defining today’s advisor tim heslin
TRANSCRIPT
HERB DAROFFAre We Better Off?IN PROFILEDAVE PORTERAccountability
BECKY FERGUSONSandwich Generation
JOHN MASTALThe Affluent Market
TIM STARKEY6 Reasons to Sell Voluntary
DANIEL STEENERSONClosing Thoughts
Today’s ULBRETT BERGSuccession Planning
TIM HESLINHarness the Power
i n s u r a n c e i n v e s t m e n t i n c o m e
DEFINING TODAY’S ADVISORMay 2013
Digital EditionVol 17 No. 11
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MAY 2013 Life & HeALtH Advisor
contents
Founder Sally O’Connell 1954 – 2010; Publisher/Editor Peter E. Kelley;Creative Director Diane Astle; Features Editor Carolyn S. Ellis; Client Services Elizabeth Kelley
LIFE&Health Advisor is published monthly by JonHope Publishing Co., Inc., 71 Emerson Road, East Walpole, MA 02032. 508-668-8025 (voice), email: [email protected]. Subscriptions $29.95/year, $49.95/two year. send name, address & zip code with payment. JonHope Publishing Company, Inc., d/b/a/ LIFE&&Health Advisor shall not be held liable for failure to publish an advertisement or for typographical errors or errors in publication. For more information e-mail [email protected]. Editorial submissions are accepted discussing trends and issues facing the financial planning marketplace. For a copy of editorial guidelines visit www.lifehealth.com.
4Herb DaroffAre we better off than last year?Let’s not start with investment performance. Instead, let’s look at what are the obstacles and hurdles to a successful financial future. For example, the cost of health care.
8 in ProfiLe: Dave Porter
AccountabilityDave Porter is managing partner of Baystate Financial Services in Boston, the erstwhile New England Financial boutique agency he acquired in 1996 at the age of 35. At the time, the agency had about $1 million in commission and fees, which he has grown to more than $65 million.
10Becky FergusonUsing iUL to help the sandwich generationIn the last 100 years, women have made significant progress in many areas. They have stepped out of the shadows of their male counterparts and into more prominent roles, especially within the workplace.
sPeciAL: todAy’s UniversAL Life
14Brett Bergthe sandwich GenerationWith more and more people caring for parents and children at the same time, protecting income replacement and building supplemental cash reserves are important financial planning goals.
17Tim HeslinHarnessing the Power of ULYou may have seen the numbers from LIMRA — but to be sure, they’re worth noting: based on the organization’s First Quarter 2013 Industry Briefing, sales of indexed universal life insurance (IUL) jumped a whopping 42% for October through December 2012 and were up 36% for the year.
20John Mastalthe Affluent Market intensifiesThe investment advisory arena continues to be as dynamic as ever. Traditional providers of advice and services to the high net worth investor (HNW—$500,000 to $10 million investable assets) are experiencing unprecedented challenges.
22Tim Starkey6 Great reasons to sell voluntary BenefitsCommission cuts, five years of a down economy, increasing competition and historic changes to the health insurance industry in our country — any of these might be enough to make you reconsider your career choice. Taken together, no one would blame you for moving on to something less risky, like circus trapeze artist.
27 cLosinG tHoUGHts
Daniel Steenerson the di Window of opportunityIf you’ve shied away from selling disability income, now is a good time to reconsider. Marketplace trends point towards new and improved opportunities to make disability income sales a steady and lucrative source of income for the savvy producer. And developments within the DI industry are resulting in better support than ever for garnering these sales.
special-needs planningPreparing for social security does china matter to you?Underwriting GLBt
coMinG neXt MontH
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Financial Optimism: Are You Better Off Than Last Year? The emergence of real investment diversification empowers our clientsBy HerB Daroff, JD, CfP
Let’s not start with investment performance. Instead, let’s look at what are the obstacles and hurdles to a successful financial future.
Cost of health care/custodial care for you, your spouse, children, and grandchildrenRegardless of your investments, your financial future can suffer if you or a family member incurs expensive medical treatments or needs assistance performing the activities of daily living. As Congress attempts to reform how we pay for health care, we have not yet really examined how we go about keeping ourselves healthy and how health care is provided.
Supporting your children (unemployment and underemployment)After my children graduated from college, step one was making sure they were employed. Step two was making sure they had health insurance. The issue for many is that IF the kids from employment, does the job provide sufficient income to cover their costs of living? Will part of the parents (or grandparents) retirement income be needed to help financially support other family members?
Educating your children and/or grandchildrenOnce educated, there are still the outstanding loans to pay. Funds set aside for helping to education children (and grandchildren) reduce the dollars set aside for retirement or come from funds that were earmarked for retirement.
The future of Social SecurityWill Social Security become an add-on
income only for those who have not otherwise saved for retire-
ment? Will we, in essence, be punished for having suc-cessfully set aside dollars for our own retirement income? These and other discussions are taking place to help cover the costs of providing income for an ever increas-ing number of those no longer working.
InflationWe haven’t talked a lot about inflation as interest
rates continue in low single digits. However, many costs
that we incur are not included in the inflation calculation, including the cost of energy to heat
and cool our homes, the cost of educating our children, the cost of health care, etc.
Living too longDo I have enough money set aside for my retirement? Depends on how long you will be alive and need to tap into those resources.
So much for the doom and gloom. Now, why should we optimistic?
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finAnciAL oPtiMisM: Are yoU Better off tHAn LAst yeAr? continued
Access to worldwide investment choices and information (real diversification)We live in an amazing time where information is readily available. The problem is how to decipher the overwhelm-ing amounts of data that cross our eyes every day.
n When do we invest? Dollar cost averaging (putting away approximately the same amount on a regular basis into the same asset classes) has been institutional-
ized with 401(k) plans. This is a proven strategy for
accumulating retire-ment assets. Each
period you buy a differing amount of each asset class since the price of the investment changes. You buy
some when prices are high, others when
they are low. You don’t try to time the market.
Most investors end up buying high (when greed sets in after
hearing about how much money others are mak-
ing) and then selling low (out of fear when they hear about how badly things are going). Of course, all of us would
like to buy low and sell high. But, most do not. It’s
common nature not to buy a generator during the summer
and instead waiting until after a big storm, when prices are sky high.
We have to overcome that conven-tional “wisdom?”.
n In what do we invest? Many American investors think that 5% to 20%
is more than enough international holdings (companies and governments outside of the U.S.). Many non-American investors rarely hold more than about 40% to 50% of U.S. holdings. So, in essence, they are investing 50% to 60% (not 5% to 20%) inter-national. Some non-American financial advisors use contribution to world GNP in order to select in what countries asset to invest.
Asset allocation re-visited
n Old Asset Allocation = stocks/bond (correlated to S&P500)
All too often, investment portfolios are not really all that diversified. Increases and decreases in value of most holdings are correlated with the performance of specific indices.
n New Asset Allocation = stocks/bonds/alternatives (along with financial hedges l options l stop losses, and l variable annuity lifetime benefits)
Adding other asset classes (real estate, currencies, com-modities, etc.) to the investment mix helps to more fully diversify into asset classes that are not all corre-lated to one index.
