My "Bersonal" View

Each day we field questions about Whole Life in relation to Indexed Universal Life (IUL) products. These product types are not mutually exclusive — both product can be a valuable contributor to a client’s financial-asset portfolio.

UNDERSTANDING THE DIFFERENCES

The benefit of Whole Life is the certainty of policy guarantees: guaranteed cash-value accumulation, guaranteed death benefit and guaranteed premium level. Indexed Universal Life insurance policies are designed upon a universal life chassis; meaning most of the values in the policy are not predetermined.

The formulas to arrive at guarantees for Indexed Universal Life policies may vary among carriers. Some have a fixed guaranteed rate of interest, while some apply an average value methodology.

Understanding the assumptions on which the illustrations are based for both products is important. Whole Life illustrations assume current dividend scale for projections while Indexed Universal Life illustrations assume a return in the selected measuring index for projections. Since both use projected rates, we have to ask are projected rates of interest realistic and sustainable?

It is also important that clients and financial professionals understand the critical need to manage both products — particularly when distributions are taken from the policy —and to recognize the differences between both products. Perhaps the most prominent difference is that Indexed Universal Life products contain more moving parts when compared to a Whole Life policy. At the same time- Index UL offers more flexibility in plan design.

Cost is also a factor. While Whole Life has better guarantees those guarantees come at a cost. IUL has less guarantees and more flexibility, but typically the cost is lower than whole life for the same Death Benefit.

OTHER ITEMS TO CONSIDER:

• What is the client’s risk tolerance and years to retirement?
• How much money does the client currently have exposed to market risk?
• How much money does the client currently have in fixed-rate, conservative financial assets?
• Are guarantees and safety important to the client?

We are a firm believer in both Whole Life and IUL. Each situation needs to be looked at before a product can be recommended. Give us a call on your next case and we can design a plan for you.

The WordPress.com stats helper monkeys prepared a 2015 annual report for this blog.

Here’s an excerpt:

A New York City subway train holds 1,200 people. This blog was viewed about 7,100 times in 2015. If it were a NYC subway train, it would take about 6 trips to carry that many people.

Click here to see the complete report.

As the end of another year is upon us, I wanted to thank all of our reps, associates and employees for helping ISN have another successful year. We have had an amazing year of growth with production up across the board and the successful launch of our new division ISN Premier. We know you all have lots of choices when choosing an IMO and we appreciate that you have chosen to work with us.

With that in mind, Sheryl Moore is someone who I follow on a regular basis. I like this take on picking an IMO. Thanks for picking us!

Opinion

By Sheryl J. Moore

Reprints

One of the biggest challenges that newly licensed independent insurance agents face today is identifying the marketing orginization that they will appoint with. It seems logical that the typical independent agent is licensed with 26 different insurance companies. After all, the agent needs to have the most competitive products in their arsenal regardless of who offers them, in order to provide the best product solutions to their prospects. By contrast, one must question why the typical agent is appointed with six different marketing organizations?!? The responses to this question range from “They offered a fantastic trip I wanted to attend” to “They have this lead generation program…”

In truth, there is no need for more than one marketing organization.

Before we can address why, we must first identify what the marketing organization brings to the table.

Marketing Organization (a.k.a. AFMO, FMO, IMO, NMO) – a third-party intermediary between independent licensed insurance agents and insurance company home offices, who provides economies of scale for product manufacturing and distribution. The intermediary is a distributor of insurance products that performs many of the functions traditionally provided by an insurance company in a career agency distribution arrangement. In exchange for a small portion of the commission paid on the products’ sale, this third-party intermediary provides recruiting, contracting and agent licensing services for the insurance company home office while also offering continuing education, marketing, sales support, and other services to independently contracted insurance agents.

Note that it is possible to be an independent insurance agent and not use an FMO. However, there are only two insurance companies in the indexed annuity market that permit contracting directly with the home office (and thus bypassing a marketing group). Regardless of how knowledgeable, autonomous and experienced you are, the other 31 insurers that distribute their products through independent agents require a marketing organization intermediary.

