Thought for the day:

Retire? I’m going to stay in show business until I’m the only one left.
— George F. Burns

If you will read no further:

If you had an opportunity to provide your clients with a retirement investment strategy that would credit annual interest based on the performance of the S&P index each year  up to 12%  and charge you 1% to guarantee no losses in down years, would you offer this to them?  What if it would also provide lifetime tax-free retirement income?  What if it would guarantee to pay any balances to the heirs tax free?  Sound good?  What if it was called life insurance?  Oh crud. Guess we can’t do it then.

Thought for the Week:

As the government continues to go after our 401ks and IRAs there is going to be more and more interest in finding ways to create tax free retirement income and pass tax favored money to our heirs.  This is why every young client in the process of building their financial net worth should seriously consider adding an Index Universal Life insurance policy (IUL) to their portfolio.  These products allow the client to deposit large amounts of money into the cash value which will be credited each year with interest based on the performance of the S&P (or other chosen index) typically up to a maximum of 12%-13%.  That means if you have $20k in the cash value and the index rises 15% in a given year 12% or $2400 will be credited to the account. Then the account will be charged for the cost of insurance (perhaps 1%) so that the cash value will now be $22,200.  (not precise amounts, but give you the general idea.)  If the market went up only 10% the same 10% would be credited to the cash value before deducting for cost of insurance.  The real value here is that if the market loses money in a given year the cash value does not go down, except for the (approx.) 1% charge for insurance.

An account that can only go up or stay the same is a really good deal as long as it doesn’t cost too much.  Add to that the fact that there are no income taxes applied against the annual gains and, when properly designed, income can be taken without income taxes, and you have the basis for an excellent private pension strategy that can look like a Roth IRA but without the government regulations and limitations.  Check out the results on pages 15-17 of the illustration that a 45 year old client can achieve for his retirement while protecting his family with almost ½ million dollars of life insurance.  If you are not showing this to your younger clients or to your retired clients for their children, everyone is missing out on an excellent opportunity.

In most cases if your client is in his forties, he probably should have $1million or more of life insurance.  Half of it should be this kind.  They don’t need to fund the policy with maximum deposits initially if they don’t want; but set it up so it will be grandfathered in when this tax favored product is also taken away by the government.  They will be really glad you put it in their portfolio then.  Nancy Woo and Randy Masciarelli can help you design a proposal to show your client.  Call Peggy at (800) 238-8144 and she will put you in touch with one of them.

A Final thought:

It is interesting to me that when you describe what insurance and annuities do, what benefits they provide and what security they offer, they rise to the top of the charts for desirability.  Then the press and the rest of the folks who don’t, can’t or won’t bother to understand them come forth with all the negative reasons why these are no good.  And, almost always, they are wrong.  But then we move on and fewer people get the benefit of these outstanding solutions for financial security.  And now with the easy apps that are available for so many of the products, you are quickly running out of excuses to avoid offering them to your clients.

Thought for the day:

Before you build a better mousetrap, it helps to know if there are any mice out there.                           -unknown

If you will read no further:

Quality financial advice and planning is more than simply investing money and “managing the wealth”.  It’s about providing ways to guarantee results.  Westland deals in guaranteed results.  We love what we do and we are really good at it.

Thought for the week:

The story of Ralph and Alice…and Roger

Ralph & Alice have been retired for a couple of years and Ralph is soon turning 70.  Fortunately they were both still working when the 2008 recession hit and were not affected much other than to be scared almost to death by what they saw happening in their 401Ks.   Now they have substantially recovered and are trying to decide what to do going forward.  They’re looking for a financial advisor to assist them and have interviewed a couple of fee-based planners and a stock broker.  Alice thinks they are all very nice but can’t be sure how good they are.  The one thing that jumps out at her is that they all want to show her how good their past results have been…especially the last 4 years, but none of them will guarantee her that their future advice will work.

Ralph doesn’t particularly like any of them. He just thinks they want to get their hands on his money. Since he and Alice have about $750k in their 401k’s and he has a pension, these candidates  are all telling them that they can invest their money in stocks and bonds and will do their best to make sure it mostly goes up….over the long term.  What Alice really wants is to not have to be concerned about their money; and their only answer seems to be “trust them and they will take care of everything”.

But then they met Roger.  Roger was different because he suggested that they might want to set up their money such that it will provide guarantees that certain issues be addressed regardless of the uncertainties in the markets…and the world for that matter.  He suggested that they create a personal pension for Alice that, along with their social security and the Ralph’s pension, would guarantee to provide a monthly check for the rest of their lives to provide added certainty that they could always maintain their current lifestyle.