Key is chasing net return — not chasing lower fees — first, re-balancing
RE-BALANCING
For example: Your risk tolerance directs you to invest your $30,000 equally into asset classes A, B, and C. After some period of time, your $30,000 is now worth $33,000 with A increasing by 50%, B decreasing by 20% and C staying level. Disciplined re-balancing dictates that you re-align your portfolio back to the equal thirds. However, human nature says, “you want me to SELL 4 of my winner in order to BUY 3 of the loser and 1 of the asset that went nowhere?” The advisor says, “that’s right.” The client says, “no way” and puts all the holdings into A (the big winner, looking into the rear view mirror). What happens next? A had its day. After the next period of time, the total portfolio has dropped to 13.
Second, what truly is your risk tolerance or risk capacity? I like to ask this simple question?
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n Suppose you BOUGHT a stock for $10 and then SOLD it at $12.
n Then that stock, had you kept it, GREW to $15. n In your mind, did you MAKE $2 or LOSE $3?
n The Conservative risk takers (1,2,3) tend to answer, MADE $2.
n More aggressive risk takers (7,8,9) answer, LOST $3n Those who can’t really decide are the moderates (4,5,6)
RISk ToLERANCE
If you BoUGHT a stock for $10 and then SoLD it for $12, but
after that the stock went to $15, did you MAkE $2 or LoSE $3?
Then, you need to recognize that it takes more “work” to keep a portfolio UP than to raise it after it has fallen DOWN.
n $100,000 dropping by 20% to $80,000, n needs 25% growth ($20,000 on $80,000) to return to
$100,000So, in addition to disciplined re-balancing that is consistent with real risk tolerance, we need asset LOCATION
PoRTFoLIo FoR ALL SEASoNS
In any year of retirement, two of these four accounts are in play. (HIGH/HIGH, LOW/LOW. HIGH/LOW, LOW/HIGH) v
Mr. Daroff is affiliated with Baystate Financial Planning in Boston. He can be reached at [email protected]
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Accountability
Dave Porter is managing partner of Baystate Financial
Services in Boston, the erstwhile New England Financial
boutique agency he acquired in 1996 at the age of 35. At
the time, the agency had about $1 million in commission
and fees, which he has grown to more than $65 million,
representing the largest financial services agency in the U.S.
At a time when the traditional agency system was failing
many of the recruits coming into the financial services
career, and as the brokerage channel began to eclipse the
traditional distribution flow, Porter recognized the need to
create a stronger support system for advisors, one founded
on the seemingly counter-intuitive premise that they are
the ones who should be accountable for their own success.
We spoke with him about how he applies this principle of
accountability to running his organization.
L&HA: Insurance is a people business. To what do you attri-bute your interpersonal skills?DP: I grew up with nothing, but I had awesome parents. I rely on my emotional intelligence, and I believe these things are important: Treat people the way they want to be treated. Start with please and thank you. Do what you said you were going to do, be on time, and finish what you started. I also write three thank you notes every business morning of my life.
L&HA: Who receives your handwritten notes?DP: The manager of a restaurant, one of our advisors, or a client of ours. I have drawers full of thank you notes from other people. I don’t care if they are from a seven year old or a business person, I judge myself by these letters because I know I’m making a difference in someone’s life.
L&HA: Besides your parents, who would you credit with your success?
DP: I credit my mentor, Tom Quirk. I joined his agency when I was 26 years old. He set me on a path: It’s not about what you accumulate; it’s about what you give. It’s not about what you earn; it’s about what everyone around you earns. If you live like that, everything gets taken care of.
L&HA: You also believe in unlimited possibilities.DP: Anything is possible when you hold yourself personally accountable. If I said to you, “I want to exercise three days a week or build a $100 million business, or I dream about having a whole floor of the Hancock Tower which we now have,” when you look in the mirror and you own the outcome, the possibilities are endless.
L&HA: You success story has been told many times and writers often highlight your internship in Washington D.C. during the Reagan Administration. Was there a takeaway from that experience you still hold onto?
in profileBy Carolyn S. elliS
in ProfiLe
Dave PorterPresident and CEO, Baystate Financial Services
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in ProfiLe: dAve Porter continued
DP: When I arrived at the White House my 31-year-old boss explained we were going to work from 7 AM until the work was done. I got the idea that yes, the job was sexy and fun but we were going to work hard. My father taught me something else. He told me when you’re in a receiving line get the guest of honor’s attention somehow in a very gracious way. I had been a TKE in college and Ronald Reagan was a TKE, too. The third night I was
there we were having dinner with the president and Nancy Reagan, and when I went through the receiving line, I gave President Reagan the
TKE handshake. Ten minutes later he came back to me and said, “Young man, where were you a TKE?” Before I knew it, I had walked down the hall to the Oval Office and had my picture taken with him.
L&HA: Baystate Financial has extraordinarily high retention rates for new hires. What’s your secret?DP: I view our 200+ advisors as my customers and my clients. If you looked at our organization chart, I am at the bottom. We have over 100,000 customers, but those are the advisors’ customers. If your desk chair is uncomfortable or you’re struggling to put together the right presentation for a prospect, I’ve got to find a way to help. Otherwise I’m a commodity and you can move on to the next Baystate-type organization. I think of it as being like Nordstrom’s. It may be a little more expensive, but it’s a great place to be. Advisors only get paid when they are face-to-face with their prospects and clients. We’ve built an internal infrastructure that’s huge, bigger than some mid-size insurance companies, that does nothing but cater to the advisors’ needs. We have 70-plus internal support people including attorneys, our pension group, product specialists, sales and support desk, and financial planning specialists.
L&HA: So, dothe he results speak for themselves?DP: We did a million dollars of commission and fee revenue in 1996 when I bought Baystate, and we did over $60 million last year. We have about 450 people, and our average production per advisor is almost $300,000. We’ve grown from one location in 1996 to ten today, ranging from Colchester, Vermont to East Providence, Rhode
Island. Our retention rate is over 74 percent after four years for new hires. The industry average is 11-12 percent. We started a charitable foundation 14 years ago, and today we’ll give away in excess of $300,000. We target children who are disadvantaged in some way by supporting organizations like the Police Athletic League and Access Sports.
L&HA: Your book, Where Winners Live, is now required read-ing at The American College. What motivated you to write this book?DP: Early in my career, someone suggested I start keeping track of how business was going, so I have kept notebooks
with quotes, articles, and books I liked. Someone asked me how I went from selling insurance door-to-door at age 22
to having the largest agency of any company in the United States. It came down to accountability. I found a co-author, Linda Galindo and with our editor the book came together. The first printing was 15,000 copies. The president of The American College just called me to say the book is required reading for new students in the Capstone program.
