Annuities

Adversity: A Different Perspective


Annuities

Adversity can come in many forms, sneaking in slowly but then spiraling out of control. How many times have you described a sales slump just like that? I certainly have had my share of slumps during my nearly three-decade career. However, I think it’s important to look inside the problem to keep the adversity in perspective.

 

First, we have to look at the root cause of any adversity. This may seem easy, but almost always the obvious cause is not the real cause. You have to look deeper than just looking at the obvious. Key performance indicators (KPIs) are a great place to start, but even KPIs might not show the heart of the problem. You have to ask yourself, “Why is this KPI looking like this? What might I unknowingly be doing that creates these results?”

 

As I frequently suggest, behavior change is not only difficult but also at times painfully slow. Recognizing the problem early is critical to lessening the effects of poor performance. But stopping the patterns of behavior that are causing the problem is only one part.

 

Once you have determined the cause of the adversity, you then have to keep that adversity in perspective. Recently, I measured our performance against different industry benchmarks in several distribution channels. Even though our activity and effectiveness were not up to our normal KPIs, I found our sales numbers were much better than industry averages. Now, that doesn’t mean we don’t need to change, but the numbers do help me keep our current activity in perspective. And it helps me provide information to my sales team that keeps them energized. When our competition is suffering, that is the time to capture market share, not say, “Everyone is affected, so we are just fine.” We still have to focus on the root cause of adversity to deal with it.

 

At the end of the day, adversity provides an opportunity for improvement. But it’s important not to correct the same problem time after time. Each cycle of adversity generally creates unintended and unexpected consequences for our actions. Look at adversity as a chance to improve. When you do, adversity doesn’t seem as bad and can even be a sign of healthy growing pains.

 

Winning Strategy:

Don’t hang your head during adversity. Look at adversity as a learning tool. Identify the root cause and work on correcting it; but, keep the adversity in perspective to your overall business. Make sure you don’t overcorrect but use adversity as an opportunity to grow through 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 Adversity

Interest Starts Change


Annuities

I recently spent a couple of beautiful days in Washington, D.C. Although many people were on fall break visiting our nation’s capital, I was not. My days were spent preparing for, and talking to, members of the Department of Labor. I found the experience intriguing, interesting and awkward—all rolled into one. But, significant change requires all those factors.

 

As financial professionals, we must always be intrigued by our fiduciary responsibilities to our clients, even if we believe we are already providing that level of care. No matter what specialty your financial services practice focuses on, you have to think about all the possible ways of improving a client’s position. This is exactly why the department allowed us to come in and discuss our concerns. They were as intrigued as we were about the opportunity to improve the distribution of financial advice. I believe that level of intrigue is good for our industry.

 

Next, in order to improve, you must have an interest in change—far more than simple intrigue. We must have a sincere interest in changing how the industry provides better options and service to our clients. The department displayed a genuine interest in improving and understanding the market for annuities and life insurance. With a genuine interest in improving, we typically move to the awkward stage—you feel you need to change your behavior.

 

The new fiduciary rule requires significant changes of behaviors at every level of our industry, perhaps even a change in behavior from the department, as well. Regardless, when you change the way you do things, there is a feeling of awkwardness. However, there is always a path to change through understanding and repetition. If you were intrigued and interested in getting better, you will do the uncomfortable things until they become comfortable. In the end, you will have to go through all the stages in order to improve.

 

Winning Strategy:

Find something that intrigues you about your business. Get interested in why the process works the way it does. Get uncomfortable with a new process or product.

 

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.”

DOL Fiduciary Annuities

3 Ways to Get More from Your Brain


Annuities

Like many professionals, I am trying to incorporate meditation into my daily routine. With meetings for seven to eight hours of the day and many nights taken up by client dinners, I find it difficult to be present while at home or to simply rest my mind. It’s hard to start a new habit, especially when you don’t feel results immediately. However, I know in the long run that meditation will make me healthier and help me make better decisions for my sales division. 

 

One of the reasons I started to look in to meditation was the advice from my business coach. But, I found a lot of other information about the brain and reasons why I needed to “rest my brain” occasionally.

 

Did you know the brain completes 1,000,000,000,000,000,000 calculations per second? That’s right – it’s a one with 16 zeros after it. I had to look up the proper name for the number – it’s quintillion. I just knew it was a big number.

 

Think about the brain’s capacity and its limitations. It takes the brain approximately 21 minutes to refocus on a complex task after being interrupted. But, at the same time, it can conduct 1 quintillion calculations per second. So, how do you manage this important part of the human body and maximize its use for clients?

 

Focus

Given our busy schedules (and our clients), it’s imperative we keep the mind on task. I recommend time-blocking for important activities like calling clients, client appointments and managing your business. Focusing on tasks allow you to leverage the power of your brain and its massive computing ability. 

 

Rest

It’s important to rest your brain and keep it fresh. After all, it’s really working overtime doing all those calculations. Take time to enjoy the outdoors; sit and listen to “nothing” – chirping, whispering, glistening, or whatever you hear. Enjoy the moment. Allow the brain to relax and take in the environment. By having a relaxed brain, you are in a better position to make great decisions on your business and with your clients. 

