Annuities

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.

 

Plan for Retirement’s Descent


Annuities

Climbing Mt. Everest is one of the most sought-after adventures in the world. Since Sir Edmund Hillary reached the top in 1953, more than 4,000 different climbers have reached the summit a total of 6,871 times. And, since 2000, the number of climbers has increased dramatically due to the commercialization of expeditions on the mountain.

Unfortunately, deaths on Mt. Everest have increased as well, and more than half of them occur on the descent from the summit, not the climb. Why? Most people focus on the time, energy, resources and support needed to reach the top. Few pay as much attention to what’s needed to make it back down.

The same can be said about retirement planning. Americans spend a considerable amount of energy and resources to save for a successful retirement. However, most of us don’t think about what we’ll do once we get there. Sure, we need to have those assets. But, a large factor in our retirement success is how we use those assets once our income starts.   

Facing the Risks

The early retirement years magnify several risks – longevity, sequence of returns and inflation, to name a few. Addressing these concerns during the climb to retirement can make your clients’ descent much more smooth, reliable and efficient.

  • Longevity – This is the multiplier of all other retirement risks. Making sure clients have reliable income reduces the impact longevity can have a portfolio.

  • Sequence of Returns – We can’t control what will happen to the market during the early years of retirement. But, we can take steps to insulate portfolios from this risk and provide greater probability that funds will last longer.

  • Inflation – We have to make sure our client’s base income can grow as they age. They must be confident they can afford the same necessities today AND in 25 years.

 

Bottom Line:

Make sure you plan for the descent while you’re helping clients climb to their retirement. Consider the risks and plan a retirement income strategy that helps them come down from the retirement summit safely. 

 

Learn More

Everest by the Numbers: http://www.alanarnette.com/blog/2014/02/20/everest-numbers-latest-summit-stats/

Death on Mount Everest: http://blogs.scientificamerican.com/news-blog/death-on-mount-everest-the-perils-o-2008-12-10/

 

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 Circumstances Really Do For You


Annuities

This past Christmas, I received the book, “Sidelined,” as a gift from my mother-in-law, and I was inspired when I read it. The book is about Chuck Pagano, who battled cancer during his first season as head coach of the Indianapolis Colts. It’s a story of family, faith and vision that rings true for everyone, including financial professionals.

Coach Pagano was named head coach of the Colts in January 2012. Not long into his first season, he was diagnosed with leukemia and started cancer treatment, forcing him to take a leave of absence from his coaching duties. Pagano’s family – both his blood relatives and his football family – helped keep his spirits high.

Throughout his treatment, he kept telling himself one thing:  

“But regardless of our circumstances, they do not define us – not unless we give in and let them. Circumstances never determine who we are; they reveal who we are.”

– Chuck Pagano

                                                                                                           

Today, Coach Pagano remains cancer free and in full remission.

 

Reveal Yourself

Ask yourself, “How are my circumstances defining me and/or my financial services practice?” Maybe a broker-dealer is defining how you serve your clients. Maybe your perception of certain products and services within our industry are affecting your financial plans. Or, maybe the circumstances of pending regulation and the uncertainty around new standards are making you unsure of your entire practice.

There will always be changes in our industry – some more drastic than others. However, we can’t let those circumstances define us. Instead, each change provides a chance for us to reveal our true value to the American public – providing quality advice to help generate dependable, secure income that our clients can’t outlive.

Those professionals who hold their clients’ best interests front and center will thrive in our new transparent world. No one should hesitate to earn a commission or charge a fee so long as the service and/or product meets the best interest of the client.

Because the commission structure of a financial solution is largely irrelevant. What that solution does and how it fits into the individual’s financial plan is what matters most.

That, I believe, is what our circumstances will reveal about our industry.

Bottom Line:

Don’t let your circumstances define you. Instead, let them REVEAL you.

 

Learn More

Indianapolis Colts Announcement: http://www.colts.com/news/article-1/Chuck-Paganos-Book-Sidelined-Now-Available/729ebe03-2076-4b84-b4ff-0fa8769a23e9

 

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 Annuity Industry’s Next Possession


Annuities

While serving as a student manager for the men’s basketball team at Indiana University, I learned a lot from Coach Bob Knight. Many of those lessons can be applied to the financial industry, and I’ve written about a few before. Today, as we’re on the cusp of what could be a game-changer for our industry, I wanted to share another.

