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August 2012

ALSO INSIDE: Get Out of the Office and Improve Sales! PAGE 24

Why CPAs LOVE Life Agents PAGE 44 Indexed Annuities Calm Shaky Investors PAGE 46

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Learn How to Dominate the Fastest Growing Segment of the Life Insurance Industry Indexed Universal Life (IUL) sales are soaring. In fact, it’s the fastest growing segment of the life insurance industry and now accounts for one out of every four universal life insurance sales. In 2011, sales increased a whopping 38% reaching nearly $1 Billion in target premium. According to LIMRA, we should continue to see this trend continue well into the near future. The rise in popularity just in the last few years “could not have come at a better time in financial history.” In today’s economic environment, clients are looking to take advantage of bull markets but don’t want their money at risk of being decimated by another correction. As more and more carriers enter the market every day, the choices and complexities are greater than ever, leaving producers left to figure it out by themselves. At Brokers Alliance, we want to take the lead and help train and educate producers how to understand, compare and present this powerful product. We have created the most comprehensive training package ever created for Indexed Universal Life. Our training will take you from zero to 30,000 feet and make you an expert in a matter of days.

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» read it

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38 38 Send in the S.W.O.T. Team


24 S ell Anywhere

By Linda Koco Today’s multiple mobile technologies allow insurance professionals to stay connected, work smarter, more productively – anywhere.

8 Decision Affirms ACA Survival, But Agents’ Future is Unclear By Linda Koco With the Affordable Care Act now law, insurance agents and brokers must educate themselves, and their clients, on its many complexities and legal implications – a daunting task.

By Gregory B. Gagne Know the client’s Strengths,Weaknesses, Opportunities and Threats even before the first meeting.

32 D  emand for Mobile Shoots Up

By Linda Koco LIMRA and other studies show that insurance and financial advisors are on the mobile device band wagon and driving full-speed toward the mobile app superhighway.



36 FEATURES 12 G  ood to Great – How Advisors Can Make the Leap

LIFE 36 Secrets of Selling Insurance to Multicultural Clients

An interview with Jim Collins Author and co-author of six books, Jim Collins is obsessed with finding out the hows and whys of great companies and their enduring success. 2

InsuranceNewsNet Magazine » August 2012

By Michael Soon Lee There’s a growing market in multicultural circles with insurance needs of all types, but to reach them you need to know how to safely cross cultural divides.

44 W  hy CPAs Love Life Agents

By Brandon Stuerke A career financial advisor illustrates the advantages of being insuranceonly licensed and forming a strategic alliance with a CPA.

46 I ndexed Annuity as Alternative Asset Class By Linda Koco Advisors can calm investors’ stock market jitters by diversifying with fixed indexed annuities for long-term capital preservation with less volatility.





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FINANCIAL 54 VAs Edging Up in Financial Advisor Offerings

By Linda Koco Annuity sales may be challenging, but a new survey shows that advisor sale of variable annuities is just behind that of mutual funds.



56 M  DRT: Financial Solutions Found by Asking the Right Questions By David Alarid Asking tailored questions of each unique client will lead to the best investing tactics and satisfied long-term customers.

58 R  emembering A Friend

By Steven A. Morelli The insurance community lost Wendy Waugaman of American Equity in June, and we lost much more than a CEO.

60 L IMRA: Behavioral Economics – Sales from Your Clients’ Point of View By James O. Mitchel Learn and profit from the specific principles that help explain the buyer’s thought process in deciding to purchase life insurance.


EVERY ISSUE 6 Editor’s Letter 22 NewsWires

34 LifeWires 42 AnnuityWires

50 HealthWires 59 Advertiser Index

INSURANCENEWSNET.COM, INC. 355 North 21st Street, Suite 211, Camp Hill, PA 17011 tel: 866-707-6786 fax: 866-381-8630

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EDITOR-IN-CHIEF Steven A. Morelli











Copyright 2012 All rights reserved. Reproduction or use, without permission, of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail, send your letter to 355 North 21st Street, Suite 211, Camp Hill, PA 17011, Fax at 866-3818630, 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 or call 866-707-6786 ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to, or call 866-707-6786, Ext. 115 for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 355 N. 21st Street, Suite 211, Camp Hill, PA 17011. Please allow four weeks for completion of changes.


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August 2012 Âť InsuranceNewsNet Magazine


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Sometimes you get to know people just before they are gone, or even after the fact when you learn their life story in an obituary. Some of those interactions are enriching even in their brevity. We had two of those circumstances recently with two people about the same age who left too soon. They were Pete Winer, 54, our vice president of marketing, and Wendy Waugaman, 51, CEO of American Equity. Wendy’s story is told on Page 60, so I won’t go into detail here, but I will say that I regret not having met her. Her interests and influence reached far beyond her company and her home. We focused on her contribution to our industry in our article but that piece could have gone for many pages to cover all the good she did for others in business and her community. It’s difficult not to think about our own contribution when learning about someone like Wendy. How will we be remembered? Will a huge crowd show up at our funerals, even competitors, as they did for Wendy? Of course, that’s not the goal, to have a sold-out send-off, but it is an indication of how much a person meant. Much of what we cover in this magazine has to do with meaning and significance. Often, our question-and-answer profiles revolve around finding and imparting significance. That is the value when we talk about value-added. And what most of our readers sell has to do with commitment. Do people love their families enough to provide for them after they’re gone? Do they want to remain self-sufficient and not a burden on their loved ones later in life? Do they want to leave a legacy that speaks to their values? Pete constantly searched for meaning and significance. He did that in his short stint as our VP of marketing before he died as a result of a motorcycle accident. He also brought his sense of curiosity, caring and challenge to his insurance marketing work in the Nashville area and to his insurance sales career in the Baltimore region. 6

Peter A. Winer, 1958 – 2012 He could be counted on to question the status quo and to get others thinking about the way things had always been done. He resisted the yoke of conformity, which led to surprises and, to be frank, some frustrations for those around him. He wasn’t boring. Despite his achievements, Pete was still searching for answers and fulfillment in his life. Wendy found a multitude of successes, including a personal one a few years before she died of cancer. She married, by many accounts, the love of her life and found an inner peace. Who can ask for more in life? We are keeping them both close in our thoughts and wish them well on wherever their journey takes them next. Steven A. Morelli Editor-in-Chief

InsuranceNewsNet Magazine » August 2012

SEE ALSO Remembering Wendy Waugaman Page 58

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Decision Affirms ACA Survival, But Agents’ Future Unclear Now comes the scramble for health agents to figure out how to do business. By Linda Koco Eve r s i nc e t he Supreme C ou r t declared most of the Affordable Care Act (ACA) constitutional, news sites have overflowed with reports on how this will affect consumers, businesses, insurers, state governments, federal programs, political campaigns and even the stock market. Very few have said much about the decision’s impact on local insurance agents and brokers. On the day of the decision, the National Association of Health Underwriters did issue comments, pointing to continuing concerns about certain parts of the law but adding that the focus for agents now “is to help our customers transition to the regulations, policies and procedures the law outlines.” The Independent Insurance Agents & Brokers of America spoke out, too, voicing “disappointment with the decision” and vowing to work for repeal of certain “detrimental” ACA provisions. But the impact on the everyday life and work of health agents and brokers has yet to be told. Until now. As will become clear, health agents are already grappling with the many changes that ACA is bringing.

Getting Educated

Take Louanne Trebing, for example. An independent agent at Trebing Insurance Services in Garland, Texas, Trebing says she continues to have misgivings about parts of ACA. But she is finding herself in the position of having to help individuals, families and businesses understand and deal with the law, and that means “I have to educate myself every day on what is going on, so I can help my clients.” The get-educated message seems to be a common one right now. “This world is not for amateurs,” says Bruce Benton, 8

Status of State Action


the current president of National Association of Health Underwriters and a partner at Genesis Financial and Insurance, Sherman Oaks, Calif. “We all need to become educated on what reforms mean to employers and individuals, so that we can educate our clients.” In particular, employers will be relying on their health agents and brokers to be sure their firms are in compliance, he says. “We need to be engaged in order to be able to do this.” The law is complicated, points out Arthur B. Tacchino, assistant professor of health insurance at The American College. That means agents and brokers will need to provide a lot of advice, particularly to small and medium-sized businesses that have questions about tax

InsuranceNewsNet Magazine » August 2012

Studying Options Decision Not to Create State Exchange Planning for Partnership Exchange Established State Exchange No Significant Activity

liabilities, which parts of the law affect them, health care costs, the role of the health benefit exchanges (state or private insurance marketplaces), and more. To be able to provide this advice, the producers will need to get up to speed on the law, he says. The upshot is that producers will need to find places and ways to learn. The larger health carriers that have captive or career agents will likely be providing ACA education to their own producers, Tacchino observes. But independent agents, who represent several carriers and who may place business through brokers, will need to seek out this information on their own. They should be contacting their professional associations, educational organizations

DECISION AFFIRMS ACA SURVIVAL, BUT AGENTS’ FUTURE UNCLEAR or other sources for assistance. In fact, many independent agents are already attending courses from The American College that cover the ACA, Tacchino says. Where education on products is concerned, independent agents will need to look at the law and the products from a neutral perspective, the professor says. That can entail a lot of research, especially since products and plans will be changing to adjust to the law’s requirements. As for captive and career agents, they will be receiving product information from their own carriers, so acquiring the education on this may be a bit easier. However, Tacchino point out that the information they receive will likely focus on the company’s own products, not necessarily that of the broad market.

Dealing With Complications

The complexity of the law is already causing complications for agents and brokers and their clients. Trebing provides a recent example. The case involves the dependent coverage provisions of ACA. This is the part of the law that allows children up to age 26 to be covered under their parents’ health insurance. These provisions are already in effect. Trebing found herself meeting with a young man who has dependent coverage under his parents’ plan and the man’s fiancé, who has dependent coverage under her own parents’ plan. As she tells it, “The fiancé got pregnant and had the baby. But the baby was not automatically covered as a dependent under the grandparents’ plan, because the baby is a grandchild, not a child up to age 26.” Before ACA, Trebing says she could have secured coverage for the baby under a child-only policy. “Those policies were cheap and easy to write. But since the law says that children under 19 are guaranteed issue with no-pre-existing conditions, the carriers here pulled all their child-only policies. So I couldn’t put the baby in those former child-only plans.” Trebing says she found she had only two options – to use CHIP (the Children’s Health Insurance Program, a state/federal partnership plan that works closely with Medicaid) or a Blue Cross policy that has open enrollment only once a year. She recommended the CHIP program, and that’s what the family select-


Will Navigators Replace Health Agents?


little discussed part of the Affordable Care Act (ACA) has to do with “navigators,” which agents will want to know about because federal regulations say that states can allow licensed agents and brokers to be navigators. Navigators are trained and certified to educate the public about the state health benefit exchanges and perform other duties as set out by their respective states. Earlier this year, the Department of Health and Human Services (HHS) published navigator program regulations, but the states have a lot of leeway in structuring the programs. The HHS rules say states can choose navigators from among several groups, including community nonprofits, human service organizations and others. One of the allowed groups is licensed agents and brokers. However, HHS also says that states cannot require navigators to hold agent or broker licenses. Before HHS came out with its regulations, some health agents and brokers were concerned that the navigators

might replace them. But the HHS rules make it clear this won’t happen, says Michele Thornton, an agent with Thornton Powell, Oak Forest, Ill., who co-authored a white paper for a coalition that is contributing to the Illinois exchange plan design. In Illinois, the navigators will probably work on a part-time basis, perhaps representing a social service organization or nonprofit, she says. It is unlikely that they will enroll consumers in a plan. Instead, they can refer consumers to an exchange-certified agent or broker who is licensed and carries errors-and-omissions insurance. “We think there should be a clear line, with no overlap of duties or responsibilities between navigators and agents,” she adds. But Thornton stresses that navigator arrangements will differ by state. Even if agents are not allowed to be navigators in certain states, Thornton suggests agents learn about navigators – for networking and community-building purposes, for instance. - Linda Koco

August 2012 » InsuranceNewsNet Magazine




ed. Trebing received no compensation for her time and effort, however, because neither CHIP nor the special Blue Cross plan pays commissions. The no-comp outcome was not the end of the world for Trebing. “I believe that if you do what’s right for the client and try to help people out, the dollar will follow,” she says, adding that “when you work hard, people send referrals.” She says she mentioned the outcome, along with the story, to help illustrate how ACA has created complications that agents and clients must deal with.

Compensation Issues

Other compensation issues related to ACA have definitely affected agents, however, and they continue to do so. The ACA’s medical loss ratio (MLR) provisions are the key area. The MLR is the part of the law that requires insurers to treat agent compensation as an administrative cost for purposes of MLR calculations. These provisions have been widely blamed for unleashing substantial cuts in commissions as carriers scrambled to adhere to the rules. “We took a 30 to 50 percent cut in pay (commissions) due to MLR,” Trebing says. Those cuts have forced agents to make some hard decisions, and these are continuing post-Supreme Court decision. Some agencies have implemented staff lay-offs or other belt-tightening measures, for instance. Others are considering specializing in other types of insurance products, such as Medicare Supplemental insurance or even property-casualty insurance. Trebing herself says she is looking into branching out into long-term care insurance and voluntary dental and vision care plans. “The strong will stay in the business,” she predicts. “But the part-time agent will run from this market, because it is going to be a challenge to survive.”

Charging Fees For Advice

With economic survival in mind, along with the increased complexities that ACA is creating, some agents are looking seriously at transitioning their firms into fee-based businesses, or into businesses that work on either fee or commission basis. Trebing says she has already secured a life and health insurance 10

“We all need to become educated on what reforms mean to employers and individuals, so that we can educate our clients.” -Bruce Benton, president of National Association of Health Underwriters

counselor license in Texas, so she will be ready to do fee-based counseling if she wishes. (Note: Fee-based approaches will vary by individual state requirements.) Charging fees might be especially suited for the business market where there are many complexities, points out Tacchino, the American College professor. Agents who are educated on ACA and the market that is now forming will be in a good position to provide such advice, he predicts. Fee-based advice is a possibility for the individual market too. Some advisors are considering offering that as a service for consumers who want guidance on options and on whether to buy a policy through their state’s health benefit exchange, a private insurance exchange (run by a private sector company or nonprofit) or a private market health insurer. So-called “navigators,” created by the ACA, will be available to offer information and guidance on buying health insurance through the state health benefit exchanges, and some states might allow agents to be navigators. (See sidebar on pg.9) However, the navigator role is not the same as the role of a licensed insurance agent or credentialed advisor in the private market, so it is likely that the advice of the agent and broker will continue to be needed. It’s possible that fee-based service will be the way things will go as agents provide more and more advice, says Michele Thornton, an agent with Thornton Powell, Oak Forest, Ill. But there is still value to being paid a commission by the insurance company, so agents will need to consider this carefully. Her own view is that a transactional business model won’t work in the new health insurance environment. “We need to be advice-centered, more of a consultant or advisor, comparable to attorneys

InsuranceNewsNet Magazine » August 2012

and accountants. People will need to view us as an unbiased source, not just someone out to get a commission.” The health insurance business seems to be evolving along the same lines as the financial services industry, observes Tacchino. The advisors will become more educated, some will charge fees and they will likely become subject to new regulations and requirements.

