-term care, disability, life and annuities. Besides the addition of financial advisors to the company’s base, Crump is finding another outcome, a growing acceptance of electronic filing. Or more accurately, an acceptance to have Crump file for them. “That’s been helpful in gaining adoption because they’re used to using financial 28
planning tools and that’s a point of integration that we’ve been focusing on — getting integrated with financial planning tools,” said Joe Johns, senior vice president of business planning and carrier relations. “As we do business with more professionals that aren’t traditionally trained insurance agents, it’s important for us to be at the point of transaction where their eyeballs are when they’re looking at these types of things.” By integrating with financial planning tools, Crump also plugged into a practice that financial advisors are used to – drop tickets, said Ron Alexander, Crump’s senior vice president of direct-to-consumer services. “We’re seeing drop ticket solutions emerge as a very efficient way for advisors and agents to reduce the amount of paperwork that they have to do while still being able to capture the data that the life insurance companies require,” Alexander said, adding that the company has a series of call centers to enter the data. “For nonlife insurance-focused advisors, we have found this is the preferred method for applications.” This is where Crump’s integration with financial planning tools comes in. “If a MoneyGuide Pro plan calls for a million dollars of life insurance, we’re integrating with the financial planning
InsuranceNewsNet Magazine » November 2018
software so that the advisor can click a button that says, ‘Get Quotes,’ ” Alexander said. “The quotes pop up on the screen. Then if they move forward with that, they can click a button and then provide a little bit of contact information, hit ‘Submit’ and be done with the transaction.” Crump then handles the app from there, Alexander said. “From that point forward we’d do everything from soup to nuts and then ultimately send the commission check when it’s done.” The advisor and client can then watch the process progress through a tracking system. Does that leave traditional insurance agents out in the cold? If anything, the trend of distributors offering more services allows agents to plug in. In fact, their IMO or brokerage general agency probably already has help at the ready. “If an organization doesn’t offer end-toend digital tools to help you process transactions at every step of the way,” the agent ought to look for a new home, Alexander said. “The majority of BGAs offer something that can get you from Point A to Point Z electronically. Some offer more than others.” Alexander said the company has seen agents and advisors across the age range adopt tech. “I think that the usage of the electronic tools is being adopted a little bit faster by the millennials and Gen Xers,” Alexander said. “But it’s been fairly balanced across the board.”
Loving Tech’s Effects
If e-acceptance crosses the age spectrum, so does non-acceptance. Just because people were brought up in an era when electronics became the norm doesn’t mean they love dealing with tech. Kristi Sullivan of Sullivan Financial Planning in Denver is one such Gen Xer who doesn’t want to become a techie but wants the benefits of tech when they make sense. She is a fee-only planner who does not sell any products. But she does love dealing with the numbers. “When I started my own business 11 years ago, I thought I would do the assets under management model like everybody else was doing, but when it got right down to it, I don’t really like managing investments,” Sullivan said. “I really like the financial planning part — the modeling,
HOLISTECH: THE FUTURE OF ADVISING IS HOLISTIC TECH COVER STORY the life decisions, the prioritization, the running the numbers.” Sullivan uses Money Tree financial planning software. But she does not ignore investments. Sullivan uses the Morningstar Premium platform to do analysis on portfolios and recommends changes. She refers to a list of insurance agents if she finds clients need insurance. Although she relies on the typical tech, such as financial planning software, Sullivan recently adopted a tool that made a little change but a huge difference. Like Sestok in New York, she uses Calendly to allow prospects, clients and even colleagues to schedule meetings. Well, not exactly meetings. Sullivan found that she was getting a lot of calls from people just starting out in financial planning who wanted to chat with her about the business. Invariably it was an invitation to go get a cup of coffee. “I mean, I want to help, but I don’t want to necessarily drive across town and spend what turns out to be two hours on something like that, because I get paid by the hour,” Sullivan said. “So I got set up with this online scheduler where I have 30-minute virtual coffees and then I have one-hour appointments and I have 15-minute prospect calls.” The simple tool was like a one-weirdtrick diet that dropped massive weight from her schedule. “I just say, ‘Great, can’t wait to talk to you. Here’s my online scheduler. Grab a slot,’” she said. “It just saves all that back and forth. ‘Well, can you do Oct. 3rd?’ ‘No, I can’t do Oct. 3rd. Can you do the 16th at 10:00, 12:00 or 4:00?’ ‘No.’ … All that. People can just see my calendar and it’s tied real-time to my Outlook and they just take what’s open.” Sullivan makes sure she blocks the time she needs and the software takes care of the rest. She loves it and wishes she had done it sooner. “I’ve been toying with the idea forever — but I’m terrible with technology,” Sullivan said. “I hate getting a new phone. I hate getting a new computer. I hate learning new software. I was referred by another planner to this other financial planner in Arizona.” That person was Arielle Minicozzi, co-founder of Sphynx Financial Planning in Chandler, Ariz. Minicozzi took a circuitous route to
It will keep us front of mind without being like, ‘Hey, how are you doing? I’m following up with you.’ — Arielle Minicozzi
opening her practice just a year ago as a millennial focused on helping millennials. She has an art degree and was working in the mortgage industry when she decided to be a financial advisor focusing on taxes. So she worked for H&R Block for a season before opening up her own registered investment advisory. She does not mind trying something new to see how it works. She loved the business of helping people but not so much running the business. “That’s part of the reason why I decided to automate a lot of my processes,” Minicozzi said. “I wrote down what my processes were going to be for financial planning from start to finish from the time a client reaches out to me as a prospect to the time we finish their plan. Then if they continue to work with me in an ongoing planning role, what that would look like as well.” She found ways that tech can do those jobs and now she has automated more than 85 percent of her workflows. Here is how it works: When a client sets an appointment in Calendly, the software sends the client’s name, e-mail address and type of appointment to Mailchimp, an e-mail marketing platform. Then Mailchimp sends the appointment-setter a thank-you note. “And then a day before the call, they’ll get a call agenda sent to them so that they know what to expect when we speak together,” Minicozzi said. After the call, she sends them a manual thank-you e-mail with the details they discussed. Then an automated e-mail is sent with next steps, followed by other e-mails if the client has not set up a follow-up call. “It will keep us front of mind without being like, ‘Hey, how are you doing? I’m
following up with you,’” she said. “You know, those really annoying calls, e-mails that you feel terrible sending but you want to make sure that they’re still alive. Instead, I want to give them something informative and educational so that they know we still are there to help them if they need it but also not put that pressure and that awkwardness on them as well.” When she told other advisors about her processes, they asked her to help them. So, she has what millennials know as a side hustle. She is a paid tech consultant. Minicozzi found that the automation process is about more than tech for her colleagues. It is about standardizing their processes to build workflows — something Minicozzi requires before automation. “And a lot of people have told me that was actually their biggest benefit of doing this,” Minicozzi said. “It forced them to refine their process before doing anything else and that ensures a consistent client experience every single time. You know what’s going to happen at Point A, at Point B, at Point C. The goal is not to get everybody to automate for the sake of automation. The goal is to help people be able to serve more clients or serve them in a better capacity than they’re already doing.” Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at email@example.com.
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What to Do When Insurance Goes ‘Amazon’ Direct-to-consumer policies DOUBLED in the past 2 years. Here’s how agents can set up a D2C selling machine!
Facts are facts. Consumers are ditching Levinson & Associates — again — takes the agents and opting to purchase policies onupper hand. line. It’s a trend that’s doubled in the past Alongside the groundbreaking SWYS two years. And according to every crediplatform is a state-of-the-art CRM and ble source, there are no signs of it slowing marketing powerhouse given to every acdown. tive agent — Agency Automator. While this movement may cause many Thanks to its built-in social media, email, agents to hit the panic button and focus drip, banner and retargeting capabilities, only on high-net-worth prospects and polthis proprietary software helps drive web icies that require face-to-face meetings, traffic and agent sales through the roof. others are turning this growing trend into No longer do you have to worry about an automated sales machine. how to set up complicated campaigns or deAnd Bill Levinson, managing partner at termine the best approach for social media Levinson & Associates, is at the forefront. to drive prospects to a website; Agency AuBill Levinson, managing partner “There’s a monumental push for a ‘shoptomator has the tools ready and right at your ping cart’ approach to insurance. And agents need to realdisposal — in addition to feeding all the information into its ize that it’s not their nemesis; it’s their friend. Consumerbuilt-in CRM, which also delivers 1,000 prospects monthly. driven insurance policies are the future,” states Levinson. “Our software developers and marketing team work around the clock to make sure our platforms don’t just keep up with the trends, we [also] set them,” says Levinson. Agency Automator is there to help agents market themselves successfully and to drive traffic to their sites. SWYS lets prospects shop, quote and buy insurance products on the spot as easily as they buy anything else online. If someone visits a site and doesn’t buy, ads known as banners will appear on websites that the prosAlways eager to launch the most cutting-edge tools for pect visits later. That can drastically agents, Levinson just unleashed a brand-new online shopincrease prospect-to-client conversions ping platform. It’s called Sell While You Sleep (SWYS) beand drive lots of traffic to your site — all cause it’s so hands-free that an agent can be credited for without any agent involvement. selling a policy without lifting a finger. “I’m proud to say that our agents are This revolutionary insurance shopping experience alamong the most successful because lows prospects to research, quote and apply online for (so we give them virtually every piece of far) Life, Health, CI, DI and Guaranteed Issue policies. And tech available to market themselves E st 1972 they can do so with the greatest of ease. better to help protect more families, “We wanted to create the ultimate insurance shopping including free college scholarship programs offered to every experience — complete with as many product options as prospect and client,” Levinson explains. “That’s why we’ve possible. And we wanted to make it as easy as looking for been voted 2018’s most disruptive IMO in America. And that’s a product on a site like Amazon. We wanted to host it right why agents come to us in record numbers every year.” on each of our agents’ websites, letting anyone who quotes, applies and buys a policy to give full commissions and reTo see for yourself what separates newals to the agent,” Levinson explains. In fact, because Levinson & Associates believes it to be a conLevinson & Associates’ agents from flict of interest to compete with their agents, prospects looking other IMOs and to download a free for any SWYS products must buy them from an agent’s site. Of course, having a website and products is pointless if copy of their E-Marketing Resources you can’t drive traffic to your site. Marketing yourself is, for Insurance Agents handbook, after all, agents’ greatest expense AND the most challengvisit ing aspect they face. It also happens to be an area where
“Our agents are among the most successful because we give them virtually every piece of tech available to market themselves better ...”
Technology Issue • Special Sponsored Section
Be Disrupted or be the Disruption Carriers: The choice is yours Consumers are demanding better digital experiences from insurance companies. And those that fail to adapt run the risk of being disrupted — or worse. LegacyShield CEO Michael Babikian, former President and CEO of Transamerica Brokerage, and his business partner, Dan Pierson, who previously owned a large brokerage firm, realized that the insurance industry as a whole was not using technology to meet the needs of today’s consumer, and they decided to do something about it. In this interview, Babikian reveals how LegacyShield is helping carriers and financial service organizations thrive in the digital age so they can not just meet but also exceed the digital expectations of today’s consumers.
Q: Are carriers struggling to evolve in the digital age? A: Yes, carriers are racing to come up with a consumer-centric solution that meets the needs of customers who are demanding a better digital experience. The insurance carriers that adapt and innovate the fastest will be the ones to take a disproportionate share of the opportunities and profits.
Q: How can insurance carriers embrace the digital revolution and not fall behind? A: Most carriers have two options. They can build their own technology, or they can partner with a company with existing technology. Let me explain.
