The Swinging Pendulum


Understanding client behavior has always been an interesting – if not challenging – aspect of the financial planning process for me. Sometimes it seems that clients move in opposite directions from what logic would dictate. Client trends remain one of the most important pieces of knowledge we can possess when we meet with our clients and prospects. 

A Towers Watson research paper released in May 2014 showed that consumer behavior has moved opposite of where we would typically think. Today, 62 percent of Americans would be willing to give up some current pay or salary for a guaranteed income stream in the future. While most companies are looking to take pensions off the books because they don’t help the recruiting process, the majority of Americans are looking for pension-like income. It appears we are not aligned with our clients. 

The need for guaranteed income is a major shift from just five years ago. In the same survey in 2009, only 46 percent of Americans said they would give up some portion of their earnings to have guaranteed retirement income. Think about the time in which that survey was conducted – 2009. The financial crisis was fresh in everyone’s mind, defined contribution account balances had fallen as much as 40 percent, and prospects were bleak for economic growth. Yet, as most account balances have nearly rebounded, more Americans want guaranteed income. 

Clients can no longer expect guarantees from their employers. With the PPA and proposed changes to PBGC premiums, it is unlikely that most employers will reinstate pension contributions. As planners, we must provide guaranteed solutions to our clients. We need to set aside our egos relative to money management and realize that our clients want some level of base, guaranteed income. Call Ash Brokerage for details on how to secure this kind of tax-efficient income for your clients.

Insure to Be Sure


According to a recent MarketWatch survey, 52 percent of retirees said they are pulling money out of their retirement accounts simply as the need arises – with no real plan in place. Most retirees fail to create an income plan, yet poll after poll suggests that their biggest worry is outliving their money.

So what advice are these retirees given?

  1. Stick to a budget
  2. Cut expenses
  3. Make sure you have the right mix of stocks and bonds in your retirement accounts

The list of advice goes on and on ....

I say if you want to BE sure … INSURE. Consider an annuity with a lifetime income rider. This strategy GUARANTEES a lifetime income payment for as long as you live.

A client’s lifetime income payment is based on their annuity income base and their age when they decide to start lifetime income payments. Some annuities even offer an increasing lifetime payment opportunity. Most importantly, employing this strategy guarantees an income payment for life.

It is worth repeating: If you want to BE sure … INSURE!

Planning with May in mind


In my hometown of Indianapolis, Indiana, the month of May brings spring, warmer temperatures and the Indianapolis 500. The Indy 500 is celebrating its centennial era after the inaugural race of 1911. Much has changed, but many of its traditions remain intact. Because of the race, May contains a lot of tradition, pageantry and speed. And, if we are lucky, sometimes late May has some NBA Playoff action. The events of May are a great analogy for talking to your clients about their retirement plans and future income needs. Teams are looking for speed, endurance and strategy throughout the month. 

At the beginning of the month, the focus is on speed in order to qualify for the best starting position. Many of our clients retire with plans to travel, build new vacation homes, or start new businesses. These early retirement years require a lot of income, and sometimes, we need to look at the most tax efficient manner to fund these years. Positioning our clients for their best start requires planning and strategy for the 10-15 years prior to retirement. In the Indy 500, teams who don’t test regularly struggle with qualifying and end up starting at the back of the 33 cars. The turbulence at the back of the pack is incredible, so getting your clients near the front is critical. Provide them with options for retirement by having a different conversation about protection, guaranteed income levels, and diversifying the product portfolio. 

After qualifying for Indy, teams begin looking for endurance. Drivers and machines must last a grueling 500 miles at speeds averaging 210-plus mph. Each team is provided the same amount of fuel and tires, and they must meet the same technical specifications. How they utilize the allowable resources throughout the race determines how they finish. We have to make sure our clients use their available resources appropriately and have a plan that will last for their entire life with certainty. 

