Annuities

Effective Change


Annuities

Habits are hard to break.

It’s even harder to make positive changes that create good habits. We’ve all said we wanted to set a new goal ― exercise more, eat better, read more, get to work earlier or spend more time with the family. I’ve failed many times at all of the above.

The secret behind effective change is repetition and focusing on a goal.

Many people who change do so with a mental picture of what the goal looks like. Instead of setting a goal to lose weight, it’s proven to be more effective to set goals such as running a 5K, achieving a thinner waistline or building stamina to play with the kids. It’s important to know where you are headed and the reward that will be there ― that keeps a person motivated, especially through the hard times.

Real change happens when we make incremental changes in our daily habits. Some people may be able to go cold turkey or jump in with both feet. If you’ve created permanent change with an all-or-nothing approach, congratulations! But, statistically, chances are those changes won’t stick. Breaking old habits and creating new, sustainable ones takes time and commitment.

The same goes for changing your financial services practice to an income planning focus.

For years, all of us in the financial services industry have been told to build a business with reoccurring revenue. The path of least resistance has mostly focused on a wealth management strategy ― accumulating assets under management and creating a steady flow of revenue from a percentage of those assets.

The problem is that strategy doesn’t allow for shifting demographics. We have to create more income, for a longer period of time, with less assets, than ever before.

It is a unique challenge, and it’s relatively new. Past generations had a stronger pension system and started taking Social Security sooner. The markets didn’t fluctuate based on sound bites circulated on the internet.

Retirement income planning is changing before our eyes. Nearly $600 billion worth of pension assets is currently frozen in the U.S. pension system, and current reports predict that Social Security will go bankrupt in 2035 without substantial change. Markets will continue to be affected by political climate, taxes, tariff structure and general market fluctuation.

We have to act, think and behave differently in order to help our clients retire securely.

We can’t go “cold turkey” with all of our clients ― the vast majority need advice and guidance on how to make sure they don’t run out of money in retirement. So how do you create effective change in your practice to address these changing demographics? The same way you successfully change other habits ― vision and repetition.

If the benefits of changing your practice to focus on income planning aren’t immediately clear, look at the risks of not doing so. In multiple surveys, investors have said they would leave their current financial advisor if Social Security or income planning advice is not offered to them within the next five to ten years. Changes to our practice need to happen in order to remain relevant.

Income planning is unique ― it takes planning, listening and alternative vehicles to reach the ultimate goal of a secure retirement. It must be done individually, one-on-one, which makes for the repetition. But it’s important to think strategically: How do we make the shift now, instead of when it’s too late?

Winning Strategy: Changing demographics continue to shape the needs of our clients. Make sure your practice reflects the coming needs of your clients, so they want to stay with you.

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.

Keep Moving Forward


Annuities

As I travel, I often look out the plane window and marvel at the vastness of our country. As we celebrate Independence Day, I’ve gotten to wondering what it would be like to live in 1770s America. Life was so different for our founding fathers. Their challenges were very different from ours ― and harder than we can ever imagine. Yet in some ways, life was simpler and better then ― at least it feels that way based on how immensely we complain about our life situations.

Picture being in the fight for our independence. The bite of winter sending endless shivers through a worn uniform. Food and supplies dwindling down to meager rations, with limited communication on when additional supplies may arrive. Moving into unchartered lands for the next battle, only to come across a wide, raging river.

And think about the generals commanding it all. It took days to move up- or downstream to find a suitable river crossing. Scouts would ride far in advance looking for the other army, detecting movements and potential sites to set up for battle. It could be weeks before orders would come from leaders about changes in plans. Information was limited at best. Yet they continued.

The revolutionary army’s struggles are far from the challenges in our personal and business lives. Today, we have access to nearly unlimited information and technology. For our clients, it’s probably too much information ― which leads to paralysis by analysis.

In 1776, you couldn’t afford to stay put; you had to move forward with limited information.

