Bridging the Gap from Annuities to Life Insurance

By: Charlie Gipple CLU, ChFC, SVP Sales and Marketing at Partners Advantage Insurance Services, LLC

Today, there are about 325 million people that live in the United States. However, only around 4.8 million of those people have a long-term care policy, and long-term care can be expensive! In 2015, the median cost of a private room in a nursing home was around $90,000 per year and the median assisted living facility was around $42,000 per year. Considering there is a 70% chance that if you are over the age of 65 you will experience a long-term care event, these statistics are worrisome. Especially considering the persisting hesitancy for consumers to purchase long-term care insurance because of the high cost, premium increases, and the big one; if the consumer doesn’t use the benefit, they lose it!

The good news is Single Premium Life Insurance can help in this area as well. Many products have long-term care, chronic illness and/or terminal illness benefits that come along with the product, whether in the form of a rider or an imbedded benefit. 

Many times what these riders will allow is an “acceleration” of X percent of the death benefit if the consumer has a condition that qualifies. Taking one very popular SPL product in the marketplace as an example; this product has a terminal illness rider that will pay out 95% of the death benefit if the insured is diagnosed with a terminal illness. Furthermore, 100% of the death benefit (minus a $250 charge) can be paid to the insured over a period of time if the client is either confined to a nursing home or diagnosed with a chronic illness. If the client wants the nursing care confinement benefit or chronic illness benefit in a lump sum, there are “discount factors” that would be applied to the death benefit, for example 85% and 75% respectively for the nursing care confinement and chronic illness benefits. 

Furthermore, the underwriting for these extra “morbidity” benefits many times amounts to nothing as the insurance company may only underwrite for mortality (Death) and not morbidity (Illness). So, for a consumer that has been denied traditional long-term care insurance, these benefits attached to an SPL policy may be a good alternative. 

The time has never been better for the “Live, Die, or Quit” value proposition of Single Premium Life. To clarify, if the consumer lives long enough to have a chronic illness, there is great value in SPL. Conversely, if the consumer dies, the death benefit will pay out to a beneficiary. Or lastly, if the consumer realizes they want to “quit” their policy, they can do that at any time and get at least their original premium back.

Learn more in the full white paper "SPL: Bridging the Gap from Annuities to Life Insurance," by Charlie Gipple, CLU, ChFC. It provides case examples, addresses costs, and how you can find success in explaining these products to clients.  

Questions or Need Case Assistance: Contact the Partners Advantage Brokerage Team at 888-251-5525, Ext. 700.

Fill out my online form.

For financial professional use only. Not for use with consumers.

This material is intended for educational purposes only and is not intended to serve as the basis for any investment or purchasing decision. Insurance and annuity products: Are not deposits. Are not guaranteed by a bank or its affiliates. May decrease in value. Are not insured by the FDIC or any other federal government agency. This information is written in connection with the promotion or marketing of the matters addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, your clients should consult their own tax or legal counsel for advice. Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances. Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with any accrued loan interest, will reduce the policy’s account value and death benefit. Assuming a policy is not a modified endowment contract (MEC), withdrawals are taxed only to the extent that they exceed the policy owner’s cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. These characters are fictional and are not actual customers. Your own decisions should be made in light of your own financial situations. This hypothetical examples used are for illustrative purposes only, is no guarantee of return or future performance, and does not depict the actual performance of a specific product or its investment options. In order to provide a recommendation to a client about the liquidation of a securities product, including those within an IRA, 401(k) or other retirement plan, to purchase a fixed or variable annuity or for other similar purposes, you must hold the proper securities registration and be currently affiliated with a broker/dealer or registered investment adviser. If you are unsure whether or not the information you are providing to a client represents general guidance or a specific to liquidate a security, please contact the individual state securities department in the states in which you conduct business. Indexed Universal Life is not a stock market investment and does not directly participate in any stock or equity investments. Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; a market-indexed insurance product is not comparable to a direct investment in the equity markets. Clients who purchase IUL are not directly investing in a stock market index.

65157

The Mind-Game of Seminars

By: Charlie Gipple CLU, ChFC, SVP Sales and Marketing at Partners Advantage Insurance Services, LLC

Conducting presentations is one big mind-game. I believe it is the mind-games that presenting plays on us that makes presenting the number one fear in America in study after study. Just google “America’s #1 fear” to see my point. I therefore believe that the mindset of the presenter is what will determine the success or failure of a seminar presentation. 

So, allow me to address different areas of “mindset” that are of huge importance.

