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

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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.”

Three Year-End Charitable Giving Ideas

During this holiday season, many of us consider making charitable donations to a favorite cause or institution. In fact, according to the Giving USA Foundation’s annual report, American individuals gave $292 billion to charity in 2018.1 Many of the donations were large gifts as opposed to a few dollars here or there. If you’re considering making a significant gift, keep in mind these three strategies that could help both you and your charity of choice.

Donate Appreciated Assets

Some economic indicators suggest that we may be approaching the end of the longest bull market in history. Now would be a perfect time to consider donating appreciated assets—like stock that has grown in value—to not only support your favorite charity, but also receive a tax deduction and eliminate a future tax liability.

For example, let’s assume you have a stock worth $50,000 with a cost basis (the purchase price) of $20,000. If you sold the stock today, you would pay capital gains tax on the $30,000 gain. Assuming a 15% capital gains tax rate, the tax would be $4,500. However, if you direct your broker to transfer the stock directly to the charity, you receive a deduction for the entire $50,000 gift and the charity pays no tax on the subsequent sale.

On the other hand, if you want to donate a stock that declined in value, you would be better off selling it yourself and using the loss to offset other gains or to generate a deduction for yourself before donating the net cash.

Heap Your Donations

For 2019, to receive a deduction for charitable gifts over the standard deduction, you must be able to itemize your deductions. The chart below shows the standard deduction for the various filing statuses:

Filing Status Standard Deduction Amount
Single $12,200
Married Filing Jointly & Surviving Spouse $24,400
Married Filing Separately $12,200
Head of Household $18,350
Source: Internal Revenue Service

Let’s assume that you and your spouse are contributing $6,000 per year to your church. Since this amount is below the Married Filing Jointly standard deduction of $24,400, you would receive no additional deduction other than the standard $24,400. On the other hand, if you were capable of “heaping” the next five years into 2019, you could donate $30,000 before year end and take a deduction for the full amount. Do a quick check with your accountant to make sure the strategy works for your personal situation.

Donate Part of Your IRA

Typically, when a taxpayer reaches 70½, they are required to begin taking required minimum distributions (RMDs) from their IRA accounts, which are fully taxable. However, in 2015, a minor change to the tax law allowed taxpayers over 70½ to transfer up to $100,000 annually from their IRA directly to a charity, tax free.

In situations where these retirees don’t need the additional income, it may be more tax efficient to have the RMD amount (or more) transferred directly to the charity of their choice as a charitable rollover. This strategy satisfies the RMD requirement without generating additional taxable income to the owner.

Making a financial gift to a worthwhile charitable organization can be a game-changer to the organization itself. More likely, your holiday season will take on a distinctly different feel, knowing that you shared your wealth with those who need it more.

1 Giving USA 2019: The Annual Report for Philanthropy for the year 2018, IUPUI Lilly Family School of Philanthropy, 2019.

10 Things to Consider before Resigning from Your Broker/Dealer

Business Discussion

Transition is tough. Nobody leaves a broker/dealer (BD) they’re happy with. In fact, the pain you’re experiencing with your current BD has to exceed the pain of moving on, especially since the old days of “block” transfers are long gone. Today’s transitions are like going through a divorce and remarriage in 30 days with 300 children, but at some point, you may realize it’s worth it. Here are 10 things to consider before notifying your current BD of your intent to move on.

1. Make a firm decision. This may sound simplistic, but it’s essential. All too often, advisors think about leaving their BD and start checking into options. Then they begin to stew over all the paperwork, the effect of a change on their clients, the interruption to their business, etc., taking it all the way to the five-yard line without going for the score. After all that effort, they end up staying with their current BD and their practice often begins a slow death spiral. The point is, be decisive. Either move on to greener pastures or stay where you are and add more water. Both are good decisions. Anything else is a recipe for disaster.

2. Identify your new home. This is no easy task. You must take your time and do your due diligence. Every BD has a unique culture and set of offerings, so consider everything they provide, not just payout or incentive summary. Be sure their culture is in line with yours, because once the “honeymoon” phase is over, you’ll have to work with their people and processes for a long time. You don’t want to set yourself—or your clients—up for another divorce.

3. Read and understand your rep agreement. That document you signed years ago not only outlines your obligations to the firm while employed, it also outlines your obligations—and theirs—upon resignation. It’s important that you understand and abide by their pre-notice requirement. Many agreements require a 30-day pre-notice on either party. This protects both you and them from an immediate termination. This agreement should also outline their obligations regarding payment of commissions post-termination. With that in mind, it’s always best to set your termination date after any large, recurring commissions. For example, if you receive large deposits at the end of each calendar quarter, your termination date should be after those are typically received.

Picking the “Right” Index Crediting Strategy

Picking the “Right” Index Crediting Strategy

When positioning life insurance from a perspective of potential cash value build-up, there are various product types to consider, each with its own straightforward, distinguishing features. For aggressive risk profiles, variable life products—which may be fully exposed to the ups and downs of the market—may be appropriate. On the other end of the spectrum, fixed universal or whole life contracts with guarantees may be more suitable for a risk-averse client.

In between those extremes are index universal life products, where the lines between similar products can become distorted with very different features. Guarantees and safeguards are available with many, but not all contracts and accumulation strategies vary from simple and conservative to complex and aggressive.

On its face, traditional index universal life (IUL) is simple and straightforward. The policy owner trades some upside potential in the form of a cap in return for downside protection in the form of a floor. But the reality of the current IUL marketplace is far more complex and nuanced than that.

The array of index account options available today is vast. They range from the simple and straightforward cap- and floor-tied; to the Standard & Poor’s 500 Index (S&P 500); to those with multiple underlying indexes; to some that may include global exposure and a variety of caps, participation rates, bonuses, and index credit multipliers; or any combination thereof.

Long-Term Care: The Good, the Bad, and the Necessary

Advisor with couple

Long-term care (LTC) is probably one of the most important and perhaps sensitive discussions you can have with your clients. There are so many variables—your client’s actual vs. estimated longevity, current vs. future health, current vs. future lifestyle—each of which change the equation. But it’s also the emotion that’s attached to the discussion; every one of your clients knows they will eventually pass away, but thinking about how, when, and in what way always brings some consternation and even avoidance.

The approaches that you as an advisor can take to this sensitive topic are also numerous. Should you present clients with a total lump-sum amount, based on their current health and predicted longevity, calling attention via sticker shock? Should you narrow focus to smaller, near-term, known costs? Or, should you consider dividing their retirement into three main categories—active years, moderately active years and non-active years1—to soften the conversation? Regardless of your approach, one thing is certain: longevity and LTC should be discussed with all clients, especially those aged 50 or older, as part of a holistic and proactive retirement plan.

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