Thursday, August 20, 2015

Evaluating Trust Owned Life Insurance

The major role of a life insurance trustee is the maximization of the value of the life insurance policy held in trust. There are times when the maximization of the trust may call for the replacement of the existing life insurance policy for one that is more appropriate and provides greater value to the heirs.  A prudent approach is to consider as many of the issues as possible before making any decision that may affect the eventual outcome of the trust.

There are special challenges associated with Trust-Owned Life Insurance especially regarding policy performance in the low interest and volatile climate we have weathered. The simple fact is that a good portion of life insurance policies sold in the last two decades have not performed as expected. At the same time lower mortality charges and more efficient product design have created a new generation of life insurance policies that can provide greater value for trust beneficiaries.

  • For the professional trustee governed by The Uniform Prudent Investor Act (UPIA) there is a fiduciary process which requires that all assets, including life insurance, are deemed suitable for the specific trust goals and are reviewed periodically. It is critical in mitigating liability that the professional trustee have a process in place to review the trust assets and that the process be well documented and made a part of the trust file. 
  • There are also challenges for the non-professional trustee. While we can assume the professional trustee has some expertise in both product and administration, the same cannot be said of the non-professional trustee. Improper administration may subject the trust to scrutiny that can negate some of the benefits of the trust. Without the proper knowledge or ability to review a complicated asset like life insurance, policies managed by a non-professional trustee can often underperform and not reach their expected goal.  Trust Fiduciaries

  • There are a number of very valid reasons why an older policy should be exchanged for another policy.
    • Changes in underwriting of the insured(s). Sometimes, the insureds have favorable changes to their health that might affect the cost structure of the policy.

    • Underwriting opportunities. Specific underwriting programs which “shave” undesirable ratings off the original underwriting offers may become available. These may reduce the mortality costs within the policy.

    • Newer policies may have lower costs.  Lower mortality charges, cost efficiencies and access to capital markets have allowed insurance companies to create new life insurance products that may provide a greater value to the life insurance consumer.  Many of the newer policies available today have cost structures that are lower than policies issued just a few years ago. The carriers tend not to pass these cost savings on to older policyholders – so those who wish to take advantage of the newer costs may need to purchase new, more efficient policies.  Policy Review

    • Loans.  If the present policy has existing loans, the transfer of the policy values may have potential tax consequences. An outstanding loan is part of the policy’s cash value.  Under certain circumstances you may exchange a contract with an outstanding loan for a “new” contract.  This depends on many factors such as the size of the loan as compared to the policy’s cash value and whether or not the insurance company issuing the “new” contract will allow it. Not all insurance companies will allow this. The client should gain an understanding of this issue from a life insurance agent and also discuss this with a tax advisor.
    • Taxes.  Even if the policy does not have a loan, there could be tax consequences. Generally, if you terminate a life insurance policy, there will be taxes due on the gain in the policy, which is the difference between the surrender value and the cost basis (the amount of premium paid which includes any carry-over premiums from earlier contracts). We can help mitigate the tax consequences with the use of a 1035 Exchange.  A 1035 Exchange allows the contract owner to exchange contracts while preserving the original policy’s tax basis and deferring recognition of gain for federal income tax purposes.
    • Ownership.  The owner and insured on the “new” contract must be the same as under the “old” contract. However, changes in ownership may occur after the exchange is completed.  Two or more “old” contracts can be exchanged for one “new” contract. Multiple contracts can be exchanged for one contract as long as the insured, the beneficiary and the policy owner are the same.  You cannot exchange a second-to-die policy for a single-life policy or vice versa. However, the IRS has provided guidance in two Private Letter Rulings which allowed the exchange from a second-to-die policy to a single life policy after the death of one of the insureds.

    Friday, July 10, 2015

    Getting Started in Financial Services

    You can get an insurance license in 3 days.  3 days!  Then what?  That's when the real learning begins.

    In the beginning we would go online and consume as much information as we could.  Much of it was consumer based.  What do consumers like about this product of insurance?  Why does it work?  Why should they work with me?  We dug in and figured out way more than a typical insurance agent would.

    We ended being licensed in about 45 states.  On a good day we might do 5 - 10 insurance cases.  We didn't know that was special.  The problem, if you want to call it that, was we weren't meeting our clients face to face.  It was all over the phone,  This was before e-applications so we took our applications down on paper.  We would then fax or snail mail them to the clients.  We needed original signatures on most everything then.  We didn't know it was a challenge.  We just embraced and plowed forward.

    Our clients found us usually after speaking with their local insurance agent and were skeptical of what they heard.  Their skepticism was founded.  They sought better advice and they found it in us.

    Enjoy our video.....

    Saturday, July 4, 2015

    Are You Working With The Right Financial Professional?

    There are numerous articles you can access pertaining to finding the right financial professional.  "What are the top ten questions you should ask?"  Without regurgitating all of that we thought about if we were in that situation what we would we want to know.  What if we were the client?  What would we ask?  What would we want from our financial professional?

    We would ask to speak to some of the clients they have worked with recently and one they have worked with over time.  Hopefully, it is all positive or they have some specific information to give you.  If it is easy for that referral to explain why they like working with this person that you are vetting then you may have the right person.

    Lets say you have two professionals you are meeting.  One is out just for the commission dollars and the other one is well-intentioned.  The first person comes to the meeting and he doesn't ask too many questions and within a few minutes is already pitching a product.  Just one product.  It solves everything.  Death benefit.  Retirement.  Cash Value.  Its the greatest new thing.  You should hurry up and buy it.  You probably want to steer clear of that one.

