Annuities

Why You Should Be Optimistic About the Future


Annuities

While you might be afraid of the fiduciary rule and its effects on your business, there are so many reasons to be optimistic about the future of our profession right now. Below is a list of just a few of the changes I believe will continue to impact our industry – and increase the need for quality financial professionals – for years to come.  

 

Defined Contribution Plans

Defined contribution plans offer better choices, potentially lower fees, and tax-favored investing. However, few plans have mechanisms to provide lifetime income, so the vast majority of Americans need advice on converting their accumulated wealth into sustainable income. The loss of guaranteed income places pressure on assets under management like never before. The planner who can specialize in income planning can differentiate themselves for decades to come. 

 

Savings Rates

For long-term retirement savings, the savings rate in the United States remains around 5 percent, and baby boomers have a median retirement account balance of $130,100, according to LIMRA’s 2016 Retirement Fact Book.1 This means as planners, we will be challenged to generate more income with fewer assets than ever before. Clients will value creative and innovative professionals much more than a computer program to solve this problem. 

 

Social Security

More than half of Americans take Social Security early – only 2 percent of men, and 4 percent of women, defer their income to age 70.2 That behavior tends to cost retirees as much as a 56 percent difference in income at age 70. With Social Security having an inflation factor, the income discrepancy will grow more during retirement. Advisors who can provide meaningful advice on maximizing income will separate themselves from the pack. 

 

Health Care

Health care is the largest inflationary risk for elderly Americans. The uncertainty around premiums, coverages and providers means that planners must have a conversation about who, how and where will health care be provided during retirement. Knowing this and providing quality advice on health care will become more important as baby boomers grow older.  

 

Housing

In the United States, housing wealth is larger than all of the assets under management for both qualified and non-qualified assets. More importantly, many Americans need to downsize or rightsize their housing plans in retirement. Solutions around the proper use of housing wealth and housing lifestyle will only grow in importance as our clients transition from a working career to retirement. 

 

These are just a few of the demographic and social concerns our industry faces as this generation heads to an unknown retirement. Few, if any, of these concerns are likely to be answered by a computer screen and an algorithm. Instead, these issues are real life concerns that need to be discussed, weighed, informed, and addressed with a meaningful and purposeful process. I am confident our profession is well positioned for success for the next several decades. 

 

Winning Strategy

Look at all the demographic and social changes around us today. These changes will influence many of our clients and prospects for several years to come.  If you can address these problems, you are likely to gain market share in your business. 

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

About the Author

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

 

1LIMRA, Fact Book on Retirement Income 2016: https://www.limra.com/bookstore/item_details.aspx?sku=23518-001 

2The Motley Fool, “When Does the Average American Start Collecting Social Security?” April 19, 2016: https://www.fool.com/retirement/general/2016/04/19/when-does-the-average-american-start-collecting-so.aspx

 

Retirement Longevity Financial Services

Racing Toward Retirement Success


Annuities

When you grow up in Indianapolis, you naturally follow racing to some degree. I’m not a huge racing fan, but I do follow the sport. (Actually, I follow just about any sport offers an opportunity to make an analogy with our industry.) 

 

As Memorial Day and the 101st running of the Indianapolis 500 approaches, I thought I’d share some statistics from the first race of this year’s IndyCar Series.  

 

For the St. Petersburg race, the winning margin was just 10 seconds. Now, on a race track, 10 seconds may seem like a massive win for the first place car. But, think about how narrow that margin really is over the entire race, when things could have gone wrong at any point ... 

  • There were 110 laps with multiple turns both right and left
  • The teams had to complete three pits stops
  • The drivers had to make hundreds of gear shifts

 

The timing of all of the above had to be near perfect in order to win because the next competitor was just 10 seconds behind. With any loss in momentum, the driver could have easily lost the race. 

 

Winning the Retirement Race

Just as anything can happen in 100-plus laps of an IndyCar race, you can never know what to expect in a 20-30 year retirement span. Both inflation and long-term care pose serious risks to our clients’ plans. Without a strong plan and skilled execution, they could easily be thrown off track.    

 

Our clients need to think about all the twists and turns their retirement might bring. And, we need to make sure their incomes don’t lose momentum. We need to make sure they’re able to finish strong. QLACs, deferred income annuities, income riders, and hybrid long-term care plans are just a few of the recent innovations that allow us to help our clients complete the race.  Because in their race, it’s either first … or last.  

