Annuities

Finding the Answer and Giving Knowledge


Annuities

Lately I’ve been listening, watching, and communicating with experts who specialize in hiring and managing millennials. It’s clear that this new generation of financial planner is operating with different metrics and definitions of success than the one that came before. To be clear, I’m not saying it’s wrong – it’s just different. I was blown away by the level of professionalism at the Financial Service Professionals Industry Issues Competition. Five universities competed this year, and it was clear that the new generation of advisors is as committed to the principles of integrity, preparedness and accountability as the generation that came before. One young person recently posted a video of her thoughts about the value of education versus experience. She made a great point: college teaches you how to find the answer, but experience gives you the deeper knowledge.

The same can be said for our industry, too – particularly as it applies to both generational differences and to technology. A mentor once told me, “The internet is a great place to get information, but it’s a terrible place to sell.”

While financial products are almost purely digital today, the web may not be the best place to educate and advise people on complex problems – including retirement. In the age of social media and soundbites, the internet isn’t known for being conducive to nuance. Still, it remains the easiest place to get information. How you use and filter that information marks the difference between success and failure in financial planning.

Clients depend on knowledge, not piles of data. Don’t just settle for an answer. You need to find the knowledge behind the answer that can be conveyed to the client. What technology can’t deliver – and you can – is expertise: the ability to use the information wisely, properly, confidently, and in the best interest of the client. That is what separates the financial professional from technology: human connectivity.

We tend to pacify our clients with information too often. They can find that information now, on their own. Instead of spreadsheets, statistics, fund returns and portfolio allocations, we can help them find the answers that make the most sense of the information. What they need is a person to guide them through the maze of data to formulate the best strategy for success. Think about concentrating on delivering value in the form of knowledge and expertise, not just information and data.

Winning Strategies: Your client can – and will – find a lot of information just as quickly and reliably as you can. As planners, we need to shift our focus towards using information to convey our knowledge and expertise rather than just providing data.

About the Author
Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.  

Best Interest Discrimination


Annuities

In normal circumstances, four days on a cruise ship sounds like a dream. But this wasn’t a normal cruise.

Part of professional development sometimes means continuing education, and that’s where I was – at sea, for a four-day conference, listening to talks about the financial industry and tax updates. Work is work, regardless of where you are, and I felt a need to stay connected to the office during my four days away. While signing up for internet service aboard the ship, I learned that the daily fee for basic, lowspeed internet was $15.95. I pay around $65 a month for Wi-Fi at home – that’s roughly $2.00 a day. And the coverage on board was spotty and slow at best.

Now I’m sure getting a Wi-Fi signal in the middle of the ocean is no small feat, but I have questions:

- Is paying 697% more money for less service really in my best interest?

- Who in the leisure industry is responsible for these outrageous pricing decisions?

- Why aren’t these people being held accountable?

As I thought about pricing, fairness and accountability, another question came to mind: Why does there seem to be a double standard regarding Best Interest rules directed toward the insurance industry in comparison to everyone else? Is paying $15.95 a day for internet more unreasonable than a 3% commission for lifetime income that will last 20 or more years?

The noise around Best Interest continues to increase in 2019. The SEC has an interest in providing Best Interest Standards, which seem to be the most efficient way of providing uniformity and consistency. Several states have recently begun formulating their own definitions of Best Interest Standard as well – some include a private right-of-action similar to the DOL’s version of Best Interest. But I’ve recently had to question why the financial services industry is being discriminated against and held to a certain standard when other industry standards are more lenient.

My wife and I signed a purchase agreement for a townhouse that was being built. The outer shell was already complete when we closed on the property, but we had to build out the interior. Six months after the plans were approved, we only have one pipe installed for the plumbing. Where is the accountability to a professional association for the construction industry? Why is someone allowed to charge interest and hold thousands of dollars with no benefit to the client? This would never hold up as Best Interest.

Our industry generally has the highest level of ethics of any consumer-facing enterprise. Politicians aren’t shy about voicing disgust when those ethics are violated, and yet the country turns a blind eye to abusive pricing strategies of other industries and shows a complete disregard to consumer expectations. It’s time to stop and look at all consumer interactions, not just financial transactions. Be involved with local advocacy groups. Be vocal towards your congressional representatives in the Best Interest conversation.

Winning Strategies: Be an advocate for Best Interest for everyone and every industry. Support what’s best for the consumer but every industry needs to be held accountable.

About the Author
Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com

Crossing the Bridge, Together


Annuities

All month long, we’ve been talking about Social Security and the many ways it could impact your clients. But have you thought about how it could impact their families?

 

By now, you’ve hopefully read our Crossing the Bridge white paper, which explains how you can use an annuity to delay Social Security benefits and maximize your clients’ retirement income.* Maybe you’ve also taken a look at our JourneyGuide™ planning software, which literally shows the impact of delaying benefits to age 70. 

 

Aside from increased income and improved portfolio performance, there are collateral benefits to optimizing Social Security income. Typically, your client is trying to get as much income as possible and as early as possible. Help them consider all their options – and the impact on those they care about –before they make a potentially irreversible decision.  

 

  • First of all, taking Social Security income at age 62 means that the benefit will be reduced by 25 percent for someone eligible for full retirement at age 66. If they were to wait until age 70, their benefit would be 32 percent above their full retirement age. That equates to a 76 percent increase over the income received at age 62. That’s significant! 

