Life Cycle Financial Planners, LLC

Tag: wealth planning

Wealthy People Own Jumbo Life Insurance Policies – For Good Reason.
Most wealthy people wish to preserve and protect their assets from federal estate taxes when those assets are transferred to their heirs. Perhaps you’re in this situation, and are looking for the best solution?

High net worth people use large amounts of life insurance to create the lowest possible cost of liquidity for the purpose of minimizing the impact of estate taxes. Without life insurance, federal estate taxes are paid 100% from estate assets.

Jumbo life insurance coverage, (often financed in a creative way), is a critical element in state-of-the-art succession planning and will help you transfer wealth with ease and much greater certainty.

High net worth people pay close to 50% in estate tax, on top of paying many other taxes while accumulating their wealth.

Minimizing the burden of taxation on transferred wealth is sensible planning.

For these reasons, properly structured permanent life insurance is a necessary part of sophisticated estate planning strategies. To support and enhance these planning techniques, life insurance guarantees that liquidity is available upon death. This means less pain for your heirs.

Highly regarded income and estate planning attorneys are leading advocates of life insurance for estate planning purposes because it creates the immediate liquidity that binds their wealth transfer plans.

Use your existing assets to secure jumbo life insurance coverage.

The cost of life insurance is low when structured properly. It is very important to understand how the jumbo life insurance definition affects pricing.

The cost of life insurance is a fraction of the return generated from the death benefit.

As people become more wealthy, it becomes increasingly more difficult, without insurance, to successfully protect the majority of their assets from estate and gift taxation.

Once the decision to purchase life insurance coverage is made, the question of how to best pay for the insurance can be considered. These issues are dependent upon many factors and it is why customization is always best. Should the premiums be accelerated? Should the coverage be whole life or indexed universal life?

Does premium financing make sense?

Borrow the Premiums to Pay For the Life Insurance Policy.

Premium Financing:
- Borrowing the premiums from a bank can be an optimal way to fund permanent life insurance while offering great flexibility in the future.
- Uses well managed loans to drive down out of pocket costs.
- Non recourse design requires minimal collateral other than the life insurance policy.
- Results in fully funded policies with many options to pay off the loan (always dependent on projections).
- Minimizes out of pocket costs in all years until the anticipated exit strategies pays off the loan.
Work With Me To Help You Structure The Right Plan.

For 30+ years, I have been working with individuals, families and businesses facing these very same issues. Typically, my clients work with a team of cutting edge professionals. Whether they are estate planning attorneys, CPAs and wealth managers, my clients are people who appreciate expertise from professionals who bring valuable experience from their respective fields. I have helped my clients acquire more than $1B of permanent life insurance coverage and I have placed individual policies in excess of $50,000,000. I work with my clients to create value in many ways.

Driving down the commissions in jumbo life insurance policies can have a direct correlation to better policy performance in the early years.

I will help you get the best underwriting offers possible. It is critical to help the underwriters properly evaluate an applicant’s medical history in order to qualify for the best rate class.

Testimonial:

“After spending several years working with top tier estate and tax advisors to put a succession plan in place, our counsel put us in touch with Ted Bernstein for the purpose of getting life insurance. I can’t say it any simpler than by saying, after working with Ted, I became aware that there is a real difference between insurance people. Ted is approachable and good at making insurance relatable.” Jake Garlick, Virginia

Please contact Ted Bernstein at 561-771-4647 or email him at TB@LifeCyclePlanners.com. He offers a complimentary consultation to discuss anything you wish about premium financing, succession planning and wealth preservation. If you have questions about Private Placement Life Insurance (PPLI), Ted can help make sense of this very complicated vehicle.
December 23, 2021
Simple Tips For Successful Inheritances & Wealth Transfer

Learn these simple tips for Successful Inheritances. Help your heirs hold on to their inheritances and keep your family intact.

