Nicole Rose

The Department of Labor (DOL) actions relative to any qualified plan and related products has now come to fruition. While they have seemed to have tempered the final regulation, the impact could be significant for anyone who has retirement plans in their book of business or is currently writing business in the arena. Flattened commission structures could be the norm depending on how BD’s and carriers move forward. It may take as many as 4 to 5 years for an advisor to make up the lost revenue.  Will you or your Broker-Dealer be able to sustain the revenue shortfall during this time frame? And even after full implementation, the impending changes may not be sufficient to satisfy the hungry giant!

In fact, it has been said behind a many a closed doors, that this is the first step in the Federal government’s (the hungry giant) attempts to fully control the retirement assets of America. Prediction, assumption or fact, I know not. But it is not impossible from the perspective of many.

Now let’s add to the DOL actions the health care debacle under the Affordable Care Act (ACA or Obamacare) (both of these were directed the current White House administration). We have witnessed rising health care premiums along with the reduction of commissions or the elimination of them. Carriers have left the market or will be unable to remain in it. Only the very strong will survive…maybe… but as I already alluded to, the giant is hungry. Very Hungry!!! In some circles, it has been said is that the ultimate objective of the federal government is to completely nationalize healthcare. Obviously a method of taxation would be engaged to take the place of the current insurance premiums. Again lost revenue for financial advisors but big revenue for Uncle Sam.

The future is clearly unknown. But there is rumbling in the streets and neither scenario is completely out of the question. So for those of us in the financial services business we should be at least pondering our future. It maybe that retirement planning compensation and health insurance revenue will be a thing of the past. Like Sony beta machines. So what is left for us? Non-qualified investment dollars? Seems so. So then the question is what percent of your business is non-qualified and can the revenue generated from it sustain you?

Is there another option to consider that would add to your services and income stream. My thoughts lead me to serving our clients in the good old fashion way. It is simply assessing our clients Risk Management and Wealth Accumulation needs and determine if  a product called Life Insurance is appropriate. It has its place and it may be in your future and mine more predominately than ever before.

So from my perspective, a potential survivor guide is to consider the life insurance business, increase your non-qualified book of business and buy books of business that have a lot of non-qualified assets.

John Ruggiero

Chief Marketing Officer

This is another announcement in a series of announcements disclosing increases in COI’s (cost of insurance charges).  These policies were all issued by Aetna with Lincoln Life & Annuity Company of New York as the administrative agent and reinsurer for the policies between the years 1983 and 2000.  Details are as follows:

• The COI increase is effective June 1, 2016.
• The COI changes comply with the terms of the contracts.
• These changes do not impact any life policies issued by Lincoln.
• These COI increases are the result of material changes in future expectations of key cost factors associated with providing this coverage, including lower investment income and higher reinsurance costs.
• The changes are being made only after an in-depth actuarial analysis and rigorous review process.
• These products remain meaningful solutions with competitive guaranteed credited interest rates. However, the increased COI charge will increase the monthly deduction, which will lower the policy’s future cash value and may shorten the length of time the policy will stay in force without increased premiums. As a result, some clients may lose their life insurance coverage unless they choose to make policy changes.
• Policyholders have several potential options to continue to meet their insurance needs, including:
  • continuing to pay the current planned periodic premium for a potentially shorter coverage period and/or reduced policy Cash Value
  • paying additional premiums;
  • reducing the specified face amount (subject to any minimum requirements or IRS rules);
  • 1035 exchanges
  • Policyholders also have the option to surrender or sell their policy.

Numerous carriers have made this difficult decision and many more will continue to follow suit based on our current industry environment.  Recent announcements have been made by; Transamerica, AXA, VOYA, Banner, US Life. This announcement is a reminder of the importance of monitoring life insurance on a regular basis.

-John Ruggiero

Chief Marketing Officer

According to The National Association of Insurance Commissioner (NAIC) reports, 60+% of people who own life insurance do not really know what they have or how it works. My suggestion is to be curious, ask questions, and ultimately you will be the hero for “ringing the alarm!”

The low interest rate environment keeps a knocking……..

#1: AXA, the French insurer with a major presence in the US via the acquisition many years ago of The Equitable, is the latest in the ever growing list of life insurance companies to announce an increase to costs of insurance rates. This increase will affect certain Athena Universal Life II (AUL II) policies starting in January 2016. AXA announced this increase due to mortality and investment income expectations that were less favorable than anticipated when the COI (cost of insurance) rates were established. AXA has said that the increase will be significant and most pronounced to those above the issue age of 70 with a face amount of $1 million or more. AXA AUL II policies issued to those under age 70 or with a face amount less than $1 million are not affected by this adjustment. Inforce illustrations requested after September 28th, 2015 will reflect the changes in COI’s.