He also discussed the risk to their portfolio when one or the other of them were to suffer a debilitating illness or condition that would cause them to pay for long-term care…a highly likely situation eventually as over 60% of us ultimately do have such an event in our lives.  He suggested they structure their portfolio with 15% in cash placed in a life insurance policy that would leverage that value by about 400% if/when one of them needed care.  They wouldn’t have to give up control or access to that money but it would guarantee that an additional $6000 a month would be coming in to help pay the bills for care when needed for either of them.

They asked him what they should do with a couple of old insurance policies. The other guys suggested they didn’t need them anymore and that they should cash them in and invest the money with the rest of the portfolio.  Roger pointed out that “need” wasn’t really the issue.  Where they interested in leaving a legacy for their family eventually?  If so, “let’s take a look at those policies”, he said, “maybe we can even make them more valuable”.  What about the rest of the money in their 401k?  “Once we have the major issues addressed and solutions guaranteed, we can discuss options on how we should build the rest of your investment portfolio”.

Naturally, Ralph and Alice both felt comfortable with the advice Roger was providing and they selected him as their advisor.  They also referred some of their friends and their children who lived in town to him….something they would never have thought to do if it weren’t for all those solutions that were guaranteed to work.

I know this is all true, because Roger got all his ideas and the great products to put them into action from Westland Financial.  If you aren’t sure how Roger was able to do that, and/or would like some assistance becoming as successful as Roger, give us a call.  We love to help with this stuff.

Thought for the day:

People are prepared to buy more insurance than most advisors are prepared to sell them.                                                                                                              Chuck Chillingworth

If you will read no farther:

We understand that you may not be very interested in insurance. When you take responsibility for providing financial advice to clients, you must include a discussion of long-term care. You must also recommend a strategy for the client that will appeal, and can be implemented. Linked-benefit life is often that strategy, and there is no better firm to provide you with the assistance you need than Westland Financial (800) 238-8144.

Thought for the week:

Last month, long-term care insurance providers began changing their pricing to reflect the greater usage of benefits by women.  As a result, female rates for this insurance average about 40% more than in the past.  We have been telling you for several months this would happen.  I hope you were able to get those clients, who were in the process of considering it, to apply in March (which was our biggest month in years…go figure, everyone likes to do it at the last minute.)

But the real story is how that is going to change how you advise your clients.  The LTCi rates for healthy females are now the same as (or even more than)  asset-based life products that provide similar benefits.

For example: a healthy 60 yr. old female purchasing $6,000/mo. benefits for 4 years will pay $3575 per year with Genworth.  She can purchase a John Hancock Life insurance policy that will pay the same $6,000/mo. long-term care benefit for $3,601 if she is rated standard or $3,181 if she is preferred. And unlike the conventional policy, she faces little (if any) chance of a rate increase.  The best part of all is if she never needs the benefit, her heirs will receive $150,000 tax free.

The prices for LTCi are finally residing where they should be; and linked-benefit plans are there as well.  And lo-and-behold they are now close enough that females (at least) do not have to choose based on price.  And everyone can find a plan that makes sense in their circumstances.  And you will not have to explain to the family some day why you thought it was OK that they risk spending down all of the estate’s assets for a caregiver.

An interesting story:

Recently I spoke with an advisor who had acquired a substantial new client from another advisor who had been his “wealth manager” for many years; but who never spoke to him about what role insurance could play in his portfolio.  They were introduced when the client sought advice about long-term care.

The CLU/CFP discussed conventional and linked-benefit LTCi plans and wrote one on the client and his wife. Then they discussed what the client was doing about his investments and our advisor explained how his new client could grow a modest portion of their portfolio into a handsome legacy for the kids and grandkids….all guaranteed and tax free…using a Survivor Life insurance policy. Seems the client had an old life insurance policy that his “wealth manager” never even bothered to look at. But our guy did; and they incorporated it into a big Survivor life policy on the couple. So far, he has made over $36k with his insurance ideas and is in the process of taking over the assets in the portfolio.

According to the client, “it’s not difficult to find someone who will invest my money for a fee; but very few will give me ideas that guarantee results.”

Thought for the day:

Wood burns faster when you have to cut and chop it yourself.
Harrison Ford

If you will read no further:

“I am waiting until rates increase”.  

We continue to hear a common theme from many advisors and some prospects when considering a SPIA or other fixed annuity to add to their retirement strategy.

How high do rates have to go up before we stop waiting?  Three and a half years ago, we started talking about the cost of waiting and rates have continued to languish at the lowest levels in two generations.  The Fed met recently: They are going to continue on their path until unemployment hits 6.5% and inflation slows to 2.5%.  They predicted no change in rates until at least 2015. When they last met, unemployment numbers were 7.5% and many are predicting an increase in 2014.