Preparation: Practice How You Play
To me, preparation is rehearsing.  A lot of people have this backwards—they spend more time on the PowerPoint slides than the rehearsing. Rehearsing out loud is crucial. I stress out loud because even though the words and the flow may sound smooth while rehearsing silently, it can be a night and day difference when the words are actually coming out of your mouth. Your brain works at a much different pace than your vocal cords and your tongue. By rehearsing (out loud) to the point where you have done one full presentation to yourself that flowed well, had the right pauses, right energy, right content, etc., you will knock it out of the park.  

Embrace the Butterflies
Many people view being nervous before presentations as a bad thing. I believe that being nervous can have a positive impact on a presentation. As a matter of fact, the positive effect of being nervous is a chemical and biological fact, not something I am speaking about theoretically. Our maker has given us something called adrenaline, which is a blessing!

As you are walking up on stage the number one thing you should have in your mind is almost a verbatim “script” of the first couple of sentences of your talk. Once you have successfully articulated those first couple of sentences, your nervousness will have gone down significantly and your preparation/training will then kick in. Furthermore, after the first couple of sentences, that very important first impression mentioned earlier would have already been formed in the minds of the audience. The opening determines everything! Embrace the butterflies!

Confidence
I believe the core mindset variable that determines your success or failure in this mind-game of presenting is confidence. If you come across as confident to the audience (even if you aren’t confident), your audience will feel this confidence and reflect positive body language back to you which in turn creates confidence in your own mind. Now, if for whatever reason you do not feel confident, the term “fake it till you make it” has some truth here because of that self-fulfilling prophecy.

Want to learn more? Call the Partners Advantage Brokerage Team at 

888-251-5525, Ext. 700.

Fill out my online form.

This material is intended for educational purposes only.  For financial professional use only. Not to be used for consumer solicitation purposes.

121838

Stars are Aligned for Fixed Indexed Annuities and Guaranteed Lifetime Withdrawal Benefits

By: Charlie Gipple, CLU, ChFC, SVP Sales and Marketing at Partners Advantage Insurance Services, LLC

With FIAs, IT’S NOT ABOUT THE AMOUNT OF RETURN ON YOUR MONEY, IT’S ABOUT THE AMOUNT OF MONEY YOU’RE GETTING THE RETURN ON.  

The year was 1994, and there was a CFP from California that would create one of the most profound “rules of thumb” for retirement income that has ever been created.  William Bengen wrote an article which appeared in the Journal of Financial Planning, and it released the results of this very profound study that he had just undertaken.  This study is what started the “Gold Standard” safe withdrawal rate of 4%.  William basically said that even though over time the market had averaged around 10%, in the distribution years, it doesn’t mean that a client can “safely” withdraw 10% from their portfolios.  So, what William did is he back-tested hypothetical retirement “start dates,” assuming a 50% stock and 50% bond portfolio all the way back to the 1920s, using the actual stock and bond market performance. 

After the analysis was said and done, he said that consumers were “safe” by withdrawing 4% of their initial portfolio value per year adjusted for inflation or deflation.  By “safe,” what he meant was that the 4% distributions were very unlikely to spend down the client’s portfolio/retirement money before the end of the 30-year retirement.  As a matter of fact, in his study, he had a 100% success rate using the 4% rule for retirement income. 
As a result of this study, securities reps for almost two decades have been living and dying by this rule. If a client has a million dollars at retirement, then the client should not take more than $40,000 during the first retirement year, for example. A later study was done in 2013 that was coauthored by Morningstar Inc. It established, in this new world of volatile markets and low interest rates, that the new “safe withdrawal rate” is actually 2.8%. 

The study also indicated that with today’s low-interest rates, market volatility, and SEQUENCE OF RETURNS RISK that there is almost a 52% chance of failure using the 4% rule. Would you get on an airplane if there was a 48% chance of having the number of landings equal the number of takeoffs?

Before looking at what a GLWB can do for a client on a “guaranteed* basis,” I want to point something out. When you look at this risk that we just discussed, which is the client losing 20% of their portfolio value and then taking a major pay cut in retirement or having to delay retirement, this risk is just as catastrophic as say a car crash, medical emergency, a house fire, etc. Or, maybe even death itself. What is the point? My point is, when risks in our lives are catastrophic, should they occur, we take actions to hedge those risks. What do we use? We use something called insurance!