“The insurance carriers that adapt and innovate the fastest will be the ones that take a disproportionate share of the opportunities and profits.” — Michael Babikian, CEO, LegacyShield ® Q: What motivated you to create LegacyShield®? A: As individuals, we know and believe we are living in the digital age but still plan as if we are living a generation ago. In fact, the entire industry is delivering experiences that are at least two decades old. But LegacyShield changes that. We offer a highly integrated, consumer-centric platform that allows life insurance and financial services companies and advisors to be able to onboard and engage with consumers over a lifetime. LegacyShield also meets the needs of today’s consumers by allowing them to safely and securely share all the information their loved ones will need today, tomorrow and after their death: insurance policies, bank accounts, retirement accounts, life stories, end-of-life wishes and virtually any other account they’ve created or that is important for others to know about.
A company can hire developers and create a team to build a customized solution to fit their needs. But carriers are not platform developers. To expect carriers to build and maintain their own technology on their own dime is both ineffective and inefficient. In fact, it would likely take a minimum of a few years and a few million dollars. Furthermore, building a singular carrier solution is the exact antithesis of consumer concentricity. Finding a partner like LegacyShield that already has the technology in place saves a tremendous amount of time and money — but implementing that solution without disrupting the current sales model the carrier has in place is tricky. LegacyShield was designed and built to solve this problem. It allows carriers to seamlessly integrate our platform into their current processes without any disruption while providing a single source with which the consumer can interact.
Technology Issue • Special Sponsored Section
Q: What benefits do carriers see from LegacyShield? A: LegacyShield is unique because it was designed for the insurance industry by insurance professionals. For the past four years, we have been working to help the industry disrupt existing practices by delivering what consumers demand — immediate digital access to their personal information. We offer carriers a customized platform that helps them increase the lifetime value and fee income of the policyholder by elevating customer satisfaction and retention. Our platform also allows fluid interactions between all parties — carrier, advisor and consumer.
Q: How does LegacyShield address security concerns? A: LegacyShield was built from day one as an enterprise solution. That’s important because security can often be an issue with direct-to-consumer tools. LegacyShield, however, is enterprise-grade, requiring enterprise scrutiny of scalability and security. That is exactly why we do not offer our services to consumers directly. We are the only platform that I am aware of that is a strict B2B2C advisor and enterprise solution.
Q: How does LegacyShield help independent advisors grow their practice? A: The first way is through referrals. In fact, most advisors get between 10 and 12 referrals per client using the LegacyShield platform. LegacyShield also offers turnkey marketing and client engagement as well as helping advisors uncover new opportunities to sell to clients and prospects.
Q: How does LegacyShield work hand in hand with the advisor? A: We believe better things happen when an advisor is involved. We understand the risk of disenfranchising advisors and enterprises by having direct consumer relationships. So, no matter whether you are an independent advisor, agency or carrier, your role in your relationships — directly with the consumer or with agents or advisors — can be enhanced by the LegacyShield platform and all it offers.
Visit www.BeTheDisruption.com to download their groundbreaking report, “The Insurance Platform Revolution Is Here.” To learn more about LegacyShield and how its technology can help you, call 844.308.0707.
What industry leaders are saying about
DIGITAL DISRUPTION “Insurance companies that are really good at risk management are thinking traditionally that, if you spend enough time — one year, two years — thinking and planning, the outcomes you generate would be [the result of] the time spent. But the pace of change is so fast that by the time you have thought through things, the market may have already moved on.”
—Naveen Agarwal, chief customer officer, Prudential “… companies that will stand out are the ones that are going to find ways to move a bit faster, at the pace of the people they’re insuring.”
—Scott Simony, head of industry, Google “… The second that you slow down, somebody’s going to pass you. Insurance companies operate on slower timescales. You can’t do that. The market will pass you by.”
—Andrew Rose, president and CEO, Compare.com Source: “Digital disruption in insurance: Cutting through the noise” by McKinsey & Company, March 2017
A Visit With Agents of Change
When The Community Diversifies, Serving a diverse market takes patience, but the rewards are great, says Brian Haney, an advisor who has found success through serving others.
By Susan Rupe
Brian Haney is shown at NAIFA’s annual convention in San Antonio, where he received the group’s Diversity Champion Award. 34
InsuranceNewsNet Magazine » November 2018
WHEN THE COMMUNITY DIVERSIFIES, SO MUST THE PRACTICE
you exit the north side of the White House and drive straight up 16th Street, you will cross the District of Columbia city line and into the suburb of Silver Spring, Md. It’s a town that some may sneer at as being “inside the Beltway,” but it’s also an ethnically vibrant community filled with towering office buildings and retail complexes. With more than 76,000 residents, it’s the fourth-most populous place in Maryland. Brian Haney, 38, has called this area home his entire life. As a native Washingtonian who grew up in the bordering suburb of Chevy Chase, Brian said he is a rarity in this mostly transient metro area. “Almost everyone you meet here is from somewhere else,” he said. But although Brian was born inside the Beltway, his father P. Allen Haney remains an Indiana farm boy at heart. Allen instilled in his family a passion to serve others, and Brian continues that passion
much he cares about serving all of his community, not just parts that might be considered more appealing based on industry standards or affluence … Brian has made efforts to break down social, ethnic, gender and economic barriers, both personally and professionally.” Brian credited his father with keeping the family grounded and attuned to the needs of others, even as they lived among the privileged classes in Chevy Chase. “My dad never forgot his roots — he was the son of parents who lived through the Great Depression, and he grew up around farms,” he said. Brian said his family participated in a number of community service activities and church groups. These service activities brought Brian into contact with people outside the family’s social circle. Although Brian’s father was a strong influence on his belief system, Brian had no plans to follow him into the insurance industry. Instead, he studied journalism at Indiana University, acting on his interest in writing and humanities.
“I’ve always felt that the financial services industry is one of the best industries in the world. Because money is the universal language. Everyone has it, everyone needs it, it’s a medium of exchange but it is required to function in any form of society.” by serving members of communities that are very different from his own. Brian was presented with the National Association of Insurance and Financial Advisors Diversity Champion Award in September. He was honored for his efforts in working with two population segments — the LGBT community and the Hispanic community. He is founder of The Haney Company, a financial services firm in Silver Spring. Allen joined the company after a lengthy insurance career of his own, and Brian’s younger brother, Scott, also is a principal with the firm. “For as long as he has worked in the financial industry, Brian has had a practice that cuts across barriers,” Scott said in a statement on Brian’s diversity award. “Working alongside him now, I see how
But after graduation, Brian became disillusioned over the career opportunities available in journalism. “My dad said if you’re not stuck on journalism, I’ll open some doors for you,” he said. “One of those doors was an opportunity in banking. I jumped into that and fell in love.” His initial job was with First Union, which eventually became Wachovia and is now Wells Fargo. Brian’s work with the bank brought him into contact with segments of the community he might not otherwise have crossed paths with. The common thread he had with them was what Brian calls “the universal language.” “I’ve always felt that the financial services industry is one of the best industries in the world,” he said. “Because money is
IN THE FIELD
the universal language. Everyone has it, everyone needs it, it’s a medium of exchange but it is required to function in any form of society.”
It’s A Family Affair
Brian left the bank after five years and ran an independent practice through MassMutual. He started to lay the groundwork for what eventually became The Haney Company. Meanwhile, Allen had sold his own multiline company, JZA Inc., to another firm. But he wasn’t ready to spend the rest of his days on the golf course. “We were together at Thanksgiving, and I asked him how he felt about the sale. He said something like, ‘I’m not excited about it,’” Brian recalled. “So I told him, ‘If you have any gas left in the tank, let’s work together.’” Brian’s brother Scott was living in Atlanta at the time, working in video marketing and production. Brian invited him to move back home and join the family business as well, and he agreed. An added bonus to that arrangement was that Brian and his wife, Kelly, would be able to have “Uncle Scott” spend more time with their 9-year-old daughter, Jordyn. Allen’s practice had focused on the association market, which has a large presence in the Washington area. Brian’s practice had focused on families and small businesses. “It was a nice marriage between our two marketplaces,” Brian said. They continue to serve small-tomedium-sized associations, as well as families and small businesses. The Haney Company is in its sixth year of operation, and “we’re really having a good time,” Brian said. He said the three men manage the family dynamic and the work dynamic well. “We’re at that stage where we’re adults,” he said. “So it’s as much a peer-to-peer thing as it is a junior-senior thing. “My dad has 40 years of wisdom and experience in this industry. We learn from him every day.”
Getting The Tide To Rise
When Brian worked for the bank, he was assigned to open a branch in the Dupont Circle neighborhood of Washington, a neighborhood that is home to a large LGBT community.
November 2018 » InsuranceNewsNet Magazine
IN THE FIELD WHEN THE COMMUNITY DIVERSIFIES, SO MUST THE PRACTICE
Photo credit: Susan Rupe
“I was out there building the branch, out in the community, building relationships,” he recalled. “That was what connected me to the LGBT community.” Brian soon recognized that the LGBT population was underserved by the financial industry compared with other population groups in the Washington metro area. Financial worries are a major hurdle with the LGBT community in the U.S., compared with the non-LGBT population. A recent Gallup poll showed LGBT Americans are 10 percentage points less likely to be thriving financially than their non-LGBT counterparts. In addition, research from the University of California at Los Angeles showed the LGBT population is at a disproportionate risk of poverty and food insecurity. Brian said his mantra is, “If a rising tide lifts all boats, then focus on trying to get the tide to rise. Because your boat, as well as everyone else’s, is going to sail.” He said he went into the community not necessarily to figure out the best business angle, but to figure out the things the community needs to get the tide to rise. Eventually, one of Brian’s clients invited him to attend a networking event held by the Capital Area Gay & Lesbian Chamber of Commerce. That led to a long relationship with the organization. “I wasn’t looking for it — it found me,” he said. “The invitation came out of my asking my client what he was doing to grow his business and how that was working.” Brian came to know the chamber’s influencers and sponsors. He participated in chamber events and eventually was elected to the chamber’s board of directors, and served as the group’s treasurer and vice president. Through his church, Brian provided outreach and support to the LGBT community as well. The relationships he made through CAGLCC led to his introduction to members of the Greater Washington Hispanic Chamber of Commerce. He became involved in that organization, too.
Brian also served as president of NAIFA-Greater Washington and forged partnerships among his professional association and the two chamber groups. The result was an ongoing series of diversity forums for local professionals. The Hispanic community in the D.C. area has its own diversity, he noted. “There is diversity of heritage. Are you Mexican, Central American, Puerto Rican? It’s also diverse in terms of generations. There’s a big difference between second-generation Hispanics and early first-generation Hispanics.”
The Columbo Approach
It can be intimidating to begin serving a demographic that is different from your own. The first step, Brian said, is to conduct a survey. “Take a little time to understand the demographics of your community, and pay attention to the underserved portions of it,” he said. “Do you have a personal passion or desire to help them?” Next, he advised, ask yourself whether you have any connections or passions that would help you develop those relationships. “If that exists, perfect,” he said. “Then you’re not going in just because you’re trying to make that business case. I can make a business case for any community, but I don’t want to start there.” Brian observed that there have been too many instances when well-intentioned people attempt to make business inroads into a diverse market, and “they blow in, they blow up, they blow out.” Chambers of commerce are great places to meet people, Brian said. He advised breaking the ice by taking what he called the “Columbo approach,” after the TV detective who solved crimes by asking a litany of questions in an attempt to find out “just one more thing.” “Get to know the board members, the sponsors,” he said. “Go in and just ask questions. How long have you been a sponsor? What made you decide to do
that? Two things will happen: You’ll make a better impression, and you’ll learn a lot.” Brian said when he was introduced to the president of the chamber affiliate, “I wanted to know about the board dynamic, how the chamber functioned, what areas of need it had, how I could help.” As Brian continued to develop his relationship with the chamber and its members, he submitted his name for consideration to the organization’s board of directors. He recommended board service as another way to gain credibility and trust with a diverse demographic. Another good way to become established in a different community is to volunteer, Brian said. “Do things you might otherwise do, but do them specifically for this particular community, and in doing so you will develop relationships. And you will really get to know the community better,” he said. Above all, he said, be patient in making inroads with diverse groups. “You have to play a longer game because you might not get an immediate benefit,” he said. “But you’re making a community commitment, so give yourself a longer measuring rod for success.” Susan Rupe is managing editor for Insurance N ewsN et . She formerly served as communications director for an insurance agents association and was an award-winning newspaper reporter and editor. Contact her at firstname.lastname@example.org. Follow her on Twitter @INNsusan.