    The well-intentioned professional may fashion themselves as a teacher more than an advisor.  They may show you six or eight different things.  That is too much to process.  Information overload.  People have difficulty with choice.  If we are given too many choices it can result in anxiety.  The client may leave not doing anything at all.

    As financial professionals we need to listen to our clients and then narrow the focus down to two or three things.  They should fill that need and be appropriate for the situation.  We are doings clients a disservice by either immediately jumping to one product without properly assessing the situation or bombarding the clients with too many choices and overwhelming them and their thought process.

    Saturday, June 27, 2015

    You Don't Deserve My Time, Dunning Kruger Observations

    Brian and I have noticed and discussed the inverse variation between our easiest and most difficult clients.  That is to say, that often our most difficult interactions are also the least profitable, while the easiest interactions are the most profitable.  .. See the Dunning Kruger Effect.

    People who make it difficult for us to help them do not easily trust our advice because they overestimate their understanding or knowledge in the subject of Insurance or other financial topics....or they are demanding of time.  Many times, these interactions which can be frustrating and time consuming for us also offer the least in potential return with regard to commissions/fees.  We make our recommendations based on need and budget like any good professional, and often times, we are recommending these folks pay incredibly low amounts of premium.  Sometimes we meet resistance from them on how low, in fact, as they have decided what they think is best for them based on some bias i.e. "my daddy had a policy like this."

    Inversely, the clients who are the easiest with whom to work are typically financially independent and often wealthy, which means that the revenue from our work with them can be 10x - 50x higher.  These folks usually underestimate their relative knowledge in the subjects around insurance and finance.  In fact, they more easily understand the subject matter and can make decisions quickly when presented with one of our solutions.  These folks are also very gracious and even worry that they could be taking up too much of our time.  My most wealthy client rarely takes more than 15 minutes of my time before thanking me and shuffling me out the door with some encouraging words.  Sometimes he will ask if I have time for a quick anecdote (I always do) and I will listen for the 5 minute long story and remember the life lesson, because it may be profoundly valuable.

    This is just a feeling and not based on what is most profitable, but I am happy to equally give my best work to everyone and enough of my time to get them pointed in the right direction... Agents/Brokers and Consumers alike.  I have learned though, that there are people who should be avoided.  Of course, you wouldn't know that until spending a little time with them.  No amount of good advice will help them and your time is probably not well spent.  It it is best to kindly bow out, still leaving them some suggestions on material they can seek out and use to educate themselves.  The people who can more easily recognize the value of good advice and act on it quickly are the type of people who become financially independent or wealthy, if they aren't already.

    Tuesday, June 23, 2015

    Facts of Life Insurance - Why Do We Have a Cognitive Bias?

    There can be biases for lots of reasons.  We'll explore 3 examples they we have seen that are probably all too common.

    Even independent agents can have a bias to a specific carrier or a handful of companies.  It happens to us.  We have a stretch of time where certain companies continually price well, are easy to work with, or really competitive with their underwriting.  We may lock into them without even knowing it until they stop being as competitive.  We have favorites for survivor policies.  We have favorites for term.  We have favorites for equity indexed universal life.  Those may change in 6 months.

    One example that sticks out is an agent we met that used to be a captive agent.  He still touts that one company even though we can show him a proposal with better pricing and a better product of insurance.  He remains resistant to moving beyond his comfort level.

    Consumers form their own cognitve biases by what they see on TV, or who they worth with, or what another family memeber has or even who they go to church with every week.  They get stuck what they think they need.

    One example we came across recently was client that asked about burial insurance.  That really isn't the type of coverage that we handle but, there are agents that focus on that market.  This lady specifically told us that she didn't want anything crazy like $100,000.  We are thinking anything less than that is crazy.  $15,000 is the amount she had in her mind.  She also didn't want to do an exam or answer more than 3 questions.  The insurance company was being too invasive.  If we give the insurance company a little information to use their minds it could greatly reduce the price.  Her ristance was engrained in her bias from those around her and it was something she couldn't get past.

    Medical Exams
    Along the sames lines are agents that promote nonmedical insurance companies and consumers that are resistant to doing an exam.

    We had a case recently we are insuring the owners of company.  Each owners stake is approximately 1 million.  It is a fairly typical buy-sell arrangement for a dozen owners.  One of the board members figured they didn't want quotes from carriers that required an exam.  The owners would be reluctant to do an exam.  However, all of the stakeholders realized it would be less expensive to do the exam.  Nobody was resistant to do an exam  That board had developed his own bias that stemmed from somewhere.

    Clients that are reluctant to do an exam maybe happy paying 25% more for their coverage.  In the end they may not be a good client for you.

    Enjoy our video...

    Friday, June 12, 2015

    Facts of Life Insurance - Are You Asking The Right Questions?

    How's your health?  The typical client response is "Just fine."  If an insurance agent is asking a client about their health the same way they would ask about weekend plans or the weather then the problem really lies with the question asked not the response.  Of course, if you ask me that question I'm going to give that kind of response.  99% of clients do.  What the client thinks and what the insurance company thinks could be completely separate.

