Annuities

Always Room to Improve


Annuities

One of the great motivators of our time is Mike Krzyzewski, head men’s basketball coach at Duke University. Not only is he a great tactician, but he also teaches his players and assistant coaches many life lessons. Recently, I stumbled on a repeat episode of his Sirius XM radio show. His comments made me think.  

At the time of the recording, the Blue Devils had just come off a three-game losing streak – a losing streak is unheard of with Duke Basketball. But, Coach K remained positive. He pointed out how they still had a lot going for them: 

  • His teams had more national championships than losing streaks 
  • All three losses were by one possession, and not all of them were the last possession
  • They had great players, and his staff was excellent

Though most coaches wouldn’t be able to eat during a losing streak like this, he really didn’t have anything to complain about. 

So, instead of being down and angry with his team (as many coaches would have been), he encouraged the assistant coaches to think about some little area where they could improve, then use that improvement to better the team. “There is always somewhere to improve,” Coach K emphasized. He challenged everyone to look at their body of work and find a spot where they could get better – even in the slightest way. 

Improving Your Practice

Using Coach K’s methodology, we always have room to improve as financial professionals. In the coming months, the fiduciary standard will force us to look at our business differently. We will all have to look at ourselves and ask the same question: “Where can I improve?”  

Best interest standards will mean that we must look at things we might not have considered in the past, or collaborate with other professionals who possess the expertise to fulfill a client need. At the end of the day, we are fortunate to be in this business. Just like Coach K’s teams had more success than not, there are so many positives to the financial services profession. 

In the same light, there will always be room for us to improve. I’m looking forward to looking in the mirror and improving with the fiduciary standards.  

 

Bottom Line

There is always room for improvement. Coach K turned a perceived negative into a positive for his team. Use the pending fiduciary standards to make improvements in your business and enhance the client experience.  

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 Key to Success is Simple


Annuities

Simplicity seems to be hitting me in the face with a two-by-four. After attending a conference with a speaker focusing on simplicity, on my flight home I read some recaps of college basketball games I had missed. Again, simplicity was identified as the theme for success. 

As many of you know, I follow the Indiana Hoosiers – especially their basketball program. This season started with high hopes, followed by a lot of doubt after the team lost two games in the Maui Classic. Then, the Hoosiers were completely run out of the gym when they played the Duke Blue Devils at Cameron Indoor Arena. Before they even played a conference game, their season of hope turned into a season of frustration. 

Even worse, our second-leading scorer is out for the season after a non-contact injury in practice around Christmas. So younger, less experienced players have been inserted into the line-up. In order to give them a better chance for success, their offensive scheme has been made simpler. The players were told to focus on passing, moving without the ball, and rebounding. All are very simplistic aspects in the game of basketball. 

It worked. Indiana won its first seven conference games and was one game away from Coach Tom Crean’s longest winning streak at IU. They were also one game away from the team’s longest winning streak since Bob Knight left in 2000. Coach Crean listed simplicity as the largest reason for their success.  

That’s great for IU, obviously, but what’s this mean for financial professionals like us? Too often, we complicate our business. We try to emulate the success of businesses or teams who have won lately. It doesn’t work. However, time and time again, we find success when we get back to basics. 

In any business, “blocking and tackling” won’t make the highlight reel, but I assure you those smaller victories will garner success. Take a few minutes and ask yourself, “Am I executing on the basics that drive the core revenues for my business?” If not, it’s time to change your game plan. 

Bottom Line

Simplicity wins – in basketball and business. 

 

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. 

Innovation in Simplicity


Annuities

At a carrier conference earlier this year, I had the chance to listen to Robbie Bach, the former president of entertainment and devices at Microsoft. Responsible for developing and building out Xbox, Xbox 360, and Windows Mobile, along with other entertainment aspects of the computer giant, Robbie spoke about how he turned the online gaming division into a profitable business. Because it wasn’t always profitable. In fact, his division lost $7 billion in one of its early years.  

What Robbie Bach did to turn a huge loss into a gaining market share – and ultimate success for Microsoft, even in the demanding Japanese market – was turn toward simplicity. He outlined three major components to delivering innovation:  

 

1. Business

Robbie looked at his business in a different way. He started charging a subscription-like fee for the use of his online games. Every vendor told him no, but he thought it would be an innovative way to price the services. Eventually, people began to gravitate to his model because they could share the gaming experience, talk to friends and see other people online. It wasn’t that the games were different – but the business model was.

2. Experience

This isn’t what you might think. Having experience on your staff is not the focus of innovation. Instead, we need to turn our attention to the client experience. How our customers view us is far more important than the number of years our staff has been working. Take Uber as an example. The company isn’t using any new technology – they only have cars and a mobile application. But, they took a look at the experience offered by taxi services and improved upon it. Microsoft took a look at improving the customer experience in gaming and communicating. It changed the way people play video games. 

3. Technology

Without question, technology plays an important role in innovation. However, it should not be the focus. Instead, we need to keep the first two points as priorities and look to see how technology can accommodate or improve them. Not the other way around. 

