Thought for the day:

The trouble with learning from experience is that you never graduate.

Doug Larson

If you will read no further:

One of the finest products of the past 25 years is threatened with extinction.  The Single Premium Life insurance policy is under pressure to be taken off the market until interest rates return to their long–term averages, especially the ones that will pay huge income when long-term care is needed.  That said, they are still available now and we suggest that you make a list of all clients who should have them in their portfolio.  Then get with the program to inform them of this window of opportunity.

Thought for the week:

Introducing the Financial Longevity Bond Concept

Would your clients gobble these bonds up?  These bonds are AAA rated from several major issuers.  Guaranteed for life and designed to mature to pay estate costs and/or pay a monthly tax-free income for health care costs prior to death, they can actually take the place of long-term care insurance.

Called a Financial Longevity Bond, it guarantees your lifespan by compensating your heirs in the event your death occurs earlier than expected.  Like a zero coupon bond, its interest is deferred until your death or disability.  However, it can be redeemed at any time, if desired, for its original cost.

Because of the longevity guarantee, the value at maturity varies based on your age when you purchase the bond for your portfolio as well as the time of your death.  The amount of monthly dividend payable for healthcare is a function of the maturity value.  For example: a healthy woman in her mid 60s could purchase this bond and be guaranteed a lifespan well into her 90s.  If she purchases a $100,000 bond and dies earlier than expected, say age 70 the bond will instantly mature for $195,000, tax-free under the IRS Code sec. 101.  If she lives past the longevity guarantee period of 20 years, the bond will mature for $150,000 at her death.  At anytime, if she were to need convalescent care, the bond would begin paying her a monthly tax-free income to reimburse her expenses up to $6000/month for as long as six years, a potential total of $450,000.

The older you are when you purchase the bond; your longevity risk is less valuable.  Therefore, it is best to purchase this bond as soon as you can identify money in the portfolio that will not be invested in the markets.  Certainly this is an attractive alternative to a bank CD as the yield to maturity (if never needed for income) is between 3% at 7%…and in some cases even more.  And one more thing, special tax incentives also apply.

If you are interested in how you can acquire this for yourself or your clients, send me an email at genep@westlandinc.com .  Please don’t call as I love to respond to everyone as soon as I can when I can – even in the middle of the night.  Phone calls and voice mail messages just make it more difficult.

Thought for the day:

Don’t buy a putter until you’ve had a chance to throw it.

Does it really matter who said this first?

If you will read no further:

There is important news at the bottom about LTCi.  And now all you have to do is call us with your client’s info, we will design the best product strategy for the situation then help you with the presentation if you like, and then we will take the application, underwrite the case and send you a policy ready to deliver.  See attached and call us.

Thought for the week:

My radio woke me this Sunday morning to another financial show.  I don’t need to get up that early, but I never want to miss the investment advisors promoting their service.  This weekend I was on a local show promoting MoneyGuard and a series of seminars on long-term care, so I understand the process.*  As I lay there listening to these guys discussing index annuities (FIAs), it occurred to me that I should mention it to you because it is such a good story and they are almost outselling variable annuities.

You see, people are OK with giving up some of the “upside” in exchange for “no losses”.  Certainly, the past 10-15 years proves that avoiding losses trumps occasional big gains.

Currently though, it’s all about the Guaranteed Income Riders in VAs and FIAs.  That’s what folks want….to know what their future income will look like…at least some of it.

This is not an either/or discussion.  I know it’s difficult for some advisors to see the value in FIAs that limit the upside.  So they use VAs that require a conservative investment mix in order to  provide the costly GIR that most attracts the client in the first place.

Here is a thought.  Present a combination of the two to your clients.  The FIA will give the client the certainty of a growing retirement income base (at half the cost of the VA) while guaranteeing their principal. The rest invested in the VA without all the riders allows for the potential gains from a well-managed investment portfolio.

I just can’t help but believe the upside potential of the FIA (with the downside protection) is a lot better for the client then any bond at this point.  Cheaper too!

*If you would like me to do a radio show, or a client seminar for you, just let me know.  When folks hear the story, they all want the product.  Remember, “Everyone will buy long-term care insurance if they don’t have to pay for it.”