In 2019, we can’t afford to stay put, either. But at least we know where we’re going. Retirement may be uncharted land for our clients, but we know what works and what doesn’t. We can mathematically prove that guaranteed income from Social Security, pensions or annuity-driven income makes a dramatic difference in the probability of success in a retirement income portfolio.

Yet many of us are not moving. We often keep our clients’ financial success stagnant when we could ― we should ― move them forward. Why wouldn’t we take advantage of the information at our fingertips?

Our founding fathers completed an incredible feat to secure our independence and improve the lives of the people in a new country. Now it’s time to think about how we can use existing technology, resources and products to improve the lives of our clients. The good news is that it is much easier than it was 243 years ago.

Winning Strategy: Don’t be paralyzed by indecision. With the abundance of information available to planners today, it’s easier than ever to leverage information to make good decisions for our clients.

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.

Why Annuities Are Sold, Why Annuities Are Important


Annuities

Why Annuities Are Sold, Why Annuities Are Important

 

It’s time to reacquaint ourselves with the benefit of annuities.


Contrary to recent articles from media outlets, annuities can be a valuable tool in a portfolio. Too often, the product gets bad press and people jump on the bandwagon. For the last two decades, our industry has been focused on recurring revenue and assets under management. That served our businesses and our clients well during the accumulation phase. But the game has changed.

Taxes
Tax-deferred growth is a large benefit for any non-qualified assets – especially if they are generating long-term retirement income. Assets will grow and accumulate faster using a tax-deferred vehicle. One could argue that the lump-sum tax at the end of the accumulation period would be hefty. That’s true, but it’s not the best use of an income-generating vehicle like an annuity. Annuities allow for control of the tax disbursement, which avoids a lump sum distribution at a capital gains tax rate.

 

Fees
Fees are always synonymous with annuities, regardless of whether they’re fixed or registered. Clearly, some annuities are fee-heavy, and I don’t disagree. But most aren’t - in fact, fixed indexed annuities offer the same or similar income riders as their variable counterparts. Rider charges are much less expensive due to the stability of the general account, versus the fluctuation of underlying sub accounts.

Using the Principal

Traditional SPIA and DIAs are making a comeback due to the retirement crisis. People need to generate higher levels of income, for longer periods of time, with less assets than previous generations. Using principal and interest to do that over a person’s lifetime – for both qualified and non-qualified assets – makes sense. Once guaranteed income is in place, the remaining portfolio can be invested more aggressively. Equities have historically outpaced inflation, so future losses in buying power can be offset.

 

Asset Location

We often get caught up on asset allocation models. Instead, we need to focus on asset location, which is the key to annuities adding a benefit inside a portfolio. The purpose of the asset is more critical than the class. If the asset is intended to generate retirement income, you need to consider at least a portion in guaranteed income.

Guaranteed
For most Americans, the promise of ongoing income – guaranteed for life – makes annuities one of the most beneficial parts of their portfolio. Don’t take my word for it! The power of guaranteed income can be proven through our tool, JourneyGuide. I encourage anyone to take their typical middle-American client and evaluate the use of guaranteed income in a $1 million portfolio. You’ll find a $275,000-$325,000 difference in total income increases for mass affluent customers.

 

Winning Strategy: Look at the true benefits of annuities in the retirement income strategy and not the recent headlines.

 

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 annuity time

2 Minutes to 4 Hours


Annuities

We’ve either done it or seen it – the mad dash through the airport, desperate to reach the gate before it’s too late.

 

I was recently flying home from Kansas City, Missouri to Fort Wayne, Indiana. My connecting flight in Detroit was running late. It was a Friday afternoon and bad weather was causing delays. My layover was less than hour, and as we landed, my phone pinged – my flight to Fort Wayne had begun the boarding process five minutes earlier. And there I was, stuck at the back of the plane waiting on others to get off.