Fielding Calls

Another consequence of the Supreme Court decision on ACA is that agents and brokers are receiving a lot of phone calls and emails about the law. Clients are wondering what happened and how it affects them, say both Benton and Thornton. “Thank God they are calling us,” adds Benton. He is grateful because he says the calls give him an opportunity to educate, clear up misunderstandings and prepare clients for what is coming. Likewise with Thornton. She says her firm has been proactive about communicating with clients about the law since 2010, but since the Supreme Court decision, people have started asking for her views about what will happen next, and what they should be planning for. “People are talking about this in church, family gatherings and elsewhere, and there’s a lot of misinformation and confusion. So this is an opportunity for agents to position themselves as the expert, so the person has a clear understanding and won’t pass along further misinformation,” Thornton says. Because the marketplace is evolving, she says she tells clients she will send out clarifications as things develop. In the meantime, she says, “we are focusing on making decisions based on what we know today.” Much of this comes naturally. The majority of successful health insurance advisors are already business consultants, Fifteen states have already established Health Insurance Exchanges, according to, a Kaiser Family Foundation website. In addition, private exchanges are starting to pop up. For instance, the JA Exchange, a private exchange in Southern Indiana, just launched in July.







explains Benton. They don’t just sell policies. “The majority of us have all lines of employee benefit coverages, even property-casualty insurance, and some do payroll and human resources, too.”

Proceeding Cautiously

Knowing just what to recommend is not always clear, however. The law was only recently upheld, after all, and some provisions won’t be phased in until 2013 or 2014. In addition, talk of repeal is once again in the air. Benefit broker Brad Elman, Nine Dots Benefits, Los Altos, Calif., notes that his own firm held off on becoming experts on the law until it was clear it was going to be upheld. “Now we know,” he says, “But it is still unclear to me what the alternatives will actually look like and what will or will not be acceptable from an employer’s or employee’s standpoint. “If it is cheaper, easier, and ‘acceptable’ to pay your employees more, and not offer health benefits, then an employer will have a choice to make. But rarely are these decisions black and white,” Elman concluded. Looking to the future, Elman predicts there will be an ongoing role for the broker. But that is provided that the broker “is educating employees on making good health insurance and good health-care decisions, helping the CFO with budgeting and cost analysis, supplementing the service of the insurer or exchange, providing open enrollment materials, auditing changes, offering HR Support, etc.” It won’t be the same old ballgame, predicts Thornton, the Illinois agent. But she says she is optimistic all the same. For a long time, agents’ hands had been tied when people came asking for help when they lost a job, retired early or had some other situation arise that affected health insurance, or when businesses struggled with plan costs and options. “It’s exciting to know that we will have some new tools coming. It won’t necessarily be perfect, but the state exchanges will create more options. That motivates me to stay involved.” Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@


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Jim Collins has made a science out of greatness. He’s a man on a mission to study and scientifically determine what makes some companies successful while others fail. 12

InsuranceNewsNet Magazine Âť August 2012

With a quarter of a century of relentless research, Jim has authored and co-authored six books that have sold more than 10 million copies worldwide.

August 2012 Âť InsuranceNewsNet Magazine





or Good to Great, Jim, a former Stanford University business professor, had a team of 20 people put in 15,000 hours of research to find companies’ secrets for success. Out of the book’s 300 pages, 82 are devoted to appendices and notes on the research methods. Hence, the science of greatness. For his latest book, Great by Choice, Jim’s objective for the nine years of extensive research was to answer the question, why do some companies thrive in uncertainty, even chaos, and others do not? In this two-part interview with InsuranceNewsNet Publisher Paul Feldman, Jim discusses the key qualities of success and how small business owners can apply them. Next month, Jim will examine the “Hedgehog Concept” – doing one thing and doing it well. FELDMAN: A lot of our readers have read your work – from Built to Last, Good to Great, How the Mighty Fall, to your newest book Great by Choice. Can you tell us about Great by Choice and what are some of your latest discoveries? COLLINS: I have had the privilege to be on a journey for almost 25 years now. In 1988, I began this journey of trying to address one really big question: what makes a great company tick? That journey began by teaching a course on entrepreneurship and small business for the MBA program at Stanford. The course syllabus said something along the lines of, “This is going to be a course on the unique challenges of small business or the small enterprise.” And I somehow had the instinct to change the syllabus intro to say, “This is going be a course about how to turn a small business into an enduring, great company.” So I put a period at the end of that and that was the opening line of the syllabus. Then I realized that I didn’t really know very much about what it took to build an enduring, great company. And I was fascinated with the journey by which people started with a small business and built a great company out of it. So I began this long research journey, and I now can think of it as a black box and inside this black box are the distin14

guishing principles that separate a great enterprise from others. In a way, you can kind of think of it as it’s really almost four volumes of one question as opposed to four different volumes, the first being Built to Last, which looked at very long-term success; Good to Great, which is about how you take a good enterprise and continually working toward making it great; How the Mighty Fall, which looks at the dark side of how companies self-destruct or how they can self-destruct; and then finally this last one, Great by Choice, which is all about thriving in chaos and uncertainty and why some do and others don’t. There has always been this lurking point that led toward this. We’re in a world that is going to be full of changes that we can’t predict and some of them are very big, very disruptive, very fast-moving and very dangerous. FELDMAN: Do you see change happening faster nowadays? COLLINS: If you look at the amount of change that happened from the end of the 1800s through the 20th century, it

InsuranceNewsNet Magazine » August 2012

has been dramatic. We had the dissemination of electricity, the rise of pharmaceuticals, television, radio, the Internet, and you had, of course, nuclear weapons. You had two world wars. You had the Cold War. You had the rise and fall of an entire empire. I mean just extraordinary amounts of change, even the rise of the modern corporation is one of the changes of the 20th century, capital markets as we know them today. The amount of change has just been utterly astonishing. So I’m very skeptical when people say today is uniquely full of change than what people before us have faced. I do see two things, though. One is that people believe that the rate of change is faster and the degree of disruption is larger. So if they believe that and they’re starting from that point of belief, then you still need to be able to answer for them, “OK, I don’t know if you’re right or if you’re wrong on that. What I do know is that if you believe that, we need to know what principles allow you to do well in a changing world, because you’re starting from that point of view.” The second is that I do believe that technological change is happening at

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a very accelerated pace. I don’t know if they’re more dramatic, but they might be happening faster.

owner, what does it take to become a 10x leader and how do you position yourself for that?

ly unforgiving, is a little bit like being Amundsen and Scott out there on the Antarctic plateau in 1911. The way to think of it is this trianFELDMAN: Right. You think about the COLLINS: One of the things that I found gle that we put in the book. One of the iPad, how that’s just taken off and now really fascinating about this is that most points is the notion of utterly fanatic tablets are a part of almost everyone’s life of what it takes seems to be learnable. discipline. The second is this empirical in the business world. So, that is good We tend to think that somebody who creativity, and the third is productive change for many people, but good or bad, would lead an enterprise to be 10 times paranoia. In the middle is this idea of how do people survive constant change better than its industry must be a super- level-five ambition animating the whole and disruption? hero. They must be off the charts with thing. Let me just briefly talk about each charisma and sheer brilliance and that of these. COLLINS: My co-author, Morten Han- we could never learn to be like them. All the people we studied were utterly sen, and I asked, “Why do some thrive We actually found that the distinc- fanatical about understanding what it is in uncertainty and even chaos and oth- tive behaviors, the things that separat- that they were trying to do and clearing ers don’t?” That was really away everything that got the genesis of the study. in the way of that. These This study distinguishes people were truly driven, itself from the prior three in intense, fanatic, disciplined two ways. The first is that it people. deliberately selected subjects Fanatic Discipline means by the severity of the enviconsistency of action, valronment. There are compaues, goals, service, execunies that outperformed their tion and consistency of hitindustries by 10 times but ting your own self-imposed Fanatic didn’t make it into the study performance expectations. DISCIPLINE because they weren’t in a turThey don’t come from outbulent enough environment. side. They come from inside. The second is that this You drive yourself harder study more than the oththan anyone else could posers puts an emphasis on the sibly drive you. LEVEL 5 small business and the entreThat notion of discipline AMBITION preneur, because in order to has shown up in all of our qualify for the study you had work but it really stood out to have started your journey in this study and came to Productive Empirical to be a 10x great compalife in this thing we came PARANOIA CREATIVITY ny from a position of being to call the 20-mile march. small or young. Very signifThe idea of the 20-mile icant companies were once march is that you’re on a 10Xers embrace a triad of core behaviors. startups. Intel had three peolong journey. You menAnimating these three core behaviors is a ple. MGM started in a tilt-up tioned earlier that many of central motivating force, Level 5 ambition. building in Thousand Oaks, your readers have been in Calif. Microsoft started with business for decades, and five people in Albuquerque, N.M. Pe- ed them, are learned capabilities and it’s a long journey. It doesn’t happen ter Lewis took over his very, very small behaviors. So let’s talk about these real overnight. You don’t build a great set family insurance business in Cleveland briefly. of customers overnight. You don’t and it grew into Progressive. They were In the book we use this pair of ex- build a business that serves its particstartups and then they went to become plorers, Roald Amundsen and Robert ular community so well overnight. It’s these great winners. Falcon Scott, as an analogy because a journey. We put more emphasis in our delib- here you have the ultimate sort of small What we found is that Roald Amunderate selection on looking at them when enterprise. They were two small teams sen exemplified this and called it the 20they were small and what they were do- both trying to achieve something great mile march. It doesn’t matter whether ing than we did in the previous studies. in 1911, to be the first to the South Pole it’s good or bad weather. You basically and get back alive in a very unforgiving say, “Every day we’re going to hit some FELDMAN: One of the things you talked and uncertain environment. allocated amount of miles toward our about in Great by Choice is the core comThe analogy to being a small business goal,” rather than if it’s good conditions petencies that need to exist to be what person out there in the world, which is going as far as we can and in bad condiyou call a 10x leader. For a small business so much bigger than you and potential- tions holding back. The idea of having



InsuranceNewsNet Magazine » August 2012

GOOD TO GREAT – HOW ADVISORS CAN MAKE THE LEAP a 20-mile march is something that you just stay on with incredible consistency. So, let’s move over to the insurance industry. Progressive Insurance is not your insurance world, but I think it really highlights the idea of the 20-mile march. Peter Lewis at Progressive said, “Look, we need a mechanism to keep us focused on the core discipline of our business,” and that’s the combined ratio for an insurance company, the core profitability. “We’re not going to try to make money by a whole bunch of sophisticated investing stuff. We’re going to do insurance well, and price risk well, and the real nuts-and-bolts management of that. So, we’re going to average a 4 percent combined ratio and we’re going to have a positive profitability in that core underwriting activity every single year if we can,” and they did it for 27 out of 30 years, incredible consistency year in and year out. Now, it could be that your 20-mile march is, “I’m going to place five calls a day no matter what. I don’t care if I have 105-degree temperature or whether it’s a great day and I could make 30 calls. I’m going to do five a day, every single day, no matter what.” That’s a 20-mile march, and whatever your 20-mile march happens to be, you know what it is. FELDMAN: I love your concept behind the 20-mile march. How important is having a “20-mile march” for a salesman or a business owner? COLLINS: The 20-mile march gives them something to focus on and to make progress on day in and day out. They have this clarity and incredible commitment to find a way of navigating their way in a world that just seems to be swirling all around them. The discipline is in every single day you wake up and the first thing you do is you track your hours from the day before, and you do it every day, and you do it 365 days a year, and you stay on target. The learned behavior is to say, “I need to know as an agent or an advisor, what is really the right kind of march for me?” And then they need to hold themselves to it fanatically. That’s where the real 20mile march comes in. It’s in the holding yourself to it.


Lessons from Great By Choice, by Jim Collins Discipline and Self Reliance: • 10Xers remain productively paranoid in good times, recognizing that it’s what they do before the storm comes that matters most. Since it’s impossible to consistently predict specific disruptive events, they systematically build buffers and shock absorbers for dealing with unexpected events. They put in place their extra oxygen canisters long before they’re hit with a storm. • The 20-Mile March builds confidence. By adhering to a 20-Mile March no matter what challenges and unexpected shocks you encounter, you prove to yourself and you enterprise that performance is not determined by your conditions but largely by your own actions. • On the one hand, 10Xers understand that they face continuous uncertainty and that they cannot control, and cannot accurately predict, significant aspects of the world around them. On the other hand, 10Xers reject the idea that forces outside their control or chance events will determine their results; they accept full responsibility for their own fate. • It’s what you do before the storm hits – the decision and disciplines and buffers and shock absorbers already in place – that matters most in determining whether your enterprise pulls ahead, falls behind or dies as a result.

Unexpected Findings: • The 10x cases took less risk than the comparison cases yet produced vastly superior results. • The 10X winners were not always more innovative than the comparison cases. In some cases they proved to be less innovative. • Contrary to the image of brazen, self-confident, risk-taking entrepreneurs who see only upside potential, 10X leaders exercise productive paranoia, obsessing about what can go wrong. They ask questions like: What is the worst-case scenario? What are the consequences of the worst-case scenario? Do we have contingencies in place for the worst-case scenario? What’s the upside and downside of this decision? What’s out of our control? What if…? • 20-Mile Marchers have an edge in volatile environments; the more turbulent the world, the more you need to be a 20-Mile Marcher.

