Two-Thirds Right


When financial markets become more volatile, as they have over the past few months, clients tend to seek safety. After all, increasing volatility was the first indicator of the tech bubble in 2000-03 and the financial crisis in 2008. It’s no wonder conservative clients are anxious to avoid another potentially significant retreat in the stock market.

Clients are afraid of doing the wrong thing at the wrong time – that’s why there are trillions of dollars still sitting on the sidelines. As their financial advisor, you can assuage those fears by positioning index annuities as a significant percentage of their portfolio. With the two-thirds strategy, they can take advantage of any market conditions.  

Here’s how it works: First, your clients position one-third of their assets in mutual funds, variable annuities or other managed equity investments. Then, they position one-third of their assets into fixed annuities and one-third into index annuities. Once this positioning is complete, your clients have two-thirds of their assets positioned to take advantage of any market eventuality.

If the stock market turns negative, the one-third in fixed annuities would be earning the stated interest rate, while the index annuity would at worst be unchanged by the sinking market. In fact, if the index annuity has an annual reset crediting method, the starting point for the subsequent year would be lower, making it more likely for a positive return.  

If the stock market stays positive and continues to set all-time highs, your clients will still have two-thirds positioned to take advantage. The one-third in mutual funds or variable annuities will grow along with the market, and the one-third positioned in the index annuities will also be earning competitive returns based on the crediting method. 

With this strategy, your clients can feel comfortable that they will always have two-thirds of their assets positioned to take advantage of market conditions. For more conservative clients, you might want to use the same concept, but raise the level to three-quarters or even four-fifths.


  • 25% Fixed Annuities
  • 50% Index Annuities
  • 25% Mutual Funds/Variable Annuities


  • 20% Fixed Annuities
  • 60% Index Annuities
  • 20% Mutual Funds/Variable Annuities

You can change the allocation based upon the ages and risk tolerances of your clients. If nothing else, the discussion of the above strategies will open up a dialog of the features and benefits of fixed and indexed annuities, as well as other equity investments.  

Start the “two-thirds” conversation with your clients – you’ll be glad you did!


How Quickly It Goes…


During the recent market volatility, it’s hard to comprehend how much wealth was unnecessarily lost or how quickly. Through our complacency as advisors, our clients lost an astonishing amount of wealth that currently makes 2014 a nearly lost year. Due to inaction, we chose (yes, it was a choice not to have the conversations with our clients) to take them back to January 2014, when the S&P 500 was in a similar position.  

Without a doubt, risks exist with equity investments. Up until the third quarter, investors were rewarded with better-than-average returns. However, we spoke earlier this year about the potential for a correction, or at least volatility. Once again, we failed to take gains off the table and protect our wealth. 

Making clients aware of their options is paramount during bull markets. They never know how much risk to take … until they’ve taken too much. We run the risk of repeating the mistakes and greed associated with the financial crisis of 2008-09.

In the 22 trading days since Sept. 18 – when the S&P 500 saw an all-time high of 2,011.36 – $787.3 billion of wealth has been lost. The U.S. Treasury’s interest expense for debt payments was only $415 billion for all of 2013. In other words, we failed to protect more than 1.8 times the interest payment of the U.S. government. 

Our clients should be appalled and question what they could have done differently. This time, let’s have meaningful conversations about mechanisms that protect clients and minimize risk. An optimized retirement income isn’t always dependent on the highest return or best asset allocation. An optimized retirement maximizes after-tax income, makes sure there are guarantees in place and places emphasis on protecting what we earn. Let’s have the right conversations in the next bull market.

The Bottom Line: In the last month, clients lost more than a year’s worth of national interest debt payments. In the future, we need to place more emphasis on protecting wealth. 


Goldilocks and the Split Ticket: A Retirement Tale


Goldilocks tried three different porridge bowls before finding one that was, “Just right.” 

When choosing where to draw income during retirement, the markets offer similar options: too hot, too cold and just right. 

If your client chooses just one annuity – variable or fixed index – market performance can make their selection either too hot or too cold. However, by positioning your clients with a split ticket – a combination of the two annuities – you give them options for withdrawing income from one or the other. Depending on market performance, they’ll be able to use the option that’s just right!

Here’s how it works: 

If the equity markets are performing well, the last thing an investor should do is drain their “bowl.” Variable annuities with guaranteed income riders can ratchet up their income base with each market advancement. Therefore, income should be taken from fixed index annuities.

