If you knew “the good old days” were happening right now, what would you do differently? What would you eat, buy or do more of? What opportunities – that maybe you didn’t take advantage of or took partial advantage of – would you want to seize so you don’t look back in regret?
I’m not talking about stopping to smell the roses, though that’s never a bad idea. But isn’t it true that we choose to isolate and romanticize things from the past, blocking out a preponderance of other, negative things that were going on at the same time? Whether it was “the good old days” of more respectful youth (Vietnam), “Leave it to Beaver” middle class America (a martini and cigarette for dessert) or the days of the “perfect President” (pick one – the rose colored glasses of either party are equally myopic and revisionist), the “reality” of the past is really in our interpretation of it.
In planning our financial futures, it is equally dangerous to look fondly on the past as it is to look optimistically to the future. We need to focus on the now! We’ve been told that interest rates would be rising for at least the last five years. How many earnings have been lost waiting for that to happen? And how much more will continue to be lost, waiting until that magic percentage rate is reached?
Alternatives exist now to participate in the market’s current positive trajectory, lock in gains and providing future flexibility. Not acting now could result in retirement savings disappearing and becoming a bitter memory as the result of an upcoming market correction.
Here’s the trap: Now may not seem like a good time to take action because you are too busy, you have other more urgent things to do, interest rates are too low, there’s an election coming up, etc. Later seems better because you (think you) will have more time, more money, more information and better opportunities.
The Bottom Line: Will later be better? Or will later turn out to be the worst of times – too late? Take action now. Give yourself the chance to look back and say, “Those were the good old days.
Think back over your career in financial services. Of the thousands of conversations you’ve had with your clients over the years, think of the most difficult ones – the ones that give you that queasy feeling in your stomach even now as you recall the circumstances.
When I ask advisors to describe their most difficult conversation, each answer is slightly unique, based on their particular situations, but almost all fall into a few categories:
In virtually every case, the advisor freely admits the blame rests largely with him or her. They know things could have been different if they were a bit more adamant about covering the specific needs and risk tolerances of their clients, and positioning them to handle any eventuality.
As the conversation continues, my next logical question is, “So, what are you doing now to make sure you avoid having to have a similar difficult conversation in the future?”
The Bottom Line: Ash Brokerage is uniquely qualified to help advisors design products and portfolios to avoid the perils of market volatility, income shortfall, catastrophic injury or illness, or premature death. You should call your Ash RVP today, and start a conversation. We’ll help make your difficult client conversations down the road much more pleasant.
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:
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.
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.
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.
© 2018 Ash Brokerage LLC.