How Quickly It Goes…


During the recent market volatility, it’s hard to comprehend how much wealth was unnecessarily lost or how quickly. Through our complacency as advisors, our clients lost an astonishing amount of wealth that currently makes 2014 a nearly lost year. Due to inaction, we chose (yes, it was a choice not to have the conversations with our clients) to take them back to January 2014, when the S&P 500 was in a similar position.  

Without a doubt, risks exist with equity investments. Up until the third quarter, investors were rewarded with better-than-average returns. However, we spoke earlier this year about the potential for a correction, or at least volatility. Once again, we failed to take gains off the table and protect our wealth. 

Making clients aware of their options is paramount during bull markets. They never know how much risk to take … until they’ve taken too much. We run the risk of repeating the mistakes and greed associated with the financial crisis of 2008-09.

In the 22 trading days since Sept. 18 – when the S&P 500 saw an all-time high of 2,011.36 – $787.3 billion of wealth has been lost. The U.S. Treasury’s interest expense for debt payments was only $415 billion for all of 2013. In other words, we failed to protect more than 1.8 times the interest payment of the U.S. government. 

Our clients should be appalled and question what they could have done differently. This time, let’s have meaningful conversations about mechanisms that protect clients and minimize risk. An optimized retirement income isn’t always dependent on the highest return or best asset allocation. An optimized retirement maximizes after-tax income, makes sure there are guarantees in place and places emphasis on protecting what we earn. Let’s have the right conversations in the next bull market.

The Bottom Line: In the last month, clients lost more than a year’s worth of national interest debt payments. In the future, we need to place more emphasis on protecting wealth. 


Goldilocks and the Split Ticket: A Retirement Tale


Goldilocks tried three different porridge bowls before finding one that was, “Just right.” 

When choosing where to draw income during retirement, the markets offer similar options: too hot, too cold and just right. 

If your client chooses just one annuity – variable or fixed index – market performance can make their selection either too hot or too cold. However, by positioning your clients with a split ticket – a combination of the two annuities – you give them options for withdrawing income from one or the other. Depending on market performance, they’ll be able to use the option that’s just right!

Here’s how it works: 

If the equity markets are performing well, the last thing an investor should do is drain their “bowl.” Variable annuities with guaranteed income riders can ratchet up their income base with each market advancement. Therefore, income should be taken from fixed index annuities.

If the markets are breakeven or declining, it’s not likely that the account value will ever push the income base higher than the guaranteed growth of the index annuity (especially with the internal costs of a variable annuity being around 4 percent). In this situation, income should absolutely be taken from the variable annuity.

The concept of a split ticket has probably been around as long as “Goldilocks and the Three Bears.” With the movement of Baby Boomers into retirement, this concept should definitely be re-visited.


Innovation and Insurance


On Oct. 21, 1879, Thomas Edison invented the first commercially viable light bulb. It lasted 13.5 hours … but soon, the average bulb lasted 150 hours, and within 10 years, commercial bulbs glowed for 1,200 hours. The speed of improvement on Edison’s commercial bulb was incredible. 

Today, technology and communication are the new light bulb. Google, Apple and Microsoft have changed the way we live, communicate and do business. However, the insurance industry isn’t catapulting like other industries with its speed of innovation. Why? Is it because we’re full of mature carriers and distribution? It doesn’t have to be that way, does it?

We have to look at new opportunities to expand and, at the same time, go back to our roots. Only 43 percent of Americans own life insurance outside of group contracts. Of that 43 percent, 70 percent believe they are under-insured. Why are we not addressing our own clients? What level of service are we providing to our existing clients?  

Richard Branson started Virgin Airlines based on a bad service experience. The airline industry hasn’t been the same since then. Which one of your clients will impact your business by leaving you, challenging you or becoming your competitor?

I challenge all distributors in our industry to force innovation. We can’t continue to help Americans at the level they need without significant change. It requires investment, commitment and vision. Bringing new people into the business is only part of the solution; we have to change the way those new people interact with their clients. Within 10 years, we have to distribute products in a new way that can reach more people and grow, just like Edison’s commercial light bulb. 