Giving while living is ideal but that oftentimes is not possible. Wealth transference can be complex and gut wrenching for some. Without careful planning, conditions can end up ripe for wealth destruction. Wealth will transfer, just maybe not where you intended it to go. If you’re not okay with your life’s assets enriching litigation departments of probate law firms you’ve never met, now may be a good time to enhance your current wealth transference plan. Don’t let the assets for your heirs end up being lost to professional fees.

I see more and more cases where well-meaning inheritances are busting up families and family relationships. The attached article does a great job highlighting a few of the unintended consequences that can affect not only the rich and famous. How much would it disappoint you to learn that your children may never speak to each other again because of their inheritance. It is a reality that is occurring more often every day.

INHERITANCE Feature-INNM0518

Or you can click on the link at Insurance News Net to view the article online.

Please contact me at 561-869-4500 or email me about a complementary consultation about the wealth transfer and inheritance issues that may be concerning you and your spouse.

You can visit us at www.facebook.com/lifecycleplanners

ted bernstein boca raton, ted bernstein insurance

May 24, 2018
“Not My Family!” Strategies To Avoid Wealth Destruction

Wealth destruction at inheritance time is showing no signs of slowing down. More and more family members are litigating with one another including attorneys, CPAs, wealth managers, family businesses and other related parties. Why is behind this unfortunate trend?

Too often, all the planning attention is placed on the family’s financial and real estate assets. There is nothing wrong with this but when there were dysfunctional family dynamics before inheritance, it is likely there will be dysfunctional family dynamics upon death. Neglected during the planning process, this dysfunction can lead to unintended consequences for family and business relationships. Most people passing on wealth do so with an expectation that their generosity will be received in the spirit it was intended. Without a proper amount of focus on family dynamics, succession inheritance can cause further damage to family relationships.

Avoiding Wealth Destruction

“If your wealth transfer plan is not done carefully, your wealth will be transferred… just not where you intended. It will end up being transferred, that’s for sure. It will be paid out as legal fees to law firms and other professional firms. In no time, millions of dollars can be wiped out in fees and settlements.

AVOID WEALTH DESTRUCTION – CLICK HERE

Contact me at 561-869-4500 or email me at TB@LifeCyclePlanners.com for a complementary consultation. Or, visit us at Facebook

ted bernstein boca raton florida

November 1, 2017
Federal Estate Tax Repeal – Bad For Business

The life insurance industry let us down when it allowed the estate tax rate to settle at 40% and the lifetime credit (exemption) to rise to $12MM per couple. The impact is still punishing planners of all stripes. It is time for life insurance companies to step up and commit to national advertising and marketing campaigns to promote the virtues of their core products, especially permanent life insurance.

Since then, the pin has been pulled from the grenade for PERMANENT life insurance. If the estate and gift taxes are successfully repealed in an upcoming tax reform act, it will be a devastating blow for the jumbo case market and for PERMANENT life insurance. The grenade will have gone off. I understand there will be a few niche markets (key man, forced savings strategies, over-funding for retirement income, premium finance and others) that will survive. Those niche markets for permanent insurance may be meaningful enough for a handful of carriers; not for dozens of them. There will always be a need for low face amount, permanent policies. To be clear, the sale of these permanent policies does not support or lead to a successful, bustling practice. That model used to work by helping new agents develop the stepping stones to much larger opportunities. That model is on life support and the repeal of the estate tax will be its end.

Just look at the overall permanent insurance numbers since the industry did not prevent the tax from being lowered or the exemption from rising to almost $6MM per person. Hopefully, the life insurance industry is mobilizing their influence and inspiring their troops to prevent the estate tax repeal from becoming reality. Personally, I don’t see it happening and I’m not sensing the passion and the fear required to win this battle. As much as anyone else in our industry, I hope that I am wrong.

Whether the tax is repealed or not, I would urge life insurance companies to act like companies in other industries who own the responsibility for creating a product’s demand. Without advertising and marketing campaigns on a national stage to re-brand the image of permanent life insurance and its distribution system, the remaining agents who average 60 years old will continue jumping ship. Leaving the responsibility and the cost of creating demand for this product to the distribution system, or no one, is a recipe for further disaster. Manufacturers create organic demand for their products. The auto industry and consumer electronics are two great examples.