Learn more about FIAs and GLWBs in the full white paper "Stars are Aligned for Fixed Indexed Annuities and Guaranteed Lifetime Withdrawal Benefits" by Charlie Gipple, CLU, ChFC. Gain insights on how to help your clients with FIAs and GLWBs and walk them through hypothetical scenarios that show them how FIAs can be great inflation fighting products.

Call your Partners Advantage Brokerage Team at 888-251-5525, ext. 700 for a copy.

For financial professional use only. Not for use with consumers4

*Guarantees are backed by the Financial Strength and claims-paying ability of issuing company.

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries.

An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal benefit rider or GLWB rider) is an additional feature available with some annuities and generally optional and come with additional costs. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities.

Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their 
representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney.

The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances.

30377

Human's Defense Mechanisms: Fight or Flight

By: Charlie Gipple, CLU®, ChFC®, Senior VP of Sales and Marketing, Partners Advantage Insurance Services, LLC

For our ancestors to have survived prehistoric/ancient frightening predators and harsh environments, we as humans have been given built-in defense mechanisms that have never left our DNA. Paradoxically, these same defense mechanisms are instilled in our clients’ brains and can be counterproductive to making wise financial decisions today. For instance, picture yourself about 14,000 years ago walking through the woods with your spear searching for food. Suddenly, from behind, you hear a low growl, a few thunderous footsteps, and you turn to see a saber-toothed tiger upon you. 

What goes through your mind at this point in time? Are you looking at this saber-toothed tiger and calculating the distance between you and him versus the distance between you and shelter? Do you calculate how fast you can run versus how fast he can run and then decide the success rate of escaping as this tiger’s lunch? Maybe you are calculating in your mind the odds of going head-to-head with him? In other words, are you making a left brain analytical decision at this point in time? No you’re not! Nobody can be that cool, calm and collected to make a left brain rational calculation in times of severe stress.

Conversely, this is what is happening. Your brain is moving to the tune of 268 miles per hour, and it’s telling your pituitary gland to secrete adrenaline immediately into the bloodstream. This shot of adrenaline increases your blood pressure, increases your heart rate, and actually increases the blood flow to the muscles, thus making you far athletically superior than before getting this shot of adrenaline. This “fight or flight” mechanism is what allows us a fighting chance of surviving that saber-toothed tiger. A similar example would be: we have all heard stories of a distressed mother pulling a car off her baby. Adrenaline and “fight or flight” is a powerful thing. This right brained “fight or flight” capability is biological and has been given to us by our creator. It is what has been happening in our brains since the very beginning of our existence. This is why we exist versus being extinct by dinosaurs or a saber-toothed tiger. It is what we are born with and it stays with us until the day we die.

Find out about the seven secrets: primacy bias, storytelling, simplification, power in the pen, feel/felt/found, confidence and recency bias...

DOWNLOAD the full complimentary whitepaper: Seven Secrets to Effective Communication, by Partners Advantage Senior VP of Sales and Marketing Charlie Gipple, CLU, ChFC. 

Fill out my online form.

For financial professional use only. Not for use with consumers.

67113

The Human Brain: An Amazing and Powerful 3 Pound Machine

By: Charlie Gipple, CLU,® ChFC® - Senior VP of Sales and Marketing, Partners Advantage
This is an excerpt to the full whitepaper by Charlie Gipple: "What Robo-Advisors CanNOT Do That You Can An Introduction to Behavioral Finance"

The Brain is a Powerful Thing
The date was May 6, 1954. Up to this point in time, it was clear, it was impossible. Sports scientists, medical doctors, world class athletes from across the world said it was absolutely impossible to athletically accomplish this feat. Our bone structure was all wrong. We were not aerodynamic enough. Humans had inadequate lung power and inadequate heart power. All of these excuses were used and millions of athletes tried but failed. This challenge went all the way back to the ancient Greeks and nobody could do it. However, on this day, somebody proved wrong all of the pundits and athletes before him. His name was Roger Bannister. Here is the interesting part. Over the next 12 months, 37 more people broke the 4-minute mile. In the second year, thereafter, 300 more people broke the 4-minute mile. 337 people broke the 4-minute mile within two years of Roger Bannister accomplishing this feat that was “absolutely impossible.”¹ 

What is my point? My point is it’s all psychological! The Human Brain is an amazing thing. This little three-pound thing between our ears that usually takes up about 2% of a human’s bodyweight and has 100,000 miles of blood vessels is one of the most powerful things on earth. Of course, I’m talking about the human brain. It’s that powerful! There isn’t any other animal (except for maybe a dolphin) that has the brainpower like we do. For example, although an elephant’s brain is physically larger than a human brain, the human brain is 2% of our total body weight, where an elephant’s brain is .15% of their bodyweight. Meaning humans have a very large brain to body mass which makes us one of the smartest species on earth.²

Furthermore, because we are so smart, we can predict events that other species cannot predict. For example, I know when lightning streaks across the sky, there is the sound of thunder to follow. I know that if I am on the street and there is a car coming towards me from ½ mile out, to get out of the way. I can predict that if I bring home a Harley Davidson today, to my wife’s surprise, I will be single the next day. We have predictive capabilities that no other species on earth has.

