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5 Big Myths About Millennials Page 42

The 8 Traits of Highly Successful Advisors

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 OP Hopes G Tax Bill Delivers A Happy Holiday

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Bonus vs. Index Crediting Potential Page 50

Ferrari/ZUMA Press/Newscom

PLUS: 2017 in Review  Tamed Rules DOL Rule Takes A In Attempts To Kill and Reinvigorated Stumbling Journey ACA, Obamacare Practices Through 2017 Becomes Trumpcare Page 30

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LY FIRST L MI

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Conrad Pawlowski – FFL Midwest Like many of Family First Life’s VPs, Conrad’s rise stems from his genuine desire to leave families in a much better financial position than when he first meets them — a singleminded passion that is reflected in all aspects of his life.

Matt Smith – FFL North West As the #1 career producer, Matt owns and operates one of the largest agencies inside FFL, where he believes he can train agents to have the same results and success he’s experienced over the past four years.

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$100 Million Per Year IN FOUR SHORT YEARS!

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Andrew Taylor – FFL USA From a grocery store clerk to a $6 million paid issue VP, Andrew proves that those brave enough to make the switch can make their dreams come true.

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John Wetmore – FFL East Coast Known as a mediator and mentor with an admirable work ethic, the president of Family First Life East Coast and FFL Hall of Fame producer proves that if you are willing to put families first, the rest will fall into place.

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Drew Jerdan – FFL Global With a true passion for helping people, the founder of FFL Global’s mission has been to inspire his army of agents the way FFL’s president and other VPs have inspired him, resulting in 10 of his agents being among the year’s top 50 producers!

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Paul McClain – FFL West Coast Submitting over $1 million paid issue per month, Paul attributes the training and heart of Family First Life to his persistent growth and ability to take action.

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Domonique Rodgers – FFL Golden State Domonique has a clear mantra: “I just want to do for others what has been done for me. We are on a mission to change lives and income brackets for generations.” With this simple goal, Domonique has built one of the fastest growing agencies in the FFL network.

Brent Abernathy – FFL Gulf Coast A former MLB player and Olympic gold medalist, Brent brings the same work ethic he applied to his sporting career.

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Our secret is simple: We train, pay, equip and treat our agents better. Flip the page to check out this year’s top 50 agents and find out how you can join them in 2018!


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Marc Meade – FFL Tri-State Since 2014, Marc has looked at his partnership with FFL and the opportunities it gives him to help others as ministry unto the Lord. With an insatiable desire to be successful, Marc believes that all his dreams can be realized through great mentorship and hard work.

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Frank Eufemia – FFL Maryland On track to produce $3 million in paid issue this year, when Frank is not protecting families with insurance, he’s spreading his values and dedication by serving his community through volunteer work and coaching his son’s football team.

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Athena Villanueva – FFL Coastal Thanks to her strong desire to help others, Athena has one of the fastest growing FFL agencies. In fact, she tripled her production over the past six months, and is on track to continue her record growth into 2018.

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Ryan Montalto – FFL United A three-time top 25 national producer award winner since joining Family First Life, Ryan believes that with the FFL vision, the right attitude and the ability to out-hustle the competition, any new agent or manager can achieve the same success.

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WWW.FAMILYFIRSTLIFE.COM

FAMILY FIRST LIFE

SOUTH EAST

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Jonathan Guzman – FFL Scholars of Finance At 27 years old, the ambitious VP has kept busy producing about $200,000 in issue paid volume per month while also focusing his efforts on helping other young agents learn what it takes to truly be successful in the insurance industry.

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Bryan Mendenhall – FFL Central Division After a decade in the fitness industry, Bryan decided it was time to work with a company that would give him the opportunity to make the money he felt he deserved. Since joining FFL, Bryan has doubled his income to more than $500,000 last year.

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Family First Life’s grassroots network of VPs keeps spreading! And they want to show you what’s possible.

A RY L A N D

Mike Killimett – FFL South East Starting from scratch in the insurance industry, Mike’s grown his agency from $0 to producing more than $1.7 million in issue paid volume per month, and it’s on track for $20 million this year.

Danielle Byrne – FFL Tri-State East The #1 female VP at FFL, Danielle just began protecting families full time in 2014. Since then, she has experienced nothing but success, thanks to her belief in selfless, honest service.

FAMILY FIRST LIFE

TRI-STATE EAST


Meet Family First Life’s

Top 50 Agents of 2017

and Their Projected IssueD Paid Earnings! #1 Matt S. $621,659.16

#14 Israel W. $373,023.75

#27 Hunter H. $320,264.50

#39 Chimera T. $263,028.61

#2 Nick S. $588,277.15

#15 Terry H. $368,853.08

#28 Eric A. $317,397.20

#40 Gaylin W. $252,878.52

#3 Amy M. $551,403.68

#16 Bryan M. $368,505.53

#29 Chantal W. $302,811.65

#41 John G. $248,466.63

#4 Andrew T. $473,827.02

#17 Len D.G. $366,253.90

#30 Cynthia S. $296,002.75

#42 Tyler J.T. $248,027.43

#5 Jack Y. $462,976.78

#18 Marc M. $364,587.37

#31 Athena V. $290,446.21

#43 Matt W. $247,930.00

#6 Wayne C. $440,074.40

#19 Mickey T. $362,334.66

#32 Priscilla C. $285,253.06

#44 David T. $247,626.27

#7 Millie B. $438,108.65

#20 Ryan M. $352,635.28

#33 Josh R. $279,999.45

#45 Keith M. $247,520.25

#8 Frank E. $426,333.01

#21 Jonathan P. $349,061.16

#34 James J. $278,456.46

#46 Chris W. $246,537.47

#9 Paul M. $425,575.20

#22 Lou S. $348,847.50

#35 JJ F. $277,471.68

#47 Gary P. $245,086.78

#10 Conrad P. $416,053.07

#23 Danielle B. $347,004.14

#36 Michael P. $274,545.30

#48 Jerrod H. $242,930.22

#11 Linda L. $409,415.45

#24 Brandon L. $345,420.07

#37 Jordan S. $267,045.73

#49 Charles H. $241,090.45

#12 Tiffany G. $401,384.70

#25 Leslie S.H. $347,713.93

#38 Anthony S. $265,397.96

#50 Jonathan G. $240,825.60

#13 Gary M. $385,382.03

#26 Zach L. $331,522.18

Real Issued Paid Numbers!


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to Where See Would You Like to See r? Your Name Next Year? If you’re not hitting THESE figures regularly ...

It’s time you switch to an IMO that $3 $341,8 4 1 , proudly puts its agents first. 8 6 5 Average Avera 65 ge Com Com mission

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IN THIS ISSUE

View and share the articles from this month’s issue

» read it

online

www.insurancenewsnetmagazine.com

DECEMBER 2017 » VOLUME 10, NUMBER 12

FEATURE

30 2017: Tamed Rules and Reinvigorated Practices By Steven A. Morelli It was the year that was supposed to stomp on annuities, but it ended up being surprisingly good for business. 34 DOL Rule Takes A Stumbling Journey Through 2017 35 In Attempts To Kill ACA, Obamacare Becomes Trumpcare

INFRONT

16 G  OP Hopes Tax Bill Delivers A Happy Holiday

LIFE

42 The 5 Big Myths About Millennials

By Pam Jenkins To tap into this huge market successfully, take a moment to learn more about what millennials think, prefer and need when it comes to financial protection for themselves and their families.

By John Hilton Republicans engage in late-stage horsetrading to save a tax cut bill and their chances in 2018 midterms.

HEALTH/BENEFITS

58 M  ake The Right Match With ThirdParty Benefits Providers By Scott Robb The selection of an outsourcing partner for benefits administration is a high-stakes decision for your client. Here is how you can help.

62 8 Traits of Highly Successful Advisors By Laurence P. Greenberg The most successful registered investment advisors and fee-based advisors have these things in common.

44 Advance Your Professional Standing Working With Lawyers By Louis S. Shuntich Establishing networking relationships with lawyers helps you grow your practice and provide better client service.

INTERVIEW

20 The Gaga Effect

An interview with Jackie Huba What can Lady Gaga teach advisors about client loyalty? Jackie Huba looked at how the pop sensation turned her followers into fanatics, and what lessons the business world can learn from that phenomenon. In this interview, Jackie tells InsuranceNewsNet Publisher Paul Feldman how advisors can grow their own Little Monsters.

8

ANNUITY

50 B  onus vs. Index Crediting Potential: Which One Is Better?

InsuranceNewsNet Magazine » December 2017

By Michael Jay Markey Jr. A mathematical look at whether an annuity with an upfront bonus and lower crediting potential would be materially different from an annuity with higher crediting rates and no bonus.

64 Advising Freelance Workers Can Be A Profitable Gig By Brian O’Connell The “flexible economy” means more workers lack retirement plans and other benefits. Financial advisors can play a key role in helping these gig workers achieve financial security.


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ALSO IN THIS ISSUE

DECEMBER 2017 » VOLUME 10, NUMBER 12

69 N  AIFA: The Second Generation Opens The Door To The First

Are Online Agencies Stealing Your Business?

By Ayo Mseka A successful advisor tells how he works with second-generation Hispanic clients to gain the trust of their elders.

Bill L. Levinson

A

gents are worried about directto-consumer insurance, fearing online agencies will steal their business. It could happen. As millennials age, they now represent the highest purchasing power in the U.S. — a market that researches and buys everything online, including term life policies. But before you panic, let’s review the pros and cons of online insurance. And see how smart agents can profit from this shift. To buyers, there’s much to like about direct. Everything happens on their schedule. No appointments are required. Policies are bound, approved and mailed in days, without physicals, bloodwork or hassles. And products are affordable for young, healthy adults who don’t need much insurance. From the carrier’s side, things get less expensive — with little overhead. Effective marketing can lead to instant, easy sales. And minimum paperwork makes processing e-applications and assembling policies a snap. There are downfalls, however. Quotes are typically from one carrier, for one product. Also, consumers have little to no help determining how much insurance is actually needed. On the contrary, independent agents can offer multiple products from several carriers, researching the best options and discussing any new or better-suited products. And if there are any questions, licensed agents can legally offer help. So don’t worry. You’re not going anywhere. But you SHOULD start taking your share of the direct-toconsumer business. At Levinson & Associates, for example, all active agents enjoy the traditional agent perks while ALSO taking credit, commissions and renewals for over 10 client-driven products to choose from, like our proprietary Lightning Term Life. Now, clients can purchase online and still give the agent credit AND an opportunity to upsell or cross sell down the line. • Bill L. Levinson is the managing partner of Levinson & Associates, a national life and annuity IMO since 1972 found online at www.carylevinson.com.

70 MDRT: Teaching Kids About Money Is A Lifelong Process

BUSINESS

By Kobus Kleyn With children, the goal is to create strong financial habits as they move through each life stage.

66 Pitching To A Group Without Being Thrown A Curveball By Isadore Barefield Pitching to a group can lead to a big sale, but the process can be painful if you don’t know how to do it effectively.

INSIGHTS

72 LIMRA: How Digital Tools Help Advisors Cement Post-Sale Relationships By Mary M. Art Research with policy owners and financial professionals shows that many see the benefits of expanding service options, including incorporating digital channels.

68 THE AMERICAN COLLEGE: Cyber Breaches Are Becoming The New Normal By Jocelyn Wright Each year, millions of consumers have their personal information stolen. Here are some ways to protect your identity in the wake of a cyber breach.

EVERY ISSUE 14 Editor’s Letter 28 NewsWires

40 LifeWires 48 AnnuityWires

56 Health/Benefits Wires 60 AdvisorNews Wires

INSURANCENEWSNET.COM, INC.

275 Grandview Avenue, Suite 100, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630 www.InsuranceNewsNet.com PUBLISHER Paul Feldman EDITOR-IN-CHIEF Steven A. Morelli MANAGING EDITOR Susan Rupe SENIOR EDITOR John Hilton SENIOR WRITER Cyril Tuohy VP MARKETING Katie Frazier SENIOR CONTENT STRATEGIST Kristi Raynor AD COPYWRITER John Muscarello AD COPYWRITER James McAndrew CREATIVE DIRECTOR Jacob Haas SENIOR MULTIMEDIA DESIGNER Bernard Uhden

GRAPHIC DESIGNER CHIEF OPERATIONS OFFICER QUALITY MANAGER TECHNOLOGY DIRECTOR MEDIA OPERATIONS MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER NATIONAL ACCOUNT MANAGER EXECUTIVE ADMINISTRATOR CORPORATE ACCOUNTANT SENIOR ACCOUNTANT ASSISTANT

Copyright 2017 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 editor@insurancenewsnet.com, send your letter to 275 Grandview Avenue, Suite 100, Camp Hill, PA 17011, fax 866-381-8630 or call 866-707-6786. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 866-707-6786, ext. 115, or reprints@insurancenewsnet. com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 866-707-6786, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 866-707-6786, ext. 115, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Avenue, Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes.

Shawn McMillion Doug Cooper Sharon Brtalik Joaquin Tuazon Ashley McHugh Tim Mader Brad Costolo Samantha Winters Kathleen Fackler Elizabeth Nady Bobby Mack

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


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E H T L L A O D L L ’ WE ! U O Y R O F G N I SELL N O I T A C I L P P A E H T T E G S I O D O T ! E K V C A E H H U C O E Y H L T T AL C E L L O C D SIGNED AN TO W O H R E V HOLE W E DISCO S O L C NTLY CONSISTE ANCE CASES AND: R LIFE INSU y 60 days ever 0 0 ,0 0 2 $ e k Ma g and in ll a c ld o c to Say goodbye prospecting sales e n o h p le e t t Exper included s e iv t a t n e s e repr ommon c io t a r e s lo 80 % c ha r ed s r e v e n , s d a Exclusive le with others es as g a k c a p g in vertis Complete ad 0 low as $2,00

enter. c t i f o r p a ars into l l o d or you! f g k n r i o t e w k o r t a g m Turn your n $1,000,000 advertisin e Put our prov 12

InsuranceNewsNet Magazine » December 2017


OUR CALL CENTER HAS ADVISORS CLOSING WHOLE LIFE INSURANCE CASES

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» InsuranceNewsNet Magazine

13


WELCOME LETTER FROM THE EDITOR

So, You Wanna Be A Star

O

K, it’s guilty pleasure confession time: I love watching singing-competition videos on YouTube. I mean I can rewatch some so often that the YouTube algorithm suggests addiction videos. I don’t sit through whole seasons of reality TV shows such as The Voice or America’s Got Talent. Just particular moments in the qualifying round. It’s when the judges seem skeptical about the contestant. Perhaps it’s the meek teenager or the overconfident guy who might seem to have little to crow about. Then the contestant casts a spell. From the moment the person starts singing, the judges’ eyes widen, jaws drop and we all think the same thing — this one is different. Josh Daniel was an example of one of those performers when he appeared on the UK edition of The X Factor in 2015. He was a 21-year-old mechanic, with his mother, or “mum,” watching in the wings. Daniel admitted to the significance of his spot on the audition roster — last, which usually goes really well or classically bad. And the notoriously cranky Simon Cowell did not appear to be expecting greatness. The song was Jealous by Labrinth, which Daniel sang in memory of a childhood friend who had died. As soon as Daniel started singing, it was clear he was not disgracing his friend’s memory. Not only were the judges transfixed, but Cowell was obviously struggling not to weep. When Daniel let those last, tender notes float away, Cowell could not even speak. Another judge had to take over. Those moments when someone transforms the ordinary into the extraordinary are not just riveting entertainment but also lessons on how to stand out. Don’t we all want to do that? And who stands out more than Lady Gaga? She is the subject of Publisher Paul Feldman’s interview this month with Jackie Huba, an author who tells us how Lady Gaga can help advisors improve their practice. 14

That discussion focused on how Lady Gaga cultivates and maintains a core of raving fans that she calls Little Monsters — a name they bear proudly. That was the subject of Huba’s book Monster Loyalty. But Huba took the Lady Gaga model a step further in her next book, Fiercely You: Be Fabulous and Confident by Thinking Like a Drag Queen. OK, I sense your eyes might be rolling or widening at that title. But the central message is about adopting a persona. Stefani Joanne Angelina Germanotta was a New York City kid who loved playing the piano. Her talent was undeniable, but it was not enough. Stefani Germanotta didn’t feel like a glam pop star, but Lady Gaga did. So, what does all this mean to us in our lives as mere mortals? Well, we all perform. We do it to make a sale, to woo our spouse, to cheer up a sad child. The best performers leave an indelible memory. I will always remember my Uncle Louie for the dumb jokes he would tell, but not because of the jokes. It was the way he would embody the characters and add a dash of nuance that transformed the joke into a performance. By the way, his skill as a charmer allowed the rest of us to overlook some not-so-fun qualities. Perhaps when an advisor faces a speech in the community, a seminar or even a one-on-one with a significant prospect, it doesn’t have to be Joe or Jane Agent who shows up but instead a star does. But how does somebody manage a conversion like that? The transformation has two elements.

Craft

Lady Gaga didn’t create something out of nothing. She was a classically trained musician who honed her skill. Just watch a YouTube video of her performing acoustically and that is apparent. Whenever we enjoy a fine musician, actor or speaker, we are listening to the result of many hours of practice. In a

InsuranceNewsNet Magazine » December 2017

sense, we are rewarding that hard work with our rapt attention (and sometimes with buckets of money). That expertise has to come first. In the case of an advisor, it is vital to know the business, the best practices and the products. Think of dealing with salespeople who clearly do not understand their product or service. Not only is the faith in the salesperson broken, but obviously the whole conversation also is a non-starter. Even talented people are likely to crumble in a performance if they haven’t practiced.