Imagine if Apple and BMW left all sales and marketing solely to their local dealerships or the local wireless stores? No national sales and marketing campaigns to launch new products, defend against competitors, shape markets or educate consumers?

Today, most life insurance companies do not advertise on a national stage and if they do, they are brand advertising, which is of little or no value in business development at the local level. We don’t need anymore TV branding ads from insurance companies during The Masters. What the industry DOES NEED is for every relevant company to start running advertising campaigns about the virtues of permanent life insurance (and their other products) during the NCAA tournament, The Bachelor, the morning news shows, The Late Show with James Cordon and The Masters. This is an industry-wide problem and the industry needs to step up.

Permanent life insurance is a remarkable tool with extraordinary flexibility and great versatility. It can be customized, by the right professional, so that no two permanent life insurance policies are the same. No two buyers are the same. Their policies can and should reflect their differences, their needs and their desires, now and in the future.

One client may have an over-funded $5,000,000 IUL with Option C and a death benefit payable in a lump-sum. Another may have a $5,000,000 GUL with Living Benefits and the Installment Payout Option to protect his/her family with 20 guaranteed payments of $250,000 for 20 years. Another client may have a minimum funded UL tied into their lifestyle, earning credits for living the good life. And another might have a $5,000,000 WL policy with vanishing premiums.

Just like the combination of apps on my Smart Phone are not like the apps on another’s, no two permanent life insurance policies should be the same. We each start with a Smart Phone that makes calls. But, the way I intend to use mine is different than how you use yours. Our needs are different and that is what leads to which apps we download.

To help our industry fight the battle against the estate tax repeal, contact AALU for information about who to contact in Washington.

Ted Bernstein can be reached at Life Cycle Planners or by calling him in Boca Raton, Florida at 561-869-4500.

Don’t need your life insurance policy anymore? It has value, even term insurance. Read more…

March 28, 2017
The Longevity Story

Longevity is extending. Both science and technology are on the verge of solving many every day problems of aging. What if we could not only add years to our lives? What if we could spend those years being physically fit, functionally independent, emotionally and mentally healthy? To do this, we must make ourselves FINANCIALLY SECURE through plentiful amounts of guaranteed, lifetime income?

At that point, it is no longer a story about old age. We have a story about long life!

Read more about longevity risk:

http://www.investopedia.com/terms/l/longevityrisk.asp

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=17&cad=rja&uact=8&ved=0ahUKEwivofism-vSAhVP6GMKHdu9AlEQiBUIbjAQ&url=https%3A%2F%2Fplus.google.com%2F114674288256493099531%2Fposts%2FZBnygLHNoXQ&usg=AFQjCNGDDCF2yiuSBPXppEbcbN_nL9zsMA&sig2=nPbXUXWPjGd9s379q6sZuA

http://www.institutionalinvestor.com/article/3373646/investors-pensions/the-rising-challenge-of-measuring-and-managing-longevity-risk.html#.WNMC4O-guUl

December 16, 2016
The Value of a Professional’s Advice
Professional Advisors Vital to Financial Health.

Make no mistake about it. The research continues to confirm that getting advice from professionals is beneficial in every measure: insurance, retirement planning, investing and quality financial plans.
- Within 4 to 6 years, households who used advisors accumulated 58% more assets than those who self-directed their investments.
- Using a professional advisor for 7–14 years essentially doubled the wealth accumulation of those without an advisor.
- After 15 years, households held 2.7 times more wealth than those who did not seek professional guidance.
- No other strategy guarantees lifetime income with no principal risk like indexed annuities.
These are NET RESULTS after taxes and accounting for the costs of the professional advice.

Advisors encourage their clients to save twice as much while simultaneously helping their clients develop long-term insurance, investment and retirement plans.

The Growing Demand for Advice.