How long will you wait to give your client the peace of mind that a SPIA in their portfolio will provide?  See actual example.

Get a male age 70 $7650 per year, (80% tax free) from a $100,000 investment for the rest of their life.  Then invest the rest of the portfolio for growth to offset inflation.  Now that they get that monthly payment in their checking account no matter what happens in the world or in the economy or on the nightly news, volatility doesn’t feel so bad.

BTW: Here is a great website to calculate your life expectancy. Check it out http://www.livingto100.com/

Thought for the week:

In the late nineties I heard tales of financial planners being accused of improperly advising their clients to benefit themselves thru commissions.  Today I am watching fee-based planners making recommendations to their retired clients based on how it will affect their own (the advisor’s) income stream.  By that I mean things like avoiding leaving money in Money Market accounts or purchasing a SPIA that would clearly address the clients’ need for safety and predictability in favor of investing in the managed portfolio to collect the ongoing fee.

In many cases, I’m not sure they even realize it; although many have expressed that exact sentiment.  But when you opt to distribute 4% per year to provide income when the client could often receive as much as 8% mostly tax free and guaranteed for life you have to consider if that really helps your ageing client to enjoy piece of mind.

Think interest rates are going up soon?

In the past 707 rolling-12-month periods since 1953 the 10 year treasury jumped 200bp only 30 times (4%); the last one in 1986.  Don’t try to time rates. Ask Josh (800)238-8144 to help you place money in the best place available at the time that provides the additional safety and peace of mind to the client.  

A final thought:

As financial planners ourselves we understand that insurance should only be a part of a well-balanced financial plan. But it amazes me the number of advisors who use no insurance in their clients’ plan; and then the calls we get from those who ignore these products and strategies until it is too late, “I would like to get a quote for long-term care (or life) insurance.  My client is pretty healthy.  The stent is working fine and her arthritis doesn’t bother her too much.  What do you think?” …and the best one of all, “she only uses a cane when she walks.”

Thought for the day:

“The hardest thing in the world to understand is the income tax.”
Albert Einstein

If you will read no further:

If your client has life insurance we can help you improve it by adding a long-term care benefit.  Now your client can expect income when needed most when he/she needs long-term care or pay a lump sum to the heirs when he/she dies….all for what they currently pay for life insurance.

We provide an LTCi backup for financial professionals that is second-to-none.  Our commissions are excellent and we have a complete product line from the major carriers in the business.  No B/D has more in-house experience (average over 10 years selling LTCi) and the overall understanding (like we have with linked-benefit) of the LTCi market than the folks at Westland Financial.

Thought for the week:

Fifteen years ago, I deposited a lump sum of money into an insurance policy on the life of my 75 yr old mother.  I own the policy (and the cash value), and am the beneficiary; and she, of course, is the insured.  Over the years the money in the cash value has earned a very respectable rate of interest and I have never paid a penny of taxes.  She is now 90 years old and in poor health but still living independently.  We take comfort in the fact that the life insurance policy will pay its benefits for long-term care if needed, so her quality of life is assured at the best possible level.  I recently calculated the anticipated rate of return on my “investment” in this policy should my mother die in the next couple of years.

• With absolutely no uncertainty or concern about that money in my portfolio all these years, it has remained on my balance sheet and been available at any time should I need it.
• Should Mom need to pay more for LTCi than her own estate can accommodate, I know that I will have ready-cash to continue to assure her of the best possible care.
• To the extent that she never needs to spend much on care, I will end up with a healthy tax-free return on my original deposit that has provided so much security for the past 15 years.

WHO SAYS LIFE INSURANCE (THE RIGHT KIND) IS NOT AN INVESTMENT?

Suppose your client, a 71-year-old widow, has an RMD from her IRA of $14,000; and suppose she doesn’t need the $11,000 that is left over after she pays her taxes.  If she is in good health the $11k could buy her a $440,000 life insurance policy that would pay her $8,800 per month for 50 months if she needed long-term care someday and any not needed for that would become a tax free legacy to her heirs.  If she lives as long as my Mom, the tax-free annual rate of return on her “investment” is 7%…GUARANTEED.

Thought for the day:

The time you enjoy wasting is not wasted time.              Bertrand Russell

If you will read no further:

LTCi PREMIUMS INCREASING FOR WOMEN

In two weeks, the major LTCi carriers will be increasing the rates for women by an average of 24% for long-term care insurance.  (Called gender-based pricing) If you have clients still considering whether or not to buy a policy, I suggest you encourage them to get an application going this week.  Just call us and we will arrange to take the application for you.