And with 300-plus marketing organizations to choose from, how does an agent narrow it down to just one?

Create a list of FMOs that are strong where you are weak.

Are you a new agent and need a partner that can help you learn the basics? Or, are you seasoned and looking for a partner that can help with your ailing seminar program, etc.?

Narrow down your list based on shared significance.

What is most important to you in your relationship with the FMO ? Which companies does the FMO have contracts with? Do they offer a lead generation program or some sort of income planning software?

Don’t be laissez-faire in your selection process.

Treat this like a consultation for a job, and interview each group on your list. (After all, you will be paying this company to provide you with a service.) Develop an inventory of meaningful questions, and compare each organization’s responses.

If they want you, let them prove it.

Ask each of your final few what they will bring to the table in a shared relationship with you. If they cannot figure out why you need them, and what they can offer over their competitors, they can’t make it to the next round.

Test the chemistry.

Do you like the staff within the organization? Do you feel valued and appreciated? Do the principals know you and remember details from your previous conversations? Do they care? If they treat you like a number, move on.

Ultimately, the only thing that differentiates a marketing organization is their relationship-building abilities. Everything else can be duplicated by the FMO’s competitors: leads, mailer programs, seminar systems, products, companies, software and more.

In short, the one marketing organization you need is the one that meets your needs, helps your business grow, and treats you as a partner.

On January 1, 2016, most of our annuity carriers will implement a new mortality table, per NAIC requirements. The new table will result in the need for increased reserving for Income Rider benefits, as well as Annuitization benefits associated with all products.

Today is the anniversary of the tragic events that took place in Sandy Hook. It’s been 3 years and still the violence continues. I am not political but I do believe something needs to be done to curb the violence. The non-profit group “The Sandy Hook Promise” is an awareness organization that I fully support. Here is the video we made back in December of 2012. If you feel so inclined, please pay it forward.

A NEW PROMISE- SANDY HOOK

…believes in annuities! It is hard to argue that there is not a place for annuities in a clients retirement plan. Even though the Ken Fisher’s of the world want to argue against annuities. It is never so black and white- as with any investment it has a place.What an annuity provides is unique and can only be provided by an insurance company. Here is a recent article  from the Motley Fool about annuities. Enjoy.

Nov 29, 2015 at 8:07AM

One of the greatest dangers we face as we get older is the risk of running out of money. One way to put such a worry to rest is with a certain kind of annuity. On top of providing you with a steady stream of income, this annuity can simplify your finances and lower your risk of mismanaging your money as you age.

Intro to immediate annuities
First off, let’s go over what annuities are. They involve contracts with insurance companies, whereby you typically hand over a significant sum of money and receive regular payments immediately or in the future — for the rest of your life (and, if you want, for the rest of your spouse’s life, too).

There are lots of different kinds of annuities: immediate versus deferred (paying you immediately versus starting at some point when you’re older), fixed versus variable (fixed payouts versus payouts tied to the performance of the market), lifetime versus fixed-period (paying until death or paying for a certain span of time), and so on. Some annuities, such as indexed annuities and many variable annuities, are unsuitable for many people, as they charge steep fees and/or carry restrictive terms. But immediate or deferred fixed annuities are smart options for people who are in or near retirement.

Your annuity strategy
The average Social Security benefit, as of September 2015, was $1,338 per month, or about $16,000 per year. That’s not enough to provide you with a secure and comfortable retirement, so you’ll need to establish other income streams. Investment accounts and retirement accounts (especially those that generate significant dividend income) can grow your wealth the fastest, but they can also fall in value if the economy goes through tough times. That risk might keep you at night, and when you’re living off your retirement savings, a market crash can be devastating.

Enter the annuity. Prevailing interest rates will influence how much insurers are willing to pay you, and these days rates are extremely low. Still, if you’re a 70-year-old man, $100,000 may get you an immediate annuity that pays about $640 per month, or $7,700 per year. A $300,000 purchase would generate about $23,000 annually. (Women can generally expect lower payouts, because women tend to live longer than men.) If you have that kind of money, an annuity can be a major complement to Social Security income.