News you can use:

The leading LTC insurers have all filed (or will soon be filing) for sex distinct rates.  Those that have not will likely face some anti-selection (assuming their rates are lower) that will certainly cause concern; prompting them to follow suit. Since women account for 65 percent of all new claims, the anticipated increase in female rates is from 20% to 40% for widows and singles.  It stands to reason that you should bring this up to your clients who have not yet addressed this issue or have been “thinking about it”.  There is still some time to acquire insurance at the current non-sex distinct rates.

Thought for the day:

Don’t complain about growing old… not everyone gets the privilege.

Unknown

If you will read no further:

Several thousand financial professionals do their insurance business through Westland Financial…not always because their broker/dealer says to; but because they choose us for outstanding service, top tier products competitive comp and after sale client service.  Go ahead and take a couple more minutes a read about two new reasons for calling Westland.

Thought for the week:

Those of you who have received emails from me in recent months have perhaps seen the little picture in my signature block that encourages you to “click here” for an important message.  This is the latest in presentation tools to help you get the message out about linked-benefit LTCi and how simply it can become part of the clients’ portfolio.

Many people resist the idea of “buying insurance” for long-term care (and unfortunately, many advisors resist the idea of recommending it); but investing for long-term care if needed…..that’s another matter.  I will address that concept in later issues of Pearls, but suffice it for now that many people can “invest” money on an annual basis that will effectively yield results in excess of 7% /year and provide 5-10 times that amount if they do, in fact, ever need income for long-term care expenses.  Did you “click here” yet?

This 2-minute video can be customized with your contact information to be used in the signature block of your emails and/or on your website.  It has already been directly credited with several MoneyGuard sales and has been approved by many broker/dealers.  If you would like to have this video for your own use, contact Tim Morton at timm@westlandinc.com.  He will assist you.  Also, if you need assistance getting it approved by your BD, he can help.  He loves that stuff.

Announcing the Westland Hands Free App Process

Many new advances in products and services are coming from Westland this year that will help you do a better job for your clients and (in many cases) make more money in the process.  Number one on the hit parade is the new Westland LTC Insurance Services.  Very soon you will be receiving specific information including, carrier lists, contacting process, commissions, and the specifics of our exclusive Hands Free App Process.

Just imagine.  You identify your client who should consider long-term care.  Call Westland and speak with one of our experienced (average 15 years) counselors who will design the appropriate plan and send it to you with appropriate support materials and product comparisons if you like.  Once you have presented it to the client, (yes, we are available to help there as well) let us know that he/she is ready to move forward.  You are almost done.  We will call the client and take the application over the phone, answer any follow-up questions your client may have and re-assure them of the advisability of this action.  Within a week or so, you will receive a policy ready for delivery.  No more forms to learn or personal health questions to ask.  Clean and professional.

All this will be ready to go in two weeks.  But don’t let that slow you down.  Call Chris Ridd today at 800-238-8144 to request illustrations, get answers to commission and contracting questions and anything else that is on your mind.  We want your LTCi business, conventional products as well as linked-benefit and now there is no reason to go anywhere else for your long-term care get your solutions.

Thought for the day:

“The retiree’s worst nightmare….too much life and not enough health.”

Gene Pastula, CFP

If you will read no further:

Look for our announcement of the expanded LTCi department from Westland.  All of your clients should be provided with information about how to prepare for an eventual long-term care episode.  No one will be able to provide more viable strategies, better products or a higher level of service than Westland.  And… we will take the application for you and pay top commissions.  Try us out and see how we do it.

Thought for the week:

The article starts out quoting officials of Russell Investment at a press briefing for a new retirement planning program for advisors.  “I desperately need you to secure an adequate retirement for me” says the retiree, “I’m afraid my assets will run out before I do.  But stay away from me advisor, because I don’t trust you.”  Then it goes on to talk about a computer program intended to help advisors design customized retirement plans that can be modified throughout the clients’ life.  It allows the planner to change course if things don’t work out the way we expect.

Here is a question.  If we have another meltdown in the next 12 -18 months like the one in 2008-9, how many clients will you lose?  What if they are in poor health at the time and spending money on nursing care?  What if there is no meltdown, but the markets just don’t perform well?  Will your clients accept that and stay with you, continuing to pay 1% or more for your services?

