Change vs. Virtuosity


The definition of change is to convert or transform. Essentially, we all change year after year as we continue to transform as humans. But real, meaningful change might be better described as virtuosity – the development of great skill or mastery. So, what does it take to become virtuoso?  

Becoming a virtuoso starts with one question: Am I resolved to be the best? If you are resolved to be a virtuoso, you have a purpose or intent to be the best. In doing so, you will do the things necessary to become the best – regardless of time commitments, money or effort. That is a clear difference to just changing.  

As an industry, we have to be resolved to improve the client experience with underwriting, application processing and overall experience. We must commit to making the industry better, and do so in a manner that deploys financial resources, intellectual capital and time commitments from all levels.

We have to change our mindset from just change – because we are changing for the sake of change – to being resolved to make our industry a virtuoso industry. It has to be one that new talent views as a premier place to build a career, where clients seek information and don’t rely on “robo-investing,” and where we deliver true value to clients.  

The Bottom Line: Re-think change to become a virtuoso, and remember the first step is redirecting our mindset.  


Contracting Doesn’t Have to be Complicated


Contracting is a single word, but it covers a broad scope of responsibilities. To an advisor, it may seem like a lot of hoops to jump through, but our team focuses on making these necessary steps as easy as possible for everyone. 

To begin, we validate that the agent has an active appointment with the state in which they are writing business, and that they have the necessary the line(s) of authority on their license for what’s being written. Then, we process the carrier-specific contracting documents and ensure all required courses have been completed for continuing education and product training. 

Finally, we setup the appropriate commission schedule and contract hierarchy with the carrier to ensure the agent is paid correctly on the business being submit through Ash Brokerage. 

Our dedicated contracting team works hard to understand and maintain the most-up-to date information related to carrier and state requirements – we’re happy to help you navigate through the process. Our advisors can also access our custom database, which lists specific carrier and state requirements and provides links to carrier training portals. It’s a valuable tool we provide at no cost to advisors. 

The Bottom Line: Contracting doesn’t have to be complicated. Let our team help you through this process so you can get on your way to getting your case in force. 


Do You Know What You Own?


Anyone can look at their quarterly statements and see what they have in their portfolio, right? But, do you really know what you own? Granted, you can easily see the ticker symbols for your mutual funds, but you might be surprised to know how much drift there is in any mutual fund in the United States. 

It’s always good to sit down with your clients and review their portfolio’s asset allocation – many advisors use tools such as Morningtar, Albridge or other data aggregators. Before your client meeting, however, it’s important to review the style drift and correlation of the selected mutual funds. Style drift happens when fund managers tend to chase returns and look to different asset classes to gain extra return. Before you know it, the large cap equity fund becomes a small cap emerging growth fund. 

It’s the advisor’s responsibility to make sure the fund managers continue to meet the requirements of the allocation strategy by maintaining their expected asset class. 

A recent article from Financial Planning (subscription required) highlighted the increased correlation in returns between several bond funds and the S&P 500. Due to the continued low-interest-rate environment, many bond funds perform similar to equities. The idea of an asset allocation strategy is to have uncorrelated assets in the portfolio to balance and reduce volatility. While those bond funds may have maintained the integrity of their portfolio design at one time, the current economic environment makes it necessary to revisit their viability into today’s portfolios.  

When you dig deep in your clients’ portfolios, you’re promoting trust and deeper relationships. Take the extra time to review all aspects of the portfolio, including risks and potential solutions to reduce risks. Many of us may not see the risks of our current allocation strategy until it’s too late. Take the extra step to look at vehicles that remain uncorrelated to portfolios.

The Bottom Line: The current economic environment has changed the way traditional investment vehicles perform. Take time to re-evaluate the products used for a client’s asset allocation strategy and reduce volatility due to highly correlated investments.  


What’s the Largest Case You’ve Written?


A salesperson often gets asked, “What’s the largest case you’ve ever written?” My answer is always that I haven’t written it … YET. However, that time may be coming soon. Due to changes in the pension environment, I think we should get into position to write large cases in 2016 and 2017. 

Significant changes in the pension landscape make it a great time to discuss transferring the plan’s risk to an insurance carrier. First, due to the continued bull market, plans have increased in value. February’s corporate plan funding index increased to 87.5 percent after posting its best 30-day performance since January 2011.1 

With plans closer to being fully funded, business owners must write a smaller check to reduce or eliminate the risk from the balance sheet. Along those same lines, rising interest rates in the future will erode the bond valuations of current plans, making it more costly to transfer the risk. Now is the right time to have the conversation. 

Second, the Society of Actuaries has suggested – and Congress has approved – the change in actuarial assumptions in pension plans. It is expected that the actuarial changes alone will negatively affect funding levels by as much as 8 percent.2,3 Due to the length of time it takes to move a plan to a carrier from Department of Labor standards, most plans will likely be affected by this.  

Finally, premiums for the Pension Benefit Guaranty Corporation are on the rise, with plans paying $49 per participant in 2014, $57 in 2015 and $64 in 2016. Underfunded plans also pay a variable premium per $1,000 underfunded of $14 in 2014, $24 in 2015 and $29 in 2016.4 These premiums will increase the overall cost of maintaining a fully funded plan by more 30 percent and significantly more for underfunded plans.

If you are looking for a way to talk to business owners, and at the same time write a big case, consider exploring the pension termination marketplace. The time is ripe for advisors to bring business owners a solution to that is ready to help them in 2016.  

The Bottom Line: Look at the pension termination market for the opportunity to write larger cases in 2015 and 2016.  


1BNY Mellon

2Society of Actuaries


4Pension Benefit Guaranty Corporation


How Much Can Our Clients Lose?


Many planners I talk with say they educate their clients on a relative percentage basis. For example, they tell them bear markets are defined as 20 percent decreases. This approach may help clients grasp the concept, but it fails to take into consideration how much of their hard-earned money could be lost or how much their retirement assets are truly at risk today, versus previous corrections. Additionally, the client may not realize how that loss could affect their retirement income level.  

If our clients realized how much more is at risk today than in 1987 or 2008, I feel they may consider being more conservative with some of their assets. Instead, we hide behind the fact that recent corrections have lasted only “x” number of months or have been only “y” percent in depth. What does it mean to the client? Potentially, a lot of dollars. 

In the crash of 1987, the stock market lost approximately $500 billion of market capitalization in one day. That represented a 22.6 percent downturn in the market indices.1 Today, the S&P 500 retains a market capitalization of $19.7 trillion.2 If the same correction/crash would occur, investors would lose $4.45 trillion dollars – nearly 9 times the wealth.  

We have a responsibility to protect wealth for our clients – not just grow it. To look at it differently, one of the best strategies to growth wealth is to take away some of the decreases that might happen along the way. There are vehicles designed to assist clients in this regard. In the most recent correction of October 2014, investors lost $1.3 trillion of wealth. However, I’ve always argued most consumers didn’t even feel or see that dip because it happened between statement cycles. (The S&P 500 only lost 1 point between quarterly statements the client would have received.)  

When you talk to clients, I’d like you to discuss the real economic value of a correction – in hard dollars. Clients need the transparency of knowing exactly how a percentage change equates to their retirement and potential losses. 

The Bottom Line: Don’t hide behind percentages and historical data. Talk real dollars. Clients deserve to know how changes could impact their assets and future retirement income. 


2 S&P Dow Jones Indices, Equity, S&P 500 Fact Sheet