Keep in mind that fixed annuities can start immediately or can be deferred. If you think you have sufficient income for 20 years only, then you might buy a deferred annuity today that will start paying you in 15 years or so. That way you’ll be assured of income later, too. 

 Declining financial skills or interest
Another great benefit of annuity income, like Social Security income, is that once it starts, it can keep paying you for the rest of your life — with little effort on your part. Most other investments demand that you monitor them closely and regularly, occasionally buying into new investments and selling out of others. That’s no big deal for some people, and some even consider it a pleasure. However, as you get older, you’ll be less able — and perhaps less willing — to oversee your finances.

Our cognitive abilities decline over time, whether we’re aware of it or not. Some studies have even suggested that mathematical and financial skills are among the first to go. According to a 2010 study by the Center for Retirement Research at Boston College, “Individuals make the most effective financial decisions in middle age, resulting in lower fees and interest rates on credit and loan transactions.” The study found that financial decision-making peaks near age 53, noting, “Financial performance declines for older adults, raising a potential concern as the retirement system has shifted more decisions to individuals.” A more recent study from the same center found that while financial decision-making skills decline, confidence about them often does not.

To combat your declining financial skills or interest, you might enlist a trusted loved one to help you, but even that can present some risks if they’re not good at managing money or have any ethical shortcomings.

With annuity income, once you buy the annuity, you can rest assured that as long as the insurer is solvent (always buy from highly rated insurers), your checks will keep coming, no matter how the stock or bond market is performing. You can also spend a little extra (or accept a little less) in order to have your annuity checks adjusted to keep up with inflation. Whatever your needs, there’s a good chance you can find an annuity to meet them.

Selena Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool’s syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter…

Dean Potter is the original mastermind behind the Reversionary Annuity Product. Recently he sent me a case study outlining the largest case sold to date for this product. Take a look and tell me what you think.

CASE STUDY:

The prospect was a wealthy individual (Wife & two daughters both married) with an estate of over $18,000,000, most of which was a Bank Holding Company and Banks that he owned.  When I became involved, I found he had already had completed his estate planning done by a local life agent and his attorney.

After reading an article I wrote about the Reversionary Annuity in a business magazine, he gave me a call to meet with his wife, the bank’s attorney.  He said, he thought I might be able to do something that his insurance agent affordably could not do. He ultimately purchased a Reversionary Annuity that would provide his wife $20,000 per month for life upon his death, which included the Return of Premium Rider.  Annual premium was over $55,000 annually.  The Present Value of this life income was well over $6,000,000.00

 What was the problem he was trying to solve? 1.]  Upon his death who was going to provide his wife with her current income of $20,000/mo?

 His wife, who now owned the bank, would not be able to take his place in the Bank management, she was a banker’s wife with no banking experience – yet now she would need to rely upon the Bank’s continued dividend success for an income of $20,000/mo. in order to maintain her living standards. The only option she would be forced to sell the assets to have income. According to his words, the bank was a gold mine and sufficient management to sustain it. The stock was placed into a family trust.      

 The Reversionary Annuity solution would provide her the needed income – independent of the Insured’s asset and was not dependent in any way to the future success of his business.

The premium payor/policyholder was the Bank, who purchased the coverage on the insured as “Key-man Insurance”.  The Bank deducted the premium from their gross income and the insured paid income tax on the premium personally as a non-cash contribution from his employer, per IRS Section 162.

CONCLUSION:  (His words)  “If I die first, my wife is taken care of – guaranteed $20,000/mo. for life and the Bank’s financial future is not burdened with an expense of $240,000 annually.  The ownership (family trust) can do what it wants to without financial pressure. If she dies first, then I will be returned all paid premium, net cost $0.00 – I can’t lose!”    Very nice commission and in this case for a need that only the prospect saw and took action to solve!

How many clients do you have like this banker?  Why don’t you offer them the same opportunity to guarantee their survivor a lifetime of income independent of the assets?