L&HA: Today we’re bombarded with media messages that we deserve this and are entitled to that. How does that square with personal accountability?DP: Here’s an example. Today one of our advisors emailed me about a problem with a split commission. I told him he was accountable for filling out the form first. He had made a mistake and needed to stop blaming everyone else. That said, he is my client so I will do what I can to help him.
L&HA: Will the industry be able to replicate your process or does it take a Dave Porter to make it work?DP: I think it comes down to execution and treating people the right way. I was the classic C- student but I worked hard. Family, business, and philanthropy are important. I can tell you every single person in our organization’s definition of success. It’s not money. It could be coaching their child’s Little League team or attending every one of their daughter’s ballet recitals. When you know that, it helps you motivate people. v
Ms Ellis is features editor for LIFE&Health Advisor. She can be reached at [email protected]
Editor’s Note: Reference for Mr. Porter’s recently published work- Where Winners Live: Sell More, Earn More, Achieve More through Personal AccountabilityBy Dave Porter and Linda Galindo with Sharon O’MalleyJohn Wiley & Sons, 2013
Dave Porter, managing partner- Baystate Financial Services
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Women: An Evolving DemographicNo longer a niche, they’re approaching the lead as household earners, and the best candidates to advise other womenBy BeCky ferguSon
In the last 100 years, women have made significant prog-ress in many areas. They have stepped out of the shadows of their male counterparts and into more prominent roles, especially within the workplace. Even though the shift began in the early 20th century, it has just really started growing within the last 40-50 years.
Women’s imprint on history has been making larger impressions over time. In 1920, the 19th Amendment to the Constitution was signed into law granting women the right to vote. As women took up a larger share of the workface, Congress was faced with passing the Equal Pay Act making it illegal for employers to pay a man more than a woman for the same job. In 1969, California was the first state to adopt a no-fault divorce law, and by 1985 every state had followed suit. Although these milestones granted women new freedoms, they also created a new type of customer.
Women now make up roughly half the U.S. Workforce1
1 From 1970 to 2013, their average incomes increased by 91 percent 2
2 According to the U.S. Bureau of Labor, more than one-third of wives earn more money than their husbands, and this number continues to grow
3 Even though many women out-earn their husbands today, fair pay is not fully spread across the genders with the average woman earning $.77 to each $1 of men’s wages3
4 These are educated, empowered and successful women who run companies, as well as households
A woman who is the head of a household and financially
supports her family is becom-ing more common. As an advisor meeting with a couple, it’s helpful for you to be aware of where women
have come from as well as the planning projections that directly affect their retirement needs. Money behaviors are built on historical events that include the type of environ-ment a female was raised in and where she obtained her financial literacy information and understanding any fears she has regarding planning.
Working with advisors on a daily basis, I find a major-ity of my insurance-related calls deal with married couples. And, even though we have established laws to distribute equality across both genders, males continue to be insured at significantly higher amounts than females.
Amazingly, many women are not insured at all when, in today’s economy, most households are dual-income fami-lies. Life insurance on a woman can replace not only lost income, but can also provide funds for others in the family affected by her absence (such as child-related expenses like daycare and college tuition), help maintain the family’s quality of living or replace any caregiving needed for an aging family member.
Life insurance is especially important to single moth-ers. Whether they have always been the sole income and care provider, or share this responsibility jointly with another parent, it is important to make sure the female client understands her income will be missed should she die without having a plan in place. In addition to life insurance needs, introducing the client to other planning concepts is necessary, including establishing a will and trust to orchestrate how the proceeds should be used. In addition
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WoMen: An evoLvinG deMoGrAPHic continued
to the financial aspect, a living will can be established at the same time to prevent a child or close relative from having to make decisions that may never have been discussed.
The topic of wages can be sensitive with women, but you need to inquire so you can set them up for a successful outcome. Not asking about earned wages outside income sources (such as annuities, gifts, child-support, etc.) will hinder the planning process. Income replacement must be discussed. Many women are afraid of outliving their retirement income. The Centers for Disease Control and Prevention found the female life expectancy is currently at 81.1 years. Women need to plan for longer lives!
With fewer employers offering pension plans, saving for retirement is key; this includes females working in and out of the home. One option could be to open an IRA account. In 2013, if the spouse’s income supports the limits, she will be able to contribute $5,500 (or $6,500 if she is age 50 or older). For those women who are employed outside the home, help her examine the details of the retirement plan offered at her place of employment, and see where opportunities might lie.
Many companies match contributions, which the employee may not even be aware of … that’s money they are missing out on. This can also lead to an opportunity to move her out of an old retirement plan and into a new
vehicle that is more advantageous to her retirement needs. Encourage her to not only save to IRAs and retirement plans, but also to a general savings account; easy savings sources are tax refunds and bonuses.
Another area to consider planning for is long-term care. While many women contribute to the majority of child raising, we also found they do the majority of caregiving for elderly family members. For example, the typical U.S. caregiver is a 46-year-old woman who works outside the home and spends more than 20 hours per week providing unpaid care.4 It’s important these family members feel they will be taken care of should anything happen to their female caregiver. Long-term care insurance or hybrid life/LTC policies can protect the female clients’ retirement savings, as well as provide the financial means for their care when the time comes.
Knowing how to relate this information to a female client is the most important aspect in the advisor-client relationship. When looking into their financial future, it is best to understand the differences between women and men. Prudential Financial has published their 2012-2013 research on “Financial Experience and Behaviors Among Women Study.” In this study, the differences between women and men are spelled out on main topic points from their income and savings to their priorities, knowledge and worries about their financial future. 5
MAJoR FINDINGS – Differences between women and men WoMEN MEN
Median income $51,000 $57,000Median savings $12,400 $40,500Top 3 Financial Priorities
Not become a financial burden to loved onesMaintain lifestyle in retirementMake sure not to outlive savings
Maintain lifestyle in retirementMake sure not to outlive savingsNot become a financial burden to loved ones
Top 3 Financial Worries Household expensesHousehold debtSaving for retirement
The overall economyHousehold expensesSaving for retirement
Knowledge of Financial Products
5% Very knowledgeable49% Somewhat knowledgeable32# Not very knowledgeable13% Not at all knowledgeable
14% Very knowledgeable57% Somewhat knowledgeable22% Not very knowledgeable8% Not at all knowledgeable
Current Economic Standing
20% Doing well or ‘upscale’43% Doing OK or ‘adequate’37% Struggling to make ends meet or falling behind on bills
29% Doing well or ‘upscale’37% Doing OK or ‘adequate’34% Struggling to make ends meet or falling behind on bills
Confidence in Financial Decision Making
22% Very well prepared63% Need help or need to catch up in many areas15% Are self-described ‘beginners’
37% Very well prepared57% Need help or need to catch up in many areas7% Are self-described ‘beginners’
Risk Tolerance 49% Willing to take a risk for the opportunity of a greater financial reward22% ‘Enjoy’ investing
70% Willing to take a risk for the opportunity of a greater financial reward40% ‘Enjoy’ investing
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MArKetinG
As the chart shows, even though women make roughly 11 percent less than men, their savings are significantly dif-ferent – 70 percent less than men. However, their finan-cial priorities are similar, which underscores the need for more education about how to achieve their goals. Selling financial services to men is markedly different than selling financial services to women.