    More Specific Questions:
    1. What prescription medications are you taking?
    This will lead you into discovering what health issues the client may have whether its diabetes, high cholesterol, or anxiety.
    2. Have you had any visits to the hospital?
    This might lead you to discover chest pains or surgeries.
    3. Did either of your parents pass away before age 70?
    If the answer is no you can stop there.  If it is yes then the follow up is what was the cause of death? Be mindful this could be a delicate subject matter.
    4. Height and Weight.
    This may be more evident when sitting across from someone but, not when you are speaking over the phone.

    We need to know what your mortality risk is to the insurance company to get the best pricing.  The same risk class might be relatively inexpensive at one company but, expensive at another carrier.  We aim to dig in further to better assess the client's situation so they can make the best, most informed decision possible.

    Insurance Application
    On the other end of the spectrum we also coach clients to simply answer the question the way it is asked.  No more no less.  Some clients like to spill about issues that may not have an impact on their underwriting or present information that their doctor didn't diagnose them with at the time.

    Have you been scuba diving in the last 5 years?  Well, I remember going 6 years ago.  Then simply answer no.

    What prescription medications are you taking?  The last time I met with my doctor he said my blood pressure was..... Again the answer is no.  As far as the insurance company is concerned you aren't taking blood pressure medication.

    We don't ask for this information to be nosy or invasive.  The more we know the better we can steer you to the right insurance company for your needs.

    Enjoy our video....

    Wednesday, June 3, 2015

    Is This Really Customer Service?

    Have you ever made the dreaded phone call to a service provider.  After weaving through the maze of entering your account number and stating your name, the first question the customer service representative asks is what is your name and account number?

    Regurating the problem
    Have you ever had a similar conservation to the one in the movie Dodgeball?

    You: I know. I just said that.
    Rep: I know you just said that. 

    You: Okay, I'm not sure where you're going with this. 
    Rep: Well, I'm not sure where you're going with this.
    You: That's what I just said. 
    Rep: That's what I'm saying to you.
    You: All right.

    Most customer service reps are good at restating the problem.  I knew what the problem was when I called.  What I need help with is the fix.  As a test I may just not say anything the next time and see how they respond.  Well, Mr. Smith I'm glad I was able to pinpoint the problem.  Is there anything else I can help you with today?

    Relating to Another Scenario:  
    If your situation was like this then we could do this.  But my situation is this so how does this help?  It doesn't.

    Sounding More Important Than They Are:
    Did you just drop some knowledge on me about mortality tables?  Are you talking faster so I won't know what you are saying?  I don't know what your acronyms mean.  Just explain it to me like I'm a 6yr old.  The one acronym I am familiar with is KISS.

    We try to put ourselves on the same side of the table as our clients.  It's difficult many times because people are wired differently.  Focusing on the solution should be the mindset.  There is a reason clients to come to you for help.  It may be piece of mind.  It may be to save them money.  It may be to improve on what they have.  Educate them along the way.  It helps them make better, more informed decisions and they feel like they have more control.

    Monday, June 1, 2015

    My Spouse Just Died. What Now?

    I wrote this article because I have worked with many of the individuals described below over the course of my career and quite a few recently.  

    My spouse handled all of the family finances and just passed away, so what do I do now?  You have started sifting through different bank, investment, and IRA statements.  There is a life insurance policy or two, you think.  What about income sources like a company pension and social security?  Where do I start?  Believe it or not it is possible to sort out your finances and meet your financial goals, with the proper plan.  Most people don’t know where to go or who they can trust.

    The short answer is that there is no rush on any of these lingering issues.  There is plenty of time to first sift through all of financial and estate documents and then start making decisions on your best course of action.  Any professional, especially a financial planner, will want to get a holistic view of all the different moving parts before giving any guidance.

    I have literally had clients come into my office for the first time with a gym bag full of statements from 18 different places.  They had three or four banks relationships.  They had joint, individual, and IRA accounts spread around to several different investment firms.  There are old insurance policies dating back to the 1940’s where the insurance company has been bought out several times over.  In a perfect world many of these items would have been consolidated and there would be a plan and a go to person in place so that this process is easier to handle.  

    When you are ready to start dealing with the financial aspects after your loss here are some important steps to take.

    1. Estate Settlement – The will and/or trust will indicate how assets should be disseminated.  Assets with specific beneficiaries and joint with right of survivorship bypass the probate process and will be smoother to get to the recipients.  Other assets will need to be settled through the estate.  An estate attorney can be extremely helpful in making sure the proper documentation is filed.

    2. Gather important documents – Locate your will and any trust documents.  Get a minimum of 15 certified copies of the death certificate.  Find all of the bank, investment, and IRA statements.  Keep them all in a centralized place.

    3. Contact life insurance companies – They will send out paperwork outlining what is needed and your options.  Most insurers will send you a check relatively quickly but, don’t feel like the money needs to be invested right away.  If you are the primary beneficiary then the money bypasses probate and doesn’t need to be included in the probate estate.

    4. Contact the deceased’s employer – There may be a company sponsored retirement plan and/or survivor pension that you would be entitled to receive.  Their paperwork will have some different options to consider.

    5. Contact Social Security – You will want to determine what your social security benefits and options will be moving forward and for minor children if applicable.

    6. Retirement plan options - There are two different sets of rules for spousal beneficiaries and for all other beneficiaries. Simply put, the spousal beneficiary has far more options available.  A surviving spouse can roll over money from the deceased spouse's retirement plan into his or her own traditional IRA and in many instances that makes the most sense.  You can also designate yourself as the account owner on the IRA that is being inherited.  Age of the deceased spouse and you are critical factors in determining the best alternative.