Thoughts for the week:

Then there was the 71-year-old client who bought a new REIT that would pay 6% dividends until it was closed out when (he was told) his share price value would probably increase from $10 to $12-$15.  Very safe because all the properties are leasebacks to major “essential” businesses that will not falter in hard times (example: Drug stores and supermarkets).  No matter that in the sales literature it mentions the high level of risk and debt associated with this investment.

But hey, he is getting 6% income to spend or to further grow his estate; instead of only 3% that a  fixed annuity would yield.  With a bank rate of 1% I can triple the client’s results with no risk.  Or double that result with a REIT but with “substantial risk”.

If its income he needs, the annuity would provide (tax-advantaged) around 7%, with virtually no risk.  I’m not suggesting that he only buy annuities for income.  I am suggesting that the clients who trust you to provide them with income for the rest of their life probably should not be buying REITS or other alternative investments until their  basic required income has been secured in a portfolio that contains an annuity or two.

Probably a Waste of time…but fun.

NO WONDER MAYOR BLOOMBERG WANTS TO REDUCE DRINK SIZES.

Sugar-sweetened beverages may be to blame for about 180,000 deaths worldwide each year, according to a report by the American Heart Association. FULL STORY » – Rachel Landen

My analysis: Speaking of wasting time…….

180,000 deaths worldwide from sugary drinks.  The world population is 7.1billion and according to the article 80%  or 144,000 of the deaths are in low-income or developing countries; leaving 36,000 for the rest of the world which would be 1.42billion people. The US has 315million or 22% (half of which drink diet soft drinks =11%) and New York city is 8 million…8,000,000÷315million or 2.5% of the US share .  So .025x .11 =.000275% x 180,000= 49.5 people may have died last year from sugary soft drink consumption in New York City vs. 366.7 pedestrians killed by cars and buses….only 1 of whom drank sugary soft drinks (I made that part up).

Thought for the day:

“Counting on your opponent to inform you when he or she breaks a rule is like expecting them to make fun of their own haircut.”                                                           Unknown

 

If you will read no further:

Then there is the story of the financial planner who is being threatened with a lawsuit by his client’s son (an attorney, does that surprise you?) for not offering his mother a long-term care policy.  He said she had plenty of money and didn’t need it.  Now she is in a nursing home spending $10,500 per month and it looks like that won’t stop any time soon.  Fortunately the planner has a lot of clients; so he can afford to lose this one as the son takes the account away.  I’m not sure what the deductible is on his E&O policy.

 

Thought for the week:

It was announced in the press this week that a prominent executive for a major broker/dealer is resigning his recently accepted position so that he could tend to the healthcare needs of his parents and in-laws.  This is a great illustration of the impact that long-term care episodes can have on one’s life as well as others around him.

I was discussing this very subject at a recent breakfast with a long time friend and very successful financial planner .  Three things he said impressed me most.

1. He mentioned that his aging clientele was “falling like leaves”.  With uncanny regularity they are announcing a move into a senior care facility or using home care because of dementia, or some other debilitating cause.
2. The toll that it is taking on the families of his clients is appalling; with kids and relatives fighting one another for the money; and who is responsible to take care of mom and dad.
3. He was glad he purchased a robust LTCi policy many years ago (as did I) because even though he has sufficient assets to pay for most likely care scenarios, it is comforting to know that when the time comes there will be extra money available so it will not be such an issue to the family.

I can’t tell you how many times I have heard advisors say that their clients don’t NEED to buy LTCi insurance as they have plenty of money to pay for it.  Clearly they have not yet experienced enough of their clients writing checks for $10,000 each month; or talked to the “kid” who’s upset at seeing his inheritance being wasted away on nursing care bills; and which sister is taking care of mom and which brother is AWOL, and on, and on.

And it could have all been avoided if the advisor would have just insisted on his clients moving some of their assets into a linked-benefit insurance contact before they got too sick to do anything but put up 100% of their assets to guarantee their care.  Tragic!

 

Most inane comment of the week:

“My client can afford to self insure for LTCi.  No, he really can’t move any money (one year’s worth of self insure) into MoneyGuard” (to multiply it 4-6 times for LTC.)

 

Rate Drop Announced:  There’s a surprise

TLC will drop rates for new contract in all states except CA CT FL HI IN NJ  NY .  Interest rate will go down effective 4/22 from 3.25 to 3.0.  If you have some proposals outstanding you should call clients and tell them now is the time to decide.   Long Apps must be received in HO BEFORE 4/22; TLC Quick request tickets in good order by 4/19 and interview completed by 5/11.