Here is the paradox, however, because we are so smart we are also so dumb. Because we can predict things that other species cannot predict, we tend to think we can predict things that are impossible to predict. This is an example in behavioral finance of what is called “Overconfidence Bias.” Have you ever seen a client that thinks they can predict the stock market and makes irrational decisions as a result? Have you ever run into a client that believes they do not need life insurance because they will live to a ripe old age? Have you ever spoken with a client who says he will never need long-term care because he/she will “just die”? The problem is, markets are unpredictable, mortality is unpredictable, and morbidity is unpredictable! There are some things in life that are hard for a human being to predict, unlike hearing the sound of thunder following a lightning strike. This “overconfidence bias” is an example of the 117 documented biases that behavioral finance studies and works to find solutions for.³

If you would like a copy of this whitepaper please contact our Partners Advantage Marketing Team at 888-251-5525, ext. 138 or email news@partnersadvantage.com.

For financial professional use only. Not for use with consumers.

¹ Mackay, Harvey, 1988, Swim with the Sharks.
² “Thinking About Brain Size,” http://serendip.brynmawr.edu/bb/kinser/Int3.html, last accessed 3/10/16
³ Source: “Conquering Concerns: Selling Through Behavioral Biases”

43990

IUL: Cost Is An Issue Only In The Absence of Value

By: Charlie Gipple, CLU, ChFC, SVP Sales and Marketing at Partners Advantage Insurance Services, LLC

I had a mentor many years back who had done very well in financial services and had made a great deal of money. While I was talking with him one day on the phone, he brought up he had just purchased a Ferrari. At this point, me being fairly frugal and understanding there is no worse “investment” on earth than automobiles, I said, “what are you thinking buying a $200-$300k car? How can any car be worth this much money?” After firing back with a couple of choice words which I cannot put in this article, he told me a phrase I will never forget. He said “Charlie, cost is an issue only in the absence of value. Is this car costly to me? Yes. However, if to me the value eclipses the cost, why would I not buy it?”

The issue of cost is brought up very frequently during conversations around life insurance and especially permanent life insurance. Of course this is perpetuated by the pundits such as Suze Orman and Dave Ramsey who consistently make the blanket statement that permanent insurance is too costly and one should buy term and invest the difference. So, as I do indexed product boot camps across the country, my job is to educate the agents on why IUL is not so expensive if designed correctly and how the agents can explain this to their clients.

Learn more in the full white paper "IUL: Cost Is An Issue Only In The Absence of Value," by Charlie Gipple, CLU, ChFC.  Gain insights on how to show your clients tax advantage opportunities IUL policies offer and walk them through a hypothetical scenario that shows them IUL policies can be quite reasonable in price.

Fill out my online form.

For financial professional use only. Not for use with consumers.

Indexed Universal Life is not a stock market investment and does not directly participate in any stock or equity investments. Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; a market-indexed insurance product is not comparable to a direct investment in the equity markets. Clients who purchase IUL are not directly investing in a stock market index.
Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and
does not address individual circumstances.

Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with an accrued loan interest, will reduce the policy’s account value and death benefit. Assuming a policy is not a Modified Endowment Contract (MEC), withdrawals are taxed only to the extent they exceed the policy owner’s cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. These characters are fictional and are not actual customers. Your own decisions should be made in light of your own financial situations. This hypothetical examples used are for illustrative purposes only, is no guarantee of return or future performance, and does not depict the actual performance of a specific product or its investment options.


51766

Smoothing Out the Volatility in Your Practice with Life Insurance

By Charlie Gipple, CLU,® ChFC® , Senior VP of Sales & Marketing

Consumers also appear to disagree with what the financial “experts” like Suze Orman and Ken Fisher say about annuities.  In fact, 78% of people who own annuities are satisfied with their access to their money.¹ More than 80% of fixed annuity buyers are happy with their purchase², which is a very high happiness factor among financial products.