Clearly, our industry needs innovation. However, we are often paralyzed by the enormity of “trying to be innovative.” I challenge you to think simply, not big. The timing is right to evaluate your practice. Find ways to transform your business model and create a more valuable client experience, with or without the help of technology. 

 

Bottom Line

Time has changed our industry, so it’s time to change the way we do business. Change can doesn’t have to be complicated, however. Look to simplicity for innovation. 

 

Learn More

Robbie Bach: http://www.robbiebach.com/

 

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.

 

innovation simplicity simple business

Debunk Your Biases


Annuities

Early in January, an article from Forbes presented some potential concerns about annuities. Titled, “4 Red Flags to Watch Out for Before Buying an Annuity,” (Jan. 9, 2016) it seemed focused on products that have long and higher surrender charges. Since these products represent a very small percentage of the market, I wanted to spend some time focusing on the basics of the products we use to help improve our clients’ retirement success.

First of all, we must remember that annuities are long-term products designed for retirement income. Your clients can use a portion of their income to purchase a guaranteed stream of income – potentially for life – which is backed by the financial strength and claims-paying ability of the issuing insurance company. With the basics in mind, there are several client benefits: 

Tax Deferral

Our products allow the accumulation value to grow while not being subject to tax during the accumulation period. The client is only taxed on the growth when they withdraw the gain from the contract. Of course, for this benefit, tax penalties apply on certain withdrawals prior to age 59 ½.  

Guaranteed Income

One of the largest risks in retirement is longevity risk – living so long you run out of money. Some of our products carry an option to convert the accumulation value to a lifetime stream of income, regardless of the remaining account value. This transfer of risk can help ensure your clients won’t run out money. It’s important to remember, however, that these long-term products should not be for the entire portfolio, just a portion.   

Guaranteed Growth

Because traditional fixed annuities are contractual agreements between a client and an insurance company, many contracts carry a guaranteed minimum interest rate. Many times, these guarantees are higher than prevailing interest rates on taxable instruments. Check your local interest rates against highly rated insurance carriers’ interest rates to make a decision on which contracts might be more attractive for your client. Due to the carrier providing these guarantees, most insurance contracts require the contract to be held a certain number of years. Make sure your client’s objectives meet the holding period in order to not be charged a penalty from the insurance company. 

Low Fees

As mentioned above, many tax-deferred vehicles require a holding period before the contract is 100 percent free of any withdrawal charges. That holding period allows the insurance carrier to invest 100 percent of the client’s premium with no upfront sales charge. Over time, this initial savings can impact the overall growth of the contract for the client. With newer products that are linked to an external index, clients need to understand the limitations on growth potential each product has as the insurance company is guaranteeing the principal.  

Clearly, our financial products have both advantages and disadvantages. Each client scenario might call for different solutions; however, annuities may be a suitable fit for many clients, especially those concerned about running out of money in their lifetime. Don’t rely on what you’ve heard about these products. Instead, give a fair and balanced assessment to whether they can help meet the client’s objectives. 

Bottom Line

Don’t allow media bias to affect how and when you might use an annuity with a client. There are solid reasons to look toward an annuity to solve many client situations.  

 

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. 

 

What We Must do to Turn Crisis into Opportunity


Annuities

The Chinese symbol for crisis is a popular metaphor that’s been used by leaders and motivational speakers for years. The word is often said to be made of two distinct symbols – danger and opportunity – though that interpretation isn’t entirely correct.

The first symbol, “wēi,” does mean dangerous or precarious. However, the second symbol, “jī,” translates more accurately to something like “critical point.” That still seems fitting, in my opinion, as we find ourselves at a dangerous and critical point in the financial services industry.

With the pending fiduciary standards from the U.S. Department of Labor (DOL), we’re at a junction where regulation meets client service. The critical point we must maneuver is implementing the required fiduciary standards and conflict of interest rules while building our businesses. Fortunately, I believe many of us are currently doing this and will be largely unaffected. However, the noise around this ruling creates angst of what the future holds.

Everyone should stay focused on the critical points in the discussion:

  1. We must act in the best interest of our clients. You’re probably doing this already, but I find many advisors are closed-minded when it comes to looking at diverse product options. This bias will need to change. It will be critical to find quality partners who can open our minds to new solutions for our clients.

  2. We must use fair and balanced language with clients. Again, I believe most of the industry is meeting this requirement. However, we will have to up our game and have deeper discussions about how products meet the clients’ needs, and we will need to examine the other options we considered with the client in mind. The result might be a slightly longer sales cycle, but a more informed client. 

  3. We must discuss compensation. While this will be uncomfortable at first, we must learn to tell our clients how we are compensated for delivering valuable services to them. That means we will have to tie our compensation to the value we are providing – directly and indirectly. 

 

Yes, we are at a dangerous and critical point in our business. However, this crisis can lead to opportunity if we keep the critical points clear and in focus. Let’s make sure we address them, then move forward with helping our clients meet their financial goals.

 

Bottom Line:

Crisis means different things. But, with focus and clarity, we can turn crisis into opportunity. Make sure you focus on the changes you need to in order to have success.

 

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.