Thought for the day:

“We are all here on earth to help others.  What on earth the others are here for, I don’t know.”                                                            W. H. Auden

If you will read no further:

Financial advisors everywhere are discovering the new LTCi connection with Westland Financial.  You bring it up to your client and request a case design from us.  We give you 1,2 or 3 quotes (if you really want that many) from top carriers.  You present the case (we can help) and once the client say “yes”, we take it from there.  We take the application for you, manage the case through underwriting and send you the policy ready to deliver.  Then we pay you top comp and assist you in the future when service is needed.

Thought for the week:

We create dozens of SPIA annuity illustrations per week but only about 1/3 ever get placed in the clients’ portfolio.  Having observed this for a few years now and spoken with many advisors, I have come to the conclusion that it is the advisors who are “waiting for the rates to increase”.  In the meantime, their clients are receiving less and less interest or accepting more and more risk than they would like.

The typical SPIA is providing 6-8% income. 70% +/- tax-free.  That’s better than bonds and will last a lifetime.  It’s a personal pension the give the client the most secure, predictable income from any of the assets in the portfolio.  And if you are one of those advisors waiting for rates to go up, keep in mind that increases in interest rates have only a partial correlation to SPIA rates since a high percentage of the income is from principal.  The way to get the most total money from the SPIA is to start early and live a long time.  Waiting for rates to increase just reduces the total time they will receive the income.

Regarding those Variable Annuities; with the expenses and the portfolio restrictions, you cannot be seriously proposing them for competitive growth if you are also including the guaranteed role-ups and income riders.  Index Annuities have the same rollups and guaranteed income for half the cost or less and the client will never see their portfolio go down.  Wonder why variable annuity sales are down and index annuity sales are up?  Clients are buying the same guarantees you sold them in VAs but prefer the assurances    of safety of their money that Index products provide.  Call Josh and he will answer your questions.

By the way, the Fed met recently: They are going to continue on their path till unemployment hits 6.5% and inflation slows to 2.5%.  They predicted no change in rates till 2015. Then what; you think they are going to jump rates to 6% and destroy all the bondholders in the country?  Come on!

One more item before I let you go.

Idle money in a Forethought (A-) annuity for long-term care will provide up to 200% to 300% of the annuity value when LTCi is needed.  Another opportunity to increase your clients’ comfort level in these uncertain times.

Thought for the day:

The key to being a good manager is keeping the people who hate me away from those who are still undecided.                                                              Casey Stengel

If you will read no further:

The salesman assumes the LTCi policy will be used and the client assumes it won’t.  If an advisor insists on putting a linked-benefit product in the portfolio, they can both be right.

Gene Pastula, CFP

Thought for the week:

I had a situation come up this week that made me feel really bad; so I want to get it off my chest.  An advisor called me to see if there was anything we could do to get some LTCi coverage for a 73-year-old client who was recently diagnosed with the early stages of Parkinson’s.  As he discussed the case, I seemed to recall this client from a couple of years ago.  We had sent him proposals for LTCi insurance and for MoneyGuard.  When we followed up to see how the presentation went, he told us that she didn’t think she would need it, and that was that.  When I asked how she could possibly turn down his recommendation to move cash from a CD to this, he told me that he never recommended insurance, just presented options.  Then he left it to the client to choose.

I remember thinking, “When was the last time his doctor gave him a choice of prescriptions; or asked whether or not he would even like to take any at all?”  I also wonder how many clients of other advisors will be spending down their estates paying for care who could have had an asset in their portfolio that instantly leveraged itself 3 or 4 times; if only their advisor had strongly encouraged them to move the money while they were still healthy enough to qualify.

Do your clients a favor.  Take 15 minutes a week and think about the folks who could move $50k to $100K into MoneyGuard or a similar product.  If you would like a position paper to send to the client that will quickly explain the idea so they will want to pursue it, send me an email at genep@westlandinc.com and I will provide.  Then send the client specifics to us for a proposal.  Be sure to discuss it with us first if you have never presented this successfully.  There should be no doubt in your mind of its value before recommending it to your client.  We can even help you with the presentations until you feel comfortable that you can do it all yourself.

It’s always very sad when a client’s spouse or family announces to you that they are arranging for your client to receive care.  But it’s much more comforting to everyone to know that your plan will now add another couple hundred thousand dollars to the portfolio to help pay the bill.

An important read:

Wall Street Journal article recommends that advisors use annuities (SPIAs) instead of bonds when producing income for their retired clients.  Read it here.  See?  It’s not just me telling you this.