So, what does this mean for you? And, more importantly, how can you use it to become a better producer? Changing the way you relate to your women clients will benefit your productivity in more ways than one. During your fact-find-ing, address each of their top worries of expenses, debt and savings using a more rapport-style questioning to connect with a woman prospect’s heart.
By taking the time to learn and understand more about your female clients, you will more easily recognize what is meaningful to her and what influences her financial behav-ior. Building connected relationships (partnerships), as well as taking in the background information provided here, will enable you to provide assistance by uncovering what is missing from her financial portfolio.
Understanding the differences will provide you with the opportunity to fill gaps and bring solutions to the table that
will make her life simpler, and ensure her financial future is worry-free. The reality is, what you’re providing is financial help and trust … and, if she’s impressed with your help, you can trust her to tell her friends and colleagues. v
Ms. Ferguson is Senior Life Marketing Consultant with Ash Brokerage, Indianapolis. With more than 12 years experience in life insurance and annuities, she specializes in building agent rela-tionships and helping them find solutions for their clients while staying up-to-date on product and industry changes. Becky is a 2000 graduate of Indiana University’s Kelly School of Business; in addition to Series 6 and 63, she also has her life and health license.
Endnotes1 “Pay Equity is Good for Business and Good for Working
Women” report, Business and Professional Women’s Foundation, March 2010
2 “Women Invest“ White Paper, LPL Financial3 “Pay Equity is Good for Business and Good for Working
Women” report4 National Alliance for Caregiving and AARP, Caregiving in the
U.S., April 20045 Prudential’s 2012 Financial Experience and Behaviors Among
Women Study
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WoMen: An evoLvinG deMoGrAPHic
New LIMRA research revealed that 6 in 10 new parents and 7 in 10 newly married or divorced couples do not shop or buy life insurance within two years of having a baby or get-ting married or divorced.
Conventional wisdom was that life events - getting mar-ried, divorced or having a baby – were primary triggers for consumers to shop for life insurance. Findings from LIMRA’s 2011 study, To Shop and Not to Shop, supported this, with one in four consumers who shopped for life insur-ance were recently married or new parents.
However, looking more broadly at the 4 million Americans who married and the 7 to 8 million births that occurred over the past two years, these life events are not prompting the majority of these consumers to seek the life insurance coverage they might need to protect their families.
LIMRA found that newlyweds, new parents and divor-cees had higher levels of financial concerns regarding money
accumulation, protection needs, debt and bills than consum-ers overall. While more than one-third of new parents and 45 percent of newlyweds and recently divorced consumers acknowledged they did not have enough life insurance, nearly two-thirds of new parents, newlyweds and recent divorcees said life insurance wasn’t their top financial priority.
Often, newlyweds, new parents and divorcees have many dif-ferent financial needs competing for limited dollars. The prob-lem is that not having protection in the case of disability, death or sickness could leave their families at substantial financial risk.
LIMRA recommends that financial professionals reach out to new parents and those who have changed their marital status to help them view their financial goals holistically. These discussions may help these consumer understand how life insurance can ensure their goals to pay off debt, provide educational opportunities for their children and keep retire-ment savings intact in the event of a premature death. v
Myth: Marriage or Pregnancy Spurs Life Insurance Puchases
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Using Indexed Universal Life to Help The Sandwich GenerationFamily financial planning is not always a smooth and sequential transition
By Brett W. Berg
With more and more people caring for par-ents and children at the same time, protecting income replacement and building supplemental cash reserves are impor-tant financial planning goals. These people fit within the category that some researchers are labeling the “sandwich generation,” because they are in the middle of two generations that need their help and, in many cases, their financial support.
On January 30, 2013, Kim Parker and Eileen Patten of the Pew Research Center detailed several findings of the Pew Center’s research in a report entitled “The Sandwich Generation: Rising Financial Burdens of Middle Aged Americans”.
While a comprehensive review of the report is beyond the scope of this article, some facts support the proposition that many clients either face the immediate issue or potential issue of supporting parents and children at the same time. According to the report, in 2012, nearly half of the adults in their 40s and 50s who were surveyed (47%) reported they have a parent aged 65 or older and are also raising a minor child or supporting a grown child (age 18 and over). Moreover, the same report for 2012 noted that 15% of those surveyed had provided financial assistance to both the parent over age 65 and to a child in the past year.
From a life insurance planning perspective, when con-sidering how much death benefit may be necessary, the needs that must be considered when evaluating the type of protection necessary are numerous. For the children depen-dent upon the sandwich generation clients, traditional needs such as income replacement are obvious. In addition,
financial advisors and life insurance profes-sionals should consider how much coverage is necessary to pay other debts such as a mort-gage and taxes due at death. In addition, because the sandwich generation clients are
taking care of elderly parents, a financial advisor should investigate whether any debts have been incurred by the clients to help pay for care of their parents as well as how much may be necessary to help continue care should the sandwich generation clients die prematurely.
Accumulating Enough CashWhen selecting a policy, even though death benefit protec-tion is a primary concern, an important additional con-sideration is cash accumulation. The sandwich generation clients may have potential financial burdens for an extended period of time that may well last into their retirement years, so building up cash inside a life insurance policy could provide another source of either supplemental retirement income or supplemental income that may help offset the financial burdens associated with supporting their parents and/or children for an extended period of time.
For this reason, variable universal life (VUL), indexed universal life (IUL) and cash accumulation-oriented univer-sal life (UL) policies may be popular with sandwich genera-tion clients.
In today’s environment, IUL may be of interest to the cli-ent in that many IUL designs provide upside potential for cash accumulation while providing downside protection for the cash value in the event of market downturns. In general,
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UsinG indeXed UniversAL Life to HeLP tHe sAndWicH GenerAtion continued
most Index ULs offer a basic interest account as one choice and at least one index account. They typically “sweep” funds through a basic interest account into the index account. There is no crediting rate on the index account.
The “illustrated” rate may be based on a 25 year back-ward history of that index’s performance - even though past performance has no impact on future results. Any future projections are hypothetical. The actual performance of an Index UL will be derived from actual index performance, and subject to some upward cap on participation that can limit gains and a floor that limits losses. In general, the carrier hedges their risk by purchasing options, resulting in asset performance that mirrors their crediting liability. The upside potential and downside protection offered by the IUL product may be particularly attractive to the client.
Using a Trust as a Planning ToolRegardless of the type of insurance policy selected, if the client dies early and he/she has named the family as ben-eficiary, the family may receive the death benefit to help provide income replacement, pay for final expenses, etc. In situations involving sandwich generation clients, the use of a trust may be an important planning tool. The death ben-efit may be paid to the trust, which may include the elderly parent as well as the children as beneficiaries of the trust. This is particularly important if both parents in the sand-wich generation die prematurely. The trustee of the trust may be given discretion to make distributions to the elderly parent and/or the children. As in all cases involving estate planning, a client should consult with a licensed attorney knowledgeable in estate planning to develop an appropriate plan to meet the client’s specific needs.