Confidence

Knowing the material leads to confidence. But even with the skills mastered, people might not be confident enough to open the door or walk onto the stage. Those people probably know someone else who can. For example, Tommy Lee Jones helped me out once. My wife had “volunteered” a fellow reporter and me to appear in a community play for charity. Think of Hee Haw, but just not so great with the heeing and hawing. We were doing a sketch called Skunk Hollow, with the first line, “Things are shure pickin’ up in Skunk Holler!” No way was I going out there and doing that, but Lonesome Dove had recently come out, and I liked Jones’ character Woodrow F. Call for this role. I paced my house reciting the short sketch over and over until it came out naturally. So, I didn’t go out on stage — Tommy Lee Jones did. It worked out so well that during rehearsal the director said she could believe my accent but not so much my colleague’s, leading him to exclaim, “But I’m from Alabama!” We all put on a costume in the morning and play our roles. Why not become a star and make a difference along the way? Steven A. Morelli Editor-in-chief


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INFRONT TIMELY ISSUES THAT MATTER TO YOU

GOP Hopes Tax Bill Delivers A Happy Holiday Republicans engage late-stage horse-trading to save a tax cut bill and their chances in 2018 midterms.

By John Hilton

W

ith the curtain about to descend on Year One of the Trump Era, Republicans have one final shot to translate their majorities into sweeping legislation. Reforming the tax code goes to the very heart of GOP ideology. In short, this should be a slam-dunk followed by an extended victory lap that fires up the Big Mo(mentum) and carries the party into the midterms. Alas, if the first 11 months of this recalcitrant GOP majority have taught us anything, it’s to expect dysfunction. The ongoing tax reform process looks no different. Separate House and Senate bills were built around a tax cut that all Republican leaders from President Donald J. Trump on down are calling their No. 1 goal: slashing the corporate tax rate from 35 percent to 20 percent. From there, the bickering starts. Similar 16

to the health care acrimony, the GOP disunity is rooted in the wide-ranging concerns of its members. The GOP is trying to find $1.5 trillion to pay for the corporate tax cuts. That means cutting, or eliminating, a series of popular deductions from across the spectrum. The payoff, as Republicans see it, is a U.S. economy that charges to the forefront of a global economy marred by conflicts in many regions. To be fair, hope shines from some Capitol Hill offices. Sen. Jerry Moran, R-Kan., spoke enthusiastically for a historic final tax bill: “I feel different than with health care, that there’s a greater likelihood that involves passage of tax reform.” We break down the important components of tax reform, beginning with what’s at stake for financial services. Financial Services. Two tax changes affect financial services and split into good news/bad news camps. Good news: Tax writers in both the House and Senate leave intact the existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-deferred. Bad News: Under both plans, the estate

InsuranceNewsNet Magazine » December 2017

tax exemption would double immediately from the current $5.6 million for individuals and $11.2 million for couples. The House would repeal the estate tax in 2024, while the Senate plan would keep it. Either scenario means a decreased need for big-case life insurance policies. Cost. Various projections conclude the House/Senate tax bills will add $1.4 to $1.7 trillion to the federal debt over a decade. Proponents argue that higher growth will increase tax receipts and offset that figure. Whether enough Republicans accept that argument is questionable. “I remain concerned over how the current tax reform proposals will grow the already staggering national debt,” Sen. Jeff Flake, R-Ariz., told the New York Times, “by opting for short-term fixes while ignoring long-term problems for taxpayers and the economy.” Perception and Politics. The politics will be fascinating to watch as the few remaining session days peel away from the calendar. Republicans were chastened by the Nov. 7 election results. In particular, the Virginia governor’s race was expected to be a close match between Democrat Ralph


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December 2017 » InsuranceNewsNet Magazine

17


INFRONT GOP HOPES TAX BILL DELIVERS A HAPPY HOLIDAY

Comparing the House and Senate Tax Bills Sources: U.S. House of Representatives and U.S. Senate

Issue

House Bill

Senate Bill

Estate Tax

Exemption doubled; tax repealed after 2024

Exemption doubled; tax remains

Corporate Tax Rate

Reduced from 35% to 20% in 2018

Reduced from 35% to 20% in 2019

Income Tax Brackets

Reduced from 7 brackets to 4

Stays at 7 brackets

Top Income Tax Rate

39.6

38.5

"Pass-Through" Tax Treatment

Allows business owners to treat business profit as income at 25% rate; 30% of owner's income can be claimed at the 25% rate. The rest would be treated as wages.

Creates a 17.4% deduction on income taxes for pass-through owners at all income levels.

Mortgage Interest Deduction Capped at $500,000; limited to one home

Maintains $1 million cap

Medical Expense Deduction

Repeals

Maintains

State and Local Property Tax Deduction

Capped at $10,000

Repeals

Alternative Minimum Tax

Repeals

Repeals

Charitable Deduction

Maintains

Maintains

Standard Deduction

Increases from $6,350 to $12,000 for singles; from $12,700 to $24,000 for married couples

Increases from $6,350 to $12,000 for singles; from $12,700 to $24,000 for married couples

Northam and Republican Ed Gillespie. Instead, Northam coasted, and liberal/progressive candidates upset several GOPers in the Virginia House of Delegates. Pundits point to a fired-up Democratic base for the election success, while Republicans fear it could carry over into the 2018 midterms. Firing up the Republican base likely hinges on getting that tax reform victory lap. Therein lies the conundrum. Bolstered by independent analysis finding that the bulk of tax cuts will benefit the wealthiest Americans, opponents are effectively painting the tax reform plan as a giveaway to the rich. The Tax Policy Center concluded that 25 percent of middle-class earners will pay higher taxes by 2027. “I say to every one of my Republican colleagues in the House who come from a suburban district: This bill could be your political doom,” said Sen. Chuck Schumer, D-N.Y., from the Senate floor. To make matters worse, a few Republicans spoke candidly of the need to get tax reform done to satisfy their antsy donors. “The financial contributions will stop” if tax reform fails, said Sen. Lindsey Graham, R-S.C. The Votes. Several Affordable Care 18

Act repeal bills died in the Senate by a stray vote here and there, an occupational hazard of such a slim 52-48 majority. Senate Majority Leader Mitch McConnell, R-Ky., learned that certain senators have pet positions that can’t be bargained away. Sen. Lisa Murkowski, R-Alaska, wanted Planned Parenthood covered. Sen. John McCain, R-Ariz., demanded fiscal responsibility. And so on. There’s no reason to think a tax reform vote will be any different. A Dec. 12 special election to fill Attorney General Jeff Sessions’ Senate seat could cost the GOP another vote. Republican leadership tried to snare a few Senate Democrat votes prior to releasing their plan, but it went for naught. Already, Republicans are clamoring for tweaks. Sens. Mike Lee, R-Utah, and Marco Rubio, R-Fla., want a much bigger expansion of the child tax credit, which rose to $1,650 per child in the Senate version from $1,600 in the House bill. The credit would now be available to families making up to $1 million a year, a big jump from the current $110,000. “The Senate is not going to pass a bill that isn’t clearly pro-family,” Lee and Rubio said in a joint statement. “We look forward to working with our colleagues

InsuranceNewsNet Magazine » December 2017

to get there.” There is even an issue — the elimination of the deduction for state and local taxes (SALT) — that divides House Republicans from Senate Republicans. That deduction is a big value in high-tax states such as California, New York and New Jersey. Those states are represented by Democrats in the Senate, but their House delegations include several Republicans. Not coincidentally, the Senate bill eliminates SALT, while the House bill retains the deduction for property taxes up to $10,000. “I’m not voting for the $10,000, so I’m certainly not voting for zero,” Rep. Leonard Lance, R-N.J., told the New York Times. Republicans have just two weeks to bridge these gaps. The Senate goes home for the holidays at the close of business Dec. 15. “The conversation, the negotiation, will continue until we arrive on consensus,” Sen. Ted Cruz, R-Texas, told CNN. “This is an ongoing discussion.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@ innfeedback.com.


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December 2017 » InsuranceNewsNet Magazine

19


INTERVIEW

JACKIE HUBA

on how LADY GAGA can teach advisors to super-engage fans

20

InsuranceNewsNet Magazine » December 2017


THE GAGA EFFECT INTERVIEW

J

ackie Huba is well aware of what you are wondering right now: Why the heck are we talking about Lady Gaga? It’s because of Little Monsters. That is what Lady Gaga calls her most devoted fans, which is what Jackie says you need. Jackie turned to Lady Gaga as a muse for the book Monster Loyalty because although she was a Gaga fan, she noticed there was an inner circle of even bigger fans. That in itself is not unusual for a pop star. What was different was how Lady Gaga nurtured this base. The star spoke to them directly, remembered their names and clued them in on her motivations and mission in life. Those fans graduated from merely enjoying her music to believing in it. Jackie says Lady Gaga expects to avoid the typical, early flameout of a pop career because of the momentum propelled by her most devoted fans. Shouldn’t advisors be looking at their careers the same way? If you look at your business as serial transactions, then you will be forever looking for the next sale. Jackie says investing in your most devoted clients will turn you into a star people will want to see rather than a salesperson looking for a target. In this conversation with Publisher Paul Feldman, Jackie explains how you can grow your own Little Monsters. FELDMAN: Lady Gaga is not somebody a business owner would ever think they could learn something from. But what are some lessons about marketing and customer loyalty that Lady Gaga would teach us directly as business owners? Anthony Behar/Sipa USA/N ewscom

HUBA: What drew me to her initially was that she was a performance artist we had never seen before. She was doing things no pop artist had done well. Although, David Bowie had done things like this, being a performance artist. But from a business standpoint and for someone who’s studying customer loyalty, what I saw was a very methodical way and approach to her customers that was for the long term. She and her manager even spent a lot of time telling the press what they were doing. They want to be around for the next 25 years. They understand the power of building a following. So they did everything they had to do. In the very beginning, she was getting a lot of popularity, and they could have jumped to performing in big arenas. Nope, they still played really small bars. They wanted to develop this grassroots following. They were so strategic in knowing that if you’re going to be around for the long term, you want to build a constituency from the ground up, from the grassroots. These are people you nurture. So she would spend hours meeting with these fans after the shows in these bars talking to them. There are folks she knows today. She knows their names. And I know who they are, too, because I’ve been in the Monster community for a long time. We all know who these folks are. She still remembers their names. She’s still in contact with them, and she’s never forgotten people who have supported her from the beginning. Most people wouldn’t think of a pop star having a very strategic approach to her business. It’s not a cynical thing. She’s very authentic with wanting to inspire people with her music, wanting to make people better. She started a foundation called the Born This Way Foundation because she wants to eradicate bullying, especially in young people. These are the things that she believes in. She writes. She believes in LGBT. She’s a constant champion for that community and for women as well. What I love about how she goes about her business is she’s always the leader of this community and always inspiring them. She knows her customers get her. They understand why she had the meat dress on, why she came out of the egg at the Grammys, why she’s done a number

The FIVE Dimensions OF A

Cause

To make the “sell” about something bigger, you must start with your values, or in other words, a cause. Causes do five things: 1. Embody a vision. A vision is a person’s or company’s perception of how to change the world, even if it is just the part of the world that is important to their customers. 2. Make people better. Your values should make people perform or feel better. 3. Generate big effects. Your values should scale. They should affect a lot of people. 4. Catalyze selfless actions. Powerful causes make ordinary people do special things. 5. Polarize people. Causes that challenge the norm can generate strong feelings. Jackie Huba, Monster Loyalty, Portfolio/Penguin, 2013

December 2017 » InsuranceNewsNet Magazine

21


INTERVIEW THE GAGA EFFECT of these things. There’s a cause behind it. There’s a meaning behind it. There’s some big political or maybe social statement she’s making. They get that, and then they love her even more. Just like a business would be very strategic about how to do this and how to craft this, it’s the same thing. FELDMAN: Most people don’t consider pop stars as being in a business. But aren’t there are a lot of similarities to their own businesses? HUBA: The way I start a lot of my talks is I say to people, “You’re probably wondering why the heck we’re talking about Lady Gaga in terms of what we can learn from her and apply to our businesses.” But to me, that’s where innovation happens. When we really want to take our business to the next level, we are trying to innovate. And we can’t look at what everyone else in our industry is doing. We need to take inspiration and new ideas from other places we never would have looked at. That’s where innovation happens, and I think no matter what industry we’re in, we should look for outside sources of inspiration of how to take our business to the next level. FELDMAN: How can our readers get “monster loyalty” from their clients and customers? HUBA: The No. 1 challenge for all businesses is getting our customers to want to continue to buy from us as well as to tell other people about us. That is really the holy grail of what we want to do with customers. When we reach that, that’s when we know we’ve succeeded. The way I define loyalty is not just people who stick with you, but people who love what you’re doing so much they recommend you to someone else. When we look at that as the final goal, then we start doing all those things to cause it to happen. The only reason people are going to refer you is if they have an amazing experience. Too often in financial services, we think it’s about only the returns and how our money is doing. But you must think about what you’re selling that’s really bigger than that, and that is maybe you’re selling security or safety or peace of mind. We always have to 22

Jackie Huba, left, says Lady Gaga calls her fans "Little Monsters" but treats them like angels. think about that in everything we do with our customers, and I think that will help lead us toward this place of getting people who want to refer us to their friends and family. FELDMAN: What are some steps for getting to that? HUBA: First of all, I want to know what my customers think of what I’m doing. And here we can get a little analytical about it. I don’t know if your audience is familiar with something called the Net Promoter Score. It’s a research methodology out of Bain, and it’s basically two questions. The first question is: How likely would you be to recommend this to someone else on a scale of 0 to 10? Those 9s and 10s are promoters, people who answer 0 to 6 are detractors, 7s and 8s are passive. I love this scoring methodology because it actually takes the percentage of promoters you have in your business minus the percentage of detractors, and you get a

InsuranceNewsNet Magazine » December 2017

score. Right away, at least we can benchmark what percentage of our customer base is people who would promote us, and what percentage of our customer base is people who would not. And then for the second question, we ask them to tell us more about why you gave us that score. So, of the 9s and 10s, we might ask, “What will you say when you recommend us to other people?” And that’s going to tell us what our word of mouth is, because maybe we don’t know what people are saying about us. And then of the lower scores, we ask: What can we do to improve? This helps us get feedback on whether we are doing the right thing and how we could get to a place where more people will refer us, because we might not even know what’s going on. And to be quite honest with you, I have to tell you my financial advisor is really frustrating the crap out of me right now. There are some issues going on with my finances, and he is not very responsive


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INTERVIEW THE GAGA EFFECT who the top folks are, and then maybe there are things we can to do to pull those folks together. It doesn’t have to be overly salesy. I’ve seen companies who do more of a social event or something around a community cause where it doesn’t seem like they’re only focused on getting someone’s business. But it’s thinking about the bigger ideas of what’s going on in the world, what’s going on with our clients and building more of an emotional connection to show that we’re in it for more than just the transactions. Allow them to bring a guest, because then they get to meet you through the introduction of your client. FELDMAN: How does someone connect with the super-engaged audience to create that movement?

It’s five times cheaper to keep a current customer than to get a new one. This army of customers is our sales force. about them. I don’t know that I would refer him today. I hate to say that, but he has no idea because he is not asking. FELDMAN: How often should someone survey clients? HUBA: I would at least do it twice a year, an email survey, something like SurveyMonkey, very simple to use. I would benchmark it, and then I would do it on a periodic basis. I would send it out to everyone and keep trying to move that score higher. It’s going to continually give you feedback on how well you’re doing just in that open-ended question. That’s because it’s where you’re getting the insight into what people think about what you’re doing. FELDMAN: You talk a lot about the “shiny new object syndrome,” and I think a lot of our readers fall into that, where they’re busy chasing new client after new client, but not leveraging the network of clients that they’ve been building all along. What are some ways of refocusing toward your current clients rather than the shiny new objects? HUBA: Yes, this is such a common thing where businesses focus on getting new 24

customers in the door. You have to focus on getting new customers. That’s great. But what I think people don’t realize is the power of the customers we currently have. It’s five times cheaper to keep a current customer than to get a new one. This army of customers is our sales force. If they love what we do, they are going out there and recommending. They are acquiring new customers for us. So when we think about acquisition sources, current customers are No. 1. Especially when it comes to something like financial services, because this is such an important matter. If a friend or a colleague you trust says, “You know what, I love this person. You need to go with this person,” that marketing is way more influential than any kind of advertising or other things we could do. When you look at all the studies on who people trust, they trust a friend or a colleague in recommending a business versus the advertising from the business. So there are just so many things that could be done. One of the things I talk about in Monster Loyalty is the one-percenters. These are the absolute super fans of your business, maybe the 9s and 10s. It’s usually a really small group. So if we use Net Promoter, we can isolate

InsuranceNewsNet Magazine » December 2017

HUBA: For people in financial services, maybe there’s something in the news that has people unnerved. And you want to bring people in to talk about what’s going on, what’s happening with trends, make people feel at peace about or at least more comfortable with what’s happening. It could be something in the community. I’m sure around Texas there was an opportunity — and I don’t mean this in a crass way — around Hurricane Harvey, where a lot of people would step up and do a fundraiser. When we see people step up, we start to see them in a different light. If you don’t know what your customer base is interested in, I would ask them. A lot of businesses have a customer advisory board. Even though we might be one person, that doesn’t mean that we can’t also have almost a little board of advisors — some of your top customers you get together with and who would be happy to help you brainstorm things. These folks love to help the company. I think many business owners are surprised that people will actually volunteer their time for this. But this is the behavior I’ve seen over and over again, and one I’ve studied, of how people feel about a company or a business. I think a lot of business people think, “Oh, no, I don’t want to — I’m asking too much. I don’t want to intrude.” But those folks actually are very happy to help, and I would say just try it.


