What’s the Largest Case You’ve Written?


A salesperson often gets asked, “What’s the largest case you’ve ever written?” My answer is always that I haven’t written it … YET. However, that time may be coming soon. Due to changes in the pension environment, I think we should get into position to write large cases in 2016 and 2017. 

Significant changes in the pension landscape make it a great time to discuss transferring the plan’s risk to an insurance carrier. First, due to the continued bull market, plans have increased in value. February’s corporate plan funding index increased to 87.5 percent after posting its best 30-day performance since January 2011.1 

With plans closer to being fully funded, business owners must write a smaller check to reduce or eliminate the risk from the balance sheet. Along those same lines, rising interest rates in the future will erode the bond valuations of current plans, making it more costly to transfer the risk. Now is the right time to have the conversation. 

Second, the Society of Actuaries has suggested – and Congress has approved – the change in actuarial assumptions in pension plans. It is expected that the actuarial changes alone will negatively affect funding levels by as much as 8 percent.2,3 Due to the length of time it takes to move a plan to a carrier from Department of Labor standards, most plans will likely be affected by this.  

Finally, premiums for the Pension Benefit Guaranty Corporation are on the rise, with plans paying $49 per participant in 2014, $57 in 2015 and $64 in 2016. Underfunded plans also pay a variable premium per $1,000 underfunded of $14 in 2014, $24 in 2015 and $29 in 2016.4 These premiums will increase the overall cost of maintaining a fully funded plan by more 30 percent and significantly more for underfunded plans.

If you are looking for a way to talk to business owners, and at the same time write a big case, consider exploring the pension termination marketplace. The time is ripe for advisors to bring business owners a solution to that is ready to help them in 2016.  

The Bottom Line: Look at the pension termination market for the opportunity to write larger cases in 2015 and 2016.  


1BNY Mellon

2Society of Actuaries


4Pension Benefit Guaranty Corporation


How Much Can Our Clients Lose?


Many planners I talk with say they educate their clients on a relative percentage basis. For example, they tell them bear markets are defined as 20 percent decreases. This approach may help clients grasp the concept, but it fails to take into consideration how much of their hard-earned money could be lost or how much their retirement assets are truly at risk today, versus previous corrections. Additionally, the client may not realize how that loss could affect their retirement income level.  

If our clients realized how much more is at risk today than in 1987 or 2008, I feel they may consider being more conservative with some of their assets. Instead, we hide behind the fact that recent corrections have lasted only “x” number of months or have been only “y” percent in depth. What does it mean to the client? Potentially, a lot of dollars. 

In the crash of 1987, the stock market lost approximately $500 billion of market capitalization in one day. That represented a 22.6 percent downturn in the market indices.1 Today, the S&P 500 retains a market capitalization of $19.7 trillion.2 If the same correction/crash would occur, investors would lose $4.45 trillion dollars – nearly 9 times the wealth.  

We have a responsibility to protect wealth for our clients – not just grow it. To look at it differently, one of the best strategies to growth wealth is to take away some of the decreases that might happen along the way. There are vehicles designed to assist clients in this regard. In the most recent correction of October 2014, investors lost $1.3 trillion of wealth. However, I’ve always argued most consumers didn’t even feel or see that dip because it happened between statement cycles. (The S&P 500 only lost 1 point between quarterly statements the client would have received.)  

When you talk to clients, I’d like you to discuss the real economic value of a correction – in hard dollars. Clients need the transparency of knowing exactly how a percentage change equates to their retirement and potential losses. 

The Bottom Line: Don’t hide behind percentages and historical data. Talk real dollars. Clients deserve to know how changes could impact their assets and future retirement income. 


2 S&P Dow Jones Indices, Equity, S&P 500 Fact Sheet



The Life of an Annuity Application


As a case manager, I regularly receive calls from agents asking me how to fill out an application. Each carrier’s application is different and requirements vary by state. Adding to the confusion, some carriers happen to be more strict than others with their requirements. Some focus more on suitability, so an error on the application can set the process back a week. Others merely require initials on all changes or updates to an application, and still others are flexible and will accept changes and updates over the phone.    

I receive an application after our IGO (In Good Order) team has entered it into our computer system. I start by reviewing the application to determine what, if any, changes need to be made, while our contracting team reviews licensing requirements and ensures there will be no contracting hold-ups when the application arrives at the carrier.  

