My "Bersonal" View

Many of our reps are working in the business market. There is a lot of opportunity there with the ever-changing tax environment and the evolving pension industry. If you are working with Business Owners then you know the key to success is gaining their trust and confidence, You need to become their go-to-person” for all financial matters. In a recent survey of 750 owners of Small Businesses the following was revealed:

Question-

“Who do your turn to for advice when making important business decisions?”

67% cited a single confidant

59% of those relying on a single confidante said that person is an immediate family member

47% did not seek advice about the previous year’s most important business decision

40% had not sought advice from a fellow business owner in the past 12 months

22% of those who didn’t seek out advice cited privacy as the main reason

These results are revealing. Small business owners take time to build relationships with. Our experience is to start small. Do what you say you will do. Solve a problem. Then tackle the next issue. Once you are in- you stay in. Keep that in mind when you decide to approach the next business owner for a discussion.

From the Court:

“The Court, in this decision, holds same-sex couples may exercise the fundamental right to marry in all States. It follows that the Court must also hold- and it does now hold- that there is no lawful reason for a State to refuse to recognize a lawful same-sex marriage…”

Here are some of the highlights and key points as it relates to our business:

• States must license same-sex couples to marry and recognize same-sex marriages lawfully performed in other states.
• Same-sex couples will have access to lifetime IRA benefits such as spousal contributions and the ability to use the Joint-Life Expectancy Table to calculate RMD’s.
• Same-sex IRA beneficiaries will be able to complete a spousal rollover and enjoy the benefits and special rules for inherited IRA’s.
• Same-sex couples will have access to qualified plan benefits, including spousal protection under ERISA and the QDRO exception to the 10% penalty.
• The most significant positive impact will be on Social Security. Same-sex couples are now able to qualify for benefits that were previously denied them.
• Estate planning is also a new benefit and include concepts around gift tax treatment, adoption rights, and greater ability to make medical and end-of-life decisions.

Groundbreaking Social Security reform contained in budget legislation approved at breathtaking speed this week by Congress has financial advisers scrambling to rethink many of their clients’ retirement plans.

The measure, passed by the Senate early Friday morning after being approved by the House earlier in the week, includes a provision that ends two popular Social Security claiming strategies: file-and-suspend and filing for a restricted claim of spousal benefits.

Both approaches generate higher benefit payouts for entitlement recipients and have been baked into retirement planning for many aging clients.

“We’re going to have to take all of that, throw it in the trash can, and do the analysis all over again,” said Michael Kalscheur, senior financial consultant at Castle Wealth Advisors. “That’s going to be a huge task for planners to try to figure out how to make up for that shortfall in income.”

Clients will have to tap other financial resources to fill in the retirement-funding gap, said Robyn Hari, principal at Diversified Trust. That may include cutting personal expenses, continuing to work or depending more on their children.

“They may not have much time to make up that difference,” Ms. Hari said. “They’ll have to look at adjusting their standard of living or working longer.”

Clients who have not saved enough for retirement and were depending on the extra boost from Social Security with these particular spousal claiming strategies will be hit the hardest.

“For somebody who was tenuous, this may be the thing that pushes them over the edge,” said Don St. Clair, owner of St. Clair Financial. “They’ll have to delay retirement or live on less.”

Changes to Social Security claiming strategies will take effect within six months of it being enacted. President Barack Obama is expected soon to sign the measure, which sets federal spending limits for the next two years and lifts the ceiling on the federal debt limit.

Surprisingly, the IRS’ attempt to “reform” travel and entertainment practices has left the door wide open to many tax shelters. But so much confusion exists over this whole situation that now many of my colleagues pass up on big tax savings simply because they don’t know how to pin down legitimate deductions.

There is no need to add to your tax bill by missing deductions or incurring unnecessary T & E expenses. We now have available a comprehensive guide for you to own.

“76 Ways to Maximize Expense Account Deductions” was developed by trusted experts and I have a chance to get this exclusive report at a low-cost for all of my blog subscribers. If you want to discover how easy it is to slash your tax bill without cutting back on vital business entertaining, then you should contact me about this comprehensive guide.

As a member of Insurance Designers of America- I thought it would be good to hear from our Executive Director, Dick Schuettner, as he lobbies NAILBA on our behalf.

To thought leaders and select distributors of the Life Insurance Industry:

Please read on…

Today, we are facing the most serious threat to our beloved life insurance industry in modern times. Our industry is a national treasure, receiving special treatment by our government in order to provide risk shifting and guarantees for American families and businesses that count on our products to protect them during critical life events. As you have probably heard, five large household name, insurance carriers have increased cost of insurance charges on policies that have been in force for some time. Leave aside whether they have the legal or contractual right to do this; the most important issue is the potential harm to the consumers’ confidence in our industry.