Finally, in the final 50 laps or so of the race, strategy plays a large role in determining who reaches the winner’s circle. Making sure our clients have multiple streams of income that they can’t outlive is only one part of winning their retirement race. One of the most overlooked needs in retirement planning is inflation protection. Today, interest rates are poised to increase at some point the next three to five years. Therefore, the ability to afford the same items and maintain a normal lifestyle in the future requires growing your income. It’s easier to grow income with the proper products than to grow your account balances above and beyond your withdrawal rate annually and consistently. 

In order to win the retirement race, it takes planning, education, communication with your clients, and strong product selection. Let Ash Brokerage help you have a meaningful conversation with your clients and demonstrate new and innovative ways to secure your clients’ lifestyles during their different phases of retirement.

Make it or take it?


Whether your prospects are more concerned with “Making It” (accumulation) or “Taking It” (locking in the highest amount of retirement income) or both, recent innovations in Fixed Indexed annuities (FIA) can meet their needs.

Perhaps it sounds too similar to the inflammatory and divisive stereotype of the American public during a presidential election, but identifying where your prospects stand on the “Make It — Take It” scale can prove invaluable in leveraging recent product enhancements for FIA products.

Make It

FIA’s have been criticized recently for having caps that are “too low,” thus limiting earning potential. While caps are historically on the lower end, significant opportunity still exists.

  • Uncapped Option – Designed to minimize the effect of volatility in today’s markets, this dynamically managed option shows well historically and may provide the growth potential your prospects are looking for or need to make up lost ground. (100 percent participation rate with annual spread)
  • Uncapped option + 50% – Add a reasonable policy fee or wait to take income for 10 years (still well below those on VA’s) and your prospect will receive an additional boost to their annual index returns.


Take It

  • Increasing Payout Percentage – Not your standard age banded payout percentage, this rider provides an annually increasing payout percentage for each year that the contract is in accumulation.
    A 50-year-old client, after a 10 years of accumulation, can lock in a 5.5 percent to 7.0 percent payout. (Selection based on single/joint, level/increasing payout at time income is taken – not at issue!) With a 20-year hold, the range increases from 8.5 percent to 10 percent. 

    A 60-year-old client, after a 10 years of accumulation, can lock in a 7.5 percent to 9.0 percent payout. (Again, selection based on single/joint, level/increasing payout at time income is taken—not at issue!) With a 20-year hold, the range increases to 9.0 percent to 13 percent.
    Many consumers are purchasing this rider primarily to lock in these percentage options.

  • Increasing Lifetime Income at Payout – If income is important now, won’t it be even more so in the future? Regardless of the severity of future inflation, prospects must plan for the need for even more income in the future.
    This feature enables your prospect’s future guaranteed lifetime income to increase every time there is an index credit earned – even if the account value goes to $0. While this doesn’t mean guaranteed, annual income increases, it does provide for welcomed income increases periodically.

Allocating a portion of you prospect’s portfolio to a FIA with a combination of uncapped growth, uncapped growth with guaranteed increasing payout percentages and /or guaranteed lifetime increasing income, can provide your prospects with a cost-effective means to increase their comfort in retirement, be they “Makers or Takers.”

No Better Time for Advisors


When you look back on your career in financial services, has there ever been a better time to be a financial advisor? Has there ever been a time when sound financial planning has been more needed than right now? Clients have access to more information, more analyses, and more financial opinions than ever before. The result? More confusion. More fear. More doubt as to which direction to take. 

Just turn on your favorite financial network, and listen to the well-credentialed featured guest telling you exactly what to expect from the financial markets in the days ahead. The arguments are well thought out and convincing. But, after the next commercial break, a new guest is introduced … Equally credentialed. Equally compelling. The only problem is that this guest is making the exact opposite predictions for the future of the financial markets. Is there any wonder why clients are so confused and in need of your services more than ever? 

When you recommend fixed and indexed annuities, your clients will appreciate having the opportunity to earn reasonable rates of return without having to worry about the preservation of their principal. In addition, when appropriate, you also can enhance the annuity value by adding a death benefit, a lifetime income rider, or a long-term care rider. In doing so, your clients can feel comfortable with the direction of their financial future. 

There truly has never been a better time to be a financial advisor.