I think these are some questions that should be answered about every client portfolio you manage. Because if you can point to the positive steps you have taken to accomplish that, you have no doubt created protections from the things that retirees fear most….too much life and/or not enough health.  Where have I heard that before???

I was at a party the other night and talking with a friend who just recently retired from his practice as a CPA.  He’s a pretty bright guy who always had worthwhile perspective on things financial.  He told me that all of his money is in the bank.  Not a single stock, piece of real estate (except his house) or any other financial product does he own.  “I know that sounds rather stupid to some”, he said, “but no one has ever convinced me that they had a plan that was assured of working and I have seen too many that didn’t.”  As we talked I realized that he was probably right. The Planners and stockbrokers always talked about how their market recommendations would average this-or-that rate of return with this-or-that level of probability.  The insurance guys said, “Just give the insurance company your money and they will take care of you”. Do I really need to tell you what the real estate guys said?

So Jim says, “I’ll keep my money in cash, even though it is probably counterproductive.  I have plenty to last as long as I’ll probably need it; and if I start to run out, I can just cut down on my spending.  At least I know I won’t be spending it on advice that doesn’t end up working”.

An awful lot of people think like Jim; even though they don’t express it so well.  “Show me a reason I can relax knowing my income is safe as long as I live.  Prove to me that if one of us gets sick, there will plenty to pay for our care.  Explain why we don’t have to worry about income after one of us dies and part of our pension and social security goes away.”  Do that and I will continue to be your client?

This is not difficult to do if you combine the stocks, bonds and real estate with insurance and annuities. Doing so properly, allows you to show them how much income will always be there no matter what bad happens in the markets.  Also how their income will increase automatically if they get sick enough to need professional care. And you will also be able to show them how the value of their portfolio is protected, even when the market goes down as it does every few years.

There is no doubt that financial planners and investment advisors are beginning to understand the strategic value of these products in the portfolio and the incredible benefits they will provide.  If you have not pursued this with our clients you need to get with the program.  This is not about needing insurance….or not.  This is about placing some of their money safely where it will perform best when needed….by the client, by his heirs, or in the event of long-term care when its value expands five fold. 

Do I need to remind you that we are here to help?  (800) 238-8144

Thought for the day:

A good battle plan you act on today can be better than the perfect one tomorrow.

Gen. George S. Patton

If you will read no further:

In these times of increased uncertainty and market volatility, one of the most dangerous comments I hear from Financial Advisors is “my client has plenty of money and doesn’t need long-term care insurance”.  At least one in three of your clients will have to payfor care someday.  At the very least, you should have a serious conversation with them so that there is an agreed upon strategy in place.  And while you’re at it, ask them to take two minutes for this:

Thought for the week:

How NOT to sell insurance products to your clients

1. Wait until the client asks you for a price quote…a sure sign that he has been informed of some serious health issues and is unlikely to qualify.
2. Show the client a proposal, but do NOT advise that it is the best choice to address his needs for income or to protect his portfolio from risk and volatility.
3. Present an insurance product but make sure the client has no sense that you consider this a serious recommendation.
4. Present insurance as the whole solution rather then a part of the overall investment plan.
5. Don’t read the proposal or fully understand the product before presenting it to the client so that you are unable to give a clear and compelling presentation.
6. Do tell the client everything you know about insurance instead of focusing in on what it will do to improve and help assure the results of his financial plan.
7. DON’T RECCOMEND IT!  Just throw it out there as “another approach” or better yet, send the client a proposal and/or a brochure in the mail.
8. Avoid moving money in the portfolio you are managing because it will reduce your annual fees.
9. Start the presentation with “I don’t like insurance companies and I rarely recommend insurance, but in this case…..”
10. Use some source other than Westland Financial Services as your source for Life Insurance, Annuities and Long-term care strategies.

Tax update:

You have probably already read much about the American Taxpayer Relief Act of 2012.  I’m not sure where the “Relief” part comes in, but at least there are several positive long-term commitments made on tax rates and other provisions in question.  Read it here from AVIVA for an excellent summary of the important features of the law.

Thought for the day:

“The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year.”  John Foster Dulles

If you will read no further:

NEVER FILL OUT ANOTHER LONG-TERM CARE APPLICATION.