Millions of people benefit each year from the value of annual reviews. Life Cycle Planning is financially rewarding and leads to more security. We will continue to demonstrate the value of professional advice by offering the best products, solutions and service to our clients. Please call us at 561-869-4500 or email me to arrange a complementary meeting to discuss how we may help.
December 3, 2016
Life Insurance Premium Financing – Minimizing The Risks.
Why do high net worth people borrow to purchase life insurance?

Premium financing relies on the concept of interest rate arbitrage. A loan enables life insurance owners to keep their money working for them and earning a higher rate of return than the interest rate charged for the loan. Instead of paying life insurance premiums with their own capital, a low cost loan is advantageous. This rate arbitrage must be favorable and appreciated for a successful premium financing arrangement to be suitable and make sense for the borrower.

The Advantages of Premium Financing are:
- Low cost method to fund permanent life insurance while offering great flexibility in the future.
- Using well managed leverage to drive down out of pocket costs.
- Using life insurance to offset estate taxes.
- Using low cost loans to fund permanent life insurance with the goal being of having fully funded policies in the later years.
- To minimize out of pocket costs in early years until the anticipated exit strategies can pay off the loan.
Successful premium financing is understanding the risks and managing expectations. Working together with insurance companies and lenders ensures successful outcomes. People borrow money to pay for life insurance because they can borrow the annual premiums at a lower rate than what they are earning on their money. This historically reliable arbitrage between loan interest rates and a borrower’s ROI must be present for this to make sense. Later, we will explore this important arbitrage in more detail.

Premium Financing gives families with illiquid estates the ability to acquire large amounts of needed liquidity at death. By only paying annual interest on the loan, the out of pocket cost is less than paying properly funded permanent policies. Many estate planning attorneys find this financing strategy helpful to accomplish their wealth transfer objectives.

With short term interest rates near zero percent, life insurance premium financing gets strong consideration among high net worth life insurance buyers. Proceeds from life insurance provides the much needed liquidity that complements succession planning and wealth transfer planning strategies. Financing jumbo life insurance policies is often appealing to HNW people and their advisors because the arbitrage DOES EXIST between actual borrowing cost and the client’s overall ROI. If we look back 50 years, we see that interest rates are lower than insurance company crediting rates, with almost no exceptions. This correlation is the foundation of successful premium financing.

I have arranged financing for more than 500 families over the course of my career. As a result, I bring valuable expertise and experience that benefits consumers, their advisors, lenders and life insurance companies. For example, it is true that low interest rates are beneficial, if nothing more than causing a lower out of pocket cost. But, financing a life insurance policy should make sense whether interest rates are 3%, 6% or 9%. When borrowing costs increase, the values inside the life insurance policy should also be increasing. That can also lead to less collateral being needed for the loan and less premiums to fund the policy.

The borrowing rate is only one part of the premium finance story. Historically, insurance companies pay higher interest on policy cash values than borrowers pay for interest on loans. This is the other important rate arbitrage that should exist in properly structured premium finance arrangements.

Premium Financing Done Right.

Not free life insurance.

If premium financing is not “free life insurance”, then what is the true cost of financing a life insurance policy? It is the annual interest expense; that is the true out of pocket “cost” of a premium finance loan. When the loan is paid off, either during lifetime or upon death, that too is part of the cost.

With rates near 0%, premium financing is a strategy that deserves strong consideration for high net worth individuals, families and business owners who need permanent life insurance coverage. Compared to paying the annual premiums out of pocket, there are advantages to using a competitively priced loan to pay the premiums.

A properly structured premium finance arrangement is best suited for people who need and want coverage for life. The cost to borrow the annual premiums should be at least 3% lower than the ROI on their other assets. This creates another arbitrage that justifies premium financing. For example, if the loan interest rate is 4%, then the borrower’s ROI on other assets should be 7% or greater. If it is not, then it may not make sense to finance life insurance.

Premium Financing Considerations:

Each premium finance loan is unique and should be stress tested using conservative assumptions. We recommend working with experienced insurance professionals, advisors and experienced lenders who are familiar with this asset class.