If the markets are breakeven or declining, it’s not likely that the account value will ever push the income base higher than the guaranteed growth of the index annuity (especially with the internal costs of a variable annuity being around 4 percent). In this situation, income should absolutely be taken from the variable annuity.

The concept of a split ticket has probably been around as long as “Goldilocks and the Three Bears.” With the movement of Baby Boomers into retirement, this concept should definitely be re-visited.


Innovation and Insurance


On Oct. 21, 1879, Thomas Edison invented the first commercially viable light bulb. It lasted 13.5 hours … but soon, the average bulb lasted 150 hours, and within 10 years, commercial bulbs glowed for 1,200 hours. The speed of improvement on Edison’s commercial bulb was incredible. 

Today, technology and communication are the new light bulb. Google, Apple and Microsoft have changed the way we live, communicate and do business. However, the insurance industry isn’t catapulting like other industries with its speed of innovation. Why? Is it because we’re full of mature carriers and distribution? It doesn’t have to be that way, does it?

We have to look at new opportunities to expand and, at the same time, go back to our roots. Only 43 percent of Americans own life insurance outside of group contracts. Of that 43 percent, 70 percent believe they are under-insured. Why are we not addressing our own clients? What level of service are we providing to our existing clients?  

Richard Branson started Virgin Airlines based on a bad service experience. The airline industry hasn’t been the same since then. Which one of your clients will impact your business by leaving you, challenging you or becoming your competitor?

I challenge all distributors in our industry to force innovation. We can’t continue to help Americans at the level they need without significant change. It requires investment, commitment and vision. Bringing new people into the business is only part of the solution; we have to change the way those new people interact with their clients. Within 10 years, we have to distribute products in a new way that can reach more people and grow, just like Edison’s commercial light bulb. 

The Bottom Line: Innovators like Thomas Edison and Richard Branson changed the way we live. Our industry must also change so Americans can continue to thrive after catastrophic events. The light bulb changed 10 fold in 10 years; we have to do the same.   


innovation change technology

RMD, QLAC, IRA, DIA – What does it all mean? Action!


If your practice is anything like mine, activity is a critical component in driving revenue-generating opportunities. The IRS and U.S. Treasury put new required minimum distribution (RMD) regulations into place effective July 1, 2014, and in doing so, gave us an opportunity to increase activity that will drive sales in the fourth quarter of 2014 and into 2015.

These new regulations implement suggestions made in 2010, in response to the Obama administration’s request for information on lifetime income options. The new regulations allow an individual retirement account (IRA) owner to use a portion of their qualified money to purchase a qualified longevity annuity contract (QLAC), and have that portion exempt from RMD calculations.

A QLAC in our language is a deferred immediate annuity (DIA). It’s very important to note that a QLAC must be a DIA fixed contract issued from a carrier – no private annuities are allowed. In addition, fixed indexed annuities and variable annuities don’t meet the regulations.

Now you have a great reason to contact clients who aren’t using their RMDs and show them a way to continue to defer taxes on a portion of their qualified assets. These recent changes to IRS rules have many benefits: 

  • Your clients may defer 25% of their qualified assets, up to a maximum of $125,000
  • DIAs are the least expensive way to purchase a guaranteed future income stream, and purchasing today allows your clients to take advantage of today’s mortality credits. For example: a 70-year-old male  purchasing a $100,000 DIA from an A++ carrier today could guarantee themselves a $30,698.76 annual income beginning at age 85 (life with cash refund)
  • Income can be deferred up to age 85, and as a result, taxes are too
  • A number of death benefit options are now eligible, including return of premium


While DIAs are available today, the first QLAC-friendly contract is expected to be released at the beginning of November, with more expected to follow. Now is a great time to reach out to your clients who don’t enjoy taking RMDs – schedule a meeting to discuss this new opportunity. Activity will lead to sales, even if it doesn’t involve utilizing this concept.

Our Ash Brokerage annuity team is stacked with industry experts who are very much up to speed with these new regulations. According to LIMRA, DIAs were the fastest growing annuity segment in 2013, and they are expected to capture significantly more market share in the years ahead. We’d love to hear from you to discuss this new opportunity and be the trusted partner who helps you incorporate QLACs into your practice. Call us today – your clients are depending on you, and you can depend on us. 

QLAC Annuities DIA Deferred Immediate Annuity