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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.

When people review executive compensation they usually only discuss half the story. They tend to focus on the cash and equity side of the triangle and forget about executive benefits when, in fact, these benefits should fit into a company’s integrated total rewards program. In our last communication, we discussed the value of cash value life insurance. But did you know that the Life Income Strategy ™ can be used as:

• an incentive compensation program
• a funding vehicle for executive life programs
• an after-tax, tax-free retirement income plan
• an alternative to deferred compensation providing corporate tax deduction with no Sec. 409A compliance

“Executive benefits help to balance the overall savings and retirement strategy.”

MAF Companies works in concert with leading executive compensation consultants to help develop a “total compensation and benefits” strategy. Our job is to pro-actively control the experience of your clients, making their future more predictable.

Using a life insurance policy to help fund retirement? Did you know there is a strategy that will lend your client money for college expenses, a wedding, a vacation or even income taxes while all your
online slots premium dollars are at work building cash inside your policy?

Join John Ruggiero, MAF Chief Marketing Officer, for our first Tuesday Topic webinar as he discusses the Life Income Strategy:

Date: Tuesday, February 14th

Time: 10:00 a.m.-11 a.m CST

Meeting Number: 715 177 238

Meeting Password: Lifeincome123

To join this meeting:

1. Go to https://aimcor.webex.com/aimcor/j.php?J=715177238amp;PW=NY2NmZGQ2ZWFl

2. If requested, enter your name and email address.

3. If a password is required, enter the meeting password: Lifeincome123

4. Click “Join”.

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5. Follow the instructions that appear on your screen.

Audio conference information:

To receive a call back, provide your phone number when you join the meeting, or call the number below and enter the access code.

1. Call-in toll-free number (US/Canada): 1-877-668-4490

2. Call-in toll number (US/Canada): 1-408-792-6300

3. Global call-in numbers: https://aimcor.webex.com/aimcor/globalcallin.php?serviceType=MCamp;ED=169932707amp;tollFree=1

4. Toll-free dialing restrictions: http://www.webex.co

m/pdf/tollfree_restrictions.pdf

5. Access code:715 177 238

Word is getting around throughout the charitable giving community that a new endowment campaign financing facility is making possible $billions of donations to top charities, hospitals, and fraternal organizations.

The program I’m describing was created by a team of ex-Lehman Brothers and Bank of America Securities ABS professionals, and is being sponsored by some of the largest charitable endowments in the country.

Each program is run as a fund-raising campaign by the Non-Profit Organization (NPO) but is totally distinctive in that the donors as part of the EPOCH Program, receive premium loans for their entire lifespan on a non-recourse basis. Each donor agrees to have a $2.5 million universal life policy placed on his or her life, with the entire proceeds irrevocably dedicated to a trust whose beneficiary is the charity or qualifying NPO.  Each tranche contains at least 400 donors-trusts for a total of $1 Billion in life insurance proceeds.

Life insurance trusts in themselves are not earth-shaking as they have been a standard planned-giving staple for years.

However, to further what I mentioned above,  the premiums are paid by a master trust which is funded by an unusual form of security – the Life Insurance Financing Trust Security or “LIFTs”.  The LIFTs are “loans for life,” which are collateralized by  Irrevocable Life Insurance Trusts (ILITs) and, as an actuarially significant portfolio, are sold to major pension funds or to existing major charitable endowments in securitized form as LIFTs securities.

LIFTs securities are popular because they are high yield (10.5% IRR), non-correlating to the capital markets, liquid via rule 144 eligibility, and best of all, long duration (27 years).  The buyers are also motivated by the duration-matching character of the collateral – all policies statistically “mature” by age 100 and are actuarially curved by the consulting actuaries to insure that significant annual payouts will occur throughout the 27 year life of the LIFTs security.

gryphynmedia.com

The LIFTs are designed to be issued via prospectus only from top securities broker-dealers.

I was amazed and full of questions when I reviewed the due diligence package on LIFTs and I’m sure most of you will be skeptical as well. But after considerable review, I am convinced that LIFTs make good sense and moreover, may be the answer to many of the problems faced today by both charitable fundraisers and by the defined benefit pension community.

