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.”


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.


Managing Long-Term Care Risk for High Net Worth Clients

Managing LTC Risk for HNWC

Why would you recommend that clients with millions of dollars in invested assets spend money on a long-term care plan? Because it helps remove the risk from their portfolio.

With affluent clients, it’s not whether they can afford to pay for potential long-term care needs. But is it an expense they want to incur at an unpredictable time in their lives?

Long-term care concerns are similar no matter your clients’ net worth.

  • They may equate long-term care with a stay in nursing homes. In fact, 76 percent of long-term care insurance claims begin with home care or in assisted living facilities.¹
  • Another factor to consider is that long-term care is just that – long-term. About one-third (34 percent) of LTC insurance claims last at least two years and 13 percent last more than five.²
  • Active baby boomers may expect to remain healthy throughout retirement, but Americans turning 65 face a nearly 70-percent chance of needing long-term care services in their lifetime.²
Sources:  ¹ American Association for Long-Term Care Insurance; ² U.S. Health and Human Services Department

Self-Insuring Is Self-Funding

High net worth clients don’t have the affordability objection. But their mindset may be “If the time comes, we’ll pay for it ourselves.” That perspective could have an adverse effect on their portfolios if and when they do need long-term care.

Ask your clients if they believe another downturn in the market could happen. There’s also the likelihood that they could experience an unexpected health event. There’s simply no guarantee that their need for care would come at a time that’s either convenient to them or to the performance of their portfolio.

It may make sense to concentrate on insuring affluent clients’ investments with product solutions that can minimize their risk of absorbing the entire cost of care.


Collaborate with an LTC Expert to Boost Business

Collaborate with an LTC Expert

The recipe for a typical long-term care conversation calls for:

  • Equal parts rising health care costs and longer life expectancies
  • 1 preconceived notion about nursing homes
  • 1 heaping cup of confidence that a health crisis won’t happen
  • Pinch of fear that it will
  • Blend with emotional stories of caring for a parent or loved one

For best results, add the expertise of Nancy Simm, Director of LTC & Longevity Planning at Highland Capital Brokerage. She can be your secret ingredient to offset client hesitation when discussing this complex topic.

30 Years Working for You

Nancy suggests adding long-term care planning to your agenda with clients at their annual review or financial analysis. She knows they will be relieved that you have addressed the topic. When clients are open to it, arrange a conference call and introduce Nancy as a member of your team.

Then, you don’t need to be an expert on long-term care. She can be one for you. Take advantage of her 30 years of industry experience when helping clients make plans to protect themselves financially from potential long-term care needs.


8 Ways to Talk About Long-Term Care

Advisor with Clients

One reason your clients trust you with their assets is your recommendations help them sleep at night.

Whether the market is up or down, your advice provides peace of mind that clients count on. It’s time to put that calming effect to work on the topic of long-term care.

You owe it to your clients to talk about incorporating Longevity Planning in their financial plans. Breakthroughs in medicine, technology and public health have led to longer life expectancies. Your clients can look forward to many years ahead.

But there’s no guarantee they won’t need some sort of assistance. Americans turning 65 face a nearly 70-percent chance of needing long-term care services during their remaining years, according to the U.S. Health and Human Services Department.

Rest easy, we’ve got tips for making the subject relevant to a wide range of clients.


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