The changes in the underwriting world continue, as there is now a solution for HIV positive clients from Symetra Financial. Even better: Symetra has clear “rules of engagement” for underwriting these clients, making it easy to determine if there is a “fit” for that case on your desk. For more information, contact us at 800-338-1892..
How Does Kai-Zen Work?
The Kai-Zen Executive Benefit Plan is partially funded by the employer/executive and partially funded by bank financing. The financing provides approximately 60-75% of the total contribution to the plan thus reducing your cost while increasing benefits over what your contribution alone could achieve.
Each insured (the executive/partner, etc) has a segregated trust containing a Kai-Zen policy. The employer or the executive makes a contribution to the trust. A Master Trust bundles multiple individual trusts to obtain critical mass thereby getting optimal loan pricing. The contribution and the trust policy are the sole and only collateral for the Kai-Zen Plan financing. You don’t sign any loan document.
The cash growth along with future contributions (10 in total – 5 by the executive/employer) sustains the security of the loan and eventually pays off the loan in full. The result is a policy that has both a death benefit along with other sometimes, costly benefits. Once the loan is paid off, other benefits from the tax deferred growth of the cash value or policy riders include:
Or, can be used to fund Benefits for the Employer. The Kai-zen Plan can be utilized to cover both the event of death AND the person leaving for the following reasons:
Contact us to learn more.- 1-800-338-1892
Feb 21, 2016 @ 12:01 am
If the Labor Department has its way, say goodbye to the variable annuity industry as we know it.
The department’s pending fiduciary rule, if finalized in its proposed form, would have profound effects on variable annuities sold in retail retirement accounts, from sales to product development and adviser compensation.
Namely, brokers selling VAs would likely operate more in a fee- rather than commission-based capacity, and insurers would pivot to develop product suites catering to this new demand. Further, there could be commission compression, more use of trailing rather than upfront commissions, a shift toward lower-fee share classes and increased adoption of fixed-indexed annuities.
“I think it’ll be a real test for the variable annuity industry,” said Bing Waldert, director at research firm Cerulli Associates Inc.
The Labor Department’s rule, a final version of which is expected as early as March, would raise investment advice standards for brokers working with retirement accounts such as IRAs and 401(k) plans. It would affect more than half of variable annuity sales; through mid year 2015, 61% of VA sales were in individual retirement accounts, according to Cerulli data. That’s little changed from 62% during the prior two years.
The one facet of the proposed fiduciary rule that would drive a sea change above all others is something called the Best Interest Contract Exemption (BICE). For advisers to receive variable compensation, such as a commission, for the sale of annuity securities, they would have to satisfy conditions laid out under the BICE.
The BICE would require the insurance adviser and insurance company to enter into a contract with the IRA owner that would, among other things, acknowledge the adviser’s fiduciary status, that the adviser will serve a client’s best interests and that the adviser will receive reasonable compensation. It would also require additional financial disclosures.
INCREASED LIABILITY
The additional compliance steps and increased liability associated with the BICE would lead many advisers to steer clear of variable compensation, industry experts say.
“I don’t think broker-dealers will be comfortable with the environment in which they’ll have to [operate] in order to do commissionable business,” said Judson Forner, director of investment marketing at ValMark Securities Inc., an independent broker-dealer. “It seems people will probably shy away from that.”
Broker-dealers currently writing annuity business will likely figure out a way to continue doing annuity business, just not within the confines of the BICE, Mr. Forner said.
American International Group Inc. chief executive Peter Hancock in January cited the DOL rule as a reason for the company’s sale of AIG Advisor Group, a network of four broker-dealers.
Advisers using products on a fee-only basis wouldn’t need to comply with the stricter BICE standards given the lack of variable compensation associated with that model.
“As drafted, the rule clearly provides a safe harbor for fee-based products, and those going outside that do so at their own peril,” said Lee Covington, senior vice president and general counsel at the Insured Retirement Institute. Based on his reading of the rule’s text, Mr. Covington says it’s not certain whether commission-based products would be permissible under the BICE at all.
