The Three Myths of Annuities

Three Myths of Annuities

In today’s customizable, satisfaction-guaranteed world, it’s no surprise that investors, too, want it all. They expect retirement solutions that provide guaranteed income, while still insulating them from downside risk.

There is a solution that offers both: annuities. But even though annuities are one of the only vehicles that deliver income and risk mitigation, surprisingly only 42% of financial advisors recommend them as part of retirement and income plans. Misconceptions or outdated views on annuities may be keeping advisors from offering the financial stability their clients need. Dispelling the most common annuity myths is the first step in remedying this.

MYTH 1: Consumers hate annuities

Truth: Although some clients may not fully know the benefits of annuities, or hold outdated, incorrect opinions, a growing number are becoming educated and are choosing to add fixed indexed annuities (FIAs) to their retirement plans. In fact, recent annuity sales are shattering previous records. According to the LIMRA Secure Retirement Institute, FIA sales were $20 billion in the second quarter of 2019, 14 percent higher than prior year results.1 Indexed annuity sales are expected to grow by double digits to about $96 billion by the end of 2023, a 38 percent gain over 2018.2 Those who understand the benefits FIAs can provide — income protection and stability with little or no maintenance — are not surprised.

What are the Living Benefits of Life Insurance?

You already know the most common reason to buy life insurance—to financially help those that are left behind. But did you know that life insurance can also provide benefits during your lifetime? By purchasing a cash-value life insurance policy, you can better manage your money for what matters most: a greater quality of life for you and your family.

Tax laws change. What may be a favorable tax environment now may look completely different when you retire. But in a cash-value life insurance policy, savings accumulate tax-advantaged, helping to diversify your retirement income’s taxation, ultimately preserving more of your hard-earned money.

And, as more of us are living longer, there may be a greater need to access your cash-value policy’s death benefit for medical reasons, a decision that may help protect your assets from depletion in the event of a chronic or critical illness.

This video illustrates how carving out savings today for a cash-value life insurance policy may help protect your income in the future. Download and share this video and encourage friends and family to make an appointment with a life insurance advisor for more detail.

pro tip image

Download and share this video with your online community. Spread the word about how life insurance can help your clients protect their income in the future.

Download Video Now

Complete the form below to download this resource.

This material does not constitute tax, legal or accounting advice and neither Highland Capital Brokerage nor any of its agents, employees or registered representatives are in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors.
By submitting this form, I certify that I am authorized to access the pages and any materials or documents provided by therein.

Eye on Congress: What Does the SECURE Act Mean for Businesses?

What does the SECURE Act Mean for Businesses header

On December 20, 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which has a laudable goal of expanding opportunities to increase individual retirement savings. The new law enacts several changes to employer-sponsored retirement savings plans, which historically have helped individuals save more for retirement than traditional IRAs.

Advisors working with business owners who have or are considering an employer-based retirement plan should familiarize themselves with the four most prominent changes laid out in the SECURE Act:

  • Offering lifetime income annuity options in retirement plans
  • Changes to enrollment requirements, tax credits, and tax-filing deadlines
  • Adoption of multiple employer plans (MEPs)
  • Eligibility of part-time employees in 401(k)s

Enhancing Lifetime Income

Several provisions in the new law encourage employers to offer lifetime income annuity options in their retirement plans. The key change of the SECURE Act is an enhancement of the fiduciary “safe harbor” protections for employers when assessing financially secure life insurance companies that provide annuities in employers’ qualified plans.

Understanding New York Regulation 187 (NY 187)

Suitability and Best Interests in Life Insurance and Annuity Transactions

The New York State Department of Financial Services (NYDFS) best-interest Regulation 187 (NY 187) is effective February 1, 2020 for life insurance transactions, and August 1, 2019 for annuity transactions within the state of New York.

What is NY 187?

NY 187 imposes a best-interest standard on recommendations to purchase, replace, or alter life insurance and annuity products sold in New York state. According to the NYSDFS, a goal of the amended regulation is to “fill in regulatory gaps” resulting from the elimination of the Department of Labor’s Fiduciary Rule.

Compliance with the duties and obligations connected with life and annuity product transactions fall on both producers and insurers. The new regulation significantly expands the producers’ duties and obligations by imposing a best-interest standard on all life and annuity products recommended to consumers. In general, producers must act in the “best interest” of the consumer with respect to purchase and replacement recommendations, and to post-issuance transactions of in-force products, including the exercise of any contractual provisions. Those transactions of in-force business that do not result in a commission are subject to “best-interest lite” standards.