Assuming the client lives to retirement, the client may take withdrawals and/or loans from the policy at retirement to help pay for a child’s expenses and/or help an elderly parent.
It’s important to note that both loans and withdrawals from a permanent life insurance policy may be subject to
penalties and fees and, along with any accrued loan interest, will reduce the policy’s account value and death benefit and may have tax consequences. If the policy is a VUL, depend-ing upon the performance of a VUL policy’s investment choices, the account value may be worth more or less than the original amount invested in the policy.
Please note that if your premium payments exceeds tax law limits, your policy will be classified as a Modified Endowment Contract (MEC). Lifetime distributions from MECs receive less favorable tax treatment than generally provided life insurance policies. Assuming a policy is not a MEC, withdrawals are taxed only to the extent that they exceed the policyowner’s cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions.”
In conclusion, when working with clients in their 40s and 50s, financial professionals have every reason to consider whether clients are or will be supporting both their parents and their children at the same time. For these sandwich generation clients, permanent cash value life insurance, including IUL, may be an important part of managing the financial issues that may arise. v
Brett W. Berg currently serves as Director, Advanced Marketing for Prudential. Mr. Berg can be reached at [email protected]. Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Variable Life Insurance is offered by Pruco Securities LLC . All are Prudential Financial companies and each is solely responsible for its own financial conditions and contractual obligations. The avail-ability of other products and services varies by carrier and state. This material is designed to provide general information in regard to the subject matter covered. It should be used with the understanding that we are not rendering legal, accounting or tax advice. Your clients own advisors should provide such services. Accordingly, any information in this document cannot be used by any taxpayer for purposes of avoiding penalties under Internal Revenue Code.
“Two of the biggest retirement concerns for many Americans are outliving their money and protecting their savings between now and when they plan to retire…”
doUGLAs dUBitsKy, Vice President of Product Management & Development for Retirement Solutions with The Guardian, speaking on the need for greater innovation in annuity product design
notes & qUotes
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L&HA 17
May 2013 www.LifeHealth.com
Harness the Power of Indexed Universal LifeA focus on security, flexibility and a potential to grow cashBy tim HeSlin
You may have seen the numbers from LIMRA — but to be sure, they’re worth noting: based on the organiza-tion’s First Quarter 2013 Industry Briefing, sales of indexed universal life insurance (IUL) jumped a whopping 42% for October through December 2012 and were up 36% for the year. As LIMRA President Bob Kerzner articulated in the presentation, the fact “…that IUL continued to do better, even in December, would seem to indicate the market has made the change to IUL, making it the product of choice.”
Yet, there is still market share to be gained for IUL. If you’re not among the agents who have fully harnessed its potential for your clients, let’s talk about why you might want to take another look.
It comes down to the value proposition, really — and as we’ve seen over and over, what constitutes value to so many of today’s life insurance buyers is security, flexibility and the potential to grow cash value. That’s not really surprising given the economic climate of late, but it’s also not really such a tall order given the powerful features and benefits of the most attractive IUL policies on the market these days (more about that shortly).
In the meantime, consider this: in this country’s pro-longed low-interest rate environment, retirement plans have been ravaged while we’re still dealing with burdensome con-sumer debt loads, high unemployment, record default rates on mortgages, and throngs of people working far past their
planned retirement age because they don’t have enough money to live comfortably or to meet their other financial needs. It’s not a pretty scenario, even though there is some cause for cautious optimism.
Protection is still critical; after all, no one wants to figure out too late in life that they can’t safeguard the estate they have worked so hard for, or cover their long-term needs or provide a legacy to their heirs. Boomers have struggled through not one but two market corrections in a dozen years, and they are rightfully uncertain about the state of our economy and also uncertain about what they will have left at the end of the day.
For that very reason — the fact that clients don’t have a crystal ball in which to see the future clearly — flexibility is highly desirable. Policies, to provide the strongest value proposition, simply have to be customizable based on individual needs as they fluctuate, especially since many Americans don’t have the savings they did in the past. To help take care of unexpected expenses, they may look toward their life insurance policy, to take a distribution from it or perhaps have the premiums adjusted.
Further, while security and optionality are foremost con-cerns for many people, it’s a rare client indeed who wouldn’t like to realize the potential to grow cash value. That’s the beauty of IUL: it can provide customers with the oppor-tunity for cash accumulation as well as those other two coveted features: security and flexibility.
continued
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May 2013 www.LifeHealth.com
HArness tHe PoWer of indeXed UniversAL Life continued
The most flexible build for this breed of product offers clients long-term guarantees in addition to the opportu-nity to allocate premiums to index accounts, providing the potential to grow considerable cash value. What’s more, this type of policy is structured to provide robust death benefit protection and the flexibility to customize coverage guaran-tees in alignment with the policyholder’s unique needs.
It’s true that non-indexed, fixed UL products are still available and that they generally require lower premiums, but the tradeoff is that they provide clients with lower cash accumulation potential — and few, if any flexible features. It’s no wonder, with the mindset of today’s clients, that so many prefer indexed UL products instead.
With IUL, clients can benefit from the best of both worlds. On one hand, they have the opportunity to real-ize higher returns by capital-izing on some of the equity markets’ upside potential; on the other, they can enjoy a measure of protection against negative exposure to volatility.
One especially attractive type of IUL product lets the policyholder choose from among three premium alloca-tion choices to best suit his or her individual goals — a declared interest account, a five-year index account and a one-year index account. These interest-crediting accounts not only provide death ben-efit protection, they also offer the potential to accumulate cash based in part on the performance of one or more global indices, with the ability to change the allocation directions.
With the needs and goals of your clients in mind, look for the following features and benefits in an IUL policy:
n death benefit protection, with a choice of two death benefit options (level and increasing)
n flexible allocation choices: declared interest and/or two index interest options (allowing efficient repositioning of existing assets)
n five-year, point-to-point index interest crediting based
partly on three global indices with automatic over-weighting of the two best-performing indices
n one-year index interest crediting based in part on the one-year, point-to-point growth of the S&P 500® with cap rate and guaranteed monthly crediting of an inter-est rate equivalent to .25 percent annually
n strong cap and participation ratesn high early cash values that allow for business applica-
tions or use for collateral purposesn two or more loan options, including one that allows
the loan collateral to remain in the account, eligible for indexed interest crediting nMonthly Guarantee Premiums which establish premiums that, if paid timely, ensure the policy will not lapse within designated time frames, andna variety of optional rid-ers, including an Overloan Protection Rider that ensures the policy won’t lapse because of a large outstanding loan balance.
With features and benefits such as those described above, offer-ing a powerful blend of security, flexibility and the potential to grow cash value, IUL can be an excellent fit for clients who want guarantees but also crave the opportunity for accumulation. It’s no wonder IUL products are looking so good — so if you haven’t looked lately, look again. Your clients will thank you.