The majority of the collateral for premium finance loans is typically the cash value within the policy. The reason lenders are willing to make premium finance loans at low interest rates is because cash value is considered to be as creditworthy as cash. Currently, premium finance loans are less than 3%. While interest rates are at historic lows, it can be wise to consider locking in a fixed rate.

Exit Strategy and The Loan Payoff.

There must be a sensible exit strategy to pay off the loan. One option is to use cash value from the policy. Another is to use assets already in the trust, such as inheritance monies, liquidity events from sales, etc. When the cash value of the policy is used to pay off the debt, make sure the policy is properly funded to remain inforce for life, after the cash value has been withdrawn or borrowed from the policy.

Can Real estate be used as collateral for premium finance loans?

Lenders typically do not like lending against real estate for these loans because the collateral is not easily available. However, there are some lenders that do work with existing clients to use real estate to support these loans. This tends to complicate something that is already complex. Customers with strong relationships have been known to receive loans from their existing bank.

Premium Financing and Estate Planning.

A premium financing arrangement can be beneficial to your overall estate plan. The life insurance policy is typically owned in a trust without gift tax or estate tax consequence. It is not uncommon for $25,000,000+ life insurance policies to be financed and owned in trusts that may be exempt from gift or estate taxation.

Premium Financing Is Best Suited For:
1. Clients who need jumbo amounts of permanent death benefit.
  2. Clients who understand leverage & complex financial transactions, or
  3. Clients using life insurance to offset estate taxes.
Business owners interested in succession planning and key-person protection may also be good candidates for premium finance arrangements:

Top 7 Premium Finance Considerations:
1. Lenders and insurance companies require that these loans are collateralized. The policy’s cash value is typically the majority of the collateral. In the early years, there is typically a small gap which the policy owner is required to satisfy.
2. The borrowing cost and the policy crediting rates have long been favorably correlated for these types of structures. They historically move in the same direction with the insurance policy crediting rates and dividend scales being higher than the borrowing costs.
3. Assuming you feel this strong correlation will continue in the future, financing may be right for you.
4. A positive rate arbitrage is created when policy crediting rates are greater than loan costs and a cushion is created that can be used when interest rates turn volatile or increase rapidly.
5. When interest rates rise quickly, there may be temporary rate compression or even rate inversion. Either scenario could increase the annual interest expense until rates stabilize.
6. The cash value of the life insurance policy ultimately represents 100% of the required collateral for the loan. Gap collateral must be pledged until the cash value is 100% of loan value, typically in less than 10 years.
7. Properly structured, no personal guarantees are necessary.
Premium Finance Risks:

– Decreasing policy interest rates and policy performance risk.
– Increasing borrowing costs or inability to refinance.
– Policy lapse risk.
– Collateral call risk.
– Income tax risk.

STOLI RISK: Many premium finance structures have been created or used to take advantage of consumers and insurance companies by purchasing policies owned by strangers. They do this for the sole purpose of re-selling or using them for an illegal profit. We will not participate in STOLI arrangements and we urge people to avoid using life insurance for anything other than long term death benefit. Stranger Owned Life Insurance (STOLI) is not legitimate premium financing and should be avoided. Before proceeding with any premium financing arrangement, you want to fully understand the risks mentioned here and the exit strategies.

Inforce Life Insurance Policy Premium Financing:
- Policy is the only collateral for the full loan balance; no PG.
- Our capital source is a New York lender experienced in this asset class.
- 7-year loan maximum.
- Fees and interest are financed as part of the loan. Little or no out of pocket expense.
- Competitive interest rate.
- Life expectancies: 12 years or Less. Sweet spot is 9 years or less.
- Insureds: 70 and over.
- Individual Policies: $3-99m face.
- Portfolios: $35-500m face.
- Issued Preferred or Standard.
- Term sheets: Please allow turnaround time of 3-4 working days.
- International loans not an issue.
In addition to securing coverage and arranging for the right lenders for each loan, Ted is often hired as an impartial consultant to help life insurance buyers determine which is the best financing solution. These cases often involve jumbo insurance amounts. Working with an experienced consultant on your side that is not selling product can prove to be very valuable.