Westland Financial Long-term Care is now powered by the LTCi Partners national marketing group.  This means that we have MORE of the finest LTCi carriers and many increased commission rates.  We also provide the best training, the best back-office support and LTCi Partners proprietary Free Application Completion Service.  Your decision to choose Westland as your #1 source for conventional and linked benefit Long-term Care strategies has never been wiser.   Call Gene @ (800)238-8144 to discuss.

Thought for the week:

THE STORY OF ALLEN AND JUDY

Allen had been a very successful advertising executive in Philadelphia back in the 70’s and made a lot of money.  About 5 years ago at the age of 78 Allen was diagnosed with Parkinson’s.  If was manageable for a time, but after several small strokes as well, it got the best of him and today he is bedridden in his home with two health care professionals taking care of him every day from 6:00AM until 10:00PM.  This at a time when his investment portfolio is certainly not performing like it has in years past.  About 12 years ago I talked with Allen about putting MoneyGuard in his portfolio, but he assured me that would not be necessary.  Since I was not his advisor and he handled (very successfully) his investment portfolio himself, that was, basically, that.

As it has turned out, they probably have enough money to continue to pay the $110,000 per year that it has cost them for the past 2 years.  There is no way to tell how much longer he will need the care, but I can tell you that Judy is emotionally stressed.  Their portfolio is being significantly impacted by the need to pay his care bills.  And Judy still must pay the ongoing expenses of their home and cover her needs.  She is only age 70 and must look forward to a much-diminished financial situation for many years.

Had Allen taken my advice in 2000, he would have achieved the same investment income as he has now; but he would be receiving an additional $5000 per month, tax-free to help pay for his care, thus cutting the financial devastation to his portfolio in half.

Nobody wants to talk about insurance when they are healthy.  They can always self-insure.  But as soon as their health begins to fail, they become very interested.  Do your clients a favor.  Help them put a long-term care strategy in place before they know they will be using it.  Make 2013 the year that you take care of this with all of your clients.

They need more from you than just asset appreciation in the market.

Thought for the day:

If you will read no further:

RE-Read thought for the day! Then…. Play the 2- Minute Linked-Benefit video

Thought for the week:

Most of what I read is about the economy and politics. I read financial analysts who sell their opinions and columnists who give them away. What interests me lately is that I am not reading or hearing anything that is encouraging me to invest a lot of money.

I have a couple of money managers that take care of my important money (that’s the money my wife knows about) and then I have a little investment account that I use to entertain myself by trading and doing things that seem to be right at the moment. Sometimes I win and sometimes I loose; and all the time I am glad those money managers who are taking care of my wife’s money. They just tell me “don’t expect too much for a while”…until some of the economic and political issues are settled and there is a clearer path ahead.

Each week, I write this BLOG (please comment if you like)  discussing our insurance-based products and strategies and I compare them to the other financial assets with which most folks are more familiar. And I see that “my stuff” is doing well, or at least as good as that other stuff; but with a lot less excitement. Don’t get me wrong, excitement is good when that is what you are looking for…like a roller coaster, or sky diving. But I’m not hearing too much joy at the year-end parties about how exciting people’s investments are these days.

I think there is a very good chance we will have another, uh, market adjustment in the near future. Two reasons I say that. One, we are almost due, since we haven’t had a serious one in four years. Two, no good news. Everything is bad in Europe, and in the U.S. we are either going “over the cliff” or we are going to increase taxes on the rich and borrow and spend more money. Sometimes I think we should just go over the cliff and get it over with.  I’m glad I’m not retiring soon; partly because I still need to help more planners to understand how important it is, to include insurance products in their clients’ investment portfolio; and to be aware of the uncertainties they face and how fragile their portfolios will be if the bad stuff happens financially at a time when other “bad stuff” is happening personally.

That’s what adding insurance to the portfolio is all about…reducing the risk and volatility while increasing the predictability of results. I hope you will make 2013 the year you become more accomplished in Insurance and Annuities. Add them to your own portfolio and suggest that your clients do the same. We are here to help.

SPECIAL ANNOUNCEMENT

Welcome to our new blog! The “Thought” this week may be controversial to some and we encourage your responses and additional comments….agree or disagree.

Thought for the day:

All investment strategies have the potential for profit or loss.  Changes in investment strategies, contributions, withdrawals and economic conditions may materially alter the performance, strategy and results of your portfolio.