And by the way, regarding what else is in it for you as a broker, see if you can find an IUL product with especially high rolling targets. Carrier offerings
have changed of late….review them closely to identify those from which you and your business can benefit the most. v
Mr. Heslin is Vice President, Product Strategy and Implementation, for American General Life Companies. He can be reached at [email protected] American General Life Companies, www.americangeneral.com, is the marketing name for a group of affiliated domestic life insurers.
“ It comes down to the value proposition, really — and as we’ve seen over and over, what constitutes value to so many of today’s life insurance buyers is security, flexibility and the potential to grow cash value ”
How can you help your clients make more informed decisions?
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Thomas J. Harmon is an authorized user of The Living Balance Sheet®. The Living Balance Sheet® and the Living Balance Sheet® Logo, are registered service marks of The Guardian Life Insurance Company of America (Guardian), New York, NY. The graphics and text used herein are the exclusive property of Guardian and protected under U.S. and International copyright laws. © Copyright 2005-2012, The Guardian Life Insurance Company of America.
Registered Representative of Park Avenue Securities LLC (PAS), 110 Cedar Street, Wellesley Hills, MA 02481, 1-781-237-1720. Securities products/services and advisory services are offered through PAS, a registered broker/dealer and invest-ment advisor. Field Representative, Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Wellesley Financial Group and Insurance Agency is not an affiliate or subsidiary of PAS.
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One of Guardian’s fastest growing Agencies Thomas J. Harmon
CLU, ChFCAssociate General Agent
L&HA 20
May 2013 www.LifeHealth.com
The investment advisory arena continues to be as dynamic as ever. Traditional provid-ers of advice and services to the high net worth investor (HNW—$500,000 to $10 million investable assets) are experienc-ing unprecedented challenges. Their business models are being tested by industry consolidation, democratization of investment knowledge, rising regulation, and blurring of the service demarcation between the ultra-high net worth (UHNW—over $10 million investable assets) and HNW investor. These factors have left many advisors scratching their heads as to how to grow their business, best serve their clients, and improve their profitability.
Across the board, these industry dynamics are creating a great opportunity for savvy advisors to significantly grow their business—as well as exposing them to the risk of being left behind. This competition continues to heat up as wire-houses, private banks, independent broker dealers (IBDs), and custodians (on behalf of registered investment advi-sors or RIAs) all spend a great deal of money on marketing and technology to target prospective clients in the HNW marketplace. The difficult task at hand for many advisors is evaluating which platform provides the most synergistic business model.
Stress on the PlayersSince the Great Recession of 2008, wirehouses and private banks have been barraged with bad (yet often accurate)
press, complicating their advisors’ busi-ness development efforts. Additionally, with many five- to seven-year forgiv-able loan deals expiring soon, advisors are now reviewing the pros and cons of their upcoming “free
agent” status. IBDs, custodians, and RIAs are scrambling to improve their marketing, research, technology, reporting, and client service to lure advisors who can effectively serve the HNW marketplace. Aggregators have also joined the fray, adding another thorn in the side of private banks and wirehouses. These aggregators are often backed by private equity money, giving them the ability to create competitive pay packages for potential advisors (similar to, though often not as large, as the ones offered by wirehouses and IBDs). All this industry tumult has brought about new opportuni-ties for advisors, especially wirehouse advisors desiring to make a shift and work with clients in a solutions-oriented, open architecture environment, impartial to product.
Change is AfootFurther buoying the advisor exodus from the bank/wirehouse model is the rapid transformation of available investment products and platforms. Better planning, more products, more service choices, more transparency . . . all aimed at providing an improved experience for the cli-ent. What only institutions, endowments, and ultra-high net worth clients could access five to ten years ago is now becoming available to the mass market investor. These
The Affluent Marketplace IntensifiesChallenges and Opportunities AheadBy JoHn maStal
continued
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tHe AffLUent MArKetPLAce intensifies continued
options are creating a new HNW market environment that can provide talent and solutions once reserved only for the UHNW investor. However, many HNW and most UHNW clients are demanding more than just a separately managed account, a mutual fund or ETF product in their portfolio. Clients want a combination of more sophis-ticated and more specialized services: holistic wealth manage-ment, estate planning, and the like. And more and more, clients are looking to find advisors who are equally knowledgeable about their industry or profession. As in law or medicine, the advisor of the future will likely be a specialist rather than a general practitioner.
Seeking SolutionsAdvisors need to carefully evaluate all of these factors in order to decide which platform will best highlight their
competitive advantages and help overcome their weak-nesses. An advisor should determine which niche skills
they possess—as well as the kind of company culture they want to be a part of— and then methodically assess the various business models to determine the right fit for their clients and their business. However, as the investment advisory industry attempts to accommodate change, most advi-sors are struggling, as well, to build out their capabilities. The challenges facing the industry are likely to only get more complex and costly. Advisors who understand how each platform—aggregator, private banker, wirehouse,
IBD, RIA and custodian—can minimize these complexities will help ensure future success. v
Mr. Mastal is managing director of Convergent Wealth Advisors, in Washington, DC, an industry leader in wealth management with over $18 billion in assets. Connect with him by e-mail: [email protected]
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“ Since the Great Recession of
2008, wirehouses and private
banks have been barraged with
bad (yet often accurate) press,
complicating their advisors’
business development efforts ”
L&HA 22
May 2013 www.LifeHealth.com
Lighten Up!Six reasons voluntary benefits can put a smile on your face in today’s marketplace
By tim Starkey
Are we having fun yet?Commission cuts, five years of a down economy, increas-ing competition and historic changes to the health insur-ance industry in our country — any of these might be enough to make you recon-sider your career choice. Taken together, no one would blame you for moving on to something less risky, like circus trapeze artist.
And yet, I firmly believe the opportunity to provide working Americans with the financial protection benefits they need has never been greater.
Before you bundle me off to the funny farm, hear me out. I’ll give you six good reasons you’re in the right place at the right time — if you make voluntary benefits an integral part of the solutions you bring your clients in today’s complex benefits market.
Reason #1: You can help employers with their most desperate benefits problem: controlling costs.An aging population, advances in medical technology, more expensive medications and other factors have all driven up the cost of health care — and health insurance. According to a report by the Kaiser Family Foundation, employers paid an average annual premium of $15,073 for family coverage in 2011, an increase of 9 percent over the previ-ous year. The same report found the cost of family coverage has doubled since 2001. That trend continued into 2012: a recent survey of mid-sized companies with 51 to 1,000 employees found 80 percent experienced increased health care costs in 2012.
As a result, many employers have moved to high-deductible health plans to keep premiums affordable. The downside of this strategy is the large financial exposure gap it creates for employees faced with significant potential out-of-pocket costs. Adding voluntary coverage that helps
bridge this gap is a cost-effec-tive solution. In fact, many employers find they can even pay for this additional cover-age for their employees and still save money compared with their previous major medical costs.
