Annuities

Rule Delay Announced


Annuities

On April 7, the U.S. Department of Labor (DOL) will likely publish an official delay of its fiduciary and conflicts of interest rule. Many in our industry have been waiting for this rule to be delayed, but several points around the fiduciary rule remain uncertain. Industry experts predict a further delay, allowing the DOL to fully complete President Trump’s requested review of the rule.  

 

I want to stress to all who work in our industry that many aspects of the rule will go into effect June 9, 2017. Most notably, impartial conduct standards must be adhered to on any qualified sale after the delayed implementation date. Although the Best Interest Contract (BIC) requirement appears to be have been pushed off until Jan. 1, 2018, the sale of an annuity inside a qualified account must be in the best interest of the client, make no misleading statements, and have reasonable compensation tied to the transaction.  

 

More importantly, our industry has already begun to shift to the fiduciary status and will continue to do so before the June 9 delayed implementation date. For those of us serving our clients, it continues to be table stakes to work in the best interest of our clients. We must work toward the standard of care that every client deserves while protecting our profession that serves those clients.  

 

Even with the relief of the BIC through 2017, we need to look at the next nine months as an opportunity to evolve in the fiduciary world. We must continue to evaluate our sales process, our product shelves, and our holistic nature of our clients’ needs. The successful retirement advisor of the future will get to the fiduciary standard quicker, more efficiently, and have greater effectiveness with each client. 

 

Ash Brokerage stands committed to helping all our advisors make this transition. As implementation grows clearer in the coming weeks and months, we will announce several tools and resources to help you.  

 

Many aspects of the rule remain unanswered. Namely, the independent marketing organization exemption continues through the review process without finalized thresholds for marketing organizations to sign the BIC in 2018. We look forward to continuing to be part of the conversation in shaping these important changes to our industry. Look for continued information through Ash’s sales teams and social media. I look forward to growth in our industry with the increased care that the rule will provide to our clients.  

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”

DOL Annuities

Resting on the Red Sweater


Annuities

March Madness is the most exciting time of the year for me – even more exciting than Christmas. You see, this time of year always brings back memories of Indiana’s run to the national championship in 1987.

 

As a student manager, I can remember preparing the bench for the national championship game at the Superdome in New Orleans, Louisiana. I was extremely anxious – everyone was. And, as I walked back into our locker room for the last time before warm-ups, what I saw made me even more anxious. 

 

Coach Bob Knight was laying on the training table. He’d folded his famous red sweater into a nice, neat pillow … I couldn’t believe he seemed to be resting peacefully just minutes before our biggest game of the year.  

 

Looking back now, however, I think he was at peace because he knew our team was prepared. During the season, we had several days to prepare for games, but for the national championship, we had just 48 hours. However, we followed the exact same process: 

  • The team reviewed the players from Syracuse right after the national semi-final 
  • The coaches watched film Saturday night and presented the game plan to the players the following morning
  • On game day, we went through the exact same preparations as we did for every other game in the  season
  • We continued to use our model of basketball – man-to-man defense and motion offense 

 

Preparing for Your Own Big Game

When it comes to preparing for the fiduciary rule, you can use the same formula for success. As planners, most of us already act and make recommendations in the best interest of our clients. However, we need to document our sales process and make it repeatable.

 

Though the outcome was different for each game, the Hoosiers’ process remained consistent through the 1987 season. We evaluated each team’s strengths and weaknesses from top to bottom – we just didn’t look at the team’s starting five or star players.

 

Similarly, as planners, we have to focus on all the risks associated with financial planning. Too often, we look at asset management as the solution to wealth management. But, we also have to consider longevity needs (so our clients don’t run out of money), long-term care, taxes, the death of a spouse, and transferring their legacy to the next generation. These concerns need to be evaluated as a regular part of our client process.

 

I encourage everyone to evaluate their sales and business practices during the time remaining before the fiduciary rule takes effect. You could say it’s already in effect due to many broker-dealers implementing new strategies and FINRA assessing fines based on conflicts of interest. To reduce your risk of litigation, you should prepare to win, and prepare consistently.

 

Winning Strategy: Establish a sales process that is repeatable and can easily be documented. Consistency will allow you to focus on your clients’ needs, and force you to consider all the risks.

 

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”

Preparation DOL Fiduciary Annuities

Winning the Right Way


Annuities

Winning the Right Way

By Mike McGlothlin, EVP of Annuities

 

If you read much about the U.S. Department of Labor Fiduciary Rule, you know many people are saying it’s unworkable. While I agree the rule may be overreaching and it will be difficult to meet all the disclosure requirements, I think it’s clear the effects of the rule are making a difference already. FINRA has fined an institution for creating conflicts and incentives to sell one product, and clients are asking prospective planners if they are a fiduciary.

 

Still, many advisors feel like cannot work as a fiduciary. I believe with the right focus, you can.

 

Defining Success

As a student manager at Indiana, I worked in one of the most competitive environments in college basketball. We didn't always win. In fact, my sophomore year was one of the worst in Indiana’s history under Coach Bob Knight. Two years later, we were ranked in the top 10 in many of the polls throughout the season, and we won the national title.  