August 2012 » InsuranceNewsNet Magazine




“The people we studied were not just creative. They were really good at figuring out what works empirically. They would try things. We call it firing bullets, then cannonballs. If you’re going to try something radically new that you haven’t tested, you can’t fire a big un-calibrated cannonball first, because then you won’t have any gunpowder left if it misses.” Once you set your march, there’s no acceptable reason for missing it, no matter what. That’s what the 20-mile march is all about. FELDMAN: What is your 20-mile march? COLLINS: My own march is an annual one and I track my time. Every day I put my time in a spreadsheet broken into three categories: creative time, teaching time and other. Over time it needs to be more than 50 percent creative. 50/30/20 should be the target. And if other time starts growing beyond 20 or creative starts falling below 50, I’m off my march. Now there are some days that are all teaching, some days that are other, whatever, but over the course of a year I track it every day and then I have a constant running monthly total, and then I have the annual total, and over the course of a year I should really come in on target, and the only way I can come in on target is if I’m constantly making sure that I am allocating time for creative work. FELDMAN: What does “creative time” look like for a salesperson or business owner? Our reader’s creative time is very different from yours because you create a lot of research, books and writing. But for 18

people who are selling insurance, what would their creative time be? COLLINS: I wouldn’t suggest that somebody should have my march. Mine came out of asking my stepfather, who was a great physics professor in terms of great teaching, great research and great service to the university. I once asked him, I said, “What marks a great professor?” He said, “Well, the key is you do 50/30/20, 50 percent of your time in intellectual work, 30 percent of your time teaching and 20 percent in other things you need to do to help the institution.” I just wrote that down and I thought once I formed my own research lab, I needed to stay on that track. I needed to stay on that 50/30/20. So that’s where it came from. Now if I were in a different activity in life, then I would have a different allocation. Mine might be 40 percent sales/ marketing, 40 percent service, 20 percent other. The key to a 20-mile march is how you’re allocating your time and being utterly, ferociously consistent in how you deploy on the things that you know over time are the most important and tracking it. The beauty of the 20-mile march is when the world is melting down on you

InsuranceNewsNet Magazine » August 2012

in difficult times with tremendous uncertainties, it gives you something to make sure that you’re paying attention to when you wake up in the morning. FELDMAN: Let’s talk about the second part of the triangle, the “Empirical Creative Side.” What does that mean to salespeople who might not think they are creative? COLLINS: The people we studied were not just creative. They were really good at figuring out what works empirically. They would try things. We call it firing bullets, then cannonballs. If you’re going to try something radically new that you haven’t tested, you can’t fire a big un-calibrated cannonball first, because then you won’t have any gunpowder left if it misses. So, fire bullets. When I see that the bullets are actually on target with something and I’ve got a calibrated line of sight, then I put a lot of resources behind that line of sight and fire a cannonball. Now for a small business person with limited resources, this is an extremely important idea because you always feel that you need to be thinking about doing something new, whether it’s a new way of reaching your customer audi-

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ence or responding to challenges. But you have to place your big steps on sound footing. We write in the book about how Robert Falcon Scott, who didn’t get to the pole first and died along with all of his people on the way back, had placed a big bet on these things called motor sledges, which were engine-driven tractors that they hadn’t tested for the conditions of the South Pole. The engine blocks cracked and that led to a series of things, such as using ponies, which also didn’t work. Amundsen said, “That’s not proven yet and we’re betting our lives out here,” and he went and lived with Eskimos. The Eskimos said, “Dogs and sleds and skis work really well out here.” The difference between the two of them is that Amundsen formulated his path based upon real proven empirical experience. He learned from the Eskimos and his own trial and error, whereas Scott went with something that was unproven. So what does that mean for a small business person? You can’t afford to fire a lot of un-calibrated cannon balls. You’re small. And at the same time, you have to be moving forward and doing new things because the world around you is changing. So when you’re facing questions such as, “Should I do something with social media? Should I do something with the Internet? Should I do something with whatever,” instead of kind of having this big yes or no answer, which can be paralyzing, turn it into a different question such as, “How can I fire a bullet on this? Is there some way I could do this in a small shot and see if it works?” FELDMAN: The third part of your triangle is “Productive Paranoia.” Why is this important to 10X leaders and how do you manage it productively? COLLINS: Our people were really paranoid. They worried constantly about what the world could do to them. Our leaders carried extra cash. They always assumed that they might have to go through a very difficult period. They always assumed that that period might last a lot longer than anybody anticipated. 20

tell us how that fits in the middle of this great success pyramid and what it means? COLLINS: All the best people we ever studied were always trying to do something that was more than just their own personal success. Think about what allows you to do a 20-mile march, find and validate new things that will work even better, protect your flanks from the productive paranoia and all the things necessary to produce the best possible results you can over a long time. If it’s just about some personal success and it’s not really about contribution to something larger than yourself, it’s very hard to sustain it. Our leaders always saw themselves in service to some cause. FELDMAN: So, basically you need a total mission of service to choose to be what you call “Great?”

“10Xers distinguish themselves not by paranoia per se, but by how they take effective action as a result. Paranoid behavior is enormously functional if fear is channeled into extensive preparation and calm, clearheaded action, hence our term “productive paranoia.” - Excerpt from Great By Choice As a result, they could stay on their march and keep moving forward, when others who are less conservative and less disciplined in good times would find themselves more exposed and maybe have to stop their march altogether. When you put those three behaviors together, the fanatic discipline, empirical creativity and the productive paranoia, those are kind of the three distinctive behaviors. FELDMAN: You have “Level 5 Ambition” in the middle of your triangle, can you

InsuranceNewsNet Magazine » August 2012

COLLINS: Absolutely. Whatever it was, they were in service to it. So when they woke up in the morning the question wasn’t, “How do I make myself more successful?” The question was, “How can I be of better service? And how can I be of better service to whatever cause it is that I’m engaged in?” One of the things that’s very interesting about great entrepreneurs over time is you think about four phases of an entrepreneurial business. First phase, you have an idea. The second phase is converting that idea into a business, so now you have a business. Well then you might actually convert that from a business to a company. It doesn’t have to be a big company, but it’s a company. Then finally, you create a movement like “hey, there are a lot of people who need what we do.” Or, “the world will be better off because of what we do.” That’s a movement. I think that when you have that orientation it just allows you to be self-propelled for a very, very, very long time.

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Study Shows Insurance CIOs Look to Diversify in Light of Weak Market Outlook

Health Insurance Brokers, Get Ready The Supreme Court’s decision upholding the Affordable Care Act (ACA) will likely kick-start changes in health benefit plans for many – but not all – employers who have EMPLOYERS WHO ARE JUST hesitated to do so up to now. STARTING TO ADJUST HEALTH For example, in a poll conducted by MerPLANS FOR ACA cer immediately following the high court decision, 40 percent of the 4000+ surveyed employers said they will now begin developing a strategy to respond to ACA provisions slated to go into effect in 2014 and beyond. However, another 16 percent said they will continue to wait until after the November elections. The 2014-and-beyond provisions are the ones that aim to expand access to coverage, Mercer notes. That could cause certain larger firms, such as those with large part-time populations, to choose between increasing the number of workers eligible for coverage or reducing the number of hours worked, says David Rahill, president of Mercer’s Health and Benefits business. That provision has broader implications for employers than ACA requirements taking effect earlier, in 2012 and 2013, which include benefit summary disclosures, new dollar limits on health care flexible spending arrangements, and increased Medicare withholding for high earners. If employers continue to take divergent positions on compliance through November, health insurance brokers will have their hands full. Not only will they need to help educate employer clients on ACA provisions but they will also need to keep track of which clients are moving forward on compliance and which are not, and they may need to hustle to help others “catch up.” Most brokers are accustomed to unique employer approaches, of course. But in this particular area, the employers who delay are risking repercussions. Mercer’s take: Employers should stay on track in their efforts to comply with the law as enacted or they may face penalties.


Financial planners could be good for a consumer’s health, according to some surprising findings from First Command, Fort Worth, Texas. Researchers for the firm’s Financial Behaviors Index found that middle in-

come people who worked with a planner last year reported fewer mental or physical health problems in their households than did people who

did not work with a planner despite the year’s continuing economic turmoil Only 18 percent in the planning group reported that someone in their household had difficulties falling asleep versus 22

28 percent of those with no planner. Similar differences showed up among those reporting a general increase in stress, difficulties in staying asleep, muscle tension and changes in weight. Worth noting: The survey group was limited to military families with household incomes of at least $50,000. That’s a prime market for advisors selling basic annuities and life insurance.


Brokers and producers are pressing carriers in the voluntary insurance market for certain things – but not for increased commissions, according to a 2012 survey of carriers conducted by Eastbridge Consulting Group. The survey asked the carriers to

InsuranceNewsNet Magazine » August 2012

identify which of several listed items causes the greatest pressure concerning voluntary products. Forty percent said it was the pressure to liberalize guaranteed issue guidelines, followed by pressure to lower prices. However, “no carriers in the most recent survey mentioned feeling pressure to increase compensation/commissions,” the re-

searchers say. In a 2010 survey, the firm says, 18 percent of carriers had identified pressure to increase compensation/commissions as causing the greatest pressure. The majority of carriers (74 percent) indicated that the pressure they are experiencing this year is coming from brokers/producers. Just 21 percent said it was from their field staff, Eastbridge says. These results could be a signal that voluntary producers are focusing on finding products they can successfully place in today’s challenging economy, with the understanding that the comp will follow. If so, the producers may

be getting what they want. The same Eastbridge survey found that carriers named “more guaranteed issue,” “more features and options,” and “lower participation requirements” as the most significant product trends in today’s voluntary market.


Fifty percent of all new long-term care insurance claims opened during 2011 began with the policyholder receiving care at home, according to the American Association for Long Term Care Insurance. DID YOU


MALE BABY BOOMERS SAY THAT RATE OF RETURN (22 PERCENT) and past investment performance (15 percent) are the most important features when selecting a retirement investment product, but female boomers say guaranteed monthly income (18 percent) and financial advisor recommendation (17 percent) are most important.


Source: Insured Retirement Institute

[NEWSWIRES] By comparison, less than one-third of new long-term care claims began with the recipient receiving care in a nursing home. Clients might appreciate hearing about that, when evaluating whether to purchase home care coverage or not. Another piece of information that might help with decision-making is that the average national hourly rate last

year for a home health-care aide was $21. The rates do vary by region, the

association points out. For instance, Boston home health aides had the highest reported rate of $39 an hour (and their average was $27 an hour). Meanwhile, aides in Dallas/Fort Worth had the lowest reported rate at $12 an hour. Still, the numbers provide a starting point for considering options – and a sobering one at that.


It is common knowledge that advisors have a smaller pool of businesses – and employees – to which they can offer services as compared to before the recession. However, change may be in the air. CBIZ Payroll Services says hiring is actually up among companies with 300 or fewer employees. The Cleveland, Ohio firm manages payroll services for more than 3,000 businesses. It says its CBIZ Small Business Employment Index rose by 1.38 percent in June 2012,

following a 1.34 percent increase in May,

and an increase in April too. “This runs counter to many of the other employment metrics that are showing stagnation or modest decline,” allows Philip Noftsinger, business unit president. What could explain the difference? For one thing, CBIZ says its data is derived from a segment of employers not completely accounted for by ADP and Federal BLS employment reports. For another, the firm says the domestic economy has been stable through the first two quarters of 2012, so it’s likely that many smaller employers are benefiting from a steady domestic situation as well as the summer travel season. Maybe this is a good time to check in with some of these smaller firms to see

Charitable Giving: It’s More Than You Think CHARITABLE GIVING BY CLIENTS

Wealthy clients – those with $1 million or more in investable assets – are making more charitable gifts than advisors realize, according to a survey of clients and advisors ESTIMATED BY by Fidelity Charitable Gift Fund, an indeADVISORS pendent public charity based in Boston. Advisors who have such clients told researchers that they estimate that 48 percent of their client base makes charitable giving an annual activity or financial goal. But in ACTUAL Source: Fidelity Charitable Gift Fund a separate survey, 93 percent of the wealthy who work with financial advisors said they make charitable contributions on an annual basis. Here’s another surprise: Financial advisors estimate that, on average, 54 percent of wealthy clients gave $2,500 or more to charity in the past 12 months; but in fact, 51 percent of wealthy clients report giving at least double that amount – 5,000 to $100,000 or more – to charity each year. Those numbers are big enough to give advisors strong reason to start talking about charitable giving with wealthy clients, if they haven’t already. So is this: Seventy-two percent of advisors with wealthy clients say they have personally found offering financial strategies for charitable giving to be a relationship builder. In addition, 57 percent told researchers that such discussions with clients help position the advisor as a broad financial expert. And 37 percent say these discussions lead to a multi-generational relationship with their clients, and also can be a referral source (35 percent). Sounds like a plan, doesn’t it?

48% 93%

how things are going, and to find out if insurance updates are in order.


Women are nearly twice as likely as men to be victims of elder financial abuse, accord-

ing to Insured Retirement Institute (IRI) President and CEO Cathy Weatherford. Other factors: Victims are typically in their 70s, living alone, and are in need of assistance with either health care or home maintenance, Weatherford said, citing the findings of an IRI member company. As for perpetrators of the frauds, they are most often “strangers, followed by DID YOU



family, friends and neighbors,” she said. The business sector falls in behind, she added, “with occurrences of exploitation within the business sector accounting for about one out of every 10 instances.” What has this got to do with insurance? Financial elder abuse preven-

tion “is not only a natural fit for IRI, but for the financial services industry as a whole,” she said, adding “you can

count us in as an active participant in your growing consortium of ‘awareness’ partners.” Among other things, she said the industry can help with identifying some of the “red flags” of abuse, given its vantage point as a trusted financial partner. This is a hot topic in the industry, so stay tuned.

SINCE 2010, 10 STATES HAVE FROZEN, ELIMINATED OR TRIMMED the annual cost of living increase they pay current retirees. Source: The Pew Center on the States

August 2012 » InsuranceNewsNet Magazine



lanning to work while enjoying the summer sun? No problem. With your trusty tablet, smartphone, mobile apps, and social media, you can do it. That’s what some insurance professionals are discovering. They are using today’s trendy mobile technologies not only for keeping up with the office while vacationing, but also for status updates with clients while out of town, gathering customer data on a moment’s notice, making interactive presentations at local coffee shops, prospecting, marketing and more. These advisors are not armed and dangerous. They are armed and connected – and in ways no one dreamed about even a few years ago. In fact, although some producers have started boning up on use of social media in their practices, going mobile is the mantra of many others. Take a look at how four advisors are doing it and kicking the desk habit in the process.


InsuranceNewsNet Magazine » August 2012

Anthony Saccaro gets business done in a non-business environment via iPad and Droid smartphone.