Reason #2: You can help your clients expand their
benefits packages instead of cutting back.Your clients may think eliminating benefits is a quick and easy way to save money. In fact, cost is the most important factor for more than 75 percent of employers in decid-ing how they’ll respond to health care reform. Instead of cutting coverage, advise them to move noncore benefits to employee-paid voluntary products. This allows them to continue to offer a comprehensive benefits package that may be a differentiator as other employers cut back coverage and even stop offering major medical insurance.
Shifting noncore benefits to voluntary coverage is a very effective yet underutilized solution. A survey of members of a large government financial officers association showed only about a third were using this strategy, but of those who were, 87 percent recommended it and 70 percent recom-mended it strongly.
Voluntary benefits give employees access to expanded options to meet their unique family situations, and the coverage is typically more affordable than employees could obtain themselves outside the workplace. There’s no direct cost to your clients because employees choose and pay for the coverage they want. Besides, does it make sense for your clients to pay for coverage for all employees when only a portion may need and value a particular benefit?
Reason #3: You can help your clients better meet the need for benefits choices demanded by demographic shifts in today’s workforce.
continued
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May 2013 www.LifeHealth.com
LiGHten UP! continued
At nearly 92 million strong, Generation Y is poised to take over the workplace, accounting for nearly half of all employees worldwide within four years. At the same time, today’s workforce is more diverse than ever before. The one-size-fits-all benefits plans of the past just don’t work any longer. But that doesn’t mean today’s younger workers don’t think employer-provided benefits are important. In fact, benefits rank highly in many surveys as a top contributor to job satisfaction. Your clients can better attract and retain top talent by offering a menu of voluntary benefits employees can customize and personalize to meet their unique needs. Voluntary benefits offer the key advantages of choice, cost and convenience today’s workers are looking for.
Reason #4: You can help your clients maximize their return-on-investment through stronger benefits communication and education.Many employers have been forced to make significant changes to their major medical coverage and other benefits for economic reasons. That’s why effective benefits com-munication is more important than ever. Employers nearly unanimously agree it’s important for employees to under-stand their benefits; 89 percent say it’s very important. Yet less than half of employ-ers believe their employees actually have a good understanding of their benefits.Without a strong benefits communication plan, employees won’t understand their options or appreciate the investment their employer is making. Employees are also much more likely to engage and accept changes in their benefits if they under-stand the reasons behind them.
This is especially true when it comes to driving participation in wellness programs. Wellness initiatives are a successful and increasingly popular strategy for controlling benefits costs — but they only work if employees engage in them. However, wellness programs are often poorly understood. A recent survey of both employers and employees revealed a surprising gap: While 57 percent of employers believed their employees had a good understanding of the health and wellness programs offered and how to participate, only 41 percent of employees said they felt they had a strong grasp of the programs offered. Only half of respondents said they knew how to participate in their company’s wellness programs, while the other half said they had either some knowledge or none at all. A comprehen-sive benefits communication program can drive the
understanding and engagement that makes wellness programs a valuable cost-control tool.
Reason #5: You can protect and even build your revenue stream.If you’re like many benefits brokers, you’ve seen your com-missions from major medical plans pared down in the last few years, or cut entirely if your clients have decided to stop offering major medical coverage. Adding voluntary benefits to your portfolio helps ensure a continuing revenue stream — plus you have no investment in training or infrastructure when you partner with a top voluntary benefits provider that brings products, communication and enrollment sup-port to the table. Offering voluntary benefits also helps you strengthen your client relationships as a valued partner.
Reason #6: Health care reform will make voluntary benefits and communication even more important.Many people in our industry — providers, producers and clients alike — have been stuck in a holding pattern for almost three years, waiting to see how health care reform legislation will shake out. A Supreme Court challenge and
a national election later, it’s now clear the law isn’t going to just disappear. There’s still a lot of uncertainty about exactly how it’ll be implemented, but one point is clear: no matter what changes employers may make in their major medical offering, voluntary benefits will continue to be a critically important part of the overall benefits pack-age. Even employers considering eliminat-ing their company-sponsored major medical coverage in favor of exchanges can still benefit from offering voluntary benefits. That’s because voluntary benefits can be the
differentiator that makes them stand apart from the compe-tition, and most voluntary coverage isn’t included in health care reform legislation. And since employees select and pay for the coverage they want, there’s no financial impact on the business.
If you still think you need to check the want ads for a new career, I encourage you to check out voluntary benefits instead. It could be the most fun — and the most reward-ing — step you’ve taken in years. v
Mr. Starkey is Northeast Region Vice President of Sales for Colonial Life, respon-sible for the company’s sales, marketing and recruiting efforts in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, Ohio and Washington, D.C. Contact him at 614- 356-5670 or [email protected].
Advisor Stressorsretirement / successiontechnology & operationscompliance & legalcontinuing educationmarketing & business
developmentstaffing & profitability
L&HA 24
May 2013 www.LifeHealth.com
MArKetinG
MILWAUKEE— Northwestern Mutual today released data from its 2013 Planning and Progress Study showing that more than six in ten (63%) Americans say their financial planning needs improvement; and that the No. 1 obstacle is not having enough time (24%).
“There’s an interesting parallel that exists between manag-ing your finances and managing your day-to-day life in that it’s so easy to let short-term needs and wants over shadow the more critical long-term goals,” said Greg Oberland, Northwestern Mutual executive vice president. “We’re all susceptible, particularly today, as we’re often overloaded with information and over scheduled.”
Oberland added that Northwestern Mutual’s study results should be read as “a wake-up call to put long-term financial planning on our collective to-do lists.”
Time-Strained AmericaThe majority of Americans (69%) say the pace of society makes it harder for them to stick with long-term goals.
•Morethanoneinfour(26%)peoplesaytheyeitheroften or always feel too busy to think about long-term goals.
• Additionally,nearlyoneinthree(31%)saytheyfindthe level of immediacy of society today – character-ized by 24/7 connectivity and accessibility – to be distracting.
Half of All Americans Have No Financial Plan in PlaceWhen people were asked to specify what type of planners they are:
• 40%describedthemselvesas“Informal,”meaningtheyhave a general sense of their goals and how to meet them, but no specific plan in place.
• Anadditional9%saytheyare“Non-Planners,”mean-ing they neither have specific goals nor specific plans of any kind.
• Oneinthree(34%)peopledescribethemselvesas“Disciplined,” meaning they know their goals and have a plan in place, but deviate at times because they don’t always stay on top of them.
• Just16%saytheyare“HighlyDisciplined,”meaningthey know their goals, have a plan in place to meet them, and rarely deviate.
Gen Y Shows More DisciplineWhen it comes to financial planning, Gen Y (ages 25-32) may be the most disciplined generation with 24% say-ing they are “Highly Disciplined” planners. This is a 50% increase over the full-sample average (16%).
The discrepancy is even greater when comparing Generation Y (ages 25-32) to Baby Boomers (ages 47-66), among which only 14% are “Highly Disciplined.”