The Bottom Line: Innovators like Thomas Edison and Richard Branson changed the way we live. Our industry must also change so Americans can continue to thrive after catastrophic events. The light bulb changed 10 fold in 10 years; we have to do the same.   


innovation change technology

RMD, QLAC, IRA, DIA – What does it all mean? Action!


If your practice is anything like mine, activity is a critical component in driving revenue-generating opportunities. The IRS and U.S. Treasury put new required minimum distribution (RMD) regulations into place effective July 1, 2014, and in doing so, gave us an opportunity to increase activity that will drive sales in the fourth quarter of 2014 and into 2015.

These new regulations implement suggestions made in 2010, in response to the Obama administration’s request for information on lifetime income options. The new regulations allow an individual retirement account (IRA) owner to use a portion of their qualified money to purchase a qualified longevity annuity contract (QLAC), and have that portion exempt from RMD calculations.

A QLAC in our language is a deferred immediate annuity (DIA). It’s very important to note that a QLAC must be a DIA fixed contract issued from a carrier – no private annuities are allowed. In addition, fixed indexed annuities and variable annuities don’t meet the regulations.

Now you have a great reason to contact clients who aren’t using their RMDs and show them a way to continue to defer taxes on a portion of their qualified assets. These recent changes to IRS rules have many benefits: 

  • Your clients may defer 25% of their qualified assets, up to a maximum of $125,000
  • DIAs are the least expensive way to purchase a guaranteed future income stream, and purchasing today allows your clients to take advantage of today’s mortality credits. For example: a 70-year-old male  purchasing a $100,000 DIA from an A++ carrier today could guarantee themselves a $30,698.76 annual income beginning at age 85 (life with cash refund)
  • Income can be deferred up to age 85, and as a result, taxes are too
  • A number of death benefit options are now eligible, including return of premium


While DIAs are available today, the first QLAC-friendly contract is expected to be released at the beginning of November, with more expected to follow. Now is a great time to reach out to your clients who don’t enjoy taking RMDs – schedule a meeting to discuss this new opportunity. Activity will lead to sales, even if it doesn’t involve utilizing this concept.

Our Ash Brokerage annuity team is stacked with industry experts who are very much up to speed with these new regulations. According to LIMRA, DIAs were the fastest growing annuity segment in 2013, and they are expected to capture significantly more market share in the years ahead. We’d love to hear from you to discuss this new opportunity and be the trusted partner who helps you incorporate QLACs into your practice. Call us today – your clients are depending on you, and you can depend on us. 

QLAC Annuities DIA Deferred Immediate Annuity

Lessons from the Boll Weevil


You may or may not be familiar with the story of the boll weevil, but I’ve been thinking about it the last few weeks during the recent market volatility. The story is a great reminder of why we need to consider alternative products outside of our normal assets-under-management mindset. Change is always feared, but many times, it results in greater success. 

The boll weevil is a beetle that migrated to the United States from Mexico in the late 19th century and devastated the cotton crops in the South. Farmers nearly went bankrupt due to the infestation, so many began to grow peanuts instead. Most cotton farmers resisted the change, however, saying peanuts wouldn’t grow and no one would buy them. As it turns out, peanuts were not only resistant to the boll weevil, but they were also extremely profitable. In fact, the peanut farmers made enough money in three months to equal an entire year’s work in cotton. 

Eventually, the boll weevil was nearly eradicated in the south and cotton farming resumed. However, those who seized the opportunity to grow peanuts became far more prosperous than those who never diversified. In fact, the citizens of Enterprise, Alabama, erected a boll weevil monument to show their appreciation for the insect and its profound influence on the area’s agriculture and economy. 

Take a hint from the peanut farmers. With the recent market volatility, we must look to alternatives to meet client needs. Our clients continue to fear running out of money during retirement, yet we continue to throw out the same solutions to old problems. Like many farmers in the south found, a forced change creates opportunity and profits. Annuities and life insurance provide an opportunity to leverage tools for safety, protection and tax-advantaged growth. Many advisors don’t like having a conversation about these products, but it’s time to change.

The Bottom Line: The boll weevil taught a southern town the value of change. Adversity forces us to look at alternatives that many times work in our favor. 


AUM Annuities Change