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INTERVIEW THE GAGA EFFECT FELDMAN: Interesting, because I don’t think a lot of our readers have a client advisory board or have even thought about that. HUBA: There was a chain of auto repair shops outside Chicago that had a customer advisory board based on our advice. And it was a huge success. They would go to a restaurant. They would have a light dinner and drinks and just chat and get ideas. I think a lot of people in that industry never would have thought that’s something they should do, but it was a huge success. FELDMAN: How do you design a program to get people to follow you like Lady Gaga did with her Little Monsters? HUBA: Email and social media. Social media is a great way for people to learn about you. For most businesses that are on the smaller side, social media is brilliant because it allows us to showcase our knowledge, who we are, as well as build a brand, amass a following. People just can “like.” Now we have Facebook Live. You really don’t need to organize a webinar. Honestly, if you create a business page on Facebook

and you just want to make a two-minute commentary about rate hikes or something that’s happening out there and you want people to know about it, boom. I would definitely have an email database of all of my customers, and I would periodically email them. Put in a link to the video. Email is still the most effective in terms of what we see on conversions. FELDMAN: How important is it to lead with value during your campaigns? HUBA: I’d say it’s everything. How do we differentiate ourselves from other financial advisors, from other businesses? People want to know what you stand for. As I was saying earlier, sometimes it’s that bigger thing you’re selling. So in financial services, what are we selling? Peace of mind, right? We’re selling security. We’re selling something that is more emotional, having to do with our lives instead of just transactions and what kind of returns we’re seeing on our investment. We lead with that. We need to know more about that person, more than just, “Oh, this person is able to get great returns.” I want to know more about whether I can trust this person. So

Having a showcase of what you believe in, so people can learn more about you, is super important. 26

InsuranceNewsNet Magazine » December 2017

having a showcase of what you believe in, so people can learn more about you, is super important. FELDMAN: You talk about giving people something to talk about. Lady Gaga is great at this. But I think a lot of business owners would struggle with this. What are some strategies they might try? HUBA: For any of us in business, it is really hard to stand out in today’s environment, especially with online and social media. There’s so much noise, it is hard to stand out. It’s the things that are bold that stand out. One of the things I love for smaller businesses is thinking about humor, thinking about fun, thinking about using social media. For example, if you decide to bring people together in a social way, what is a really fun way to do it? Is there a way you can build in these shareable moments? This is especially important when you think about social media. Social media is really, really visual. So whatever you’re crafting has to have a lot of visual elements to it. Let’s just say you were bringing your top clients together around this cause that you believed in. Maybe it was a cancer walk. You’re not going to bring those folks together and just call them Team Smith or whatever. You’re going to call them something interesting maybe. Maybe you’re going to all wear the exact same thing — not just a T-shirt. You have to really amp it up. Maybe there’s a theme around it like the ’80s, and you’re all going to dress in your ’80s wear. But you’re going to run this race wearing something very visual and something very fun. Anything we do that is average, no one is going to talk about. There’s nothing to share there. We really need to think like marketers and craft an experience that’s worth sharing in every single outbound marketing thing that we do. Your litmus test must be, “Is this worth sharing?” Because if it’s not, we need to amp it up in some way. Using fun and humor get people to share it and to be enthusiastic about it like, “Look what we did. Look at this picture. Look at us together.” Those are the things that spread, and so we have to architect those things ahead of time.


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Source: Minnesota Life and Securian Life Competitive Research. S&P 500®, Standard & Poor’s 500® index, Standard & Poor’s®, “S&P®”, “S&P 500®”, “Standard & Poor’s 500®”, and “500” are trademarks of Standard & Poor’s and have been licensed for use by Minnesota Life Insurance Company (“Minnesota Life”) and Securian Life Insurance Company (“Securian Life”). The Indexed Universal Life Series Policies (“the Policies”) are not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Products. The Policies are not sponsored, endorsed, sold or promoted by Standard & Poor’s (“S&P”) or its third party licensors. Neither S&P nor its third party licensors makes any representation or warranty, express or implied, to the owners of the Policies or any member of the public regarding the advisability of investing in securities generally or in the Policies particularly or the ability of the S&P 500® (the “Index”) to track general stock market performance. S&P’s and its third party licensor’s only relationship toMinnesota Life and Securian Life is the licensing of certain trademarks and trade names of S&P and the third party licensors and of the Index which is determined, composed and calculated by S&P or its third party licensors without regard to Minnesota Life and Securian Life or the Policies. S&P and its third party licensors have no obligation to take the needs of Minnesota Life and Securian Life or the owners of the Policies into consideration in determining, composing or calculating the Index. Neither S&P nor its third party licensors is responsible for and has not participated in the determination of the prices and amount of the Policies or the timing of the issuance or sale of the Policies or in the determination or calculation of the equation by which the Policies are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Policies. NEITHER S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MARKS, THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE. Orion IUL is designed first and foremost to provide life insurance protection and should always be promoted as such. Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender charges. Interest crediting will vary based on the movement of the investments within the underlying index. The underlying indices only recognize the changes in stock prices and do not include any dividend returns. The policy does not actually participate in the stock market or the S&P 500® Low Volatility Index. One cannot invest directly in an Index. Participation rates are subject to change and may be less than 100%. One could lose money in these products. These materials are for informational and educational purposes and are not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered as investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. Securian Financial Group, and its affiliates, have a financial interest in the sale of their products.

1 2

Securian Financial Group, Inc. www.securian.com Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York authorized insurer. Minnesota Life is not an authorized New York insurer and does not do insurance business in New York. Both companies are headquartered in St. Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues. 400 Robert Street North, St. Paul, MN 55101-2098 ©2017 Securian Financial Group, Inc. All rights reserved. F88673-23 7-2017 DOFU 7-2017 223893

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

December 2017 » InsuranceNewsNet Magazine

27


NEWSWIRES

QUOTABLE

Three Top Fed Leaders Are Out The Federal Reserve will see some new faces as three of its top leaders have left their posts or will exit soon. President Donald Trump nominated Jerome Powell to take the helm of the Fed when current chair Left to right: William Dudley, Jerome Powell, Stanley Fisher Janet Yellen’s term ends in February. Powell is a Republican appointed to the Fed by President Barack Obama in 2012. He served as a Treasury Department undersecretary during the George W. Bush administration. The new Fed chairman nominee is seen as a safe pick, someone who supported the cautious approach to interest rate hikes that Yellen pursued in her nearly four years as chair and who would likely deviate little from it himself. In addition, New York Fed President William Dudley said he will step down from his post in mid-2018, about six months before his term is set to end. Fed Vice Chair Stanley Fischer announced his retirement in September and officially stepped down in October.

CONGRESS WARNED OF RETIREMENT CRISIS

The Government Accou nt i ng O f f ice (GAO) wants to light a fire under Congress to head off an impending retirement crisis. The GAO wants Congress to create an independent commission to “comprehensively examine” the U.S. retirement system — including Social Security, workplace retirement plans and individual savings — and make recommendations for improvements. The GAO report details a number of issues that could put retirees in a financial bind. They include the need for Congress to shore up the Social Security system, monitor the growth of defined contribution plans, note increased levels of household debt and medical expenses, and prevent the roadblocks that keep Americans from saving for retirement. Longer life expectancies also could translate into trouble funding retirement for future retirees, the GAO report said. DID YOU

KNOW

?

28

NEW CEO AT ANTHEM

When Anthem went looking for a new CEO, they found one at a rival health insurer. Gail Boudreaux replaces Joseph Swedish in the No. 1 spot at the nation’s No. 2 health insurer. Boudreaux previously ser ved as CEO of UnitedHealthcare, and also worked at Blue Cross/Blue Shield and Aetna. Anthem is now the second-largest company in the nation to have a woman as its CEO. Swedish’s tenure at Anthem was marked by an attempt to buy Cigna. But a federal court blocked the $54 million deal on antitrust grounds.

49 percent of Americans said their family's income level is not keeping pace with the cost of living.

InsuranceNewsNet Magazine » December 2017

Source: Pew Research Center

We must act ethically, and we must demonstrate our ethical standards in ways that leave little room for doubt. — Federal Reserve Chairman Janet Yellen

MAINE VOTERS OK MEDICAID EXPANSION

In a first-of-its-kind ballot initiative, Maine voters approved a measure that would allow an additional 80,000 state residents to qualify for Medicaid coverage under the Affordable Care Act. Maine Gov. Paul LePage

The referendum marked the first time since the ACA took effect that the question of Medicaid expansion had been put in front of U.S. voters. The vote took place after Republican Gov. Paul LePage had vetoed five different attempts by lawmakers to expand the program. Other states have been watching the Maine campaign. Newly formed committees in Utah and Idaho are working to get Medicaid expansion on next year’s ballots.


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December 2017 » InsuranceNewsNet Magazine

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2017: Tamed Rules and Reinvigorated Practices It was the year that was supposed to stomp on annuities, but it ended up being surprisingly good for business. By Steven A. Morelli

T

he biggest problem with 2017 is that people have been too darn happy. That is what Erin Botsford sees as she surveys the year. Her observation might strike some as odd because Americans seem to be anything but sedate and satisfied these days. Botsford is a financial advisor for mostly high-end clients in her 20-person practice, Botsford Financial Group, based in Dallas and Atlanta. Her problem is recruiting more clients because everybody is doing well in the stock market.

“Getting them to change from whatever they’re doing to come with me has been a challenge,” said Botsford, whose firm has more than $700 million under management. “Mostly because everybody’s sort of fat, dumb and happy at this point.” Such is the environment at the end of 2017. Amid the noise and angry division between Americans, things aren’t too bad for insurance and financial advisors. The (rational?) exuberance of the stock market is lifting all boats in investment. But in the world of annuities, the bigger impact might have been the election of President Donald J. Trump and the loosening of what many felt was

the noose of the Department of Labor’s fiduciary rule. Before the election last year, agents and insurance distributors were facing a lockout from selling annuities with money from individual retirement accounts. The rule required the signature of a financial institution for a fixed indexed or variable annuity sale with IRA money. Insurance agents and distributors, such as independent marketing organizations, were not considered financial institutions. But that rule turned out to radiate far beyond IRA rollovers. An agent talking to a client with an IRA could be considered offering advice on the retirement funds,

ADDITIONAL READING

DOL Rule Takes A Stumbling Journey Through 2017 • PAGE 34 30

InsuranceNewsNet Magazine » December 2017

In Attempts To Kill ACA, Obamacare Becomes Trumpcare • PAGE 35


2017: TAMED RULES AND REINVIGORATED PRACTICES FEATURE

Erin Botsford signs her book, Seven Figure Firm, after speaking to a group of Thrivent advisors. Botsford formed a more “institutional” advisory firm partly in response to increased regulatory pressure.

even if the IRA money was not disturbed. Lawyers also sounded alarm bells over agents and advisors applying two standards in selling annuities, even potentially with the same client. That perception of offering less protection could be subject to a plaintiff attorney’s withering questions in front of a jury. The required documentation also rankled many in the industry. But perhaps the most galling for many was the sense that insurance agents and financial brokers were just not to be trusted. Botsford, as a registered investment advisor, would not have been affected by the DOL rule but bristled at what she called the department’s overreach. So, she was happy to see Trump’s election along with his push for deregulation, particularly against the fiduciary rule. Trump ordered the DOL to reassess the rule under different metrics, with an eye toward changing the regulation if it did not meet the new standards. To do this, freshly confirmed DOL secretary Alexander Acosta pushed most of the rule’s implementation to July 2019. Not all of Botsford’s fellow advisors rejoiced at the news. Many fee-only advisors supported the Obama administration’s regulation, although Botsford said the rule was a blunt instrument for the specific aim of ensuring that advisors acted in clients’ best interests. She said the goal was laudable but the rule was not.

Brighter Quarter

Insurance and financial company executives breathed a sigh of relief when they reported third-quarter earnings that largely exceeded expectations. It was the first full quarter since the delay was announced and since the June implementation of a small part of the rule. “I think this pause plus the distance from June 9 is beginning to ease the impact of the DOL from a sales standpoint,” said Dennis R. Glass, CEO of Lincoln Financial, during a quarterly conference call.

and variable annuities lost 8 percent, for an overall decrease of 10 percent, according to LIMRA. Although analysts were pleasantly surprised by the third quarter’s earnings, the effect on the industry as a whole was not yet known at press time. But LIMRA was encouraged enough to revise its initially dour forecast for 2018. The association was projecting a 5 percent drop in annuity sales next year, but reversed that after the rule delay. LIMRA is now predicting a 5 percent increase. In contrast, life insurance did fairly well in 2017’s first half. Annualized premium and face amounts were up 4 percent year over year, although the number of policies dropped 3 percent. That dichotomy between the up premium and down policy count is a continuation of the industry’s trend of selling up-market — bigger cases for fewer people. Part of the life insurance uptick had to do with a migration of business to indexed universal life from fixed indexed annuities, which faced significant pressure under the DOL rule.

Simpler Products

Companies also indicated that they won’t be pulling away from commission-based products to the extent that they had planned. But many said they will continue developing fee-based annuities that were

“People spitting at each other across the aisle — commission or fee — I think it’s a little ridiculous. It comes down to the individual ethical standards of the individuals in the firms. I think everybody ought to settle down a bit and respect their fellow financial folks.” Clifford Ryan, Financial Advisor, South Portland, Maine Glass and other executives said distributors such as IMOs were able to look away from the impending rule and back toward selling. In the first two quarters, things in the annuity world were not looking so rosy. Early in the year, it was looking like total annuity sales might have their first down year since 2012. In the first half, fixed annuities dropped 11 percent year over year

designed in response to the DOL’s rule, particularly the regulation’s best interest contract exemption requirements. Botsford said that was a good outcome of the rule. Her practice has about $350 million in variable annuities on the books, but it is mostly “legacy.” She is looking more toward newer, simplified fixed indexed annuities these days because they have fewer fees than VAs.

December 2017 » InsuranceNewsNet Magazine

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INTERVIEW 2017: TAMED RULES AND REINVIGORATED PRACTICES Another advisor, Clifford Ryan of South Portland, Maine, also doesn’t like the DOL rule, but does appreciate its impact on products. He is a registered investment advisor focusing on retirement-age clients in his practice, Elder Planning Advisors of Maine, with $51 million under management. Annuities are attractive for their guaranteed income for life, Ryan said, but the fees and restrictions are usually not so pretty. He became interested in VAs when some were shorn of commissions and other restrictions starting in 2008. “The clients and public are looking for that kind of stuff,” Ryan said. “There are several VAs that can be transacted and managed by investment advisors where they really stripped away all the commissions. No surrenders, no penalties, no holding period and a very, very low cost of doing business.” Now a few new FIAs offered this year by companies such as Lincoln Financial and Athene really caught his attention. “Once they dropped the service fees and commissions, they could take a commissionable product with a 14-year surrender charge and bring that to five years,” Ryan said. “And because they’re not taking money out on a regular basis to pay service fees, the caps are going from 2 percent up to 5 percent.” Ryan considers the annuity as AUM but charges a lower fee than other assets. His three-person agency usually charges 1 percent, but some hit a breakpoint where the fee drops to .25 percent overall. If clients have not hit the breakpoint, he will charge about a half percent. “The products are becoming more viable,” Ryan said. That is exactly what Robert Kerzner wants to hear. As CEO of LIMRA, he has been preaching for fundamental shifts in the insurance industry. He has been encouraged by the new products and hopes they can chip away at the icy reception that annuities have been getting in the financial advisor world. “They’ve never become a fundamental asset class and that’s part of the issue,” Kerzner said. “Those in the RIA community have avoided them because of all the bad press — real or imagined — but also because of the fee structure.” Not only is it important for the industry but also for the growing number of 32

Clifford Ryan, right, brought on Hugh O’Shea as an associate planner with an eye toward transitioning out of his agency. Ryan says he likes the fee-based fixed indexed annuities that companies have been offering in reaction to the Department of Labor’s fiduciary rule.

Americans retiring without a secure future. Kerzner said annuities need to catch on as a viable option in financial advisors’ tool box and as a new rule of thumb. “We need to get that community thinking about annuities, especially as we move to the income phase,” Kerzner said about annuities as an asset class. “I specify that because you know advisors allocate by formula. And if we start saying and people start believing that 20 percent of your total ought to be in guaranteed income, then I think it starts to catch on. But it’s got to be a fundamental change.”

Merging and Acquiring

Botsford found another welcome consequence of the DOL rule. It pushed her to rethink her agency’s business and she subsequently merged with two others to expand her services. She was one of many in the industry looking to diversify their practices and take advantage of economies of scale as regulators demand more processes and documentation. The merger helped her develop a program to place new financial school graduates on a career track. She noticed that younger financial advisors may be excellent at the planning aspect of the business, but not so much on the business development. “We’re creating more of an institutional situation,” she said. “It’s kind of like a law

InsuranceNewsNet Magazine » December 2017

firm. You come in and you are an associate and then you can move up and become a partner. They don’t have to excel in prospecting. They don’t have to go out on their own and sink or swim.” The program helps grow Botsford’s practice, but it also addresses the insurance and financial industries’ long-standing problem of high attrition rates among young advisors. The recruiting effort fortifies the infantry in the battle against another trend of companies turning to automation in response to a declining advisor force. But Botsford is not too worried about the automation trend. “In my humble opinion, I think all of that’s going to work out just great until the next market crash,” Botsford said. “Then I think robo-advisors are going the way of the dodo bird. Everything’s fine as long as the market’s going up.” 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 steve.morelli@ innfeedback.com. Follow him on Twitter @INNSteveM.


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FEATURE DOL RULE TAKES A STUMBLING JOURNEY THROUGH 2017

DOL Rule Takes A Stumbling Journey Through 2017 By John Hilton

T

he political winds shifted abruptly during the early morning hours of Nov. 9, 2016, when Donald J. Trump declared victory over Hillary Clinton. In the world of financial services, the winds of change were very positive throughout 2017. Barack Obama-led regulations were reversed, or stymied, and Trump appointees worked tirelessly to enact a broad, pro-business agenda. By far, the controversial Department of Labor fiduciary rule was, and remains, the biggest item on the minds of distributers and producers. The fiduciary rule began taking effect June 9 with the impartial

“Because the political climate is so divisive right now, I feel like nothing is really going the way it would go with a president who has full support,” she said. “It’s brought more of a Wild West feel to this process than would have ordinarily been there.”

Stutter Steps

USA Financial is a broad-based financial services firm with a broker-dealer and a registered investment advisor force. Like many competitors, the company struggled with its response to the ever-changing fiduciary rule, McGrew said. “There were lots and lots of rabbit holes that this rule went down, with unintended consequences,” she said.