One of seven disclaimers found on a random Financial Planner’s web site

THOUGHT FOR THE YEAR:

I fear that the way many planners approach their older clients’ financial issues involves a critical flaw.  For most clients, the objective of financial planning can no longer be focused on simply and growing their assets.  Things like retirement income, paying for health care and leaving a legacy are not just about ROI; because the issues are too complex to make portfolio decisions on that alone.  Consider the client who began her retirement in 2008 with a plan to take withdrawals from a managed portfolio that became severely diminished within a year; or at best, generated little or no return.  It will be extremely difficult for her to recover, unless she can cease taking income for several years while the portfolio rebuilds.  ROI is a function of the time period in which it is measured and the activities (adds and subtracts) that occur in the account along the way.

I submit that the best retirement plan is one that has a foundation of a pension account that provides a basic monthly income to cover fundamental expenses such as housing, transportation, insurances and the like.  If the client would require nothing less than $50k per year, her planner’s first responsibility is to provide the security that she will never receive less than $50k per year no matter what happens in the future, no matter how many 2008s there are.

Here is a good place to detour for a moment.  There will be several more 2008s (or similar) in our retiree’s future.  No one knows how mild or severe.  I assure you, however, as your client ages, his/her sensitivity to those financial incidents will increase…no matter how much money they have.  Not all, of course; but many clients will fall into this group.  More than ROI, they want predictability that their income will last as long as they do.  Predictability that there will be enough income to pay the increased cost of living due to long-term care needs.  A friend of mine is being cared for from 6:00 AM to 8:00PM in his home at a cost of $11,000 per month and his wife must continue paying the mortgage, the condo fees and her other living expenses.  That is a concern, especially since their ROI right now is nothing like it has been in the past.

The attached statement for another client just arrived while I am typing this.  This is a statement from his LTCi insurance policy that we helped his planner sell him over 10 years ago.  Imagine what this would do to the return in his managed portfolio if, for the past 6 years, he had to withdraw $7,300 per month while trying to re-grow it after 2009. 

Now that we have built your wealth, you can’t spend it!

It is interesting to me that we help our clients create wealth to provide income in retirement then, when retirement comes, we tell them that they cannot spend that money.  They can only spend the interest that it earns…even if that is not as much as they would like.  That makes absolutely no sense when it is so easy to contract with an insurance company to make that promise of lifetime income.  Annuities are the core to any retirement strategy.  They efficiently pay the client an income for life.

Are you able to guarantee your clients 6-8% income for as long as they live?  Will it also be substantially tax-free?  Does he really care what the ROI is if $500k of his portfolio is providing him with $3000 per month (80% tax-free) every month regardless of what the congress does or the economy does or what the terrorists do… for as long as he lives?  In light of that, how important is having some left over when he dies?  If the legacy is most important, he may not choose the pension (SPIA).  But if he needs more income, I’ll bet he will leave the rate of return calculation to the kids after he dies and take the money now.  I would.

You cannot guarantee success…only that you will do your best. 

Planners and investment advisors know how to manage a portfolio for growth, when ROI is an important measure of their value to the client.  But, when we are dealing with retirees, we are no longer talking about growing the portfolio as “job one”.  What about your fiduciary duty when you tell them your plan includes an 85% – 95% probability of success that their income will last as long as they do?  “So what happens if I end up in the 10% or 15%, Mr. Planner?”  “Oh, well, that will be on you, Mr. Client.”  Including annuity income in their portfolio increases the probability of success and is simply serving your client responsibly.

Not for everyone or for all the money.

Not all clients fit into my scenario as described above.  But we all must be sensitive to the perspective that we bring to the table; and understand that this perspective changes as we age.  Does the 50-year-old planner really know what a 75-year-old client feels?  That is the issue that we must deal with.  My 90-year-old mother is pretty sharp about money.  She has significant financial assets and pension income coming from Social Security and a private annuity.  Her expenses are $17,000 per year more than her pension income.  Even with zero ROI, I know that the annual shortfall can come out of her assets for the next 23 years when she will be 113.  Only when I explain that to her (every few months), does she relax.  Trust me.  She does not care about ROI unless it means “Reliability of Income”; and, I suppose, neither do I.

Thought for the day: 

Always get your facts right first.  Then you can distort them as you please.  -Mark Twain

 If you will read no further:

That’s OK.  This is interesting, but will only change your life if you are not already doing business with us.

