Annuities

Seeking Greatness


Annuities

I was dreading the two-and-a-half-hour flight.

After focusing on the industry for five days at a meeting, I didn’t feel like my normal writing habit while in flight. I rarely watch movies while traveling, but this time I made an exception: In Search of Greatness, a documentary interview of successful athletes asking what made them different than the competition.

In his segment, Wayne Gretzky made an observation that jumped out to me: he spoke about the loss of creativity in today’s world, especially with younger athletes. Several of the interviewees told stories about playing multiple sports when they were kids.

Today, kids are focused on a single sport, often working with specialists and trainers to give them an edge on the playing field. Gretzky played baseball as a child and loved it before he found hockey. He talked about decisions made on pure metrics – something we do in the financial industry all the time.

But metrics are only part of the story. Both Gretzky and Jerry Rice both said that while they weren’t the fastest person in their sport, they made up for it through practice, better fundamentals and creative thinking.

Why should our profession be different?

For the last several decades, financial advisors have been told to focus on growing recurring revenue and assets under management. We’ve attended seminars and mentored others on how to build a successful business. But we’ve lacked the creativity to shift according to changing demographic needs.

Our clients are faced with their biggest financial challenge– making their income last through retirement. We can’t simply manage assets the same way we did twenty years ago. Instead, we have to get creative in order to address our clients’ needs. Different solutions. Different products. Different models.

Which brings us back to self-awareness. It may be the greatest characteristic of any good salesperson. Understanding where your weakness lies and how to leverage your strengths can take you to great heights, but you can’t execute unless you’re self-aware.

Are you learning and using a full range of solutions to meet your clients’ needs? Or are you stuck in a model that doesn’t work? If so, develop more creativity in your planning and find ways to address the risks associated with longevity.

 

Winning Strategy: Learn and practice creativity. Kids excel when they learn multiple sports. Professionals excel when we learn and deploy multiple solutions for changing client needs.

 

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. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

 

retirement winning strategy creativity

Riding the Waves: How to help your clients cruise through retirement


Annuities

Have you ever been on a cruise ship? The first day at sea can feel pretty strange, especially if it’s a windy day and the sea is churning with waves. If you’re not accustomed to walking on a ship, you might even find yourself holding on to the walls. 

Though they may rock a little, cruise ships and other large vessels will continue cutting through the water with ease – they are built with a strong foundation and designed for balance.

 

Riding the Market Waves

Many Americans find their retirement vacillating on market returns, and early in 2016, the markets created choppy waters for those seeking steady income. So, how can you make sure your clients don’t have to hang on to the walls through retirement? 

Like a ship, they need a strong foundation and balance to cut through the waves. With a doubt, a ship has to sway to some degree – just like a portfolio of well-balanced stocks and bonds. However, the variations in performance sometimes make things lean too far for a comfortable ride. No matter what happens, a strong foundation will bring their ship back to the middle. 

 

Creating Strength and Balance

I’m not advocating everyone place their assets into instruments providing guaranteed income. Instead, I think you should think of a couple points when designing a portfolio for your clients.  

  1. You should take longevity off the table with a guaranteed, long-term income stream so your clients will not run out of money for essential living expenses

  2. You should help provide inflation protection for future health care needs and overall growth

 

The next time you take on a retirement planning case, think about designing the portfolio like a ship. Guaranteed income will provide a strong foundation, and a selection of other assets can meet any needs that might arise and rock the ship. 

Winning Strategy

A ship must be built to withstand all conditions – a retirement portfolio should be built the same way. Build a strong foundation and create balance so your clients can have smooth sailing through retirement.  


About the Author

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.

retirement

Pension Plan Sponsors are Running out of Excuses


Annuities

Most pension plan sponsors have been content to wait for low interest rates to rise before considering pension risk transfer solutions. As they wait, however, their plans experience rising costs, funding and market volatility, and the prospect of paying retirement benefits to employees who are living longer than originally planned. 

By 2019, Pension Benefit Guaranty Corporation premiums will increase more than 40% compared to 2015 rates for fully funded pension plans. Underfunded plans also pay a variable premium rate based on their funding level. What makes better economic sense for sponsors – pay the costs to maintain the plan or transfer it to an organization in the business of managing risk?

Sponsors are beginning to grasp the cost realities of waiting to address their pension obligations, but they need our encouragement and guidance. Consider this: Russell Investments published an interesting research piece, “Borrow to Fund,” that examines the costs/benefits of borrowing money to fully fund an underperforming plan. In addition to potential expense and tax savings, a fully funded plan is positioned for transfer of its obligations to a top-rated insurance company through pension derisking, a strategy that’s going to help even more companies in 2016.