 

Coach Knight eventually retired as the winningest coach in NCAA history with 902 wins. His teams won three NCAA titles, 1 NIT championship, and 11 Big Ten conference titles, and he won numerous Coach of the Year awards – those are the accolades most people remember him for. But, I think it’s important to recognize to more stats:

  • Coach Knight graduated 98 percent of his student-athletes who stepped foot on campus
  • He had ZERO violations during his four-decades-long coaching career

 

Success in sports is usually defined in wins and losses, awards, titles and rankings. But at Indiana, we were taught that the real win is how you play the game and how you improve your chances for success beyond basketball.

 

I find our charge as financial planners very similar. Our industry has to pay attention to how we handle clients, improve their chances for success and help them enjoy their retirement in the event of major longevity issues. We have to be more cognizant of the process we use with clients and how we plan. 

 

The DOL rule is meant to protect retirement investors, but it should really be about redefining our practices. The successful planner in a post-fiduciary world will have a process that:

  • Addresses the many risks of retirement
  • Makes interaction feel unique to the client
  • Promotes the sharing of information at lightning-fast response times. 

 

That is not unworkable with a growing, caring and thriving financial services business.

 

Winning Strategy: Take a page from a legendary coach. Focus on the process and not the results. Redefine how you interact with your clients and make their experience unique. You can win by staying within the rules and focusing on what's important.

 

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”

 

Coaching DOL Fiduciary Client Success Practice Enhancement

Why You Need to Change Your Game


Annuities

Last year, I heard Robbie Bach speak at a carrier meeting. His story stuck with me – it might stick with you, too, and inspire you to change your business model for a post-fiduciary world.

 

If you’ve never heard of Robbie, he’s the former leader of Microsoft’s Mobile Entertainment and Device division and was responsible for developing and bringing Xbox to the market. The console was eventually a success, but at one point, Robbie thought about resigning. He’d lost nearly $6 billion and was unable to penetrate the Japanese gaming market.

 

To better fit his market’s wants and desires, Robbie created an interactive, subscription-based business model. For a set price per year, players could not only access Microsoft’s games, but they could also see and hear the other players around the globe via headsets and cameras. No other game allowed that level of interaction before. 

 

The results were outstanding. In a short period of time, Robbie’s division went from billions in losses to a $1 billion profit. Even more impressive was their penetration of the Japanese market – Xbox earned a nearly 10 percent market share when no one had been able to earn more than 1 percent. His tweak in the business model and addition of value created a sustainable growth trajectory for the division. 

 

What’s Your Game Plan?

In the post-fiduciary world, a proper business model will be critical to your success. I think it’s the biggest decision you’ll have to make as you prepare for the move toward a fiduciary-based practice. 

 

You’ll need to either move up market, or become more efficient in your current market. Neither option is right or wrong – you just need to be crystal clear in your decision.

 

  • If you move up market, how will you address the concerns and needs of higher net worth clients? Wealthy individuals tend to have access to better health care, so their longevity needs will be different.  Wealth transfer and taxes may be a bigger part of their planning process. Is your model set up to deliver those types of services as a holistic package?

  • If you stay in your current market, how is it changing? Industry reports indicate more than $600 billion in assets will shake free from large wire houses and banks that have less than $100,000 in account values. That’s a lot of assets you could capture, but efficiency will be critical to success. Do you have the right vendors for technology, software and applications to deliver products and services to these clients? 

 

Winning Strategy: Review your business model and make sure it sets you up for success. No model is superior to another, but the model you choose has to be right for you and your clients. 

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”

DOL Fiduciary Business Model Practice Enhancement

What You Can Do While We Wait for Answers on the DOL


Annuities

Since Feb. 3, when the president signed a memorandum asking the Department of Labor to review the Fiduciary and Conflicts of Interest Rule, I’ve talked to agents and advisors from around the county. Many feel a great sense of relief that the rule is likely to be delayed – many believe this is the beginning of the end for the rule.

 

Regardless of a potential delay or revision, I don't believe we can afford to move backward in how we interact with our clients. The fiduciary standard is here to stay – market forces and regulatory agencies already act as if the rule is in effect.

 

I think it’s vital to prepare for running your office as if you are a fiduciary. While we wait for answers on the DOL, you can set yourself up for success by taking a few key steps:  

 

  1. Review your sales process. Make it repeatable and document it. Think about how you interact with your clients. Document every step and turn it into a policy and procedure manual for client interaction. The final product is less important if you follow a consistent process.
  2. Evaluate your vendors. Whether it’s software, fact finding, BGAs, or broker-dealers, are they going to be able to support your business model and help you execute what best supports your client base and growth plans?
  3. Get comfortable with transparency in fees. Most clients will appreciate your plans to remain in the business and continue to stay in contact with them. Don't be afraid to discuss your model and thoughts around compensation.
  4. Listen to your clients. Engage with them however best meets their needs. I don't believe any business model is superior to another so long as your engagement is defined by client need.
  5. Think about your compensation – in relation to time, effort, expertise and what the client is asking to get accomplished. Concentrate on neutrality when defining your fees with a group of clients.

 

These are just the beginning steps to prepare for a fiduciary standard – they represent the fundamental building blocks. As planners, we can’t defer our fiduciary responsibility any further. Instead, we should look at this possible delay as an opportunity to refine our practice and enhance our client experience.

 

Winning Strategy: Take time to prepare for a fiduciary standard. If there is a delay in the DOL rule, you can get your business in a better position for success. Make fiduciary a positive differentiator for you as you look to thrive in our new marketplace. 

 

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”

DOL Annuities Fiduciary