Full Speed Ahead

Richard M. Weber, president of The Ethical Edge, Pleasant Hill, Calif., is moving full-speed-ahead on mobile. “I want to leverage the technology to the maximum so I can be accessible when I want to be and have control over my life,” he says. In his practice, he uses an iPhone, iPad, laptop and personal computer and keeps them all synced and updated with the same information. He does the syncing via software and storage in the cloud. The cloud is a password-protected network of remote servers that allow people to store, access, manage and process data.

When he is at the airport – which is often now that he is president-elect of the Society of Financial Service Professionals (SFSP) – Weber says he visits a nearby lounge with Wi-Fi service. While there, he sometimes participates in conference calls via the virtual phone on his tablet, with visual and audio capability. “I listen with ear buds,” he says. If Wi-Fi is not available, he uses a portable hotspot called MIFI to make the internet connection. The MIFI lets him connect up to five Wi-Fi enabled mobile devices via his cellphone service. He even makes phone calls using his cell phone connected to the MIFI. When he does that, the person he is

SEE ALSO: Demand for Mobile Shoots Up » page 32

calling sees his office phone number, not his cell number. That’s an advantage, he says, because regular clients will recognize the office number. In addition, it limits the number of people who have his cell number, which he prefers. Apps are critical to Weber’s mobile life. The apps are small software programs – applications – that run on smartphones and tablets. One of them, GoToMeeting, enables Weber to conduct virtual conferences with clients. Recently, he used that app to show paperwork and documents to a client and to run what-ifs for variable universal life scenarios. He also uses GoToMeeting to run through presentations.

August 2012 » InsuranceNewsNet Magazine




Richard Weber multi-tasks with several synced devices.

In face-to-face meetings with a client, Weber says he often hands the tablet, with an app running, to the client who enters information or responses and hands it back to him. That fosters interactivity, gives the client control and establishes equal partnership in the relationship, Weber says. That helps in the planning process, he says. Weber’s tablet has the Ready-2-Retire retirement planning software installed. Developed by LIMRA for use by advisors, it allows clients to choose pictures of things they might like to do in retirement, so they visualize their future more graphically. This way, the client is the one making the choices, not the advisor. Other financial planning apps are extensions of more robust programs that advisors run on their desktops, Weber adds. He points to the Living Balance Sheet app that Guardian’s full time life agents are using on their tablets. “Independent agents can use MoneyTree and eMoney,” he says. Learning how to work with the new26

er mobile technologies does involve a learning curve, Weber allows. Independent advisors in particular may be uncertain about how to get going, because they often work on their own, without a big company providing them a lot of tools and support. Age is no barrier, he points out. For instance, although the average age of SFSP members is 56, “many advisors age 55 and up are going mobile, as are advisors in all age bands.” Cost is no barrier either, he adds, noting that iPhones and iPads are available for a few hundred dollars each, many apps are free or cost just a few dollars, and mobile broadband service runs around $50 a month. Anyone who wants to learn can find help, Weber stresses, citing cell phone carriers, big box tech stores, and various community resources as examples. “Just go there and say, ‘show me.’”

App Heaven

John L. Olsen, president of Olsen Financial Group in St. Louis, uses an Android

InsuranceNewsNet Magazine » August 2012

Age is no barrier. Cost is no barrier, either... many apps are free or cost just a few dollars. mobile phone and a netbook for much of his mobile connectivity, but his top mobile passion is all the apps he has found that make working while mobile effective. “The applications turn time into productivity without any effort on your part,” he says. Take Dragon Naturally Speaking, for example. “I’m in love with it,” he laughs. “I have it on all my machines. I can sit in a small quiet area wherever I am and just talk into a small headset that has a microphone. It writes what I say into a file, and makes technical writing very easy. If I’m writing email in Outlook, I talk, review and correct any errors, and then send. If I’m at my club, I often write my books while smoking a cigar and talking into my netbook.”


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Some other mobile tools he uses: Android Razor Mxx: This is Olsen’s smartphone. He likes its financial calculator, Internet capabilities, four-inch screen, and onboard Excel and Word programs that let him read and edit files. “If you don’t know how to do something, the phone has video and audio tutorials that come up and tell you how,” he adds. Dropbox: Olsen has put this free cloud app on all his devices. Any file he saves into Dropbox is automatically saved to all his other computers. “That way you have the most current version wherever you are,” he says. If he updates a file while in the field, he saves it to Dropbox so that all devices will then have the new information. Foxit Reader: This is a PDF reader that allows annotation of p or t able do c u ment

files, filling-in of forms, and insertion of scanned signatures to documents, among other capabilities. “This lets me sign documents electronically whether I am in the field or in my office,” Olsen says. RepliGo: Olsen uses this app on his smartphone. If he receives a PDF document that is too big to read easily on the phone’s screen, he clicks on it and RepliGo formats it to fit the screen. “It also allows you to change the typeface and to move to the next page with a swipe of your finger.” Quickfinder: This is a web-based tax manual that Olsen uses to get answers to questions quickly from any machine he is using. “It also lets me print out content in PDF format,” he says. “Then I put the PDF file in Dropbox so I can read it later, on my cell phone, for instance.”

Google Maps: Olsen accesses this from his smart phone to get directions, including voice directions. On his Android, the “navigate to” icon lets him talk to the device and then it directs him. Mobile technology facilitates working in partnership with clients, Olsen contends. “A lot of my clients are engineers, and I create their plans right in front of them. We build the plans and do assumptions together and they like it that way.” Having a lot of software at hand helps, but Olsen has plenty, so going mobile works for him.

Beefing Up Productivity

Anthony R. Bartlett is financial advisor and registered representative with Baystate Financial, Worcester, Mass., who uses the full battery of mobile devices. Bartlett recalls that he started going mobile with his laptop five years ago. Then he added a Blackberry smartphone three years ago, and the other ca-

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InsuranceNewsNet Magazine » August 2012

SELL ANYWHERE pabilities later on. The result, he says, is that “I have become at least 50 percent more productive.” He uses a Blackberry phone for communicating with clients, a laptop for static presentations out in the field, an iPad tablet for when he wants to do interactive presentations with clients, and a netbook for lighter gear when he is traveling and wants to capture information or do webinars with clients via GoToMeeting software. Surprisingly, despite this array of devices, Bartlett describes himself as using mobile “to a certain extent but not to the extent that I want or that I think the industry should be doing.” For instance, he does not use Skype or other Internet telephone capabilities or video conferencing. He says he wants to use these things but is waiting for more clarity. “The regulatory bodies are assessing the mobile technologies, along with social media and use of interactive client meetings, and what advisors can and cannot do,” he point out. “They are con-

cerned with how secure the information is compared with traditional face-to-face meetings with clients, and with things like whether someone can overhear the conversation or find it on the web.” Other industry groups are looking into how to develop more confidence around the technologies, and how to save and document what transpires in the mobile conversation. Cloud technology will help provide answers to a lot of this, he predicts. Advisors who don’t embrace mobile technology won’t be able to do what their clients expect them to do, Bartlett cautions. “That will lead to dissatisfaction, and the unhappy clients will shift away.” That awareness, plus the increased productivity that mobile makes possible, has made him a believer. The cost/benefit of going mobile is “absolutely” in the advisor’s favor, he says.

Mixing Mobile and Social Strategies

Anthony A. Saccaro, president of Providence Financial & Insurance Services,


A laptop, Blackberry and iPad tablet keep Anthony Bartlett productive wherever he is.

Inc., a Woodlands, Calif., registered investment advisor (RIA), has just launched a strategy that yokes mobile technology with social media initiatives. He is doing this to enhance marketing, he says. The social media is for branding, promotion and prospecting, and the mobile technologies are for efficiency and prompt fast access to clients.

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August 2012 » InsuranceNewsNet Magazine




John Olsen uses Dragon Naturally Speaking with his Netbook to work on vacation.

He says his firm started using mobile two years ago, initially to access client accounts via iPad and Droid smartphone and answer client questions when they want it, wherever he is. He uses Pershings’ NetX360 app for advisors for that purpose. Clients can download a client version of the app to their own tablets, too. “I can also use this technology to buy, sell and trade while on the road, but I usually don’t do that,” he adds. That’s because most clients call to find out how their accounts are doing or to refresh their memory about something, not to make trades while he is on the move. The mobile technology means he can return those calls within 24 hours, and often within one hour. Next, Saccaro added the LogMeIn app to his mobile devices. This lets him access any of his computers wherever he is from his iPad or Droid. The social media piece came next. His firm found that very few RIAs in California were using social media in the first half of 2012, despite the rapid growth of social media such as Facebook, Twitter and LinkedIn. “We also noticed that every new client we were taking on, including people over age 50, said they first researched advisors on Facebook, Twitter, LinkedIn and websites,” Saccaro says. 30

“The applications turn time into productivity without any effort on your part.” – John L. Olsen. So the firm ramped up in May by joining social sites, doing regular postings, and leveraging social media activities for prospecting. He promotes those postings to clients, and asks clients to “like” the posts on Facebook. Those “likes” go out to the clients’ Facebook friends, creating potential for new leads or clients, he says. “More ‘likes’ equal more prospects.” The firm also asks clients to “checkin” when they come for an office visit. (Check-in is a Facebook capability that lets users tell their Facebook friends where they are right from their mobile devices.) “When clients push that button, all their friends see they are here, so then their friends know of us,” Saccaro says. Saccaro’s firm is also using the social and mobile technologies in a symbiotic manner. For example, because the firm is an RIA, Saccaro says he must ensure that no testimonials go on his social media pages. That’s where the mobile comes to the rescue. “I use HootSuite (an app) on my smartphone and iPad to get real time updates on my social

InsuranceNewsNet Magazine » August 2012

media accounts from wherever I am,” he explains. “If a testimonial comes in there, I can remove it right away right using my mobile device.” He says he uses his mobile devices to respond quickly to other types of comments on the social sites, too, and/or to contact his marketing person for possible follow-up. In addition, he follows the check-in activity of his clients. “For instance, if a client checks in nearby, I can use my smartphone to email them or phone them, and then invite them to come over when they are done. Or I might just go over there and see them.” What about texting? “I use that all the time, but mostly it’s personal or for contacting my staff. If I use it with a client, it’s to set up a visit or a phone call or for clients who are hard of hearing.” He’s also started instant messaging from his tablet, primarily to his employees when immediacy is important. And emails? “I get all my emails on my mobile devices,” he said. So what about the laptop? “I have one, but I don’t use it much anymore,” Saccaro says, echoing a point made by other advisors. “My iPad has replaced it, and also my smartphone.”

What About Sales?

The advisors quoted here have avoided making sweeping statements about how going mobile will increase sales. They say they don’t want to create the impression that having the technology is an automatic money maker. As Weber puts it, “it’s up to you to use it effectively.” They prefer to speak of mobile’s effect in terms of increased productivity. That productivity can result in increased sales, they allow, but it can also result in more time for family, travel, volunteering, hobbies or free time. So is it worth the time and effort for independent advisors to obtain the technologies and learn how to use them? “Beyond question,” says Olsen. “If I can do something that I was doing before but in one-third less time, isn’t that worth it?” Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@





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Demand for Mobile Shoots Up The word-of-mouth buzz is that agents are going mobile. But what do the numbers show? By Linda Koco The answer is, researchers are finding that insurance and financial advisors are definitely using mobile technology, that this use is increasing, and that advisors are “demanding” mobile capabilities, too. For instance, in 2010, LIMRA found that use of handheld mobile devices among life producers had increased from 22 percent to 40 percent between 2008 and 2010 alone. Meanwhile, in a fall 2011 survey of 50 32

agents attending a trade show, FirstBest Systems, Bedford, Mass., found that 100 percent of those polled were already using a smartphone (a cell phone with Internet, video, photo, recording and other capabilities). Four percent were using more than one smartphone. In addition, 52 percent were using tablet devices – mostly Apple’s iPad. In another survey, also in fall 2011, LIMRA found that carriers were reporting producer demand for a variety of mobile features. The top three producer requests were for mobile capabilities related to quotes and illustrations, product marketing materials and prospecting

InsuranceNewsNet Magazine » August 2012

information, and client account/CRM/ policy information. Other requests referenced compensation information, electronic applications, pending business status and self-service transactions.

Which Producers?

Common industry knowledge is that property/casualty producers and carriers are the ones who are out in front on things mobile. Indeed, FirstBest found that many producers in its survey came from the property-casualty side of the insurance business, says Liza Colburn, spokesperson for FirstBest.

DEMAND FOR MOBILE SHOOTS UP But Aite Group has found that “financial advisors” (presumably including life and annuity advisors) are closing in on the mobile trail, too. In March, for example, Aite surveyed 425 financial advisors, including 88 independent financial advisors and 41 insurance financial advisors. The Boston researcher found that “mobile access to applications” was among the top five spending priorities for these advisors, says research director Alois Pirker. That ranking was out of 24 possible categories. Producers appear to be seeking mobile technology for business purposes, not for the cool factor or for personal enjoyment. For instance, LIMRA says that 90 percent of mobile producers it polled in 2010 were using their devices for email, 70 percent to check calendars, 41 percent to access client information and 39 percent to update client account information. Some of those capabilities require that advisors have apps on their devices that give them mobile access to company databases. The FirstBest survey found that producers increasingly want such access. This is probably the chief area of the producer demand that the companies are experiencing. Independent advisors may buy their own equipment, but they want the carriers with whom they do business to provide apps or other means of allowing advisors to access information of company servers. Apps are small software applications that run on smartphones and tablets. In the insurance and financial services business, these apps are often small slices of larger financial programs or programs. Mobile access can also come in the form of modified carrier websites that are mobile-friendly or brand new mobile websites, which are streamlined websites constructed for viewing via mobile devices.

Coordination Needed

So pronounced is life producer yen for things mobile that LIMRA is predicting producer use of it will continue to increase. But allowing advisors to access company content via mobile devices or mobile websites will take some coordination. As LIMRA points out, carriers must find ways to allocate staff to launch and man-


tablets and in mobile transaction activity. Still the life insurance business is closer to mobile prowess than it once was. In the fall of 2011, for example, 30 percent of 53 life companies told LIMRA researchers that they had already launched mobile initiatives for producers. In addition, 47 percent said they have plans to do so.