“While overall discipline remains low, we’re encouraged to see that the youngest generation of adults appears to be taking demonstrable action,” said Oberland.
This is the first set of findings released from Northwestern Mutual’s 2013 Planning & Progress Study, which explores the state of financial planning in America today, and provides unique insights into people’s current attitudes and behaviors toward money, goal-setting and priorities. The study was conducted by the independent research firm Harris Interactive. Northwestern Mutual will release addi-tional results and a series of multi-media materials over the coming weeks. v
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Americans’ No. 1 obstacle for Financial Planning is Lack of Time
L&HA 25
May 2013 www.LifeHealth.com
MArKetinG
Health, Not Income, Tops Longevity Concerns for Middle-Income Americans New Survey Findings on Longevity Risk and Reward
Declining health is the number one longevity concern for middle-income Americans, nearly four times the concern over inadequate retirement savings (10%) or outliving their money (9%), the latest study released by the Bankers Life and Casualty Company Center For A Secure Retirement ® (CSR) reveals.
The study, Longevity Risk and Reward for Middle-Income Americans surveyed 500 Americans ages 55 to 75 with an annual household income of between $25,000 and $75,000.
Retirement Income ShortfallsTo compensate for the possibility of outliving their savings, here’s a look at how middle-income Americans plan to deal with shortfalls in retirement income.
n Reduce spending (63%)n Get a part-time job in retirement (41%)n Sell my house (25%)n Give less money to children/grandchildren (24%)n Don’t plan to do anything (15%)
The good news is that the majority of today’s middle-income Americans are living within their budget. According to the CSR study, seven out of ten (70%) report living comfortably within their budget. Only one in ten (9%) admit to living beyond their means.
Use of Common Planning MethodsFour in ten (44%) admit that their retirement savings may not last until the end of their life. Yet, when it comes to developing a retirement savings goal, only one-fifth (21%) of middle-income retirees and pre-retirees calculated a monthly retirement income goal number; only one in ten (13%) determined a total savings goal number to reach.
“Realistically assessing longevity can be a powerful tool in planning for retirement,” said Chris Campbell, vice presi-dent of marketing and business development at Bankers Life and Casualty Company, a national life and health insurer. “Set a clear retirement goal and be realistic about
the amount of savings it will take to be able to live the retirement lifestyle you desire.”
Retirement AnxietyThe CSR study cites more than half of middle-income Boomers (55%) have saved less than $100,000 for retire-ment. In light of this reality, it is not surprising that nearly two-thirds (62%) of middle-income pre-retirees report some level of anxiety about retirement; one in four (28%) report being “anxious” or “very anxious.”
All of these factors suggest that most middle-income Americans should apply some disciplined planning to over-come these anxieties. Yet that does not seem to be the case, according to the study.
MethodologyThe Bankers Life and Casualty Company Center for a Secure Retirement’s study Longevity Risk and Reward for Middle-Income Americans was conducted in November 2012 by the independent research firm The Boomer Project. The full report can be viewed at CenterForASecureRetirement.com.
About the Center for a Secure RetirementThe Bankers Life and Casualty Company Center for a Secure Retirement is the Company’s research and con-sumer education program. Its studies and consumer awareness campaigns provide insight and practical advice for how everyday Americans can achieve finan-cial security during retirement. To learn more, visit CenterForASecureRetirement.com.
Established in 1879 in Chicago, Bankers Life and Casualty Company focuses on the insurance needs of the retirement market. The nationwide company, a subsidiary of CNO Financial Group, Inc. (NYSE: CNO), offers a broad portfolio of health and life insurance and annui-ties designed especially for retirees. To learn more, visit Bankers.com. v
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The DI Window of OpportunityHow aging boomers are creating
a disability sales boomBy Daniel SteenerSon
If you’ve shied away from selling disability income, now is a good time to reconsider. Marketplace trends point towards new and improved opportunities to make disability income sales a steady and lucrative source of income for the savvy producer. And developments within the DI industry are resulting in better support than ever for garnering these sales.
Sales to Boomers Are BoomingThe single most significant mar-ket trend creating expanded DI sales opportunities today is the aging of the baby boomers. As 82 million boomers enter middle age, they also enter their peak earning years and their years of greatest financial obli-gation. Along with their increased incomes and increased responsibilities comes a keen awareness of the need to insure their earnings.
Within the broad baby boomer category are numerous attractive niche markets. For example, minority groups are growing. As the most highly-educated, most affluent
minority, Asians are good pros-pects for DI. And the U.S. Census Department projects that Hispanics will make up over 20% of the U.S. population by the year 2000, a goldmine of buying power.
Societal Shifts Create New NeedsShifts away from the traditional breadwinner/homemaker family configuration are bringing home the need for income protection to new prospects. Two-income couples have twice the need for income protection. The “sandwich generation,” which is simultane-ously supporting young children
and elderly parents, likewise has heavy financial burdens. Single parents and divorcees as well as the growing ranks of nevermarrieds have no one to fall back on if they lose their ability to earn. With the U.S. savings rate at an all-time low, few people, regardless of occupation or family situation, have enough set aside to sustain them through an extended period of disability. All these circumstances call for disabil-ity income insurance.
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Target occupations Changing and ExpandingNew and non-traditional ways of earning income extend the need for disability beyond traditional professional mar-kets, and even change the requirements within established markets such as physicians and business owners. This affects both the need for disability income and the kinds of poli-cies that will meet changing needs.
As employment opportunities shrink, more people are becoming self-employed and in need of individual coverage to replace group coverage an employer might have pro-vided. And as many seek more flexibility in their working life, the ranks of part-time, at-home, and freelance workers swell. These individuals need income protection plans that are compatible with their unpredictable income and earning patterns.
The Move to Multi-life In the search for affordability and guarantees of insurabil-ity, both the new self-employeds and the traditional self-employeds, such as physicians and attorneys, are grouping together. The resulting shift towards buying both indi-vidual, group, and hybrid income protection plans in group settings is good news for producers: multi-life marketing - selling multiple policies to many people found in a single
setting - is more efficient and profitable than selling policies one at a time. Especially good multi-life opportunities can be cultivated with employer/employee groups and associa-tion memberships.
Industry Responds to MarketplaceMarketplace changes call for innovative disability income marketing programs and product designs. Only serious DI carriers are devoting the resources necessary to support your efforts in new arenas. The key to your own success with dis-ability income, then, is working with the dedicated DI car-rier who can provide the products your clients will demand and the services you’ll need to meet their demands. Look for a carrier with complete individual and group portfolios, marketing programs and support for basic and advanced sales concepts, along with highly-trained underwriters. The right carrier will help you turn DI opportunities into com-mission dollars. v
Mr. Steenerson, a foremost disability insurance field authority, is the founder and principal of San Diego-based Disability Insurance Services—the nation’s leading disability brokerage agency that’s earned the distinction as the largest wholesale distributor of disability insurance products in the United States. Connect with him by e-mail: [email protected], or visit www.DIServices.com.
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