Relationships with our clients are built on trust. For generations, we have sold policies that are “trust me” type arrangements where there is a very substantial difference between current projections and that column off to the right called guaranteed. It is incomprehensible to consumers how mortality charges can be increased even though Americans are living longer than they were in the past. Many carriers have assured our clients that the carrier has never increased mortality charges in the past. This understanding shared by the field force has been conveyed to our clients and is an important factor when considering purchasing insurance. For five carriers to breach this understanding is a serious violation of the trust our clients placed with us and the carriers we represent.

Some carriers will point to persistently low-interest rates or lower lapse rates due to the life settlement industry as justification for their actions. At the same time, these carriers are still immensely profitable in both their North American and worldwide operations.

The severe danger is not from these five carriers, rather it is the “lowering of the bar” in terms of treatment of our clients. If we, as leading distributors of life insurance, do not fight back and show these carriers that we vehemently disapprove of their actions, we are tacitly indicating to the other carriers (who have not raised inforce COIs) that there will not be a backlash and that they can raise inforce COIs. This problem must be “nipped in the bud” by those of us who love this industry and want to protect it from the ultimate harm that will follow.

Just imagine what will happen if a sophisticated reporter from a major newspaper was to get a hold of this issue. We can foresee language such as, “broken promises”, “elder abuse” and other equally unflattering statements about us and our industry. If you buy a policy, own it and pay the premium for thirty years, you can wake up one day and find that the policy is no longer affordable, despite paying the premiums and adjusting for changes in interest rates. In other words, even the most responsible policy owners can be blindsided by the products that our carriers have manufactured.

Selling products marketed as guaranteed no-lapse is not the solution. These products are not so guaranteed. If you pay your premium early or late your guarantees can melt down. In effect, the insurance industry has shifted the risk to the consumer and the agent which is contrary to our paradigm.

There are those who would like to vilify the life settlement industry and state that they are the problem. While the life settlement industry has had reputational issues in the past, forty-six of the states have regulated this industry to benefit consumers who live in their states. Behind each life settlement there is a senior citizen who made the decision that they needed the funds during lifetime and for whatever reason, chose a cash settlement instead of a future death benefit. Instead of fighting with life settlement providers, the insurance industry could easily have addressed the needs of seniors themselves and provided living benefits for inforce policy holders. Let’s also not forget that many charities hold substantial amounts of life insurance donated to them by our clients. These cherished causes will now forego any benefit after years of paying premiums.

I know our clients don’t know or care why the carriers are behaving this way. They’re only concerned about the coverage that their family was counting on to provide an education for grandchildren, to protect a surviving spouse or to pay the cost of a funeral. They will not be concerned with “why”.

Insurance carriers need to be worried. A loss of consumer confidence will devastate our ability to sell their products. Consumers could demand only guaranteed type products which, the carriers will tell you, are a drag on their earnings. The rating agencies and stock holders will not be pleased.

We need to voice our concerns immediately. Please join me in contacting our Carriers to express our concerns about these recent actions.

 Jack Chiason, please confirm a time at NAILBA when our industry leaders can meet to address this issue.

Dick Schuettner

President/Executive Director

Insurance Designers of America, L.L.C.

“Throw Back Thursday” is a tradition of sorts for all of you who Facebook, tweet and Instagram. For my blog- it is an opportunity to republish some great articles from the early days of our blog- when the only followers were my mom and my wife. Now, with over 500 followers it makes sense to “throw back” some good ideas from the early days. This was published in October of 2012. Thanks for all of your comments and support.

A Synergy Succession Plan

My dentist, Dr. Frankel, is a good guy. He’s been my dentist for the past 5 years. Visiting him isn’t my favorite thing to do in the world but I do it because it’s necessary and the smart thing to do.Now, he hasn’t always been my dentist but the way he became my dentist is a good lesson in succession planning and one that could be quite useful in the retirement plan advisor world.

My childhood dentist was Dr. Newman and I’d been seeing him since I first started seeing a dentist. As an adult, it was easy to continue to see him because I knew him, he knew me, and he knew my history.One day, about five years ago, I called for my annual check-up. The receptionist told me that she could get me in to see Dr. Newman in two weeks, but if I didn’t mind, Dr. Newman’s new associate, Dr. Frankel, was available tomorrow. I saw no harm in seeing Dr. Frankel. After all, he worked in Dr. Newman’s office so he had access to my records and he had Dr. Newman’s trust and confidence. I booked my first appointment with Dr. Frankel and the cleaning and check-up went smoothly. Later that year I needed another cleaning. Again, Dr. Frankel was more readily available so I took the appointment with him. By this time I was familiar with Dr. Frankel. He also knew me and remembered my history. So when I got the letter six weeks later announcing that Dr. Newman was retiring in six months and that Dr. Frankel was going to be assuming the bulk of the case load, it was an easy decision to remain as a patient of Dr. Frankel.