Even in light of the challenges we face with the Department of Labor’s Fiduciary Rule, I am confident we will adjust and FIAs will continue to be a mainstay of our industry.  However, in the short run we will likely experience some changes with the FIA product line. For financial professionals that may have their businesses highly concentrated on FIAs, I would propose a way to “smooth out” the volatility in your practice. I propose Life Insurance!  If you don’t like underwriting, there are attractive Simplified Issue Life Insurance products.  There are also Single Premium Whole Life products and Single Premium Indexed Universal Life products, which offer an attractive alternative to FIAs, when the client doesn't need the money during their lifetime.  

I can comfortably assure you that if you know FIAs, it's not a very far leap to also learn and write IUL.  I have taken this leap myself and at the time I had less educational resources and support than what you have when you partner with a marketing organization with a strong training platform. This is what we at Partners Advantage specialize in - Education that Causes Sales. I encourage you to prepare for the future of our industry and continue to broaden your knowledge to truly serve your clients’ needs.  

Read the full article that first appeared in Retirement Advisor magazine in June 2016.

Fill out my online form.

 

Contact Partners Advantage for complete training and sales assistance at
888-251-5525, Ext. 700

For agent use only.  Not for use with the public.

* Guarantees are backed by the Financial Strength and claims-paying ability of issuing company. 

**Insurance and annuity products: Are not deposits. Are not guaranteed by a bank or its affiliates.  May decrease in value. Are not insured by the FDIC or any other federal government agency.

1Genworth The Future of Retirement Income Study 2014
2LIMRA Study – August 2012 http://www.limra.com/newscenter/newsarchive/archivedetails.aspx?prid=257

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries. 
An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional costs. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities. 

Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. 

The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances.

47886

Charlie Gipple's Big 16 in a DOL Rule - Private Right of Action World

By: Charlie Gipple, CLU®, ChFC®       Senior VP of Sales and Marketing,

Partners Advantage

Questions are whirling around about the upcoming DOL fiduciary rule. Is it really going to go through? Will the new administration make changes?  Can we leave things the way it is now? These are all valid things to consider despite the fact right now the DOL rule goes into effect in April 2017. But what if it remains status quo?

What we need to remember that this is the third time in 11 years the fixed indexed annuity world has been faced with a rule or regulation that would be daunting. All three of these “rules” sought to effectively take the annuity products and plug them into a securities world. The NASD Notice went through in 2005, while the Rule 151A by the Securities and Exchange Commission was vacated in 2010.

Now the industry is faced with the DOL proposing the agents be held to a “fiduciary standard” when working with qualified money; a standard that, up until now, has been largely associated with securities sales via “fee-based advisory” platforms. Furthermore, for indexed annuity sales with qualified money, after April 10, 2017 an agent has to be supervised by a “Financial Institution.” 

What should IMOs and financial professionals ask during this “in-between world” of uncertainty on whether the DOL will go through or not? This is especially stressful for the IMO whether they file to be a “Financial Institution” or not.

Here is my “Big 16” of items an IMO looking to become a financial institution should consider. However, even if the IMO does NOT become a “Financial Institution,” they will likely still need to implement some of the below IF the DOL Rule were to go through. Why? The reason is whatever financial institution the IMO relies on will most likely still hold them accountable for certain things to share the liability in the “Private Right of Action” world.

Big 16 items to Consider:

1. Product platform (those that abide by the “reasonable comp” rule)
2. Agent background checks
3. Field force training on “fiduciary matters”
4. Web-based financial planning tools
5. DOL compliance review for client and agent facing material
6. Best Interest Contract creation
7. Negative Consent: IE. Notice to “retirement investors” of the fiduciary status
8. Fact finding, risk tolerance, software sales system for “uniform” recommendations from client to client with similar objectives
9. Staff and systems for suitability review
10. Email surveillance
11. Website for data retention and disclosures
12. Ongoing compliance (audits)
13. Designate person to identify conflicts of interest
14. Recordkeeping/file retention for six years
15. Primary legal liability
16. Technology for business issuance, review and case management

Looking at this list can be daunting, especially if you implement all of these items. The question for the IMOs is “do I assume the DOL will go through and I invest in this stuff or do I assume the DOL is not going to happen and thus not invest in it at all?”

In reality, every IMO principal needs to consider putting in place some of the “Big 16” items whether or not the DOL rule is vacated or not. Because most likely changes like what’s found in the DOL rule are going to come eventually. It’s where it’s wise to invest into the training resources, technology, compliance, holistic planning, etc. and put them into place no matter what.