 

Winning Strategy

Now is an excellent time for you to offer pension risk transfer solutions that meet your clients’ needs and fulfill commitments made to plan participants. Be sure you’re taking advantage of a market that poised to protect thousands of companies and their employees.  

 

About the Author

At Ash Brokerage, Steve Pilger helps clients design and execute cost-effective risk transfer strategies for their pension plans. Need help getting started? Contact him at steve.pilger@ashbrokerage.com or (800) 589-3000 ext. 6828. He can help identify prospects and provide expertise to help you generate revenue in this growing market.

 

Learn More

“House approves large PBGC premium hikes in budget deal,” Pensions & Investments, Oct. 28, 2015: http://www.pionline.com/article/20151028/ONLINE/151029834/house-approves-large-pbgc-premium-hikes-in-budget-deal

“Borrow to Fund,” Russell Investments, November 2015: http://www.russell.com/us/institutional-investors/research/do-pbgc-premiums-incent-plan-sponsors.page

“Pension Derisking Poised to Accelerate Further,” The Wall Street Journal, Feb. 2, 2016: http://deloitte.wsj.com/cfo/2016/02/02/pension-derisking-poised-to-accelerate-further/

Pension retirement

Look Beyond the Numbers for Pension Risk Transfer


Annuities

No doubt, pension risk transfer activity is growing. Companies of all sizes, sectors and locations are shifting risk off their books to eliminate pension obligations. According to a study by the Pension Benefit Guaranty Corporation, between 2009 and 2013, more than 500 defined benefit plans transferred $67 billion of risk through lump-sum distributions and annuity purchases. 

If you have clients who are business owners, executives or professionals, e.g., doctors, dentists or lawyers, chances are they have a defined benefit pension plan. Although many of these plans have been replaced in recent years by 401(k) or other contributory plans, defined benefit plans remain a liability on a company’s books. Plan sponsors face important decisions to address rising costs, increased regulation and uncertain market conditions.

Pension risk transfer can make sense for both parties – plan sponsors typically want to strengthen their balance sheet and ensure employees receive their retirement benefits, and insurance companies are in the business of investing and administering retiree liabilities. 

This solution may not work for every situation, however. Many frozen pension plans lack sufficient assets to complete a transfer. These underfunded plans need help adjusting their investment strategy to close the gap between asset value and pension benefit obligation. 

When selecting an annuity provider for pension risk transfer, plan sponsors have more to consider than corporate financial and competitive pricing. They should also factor in whether the provider: 

  • Will provide comprehensive customer service during and after plan transfer
  • Offers retirement education for employees
  • Responds to participant concerns

 

Bottom Line:

Now is an excellent time for you to offer pension risk transfer solutions that meet your clients’ needs and fulfill commitments made to plan participants. Need help getting started? Drop me a line or call any time. I’m happy to help you identify prospects and provide expertise to help you generate revenue in this growing market. 

 

Learn More

Risk Transfer Study, Pension Benefit Guaranty Corporation, December 2015: http://www.pbgc.gov/documents/Risk-Transfer-with-Notes-December-2015.pdf

 

About the Author

At Ash Brokerage, Steve Pilger helps clients design and execute cost-effective risk transfer strategies for their pension plans. He is dedicated to finding solutions that meet the needs of plan sponsors and fulfill the commitments made to plan participants. Contact him at steve.pilger@ashbrokerage.com or (800) 589-3000 ext. 6828. 

pension risk transfer steve pilger retirement

Importance of a Guarantee


Annuities

How important is guaranteed income? Ask any retiree or near-retiree, or read most any survey about concerns in retirement, and the most common fear is running out of money. Financial planners must consider what assets are available and what tools they have available to create and generate guaranteed, lifetime income.

Today, one tool often used in financial plans is an annuity with an income rider. An income rider guarantees an income payment for the life of the insured, and can even be set up to guarantee income payments for the insured’s spouse. Clients may even have the option for increasing income payments under some annuity contracts. 

Here’s how it works: The average payout factor at age 70 is 5 percent. If your income base amount is $200,000, then the resulting payout is $10,000. In most cases, this would be the amount the insured would be guaranteed on an annual basis for their lifetime.

With an increasing income payment option, when there is any interest credited to the annuity, the insurance company increases the last annual payment amount by the interest earned, expressed as a percentage. Say your annual income payment was $10,000; however in the last contract year, you earned 4 percent in interest. The insurance company would then increase your lifetime annual income payment to $10,400. Choosing this option would help you keep pace with inflation, and potentially help you offset higher health care and other costs. 

The Bottom Line: Guaranteed lifetime income is important to many of your clients. Show them options with annuities and income riders. 

 

guarantee income annuities retirement