Annuities

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

Vision for What Your Effort Will Deliver


Annuities

A couple of weeks ago, I was talking with my business coach, CJ McClanahan, and he said something that struck me: “People don’t have a vision for what the effort is going to deliver.”  If you think about that statement, it applies to several parts of our lives as financial planners.  

 

Vision for Your Practice

In today’s increasing regulatory environment, we tend to focus our attention on fighting the U.S. Department of Labor rule. In practice, the rule has already taken effect as clients are already asking planners if they are fiduciaries. For the last nine months, banks and wire houses have been converting their clients, for better or worse, to fee-based accounts. And, as I travel around the country, I hear too many people talking about what they are going to do to fight the rule, rather than what they are going to do to implement the rule in their practice.  

 

The rule will undoubtedly require a lot of effort to fully implement. However, our clients are likely to benefit from the changes that the rule suggests. Putting our clients’ best interests first has always been a part of our ethical makeup. However, the documentation needed to prove this status will require changing how we process our client files, complete our paperwork, and follow our sales process. 

 

That said, we tend to lack the vision of what our businesses may be like when we implement the rule. Your clients will likely have more trust in you. They will likely discuss more concerns with you. And, they will be more likely to refer you to other like-minded prospects. Those items can make your business more profitable and more efficient. 

 

Vision for Your Clients

At the same time, our clients lack vision in the financial planning process. Most clients spend more time planning this year’s vacation than they do planning their retirement. We have to do a better job of providing that vision, through education that motivates them to complete the planning process.  

 

Without a doubt, the planning process can be onerous if done properly. Planning should consider the risks of retirement, including longevity, legacy and charitable desires, taxes, and health care, to mention a few. Each of those risks needs special consideration, evaluation, and analysis to prepare a proper recommendation for each client’s concerns, goals, and objectives. 

 

Few people rarely want to think about those risks, let alone plan for them or act upon them. It’s our job as financial professionals to create a positive vision of the outcomes for our clients: sustainable retirement income, better lifestyle management, and more time with children and grandchildren.  

 

Eyes on the Prize

In the end, vision becomes an important part of the planning process and of our business models. We must keep the vision of all the changes in perspective, but we must also envision the benefits of change. In doing so, we can easily put forth the efforts needed today for a better business and happier client relationships. 

 

Winning Strategy

Few people maintain the vision of all the effort that change requires in order to improve. That applies to clients and planners. Take time to think about where your clients need to be in the future and where your business needs to be in three to five years. Keep that vision in the front of your mind for proper motivation to change.  

 

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 DOL Fiduciary Rule

QLACs: The Unused Gift


Annuities

In 2014, the U.S. Treasury Department released new rules around Qualified Longevity Annuity Contracts or QLACs. After an initial increase in utilization, the focus and attention dwindled over the past two years. Today, the sale of all deferred income annuities remains stagnant and far below expectations from 2014. This gift that the government provided remains largely unused in the planning community. 

 

As I prepared for a presentation recently, I asked our team to update our research on the use of QLACs at different ages and for different risk allocation models. The results were similar to an earlier study we did in 2015. In fact, the results from 2017 are even more convincing for the use of QLACs. Keep in mind the interest rate environment hasn’t changed significantly over the past 24 months. Yet, a fixed instrument was proven to improve the probability of success across many categories. With such a wide improvement, we owe it to our clients to consider this solution in the retirement planning process.  

 

A Closer Look

Our QLAC study evaluated four asset allocation models: 

  • Aggressive – 80/20 equity-bond allocation
  • Moderate-aggressive – 60/40 allocation
  • Moderate-conservative – 40/60 allocation
  • Conservative – 20/80 allocation

 

The initial investment started at ages 55, 60, 65 and 70. We looked at placing a $500,000 portfolio in each of the allocations. Each portfolio began a reasonable distribution of income beginning at age 70. For each allocation strategy, there was a probability of success of having $1 left in the portfolio at ages 90, 95, and 100. 

 

Next, we placed a QLAC at each one of those ages and allocation strategies. The annuity began paying out at age 80. With QLACs, you can tend to change income start dates five years before and after the initial requested start date – this gives the client a 10-year window if their needs change. So, there are 48 results cells between ages 55, 60, 65 and 70 in the four different allocation strategies when we look at longevity at 90, 95, and 100. In every one of those 48 cells, the study found that a QLAC improved the probability of success. What surprised me was the fact that some of the largest improvements in success rates happened when a QLAC was purchased at younger ages.  

 

A Change in Mindset

Too often, we think of QLACs as a way to push required minimum distributions down the road. Instead, we need to initiate a conversation about this solution in order to mitigate the risk of longevity. In doing so, we reduce some of the concerns our clients have about running out of income during their life. We clearly help some of our younger, more conservative clients in the process.  

 

Winning Strategy

Take the time to evaluate the use of deferred income annuities in the planning process with clients. Their best interests might be served by providing guaranteed income later in life. Our study shows that you can engage a client and have a high probability of helping them improve their retirement outcomes. 

 

For more information about the assumptions and results of our QLAC study, call Ash Brokerage at 800-589-3000. Ask for our annuity sales desk and tell them you want to know how you can improve the probability of success for your clients.  

 

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 QLAC Retirement