My "Bersonal" View

Kim O’Brien

We Protect Annuities! Annuities Protect Americans!

ACLI Moves Closer to Fiduciary Lawsuit

May 11, 2016

Americans for Annuity Protection continues to work with its key contacts on litigation and legislation efforts to fix the damaging DOL requirements that will harm retirement savers.  We are pleased to share this report from Insurance News Net and will continue our efforts to change the outcome and ensure annuities remain accessible and affordable for all Americans.

John Hilton reports…

The American Council of Life Insurers moved one step closer to a legal challenge of the controversial Department of Labor fiduciary rule.

“The ACLI Board of Directors has approved exploring the details of a legal challenge to the Department of Labor’s fiduciary regulation,” spokesman Jack Dolan said in a statement. “ACLI will make strategic decisions based on further direction given by our member companies.”

“Research shows that clients who put their retirement plan in writing are more likely to be successful in managing their income and assets in retirement”

Have you ever written down your goals? There is a reason why so many goal oriented self help books recommend you do that. The reason is if you write down your goals it becomes more tangible. I know when I wanted to lose weight, just thinking about it did not really work. But, when I added an app to my phone that asked me what my goal was and then gave me the plan to reach my goal- I lost all the weight I wanted to lose and more.

The same is true for your clients. Not for losing weight, but for planning for their income needs in retirement. Once they understand the need, it is easier to develop a plan, and more importantly, to implement a plan.

Research shows the following:

• Clients with a formal written plan are more likely to explore options for guaranteed income plans.
• Plan development often leads to developing a need for financial products that help manage risk.
• Formal written plans increase client confidence and help bond the planner to the client as someone who better understands their needs.
• Clients who get a written plan are more likely to refer you to others.

For all those reasons it is a good idea for the planner to offer a written retirement plan.But more importantly, the written plan is the key for getting your client to retirement in a positive way.

To figure out whether your clients are best served by a meeting, look at the alternatives. Can the goal  be accomplished other ways? Do you have clear goals for the meeting? Will the right people be there? Are you prepared?

Ask questions- listen to the answers, then ask more questions. Present ideas concisely, avoid digressions and interruptions and keep the focus on “how,” not “why”—because “why” should be implicit in your clients  goals.

Meetings are effective only if they advance the client’s  goals and an unnecessary meeting can actually damage or kill that idea.

When can you get more out of a meeting you don’t have than from one you do? When you can save everyone time.

In the on-going struggle of carriers trying to cope with the low interest rate environment, another carrier is being sued for the way they are going about mitigating their risk at the cost of their clients.

ISN no longer represents Transamerica- but if you are currently writing with them you might want to read this article from Mike Smith.

Transamerica Hit With Class Action Law Suit Over Cost of Insurance(COI) Increase

As a follower of Steve Lewitt- I thought his take on the future and the DOL was worth sharing. Our world is changing- better or worse is a matter of opinion. Our firm is ready for the challenge. Call us and we can help you get ready.

FROM STEVE LEWITT:

Okay, you’re getting it in stereophonic, high resolution and surround sound – the DOL Ruling is here!

The question is if this is one of those things we don’t expect that’s really good for us – that would make it a serendipitous event; or is it zemblanity, something that’s come about that should make you unhappy?

In my world I always make lemons into lemonade, so it doesn’t matter to me whether it’s a serendipitous or zemblanitous event. Either way I’m good, as so you should be too. Let’s see why.

Steve Lewit’s Selling World

Let’s face it, most consumers do not hold us advisers in the highest of esteem. In a recent Deloitte study, researchers found that 58% of Americans don’t have a formal retirement plan in place. One potential reason for this is rampant mistrust in the financial services industry. Only 2 out of every 10 polled said they had trust in financial services providers. Looked at from the other end of the scope and that means that 80% said they do not have trust in financial service providers. I’ll repeat that – 80% of our potential clients do not trust us. That’s almost on par with car salespeople, who are the lowest on the trust list.

That’s not all. While I’ve searched for the quote (I’ll find it sooner or later), a well know financial person said something like, “I love the DOL Ruling. Think about it. The industry has been telling people for 20 years that it doesn’t do things that are necessarily in their best interests, and the DOL Ruling corrects that. The problem is, people don’t know that they haven’t been getting the best advice and they have little or no idea about the DOL Ruling.”

Look at it this way, you need to balance the DOL Ruling’s “red tape” with the benefit of being able to look your client in the eye, educate them on the meaning of Fiduciary, how business has been done in the past (not by you, of course) and that the industry has taken a major step forward (and has finally begun to catch up with what you’ve been doing for years).