Fee-based variable-annuity sales only accounted for 4%, or $4 billion, of the $99 billion in total VA sales through the third quarter of 2015, according to Morningstar data. In full-year 2014, their share was 3.8% of a total $137.9 billion.
Approximately 20 insurers sell these types of annuities through an I share class. The big difference between commission and fee-only annuities, other than their compensation structure, is that insurers haven’t made living-benefit or guaranteed-income riders readily available through the fee-only products. Rather, they’re mainly investment-focused annuities tapped by advisers for tax deferral in non-qualified accounts.
“Advisory products today have not completely embraced these riders or have not built them out because most advisers looking for those features are using annuities in the commission space. It has not been a priority,” Mr. Forner said.
Approximately 75% to 80% of ValMark’s variable annuity sales in 2015 were in the guarantee space, through income, walk-away and death-benefit guarantees.
Many believe insurers would build fee-only products for the advisers currently using commissionable products, or those with guarantees, as a sort of pivot product in the advisory space.
IMPACT ON PRODUCTS
“There would be a product development impact [due to the DOL rule] because I shares would be repurposed with living benefits attached,” said John McCarthy, senior product manager for wealth management products at Morningstar Inc.
Jefferson National’s VA business is entirely in the fee-based, non-qualified world, without the offer of riders or guarantees. The firm did around $800 million in VA sales in 2015. Jefferson National president Laurence Greenberg says the Labor Department rule could open up an opportunity for the firm to expand its VA business into the qualified market with riders and guarantees.
“It’s something we’re looking at,” Mr. Greenberg said.
The fee-only VA story would be playing out amid a backdrop of broker-dealers encouraging advisers to move to fee-based business, meaning they derive the majority of their business from charging clients an annual fee on assets under management. Around 33% of Jefferson National’s business is expected to come from B-Ds this year, up from about 5% to 10% a decade ago, Mr. Greenberg said.
Variable annuity commissions historically have been front-loaded, with brokers being paid a commission upfront for a sale, according to Chris Joline, partner in PwC’s Financial Services Regulatory practice. However, the need to disclose that commission to clients as part of BICE compliance might lead to greater use of trailing commissions that pay out the same amount, but over a longer period of time.
“That longer trail might be, from an optics and sales perspective, a better presentation,” Mr. Joline said.
Overall commissions, which the insurer pays to the broker, may compress as a result of the rule in order to satisfy the perception of what’s deemed to be reasonable and fair compensation, he added.
Some argue that the high compensation offered by some VAs is justified because they are more complex products than, say, mutual funds, and require additional paperwork, all of which contributes to more work and a longer sales process. If a broker does a cost-benefit analysis and feels a lower commission wouldn’t be worth that additional work, VA sales could suffer, some say.
‘THAT’S ECONOMICS’
“If the incentive-based compensation is too low, product sales are going to go down,” said Austin Frye, president and founder of Frye Financial Center and an adviser with LPL Financial. “That’s economics.”
Further, brokers could find themselves in the situation of not being able to recommend a variable annuity for a client at all, if no annuities available over their broker-dealer’s platform are deemed to be in a client’s best interest, according to Amy Lynch, president and founder of Frontline Compliance.
“Under a fiduciary standard, [brokers] can’t make the sale, period, if nothing fits for a particular client,” Ms. Lynch said.
On the commission side of the house, there would likely be a continued trend toward a B share class and away from an L class because of the greater sensitivity about fees the fiduciary rule would create, Morningstar’s McCarthy said.
The base contract expense of a B-share variable annuity averages 126 basis points, compared to 163 basis points for an L share, according to Morningstar data.