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“There is diversity of heritage. Are you Mexican, Central American, Puerto Rican? It’s also diverse in terms of generations. There’s a big difference between second-generation Hispanics and early first-generation Hispanics.” 36
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WHEN THE COMMUNITY DIVERSIFIES, SO MUST THE PRACTICE
IN THE FIELD
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John Hancock To Sell Only Interactive Coverage Strap on that Fitbit. John Hancock
announced it is ending sales of traditional life insurance in favor of coverage that will provide policyholders with discounts for taking steps to improve their health. The Vitality Life Insurance Program allows consumers with active and healthy lifestyles the option to lower their premiums by accumulating Vitality Points for health-related activities such as exercising, getting a flu shot and logging their annual visit to the doctor. The points are translated into discounts. Since initiating the program, John Hancock reported their policyholders with the program take nearly twice as many steps as the average American; have logged more than 3 million healthy activities including walking, swimming or biking; and engage with the program approximately 576 times a year. This life insurance program does not penalize or shift costs to consumers who are less active, but instead offers an actuarially sound method to provide discounts for those policyholders who choose to live a healthy lifestyle, and are therefore likely to increase life expectancy.
INDEXED LIFE SALES HIT NEAR RECORD HIGHS IN 2Q
Second-quarter sales of indexed life insurance rocketed to near record highs: $552.7 million, to be exact. This was up more than 13.6 percent compared with the prior quarter, and up over 13.9 percent compared to the same period last year, according to Wink Inc. “This was the second-highest quarter ever for indexed life insurance sales,” said Sheryl J. Moore, Wink CEO. Meanwhile, nonvariable universal life was on an up-and-down track. Nonvariable UL sales for the second quarter were more than $958.1 million — up more than 9 percent compared with the previous quarter and down more than 2.2 percent compared with the same period last year. Whole life second-quarter sales remained relatively steady at $1.1 billion in the second quarter.
BIG OPPORTUNITIES IN WEALTHY MARKET
Bigger is better! The affluent market is on the rise, and that means more opportunity for life insurers, according to Conning research. “Affluent households — those with more than $100,000 income — grew by 30 percent between 2012 and 2016,” said Mary Pat Campbell, a vice president of insurance research at Conning.
Mary Pat Campbell
Although that portion of the market had significant growth, the increase in the mass affluent market — households with $200,000 or more in income — was stunning, showing growth of 61 percent between 2012 and 2016.
Nestle agreed to sell Gerber Life to Western & Southern Financial Group for $1.55 billion. Source: Nestle USA
InsuranceNewsNet Magazine » November 2018
We need to get out more get more people on the street, get out there meeting more people. Because we have great products to sell. — Joann Martin, Ameritas CEO
“While the affluent market leads in life insurance ownership, our analysis shows that this market still has a large protection gap, signaling unmet need and insurer opportunity,” said Steve Webersen, head of insurance research at Conning. “Of course, affluent market retirement and protection needs are more complex, so insurers need a sophisticated range of products to compete successfully here.”
GROUP TO INSURERS: DITCH COAL
A campaign is calling out the insurance industry as a contributor to climate change and urging insurers to stop investing in fossil fuels, particularly coal. Insure Our Future has begun its focus on what it called the U.S. insurance industry’s “significant role in climate chaos.” The campaign began as a new insurer, Lemonade, became the first U.S. insurer to commit to never invest in coal. These announcements were made public during a panel discussion at the recent Global Climate Action Summit, where the topic was the role the insurance industry can play in decarbonizing the economy. Two months earlier, 17 nongovernmental organizations sent letters to 22 U.S. insurers — including MetLife, AIG and Prudential — urging them to stop insuring and investing in coal and tar sands and to scale up their support for clean energy.
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It’s more important than ever to have an expert to decipher product features and intrinsic benefits.
Advisors And Technology: Crossroads Of A New Frontier Even though consumers make many of their buying decisions online, they still need an advisor to decipher product features and benefits. By Michael Babikian
t’s a very different world than it was 20 years ago. That’s true in every market and every industry — insurance is no exception. I’ve seen a lot of change over the course of my career. For some time now, consumers have been demanding the same convenience and accessibility from insurers as they get from the Amazons of the world, but the responses to those demands have fallen short. It’s not for lack of trying. Insurance carriers have put a lot of effort into streamlining the buying experience by expediting underwriting, but that alone is not enough. Success today requires more than just being efficient and offering a few digital portals. A website or app alone isn’t what’s going to catapult a company into the modern age. What’s needed is a reinvention. 40
“Simply hooking digital assets on to an analog business model does not make a digital business,” says the McKinsey study “Digital Disruption In Insurance: Cutting Through The Noise.” Before I delve into the infrastructure that allows a carrier to transform its business model and offer what consumers demand, I want to spend some time talking about the reason for the change. What’s so egregious about engaging with the majority of insurance companies compared with banks, for example, is that the focus still faces inward. Offerings bubble up from a place of current capabilities and margins of profitability. Companies are still looking at the solutions they create through the lens of what they’re able to offer and what makes sense for them financially. Although a company must be profitable in order to succeed, profit can’t be the only concern. Instead of taking an inside-out view, it’s time to look from the outside in, meaning from the consumer’s standpoint. True customer centricity can’t exist until the effort is made to understand what customers actually want and need — and that applies to everyone in the supply chain.
InsuranceNewsNet Magazine » November 2018
Here are a few elements of customer centricity that I believe are important.
If you look at the insurance-buying process from a customer’s perspective, it’s hardly transparent. People don’t understand how insurance is priced — why it might cost more for one person than it does for another when buying the same type of policy. Consumers often don’t understand how mortality rates factor in and why the underwriting process is so long and confusing. And they certainly don’t understand why different carriers follow different underwriting guidelines. But perhaps most important, they aren’t aware of the full value proposition: that life insurance takes a big risk factor off the table, that the return on investment is high, and that life insurance provides benefits beyond making sure their family is taken care of.
Ease of Use
In the digital age, it’s no longer acceptable to force consumers into an offline experience. Consumers make the majority of their buying decisions online, and they
ADVISORS AND TECHNOLOGY: CROSSROADS OF A NEW FRONTIER want the ability to browse products and organize their financial lives online. But just because they’re doing more online and don’t necessarily want to involve the advisor at the onset doesn’t mean that the advisor is removed from the process altogether. On the contrary, with the overwhelming amount of information available, it’s more important than ever to have an expert to decipher product features and intrinsic benefits. Advisors are also best at customizing the experience and helping clients determine the solutions that make the most sense for their unique situation. What changes is that customers have the ability to do some things on their own and then engage an advisor when and how they want. Another part of making things easy is creating a connected journey — the same experience from the carrier down through the advisor. It shouldn’t be con-
An example could be offering elements of products a la carte so that customers are getting precisely what they want and not a bunch of bloat that does nothing but increase the cost. Customizing solutions for an individual is an attractive value proposition for carriers, distributors and advisors to consider. It requires some creativity and flexibility, but it’s an appealing proposition. Customization could also come in the form of innovation, offering new services based on the data you collect. For example, a carrier might consider partnering with software providers to include prevention services and insurance that’s integrated into the software.
Now, let’s talk about the infrastructure it takes to deliver that customer centricity. Integrated platforms have fundamentally
Simply hooking digital assets on to an analog business model does not make a digital business. fusing who they need to call if there’s an issue with the product. And in my opinion, that contact shouldn’t be the carrier. Let’s consider Amazon again. If there’s a problem with something you purchased on the Amazon platform, you call Amazon directly. You don’t call the product manufacturer or even the third-party seller. So why should it be different for insurance?
What you offer must improve the consumer’s life in some way — and it needs to be different from what others are offering. I’m not talking about policy benefits or nominal price differences. I’m not talking about scrubbing apps or spreadsheeting — that isn’t what’s going to make you stand out. I’m talking about the experience.
changed consumers’ expectations. They provide the instant gratification and ease of use that consumers seek. “No longer do customers have to contend with what, from their perspective, are slow and frustrating processes defined by a carrier’s internal functional silos and technical limitations,” said the McKinsey & Co. study “Capturing Value From the Core.” “Instead, digital technology and the redesign of customer journeys can help them to move quickly and seamlessly across channels and touchpoints, and deliver personalized communications.” Platforms can provide a dashboard of an entire environment — a holistic view of everything. We’re seeing environments or ecosystems form as we figure out new ways to do business. An ecosystem is
where companies from different industries work together as part of a community. In the McKinsey study mentioned previously, the connected car is one such example. Producing a connected car requires players from all types of market sectors: automakers, telecom companies, sensor and chip manufacturers, digital platforms (such as Uber), academic institutions, and insurers. Instead of operating in silos with limited touchpoints, they’re interacting to provide a complete experience. It sounds like a great idea, but how do you get there from the way you are doing business now? Start by asking yourself a few questions. What value will you provide your clients, and how will it be different from what your counterparts are offering? Next, how do you go about building capabilities — IT that can connect your data with insights from others who might be part of your ecosystem? If that’s not something you can accomplish on your own, it may be necessary to partner with a third party that offers such technological advantages. This is a different partnership than you’d have with others in your ecosystem — it’s a closer one that’s focused on helping you deliver more flexibility, more customization, and a better, more intuitive experience. The last question you should ask yourself is, can you move quickly enough? If the ecosystems I just described become the new way of doing business, there will be room for only one representative of each market, and those who seize the opportunity first will persevere. Piggybacking on a partner who has a robust, state-of-the-art platform already built could get you there faster. In today’s industry, speed to execution is worth its weight in gold. The bottom line is that customer centricity and customer experience far outweigh factors such as price and even reputation when it comes time for the consumer — or an ecosystem of experience partners — to decide who to work with. Michael Babikian is founder and CEO of LegacyShield. He may be contacted at email@example.com.
November 2018 » InsuranceNewsNet Magazine
Why Do So Many Families Go Without Life Insurance? A survey showed that the majority of American families understand the importance of life insurance, but few of them act on that understanding. By David Ehrenthal
n a recent SBLI Financial Awareness Survey, we looked to see why so many families choose to ignore the risks of not having a life insurance policy. As the survey showed, although the majority understood the importance of life insurance to financial security, only a minority made a plan and acted on it. Why?
income is essential to achieving a comfortable lifestyle and investing in their children’s futures. Independent of the emotional hardships families endure when a parent passes, the loss of income, “child-related services” and future savings can have a devastating effect on the quality of life of the children and the surviving spouse. Given the magnitude of the impact of such an event, one could argue persuasively that every family’s financial security plan should include some form of insurance that protects the surviving family members’ quality of life.
Evidence To Act
Most people who own a home or an automobile are required to carry an insurance policy. This essentially forces people to responsibly protect themselves, their families and others. Owning a life insurance policy, on the other hand, is at the discretion of consumers, and many choose to ignore the risk — despite clear evidence that it is critically important. A key element of families’ financial security is related to the loss of a breadwinner. In addition to the love parents offer their children, the parents’ 42
InsuranceNewsNet Magazine » November 2018
In the survey, we tried to understand why so many families choose to ignore this risk, looking for answers to these questions: » Do parents not see the benefit of maintaining the right levels of life insurance? » Is it a matter of affordability? » Is life insurance (and therefore, mortality) a subject that people would rather avoid discussing?
