Senior Market Advisor

On June 17, President Obama unveiled a sweeping package of regulations aimed at the financial services industry. A brief summary of the regulations includes:

1. Letting the states retain much of their current regulatory oversight.
2. Creation of a new department, the Office of National Insurance, which has been proposed to act as a government watchdog to nearly every aspect of the industry.
3. Further empowerment of the Federal Federal Reserve Board to oversee companies that might pose a future risk, and subject them to more stringent rules.
4. Creation of a new “Consumer Financial Protection Agency,” which could cover products such as variable annuities.

As the dust begins to settle, some two weeks later, let’s review what some of the industry experts say about the new regulations and what it would mean to advisors:

• “This will set us on the right path towards a modern, efficient and consumer-oriented regulatory program,” said Frank Keating, ACLI president. “[We] appreciate [the] commitment to work towards modernization of insurance regulation, based on the principles of national uniformity, efficiency, effective oversight of systematic risk and better international cooperation.”
• “State regulations’ solvency system and consumer protections have served consumers well, as evidenced by the relative stability of the insurance market,” NAIC chief executive Pamela Banks said. “We are pleased that a council of regulators with functional expertise is included in the proposal, but urge inclusion of state insurance regulators to offer expertise and information on the insurance markets.”
• “… We need to ensure that we get effective regulation, not just more regulation. Unless it’s effective, layering on more and more bureaucracy will do more harm than good," NAVA president Cathy Weatherford said.
• “What new consumer protections will be gained by a new standard?” asked NAIFA officials. “As we have learned from recent weeks and months, there have been several instances where individuals who had a fiduciary obligation to their clients have been charged, and in some cases, found guilty of fraud. Is it possible to legislate morality?”

As you read about the regulations and how the industry experts are responding, does it give you a warm and fuzzy feeling? How do you envision it impacting your practice? Let us hear what you think.
 

“Scammers try to take advantage of senior citizens.” A true statement, unfortunately, and one we’ve all seen far too often in the media.

But, have you seen a headline like this one before: “Scammers target insurance agents.”

No need for a double take. Yep, you read it right the first time — apparently there are scams out there trying to uncover important information from agents.

According to the Oklahoma Insurance Department, fraudsters are posing as insurance regulators to get “agents’ personal confidential information.”

In a report released yesterday, Insurance Commissioner Kim Holland sent a warning out to the state’s insurance producers and adjusters, telling them to “be on the lookout for imposters posing as Oklahoma Insurance Department employees seeking confidential personal information.”

According to the report, the Insurance Department “has received reports of individuals calling insurance agents representing themselves as employees of the Department and requesting the agents provide personal tax information via facsimile.”

A similar scam was reported in Nevada earlier this month. In this scenario, “imposters were calling agents and telling them that their licenses were going to be suspended for filing improper paperwork. They would then inform the agents that the situation could be rectified easily by providing personal information, such as a date of birth along with social security, credit card and telephone numbers.”

As a rule of thumb, if you’re contacted by someone claiming they’re from your state’s insurance department, your best bet would be to tell them you’ll have to call them back, then look up the correct contact information, call the insurance department and inquire if they are in fact seeking information from you.

If you have scam or fraud information you would like to warn our readers about, please use the form below.
 

An article hit the wires today – aimed at the insurance industry – that carried the combustible fragrance of a Molotov cocktail.

Originally appearing in “The Big Money” section of Slate and penned by Benjamin Popper, a self-proclaimed “writer and dancer based in New York,” the diatribe points an angry, gnarled finger at the life settlements industry, calling it “grim reaping.”

As Popper proclaims: “It's no surprise that in recent years the market for investing in life settlements—buying a stake in someone else's insurance and collecting the reward when they die—has grown tenfold to nearly $20 billion. Life settlements can offer legitimate value to investors and policyholders, but the industry remains largely unregulated. And just like the overcooked mortgage securities market, they've launched a flood of fraudulent policies—this time on people's lives.”

And that was all in the first paragraph. There are roughly another 1,500 words to go and Popper’s barely getting worked into a lather at this point. Click here for the full story.

Though heavy-handed at times, I’m not saying Popper doesn’t make any good points, particularly when looking at the regulatory side of life settlements, where he quotes Doug Head, president of the Life Settlement Association.

“There is an element in our industry that doesn't want to see any regulation," says Head. “The players that deal with institutional investors want to see more regulation, but not everybody does business that way.”