Sincerely,

Dean M. Potter

Today I received two emails from Genworth. The first was letting me know that November is Long Term Care Awareness Month. They included tools we can use to promote the idea and discussion topics to help our clients better understand the risk. The second email needs no explanation.

EMAIL # 1

Tools that Help Clients Decide

62% of consumers were moderately to highly educated about long term care insurance prior to submitting a request for a quote.¹

Today’s consumers do their research before contacting you.

In this section, find resources to help your clients:

• Start the conversation

• Identify the cost of care in their area

• Develop a financial strategy

November is Long Term Care Awareness Month
You may not need an excuse to talk about long term care with clients. But you may need some help. And since November is Long Term Care Awareness Month, the educational materials may be a perfect way to help your client start a conversation. 

The next email from Genworth was literally two minutes later. It is sad to say that this is the world of LTC. The problem is real…the solutions are murky at best.

EMAIL # 2

After careful consideration, Genworth determined the need to increase premiums on certain LTC insurance policy forms.  Expected claims over the life of the these policies are significantly higher than what was originally anticipated when they were priced.  We recently received approval for the rate increase in California for non-partnership and partnership policies. 

Agent notification begins 11.24.15 and policy holder notification is to begin 12.1.15.

Impacted policyholders will be notified at least 60 days in advance of their billing anniversary date, which is their rate increase date.

We will be hosting two webinars to review the updates and address questions:

At a recent workshop to improve my writing skills I came across a guru who gave me some sage advise.

“Like it or not, people judge you by how you write. Strong writing skills will help you get noticed, earn you confidence and trust, and move you up in your career.”

If your writing can use some work, here are some suggestions I garnered from the workshop:

• Understand your audience– The best writers tailor their work to the people who will be reading it. Think about your audience and figure out their problems and goals and then write specifically for them.
• Pick your topics well in advance of a deadline– If you are like me, you work best under pressure, or think you do. But deadline pressure won’t help you do your best writing. Instead, set up a schedule where you plan topics in advance. This affords plenty of time to think about them.
• Read a lot– The more you read, the more you learn, and the more you will discover the differences between good writing and bad. Don’t limit yourself to only writing within your field – broaden your horizon and perspective by looking at a variety of topics and writers.
• Make it a habit– Strong writing is developed, not something you do from time to time. Set a time and place to write so you will become consistent and efficient.

The House of Representatives passed the Retail Investor Protection Act Tuesday night, widely seen as an alternative to the fiduciary-only rule being pushed by the Obama administration. A bill proposed by Rep. Ann Wagner, R-Mo., passed 245-186 and would prohibit the Labor Department from instituting new rules governing financial services before the Securities and Exchange Commission (SEC) reviews the proposed regulations.

Wagner called the vote a win for low- and middle-income investors: “The Obama Administration and the Department of Labor believe that the American people need to be protected from themselves, that they are not smart or capable enough to control their own retirement savings.”

A similar measure was passed by House in 2013, but died in the Senate for lack of action. The RIPA legislation again faces an uphill climb in the upper chamber, and if it passed there, President Barack Obama reiterated Tuesday that he would veto the bill.

“The administration is committed to ensuring that American workers and retirees are able to receive advice about how to invest their money in safe, secure, and transparent financial products that is free from harmful conflicts of interest,” the White House said in a statement today.

The DOL is finalizing its fiduciary only rule, which is expected to be released in the spring. Any delays hamper the DOL’s chances of getting a rule done in time. The Obama administration has said it wants the rule in place before the president leaves office in January 2017.

Opponents of the DOL rule say it endangers small savers and will make it harder for them to get access to sound retirement advice. In addition, they say the rule will force costly compliance mandates on anyone who deals with retirement accounts.

“We believe today’s vote shows the deep concern with the Department of Labor’s fiduciary rule proposal,” said Cathy Weatherford, president and CEO of the Insured Retirement Institute. “Members of Congress in both chambers, on a bipartisan basis, have written letters to the DOL expressing concern that the proposal will restrict retirement savers’ access to retirement planning advice and limit their choice on retirement products.”