Now, if you aren’t securities licensed already, you might be saying to yourself that the heat is on you to get your Series 65 and become an RIA or IAR. Sure, that’s a bunch of work and, in fact, we’ll probably see a bunch of people drop out of the industry because of that (along with the lowering of up front commissions on FIA production). While I feel badly for those people, there’s another part of me that just says “tough luck”. If you’ve been a one trick pony pushing as many qualified assets into FIAs as you can for a living, or for others, pushing as much as you can into the market so you can manage it, and you want to stay in that mode, it’s probably time you hung it up anyway. Those days are simply over! Today’s advisor needs to be holistic in practice, unbiased in advice and put the client first no matter what. That means using market and insurance products objectively without pushing people one way or the other.

Making lemon into lemonade requires a little effort. In my practice I’m preparing; as part of my client take home package (I give out after the first meeting), I am including information that puts meat on the DOL Ruling and how it performs and benefits our clients and the general population. If you want to make this Ruling work for you then you must bring it to light and make it part of your practice. If not, it will just be a Ruling which, in your mind, is just another pain in the butt levied on you by a government organization.

Conclusion

Is the DOL Ruling glass half empty or half full for you? If it’s half empty and you are in the zemblanity camp, I suggest you take a few minutes (or hours) to chill and think this thing through. Once you get your left-brain around it you are going to find that the glass is really more than half full and the DOL Rule is a serendipitous event. Your choice, of course!

Until next time,

Steve Lewit
CEO & Co-Founder
New Science of Selling

Dear NAILBA Member:

Today, the Department of Labor will issue a final fiduciary rule that modifies the market for advice and product sales to qualified plans, plan participants, and IRA holders—which could make it more difficult for insurance producers to best serve their clients. As part of our partnership with AALU, we offer the following:

AALU’s top priority is to fully analyze the impacts of this rule, and give our members the tools and resources needed to navigate the inevitable marketplace disruptions that will result. We have engaged Drinker Biddle as counsel to assist in this effort, led by Brad Campbell, a former ERISA “top cop” at the Department of Labor under the George W. Bush Administration and a nationally-recognized retirement benefits expert.

Drinker Biddle will be providing a complete analysis of the rule’s details and the practical implications for the life insurance industry in a report that we expect to deliver to our members shortly. Additional analyses, fact sheets, and checklists containing actionable information and guidelines concerning implementation will be subsequently provided by Drinker Biddle and AALU staff over the next several weeks and months as we comprehensively assess the rule and its implications. Drinker Biddle will also participate in AALU’s 2016 Annual Meeting during our main stage Super Session panel on the Department of Labor rule.

In addition to these efforts, AALU has created a DOL Implementation Task Force—which includes representatives from our membership and many of our Issue Alliance partners—to facilitate a more cohesive life insurance industry response to the DOL rule, help establish best practices, and harness the knowledge of carriers and our experienced members to explore changes to product designs and new distribution avenues that could result.

Yet while we are focused on implementation issues, we will continue our advocacy to correct any shortcomings with the rule that negatively impact our members and the retirement savers you serve. We’ve worked with our industry partners over the last year to educate Congress about the many problems with the proposed rule as written—AALU submitted several formal comment letters to DOL, testified in front of the DOL and Congress, and held over 200 meetings with Members of Congress—and a number of Senators and Representatives in both parties have expressed serious concerns that the rule could harm the very individuals that the DOL intends to help. To the extent that the final rule fails to address Congressional concerns, we will continue to work with policymakers to explore all avenues  to ensure that average retirement savers’ needs are met.

Below, you will find links to a live stream of DOL Secretary Perez’s rollout event at 11:30am today, a link to the full text of the final rule in the Federal Register (posted at 11:15am), and links to additional DOL fact sheets.

Thank you for your commitment, and for being a member of AALU.

Perez Press Event (11:30am): http://1.usa.gov/1U7PpOf

Final Rule Text (11:15am): https://www.federalregister.gov/public-inspection

DOL Fact Sheet

DOL Frequently Asked Questions

DOL Chart comparing the proposed and final rules

The IRA Rollunder is without a doubt, the most exciting estate planning and preservation technique in use today. One of America’s best-kept secrets, the IRA Rollunder strategy utilizes time-tested strategies that provide guaranteed results.

The most highly taxed asset in our estate is the IRA. Qualified money has never been taxed and our good friend Uncle Sam has been waiting patiently for many years to get his “pound of flesh.” In fact, in many cases up to 70% of your IRA can be lost to taxes when we try to pass on our qualified plan to the next generation.