This places urgency on many shoulders should the April 10, 2017 date become official. But it’s best to be prepared rather than wishing you had.

Looking to find out more about how Partners Advantage can help you prepare? Contact me at 888-251-5525, Ext. 358.


For financial professional use only. Not for use with consumers.

Discussion of the Department of Labor (DOL) fiduciary rule is based on the information available from the DOL, pending litigations, and other sources deemed to be reliable as of the date this article was written. The views and opinions of author are subject to change as guidance from DOL becomes available and court opinions are published.

This article should not be considered legal advice and is intended for educational purposes only.

89763

Behavioral Finance and the Two Lane Highway

Even though the “Robo-Advisors” would disagree with me, today I would argue that in this day and age the most important thing a financial professional can do is relate to the “art” and not the “science” of their profession.  In other words, the most successful financial professionals I have ever worked with would agree that it is about the art of simplification, analogies, storytelling, managing clients’ emotions so they make healthy financial decisions, and to help them through good times and bad times.  I do believe the “science” of algorithms, Monte Carlo Analysis, alpha, beta, sharpe ratios, etc.; they are all important, but should they take a backseat to the “art” of BEHAVIORAL FINANCE?  Let me give an example of a simple behavioral analogy I like to use in financial professional and client seminars.  

A fitting analogy is that buying high and selling low in the stock market is a lot like driving down a two lane highway. Pretend you are sitting in the right lane and both lanes are at a standstill. What do you do when you notice the left lane is starting to move? You move into the left lane. Shortly after that, the left lane always comes to a standstill. Well, shortly after that is typically when you see the right lane starting to move forward. So then what do you do? You move back into the right lane. What happens to the right lane at that point in time? It comes to a standstill. But of course, that is when the left lane opens up and you hopelessly jump back into the left lane. Many of us do this over and over again to then realize that it is a losing proposition. Why does this phenomenon happen with traffic where it seems like you cannot win by switching from lane to lane? Because everybody else has the same idea of jumping into the same lane as you, the moving lane, and eventually the bubble bursts and traffic comes to a standstill. Due to the fact that everyone moved from the other lane and thus "emptied" it, the other lane opens up. At that point, everybody jumps back into that other lane and you create another "bubble“ that stalls traffic. 

That is very analogous to how the stock market behaves. Because people buy high and sell low by chasing each other, they actually do not perform as well as what the market actually does over the long haul. 

Some of the most profound studies in this area have been done by the financial services market research firm, DALBAR. Dalbar recently launched their 22nd study on investment returns versus the returns actually experienced by investors. They found that over the 20-year period of time ending December 31, 2015, the average return for equity mutual fund investors was only 4.67% even though the average in the S&P 500 was 8.19%. Thus, a 3.52% "gap" in investment returns versus investor returns. This "gap" on a $100,000 investment can mean significant damage to a pre-retirees’ or retirees’ retirement portfolio. For example, if that $100,000 gets 4.67% over a 20-year period of time versus 8.19% over a 20-year period of time that is the difference of having $249,140 versus $482,772 by the end. This is a difference of $233,632 by "buying high and selling low." And this does not include the negative impacts of taxes and trading costs for the investor that moves in and out of the market.

So again, whether it is providing simplification and analogies like the two lane highway or managing a clients emotions so they don’t “buy high” and “sell low,” today this is one of the most important topics a financial professional can use to “sharpen their axe” which is the study of Behavioral Finance.  

Learn more in the full white paper "What Robo-Advisors Cannot Do That You Can. An Introduction to Behavioral Finance," by Charlie Gipple, CLU, ChFC. 

Fill out my online form.

Questions or Need Case Assistance: Contact the Partners Advantage Brokerage Team at 888-251-5525, Ext. 700.

For financial professional use only. Not for use with consumers.

Please note that in order to provide a recommendation to a client about the transfer of funds from an investment product to a fixed insurance or annuity, you must hold the proper securities registration and be currently affiliated with a broker/dealer. If you are unsure whether or not the information you are providing to a client represents general guidance or a specific recommendation to liquidate a security, please contact the individual state securities department in the states in which you conduct business. The information in this presentation is for general use and while we believe the Information is reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. You need to take into account your client's health and legacy goals. Neither the information presented or any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any insurance or securities products and services.