    7. Other considerations – Going through a safe-deposit box, retitling ownership on your home, car, accounts, credit cards and other property will ultimately need to be done.  Real estate assets can potentially create some conflicts as it is not liquid and if there are multiple beneficiaries there can be some internal strife between the different parties and what they want to do with their portion.

    The emotional strain a death can cause a family is tough to deal with and leaves most spouses struggling with the idea of what to do next.  One major key is to not make any rash decisions that could have a dramatic impact and tax implications.  Once you have gathered everything you and your financial planner can start to map out a strategy for the next phrase of your life.  A good planner can help alleviate some of the burdens that go along with estate settlements and bring in other resources such as a tax and estate professionals if applicable to make sure all of your bases are covered.

    Tuesday, May 26, 2015

    Facts of Life Insurance - Internal 1035 Exchanges

    You don't ever change your mind, do you?  You don't ever move?  Your life is static, right?

    When mortgage rates started dropping several years ago was it your bank that first reached out to you about refinancing?  Probably not.  Why would they?  You are content paying 6% on your loan.  Why would they call you up and offer to refinance your loan for 4%?  They just sliced off extra interest they would have earned and it impacts their bottom line.  Now if you call them and say another lending group is willing to do a refinance at 4% then they will jump at the chance to keep that loan with them.  Why be proactive when you don't have to be?

    Insurance companies work in a similar way even establishing 10-20 year surrender terms if you want to cash in or exchange the cash value in your policy.  It sounds similar to a prepayment penalty for a bank loan doesn't it?  Even if there is a better product of insurance with lower fees or a more up to date life expectancy table your current insurance company isn't going to tell you about it. Policy Review  Maybe you find a better policy with another company after 10 years but you are hamstrung because you have a 20 year surrender period and taking a 25% hit on your cash value to move it into a better product still doesn't make financial sense.

    You could try an internal 1035 exchange.  As an independent agent we can sift through the different types of permanent insurance policies within that company and see if you can do a penalty free 1035 exchange.  This way you don't get dinged with a surrender charge.

    Here's an example:
    A client bought a permanent policy in 2005.  He has accumulated $150,000 of cash value.   Being a smart consumer he wonders if this is still the best plan for him.  Is he still paying the right amount?  Is the amount of insurance still appropriate?  The short answer is we can improve his existing policy based on his cash value position but, his surrender value is $100,000.  Taking a $50,000 haircut is tough to justify.  After digging into the other products at that carrier, we realize he can move it into another product that is better suited for him now without losing his $50,000.

    There can be cases based on the company and the type of products they offer where it still makes sense to switch to another carrier even if you have to leave some money on the table.  Getting objective feedback and comparing the proper inforce illustrations will show you if you should make that switch. 

    Calling your insurance company or a captive agent is not the right tact.  They aren't out to get you but, they are going to tell you your policy is running just fine. Captive vs. Independent Agents  Many independent agents aren't aware of having this as an option.  They may lose money or earn less by doing this versus switching to another company but, doing the best thing for the client takes priority.

    Enjoy our video....

    Friday, May 22, 2015

    The System is Broken - Can it be Fixed?

    I'm impatient.  Not quite Frank Shirley impatient but, not far off.  Shirley, the old curmudgeon CEO from Christmas vacation asks his assistant to "Get me somebody. Anybody. And, get me somebody while I'm waiting."

    I want things done in the quickest, most efficient, and best way possible.  Every time.  When I see areas that can be improved upon and aren't primarily from the "we've always done it this way" mindset it is like nails on a chalkboard.  To combat this we try to manage expectations.  Under promise and over deliver.

    When a client applies for life insurance we tell them it may take 3 months depending on the need for medical records.  Why should it take so long?  Why does it take so long?  Should we just except it?  How can we make it better?

    The biggest issue we see is the turnaround time for obtaining medical records.  Most of the time we have to use a third party copy service.  The copy service may only come to the doctor's office once or twice a week.  It might take 2 weeks for our request to cycle to the top of their list.  The copy service could sit on them for another week or wait for you to pay for them.  They might miss that doctor's office that week and push it out further.  That just took a month which fairly commonplace.

    The Weather - We had several snow storms this past winter.  The facility closes for 2 days.  The copy service doesn't go to that doctor's office that week.  Maybe they are preparing for the storm a couple of days before and then playing catch up after.  We might lose two weeks right there.  What happened to this paperless office.  Do phones and internet access not work assuming you have power?  Apparently not.  Everything shuts down.
    The Holidays - So, are you ready for Christmas?  You got all of your shopping done?  I hear the same questions every year.  Christmas has been my favorite holiday but, you are almost better off shutting down your practice from the week before Thanksgiving until January.  Everybody is getting ready for something which means that they can't focus on anything else for that 6 weeks.  As head of the party planning committee we can't be expected to work when the annual Christmas part is 3 weeks away.
    Not Ordering the Records Upfront - An agent should know from the beginning if medical records need to be ordered.  In many cases the application gets to the underwriter who reviews the file and confirms medical records are needed.  You just lost another three weeks because they should have been ordered from the beginning and it can be cycling through the copy service while the application is working its way through the underwriting queue. 

    We try to control as much of this process as we can.  We order the exam and the medical records through our own case manager and not rely on the insurance carrier.  It does help speed up the process and we have the ability to send them to another carrier if we aren't pleased with the offer.  This way we don't have to start over again.