 

I began checking alternatives. I could get a rental car and drive home (invariably over three and a half hours after dealing with the rental company and afternoon traffic). There was a later flight that would get me in about the same time or a little later. Or, I could run like fury and hope I made it to the terminal in time.

 

I decided to chance it. I ran through two terminals in Detroit’s airport and made it to the gate as the agent was making the last muffled boarding call.

 

I’d made it – just – with two minutes to spare.

 

I found my seat on the plane, stowed my carry-on, got comfortable and began to relax, knowing I would be home much earlier than if I had missed this flight. I could breathe again. From the time the notification popped up on my phone until the time I sat down, I was rushed, worried, anxious and feeling a bit irked toward the airline.

 

It’s entirely likely that our clients feel the same way about our industry – frustrated, anxious, and making last-minute decisions on their retirement. They only relax when they have a plan and they know they are secure in their income for life.

 

Retirement is creating more anxiety for more Americans than ever before. There are huge uncertainties due to longevity, health care, taxes, legacy concerns and charitable tendencies. Retirement is a time when Americans should be enjoying the fruits of their labor, not worrying further. We can help alleviate that anxiety by doing some simple things for our clients:

  1. Make a plan, and make it early. Our research shows the purchase of guaranteed income as early as age 55 for later use increases the probability of success in retirement income plans.
  2. Understand the three sources of guaranteed income: Social Security, pensions, and annuities. These are the only vehicles that can shift the risk of longevity.
  3. Educate clients on the benefits of guaranteed income in the portfolio, regardless of source.
  4. Teach clients the value of Social Security and how to make smart decisions about benefits.
  5. Use technology to better improve client interface and build client base to reach underserved markets.

 

If we focus our attention on income during retirement, and not just asset allocation and return, we will have a better conversation with clients. Those conversations will be more meaningful and helpful to a greater number of people.

 

Winning Strategy: Don’t wait to plan for your clients’ retirement. Talk about income with them and educate them on how guaranteed income makes a difference in the portfolio.

 

 

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 annuity time

Education is the New Product


Annuities

June is Annuity Awareness month, and that means we have a great opportunity to talk about annuity products. While the tendency is to focus the discussion around the benefits of products and their role in planning, it may not be the proper topic. While we might sell/place/transact an annuity purchase, the client, ultimately, is buying the ability to retire securely. The path to that security lies in education.

 

No one really buys a product for the product’s sake – they buy because they have been told that the product will solve a problem. It’s not the products we should be talking about; it’s the problems themselves, and the strategies we should be taking to alleviate those problems. Annuities are a great problem-solving tool, often for issues we are not addressing with our clients. Instead, we tend to ignore the issue because we are “wealth managers”, “not insurance agents”, or “focused on growing assets”.

 

Longevity is a major planning hurdle for clients. Predicting how long you are going to live is nearly impossible, making it difficult to plan the correct asset allocation, asset location and withdrawal percentage. If you ask your clients whether they feel they have enough money to live on for the rest of their life, most will say they don’t know, or are not sure. That should lead to a discussion about lifestyles, saving strategies, income generation and risk mitigation. Without having this discussion, your client is left with anxiety that builds over time and can only be calmed when they find another planner that solves the pressure point. That needs to be you.

 

Without the assurance of a plan to alleviate the pain now – or in the future – the client remains in distress. Worried clients could be swayed to the first planner that gives them a picture of security. Our industry needs to deliver the confidence to our consumers that we have a plan just for them, one that can solve their most pressing goals and concerns. Consumers deserve the right to feel that we are addressing their particular needs in the best possible way. They need to know that we are in the business of solving problems, without respect to a particular product. If that means better consumer facing material to help with the conversation, we’ll gladly work with your compliance department to help build it. As I wrote a couple months ago, our industry is the least trusted industry worldwide. Earning that trust starts with education – and it starts today.

 

Winning Strategy: Focus on finding out what really bothers your client and educating them on the problem and solving that problem without regard to product. Start this month to focus on education, not product.

 

 

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 education problem-solving