Annuities

Fundamental Truths of Chasing Yield and Liquidity


Annuities

I have long discussed the need to position your products and services on value propositions besides rate.  However, I want to talk about the advantages of selling in today’s low rate environment and placing the client in a better position using rate as an example. In the long run, the value you bring to your clients by talking about current fundamentals will bring more people back to your office.

 

As I looked at today’s rates (Sept. 6, 2016), the current 30-year Treasury Yield is 2.24 percent. Currently, several insurance carriers are offering five-year, multi-year guaranteed rate annuities with similar rates. I constantly read in the Wall Street Journal about advisors placing their clients in dividend-paying stocks in order to create better yields in the portfolio. So, in order to obtain higher yields, the client either must take equity risk in the portfolio or expose the bond portion of the portfolio to extreme price depreciation in the event of a rising interest rate market. Neither sounds fundamentally strong for the long haul.

 

Too many advisors fail to show an alternative because of their own biases against annuities or a bad past experience. But, I believe we are in the best-ever market conditions to sell our products. Even with fixed annuity yields between 2.25 percent and 3.34 percent (assuming an FIA hits a 4.5 percent cap 75 percent of the time), our taxable equivalent yield is, at a minimum, 3.84 percent – well above the current investment grade corporate bond yields. And, the nominal return is just as high as the current 30-year Treasury rate, with no risk to principal in an increasing interest rate environment. 

 

So, while your competition searches the next best thing that their clients want to hear or chase, talk to your prospects and clients about two fundamentals: safety and liquidity. Ask yourself:

  • Why wouldn’t your client want to take a 30-year yield with one-sixth of the maturity?
  • And, why wouldn’t the client want to have a more liquid portfolio for the same yield with additional flexibility for emergencies and medical issues? 
  • And, what prevents you from showing this option? Likely, it’s your mindset against a lower interest rate than six months ago.

 

Winning Strategy:

Don’t focus on where the economy or interest rates were six months ago and compare them to today. Look at the relative economic conditions and talk to your clients about fundamentals. They will appreciate the simple, straight-forward approach to their retirement success.

 

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.”

 

Yield Annuities Rates Economy Market

If You Knew Then What You Know Now


Annuities

You’ve probably heard the phrase, “Hindsight is 20/20” or, “Looking in the past is the clearest way to see the future.” While these phrases are often true, people don’t always learn from their mistakes – especially when it comes to investment decisions. 

In summer 2016, the market experienced record low Treasury yields. During that time, many clients and advisors failed to review historical trends and move assets into alternative investments.  

Looking back over the past 10 years, numerous financial and non-financial events rocked the market. Did you and your clients invest funds strategically in response to these events, or did you miss a good opportunity?

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  • The mortgage crisis of 2007 caused many investors to run from securities. But those who kept their ground are now reaping the rewards after the market reached record highs in summer 2016.  

  • In 2009, the swine flu appeared to be a catastrophic pandemic, sending many people into a financial frenzy. Yet, for those who remained invested during that time, the yield was nearly 5 percent.

  • When the United States’ credit rating was downgraded in 2011, many predicted a yield increase to reflect the rising risk associated with the downgrade. Surprisingly, the yield fell substantially. 

While you should be optimistic about yields increasing over the next three to five years, in the meantime, you must get your clients focused on how to generate income in retirement. You can’t allow the past to dictate your clients’ future. Clients are often focused on reasons not to save or invest, so it’s crucial to educate them on the proper products and asset allocation to maximize their portfolio. 

 

Winning Strategy

While clients often allow past economic conditions to dictate their current financial decisions, take the opportunity to educate them about promising investment opportunities and optimize their funds to achieve their retirement goals. 

 

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.

How You Can Overcome Constraints Like Super Mario


Annuities

A constraint is often seen as a limitation. However, true innovators see a constraint as an opportunity for improvement and creativity. It’s an opportunity to not only overcome obstacles, but also to improve upon the processes and solutions we use when problems arise.

Constraints come in many forms. In the financial services industry, our constraints include: 

  • Time
  • Resources
  • Technology
  • Regulations
  • Market conditions, especially when experiencing volatility or low yields

Regardless of your perceived limitations, you have the opportunity to produce creative solutions for your clients and the industry.

 

Constraints Lead to Creation

Mario is an iconic video game character, but the story of his creation isn’t as well known. Have you ever wondered why Mario wears his hat, gloves, overalls and huge mustache? All of those features helped his developers overcome constraints. 

They didn’t have enough pixels to make Mario’s hair flop or bounce as he moved through the game, so they gave him a hat. They also didn’t have enough time or resources to design a mouth, so they gave him a bushy mustache. Finally, limited ability prevented them from creating a shirt, buttons or belt buckle, so – you guessed it – they gave Mario overalls.  