    Possible Solutions
    1. We have shown up at the doctor's office ourselves with a HIPPA release form to obtain the records.  That may work if there isn't a centralized medical records reporting facility like some bigger institutions utilize.
    2. We have offered to buy the staff lunch if they could release the records that day.
    3. Keep calling the doctor's office and stress the importance and the time sensitive nature.
    4. Work with the insurance carrier's wholesaler.  They are incentivized to get the case placed.  They will help push the case through and serve as your advocate.

    How Long Should it Take?
    We tell clients 3 months to set expectations.  Maybe we have just accepted it ourselves.  It shouldn't take nearly that long.  It really should take two and a half weeks.  There is no reason the client can't have his exam done, we obtain the medical records, and have the application in front of the underwriter with a verdict in two and a half weeks.

    As a group we continue to push the status quo.  Why settle?  Why not strive to better.  I'm not just talking about agents but, everyone involved in the process.  The examiner, the copy service, the case manager, and the insurance company should all aim higher.  Think of how many more clients can be helped but continuing to push.  Be better.

    Enjoy our video(part 1).....

    and part 2....

    and outtakes....

    Monday, May 18, 2015

    Excellence in Business - Jennifer Coleman

    In previous posts, we have discussed examples of folks not producing quality work in our industry.  It could be in their lack of communication, their resistance to change, not properly reviewing a client's insurance policy, not bringing in experts in other fields to better assist with the client relationship etc.  Much of this was to bring to light the shortcomings we see so consumers can properly evaluate who they work with and if their advisors have any of those qualities.  From an advisor standpoint it was more of a call to action to assess the quality of their work and strive to continuously improve. 

    We would also like to highlight professionals who we see strive to do their best work.  From objectively reviewing a client's current situation, expert communication, and going above and beyond from a customer service standpoint.  Jennifer Coleman exhibits those traits.  Jennifer is a real estate professional but, has drawn from her experience working as controller in the construction that brings a unique perspective.  With the building industry as a backdrop it enables her to view the house from the other side of the table.  This niche really comes into play with buyers who are looking to purchase new construction homes.

    Jennifer also brings a balanced approach to her clients whether they are buying or selling a home.  She is numbers driven and may look at pricing and market conditions four different ways to help her clients determine pricing.  As she sifts through the mounds of information on properties and location, Jennifer can present the best options from an analytical perspective.  Jennifer also embraces the emotional aspects of the home buying and selling process and can manage both sides so the client can makes the best decision possible.

    We also advocate her speed in communication.  Jennifer is quick and responsive with her smart phone never far away.  As she indicated in today’s market, homes are coming on and going off the market in a matter of 1-2 days in some circumstances so speed is critical.  With her active buyers she makes a point to check in at least once a week to see how they are doing without coming across as pushy.

    As we are huge proponents of customer service, Jennifer keeps that mantra as a top priority.  Of course everybody says that, but how do you know if it’s true?  We took a gander at some of her unsolicited testimonials and were blown away.  All of her clients are her friends.  They may not have started that way when they met but, they are now.  Off the record, Jennifer told about meeting a client one Sunday night around 10pm in the rain to review some of the measurements of the house a client was considering purchasing.  In the end, she was able to get to the root of the problem and address the questions the client had about square footage.  Who does that?


    Sunday, May 10, 2015

    The Help (Case Managers).... Kind, Smart, and Important.

    They is kind, they is smart, and they is important.  I do not mean to degrade their work in the least.  I happen to have who I consider to be the best case manager in the business.  I have been working with her for over 10 years and she makes my life better.

    She is kind.  She knows how to handle my partners and me.  She knows that we are out in the field and need a little encouragement from time to time.  Some aspects of the insurance business can be frustrating.  It is nice to speak with someone who you can tell enjoys her job and is happy to speak with you when you need her help.  I have worked with case managers in the past who are just going through the motions. 

    She is smart.  She knows who to speak with at the insurance companies.  She has been in place long enough that she knows who to contact at the carriers to get our business underwritten at the offer we need.  She also knows to ask the right questions so that she can help us the best way possible.  In other words, she often challenges my requests by saying things like "this carrier has an online application, would you rather use that?".. or .. "Maybe this case should go in as an informal because it looks like it could be table rated."  She doesn't see the client but she knows her way around her side of the insurance business.

    She is important.  We, who see the client face to face need only to be thinking about those interactions.  Every moment wasted on paperwork, parameds, APS, etc. is a moment we could have spent with a client to improve his or her experience.  We should be able to pass off everything that isn't related to seeing clients to someone who we trust.  Most financial professionals could not say that they are completely confident that the case manager can handle that task with no oversight.  We at Brevity and Associates are completely confident.

    Wednesday, May 6, 2015

    Facts of Life Insurance - Quoting the Best Rate

    We've all been in competitive situations.  Many times they can be stressful.  You want to put your best foot forward.  When interacting with a client it behooves everybody involved if you are open and realistic.

    We often see agents quoting insurance rates to clients in a bait and switch type tactic.  They will quote the very best rate in a competitive situation to try and win the business.  They either quote the top rate in an effort to undercut another agent even when they know a client won't qualify for that or even worse they don't even ask the right questions to qualify the client.  Are You Asking The Right Questions

    By asking the right questions and having a good knowledge base around underwriting you can give a client a more realistic view of what to expect.  The client will understand that most carriers have between 8 and 12 different health ratings and where they may slot in.  They might receive a preferred rating but, they could receive a level 4 or 5.  They aren't going to shop around for a cheaper quote if you are asking the right questions and finding the quote that makes sense.

