Holding money in the right pocket


Whether you like it not, your clients have likely made a very important financial decision without your input. Look at their investment portfolios – the absence of long-term care insurance indicates they elected to self-insure. They may not even know they made a decision, but they have. As advisors, we may not be able to change their decision, but we can help mitigate their risk. 

Long-term care events may be the most costly risk to long-term accumulation and retirement goals. However, 93 percent of Americans have decided to avoid the purchase of stand-alone protection. Likely, it’s too late for aging clients to consider this level of protection due to health concerns or an unwillingness to commit to high premiums.  

If you’re like me, you carry larger-than-normal amounts of cash when on vacation. You might place some money in your significant other's purse, in a suitcase or in multiple pockets. It's as if we’re diversifying our vacation money, right? 

Well, why don't we diversify our risk by placing some of our "emergency bucket" money in the right pocket? Using asset-based tools, we can create leverage for our clients. While the return on these types of assets is low, the advantage is to remain in a conservative position while providing additional protection. 

The next time you’re looking at a portfolio and see no asset-based long-term care protection, ask your client if they have their money in the right pocket. I'm guessing that some of their portfolio is designated for future, costly medical events. Make sure you match up their assets with their risk and place the money where it can create the most leverage. Call Ash Brokerage for strategies to make it happen.   

Knowledge is power


In previous posts, I have mentioned the need to understand our clients’ behaviors, desires and objectives in order to be a valuable ally in their planning process. It seems advisors aren’t always on the same page with consumers, however.

A recent LIMRA study asked consumers and advisors what the top three concerns were in retirement planning. Of course, advisors and consumers agree that running out of money and creating a retirement income plan were very important. Unfortunately, advisors underestimated other components that their clients highly prioritized. Clients placed a high value on protecting portfolio principal – they actually valued this 50 percent more than the advisors surveyed. I found this gap alarming as it indicates we might not be addressing our customers' true wishes.

Recently, the Federal Reserve began talking about the "complacency bubble" where clients have become comfortable with risk. In reality, maybe advisors have become comfortable with the recent run in the equity markets, but our clients remain fearful of a major correction. It's worth a conversation with our clients to make sure they remain at the same risk tolerance they are willing to take.

Taking gains off the table may be an appropriate tactic in today's market environment. Fixed indexed annuities provide a tool to sweep gains in qualified accounts while remaining attached to an equity index.

The other large gap that the study revealed centered on minimizing taxes. Again, consumers valued this 50 percent more than advisors. With increased tax brackets, higher federal entitlement taxes and alternative minimum tax for high wage earners, the impact of tax deferral has never been more important.

Carriers seem to be focused more on accumulation-driven product design as they try to remove risk from their product portfolios. But for consumers worried about taxes, annuities remain a valuable tool in the planning process. Non-qualified assets gain tax-deferred status during the accumulation phase, while guaranteeing a lifetime income during the payout phase. More importantly, annuities provide tax-efficient distribution during retirement.

Annuities can provide lift and calm consumer concerns in many retirement planning strategies. Shielding growth from current taxation allows for quicker accumulation. Leveraging the many distribution options creates a better take-home income stream in many cases. And, the guarantees and safety of annuities can help clients feel secure. Look at how an annuity might fit into your clients’ retirement plans.

Don't Blink


Don’t blink ... time is flying by!

June was Annuity Awareness Month, and we have completed the first half of 2014. Wow, where has the time gone?   We have seen the markets roller-coastering and the bond market bouncing around.  The S&P is up around 6.2% and the ten-year treasury started at 3% and has been floating around the 2.6% range before hitting a low of 2.4%.

This a great time to step back and look at where we're going. Most of us have kids, grandkids and clients ready to enjoy the summer and head away for some family vacations.  What a great time to make sure we have things in order.

You may be asking yourself, "What does it mean to have things in order?"  Is it choosing a vacation destination or how we will get there?  Or is it about the car being up on maintenance so we can make the trip with ease?  Like most people, we make sure we have things in order before we head off on the road.  So let's give the following financial aspects a second look to make sure we have them checked off, too:

  • Do I have beneficiaries listed for all my assets? (Insurance, 401k, IRA, Annuities or Mutual Funds)
  • Have we protected the ones we care about?   (Have we forgotten someone or need to make an adjustment)
  • Have we just been declined for Insurance or LTC?   (Illness, results of lab work or family history open a can of worms)
  • Is our will up-to-date or advance medical directive in order?

Things happen in the blink of an eye; it feels like we just started the new year and now it's half over.

So, as you touch base with your clients, or see them before they head off for their next family vacation, remember to ask a few questions to make sure they didn’t blink and forget to protect the ones they love most.  It's easy using a fixed index annuity with today’s riders.  It’s not all about rates or caps or spreads - it’s about the right solution for the right situation.

Your dedicated team at Ash Brokerage is here to assist you. Give us a call to learn more!