 

Missing the Long Shot

Once, during a practice, a star player took an open three-point shot and missed. Like most long shots, it resulted in a long rebound and a fast break for the opponents. That’s embarrassing enough, but, to make matters worse, the player (like many college athletes) stopped and hung his head. His delayed reaction gave his opponents an advantage on the fast break, resulting in a layup.

Coach Knight immediately stopped practice. “What just happened?” he asked. Well first of all, the shot was missed for a variety of reasons. But, that was in the past – there was nothing the play could have done to change the shot after it left his hands. He could have reacted to the rebound, however.

You see, after a missed shot, the shooter actually has an advantage – more than anyone else on the court, he has the best feel for where the rebound is heading. If he’s paying attention, he can get in position to stop the ensuing fast break. Unfortunately, if he chooses to dwell on his missed shot, even for a second, it can result in an easy bucket for the other team. And we know one bucket can win or lose a game.

 

Getting Back on Defense

Today, our industry is in the same position as a player who misses a long shot. Over the last several years, we have successfully fought several pieces of legislation that would have affected the annuity industry. However, with the pending U.S. Department of Labor (DOL) ruling, it appears more likely than not that we will be required to maintain a fiduciary standard for every qualified client.

Sure, there will be litigation and other efforts to change the DOL’s proposed ruling, but it’s a long shot (pun intended). Regardless, it’s clear we will need to change in the annuity industry.

That’s OK. We can’t hang our heads for a split second, allowing litigators to attack our individual businesses under the fiduciary rule. Instead, we have to get back on defense and get ready for the next possession. 

Defense means changing how we DOCUMENT business, not how we DO business. I’ve heard many financial planners planning to discontinue the use of certain financial vehicles because of the commission structure. But if a product or service is in the best interest of a client, we should be obligated implement the recommendation, regardless of our compensation structure.

 

Setting Up the Offense

We simply have to explain how the product works and how we get paid. Our clients want us to succeed as much as we do They will understand the need for compensation if they understand how the product benefits them and their financial situation. Once we document and explain, we can move toward implementation – which means we’re back on offense. 

 

Bottom Line:

Don’t hang your head and let regulation and changes to the industry affect how you do business. Get to the next possession so you can continue to help your clients.

 

Learn More

Annuities and Sports: What I learned from Coach Knight: http://www.ashbrokerage.com/blog/annuities/annuities-and-sports-what-i-learned-from-coach-knight/

 

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.

 

annuities coach knight

Look Beyond the Numbers for Pension Risk Transfer


Annuities

No doubt, pension risk transfer activity is growing. Companies of all sizes, sectors and locations are shifting risk off their books to eliminate pension obligations. According to a study by the Pension Benefit Guaranty Corporation, between 2009 and 2013, more than 500 defined benefit plans transferred $67 billion of risk through lump-sum distributions and annuity purchases. 

If you have clients who are business owners, executives or professionals, e.g., doctors, dentists or lawyers, chances are they have a defined benefit pension plan. Although many of these plans have been replaced in recent years by 401(k) or other contributory plans, defined benefit plans remain a liability on a company’s books. Plan sponsors face important decisions to address rising costs, increased regulation and uncertain market conditions.

Pension risk transfer can make sense for both parties – plan sponsors typically want to strengthen their balance sheet and ensure employees receive their retirement benefits, and insurance companies are in the business of investing and administering retiree liabilities. 

This solution may not work for every situation, however. Many frozen pension plans lack sufficient assets to complete a transfer. These underfunded plans need help adjusting their investment strategy to close the gap between asset value and pension benefit obligation. 

When selecting an annuity provider for pension risk transfer, plan sponsors have more to consider than corporate financial and competitive pricing. They should also factor in whether the provider: 

  • Will provide comprehensive customer service during and after plan transfer
  • Offers retirement education for employees
  • Responds to participant concerns

 

Bottom Line:

Now is an excellent time for you to offer pension risk transfer solutions that meet your clients’ needs and fulfill commitments made to plan participants. Need help getting started? Drop me a line or call any time. I’m happy to help you identify prospects and provide expertise to help you generate revenue in this growing market. 

 

Learn More

Risk Transfer Study, Pension Benefit Guaranty Corporation, December 2015: http://www.pbgc.gov/documents/Risk-Transfer-with-Notes-December-2015.pdf

 

About the Author

At Ash Brokerage, Steve Pilger helps clients design and execute cost-effective risk transfer strategies for their pension plans. He is dedicated to finding solutions that meet the needs of plan sponsors and fulfill the commitments made to plan participants. Contact him at steve.pilger@ashbrokerage.com or (800) 589-3000 ext. 6828. 

pension risk transfer steve pilger retirement