    Enjoy our video....


    Monday, May 4, 2015

    All of our LTC and disability are all handled by my husband's office

    "All of our LTC and disability, are all handled by my husband's office."   Let me explain. 

    I recently reached out to a new insurance agency.  New in a sense.  They have another P&C agency one town over and recently purchased this agency.   She is an independent agent and her husband is a captive agent.  I briefly described how we partner with other groups and thought a meeting to go into more depth would be appropriate.  I know we can help them.  They may not come to that conclusion and that's ok.  Companies have a certain way they do business and breaking away from that with different ideas can make your calves tighten up.  We aren't a good fit for everybody.  We try to work with people and companies that are like-minded, think with reason and logic, and always do their best work for their clients.  Developing and Maintaining Partnerships

    I get at least one phone a day from a wholesaler asking for a meeting.  It can be a little much.  If nothing else I am going to learn something if I take the meeting either about market conditions or a innovative new strategy.

    Someone in the same area calling to exchange ideas is a bad thing?  The first response was "I have to run it by my husband."  Great, bring him along.  We may be able to help him as well.  A follow up email included "All of our LTC and disability, are all handled by my husband's office."  No conflict there.  I'm sure all of your clients would be happy to know their local P&C independent agent is sending any of those needs to someone who is captive.  I've heard some dandies before but, that is a first.

    Friday, May 1, 2015

    Facts of Life Insurance - Trust Fiduciaries

    We run across trust fiduciaries quite often many of which are tasked with overseeing an irrevocable life insurance trust.  The overwhelming majority are neglecting their responsibilities when comes to thoroughly reviewing the health of these policies. Evaluating Trust Owned Life Insurance

    Ex: 5mil policy that costs $100,000/yr
    If you can get the same policy for $60,000/yr you are throwing away $40,000.  A fiduciary should be able to figure that out.  In fact it is their responsibility.

    What if they are being underfunded?
    We see far too often that these polices are blowing up or running out of steam.  If you aren't comfortable with doing this analysis beyond a simple inforce illustration then find someone who can do this for you. Policy Review

    What if you are overspending?
    Consider reallocating those premiums.  Maybe they should go back into the trust as a gift.

    Is the amount of insurance appropriate?
    What if the policy was set up based on a net worth of 5 million and now it is 10 million.  That should be addressed potentially before an attorney brings it up.

    Friday, April 24, 2015

    Facts of Life Insurance - Diabetes

    Diabetes comes in 2 forms.

    Type 1 - diagnosed in children and young adults, and is known as juvenile diabetes. It is the rarer of the 2 types.

    Type 2 - considered as adult-onset or noninsulin-dependent diabetes.  It is the more common of the two.

    With good control and normal A1C score life coverage is attainable.  An A1C score under 7 is better for getting approved.  It is tougher with scores beyond 8 but, it is still possible.


    40yr. Male looking for 1 million of 20yr. Term

    Less than $1,800/yr

    40yr. Female looking for 1 million of 20yr. Term

    Less than $1,500

    You may be able to get a better deal on a permanent policy.  Many insurance carriers offer underwriting credits.  Individuals with diabetes would qualify for those credits.  It could result in a substantial reduction in premium.

    You should always try to obtain coverage going through normal underwriting channels.  Premium wise it should make a big difference in cost.  If that method doesn’t work then a client can look at a guaranteed acceptance policy.  That should be used as a last resort.

    Enjoy our video....

    Tuesday, April 21, 2015

    Facts of Life Insurance - Professional Designations

    Why do business professionals get professional designations?  Is it to enhance the quality of your work and improve the client experience?  Is it simply to make you appear smarter?  What have you been doing since you put those letters after your name?

    As an advisor who clients put their trust in there should be an ongoing quest to learn and get better at your craft.  Many professionals have blinders on and want to meet and talk to as many clients as possible so they can focus on their specialty.  Sales.  If you aren't taking the time to learn in this dynamic business world how can you give your client the best experience?  There is no virture in ignorance.

    The good news about a designation is that they come with some amount of learning.  I spent quite a few hours slaving over those CFP books.  If you stop learning and challenging yourself what was the point in getting the designation in the first place?

    We strive to work with partners that excel.  They are proponents of lifetime learning.  They wouldn't sleep at night if they didn't think they were doing their best work.

    Don't hide behind the letters after your name.  Don't use them as a crutch.  Prove how good you are with the quality of your work.

    An example we have seen in the life insurance industry agents that manipulate target premiums in order to receive a higher payout.  The client may not even realize the difference.  In the end it is going to have an negative impact on the amount of insurance or premiums.  It is just not the best plan the client could have received.

    Enjoy our video....

    Sunday, April 19, 2015

    Stockholm Syndrome in Captive Agents

    I have recently realized something about a captive agent friend of mine in the life insurance and financial planning business.  Over the 10 years I have known him, I have heard him complain about how some of his clients and even friends of many years have been taken away from him by independent agents.  Some of these times were when he was expecting a six figure premium case from wealthy clients and because he did not have the best product or quote, his long time clients went with the other guy.  He thinks it's the clients' fault or they were misled by a polished salesman.  Of course, neither of these assumptions are true. But I think I know what's going on....

