IF YOU WILL READ NO FURTHER

I read several financial newsletters each week and the Wall Street Journal almost every day and I subscribe to Stratfor, one of the best world intelligence services for executives. I can tell you for certain the world economy is shaky but will be just fine; or we are going to experience a financial crisis of biblical proportions. I am less sure about Climate Change or whether the Juan will be the new reserve currency.

 

But what I am really sure of is that I would not want to be retired living off of my assets and depending on my financial advisor to assure me that I will have all the money I need for as long as I need it. I would want him or her to be in close contact with the folks at Westland Financial who can help him/her set me up with appropriate annuities and long-term care strategies to protect my income and my quality of life for as long as I am on this earth worrying about climate change, the rising dollar and the California drought.

 

INTERESTING FACT

The IRS reported recently that the predicted 3-6million people who would pay the fine instead of purchasing Obamacare turned out to be 7.5 million.  Another 12 million claimed an exemption from the fine due to low income levels or other hardships.  So the 30 million who couldn’t afford it, now have it free and the 30 million that did have it, now can’t afford it.

 

THOUGHT FOR THE WEEK

Early in my life insurance career I was taught “Life Insurance, the 9% Investment”. It was all about how the tax deferred cash value built up and the tax free access through loans or the tax free distribution at death equated to any other investments with a before tax rate of return of 9%. It was a stretch, but in many instances it was no doubt true. Problem was, not everyone believed it.

 

For years ever since, I have sold insurance for a number of reasons; paid death claims, paid long-term care claims, helped borrow money for clients at critical times and witnessed the peace-of-mind experienced by people who were diagnosed with a life shortening disease who had a large life insurance estate and could visualize exactly how that would benefit those they love.

 

Lately though I have been showing people on a regular basis what a great investment life insurance actually is. And I must say it is fun to see when the light goes on and they actually get it. Because everyone needs to leave a legacy; to plan not to do so means that you have to KNOW when death will occur or else be at high risk of running out of money. In retirement, life expectancy creates more uncertainty in their financial planning in addition to the economy, the FED, politics, and maybe even climate change. Asking an 80 year old client to bare all of that when there are alternatives that eliminate the uncertainty, well I think it is irresponsible. But I digress

 

What about that cost/ benefit thing I was talking about?

Life insurance in force when one is 70+ years old is not an “if you die” situation, but a “when you die” proposition. Money being paid into a policy either one time or annually, will create a tax free legacy with about a 7% or 8% rate of return at life expectancy….much greater if they are unfortunate to die earlier. “The bad news, mom died at 82. The good news is that her life insurance investment earned 13% tax free.”

Fixed and Index deferred annuities and SPIAs are even more valuable to retirees, because they provide dependable, risk free retirement income at such a high equivalent rate of return. Imagine replacing the monthly income you are now delivering to your client from their entire portfolio using only 50-60% of it. How would you invest the rest of the portfolio for better growth? And don’t forget the tax efficiency that is available depending on the needs of the client. Now the newer products using Dynamic Indexing provide increased options for retirement income planning at reduced costs to the client. No wonder the Fixed Indexed Annuities are replacing variable annuities at an increasing rate.

I have lived in the financial planning world for the last 40+ years and presented my products and solutions in the context of the total financial plan. I have never been able (or wanted) to convince someone they should buy insurance or adopt my strategies out of fear or other emotion that clogs the facts. It has always been for me, a cost vs. benefit issue. And ask anyone who has clients collecting their life insurance to pay for long-term care if they think selling their clients MoneyGuard or conventional LTCi was a good idea. Better yet, ask yourself when your client instructs you to start liquidating their portfolio to pay for care if it wouldn’t have been wiser to have an insurance policy in place that would be kicking in $50k to $70k per year (tax free) to help them stay in their home and preserve their dignity.

Whether it is a discussion of a life insurance policy to guarantee a legacy or pay for long-term care, or an annuity that will pay lifetime income, refraining from properly presenting these concepts to your retired client is a dangerous practice. Having insurance plans in place and never needing to use them is no big deal. Needing what isn’t there? Now

that’s a big deal.

 

AND FINALLY?

Are you having trouble networking and picking up new clients? The Wall Street Journal spoke to some veterans in the industry about how to reach more perspective clients. One story focused on a veteran who would travel to a new neighborhood and let his cat roam the streets. When a stranger picked the cat up he would find a collar saying, “Call this number if you find me.” From the Journal: “Inevitably, a good Samaritan with deep pockets would comfort the stray and contact the owner at work. The stockbroker feigned relief, gushed gratitude, and began the steady push for a new account.”  No matter how you prospect, the key to a bright and successful future involves creativity and constant prospecting.