Popper claims that although there are many in and outside of the industry pushing for reform, he writes that many of those dealing in life settlements “remain from the Wild West days.”

Since you’re on the front line, I want to know what you think about this article and the product. Is Popper taking potshots as we saw on the Dateline piece last year? Or would you like to see some serious overhauls take place with life settlements?

Use the form below and let us hear what you think.
 

It’s clear. The results are in. Overwhelmingly, seniors are telling us that “trust” is the number one factor that earns (and keeps) their business.

We wanted to hear what you think about this finding and surveyed many of our readers on the subject of trust, how you perceive it and what you do to gain trust. More than 100 responses came in and we plan to release them soon, but here’s a little sneak peek to tide you over until then.

What can you do or are you doing to gain/regain the trust and confidence of your clients?
Our first appointment is no charge. It’s a chance to get to know each other and state how we do what we do. Also it’s an opportunity to find out what the prospect is looking to receive in the form of advice, input and guidance from their advisor. With existing clients we keep in touch on the phone, via our newsletter and periodic appointments to keep up to date on their needs and their concerns.
--Gerald W. Nannen

Because I communicate with my clients all of the time, I have never lost their confidence. With my prospective clients however, I highly encourage them to contact the Department of Insurance, the Department of Corporations, the Chamber of Commerce and the BBB along with offering client referrals. I promote the fact that it only takes one irritated client to complain to any of these institutions for it to blemish my record and I have never had a complaint.
--Anthony Saccaro

My clients are still satisfied because they have not lost a dime in the market. I only sell fixed annuities.
--Sarah Delk

First, listen to clients’ questions, concerns and needs particularly in today's economy. Secondly, answer clients’ questions and offer possible solutions to these issues.
--Robert Mischke

Constant contact! Phone calls, mailings, meetings, etc. I try to put things in perspective, while showing I understand their fears and concerns.
-- Stephen Vachon

If you have good ideas on gaining trust with your clients, use the form below to add your comments.
 

A bill that would overturn SEC rule 151A is “in the house,” as they say on Capitol Hill. If you’re reading this blog, you’re most likely well-versed on 151A, which would securitize most fixed and indexed annuities and place them under the “watchful” eye of the SEC. (OK, hold the laughter.)

This bill, which is making its way through the House, is known as H.R. 2733. Congressman Gregory W. Meeks (D-NY) and Congressman Tom Price (R-GA) have co-sponsored the bill — the “Indexed Annuities and Insurance Products Classification Act of 2009.”

The bi-partisan bill has picked up an additional 21 sponsors and, in overturning 151A, would clarify that fixed indexed annuities are not securities, thus ensuring that consumers would continue to have access to those products.

“The last thing the U.S. public needs is unnecessary and duplicative regulation,” said Jim Poolman, the Coalition for Indexed Products’ spokesperson, who noted that fixed indexed annuities are already effectively regulated by state commissioners, under the Securities Act of 1933.

“These products have proven their ability to provide middle class investors with a high level of stability and peace of mind in a very difficult market environment,” he added. “In light of recent events, the advantage inherent in guaranteed, non-securities, insurance products is more evident than ever.”

A funny thing happened on the way to the financial meltdown … index annuities were among those rare products — like milk and bread – that have not seen a dip in sales.

In fact, according to a first quarter report by LIMRA, fixed annuities outsold variable annuities for the second quarter in a row — $35.6 billion to $30.7 billion.

“The last time fixed annuities outsold variable for two consecutive quarters was in the first half of 1995,” said Joe Montminy, research director for LIMRA's annuity research.

So, what seems to be the magical allure of fixed annuities in the market? Montminy believes he has the answer: “Consumers, still leery of the volatile stock market and looking for secure, competitive guaranteed rates of return, continued to invest more money into fixed annuities for their retirement income needs.”

According to the report, fixed annuities have experienced a 74 percent increase, with overall individual annuity sales making a 6 percent gain, giving the product $66 billion in sales for the first quarter of 2009.

The news has not been as kind to variable annuities. Sales for those products dropped 27 percent compared to the first quarter of 2008.

What do seniors look for in advisors? According to our annual senior survey, which was once again conducted for Senior Market Advisor by The Boomer Project and its associated partner, the Southeastern Institute for Research, honesty tops the list of attributes.

