Annuities

The Secret to Increasing Your Compensation


Annuities

Many of you may be uncomfortable talking about your compensation with clients. That’s fair. Up until now, you haven’t had to do that. But the market is shifting toward more transparency and commoditization. Consumers want more for less. 

 

If you want to simply remain relevant in this business, you have to add value. Beyond that, if you want to increase your compensation, you have to increase the number of people you serve. That’s the secret. 

 

Law of Compensation

In Bob Burg’s book, “The Go-Giver,” the Five Laws of Stratospheric Success are laid out through a story about a sales person who is focused on taking instead of giving. He expects people to buy from him because of his quota.

 

Too often, we think of driving our compensation through earning more from every client or transaction. That’s another way of taking vs. giving. Instead, you need to focus on how many people you can serve. The Law of Compensation states that your income is determined by how many people you serve and how well you serve them. So, let’s concentrate on increasing the number of people we serve. 

 

Access to More Clients

One way to uncover more prospective clients is to meet people in a larger group setting. You might immediately think of hosting seminars. However, seminars are expensive and time-consuming, and they don’t necessarily create influence or interest. 

 

We’ve been helping advisors find groups of prospective clients another way – through pension risk transfers. In these situations, you can not only provide assistance to a business, but you could also gain access to all the employees. Wouldn’t we all like to be introduced to hundreds of people at the request of their employer? You’re using the business’s influence to serve more people.

 

A typical transfer includes a period where employees may elect to take a lump sum and roll over their retirement savings. You can provide valuable information to help them make those decisions and win them as clients. By doing so, you have successfully followed the Law of Compensation: Your income is determined by how many people you serve and how well you serve them. 

 

Winning Strategy

Don’t concentrate on how much you earn by each transaction. Focus on how you can help more people. Increase your value proposition and the number of people you serve, and I’m confident you’ll see results.

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

Retirement Planning Compensation The Go-Giver Client Value Pension Risk Transfer

3 Reasons You Need to Talk About Guaranteed Retirement Income


Annuities

This blog is meant to educate, motivate and inspire advisors to look at retirement income planning in a different way. Retirement can’t be discussed with a client without involving some type of guaranteed income – Social Security, defined benefit plans or commercially purchased annuities. All have the same basic components, but it’s critically important to have an income discussion with clients as early as possible. Here are three reasons why: 

 

1. Social Security planning and integration is rapidly becoming an important topic for many Americans. Recent surveys indicate that the majority of clients will seek out another financial planner if their current planner is not talking about Social Security integration.1 In and of itself, Social Security is nothing more than a public annuity. You place funds into the system for a guaranteed income that you can’t outlive. So, no one should be uninformed about annuities because many people’s main source of retirement income is an annuity called Social Security. 

 

2. At the close of 2017, the S&P 1500 Pension Index stood at 84 percent.2 That means the average pension plan is only 84 percent funded. Pension risk transfers continue to grow. (See my March 2018 posts on pension risk transfers for more information.) Transferring the liabilities of a defined benefit plan typically requires the use of a group annuity – a promise to pay the plan participants for the rest of their lives according to the plan document. Today, insurers are in a much better position than pension administrators to manage longevity risks. We are moving into a more volatile market situation while longevity for 70-year-olds grows. Those are two risks where plans can ill afford to miss the mark. 

 

3. Finally, our research through our JourneyGuide™ planning team finds that guaranteed income sources increase the probability of success by large margins. By placing 15-25 percent of a retirement portfolio in guaranteed income sources, a large segment of the population will have a better chance of having at least $1 remaining in the portfolio at age 95 (or whenever they select). Please go to www.journeyguideplanning.com for your free 14-day trial of the software tool and schedule a one-hour training session to learn how your clients can benefit from the proper placement of annuities. 

 

Annuity Awareness Month gives you a chance to talk about annuities with your clients. Think about how comfortable your clients are with the annuities they already have – even if they may not realize it. I think it will provide a great comfort level. 

 

Winning Strategy

Take a step back and talk to your clients about the annuities they likely own now – Social Security and pension plans. Knowing they already have guaranteed income sources might make them feel better about placing annuities in their portfolio.

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About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon. 

 

1Nationwide Retirement Institute, Social Security 4th Annual Consumer Survey, September 2017: https://nationwidefinancial.com/media/pdf/NFM-16735AO.pdf

 

2Mercer, “S&P 1500 Pension Funded Status Increased by Two Percent in 2017”: https://www.mercer.com/newsroom/january-2018-pension-funded-status-increased-by-two-percent-in-2017.html

Retirement Social Security Pension Risk Transfer JourneyGuide

Shift the Risk, Not the Return


Annuities

Lately, I’ve spent a lot of time talking about pension risk transfers. I think it’s market that can explode over the next 12-18 months for any financial professional who is committed to talking to CEOs and human resources leaders. 

 

But, saving on premiums and taking a less valuable employee benefit off the table is only part of the benefit. The real benefit is the shifting of risk. Plan sponsors bear several risks that can be reduced or eliminated.

 

The Real Risks

Pension plan sponsors take on the investment risk of plan assets. Regardless of economic projections, managing risk will likely be more difficult within a plan for the immediate future. Rising interest rates will result in lower bond valuations. A choppy market will make it difficult to have steady returns necessary to hit funding targets. 

 

Life expectancies continue to increase in the United States. There is a requirement to pay the monthly income stated in the pension plan document. Regardless of how long the plan participant lives, the plan must meet that obligation. The problem is that the current funding status for many plans is below 100 percent, so the plan might not have enough assets to meet those obligations. 

