Winning with New Regulations


The proposed rule from the Department of Labor takes up a lot of conversation these days. While we await the final rule, it’s clear that we are likely to be acting in a fiduciary role soon. Many have predicted lower sales and as much as 25 percent of the sales force shrinking. However, with any change, there is opportunity to capture additional market share – even with increased regulation. 

A large advice gap exists in the United Kingdom, where similar legislation went into effect in 2012.  Many financial institutions moved up market as they did not find the mass affluent market profitable.  Unlike in the United Kingdom, we will still be able to write commission-based products. Let’s not lose sight of that fact in the conversations surrounding the Department of Labor. For those financial professionals who can work efficiently in the mass affluent, there will likely be opportunity to thrive in the post-DOL world.  

It will take efficiency and effectiveness – two business building blocks – in order to succeed in this market with the proposed regulations. Professionals earning a commission must be able to repeat a sales process with every client to assure the planning process remains holistic. In order to capitalize on the opportunity that involves key components in the proposed rule, in 2015-16, you must think about strategic maneuvering: 

  • What level of staffing will help me in the post-DOL era?
  • How can I easily document all of my client interactions, client conversations, client goals, and case-specific data that leads to my recommendations?
  • What software will I need to show I am working in the best interest of my client while remaining carrier/fund/investment agnostic?
  • How can I repeat the sales process efficiently, and with care, to create scale in my office?

Bottom Line

New regulation does not mean you automatically have to change your business plan to a fee-based or assets under management model. However, it will require some thought about how to take advantage of some of the opportunities. I urge everyone to begin the thought process around a post-DOL Conflict of Interest era. The plans you make today are likely to help you and your clients succeed in the future.   


Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets. 


Regulation Department of Labor

Be a ‘Go-Giver’ and You’ll Come Out Ahead


I am not an avid reader. But last winter, my wife received a book called “The Go-Giver,” by Bob Burg and John David Mann.  

I sat down thinking I would only read about one chapter, lose interest, and put the book on my bookshelf to collect dust. Interestingly enough, two hours later I was finished with the book. I was so enamored with it; I sat down and read it again the next day. I was even so inspired that I bought 50 copies to give to some of my top advisors.

I’m not here to give you a book report because I’d like you to actually read this book yourself. But the message is this: Your income is determined by how well you serve others. In an instant gratification society, we are so caught up with, “What is in this for me?” We don’t realize the value we bring to others will take care of us for our lifetimes.

The best example of this is a conversation I had with Jim Ash, the founder of Ash Brokerage. We had a prospective group of advisors – a large opportunity – in our offices in Fort Wayne, and we took them to dinner. Jim discussed with them how we were able to land a few of our larger accounts.

One example was a large mutual Insurance company for which we were going to be a brokerage outlet if they could not place cases with their career company. After a couple of months, the GA’s of this firm had a huge increase in their OWN product line. When they questioned the advisors about what they were doing differently, they said, “Ash Brokerage is giving us positioning ideas on our own product line.” That being said, there was no instant gratification for Ash Brokerage, but this is now one of our largest accounts.

I also have a peer who is a very successful wholesaler in a different product line, and he prides himself on knowing every product available.  When one doesn’t fit, he always recommends one that will. Needless to say, he’s now in upper management at his firm, running the top territory in his company.

The Bottom Line: Your income is always dependent on how well you serve others. If you just do the right things in life, even if there is no instant gratification, you’ll come out ahead. 

The New ROI


Business schools still teach ROI, I’m sure. For most Americans, unfortunately, it might be the wrong ROI. 

Business schools are probably stuck on return on investment, and I can argue that many financial planners are still talking to their clients about return on investment. However, I say the new ROI is Reliability Of Income. For most retirees, the need for a steady, dependable, lifetime income continues to grow in importance. 

So many planners and schools focus on the returns of a portfolio. In reality, the changes in return from 5 percent to 6 percent, for example, have a nominal difference on the retiree’s income outcome. Now, the sequencing of those returns, especially early in retirement, may have a larger effect on the outcome. But overall averages will not impact the success or failure of a retirement plan. Instead, the larger impact comes from life expectancy, which is a variable we cannot predict.  

Therefore, clients need to have a guaranteed, inflation-adjusted floor of dependable income in their portfolio. Without it, the success of their retirement portfolio can’t be projected accurately. Too many variables – like return on investments, life expectancy, sequencing of returns, health care costs and emergencies – could impact the probability of success.  

By focusing on the reliability of their income, clients can reduce the risks in their retirement portfolio. Inflation can be mitigated with cost-of-living increases. Longevity can be eliminated with lifetime income options – both single and joint. Fee and tax drag can be greatly reduced, if not eliminated, by proper choice of product. 