None Too Soon

LIMRA says that 90 percent of mobile producers it polled in 2010 were using their devices for email, 70 percent to check calendars, 41 percent to access client information and 39 percent to update client account information. age mobile initiatives, coordinate multiple mobile devices and systems, address mobile data security, and define mobile return on investment. Those efforts take time and resources, and carriers need to do them without neglecting their insurance businesses. There is another issue, too. As noted above, the life insurance industry is coming from behind where mobile access and mobile strategy is concerned. In October 2011, for instance, Celent reported that only 12 percent of the top 100 life/health/annuity insurers in North America had introduced mobile technology to their producers. What’s more, the majority of the existing applications were non-transactional, the New York City firm says. Similarly, Aite has found that carriers that sell through advisors have lagged direct-to-consumer companies like Schwab and TD Ameritrade in use of mobile technologies, Pirker says. Carriers have also lagged consumers, who he says have been leaders in using smartphones and

If those carriers follow through, that will be none too soon for insurance advisors. As Pirker tells it, many advisors who lack mobile capabilities have found themselves in the uncomfortable position of being in front of clients who already have mobile access to their accounts at companies like Schwab. This makes advisors wonder if they appear to be “badly equipped,” he says. What advisors need now is not tablet or smartphone access to the very same information on company servers that advisors can obtain via laptops, Pirker says. Rather, advisors need mobile apps that support what advisors actually do in the field, that leverage the smaller, touch-sensitive screens, and that don’t depend on physical keyboards (which most mobile devices don’t have). The apps should enable advisors to walk through various steps with a client in a visually appealing – and compliance-friendly – way, he adds. And, because tablets are similar to a sheet of paper, the apps should be designed in a way that takes advantage of the attribute, for instance by performing well when advisor and client pass the tablet back and forth or engage in “co-browsing.“ If going mobile were a passing fad, maybe striving for all of that would be pointless. But consider this: By 2015, over 60 percent of mobile users and almost half the total U.S. population will be using the mobile internet, according to an eMarketer projection. In addition, younger people who are accustomed to using mobile devices will be entering the insurance sales force, Celent says, and those younger producers “will demand mobile sales functionality.” Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@

August 2012 » InsuranceNewsNet Magazine



For the full LIMRA WL study results, go to

Whole Life Drives Industry Growth


In the first quarter, whole life premium increased 10 percent compared to last year and whole life policy count went up by 6 percent, according to LIMRA. The whole life sales were so strong that the WHOLE LIFE ALL LIFE PRODUCTS researcher credits the product line with being the biggest driver behind the individual life industry’s 3 percent growth in first quarter premium. If there are any doubts, consider this: Half of all individual life insurance policies issued in first quarter were whole life, LIMRA says. And, measured by annualized premium, whole life market share reached 32 percent in the first quarter. That’s only 7 percent lower than universal life, which has been market share leader since 2003 and which, in 2007, had a 20 percentage point lead in market share over whole life, the researcher says. This growth is not just in pockets. As LIMRA senior analyst Ashley Durham puts it, “we saw growth in whole life sales across the industry, including three-quarters of our survey’s participants, and all but one of the dominant top 20.” In addition, indexed universal life galloped ahead by 22 percent compared to first quarter last year. New term life premium grew by 1 percent, LIMRA says. The indexed life premium growth is a wow, but it bears remembering that premium volume in this still-evolving product line continues to be far below that of traditional universal life and also whole life. However, new entrants keep jumping into the market as insurers are continuing to introduce indexed universal life policies, and the sales represent more than 25 percent of all universal life sold in first quarter. The other individual life product lines tracked by LIMRA did not fare as well as the top flyers. For instance, total universal life premium was flat. Also, lifetime-guarantee universal life premium fell 12 percent, and variable universal life premium fell by 1 percent.

10% 3%


Applications for life insurance are up – that is, the applications checked by MIB, a firm that tracks the searches t h at m e m b e r c o m p a ny u nd e rwriters perform on its database. In May 2012, U.S. application activity for individually underwritten life insurance was up 1.3 percent compared to May

2011. In fact, according to the MIB Life Index, application activity has shown positive numbers in seven of the past DID YOU




eight months. Year-to-date, the Index is up 2.9 percent as compared to the same five months last year. Does this mean that life producers will be charging ahead, turning in even more apps for underwriters to check this summer? Well, not all of them. As MIB puts it, there tends to be a “summer lull” in life application activity. The May Life Index was down by 7.8 percent from the previous month of April, MIB says. But those who are not discouraged

LIFE INSURANCE PREMIUMS, COMPRISING ORDINARY AND GROUP LIFE, are concentrated among a small number of companies, with 49.8 percent of premiums written by 10 top-tier insurance entities. Source: SNL Financial

InsuranceNewsNet Magazine » August 2012

by the lull might be interested to know which markets are yielding the most apps, which is the 60 and up age group.


Almost half of life insurance chief financial officers say that a prolonged low interest rate environment is the greatest threat to their business. In a Towers Watson survey, 87 percent of the company officers told researchers that they believe there is a 50 percent or greater likelihood of a major disruption to the economy in the next 12 to 18 months,

and some put the percentage even higher. No wonder then, that 68 percent told researchers that they are expecting a three- to five-year period of low interest rates, followed by a gradual increase. The upshot, for producers, is that carriers will likely continue to make changes to products and procedures as they continue to find ways to cope with interest rate risk. Some carriers told Towers Watson that they’ve already increased the cost of insurance in their products, and others say they have the capability to do so. Other changes that carriers have made include minimum guarantee reductions in fixed-account products (96 percent), premium rate adjustments (56 percent), reductions in living benefit guarantees or adjusted fees on annuity products (56 percent), and curtailment/cessation of sales of some products (54 percent). Twenty-five percent of the CFOs say their companies have even exited product segments, and another 13 percent plan

to do so in the next six months. So get ready, for more of the same.


As an industry, our challenge is to persuade people from all parts of American society to view life insurance as a strategic financial asset — a tool to help families achieve their financial goals and protect what is most important to them. — Janet Deskins, senior vice president for life insurance products, Genworth.

August 2012 Âť InsuranceNewsNet Magazine




Secrets Of Selling Insurance To Multicultural Clients Minorities in America are more than one-third of the population and the U.S. Census Bureau estimates they will become the majority by 2050. By Michael Soon Lee The minority population is growing much faster than the Caucasian population primarily because these families are younger and larger on average. Whether you sell life, disability, home or auto insurance this is good news. This huge and growing market is an opportunity for life insurance producers if you know the secrets of how to meet the unique needs of Hispanics, African Americans, Asians, Middle Easterners and others. The first secret that insurance professionals must understand is that minorities don’t necessarily need or want to work with an agent who is from their own culture. In fact, many clients deliberately seek out agents who are not from their culture because they’re afraid that if they disclose personal financial or health information to someone from their own culture, it might be easily shared within their community. The second secret is that, unless a person is recently immigrated and there is a language barrier, they’re usually happy to work with anyone 36

who is sensitive to their culture. Unfortunately in the first 30 seconds most untrained agents will unintentionally insult a multicultural client at least three times. This obviously will not build a trusting relationship or obtain referrals. So what are some of the ways that we can offend minority clients? The first and most common mistake most people make when greeting someone from a different culture is to assume that they automatically want to shake your hand. While this may be natural for you, it could be extremely uncomfortable and possibly even insulting to someone from outside the United States. For instance, many Middle Eastern, Asian Indian and Japanese women are forbidden to touch any man who is not her husband or relative. The secret to avoiding this problem is to stop assuming that everyone wants to shake hands and let the other person tell you how they want to be greeted. Don’t just automatically stick your hand out when you meet someone for the first time. Instead, introduce yourself and let the other person give whatever greeting he or she is most comfortable with and then simply return the gesture. When greeting a couple you will generally greet the man first. Remember to wait

InsuranceNewsNet Magazine » August 2012

to see what kind of greeting he gives you. If he offers his hand go ahead and shake it but be sure to drop your hand to your side before turning to the woman. She will likely just nod to acknowledge you and you should do the same. The second way that many agents insult their customers is by assuming that eye contact is the same around the world. For instance, in the United States we tend to think of looking others in the eye as essential when building relationships. In fact, we relate eye contact to honesty, sincerity and respect. The secret with direct eye contact is that some cultures consider it rude and disrespectful. This is common in the Asian and Native American cultures where people often look down while talking as a sign of respect for others. So instead of feeling uncomfortable or trying to get eye contact if a client looks away – just do the same. The third way that insurance professionals can make clients feel uncomfortable is by standing too close or too far away when talking. In the United States, we stand about two feet apart after shaking hands, and that’s the distance at which we tend to talk. However, in Japan for instance, people there are much more formal and will shake hands or bow and then step back to give each other greater personal space. However,

SECRETS OF SELLING INSURANCE TO MULTICULTURAL CLIENTS for an American, this is way too much room so we naturally step forward which violates the Japanese person’s personal space. This causes them to step backward and for the American to end up chasing them all over their home! On the other hand, there are some cultures that stand much closer when talking than Americans are used to. One example is people from the Middle East. They might shake hands and then take a step forward, putting them just inches away from each other’s face, which is obviously much too close for people in this country. In fact, in the Middle East they have a saying, “When I’m talking to a friend I want to feel his breath on my cheek.” As a result, the American will probably take a step backward, forcing the Middle Eastern buyer to chase him all over the office. The secret to dealing with personal space differences is simply to stand still if a client steps backward or forward after your initial greeting. It may be a bit uncomfortable for you but the key is to do what’s comfortable for the client.


Don’t just automatically stick your hand out when you meet someone for the first time. Instead, introduce yourself and let the other person give whatever greeting he or she is most comfortable with and then simply return the gesture.

much personal space he or she wants. If you do just these three things in the first 30 seconds it will put you light years ahead of your competition. Remember, these could be your clients if you are willing to adjust your practices, just a little, to meet their unique needs. If you do, you will win clients for a lifetime who are more likely than the average person to refer their friends and family to you. There are many other secret ways to build relationships with multicultural clients. To test your cultural awareness go to: and take the “Salesperson Cultural Competency Quiz.”

This is what good customer service, in any language, is all about. These and other cultural mistakes can ruin a relationship before it even gets started. So be sure to let the client show you how he or she wants to be greeted, if you don’t get direct eye contact don’t expect it, and if the customer steps in or back after your greeting just stand your ground and let them determine how

Michael Soon Lee, MBA, CLU, is a former CFP who teaches insurance professionals and others how to increase sales to multicultural clients. He is the author of seven books on diversity including Cross-Cultural Selling for Dummies. Michael is president of EthnoConnect, whose clients include: State Farm Insurance, MassMutual Insurance and more than 1,000 others. His email is

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Send in the S.W.O.T. Team Know the client’s Strengths, Weaknesses, Opportunities and Threats even before the first meeting. By Gregory B. Gagne In our profession, we are trained to complete the fact-finding process with prospects completely on our own. As such, many advisors will spend the first 55 minutes of an hourlong meeting trying to gather all the data and facts from the prospect, leaving only the last five minutes to begin problem-solving and really diving into the meat of the discussion. Clearly this is not an efficient use of anyone’s time. Similarly, as advisors, it is instinctive to pursue those prospects 38

with the highest net worth to build business. Once again this often results in time poorly spent, particularly if the prospect does not share the same goals as your practice or does not see the value in your services. When I began my career in the financial services industry, these were some of the struggles I faced and I see younger advisors confronted with these same issues today. While we are conditioned to do it all, from prospecting to fact-finding to closing the sale, I quickly learned I needed to put systems into place if I was ever truly going to achieve success in this business. As a financial advisor, your time is precious. Delegating work to staff in your practice is critical if you are to efficiently

InsuranceNewsNet Magazine Âť August 2012

carry out your work day. I decided early on the best use of my time was to focus on finding the best potential clients and actually making them clients and leaving the task of gathering data to my staff. Because this research is conducted prior to my first meeting with the prospect, I am afforded time to preview and qualify their files and further understand their strengths, weaknesses, opportunities and threats (SWOT analysis). My team typically sends a letter to a prospective client outlining the materials we will need before our meeting, including full copies of their brokerage statements, copies of their life insurance specification pages and/or longterm care and/or annuities, their most recent federal income tax return, legal


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by visiting or scanning the QR code. Important Notes: Important Notes: All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performance is no guarantee of future results and there can be no assurance, and clients should not assume, that future performance will be comparable to past performance. SMARToption claims compliance with the Global Investment Performance Standards (GIPS®) through 2010. The verification and performance exam reports are available upon request. Historical numbers are based on an all accounts composite and includes all discretionary accounts which were invested in Swan Wealth Advisors, Inc.’s Defined Risk Strategy (DRS) since inception, July 1997. This composite is a combination of accounts utilizing margin and accounts not utilizing margin. SMARTOption follows the non-margin methodology of the DRS. SMARToption is subadvised by Swan Wealth Advisors, Inc., a SEC registered Investment Advisor. Awards and industry recognition are based on the performance of Swan Wealth Advisors, Inc.’s DRS select composite which includes all discretionary accounts which utilize margin. *Since inception gross-of-fees (July, 1997 - December 31, 2010).