    He has Stockholm Syndrome!  Stockholm syndrome is the psychological condition in which hostages form a positive bond with their captors.  Those being held captive empathize and sympathize with their captors to the point that they even defend their motives. 

    Many insurance companies such as Mass Mutual, MetLife, Nationwide, American General, AXA, Lincoln, etc., have captive agents.  These agents are not allowed or are highly discouraged from doing business with other companies.  But here's the rub, there is a double standard.  The companies above and many more are available for independent agents to use.  The carriers have support teams just for the brokerage channels who compete with the agents on the captive side.  So what would motivate a prospective insurance buyer to work with a Lincoln or Nationwide captive agent, when that consumer could have access to those companies and more through an independent?  A relationship, Maybe, but when you're talking about 10's or 100's of thousands of premium dollars over the life of the insurance contract, the smartest shoppers use independent agents.

    Thursday, April 16, 2015

    Whose Hours are the Most Valuable?

    The answer is.. The person who knows the most.  A smart friend of mine once told illustrated this to me in this example:  A guy calls a mobile computer technician to fix his computer after trying everything he knew to solve the problem himself.  The tech shows up, hits a couple of keys, flips the computer around, pulls out a screwdriver and turns a screw half a turn.  Immediately, the computer starts working again.  The gentleman with the newly repaired computer says "Wow, that was quick work.  How much do I owe you?"  The tech says, "that will be $100."  Surprised, the customer says, "A hundred bucks for turning a screw!?" the tech responds "No sir, that would be outrageous.  I charge a dollar for turning the screw.  The other $99 is for knowing which screw to turn."

    The real story is that the folks who know the most have already put in thousands of hours of time.  This is how they acquire the knowledge it takes to earn the seemingly outrageous (to some people) sums of money for each actual hour on the job.

    Developing and Maintaining Partnerships

    Folks, we can't do it all... But we know the kind of excellence our clients deserve. 

    As a financial professional, it is important that you do not abandon your clients to the waiting wolves when your job is complete.  If you consider the wellbeing of your friends and clients, the responsibility is upon you to make sure that all the right people are in place to keep the wolves at bay.  How do you do this when you know what you're good at but your focus is narrow?


    The right people are rare, which makes them hard to find and valuable.  I'm talking about bankers, independent property and casualty brokers, independent life and health insurance brokers, wealth managers, CPA's and attorneys, etc..  You get the picture.  The partners I am talking about are the kind who are as good at what they do as you are at what you do.  That isn't all.  There has to be a similar business culture and philosophy, client bases and complimentary selling styles.  It will probably take you a couple of years to build these relationships.  Some of these people may be licensed as you are, so commission or fee splits will be involved.  In those cases, the MDRT guidelines are a good starting point for figuring out  percentages.  These relationships, if done right, are mutually beneficial and end up adding extra revenue to both sides.  Referrals come more frequently because of all the extra lines of business that your "group" handles.

    Enjoy our video....

    Monday, April 13, 2015

    Facts of Life Insurance - Policy Review

    How different was your life 5 years ago?  How about 10 years ago?  Family.  Technology.  Job.  Investments.  Gas prices.  The only thing certain in this world is change.
    We meet clients all the time that don’t want to think about reviewing their insurance situation or think everything is fine.  As an advisor you are doing a disservice if you aren’t asking those questions.
    Reviewing your existing life insurance is something that should be done every few years.  You aren’t going to mess up your current policy by requesting an inforce illustration.  It may not be performing the way it was designed to run or there simply may be a better product available now that wasn’t before.  90% of People Have The Wrong Insurance

    New surrender charges - That could be a factor but, if a new policy is still a better fit then that shouldn’t deter you from making a switch.  There are policies now that have a high early cash value option where your premium money is guaranteed available from year 1.

    New contestable period – You weren’t worried about that when you first bought the policy so it shouldn’t be an issue.  If you don’t materially misrepresent(lie) on the application then you have nothing to worry about.  Even still the issuing company could come back and tweak the policy to represent what you should pay for the same coverage if they find out.  The insurance company really isn’t in the business of doing that.
    Bad decision - Many times captive agents will use fear mongering to try and keep policies on the books to enhance their numbers.  Don’t let that sway you.  Get an unbiased perspective.

    Analogous to mortgage rates – If you have ever refinanced your house then you realize how important the interest rate variable is to the equation.  There are interest rates in life insurance as well as mortality tables.  Back in the 1980’s when interest rates were drastically higher cash value projections were based on double digit returns.  Now 3-4% is more likely.  You wouldn’t keep paying a higher interest rate on your mortgage if you could drop your rate enough to reduce your payments or trim down your time period for paying off your house.
    Along with interest rates mortality tables have changed with people living longer.  Insurance companies have updated their policies to reflect that which in turn lowers the cost of insurance.

    Family Dynamics – As people age the amount of coverage changes as well.  When you are first married you may primarily be looking to replace income for the deceased spouse.  Fast forward 10 years later and maybe you have 3 kids to factor in along with a bigger house and college.  There is a need for more coverage.  Fast forward another 10 years and the kids are out on their own.  You have funded retirement accounts and good portion of your house is paid for.  Maybe now you need less coverage.
    Conclusion – Reviewing your insurance needs just like any other asset shouldn't be ignored.  The insurance landscape is ever changing.  If you aren’t elbows deep in it(and why would you) then you wouldn’t know if you can improve on what you have or if it is just fine.  Beyond the insurance industry reassessing your own financial situation as it pertains to risk management is equally important.