What I didn’t realize at the time was that this was Dr. Newman’s succession plan. Dr. Frankel had successfully transitioned the bulk of Dr. Newman’s patients and was now the primary provider for a large percentage of them. Yes, some of the patients left because Dr. Newman was gone. But most of them had stayed on and continue to stay on. Can this model work in the retirement planning world?

Thinking ahead is a cardinal rule of business. In addition to monitoring the daily operation of your business, you need to think about the future. We ask our clients to do this, so why shouldn’t we?  And as difficult as it may be, it’s important to envision the day when you no longer will be in charge. Statistics show that more than 70 percent of small-business owners don’t have a succession plan in place (LIMRA Report 2005). Succession planning for a successful retirement plan advisor is a difficult process and an even more difficult topic to discuss. Typically there have been few solutions for the owner of a successful retirement planning practice. Most either have a family member to “pass the torch” to or they try to cultivate a valued employee to take over the business. Otherwise the only alternatives are to sell the business at a value way below market or to die in the saddle. Dying in the saddle may sound romantic, but it’s very hard on the horse. In this case, the horse is the business you’re trying to preserve. Let’s take a close look at the two main options and then see how the Dr. Frankel’s transition plan can work better than the other options.

 The Family Succession Plan: “Passing the Torch”

If you’re lucky enough to have a family member who is capable and willing to succeed you, then you’re ahead of the game. However, in choosing a successor, don’t force a member of your family to assume unwanted responsibilities. First, find out whether he or she is willing and able to assume the role. If so, make sure you’re in agreement that a moderately paced transition will provide the best environment for the company’s bottom line and overall stability. Once you decide on the family successor, most experts in the field of succession planning suggest using these steps to pave the way for a suitable successor:

• Set a target date as your last day with the company and start shifting responsibilities ahead of time. You want to be able to oversee the transition while you’re still there.
• Set standards that take into consideration the needs of your successor.
• Decide whether to offer stock to retain key employees after the transition.

The main advantage to the family succession plan is continuity. Most of us who own our own business like knowing that what we built will benefit our families for multiple generations. If done properly, a true legacy can be left for your family. Another advantage is that negotiations on price are usually not so painful, although most often the price of the business is paid out of the business’s profits. Or, since we’re viewing this as a legacy transfer, we sometimes discount the cost for the benefit of our family.

Perhaps the biggest obstacle in this process is the negotiation among siblings as to who is the best choice as successor. I often refer to the classic film “The Godfather” as an example of a transfer of power and how tricky it can be. Most of us have seen the film and recall that Sonny Corleone was the oldest son. As the oldest, Sonny was the most likely successor. When he met his untimely demise, the next in line might have been Fredo, the second-oldest son. But Fredo was passed over for Michael, the youngest son. Which didn’t sit too well with Fredo.

Not every business has a family successor in place and ready to be the leader of the business. At some point it may become clear that the burden of managing your business requires the skills of a professional with few or no ties to your family. If such a person is already in your employ, his or her ascent to leadership may prove more advantageous to the business than carrying on a “family tradition.” If it’s a valued employee within the company, you’d begin the process about six months before the announcement of the succession, similar to the way Dr. Frankel and Dr. Newman worked their plan. Key clients and accounts will be referred to and serviced by the key employee to establish a sense of familiarity. It’s important that the owner and his successor coordinate the transition and timing of the announcement. As with the family succession plan, you should follow these similar steps once you’ve identified a successor:

•  Set a target date as your last day with the company and start shifting responsibilities ahead of time. At least six months should be allowed for the transition if you want to be able to oversee it while you’re still there.
• Set standards that take into consideration your successor’s needs.
• Use the strengths of your chosen successor and be sure to emphasize those strengths during the transition period.

The Synergy Plan:  “A Succession Agreement”

Even if you don’t have a family member or key employee that can be the successor, a new idea is emerging known as the “Synergy Plan.” It has a track record of success and the ability to adapt to any circumstance.  In this process, the owner of the business identifies another organization that is familiar with the synergy transition plan.

The key to the synergy plan is the agreement. Both the business owner and the synergy partner must agree that this is a process they want to begin. The agreement outlines the parameters of how the transition will take place, who is responsible for what aspect, and how the parties will be compensated. Once the agreement is in place, the transition plan is divided into several different areas: Each area is discussed in detail and a plan is put into place. Once the “Launch to the Field” is implemented, the rest of the succession plan works very similar to the plan that Dr. Frankel and Dr. Newman used. A slow process of funneling requests and business through the synergy partner is created. This seamless integration of the two businesses has no real effect on the reps who work there. Instead, service is increased, relationships are preserved, and a smooth transition process is set in motion.