The key to the Rollunder Strategy is the guarantees that support all aspects of the plan. While we are alive, we take systematic steps to transfer the IRA to our heirs in a more efficient manner. We cannot totally eliminate the taxes on the Qualified plan, but we can minimize the taxes today and maximize the legacy to our heirs. In this way we “rollunder” the tax and provide a lasting tax-free benefit to our heirs.

Is the IRA Rollunder appropriate for you?

In evaluating the Rollunder as a wealth transfer technique we must look at the overall goals and objectives of the individuals involved and compare them to their current estate and asset allocation. Is there significant dollars in the IRA? Is the money in the IRA being used to provide current income? Do you have a desire to see that your IRA is used to provide a Legacy for your heirs? Your Estate planning team considers all of these factors as they determine the value of the Rollunder technique for you. As part of this process, we can provide you with a snapshot of how the current tax environment would affect your IRA if you should be trying to transfer today.

IRA Rollunder: The Steps Involved

 While you are alive, you can take steps to transfer your IRA to your heirs today. You can guarantee all the elements of your program by using specially designed financial products. The rollunder utilizes life insurance with maximum death benefit guarantees as the main source of transferring wealth. This is the form of life insurance that many Fortune 500 companies are using today. It was not long ago that a person 75 years of age or older couldn’t even purchase this type of protection. But that was then, and now life insurance has evolved over the years to include guarantees that provide coverage for the rest of your life on a guaranteed basis.

Life Insurance with these types of guarantees is usually the best choice for transferring wealth. The reasons are many. For example, the death benefit is paid at death. It is the only financial vehicle that matures exactly when your beneficiaries need it the most. Yet another reason is that cash-rich life insurance has income tax favored treatment. Not only is the cash buildup free of income taxes, but the death benefit is as well.

For funding the life insurance we also use a product with specific guarantees. This product is called a Single Premium Immediate Annuity (SPIA) and is often used by government entities to provide lifetime incomes to lottery winners. The SPIA provides an income that cannot be outlived and can be utilized by either a single individual or a married couple. As long as one person is still alive the income stream will be generated. This is important, as we want to be sure that the funding of the cash-rich life insurance will not be interrupted and the benefits will be available upon death on a guaranteed basis.

The actual IRA Rollunder steps are as follows:

• Within the IRA purchase a SPIA with a guaranteed income stream
• Begin taking the distributions from the SPIA
• Pay the income taxes on the distribution
• The net income stream is then used to fund the life insurance with the guaranteed death benefit
• Have a trust own the policy so the benefit is outside your estate
• Name your heirs as the beneficiary

Commonly Asked Questions about the IRA Rollunder?

Why are taxes so high when we transfer our IRA’s to the next generation?

Qualified money, such as the money in your 403(b), has never been taxed and has grown tax deferred throughout the life of our plan. This means that any distribution from the 403(b) is subject to income taxes. Upon death, your heirs will also be subject to the same income taxes. In addition, if the 403(b) is part of your estate and your estate is large enough to be subjected to estate taxes, then the 403(b) will also be subject to estate taxes. This is double taxation and can eliminate up to 70% of your 403(b).

 Why do we use guaranteed life insurance as part of the IRA Rollunder?

Life Insurance with death benefit guarantees are usually the best choice for transferring wealth. The reasons are many. For example, the death benefit is paid at death. It is the only financial vehicle that matures exactly when your beneficiaries need it the most. Yet another reason is that cash-rich life insurance has income tax favored treatment. Not only is the cash buildup free of income taxes, but the death benefit is as well.

 Why do we use a Single Premium Immediate Annuity (SPIA) in the IRA Rollunder?

The money in your IRA can be used to provide a lasting Legacy for your heirs by utilizing the Rollunder techniques. The key elements of the plan are that the income stream that is created by the SPIA cannot be out lived. Any other investment would be at risk to market fluctuation and may not provide the funding necessary to ensure the cash-rich life insurance will be properly funded.

How does my age affect the IRA Rollunder?

As most people are aware, life insurance premiums are based on the age of the insured. The older we are the higher the premiums will be. On the other hand, when we use the Single Premium Immediate Annuity (SPIA) as the funding vehicle the opposite is true. The income stream is also calculated on age; however, the older we are the higher the payout will be. This helps to make the Rollunder strategy viable for just about any ages.

What happens if the tax laws change?

Tax laws change and so should your estate plan. Even though governing tax codes will evolve, the plan and strategy utilized today will continue to provide the Legacy to your heirs that you desired. Any new tax laws cannot effect the planning you have already completed.

 Can I use my own attorney for advice or help?

Of course. However, we have found that out Affiliated Attorney Network, with its high level of expertise in these strategies, cost less and actually saves time in the execution of your trust work.