    Enjoy out video....

    Wednesday, April 8, 2015

    Facts of Life Insurance - Do As You Say Not As You Do

    Why would you do what say you're going to do?  Is there any value to it?

    People can recognize excellence.  It starts with doing what you say you are going to do.  We run across too many people that take this simple exercise for granted.

    1. Client asks us for a term insurance quote and we tell them we will get them something before the end of day.  We better do that or we are starting off on the wrong foot.
    2. Answering emails in a timely manner -  24 hours has been the status quo for a response even though now that is considered slow.  If we don't know the answer or can't solve the problem we pride ourselves on responding back the same day or the following morning if it was received late in the day.
    3. Phone calls - We work with too many individuals that aren't great at returning phone calls.  The response is we'll call you back in 15 minutes or tomorrow.  Then....nothing.  Who does business that way?  We aren't cold calling.  We're calling because there is something we are working on that we need your help with addressing.  Next time just tell us you aren't going to call us back or better yet do so in a timely manner.

    We partner with business professionals and bring an expertise to the table to help their clients.  We aim to enhance and broaden the experience the client has with their advisor.  We strive to assist that client as if they were our own and when we accomplish this that client's experience is top notch and the advisor has done even more to solidify their relationship.

    It shouldn't be such a rarity that people you partner with do excellent work and do what they say.  It makes us stand out.  We have agents and advisors that come to us because of that very reason.  Even if you strive for perfection you can't expect it.  There are things we can't accomplish but one of our goals is to be upfront and explain everything.  What a concept!

    Enjoy our video.....

    Friday, April 3, 2015

    Facts of Life Insurance - How To Handle A Decline

    If you have been declined for life insurance all hope is not lost.  Insurance underwriters don't like uncertainty.  If a client has a medical issue the underwriting department would rather see a period of time between the occurrence and the treatment provided as well as successful follow-ups.  Any ambiguity and they always assume the worst.  No news is bad news.

    Check out ways to avoid being declined. How To Avoid Being Declined

    Ideas to Consider if You've Been Declined:
    1. Pick A Better Company - If you worked with a captive agent then the solution that was presented to you at application was within whatever company that agent represented.  Clearly that wasn't the best fit.
    2. Shop Around - Companies change their underwriting standards.  Some companies are more aggressive with certain health issues than others.  Sometimes depending on their existing portfolio a company could more lenient on diabetes or heart issues for example.
    3. Avoid a Second Decline - Companies can view your history through the MIB.  One red flag like a decline that pops up is less than ideal but, a second would really sting.
    4. Better Explanation of Your Situation - An underwriter just reviews the material that's put in front of them.  A conversation or a cover letter outlining your past declination may present your case in a better light and many times can change the mindset of the insurance company.

    Enjoy our video.....

    Friday, March 27, 2015

    Facts of Life Insurance - How to Avoid Being Declined

    Fear of rejection is one of the deepest human fears.  Nobody likes to be rejected.  It happens in the world of relationships and in most industries.  Insurance is no exception. 

    As individuals consider their insurance needs and begin the process of applying for coverage there are some things to consider to avoid a potential declination.  A good agent should be able to access your situation by asking the right questions.  If they are in-depth with their fact finding they will be able to direct you to the correct company based on your health and financial situation.

    Ideas to Consider:
    1. Apply Informally - An agent can send all of the normal requirements but, let the company know an informal application and if it appears to be a decline the case can be pulled.
    2. Quick Quote - An agent can send a quick blast out to multiple carriers with an overview of the case and the carriers will reply back with a possible outcome assuming everything comes in as outlined.
    3. Apply at Multiple Companies Informally - For a client applying for a great deal of coverage an agent can send an informal application out to several carriers partly as way no to raise any red flags with other companies.

    Enjoy our video....

    Thursday, March 19, 2015

    Facts of Life Insurance - Captive vs. Independent Agents

    There are several differences between a captive insurance agent and an independent agent.  It is important as you assess your own insurance needs.

    1. An independent agent is working for the client whereas a captive agent is working for the company they represent.
    2. An independent agent could potentially have access to dozens of carriers instead of being limited to one.
    3. Independents can help a client determine which company may be best to use based on their health and financial situation.  A captive agent is stuck with only the products they're company has.
    4. A captive agent has very little to no incentive to review your policy in the future as it may be detrimental to replace what they have already done.  An independent has the flexibility to continually review the marketplace as things change in the industry as well as things change for a client's situation.
    5. There is no benefit for a client to apply directly with a specific company.  The premiums will be the same and they are better off getting guidance from an independent agent as they decide what is best.

    Enjoy our video....

    Thursday, February 26, 2015

    Facts of Life Insurance - Taxable Life Insurance

    In most circumstances life insurance isn't taxable.  Here are some instances when it is and how to avoid them.

    1. Businesses writing off the premium costs on their taxes.  Can be prevalent with key person policies.
    2. Unholy Trinity - Owner, Insured, and Beneficiary are all different.  It creates a gift from the owner to the insured
    3. Tax Code Section 101J - For business policies after 2006 a disclosure form should be completed.
    4. Estate Taxes - If policies are individually owned and not trust owned then the benefit is subject to estate taxes beyond the exemption level.
    5. Policies held in a non-qualified retirement plan.

    Enjoy our video...