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How Primacy Bias Impacts Effective Communication

By: Charlie Gipple, CLU®, ChFC®, Senior VP of Sales and Marketing, Partners Advantage

Our right brain is the underlying cruise control and the left brain takes effort to fire up. If it takes no effort from your clients to work their right brain and a lot of effort for clients to work their left brain, it is obvious one should appeal to the side that takes no effort, which is the right brain, the emotional and natural instinct side. This again is what we want to do with these “Seven Secrets to Successful Communication."

Secret 1: Primacy Bias
You only get one chance to make a first impression, which takes place within seven seconds of somebody meeting you. What the primacy effect says is that the vividness of a memory or retention of information is higher at the beginning of a presentation or sales pitch or conversation.

As you can see on the graph below, when you first meet somebody, this vividness in their memory is the highest, or almost the highest (we will talk about the right side of this chart in a bit), and then as time goes by, towards the middle of a talk, the vividness tapers down. This chart below is why, if I am going to prepare for a presentation or a sales talk, I have what I call the 50/20 rule. What this means is I put 20% towards my introduction and closing, and I will allot about 50% of my preparation time to the middle section.
 

So, with a 50-minute presentation, it is common for me to have 20% (or 10 minutes) of this presentation allocated to the opening and closing. In preparing for that 20%, I will spend around three of my six hours prepping for it.

First impressions matter and you only have one chance for a first impression. Without a great first impression, anything that follows is usually clouded in the listeners’ mind by the “bias” they formed earlier. So, it doesn’t matter how good the experience is beyond the first impression, if the first impression was negative, the following will be suboptimal to the listener versus if you otherwise gave a good first impression. Anybody who has ever presented and bombed at the beginning of a presentation knows exactly what I am talking about.

Learn more about the rest of the seven secrets: storytelling, simplification, power in the pen, feel/felt/found, confidence and recency bias...

DOWNLOAD the full white complimentary paper: Seven Secrets to Effective Communication, by Partners Advantage Senior VP of Sales and Marketing Charlie Gipple, CLU, ChFC.

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Questions or Need Case Assistance: Contact the Partners Advantage Brokerage Team at 888-251-5525, Ext. 700.


For financial professional use only. Not for use with consumers.
 
67113

The Life Insurance Coverage Gap: How Single Premium Life (SPL) Insurance Can Help

In 2015 there was a life insurance gap in our country that exceeded $16 trillion dollars. The “life insurance gap” is what the need is of American households less the life insurance coverage already in place. Back in 1960, 70% of U.S. adults owned life insurance, whether it was individual life insurance or through a group plan usually found at their jobs.  In recent years, this number has fallen to only 59% of American adults that have either an individual plan or group plan. Even more startling, only 36% of U.S. adults have individual life insurance policies versus 59% back in 1960. The fact that since 1960, American families have evolved to dual income households, the percentage of adults having life insurance should have increased, not decreased! In other words, if two people in the family are getting income, both of those income earners should have life insurance.

There are five key reasons cited by consumers for not having life insurance or adequate life insurance:

1. Affordability: In a study published by Prudential in 2013, 74% of consumers said that concerns about affordability prevented them from purchasing life insurance.
2. Cost: Related to the above, consumers consistently overestimate the cost of life insurance. In the 2015 Insurance Barometer Study, 80 percent of consumers misjudge the price for term life insurance, with Millennials overestimating the cost by 213%, and Gen Xers overestimating the cost by 119%.
3. Confusing: In that same Prudential study, 50% said that life insurance is too complicated to purchase.
4. Underestimating the Need: Consumers in the Prudential study felt that they were adequately covered. Furthermore, they felt that high face amounts are excessive, especially at death benefits above $250k. A majority of the consumers felt overall that death benefits of two to three times their annual income would be sufficient. This is backed up by the fact that the median household income in America is around $50,000/yr. and the median life insurance policy has a death benefit of $115,000.
5. Misperception about the Limited Role of Life Insurance: 63% of consumers in the Prudential study claimed they bought life insurance merely for funeral costs and final expenses. 

The confusion and misperceptions around life insurance create a perfect opportunity for SPL to help fill the coverage gap. Affordability should not be an issue with SPL because the target age group for SPL is 60-85 years of age. These folks likely already have money that they are merely looking to pass on to the next generation. Of course, if the client has “lazy money” in CDs, money markets, etc., the affordability issue can be easily overcome. Furthermore, SPL is a very simple product to understand. If the client puts $100,000 into the policy, the death benefit will immediately be $200k, for example. Note: the death benefit can be anywhere from 15% to 200% higher than the premium the client puts in based off the age of the insured. And by the way, the death benefit would be WITHOUT TAXES.
Learn more in the full white paper "SPL: Bridging the Gap from Annuities to Life Insurance," by Charlie Gipple, CLU, ChFC. It provides case examples, addresses costs and how you can find success in explaining these products to clients. 