Key Survey Insights
With approximately 1,100 individuals completing this online survey in recent months, we’ve discovered some important themes. Parents absolutely recognize the importance of family financial security and life insurance. Yet only a minority of respondents have a plan and have acted on it. For those who have a plan and acted on it, it’s usually the result of a conversation with a friend or loved one or the result of a “personal experience.” There are two primary reasons for parental inaction. 1) Procrastination: this topic is frequently ignored or avoided because of its linkage with mortality; 2) Affordability: 1 in 3
WHY DO SO MANY FAMILIES GO WITHOUT LIFE INSURANCE? LIFE believes they cannot afford to fund this goal for their family. Yet, 84 percent said they would be comfortable spending between 0.5 percent and 5 percent of their annual household income on life insurance.
Procrastination Is Rampant
Survey respondents agree that protecting the family in the event of their or their spouse’s death is important, and 84 percent appear willing to fund a life insurance policy for this purpose. Forty-five percent agree it’s important to protect their family despite having done nothing about it, and another 45 percent believe their family is well-protected. When asked how much of their annual income they would be willing to spend on life insurance, the most common response was 2.5 percent. Seventy percent of families said they are comfortable spending up to 2.5 percent of their annual income on coverage. Yet procrastination is rampant when it comes to consumers planning to protect their families. A minority – 36 percent – have a plan and have acted on it.
What about the other 64 percent?
Forty-four percent of those procrastinators either never had the conversation with their spouse or admit they don’t really have a plan. The remaining 20 percent has a plan but have failed to act on it. And it seems to take a long time for people to move from the thinking-aboutit phase of buying life insurance to the dosomething-about-it phase. Eighty percent of those who said they are thinking about purchasing life insurance have been doing so for more than a year. More than half of those who are thinking about it — 57 percent — have been considering it for three years or more. Why does it take so long for people to take action on buying life insurance? Life insurance inherently raises the question of mortality, and 43 percent of respondents said they are uncomfortable thinking about it. But a life event, provocative conversation or experience usually sends parents
into action. Sixty percent of respondents said their reasons for developing a plan and acting on it were “a personal experience” and a “conversation with a friend or a loved one.” For the 20 percent of respondents who have a plan but have failed to act, 1 in 3 believes they can’t afford life insurance. Nearly half (41 percent) are “not really sure” why they have failed to act or don’t know where to go to act on their plan. Generally, respondents were complacently confident their family would be financially protected if something were to happen to them or their spouse. But unfortunately, this belief in their “readiness” appears to be unsubstantiated; only 1 in 5 has actually “run the numbers.”
Parents are blessed with one essential asset to cope with challenges of parenting: The impulse to love and protect their children is hardwired. Studies show that the act of caring for children activates a “parenting network” in the brain. This is equally true no matter whether we are talking about a mom or a dad or biological or adoptive parents. So it’s no surprise that parents can give their children just what they need — love and a feeling of safety — without an operator’s manual. The pivotal word in the previous sentence is “can.” Just because a parent can provide their children with love and safety does not mean they will always succeed.
Several environmental and biological factors can get in the way. Rearing a child is an expensive proposition. The need to cover a child’s related expenses — which the U.S. Department of Agriculture estimates run between $212,300 and $454,700 — places particular funding pressures on parents. Parents are generally uncomfortable thinking about factors that could cause chaos in their family’s life. Two out of 10 parents have failed to act on a plan to protect their families, our survey revealed. Although 82 percent of parents believe their loved ones would be financially protected if something were to happen to them or their spouse, only 22 percent have done those calculations. Such reservations are not surprising, since just the thought of a chaos-causing event is highly unpleasant and therefore will naturally be avoided. For most parents, the thought of their own mortality and the mortality of their significant others is virtually unthinkable. Needless to say, few couples relish a conversation about the unthinkable. Within a parent’s psyche, a neurological tug of war plays out: a hardwired instinct to protect the family from chaos pulling against a powerful resistance to thinking about mortality. This “hijacking” of important parenting instincts, ones that foster love and safety for their children, results in too many families placing their children at needless risk.
For parents with enough discretionary savings, there is only one sure way to overcome this hijacking. At a minimum, for every child born, a life insurance policy should be purchased with a coverage amount that funds a child through college. Moreover, when a home is purchased, more coverage should be added equal to the mortgage debt. By recognizing their discomfort with the subject matter, partners can more easily overcome their resistance and do the right thing for their family. David Ehrenthal is senior vice president at SBLI. Dave may be contacted at dave. firstname.lastname@example.org.
November 2018 » InsuranceNewsNet Magazine
ANNUITYWIRES J. Scott Applewhite/AP
A Push For Annuities In Tax Reform Bill
Executives from major carriers are backing a measure that would make it easier to add annuities to company retirement plans. The industry chiefs want House leaders to amend the Family Savings Act to encour- Industry leaders are asking for changes in the Family Savings Act, sponsored by Rep. Mike age the use of annuities in work- Kelly, R-Pa., left. place savings plans. In a letter to House leaders, major insurance executives said, “While the Family Savings Act takes steps to address the need for Americans to increase their retirement savings, we believe Congress can do more to boost Americans’ retirement security.” The letter was signed by the CEOs of 17 carriers, as well as the Insured Retirement Institute and the American Council of Life Insurers. The Family Savings Act includes provisions to expand access to workplace savings plans by allowing small businesses to band together to offer them and relaxes required minimum distribution rules for individual retirement accounts. But the act included little about annuities.
ADVISORS SEEK SAFE PRODUCTS ies uit n n a
OHIO NATIONAL DROPPING ANNUITIES
Ohio National Financial Services is laying off 300 people and dropping its annuity lines. The company said it will exclusively focus on growing its life and disability income insurance product lines going forward. The decision follows a “comprehensive strategic review of Ohio National’s businesses, taking into account the continuously changing regulatory landscape, the sustained low interest rate environment, and the increasing cost of doing business, as well as growth opportunities and the company’s competitive strengths,” according to a company news release.
As the 2008 financial crisis fades into memory, advisors have shifted toward “safer” products as clients seek stability and guarantees. It’s fertile ground for annuities, according to Nationwide’s annual Advisor Authority study. The study asked advisors how the crisis changed the way they approach planning. Here’s what it found.
» 37 percent increased their use of variable annuities with guaranteed living benefits. » 31 percent said their use of a fixed annuity had increased. When advisors were asked to list priorities to prepare clients for the next downturn, the survey found that 28 percent said they are adding annuities to
Western Life has added the NWL Dynamic KNOW National series to its annuity illustration resource for agents 44
— Michael Manetta, senior quantitative analyst at Morningstar
provide guaranteed income and 28 percent said they are adding annuities to provide guaranteed downside protection.
NEW PRODUCT NEWS
New annuity products continue to hit the marketplace, and here are some of them.
Brighthouse Financial has two new fixed annuity products: the Brighthouse Fixed Rate Annuity and the Brighthouse Fixed Rate Annuity MVA. Both are singlepremium deferred fixed annuities that offer consumers a guaranteed rate of interest for the initial guarantee period. Consumers can select an initial guarantee period of three years, five years or seven years at the time of purchase. In addition, any purchase payment of $100,000 or more will receive an enhanced rate.
» 43 percent of advisors said they increased their use of indexed annuities.
It is encouraging to see a solid rebound in overall sales of variable annuities.
InsuranceNewsNet Magazine » November 2018
Source: National Western Life
Allianz Life is offering its Allianz Index Advantage Income Variable Annuity. This product includes three key features to help meet retirement goals, including income withdrawal percentages that offer the potential to increase each year retirement income is deferred, the ability to customize growth potential and protection opportunities through a variety of crediting methods (also called index strategies), and an option for guaranteed income for life that can increase each year.
Could Indexed Annuities Steal The Spotlight From VAs? The variable annuity market’s recovery could be overshadowed by competition from the indexed annuity market segment.
By Cyril Tuohy
ales of fast-growing indexed annuities could eat into the VA market’s recovery, a Morningstar analyst said. Regulatory relief and the Trump administration have provided a welcome tailwind for VA sales, which finally ended their long sales slide with a slight sales uptick in the second quarter. But now the looming issue for VAs is competition from the indexed annuity market segment, said Michael Manetta, senior quantitative analyst with Morningstar. “VAs are still outselling indexed annuities, but indexed annuities are growing much faster,” Manetta said. “That’s challenging going forward for VAs, and that may cap the rebound of VA sales.” VA sales inched up in the second quarter to $23.6 billion from $23.2 billion in the year-ago period, the first time VA sales rose year-over-year in the past four years, Morningstar reported. Indexed annuity sales, meanwhile, climbed 17 percent to $17.6 billion in the second quarter over the year-ago period, LIMRA Secure Retirement Institute data showed. A decade or more ago, linking the VA benefit base to the market held strong appeal. But with more people turning risk averse, a guaranteed floor linked to the market — which indexed annuities offer — is likely to prove more attractive these days, Manetta said. VAs are on track for sales in the $100 billion range this year, flat compared 46
with last year, LIMRA analysts have said. Indexed annuities are expected to turn in record sales this year, cresting $62 billion, said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink Inc., publisher of Wink’s Sales & Market Report. “I agree — indexed annuities are the biggest threat to VAs,” said Moore. “If you ask me, indexed annuity sales are going to overcome variable annuity sales soon.”
mortgage market, where lenders like Quicken Loans were able to establish a foothold in a market dominated by traditional mortgage lenders. “It will be interesting to see who the big players are in the indexed annuity space and if they are different from the ones in the VA space,” Manetta said. “That might be an interesting dynamic.” At the moment, the VA market appears to have stabilized, but whether it could decline still further is difficult to say, Manetta said. The VA sales decline was already slowing, and there’s little reason to believe the decline would have continued much further. Still, the days when VAs were selling $40 billion a quarter aren’t going to come back anytime soon.
Independent Channel Racks Up Gains
Moore is projecting sales of indexed annuities to be $62.3 billion for 2018.
Same Insurers In Both Segments
While indexed annuities may turn out to be VAs’ biggest long-term challenge, if the same companies are selling both types of products, then the insurer isn’t likely to suffer in terms of overall sales. But if upstarts begin to sell indexed annuities and eat into VA sales traditionally sold by legacy insurers, look out, Manetta said. Manetta sees some parallels with the
InsuranceNewsNet Magazine » November 2018
Independent advisors also cooked up big market share gains in the distribution of VAs, the Morningstar analyst said. Independent advisors accounted for more than 42 percent of all VA sales in the second quarter, up from 36 percent in the year-ago period. Much of the gains came at the expense of the captive agency channel, which saw its market share plummet to less than 30 percent in the second quarter compared with 37 percent in the year-ago period, the data show. Older VA contracts seem to be selling better than more recent contracts, and independent advisors may be more comfortable selling contracts dating from 2012-13 rather than contracts from 201718, Manetta said. Another reason for independent advisors increasing their market share could be the surge in the numbers of people retiring or nearing retirement, and people relying on independent advisors to service those retirement portfolios, he said.
COULD INDEXED ANNUITIES STEAL THE SPOTLIGHT FROM VAS? ANNUITY
VA Growth ‘Minimal’
“It’s nice to see that the quarterly values have stopped that long slide, but growth is minimal,” Todd Giesing, annuity research director for LIMRA SRI, said of VA sales. The top three sellers were Jackson, TIAA and AXA, LIMRA reported. For a long-suffering segment of the annuity market, two major developments helped stem the ebbing VA tide. In March, a federal court vacated the Department of Labor’s fiduciary rule and the Trump administration opted not to appeal the decision, effectively killing a rule that many VA sellers blamed for contributing to the decline in sales. Rising interest rates also help make the living benefit features of VAs more attractive, and companies have loosened investment restrictions, which gives advisors more freedom in their investment choices, Giesing said.