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Most life insurance companies see only policies.


documents, wills, trusts, and powers of attorney or advance directives. We do not schedule meetings until all this data has been collected. If they’re not serious enough to give us the data up front, we often cease pursuing said prospect. This decision has been instrumental in our overall growth as a firm. We choose not to spend time with people just looking for a few nuggets of free financial advice. Out of the establishment of our data-collection process came my 5/55 Model. Since I am fully prepared for meetings with my prospects, I like to spend the first five minutes getting to know each other, and then the remaining 55 minutes working on the issues the prospect is facing. Having the facts and data up front not only enables me to offer the most relevant financial planning strategies to the prospect, it illustrates to the prospect I am serious about providing the right solutions that meet their individual needs. I have gained a great deal of valuable perspective from the client experiences I have had. Early in my career there were several times I found myself pursuing prospects with high net worth, no matter their background, and closing the sale always proved challenging. What I soon discovered was there were people with whom I naturally meshed, particularly as it related to their profession. And so, to focus on anyone outside of a set of criteria I had developed was not an effective use of my time. Therefore, assuming the prospect sends us all the documents we request, my practice now has a prospect profile we apply to each item. We determine age, the way the assets might be distributed – are they qualified or non-qualified – personality, core values, etc. If they meet my criteria we move forward with scheduling a consultation meeting with me at our cost. If they do not, we do one of two things. We either refer the prospect to a junior colleague within our firm, or simply send a letter thanking them for their interest, and letting them know we’re not certain we can help them, but if they’d like to move forward with us, to please give us a call. Most of the time, these prospects do not reach out to us after they’ve received this letter. 40

To establish a prospect profile, I recommend examining the existing book of business you’ve established throughout your career and identifying which area and type of person you have the most fun working with. Then, begin laser-focusing your prospecting. Find a process that works and stick with it. While reinventing the wheel every now and then can be beneficial, there is no reason to abandon a system that has proven effective. I repeatedly replicate the same prospect profile procedure throughout the year to put myself in front of the best possible prospects. In the same three to four month period it took me to cultivate a prospect that didn’t fit my profile and would likely never become a client, I am now able to write up to nine cases that have been long-term successes. I now stick to the profile, the personalities match, the assets are fine, they want my help and know they need it. As a result I continue to bring clients on board who work with me for years. Delegating and profiling can be the difference for your business, too. Gregory B. Gagne, ChFC, is a 13-year MDRT member with four Court of the Table and four Top of the Table honors. He is founder of Affinity Investment Group, LLC, in Exeter, New Hampshire, an investment advisory firm offering wealth management and distribution planning services for retirees or those planning to retire. You may contact Gregory at

InsuranceNewsNet Magazine » August 2012

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August 2012 » InsuranceNewsNet Magazine


[ANNUITYWIRES] Income Annuities Lead Sales Growth

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The first quarter had a surprise in store for annuity watchers. According to Beacon Research, the quarter’s top-selling product line, as measured by growth, was the income annuity. That is the first time sales of these products have led quarterly sales growth for the indusSource: Beacon Research try, as tracked by Beacon. Sales for the policies were up by nearly 23 percent over the same quarter last year. In comparison, another top seller – the indexed annuity – saw sales increase by nearly 9 percent over first quarter last year. Both sets of sales results are worth noting, given that they occurred during the prolonged low interest rate environment and that fixed annuity sales typically decline during such periods. Beacon CEO Jeremy Alexander attributes the growth in these particular fixed products to “demand for guarantees in general and reliable retirement income in particular.” In addition, he says that “indexed annuity cap rates looked comparatively good relative to certificate of deposit and annuity fixed rates.” On a quarter over quarter basis, however, income and indexed sales did not fare as well. Viewed that way, first quarter income annuity sales were down by 3 percent compared to fourth quarter 2011, and first quarter indexed annuity sales were down by 2.2 percent. But then, total fixed annuity sales (i.e., sales for all types of fixed annuities) were down in the first quarter as well when compared to fourth quarter. The total sales fell by 2.2 percent to $16.9 billion from $17.3 billion in fourth quarter of 2011, Beacon says.

1Q 2012


ed economic challenges. If Pacific Life is reaching out for more distribution while the market is in a holding pattern, that’s worth following.

and experienced life insurance producers


That’s not a misprint. Pacific Life is expanding its fixed annuity distribution to include select registered representatives who did not previously have access to Pacific Life’s fixed annuity products and services. “These producers can now form a direct relationship with Pacific Life,” says Chris van Mierlo, Pacific Life’s senior vice president-retirement solutions. What is interesting about this is it is happening at a time when fixed annuity sales, industrywide, are generally on the slow track, thanks to the prolonged low-interest rate environment and relatDID YOU




Apparently, investors want variable annuity prospectuses to get to the point, according to an Insured Retirement Institute (IRI) survey. Specifically, 95

percent of surveyed investors say they prefer having a shorter – rather than longer – paper summary prospectus for their variable annuity. That’s a doc-

ument that spells out policy and service details. In addition, 59 percent say that having a short version written

TOTAL ANNUITY SALES FOR FIRST QUARTER 2012, came to $53.1 billion, down by 2.5 percent from fourth quarter, with $36.2 billion attributable to variable annuities and $16.9 billion to fixed annuities. Source: The Insured Retirement Institute

InsuranceNewsNet Magazine » August 2012

in easy-to-understand language would have a positive impact on their decision to consider a variable annuity as part of their investment portfolio. Only 17 percent of surveyed investors report reading any part of the longer prospectus in 2012, IRI says, and that is down by 5

percent from 2011. The 2012 survey sampled views of 255 retirees and pre-retirees with at least $100,000 in investable assets. For this group, it seems, less is definitely more.


Fidelity Investments has just partnered with New York Life on an annuity deal that is sure to draw attention. The deal will enable Fidelity to sell deferred income annuities, or DIAs, issued by New York Life. That’s noteworthy because

DIAs are still relatively rare contracts in the annuity world, and because the New York Life DIA – the Guaranteed Future Income Annuity II – will be the first DIA offered through the Fidelity Insurance Network. DIAs enable the customer to buy an annuity now but delay start of the policy’s guaranteed income stream until deep into the retirement years, say starting at age 85. The contract has no cash surrender value and does not permit withdrawals before the income start date, so this is not a liquidity play. The partnership might make some hay. After all, New York Life says that premiums for the Guaranteed Future Income Annuity (the DIA it has been distributing through its career agents and select investment firms since July 2011) totaled $500 million by June 2012. Those sales far surpassed expectations, the company says.

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August 2012 » InsuranceNewsNet Magazine



Why CPAs Love Life Agents When Not Having a Securities License is a Good Thing By Brandon Stuerke In coaching hundreds of annuity advisors in the art of forming strategic alliances with CPAs, I have often heard the question: “Is it better for me to have a securities license, or is being simply a fixed insurance producer enough?” I think at the heart of this question is the fear annuity and insurance producers have that they are somehow at a disadvantage to their securities licensed competition. While there are some inherent advantages unique to both sides, the focus of this article is to point out the specific advantages of the insurance-only licensed advisor. When I began my career in the financial industry, I did it all. Not only was I insurance-licensed, but I sold fixed products and held my series 6, 63 and 65. Although I was initially selling securities primarily, in 2007 I began focusing on fixed products, selling primarily indexed annuities and life insurance. The interesting part of my story is that it wasn’t until I made this transition that I began incorporating strategic alliances with CPAs into my business. That forced me to convey to my strategic alliances the benefits of working with me rather than the securities-focused producer down the street. We can’t cover all of the elements in forming and implementing these strate44

gic alliances, but here is the important point. If you are insurance-only, you have two advantages over the securities producer: You represent much less risk to the CPA’s existing relationships, and the products you represent are already seen in a positive light by the CPAs you may want to work with.

Protecting The CPA’s Relationships

On the mind of every CPA you approach is this question: “If I recommend you to my clients what is the risk that you may damage my relationships and cost me tax clients?” This is obviously a very fair question considering what they’ve seen every one of their clients go through in the past 10 years. With two of the worst down markets in U.S. history causing 30, 40, and 50 percent losses in their clients’ portfolio, everyone is leery of the securities producer. Not necessarily because the securities rep is a bad guy, but let’s be honest, people still aren’t comfortable that the market has leveled out. Couple this with the fact that many CPAs themselves in the late 1990s began getting securities licensed with the plan of becoming both the tax professional and financial advisor got burned badly by the market in the early 2000s. This cost them dearly in the form of lost tax-planning relationships. All of this has caused the CPA out there in today’s market to be very hesitant to recommend their clients to

InsuranceNewsNet Magazine » August 2012

anyone, but specifically to anyone who recommends securities products. This is where you can separate yourself from the competition. I’ve found in my own experience and the experience of those I’ve coached that CPAs, enrolled agents and accountants are very receptive to the idea of an advisor specializing in fixed products that carry no market risk for the client. This is where you have an advantage over the securities producer. When forming my own alliances I went to great lengths to educate the CPA on the benefits of the products I represent, on principal protection and the built-in tax benefits. The relief on the faces of most CPAs I’ve talked to when I explain that I’m not a market-timer, stock-picker, or some other type of Wall Street advocate was almost comical. Once their guard came down, I got to hear all the horror stories of failed relationships. Now, a couple of the CPAs I work with always start the conversation about me with their clients by saying, “The reason I work with Brandon is because he’s not going to lose your money!” That’s a pretty strong introduction. Couple this with the tax benefits associated with annuities and life insurance and you have a powerful combination that speaks directly to the CPA and other tax professionals. I’ve found that many CPAs are strong advocates for annuity and life insurance products, not because they really understand how the products work but simply because they


The relief on the faces of most CPAs I’ve talked to when I explain that I’m not a market-timer, stock-picker or some other type of Wall Street advocate was almost comical. understand the value of the tax benefits they offer. In a world of “anti-annuity” jargon, it’s great to have a center of influence that can also be a strong advocate for you and the products you represent.

Let’s Be Fair

In an attempt to speak to those of you who do hold securities licenses and even recommend securities products, let me draw this comparison. There are arguments to be made that having securities licenses gives you an advantage in the sense that you can “do it all” for your cli-

ents and offer a wider variety of products and services. While this is true, make sure you approach CPAs with an understanding of what they’ve been through and what they’ve seen their clients go through over the past decade. While there are certainly benefits to being securities-licensed, from the CPA’s perspective, being able to help their clients gain exposure in the market in exchange for potentially higher returns is not one of them. It is nice, however, to know that when it comes to source-of-funds issues, that you won’t end up in trouble with regulators for making “securities recommendations” when recommending clients liquidate securities positions to move their money into a fixed product. It’s also nice for the client who is well-suited for market-based investments, and is looking for more potential upside in their portfolio to know that you can handle both for them. In closing, if you’re not securities-licensed you’re certainly not at a disadvantage if you know how to tell your


story effectively and communicate your core convictions of wanting to insure the security of your clients’ assets. With the CPA’s inherent skepticism of the securities industry and their favorable outlook on products with built-in tax benefits, you have a very strong story to share with the tax professionals you want to work with. Simply taking some time to educate yourself on what it’s been like to be a CPA over the past ten years will give you a tremendous advantage in that you’ll be able to speak to their core fears or hesitations when it comes to referring clients out to an advisor. This is a huge opportunity to stand out from the crowd and position yourself as a real asset for both the CPA and their clients. Brandon Stuerke, financial advisor and Chartered Retirement Planning Counselor, is president of Golden Financial Group. For more information, visit or email Brandon at Brandon.

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August 2012 » InsuranceNewsNet Magazine




Indexed Annuity as Alternative Asset Class The indexed annuity marketing message of safety with upside potential should connect with Dow-shocked consumers. By Linda Koco As you read this, the Dow could be up or down, even dramatically. At this moment the Dow could be plummeting or skyrocketing. It’s that uncertainty, along with ongoing unease about the overall economy, that makes safety-minded consumers nervous, say annuity experts. For that reason, marketers are encouraging advisors to position the fixed indexed annuity as a product that gives consumers the predictability for which they are yearning. Some thoughts on this from a Genworth executive follow. But first, to what extend are consumers expressing such nervousness?

Worry is in the Air

Several recent surveys indicate that consumer and investor confidence is wobbling. The magnitude is not dramatic, but worry is definitely in the air. For example, in June, the closely followed Consumer Confidence Index from the Conference Board fell to 62 in 46

June. The New York researcher said this is down from 64.4 in May (a month that had also seen a decline from the previous month). The June decline is the fourth consecutive moderate decline in the Index, said Lynn Franco, director of economic indicators in announcing the results. “Consumers were somewhat more positive about current conditions, but slightly more pessimistic about the short-term outlook.” Some surveys focus only on investor sentiment, and they are detecting dips in confidence, too. For example, early this month, John Hancock Financial Services surveyed among more than 1,000 investors with household incomes of at least $75,000 and assets of $100,000. The Boston company’s Investor Sentiment Index fell to 19 in second quarter 2012, down from 21 in first quarter. Hancock attributed the decline to “less optimistic views on equities.” Significantly, perhaps, the firm also noted that investors mentioned their biggest personal financial concerns were the decrease in the value of their investments and their ability to save enough retirement. What about high net worth investors with $1 million or more in investable as-

InsuranceNewsNet Magazine » August 2012

sets? A survey of 500 of these investors, completed in late January and early February by Charles Schwab Advisor Services, found that they have only limited optimism about the stock market. Only 29 percent indicated that they were feeling bullish about the market, the San Francisco company says. The largest perceived barrier? Fifty-seven percent of the investors answered “low return on investments,” and 37 percent, “market losses,” says Schwab. Not surprisingly, over onethird (37 percent) said their desire for investment advice during the past four years had increased.

The Role of the Fixed Indexed Annuity

Eric Taylor, national sales manager for Genworth, thinks advisors should be aware of the broad consumer mood when working with clients. That may help with considering whether a fixed indexed annuity would be appropriate. As part of the assessment, he recommends exploring overall client goals for not only the portfolio but also for lifestyle. It is likely that many will look not only at their invested assets but even





BUILDING CHAMPIONS BUILDING YOU What would it be like to hold 15 to 20 appointments per week without any overhead and without the burden of prospecting? Impossible you say? Well, that’s exactly the system that David McKnight has created and perfected over his 15 year life insurance career. This proven system has allowed David McKnight to close millions of dollars of life insurance premium without making a single prospecting call. His schedule is booked nearly six months in advance, he keeps everything he makes, and he never, ever, has to worry about prospecting.