Matt Thornhill, founder and president of the Boomer Project, says there were some interesting findings from this year’s survey of more than 300 seniors nationwide. “Anyone wanting to build their business with seniors should develop skills, expertise and even personnel who can relate to senior women,” he says. Interestingly enough, he adds that women are more skeptical and demanding when it comes to seeking advice from professionals.

Advisors hoping to reach that market need to pay attention to several key attributes, measured in the survey. According to participants, “honesty,” “trustworthy” and “knowledgeable” ranked as the most important attributes seniors seek in a financial professional, followed by “acting in my best interest,” “understanding my needs and goals” and “giving good, objective advice.”

A gap currently exists, for many seniors, when actually matching those attributes up with an individual. “The gaps between ‘importance’ and ‘performance’ are significant, and suggest opportunities for advisors to improve,” Thornhill says. “Any improvement will result in more business from existing clients and more referrals from other clients.”

The easiest of these to improve on is honesty, he adds. “Advisors should admit mistakes, or weaknesses, if for no other reason but to demonstrate honesty. It is clearly the most important attribute and advisors are underperforming in delivering it.”

Stay tuned to the July issue of Senior Market Advisor for the full results of the survey.

As many of us are recovering from the current financial meltdown and consumed with how to recoup the lost assets, there’s another financial crisis looming — caring for the elderly.

Howard Gleckman, a senior researcher at The Urban Institute, has written a fascinating book -- Caring for our Parents, published by St. Martin’s Press -- that shines a bright spotlight on long term care and the monetary consequences unfolding under the current long term care system.

Gleckman reveals some staggering numbers:

• Nearly 70 percent of all 65-year-olds will need some long term care before they die.
• The costs to care for them is massive — more than $200 billion annually.
• Most paid long term care in the United States comes from Medicaid (further weighing it down.)
• Less than 10 percent of assistance is paid by private long term care insurance.
• As the baby boomers retire, today’s long term care challenge will balloon into a full-blown social and financial crisis. Twenty million baby boomers will need LTC by mid-century. (The question then becomes: Who’s going to pay for it? How is it going to be financed?)

In short, the book is a wake-up call to the general public and the government, and an opportunity for advisors. As advisors who read Senior Market Advisor, you’ve committed yourselves to protecting the insurance needs of seniors.

Are you guiding your clients’ LTC needs? What are your thoughts on the burgeoning long term care crisis?

Let me hear your thoughts on the subject.

As advisors, you are constantly in front of clients. Some of you are even talking to larger groups of people, putting an idea in front of them. With so much of your time in front of people “presenting,” it begs the question — what are the ingredients for a successful presentation?

Dr. Kerry Johnson, our regular “Marketing Playbook” columnist has written about presentations in the last couple of issues of Senior Market Advisor.

He says one way to draw your audience in is by telling stories. Johnson adds that “audiences are far more attentive than your friends and family ... your career is filled with stories about clients who succeed and fail, who are smart or less than stellar. Tell them.”

We caught up with Johnson recently to have him elaborate on great presentations. To view him talking about the subject, click on the video below.

Industry leaders met in Washington, D.C. May 6-8 for the 2009 NAFA Annual Meeting and Summit. It was quickly apparent that the gathering was a rallying point to educate attendees and gain momentum before embarking on a march on Capitol Hill in opposition of 151A.

In addition, Congressman Gregory W. Meeks (NY) and Congressman Tom Price (GA) have co-sponsored a bill, the “Indexed Annuities and Insurance Products Classification Act of 2009.” This legislation would overturn Rule 151A and clarifies that fixed indexed annuities are not securities, ensuring that consumers continue to have access to fixed indexed annuities.

Price, speaking at the conference, said the bill he’s worked on with Meeks is “a common-sense bill” that is in the best interest of consumers, particularly seniors. He added that it will be “difficult to get 151A overturned or stopped, but that doesn’t mean we can’t do it, but it will take hard work – the kind you’re doing right now to make it happen.”

Armed with that information, attendees met with their state’s congressmen (or members of the congressmen’s staff) to voice their displeasure about 151A and why they believe it’s a bad ruling and should be overturned.

According to Kim O’Brien, executive director of NAFA, the initial wave of getting in front of legislators was a step in the right direction, with “four new co-signers” on the bill. But, O’Brien says that more is needed. The push is on for the next couple of days as the deadline for original co-sponsorship is Wed., May 13, 2009 at 5:30 p.m.

To view Congressman Price talking about opposition to 151A, click on the video below.