You can Email Ted or contact him directly at 561-869-4500.
November 28, 2016
Everyday Tips For Longevity In Retirement.

1. Time passes faster every day. Don’t make it worse by rushing and stressing over time. Where are you going?

2. Take care of your body so it will take care of you later. Don’t let your world get smaller each day – stay fit and mobile.

3. Intimacy and friendships remain important regardless of where you are on the life cycle spectrum.

4. Healthy relationships are the most important thing in your life. Steve Jobs at end of life:

While the above-quoted essay does not represent either Steve Jobs’ final words nor remarks he made (in either oral or written form) at any time during his life, his biographer Walter Isaacson did record Jobs’ expressing regret at the end of his life about how he raised his children:

“I wanted my kids to know me,” Mr Isaacson recalled Mr Jobs saying, in a posthumous tribute the biographer wrote for Time magazine. “I wasn’t always there for them, and I wanted them to know why and to understand what I did.”

“He was very human. He was so much more of a real person than most people know. That’s what made him so great,” he added. “Steve made choices. I asked him if he was glad that he had kids, and he said, ‘It’s 10,000 times better than anything I’ve ever done’.”

It wasn’t always thus. In the early stages of his career, Jobs, who was adopted, denied being the father of Lisa and insisted in court documents that he was “sterile and infertile”. He acknowledged paternity when she was six, and they were later reconciled.

5. Money talks. It says “Goodbye.” If you don’t convert assets in the market into guaranteed lifetime income, you’ll wish you had. And then it’s too late.

6. Many of the seeds you planted in the past, some good and some bad, will begin to bear fruit and affect the quality of your life as you get older.

7. Acceptance is grace, freedom and peacefulness.

8. Don’t let your possessions own you. Consider them on the trouble vs. enjoyment scale. Simple but enlightening.

9. You may regret some things you didn’t do far more than the ones you did that were “wrong”. If you get the chance — do them. You may not get the chance again.

10. Every day you wake up is a gift.

11. Converting retirement assets – stocks, bonds, CDs and Treasury’s – into a Longevity Annuity will eliminate risk, guarantee income for life, allow you to enjoy retirement and sleep at night. Do you want to receive guaranteed monthly income, paid to you no matter what? Or, do you want to be responsible to mange a complex investment portfolio into your 80’s and 90’s? Talk to friends and others who receive large amounts of guaranteed, lifetime income and ask them for their opinion about this critical issue.

If guaranteed lifetime income is a primary retirement goal for you, please contact me to arrange a no obligation discussion about my views concerning retirement security. There are dozens of threats to your nest egg in retirement and I will explain the power of guaranteed income contracts and why you will never learn about these strategies from traditional money managers. You can email me or call me directly at 561-869-4500.

November 21, 2016
Beware of Bad Financial Advice.

Beware of bad financial advice from your friends and family https://t.co/h5zoIuf6SF

— dnason (@dnason) November 7, 2016

November 7, 2016
Life Insurance Industry Must Do Better Controlling The Important Conversations.

Can you recall any life insurance company campaigns targeting consumers directly about the value and virtues of their core products? Have you ever seen these ads during the LPGA, The Masters, The World Cup or the World Series?

They could be promoting the value of income annuities in retirement, or the differences between permanent life insurance and term insurance? Each of those events reaches the necessary demographics for our industry. Imagine if Apple did not advertise directly to their customers? What if Ford didn’t advertise directly to buyers but GM and Toyota did, spending hundreds of millions of dollars targeted right at those consumers? The immediate impact on GM sales would be dramatic.

Imagine if these companies left the sole messaging responsibility to their local, privately owned distributors? They wouldn’t. It would be disastrous in every way. And yet, this is exactly what is happening with the life and annuity companies; almost without exception.