‘Not Having The Same Success’
But VAs still face an uphill battle as insurance companies add competitive
features to indexed products and rising Treasury yields make fixed annuities more attractive. “Despite introducing new products and making changes to enhance their existing products to make them more competitive, companies are not having the same success with VAs as they are with fixed annuities,” Giesing said. “In the VA market, we’ve had the regulatory issues and concerns that have diminished and we have better economic conditions that should help,” he said. “But we’ve also seen a shift and the pivot to indexed annuities, and they are growing much faster than the VA side.” Indexed annuities and multiyear guaranteed annuities, or MYGAs, each posted double-digit percentage sales gains, LIMRA reported Sub-segments of the VA market, like fee-based VAs and registered index-linked annuities, have done well as sales continued to climb — albeit from a very small base. Second-quarter sales of fee-based VAs, which are designed to appeal to registered
investment advisors, rose 49 percent to $850 million, LIMRA reported. Fee-based VAs, however, represent only 3.3 percent of the total VA market. Insurers and distributors are still adjusting their technology platforms to accept fee-based products, so there’s still plenty of growth potential for those VAs. Fee-based VAs should eventually break the $1 billion-per-quarter sales threshold, Giesing said. VA sales this year are expected to rise less than 5 percent over last year, according to LIMRA forecasts. Last year, VA sales fell 9 percent to $96 billion compared with 2016. The days when VAs sold $30 billion or $40 billion a quarter are gone, “but we think VA sales will be level over the next three years at $100 billion a year to 2020,” Giesing said. InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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November 2018 » InsuranceNewsNet Magazine
HEALTH/BENEFITSWIRES ks, No thaon d o I’m g .
It’s Easier To Opt Out Of Mandate The Trump administration made it eas-
ier for individuals to say “thanks, but no thanks” to the Affordable Care Act’s individual mandate. The Centers for Medicare & Medicaid Services said it is smoothing the path for taxpayers to claim a “hardship exemption” from the mandate, which requires everyone to have coverage or pay a fine. CMS will allow individuals to claim hardship exemptions on their tax returns without providing any documentation or written explanation. An individual may be eligible for a hardship exemption if they experience certain circumstances that prevent them from obtaining health care coverage, such as bankruptcy or homelessness, or experience a fire, flood or other natural disaster. But the hardship exemption will be short-lived. The 2018 tax year will be the last one for the mandate. The GOP tax law that passed in December removed the tax penalty associated with the mandate, effectively repealing it.
PATIENT GROUPS SUE OVER SHORT-TERM PLANS
Seven health care groups filed suit over the Trump administration’s expansion of non-ACA-compliant health insurance plans, arguing that the move harms people with pre-existing conditions. The groups want to stop the administration’s rules expanding short-term health insurance plans. In August, the administration issued rules that allow short-term plans to last up to one year instead of three months. The groups suing include the National Alliance on Mental Illness, the American Psychiatric Association and the Little Lobbyists, which represents children with complex medical needs. The Trump administration argues these plans provide a cheaper alternative to ACA plans. But opponents call them “junk” plans because they are not required to cover people with pre-existing conditions and can exclude coverage of certain health services.
ALZHEIMER’S CASES WILL NEARLY TRIPLE BY 2060
Unless something dramatic happens to change the trend, the number of people with Alzheimer’s disease will nearly triple in the next 40 years, the Centers for Disease Control and Prevention predicts. Right now, about 5 million people have Alzheimer’s, the CDC reports. That’s about 1.6 percent of the population. But by 2060, that number will hit nearly 14 million, which will then be 3.3 percent of the projected population. As more Americans live longer, the risk of developing Alzheimer’s will continue to go up. The disease is expected to hit the Hispanic-American community hard. This demographic will have the largest projected increase in Alzheimer’s cases due to population growth over the next 40 years, the CDC said. African-Americans have the highest percentage of Alzheimer’s by population,
85% of large employers offering health insurance included a wellness program. Source: American Association for Medicare Supplement Insurance
InsuranceNewsNet Magazine » November 2018
Source: Kaiser Family Foundation
There is considerable evidence we are receiving less in the way of good health care. — Sylvester Schieber and Steven Nyce, co-authors of a Willis Towers Watson survey
with 13.8 percent of blacks aged 65 or older affected. More than 12 percent of older Hispanic-Americans have Alzheimer’s, while 10 percent of whites over 65 have the disease.
LONELINESS REACHES EPIDEMIC HIGHS
More than one in five Americans (22 percent) said they frequently feel lonely and socially isolated, and those feelings can have serious consequences. That’s among the findings of a three-country survey conducted by Kaiser Family Foundation and The Economist. More than half of Americans who feel lonely or socially isolated report a negative impact on their mental and physical health. Nearly half said loneliness affects their personal relationships and one-third said it hinders their ability to do their jobs. Thirty-one percent said loneliness has led them to think about harming themselves and 15 percent said social isolation has caused them to consider committing a violent act. The survey took a look at the prevalence, causes and consequences of loneliness and social isolation in the U.S., the United Kingdom and Japan at a time when aging societies and increasing use of technology are generating concerns about the effects of loneliness on health. In the U.S., those most likely to experience loneliness include people who report having a mental health condition (47 percent report loneliness) or a debilitating health condition (45 percent). That’s roughly three times the rates for those who don’t have such conditions.
At Foresters Financial, we are ™
Foresters does more than offer a range of competitively priced financial services products. As a member based organization, we are moved to action and give back to families and communities where our clients live.
In 2017 alone, Foresters contributions¹ included:
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volunteer hours donated by members through Community Grants
$2.2 million in Competitive Scholarships² to 250 students
$3.1 million to our members in Emergency Assistance relief
local community organizations supported by members donating time and effort through granting activities
And Foresters remains financially strong³ with:
3 million+ members and clients in Canada, the United States and the United Kingdom
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Learn how we can do more for your clients. Visit report.foresters.com 1 Consolidated financial results as at December 31, 2017. All figures in Canadian dollars. 2 This program is administered by International Scholarship and Tuition Services. Available to eligible members with an in force certificate having a minimum face value of $10,000 or if an annuity, either a minimum cash value of $10,000 or a minimum contribution of $1,000 paid in the previous twelve months. 3 Financial strength refers to the overall financial health of The Independent Order of Foresters. It does not refer to nor represent the performance of any particular investment or insurance product. All investing involves risk, including the risk that you can lose money. Foresters Financial and Foresters are trade names and trademarks of The Independent Order of Foresters (a fraternal benefit society, 789 Don Mills Road, Toronto, Canada M3C 1T9) and its subsidiaries. N262
416314 US (08/18)
Mars And Venus Look At Risk: New Approaches To Selling LTCi Now there’s someone who could use some long-term care...
Men and women assess risk differently. When you understand those differences, you can have a more effective conversation on long-term care. By Harley Gordon
elling long-term care insurance to a healthy client can be an extremely challenging experience. Yet no financial plan is complete without addressing this potentially devastating effect of requiring longterm care. The problem is twofold: how to approach this critical conversation and how to fashion a solution using the available product options.
Understanding The Difference: Risk And Consequences
Generally, any conversation about extended care revolves around selling a product to solve the problem. Long-term care insurance is positioned as managing the risk and cost of care, both of which are backed by statistics. This risk-based approach works with sickly clients and those with prior LTC experience, but rarely with perhaps the most difficult 50
demographic in insurance: healthy men (and to a degree, healthy women). The reason, which appears obvious, is that men assess risk differently than women do. But the ultimate question is, why? Why would a person who tells you he (or again, she) loves his family and understands how awful it would be for them if he needed care nevertheless refuses to purchase long-term care insurance? Studies have shown that men have developed characteristics that, in general, lead them to minimize or disregard risk. They perceive their behavior as less risky and are more likely to engage in behavior that could lead to undesirable or damaging outcomes than do women. This manifests itself in a variety of ways, but here are a few examples, as reported in the American Psychological Association’s Psychological Bulletin. » Men drive more recklessly, with fully 97 percent of dangerous driving offenses committed by men. » Men use drugs (alcohol, tobacco, cannabis and cocaine) more than women do. » Men also have a significantly higher
InsuranceNewsNet Magazine » November 2018
death rate from nonvehicle accidents such as falls, drowning, electrocution, firearm accidents and fires. It’s this tendency to ignore or feel indifferent about risk that makes it difficult for men to buy insurance. This is critical. Men tend to separate the risk of dying or becoming severely disabled — or in this case, needing extended care — from the consequences of doing so. If they don’t see something as a risk, then, in their minds, there are no consequences to them and therefore no consequences to those they love. Of course, these findings vary based on a wide variety of social and cultural factors. Women, in general, are less likely to engage in risky and impulsive behavior and are more likely to weigh the potential cost of an action in comparison with the benefit. As a result, women are more likely to look at the risk and consequences of an event as one and the same. In other words, a risk is a consequence. When it comes to long-term care, they may instinctively understand the emotional, physical and financial responsibilities associated with an extended illness or disability. They
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HEALTH/BENEFITS Mars And Venus Look At Risk: New Approaches To Selling LTCi view the risk of needing care through the prism of its consequences. In my personal experience of more than 25 years in the long-term care industry, I have often seen these ideas manifest as follows: If you ask a man whether he believes he will ever need care over an extended period of years, the answer is a simple “no.” In his mind, if there is no risk of the event happening, then there are no consequences. Therefore, why buy a product to cover them? Often, when a woman answered this question, the answer was “I hope I don’t,” thereby confirming the belief that risk and consequence are inevitably intertwined.
and ever occurred, has the potential of causing serious if not irreversible consequences to your wife and children. It also has the potential of undermining your portfolio.” Client: “What do you mean?” Advisor: “The subject is extended care. Needing care of this nature is caused by illnesses that can be managed but never cured, like dementia and Parkinson’s disease. As they progress, they so severely compromise you that the people you said you would take care of will have no choice but to take care of you. And that’s the problem.”
Give them the opportunity to consider what will happen to their family if they don’t take action. Again, while these gender-based differences to risk are supported by studies, they are not absolute, especially for many of today’s families. For example, many women are the primary financial providers for their families. Women in these roles may view risk as men would, and men, vice versa. It’s no different with same-sex couples.
Changing The Conversation
Client: “This whole thing is based on my needing care, which I don’t think I will.” Advisor: “Let’s take a look at this a different way. I believe you. I believe that you don’t think you will ever need care. But, rather than look at this as a series of risks to you, look at it as a series of consequences to them: those you love and have promised to protect.”
When discussing the subject of long-term care with clients and prospects, do not focus on the risk of him needing care, supported by endless statistics. Instead, focus on the consequences to them — those they love and are committed to protecting. Give them the opportunity to consider what will happen to their family if they don’t take action. Have him think about the serious emotional, physical and financial consequences and you’ll connect to his deep-seated purpose to protect and provide for the people he invited into his life and promised to care for. Here are sample discussions between an advisor and client that integrate these key points.
Client: “I understand, but we have enough assets to pay for my care.”
Advisor: “I need to talk to you about an event that, if not properly planned for
Client: “I hadn’t thought about it that way. What should we do?”
Advisor: “Yes, but let’s think it through. You’ve worked hard to put together a financial plan for you and your family. But all that would be in jeopardy. It would require a reallocation of income and depletion of your capital — that which has been accumulated to generate predictable streams of income later in life. Using capital causes unnecessary taxes, subjects withdrawals to market timing and could create liquidity issues. Perhaps most important, every capital dollar used for care is one less dollar available to generate income.”