“Because the political climate is so divisive right now, I feel like nothing is really going the way it would go with a president who has full support.” Andrea McGrew, Chief Compliance Officer, Ada, Mich. conduct standards requiring advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. Phase two of the rule is expected to be delayed until July 1, 2019. Phase two deals with exemptions that regulate the sale of annuities sold with retirement funds — in particular, the Best Interest Contract Exemption, which requires a financial institution to accept liability for each contract and gives clients the right to sue over investment advice. While the fiduciary rule timeline seems somewhat normal on paper, in reality it has been anything but, said Andrea McGrew, chief compliance officer for USA Financial, Andrea McGrew based in Ada, Mich. 34

The cost of complying with the fiduciary regulation is pegged at $2 billion to $3 billion by the DOL. But the Securities Industry and Financial Markets Association, a Wall Street trade group, said its studies put the number at closer to $4.7 billion. USA Financial certainly saw expenditures rise, McGrew said. “It was an expensive year,” she said. “We put a lot of money into technology. We put a lot of money into procedures — a lot of manpower and time.” The DOL rule is creating problems that financial services are already dealing with, executives say. The most obvious, and predicted from the start, is the potential declining access to financial advice to smaller accounts. USA Financial is not dropping accounts, but other firms are, according to an Insured Retirement Institute comment letter to the DOL.

InsuranceNewsNet Magazine » December 2017

“In a July 2017 survey of IRI members, a number of IRI distributor members reported that approximately 155,000 of their clients have already been orphaned, with far more accounts expected to be impacted as implementation of the rule proceeds,” according to the comment. The awkward delineation of qualified and nonqualified accounts continues to be an issue. Of course, DOL can only regulate qualified money, per the Employee Retirement Investment Security Act of 1974. Still, it is an issue, McGrew said. “This bifurcated standard that we have, or could potentially have, is really, really clunky, especially for a firm like ours, where we work in both spaces — qualified and nonqualified,” she explained. “It makes it really, really difficult because how are you going to say to a nonqualified account ‘Well, we treat your assets differently?’” Once the rule is fully in place, USA Financial will treat all accounts the same, McGrew said.

More Cooks in the Kitchen

While the Trump victory was a clear sign to financial services that the DOL rule was not going to survive, the road to change was a bumpy one that left many firms in an uncomfortable limbo. Problems came quickly after inauguration. Trump’s nominee for secretary of labor, Andrew Puzder, twisted in the wind for weeks while damaging personal information leaked. By the time it was revealed that Puzder had once employed an undocumented housekeeper and he withdrew his nomination, valuable weeks were lost. Alexander Acosta was quickly nominated and confirmed, but it was already late April. “The amount of indecision and/or ambiguity around the rule was exacerbated by the lack of leadership at the DOL for a while,” said Brendan McGarry, an attorney specializing in financial services issues for Kaufman Dolowich & Voluck. “Industry participants were left waiting for specific guidance.” While Trump delayed the fiduciary rule implementation for 60 days until June 9, Acosta said he could find no legal basis to prevent the impartial conduct


DOL RULE TAKES A STUMBLING JOURNEY THROUGH 2017 FEATURE standards from taking effect. From there, he zeroed in on delaying the second phase of the rule. In the meantime, the delay created a void that state regulators and the Securities and Exchange Commission rushed to fill. Several states are pursuing fiduciary style regulations, with Nevada being the first to put such a law on the books. This push makes financial services execs nervous. “From my perspective, as a compliance officer, it is really challenging when you work in virtually every single state to then have to maintain, review and comply with 50 different standards,” McGrew said. SEC efforts, on the other hand, are welcomed by an industry that sees better potential for a consistent and workable

“The amount of indecision and/or ambiguity around the rule was exacerbated by the lack of leadership at the DOL for a while.” Brendan McGarry, attorney, Kaufman Dolowich & Voluck standard. Chairman Jay Clayton has refused to put a timetable on when the agency might complete its fiduciary standard. It all contributed to a big year of uncertainty swirling around the fiduciary rule. And that doesn’t appear to be changing anytime soon. “We’re in a holding pattern. We’re just waiting to see,” McGrew said. “We put in place procedures and processes in order

to make sure that we’re complying with the current state of the rule.” 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.

In Attempts To Kill ACA, Obamacare Becomes Trumpcare By Susan Rupe

P

resident Donald Trump promised to “immediately repeal and replace” the Affordable Care Act on Day One of his presidency in January. But nearly a year later, the ACA is still law. The Washington swamp-drainers’ battle cry of “repeal and replace” turned to “maybe next year” as 2017 came to a close. So far, the only changes made to the Affordable Care Act in 2017 were changes that came through executive order, as Congress was unable to get enough votes to pass a bill that would replace the law. House Speaker Paul Ryan, R-Wis., said in late October that his fellow Republicans won’t make another attempt to tackle health care reform until 2018. But although Congress was not able to get rid of the ACA, President Donald Trump used the pen of executive order to chip away at parts of it. Trump’s executive orders weakened the ACA by: » Pulling funding for enrollment education and outreach efforts, particularly for the health care navigator program. » Instructing federal agencies to “minimize the unwarranted economic and regulatory burdens” of the health law. » Cutting the open enrollment period to six weeks from the previous 12 weeks. » Tightening the rules that enable consumers to buy coverage outside of the

open enrollment period. » Ending cost-sharing reduction (CSR) payments to insurers to offset subsidies provided to low- and moderate-income people that enabled them to buy health insurance on the exchanges. » Easing the rules that allow small businesses to band together to buy health insurance through association health plans. » Allowing employers to set aside pretax dollars so workers can use the money to buy an individual health policy. » Easing current restrictions on shortterm policies that last less than a year.

for coverage on the federal exchanges for 2018, a drop of 43 percent over last year, the U.S. Department of Health and Human Services (HHS) reported. And there are fewer offerings on the federal exchanges this year than there were last year, HHS reported. A total of 132 health insurance plans were offered on the federal exchanges for 2018, down from 167 offered for 2017. Premiums on the federal exchange took double-digit rate increases for 2018. The average premium for a benchmark silver plan rose 37 percent for next year,

“Obamacare is finished. It’s dead. It’s gone.”

KEVIN LAMARQUE/REUTERS/Newscom

President Donald Trump Meanwhile, health insurance carriers as well as agents and brokers were left to sit back and wonder how to survive amid the turbulence and uncertainty. Actually, fewer agents and brokers wondered about how to survive because evaporating commissions led to fewer of them being authorized to sell health insurance on the federal marketplace this year. Only about 43,000 health agents and brokers were certified to help consumers shop

according to a study by Avalere Health. Average premiums also are going up by double digits for different levels of coverage, including bronze (18 percent), gold (16 percent) and platinum (24 percent). Avalere attributed those premium hikes to market instability driven by the end of CSR payments to insurance, continued uncertainty over the future of the ACA and the executive order that could lead to lower-cost health plans outside of the law.

December 2017 » InsuranceNewsNet Magazine

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Wayne Townsend, COO of Platinum Advisor Strategies You need to remember that projecting the right image is vitally important to your success. This is true for you, your staff, your office and your collateral. When people go to the mailbox and see your mailer, they don’t think, “Wow, that piece looks pretty good considering that the advisor who mailed it has only a two-person office.” No. It’s either good, or it’s not. It needs to stand out among everything else in the mailbox that day, or it’s going in the trash. Every interaction with your clients and your prospects is an opportunity to WOW them and should be prepared accordingly. That can be a tall order, so how does one compete? Make sure you guard your image by producing only work you are extremely proud of. Work with a professional designer and a professional photographer. Have a professional headshot taken, and use it on your pieces. No iPhone photos allowed. And if you are bewildered by how to even start finding these resources, know that Platinum Advisor Strategies is a key element of AGT and can provide you with all of these things and more. Everything from full graphic and web services to help planning client events to personalized gifts to systematizing and streamlining your office. One-stop shop, if you need it. Never miss an opportunity to WOW again.

Warren Wall, AGT Mentor I’m a firm believer in educational marketing. That’s why I teach adult education classes, like Maximizing Your Social Security and Your Dream Retirement, that are relevant to current hot topics. Additionally, it is helpful to host these classes in an educational environment, such as colleges or public libraries. Being seen as a respected educator can help to minimize the negative stereotype of being labeled “just another salesperson.” As an educator, you will more easily gain your prospects’ trust, and class attendees are more likely to meet with you later. If presenting a class like this seems daunting, membership in AGT will give you access to a wealth of materials to help you get started, including full scripts, PowerPoint presentations and even videos of mentors like me presenting actual classes. Joe Maas, Synergy Business Consultant One of the most important aspects of building a successful practice is to make sure you have strong, battle-tested

Joseph M. Maas provides comprehensive investment management services for individual investors, business owners and financial advisors.


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processes and procedures for every aspect of your business. Your employees must have clear direction and well-defined policies to guide their daily work. If you have to micromanage every task in your office, you might as well just do it yourself. And that’s a recipe for disaster. Strong procedures and written policies allow your staff to do their best work and also increase their job satisfaction. They have the autonomy and confidence to do the right thing in every situation. It’s also really important that every employee knows what the measure of success is for everything they do. Here’s a test: If you take a six-month vacation to Maui and won’t have access to a phone or email, will you continue to have a thriving business when you return? When the answer is “yes,” you know your staff is working at its highest capacity, and your business value will be maximized in the market should you want to sell or need to step away for any reason.

Elyse Archer, Sales Training Coach People don’t buy anything unless the pain of staying the same outweighs the pain of making a change. A huge mistake I see advisors make is not asking enough questions that really dig into a client’s needs and not showing them the implications of what happens in their world if they don’t make a change. When you ask enough questions to uncover needs, the clients sell themselves on why they need to make a change. The problem is, sometimes these questions are uncomfortable to ask. “What happens if nothing changes?” can be a hard question for many advisors to ask, because it opens the client up to feel pain around

Elyse Archer is a top producer. A sales strategist with Southwestern Consulting, she has successfully trained hundreds of sales professionals and business owners on how to build a strong personal brand that attracts ideal clients.

Patrick Wehrly prides himself on giving both his clients and other advisors “income tax solutions for a stress-free — and a reduced-tax — retirement.” He feels passionate that these concepts can be used by any advisors who are looking to build their practice.

Patrick Wehrly, AGT Mentor As an advisor, you have an obligation and a duty to help your clients understand the impact of taxes on their retirements. Many advisors barely touch on this topic, if at all. And that’s probably because they themselves have little understanding of the subject. Many clients may not realize that they must pay taxes on their Social Security, let alone have a plan to minimize the impact. Income taxes could be the single biggest expense many of us will face in retirement. So, build your understanding of this topic. Become a master. Lead with it in your advertising and marketing. It will make you stand out in a sea of advisors, and you’ll be doing a real service for your clients.

their current situation. What we have to realize is that it is a service to help clients avoid the long-term pain of not taking action by feeling the short-term pain of their lack of proper planning. Conclusion The folks at Simplicity Financial Marketing are justifiably proud of AGT, and they are confident they’ve built a game-changing resource that can impact your world today. They stand ready to support you in three areas critical to your success: (1) business management, (2) marketing programs and (3) the sales process. For access to this one-of-a-kind portal, as well as access to the mentors, consultants and strategists who are making a big impact in the market today, visit

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FEATURE IN ATTEMPTS TO KILL ACA, OBAMACARE BECOMES TRUMPCARE

A See-Saw Effect

But not all consumers will feel premium hikes equally. Low-income people in about half the counties in the U.S. will be able to get a taxpayer-subsidized policy for free on the federal exchanges, according to a Kaiser Family Foundation study. The study found that in 1,540 counties, a hypothetical 40-year-old making $25,000 a year can get a basic bronze plan under the ACA next year for zero monthly premium.

that the individual market is on a downward trajectory in terms of enrollment,” Sloan said. “We are seeing lower enrollment, higher premiums, less competition. Obviously less opportunity for agents and brokers.” This year was the first that had a drop in individual enrollment, which is not a good sign, according to Sloan. “It was the first year where we saw a substantial number of counties with limited insurer participation on the exchang-

“I think [the ACA is] going to implode on its own. To some extent, perhaps [Trump] is expediting the implosion.” Rep. Chris Collins, R-N.Y. A see-saw effect is the reason. The end of CSR payments to insurers led to increased premiums, which led to more consumers being eligible for subsidies to pay for exchange coverage. For consumers who don’t qualify for subsidized coverage, premiums continue going up. In particular, families with children will see a premium spike for 2018 as a result of an Obama administration rule that allows insurers to recalculate the health risks of children within a family’s premium bill. The rule allows insurance companies to assign more of a family’s overall premium cost to children in individual and small-group policies, starting in 2018. It also allows insurers to charge higher rates for teens beginning at age 15 than it allows for younger children, because teenagers typically rack up bigger medical bills. Up until now, the ACA has not allowed any difference in the amount charged for children from birth to 20.

2017 a Turning Point?

Did the ACA reach its turning point in 2017? Chris Sloan thinks so. He is senior manager focusing on individual market and ACA-related work for Avalere. “I think right now, unless there’s some legislation to stabilize the market or to repeal and replace Chris Sloan ACA, it’s pretty clear 38

es,” he said. “Obviously, we have a president who took office this year and who is opposed to the ACA, and the party that controls both houses of Congress is also opposed to the ACA.”

Where Do Brokers Fit In?

This year has been a bad year for brokers, Sloan said. “The whole ACA has hastened a trend away from agents and brokers,” he said. “I think what’s happening now is that the individual market is increasingly becoming a market of subsidized individuals and those subsidized individuals have to purchase their coverage through the exchanges. So that hurts the opportunities for agents and brokers.” If health insurance becomes a product people don’t want to buy, or find too expensive, there’s a limit to how much assistance an agent or broker can provide if the price is too high, Sloan said. “And that happened a lot in 2017 and will happen next year.”

The Last Shrimp Boat

Despite what he called the “turbulence” that marked the health insurance world in 2017, Michael Z. Stahl said there’s a silver lining for health insurance brokers. Stahl is an executive vice president at HealthMarkets in North Richland Hills, Texas. “We see all this as an opportunity to be like Forrest Gump’s last shrimp boat,” he said. “As a lot of brokers are exiting

InsuranceNewsNet Magazine » December 2017

the business, there are still going to be a similar amount of consumers who need help.” Health commissions have come down, which spells trouble for brokers Michael Z. Stahl who are used to selling health insurance but not building a true client relationship, Stahl said. “In that case, you’re in trouble and if you haven’t exited the market, you probably will.” As the government cuts the navigator program, consumers can turn to brokers as a source of help — not only in obtaining health coverage but also in obtaining other products, such as life insurance, dental or vision benefits, or critical illness or accident coverage, Stahl said. “Within turbulence, someone still can win,” he said. “There’s a lot of need out there, a lot of people who need someone to help them. Why not you? And while you’re doing that, why not do it in a more complete fashion? And in so doing, you will do better by your client and you will earn the income to support yourself as a professional.”

It’s Trumpcare Now

Although the Affordable Care Act — or Obamacare, as it is commonly known — is still in force, the law has evolved to the point where we now have “Trumpcare,” Stahl said. “We have Trumpcare in the sense that what we have now is not what we had a year ago,” he said. “But it’s still wet cement. It’s not cured as to what it will be in the final sense.” One thing that’s certain is that the consumer and the health insurance broker are entwined as the market challenges continue, Stahl said. “When it’s tougher for the consumer to afford to buy, it’s tougher for the agent to make sales,” he said. “When it’s tougher for the carriers to make money, we see the continued pressure on agent commissions. All of that is the environment we are in today.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback. com. Follow her on Twitter @INNsusan.


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39


LIFEWIRES

QUOTABLE

Life Insurance Sales Are Gone With The Wind This year’s hurricanes devastated parts of the Gulf Coast and the Caribbean, but they also did some damage to life insurance sales. September hurricanes cut into life insurDown 2%? ... ance sales by about 2 percent, dee Fiddle -dee insurance company executives reported. In addition to putting a dent in sales, the hurricanes resulted in insurers extending due dates for policy premiums by up to two months for policyholders in declared disaster areas. The extensions kept policies in-force even if the companies weren’t collecting premiums. Torchmark and CNO Financial were among the carriers who cited hurricane-related sales slowdowns in their third-quarter earnings reports.

TREASURY DEPARTMENT LOOKS AT SIFI

The Treasury Department wants federal agencies to change the ways insurance companies are regulated under the DoddFrank Act. In particular, the Treasury Department wants agencies to move away from regulating insurance companies based on size, and instead focus on any risky activities insurers might be engaged in. Dodd-Frank imposes tighter rules and closer federal scrutiny on banks and certain financial firms with more than $50 billion in assets. Federal regulators analyze those firms — called systemically important financial institutions (SIFI) — to ensure their stability. Some insurers faced tight federal scrutiny after the 2008 financial crisis. DID YOU

KNOW

?

40

The Financial Stability Oversight Committee recently released AIG from the SIFI rules after the firm scaled back their non-insurance activities. A federal court struck down MetLife’s SIFI designation last year, and Prudential is fighting theirs.

ACCELERATED UNDERWRITING IS BREAKING BARRIERS

The walls around digital life insurance distribution are crumbling as accelerated underwriting is gaining acceptance. Life insurance application and issuance, two of three steps necessary before buyers receive coverage, have been digitized for years. But the in-between step — an invasive paramedical exam that often takes several weeks to schedule and administer — has remained the sticking point to an entirely digital life insurance buying process. A Conning report revealed that the in-between step is gradually becoming

47% of people living with diabetes fear they won’t qualify for life insurance coverage.

InsuranceNewsNet Magazine » December 2017

If what the press says about where people will be making buying decisions over the next 10, 20, 30 years, it's really critical that we continue to diversify away from television. — Gary C. Bhojwani, president and CEO of CNO Financial Group, parent company of Colonial Penn

automated through accelerated underwriting as insurers get better at processing more data to price a 30-year policy in a way that reflects the risk appropriately. “Using accelerated underwriting, digital agencies are now able to issue policies directly to potential consumers,” wrote Scott Hawkins, director, insurance research at Conning, in the report.