This is not about brand advertising. There is plenty of money being spent on branding ad campaigns while Suze Orman, Ken Fisher and Dave Ramsey have taken control of these conversations affecting our businesses.

Why are these companies not advertising and marketing their products to their policyholders? One explanation from some companies is that they do not sell directly to consumers and as a result, it is not their responsibility. Insurance companies rely on a variety of distribution methods to sell and reach their policyholders, mostly through a network of professional agents who specialize in the sale of these products.

Distribution in the automobile industry is similar. For example, as consumers, we are unable to purchase a BMW directly from the BMW company. Nor can we buy a Cadillac directly from GM. We buy from their middleman, their dealerships. The car companies support their distributors in many ways and one way is through direct to consumer advertising and marketing. The manufacturers advertise on a national level and their dealerships are targeting more locally in a coordinated partnership.

We have reached the point where our product manufacturers must seize this responsibility and begin to advertise, promote and market the products they manufacture, directly to insurance and annuity buyers. Over the past several years, there has been an obsession to “crack the code”, to find a way to jump start and create online consumer demand for life insurance and annuities. Unfortunately for all stakeholders, no magic bullet has been found. Life insurance is sold, not bought. But the insurance companies can help us create demand for these products. We are the industry’s “dealerships” and we simply cannot afford to shoulder this responsibility without their help.

The time is now for the industry to use its formidable resources and take control of these conversations. The carriers should begin inspirational campaigns that are dedicated to influence consumers to take action. This messaging requires complex, multi-media campaigns. I believe the ROI will be significant on many tangible and intangible levels, especially on new sales.

Without this change, calculated misinformation from our competitors will continue to influence consumers about our products. Consumers will lack the education based information to make informed decisions which negatively impacts sales. As the whole pie continues shrinking, so too will the overall slice for each distributor. We know this happens. The industry continues to lose agents every year and the remaining agents have reached an average age of 60. Sales are down or flat every year!

Currently, it is our competitors who define our products, our services and our professional status. They spend more, they message better and they communicate better with financial journalists. With all due respect to the few journalists who cover and do know the insurance and annuity space well, there are far too many others making incorrect and un-rebutted claims about our industry. I worry every time I see an article about life insurance and annuities written by journalists without the credentials to critique these products. Asking the distribution system to be solely responsible for pushing back against these misinformation campaigns is ineffective. By definition, we are easily dismissed for lacking objectivity and impartiality.

As these trends persist, crises of uninsured’s and under-insured’s have emerged into a national problem. I also suggest that there is a crisis of incorrectly insured’s, people who own the wrong coverage. There are millions of term insurance policyholders in their 50’s and 60’s who are near the end of the guaranteed term period, without good options. They didn’t convert and the conversion deadline passed meaning they cannot convert if they wanted to. For some, obtaining new coverage is filled with hurdles. Their health has changed and their budgets may not allow them to acquire what they now need.

How did they get here? Suzy Orman, Dave Ramsey and Art Williams told them to buy term and invest the difference. But nobody did. They bought term but didn’t invest the difference with any kind of discipline, if they did at all. Too many inexperienced insurance agents told people they would not need life insurance once their kids were grown and independent. Ask any person over 50 with kids and a spouse if they have no further need for life insurance today. There is plenty of pain and blame to go around but these consumers deserve good solutions going forward and we need to counsel the millennial generation about how to buy the right blend of affordable protection, for now, and permanent coverage for later. The cheapest term insurance product when they’re 35 is not the answer.

It is time for the entire compensation system to be reconsidered. Part of the reason for the widening gap of un-insured’s and under-insured’s in the middle market is because the commission is too low for sales in this market. As premiums drop and commission levels remain constant, the selling compensation is dropping in real terms.

To conclude with some good news, I am hearing more and more carrier interest about direct to consumer campaigns. Let’s hope this interest turns into real, meaningful dialogue about these issues, with all stakeholders.

I can be reached at Life Cycle Planners, Email or Facebook.

October 11, 2016