 

Challenge

Lately, I’ve been talking a lot about constraints. Challenge your brain to think outside the normal flow of business. Ask yourself, “Is there a better solution for my client that provides a better outcome than how I am doing it now?” Your clients will appreciate the ideas that your brain delivers. After all, one idea out of a quintillion isn’t all that hard, right?

 

Winning Strategy

Allow your brain to rest periodically. But, when it’s time to focus, make sure you are uninterrupted. The level of productivity you enjoy will surprise you. Practice exercising your brain just like the rest of your body. 

 

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.”

A Call for More Financial Professionals


Annuities

With the U.S. Department of Labor Conflict of Interest and Fiduciary Rule looming, many people predict a loss of sales and financial professionals. I’ve talked extensively about the opportunity to expand one’s financial practice, but I fear the new rule will create a barrier to entry for many individuals – young and old – thinking about a financial services career.

 

A recent study by The American College found a large segment of the population scored poorly on a financial literacy test, indicating a tremendous need for retirement education, which can best be served one-on-one and face-to-face, not through a digital interface.

 

Below are some key findings from the RICP Retirement Literacy Survey*:

 

Only 19 percent passed the retirement income quiz (60 percent or better).

Not one person in more than 1,000 respondents received an A (90 percent or better). And, only 1 percent of the respondents scored a B (between 80-90 percent). 

 

Only 39 percent of respondents knew that when interest rates rise, bond prices drop.

With today’s low interest rate environment and people reaching for longer durations, the risks associated with bond ownership has never been higher. The majority of Americans don’t understand the direct correlation and the effects of changes in interest rates. 

 

More than half the respondents underestimated the life expectancy of a 65-year-old male. 

Too often, robo-advisors guide a client through some assumptions. But, the assumption is left to the person selecting the input. This survey result suggests half of Americans are underestimating how long they will need their assets to last.

 

Only 31 percent of people responding to the survey knew that 4 percent can be safely withdrawn from an account during retirement (the 4 percent rule).

Even with increased media attention to retirement income and focus on de-accumulation strategies on digital platforms, most people do not understand how much they can withdraw from their savings. 

 

All of the above (and similar statistics from the survey) alarm me about the readiness of most Americans as they move toward retirement. When we are unprepared, we have to seek out professional assistance. That assistance is not going to come from a robo-adviser or digital platform. Clients need, and deserve, to feel comfortable and have their questions answered. More importantly, they should have a relationship that challenges them to think about potential risks like longevity, health care, interest rate risk, rate of return targets, and income strategies. 

 

It’s unlikely that a computer program will have the expertise to direct a client through the complexities of retirement planning and be there to make them feel comfortable when the plan may bend off course. 

 

Winning Strategy

Think about providing more education to your clients and prospects. Surveys point to a need for more education. More importantly, there is a need for more financial professionals to help execute meaningful financial plans. Help someone into our industry and be a mentor to them. 

 

*“6 Disturbing Findings from America’s Failed Retirement Quiz,” The American College, Aug. 10, 2016: http://knowledge.theamericancollege.edu/blog/6-disturbing-findings-from-americas-failed-retirement-quiz

 

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.”

Which Risk Do You Want?


Annuities

Since the U.S. Department of Labor (DOL) rule was announced in April 2016, there have been so many interpretations of the rule and its effects on individual financial planning firms. As I read the rule in April, one of my biggest concerns was that advisors would shift their product mix to the path of least resistance instead of really digging in to what might work for the client.

 

Unfortunately, I see and hear a lot of “I’m not going to sell annuities in the future.” Even worse, I continue to hear broker-dealers limiting product menus to make compliance easier. 

 

Over the last several years, the stock market has been on one of the longest bull runs in history. Recently, in July and August of 2016, I watched the stock market hitting all-time highs. But, at the same time, I saw inactivity at the advisor level and the client level. The annuity industry reports sales slowing during the summer months across most carriers. Our business has slowed and our sales teams report that clients don’t want to meet with their financial advisors. In turn, advisors have begun to turn their clients’ accounts into fee-based accounts after charging an upfront commission. In many cases, they feel the change is mandated by their firm. Many are not taking the opportunity to advise clients – instead, they are just focusing on the administrative change in compensation. 

 

Unfortunately, through all the DOL issues, we have failed to focus on what is most important: protecting our clients’ retirement income savings and income potential. With markets growing to all-time highs and volatility low, it seems like a perfect time to remain invested. However, when you look at extended periods of low volatility heading into the fall months, you see an increased period of volatility after Labor Day. Our clients, especially those within five to 10 years of retirement, have too much to lose in the next market downturn.

 

So, my question is simple:

 

Do you want to be protected from regulatory risk by not selling annuities under a Best Interest Contract? Or, are you exposing yourself to litigation risk by not reaching out to clients and locking in gains with a significant risk of account value loss?

 

Too often, we get caught up in media and peer conversations about the regulatory environment changes. Make no mistake, the changes coming in April 2017 are significant. But, it’s no reason to abandon our clients and stay within our comfort zone of asset management. Instead, it’s a time to reflect on the entire value proposition you bring to the table for your clients. And, more importantly, it’s time to act upon protecting their retirement savings before the next market correction. 

 

Winning Strategy

Take a look at your clients who are within five to 10 years of retirement. Call them into your office for a meeting to assess their current risk tolerance and desire to take some of the investment risks off the table.

 

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.”