Eventually, an announcement is made to the field that the merger/transition is complete. As with the example of the dentist, a large percentage of the reps will stay with the new entity. This is the goal and the success of this type of approach has been changing the way businesses view their transition.

A synergy plan can be customized for any organization that wants to implement a succession plan. Each agreement takes into account the nature of the business and the values each partner brings to the table. The synergy plan isn’t a purchase, it’s a partnership between the two groups that delivers lasting value to both parties.

Something to think about on your next trip to the dentist.

We are pleased to announce that we are now working with one of the premier appointment setting resources in the industry. Unlike any other service, The Appointment Lab delivers and will help you grow your business. The President of The Appointment Lab, David Marse, will be presenting his concept and program at our next “Income Builder Workshop”- scheduled for October 21st-22nd in Los Angeles. Please call our office f you would like to attend –  1-800-338-1892 ext 1. Here is a preview from David.

At The Appointment Lab, we know that we’re only successful when our advisors are successful. That’s why, from day one, we’ve made it our priority to offer our producers an unparalleled value proposition. Now, we’re taking it to the next level with our appointment setting service, by having a professional who can have dynamic conversations with your leads, investing time into their question’s to position you better for the solution.

 Are you an independent advisor purchasing your own leads?

Why take your costly purchased leads and turn them over to someone in your office who cannot have the same conversation as you. The alternative would be that you could make these calls but who then is educating the client and writing business? Advisors come to us from Coast to Coast looking for a solution without the gimmicks, and that’s where we play; Solution based appointment setting.

We are an Independently Owned and Operated full service advisor program focused solely on setting your appointments. We strive to offer concierge level service by increasing your appointment ratios thus resulting in more business. Our commitment to you as the advisor is to never forget that you are the client. Our goal is to take your leads & educate your potential clients while creating intrigue as to why you are the expert in their area.

“The Appointment Lab” – Where value is in the Quality of the Appointment,
David Mares

davidm@theappointmentlab.com

This is a post from my friend and colleague Andrew Unkefer. He has been a mover and shaker in the annuity world for a long time and is the genius behind the SUPER AGENT TOOLS that we promote. If you are looking at the new designs it may be smart to heed his warning.

“If you sell FIAs, beware of VOLATILITY CONTROL or RISK CONTROL indices. Several companies have come out with new indexed crediting methods tied to volatility controls as low as 4%. These low volatility indexes will not drive the performance you seek. Some better options? Look for volatility controls of 8% or higher (currently available). OR – Use a traditional index with no volatility restrictions (also currently available). Don’t be fooled by all the “constituents” in a given index. Know the volatility control. If it’s low, let it go!”

If you are like me, and you travel for business, then it is important to maximize your time on the road. Most business travelers will view their trip as successful if they meet the following three factors:

• More meetings- A trip with only one meeting is a wasted trip. Every additional meeting you can book while you are on the road increases the probability of a good trip. Last week I was in Dallas for a conference. Instead of just attending the conference I booked evening meetings with local reps in the area. This was the best way to maximize the trips potential.
• Enough time for meetings- Just having more meetings is not the only factor. You need to plan- look at distances to travel and potential traffic issues. make sure you have enough time to get to meetings, and enough time to make the meeting worthwhile. In Dallas, it was easy to plan as I was staying at a Resort in a central location. I had some reps meet me at the resort and I drove to two others. Each time I planned for time to make the appointment worthwhile for both of us.
• Advanced bookings – Sounds obvious, but booking your trip and appointments in advance is crucial to success. Not only does it save money to book in advance- it saves time and energy. Pre-planning for plane tickets, hotels, rental cars and who and when you will see people is perhaps the most vital element of a successful trip.

If traveling for business is something you do- keep these ideas in mind and increase the probability of a successful trip.

In our business we have several concepts that utilize Family Limited Partnership’s (FLP’s) as part of an overall tax reduction strategy. The IRS often examines FLP’s to ensure that they are not merely tax avoidance schemes. But that doesn’t mean you should dismiss the idea. To minimize the likelihood of an IRS audit, our planners recommend the following precautions:

• The FLP should be treated like a legitimate partnership. Hold regular meetings with the other partners to discuss management issues.
• Have the partnership agreement drafted by an outside source. This is a good idea to avoid potential abuses by the general partner.
• Administer the FLP properly.  Set up a bank account that makes distributions in accordance with the partnership agreement, not just for personal convenience.
• Don’t go overboard. The IRS is likely to become suspicious if all, or virtually all, of your assets are transferred to the FLP. Don’t transfer personal assets such as your home and leave yourself plenty of money to live on.

Remember – the more the FLP looks and acts like a legitimate business partnership, the better the chances of surviving an IRS challenge.