Bottom Line: Put first things first when designing a portfolio – reliability of income should be the new ROI. 


ROI Investment

How Will You Be Remembered?


I love good sports stories and analogies, as well as strange facts and figures from the sports world. So of course I enjoyed an article from USA Today Sports that listed 101 little-known sports facts. One that jumped out at me? Bill Buckner has more hits than Ted Williams. Unfortunately, most people remember Bill Buckner for one error than they do for all his achievements at the plate. 

This made me think about our business and our relationships, not only our clients but also their beneficiaries. Do you want to be remembered for the one error you might have committed in the planning process? Or, will you be remembered for all the great years of returns you provided your client during their working years? You can accumulate a lot of money for your clients over their earning years, but if you fail to plan for their lifetime income, your legacy to their family will be dramatically different.  

Watching their parents, kids see firsthand what their retirement lifestyle could be with you as an advisor. With a flawed history, your chances of managing the next generation’s assets become slim to zero. If you haven’t addressed their parents’ longevity or health care concerns, they likely won’t want to have the same experience. If you haven’t taken care of their parents, why would they want you to take care of them? 

At the end of the day, we can manage assets and build wealth all day long. We can outgain the money manager across the street or beat the market indexes. But, if we commit an error in not addressing predictable, guaranteed, inflation-adjusted income to our client; we will be remembered for our one error versus all the years of outperforming the market. 

Bottom Line: Don’t let one error define your legacy for generations to come. 


Lessons Learned … Again


In November 2014, I wrote about a short correction in the market. Over a period of 22 trading days in the fourth quarter of 2014, the market corrected and wiped out over $1 trillion of wealth. Clients never really felt that loss, however, because it came and rebounded before the next quarterly statement. Once again, we’re witnessing wild market swings with many clients concerned about their retirement savings fueled further by instant news and financial news outlets.  

From Aug. 17-24, we’ve seen global economic concerns impact the financial markets severely. During times of market volatility, it’s important to remember the fundamentals of financial planning and to deliver on those fundamentals through the planning process. While no planning process fully insulates you from market fluctuations, long-standing principles used in previous volatile markets can provide insights – some that have worked and some that continue to be refined. I want to offer a refresher on some of these basic principles and add some insight from what we’ve learned works best in all markets.   

Product allocation before asset allocation (i.e. focus on what’s really important to each client): In the past, we’ve focused on building a portfolio based on negative correlations and asset classes that don’t always move in the same direction. Math and science point to product allocation being just as important, if not more important. Not all products were built to accomplish the same purpose, so it’s necessary to build a portfolio of products that meet the client’s needs before we focus on asset allocation.  

Start with securing income: When using a variety of products to solve client needs, you should discuss the need for a secure retirement income. A client exponentially enjoys their retirement when they’re meeting their essential expenses and adding an inflation hedge. Secure income can come in many forms; however, planners must look at various sources that minimize the amount of capital needed to secure it.  Essential expenses should be met with dependable income streams. The liquidity-free capital can be used for other goals and desires.  

Mitigate longevity risks: Longevity is a multiplier for all risks in retirement. Statistically, the risks of asset allocation, health care costs, and long-term care costs grow when longevity is not addressed. Positioning the proper amount of assets in the proper vehicles to mitigate longevity allows a client to minimize all other risks to proper levels. Thus, the rest of the financial plan may be met with more reasonable assumptions and expectations.  

Address legacy goals: Making sure other risks, like disability and death, are addressed creates security that the family’s goals and objectives are will be met in the short term and long term. A financial plan without these elements is doomed. More importantly, cash value life insurance can provide a resource to supplement retirement income during market volatility, which is when you least want to withdraw assets from your investments.  

Evaluate tax efficiency and fee drag: When choosing financial solutions, it’s important to consider the impact of taxation, especially on income-generating vehicles. It’s not what you earn; it’s what you keep.  With the ever-changing and more complex financial solutions, many financial plans include expensive riders. As we enter a fiduciary role for all our transactions, fee drag and tax consequences must be considerations that we evaluate in our solutions.  

Bottom Line: Today more than ever, Americans need strong financial advice. During times of financial extremes – both up and down – it’s important to stay fundamentally strong. I challenge you to take a look at your financial plans. Evaluate how close you are to the fundamentals.

If you’ve strayed, my guess is that you have some anxious clients. If you’ve remained fundamentally strong through the six-year bull market, my guess is that you’re earning your clients’ trust during these volatile markets.