The overarching theme of the regulation is to redefine the client’s best interest in insurance product recommendations in alignment with other fiduciary rules. Only the consumer’s interest can be considered when making a product recommendation. According to NY 187, this recommendation must reflect the care, skill, and diligence of a prudent person, and must not be influenced by a “producer’s receipt of compensation or other incentives.”

A dominant emphasis in the regulation is written documentation—disclosing the range of products recommended after an evaluation of the client’s needs based on relevant suitability information and consistent with the client’s risk tolerance. (A summary of the information required to support a product recommendation can be found at the end of this article.)

The Many Shades of “Maybe”

The Many Shades of Maybe

Clients fall into the psychological traps of investing all the time. They stick to old ideas and protect earlier choices, even those that aren’t financially beneficial. They follow the herd mentality, investing in the latest, hottest product without concern for how it may fit into their broader financial plan. Or they may hold as truth the advice of a friend or family member whose financial goals don’t match their own.

These restrictive mind-sets can be exacerbated by immediate access to online advice, whether sound or not. Prospective clients can search infinite opinions on a product or topic, weigh pros and cons, and—after a dash of intuition—make a decision, all before even meeting with you.

Even during a meeting, these mind traps may lead clients to say “no” before they’ve fully considered the option you’re offering. That’s because individuals are programmed for financial survival before financial growth, instinctively trying to stock and preserve.

Will the SECURE Act Affect Your Clients’ Financial Plans?

SECURE Act image

On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The new law has the laudable goal of expanding opportunities for individual retirement savings. However, several key changes made by the SECURE Act may affect your clients’ retirement and legacy plans, requiring possible reconsideration and adjustments.

Age Restriction for IRA Contributions Eliminated

Old Law: No traditional IRA contributions are allowed in the year the IRA owner turns 70½, or any subsequent years.

New Law: For tax years 2020 and beyond, contributions to traditional IRAs are allowed at any age.

Charitable Implications—Qualified Charitable Distributions (QCDs): QCDs of up to $100,000 are allowed once the owner of the IRA reaches 70½ (age unchanged). If the IRA owner requests a QCD in the same year that a deductible contribution is made, the QCD is decreased by the amount of the deductible portion of that contribution.

8 Secrets of Prospecting


How much money could you make if you had a steady stream of quality leads and referrals? We’ve all asked ourselves that same question. The reality is that 20% of all agents generate 80% of all commissions. And the top 20% of those high-performing agents generate 80% of the commissions in that group. What separates that top 4% from the rest of the field? They spend the vast majority of their time working at their maximum-income tasks. For most of us, that means face-to-face selling situations with a client.

Before we explore how you can work toward this goal, you must first take a long, hard look in the mirror. Ask yourself, “Do I have the tools that will allow me to capitalize on that consistent flow of prospects?” For example:

  • Can you close a sale? It may seem like a silly question, but if you’re not selling something on at least 70% of your appointments, you need help in this area. Too many agents blame poor sales results on poor leads, bad referrals, the weather, the season, the phase of the moon, etc. The reality is that right now you’re either a closer or you’re not. The good news is that closing skills can be learned. And, the more clients you meet, the more rapidly you’ll learn them.
  • Do you have the knowledge? Have you taken time to invest in yourself? Have you earned professional designations? Are you securities-licensed? Do you attend practice development programs? Our industry is changing so rapidly that not staying current will doom you to failure. In addition, the clients of today are much more educated than even 10 years ago. They can easily tell if you don’t know what you are talking about.
  • Are you selling multiple products to your clients or are you a “one-trick pony?” By offering multiple products, you not only increase the average income per client, but you also create greater client loyalty and, not surprisingly, more referrals.

I hope you see my point. Putting an advisor in front of a large quantity of prospects without the proper skills or knowledge is like asking a carpenter to build a house without a hammer or saw. The house may eventually be built, but the cost would be so prohibitive, nobody would buy it!

Now that we’ve gotten that out of the way, let’s talk about prospecting.

Stop Selling Features. Start Solving Problems.

Stop Selling Features header image

I never cease to be amazed at the way some advisors obsess over every change made by a vendor: “The sky is falling, the sky is falling!” Translation: rates or benefits are changing.

Your client doesn’t care, because clients buy solutions, not features.

I learned a long time ago that if you focus on features rather than solutions, you train your clients to concentrate on the wrong thing. Let’s look at two examples:

1. “My term rate is better than Company X.” By taking this approach, we are training the client that the only important thing is price. When somebody comes along with a cheaper price, you lose the client. If you don’t believe that, consider what happened in wealth management. Stockbrokers used to get $83 to execute a trade. Now people expect trade execution to be free.

You should instead focus on providing a policy that will deliver a known amount of cash at an unknown point in time, such that a surviving spouse and children will have stability and comfort following the untimely death of a parent and spouse.