InsuranceNewsNet Magazine » November 2018
Advisor: “You need to have a plan. Let’s discuss some options.”
Presenting The Plan
In the preceding conversation, the advisor focused on the client’s family instead of the client, and the consequences instead of the risks. Next, when discussing how to pay for long-term care, the advisor should never focus on the product, only on developing a plan to mitigate the consequences. A comprehensive long-term care plan can start with an understanding of who the other participating family members are and how they potentially could contribute. Then, you can move the discussion into how the financing would work, with the goal being to preserve the financial well-being of the family. Consideration should be given to the following elements: » How much of the client’s assets/home equity could be available for long-term care expenses. » Group benefits that might be available through the client’s employer. » Long-term care insurance, although there are only about a dozen carriers left in the market, and the policies have not been very popular due to premium increases and limited benefits. » The new “combo” or “hybrid” policies whereby your clients can purchase an annuity or whole life policy that they can draw on in the event they need to pay for long-term care. These policies can help meet broader planning objectives because they provide benefits even if the long-term care provisions are not used. These products, as with life and disability income insurance, focus on the client’s commitment to their family, which should not end due to death, disability or the need for long-term care. Harley Gordon is a founding member of the National Academy of Elder Law Attorneys and is the author of The Conversation: Helping Someone You Love Plan For An Extended Care Event. Harley may be contacted at firstname.lastname@example.org.
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Advisors Hold Themselves Up To A Mirror
Robert Burns’ line about the gift of being able “to see ourselves as others see us” has implications for advisors. For the way that clients perceive advisors is not the way advisors see themselves. Advisors expect their role will evolve toward acting as a planner, concierge or educator — helping to guide clients rather than functioning as an investment manager — according to research from consultant Howard Schneider, head of Practical Perspectives. When advisors look in the mirror, here’s what they see: » 36 percent position themselves to clients and prospects as a financial planner and 32 percent expect their greatest impact to be as a planner. » 60 percent expect their key challenge in the future will be attracting new clients and assets. her income was lower or she took time out of the workforce — for example, to raise children. Women’s longer life expectancies also mean they’re likely to outlive their husbands, and they’re at greater risk of outliving their savings.
WOMEN GIVE UP WEALTH WHEN RETIRING WITH SPOUSE
Women typically retire at the same time as their husbands and, while it might be a desirable thing to do in terms of traveling and doing other activities together, it often comes at a financial cost. Married women typically sacrifice more Social Security wealth than married men when they retire early, said economist Nicole Maestas, the author of a recent study about couples’ income and retirement patterns. Why? Married women overall are still in their peak earning years in their 50s and early 60s, while married men’s earnings are on the decline, she said. Social Security benefits are based on a person’s 35 highest-earning years, so each additional year an older married woman works could replace an earlier year when DID YOU
GET MILLENNIALS ABOARD THE INVESTMENT TRAIN
Millennials are a force to b e re ckone d w it h i n t he workplace, but many of them are intimidated when it comes to investing outside their 401(k) plan, a study shows. In particular, a majority of millennials (56 percent) don’t think they have enough money to even start investing. The survey, conducted by the savings and investing app Twine, showed millennials have a solid grasp of investing. But they have many misconceptions about how to get started. Nearly half of the millennials surveyed said they believed they needed to have at least $1,000 to get started.
Half of widows experience a household income decline of 50 percent or more. Source: LIMRA
InsuranceNewsNet Magazine » November 2018
Source: Merrill Lynch and Age Wave survey
Americans have a bad habit of saving when times are bad, and spending when the economy is good. — John Girouard, CEO of Capital Asset Management Group
Meanwhile, millennials tend to go to their friends when they want financial advice, with 80 percent of those who are currently investing reporting they discussed their finances with their peers. And even the best-intentioned millennial investors reported they find themselves sidetracked by impulsive spending on vacations and shopping. More than twice the number of millennial respondents indicated they are distracted from their financial goals by spontaneous weekend trips with friends or clothes shopping than their Generation X counterparts.
MORE CLIENTS DEMAND SOCIALLY RESPONSIBLE INVESTING
More clients want to put their money where their mouths are when it comes to social responsibility. But are advisors listening? According to a Charles Schwab ETF Investor Study, three out of four exchangetraded fund investors would invest more in SRI funds “if they had more education and professional guidance.” While younger investors and women, especially, are flocking to socially responsible funds, 84 percent of all ETF investors believe they’re sacrificing investment returns by engaging with SRI funds — a belief that isn’t backed by the facts. Most advisors still think it’s too hard to put a well-diversified portfolio together with SRI funds. That, too, is a misconception, said Sam Adams, chief executive officer at Vert Asset Management. “There are hundreds more SRI funds available now than just a few years ago,” he said.
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The Millennial Dilemma: Student Debt Or Retirement Saving? The millennial generation is taking the labor force by storm. But they are faced with two competing financial needs: saving for retirement and paying down their student loans. • Chris Dugan
he millennials are now the largest generation in the U.S. labor force. As such, employers continue to place a large emphasis on millennials and providing resources and benefits that resonate with this key demographic. Spanning a wide age range (22 to 37 years old), millennials are in various life stages — pursuing higher education, starting their first job or climbing the corporate ladder. Yet the majority of them have one thing in common: student loan debt. Older millennials came of age and entered the workforce during our country’s most recent economic recession. Beginning adulthood during this challenging time hindered some from finding jobs in their desired fields, while others decided to pursue additional schooling in hopes of waiting out the financial downturn. This “slow start” is one reason many in this generation are still digging out of 56
student loan debt. Younger millennials recently graduated from college and are likely feeling the hit of student loan payments that recently became a reality. Research shows that in the 2016-17 academic year, tuition and room and board at a public four-year in-state school cost, on average, $20,090 annually, excluding the cost for school supplies such as books and a computer. Because of these skyrocketing costs, almost four in 10 adults under 30 have student loan debt, Pew Research Center reported. This puts millennials at the top for the generation with the highest debt rate in history, with an average total of $30,000 in student loans. As millennials become more established in their careers and have more discretionary income, they often want to pay off their student loans as fast as possible. This often means that whatever additional income they have goes directly to paying down debt and not toward growing
InsuranceNewsNet Magazine » November 2018
their retirement savings. Many assume this is the right thing to do since “conventional” financial advice used to teach us that individuals should get rid of debt as soon as they could. Although paying down debt is important, if it’s the sole focus, it can impact an employee’s ability to save adequately for retirement. Contributing to a 401(k) plan now, even small amounts, can create larger earnings in the long term due to the growth potential from compounding interest and benefits like an employer’s match. As the topic of financial wellness continues to be a priority, this presents you with an opportunity to talk to clients about the importance of educating this demographic about how to pay down student debt while saving for retirement.
Step Into The Millennial Mindset
As you prepare to meet with clients and discuss how to reach this workforce demographic, first get yourself in the “millennial mindset.” Whether you are a millennial, have millennial children or work with millennials as colleagues,
THE MILLENNIAL DILEMMA: STUDENT DEBT OR RETIREMENT SAVING?
you know that student loan debt can be a source of financial stress. For some millennials, paying down their student loans comes with some emotional baggage. The thought of owing a large sum of money and the amount of time it can take to pay it off can be overwhelming. They want to get the debt off their shoulders and have the payments out of their minds as fast as possible. It’s helpful to think from this millennial mindset perspective and understand the financial stresses they may be feeling when it comes to talking about whether to pay off student loans or to put that money toward retirement. Being mindful of the potential sensitivity around this topic can help you craft your conversations about retirement savings best practices so they best resonate with this audience.
Highlight The Need For Targeted Education
When you meet with plan sponsors to discuss the importance of helping their millennial workforce balance saving for retirement and paying down student loans, highlight the need for targeted education. Retirement planning is not a onesize-fits-all approach.
and being more aggressive with their retirement savings strategy. This information is important to address directly with plan participants. For instance, instead of skimming over this topic in your annual meetings, provide the following insights as key parts of your presentations or one-on-one meetings. Continually addressing the challenge that millennials are facing with student loan debt and emphasizing the importance of saving for retirement can be very useful for this generation.
Show The Value Of Tax-Deferred Compounding
Many participants may not realize that tax-deferred compounding is a key benefit they could miss if they are only paying off student loans. If an employee steadily contributes to their 401(k) plan, over time that money can accrue interest, offering long-term growth as it sits in a retirement account. If millennials decide to be more aggressive and pay off their student loans beyond the minimum payment, they would not have the benefit of the tax-deferred growth potential. Demonstrate the value of tax-deferred compounding with this hypothetical example. If a plan participant contributed
For some millennials, paying down their student loans comes with some emotional baggage. They want to get the debt off their shoulders and have the payments out of their minds as fast as possible. Work with your clients to provide retirement planning education that is targeted to the life stages that millennial participants are going through and that speaks specifically to paying down student loan debt. For the younger millennial generation, part of this education may simply focus on breaking down the common misconception that it’s better to pay off a student loan completely before investing money anywhere else. For older millennials with more discretionary income, the education should center around the value of making the minimum payments on their student loans
$100 a month of disposable income to their tax-deferred retirement plan, instead of putting it toward their monthly student loan payment, they could potentially have more than $17,000 saved in 10 years (assuming a 7 percent rate of return). This example can help highlight the value of tax-deferred compounding and starting to save as early as possible in their employer’s retirement plan. For some millennials, putting their money toward student loan debt or toward a retirement savings account nets out evenly in their minds. Using these types of scenarios can help participants recognize
that student loan repayment time is also the prime time for them to start saving for retirement. Depending on their current age, millennials could have 40 years or so to take advantage of the potential long-term growth opportunities of the stock market.
Max Out An Employer’s Match
Another point to make with millennials is that by forgoing saving in their retirement plan for several years, they are missing out on the employer match. They should try to at least contribute an amount that will get the maximum match. As most advisors like to say, “Not maxing out an employer’s 401(k) match is like leaving free money on the table.” Not to mention the additional savings that could benefit from tax-deferred compounding. If you are talking with millennials who were auto-enrolled, help them understand that it does not necessarily mean that their contribution rate was automatically set at a level to receive the maximum employer match. Encourage them to review their contribution rate and increase it if they are not receiving the maximum match. This is an important distinction to make and a key way this generation can be on its way to growing its retirement savings. As millennials continue to be the largest demographic in today’s workforce, there’s a great opportunity to set yourself apart by helping plan sponsors address financial well-being with their plan participants. Burdened by debt and struggling between paying down loans and saving for retirement, this generation can benefit from targeted education and industry tips on how to balance these two financial priorities. Chris Dugan is the director of retirement plan communications at The Standard. Chris may be contacted at chris.dugan @innfeedback.com.
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November 2018 » InsuranceNewsNet Magazine
Beat The Race To The Bottom On Fee Compression $500 The vast majority of advisors are feeling the pain as fee compression forces them to adapt. But it doesn’t have to be that way. • Craig Hawley
ee compression is pushing downward, driving costs to unprecedented lows. The price for many financial transactions and services has declined to near zero, and there is no doubt that low-cost investment vehicles continue growing in popularity. Clients benefit as these savings go right back into their portfolios — or straight into their pockets. But as fees “race to the bottom,” the vast majority of advisors are feeling the pain. More than two-thirds of registered investment advisors and fee-based advisors are concerned about fee compression, according to our most recent Advisor Authority study of more than 1,700 advisor and individual investors nationwide. In the face of increasing fee compression, the most successful RIAs and fee-based advisors — those who earn more or have more assets under management than their peers — are already a step ahead. Successful advisors with larger firms will win by leveraging scale to cut costs and create greater efficiencies. Many are poised to gain a competitive edge through acquisitions that will increase their size and scale. They are already re-engineering their current business models to remain viable — from the specialized services they offer to their use of technology to the ways they put clients first. All advisors will need to take a page from the playbook of successful advisors to join in this race — or they will be left behind.