If any of you in my blogosphere are curious about LIFTs and want more information, please contact me at (630) 834-2210 Ext 240.  I’ll walk you through how it works in detail.

I come from the old school of selling; cold calls to set appointments. The more calls you made, the more appointments you set and, in the end, the more sales you closed.

It’s not that simple anymore. The people you are trying to reach today just don’t answer the phone like they did in the old days. Today’s first meetings require a lot of leg work; networking, referrals, LinkedIn, etc. You have to work a lot harder today to “crack the door.”

So what happens in that first meeting today is especially critical to your success. I was trained in Solution Selling. Solution Selling’s premise is to ask the right discovery questions to uncover the prospect’s needs, or “pain points,” and let the prospect navigate to the conclusion that your product or service is the solution to solving the problem. As the sales professional, you are the problem solver for the prospective buyer.

In the current issue of Harvard Business Review, the claim is made that Solution Selling is dead, and today’s top sales professionals are using a new sales approach called read more
Insight Selling; a radically different approach to selling in a B2B environment. I’m not sold on the total premise of Insight Selling, but I strongly believe there are elements that can be used to improve your sales effectiveness with prospects.

One sales strategy with Insight Selling that applies to selling one of our strategies, 401k SAFE, is the idea of showing a prospect a solution that solves a problem that the prospect hadn’t previously identified. Outsourcing administrative functions, such as payroll, is not a new concept to employers, but outsourcing their 401(k) plan is a new concept for most employers, and an opportunity to educate, or provide insight to a prospect on how outsourcing the fiduciary, compliance and administrative burden can free up valuable resources and mitigate the risk associated with a non-profit generating function in their business. It’s a different approach to discussing traditional fund performance, plan services, and cost.

If you have a specific situation or would like to review how Insight Selling can change your prospecting methods, please call me at (800) 979-9393 or john@mafcompanies.com

Term insurance is one of the most valuable life insurance products in the market.  As you know, it provides life insurance for a “term” of time.  In today’s marketplace, it has evolved from an annual increasing premium concept to a level premium structure offering level premiums for 10, 15, 20 or even 30 years.

There are riders that can be attached to the policy giving the contract more value-added features.  If a client should face a disability, adding disability waiver of premium can be included and the insurance carrier will pay the life premium.  Return of premium can be included by a rider or even issued as a stand-alone policy. Here the carrier will charge the extra premium so at the end of the term, all the payments are refunded.  Child riders can be a good addition to the policy and protects the insurability of the children in the family…giving them a start.

The risk of term insurance is when the level premium comes to an end but the need continues; can the insured medically qualify for a new plan? Finding a term product with good conversion privileges is important.  Term insurance pricing increases significantly if one’s health moves from the preferred health class to a standard or substandard class.

What I have discovered is how many advisors and clients do not realize that the term insurance market continues to be very competitive and a simple evaluation may produce significant savings. As I have preached in the past, life insurance is generally not managed or overseen properly.

Here are some recent case discoveries:

• A 40 year old male had a $1.5 million term policy with an increasing term premium structure.  He wanted to be covered another 20 years. A new 20 year level term program saved him 30% over the 20 years.  He pays more currently but over the 20 year period will save significantly over the increasing premium plan.
• A 50 year old bought a $2 million, 15  year level term plan 10 years ago.  He could replace it with a new 10 year, level term plan for the same premium and the new plan gives him an extra 5 years of coverage.
• A business owner had $20 million of term that was issued with a table rating. We were successful in reducing the table rating to a standard risk saving about $10,000 per year.
• A client had $10 million of 20 year coverage that he bought 15 years ago. His need for life insurance has decreased based on a collaborative discussion with his other advisors and we reduced the coverage to $7 million for 10 years at the same premium, adding 5 more years to his program.

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• A client was spending $30,000 for two whole life policies totaling $5.2 million. After an exhaustive and as he put it, “mind-numbing” analysis, we finally came to the conclusion that his true need was $20 million.  He implemented a 20 year term plan…waiting to see how the tax laws and his needs unfold over the next 10 years.

Term insurance needs attention, too!  It does not always save money but each case involved the critical thinking needed to make the necessary adjustments in their planning and need for life insurance.

We are here to help. Please call us at (800) 979-9393 for your case design needs.