 

The same problems exist for most retirees. They ask, “Do I have enough assets to generate the income that I need? And, will I live too long and exhaust those assets?” Unfortunately, business owners and leaders must answer that question for themselves, as well as for all their employees. The fact that business owners have an added responsibility for their employees’ retirement creates more stress and anxiety. 

 

Worth the Shift

These risks can be shifted through pension risk transfer. The process can be cost effective. It’s long, but it can be easy and seamless for business owners. There is little reason to keep risk on your balance sheet when there are alternatives. Unfortunately, most business owners don’t know about the options available to them. It makes a great conversation for you to have with business owners: Shift this risk, and you will gain the trust of the entire company. 

 

Winning Strategy

Shift the longevity risks for corporations in a similar fashion to individual retirement plans. Take away investment risks and the potential of living too long, and you’ll gain a corporate client plus all the employees.

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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.”

Pension Risk Transfers Retirement Practice Management

Missing the Shot You Didn’t Take


Annuities

I can never resist talking basketball in the spring, especially around the NCAA tournament and the final stretches of the NBA season. 

 

For anyone who knows me, my recreational basketball skill set is focused on offense, not defense. Specifically, my game is played between the two 3-point lines. I usually don’t leave a game thinking I should have taken a shot but didn’t. A lot of coaches tell players that they will never make the shot that they don’t take. 

 

Recently, one of my best wholesalers posed a question to the rest of our sales team. He asked how often clients wish they had bought something a year ago but didn’t have the faith to make the decision. 

 

Think about how many people wish they had bought a few years ago. And, think about how many had wished they sold it while it was at an all-time high. That’s always the case – clients always wish they had done something a year ago.

 

So here’s my question: What will you wish you had done this year when you look back at your business next year? 

 

One Possible Answer

Pension risk transfer is an opportunity to drive revenue in your practice for 2018 and beyond. However, many are reluctant to pursue this market because it has a long gestation period before you receive revenue or commission. I think there are several reasons to evolve your financial planning practice to include pension risk transfers:

 

  • Current tax law allows companies to make deductible contributions to their 2017 pension shortage at the higher tax rate of 35 percent. This equates to a 14 percent discount for applying contributions to the pension shortage in 2018.
  • With our recent strategic partnership, Ash Brokerage can provide fee income to financial advisors before product is placed and while the company completes the termination process. 
  • More and more large companies are taking advantage of shifting pension risk to insurance companies. Small and midsized companies tend to follow larger corporations, and most pension assets rest with small businesses. 
  • Bond yields will likely change dramatically over the next 36 months, putting pressure on the fixed income portion of the investment portfolio. The same can be said for the recent volatility in the equity markets. It makes it difficult for plan sponsors to manage the risk for investment yields. 
  • Life expectancies continue to increase for older workers. That puts more obligation on the plan assets to provide lifetime income to the plan participants. That translates into more risk for the plan sponsor. 

 

Economic and tax climates make it a great time to talk about pension risk transfers. If you don’t begin integrating it into your practice today, you will likely look back a year from now and say that you wished that you done so. Don’t be wishing you had done something a year ago that is now costing you business. Take a good look at pension risk transfers as a larger part of your business. 

 

Winning Strategy

Don’t look back a year from now and wish you had added pension risk transfers to your business. The climate is ripe to take advantage of a business opportunity that might not come by again. 

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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.”

Retirement Pension Risk Transfer Practice Management

How You Can Find More Clients with Pension Risk Transfer


Annuities

Our sales team talks with a lot of advisors over the course of our travels. Most conversations center around the need to grow the advisor’s business. 

 

As I’ve discussed before, part of The Go-Giver philosophy is the Law of Compensation: Your income is determined by how many people you serve and how well you serve them. Deploying this law through pension risk transfer sales can help you drive your firm’s revenue and increase the number of people you serve. 

 

Pension risk transfers will be a significant market over the next decade. For advisors, it’s a great way to meet new prospective clients through a business contact. It opens the door to a group of employees with the approval of the employee’s human resource department or company’s leadership. What a great introduction to new people! 

 

Companies of all sizes have pension liabilities that are at risk of hurting the enterprise. Pension plans carry longevity risk for the plan sponsors, interest rate risk for the pension fund managers and investment committee, and cost increases that concern C-suite leaders. When working on pension risk transfers, you can reduce or eliminate several problems for the employer:

 

  • Reduce a liability that shows up on the balance sheet (if not fully funded)
  • Avoid the increasing cost of administering the pension plan in the future
  • Shift the risk of employees living longer than funds can support payments
  • Eliminate the risk of interest rate fluctuations and equity market volatility 

 

There are several reasons that an employer would want a retirement income specialist in their office to talk with their employees about options on pension risk transfer decisions:

 

 

Pension risk transfers create a win-win-win scenario for the advisor, the employer and the employees. The employees gain the advantage of talking to a retirement expert on-site, which is viewed as an added benefit at no cost to the employer. The employer gains the ability to transfer their risk to an insurance carrier, and eliminate or reduce the risks to their balance sheet and cost structure of maintaining a pension plan. The advisor wins by helping more people and serving them better, which is the basis of the Law of Compensation.

 

Winning Strategy

Help more people and help them with their most complex problem – retirement. You can do both by working in the pension risk transfer market. 

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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.”

Pension Risk Transfer IRA Annuities Retirement