August 2012 » InsuranceNewsNet Magazine




at things such as the decline in housing the same reason. But in each case, the values that has come in the wake of the client’s account value will still be exlast recession. “That decline affects the posed to potential ups and downs. consumer’s feelings of wellbeing – the Where variable annuities are conclient’s mindset regarding their overall cerned, the income guarantee will asfinancial situation,” he says. sure a fixed income at retirement, he The mindset of the client is what the concedes. But he says it won’t prevent advisor needs to address, he stresses. So, the policy’s subaccounts from changlook at which of the available products ing in value in response to market conwill best align with the client’s risk/re- ditions. “Even though the clients have ward characteristics. “Ask if the client is guaranteed income potential, it does litwilling to give away some downside risk tle to sooth them if they get a statement in order to have more modest growth showing a reduction in principal.” potential and less volatility?” The psychology needs to be considIf stability is what the client is seeking, ered in evaluating this, he stressed. “Ask, the fixed indexed annuity should defi- will a decline in the account value of the nitely be considered, he contends. variable annuity make the client feel He believes that many consumers will more constrained or less comfortable?” be interested in talking about options Another problem with recommendthat offer stability. In fact, he believes ing a variable annuity for stability-mindthe recent sales results for fixed indexed ed clients is that clients can “wreck the annuities have demonstrated that the guarantee.” This could happen if the clishift in mindset toward more stability ent makes policy changes that go against has already occurred. provisions that are required to keep the “The fixed indexed annuities are the guarantee in force. A client might make only annuities showing a substantial excess withdrawals, for example, or shift in growth, as compared to variable change their subaccount allocation in annuities and traditional fixed annu- ways that the provisions don’t allow. ities,” he points out. Guaranteed lifetime benefits are im[Note: First quarter indexed annuity portant to customers who want certainsales reached $8.1 billion – up 14 per- ty, Taylor allows. But advisors should cent compared to first quarter 2011, not overlook that a number of fixed inaccording to estimates from LIMRA. dexed annuities have the features, too. reported similar reSo a point to bring up with clients is, sults – first quarter sales of $8 billion in “If you can have a similar income guar2012, up by more than 13 perantee in either a variable annucent from first quarter last year. ity or a fixed indexed annuity, Meanwhile, variable annuities what is more important to you? saw a 7 percent sales decline The stability of the principal or in first quarter, and fixed rate greater growth potential but deferred annuity sales were with an opportunity for loss in EXTRA down 28 percent, according to account value?” For more details LIMRA. For more details, see The advisor needs to educate on annuity sales Why Indexed Annuities Keep clients about these factors, Tayresults, go to: lor insists. Some clients may not Charging Ahead.] In the face of volatility and be aware of the issues involved. uncertainty, consumers are asking, “What alternatives do I have, and where Bond Funds and Other Alternatives can I go?” Taylor continues. In order to provide greater stability in the overall portfolio, some advisors Compare to Variable Annuities recommend bond funds, Taylor points Some dual-licensed advisors are con- out. The idea is that will help diversify sidering using variable annuities with the portfolio by introducing another guaranteed living benefit options (such asset class. as guaranteed withdrawal benefits) to However, bond fund ownership inject more predictability into the port- means the client will take on interest folio, Taylor allows. Others are consid- rate risk, he says. That happens because ering bonds or bond mutual funds for when interest rates rise, bond prices 48

InsuranceNewsNet Magazine » August 2012

… the fixed indexed annuity can take the place of a bond fund or portfolio. ‘It offers long-term capital preservation with less volatility.’ fall. Given that interest rates are now about as low as they are likely to go, he says, the likelihood is that rates will rise in the coming years. In that case, the customer will be seeing a decline in value of the bond account. That’s not what stability-minded clients want to have happen. He maintains that the fixed indexed annuity can take the place of a bond fund or portfolio. “It offers long-term capital preservation with less volatility. And even if interest rates rise, this will not impact the value of the principal.” Advisors are also looking into placing clients in so-called alternative investments – real estate holdings, hedge funds, commodities and the like – to diversify the holdings and gain the advantage of holding assets that are not correlated with the stock market. In fact, Jackson National Life, Lansing, Mich., just reported that over 90 percent of 2,000 financial advisors that it surveyed recently are planning to increase use of alternative asset classes over the next year. Taylor suggests that advisors might look at positioning the fixed indexed annuity as an alternate asset class. That is, the product can function as an alternative to variable annuities, stocks, mutual funds, and bonds. “Use it as hedge against rising interest rates and volatile markets,” he suggests Think of the fixed indexed annuity as a way to create a new asset class for safe accumulation, Taylor concludes. The reason: it is an asset class that offers stability of principal without the interest rate risk of bond, and the products offer guaranteed income options as well. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@



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For the latest on the health-care reform case aftermath, go to

Employers Increase Benefits That Improve Employee Health


45% 33%


2008 Since 2007, benefits that reward employees for improving their health have increased, a sign that businesses recognize that employ- Percentage of employers offering health and lifestyle coaching ees value these benefits and are looking for Source: Society for Human Resource Management 2012 Survey ways to cut operating costs. The percentage of employers offering health and lifestyle coaching was up from 33 percent in 2008 to 45 percent in 2012, and rewards for completing a health and wellness program increased from 23 percent in 2008 to 35 percent in 2012, according to an employee benefits survey by the Society for Human Resource Management (SHRM). Employer spending on benefits remained stable in 2012 with organizations spending an average of 19 percent of an employee’s annual salary on voluntary benefits, and 18 percent on mandatory benefits. The survey examines 297 benefits, the four most common in 2012: paid holidays (97 percent); prescription drug program coverage (97 percent); dental insurance (96 percent); defined contribution retirement savings plans (92 percent).


Medicare hospital costs for stays ending in death were over $10 billion in 2010, which accounted for 6.9 percent of all Medicare inpatient costs and 61 percent of total hospital costs for stays ending in death, according to an Agency for Healthcare Research and Quality brief. Privately insured deaths cost nearly $3.6 billion, accounting for 20 percent of total hospital costs for stays ending in death. A Medicare Current Beneficiary Survey found, on average, the last six months of life account for about 70 percent of cost for the final twelve months of life.

Medicare paid 61 percent of decedents’ costs, Medicaid paid 10 percent, and other payers paid 12 percent.


In 2011, critical illness sales were up 20

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Rounding out the top five growth products for the industry after critical illness, accident, and UL/WL were supplemental medical/gap coverage and hospital indemnity insurance. “Critical illness, accident, and UL/ WL also ranked at the top of the carriers’ lists when asked what product would be growth products over the next few years for their own company.” adds Bonnie Brazzell, vice president at Eastbridge. “Over the past few years, we have seen a great deal of similarity with the products carriers see as growth products for the overall industry and their company,” adds Brazzell.


Nine in 10 retirees with at least $250,000 in household assets are not concerned about paying for their future health care costs beyond what Medicare covers, says a Harris Interactive poll of 1,250

HEALTH SAVINGS ACCOUNTS (HSAs) have continued to gain in prominence in recent years, reflecting the trends of shifting costs and decision-making to employees. Source: Society for Human Resource Management’s 2012 Employee Benefits survey report

InsuranceNewsNet Magazine » August 2012

Americans, including 625 retirees. This contrasts with the nearly half (46 percent) of boomers nearing retirement with the same amount of assets who say they are worried about health care costs. Forty percent of retirees say their biggest expense is paying monthly housing bills, 21 percent say the cost of health

care and 16 percent say providing for their family. Those nearing retirement say they expect health care to be their biggest expense (45 percent).


W ho cou ld have pred icted t h is? Error rates for private health insurers on paid medical claims dropped from 19.3 percent in 2011 to 9.5 percent in 2012. Even so, the commercial health insurance industry still paid the wrong amount for nearly one in 10 medical claims. Providers with the highest accuracy rating on the list of large commercial health insurers were UnitedHealthcare, Anthem Blue Cross Blue Shield and Humana. Other AMA Report Card measurements: Timeliness, Private insurers have improved response times to medical claims by 17 percent from 2008 to 2012; transparency, health

insurers have increased the transparency of rules used to edit medical claims by 33 percent from 2008 to 2012; denials, medical claim denials are up, reversing a downward trend between 2008 and 2011.

QUOTABLE The irony is that people who stay in shape have a better quality of life in retirement but may end up with higher health-care costs because they’re alive longer and need care for more years. — Kevin McGarry, director of the Nationwide Institute.



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The College Planning Lead Machine Save tuition, protect their future, and be a HERO.

By Bill L. Levinson


f producers want to get the attention of parents or grandparents of school-age children, two words are all they need: tuition discount. Good producers, no matter what they sell, know they need to understand what’s troubling their clients. The really successful producers know not only that, but also how to help ease their pain. Everybody knows that what really hurts many families these days is college tuition. The National Center for educational statistics said the average tuition at a private college or university was $32,475 for the 2009-’10 school year, the latest information available. And it climbs every year at rates far exceeding inflation. That’s just the average. Some elite private schools are firmly in the $40,000-plus range. A couple of college-bound kids in the house would be enough to make even a wealthy parent sweat. Producers can help ease that pain while generating business, a win-win if there ever was one. Many private colleges and universities offer merit aid that a Philadelphia-based firm has turned into a business venture — a unique client rewards program that financial advisors can access through insurance marketing organizations. SAGE Scholars was founded in 1995 by the former director of admissions and financial aid at The Wharton Graduate Division of the University of Pennsylvania. The Tuition Rewards private college and university enrollment marketing consortium is a growing enterprise that has expanded to 292 member colleges in 45 states as of June. Families love the program. Agents can show parents how to use life insurance and SAGE to help pay for a child’s college education — as well as provide a tax-free death benefit. The best part is the client doesn’t pay anything for the SAGE Scholarship, and

the agent doesn’t give up any commissions. The program allows clients to earn points toward tuition at schools participating in SAGE. Advisors can promise prospective clients or seminar attendees a 500-point bonus ($500 value) just for listening — no purchase necessary. One point equals one tuition dollar. Meeting face-to-face with an advisor can lead to another 500-point bonus, again, no purchase necessary. Prospects and clients receive 500 more points for activating their account online — and 500 more for each student enrolled. If clients purchase a qualifying life policy, they can receive 4,000 points in the first-year of the policy and 2,000 every year as long as the policy is in force and also as long as the clients log into their account at least once annually. The reward is ultimately given by the college — not by the insurance carrier, the agency, the agent or by SAGE Scholars. The colleges that participate in Tuition Rewards include some of the nation’s top engineering and science schools: Clarkson, Embry-Riddle Aeronautical, Florida Institute of Technology, Illinois Institute of Technology, Rensselaer Polytechnic Institute, Rochester Institute of Technology, and Worcester Polytechnic Institute. Arts leaders include Pratt Institute and Savannah College of Art & Design. Some national universities known for NCAA Division 1 sports participate: DePaul, Drexel, Duquesne, University of Dayton, and University of San Diego. Some families in the program have saved as much as $40,000 on tuition bills. Further, savings under the Tuition Rewards program are income-tax free, so the real economic benefit of the program is much greater. Financial aid calculations take into account a family’s assets. Colleges are not asking for insurance policy cash values when determining financial aid. So, any money moved to a permanent life policy from a mutual fund, for example, can in-

crease financial aid eligibility. Insurance agents and agencies can participate as a way to get in front of audiences, to differentiate themselves, and to focus the conversation on college savings — a relatively “new market” for the insurance industry. For insurance marketers, Tuition Rewards is a proven lead generation program. Unlike traditional lead generation tools like mortgage protection leads and final expense leads, very few agents and agencies are working in the college planning market and promoting the Tuition Rewards program. Advisors can use the SAGE Program to help families afford a better education — and create their own lead-generating machine using this program. Agencies can use this program to recruit new agents and create new lead generation programs. This gives agents a complete turnkey platform to help clients with life insurance as well as an exclusive college savings plan. Email blasts/campaigns, brochures, presentations and customized agent websites are available. We strongly encourage agents and advisors to sign up all of their current clients. It’s good business for advisors to stay in touch with their clients and reward them. Advisors can reward clients with 500-point bonuses for annual review meetings — and for a referral. People are sometimes suspicious to hear that a group of colleges will give away scholarships. But, it is credible when an advisor says that some colleges might choose to give discounts to attract more and/or better students. The term “tuition discounts” is a proven conversation-starter. Bill L. Levinson is the managing partner at Levinson & Associates. He can be reached by email bill@

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VAs Edging Up in Financial Advisor Offerings Annuity sales may be flattening from last year, or even dropping in some markets, but it is not from decline in advisor use of the products. By Linda Koco In fact, more than 80 percent of financial advisors say they have continued to sell variable annuities this year, the same percentage as in 2011, reports Cogent Research. In addition, 38 percent say they are selling fixed annuities, a percentage that has been inching up since 2010, when it was 30 percent. Both findings are pretty interesting, given the much publicized cuts and exits that some annuity companies have made during the past year, says Meredith Rice, project director for the Cambridge, Mass., research firm. She is referring to the concern voiced by a lot of annuity watchers earlier this year, that the cuts and exits – particularly in the variable annuity market – could have a dampening effect on advisor interest in selling annuities. So far, that does not appear to have happened. The findings come from Cogent’s Advisor Brandscape Report, the 2012 version of which Cogent released to its clients. The Brandscape Report annually surveys financial advisors from five distribution channels (national wirehouses, regional broker-dealers, independents, banks and registered investment advisors) about their views on various financial topics, including annuities. The 2012 report reflects views of 1,741 advisors.

Allocation to Annuities Continues

Rice points out that not only have advisors continued to sell annuities in the same percentage in 2012 as in 2011, but their allocation to annuities as a percent of assets under management has remained the same as well. That is, their allocation to variable annuities is 54

11 percent in both years, and their allocation to fixed annuities has hovered between 1 and 2 percent in both years. “That’s flat, from year to year, but it’s interesting considering all the changes that have occurred in products and the market,” she says. As the 2012 allocation percentages indicate, the surveyed advisors give variable annuities much more attention than fixed annuities. In fact, advisor sale of variable annuities (81 percent) is just behind advisor sale of mutual funds, which at 95 percent is the top product that the polled advisors say they sell. The variable annuity sales are not evenly spread between the distribution channels, of course. For instance, only 29 percent of registered investment advisors (RIAs) report selling variable annuities in 2012, Rice points out. By contrast, 88 percent of national wirehouse advisors in 2012 say they are selling variable annuities. “And that’s up from 2011, when 81 percent of wirehouse advisors said they sold variable annuities,” Rice said. The comparatively low usage among RIAs is understandable, since these advisors tend to be mostly fee-based. They are less interested in selling variable annuities because the majority of these products are designed for commissioned sales. What is spurring the growing interest of national wirehouse advisors in variable annuities? “I think it has to do with client demand,” Rice says. In today’s volatile economy, “people want to protect their principal, and those who are near or at retirement want to have attractive retirement income benefits.” Today’s variable annuities, although scaled back, still offer guarantees that do those things, she indicates.

Curious Finding

A small percentage of advisors in the 2012 study did report that they have actually

InsuranceNewsNet Magazine » August 2012

decreased their use of variable annuities. The surprising thing is that “these advisors aren’t necessarily increasing their sales of fixed annuities,” Rice notes. “Instead, they are increasing use of separately managed accounts, exchange traded funds, and in some cases alternative funds and strategies (hedge funds, structured products and the like).” Choosing separately managed accounts and exchange traded funds over variable annuities is not unheard of during times of market volatility. But using alternative products and strategies this way does raise an eyebrow. Why might that be happening? For one thing, at least 75 percent of all advisors surveyed by Cogent in 2012 say they are using some type of alternative product or strategy. That percentage is similar to last year, Rice points out, adding that use of alternatives is particularly strong in the national wirehouse channel. So, it could be that those advisors who are throttling back on use of variable annuities in favor of alternatives are simply going with the flow. After all, only a handful of variable annuities offer alternative options, so the advisors may feel forced to go elsewhere if their own variable annuity carriers do not offer alternative funds. Then there is the matter of rationale. The Cogent survey did ask advisors why they are using alternative investments and strategies. A few of their answers have an annuity-like feel to them. Consider:

VAs EDGING UP IN FINANCIAL ADVISOR OFFERINGS Eighty-eight percent say they are using alternatives for “diversification or use of non-correlated assets,” and 47 percent of those advisors listed this answer as their top reason for selling alternatives. (The same has been said for recommending annuities, at least where diversification is concerned.) Eighty-three percent say they are using alternatives for “downside protection of the portfolio or risk management,” and 27 percent of this group said this is their top reason. (Downside protection is a major reason why advisors recommend use of annuities with guarantee riders, indexing, etc.) Sixteen percent say they are using alternatives for “managing tax benefits for clients,” and 2 percent of these mentioned this as their top reason. (Likewise with annuities, where the benef it of ta x deferra l is a major consideration in the buy recommendation.)