NEW CEO AT NAILBA

The National Association of Independent Life Brokerage Agencies (NAILBA) has a new leader. Dan LaBert, former executive director of the National Association of Consumer Bankruptcy Attorneys (NACBA), has been named as the organization’s new CEO. Before joining NACBA, LaBert served as executive vice president and chief operating officer for the Pennsylvania Institute of Certified Public Accountants. LaBert takes the helm from Jack Chiasson, who retired in May after serving as NAILBA’s CEO for 13 years.

Source: John Hancock


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December 2017 » InsuranceNewsNet Magazine

41


LIFE

The 5 Big Myths About Millennials One stereotype about millennials is that they believe they are invincible and therefore aren’t interested in life insurance. But other myths about millennials and life insurance might be keeping advisors from serving that market segment.

The Top 3 Most Important Facts When Purchasing Life Insurance Millennials

M

Myth 1: Benefits aren’t important to them.

Even though they’re the youngest generation in the workplace, millennials value benefits as much as their older colleagues, according to LIMRA research. Like other employees, nearly all millennials — 94 percent — say having health insurance through their workplace is important or very important, with dental insurance and vision care not far behind. But they also value life insurance in increasing numbers. The majority of millennials — 54 percent — own life insurance, up from 47 percent in 2010, LIMRA reports. You can reach this growing market with workplace-sponsored individual life insurance coverage provided by your voluntary benefits partner. 42

Easy to understand (79%)

1.

2. Ability to chat with a person (68%)

By Pam Jenkins illennials are taking over the world! (Insert ominous blockbuster movie theme song here.) No, really, they are. The largest generation (those born between approximately 1982 and 2004) in history is entering the workplace in record numbers. Millennials comprise more than one in three of America’s workers, making them the largest generation in the workforce at 53.5 million. But here’s the surprise: Millennials are just like other employees in more ways than you might think. To tap into this huge market successfully, take a moment to learn more about what millennials think, prefer and need when it comes to financial protection for themselves and their families. See how many of these myths about millennials and life insurance you believe — then keep reading for the real story.

Gen X 1.

2. Ability to pick insurance type from categories (65%)

3. Ability to pick insurance type from categories (67%)

Boomers

3. Ability to chat with a person (64%)

Seniors 1.

Easy to understand (87%)

1.

2. Ability to chat with a person (66%)

Myth 2: They don’t need life insurance.

Many millennials have postponed marriage, children and home ownership — some of the key triggers for buying life insurance. However, many also are carrying staggering amounts of college loans and credit card debt. According to the finance website Make Lemonade, the average student in the class of 2016 has more than $37,000 in student loan debt. Anyone who co-signed a college loan would be responsible for paying that debt if the borrower died unexpectedly. Even if they don’t have a family or mortgage payment to protect now, millennials most likely will in the future. Buying life insurance while they’re young and healthy is smart in two ways: First, the younger they are when they buy life insurance, the more affordable it generally is. And second, having life insurance means they have protection when they need it, without worrying

Easy to understand (89%)

2. The company selling the policy is well-known (69%)

3. Friendly, conversational language used (65%)

InsuranceNewsNet Magazine » December 2017

Easy to understand (80%)

3. Ability to chat with a person (62%)

about the ability to qualify for it in the future if, for example, they developed a health condition that made it difficult or costly to get coverage.

Estimated Yearly Cost for a $250K Term Policy for a Healthy, Nonsmoking 30-Year-Old 6%

7%

<$ 100

21% 23% $100 - $299

14%

18%

$300 - $499

44% 15%

23%

$500 - $999

29%

Millennials Everyone else

$1,000 or more


THE 5 BIG MYTHS ABOUT MILLENNIALS Visited the website of a life insurance company

LIFE

Sought information about life insurance online

Purchased/attempted to purchase life insurance online

64% 64%

56% 53%

45%

47%

45%

43%

33%

36%

22%

Millennials (18 to 36)

Gen Xers (37 to 52)

Myth 3: They can’t afford life insurance.

This myth is more about life insurance than it is about millennials. The fact is, most people far overestimate the cost of life insurance, but millennials are further off base than are other employees. LIMRA’s 2017 Insurance Barometer study asked adults of all ages how much a $250,000 term life policy for a healthy 30-year-old would cost. The median estimate was $500 — more than three times the actual cost. Millennials were the most likely over those of other age groups to speculate the cost was $1,000 or more. Life insurance offered through the workplace can be very affordable, and paying premiums through payroll deduction makes it convenient while keeping monthly costs lower.

Importance of Benefits to Millennials*

92%

82%

72%

67%

Boomers (53 to 64)

Myth 4: They prefer to shop online.

Millennials have an online-all-the-time reputation, but we need to define “shop.” Millennials do like to research online, including seeking information about life insurance. They’re significantly more likely to visit a life insurance company’s website than even slightly older employees are, and are much more likely to visit a website than much older employees are — 64 percent for millennials compared with 56 percent of Gen Xers and 47 percent of baby boomers, according to the Insurance Barometer study. The same is true for seeking information about life insurance online: 64 percent of millennials say they’ve done that, compared with only 36 percent of seniors. But millennials are more likely than any other generation is to say being able to talk to someone when buying life insurance is very important to them. When the same study asked about the top three most important factors when purchasing life insurance, 68 percent of millennials cited the ability to chat with a person. That compares with 64 percent of Gen Xers, 66 percent of boomers and 62 percent of seniors. Whether it’s face-to-face, on the phone or an online chat, millennials crave a personal connection to help them make the right choices.

Myth 5: They’re not concerned about financial security. Medical

Dental

Vision

Life Insurance

*Percentage of millennials saying it is "important" or "very important" to have the benefit available at work. Source: Can You Hear Me Now? Employee Views of Benefits Communication and Enrollment, Technical Report, LIMRA, 2015

17% Seniors (85+)

earning years, and retirement is a vague concept decades in the future. Instead, research shows millennials are highly interested in peace of mind. Burdening dependents because of a premature death is millennials’ No. 2 financial concern, according to LIMRA, following their top concern of paying monthly bills. Show your millennial clients how life insurance can help them achieve peace of mind by protecting the financial security of their families and loved ones. Millennials are just like other workers — only a little different. Taking time to understand their unique needs and preferences, and partnering with a voluntary benefits provider that can offer the options and communication preferences that meet those needs, can help you successfully tap into this tremendous market. Pam Jenkins is assistant vice president for product development at Colonial Life & Accident. Pam can be contacted at pam.jenkins@ innfeedback.com.

Like this article or any other? Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com. As seen in the July 2012 issue of InsuranceNewsNet Magazine

OK, this one actually is partly true. Financial security doesn’t resonate with millennials the way it does with baby boomers and older generations. And who can blame them? These 20- and 30-somethings aren’t yet in their prime

Life

Annuities

Health

July 2012

December 2017 » InsuranceNewsNet Magazine

43


LIFE

Advance Your Professional Standing Working With Lawyers How to choose lawyers who will actually work with you in your specialty. By Louis S. Shuntich

W

hen life insurance advisors know how to work with lawyers, the relationship can lead to success in the advanced markets. Let’s expand on some of the aspects of what you need to know to be successful working in cooperation with the legal profession.

Networking With Lawyers

Establishing networking relationships with lawyers helps you grow your practice and provide better client service. These professional relationships provide you with a number of advantages. Associating with lawyers enhances your position and professional reputation in the advanced markets. 44

Networking with lawyers is a way for you to obtain no-cost input to refine your sales proposals for specific prospects. In that respect, most top producers have relationships with local lawyers they can call free of charge to ask questions about developing prospect proposals. Lawyers are willing to cooperate in this way because it can mean business for the lawyers as well. That is because advisors are not prohibited from soliciting business the way lawyers are. As an advisor, you are in a position to act as a catalyst in approaching prospects and getting them to recognize and agree to act on their problems that may require legal services for which you may recommend the lawyer. In addition, you can be a resource for information to the lawyer about life insurance products and their uses. On the other hand, it should be noted that it is unlikely that you will receive referral business from a lawyer. This is because

InsuranceNewsNet Magazine » December 2017

by the time a lawyer sees a client, that client usually has a relationship with an advisor, and the lawyer is not in a position to direct the client to another advisor.

The Right Stuff

When selecting a lawyer for a networking relationship, look for the right characteristics. • Quality: Choose the best, brightest and most professional lawyers you can associate with. When dealing with extremely complicated legal and tax issues, you need to know that such matters will be handled correctly. • Accessibility: You should select lawyers who will return phone calls promptly and be accommodating on short notice. • Trust: You must be certain you can


LIFE ADVANCE YOUR PROFESSIONAL STANDING WORKING WITH LAWYERS trust the lawyers you choose, and you should feel comfortable with the lawyers’ motives and good judgment. • Specialist: Choose a lawyer who specializes in your areas of interest. The laws pertaining to the advanced markets are so extensive and complex that a general practitioner is not likely to be an effective legal resource.

Finding Suitable Lawyers

If you do not know local lawyers who meet your criteria, ask other lawyers, accountants, trust officers and bankers for recommendations. In addition, you should interview those who are suggested and get to know them as much as possible in both business and personal settings. Further, you should not hesitate to check the lawyer’s credentials. When contacting lawyers about establishing relationships, you should not go “hat in hand” as though you are asking them to do you a favor by agreeing to do business with you. Rather, you should approach the situation as an established professional who is looking for a mutually beneficial professional relationship. This might begin with inviting lawyers to breakfast or lunch for a meeting at which you may discuss the advantages to both parties in establishing relationships.

Grow The Relationship

To work with other professionals successfully, you must also be perceived as a professional. The first step is acquiring the necessary credentials. This means obtaining professional designations as well as joining industry associations. In addition, self-study, industry seminars, agent study groups and membership in interdisciplinary associations are advisable. All these activities will provide the knowledge you need and give you a professional identity and credibility with those you serve and work with. To grow your relationships with lawyers further, you also should do the following: • Communicate regularly: Meet regularly with lawyers to talk about business and developing mutual clients. Further, it is a good idea to try developing a personal relationship with lawyers by inviting them to social functions, sporting activities or just dinner as a sign of 46

When contacting lawyers, you should not go “hat in hand” as though you are asking them to do you a favor by doing business with you. appreciation of your relationship. This personal side is important because people simply prefer to do business with people they like. • Keep each other informed: Each party should keep the other informed of technical and business developments that are important to their mutual interests. You should inform the lawyers about new products and new or unusual uses for existing products. The lawyers, on the other hand, should inform you about legal or tax developments that are important to the advanced markets. • Brainstorm: You and the lawyers should act as brainstorming partners in developing solutions for those you jointly serve. • Boost their image: Each party should look for ways to help enhance the other’s image within the community. One example is by conducting seminars together.

Working With Your Prospect’s Lawyer

Serving clients in the advanced markets is a cooperative undertaking because of the diversity and complexity of disciplines involved. Defining roles is, however, the key to successful cooperation with the lawyer. In that regard, here are the roles of the advisor and the lawyer. Advisor: Recognize insurance needs and motivate the prospect to take action. Provide all the insurance services required. Lawyer: Review the advisor’s propos-

InsuranceNewsNet Magazine » December 2017

al, taking into consideration the legal and tax implications as well as the prospect’s objectives. Prepare legal documents. Your prospect’s lawyer generally should be brought in immediately once you have presented your prospect with a proposal and your prospect has agreed to take action. This puts the lawyer in a timely position to counsel the prospect on your proposal.

Inquiring About Your Prospect’s Legal Representation

You always should tell prospects that input from their lawyer is welcome. Further, if your prospect does not have a lawyer and asks for a recommendation, you may make a recommendation, but you must be able to explain why that lawyer is being recommended. This means being familiar with the lawyer’s qualifications and knowing something about what the lawyer charges for various documents and services. You must tread carefully if your prospect has a lawyer and you decide to recommend a different lawyer who specializes in the field. In such a case, you emphasize the specialist’s qualifications and avoid implying that your prospect’s lawyer is not qualified in that area. Further, you should be clear that you are recommending the specialist only for the purpose of implementing your proposal and no other. If your prospect prefers to use their own lawyer, you should ask whether the prospect would object to your meeting with the lawyer in advance. You and your prospect should be aware that the lawyer might send the prospect a bill for the time that you spend with the lawyer.


ADVANCE YOUR PROFESSIONAL STANDING WORKING WITH LAWYERS LIFE

Meeting With Your Prospect’s Lawyer

Prospects have different levels of involvement with their lawyers. Some consult with their lawyers very little, while others will not make a move without the lawyer’s advice. Consequently, before going to see your prospect’s lawyer, you should try to get a feel for the nature of the relationship between your prospect and their lawyer. Most importantly, you must remember to ask your prospect to call the lawyer to say you will contact them to arrange a meeting. This will make it much easier for you to set up the appointment. When meeting for the first time, you should assure the lawyer that their input is welcome and nothing will be done until they agree it makes sense. When preparing a proposal to show the lawyer, you should base it as much as possible on information obtained from your prospect. You should not look to the lawyer for information that can be obtained from the prospect. This is because you must appear able to help the lawyer serve your prospect. Possessing key in-

formation about your prospect will give you credibility with the lawyer. Having that key prospect information is evidence that your prospect takes you seriously. As a result, the lawyer will be more inclined to take you and your proposal seriously. Lawyers have different degrees of expertise on various subjects. As a result, you must understand that the lawyer may not be very familiar with the subject of your proposal. You should be prepared to talk technically and present illustrations of what you are proposing. It is important that your meeting with the lawyer take place without the prospect being present. This is because it is much easier for the lawyer to admit they are unfamiliar with something when their client is not present. Further, you should always present the proposal in a way that shows the proposal is flexible enough to adapt to the lawyer’s input.

Avoiding Problems With The Unauthorized Practice of Law

needed for a given situation. For example, in an estate planning case, you may gather data regarding the size of the prospect’s estate, estimate the tax due under varying assumptions and project the likely tax and liquidity needs. However, when it comes to recommending ownership of the insurance, beneficiary designations and settlement options, you should tell your prospect these issues should be discussed with their lawyer. That is because such issues can have a dramatic impact on the results and consequences of the proposal. Further, the lawyer is authorized to draft legal documents or give tax and legal advice. You are not and must not attempt to do so. Louis S. Shuntich, J.D., LL.M., is director of the advanced consulting group at Nationwide. He may be contacted at louis.shuntich@ innfeedback.com.

It is appropriate for you to recommend the type and amount of life insurance

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December 2017 » InsuranceNewsNet Magazine

47


ANNUITYWIRES

Delay In DOL Rules Leads To Adjusted Annuity Forecast

LIMRA Individual Annuity Sales Forecast Variable

0-5%

Fixed

5-10%

LIMRA has revised its 2018 annuity fore5-10% Indexed cast in light of the delay in implementation 0-5% Fixed-Rate Deferred of the Department of Labor fiduciary rule. And that’s good news in predicting sales of 5-10% Income annuities in the new year. 0-5% Total U.S. Individual Annuities LIMRA had predicted the overall decline in 2017 annuity sales to continue in 2018. But now LIMRA foresees a 5 percent increase in overall annuity sales in the U.S. next year. Variable annuity (VA) sales are expected to see a drop of about 5 percent in 2018, but that decline is less than the 10-15 percent decline LIMRA originally predicted. In addition, LIMRA expects fixed annuity sales to increase 5-10 percent in 2018, an improvement over the expected 5 percent decline expected in 2017. Because of the delay in the DOL rule, LIMRA projects 2018 indexed annuity sales will bounce back from the decline seen early in 2017 to reach the near-record levels of more than $60 billion seen in 2016. they will outlive their retirement savings. Nearly 90 percent do not feel confident in their retirement savings situation.

56% of Americans say they are not sure they will outlive their retirement savings

AMERICANS MORE INSECURE ABOUT RETIREMENT SAVING

More Americans are financially insecure about their retirement, according to a study by the Indexed Annuity Leadership Council (IALC). The majority of Americans (56 percent) say they want to be sure they save enough to last their entire retirement. However, only one in five grades themselves an “A” when describing their financial literacy. One in five Americans admitted they have nothing saved for retirement at all. For Americans who have saved, the survey reveals 56 percent — more than half — said they are unsure whether

HYBRID ANNUITY MARKET HEATING UP

Competition in the fast-growing hybrid annuity market is about to get fierce, the CEO of a life and annuity company said. But all competitors are welcome, said Eric Steigerwalt, president and CEO of Brighthouse Financial, a big seller of hybrid annuities. Hybrid annuities, sometimes called buffer or structured annuities, combine the elements of an indexed annuity and a variable annuity. They protect, or buffer, contract holders from market downturns to a limited extent in exchange for higher caps on interest credited to the policyholder. Insurers like hybrid annuities because they don’t come

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11% of preretirees have completed a formal retirement income plan.

InsuranceNewsNet Magazine » December 2017

Source: LIMRA

QUOTABLE

Therehybrid are 11 companies The annuity is offering a great QLAC (qualifying longevity annuity product for manufacturers, it’s a contract) products. While this is it’s great product for distributors, aa small and new part theclients DIA great product forofour market, we expect to see an uptick so growing that business, I think, in sales in 2016.

would be great.

— Eric T. Steigerwalt, president and CEO of Brighthouse Financial

with lifetime income riders. Hybrid annuities also ease the capital requirements on the underwriter and are well-suited to a low interest rate environment. As sales volumes grow, regulators are also taking a closer look at hybrid annuities. Critics say the products carry high fees and suffer from other drawbacks.

THE BEST-INTEREST VALUE OF ANNUITY GUARANTEES

When it comes to its controversial fiduciary rule, the Department of Labor has assured the industry that cost isn’t the only factor that satisfies a best-interest standard. In other words, agents and advisors don’t always have to recommend the lowest-priced option. That is good news to insurers who say other factors are equally important to clients — factors such as income guarantees. “There’s some data out there on how important having peace of mind and guaranteed income are to clients,” said Eric Henderson, senior vice presEric Henderson ident for life insurance and annuities at Nationwide. “A number of surveys show that it is more important than achieving a higher return.” Henderson spoke at the 2017 LIMRA Annual Conference. Certain annuity products do a good job providing later-in-life income protection, he said, but they might not be the lowest-cost products. The key is finding the right option for the client, Henderson said.