#2: VOYA (changed their name from ING) announced an increase to costs affecting the policies of nine universal life products sold in late 1990s early 2000s. This increase will range from 9% to 42% depending on the product. VOYA announced this increase due to a reinsurance rate hike and low crediting rates and deferred this increase to the customer. For the guaranteed premium products only the current charges will be affected, for the other products the increase will be seen as a percent of asset based charges, a percent of premium charges, or an increase in cost of insurance depending on the product.

When insurance companies price their products they are making future assumptions about many factors; i.e., interest rates, infrastructure costs, profit margins, lapses, mortality of the particular product line, aggressiveness in how they want to acquire market share, market segment focus…In regards to whole life, it is more conservatively priced and is packed with guarantees so if assumptions change the only “part” that can be adjusted is the dividend. There are no other moving parts so the product line is on more solid ground. Whole life is certainly impacted by the current rate environment but the only thing that can change is the dividend paid.

In general the largest single cost factor is the cost of insurance over the life time of any life product. In Universal Life, Variable Universal Life, Index Universal Life the insurance company reserves the right to increase the COI (cost of insurance). The PROBLEM lies in the fact that consumers have no idea what the “COI increase” notice means when they get it in the mail. I just had a situation where I was talking to a person in my network about recent COI increases made by Transamerica and they chimed in that they just received a notice from US Life that their COI increased and they had no idea what it meant to them and their policy!

By Brad Gordon

President, MAF Companies

September is “Life Insurance Awareness” month. What is our role as advisors? Keep on reminding our clients of their financial responsibilities! Now is the time to take applications!

Using Ben Franklin’s rule of making choices by listing reasons for and against side by side, here is my quick and dirty snapshot why people with financial responsibilities should purchase protection now rather than wait. Most everyone reading this knows these reasons so consider this just a reminder of what we must communicate to the public:

1. Nobody knows when they will die. It can happen later, today!
2. Nothing beats life insurance for immediately creating a tax-free estate when the ownership and beneficiary designations are set up properly.
3. Buy today. Your insurability can change if you wait too long.
4. Buy before the market takes another 1,000 point tumble as it did recently. Don’t forget the magic of indexed life’s “ratchet effect” which can lock in previously earned gains.
5. Conversely, the market could rise substantially in the near future. Wouldn’t your clients want to ride that wave?
6. A Roth IRA and a life insurance policy properly structured are the only financial tools available for tax-free build up as well as tax free distribution anytime the family wants. No age 70 ½ minimum distribution rules.
7. Life Insurance is actually better than the Roth because not everyone is eligible for a Roth and there are maximum contribution rules with a Roth that you don’t find with Life Insurance.
8. Your life insurance policy can offer benefits prior to death such as chronic illness. We are seeing more and more “hybrid” sales where we use Life Insurance with riders to eliminate the need to purchase a separate long term care policy.

Many of you can add more reasons for making a sensible buying decision. Now, on the other side of Ben Franklin’s decision chart, what are the valid reasons for not purchasing? There is only one good reason regarding the pain of paying a premium. Ask an expert when the best time to buy a life insurance policy and they will tell you that you should buy right before you die. Of course, the answer to this is in points #1 and 3, above. As advisors, we have to change the mindset about premiums that our buyers have into a wise choice of leveraging money as you see in points #2, 4 and 5, above.

I believe the real reason people are not buying has to do with lack of confidence. Purchasers are not compelled unless they really trust their advisor and I see so many advisors who hesitate in making recommendations due to fear of a possible rejection. Perhaps there is a concern of being seen as a “pushy salesman.”   Of course, anyone with conviction will be seen by some as “pushy” from time- to- time and, of course, our advice will be ignored or rejected. This goes with the territory of being an advisor. Instead of being fearful of potential negative results, think of how baseball players see a lifetime .300 hitter. They are only successful 30% of the time yet will probably be in the Hall of Fame! Getting up to bat enough times to make a difference is what really matters.

I ask all those reading this to now go into serious mode regarding our chosen profession and take some chances. Talk to those prospects! Get some at-bats and make a difference in people’s lives.

You will be reminded of how fulfilling a profession we all enjoy.