Year-to-date through the third quarter of 2015, 75.3% of all VA sales flows were going to a B share, up from 63.6% over the same period in 2012. That shift in part reflects a Financial Industry Regulatory Authority Inc. announcement in early 2015 that it would target VA sales practices in its regulatory and exam priorities, particularly practices relating to L shares given their higher costs and shorter surrender periods.
Following the announcement, Voya Financial Advisors said its brokers could no longer sell L shares if the variable annuity contract included a rider. B shares are most consistent with a long-term investor because their surrender periods are longer than those of a typical L share, and hence they are the share class in which living-benefit riders usually make the most sense for clients, Mr. McCarthy said.
Fixed-indexed annuities could also get a shot in the arm from the DOL rule, with some discussing the possibility of switching to FIAs where they might have previously sold VAs, according to Fred Reish, a partner in Drinker Biddle & Reath’s employee benefits and executive compensation practice group.
“There’s definitely conversation out there around that,” Mr. Reish said. Compliance with the BICE only pertains to securities products under the DOL’s proposal, and fixed-indexed annuities don’t fall into that category, he explained. Regardless, sale of the products would still be beholden to a fiduciary standard in qualified accounts.
FIA SALES RISING
Although variable annuity sales are almost triple those of fixed indexed annuities, FIA sales have been gathering steam the last few years at the same time that VA sales have floundered.
Because annuities in the non-qualified market will not be affected by the Labor Department’s proposal, some industry experts believe brokers will sell more variable annuities in this market.
“I think they’ll sell more outside the ERISA purview,” Ms. Lynch said. Shunning the qualified market would mean missing out on the huge pot of rollover money into IRAs, though. New money from rollovers contributed $377 billion to overall IRA assets in 2014, according to Cerulli data.
However, this point is moot if the Securities and Exchange Commission follows the Labor Department with a fiduciary rule making endeavor of its own, which would affect all securities products, Ms. Lynch said. The SEC isn’t expected to propose its rule until late this year.
Of course, there’s one caveat — the aforementioned items are scenarios that could play out under the proposed version of the DOL rule. What the final rule will look like is a mystery to all but a handful of Washington policymakers.
However, the timing of the rule’s arrival at the Office of Management and Budget, which must sign off on it before the DOL makes it public, indicates that it will likely undergo a few tweaks, rather than an overhaul.
“We don’t expect wholesale changes,” Mr. Joline said.
I started swimming laps for exercise in my 20’s when I met a man named Lou Stein. At the time, Lou was in his 60’s and was one of the top rated 60+ tennis players in the United States. Lou was about 5’4″ inches tall and weighed in at a rousing 120 pounds. He was lean and strong. Fit as anyone I knew. His tennis game was built around fitness. He returned everything, and back then, with the smaller rackets and the clay courts, he was almost unbeatable. I used to hit with him once a week and he ran me ragged.
As we got to know each other better I asked him what he did to stay so fit. He said one word- swimming. At the time I knew how to swim but the idea of swimming laps was not one I ever would have considered. I was a big runner, bike rider and had just started jumping rope as exercise. But Lou convinced me that swimming as an exercise was the best and it was something I could do for the rest of my life. Looking at how his fitness level was crushing me on the tennis court every week I decided he may have a point – so I started swimming.
My first time in the pool was a nightmare. I could barely make three laps- so I rested a bit and swam three more. Rested and swam. It was grueling but I did 40 minutes of that. My arms were sore- my legs were weak and I felt completely rejuvenated by the experience. Each time out I got a bit better until now I can swim for an hour without any rest. This new “habit” has stayed with me for 30 years. It got me to thinking what an impact this has had on me and my health, but also on my work.
We have the power to change our habits- to reinvent ourselves as business people and as leaders. I did some research on this idea and talked to some experts who agreed with me. Better habits can change how we work- how we live and how we are perceived. Here are some ideas that I found- try one or two and see how it changes your practice.
Better habits will up your game, but they take time to establish. Take the time. Start today.