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ANNUITY

Bonus vs. Index Crediting Potential: Which One Is Better? Weighing the long-term account values of a bonus annuity with lower crediting caps against a non-bonus annuity with higher crediting caps. By Michael Jay Markey Jr.

S

atisfaction, regardless of the product or service involved, occurs when experience is parallel to expectation. Said a different way, would a consumer who expects a 2-3 percent rate of return and experiences a 2-3 percent rate of return have a higher level of satisfaction than a consumer who expects a 5-6 percent rate of return but experiences only a 4 percent rate of return? What if both scenarios involve the same product? These questions are hard to answer. They examine the validity of a financial product through the behavioral lens of a consumer’s experiences instead of using 50

pure math. Sometimes the way something makes us feel is more important to us than how much it costs. The conclusion is this: A fixed indexed annuity (FIA) with a bonus and lower crediting potential is not inferior to an FIA without a bonus and higher crediting potential. In my opinion, the notion that FIAs with higher caps (maximum amount of interest possible in any one term) are superior will lead to decreased consumer satisfaction as this altered focus on index credits will lessen the likely equivalence between experience and expectation. This conundrum of mine started last summer when what I call a dinner-ruiner brought a screeching halt to my nice, quiet dinner. A dinner-ruiner is one of those people who decides that the moment you’re not actively chewing your food is the perfect time to volley question after question your way like the last hurrah of a Fourth

InsuranceNewsNet Magazine » December 2017

of July fireworks show. My last run-in with a dinner-ruiner occurred during summer 2016, shortly after the Department of Labor finalized its fiduciary rule. Typically, a dinner-ruiner jumps in at the awkward moment between the salad and main course or between the main course and dessert. My dinner-ruiner seized the after-salad opportunity. He put his hand on my knee, leaned in closely to the right side of my face and said in a quiet voice, “What do you think about this fiduciary rule? I think it’s a good thing. It’s going to make us all focus on finding the best products.” I said, “Well, Mr. Dinner-Ruiner, what makes the best product?” With his hand still on my flipping knee, he said, “I just think it’s all about the caps — don’t you agree?” In a single big breath I replied: “Are you kidding me? Not at all! Our industry is moving toward higher caps while at the


BONUS VS. INDEX CREDITING POTENTIAL: WHICH IS BETTER? ANNUITY same time advocating shorter surrender periods. Shorter surrender periods will reduce the profitability of the insurer, which of course will lower the caps. So what do we gain? More liquidity for full withdrawals on a product/asset class for which increased liquidity undermines its very purpose — income. I mean, shorter surrender periods will likely just lead to some advisors laddering annuities again, and then every five years or so, writing a new contract and thus new commissions. Who will that help? No one — so this concept of lower comp is really just smoke and mirrors. And caps aren’t guaranteed, so what happens when the cap changes, when it’s reduced? Yeah, it’s clearly all about the caps — something you can’t control or predict. Good luck with that.” Without any facts, he told me I’m wrong and someday when I’ve been doing this long enough, I’ll see. That conversation led me to wonder whether I could prove mathematically that, in the end, an annuity with an upfront bonus and lower crediting potential

wouldn’t be materially different from an annuity with higher crediting rates and no bonus. And if this is true, then this new focus on crediting rates would therefore likely

longer. Why not look at annuities with shorter surrender periods? Because they often eliminate bonuses. As a result, the consumer pays for the shorter surrender period through the reduction of interest crediting potential. Therefore, it’s inappropriate to consider shorter-surrender annuities when making this comparison. I narrowed the search to FIAs that had an income benefit rider available (no preference was made to cost). They also had to have an S&P 500 annual point to point with a cap index crediting strategy available. In doing so, I split each IMO’s FIA offerings in separate piles. Each IMO’s offerings were split into two groups: FIAs with a 4 percent or greater bonus and FIAs without a bonus. For each category, I eliminated all the FIAs below the group median. Although those FIAs may have some unique features, this argument is about crediting

With his hand still on my flipping knee, he said, “I just think it’s all about the caps — don’t you agree?” decrease consumer satisfaction since the promise of materially greater wealth is not likely to be fulfilled. There’s no easy way to compare FIAs with and without bonuses. Here’s what I did. I used the annuity spreadsheet comparison calculator from two large independent marketing organizations (IMOs). I compared indexed annuities that had surrender schedules of 10 years or

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ANNUITY BONUS VS. INDEX CREDITING POTENTIAL: WHICH IS BETTER?

and bonuses, so the lowest bonuses and lowest-cap FIAs are gone. From what’s left of each group, I took the average from each IMO. For bonus annuities, that meant the average bonus and cap. More simply, for non-bonus annuities, it was just the average cap. Then for the calculations, I took the average of the two IMOs’ offerings. My thought was that by taking the initial median rather than the average of each IMO group, I would simulate the selection process many advisors go through. (They seek higher bonuses or higher caps.) Taking the average of the higher side of the median, it should then diminish the influence of any outlying products potentially superficially inflated by an insurer temporarily trying to elevate sales while intending to recapture this cost through the gradual reduction of renewal rates. In the end, the average bonus annuity carried an upfront bonus of 8.61 percent and an S&P 500 annual point to point with a cap of 2.89 percent. The average non-bonus annuity had an S&P 500 annual point to point with a cap of 4.91 percent. How would you compare cap to cap? I made a spreadsheet using the S&P 500 for every 10-year period, Jan. 1 through Dec. 31, each year, starting with 1975. From here, we can compute the ending balance for every 10-year, 20-year and/ or 30-year run since 1975, using the 52

parameters outlined above. Chart 1 above illustrates the difference in value between the non-bonus annuity and bonus annuity at 10-year, 20-year and 30-year intervals, with each annuity having an initial, one-time premium of $100,000. (Bonus annuity account balance at 10, 20 and 30 years: $133,433, $164,849, $204,219; non-bonus annuity account balance at 10, 20 and 30 years: $140,966, $199,240, $280,585)

InsuranceNewsNet Magazine » December 2017

That knee-touching dinner-ruiner was right — right? The math is clear. Not quite. Annuities are used for future income. Disagree? Then why do so many annuities have a lifetime income benefit rider (LIBR) attached to them? Aha! If we defer the income for five full years and use a 6 percent rollup and a 5 percent payout, then we get an annual lifetime income amount of more than $7,000 per year ($7,267 to be exact). For now, let’s make the income on both annuities equal, even though they’re not. As you’ll see, taking income regularly from the FIA diminishes the higher crediting advantage of the non-bonus annuity. Chart 2 below illustrates the narrowed gap. Most interestingly, all but one of the periods resulted in the non-bonus FIA account value hitting zero at the end of the 24th or 25th policy anniversary. Meanwhile, the bonus annuity exhausted the account value mostly at the end of the 22nd policy anniversary. Furthermore, the average account value (using every 10-year period since 1975) was higher using the bonus annuity until the end of the eighth contract year. Since the LIBR fee is calculated as a percentage of the account value, the non-bonus annuity carries a greater fee. If we make the income the same for each type of annuity, the non-bonus annuity is $1,902 more expensive. However, if we


ANNUITY BONUS VS. INDEX CREDITING POTENTIAL: WHICH IS BETTER? adjust the income amount — removing the bonus’s influence on the first year LIBR rollup — this reduces income to $6,691 per year (versus $7,267). In the end, the non-bonus fee becomes $3,445 more than the bonus annuity. Here’s what I mean:

One last thought: Distance magnifies errors. If you hit a golf ball toward a target five feet away, a 10-degree error left or right is hardly noticeable. But if the target is 500 feet away, that same degree of error is obscenely noticeable. When using an annuity for what you know it will at least do — not what you hope, predict or think it might do — the probability of error is removed. However, when you focus on caps, if you’re wrong on the crediting rate by just a bit, then distance — in this case, time — will magnify your error. Earlier I asked whether a consumer who expects a 2 to 3 percent rate of return and experiences a 2 to 3 percent rate of return would have a higher level of satisfaction than a consumer who expects a 5 to 6 percent rate of return but experiences only a 4 percent rate of return? I believe the answer is yes. Since summer 2016, we have seen a mass exodus toward lower surrender schedules or higher crediting caps and lower compensation. An indexed annuity, with an upfront bonus, is not inferior to an indexed annuity with no bonus and higher index crediting potential (higher caps, lower spreads). Michael Jay Markey Jr. is a co-founder and owner of Legacy Financial Network, Kentwood, Mich., and the author of Fireproof Your Retirement. He may be contacted at michael.markey@innfeedback.com.

By the time the bonus annuity exhausts its account value, the purchaser has received $9,792 more income than the non-bonus purchaser. To all of you saying, “Yeah, but the non-bonus annuity lasts longer,” I say: Right, which simply means the death benefit in the non-bonus annuity exists longer than in the bonus annuity. By the time this is negated, meaning when the account value is also exhausted in the non-bonus annuity (end of the 27th year), the purchaser will have paid $3,445 more in fees and received $12,672 less in income. The bonus annuity purchaser could use the higher annual income to purchase life insurance to offset this risk. Term life insurance would even be appropriate since the lower value in the bonus annuity is not a permanent risk. Does a higher cap guarantee a higher account value? No, interest isn’t guaranteed. And further, when you alter the focus of FIAs’ benefits from predictability and guaranteed income to accumulation and growth, then what happens when growth is stagnant? What happens when the insurer reduces the cap? Guaranteed income is guaranteed. You can accurately depict what it will be. What the account value will be in 10, 20 or 30 years from now in an FIA, regardless of cap, is much harder to predict. 54

InsuranceNewsNet Magazine » December 2017

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HEALTH/BENEFITSWIRES

CVS/Aetna Deal Could Be Worth $66B First, Aetna said it is selling its group life and disability insurance business to The Hartford. Now it appears that Aetna itself could be on the sales block, following a report that CVS Healthcare wants to buy the insurer for more than $200 per share, or more than $66 billion. CVS’ move to buy Aetna would shore up the drugstore giant’s position as Amazon looms as a threat to the pharmacy business. Amazon reportedly has obtained pharmacy licenses in a handful of states, fueling fears that the drugstore business is the next industry to be in the online giant’s crosshairs. Analysts said the potential CVS/Aetna deal would help CVS incentivize Aetna’s 23 million health plan participants to use the CVS/Caremark mail-order prescription system and shop at the pharmacy company’s retail stores. The transaction also would eliminate any risk that CVS could lose Aetna’s business, which contributed 11.2 percent of CVS’ consolidated net revenues in 2016.

SIGN-UPS SET RECORD IN OPENING DAYS OF ENROLLMENT

What a difference four years make. When the first Affordable Care Act enrollment season started — way back in 2013 — online glitches and overall confusion led to only about 50,000 people signing up for coverage in the first month. Compare that with the most recent enrollment season, when sign-ups surged to a record 200,000 on the first day that consumers were able to select health plans for 2018 on the federal exchange. When Healthcare.gov opened for business on Nov. 1, nearly twice as many people signed up for coverage as on the opening day of

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enrollment the previous year. One reason for the spike in activity is that the open enrollment season is only about half as long as in previous years — ending on Dec. 15 instead of in February. In addition, officials said many of those who chose coverage on opening day were renewing their coverage rather than enrolling for the first time.

FEW WORKERS UPDATE THEIR BENEFITS

‘Tis the season for workers to update their employee benefit choices, although few actually will make any changes to what they currently have in place. An Aflac survey found that 92 percent of workers kept the same benefit selections they had made the previous year, and more than 80 percent spent less than an hour looking at their options. Two-thirds of workers told Aflac that making sense of benefits is too complicated, and nearly three in four employees reported they don’t understand some part of their coverage. This inertia could cost workers dearly;

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more than half of employees estimate they are wasting up to $750 a year because of their benefit choices.

ADULTS FEAR PAYING FOR LTC, BUT FEW HAVE A PLAN

Even though most adults say paying for long-term care is their biggest fear about growing older, few have taken any action to finance that care.

Genworth’s most recent consumer survey found that only one in five adults has a plan for paying their future care needs. In addition, about half of those surveyed said they plan to take personal financial responsibility for their own care as they age. The others said they would leave that worry to the government, their children or family, or community or faith-based organizations, or they had no idea who would provide their care. The survey found an interesting generational twist in how adults plan to pay for their care. Baby boomers — those most likely to need care soon — were the least likely to believe they will require longterm care services. Millennials — the youngest generation surveyed — are most likely to have taken action to pay for future care expenses, in part because they believe the government won’t be able to help them.

Cigna will stop covering the painkiller OxyContin in an attempt to reduce overuse of the opioid prescription drug.

InsuranceNewsNet Magazine » December 2017

Source: National Journal


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HEALTH/BENEFITS

Make the Right Match With Third-Party Benefits Providers

More employers are choosing to outsource their benefits administration. Here is how health insurance brokers can provide value to their clients by helping them choose the right provider for their workers’ needs. By Scott Robb

I

n the increasingly complex world of benefits administration, more and more employers are outsourcing their benefits administration. Larger employers are most likely to outsource this, using an average of more than five vendors. But increasing numbers of small and midsize employers are partnering with third-party benefits providers as well. Benefits brokers can play an important role in helping employers navigate this space by becoming well acquainted with the benefits provider landscape and helping them make the right choices. But how do brokers determine which third-party providers to choose for their clients?

Determine Your Niche

Before you begin to scrutinize benefits technology vendors for your clients, you’ll want to go through your current book of 58

business to determine what they have in common. You may find that you have a natural niche in a particular industry or with a particular employer size, and that will dictate the approach you take to analyzing third-party providers. As you determine the market you seek to target, you’ll want to consider the difference in your role if you work with larger employers as opposed to smaller employers. If you focus on smaller markets, you may find that you’ll partner with one particular platform that you seek to bring in-house. Conversely, if you target larger employers with more complex needs, you may forge multiple partnerships and become more of a true consultant.

Learn the Space

After you identify your target market, it’s time to study the benefits technology space and learn each prospective partner’s specific capabilities. Start with a group of proven technologies that address both human resources and administration needs. Then choose those that offer combined capabilities, as no single technology solution will have everything. The marketplace uses a variety of labels, such as “private exchange,” “benefits administration” or “human

InsuranceNewsNet Magazine » December 2017

resources information system (HRIS).” These descriptions can be misleading, so you’ll need to gain a solid understanding of each technology platform and its actual capabilities. As you first look at vendors, keep in mind that the products they offer can appear similar. However, as you dig into the details, you’ll find that there are notable differences. For example, one exchange may differ from another in the defined product it offers. Alternatively, some benefits administration platforms offer more flexibility than others. There are differences among HRISs as well. Some may have the same offerings but have limitations in areas such as minimal voluntary benefit options. The more platforms you research, the more you’ll see that different technologies serve various market niches. Seek information from various resources to learn as much as you can about the market. Tap into the knowledge of those with experience in the field and agencies with whom you have a relationship. Consider attending industry networking events where you can learn more about vendor products and emerging trends. There may be an in-house expert in your agency who is intimately familiar with the benefits technology space. And don’t forget to contact your carrier partners for information. Insurance carriers constantly evaluate the market and develop solutions and integrations that simplify the delivery of benefits for you and your clients.

Evaluate Vendor Attributes

Here are some specific attributes you will want to evaluate as you consider partnering with a third-party provider. Compliance. A vendor should demonstrate the ability to comply with evolving government legislation, whether changes to the Affordable Care Act, tax reform or regulatory changes. Employers must be confident that their benefits vendors will keep them in compliance, and that


MAKE THE RIGHT MATCH WITH THIRD-PARTY BENEFITS PROVIDERS HEALTH/BENEFITS vendors have the ability and technology to adapt to future changes in the law. Product Offerings. Employers are offering a growing number of benefit types. Benefits such as disability or critical illness insurance, dental insurance, accident coverage, identify theft protection or wellness programs — and related administrative needs — are becoming more common and should be accommodated by newer technologies. Carrier Connections. Does the vendor have online connections that will allow for real-time decision-making? Does the technology allow for ease of integration with the benefit carriers? Ancillary Services. Some vendors provide additional services that enhance the value proposition. These services may include administration for benefits such as flexible spending accounts, health savings accounts, health reimbursement arrangements, COBRA or wellness programs. User Interface. The interface should be intuitive for employees, provide guidance on options and include appropriate education about benefits terms. It also should

provide engaging decision-support features that help workers get the most out of their benefits. Cost. Learn about each vendor’s cost model to determine if the program is feasible for your client. If you plan to absorb the cost initially, how can you share that cost with the client? Delivery Model. Each third-party vendor delivers its services differently. In some cases, a broker may buy a license to use software but be responsible for configuring the platform. Other benefits administration vendors provide all the services, including platform configuration, loading census files and supporting electronic data interchange connections with various carriers. Customer Service. Vendors that offer excellent customer service can make your job easier. Assistance can take various forms — from online support to live customer service to user guides that help you configure the platform if you bring the technology in-house. Platform Maturity. Benefits technology is an actively changing space with many

new emerging companies. You’ll want to consider the importance of time-tested companies that have proved their ability to deliver on what they say they can do. The selection of an outsourcing partner for benefits administration is a highstakes decision for your client. It’s a task that requires close inspection of services to be provided and assessment of the levels of service that need to be maintained. Relationships with outsourcing vendors tend to be long term, adding to the importance of making the right choice. By doing your due diligence on thirdparty vendors that provide this important function, you’ll ensure that your clients can proceed with confidence — and with every chance to be successful in a complex endeavor. Scott Robb is assistant vice president, customer eligibility and payment services, with Guardian Life. Scott may be contacted at scott. robb@innfeedback.com.