The advisors mentioned a few other reasons for using alternatives, but the above three stand out as ones that are also reasons for recommending annuities. So it could be that the advisors who are scaling back on variable annuities and not using fixed annuities instead are simply looking for alternative investment options for their clients – and, in particular, alternatives that act like annuities. If that is the case, as more carriers add alternative options to their variable annuities (a trend that is under way now), these particular advisors may once again ramp up their use of annuities.


Rice says the Cogent survey did detect advisor discomfort with annuities in two areas. One concerns how annuities fit into the advisor’s compensation structure (fee-based, commission-based or a mix of both). For example, fee-based advisors don’t want to work with commissioned products. The other is what Rice terms “a somewhat lower overall impression of provid-


ers’ brand favorability.” In some cases, she says, “the advisors’ impressions of annuity carriers are relatively low, even among current users of variable annuity products.” And the overall trend in this area is “flat” when compared to 2011. But areas of advisor discomfort can be opportunities for carriers, she adds. For instance, some carriers are working on the compensation issues right now. And where brand is concerned, carriers can address the concerns and strengthen their image with the advisor community. In particular, she says, carriers can differentiate themselves by showing commitment to the business, demonstrating they have the financial stability to support their guarantees, and providing a range of features in their products. “Those things are very important to advisors,” Rice says. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at Linda.Koco@

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Tailor Your Questions for the Best-Fitting Solution When working on the risk side of financial services in areas such as life insurance, it is imperative to remember the need to be extremely client-specific. By David Alarid I believe that 90 percent of the business is simply asking all of the right questions when meeting with a client for the first time. As financial advisors, we work in an inverted-triangle world, where the point is at the bottom. The top of the triangle represents the many questions you ask your client in order to get to the one specific, tailored solution at the bottom point. Each client’s solution should be unique to that individual.

Living Longer Increases the Need for Permanent Policies

When introducing the option of life insurance to clients, educating them on life expectancy is extremely important. If clients understand they may live well into their 80s or even 90s, they will make smarter financial decisions regarding products like life insurance in order to ensure protection for their families. People are simply living longer today compared to the 1950s, and life expectancy will only increase with time. In my experience it’s rare to find a client who will benefit from purchasing one type of life insurance policy. Most clients may benefit from a combination of term and permanent life insurance, depending on their unique characteristics such as family situation and age. Term insurance may not last long enough to ensure life-long security, and some or all of their protection needs to be designed to last a lifetime. This has become increasingly important in the past few decades as life expectancy has continually increased. Each client is different, and it is imperative we ask many questions to understand their goals for their life insurance policy. 56

One thing I’ll typically ask is, “If you saved as much money in the next five years as you have in the past five years, would you be happy with the result?” Term Insurance as a Temporary Fix

While I normally recommend a combination of term and permanent life insurance policies, sometimes a particular client will come through the door, and it will make sense for them to only purchase 100 percent term or permanent coverage. Generally I suggest the purchase of term-life insurance plan to younger married couples who are just starting to build a life together. This client type is scraping together funds to purchase their first home and is just about ready to start a family. Frankly, term life insurance is the affordable option for them. While I would recommend this as a temporary solution, I would remind them this is just a starting point. In the future, they will need to prepare for a larger, permanent life insurance investment to provide added value. Every now and then I’ll work with a couple who won’t fully understand the reasons why the purchase of some permanent life insurance may be essential. Because they are young and looking to have children in the coming years, it makes sense to protect themselves and their children. My job is to encourage and remind them of the importance of looking toward long-term goals. This all goes back to asking good questions. One thing I’ll typically ask is, “If you saved as much money in the next five years as you have in the past five years, would you be

InsuranceNewsNet Magazine » August 2012

happy with the result?” Remind them it makes sense to use smart savings strategies and consider different options so they don’t encounter the same saving issue in the next five years. My goal is to help people understand strategies they must develop over time to get them where they want to be financially.

Asking Questions to Understand Client Spending Habits and Long-Term Goals

Asking the right questions will lead you to suggesting the best investing tactics for your clients. By educating our clients on life expectancy, we can truly aid in the comprehension of the importance of protecting loved ones with a client-specific life insurance strategy. By asking the questions to better understand your client and their objectives, you can ultimately lead them to the perfectly tailored solution to help them achieve these goals. David Alarid is an associate partner with Tax & Financial Group with more than 25 years experience, specializing in comprehensive investment, retirement, estate and business planning strategies as well as life, health and disability insurance programs. David is a qualifying and life member of the Million Dollar Round Table with Court of the Table honors. Reach David at


InsuranceNewsNet Magazine is now available on the iPad Newsstand You can now download INN Magazine for free on your iPad from the App Store Newsstand. Simply search for InsuranceNewsNet in the App Store or visit for a direct link and you’ll be up and reading in minutes. August 2012  InsuranceNewsNet Magazine




Wendy C. Waugaman, 1960-2012 Wendy C. Waugaman’s death was startling not just because she was gone too early in life, but because of the expansive absence she left behind where her good works and enormous influence used to be. By Steven A. Morelli Wendy C. Waugaman was one of those people who had many roles and did them all well – insurance company CEO, attorney, certified public accountant, community leader, tri-athlete, pianist and one of the toughest opponents to the SEC’s attempt to regulate indexed annuities. Odds are good that Waugaman, who died on June 18 at 51 after a two-year battle with cancer, will be remembered more for a quality – courage. Her courage coupled with her sharp intelligence pushed her to excel in her many areas of work, but it also allowed her to believe in her instincts about people. Nick Gerhart learned about Waugaman’s courage as a young attorney when he was interviewed by her for a job with American Equity, the nation’s No. 3 seller of indexed annuities. “I said I don’t know anything about annuities, but I promise I’ll learn as fast as anybody and I’ll never let you down,” Gerhart remembered. “She looked at me and said, you know, I’ve got a good feeling about you. How much money do you want to make and when can you start?” It was a good bet on Waugaman’s part, because as American Equity’s corporate counsel, he was one of the key people on the front lines in the fight against the Securities and Exchange Commission’s 151A, the rule that would have allowed the agency to regulate indexed annuities. Many companies, particularly American Equity, believed SEC 151A would have killed the independent distribution channel for indexed annuities and may have destroyed the market segment. Gerhart was named Insurance Commissioner of Iowa in June, replacing Susan Voss when she retires at the end of this year. Gerhart said Waugaman’s confidence, mentoring and influence were instrumental in his success. 58

Wendy Waugaman was the CEO of American Equity but her influence and impact went far beyond her company.

Gerhart benefited from Waugaman’s courage to say what she felt should be said and the judgment to know the right moment to say it. “She always knew what to say and always had advice for me,” Gerhart said. “Even if I didn’t want to hear it, it turned out to be right.” Gerhart turned to that advice in many difficult times, particularly during the 151A fight. Waugaman helped form a coalition against the rule – an effort that required battles on a few fronts. First, the group opposed the SEC during the rule-making process. But the agency’s commissioners approved the rule despite thousands of opinions filed against it. After that defeat, Waugaman and the coalition redoubled their efforts. They pursued a legislative strategy and also filed a lawsuit to prohibit the SEC’s regulation. After many setbacks and during the whirlwind of legislation in the post-economic collapse, a small group, including Gerhart, was about to get an amendment into the enormous Dodd-Frank financial reform behemoth bill, when yet another challenge popped up. This one would have been an unpalatable compromise. “Everything was coming together and unraveled that same day,” Gerhart said. “That night we had a phone call around midnight. I got Wendy on the phone with about four or five of us and we just didn’t know what the right decision was. We could compromise on a couple of key

InsuranceNewsNet Magazine » August 2012

points and get something in the bill or we don’t compromise and possibly lose it all. She was against the compromise and said let’s roll the dice and see if it gets in the bill. It was pretty gutsy, but it turned out to be the right decision.” The lawsuit also was decided in the coalition’s favor, further sealing SEC 151A’s demise. Waugaman was a good mentor and had a model mentor herself. David Noble, the founder of American Equity, was important to Waugaman even while she was attending Notre Dame Law School and was a clerk at a law firm, where she later helped Noble start American Equity in 1995 as an outside counsel. She joined the company as chief financial officer in 1999 and became chief executive officer in 2008, becoming the only female leader of an Iowa-based insurance company, according to Business Record in Central Iowa. “She learned from Mr. Noble and Mr. Noble is an amazing person, too,” Gerhart said. “So you had this amazing knowledge transfer.” Noble said Waugaman was eminently capable for her position but that she also had the two qualities that he required, courage and ability to be part of the tight 340-member unit of American Equity. “I’ve used the word ‘family’ around here for some time, and in many of the cards that we received about Wendy, people said that we were a family, not a

ADVERTISER INDEX corporation,” said Noble, who is still the chairman of the board. “To some extent, it explains why the loss of her was very, very personal.” Former CFO John Matovina was named interim CEO on June 8 when Waugaman took sick leave. She died 10 days later, much to her colleagues’ shock. “She was undergoing health treatments,” Matovina said, “and continued to operate at a very high level until she took her leave.” Gerhart knew that particular part of Waugaman – the hard-working, tough woman that never had a “woe-is-me” moment during her ordeal. But he also knew the happiness she found late in her life when Wendy Carlson became Wendy Waugaman in 2009. “When I first met her, she was all business,” Gerhart said. “She had a transformation when she got married. Her husband Lou was just an incredible guy and I’m just so happy that he came into her life when he did. I remember she went on a trip with Lou and she left her Blackberry at home – on purpose. It was the first time she’d done that since she had a Blackberry. So she really was able to strike this balance the last couple of years of her life.” Gerhart met Waugaman for coffee five days before she died. She knew her days were few but all she wanted to talk about was Gerhart’s appointment as commissioner and his family. He said he’ll always remember Waugaman’s poise and courage even in the face of death, but he’ll also remember her as the mentor who gave him room to grow simply by having faith in him. And not just in him, but in many others she trained and then empowered to make important decisions and who now owe their thriving careers to her. “Wendy really did believe in me and gave me more and more stuff to do at a young age, and I think a lot of CEOs would probably say she’s kind of crazy to do it,” Gerhart said. “But she knew us and then trusted us. That’s a good leader. That was Wendy.” 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

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Behavioral Economics – Sales from Your Clients’ Point of View likely to use trial-and-error methods and rules of thumb in reaching a decision, and those decisions are often just as good as conclusions based on other, more rational models. Keep things simple to help prospects decide, and make a recommendation as to what they should do.

Behavioral economics is a blend of psychological and economic insights into how people manage risk and make important financial decisions. By James O. Mitchel Research in this emerging field already has produced two Nobel Prizes in economics. Considerable evidence has accumulated over the years demonstrating that people do not process and act upon that kind of information in the ways we might typically assume. We know most people do not have a good understanding of probability and risk, and many also face constraints – such as the household budget or emotional concerns – not contemplated by traditional economic theory. Because of these and other limitations, economists and psychologists began to look for alternative models to explain this area of decision making. The result was behavioral economics, which provides more answers and acknowledges the role that psychological factors play in financial decisions. It helps us understand the seemingly irrational decisions consumers make about insurance and investments. The evidence that using the principles of behavioral economics can improve your sales effectiveness is compelling. That’s the premise of this article – you can influence the choices your prospects make by what you say and do to address these underlying psychological factors. Research has identified a number of specific principles of behavioral economics that help explain the buyer’s thought process in deciding to purchase life insurance. Utilizing these insights can help you create more persuasive and effective presentations – and close more sales. Here are a few key takeaways to consider when meeting with a prospect: People do not have a real sense of the value of money. They make 60

Your ability to see and understand the sales process from a client’s point of view will give you an advantage. decisions based on the perceived present value of money. So do not sell on price, but rather on the emotional value your products and services offer. Also, not all money is viewed or treated the same. You must recognize that “we cannot afford it” doesn’t always mean they don’t have the money. You may have to help your prospects “find” the money for them to decide to purchase. Emotions and rational thinking both play a part in their decisions, but emotions are more important. An emotional response, such as regret, fear, love or greed, is crucial in encouraging the decision to purchase. People respond best to vivid and personal narrative information. Stay away from general statistical data whenever possible. If you cannot get an emotional reaction from the prospect, chances are you won’t get the sale either. Simplify the decision-making process. You know from your own sales experience that buying life insurance can be complicated. Financial products are often difficult to understand and prospects worry about making the wrong decision, so they may avoid making any decision at all. Where complex financial decisions are involved, people are more

InsuranceNewsNet Magazine » August 2012

People dislike losing more than they like winning. Early death is both unpleasant to think about and low in probability, so people tend to assume it won’t happen to them. To avoid the “loss” of paying the premium they might gamble that they will not need the “gain” of insurance. This can be another reason not to make the decision to buy life insurance. People learn from others. Research also shows that people like to do what others do. They assume that something is good (or bad) based on the behavior of trusted family, friends and neighbors, and they will often copy another’s decision in choosing to buy life insurance. It’s clear that behavioral economics offer a different way of thinking about how and why your clients make their financial decisions. You can adapt your sales approach to incorporate some or all of these principles and insights. You may also find that behavioral economics reinforces methods you intuitively know and already use successfully in working with prospects. Your ability to see and understand the sales process from the client’s point of view will give you an advantage that can translate into a better sales experience for the prospect and for you. James O. Mitchel, Ph.D., CEBS, vice president and director, LIMRA’s Developmental Research, is responsible for LIMRA’s exploratory research in the United States and Canada focused on new and developing areas within the financial services industry. He also is responsible for research in the affluent market. He can be reached at

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Good to Great: Jim Collins explains how advisors can make the leap to enduring success.