We go over your application with a fine-tooth comb, and some carriers even trigger a second review on all applications. We make sure the most current forms were used, and we look for blanks that should have been filled in or information that is unnecessary or not specific to the state in which the business was written. We check calculations on suitability to make sure the math is right, and we search for corrections that were made but not initialed. We also compare questions on the application to make sure questions are answered the same way that each time. We then call or email you, the agent, to get the necessary corrections made. 

The point of this process is to prevent the need for the client to re-sign or initial the application. Not only is it unprofessional to call the client and ask them to re-sign an application due to an overlooked error, it also holds up issue by days or sometimes weeks.  

The Bottom Line: Our goal is to help you deliver top-of-the line service to your customers. As a team, we can work together to submit clean applications and get policies issued in a timely manner.

For financial professional use only; not for use with the general public. #E1503-589 Rev. 3/15

igo application

Baseballs and Tomatoes


Recently, I heard a great story about a man coaching his 7-year-old’s baseball team. At practice, he was pitching to all the kids, and each would step up to the plate with their bat to take a few swings. As many kids tend to do, they’d stop their swing the moment the bat made contact with the ball. The result was more of a bunt than a hit – the ball would almost fall off the bat and trickle on the ground for a couple of feet. This would happen batter after batter. The coach tried to get his players to swing harder, get the bat in a better position, step into their swing, etc. Nothing changed.   

Since his players couldn’t seem to grasp what he was trying to teach them, the coach changed his own technique. He took the baseball in his hand and asked the batter what he was holding. The child looked at him as if it was a trick question. “It’s a baseball, coach,” the young boy said.  

The coach said, “No, it’s a tomato. I want you to think of this as a tomato and smash it!” The next pitch came, and the batter took the “home run swing” that the coach was looking for. From then on, each batter got up to the plate and swung so hard they nearly turned themselves around. But, they made good contact and got the ball out of the infield. 

The players’ success had nothing to do with their technique – it was about their mindset. The coach changed the way the batters thought of the ball. Instead of thinking of it as a hard object, each boy began thinking of a lighter, more fragile object he could easily bust up. Once their mindset was changed, success followed quickly. 

I bring up this story for two reasons: First, baseball season is back in full swing (pun intended). Second, it reminded me of the problems many of us have when talking to our clients about their future. How often do we discuss rate of return, fees, style drift and other financial terms that are likely over their heads? Not that those things aren’t important, but we have to focus on the clients’ needs and how we can help address them. 

We have to make it easier for our clients to understand the risks of living too long. It’s time to ask questions about how they’re going to live if they run out of money or need long-term care. More importantly, we have to change our story about how we can help them mitigate those risks. It starts with changing our own mindset … then changing the conversation. 

The Bottom Line: Think of positioning your clients’ needs in a new light. If you can change their mindset about the problem, you’re more likely to find a successful solution.


What Fiduciary Should Mean to You


As the NCAA tournament unfolds, many people have been asking me about my experience at Indiana University during our run to the national championship. Frequently, I get asked how it felt to be on the bench during a game played in front of 70,000-plus people. Was it easy to stay focused on the game? How did the players maintain their poise? And, the pressure must have been intense, right? 

Well, I’ll tell you. When you are “in the moment,” all the distractions seem to vanish or become far away from your focus. Even 70,000 people at high decibels won’t faze a high level athlete. You tend to be focused on the task at hand and the execution of the game plan in order to succeed. 

At the end of the day, that’s the same philosophy we need to have when it comes to our clients. If we are solely focused on our clients, we will not be distracted by factors that cause us to stray from our mission: securing the finances for our clients.   

The discussions around the fiduciary standards heats up and cools down. However, if we are truly “in the moment” with our clients, we have nothing to fear. It’s when we focus on our business model that we become incongruent with our clients’ needs and objectives. As financial professionals, staying focused on our clients and aligning our recommendations with them in mind keeps us within the fiduciary standard. Fiduciary is not a business model but a way of doing business.  

I encourage financial professionals to not be afraid of the fiduciary standard but embrace it. If we really are acting in the best interests of our clients, we won’t see a day-to-day change in the way we do business. It’s important for our broker-dealers and institutions to understand the proposed standards don’t require us to do business differently. True professionals, successful professionals, already conduct themselves in this manner.  

The Bottom Line: Fiduciary is not a business model. It’s a level of conduct where we focus on our client.  Many of us are already there.