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December 2017 » InsuranceNewsNet Magazine

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NEWSWIRES

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QUOTABLE

Millennials Afraid To Take The Investment Leap

50% aren’t comfortable investing

Will millennials ever enter the markets? A Wells Fargo survey revealed millennials lack the confidence in Wall Street to put their money in the markets, and that 20 percent of them might never do so. The survey also showed that more than half of millennials said they never will feel comfortable investing in the markets. Between record levels of student debt and skepticism stemming from the Great Recession, millennials are skittish about investing their money in the stock market. The survey also showed that 98 percent of millennials said feeling financially secure was important in their lives, but only 32 percent are satisfied with their financial lives.

20% may never do it

RETIREMENT EXPECTATIONS OFTEN IN LEFT FIELD

The expectations of preretirees aren’t all that realistic, concluded a new Nationwide survey of adults age 50 or older. In fact, survey respondents believe they'll get more from their retirement savings and from Social Security than is actually possible. That’s a problem for investment advisors, who have enough challenges tamp-

ing down the unrealistic expectations of clients heading into retirement. Those advisors face an uphill climb in snapping retirement clients back to reality. According to the Nationwide report, preretirees expect they’ll receive $1,578 or more in Social Security payments every month. Americans in retirement right DID YOU

KNOW

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now receive less — $1,487 per month. Additionally, preretirees believe they’ll spend the bulk of their post-career income on housing and food. But the reality is that current retirees spend most of their money on health care needs.

The sad fact is that most people don't want to deal with reality. If they talk to a financial advisor who tries to force it, many will go where they are told what they want to hear. — Ilene Davis, an investment advisor with Financial Independence Services in Cocoa, Fla.

easier to make good decisions about saving, spending and tackling debt.

92% OF CAREGIVERS ARE FINANCIAL CAREGIVERS When we think of caregivers, we think of people who help their loved ones perform the basic activities of daily living — bathing, dressing, feeding, etc. But most caregivers help their loved ones with financial concerns as well.

THIS IS YOUR BRAIN ON MONEY STRESS Most Americans are anxious about their finances, and that anxiety is damaging their brains. Northwestern Mutual partnered with neuroscience research firm ThinkAlike Laboratories to measure the electrical activity of people’s brains when they are evaluating different financial scenarios. They found that facing financial decisions actually impacts brain function. Eight in 10 Americans are anxious about their finances, and that stress can lead to bad financial choices, the study found. The good news — the study found getting advice, either from a peer or a professional advisor, alleviated stress and improved brain function, making it

A Merrill Lynch study showed that 92 percent of caregivers provide financial care, contributing to or coordinating finances for their loved ones. In fact, after two years of receiving care, 88 percent of care recipients are no longer managing their finances independently. Financial caregivers are responsible for a wide variety of tasks, including paying bills from the care recipient’s account, monitoring bank accounts, handling insurance claims, filing taxes and managing invested assets.

15 percent of those with student debt sought out a mental health professional to help them deal with the stress of that debt. Source: Renaissance Capital THE AVERAGE RETURN ON AN INITIAL PUBLIC OFFERING was 20 percent this year. The average increase in the first day (or “pop”) is 13 percent. Source: CNBC

InsuranceNewsNet Magazine » December 2017

Source: LIMRA


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8 Traits of Highly Successful Advisors What drives the most successful registered investment advisors and fee-based advisors? Here’s a look at what they have in common with each other. • Laurence P. Greenberg

R

egistered investment advisors (RIAs) and fee-based advisors are a powerful force — growing rapidly, driving change and shaping the future of the industry. They are advocates for greater simplicity, transparency and choice, and they are committed to creating greater client value. In addition, research shows that more investors now expect and demand the benefits of holistic and unbiased guided advice. RIAs and fee-based advisors also are creating new business models, with a level of independence and innovation not seen in other channels. Independent ownership is a key to their success. They’re not just employees — they’re entrepreneurs. They can create value and unlock it — for their clients, for their employees and also for themselves. What drives the most successful RIAs and fee-based advisors — those who earn more and have more assets under management? How do they evolve from being an advisor to being the CEO of their own firm? How do they manage their practice to create efficiencies, achieve scale and build a franchise for the future?

The Eight Common Traits

To help all advisors learn from these top performers and engineer their own path to success, we commissioned an annual study of roughly 1,600 RIAs, fee-based advisors and individual investors nationwide. This year, we published a special report that is focused on two types of successful advisors: high-earning advisors, with personal yearly income of more than $500,000 from their advisory business, and advisors with high AUM, who individually manage total AUM of $250 million or more. As we studied these two segments in depth, we identified eight traits of these highly successful advisors. 1. They think like a CEO. When it 62 62

comes to managing their practice, successful advisors act like business owners and think like CEOs. They are more focused on every aspect of building a practice for the future — from new technology and innovative marketing to expanding their client base and cultivating their in-house team. 2. They are technology innovators. Successful advisors understand the power of technology to create an optimal client experience on the front end and greater

for successful advisors (35 percent), especially the high-AUM advisors (43 percent) when compared with all other advisors (27 percent). 4. They are marketing innovators. Although all advisors say they prioritize adding new clients, the most successful advisors are far more likely to have new strategies to attract the next generation of investor. Both high-AUM advisors (78 percent) and high-earning advisors (70 percent) are

Be a Tech Innovator

Successful advisors understand the power of technology to create an optimal client experience on the front end and greater efficiencies on the back end. Mobile Technologies Interactive Web/Client Portal Tools for Risk Management Account Aggregation Systems Tax Optimization Tools 0

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Successful Advisors

efficiencies on the back end. Year over year, successful advisors are more likely to spend more on technology and adopt more technology into their practice. Our study found that this year, those who manage more AUM are even more tech-obsessed than other advisors. When compared with all other advisors, highAUM advisors are more likely than all other advisors to add interactive websites (57 percent) mobile technologies (57 percent), and tools for risk management (56 percent). They are also more likely to prioritize tax optimization tools (44 percent) and artificial intelligence (38 percent) than all other advisors. 3. They target new clients. Year over year, the pursuit of profitability is a top priority for all advisors. And the push for new clients is a top driver. With an eye to the future, successful advisors balance their focus on an emerging generation of millennials, Generation X investors in their prime earning years and baby boomers, who continue to control the largest percentage of assets. Adding new highnet-worth clients is a far greater priority

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far more likely to change their marketing strategies to attract the next generation when compared with all other advisors (59 percent). 5. They retain their clients’ heirs. Determined to retain a share of the $30 trillion that baby boomers will transfer to the next generation, the most successful advisors are far more likely than all other advisors to have an actionable strategy in place to retain clients’ heirs. The vast majority of high-AUM advisors (90 percent) and high-earning advisors (85 percent) are far more prepared to act on this opportunity when compared with all other advisors (70 percent). 6. They plan their succession. Successful advisors understand the importance of establishing a succession plan for their firm. They build teams, not only to optimize current workload but also to cultivate the next generation of leadership. Both high-AUM advisors (72 percent) and high-earning advisors (81 percent) are far more focused on succession planning when compared with all other advisors (64 percent).


8 TRAITS OF HIGHLY SUCCESSFUL ADVISORS

Be a Marketing Innovator

To target an emerging market of new clients, the most successful advisors have changed their marketing strategies to attract the next generation of investors. Not Sure 3%

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7. They are bullish on mergers and acquisitions. Successful advisors leverage industry trends like M&A to grow their firms. Whether buying another practice or selling their own, successful advisors are optimistic about the impact of M&A and consolidation as a way to tap into greater resources. Both high-AUM advisors (66 percent) and high-earning advisors (61 percent) are far more optimistic about the

Changed 59%

impact of consolidation and M&A activity when compared with all other advisors (47 percent). 8. They put clients first. Successful advisors make communication and one-onone relationships a priority — ensuring clients know they are heard and understood. They know that the customer experience is a competitive advantage fundamental for the growth, health and profitability of their

practice. They understand that putting clients first is not just a regulatory requirement — it’s a key driver of their business. Engineering your own path to success means taking decisive action and proactive measures. Identify your greatest opportunities, tackle your greatest challenges and take the time to actually work on your business. Be disciplined, be willing to make changes and let things go. You may lose clients in the short term. You may lose revenue in the short term. But in the long term, it’s an investment in your future success. All advisors define success differently. Not all successful advisors have the same priorities. But they all focus on one or more of these eight traits to achieve the optimal outcome — creating greater value for their clients, driving greater growth and achieving greater profitability for their firm. Laurence P. Greenberg is president of Jefferson National, now operating as Nationwide’s advisory solutions business. Contact him at laurence. greenberg@innfeedback.com.

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Advising Freelance Workers Can Be a Profitable Gig The rapidly expanding gig economy might be good for employers, but freelance workers who lack retirement plans need help. Advisors can provide that assistance. • Brian O’Connell

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he gig economy is skyrocketing as technology allows more and more workers to be their own boss and make a good living as a freelancer or solo entrepreneur. Many gig workers are already in the six-figure annual income range, which makes them prime candidates for money management and retirement help. So how should investment professionals market their services to them? What resonates with gig workers and why? First, some key data on freelance workers. Gig economy workers constitute 34 percent of the U.S. workforce in 2017, said Brad Smith, chief executive officer at Intuit. That number is expected to rise to 43 percent by 2020, he added. 64 64

Yet the gig economy has a “destabilizing effect” on personal financial security, according to a new study by Prudential. “The majority of respondents who work solely as temporary or contract workers don’t have access to employersponsored retirement or insurance plans,” the study found. While the gig model is cost-efficient for employers and reduces their benefits costs, and gives workers flexibility, “these workers may in turn suffer from income volatility and lack of access to a benefits safety net,” said Andy Sullivan, president of group insurance, Prudential. “The money made by gig work may contribute to reducing the national income gap, but the decline in employer-sponsored savings and insurance plans is doing little to address the wealth gap,” he explained. “Without benefit protections, many gig workers are left financially vulnerable.”

A Different Marketing Plan

From the marketing side, investment

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advisors should market to gig economy professionals in a way that shows the advisor understands the particular financial challenges of those workers, said Kali Hawlk, founder of Creative Advisor Marketing in Boston. “For starters, earning 1099 income is far different than earning W2 income — and so are the implications for how you can invest that income,” Hawlk said. “[Freelance] income earners have self-employed retirement plans, and can invest in those plans to gain similar tax advantages as employees would receive with a 401(k) plan.” Many gig workers have no clue they even have this option, she noted, and this can provide an opening for investment advisors to provide education and service. “Give your knowledge away for free and seek to add value -- rather than constantly trying to sell your services,” Hawlk said. “Create a website that speaks to the needs and questions of gig economy workers, and start a blog, podcast, YouTube channel or social media accounts as channels


ADVISING FREELANCE WORKERS CAN BE A PROFITABLE GIG

to deliver solutions to their problems.” The details of marketing to freelance workers can be tricky. “Unfortunately, most advisors aren't structured properly for this type of client,” said Todd Burkhalter, money manager at Drive Planning in Johns Creek, Ga. “However, a well-positioned advisor can help gig workers structure their side business properly.” Management-wise, he recommended advisors deploy these key features in their freelancer client portfolio campaigns: »» Create a wall of protection between their personal assets and business liability. »» Show them strategies for investing back into their own business. »» Teach the value of good accounting and tax planning. “Proper planning in these areas will allow their business to capitalize on the advantages of being an owner,” Burkhalter said.

Know the Differences

Knowing the differences — and knowing the unique needs — of gig workers is paramount to better managing client portfolios. “Traditional workers who are permanent employees at one firm usually are based in one main location and generally have less variation in their annual income,” said Martin Zotta, managing director at Argentum Wealth Management in Tokyo. “Having a more stable work and remuneration model makes financial planning for the long term easier as there are fewer variables to consider.” That’s not the case with gig economy workers, and the sooner advisors know that, the better. “Gig professionals have much more freedom and flexibility when it comes to work hours, projects they take on, length of those projects, as well as location from where they do their work,” Zotta said. “This flexibility, however, also means that income levels can vary significantly month to month, year to year.” For example, some clients might have large payouts if several projects finish at once, followed by a period of little or no income if they are between projects, he added. “Thus, flexibility in their financial plan-

Who Are Gig Workers? Any occupation in which workers may be hired for on-demand jobs has the potential for gig employment. The U.S. Bureau of Labor Statistics gives some examples of occupations that may be found in the gig economy. ARTS AND DESIGN. Many occupations in this group, including musicians, graphic designers, and craft and fine artists, offer specific one-time services or customized products, which makes them good candidates for gig work. COMPUTER AND INFORMATION TECHNOLOGY. Web developers, software developers, and computer programmers are among the occupations in this group in which workers might be hired to complete a single job, such as to create a small-business website or a new type of software. CONSTRUCTION AND EXTRACTION. Carpenters, painters and other construction workers frequently take on individual projects of short duration, a hallmark of gig jobs. MEDIA AND COMMUNICATIONS. The services of technical writers, interpreters and translators, photographers, and others in this group are often project-based and easy to deliver electronically, fueling a market for gig workers. TRANSPORTATION AND MATERIAL MOVING. Ridesharing apps have helped create opportunities for workers who provide transportation to passengers as needed, and on-demand shopping services have led to gig jobs for delivery drivers. Source: U.S. Bureau of Labor Statistics ning becomes essential, meaning that solutions such as monthly investment plans need to be set up for clients using more conservative investment levels,” he said.

Portability of Planning

In addition, more creative planning and solutions need to be implemented for gig workers, to reflect their flexible lifestyles and work. “Clients may prefer to invest in larger lump sums ad hoc, rather than committing to monthly automated contributions and dollar cost averaging,” Zotta said. “Portability of the planning and solutions is also key, as many people who have chosen the gig economy lifestyle will also choose not to be tied down to any specific country, being able to work on projects from a laptop from anywhere with a fast internet connection.” The independence of freelancing makes access to financial advice for gig economy

professionals more crucial than for traditional workers, Zotta said. “Securing their financial future and retirement will be dependent on the individual,” he added. “Financial advisors can play a key role in helping those in the flexible economy achieve their financial security.” Brian O'Connell is a former Wall Street bond trader and author of the best-selling books The 401(k) Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at brian. oconnell@innfeedback.com.

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

December 2017 2017 »» InsuranceNewsNet InsuranceNewsNet Magazine Magazine December

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BUSINESS

Pitching to a Group Without Being Thrown a Curveball It’s tough enough to sell an individual. Getting a buying consensus from a group is even worse. How you can keep your sales pitch from becoming dead on arrival with a group. By Isadore Barefield

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ou grab a cup of coffee while sitting down with a group of prospects. You finish making the best pitch you’ve ever made in your life and then … they say, “We will talk it over and let you know.” Time passes and you learn they bought elsewhere because your sale was dead on arrival. Your sale can be DOA if you do not implement the right techniques. Here are three techniques to reach all of the decision-makers effectively when 66

selling to a group. 1. Ask the right questions to get to the right decision-maker. 2. Get everyone to agree in unison immediately. 3. Move the deal quickly to take advantage of the momentum.

Getting To The Right Decision-Maker

The best way to ensure you are reaching all the decision-makers in a group is to find out who they are in the first place. I remember scheduling a big sales presentation two months in advance only to arrive and discover only one of the three decision-makers I needed was there. You can pretty much guess that the deal didn’t happen, because that one person who was

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there relayed my entire presentation incorrectly to the others who were absent. The inability to present to all decision-makers at the same time marks the beginning of your failure to close a deal. Therefore, finding the group members who are the “trigger-pullers” is critical, but you should do this in a considerate manner to avoid hurting the other group members’ feelings. How do you do this? Keep in mind that the odds of securing a second meeting with those key people are low. This means you must think of every appointment as your last. You can avoid insulting the group by asking direct questions. For instance, when I worked in technology sales, I would pose a question such as “Who handles that for the company?” By asking a question in that manner, you get to know


PITCHING TO A GROUP WITHOUT BEING THROWN A CURVEBALL BUSINESS the vital information without hurting anyone’s feelings. Asking questions that embarrass your prospects can hinder your efforts and relay the wrong picture of what you are offering. This happened to me during my early days in sales, when I used to ask, “Are you the decision-maker?” Trust me, I never received a reply. Identifying the decision-makers also can help facilitate arranging any subsequent meeting needed to close the sale.

One of the major reasons prospects fail to make a buying decision is a fear of the uncertain. A good way to handle this fear is to bring in a person who is already on board with what you want to offer them.

Agreeing In Unison

The agreement was signed in 30 minutes. Every meeting won’t be this way, but you certainly can make sales presentations a lot easier with small yeses. Small yeses leading to a big yes can make closing a sale as easy as cutting a cold stick of butter with a hot knife.

Getting everyone to agree in unison is crucial to closing a sale in a timely manner. You need to understand closing obstacles and listen to the buying signs. I remember experiencing a lot of resistance when I first attempted to make a sale to a group. I tried to call for a meeting to talk to all of them but would be able to get in touch with only a few of them. And sometimes no one in the group was interested. I had to re-evaluate myself and find out the best approach. I started approaching groups by going through the influential leaders, and that was my breakthrough in selling to a group. Selling to the top influencers on down allowed me to sell an entire group. Always start with the small “yes” questions/statements to guide prospects through the sales process. Remember, people like to remain consistent in what they say. This means that if they start off saying no, then they will end with saying no, and vice versa. For example, in my IT selling days, small yeses helped me sell to a family-owned car dealership. I went to the main office and talked to six people. I started off with yes statements until I closed the sale. The statements went like this: 1. We can all agree that customer service is the key to any successful car business. 2. Car dealerships depend on a good IT system to keep profits and losses in check. 3. A good staff of IT professionals and customer service reps would really help your company. 4. OK, authorize this, sign here and we will put that together for you. The small yeses made the big yes so easy.