Specialization Helps Beat Fee Compression
As costs continue to hit new lows and competition heats up, successful advisors know you can’t win on performance alone. To justify fees, you need specialized expertise that aligns with your clients’ needs. And to rise above the race to the bottom, Advisor Authority has consistently shown 58
that a top factor for attracting and retaining clients comes from leading with customized offerings. As experts say, the advisor who tries to serve all clients ends up serving no one. Successful advisors become subject matter experts, developing a unique specialty for serving clients based on their generation, profession or lifestyle. They become the trusted counselor on navigating different stages of life and phases of the market, protecting clients from reacting to emotions during challenging times and keeping them on track with long-term financial plans.
The Fin-Tech Factor
We operate in a world where digital giants such as Netflix and Amazon have raised the bar for ease, convenience and choice, while keeping costs low and creating greater value. In this world, there is pressure for advisors to meet tech-savvy clients on their terms. Everything now moves at instant internet speed, as more households are “wired,” and as mobile technology becomes near ubiquitous. The vast majority of RIAs and fee-based advisors say technology will drive more fee compression over the next 12 months. Time and costs have been cut to near zero for transactions such as stock trades, bank transfers and peer-to-peer payments. Asset management continues to become more commoditized with the growing use of robo-advice by an increasing number of investors and advisors — including the most successful. But technology is a double-edged sword. It’s the cause of fee compression and a solution. Successful advisors use more technology — and invest more in technology — to consolidate disparate data from multiple accounts, customize solutions across a wide range of client needs, and provide more holistic advice, all without additional
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$150 $39 95
staff or administrative burdens. They know technology is not an enemy but an ally in the race to refine their practice, enhance investing and advising capabilities, and ultimately serve clients more efficiently — and more profitably — at every point in the relationship.
The Competitive Advantage Of Customer Experience
To beat fee compression, advisors must also create the competitive advantage of a unique customer experience. As Advisor Authority shows, more than 90 percent of successful advisors say that customer experience is vital to their value proposition. They use customer experience as a key to unlock client acquisition, satisfaction and retention. It is fundamental for the growth and health of a profitable practice — and is expected to increase in importance. The most successful advisors are also more likely to use artificial intelligence to transform every aspect of the customer experience, from the front-end to the back office. They leverage AI to open the door to a new category of client, offer a new universe of products and solutions, and ultimately gain an edge over the competition. But to make the customer experience work, both advisors and investors say trust is the single most important attribute. They agree that quality of communication and a personal one-on-one relationship are
BEAT THE ‘RACE TO THE BOTTOM’ ON FEE COMPRESSION
key for success. And although the power of technology will continue to grow, advisors and investors also agree that it is no replacement for the human touch — and nothing can replace face-to-face interactions. Striking the right balance between tech and high touch is more important than ever.
The Fiduciary Factor
While the Department of Labor fiduciary rule was vacated by the courts, Advisor Authority has shown that 84 percent of successful advisors agree that a fiduciary model will benefit their practice, regardless of what happens on the regulatory front. At the same time, the fiduciary factor is of vital importance to clients. Year over year, Advisor Authority has shown that a fiduciary standard is consistently rated among the top three most important factors influencing an investor to work with an advisor. And as last year’s study shows, nearly half of investors (48 percent) say they would stop working with an advisor who is not required by law to serve in their clients’ best interest.
The advisor who tries to serve all clients ends up serving no one. Today, more advisors and firms are moving toward an independent fee-based service model. Cerulli data shows that across all channels, 78 percent of all advisors are now fee-based, earning more than half their revenue from advisory fees, versus 46 percent in 2003. By 2021, the number of RIAs and other fee-based advisors will grow by another 10 percent, the research firm says, and they will have 20 percent more of the available assets under management.
Rise To The Challenge And Win The Race
Fee compression will inevitably increase and there is no turning back. Innovation will continue to surge at an unprecedented pace, driven by the digital economy, technological innovations, regulatory changes
and the power of consumer demand. You can win by understanding that these trends are not your obstacles but are your allies as fees continue their race to the bottom. Specialize and recognize clients’ demands for customized offerings and holistic planning that puts their best interests first. Retool your practice and make the investments in technology to keep your own costs low as you cut costs for your clients and create the competitive advantage of a unique customer experience. The race is on and there is no turning back. So adapt now — or be left behind. Craig Hawley is head of Nationwide Advisory Solutions. Craig may be contacted at email@example.com.
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November 2018 » InsuranceNewsNet Magazine
RinRg ing ing
When a client’s number pops up on your phone, do you want to answer, or do you automatically send it to voice mail?
Defining Your Ideal Client: It’s Not How, But Who You Want Imagine if your practice were filled with clients who were enjoyable to work with and profitable at the same time. By Chris Kowalik
some point in your career, you have questioned whether you are working with the right kinds of clients. Your days may be filled with some wildly successful appointments, but you have even more appointments that go nowhere. You may feel drained after countless days of chasing prospects or trying to convince them to take action. We start to wonder why we put so much effort into trying to help people who are not as committed to helping themselves as we are. How did we get here, and how do we make it stop? I would suggest the answer is not how, but who. 60
Do You Know Who Your Ideal Client Is?
The makeup of our days is determined by the people we spend it with — in our case, prospects and clients. Although we may have a full calendar, it is often filled by people who may not be the right fit for us — or vice versa. The calendar also may be sprinkled with people who brighten our day and make us proud of the work we do to help them. If only we could have more of those! In the early part of your career, you may have been more inclined to work with anyone, especially when you are trying to find your way in the industry and pay bills. But over time, it becomes clearer to you what — and who — you are (and are not) willing to deal with. As you progress in your career, you become concerned about whether you are working not only with people who have money and can afford your
InsuranceNewsNet Magazine » November 2018
services, but with those who also satisfy the other — more personal — side of the business. Ultimately, do you enjoy working with them? Do you cringe when you see their name on your calendar, or do you clear your afternoon to spend extra time with them? When their number pops up on your phone, do you want to answer, or do you automatically send it to voice mail? We begin by being honest with ourselves about what works — and what does not work — in our business. Only then can we begin to make real progress toward crafting the business we originally set out to build. Sometimes, the best way to figure out who we do want to work with is to identify who we do not want to work with. In the spirit of being honest with ourselves, here are a few traits of people you may recognize you prefer not working with:
DEFINING YOUR IDEAL CLIENT: IT’S NOT HOW, BUT WHO YOU WANT BUSINESS » Those who treat your staff (or you) poorly, and who do not respect your time. » Those who overly question themselves (or you) and backtrack on their decisions. » Those who have a predetermined outcome and are inflexible or uncoachable. The reality is that we all want to believe we work with people who value our services, respect our time, are committed to their future and allow us to enjoy going to work every day. The quicker we identify who fits the bill, the happier we will be in business and in life. Qualifying a client or prospect at the very beginning is incredibly important to ensuring you are sitting in front of someone who is genuinely looking for financial leadership and direction. Are they interested in you as a person and as a professional? Are they shopping around for the cheapest product, or are they looking for a “right fit” relationship to build over many years? Qualifying prospects and
clients effectively — and early — can be the key to developing a winning practice. Still, there will be some people who simply are not ready for the kind of help you can provide them. When they are not ready for your help, they are not your ideal clients — at least not yet. Chances are, if we surround ourselves with the right kinds of people, we inevitably find people who want, need and are ready for our help. Who are the right kinds of clients for your business? Think about the clients you enjoy working with. Do they have certain traits or demographics in common? Ask yourself questions such as: » What problems can you solve for clients? » Who needs and wants this solution? » Where do these kinds of people work or congregate? » What types of people are ready and able to pay you for your services?
» What are their biggest financial pain factors? » What stage of life are they in where you can help them the most? Brainstorm the kinds of qualities you want your clients to have. Most advisors have a wide variety of clients but have never considered which ones are truly ideal. In simple terms, who are the clients you wish you could duplicate? Those are your ideal clients! You want your practice to be filled with these wonderful, easygoing, coachable people. Of course, it goes without saying that even as “nice” as someone may be to work with, they also need to purchase from you at some point. After all, you need to make a living. Try zeroing in on your list of top clients — the ones who were the most profitable to work with. Then ask yourself some additional questions about these top clients, such as: Were they easy to work with? How did they treat your staff? Were they responsive to providing you
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BUSINESS DEFINING YOUR IDEAL CLIENT: IT’S NOT HOW, BUT WHO information you needed? Did they appreciate your advice and hard work? Did they follow your advice? Do they freely send you referrals? In addition to these questions, take a look at their demographics: What is their average age? Are they married? Do they have children or grandchildren? What kinds of jobs do they have, and what is their annual income? Do they typically fall into a certain risk tolerance category? After you sort through their demographics, you will probably see some patterns emerge. Do not be surprised if your ideal clients look a lot like you — it is human nature to want to work with people just like us.
From these lists of characteristics, decide what is most important to you and score your clients accordingly. Are profits most important to your practice? Or are you willing to forgo some immediate profitability if it means that the meeting process or sale is easier and relatively stress-free? If you did not have to spend time working with the less-thanideal client, would that free you to focus your efforts to find more clients in the ideal category? Perhaps you are willing to work with a difficult client if you know it is going to pay off in the end, but they might not show up on your ideal client list. This means that they might help you reach a revenue goal, but they may not be the kind of client you would wish to duplicate. You may need to go through this exercise several times to get crystal clear on what is most important to you in your practice right now. It is quite possible that you will discover that you are consistently working with the wrong kinds of people. Perhaps you are serving too broad an audience, or you do not have a clear path from “introduction” to “client,” which makes your (otherwise enjoyable) conversations feel labored and ineffective. Have you considered working with a smaller niche market to refine your processes and have a more predictable prospect base that shares your “ideal client” characteristics? We simply cannot be all things to all people and expect to serve them well.
The first step in specializing your practice is to identify a group of people who you wish to serve — in other words, find your niche. Niche marketing allows you to be laser-focused and be exceptional at what you do. It sounds counterintuitive, but you really can do more with less. I define a “niche market” as a big group of people with the same big problem. When you focus your efforts in a specific niche, you can anticipate planning challenges and develop dynamic solutions quickly. You also are able to brand yourself as the financial professional of choice for your niche market — making it easy for your ideal clients to refer friends just like them. Although they may be unique in their own ways, the people in your niche market may have the same employer and the same benefits available to them. So, instead of trying to learn 100 different
I am guessing that those few ideal clients are the ones who produce at least 80 percent of your total revenue. This 80/20 rule is the Pareto Principle that you likely have seen manifest itself in so many areas of our world. Now imagine this: If these ideal clients represent 80 percent of your income and they are equivalent to only 20 percent of your entire client database, what would happen if 100 percent of these clients were ideal clients?
The Numbers Tell The Tale
Let’s play with some numbers. Imagine you have 100 clients, who provide a total revenue of $10,000 per month. Remember that of these 100 clients, only 20 represent your “ideal” clients, and they provide 80 percent of your total revenue — $8,000 per month. This means that your 20 ideal clients earn you $8,000 per month, while your other 80 clients earn you revenue of only $2,000 per month. Now imagine your 100 clients are all ideal clients! If just 20 ideal clients bring in a monthly revenue of $8,000, then 100 ideal clients could potentially bring in a monthly revenue of $40,000! If all your clients were ideal clients, instead of grossing $10,000 per month, you could be grossing $40,000 per month for the same amount of effort, time and work as you would have expended for the same number of less-than-ideal clients. And because you are working with people you truly enjoy serving, your days are filled with meetings with people you actually like! By breaking down the math, you can see why your practice should be focused on your ideal clients. Nobody likes to admit that this is a numbers game, but it is. We all have 168 hours in our week, and it is up to us to decide how (and with whom) we spend them.