 

  • Your client’s Social Security decisions will also impact their spousal benefits. So, at the death of the primary insured, the beginning income for the spouse would be 76 percent higher in many situations. Also, the impact of cost of living increases on both benefits should not be overlooked. This is a key consideration as you look to leverage some of the many options available in Social Security for couples. 

 

  • Another consideration is when there are young children involved. With more adults having children later in life, you must consider the impact on their family at retirement and at the death of the primary insured. A delay can add significant dollars to those households with younger children still at home. Children with disabilities need consideration, too. 

 

There are numerous strategies to maximize Social Security for your clients, especially married couples. Take time to sit down and listen to their concerns and legacy plans. It’s highly likely that the proper choice of Social Security options can make a big difference for them and their families. 

 

Winning Strategy

Learn all the options with Social Security and look to maximize the primary insured’s benefits. For their own needs, and the needs of their loved ones.  

Retirement Webinar

Craving More?

We sat down with Jim Blair to talk about unique situations around Social Security your clients may be facing.

Watch Now

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon. 

 

*Ash Brokerage, “Crossing the Bridge: How to Fill the Income Gap Between Early Retirement and Maximum Social Security,” Updated April 2018: http://go.ashbrokerage.com/WC2017-07-RET-Bridge_LP-Content.html

The 5 Scariest Facts about Social Security


Annuities

I read a lot about the retirement gap in America. There are some scary scenarios ahead for many people who have not committed to saving, investing or planning for income they can not outlive. But some of the scariest statistics that continue to bother me are those around Social Security. 

 

No, it’s not the fact that 78 percent of people believe Social Security will run out of money in their lifetime.1 Instead, it’s the complete lack of education that the financial services industry is providing to clients. That’s something we can control and change. 

 

Here are five stats you should pay attention to: 

 

As advisors, we must learn the complexities of Social Security and convey that knowledge to our clients. The planners who do so put themselves in a much better position for long-term success. Their client retention will likely be higher due to the information they provide while preserving their assets under management. 

 

Winning Strategy

Learn as much as you can about Social Security in the income planning process. Clients want advice on this complex benefit, and they clearly need to know more in order to make better decisions about their future income. 

Retirement Webinar

Craving More?

We talked with Jim Blair to tackle unique situations around Social Security your clients may be facing.

Watch the Replay Here

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon. 

  

1Nationwide Retirement Institute, Social Security 4th Annual Consumer Survey, September 2017: https://nationwidefinancial.com/media/pdf/NFM-16735AO.pdf

2Center for Retirement Research at Boston College, “Trends in Social Security Claiming,” May 2015: http://crr.bc.edu/wp-content/uploads/2015/05/IB_15-8.pdf

Social Security Retirement Income Planning

The Hidden Impact of QLACs


Annuities

Soon after Qualified Longevity Annuity Contracts (QLACs) were created in 2014, we put them to the test in a vigorous study. And, we’ve repeated that study every year since. 

 

Here’s what we’ve learned: While QLACs continue to offer an incentive for pushing required minimum distributions (RMDs) out to age 85 and one month, there are other benefits to consider. In every year that we’ve done the study, a few key takeaways have remained consistent. 

 

  • QLACs improve retirement outcomes. In our 2018 study, we applied QLACs to four different traditional asset allocation strategies in four different age groups, using market projections from 35 investment advisors. Amazingly, a QLAC improved the probability of success in 100 percent of the scenarios we tested.1 In our earlier studies, when we used past performance of the S&P 500 and Barclay’s Aggregate Bond Index, QLACs improved the probability of success in 95 percent of scenarios. Regardless of projected or past performance, the placement of a QLAC has proven to be a great enhancement in nearly every asset allocation plan. 

 

  • Younger, more conservative clients benefit the most. In our analysis, the largest improvements have been in younger and more conservative client scenarios. We see significant improvements when a QLAC is placed at age 55 or 60 with an asset allocation of conservative and moderate-conservative. Too often, we look at QLACs as a tool to simply push RMDs down the road. But guaranteed income, i.e., not running out of money in retirement, is the bigger story. We often overlook the benefits of guaranteed income in portfolios and this study proves the positive impact.

 

  • Guaranteed income changes the conversation. If you’re not already looking at the value of QLACs – or other guaranteed income products – then you’re doing yourself a disservice. With our JourneyGuide™  software, we’ve discovered that guaranteed income not only changes the mathematical outcome of retirement, but it also changes your client relationships. With a tool like JourneyGuide, you can have meaningful, interactive planning sessions to show clients the positive impacts that small changes can have on their portfolios. In many instances, the implementation of guaranteed income allows the client to be more aggressive with their other assets. This adds advisor gamma to the relationship that would otherwise be lost. 

 

Winning Strategy

The hidden value of QLACs is guaranteed income. We’ve proven that regardless of allocation, the impact of guaranteed income is significant – even more so with younger investors. I encourage everyone to look at your younger clients and begin placing guaranteed future income in their portfolios. That will, in turn, allow you to have a conversation around their remaining assets or capture more assets and invest them more aggressively to maximize long-term growth potential. 

Retirement Webinar

Craving More?

We're talking with Jim Blair on May 17 to tackle unique situations around Social Security your clients may be facing.

Register Here

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon. 

 

1Ash Brokerage, “2018 Study: QLACS Improve Probability of Retirement Success,” March 2018: http://bit.ly/2jN5a2K

QLAC Qualified Longevity Annuity Contract Retirement JourneyGuide