Move the Deal Quickly

Moving a group to sign a deal quickly is like trying to push a herd of cattle through a farm gate. It can be done, but it takes skill. Time is not your friend in sales. Time may heal all wounds, as the saying goes, but time also kills all deals. A group of people can be moved to a decision quickly, but it will take some effort to get them to make that decision expeditiously. It’s hard enough for a group to reach a decision, but the slow pace of getting to that decision can be painful, if not unbearable. Developing a sense of urgency helps the salesperson invest their time appropriately and avoids wasting the “prospective period” of the sales cycle that could be used to make more sales elsewhere. That may sound easy, but in reality it can be difficult. You must understand the prospect’s priorities and convince them that obtaining coverage not only is necessary but also that it must be done as soon as possible. People hold off on making decisions for various reasons. Some of these reasons have to do with you and some don’t. Also, giving your prospects too many choices holds them back in making a decision because of analysis paralysis. One of the major reasons prospects fail to make a buying decision is a fear of the uncertain. A good way to handle this fear is to bring in a person who is on board with what you want to offer them already. In other words, try to get at least one person in the group agreeing with you before the big meeting.

All of this sounds good in theory, but how does it all work out in real life? I’m glad you asked. I had a major life insurance business contract signed with a large manufacturing company because I made it almost impossible for them to say no. The administrative assistant told me the company had to change coverage plans in two months. She and I teamed up to find a perfect time for me to speak with the company executives. I made sure to schedule the meeting close enough to the deadline to ensure no one tried to “wait it out.” I examined the company’s current coverage to ensure the company wouldn’t lose anything they already had. In the meeting, the administrative assistant talked the executives into the coverage while I acted as an advisor to explain why it made sense. I gave the executives only three choices and a hard deadline. Giving the group a hard deadline made it easier for them to move forward with my offer. The executives thought about the benefits of the coverage coupled with the deadline. This made it easier for them to say yes. If I had given them too much time, then the executives would have had time to think their way out of the deal. The extra time would have halted the deal. Giving the executives just enough time helped close the sale appropriately. Pitching to a group can lead to a big sale, but the process can be painful if you don’t know how to do it effectively. Selling to a group can take time, but these techniques will help expedite the process. Isadore Barefield is a sales professional and the owner of Consistent Copywriting, Houston. Isadore may be contacted at isadore@ibarefield. com.

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THE AMERICAN COLLEGE INSIGHTS

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

Cyber Breaches Are Becoming the New Normal Cybersecurity breaches are becoming larger and more frequent. Here are some ways to protect against stolen identity and financial fraud. By Jocelyn Wright

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ust when we thought it was safe again, Equifax, one of the three national credit reporting agencies, announced a major cybersecurity breach. The Equifax security team noticed suspicious activity on July 29, according to a company news release. However, it was not until Sept. 7 that they publicly announced the breach. And this was not your typical hacking. It is estimated that the personal information of 143 million U.S. consumers was compromised. (Note: The U.S. population is approximately 325 million.) The information obtained includes Social Security numbers, addresses, birth dates and, in some cases, driver’s license information. Equifax encouraged us to go to www.equifaxsecurity2017.com to find out whether we were one of the millions whose personal information was stolen in the attack. If you were caught up in this latest cybersecurity incident, the Consumer Financial Protection Bureau (CFPB) offers 10 ways for you to protect yourself. Here are a few of the tips. 1. Review your credit report. Everyone is eligible to request a free copy of their credit report from www.annualcreditreport.com. This entitles you to a report from the three major credit reporting agencies — Equifax, Experian and TransUnion — every 12 months. You may also have access to other services that provide your credit report. 2. Consider a security freeze. A security freeze or credit freeze on your credit report restricts access to your credit file. Creditors typically won’t offer you credit if they can’t access your credit 68

reporting file, so a freeze prevents you and others from opening new accounts in your name. In almost all states, a freeze lasts until you remove it. In some states, it expires after seven years. 3. Set up a fraud alert. Fraud alerts require that a financial institution verify your identity before opening a new account, issuing an additional card or increasing the credit limit on an existing account. A fraud alert won’t prevent lenders from opening new accounts in your name, but it will require that the lenders take additional identification verification steps to make sure that it’s you making the request. An initial fraud alert lasts for only 90 days, so you may want to watch for when to renew it. You can also set up an extended alert for identity theft victims, which is good for seven years. The CFPB’s website provides steps on how to place a fraud alert on your credit report. 4. Read your credit card and bank statements carefully. This will require opening your paper statements and reviewing the activity regularly. If you no longer receive paper copies, it is important that you log in to your accounts via your smartphone or computer to monitor the transactions. Look for purchases that you do not recognize — even small ones. Fraudulent purchases may start out with small-dollar amounts to see whether they are detected before the criminal goes in for the big one. 5. Change your passwords. It is recommended that we change the passwords on our accounts regularly. We also are advised not to use the same password for all accounts. Do not use obvious passwords that can be easily guessed, like your child’s name or date of birth. Keeping track of all of these passwords can be a hassle. There are now a number of services that will not only create strong passwords but store them as well. Do

InsuranceNewsNet Magazine » December 2017

some research to determine which one you prefer. Otherwise, the Federal Trade Commission (FTC) offers tips on how to create strong passwords. For the complete list of the “Top Ten Ways to Protect Yourself in the Wake of the Equifax Data Breach,” go to www.consumerfinance.gov. Equifax offered one year of complimentary credit monitoring service to everyone impacted by the breach. However, once the year is up, we are on our own to pay for continued protection. Keep in mind we are not required to continue service with them after the 12 months. Check with your current credit card companies to see what monitoring service is available. It is especially important that we pay careful attention to seniors and minors who are particularly vulnerable. The FTC’s website offers information on how to deal with child identity theft. Given the size of this breach, we must be even more diligent and follow the steps outlined by the CFPB. Cybersecurity attacks are becoming more common. Therefore, unless we plan to go completely off the grid as consumers, we must adapt to this new normal in protecting ourselves from future threats. It may be Equifax today, but tomorrow it will be Company X. Jocelyn Wright is the chair of the State Farm Center for Women and Financial Services at The American College. Jocelyn may be contacted at jocelyn.wright@ innfeedback.com.


NAIFA INSIGHTS

Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.

The Second Generation Opens the Door to the First The key to success in the Hispanic market is to “prospect into the family” through your second-generation clients. By Ayo Mseka

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ver the years, New York wealth advisor Barjes Angulo has built a thriving practice serving Hispanic clients. Angulo is a NAIFA member, past winner of NAIFA’s Four Under Forty award, and a frequent Million Dollar Round Table qualifier. He shares some of the steps he took on his way to the top. NAIFA: Describe your practice and the markets you serve. Angulo: Angulo Strategies develops and implements financial plans and places life insurance on a single-needs basis. In doing so, we look for clients who meet the following criteria: Are they capable of implementing the solutions we have identified? Do they have character? Can we offer a process that helps them gain clarity? Can we spend time with them in a social setting? Our market consists of professional clients with families who we foresee will be going through life changes. Also, 15 percent of our clients are family-owned businesses with no more than 10-12 employees. NAIFA: Why did you choose to focus on the Hispanic market? Angulo: I fell into working in the Hispanic market initially by affinity. For me, speaking two languages — English and Spanish — was a plus in providing information to families who, for the most part, spoke only Spanish. I discovered that my focus in this market was to bring expertise and guidance to a community that lacks representation in this area. NAIFA: What specific steps did you

take to penetrate this market? Angulo: At first, I used referrals. Then I came to the conclusion that using our professional clients who are of Hispanic heritage to gain access to their parents was the ticket to success. The engagement is half done when I first sit with their parents. Because we have proven ourselves to their children, the trust and the reassurance are already there. I work through my existing clients by asking them questions like, “Do your parents have a will?” “Who will care for your parents when they need assistance?” “If they are going to depend on you financially, have you considered the negative effect this might have on your financial planning?” NAIFA: What prospecting and marketing techniques have been the most effective? Angulo: As I mentioned earlier, we have found success by prospecting into the family through our young professional, second-generation Hispanic clients. They are already enjoying the fruits of their labor. They are typically the first to go to college, to buy a home in the suburbs, and to use English as their first language. They will open the door to their parents and other first-generation family members. NAIFA: What are some of the pitfalls to avoid when working in the Hispanic market? Angulo: A major pitfall is not taking the time to explain to clients what they have in place and how it works. The more they understand them, the better their relationship will be with you. If English is their second language, the chances of their reading a contract or a prospectus are pretty slim. Also, when conducting the first meeting, ask them if they prefer to have the

business conversation in Spanish or English. Some potential clients take pride in the fact that they have learned English and are comfortable in doing business that way. Others might prefer to have the conversation in Spanish. NAIFA: How has NAIFA helped you succeed in serving this market? Angulo: NAIFA has helped me succeed by providing client solutions that prevent me from reinventing the wheel. These solutions have no cultural barriers. Hispanic clients have the same financial fears and concerns as clients in white, African-American and Asian communities. NAIFA: What are your plans for the future as you continue to serve this important market? Angulo: As I move forward, I envision having first-, second- and third-generation families come together in my conference room to plan their long-term wealth and learn how to transition their assets into the future. Let’s make the Fernandez name stand out like the Rockefeller name does! Barjes Angulo, LUTCF, RICP, is a wealth advisor with Angulo Strategies, with offices in Manhattan and Queens. Barjes may be contacted at barjes. angulo@innfeedback.com. Ayo Mseka is editor-in-chief of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors. Ayo may be contacted at ayo.mseka@innfeedback.com.

December 2017 » InsuranceNewsNet Magazine

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MDRT INSIGHTS

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

Teaching Kids About Money Is a Lifelong Process Your clients’ children are never too young to begin learning about managing money. Here are ways you can help guide the process. By Kobus Kleyn

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s trusted financial planners, we take good care of our adult clients through holistic longterm financial planning while building strong relationships. In addition, many of us deliver added value by including our clients’ family members — especially children — in the conversation. This opens the possibility of building a longterm pipeline with our clients’ children, who could become our future clients. This also provides crucial education and drives awareness of the importance of financial planning. A holistic financial plan should aid in promoting financial literacy to our clients’ children as well. With children, the goal is to create strong financial habits as they move through each life stage, categorized by the following age ranges: 4 to 8, 9 to 13, and 14 to when they earn their own income or leave the house. At each stage, it is all about age-appropriate systems and disciplines to instill better money practices with children. My saying is, it’s better to bend the little tree while you can in its young stages, before it is older and no longer pliable.

Use the Communication Vehicles Kids Already Use

There is no doubt that we all develop beliefs and attitudes toward money from observing the way our parents and peers use money. The problem is that much is changing in the industry, changing the ways we can access and plan our finances. For example, technology can be used to our advantage. With smartphones and social media constantly accessible, we can guide our clients and their children with an app or web resources. These tools 70

provide the opportunity for continuous open dialogue within the family, as well as strong money management habits formed over time. Using the communication vehicles that children are already using makes it easier to encourage the use of suggested resources, as opposed to lecturing. When you do need to use reading material with children, make sure it is something with an overall story that will keep their attention, instead of purely educational content. I prefer to use YouTube clips that bring the message to the new generations. However, if the generation gap is simply too wide, then use a younger advisor as a resource to connect with the children; a younger advisor can suggest where to find the most interactive tools.

Long- and Short-Term Goal Setting

From a young age, use the children’s allowances as an opportunity to teach the benefits of budgeting and saving. In their own planning, let them keep track of details on each spend. This is especially important since children have debit cards these days and the real feel of money is frequently nonexistent. Education with the whole family should include goal setting for special short- and long-term objectives. Through this, you can help your clients show the children what is possible if they were to save a portion of their allowance, or learn how their parents plan for the Disney World trip for the family in five years. Involve them in this discussion so they can see what needs

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to be sacrificed or controlled to make a dream family trip a possibility with savings. There should be a monthly meeting with clients’ children to help them measure against the objectives they set. It’s also good to have pictures of the objective throughout the family’s house or the meeting place. This provides a visual to see what you’re saving for and keeps everyone in the family controlled on spending without always having to cut back on something. The goal is to show children how using money effectively can lead to achieving long- and short-term goals, whether it’s having enough money to pay for groceries or examining the “must haves” versus the “nice to haves.” My professional organization, The Financial Planning Institute of South Africa,


MDRT INSIGHTS also has a “MyMoney123” program that we can use to educate our clients’ children and children in the community. Through this program, we provide piggy banks to teach children about saving. The program opens the opportunity for families to educate each other. We also have a “children’s day” at a friend’s house, where we present the program to multiple children at once. This gives parents the opportunity to connect.

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Increase Involvement As Kids Get Older

As the children get older, have them join your annual review meetings with their parents and focus on simplistic ways to grow their knowledge. If you propose an element of the family’s plan that is related to the children, such as an education plan, get the kids involved. They can work out the calculations for you with an app or calculator, allowing them to learn more by way of involvement and seeing the direct

My saying is, it’s better to bend the little tree while you can in its young stages, before it is older and no longer pliable. impact it has on them and their parents. Another fun way to boost children’s involvement is to get multiple family clients together and start an investors club. You would manage and host the club at a family’s house or at a local community center. This is a great way to build up an interactive group of adults and teach the basics of shares, bonds, asset classes, and buying and selling shares and units. Most of this can be done with virtual money through share platforms and apps as well. It must be fun, interesting and interactive, and may even include young speakers who come in and use technology to grab the children’s attention. I really believe that teaching children about money should be a process rather than a one-time meeting. You should begin with education and awareness. You will bring added value to your clients and their children, and create so many other opportunities for yourself. Kobus Kleyn, CFP, is a five-year MDRT member and director at Kainos Financial Services in South Africa. He is the author of Passion for the Profession — Mastering the 9 P’s to Professionalism. Kobus may be contacted at kobus. kleyn@innfeedback.com.

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ADVERTISER INDEX Advertiser

Pg

Advertiser

Pg

Allstate

IFC

Levinson & Associates

10

American National

9

LifePro

41

AssessBest

59

Make Insurance Interesting

12-13

Brookstone Capital

IBC

Nationwide

23

Ed Slott and Company

71

Peak Pro Financial

1

EquiTrust Life

45

Petersen International

61

Family First Life

FC, 4-5, 6-7 Sagicor Life

25

Federal Employee Benefits Advocates

17

Sammons Financial

49

Fidelity & Guaranty Life

51

Securian

27

First Protective

19

Simplicity Financial

36-37

Genworth Financial

53

Simplicity Life

2-3

Global Atlantic

55

Symetra Financial

57

Innovative Brokerage

39

Table Bay Financial

11

Insurance Agency Marketing Services

15

Tucker Advisors

BC

Insurance Licensing Services

29

Whitney & Associates

47

Kansas City Life

33

December 2017 » InsuranceNewsNet Magazine

71


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

LIMRA INSIGHTS

How Digital Tools Help Advisors Cement Post-Sale Relationships Service Channels Life Insurance Policy Owners Used in the Past and Desire in the Future

Digital tools can enhance the relationship between advisors and policy owners after the sale; but not all policy owners use those tools in the same way.

Used in the past

By Mary M. Art

H

ow can companies and financial professionals stand out with service? The relationship with the policy owner starts during the sales process, regardless of the sales channel. For the in-person sales process, prospects turn to their financial professional to help identify the right products and the amounts of these products to buy. Post-sale, policy owners want the assurance that they will receive the service they need, from the channels they prefer. When policy owners need service, how much value do they place on digital channels? And how important is it to policy owners to talk with someone — either a financial professional or a customer service representative? LIMRA’s research with policy owners and financial professionals shows that many see the benefits of expanding service options, including incorporating digital channels.

Financial Professionals Are the Top Choice for Service

Life insurance policy owners want service. Financial professionals were their top choice for service channels in the past and they remain the desired channel into the future. (See chart.) Policy owners across all generations want to meet with financial professionals in person, talk with them on the telephone or email them. Financial professionals are the first line of service for information, sales and advice for the majority of policy owners. Consumers have increasing expectations on using digital channels for financial services. Expectations are highest among millennial policy owners, followed by those in Generation X. Younger policy owners want to be able to go to their 72

Desire in the future

Source: “Pinpointing Preferences,” LIMRA (2017)

financial professional’s website for service. In addition, quite a few want the option to exchange text messages or meet virtually, using tools such as Skype or WebEx. Social networks are in less demand, but millennials value social media options more than older policy owners do. Financial professionals themselves increasingly see the value of digital service options. Many find that greater use of digital options helps them provide better service, enhance client relationships, retain clients and reach younger clients. Millennial financial professionals use more digital technology with clients, including greater use of email, social media and virtual meetings. Financial professionals across generations use text messaging. Quite a few advisors would like to text more, but some are restricted from doing so due to compliance concerns. These financial professionals often limit texting to making and reconfirming appointments.

online, including updating payment and contact information, checking beneficiaries or changing their names. Service satisfaction is often higher when policy owners talk with someone by phone, in person or via virtual meeting. However, this probably indicates that some digital channels (most notably, website and chat) need to improve, either by adding certain services or by making them easier to use. Policy owners often report that they could not find a desired service on their company’s site. Financial professionals increasingly see the benefit of having clients go online for some services, particularly transactional ones. Many know that as long as they maintain contact with their clients through regular reviews, their clients will turn to them for advice and future purchases.

Online Service Will Grow for Informational and Transactional Services

Offering quality service is essential, regardless of the channel used. It reinforces the sale, ensures policy owner information and coverage is up to date, and identifies needs that may have occurred since the prior contact. Digital services — whether through companies or financial professionals — can increase policy owner satisfaction and cement the relationship that started with policy purchase.

While financial professionals are highly valued for service, channel preferences vary by the types of service that policy owners seek. In fact, interest in online service from a company in the future is double now than it was in the past. (See chart.) Policy owners often choose to go online for general information about companies and products, preferring to self-educate prior to contacting a financial professional or the company. Online service is a time-saver they can access 24/7. Quite a few prefer to make transactional changes

InsuranceNewsNet Magazine » December 2017

Quality Service and Channel Options Build the Post-Sale Relationship

Mary M. Art is a senior research director of technology research at LIMRA. Mary may be contacted at mary.art@innfeedback.com.


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InsuranceNewsNet Magazine - December 2017  
InsuranceNewsNet Magazine - December 2017  

Going Gaga With Your Marketing