We have all seen this phenomenon in businesses all around the world. There is often an implicit pressure to be the first ones in to the office, to work the longest days, and to claim we need very little sleep. Yet the last thing a good rep needs is to burn out because they have a routine that is unsustainable. Research conducted on this topic found that people who have very high energy levels in a given day are more than three times as likely to be completely engaged in their work that same day.
If you want to make a difference — not just today, but for many years to come — you need to put your health and energy ahead of all else. If you are wiped out from working around the clock, subsisting on food from a vending machine, and not making time for daily exercise, then there is no way you’ll be effective at helping your friends, family, colleagues or clients. The good news is that making choices to improve your energy does not require a complex grand plan. It all starts with the next choice you make.
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Show your clients how they can reduce their tax burden
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Get ready to have a tax talk with your clients with these conversation starters.
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Review how life insurance can help your clients protect their retirement income.
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Use this 1040 overlay with your clients to show them where they can save money.
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Another guest article from the Master of Sports and Finance Brian Gilder. Brian has made a career of teaching reps how to make finances simple. Brian uses his vast knowledge of sports and finance to make learning easy and finances fun. Enjoy
The Super Bowl Can Teach You 4 Ways to Get a Grip on Your Finances
Brian Gilder, CFP®, CLU®, CHFC®
Contact: (310) 804-3767
People usually have at least two reasons for accepting or rejecting your proposals: one that’s meant to sound good to you, and another that they keep to themselves. If you want to uncover that hidden reason, politely ask: “In addition to that first argument, what else is stopping you from going ahead?” That way, they’ll understand you’re determined to look more deeply into them, and you just might win them over on their terms.
Remember- when you are asking questions you are finding solutions.
written by Lew Nason-
Why Do So Many Advisors Struggle Selling Fixed and Indexed Annuities?
Would you agree that the primary advantages of a Fixed Annuity over a CD are that annuities generally provide a higher rate of return, they have better guarantees, and the interest isn’t taxed until it’s used! Then, why is it so hard to convince a CD owner to convert to a fixed annuity?
Would you also agree the primary advantages of an Indexed Annuity over Equity Investments, Managed Accounts and Mutual Funds are that the prospect has the potential to reap the upside of the stock market, without the downside risk to their investment principal. Plus, an Indexed Annuity has a minimum guaranteed interest rate and the returns aren’t taxed until the money is withdrawn. Then, why do advisors have a hard time closing sales for Index Annuities?
There are many reasons why many advisors are having trouble selling Fixed and Indexed Annuities. Part of the problem is most advisors are selling a product, instead of a solution to the prospect’s problems. They are selling features, instead of presenting benefits. Most advisors are NOT making a connection with their prospects. They are NOT building trust and rapport. They are making things too complicated. They are using technical jargon. They are in front of the wrong prospects. And unfortunately, the list goes on and on!
Here are SIX simple solutions that will help you to immediately sell more annuities!
You must make sure you are in front of the right prospects for you! Most advisors are focused on attracting high net worth prospects, which puts them in direct competition with every other advisor. Then, they wonder why these prospects want to talk to their Attorney, CPA, Stock Broker, etc. before they make a decision. There are many niches within the annuity markets. You have the low, middle and high net worth people. Within those markets you have pre-retirees and retirees. There are CD owners, mutual fund investors, stock owners, widowed women, annuity owners, tax-free bond owners, IRA owners and the list goes on and on. Each of these niches has a different concern, problem, attitude, likes and dislikes. You have to decide which of these niche markets is right for your expertise, experience, knowledge and products.
You must write and speak at a sixth grade level! Then, even the college professors can understand you! And, you must stop using technical jargon. Most advisors are confusing their prospects by being too technical and going into too much detail. If your prospects are even the slightest bit confused, then why would they want to set an appointment with you, or buy from you?