 

Winning Strategy

Look at ways to protect your clients from inflation and longevity concerns.  Clients have to complete a long race that includes dangerous turns, a few pit stops, and the need to maintain momentum for the long haul.   

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

About the Author

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

Annuities Longevity Retirement

Longevity for Your Practice


Annuities

You likely spend a lot of time talking about the importance of longevity planning for your clients. But, have you thought about longevity for your practice? 

 

Recently, I was reading an article from a practice management expert who was answering some questions about an advisor’s succession planning. It made me think how prepared we are as an industry to provide ongoing service to our clients in the event of catastrophic events. We talk to our clients about mitigating risks in retirement, but we don’t necessarily talk about the risk of losing an advisor. 

 

I think it’s an important consideration for us to evaluate, especially now. Part of working in your clients’ best interest might include having a strategy for your office to make sure you continue servicing your clients after you leave the business – by your own choice or due to an external event. Think about how you would feel if you put your entire trust into a relationship with someone, and then that person suddenly left. Wouldn’t you feel better if you knew there was a plan in place to continue taking care of you? 

 

Sound Familiar?

This article focused on several mid-50s principals who did not have official succession plans. Children were going to step into the businesses if a health event forced the principals out … However, neither the staff nor the clients were aware of these plans. The children probably were not aware of his plans either, given that they had successful careers elsewhere. Unfortunately, this scenario is common among financial professionals. 

 

With our clients in focus, we must have better plans for our retirement – which might come tomorrow due to a health event, or in a few years due to a simple desire to slow down. Regardless of timing, you owe it to your clients to give thought to the consequences. You also owe it to your employees, your families, and the industry.  

 

Look in the mirror and ask yourself, “Have I created a full, holistic plan for the orderly transition of my business? And, is it up to date?” If not, you need to devote time and energy to helping yourself first, so you can impact more clients and prospects with confidence. 

 

Winning Strategy

Think about how you will exit the business. What would your clients think if you were not at your firm tomorrow or the next day? You need to plan for the orderly transition of your business so you can instill confidence in your clients and communities.  

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

About the Author

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

Longevity Practice Management Succession Planning

Longevity and Golf


Annuities

The title might make you think that I will be talking about how to spend your retirement years.  Without a doubt, many people spend more time driving a golf cart around the course, or their neighborhood for that matter, during retirement. However, longevity and golf share other commonalities in the retirement income space.  

 

In 2016, Dustin Johnson was at the top of the money list for the PGA tour, earning more than $9.3 million.* (This does not account for his endorsements, just his winnings from the 22 tournaments he played in 2016.) One of the reasons he won so often or ended close to the top of the leaderboard when he played was his putts per hole. For the entire season, Dustin Johnson putted 1.71 times per golf hole. 

 

The 100th best PGA golfer for 2016, Adam Hadwin, earned $1,067,809 – just 11.4 percent of what Dustin earned earned for the same season. Adam played in slightly more tournaments throughout the year, too. His putting average was 1.77 putts per hole … just .06 strokes more.  But, that little difference in putting made an $8.2 million difference in income. 

 

Fortunately for Adam, he has a chance to learn from his experience, and he will likely earn more throughout the rest of his career. In fact, in 2017, he has already won a tournament and matched his previous year’s income.  

 

Sink Your Putts

Unfortunately, our clients don’t get the same opportunity to rebound in retirement. Instead, they make largely irrevocable decisions when they leave their working years, so they have to get it right the first time. Like putting, the smallest movements can have huge consequences. 

 

We must guide our clients through the complexities of longevity. A major health event that requires home health care or skilled nursing might demolish the assets a person has saved. And, simply living too long creates added stress on their ability to keep pace with inflation. All are real problems that, for the most part, have to be dealt with when your clients stop working and start living off their accumulated assets. 

 

Minor tweaks like asset allocation may improve or lessen a portfolio’s ability to sustain itself through a systematic spend down over the rest of a retiree’s life. You should take time to learn about new techniques and products for your clients. With new risks surrounding longevity and retirement income planning in general, you owe it to your clients to be innovative, creative and purposeful in your planning. Just like practicing your putting, practicing your profession can make a big difference for your clients and prospects. 

 

Winning Strategy

Keep current with new products and strategies to your give your clients the best opportunity for success. When you concentrate on the small things you can tweak, you will likely have profound differences in your clients’ retirement success.

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

 

About the Author

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

 

*PGA Tour Official Money Board, 2016: http://www.pgatour.com/stats/stat.109.2016.html

Retirement Annuities Practice Management