2. “Cap rates (fees, participation rates, riders, etc.) are better with Company X than with Company Y.” Again, your client doesn’t care, let alone understand, the difference. By focusing on these features you distract them from the true solutions offered by an annuity. Try this positioning instead:

  • “This annuity will offer tax-deferred growth, protection of principal, and earnings slightly better than a certificate of deposit (CD).”
  • “An annuity is the only financial instrument that can guarantee an income that you can’t outlive.”

Or, use a feature to solve a problem.

  • “John, I know you are/will soon be taking required minimum distributions (RMDs) from your IRA/SEP/TSA/401(k). If I could show you a way to take your RMDs every year, and at your death pass on to Mary more than what you started with—even if you never earn a penny in interest—would you be interested?” (A great sales idea. Contact us to find out how this is done.)
  • “Helen, an income rider provides two safety nets on your policy. First, it provides a minimum step-up every year on your income value, protecting you against market volatility during the accumulation phase. Second, once you begin taking income, it provides a guarantee that if your account goes to $0, the insurance company will step in and continue your income payments as long as you live.”

It’s fine if you want to gripe about intricate policy changes with colleagues or attendees at an industry convention, just don’t do it in front of clients. By focusing on solutions, you’ll have happier clients and less heartburn.

To learn about the great sales idea mentioned above, or to get more information on how to differentiate solutions over features, please contact one of our dedicated annuity representatives at (800) 699-0299.

Time May Be Running Out on FLPs

Time may be running out image

Why a FLP Strategy in 2020 Could Benefit Your High-Net-Worth Clients

Harry met Wilma and started a family. Now, they’re looking for a valuable wealth preservation or asset protection instrument for their $100 million estate. Family Limited Partnerships (FLPs) have been and continue to be one of the most powerful tools in an estate planner’s toolbox due to the ability to significantly discount the value of gifts made from parents to the next generation(s). Utilizing the doubled lifetime exemption afforded by the Tax Cuts and Jobs Act ($11.4 million/single, $22.8 million/married), a parent may be able to use a FLP strategy to gift heirs more assets from their estate than what they’d otherwise be able to directly gift, while also maintaining some control over those same assets.

To help you better understand FLPs and the value they provide, Harry and Wilma’s opportunity is demonstrated in the following hypothetical example:

Harry & Wilma’s Opportunity

Harry and Wilma have a total net worth of $100 million and are looking for ways to:

  1. Reduce their estate
  2. Benefit their two children, Steve and Darla
  3. Retain control over the management of their assets

Under current law and assuming no prior gifting, Harry and Wilma currently have $22.8 million in available estate and gift tax lifetime exemption.

If they were to gift their children $29,400,000 directly, without the use of the FLP strategy, they would report a gift of $29,400,000. Because this amount exceeds the couple’s current lifetime exemption amount of $22,800,000, they would immediately owe gift taxes in the amount of $2,616,000.

Instead, Harry and Wilma determined they want to form a FLP and fund it with $30 million of income-producing commercial real estate. Through the FLP, they then gift their two children 98% (49% each) in the form of limited partnership interests which, at first glance, would appear to have a value of $29,400,000. Harry and Wilma keep the remaining 2% ($600,000) for themselves in the form of a general partnership interest.

Heins Woller-Anger Scholarship

HCF Heins Woller Anger Scholarship

HighCap Financial is always proud of the integrity, generosity, and consideration that our advisors exhibit not only with their clients, but with their communities. A prime example is Erv Woller who, along with his partner Bob Anger, have funded the Heins Woller-Anger Scholarship for 30 years through the University of Wisconsin-Madison’s (UW-Madison) School of Business. The goal of the scholarship is to not only promote the industry by providing financial assistance to select students in the Risk and Insurance Department, but also to honor the late Richard Heins, a former UW-Madison Risk Management professor whose passion for risk management was infectious.

Erv, who was a student of Dick Heins while at UW-Madison, is still impacted by the professor’s intelligence, dynamism, and desire to attract others to the industry. According to Erv, “Dick was prolific, impressive, and extremely charismatic. He was department chair, had a PhD, a LLB, an MBA, CPA, and a CPCU. Before UW, he taught at UCLA, and later became Chief Executive Officer at Cuna Mutual in Madison. He even co-authored the risk management textbook we used at UW-Madison.”

Dick was instrumental in growing UW-Madison’s Risk and Insurance Department. “He was a salesman. He brought in a lot of kids that might not have decided to go into our industry had it not been for Dick selling them on the fact that insurance is a good industry to be in and a very noble calling. That was the impetus behind honoring Dick with a scholarship.”

Page 1 of 48123...Last