You must build trust and rapport! Whether you are conducting dinner seminars, free educational workshops or just talking to people on the phone, you must be able to demonstrate to your prospects that you truly understand their concerns and their problems. For example, the vast majority of advisors are only getting a 30% appointment rate from their educational workshops and dinner seminars. Then, only 30% of those people are actually keeping their appointments. The main reason for the low appointment rate and the cancellation of appointments is the advisor is not helping the prospect to see how what they are presenting relates to the prospects situation. Most advisors tend to lecture to the prospect. Or, they are trying to educate the prospect. They are not getting the prospect emotionally involved. The advisor is coming across as a sales person instead of an advisor. There is no trust or rapport being created.
You must help prospects to identify what their biggest concerns are for themselves! You can’t assume anything. You can’t assume they understand their real problems. You must get them to really talk about their situation and tell you how they feel about what’s happening. You must do a complete, thorough fact-finding interview to help your prospects to truly understand their problems. For example, initially many retirees will tell you that their biggest concern is outliving their money. Yet, when you do a complete, thorough fact-find you might find that they have plenty of money, based on their current life style. Their real problem is they are afraid to take the income they want each year. So, they aren’t able to do the things they really want to do! Or, maybe they are afraid they’ll need long term care and they won’t have enough money to make sure they have choices as to their care. Or, they are afraid their spouse won’t have enough money when they die, because their spouse will lose their pension and social security! Or, they want to make sure they have money to pass onto their children, or a charity.
You must really listen to what your prospect is saying! When you’re really listening to someone’s words, you become connected with that person. And, isn’t that the kind of connection that we all want? You can’t sell unless you truly understand your prospect’s problems and what they really want. You must sincerely listen to the prospect, so you can ask the right questions to clarify the prospects current situation and feelings. However, listening is less important than how you listen. By listening in a way that demonstrates understanding and respect, you build rapport with prospects, and that is the true foundation from which you can sell your prospects.
You must stay in constant contact with your prospects… and your current clients! It’s a simple rule of marketing, the more you stay in front of people who can do business with you, the more opportunities you have to earn their business. If you don’t stay in touch, you’ll be forgotten. And, if your clients, prospects, and business associates forget you, then they certainly won’t do business with you (or refer people they know to you). Staying in touch is NOT about hounding your prospects and clients until they buy from you. It’s about keeping in constant contact with them in positive, non-threatening ways. It’s letting them know what’s going on, showing them you care, sending them reminders and providing information that’s of value to them.
If you want to sell more annuities, then you must practice the above six simple solutions! These six simple solutions are what we focus on in our systems and with our coaching. It’s why the advisors we work with are able to set appointments with 70-90% of their seminar attendees. And, why these advisors are able to collect a million or more of annuity premiums every month!
By Lew Nason
‘The Nine Out Of Ten Guy’
When talking to my most successful advisors one theme is clear- the common denominator of any success story is the elimination of the single meeting sale. There are a whole list of reasons why a multi-step, no pressure close is the right choice. Everything you do should be modeled after the multi-appointment and no-pressure close.
I know in my experience, I can close in one meeting but when I do it hurts me in the long term. More importantly, the clients who I close in one meeting feel pressure and that is not a good basis for a long term relationship.
One of my mentors in the business always stressed the two meeting close. However, he felt it was important to set up the 2nd meeting so that the client knew a decision was going to be made in the next meeting. Over time I have used this technique to great success. Here is a script that I adapted from his training. Feel free to use it if you feel it can work for you. Or adapt it to your own style like I did.
Script for End of 1st Meeting
Mr. Client- between now and the next meeting I am going to do the research and send you information about the ideas we discussed. Then at the next meeting I am going to spend as much time as we need to explain the idea and answer all of your questions. All I ask in return, in deference to my giving you my time for free, is that at the next meeting you be able to give me a yes or no answer. If the idea does not fit what you need right now then to say “no” is ok, but if it does fit your goals and objectives I would hope that you can give me a “yes” at our next meeting. Does that sound like something we can agree on?
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My "Bersonal" View 