Thought for the week:

Christmas is coming very soon and work activity is slowing.  It didn’t use to be that way.  Time was when we ran as fast as we could to finish the year’s work.  I’m not sure what changed that; but I actually like it better.  It allows me to spend time organizing and thinking about the year ahead and what (or how) I am going to do differently in the year ahead.

We are completing Westland Financial Services’ 38^th year in the business of providing insurance advice to anyone who will listen.

Looking back there are some milestones worth pondering….like

• Showing clients and advisors the proper way to purchase insurance; ways to be properly insured while getting the best value for the money allocated.
• We introduced Universal Life to the Financial Planning industry.  They actually got on board before the insurance agents did.
• We created the first single premium life insurance strategy and showed advisors how to benefit their clients by diversifying from investments and including insurance products in the portfolio.
  • There are still many who haven’t got that message yet but we keep trying.  I guess when everyone gets it, my work will be finished.
• We created the first (and most successful to date) asset-based long-term care product.  It was initially called Assured Care and is now called MoneyGuard.
  • No one knows these products like we do and anyone who really wants to do a proper job for their clients should work with us to set up the best strategy for the client’s portfolio.

Today we are the only ones to offer insurance products in the context of the clients’ investment portfolio vs. making it a separate need that must be filled. You don’t have to “back up the hearse” to make your point that insurance is an integral part of a balanced portfolio. And you don’t have to become an expert in insurance to employ the concepts to help your clients enjoy the predictability that it brings to their lives, and the satisfaction that they have with your services.  Call and let us help you help your clients gain peace of mind through predictable solutions to their retirement issues.

Thought for the day:

“It’s easy to sit up and take notice.  What is difficult is getting up and taking action.”

-Al Batt, Writer & Speaker

If you will read no further:

If you haven’t learned this already, you will; perhaps the hard way.  Investment diversification is only effective if you include product diversification.  The only products that can yield impressive results without risk are all offered by insurance companies.  We represent a whole bunch of them.  But you have to know when, where and how to use these products.  We can help.

Thought for the week:

Do you think you can earn your clients 8.5% on average over the next 15 years?  Would you encouraged them to expect (or even look forward to) those returns from you?  If you can achieve that level, what will it cost to do so; two percent?  How about taxes?  Can you keep their tax cost below 25%…federal and state combined?  Oh, and let’s not forget that 3.8% surtax on dividends and capital gains that ObamaCare imposes beginning in January 2013.  VAs and qualified plans will defer the taxes under current law so that will help.  When all costs and taxes and volatility are taken into consideration, however, smart advisors are projecting more modest results.

A survey conducted by CMG, an SEC registered investment advisor outside of Philadelphia, reveals that 83% of advisors are currently using tactical and alternative investment; and 84% are likely to recommend them to their clients in 2013.  The survey, conducted at the annual Financial Planning Association (FPA) Experience 2012 Conference in San Antonio, also revealed that less than a quarter (23%) of advisors surveyed still use the traditional 60-40 stock/bond allocation.

Now here is where I tell you about using life insurance as one of those “alternative” investments; but not just to pitch you on selling what we have for sale.  This is what I have done personally for over 30 years.  In all of the time, I have averaged just over 10% of my own investment portfolio in the cash value of a Universal life policy.  It has earned interest as high as 11% and today it is down to a meager 4.5%.  I have never paid a tax and it always has been a source of comfort during the many recessions and down markets we have been through.

Today’s products allow you to deposit your clients’ money in an account that will credit the annual gains in the S&P up to 12%-13% (not including dividends)  If the S&P goes down the account will suffer no losses. It only goes up.  Because it is cash value of life insurance annual gains are not taxed and unlike annuities, the value at death also passes tax-free to the heirs.  The cost to do this is about 1-2% but that actually buys some life insurance benefit…not a lot, but enough to more-than-replace that 2% charge if the money ends up going to the heirs.  Unlike annuities and qualified plans, there are even legal ways of taking income without taxes.

I’m not suggesting you change what you do and become insurance salesmen.  But I am saying that it is wise to present a portfolio option that includes life insurance in it.  You might be surprised at how many clients will jump on this these days; and with our help, how easy it is to implement.