As you can see, great successes can emerge from great constraints. As increasing regulations, changing interest rates or volatile markets seem to place undue constraints on your business, use them as an opportunity to separate yourself from the competition, be creative and provide a unique solution for your clients. 

 

Winning Strategy

Use constraints as an opportunity to differentiate yourself in the marketplace, make unique solutions and improve processes.  

 

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.

 

The Real Problem with Retirement Planning


Annuities

Some people claim the U.S. Department of Labor (DOL) conflict of interest rule is ruining the retirement industry. But, have you ever thought that maybe the industry is ruining retirement?

According to a 2015 article from U.S. News and World Report, Americans aren’t saving enough. Here are the average retirement account balances at the end of each age bracket: 

20s – $12,537
30s – $33,784
40s – $68,683
50s – $122,957
60s – $212,812

While the DOL implementation and other market shifts certainly affect retirement trends, at the end of the day, Americans simply aren’t prepared for retirement. Imagine having $212,000 set aside for retirement with no further chance to earn income. And, it must last you the rest of your life. 

In reality, the retirement industry may have created this problem. For the past two decades, I’ve been told to focus on building a renewable income stream for myself. But, in order to do that in a productive business model, most planners must move up market and set minimum asset levels to engage new clients. The problem is millions of Americans have failed to work with a financial professional early in their career to develop a well-allocated, systematic savings plan. Now, they are suffering the consequences.  

The DOL is attempting to level the playing field, but collateral effects include commoditization of our business. How can you make your business stand out from the rest and make a difference in your clients’ lives before the industry continues to make the same mistakes?

 

Strategies for Improvement

  • Evaluate your business model and target markets in light of the DOL rulings to ensure excellence in products and services
  • Focus on serving the middle class through education and strategy, as this population is ill-prepared for retirement, both financially and emotionally
  • Initiate income planning conversations with Americans of all ages whenever the opportunity arises
  • Utilize effective tools that provide relief for past years of ignoring the problem  

 

Winning Strategy

Seize the opportunity to support the underserved middle class in America. Moreover, discover market niches that boost productivity for you and your business as you navigate the post-DOL world.

 

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.

 

 

3 Steps to Get Out of Your Comfort Zone


Annuities

As a child or a young professional, I never dreamed of being a writer. I simply didn’t have the patience to stare at a blank page, waiting for the right words to come to mind. Over time, I’ve learned to rely on my expertise and passion for the subject to make it easier to begin the writing process. But to get to this point, I had to take the first step. 

When I initially began writing blogs, they were inconsistent and infrequent. Gradually, as I changed my habits and made time to write blogs regularly, themes began to emerge and a clear niche evolved. 

By practicing the habit of writing, I have developed a love for it. So much so, in fact, the editorial team probably pulls out their hair at times due to the mass quantity of content I throw at them. This passion for writing did not emerge naturally, however. I had to start with the basics and restructure my time to accommodate for this new hobby. 

 

How I got out of my comfort zone: 

  1. I developed the right mindset. Habits are formed by a mindset, so you simply must change your mindset to change your habits. The fear of the new habit must be overcome with a clear understanding of the benefits of changing your behavior, and you must remind yourself of those benefits daily. Repetition creates consistency. Consistency breeds new habits. 

  2. I made time. Writing was an additional hobby that I wanted to adopt without replacing any of my existing work duties. When I examined my time, I realized that the long hours I spent on an airplane listening to music or simply staring at the seat in front of me could be used more productively. Establishing a new habit to occupy previously “wasted time” seemed like an effective strategy.
     
  3. I executed. On every flight segment, I challenged myself to write one blog. I would use the quiet time on the plane to concentrate my thoughts and ideas into coherent written words. Over time, I developed consistency, and the task of writing became far less daunting. I also expanded my knowledge of content marketing to refine my skills, and soon, passion and expertise emerged. 

When the Ash Brokerage creative staff approached me about compiling the blogs into a book, it took me by surprise. I never imagined myself as a published author. It took some time to get used to the idea, but, in the end, I’m glad decided to step outside of my comfort zone. By taking the first step and forming a new habit, I now have a book sold on Amazon that hopefully gives advisors like you motivation, new ideas, and helpful strategies to better serve your clients. 

 

Winning Strategy

Get out of your comfort zone and try something new. You may be surprised by how much you enjoy the experience of pushing your limits and challenging your capabilities. New habits can improve your personal and business life immensely. Take the first steps: develop the right mindset, set aside time, and execute. 

 

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.