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Questions or Need Case Assistance: Contact the Partners Advantage Brokerage Team at 888-251-5525, Ext. 700.



For financial professional use only. Not for use with consumers.

This material is intended for educational purposes only and is not intended to serve as the basis for any investment or purchasing decision. Insurance and annuity products: Are not deposits. Are not guaranteed by a bank or its affiliates. May decrease in value. Are not insured by the FDIC or any other federal government agency. This information is written in connection with the promotion or marketing of the matters addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, your clients should consult their own tax or legal counsel for advice. Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances. Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with any accrued loan interest, will reduce the policy’s account value and death benefit. Assuming a policy is not a modified endowment contract (MEC), withdrawals are taxed only to the extent that they exceed the policy owner’s cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. These characters are fictional and are not actual customers. Your own decisions should be made in light of your own financial situations. This hypothetical examples used are for illustrative purposes only, is no guarantee of return or future performance, and does not depict the actual performance of a specific product or its investment options. In order to provide a recommendation to a client about the liquidation of a securities product, including those within an IRA, 401(k) or other retirement plan, to purchase a fixed or variable annuity or for other similar purposes, you must hold the proper securities registration and be currently affiliated with a broker/dealer or registered investment adviser. If you are unsure whether or not the information you are providing to a client represents general guidance or a specific to liquidate a security, please contact the individual state securities department in the states in which you conduct business. Indexed Universal Life is not a stock market investment and does not directly participate in any stock or equity investments. Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; a market-indexed insurance product is not comparable to a direct investment in the equity markets. Clients who purchase IUL are not directly investing in a stock market index.

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How Creative Destruction is Shaping Annuity Trends

By: Charlie Gipple, CLU®, ChFC®, Senior VP of Sales and Marketing, Partners Advantage

Creative destruction is the idea that in the process of evolution, free markets can become somewhat messy while making progress. Although the world becomes a better place because of this evolution, progress, and upgrades, the process can be quite the disruptor for those who find themselves on the wrong side of creative destruction. 

This comes to mind as you look at the latest trends in the annuity world. There have been wins as well as losses over the past four years. The variable annuity (VA) product line has struggled but fixed annuities, indexed annuities, single premium immediate annuities (SPIAs) and deferred income annuities (DIAs) have excelled. 

What is causing the creative destruction in the variable annuity world? The No. 1 instigator was the 2008 financial crisis. During this time period, many manufacturers realized that guaranteed lifetime benefits (GLBs) were too costly for them to continue offering the living benefits. This caused a number of VA carriers to leave the VA business. If they continued, they eliminated products. 

Again, with creative destruction there are losers but there are also winners. The winners of this process have been the new VA innovations introduced by the carriers over the past years. These recent VA innovations are investment-only VAs (IOVAs); VA + deferred annuity (VADAs); and structured product VAs (SPVAs), also known as buffered VAs. 

Another benefactor of creative destruction within the industry is fixed indexed annuities. FIAs have been able to maintain strong guaranteed lifetime withdrawal benefit (GLWB) features that have been easily hedged within the design of a FIA product than in a VA product. The benefits that once defined the VA world are now defining the FIA world and other annuity products. 

There is another source of creative destruction on the horizon, as the Department of Labor’s (DOL) fiduciary rule takes effect in April 2017. As of now, the DOL is mandating that FIAs fall under the Best Interest Contract Exemption in order for the financial professional to get paid commission. This upcoming rule will affect a fair amount of FIA business because the new regulation focuses on qualified money. Time will tell how significant the impact will be.

Despite the significant storms on the horizon, I believe the annuity will be able to put more emphasis on the creative and less on the destruction.

Taken from Charlie Gipple’s article in InsuranceNewsNet Magazine, August 2016: “How Creative Destruction Shapes the Fixed Annuity Market” 

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For financial professional use only. Not for use with consumers.

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries. 

An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional costs. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities. 

Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments.  Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; neither an Index nor any market-indexed annuity is comparable to a direct investment in the equity markets.  Clients who purchase indexed annuities are not directly investing in a stock market index.

Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. 

The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and does not address individual circumstances.

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