I define a “niche market” as a big group of people with the same big problem.
employer-sponsored plans, you can learn a single plan inside and out and be considered the local “go-to” expert for this group. By having a clearly defined niche, you can place your focus on planning techniques and product strategies that best suit your clients’ situations. But why only ideal clients — or a niche market? You might be saying to yourself, “My services can benefit everyone! Why do I have to limit my practice to only one type of client?” It is about working smarter and not harder. Why waste time and effort on prospects or clients who never heed your advice and who you do not enjoy working with anyway? It is probably best for both of you if they find someone else who is a better fit for them. But it also all comes down to numbers. That’s right — I said it — it is a numbers game. It is your business, and you get to decide your numbers. I would estimate that your current top clients equal about 20 percent of your entire book of business. After you have estimated the percentage of ideal clients you have, estimate how much profit you earn from those ideal clients compared with the rest of your clients (the other 80 percent).
InsuranceNewsNet Magazine » November 2018
Chris Kowalik is founder of ProFeds, and is an expert at serving federal employees. Since 2001, Chris has coached more than 1,000 financial professionals, to help them turn prospects into profitable clients. She may be contacted at firstname.lastname@example.org.
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Who Leads The Sales Dance? Like it or not, we are not always the lead; sometimes we have to follow. By Elie Harriett
he longer I am in business, the more flexible I must be. More of what I knew is not what I need to know. It’s a dance with our clients. Sometimes you take them in your arms; at other times, they move you to where they want you to be. Information gathering has changed, and clients have become incredibly informed. No longer do they need me to tell them the kinds of coverage available out there. All they need to do now is to open their computers or their mail and they see the products we sell being offered to them, along with plenty of videos of how something works and why. And every version of every product is presented as a cherry on top of the ice cream sundae of their lives. If selling is a dance, we are not always the lead; sometimes we must follow. We need to listen better. As we move more toward the idea of our products being bought, not sold (most insurance isn’t there yet, but someone will figure out how to do it eventually), we need to decide what we change and what we don’t. Here are some things I’ve changed over the years, and some things I’ve held firm on. I still want an in-person meeting. Some of my fellow Medicare-insurance agents will scoff at this idea, but I am adamant that clients still meet me at least once. I have some clients who are equally adamant that we don’t meet, and if they feel that way, we won’t. Most clients say they don’t care, but they really do. It is still a sign of respect when — after talking on the phone or emailing them about choices and even giving them the option of doing business through the mail — you still tell your client you’ll come down to see them in person. Get your hands dirty. Yes, it means you’ll see one 64
person instead of talking with 10, but that one person has a greater chance of being a client for life than the others have. Electronic communications are there only when clients are comfortable with them. Tell my mother she’ll have to receive her statements electronically and she’ll say, “OK,” but she’ll hate it and eventually hate the company for making her do it. I personally dropped my auto insurance after an accident when I called in to talk to their claims adjuster because every two sentences ended with the disclaimer: “For faster service, go online.” I was distraught, I was not in a good state of mind, and I wanted a person to hold my hand. These tools are great for convenience, but insurance is still a human interaction. Don’t try to retrain your clients too much; they’ll accommodate us only so far. If you have lots of options, listen and fact-find; be open to changes. The majority of my Medicare clients are in Medicare Supplements. The statistics of my practice bear out a high level of past dissatisfaction with the alternatives. It would be easy for me to say no client should be in an alternative plan. However, that wouldn’t be accurate. Why? Because my clients who have alternative plans are happy in those plans too. Why? I learned to listen better to
InsuranceNewsNet Magazine » November 2018
what clients are asking for. They lead that dance and I follow their lead. I also ask more open-ended questions instead of asking leading questions in order to get the sense of what clients want. My clients tend to be happy now with what they choose because I have learned to listen better and follow their lead to where they’re the most comfortable. Bring your A-game to every meeting and treat longtime clients as though they were new clients. Business gravitates toward those who want it. A longtime client wants to talk with you because of some new concerns? Be prepared to address them. You don’t know whether your client is talking with someone else. And the competing advisor they are talking with may take those concerns more seriously. If you blow off client apprehensions, you may find yourself without a longtime client. Unfortunately, this was learned the hard way. Think it won’t happen to you? Then you must be new to this business. Welcome to the insurance sales dance! Elie Harriett co-owns Classic Insurance & Financial Services Co., an independent agency specializing in individual Medicare-related insurance. Elie may be contacted at email@example.com.
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1 National Institute on Aging and U.S. Census Bureau, An Aging World: 2008 International Population Reports, June 2009
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Client Service As A Cornerstone Of Retirement Planning Knowing how to communicate with clients and guide them through the phases of retirement will help them enjoy the fruits of their labor. By Clay Gillespie
lient service is the most vital component of retirement planning. Communication in particular is a helpful tool to bridge knowledge gaps and help clients feel included and invested in their financial futures. Advisors can help their clients understand all that goes into their retirement plan to protect them against the main variables and risks they are likely to face — from life expectancy to inflation, total income needed, stock market risk and health care costs. A deeper understanding on both sides creates a more solid plan and stable relationship.
Communicate With Prospects In Their Own Language
Pay close attention to how clients and prospects communicate in order to build confidence and streamline the planning process. The way clients talk about their financial plans and goals, and the questions they ask during meetings, can provide helpful insight into their mindsets and create an opportunity for open discussion and education for a stronger relationship. For example, I know clients are ready to seriously discuss retirement planning when their timeline changes from “in a few years” to “in 2025.” The immediacy and concrete deadlines indicate their frames of mind and can help you guide conversations. Similarly, it’s important to provide the key details clients care most about and will understand during the planning process. In my experience, clients are more interested in their monthly income as a 66
way to understand what lifestyle they’ll be able to support through the rest of their lives, instead of having an account of their total funds.
Optimize Retirement Income Strategy To Align With Phases
Retirement planning must also include an understanding of how clients’ lifestyles will change throughout the course of their retirement. There are three general phases that relate to clients’ spending patterns — “Go-Go,” “Slow-Go” and “No-Go.” In the Go-Go phase, clients are extremely active and excited about retirement. This phase — particularly the first few years — is the most expensive part of retirement as most clients view it as a vacation. The pent-up desires and demands they were unable to fulfill as working professionals are now their main priority. As retirees grow accustomed to their freedom and lifestyle, they enter the less-hectic Slow-Go phase after a few years. Spending is more conservative as
InsuranceNewsNet Magazine » November 2018
they favor leisure projects over travel and other high-intensity activities. Retirees enter the No-Go phase when health or energy declines and they can no longer take part in the activities they did previously. In some cases, long-term care can make the final years of retirement very costly as well. A well-structured retirement income strategy that is supported by the right products will alleviate any concerns and enable appropriate spending while clients can enjoy their pursuits. In my practice, I’ve seen that clients do not need to increase their income every year by the rate of inflation in order to maintain their lifestyle in retirement outside of the high-spend phase. In most cases, we find that retirees usually increase their income only every three or four years. In fact, many of our clients start to slow down later in retirement — typically around age 80 — and spend less money as they become less active. If your clients seem to fit this spending pattern, it might be wise for them to
ADVERTISER INDEX either start with a higher initial withdrawal level, retire earlier or save less to ensure they are able to spend all the funds they worked hard to save.
Help Clients Mentally Prepare For The Transition
The change from working professional to retiree has more than just a financial impact for clients. To ensure a successful transition, include conversations about what to expect from a mental aspect and in their family dynamic. Clients may be surprised at how closely their personal identity and professional status are linked. Relationships with friends, family members and co-workers will inevitably shift, and clients should be prepared to find a new balance.
A well-structured retirement income strategy that is supported by the right products will alleviate any concerns and enable appropriate spending... A more holistic approach to retirement planning that includes elements beyond income requirements and investments truly sets up clients for a successful and enjoyable retirement. Advisors who deeply understand and specialize in retirement planning are well-suited to carry their clients through the entire planning and transition process. Clients are able to retire with understanding and peace of mind as they enjoy the long-anticipated fruits of their labor. Clay Gillespie, CFP, CIM, is a 16-year MDRT member with one Court of the Table and 13 Top of the Table honors. He is a financial advisor, portfolio manager and managing director of RGF Integrated Wealth Management. Clay may be contacted at email@example.com.
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It’s All In The Timing: Making The Right Retirement Decisions Actual Versus Anticipated Retirement Timing
Regardless of many workers’ best intentions, early retirement is common. Here is how advisors can come to the rescue.
By Cecilia Shiner
etirement timing decisions serve as the foundation of financial security and living standards in retirement. Yet, many workers base these important decisions on reasons other than their own financial circumstances. Financial advisors are on the front line of trying to help people make better decisions. Given the importance of this issue, LIMRA Secure Retirement Institute compared retirement timing expectations with experiences to better understand retirement timing decisions. Research shows that although the average retirement age has trended upward over the past 15 years, the dramatic predictions of 70 being the new 65 have not proven to be true. As of 2016, the average age at retirement is nearly 65 years old for men and 63 for women, according to the Center for Retirement Research at Boston College. Despite gains in Americans’ average retirement age, there is a three-year disconnect between expectations and actual experience (See chart.) Although nearly 1 in 6 workers expect to retire at age 70 or older, only half as many retirees (8 percent) actually do so. Regardless of many workers’ best intentions, early retirement is common. More than half of all retirees said they retired earlier than planned; 44 percent of retirees aged 70 or older said the same. These retirement timing trends are important because they affect retirees’ lifestyle outcomes. Two-thirds of those who retire when planned are confident they will live their desired retirement lifestyle. In contrast, 42 percent of those who retire early express the same confidence. Even controlling for wealth, retirees who retire when planned have greater confidence in 68
15% 10% 5% 0%
Source: Q1 2018 LIMRA Secure Retirement Institute eNation Survey. “Anticipated” reflects the expected retirement age of 378 workers under age 55. “Actual” reflects the actual retirement age of 70 retirees aged 70 and older.
being able to live their desired retirement lifestyles. The impact of earlier-than-expected retirement timing is especially felt by households without financial advisors. Only 31 percent of unadvised retirees who retired earlier than planned are confident of living their desired retirement lifestyles. Compare this with 69 percent of advised retirees who also retired earlier than planned. Because retirement timing is so important, which specific actions can you take to help clients? 1. Improve retirement timing expectations. Retirement does not have a finite price tag like some other financial decisions (such as buying a house); the cost fluctuates, depending on the saving and timing decisions that workers make. Offering clients scenarios that demonstrate the beneficial impact of delaying retirement on their retirement savings allows workers to consider more clearly not only the age at which they would like to retire but also how affordable their goals may be. 2. Plan for the possibility of early retirement. Since lost income during peak (or near peak) earning years can be detrimental to retirement security, preparing clients for this circumstance and
InsuranceNewsNet Magazine » November 2018
developing a plan for the consequences is vital. Planning should also include discussions of potential employment outcomes since advised retirees are most likely to say a layoff prompted their early retirements. 3. Trigger earlier planning. Reaching a certain age is a common trigger for retirement planning. However, this often happens after age 55, which is too late for adequate investment course corrections. The most common trigger ages are 55, 60, 62, 65 and 70. These ages coincide with typical retirement ages as well as key benefits decision points. Client outreach should target earlier milestones to promote more comprehensive planning that can address risks (before and after retirement). Our research shows that working with clients to develop realistic time frames for retirement and establishing strategies to mitigate the financial risks can help them achieve their desired retirement lifestyles. Cecilia M. Shiner, FSRI, FFSI, ALMI, ACS, is an associate research director for the LIMRA Secure Retirement Institute. She is responsible for conducting various major primary research projects for the Institute. Cecilia may be contacted at cecilia.shiner@ innfeedback.com.
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